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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 3, 1997
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PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13245 75-2702753
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
1400 WILLIAMS SQUARE WEST
5205 N. O'CONNOR BLVD. 75039
IRVING, TEXAS (Zip code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (972) 444-9001
NOT APPLICABLE
(former address if changed since last report)
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ITEM 5. OTHER EVENTS.
On September 3, 1997, Pioneer Natural Resources Company ("Pioneer")
issued a press release (the "Press Release") announcing that it had entered
into a Combination Agreement (the "Combination Agreement") with Chauvco
Resources Ltd., an Alberta corporation ("Chauvco"). The consummation of the
transactions contemplated in the Combination Agreement is subject to the
approval of the stockholders of each of Pioneer and Chauvco. For additional
information regarding the transactions contemplated in the Combination
Agreement, reference is made to the Press Release, the Combination Agreement
and certain other documents entered into in connection with the Combination
Agreement, copies of which are attached to this Current Report as exhibits and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBITS
2.1 Combination Agreement dated as of September 3, 1997 by and between
Pioneer Natural Resources Company and Chauvco Resources Ltd.
(including as Exhibits thereto, Exhibit A, Plan of Arrangement under
Section 186 of the Business Corporations Act (Alberta), Exhibit B,
Form of Support Agreement between Pioneer Natural Resources Company
and Pioneer Natural Resources (Canada) Ltd., Exhibit C, Form of Voting
and Exchange Trust Agreement among Pioneer Natural Resources Company,
Pioneer Natural Resources (Canada) Ltd. and Montreal Trust Company of
Canada, Exhibit D, Terms and Conditions of Pioneer Natural Resources
Company Special Preferred Voting Stock, Exhibit E, List of Lock-up
Shareholders, Exhibit F, List of Other Assets to be Transferred to
Chauvco Resources International Ltd., and Exhibit G, Provisions of
Memorandum of Association of Pioneer Natural Resources (Canada) Ltd.)
2.2 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company and Guy J. Turcotte
2.3 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company, Chauvco Resources Ltd. and
DNR-MESA Holdings, L.P., Scott D. Sheffield and I. Jon Brumley
2.4 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company, Trimac Corporation and Gendis Inc.
99 Press release issued on September 3, 1997 relating to the Combination
Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER NATURAL RESOURCES COMPANY
(Registrant)
By: /s/ MARK L. WITHROW
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Name: Mark L. Withrow
Title: Executive Vice President -
General Counsel
Date: September 30, 1997
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INDEX TO EXHIBITS
EXHIBITS
NO.
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2.1 Combination Agreement dated as of September 3, 1997 by and between
Pioneer Natural Resources Company and Chauvco Resources Ltd.
(including as Exhibits thereto, Exhibit A, Plan of Arrangement
under Section 186 of the Business Corporations Act (Alberta),
Exhibit B, Form of Support Agreement between Pioneer Natural
Resources Company and Pioneer Natural Resources (Canada) Ltd.,
Exhibit C, Form of Voting and Exchange Trust Agreement among
Pioneer Natural Resources Company, Pioneer Natural Resources
(Canada) Ltd. and Montreal Trust Company of Canada, Exhibit D,
Terms and Conditions of Pioneer Natural Resources Company Special
Preferred Voting Stock, Exhibit E, List of Lock-up Shareholders,
Exhibit F, List of Other Assets to be Transferred to Chauvco
Resources International Ltd., and Exhibit G, Provisions of
Memorandum of Association of Pioneer Natural Resources (Canada)
Ltd.)
2.2 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company and Guy J. Turcotte
2.3 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company, Chauvco Resources Ltd. and
DNR-MESA Holdings, L.P., Scott D. Sheffield and I. Jon Brumley
2.4 Shareholders Agreement dated as of September 3, 1997 by and among
Pioneer Natural Resources Company, Trimac Corporation and Gendis
Inc.
99 Press release issued on September 3, 1997 relating to the
Combination Agreement
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EXHIBIT 2.1
COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT (this "Agreement") is entered into as of
September 3, 1997, by and between Pioneer Natural Resources Company, a Delaware
corporation ("US Co"), and Chauvco Resources Ltd., an Alberta corporation
("Chauvco").
RECITALS
WHEREAS, the respective boards of directors of US Co and Chauvco have
approved the transactions contemplated by this Agreement, and have agreed to
submit the applicable transactions included in the Plan of Arrangement (as
defined in Section 1.1) and other transactions contemplated hereby to their
respective shareholders for approval.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
GENERAL
1.1 PLAN OF ARRANGEMENT
As promptly as practicable after the execution of this Agreement,
Chauvco will apply to the Court of Queen's Bench of Alberta (the "Court")
pursuant to Part 15 of the Business Corporations Act (Alberta) (the "ABCA") for
an interim order (the "Interim Order") providing for, among other things, the
calling and holding of the Chauvco Meeting (as hereinafter defined) for the
purpose of considering and, if deemed advisable, approving the arrangement (the
"Arrangement") under Part 15 of the ABCA and pursuant to this Agreement and the
Plan of Arrangement substantially in the form of Exhibit A hereto (the "Plan of
Arrangement"). If the Chauvco shareholders approve the Arrangement, thereafter
Chauvco will take the necessary steps to submit the Arrangement to the Court
and apply for a final order of the Court approving the Arrangement in such
fashion as the Court may direct (the "Final Order") and file Articles of
Arrangement in respect of the Arrangement. At 12:01 a.m. (the "Effective Time")
on the date (the "Effective Date") shown on the certificate of arrangement
issued by the Registrar under the ABCA giving effect to the Arrangement (which
shall be within 60 days after the date of the Final Order), the following shall
occur and shall be deemed to occur in the following order without any further
act or formality:
(a) Chauvco shall subscribe for that number of common shares in
the capital of Chauvco Resources International Ltd. ("CRI") as is equal to (i)
the number of common shares of Chauvco (the "Chauvco Common Shares") which are
issued and outstanding three trading days prior to the Effective Date (the
"Record Date"), (ii) plus that number of Chauvco Common Shares which all
Optionholders (as hereinafter defined) would otherwise be entitled to acquire
on the exercise of their Chauvco Options (as hereinafter defined) on a fully
vested basis on the Record Date, (iii) less that number of common shares of CRI
then held by Chauvco, and (iv) less that number of Chauvco Common Shares held
by shareholders who have exercised their rights of dissent in accordance with
the Plan of Arrangement and who are ultimately entitled to be paid the fair
value for such shares. The subscription price for the common shares of CRI
shall be paid for in cash in the aggregate
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amount equal to US$5,000,000 plus the fair market value on the Effective Date
(as determined and adjusted in accordance with Section 7.7) of the Gabon
Securities (as hereinafter defined);
(b) CRI shall purchase from CR International Limited ("CR"), a
wholly-owned subsidiary of Chauvco, for cash in an aggregate amount equal to
the fair market value thereof on the Effective Date (as determined in
accordance with Section 7.7), (i) all of the issued and outstanding securities
of Chauvco Resources (Gabon) S.A., Chauvco Resources (Gabon-Ngalo) S.A.,
Chauvco Resources (Gabon-Maga) S.A., Chauvco Resources (Gabon-Avomo) S.A. and
CR Trading Co. Ltd. (collectively, the "Gabon Subsidiaries"), (ii) 75% of the
issued and outstanding securities of Westoil Marine & Transport Co. Ltd.
("Westoil"), and (iii) all of its rights under a loan in the amount of U.S.
$909,421.60 made by CR to Olympic Marine Services International, Inc. (which
owns the remaining 25% of the issued and outstanding securities of Westoil),
any and all advances made by CR to Westoil, and any and all advances made by
Chauvco (all of which shall have first been assigned by Chauvco to CR) to the
Gabon Subsidiaries and Westoil (such securities in Section 1.1(b)(i), (ii) and
(iii) collectively, the "Gabon Securities");
(c) Chauvco shall transfer, assign and convey to CRI, in
consideration for $1.00, all of Chauvco's right, title, benefit and interest in
and to any and all trademarks (including registrations and applications
therefor), trade names and the internet domain name "chauvco.com" owned by
Chauvco as at the Effective Time, and the other assets and property which are
set out in Exhibit F;
(d) US Co Sub (as hereinafter defined) shall purchase from Chauvco
all of the issued and outstanding common shares of CRI (the "CRI Shares") in
consideration of the payment by way of promissory note of US Co Sub to Chauvco
in an amount equal to the subscription price paid for such CRI Shares by
Chauvco under Section 1.1(a);
(e) each of the outstanding options to purchase Chauvco Common
Shares which has not been exercised prior to the Record Date (collectively, the
"Chauvco Options") (which includes all outstanding options granted under
Chauvco's stock option plan as amended and restated on November 10, 1995 (the
"Chauvco Option Plan")) will vest, if not already vested, and be transferred to
US Co Sub in consideration for one (1) CRI Share and, in accordance with the
election of each holder thereof (the "Optionholder") and the remainder of this
Section 1.1(e) and Section 1.1(f), a number of shares of US Co common stock
("US Co Common Stock") determined in accordance with the Exchange Ratio (as
hereinafter defined) in which event, in addition to transferring the Chauvco
Options to US Co Sub, the Optionholder will be required to make a payment to US
Co Sub (the "Option Payment") in an amount equal to the aggregate exercise
price which the Optionholder would otherwise be required to pay on the exercise
of such options. As an alternative to making the Option Payment, Optionholders
will be entitled to elect to reduce the number of shares of US Co Common Stock
to be received by the number obtained by dividing the Option Payment by the US
Co Stock Price, as defined in Section 1.3 (converted into Canadian dollars
using the Currency Exchange Rate (as hereinafter defined)). Each Optionholder
will receive only a whole number of shares of US Co Common Stock resulting from
the transfer of his Chauvco Options. In lieu of fractional shares of US Co
Common Stock, each Optionholder who would otherwise be entitled to receive such
fractional shares shall be paid by US Co Sub an amount determined in accordance
with the Plan of Arrangement in full satisfaction of such fractional
entitlement;
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(f) an Optionholder electing to make the Option Payment and
receive the applicable number of shares of US Co Common Stock under Section
1.1(e) above shall give effect to the election by depositing with Montreal
Trust Company of Canada (the "Depositary"), prior to the date which is two (2)
days prior to the date of the Chauvco Meeting (the "Election Deadline"), a duly
completed letter of transmittal and election form (the "Option Letter of
Transmittal and Election Form") in the form provided by Chauvco along with the
proxy materials indicating such holder's election and by agreeing to pay the
Option Payment to the Depositary as agent for US Co Sub. Coincident with the
receipt of the CRI Shares and shares of US Co Common Stock, such Optionholder
shall pay the Option Payment to the Depositary as agent for US Co Sub less any
amounts receivable by such Optionholder in connection with fractional
entitlements under the Plan of Arrangement. In the event that an Optionholder
who has elected to make the Option Payment fails to make the Option Payment on
or before the delivery of the securities to the Optionholder, the Depositary
shall be entitled to sell all or any portion of the shares of US Co Common
Stock held on behalf of such Optionholder to satisfy the Option Payment and
remit the same to US Co Sub. In the event that an Optionholder has failed to
make an election in the Option Letter of Transmittal and Election Form pursuant
to this paragraph, such Optionholder shall be deemed to have elected the option
to receive less shares of US Co Common Stock by not making the Option Payment;
(g) each of the outstanding Chauvco Common Shares will be
transferred to US Co Sub in consideration for one (1) CRI Share and, at the
election of the holders of the Chauvco Common Shares:
(i) a number of shares of US Co Common Stock determined
in accordance with the Exchange Ratio. Each such
holder of Chauvco Common Shares will receive only a
whole number of shares of US Co Common Stock
resulting from the transfer of such holder's Chauvco
Common Shares to US Co Sub. In lieu of fractional
shares of US Co Common Stock, each holder of a
Chauvco Common Share who otherwise would be entitled
to receive such fractional share shall be paid by US
Co Sub an amount determined in accordance with the
Plan of Arrangement in full satisfaction of such
fractional entitlement; or
(ii) a number of shares of Exchangeable Shares determined
in accordance with the Exchange Ratio. Each such
holder of Chauvco Common Shares will receive only a
whole number of Exchangeable Shares resulting from
the transfer of such holder's Chauvco Common Shares
to US Co Sub. In lieu of fractional Exchangeable
Shares, each holder of a Chauvco Common Share who
otherwise would be entitled to receive such
fractional share shall be paid by US Co Sub an
amount determined in accordance with the Plan of
Arrangement in full satisfaction of such fractional
entitlement;
(h) a holder of Chauvco Common Shares shall give effect to the
election in Section 1.1(g) above by depositing with the Depositary, prior to
the Election Deadline, a duly completed letter of transmittal and election form
(the "Letter of Transmittal and Election Form") in the form provided by Chauvco
along with the proxy materials indicating such holder's election. In the event
that a holder of Chauvco Common Shares has failed to validly make an election
under Section 1.1(g) in the Letter of Transmittal and Election Form pursuant to
this paragraph, such holder shall be deemed
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to have elected the option under Section 1.1(g)(i). Notwithstanding any
provision to the contrary, holders of Chauvco Common Shares who are not
residents of Canada for the purposes of the Income Tax Act (Canada) (the "ITA")
will not be entitled to elect to receive Exchangeable Shares under Section
1.1(g)(ii);
(i) upon the transfer of shares referred to in Section 1.1(g)
above: (i) each holder of a Chauvco Common Share shall cease to be such a
holder, shall have his name removed from the register of holders of Chauvco
Common Shares and shall become a holder of the number of fully paid CRI Shares
and Exchangeable Shares or shares of US Co Common Stock to which he is entitled
as a result of the transfer of shares referred to in Section 1.1(g) and such
holder's name shall be added to the register of holders of such securities
accordingly; and (ii) US Co Sub shall become the legal and beneficial owner of
all of the Chauvco Common Shares so transferred;
(j) holders of Chauvco Common Shares who are residents of Canada
for the purposes of the ITA shall be entitled to make an income tax election
pursuant to subsection 85(1) of the ITA with respect to the transfer of their
Chauvco Common Shares to US Co Sub referred to in Section 1.1(g)(ii) by
providing two signed copies of the necessary election forms to US Co Sub within
90 days following the Effective Date, duly completed with the details of the
number of shares transferred and the applicable agreed amounts for the purposes
of such elections. Thereafter, subject to the election forms complying with the
provisions of the ITA, the forms will be signed by US Co Sub and returned to
such holders of Chauvco Common Shares for filing with Revenue Canada, Customs,
Excise and Taxation; and
(k) US Co Sub shall be continued as a corporation under the ABCA
and its Articles of Continuance shall include the items set forth in Exhibit G.
1.2 US CO SUB
(a) On or prior to the Effective Date, US Co shall (directly or
through a wholly-owned subsidiary incorporated in the United States)
incorporate a new corporation under the Company Act (British Columbia) ("US Co
Sub") to be named Pioneer Natural Resources (Canada) Ltd. and shall include the
following provisions in its memorandum of association (or as may be amended by
mutual agreement on the advice of outside counsel to comply with the Company
Act):
(i) a class of common voting shares (the "US Co Sub
Common Shares") unlimited in number;
(ii) a class of exchangeable shares (the "Exchangeable
Shares") unlimited in number; and
(iii) a restriction on the business of US Co Sub;
all as set out in Exhibit G and, in connection with such incorporation, US Co
shall (directly or through a wholly-owned subsidiary incorporated in the United
States) cause US Co Sub to purchase from US Co that number of newly issued
shares of US Co Common Stock which will enable US Co Sub to satisfy its
obligation to deliver US Co Common Stock to holders of Chauvco Common Shares
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and to Optionholders who transfer their Chauvco Common Shares or Chauvco
Options to US Co Sub under Sections 1.1(g)(i) and 1.1(e) above.
(b) US Co shall cause US Co Sub to complete the transactions
contemplated herein.
1.3 EXCHANGE RATIO
As used herein, the term "Exchange Ratio" means in respect of
Exchangeable Shares or US Co Common Stock to be delivered upon the transfer of
Chauvco Common Shares or Chauvco Options to US Co Sub, a ratio of the number of
Exchangeable Shares or shares of US Co Common Stock per Chauvco Common Share or
Chauvco Option equal to:
(a) if the US Co Stock Price is less than US$33.50, (.493827);
(b) if the US Co Stock Price is at least US$33.50 but less than
US$39.01,
.493827 - ((US Co Stock Price - 33.50) X .042360)
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5.51
and
(c) if the US Co Stock Price is equal to or greater than $39.01,
(.451467).
The Exchange Ratio as so determined in each case shall be rounded to six
decimal places. The "US Co Stock Price" shall mean the average closing sales
price, regular way, per share of the US Co Common Stock on the NYSE in United
States dollars as reported in the Wall Street Journal over the ten (10)
consecutive trading days ending on the third trading day next preceding the
date of the Chauvco Meeting. Notwithstanding the foregoing, if the Exchange
Ratio is above .465116, US Co may elect to cause US Co Sub to deliver, in lieu
of Exchangeable Shares and shares of US Co Common Stock, a number of
Exchangeable Shares or shares of US Co Common Stock for each Chauvco Common
Share or Chauvco Option based on the Exchange Ratio as set forth above equal to
(.465116) and an amount in cash (in Canadian dollars) per Chauvco Common Share
or Chauvco Option equal to the product of (x) the US Co Stock Price multiplied
by the noon spot rate of exchange of US dollars to Canadian dollars announced
by the Bank of Canada on the day preceding the date of calculation for the
exchange (the "Currency Exchange Rate") and (y)
Exchange Ratio -- .465116
1.4 ADJUSTMENTS FOR CAPITAL CHANGES
Prior to the Effective Time, Chauvco shall not recapitalize through a
subdivision of its outstanding shares into a greater number of shares, or a
combination of its outstanding shares into a lesser number of shares, or
reorganize, reclassify or otherwise change its outstanding shares into the same
or a different number of shares of other classes, or declare a dividend on its
outstanding shares payable in shares of its capital stock or securities
convertible or exchangeable into shares of its capital stock. Prior to the
Effective Time, US Co may with prior written consent of Chauvco recapitalize
through a subdivision of its outstanding shares into a greater number of
shares, or a
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combination of its outstanding shares into a lesser number of shares, or
reorganize, reclassify or otherwise change its outstanding shares into the same
or a different number of shares of other classes, or declare a dividend on its
outstanding shares payable in shares of its capital stock or securities
convertible or exchangeable into shares of its capital stock, provided that, in
connection therewith the Exchange Ratio shall be adjusted appropriately so as
to maintain the relative proportionate interests of the holders of Chauvco
Common Shares and the holders of the shares of US Co Common Stock and provided
further that, the consent of Chauvco may not be withheld if the foregoing
proviso is complied with. No such changes shall be made by US Co other than
those made in accordance with this Agreement.
1.5 DISSENTING SHAREHOLDERS
Holders of Chauvco Common Shares may exercise rights of dissent with
respect to such shares in connection with the Arrangement pursuant to and in
the manner set forth in Section 184 of the ABCA and Section 3.1 of the Plan of
Arrangement (such holders referred to as "Dissenters" or as "Dissenting
Shareholders"). Chauvco shall give US Co (i) prompt notice of any written
demands of a right of dissent, withdrawals of such demands, and any other
instruments served pursuant to the ABCA and received by Chauvco and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such rights. Without the prior written consent of US Co, except as required by
applicable law, Chauvco shall not make any payment with respect to any such
rights or offer to settle or settle any such rights. The obligations in respect
of Dissenting Shareholders shall be apportioned between Chauvco and CRI as set
forth in the Plan of Arrangement.
1.6 OTHER EFFECTS OF THE ARRANGEMENT
The Arrangement will, from and after the Effective Time, have all of
the effects provided by applicable law, including, without limitation, the
ABCA.
1.7 JOINT PROXY STATEMENT; FORM F-4, FORM S-4 AND FORM S-3 REGISTRATION
STATEMENT
(a) As promptly as practicable after execution of this Agreement,
US Co and Chauvco shall prepare and file with the United States Securities and
Exchange Commission (the "SEC") a preliminary joint management information
circular and proxy statement (the "Joint Proxy Statement"), together with any
other documents required by the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in connection with the Arrangement and the other transactions
contemplated hereby. The Joint Proxy Statement shall constitute (i) the
management information circular of Chauvco with respect to the meeting of
shareholders of Chauvco relating to the Arrangement and the approval of certain
matters in connection therewith (the "Chauvco Meeting") and (ii) the proxy
statement of US Co with respect to the meeting of stockholders of US Co with
respect to the issuance of US Co Common Stock from time to time upon exchange
of Exchangeable Shares and any other matters requiring approval of such
stockholders in connection with the Arrangement (the "US Co Stockholders
Meeting"). As promptly as practicable after the preliminary Joint Proxy
Statement is cleared by the SEC, US Co and Chauvco shall cause the Joint Proxy
Statement to be mailed to each company's respective stockholders. If either
Chauvco or US Co determines on the advice of its outside counsel (with the
concurrence of outside counsel for the other) that the offer and sale of the
Exchangeable Shares or the CRI Shares in connection with the Arrangement is
required to be registered under the
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Securities Act, then as applicable, US Co shall cause US Co Sub to file with
the SEC a registration statement on Form S-4 (or other applicable form) (such
registration statement, the "Form S-4") and if it is determined that the offer
and sale of the CRI Shares is not otherwise exempt from such registration,
Chauvco and US Co shall (a) agree on appropriate and equitable adjustments to
the Plan of Arrangement so that CRI Shares that would otherwise be issued to
holders who are residents of the United States shall instead be sold by a
trustee or agent and the net proceeds of such sales remitted to such holders
and otherwise as may be necessary to avoid offers and sales of the CRI Shares
being deemed to take place within the United States, if such adjustments will
avoid the necessity for such registration or (b) if such adjustments cannot
reasonably be undertaken so as to avoid the necessity for such registration,
Chauvco shall cause CRI to file with the SEC a registration statement on Form
F-4 (or other applicable form) covering such offer and sale (such registration
statement, the "Form F-4") and the Joint Proxy Statement shall also constitute
the prospectuses of US Co Sub and CRI, as applicable, with respect to such
offer and sale and shall be included in the Form S-4 or Form F-4, as
applicable. Notwithstanding anything herein to the contrary, neither Chauvco
nor US Co shall be under any obligation to cause to be filed the Form S-4 or
Forms F-4 if it shall have determined on the advice of its outside counsel
(with the concurrence of outside counsel for the other) that the offer and sale
of the Exchangeable Shares and the CRI Shares pursuant to the Arrangement is
exempt from the registration requirements of Section 5 of the Securities Act by
virtue of Section 3(a)(10) thereof. In connection with such determination, US
Co and Chauvco shall prepare and file with the SEC a request for no action (the
"No Action Request") seeking to confirm the availability of such exemption. If
US Co determines on the advice of its outside counsel (with the concurrence of
outside counsel for Chauvco) that it is necessary to file a registration
statement on Form S-3 (or other applicable form)(the "Form S-3") in order to
register the US Co Common Stock to be issued from time to time after the
Effective Time upon exchange of the Exchangeable Shares, then US Co shall file
the Form S-3 with the SEC and use its best efforts to maintain the
effectiveness of such registration for the period that such Exchangeable Shares
remain outstanding, and US Co and Chauvco shall use their best efforts to cause
the Form S-3 to become effective.
(b) Each party shall promptly furnish to the other party all
information concerning such party and its stockholders as may be reasonably
required in connection with any action contemplated by this Section 1.5. The
Joint Proxy Statement and, if required, the Form F-4, Form S-4 and Form S-3,
shall comply in all material respects with all applicable requirements of law.
Each of US Co and Chauvco will notify the other promptly of the receipt of any
comments from the SEC and of any request by the SEC for amendments or
supplements to the Joint Proxy Statement or the Form F-4, Form S-4 or Form S-3,
if required, or for additional information, and will supply the other with
copies of all correspondence with the SEC with respect to the Joint Proxy
Statement or the Form S-3, if required. Whenever any event occurs which should
be set forth in an amendment or supplement to the Joint Proxy Statement or the
Form F-4, Form S-4 or Form S-3, if required, US Co or Chauvco, as the case may
be, shall promptly inform the other of such occurrence and cooperate in filing
with the SEC, and/or mailing to stockholders of US Co or Chauvco, as may be
applicable, such amendment or supplement.
(c) US Co and Chauvco shall take any action required to be taken
under any applicable provincial or state securities laws (including "blue sky"
laws) in connection with the issuance of the Exchangeable Shares, CRI Shares or
US Co Common Stock and the Arrangement; provided, however, that with respect to
the blue sky and Canadian provincial qualifications, neither US Co nor Chauvco
shall be required to register or qualify as a foreign corporation or reporting
issuer where
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any such entity is not now so registered or qualified except as to matters and
transactions arising solely from the offer and sale of the US Co Common Stock,
the CRI Shares or the issuance of the Exchangeable Shares.
1.8 REORGANIZATION
The parties intend to adopt this Agreement and the Plan of Arrangement
as a qualified stock purchase under Section 338(d)(3) of the Internal Revenue
Code of 1986, as amended (the "Code").
1.9 MATERIAL ADVERSE EFFECT
In this Agreement, any reference to any event, change or effect being
"material" with respect to any entity or group of entities means any material
event, change or effect related to the condition (financial or otherwise),
properties or business of such entity or group of entities. In this Agreement,
the term "Material Adverse Effect" used with respect to any party means any
event, change or effect that is materially adverse to the condition (financial
or otherwise), properties or business of such party and its subsidiaries, taken
as a whole; provided, that a Material Adverse Effect shall not include any
adverse effect resulting from changes in general economic conditions or
conditions generally affecting the industries in which US Co or Chauvco
operate.
1.10 CURRENCY
Unless otherwise specified, all references in this Agreement to
"dollars" or "$" shall mean Canadian dollars.
1.11 EXHIBITS
The following exhibits attached hereto shall form part of this
Agreement:
(a) Exhibit A - Plan of Arrangement;
(b) Exhibit B - Support Agreement;
(c) Exhibit C - Voting and Exchange Trust Agreement;
(d) Exhibit D - Terms and Conditions of US Co
Special Voting Stock;
(e) Exhibit E - List of Lock-up Shareholders;
(f) Exhibit F - List of Other Assets to be
Transferred to CRI; and
(g) Exhibit G - Provisions of Memorandum of
Association of US Co Sub.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CHAUVCO
Except as set forth in a letter dated the date of this Agreement and
delivered by Chauvco to US Co concurrently herewith (the "Chauvco Disclosure
Letter") and subject to Sections 7.7 and 7.8 hereof, Chauvco hereby represents
and warrants to US Co that:
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2.1 ORGANIZATION AND STANDING
Chauvco and each partnership, joint venture, corporation, association
or other business entity of which more than 50% of the total voting power of
shares of stock or units of ownership or beneficial interest entitled to vote
in the election of directors (or members of a comparable governing body) is
owned or controlled, directly or indirectly, by Chauvco (the "Chauvco
Subsidiaries"), is duly incorporated or formed, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has full requisite power and authority to carry on
its business as it is currently conducted, and to own, lease and operate the
properties currently owned, leased and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation or
organization authorized to do business in all jurisdictions in which the
character of the properties owned or leased or the nature of the business
conducted by it would make such qualification or licensing necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on Chauvco. The Chauvco Disclosure Letter sets forth a complete
list of the Chauvco Subsidiaries (and all other subsidiaries in which Chauvco
has an interest of 50% or less determined as described above), the percentage
of each subsidiary's outstanding capital stock or other ownership interest
owned by Chauvco or another Chauvco Subsidiary and a description of any lien,
charge, mortgage, security interest, option, preferential purchase right or
other right or interest of any other person (collectively, an "Encumbrance") on
such stock, on treasury stock or other ownership interest and a complete list
of each jurisdiction in which each of Chauvco and each Chauvco Subsidiary is
duly qualified, registered and in good standing to do business.
2.2 AGREEMENT AUTHORIZED AND ITS EFFECT ON OTHER OBLIGATIONS
(a) Chauvco has all requisite corporate power and authority to
enter into this Agreement and, subject to approval of this Agreement and the
Arrangement by the shareholders of Chauvco and approval by the Court, to
perform its obligations hereunder and to consummate the Arrangement and the
other transactions contemplated by this Agreement. The execution and delivery
of this Agreement by Chauvco and, subject to approval of this Agreement and the
Arrangement by the shareholders of Chauvco and approval by the Court, the
consummation by Chauvco of the Arrangement and the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Chauvco. This Agreement has been duly executed and delivered by
Chauvco and is the valid and binding obligation of Chauvco, enforceable in
accordance with its terms, except that such enforceability may be subject to
(i) bankruptcy, insolvency, reorganization or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) Neither the execution, delivery and performance of this
Agreement or the Arrangement by Chauvco, nor the consummation of the
transactions contemplated hereby or thereby by Chauvco nor compliance with the
provisions hereof or thereof by Chauvco will: (i) conflict with, or result in
any violations of, the articles of amalgamation or bylaws of Chauvco or any
equivalent document of any of the Chauvco Subsidiaries, or (ii) result in any
breach of or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material
benefit under, or result in the creation of any Encumbrance upon any of the
material properties or assets of Chauvco or any of the Chauvco Subsidiaries
under, any term, condition or provision of any loan or credit
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agreement, note, bond, mortgage, indenture, lease or other material agreement,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Chauvco or any of the Chauvco Subsidiaries or their respective properties or
assets, other than any such breaches, defaults, losses, or encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect on
Chauvco.
2.3 GOVERNMENTAL CONSENTS
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (each a
"Governmental Entity"), is required to be obtained by Chauvco or any of the
Chauvco Subsidiaries in connection with the execution and delivery of this
Agreement or the Plan of Arrangement or the consummation of the transactions
contemplated hereby or thereby, except for: (i) the filing with the applicable
Canadian provincial securities commissions or regulatory authorities (the
"Commissions") and the Court and the mailing to shareholders of Chauvco of the
Joint Proxy Statement relating to the Chauvco Meeting to be held with respect
to the approval of this Agreement and the Arrangement, (ii) the furnishing to
the SEC of all required filings under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated by the
SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby (the "SEC Filings"); (iii) approval by the
Court of the Arrangement and the filings of the articles of arrangement and
other required arrangement or other documents as required by the ABCA; (iv)
such filings, authorizations, orders and approvals as may be required under
state "control share acquisition," "anti-takeover" or other similar statutes,
any other applicable federal, provincial or state securities laws and the rules
of the NYSE or The Toronto Stock Exchange ("TSE"); (v) such filings and
notifications as may be necessary under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); (vi) such notices and
filings as may be necessary under the Investment Canada Act and under the
Competition Act (Canada); and (vii) where the failure to obtain such consents,
approvals, etc., would not prevent or delay the consummation of the Arrangement
or otherwise prevent Chauvco from performing its obligations under this
Agreement and would not reasonably be expected to have a Material Adverse
Effect on Chauvco.
2.4 CAPITALIZATION
The authorized capital stock of Chauvco consists of an unlimited
number of Chauvco Common Shares, no par value. At the close of business on
August 29, 1997, 48,464,312 Chauvco Common Shares were issued and outstanding,
and no Chauvco Common Shares were held by Chauvco in its treasury. As of August
29, 1997, an aggregate of 2,901,995 Chauvco Common Shares were reserved for
issuance pursuant to outstanding Chauvco Options granted under the Chauvco
Option Plan. All issued and outstanding Chauvco Common Shares have been duly
authorized, validly issued and are fully paid and non-assessable. Except in
connection with the Chauvco Option Plan and in connection with Chauvco's
shareholder rights plan adopted pursuant to that agreement dated April 24, 1997
between Chauvco and Montreal Trust Company of Canada (the "Chauvco SRP"), no
person, firm or corporation has any agreement or option or any right or
privilege, whether by law, pre-emptive or contractual, capable of becoming an
agreement, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription, allotment or
issuance of any of the unissued shares in the capital of Chauvco or of any
securities of Chauvco.
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2.5 SECURITIES REPORTS AND FINANCIAL STATEMENTS
Chauvco and all predecessor corporations to Chauvco have filed all
forms, reports and documents with the Commissions required to be filed by it or
them pursuant to relevant Canadian securities statutes, regulations, policies
and rules (collectively, the "Chauvco Securities Reports"), all of which have
complied in all material respects with all applicable requirements of such
statutes, regulations, policies and rules. None of the Chauvco Securities
Reports, at the time filed or as subsequently amended, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Chauvco and such predecessor corporations contained in
the Chauvco Securities Reports complied in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the relevant Canadian securities statutes with respect thereto, were prepared
in accordance with Canadian generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may have been
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by applicable laws, rules or regulations) and fairly present
(subject, in the case of the unaudited statements, to normal, year-end audit
adjustments) the consolidated financial position of Chauvco and such
predecessor corporations and the consolidated Chauvco Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended. There has been no change in
the accounting policies or the methods of making accounting estimates of
Chauvco or its predecessor corporations or changes in estimates that are
material to such financial statements, except as described in the notes
thereto.
2.6 LIABILITIES
Chauvco and the Chauvco Subsidiaries do not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or have any
knowledge of any potential liabilities or obligations, other than those (i)
disclosed in the Chauvco Securities Reports, (ii) set forth in the Chauvco
Disclosure Letter, (iii) incurred in the ordinary course of business since June
30, 1997; or (iv) which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect on Chauvco.
2.7 INFORMATION SUPPLIED
None of the information supplied or to be supplied by Chauvco for
inclusion or incorporation by reference in the Joint Proxy Statement (and, if
filed, the Form S-3, S-4 or F-4) will, at the time the Joint Proxy Statement is
mailed to the shareholders of Chauvco and at the time of the Chauvco Meeting
(and, if filed, at the time the Form S-3, S-4 or F-4 is declared effective),
contain any untrue statement of a material fact or omit to state any 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. The
Joint Proxy Statement will comply as to form in all material respects with the
provisions of the ABCA and applicable Canadian securities laws and the rules
and regulations promulgated thereunder.
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2.8 NO DEFAULTS
Neither Chauvco nor any Chauvco Subsidiary is, or has received notice
that it would be with the passage of time, in default or violation of any term,
condition or provision of (i) its charter documents or bylaws; (ii) any
judgment, decree or order applicable to it; or (iii) any loan or credit
agreement, note, bond, mortgage, indenture, material contract, agreement,
lease, license or other instrument to which Chauvco or any Chauvco Subsidiary
is now a party or by which it or any of its properties or assets may be bound,
except in the case of item (iii) for defaults and violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
Chauvco.
2.9 LITIGATION; INVESTIGATIONS
There is no claim, action, suit or proceeding pending or, to the
knowledge of Chauvco, threatened, which would, if adversely determined,
individually or in the aggregate, have a Material Adverse Effect on Chauvco,
nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Chauvco or any of the
Chauvco Subsidiaries having, or which, insofar as reasonably can be foreseen,
in the future could have, any such effect. There is no investigation pending
or, to the knowledge of Chauvco, threatened, against Chauvco or any of the
Chauvco Subsidiaries before any Governmental Entity which could have any such
effect.
2.10 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in the Chauvco Disclosure Letter, other than as a
result of the transactions contemplated by this Agreement, since June 30, 1997,
there has not been:
(a) Financial Change. Any material adverse change in the
financial condition, operations, assets, liabilities or business of Chauvco or
the Chauvco Subsidiaries;
(b) Property Damage. Any material damage, destruction, or loss to
the business or properties of Chauvco or the Chauvco Subsidiaries (whether or
not covered by insurance);
(c) Dividends or Redemptions. Any declaration, setting aside, or
payment of any dividend or other distribution in respect of the capital stock
of Chauvco, or any direct or indirect redemption, purchase or any other
acquisition by Chauvco of any such stock;
(d) Capitalization Change. Any change in the capital stock or in
the number of shares or classes of Chauvco's authorized or outstanding capital
stock as described in Section 2.4 (other than as a result of exercises of
currently outstanding Chauvco Options); or
(e) Other Material Changes. Any other event or condition known to
Chauvco particularly pertaining to and adversely affecting the operations,
assets or business of Chauvco or the Chauvco Subsidiaries (other than events or
conditions which are of a general or industry-wide nature and of general public
knowledge) which would constitute a Material Adverse Effect on Chauvco.
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2.11 ADDITIONAL CHAUVCO INFORMATION
The Chauvco Disclosure Letter contains true, complete and correct
lists of the following items with respect to Chauvco and the Chauvco
Subsidiaries, and Chauvco agrees that upon the request of US Co, it will
furnish to US Co true, complete and correct copies of any documents referred to
in such lists:
(a) Material Contracts. All contracts which involve, or may
involve, aggregate payments by any party thereto of $5,000,000 or more, which
are to be performed in whole or in part after the Effective Time;
(b) Employee Compensation Plans. All bonus, retention bonus,
company severance policy, employee stock option plans, incentive compensation,
deferred compensation, profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other fringe benefit plans, arrangements or trust
agreements together with copies of the most recent reports with respect to such
plans, arrangements, or trust agreements filed with any Governmental Entity and
all tax determination letters that have been received with respect to such
plans;
(c) Employee Agreements. Any collective bargaining agreements with
any labor union or other representative of employees, including amendments and
supplements, in each case covering ten (10) or more employees, all employment
agreements involving, individually, remuneration greater than $100,000 per
annum and all executive termination agreements;
(d) Patents. All patents, trademarks, copyrights and other
material intellectual property rights owned, licensed or used;
(e) Trade Names. All trade names and fictitious names used or
held, whether and where such names are registered and where used;
(f) Promissory Notes. All long-term and short-term promissory
notes, installment contracts, loan agreements, credit agreements, and any other
agreements relating thereto or with respect to collateral securing the same;
and
(g) Guarantees. All indebtedness, liabilities and commitments of
others and as to which it is a guarantor, endorser, co-maker, surety, or
accommodation maker, or is contingently liable therefor (excluding liabilities
as an endorser of checks and the like in the ordinary course of business) and
all letters of credit, whether stand-by or documentary, issued by any third
party.
2.12 CERTAIN AGREEMENTS
Except in connection with Chauvco's executive termination agreements,
retention bonus plan, company severance policy and Stock Option Plan, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
without limitation, severance, unemployment compensation, parachute payment,
bonus or otherwise) becoming due to any director, employee or independent
contractor of Chauvco or the Chauvco Subsidiaries under any Chauvco Plan (as
hereinafter defined) or otherwise, (ii)
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materially increase any benefits otherwise payable under any Chauvco Plan or
otherwise or (iii) result in the acceleration of the time of payment or vesting
of any such benefits.
2.13 EMPLOYEE BENEFIT PLANS
Except for health insurance, vacation, severance and similar plans
which are set forth in the Chauvco Disclosure Letter ("Chauvco Plans"), there
are no employee benefits plans covering active, former or retired employees of
Chauvco and the Chauvco Subsidiaries. Each Chauvco Plan has been maintained and
administered in material compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations.
2.14 INTELLECTUAL PROPERTY
Chauvco or the Chauvco Subsidiaries owns or possesses licenses to use
all patents, patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, copyrights and written
know-how, trade secrets and all other similar proprietary data and the goodwill
associated therewith (collectively, the "Chauvco Intellectual Property") that
are either material to the business of Chauvco or any Chauvco Subsidiary or
that are necessary for the manufacture, use, license or sale of any services or
products manufactured, used, licensed or sold by Chauvco or the Chauvco
Subsidiaries, including all such intellectual property listed in the Chauvco
Disclosure Letter. The Chauvco Intellectual Property is owned or licensed by
Chauvco or the Chauvco Subsidiaries free and clear of any Encumbrance other
than such Encumbrances as are listed in the Chauvco Disclosure Letter. Except
as otherwise indicated in such letter or in the ordinary course of business,
neither Chauvco nor the Chauvco Subsidiaries has granted to any other person
any license to use any Chauvco Intellectual Property. Neither Chauvco nor the
Chauvco Subsidiaries has received any notice of infringement, misappropriation,
or conflict with, the intellectual property rights of others in connection with
the use by Chauvco or the Chauvco Subsidiaries of the Chauvco Intellectual
Property.
2.15 TITLE TO PROPERTIES
Except for goods and other property sold, used or otherwise disposed
of in the ordinary course of business for fair value, Chauvco has good and
indefeasible title to all its properties, interests in properties and assets,
real and personal, reflected in its June 30, 1997 financial statements, free
and clear of any Encumbrance, except (i) Encumbrances reflected in the balance
sheet of Chauvco dated June 30, 1997, (ii) liens for current taxes not yet due
and payable, and (iii) such imperfections of title, easements and Encumbrances,
if any, which would not, individually or in the aggregate, have a Material
Adverse Effect on Chauvco. All leases pursuant to which Chauvco or any Chauvco
Subsidiary leases (whether as lessee or lessor) any substantial amount of real
or personal property are in good standing, valid, and effective; and there is
not, under any such leases, any existing or prospective default or event of
default or event which with notice or lapse of time, or both, would constitute
a default by Chauvco or any Chauvco Subsidiary which would, individually or in
the aggregate, have a Material Adverse Effect on Chauvco and in respect to
which Chauvco or a Chauvco Subsidiary has not taken adequate steps to prevent a
default from occurring. The buildings and premises of Chauvco and the Chauvco
Subsidiaries that are used in its business are in good operating condition and
repair, subject only to ordinary wear and tear. All major items of operating
equipment of Chauvco and the Chauvco Subsidiaries are in good operating
condition and
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in a state of reasonable maintenance and repair, ordinary wear and tear
excepted, and are free from any known defects except as may be repaired by
routine maintenance and such minor defects as to not substantially interfere
with the continued use thereof in the conduct of normal operations.
2.16 ENVIRONMENTAL MATTERS
Except as set forth in the Chauvco Disclosure Letter:
(a) Environmental Conditions. There are no environmental
conditions or circumstances, such as the presence or release of any hazardous
substance, on any property presently or previously owned or leased by Chauvco
or the Chauvco Subsidiaries that could result in a Material Adverse Effect on
Chauvco.
(b) Permits, etc. Chauvco and the Chauvco Subsidiaries have in
full force and effect all environmental permits, licenses, approvals and other
authorizations required to conduct their operations and are operating in
material compliance thereunder.
(c) Compliance. Chauvco's and the Chauvco Subsidiaries' operations
and use of their assets do not violate any applicable United States or Canadian
or other federal, provincial, state or local law, statute, ordinance, rule,
regulation, order or notice requirement (collectively the "Applicable
Environmental Laws") pertaining to (a) the condition or protection of air,
groundwater, surface water, soil, or other environmental media, (b) the
environment, including natural resources or any activity which affects the
environment, or (c) the regulation of any pollutants, contaminants, waste or
substances (whether or not hazardous or toxic), including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act (42 U.
S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.) the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U. S.C. Section 2601 et seq.), the Safe Drinking Water Act (42
U.S.C. Section 300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section
401 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and
analogous Canadian, Argentine, foreign, provincial, state and local provisions,
as any of the foregoing may have been amended or supplemented from time to
time, except for violations which, either singly or in the aggregate, would not
result in a Material Adverse Effect on Chauvco.
(d) Past Compliance. None of the operations or assets of Chauvco
or the Chauvco Subsidiaries has ever been conducted or used by Chauvco or the
Chauvco Subsidiaries in such a manner as to constitute a violation of any of
the Applicable Environmental Laws, except for violations which, either singly
or in the aggregate, would not result in a Material Adverse Effect on Chauvco.
(e) Environmental Claims. No notice has been served on Chauvco or
any Chauvco Subsidiaries from any entity, governmental agency or individual
regarding any existing, pending or threatened investigation or inquiry related
to alleged violations under any Applicable Environmental Laws, or regarding any
claims for remedial obligations or contribution under any Applicable
Environmental Laws, other than any of the foregoing which, either singly or in
the aggregate, would not result in a Material Adverse Effect on Chauvco.
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(f) Renewals. Chauvco does not know of any reason it or US Co
would not be able to renew any of the permits, licenses, or other
authorizations required pursuant to any Applicable Environmental Laws to
operate and use any of Chauvco's or the Chauvco Subsidiaries' assets for their
current purposes and uses.
2.17 COMPLIANCE WITH OTHER LAWS
Except as set forth in the Chauvco Disclosure Letter, neither Chauvco
nor any Chauvco Subsidiary is in violation of or in default with respect to, or
in alleged violation of or alleged default with respect to any other applicable
law or any applicable rule, regulation, or any writ or decree of any court or
any governmental commission, board, bureau, agency, or instrumentality, or
delinquent with respect to any report required to be filed with any
Governmental Entity, except for violations which, either singly or in the
aggregate, do not and are not expected to result in a Material Adverse Effect
on Chauvco.
2.18 TAXES
Except with respect to failures which, in the aggregate, would not
result in a Material Adverse Effect on Chauvco, proper and accurate federal,
provincial, state and local income, capital, withholding, value added, sales,
use, franchise, gross revenue, turnover, excise, payroll, property, employment,
customs duties and any and all other tax returns, reports, and estimates have
been filed with appropriate governmental agencies, domestic and foreign, by
Chauvco and each of the Chauvco Subsidiaries for each period for which any
returns, reports, or estimates were due (taking into account any extensions of
time to file before the date hereof); all taxes shown by such returns to be
payable and any other taxes due and payable have been paid other than those
being contested in good faith by Chauvco or a Chauvco Subsidiary; and the tax
provision reflected in Chauvco's financial statements as of June 30, 1997, is
adequate, in accordance with Canadian generally accepted accounting principles,
to cover liabilities of Chauvco and the Chauvco Subsidiaries at the date
thereof for all taxes, including any interest, penalties and additions to taxes
of any character whatsoever applicable to Chauvco and the Chauvco Subsidiaries
or their assets or businesses. There are no tax liens on any assets of Chauvco
or the Chauvco Subsidiaries except for taxes not yet currently due and those
which could not reasonably be expected to result in a Material Adverse Effect
on Chauvco.
2.19 VOTE REQUIRED
Except as may be provided in the Interim Order, at the Chauvco Meeting
at which a quorum is present, the affirmative vote of the holders of two-thirds
of the Chauvco Common Shares present is the only vote required to approve this
Agreement, the Arrangement and the consummation of the transactions
contemplated hereby.
2.20 BROKERS AND FINDERS
Other than Salomon Brothers Inc. and RBC Dominion Securities Inc. in
accordance with the terms of their respective engagement letters in final
forms, copies of which have previously been provided to US Co, none of Chauvco
or any of the Chauvco Subsidiaries nor any of their respective directors,
officers or employees has employed any broker or finder or incurred any
liability for any
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financial advisory fees, brokerage fees, commissions or similar payments in
connection with the transactions contemplated by this Agreement.
2.21 DISCLOSURE
No representation or warranty made by Chauvco in this Agreement, nor
any document, written information statement, financial statement, certificate
or Exhibit prepared and furnished or to be prepared and furnished by Chauvco or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, contained any untrue statement of a
material fact when made, or omitted to state a material fact necessary to make
the statements or facts contained herein or therein not misleading in light of
the circumstances under which they were furnished.
2.22 FAIRNESS OPINION
Chauvco's board of directors has received favourable written opinions
from Salomon Brothers Inc and RBC Dominion Securities Inc. as to the fairness
of the Plan of Arrangement and the other transactions contemplated herein.
2.23 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no material agreement, judgment, injunction, order or decree
binding upon Chauvco or any Chauvco Subsidiary that has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of Chauvco or any Chauvco Subsidiary, any acquisition of property by
Chauvco or any Chauvco Subsidiary, the conduct of business by Chauvco or any
Chauvco Subsidiary as currently conducted or the consummation of the
Arrangement.
2.24 BOOKS AND RECORDS
The books, records and accounts of Chauvco and the Chauvco
Subsidiaries (a) have been maintained in accordance with good business
practices on a basis consistent with prior years, (b) are stated in reasonable
detail and accurately and fairly reflect the transactions and dispositions of
the assets of Chauvco and the Chauvco Subsidiaries and (c) accurately and
fairly reflect the basis for the Chauvco financial statements. Chauvco has
devised and maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (a) transactions are executed in accordance
with management's general or specific authorization; and (b) transactions are
recorded as necessary (i) to permit preparation of financial statements in
conformity with Canadian generally accepted accounting principles or any other
criteria applicable to such statements and (ii) to maintain accountability for
assets.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF US CO
Except as set forth in a letter dated the date of this Agreement and
delivered by US Co to Chauvco concurrently herewith (the "US Co Disclosure
Letter"), US Co hereby represents and warrants to Chauvco, in each case with
respect to itself and with respect to its predecessor corporations, that:
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3.1 ORGANIZATION AND STANDING
US Co and each partnership, joint venture, corporation, association or
other business entity of which more than 50% of the total voting power of
shares of stock or units of ownership or beneficial interest entitled to vote
in the election of directors (or members of a comparable governing body) is
owned or controlled, directly or indirectly, by US Co (the "US Co
Subsidiaries"), is duly incorporated or formed, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has full requisite power and authority to carry on
its business as it is currently conducted, and to own, lease and operate the
properties currently owned, leased and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation or
organization authorized to do business in all jurisdictions in which the
character of the properties owned or leased or the nature of the business
conducted by it would make such qualification or licensing necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on US Co. The US Co Disclosure Letter sets forth a complete list
of the US Co Subsidiaries.
3.2 AGREEMENT AUTHORIZED AND ITS EFFECT ON OTHER OBLIGATIONS
(a) US Co has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and, subject to
approval of US Co's stockholders as provided in this Agreement, to consummate
the Arrangement and the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement by US Co and, subject to approval of
US Co's stockholders as provided in this Agreement, the consummation by US Co
of the Arrangement and the other transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of US Co. This
Agreement has been duly executed and delivered by US Co and is the valid and
binding obligation of US Co, enforceable in accordance with its terms, except
that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
(b) Neither the execution, delivery and performance of this
Agreement or the Arrangement by US Co, nor the consummation of the transactions
contemplated hereby or thereby by US Co nor compliance with the provisions
hereof or thereof by US Co will: (i) conflict with, or result in any violations
of, the certificate of incorporation or bylaws of US Co or any equivalent
document of any of the US Co Subsidiaries, or (ii) result in any breach of or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any material benefit under, or
result in the creation of any Encumbrance upon any of the material properties
or assets of US Co or any of the US Co Subsidiaries under, any term, condition
or provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease or other material agreement, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to US Co or any of the US Co
Subsidiaries or their respective properties or assets, other than any such
breaches, defaults, losses, or encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on US Co. Without limiting
the generality of the foregoing, upon the consummation of the Arrangement,
except as contemplated herein, no person or group of persons shall have any
right, contingent or otherwise, to elect, designate or appoint any director of
US Co and no person or group
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of persons shall have any right, contingent or otherwise that is inconsistent
with the provisions hereof.
3.3 GOVERNMENTAL CONSENTS
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required to be obtained
by US Co or any of the US Co Subsidiaries in connection with the execution and
delivery of this Agreement or the Plan of Arrangement or the consummation of
the transactions contemplated hereby or thereby, except for: (i) the filing
with the Commissions and the mailing to stockholders of US Co of the Joint
Proxy Statement relating to the US Co Stockholders Meeting, (ii) the furnishing
to the SEC of SEC Filings; (iii) approval by the Court of the Arrangement and
the filings of the articles of arrangement and other required arrangement or
other documents as required by the ABCA; (iv) such filings, authorizations,
orders and approvals as may be required under state "control share
acquisition," "anti-takeover" or other similar statutes, any other applicable
federal, provincial or state securities laws and the rules of the NYSE or the
TSE; (v) such filings and notifications as may be necessary under the HSR Act;
(vi) such notices and filings as may be necessary under the Investment Canada
Act and under the Competition Act (Canada); (vii) the filing of a Certificate
of Designation with the Delaware Secretary of State with respect to the
creation of special voting stock; and (viii) where the failure to obtain such
consents, approvals, etc., would not prevent or delay the consummation of the
Arrangement or otherwise prevent US Co from performing its obligations under
this Agreement and would not reasonably be expected to have a Material Adverse
Effect on US Co.
3.4 CAPITALIZATION
The authorized capital stock of US Co consists of 500,000,000 common
shares, U.S.$0.01 par value ("US Co Common Stock") and 100,000,000 preferred
shares, $0.01 par value (the "US Co Preferred Stock"). As of August 29, 1997,
there were 73,555,501 shares of US Co Common Stock outstanding, and 3,718,314
shares of US Co Common Stock were reserved for issuance upon the exercise of
stock options outstanding under US Co's stock option plan; at the same date, no
shares of US Co Preferred Stock were outstanding. Except in connection with US
Co's stock option plan, no person, firm or corporation has any agreement or
option or any right or privilege, whether by law, pre-emptive or contractual,
capable of becoming an agreement, including convertible securities, warrants or
convertible obligations of any nature, for the purchase, subscription,
allotment or issuance of any of the unissued shares in the capital of US Co or
of any securities of US Co. US Co has no shareholder rights plan or similar
arrangement in place in connection with the US Co Common Stock or otherwise
(provided that US Co shall be entitled to institute such a plan or similar
arrangement prior to the Effective Date so long as such plan treats the holders
of Exchangeable Shares in substantially the same manner as the holders of US Co
Common Stock and provided the institution of the shareholder rights plan does
not have a tax impact on the holders of Exchangeable Shares.
3.5 SECURITIES REPORTS AND FINANCIAL STATEMENTS
US Co and all predecessor corporations to US Co have filed all forms,
reports and documents required to be filed by them by the SEC or pursuant to
relevant United States securities statutes, regulations, policies and rules
(collectively, the "US Co Securities Reports"), all of which have
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complied in all material respects with all applicable requirements of such
statutes, regulations, policies and rules. None of the US Co Securities
Reports, at the time filed or as subsequently amended, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of US Co and such predecessor corporations contained in
the US Co Securities Reports complied in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the relevant United States securities statutes with respect thereto, were
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may have been indicated in the notes thereto or, in the case of unaudited
statements, as permitted by applicable laws, rules or regulations) and fairly
present (subject, in the case of the unaudited statements, to normal, year-end
audit adjustments) the consolidated financial position of US Co and such
predecessor corporations and the consolidated US Co Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended. There has been no change in
the accounting policies or the methods of making accounting estimates or
changes in estimates of US Co or its predecessor corporations that are material
to such financial statements, except as described in the notes thereto.
3.6 LIABILITIES
US Co and the US Co Subsidiaries do not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or have any
knowledge of any potential liabilities or obligations, other than those (i)
disclosed in the US Co Securities Reports or those of its predecessors, (ii)
set forth in the US Co Disclosure Letter, (iii) incurred in the ordinary course
of business since June 30, 1997, or (iv) which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect on US Co.
3.7 INFORMATION SUPPLIED
None of the information supplied or to be supplied by US Co for
inclusion or incorporation by reference in the Joint Proxy Statement (and, if
filed, the Form F-4 or Form S-3) will, at the time the Joint Proxy Statement is
mailed to the shareholders of US Co and at the time of the US Co Stockholders
Meeting (and, if filed, at the time the Form F-4 or Form S-3 is declared
effective), contain any untrue statement of a material fact or omit to state
any 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. The Joint Proxy Statement will comply as to form in all
material respects with the provisions of applicable United States securities
laws and the rules and regulations of the SEC.
3.8 NO DEFAULTS
Neither US Co nor any US Co Subsidiary is, or has received notice that
it would be with the passage of time, in default or violation of any term,
condition or provision of (i) its charter documents or bylaws; (ii) any
judgment, decree or order applicable to it; or (iii) any loan or credit
agreement, note, bond, mortgage, indenture, material contract, agreement,
lease, license or other instrument to which US Co or any US Co Subsidiary is
now a party or by which it or any of its
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properties or assets may be bound, except in the case of item (iii) for
defaults and violations which, individually or in the aggregate, would not have
a Material Adverse Effect on US Co.
3.9 LITIGATION; INVESTIGATIONS
There is no claim, action, suit or proceeding pending or, to the
knowledge of US Co, threatened, which would, if adversely determined,
individually or in the aggregate, have a Material Adverse Effect on US Co, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against US Co or any of the US Co Subsidiaries
having, or which, insofar as reasonably can be foreseen, in the future could
have, any such effect. There is no investigation pending or, to the knowledge
of US Co, threatened, against US Co or any of the US Co Subsidiaries before any
Governmental Entity which could have any such effect.
3.10 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in the US Co Disclosure Letter, other than as a
result of the transactions contemplated by this Agreement, since June 30, 1997,
there has not been:
(a) Financial Change. Any material adverse change in the
financial condition, operations, assets, liabilities or business of US Co or
the US Co Subsidiaries or its predecessors;
(b) Property Damage. Any material damage, destruction, or loss to
the business or properties of US Co or the US Co Subsidiaries (whether or not
covered by insurance);
(c) Dividends or Redemptions. Except as contemplated herein, any
declaration, setting aside, or payment of any dividend or other distribution in
respect of the capital stock of US Co, or any direct or indirect redemption,
purchase or any other acquisition by US Co of any such stock;
(d) Capitalization Change. Any change in the capital stock or in
the number of shares or classes of US Co's authorized or outstanding capital
stock as described in Section 3.4 (other than as a result of exercises of
currently outstanding options to purchase US Co Common Stock and other than as
contemplated in Section 1.4); or
(e) Other Material Changes. Any other event or condition known to
US Co particularly pertaining to and adversely affecting the operations, assets
or business of US Co or the US Co Subsidiaries (other than events or conditions
which are of a general or industry-wide nature and of general public knowledge)
which would constitute a Material Adverse Effect on US Co.
3.11 ADDITIONAL US CO INFORMATION
The US Co Disclosure Letter contains true, complete and correct lists
of the following items with respect to US Co and the US Co Subsidiaries, and US
Co agrees that upon the request of Chauvco, it will furnish to Chauvco true,
complete and correct copies of any documents referred to in such lists:
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(a) Material Contracts. All contracts which involve, or may
involve, aggregate payments by any party thereto of $25,000,000 or more, which
are to be performed in whole or in part after the Effective Time; or
(b) Employee Compensation Plans. All bonus, retention bonus,
company severance policy, employee stock option plans, incentive compensation,
deferred compensation, profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other fringe benefit plans, arrangements or trust
agreements.
3.12 CERTAIN AGREEMENTS
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including without limitation, severance, unemployment compensation,
parachute payment, bonus or otherwise) becoming due to any director, employee
or independent contractor of US Co or the US Co Subsidiaries under any US Co
Plan (as hereinafter defined) or otherwise, (ii) materially increase any
benefits otherwise payable under any US Co Plan or otherwise or (iii) result in
the acceleration of the time of payment or vesting of any such benefits.
3.13 TITLE TO PROPERTIES
Except for goods and other property sold, used or otherwise disposed
of in the ordinary course of business for fair value, US Co has good and
indefeasible title to all its properties, interests in properties and assets,
real and personal, reflected in its June 30, 1997, pro forma financial
statements, free and clear of any Encumbrance, except (i) Encumbrances
reflected in the pro forma balance sheet of US Co dated June 30, 1997, (ii)
liens for current taxes not yet due and payable, and (iii) such imperfections
of title, easements and Encumbrances, if any, which would not individually or
in the aggregate, have a Material Adverse Effect on US Co. All leases pursuant
to which US Co or any US Co Subsidiary leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing, valid,
and effective; and there is not, under any such leases, any existing or
prospective default or event of default or event which with notice or lapse of
time, or both, would constitute a default by US Co or any US Co Subsidiary
which would, individually or in the aggregate, have a Material Adverse Effect
on US Co and in respect to which US Co or a US Co Subsidiary has not taken
adequate steps to prevent a default from occurring. The buildings and premises
of US Co and the US Co Subsidiaries that are used in its business are in good
operating condition and repair, subject only to ordinary wear and tear. All
major items of operating equipment of US Co and the US Co Subsidiaries are in
good operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted, and are free from any known defects except as
may be repaired by routine maintenance and such minor defects as to not
substantially interfere with the continued use thereof in the conduct of normal
operations.
3.14 ENVIRONMENTAL MATTERS
Except as set forth in the US Co Disclosure Letter:
(a) Environmental Conditions. There are no environmental
conditions or circumstances, such as the presence or release of any hazardous
substance, on any property presently or previously
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owned or leased by US Co or the US Co Subsidiaries that could result in a
Material Adverse Effect on US Co.
(b) Permits, etc. US Co and the US Co Subsidiaries have in full
force and effect all environmental permits, licenses, approvals and other
authorizations required to conduct their operations and are operating in
material compliance thereunder.
(c) Compliance. US Co's and the US Co Subsidiaries' operations and
use of their assets do not violate any applicable United States or Canadian or
other federal, provincial, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (a) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (b) the environment, including natural resources or any activity which
affects the environment, or (c) the regulation of any pollutants, contaminants,
waste, substances (whether or not hazardous or toxic), including, without
limitation, the Applicable Environmental Laws, except for violations which,
either singly or in the aggregate, would not result in a Material Adverse
Effect on US Co.
(d) Past Compliance. None of the operations or assets of US Co or
the US Co Subsidiaries has ever been conducted or used by US Co or the US Co
Subsidiaries in such a manner as to constitute a violation of any of the
Applicable Environmental Laws, except for violations which, either singly or in
the aggregate, would not result in a Material Adverse Effect on US Co.
(e) Environmental Claims. No notice has been served on US Co or
any US Co Subsidiaries from any entity, governmental agency or individual
regarding any existing, pending or threatened investigation or inquiry related
to alleged violations under any Applicable Environmental Laws, or regarding any
claims for remedial obligations or contribution under any Applicable
Environmental Laws, other than any of the foregoing which, either singly or in
the aggregate, would not result in a Material Adverse Effect on US Co.
(f) Renewals. US Co does not know of any reason it would not be
able to renew any of the permits, licenses, or other authorizations required
pursuant to any Applicable Environmental Laws to operate and use any of US Co's
or the US Co Subsidiaries' assets for their current purposes and uses.
3.15 COMPLIANCE WITH OTHER LAWS
Except as set forth in the US Co Disclosure Letter, neither US Co nor
any US Co Subsidiary is in violation of or in default with respect to, or in
alleged violation of or alleged default with respect to any other applicable
law or any applicable rule, regulation, or any writ or decree of any court or
any governmental commission, board, bureau, agency, or instrumentality, or
delinquent with respect to any report required to be filed with any
Governmental Entity, except for violations which, either singly or in the
aggregate, do not and are not expected to result in a Material Adverse Effect
on US Co.
3.16 TAXES
(a) Except with respect to failures which, in the aggregate, would
not result in a Material Adverse Effect on US Co, proper and accurate federal,
state and local income, capital, withholding,
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value added, sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental agencies,
domestic and foreign, by US Co and all predecessor corporations and each of the
US Co Subsidiaries for each period for which any returns, reports, or estimates
were due (taking into account any extensions of time to file before the date
hereof); all taxes shown by such returns to be payable and any other taxes due
and payable have been paid other than those being contested in good faith by US
Co or a US Co Subsidiary; and the tax provision reflected in US Co's pro forma
financial statements as of June 30, 1997, is adequate, in accordance with
United States generally accepted accounting principles, to cover liabilities of
US Co and the US Co Subsidiaries at the date thereof for all taxes, including
any interest, penalties and additions to taxes of any character whatsoever
applicable to US Co and the US Co Subsidiaries or their assets or businesses.
There are no tax liens on any assets of US Co or the US Co Subsidiaries except
for taxes not yet currently due and those which could not reasonably be
expected to result in a Material Adverse Effect on US Co.
(b) On and after the Effective Date and until such time as no
person, other than US Co or an affiliate of US Co, holds any Exchangeable
Shares, neither US Co nor any of its affiliates will be a "specified financial
institution" as that term is defined in the ITA.
3.17 VOTE REQUIRED
At a stockholders meeting at which a quorum is present, the
affirmative vote of the holders of a majority of the outstanding shares of US
Co Common Stock present at the meeting is required to approve the issuance of
the US Co Common Stock pursuant to this Agreement and upon exchange of the
Exchangeable Shares. Except as aforesaid, no vote or other approval of the
stockholders of US Co is required, under the stockholder approval policy of the
NYSE, corporate law or otherwise, to approve this Agreement, the Arrangement
and the consummation of the transactions contemplated hereby.
3.18 BROKERS AND FINDERS
Other than Goldman, Sachs & Co. in accordance with the terms of its
engagement letter, none of US Co or any of the US Co Subsidiaries nor any of
their respective directors, officers or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or similar payments in connection with the transactions
contemplated by this Agreement.
3.19 DISCLOSURE
No representation or warranty made by US Co in this Agreement, nor any
document, written information, statement, financial statement, certificate or
Exhibit prepared and furnished or to be prepared and furnished by US Co or its
representatives pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, contained any untrue statement of a
material fact when made, or omitted to state a material fact necessary to make
the statements or facts contained herein or therein not misleading in light of
the circumstances under which they were furnished.
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3.20 FAIRNESS OPINION
US Co's board of directors has received a written opinion from
Goldman, Sachs & Co. that as of the date hereof the consideration to be paid by
US Co in connection with this Agreement is fair to US Co.
3.21 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no material agreement, judgment, injunction, order or decree
binding upon US Co or any US Co Subsidiary that has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of US Co or any US Co Subsidiary, any acquisition of property by US Co
or any US Co Subsidiary, the conduct of business by US Co or any US Co
Subsidiary as currently conducted or the consummation of the Arrangement.
3.22 BOOKS AND RECORDS
The books, records and accounts of US Co and the US Co Subsidiaries
(a) have been maintained in accordance with good business practices on a basis
consistent with prior years, (b) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of US Co and
the US Co Subsidiaries and (c) accurately and fairly reflect the basis for the
US Co financial statements. US Co has devised and maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization; and (b) transactions are recorded as necessary (i) to
permit preparation of financial statements in conformity with United States
generally accepted accounting principles or any other criteria applicable to
such statements and (ii) to maintain accountability for assets.
3.23 US CO SUB
US Co Sub will be incorporated solely for the purpose of participating
in the transactions contemplated herein, will carry on no other business, and,
except as contemplated herein, will not have any liabilities or obligations,
either accrued, absolute, contingent, or otherwise as of the Effective Date.
ARTICLE 4
OBLIGATIONS PENDING EFFECTIVE DATE
4.1 AGREEMENTS OF US CO AND CHAUVCO
US Co and Chauvco agree to take the following actions after the date
hereof:
(a) Regulatory Approvals. Each party will promptly execute and
file or join in the execution and filing of any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Entity, the Commissions or the SEC which may be reasonably
required, or which the other party may reasonably request, in connection with
the consummation of the transactions contemplated by this Agreement. Each party
will use its
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commercially reasonable efforts to promptly obtain such authorizations,
approvals and consents. Without limiting the generality of the foregoing, as
promptly as practicable after the execution of this Agreement, each party shall
make all required filings with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "DOJ"), a pre-merger
notification report under the HSR Act and shall make such filings as are
necessary under the Investment Canada Act and the Competition Act (Canada).
(b) Access. Each party will allow the other and its agents
reasonable access to the premises and properties of the other and to the files,
books, records and offices of the other and the other's subsidiaries,
including, without limitation, any and all information relating to such party's
tax matters, contracts, leases, licenses and real, personal and intangible
property and financial condition. Each party will cause its accountants to
cooperate with the other in making available to the other party all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to tax matters and financial statements
prepared or audited by such accountants.
(c) Joint Proxy Statement. US Co and Chauvco shall cooperate in
the preparation and prompt filing of the Joint Proxy Statement (and, if
required, the Form F-4, S-4 or Form S-3) with the SEC;
(d) Notice of Material Developments. Each of US Co and Chauvco
will promptly notify the other in writing (i) of any event occurring subsequent
to the date of this Agreement which would render, or might reasonably be
expected to render, any representation and warranty of such party contained in
this Agreement untrue or inaccurate in any material respect, (ii) of any
Material Adverse Effect on such party and (iii) of any breach by such party of
any covenant or agreement contained in this Agreement; and
(e) Satisfaction of Conditions Precedent. During the term of this
Agreement, each of US Co and Chauvco will use its commercially reasonable
efforts to satisfy or cause to be satisfied all the conditions precedent that
are set forth in Article 5 hereof, and each of US Co and Chauvco will use its
commercially reasonable efforts to cause the Arrangement and the other
transactions contemplated by this Agreement to be consummated.
4.2 ADDITIONAL AGREEMENTS OF CHAUVCO
Chauvco agrees that from the date hereof to the Effective Date, it
will, and will cause each of the Chauvco Subsidiaries to:
(a) Operate in Ordinary Course/Consult. Other than as contemplated
by this Agreement, operate its business only in the usual, regular, and
ordinary manner and, to the extent consistent with such operation, use all
commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and
employees, and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it; permit US Co
representatives to meet with Chauvco officers and attend such Chauvco business
meetings, and provide US Co with such periodic reports, all as US Co may
reasonably request to become and keep generally informed as to Chauvco's
business, assets and operations;
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(b) Maintenance of Properties. Maintain all of its property and
assets in customary repair, order, and condition, reasonable wear and use and
damage by fire or unavoidable casualty excepted;
(c) Maintenance of Books and Records. Maintain its books of
account and records in the usual, regular, and ordinary manner, in accordance
with generally accepted accounting principles applied on a consistent basis;
(d) Compliance with Law. Duly comply in all material respects
with all laws applicable to it and to the conduct of its business;
(e) Employment Matters. Allow reasonable access by US Co to
employees in order for US Co to explore continuing employment arrangements; not
(i) enter into any contracts of employment which (1) cannot be terminated on
notice of 30 days or less or (2) provide for any severance payments or benefits
covering a period beyond the termination date of such employment contract,
except as may be required by law; (ii) amend any employee benefit plan or stock
option plan, except as may be required for compliance with applicable law or as
contemplated by this Agreement; or (iii) except with the prior written consent
of US Co, such consent not to be unreasonably withheld, increase salaries or
declare bonuses prior to the Effective Date provided that Chauvco shall be
permitted to declare and pay bonuses in an amount not to exceed $750,000
without the consent of US Co;
(f) Prohibition of Certain Loans. Not incur any borrowings except
(i) the refinancing of indebtedness now outstanding or additional borrowings
under its existing revolving credit facilities, (ii) the prepayment by
customers of amounts due or to become due for goods sold or services rendered
or to be rendered in the future, (iii) trade payables incurred in the ordinary
course of business, (iv) other borrowings incurred in the ordinary course of
business to finance normal operations, (v) borrowing to finance expenditures
not prohibited under paragraph (g) (provided however with respect to items (i)
to (v) the borrowing shall not exceed current borrowing limits under current
credit facilities), or (vi) as is otherwise agreed to in writing by US Co;
(g) Prohibition of Certain Commitments. Not enter into commitments
of a capital expenditure nature or incur any contingent liability which would
exceed $1,000,000, in the aggregate, except (i) 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, (ii) as may be
required by law, (iii) as contemplated in Chauvco's Estimated Capital
Expenditures for the period July 1, 1997 to December 31, 1997, a copy of which
has been attached to the Chauvco Disclosure Letter or (iv) as is otherwise
agreed to in writing by US Co;
(h) Disposal of Assets. Not sell, dispose of, or encumber, any
property or assets, except (i) in the ordinary course of business and not
exceeding $10,000,000 in value in the aggregate, (ii) Encumbrances as may be
reasonably required in connection with borrowings under Section 4.2(f), or
(iii) as is otherwise agreed to in writing by US Co;
(i) Maintenance of Insurance. Maintain insurance upon all its
properties and with respect to the conduct of its business of such kinds and in
such amounts as is customary in the type of business in which it is engaged,
but not less than that presently carried by it;
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(j) No Amendment to Charter Documents, etc. Except as otherwise
provided in this Agreement, not amend its charter documents or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or the
character of its business;
(k) No Issuance, Sale, or Purchase of Securities. Except as
otherwise provided in this Agreement, not issue or sell (except upon the
exercise of outstanding options), or issue options or rights to subscribe to,
or enter into any contract or commitment to issue or sell, any shares of its
capital stock or subdivide or in any way reclassify any shares of its capital
stock, or acquire, or agree to acquire, any shares of its capital stock;
(l) Prohibition on Dividends. Not declare or pay any dividend on
shares of its capital stock or make any other distribution of assets to the
holders thereof;
(m) Supplemental Financial Statements. Deliver to US Co, within 45
days after the end of the fiscal quarter of Chauvco ending September 30, 1997,
unaudited consolidated balance sheets and related unaudited statements of
income, retained earnings and cash flows as of the end of such fiscal quarter
of Chauvco, and as of the corresponding fiscal quarter of the previous fiscal
year. Chauvco hereby represents and warrants that such unaudited consolidated
financial statements shall (i) be complete in all material respects except for
the omission of notes and schedules contained in audited financial statements,
(ii) present fairly the financial condition of Chauvco as at the dates
indicated and the results of operations for the periods indicated, (iii) shall
have been prepared in accordance with Canadian generally accepted accounting
principles applied on a consistent basis, except as noted therein and (iv)
shall contain all adjustments which Chauvco considers necessary for a fair
presentation of its results for the fiscal period;
(n) Exclusivity; Acquisition Transactions. Unless and until this
Agreement shall have been terminated by either party pursuant to Article 6
hereof, it shall not (and it shall cause its directors, representatives, agents
or affiliates (collectively "Representatives")) not to take or cause to take
(or cause any of the Chauvco Subsidiaries to take), directly or indirectly, any
of the following actions with any party other than US Co and its designees: (i)
solicit, encourage, initiate or participate in any negotiations, inquiries or
discussions with respect to any offer or proposal (x) to acquire in any manner,
directly or indirectly, all or any significant part of the business or assets
of Chauvco and the Chauvco Subsidiaries taken as a whole or (y) to acquire in
any manner, directly or indirectly, more than 25% of the voting power of the
capital shares of Chauvco, whether by arrangement, amalgamation, merger,
consolidation, other business combination, purchase of assets, tender or
exchange offer or otherwise (each of the foregoing, an "Acquisition
Transaction"), (ii) after the date hereof furnish or provide any information
with respect to, or otherwise take any action that facilitates, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected
to lead to any inquiry, offer or proposal for, an Acquisition Transaction
except in the ordinary course of business (and unrelated to an Acquisition
Transaction) and as required by law or pursuant to a governmental request for
information, (iii) enter into or execute any agreement or arrangement relating
to an Acquisition Transaction, plan of reorganization, or other agreement
calling for the sale of all or any significant part of its business and
properties or the acquisition in any manner of more than 25% of the voting
power of the capital shares of Chauvco; or (iv), except as required by law,
make or authorize any public statement, recommendation or solicitation with
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respect to any Acquisition Transaction or any offer or proposal relating to an
Acquisition Transaction other than with respect to the Arrangement (provided
that neither the Board of Directors of Chauvco nor any committee thereof shall
(x) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to US Co, the approval and recommendation by such Board of Directors or such
committee of this Agreement, the Plan of Arrangement or the Arrangement or (y)
approve or recommend, or propose to approve or recommend, any Acquisition
Transaction, except with respect to either clause (x) or (y) in the case of a
Superior Transaction (as hereinafter defined) and then only at or after the
termination of this Agreement pursuant to Section 6.1(g)); and
(o) Alternative Transaction. Notwithstanding the foregoing, prior
to the approval of this Agreement and the Arrangement by the holders of Chauvco
Common Shares at the Chauvco Meeting, nothing contained in this Agreement shall
prevent the Board of Directors of Chauvco (or its Representatives pursuant to
its instructions) from: (i) engaging in discussions or negotiations with (but
not soliciting or initiating such discussions or negotiations or encouraging
inquiries from) a party concerning an unsolicited Acquisition Transaction; or
(ii) providing non-public information in connection with an unsolicited
Acquisition Transaction with respect to Chauvco or the Chauvco Subsidiaries
that has previously been provided to US Co pursuant to a customary
confidentiality agreement (having terms substantially similar to the
Confidentiality Agreement (as hereinafter defined)), in each case if the
Chauvco Board of Directors first determines in good faith, based on the advice
of outside legal counsel, that such action is required by reason of the
fiduciary duties of the members of the Board of Directors of Chauvco to Chauvco
or to Chauvco's shareholders under applicable law and that such unsolicited
Acquisition Transaction involves consideration to the shareholders of Chauvco
with a value that the Board of Directors of Chauvco in good faith believe,
after receiving advice from Chauvco's financial advisors, is superior to the
consideration to the shareholders provided for in the Arrangement; provided
that in each such event, Chauvco first notifies US Co of such determination by
the Chauvco Board of Directors and further notifies US Co of the fact that it
is furnishing information to or entering into discussions or negotiations with
a person or entity and Chauvco keeps US Co informed of the status (including
all terms and conditions thereof but not the identity of such person or entity)
of any such discussions or negotiations. Except to the extent expressly
referenced in this Section, nothing in this Section, however, shall relieve
Chauvco from complying with the other terms of this Agreement. If Chauvco or
any Chauvco Subsidiary receives any unsolicited offer or proposal to enter
negotiations relating to an Acquisition Transaction, Chauvco shall immediately
notify US Co thereof. On the date hereof, Chauvco shall immediately cease and
cause to be terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted heretofore by
Chauvco or any Representatives with respect to any Acquisition Transaction and,
in connection therewith, Chauvco shall exercise all rights to require the
return of information regarding Chauvco previously provided to such parties. In
no event may the Board of Directors of Chauvco or any committee thereof (x)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to US
Co, the approval and recommendation by such Board of Directors or such
committee of this Agreement, the Plan of Arrangement or the Arrangement or (y)
approve or recommend, or propose to approve or recommend, any Acquisition
Transaction, except with respect to either clause (x) or (y) in the case of a
Superior Proposal and then only at or after the termination of this Agreement
pursuant to Section 6.1(g). As used in this Agreement, a "Superior Proposal"
means (x) a bona fide written offer for an Acquisition Transaction to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the shares and/or voting power of the capital shares of
Chauvco then outstanding or all or substantially all the assets of Chauvco, and
(y) otherwise on terms which the
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Board of Directors of Chauvco determines in its good faith judgment to be more
favorable to Chauvco than the Arrangement (based on the written opinion, with
only customary qualifications, of Chauvco's independent financial advisor that
the value of the consideration provided for in such proposal is superior to the
value of the consideration provided for in the Arrangement), for which
financing, to the extent required, is then committed or which, in the good
faith judgment of the Board of Directors of Chauvco, based on advice from
Chauvco's independent financial advisor, is reasonably capable of being
financed by such third party and for which the Board of Directors of Chauvco
determines, in its good faith judgment, that such proposed transaction is
reasonably likely to be consummated without undue delay;
(p) Chauvco Options. Ensure that the consent of the Optionholders
as a class is either obtained or not required;
(q) Chauvco Affiliates. On or prior to the Effective Time, cause
its Affiliates (as such term is defined in the Exchange Act) to execute and
deliver customary letters in connection with Rule 145 of the Securities Act;
(r) Shareholders Rights Plan. Take such action as may be
necessary so that the Chauvco SRP shall be waived immediately prior to the
Effective Time and not apply to the transactions contemplated herein. Chauvco
shall utilize its best efforts to keep the Chauvco SRP in full force and effect
unamended until such waiver; and
(s) International Contracts. Not enter into any binding contracts
with any party in any country upon which the U.S. Government has imposed
international economic sanctions with respect to U.S. persons doing business.
4.3 ADDITIONAL AGREEMENTS OF US CO
US Co agrees that from the date hereof to the Effective Date, it will,
and will cause each of the US Co Subsidiaries to:
(a) Operate in Ordinary Course. Other than as contemplated by this
Agreement, operate its business only in the usual, regular, and ordinary manner
and, to the extent consistent with such operation, use all commercially
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees, and preserve its
relationships with customers, suppliers, distributors, and others having
business dealings with it;
(b) Maintenance and Disposition of Properties. Maintain all of its
property and assets in customary repair, order, and condition, reasonable wear
and use and damage by fire or unavoidable casualty excepted and only dispose
thereof (and such disposal shall be permitted) in the ordinary course of
business;
(c) Maintenance of Books and Records. Maintain its books of
account and records in the usual, regular, and ordinary manner, in accordance
with generally accepted accounting principles applied on a consistent basis;
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(d) Compliance with Law. Duly comply in all material respects
with all laws applicable to it and to the conduct of its business;
(e) Maintenance of Insurance. Maintain insurance upon all its
properties and with respect to the conduct of its business of such kinds and in
such amounts as is customary in the type of business in which it is engaged,
but not less than that presently carried by it;
(f) No Amendment to Charter Documents, etc. Except as otherwise
contemplated in and subject to Section 1.4, not amend its charter documents or
merge or consolidate with or into any other corporation without the prior
written consent of Chauvco (provided that such consent shall not be necessary
if such transaction will not adversely affect the ability of Chauvco
shareholders to exchange Exchangeable Shares after the Effective Date as
contemplated herein) or change in any manner the rights of its capital stock or
the character of its business provided nothing herein shall prevent the
issuance of preferred stock by US Co and the filing of Certificates of
Designation with the Secretary of State of Delaware in connection therewith;
(g) Prohibition on Dividends. Except for US Co's regular
semi-annual 5 c./share dividends, or any dividend pursuant to the
implementation or maintenance of a shareholder rights plan or similar
arrangement which plan or arrangement makes adequate provision with respect to
the holders of Exchangeable Shares, not declare or pay any dividend on shares
of its capital stock or make any other distribution of assets to the holders
thereof;
(h) Supplemental Financial Statements. Deliver to Chauvco, within
45 days after the end of the fiscal quarter of US Co ending September 30, 1997,
unaudited consolidated balance sheets and related unaudited statements of
income, retained earnings and cash flows for the period ending and as of the
end of such quarter of US Co. US Co hereby represents and warrants that such
unaudited consolidated financial statements shall (i) be complete in all
material respects except for the omission of notes and schedules contained in
audited financial statements, (ii) present fairly the financial condition of US
Co as at the dates indicated and the results of operations for the periods
indicated, (iii) shall have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis, except
as noted therein and (iv) shall contain all adjustments which US Co considers
necessary for a fair presentation of its results for the fiscal period; and
(i) Listings. Use its commercially reasonable efforts to cause,
with the cooperation and assistance of Chauvco, the Exchangeable Shares to be
listed on the TSE.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF CHAUVCO
The obligations of Chauvco to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction of the following
conditions, or to the waiver thereof by Chauvco in the manner contemplated by
this Agreement before the Effective Date:
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(a) Representations and Warranties of US Co True at Effective
Date. The representations and warranties of US Co herein contained shall be
accurate in all material respects at the Effective Date, with the same effect
as though made at such date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such date),
and except to the extent of the failure of such representations to be true and
correct would not in the aggregate have a Material Adverse Effect on US Co, and
except as affected by transactions permitted or contemplated by this Agreement;
US Co shall have performed and complied with all covenants required by this
Agreement to be performed or complied with, in all material respects, by US Co
before the Effective Date; and US Co shall have delivered to Chauvco a
certificate, dated the Effective Date and signed by its chairman of the board
or its president on behalf of US Co, and by its chief financial or accounting
officer, and its secretary, to both such effects;
(b) Opinion of US Co Counsel. Chauvco shall have received
opinions, dated as of the Effective Date, from Vinson & Elkins, L.L.P., United
States counsel for US Co, and from MacKimmie Matthews, Canadian counsel for US
Co in form and substance satisfactory to Chauvco dealing with due
authorization, execution, delivery and enforceability of documents and such
other matters as US Co shall agree to;
(c) Consents of Certain Parties in Privity with US Co. Chauvco
shall have received all written consents, assignments, waivers, authorizations
or other certificates necessary to provide for the continuation in full force
and effect of all material contracts and leases of US Co and for US Co to
consummate the transactions contemplated hereby, except when the failure to
receive such consents or other certificates would not have a Material Adverse
Effect on US Co;
(d) Shareholder Approval. This Agreement, the Arrangement and the
other transactions contemplated hereby shall have been approved and adopted by
the Chauvco shareholders in accordance with applicable law and Chauvco's
articles of amalgamation and bylaws;
(e) US Co Approvals. The issuance of US Co Common Stock from time
to time upon the exchange of the Exchangeable Shares shall have been approved
by the US Co stockholders in accordance with the rules of the NYSE and
applicable law;
(f) No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation
of the Arrangement shall have been issued by any Canadian or United States
federal, provincial or state court and remain in effect, nor shall any
proceeding seeking any of the foregoing be pending. There shall be no order,
decree or ruling by any governmental agency or threat thereof, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Arrangement, which would prohibit or render illegal the transactions
contemplated by this Agreement;
(g) Court Approval. The Court shall have issued its final order
approving the Arrangement in form and substance satisfactory to US Co and
Chauvco (such approvals not to be unreasonably withheld or delayed by US Co or
Chauvco) and reflecting the terms hereof;
(h) Commissions, etc. All necessary orders shall have been
obtained from the Commissions and other relevant United States and Canadian
securities regulatory authorities in connection with the Arrangement. All
waiting periods required by HSR shall have expired with
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respect to the transactions contemplated by this Agreement, or early
termination with respect thereto shall have been obtained, without the
imposition of any governmental request or order requiring the sale or
disposition or holding separate (through a trust or otherwise) of particular
assets or businesses of Chauvco or US Co. US Co shall have filed all notices
and information (if any) required under Part IX of the Competition Act (Canada)
and the applicable waiting periods and any extensions thereof shall have
expired or the parties shall have received an Advance Ruling Certificate
pursuant to Section 102 of the Competition Act (Canada) setting out that the
Director under such Act is satisfied he would not have sufficient grounds on
which to apply for an order in respect of the Arrangement. The Arrangement
shall have received the allowance or approval or deemed allowance or approval
by the responsible Minister under the Investment Canada Act in respect of the
Arrangement, to the extent such allowance or approval is required;
(i) SEC Filings. The Forms F-4 and S-4, if filed, and the Form S-3
shall have been declared effective under the Securities Act and shall not be
the subject of any stop-order or proceedings seeking a stop-order, and the
Joint Proxy Statement shall on the Closing Date not be subject to any similar
proceedings commenced or threatened by the SEC or the Commissions;
(j) Appointment to US Co Board. US Co shall cause James R.
Baroffio to be appointed as a director of US Co on or prior to the Effective
Date as a Class II Director to serve until US Co's 1999 annual stockholders'
meeting; Guy J. Turcotte to be nominated as a director of US Co for election at
US Co's 1998 annual stockholders' meeting and Mr. Baroffio to be nominated for
re-election at US Co's 1999 annual stockholders' meeting. US Co shall put forth
Messrs. Turcotte and Baroffio for election to its board of directors as
aforesaid and will cause to be solicited proxies for its stockholder's meetings
in favour of the election of such individual.
(k) Listings. The Exchangeable Shares shall be listed on the TSE,
subject to notice of issuance, and the US Co Common Stock issuable pursuant to
the Arrangement and upon exchange of the Exchangeable Shares shall have been
approved for listing on the NYSE, subject to notice of issuance;
(l) Certificates and Resolutions. Chauvco shall have received
such other certificates and resolutions of US Co as may be reasonably required
in connection with the consummation of this Agreement; and
(m) Material Adverse Effect. There shall have been no event,
change or effect after the date hereof and on or prior to the Effective Date
resulting in a Material Adverse Effect on US Co.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF US CO
The obligations of US Co to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction of the following
conditions, or to the waiver thereof by US Co in the manner contemplated by
this Agreement, before the Effective Date:
(a) Representations and Warranties of Chauvco True at Effective
Date. The representations and warranties of Chauvco herein contained shall be
accurate in all material respects at the Effective Date, with the same effect
as though made at such date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such date),
and
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except to the extent of the failure of such representations to be true and
correct would not in the aggregate have a Material Adverse Effect on Chauvco
and except as affected by transactions permitted or contemplated by this
Agreement; Chauvco shall have performed and complied with all covenants
required by this Agreement to be performed or complied with, in all material
respects, by Chauvco before the Effective Date; and Chauvco shall have
delivered to US Co a certificate, dated the Effective Date and signed by its
chairman of the board or its president on behalf of Chauvco and by its chief
financial or accounting officer, and its secretary, to both such effects;
(b) Opinion of Chauvco Counsel. US Co shall have received
opinions, dated as of the Effective Date, from Baker & Botts, L.L.P., United
States counsel for Chauvco, and from Bennett Jones Verchere, Canadian counsel
for Chauvco in form and substance satisfactory to Chauvco dealing with due
authorization, execution, delivery and enforceability of documents and such
other matters as Chauvco shall agree to;
(c) Consents of Certain Parties in Privity with Chauvco. US Co
shall have received all written consents, assignments, waivers, authorizations
or other certificates necessary to provide for the continuation in full force
and effect of all material contracts and leases of Chauvco and for Chauvco to
consummate the transactions contemplated hereby, except when the failure to
receive such consents or other certificates would not have a Material Adverse
Effect on Chauvco;
(d) Stockholder Approval. The issuance of US Co Common Stock
hereunder and from time to time upon exchange of the Exchangeable Shares shall
have been approved by the US Co stockholders in accordance with the rules of
the NYSE and applicable law;
(e) Chauvco Approvals. This Agreement, the Arrangement and the
other transactions contemplated hereby shall have been approved and adopted by
the Chauvco shareholders in accordance with applicable law and Chauvco's
articles of amalgamation and bylaws, and Chauvco shall not have received on or
prior to the Effective Time notice from the holders of more than 5% of the
Chauvco Common Shares of their intention to exercise their rights of dissent
under Section 184 of the ABCA;
(f) No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation
of the Arrangement shall have been issued by any Canadian or U.S. federal,
provincial or state court and remain in effect, nor shall any proceeding
seeking any of the foregoing be pending. There shall be no order, decree or
ruling by any governmental agency or threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Arrangement, which would prohibit or render illegal the transactions
contemplated by this Agreement;
(g) Court Approval. The Court shall have issued its final order
approving the Arrangement in form and substance satisfactory to Chauvco and US
Co (such approvals not to be unreasonably withheld or delayed by Chauvco or US
Co) and reflecting the terms hereof;
(h) Commissions, etc. All necessary orders shall have been
obtained from the Commissions and other relevant United States and Canadian
securities regulatory authorities in connection with the Arrangement. All
waiting periods required by HSR shall have expired with respect to the
transactions contemplated by this Agreement, or early termination with respect
thereto shall have been obtained, without the imposition of any governmental
request or order requiring the
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sale or disposition or holding separate (through a trust or otherwise) of
particular assets or businesses of US Co or Chauvco. Chauvco shall have filed
all notices and information (if any) required under Part IX of the Competition
Act (Canada) and the applicable waiting periods and any extensions thereof
shall have expired or the parties shall have received an Advance Ruling
Certificate pursuant to Section 102 of the Competition Act (Canada) setting out
that the Director under such Act is satisfied he would not have sufficient
grounds on which to apply for an order in respect of the Arrangement. The
Arrangement shall have received the allowance or approval or deemed allowance
or approval by the responsible Minister under the Investment Canada Act in
respect of the Arrangement, to the extent such allowance or approval is
required, on terms and conditions satisfactory to US Co, acting reasonably;
(i) SEC Filings. The Forms S-3 and S-4 and the Form F-4, if filed,
shall have been declared effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop-order and the Joint
Proxy Statement shall on the Closing Date not be subject to any similar
proceedings commenced or threatened by the SEC or the Commissions; and
(j) Certificates and Resolutions. US Co shall have received such
other certificates and resolutions of Chauvco as may be reasonably required in
connection with the consummation of this Agreement.
(k) Material Adverse Effect. There shall have been no event,
change or effect after the date hereof and on or prior to the Effective Date
resulting in a Material Adverse Effect on Chauvco.
ARTICLE 6
TERMINATION
6.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the transactions contemplated hereby
by the stockholders of US Co or the shareholders of Chauvco, as follows:
(a) by mutual agreement of Chauvco and US Co;
(b) by Chauvco, in the event of a breach by US Co of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Section 5.1(a) and (ii) has not been cured within 15 business days after
written notice thereof from Chauvco (except that no cure period shall be
provided for a matter which by its nature cannot be cured and in no event shall
such cure period extend beyond the Termination Date) provided that Chauvco is
not then in material breach (giving effect to any applicable cure periods) of
any representation, warranty, covenant or other agreement contained in this
Agreement;
(c) by US Co., in the event of a breach by Chauvco of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Section 5.2(a) and (ii) has not been cured within 15 business days after
written notice thereof from US Co (except that no cure period shall be provided
for a matter which by its nature cannot be cured and in no event shall such
cure period extend beyond the Termination
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Date) provided that US Co is not then in material breach (giving effect to any
applicable cure periods) of any representation, warranty, covenant or other
agreement contained in this Agreement;
(d) by Chauvco if the stockholders of US Co do not approve the
issuance of US Co Common Stock issuable upon exchange of Exchangeable Shares or
any other matters related to the Plan of Arrangement requiring their approval
at the US Co Stockholders Meeting;
(e) by US Co if the shareholders of Chauvco do not approve the
Plan of Arrangement at the Chauvco Meeting;
(f) by either party, if any of such party's conditions precedent
under Article 5 for Closing (as defined in Section 7.2) the Arrangement shall
not have been satisfied or waived on or before 5:00 p.m., Calgary, Alberta time
on March 31, 1998 (the "Termination Date"), other than as a result of a breach
of this Agreement by the terminating party;
(g) by Chauvco prior to obtaining the approval by the shareholders
of Chauvco of the Plan of Arrangement, if (i) the Board of Directors of Chauvco
shall have determined in good faith, based on the advice of outside counsel,
that it is necessary, in order to comply with its fiduciary duties to Chauvco
or its shareholders under applicable law, to enter into an agreement with
respect to or to consummate a transaction constituting a Superior Proposal,
(ii) Chauvco shall have given notice to US Co advising US Co that Chauvco has
received a Superior Proposal from a third party, specifying the terms and
conditions of such Superior Proposal and that Chauvco intends to terminate this
Agreement in accordance with this Section 6.1(g), and (iii) either (A) US Co
shall not have revised its takeover proposal within five business days after
the date on which such notice is deemed to have been given to US Co, or (B) if
US Co within such period shall have revised its takeover proposal, the Board of
Directors of Chauvco, after receiving advice from Chauvco's financial advisors,
shall have determined in its good faith judgment that the third party's
Acquisition Transaction is superior to US Co's revised takeover proposal;
provided that Chauvco may not effect such termination pursuant to this Section
6.1(g) unless Chauvco has contemporaneously with such termination tendered
payment to US Co, or its designee, of the Termination Fee that is due US Co or
its designee pursuant to Section 6.4(c).
6.2 NOTICE OF TERMINATION
Any termination of this Agreement under Section 6.1 above will be
effective by the delivery of written notice by the terminating party to the
other party hereto.
6.3 EFFECT OF TERMINATION
Subject to Section 6.4, in the event of termination of this Agreement
by either Chauvco or US Co as provided in Section 6.1, this Agreement shall
forthwith become void and have no effect, and there shall be no liability or
obligation on the part of US Co or Chauvco or their respective officers or
directors, except that (i) the provisions of the confidentiality and standstill
agreements dated May 23, 1997 and July 28, 1997, respectively, between Chauvco
and US Co shall survive any such termination and abandonment (the
"Confidentiality Agreement"), and (ii) no party shall be released or relieved
from any liability arising from the breach by such party of any of its
representations, warranties, covenants or agreements as set forth in this
Agreement.
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6.4 TERMINATION FEES
Notwithstanding Section 6.3:
(a) if this Agreement is terminated by Chauvco pursuant to Section
6.1(d) as a result of the failure of the stockholders of US Co to approve the
matters contemplated in Section 6.1(d), then US Co shall pay to Chauvco (by
wire transfer or cashier's cheque) a fee of $25 million within two business
days of the delivery of the notice of termination pursuant to Section 6.2.
Chauvco shall not be entitled to receive such payment if, at the time of
delivery of the applicable notice of termination pursuant to Section 6.2,
Chauvco is in material breach of this Agreement;
(b) if this Agreement is terminated by US Co pursuant to Section
6.1(e) as a result of the failure of the shareholders of Chauvco to approve the
matters contemplated in Section 6.l (e), then Chauvco shall pay to US Co (by
wire transfer or cashier's cheque) a fee of $25 million within two business
days of the delivery of the notice of termination pursuant to Section 6.2. US
Co shall not be entitled to receive such payment if, at the time of delivery of
the applicable notice of termination pursuant to Section 6.2, US Co is in
material breach of this Agreement;
(c) if this Agreement is terminated pursuant to Section 6.1(g),
then Chauvco shall pay to US Co (by wire transfer or cashier's cheque) a fee of
$40 million concurrently with the delivery of the notice of termination
pursuant to Section 6.2. US Co shall not be entitled to receive such payment
if, at the time of delivery of the applicable notice of termination pursuant to
Section 6.2, US Co is in material breach of this Agreement or US Co's
stockholders have disapproved any of the matters contemplated in Section
6.1(d);
(d) if this Agreement is terminated pursuant to Section 6.1(e) and
within six months of such termination definitive documentation with respect to
an Acquisition Transaction has been entered into or 50% or more of the
outstanding capital shares of Chauvco has been acquired pursuant to a tender
offer made as an Acquisition Transaction, then Chauvco shall pay (by wire
transfer or cashier's cheque), in addition to the termination fee contemplated
in Section 6.4(b), a fee of $15 million contemporaneously with the closing of
such Acquisition Transaction; and
(e) the obligation of the paying party to pay any termination fee
set forth in this Section 6.4 is in lieu of any damages or any other payment
which such party might otherwise be obligated to pay to the receiving party as
a result of any termination for which payment is due under this Section 6.4.
ARTICLE 7
ADDITIONAL AGREEMENTS
US Co and Chauvco each agree to take the following actions after the
execution of this Agreement:
7.1 MEETINGS
Chauvco and US Co shall each duly call a meeting of its stockholders
to be held within 45 days after the SEC has indicated that it has no further
comments on the Joint Proxy Statement for
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the purpose of (a) in the case of Chauvco, voting upon the Plan of Arrangement
and the transactions contemplated hereby and thereby, and (b) in the case of US
Co, voting upon a proposal to approve the issuance of such number of shares of
US Co Common Stock as are necessary to consummate the Arrangement and issue
upon exchange of Exchangeable Shares and each shall, subject to Section 4.2(o),
through its board of directors, recommend to their stockholders approval of
such matters and shall coordinate and cooperate with respect to the timing of
such meetings.
7.2 THE CLOSING
Subject to the termination of this Agreement as provided in Article 6,
the closing of the transactions contemplated by this Agreement (the "Closing")
will take place at the offices of Bennett Jones Verchere, Calgary, Alberta,
Canada on a date (the "Closing Date") and at a time to be mutually agreed upon
by the parties, which date shall be no later than the fifth business day after
all conditions to Closing set forth herein shall have been satisfied or waived,
unless another place, time and date is mutually selected by Chauvco and US Co.
7.3 ANCILLARY DOCUMENTS/RESERVATION OF SHARES/SPECIAL VOTING SHARES
(a) Provided all other conditions of this Agreement have been
satisfied or waived, on the Closing Date, the Articles of Arrangement shall be
filed pursuant to Part 15 of the ABCA to give effect to the Plan of
Arrangement.
(b) On the Effective Date:
(i) US Co shall execute and deliver a Support Agreement
containing the terms and conditions set forth in
Exhibit B hereto, together with such other terms and
conditions as may be agreed to by the parties hereto
acting reasonably; and
(ii) US Co, US Co Sub and the Depositary shall execute
and deliver a Voting and Exchange Trust Agreement
containing the terms and conditions set forth in
Exhibit C hereto, together with such other terms and
conditions as may be agreed to by the parties hereto
acting reasonably.
(c) On or before the Effective Date, US Co will:
(i) reserve for issuance such number of shares of US Co
Common Stock as shall be necessary to give effect to
this agreement plus the exchange of the Exchangeable
Shares; and
(ii) designate a series of its preferred shares as
"Special Voting Stock", such series having the
rights, restrictions, privileges and conditions set
forth in Exhibit E hereto.
7.4 INDEMNIFICATION AND RELATED MATTERS
(a) US Co agrees that all rights to indemnification existing in
favor of the present or former directors and officers of Chauvco (as such) or
any of the Chauvco Subsidiaries or present or
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former directors and officers (as such) of Chauvco or any of the Chauvco
Subsidiaries serving or who served at Chauvco's or any of the Chauvco
Subsidiaries' request as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
as provided in Chauvco's charter or bylaws or similar documents of any of the
Chauvco Subsidiaries in effect as of the date hereof with respect to matters
occurring prior to the Effective Time, shall survive and shall continue in full
force and effect and without modification for a period of not less than the
statutes of limitations applicable to such matters.
(b) From and after the Effective Time, US Co shall and shall cause
Chauvco to indemnify and hold harmless to the fullest extent permitted under
the ABCA, each director and officer of US Co Sub, Chauvco or any Chauvco
Subsidiary including, without limitation, officers and directors, serving on or
prior to the date hereof against any costs and expenses (including reasonable
attorney's fees on a solicitor and his own client basis), judgments, fines,
losses, claims and damages and liabilities, and amounts paid in settlement
thereof with the consent of the indemnifying party, in connection with any
claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby or the Arrangement. In the event of any such
claim, action, suit, proceeding or investigation, US Co shall cause Chauvco to
pay the reasonable fees and expenses of counsel in advance of the final
disposition of any such claim, action, suit, proceeding or investigation to the
fullest extent permitted by law subject to the limitations imposed by the ABCA.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any indemnified parties, (i) the
indemnified parties may retain counsel reasonably satisfactory to US Co and,
subject to limitations imposed by the ABCA, Chauvco shall (or US Co shall cause
Chauvco to) pay all reasonable fees and expenses of such counsel for the
indemnified parties promptly as statements therefor are received; and (ii) US
Co will use all reasonable efforts to assist in the defense of such matter;
provided, however, that neither Chauvco nor US Co shall be liable for any
settlement effected without its prior written consent. Any indemnified party
wishing to claim indemnification under this section, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify US Co (but the
failure to so notify shall not relieve a party from any liability which it may
have under this section except to the extent such failure prejudices such
party). The indemnified parties as a group may retain only one law firm in any
jurisdiction to represent them with respect to each such matter unless such
counsel determines that there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two
or more indemnified parties, in which event such additional counsel may be
required to be retained by the indemnified parties.
(c) Subject to limitations imposed by the ABCA, Chauvco shall (or
US Co shall cause Chauvco to) pay all expenses, including attorney's fees on a
solicitor and his own client basis, as the same may be incurred by any
indemnified parties in any action by any indemnified party or parties seeking
to enforce the indemnity or other obligations provided for in this section;
provided, however, that Chauvco will be entitled to reimbursement for any
advances made under this section to any indemnified party who ultimately proves
unsuccessful in enforcing the indemnity as finally determined by a
non-appealable judgment in a court of competent jurisdiction, and payment of
such expenses in advance of the final disposition of the action shall be made
only upon receipt of any undertaking by the indemnified party to reimburse all
amounts advanced if such action ultimately proves unsuccessful.
(d) There shall be maintained in effect for not less than six
years from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by Chauvco in the
<PAGE> 40
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amounts and with the coverages in effect on the date of this Agreement. US Co
may, however, substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous, provided that
such substitution shall not result in any gaps or lapses in coverages with
respect to matters occurring prior to the Effective Time.
(e) This section, which shall survive the consummation of this
Agreement and the Arrangement, is intended to benefit each person or entity
indemnified hereunder.
7.5 LOCK-UP AGREEMENTS
Concurrently with the execution of this Agreement, Chauvco shall cause
those shareholders of Chauvco listed in Exhibit E hereto and US Co shall cause
those shareholders of US Co listed in Exhibit E hereto to execute and deliver
to the other lock-up agreements in such forms as may be mutually agreed by the
parties, acting reasonably.
7.6 EMPLOYEE MATTERS
Subject to applicable law, US Co, the US Co Subsidiaries, and the
employee benefit plans and programs ("US Co Benefit Plans") of US Co shall
recognize the number of years of service currently recognized by Chauvco of
each individual employed by Chauvco or a Chauvco Subsidiary immediately prior
to the Effective Date, provided nothing in this provision shall require US Co
to amend any of the US Co Benefit Plans where such amendment would require
regulatory filings or approvals.
7.7 ANCILLARY TRANSACTIONS - GABON AND OTHER INTERNATIONAL PROPERTIES
It is acknowledged and agreed that:
(a) Chauvco shall cause the entities referred to in Sections 1.1
(a) through (c) to complete the transactions contemplated therein including,
without limitation, the subscription for the CRI Shares for an aggregate cash
subscription price of US$5,000,000 plus the fair market value of the Gabon
Securities on the Effective Date, and the transfer of the Gabon Securities from
CR to CRI for a cash purchase price equal to the fair market value of the Gabon
Securities on the Effective Date leaving US$5,000,000 as cash in CRI;
(b) Chauvco has determined that the fair market value of the Gabon
Securities on the date hereof is approximately US$60,000,000 relying on (i) the
bidding process in connection with the sale of Chauvco, (ii) the reserve and
evaluation reports prepared by Chauvco's independent engineers, (iii) the
review and recommendation of Chauvco's senior management which established a
range of values at various discount factors and an assessment of the
exploration and development potential of the applicable properties, and (iv)
the fairness opinion supporting such valuation from professional advisors. The
fair market value of the Gabon Securities on the Effective Date shall be
revalued and determined by Chauvco using consistent principles;
(c) notwithstanding the determination of the fair market value of
the Gabon Securities on the Effective Date under Section 7.7(b), unless the
parties otherwise agree, the amount which will be payable with respect to such
value may not exceed US$100,000,000;
<PAGE> 41
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(d) the purchase and sale agreement between CR and CRI with
respect to the transfer of CR's interest in the Gabon Securities to CRI shall
be in a form mutually acceptable to Chauvco and US Co and shall: (i) provide
that CRI will assume and be responsible for and will indemnify, defend and hold
CR, Chauvco and US Co Sub harmless from and against any liabilities CR, Chauvco
or US Co Sub may be or become subject to if any taxing authority challenges the
value placed on the Gabon Securities or the corresponding value of the CRI
Shares transferred to the holders of Chauvco Common Shares and Optionholders;
(ii) provide that CRI will assume all liabilities with respect to the
underlying operations of the Gabon Subsidiaries being purchased; (iii) provide
that CRI will assume and be responsible for and will indemnify, defend and hold
CR, Chauvco and US Co Sub harmless from and against any liabilities CR, Chauvco
and US Co Sub may be or become subject to which relate to the assets, business,
operations, debts or liabilities of CR and Chauvco which are being purchased by
CRI and with respect to the transactions contemplated in this Section 7.7
(provided that with respect to tax matters, the extent of the indemnity shall
be limited to that set out in (i)); (iv) provide that CR and Chauvco will
assume and be responsible for and will indemnify, defend and hold CRI harmless
from and against any liabilities CRI may be or become subject to which relate
to the assets, business, operations, debts or liabilities of CR and Chauvco
which are not being purchased by CRI; (v) provide that Chauvco, subject to
confidentiality provisions, will retain copies of the books and records of such
companies; and (vi) provide that the Chauvco name shall not be used in
connection with, and CRI shall not engage in, any oil and gas operations in the
Western Canadian sedimentary basin for a period of one (1) year from the
Effective Date; and (vii) provide that CRI will use its best efforts to have
Chauvco released from any and all guarantees Chauvco has given to Gabonese
Government;
(e) Chauvco will provide an additional $13,500,000 of funding into
the Gabon Subsidiaries through CR between the date hereof and the Effective
Date which shall remain in the Gabon Subsidiaries for their operations and
shall not be repaid to CR except to the extent that the same may be reflected
in the determination of the fair market value of the Gabon Securities on the
Effective Date pursuant to Section 7.7(b);
(f) Chauvco shall be responsible for all costs and expenses
(including, without limitation, costs related to establishment and promotion of
CRI and legal fees) incurred on or prior to the Effective Date to implement the
transactions contemplated in this Section 7.7;
(g) CRI shall on or prior to the Effective Date, be provided with
copies of all confidentiality agreements entered into by Chauvco in connection
with the strategic alternatives review process of Chauvco; and
(h) the representations and warranties of Chauvco contained in
this Agreement shall be read as if the transactions in this Section 7.7 shall
have already been completed.
7.8 ANCILLARY TRANSACTIONS - ALLIANCE
It is acknowledged and agreed that:
(a) on or prior to the Effective Date, Chauvco shall enter into a
transaction causing all of its rights and assets (including, without
limitation, copies of all books and records related thereto) relating to the
Alliance pipeline project (the "APP") to be distributed to or through an entity
(the
<PAGE> 42
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"Alliance Entity") for a cash payment to Chauvco from the Alliance Entity of
$13,500,000 to be made on or prior to the Effective Date;
(b) Chauvco shall be entitled to provide funding and commitments
in respect of the regular capital funding and commitments of the APP between
the date hereof and Closing provided that such funding shall be repaid, and
such commitments shall be assumed, by the Alliance Entity on or before the
Effective Time. Chauvco shall not be entitled to commit to provide any
additional funding to the APP other than in respect of such regularly scheduled
capital commitments (and shall notify US Co as and when such funding or
commitments are provided) and, in particular, Chauvco shall not be entitled to
commit to the approximate $260 million equity financing commitment due in
October, 1997;
(c) the Alliance Entity shall be responsible for all costs and
expenses (including, without limitation, costs related to establishment and
promotion of the Alliance Entity) incurred on or prior to the Effective Date to
implement the transactions contemplated in this Section 7.8;
(d) the purchase and sale agreement between the Alliance Entity
and Chauvco with respect to the transfer of Chauvco's interest in the APP to
the Alliance Entity will be in a form mutually acceptable to Chauvco and US Co
and provide that (i) the Alliance Entity will assume and be responsible for and
will indemnify, defend and hold harmless Chauvco from and against any
liabilities Chauvco may be or become subject, including any tax liability, to
which relate in any manner whatever to the transfer of Chauvco's interest in
the APP to the Alliance Entity and with respect to the transactions
contemplated in this Section 7.8, (ii) Chauvco will assume and be responsible
for and will indemnify, defend and hold harmless the Alliance Entity from and
against any liabilities the Alliance Entity may be or become subject to which
relate to the assets, business, debts and liabilities of Chauvco unrelated to
the APP, and (iii) Chauvco, subject to confidentiality provisions, will retain
copies of the books and records relating to Chauvco's interest in the APP; and
(e) the representations and warranties of Chauvco contained in
this Agreement shall be read as if the transactions in this Section 7.8 shall
have already been completed.
7.9 CHAUVCO TRADEMARKS AND TRADE NAMES
US Co covenants, whenever so requested by CRI, to execute or cause
Chauvco to execute any and all applications, assignments or other instruments
which CRI shall deem necessary in order to apply for and obtain registered
proprietary rights for the trademarks, trade names and domain name to be
conveyed to CRI pursuant to the Plan of Arrangement and in order to assign and
convey to CRI the sole and exclusive right, title and interest in and to the
said trademarks, trade names and domain name.
7.10 QUALIFICATION OF CRI SHARES
On or before the Effective Date, the CRI Shares shall be qualified for
distribution by prospectus which will be filed with the securities commissions
in each of the provinces of Canada. Chauvco will sign the prospectus as a
promoter pursuant to applicable Canadian securities legislation. Chauvco shall
cause CRI to make an application to the TSE to list the CRI Shares on such
exchange. Alternatively, the CRI Shares shall be issued pursuant to an
exemption from prospectus requirements.
<PAGE> 43
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ARTICLE 8
MISCELLANEOUS
8.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties of the parties contained in this
Agreement will expire and be of no further force or effect at the Closing. All
agreements and covenants of the parties shall survive the Closing, except as
otherwise set forth in this Agreement.
8.2 NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, by facsimile (receipt confirmed)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to US Co to:
Pioneer Natural Resources Company
1400 Williams Square West
5205 N. O'Connor Blvd.
Irving, Texas 75039-3746
Attention: General Counsel
Facsimile No. (972) 402-7057
with a copy to Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Michael D. Wortley
Facsimile No. (214) 220-7716
and MacKimmie Matthews
700, 401 - 9th Avenue S.W.
Calgary, Alberta
T2P 2M2
Attention: Jack MacGillivray
Facsimile No. (403) 232-0888
(b) if to Chauvco to:
Chauvco Resources Ltd.
2900, 255 - 5th Avenue S.W.
Calgary, Alberta
T2P 3G6
Attention: President
Facsimile No. (403) 269-9497
with a copy to Bennett Jones Verchere
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4500 Bankers Hall East
855 2nd Street S.W.
Calgary, Alberta
T2P 4K7
Attention: Martin A. Lambert
Facsimile No. (403) 265-7219
and Baker & Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas
77002-4995
Attention: C. Michael Watson
Facsimile No. (713) 229-1522
8.3 INTERPRETATION
When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section or Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
therein shall be deemed in each case to be followed by the words "without
limitation." The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.4 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to each of the other parties, it being understood that all parties
need not sign the same counterpart.
8.5 MISCELLANEOUS
This Agreement, each of the agreements attached as an exhibit hereto
and any other documents referred to herein or contemplated hereby (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
other than the confidentiality and standstill agreements dated May 23, 1997 and
July 28, 1997, respectively, between Chauvco and US Co which shall continue in
full force and effect; (b) is not intended to confer upon any other person any
rights or remedies hereunder (except as otherwise expressly provided herein and
except that Section 7.4 is for the benefit of Chauvco's directors and officers,
Sections 1.1(e) and (f) are for the benefit of holders of Chauvco Options,
Section 7.6 is for the benefit of the Chauvco Employees, Section 7.7 is for the
benefit of CRI and Section 7.8 is for the benefit of the Alliance Entity (and
said sections are intended to confer rights on such persons); and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided.
<PAGE> 45
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8.6 GOVERNING LAW
This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the Province of Alberta and the
federal laws of Canada applicable therein.
8.7 AMENDMENT AND WAIVERS
Any term or provision of this Agreement may be amended, and the
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a party of any
breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
The Agreement may be amended by the parties hereto at any time before or after
approval of the Chauvco shareholders or US Co stockholders, but, after such
approval, no amendment will be made which by applicable law requires the
further approval of the Chauvco shareholders or US Co stockholders without
obtaining such further approval.
8.8 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS
Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party hereto. This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
8.9 SEVERABILITY
If any provision of this Agreement, or the application thereof, will
for any reason and to any extent be invalid or unenforceable, the remainder of
this Agreement and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the greatest extend possible, the economic, business and other
purpose of the void and unenforceable provision.
8.10 OTHER REMEDIES
The parties agree that irreparable damage would occur and that they
would not have any adequate remedy at law 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 (without the requirement of posting a bond) and to enforce
specifically the terms and provisions of this Agreement in any court located in
Alberta, this being in addition to any other remedy to which they are entitled
at law or in equity.
8.11 NO JOINT VENTURE
Nothing contained in this Agreement will be deemed or construed as
creating a joint venture or partnership between any of the parties. No party is
by virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party will have the power to control the
activities and operations of any other and the status of each is, and at all
times, will continue to
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be, that of an independent contractor with respect to the other. No party will
have any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
section.
8.12 FURTHER ASSURANCES
Each party agrees to cooperate fully with the other party, to act
reasonably in respect of, and to execute, such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and select the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.
8.13 EXPENSES
Except as otherwise set forth in this Agreement, each party will bear
its respective expenses and legal fees incurred with respect to this Agreement
and the transactions contemplated hereby.
IN WITNESS WHEREOF, US Co and Chauvco have caused this Agreement to be
signed by their respective officers thereunder duly authorized, all as of the
date first written above.
PIONEER NATURAL
RESOURCES COMPANY
Per: /s/ Scott D. Sheffield
--------------------------------
Per: /s/ Mark L. Withrow
--------------------------------
CHAUVCO RESOURCES LTD.
Per: /s/ Guy J. Turcotte
--------------------------------
Per: /s/ W.G. Russell
--------------------------------
<PAGE> 47
EXHIBIT A
PLAN OF ARRANGEMENT
UNDER SECTION 186
OF THE BUSINESS CORPORATIONS ACT (ALBERTA)
ARTICLE 1
INTERPRETATION
1.1 Definitions. In this Plan of Arrangement unless there is
something in the subject matter or context inconsistent therewith, the
following terms shall have the respective meanings set out below and
grammatical variations of such terms shall have corresponding meanings:
"ABCA" means the Business Corporations Act (Alberta), as amended;
"Arrangement" means the arrangement under section 186 of the ABCA on
the terms and subject to the conditions set out in this Plan of
Arrangement, subject to any amendments thereto made in accordance with
Section 6.1 hereof or made at the direction of the Court in the Final
Order;
"Arrangement Resolution" means the special resolution passed by the
holders of the Chauvco Common Shares at the Meeting;
"Automatic Redemption Date" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Average Closing Price" means the average closing sales price, regular
way, per share of the US Co Common Stock on the NYSE in United States
dollars as reported in the Wall Street Journal over the ten (10)
consecutive trading days ending on the third trading day next preceding the
date of the Meeting converted to Canadian dollars using the Currency
Exchange Rate;
"Business Day" has the meaning attributed thereto in the Exchangeable
Share Provisions;
"Cash Payment" means the cash payment, if any, which a holder of
Chauvco Common Shares or Chauvco Options is entitled to receive in
accordance with Section 2.2;
"Certificates" means, collectively, the certificates representing the
Exchangeable Shares and shares of US Co Common Stock (in each case rounded
down to the nearest whole number) and the CRI Shares which a holder of
Chauvco Common Shares or Chauvco Options is entitled to receive pursuant to
the Arrangement;
"Chauvco" means Chauvco Resources Ltd., a corporation organized and
existing under the ABCA and any successor corporation;
"Chauvco Common Shares" means the common shares in the capital of
Chauvco;
"Chauvco Options" has the meaning attributed thereto in Section
2.1(e);
"Combination Agreement" means the agreement by and among US Co and
Chauvco, dated as of September 3, 1997, as the same may be amended and
restated, providing for, among other things, the Arrangement;
"Court" means the Court of Queen's Bench of Alberta;
"CR" means CR International Limited, a corporation organized and
existing under the laws of Bermuda;
"CRI" means Chauvco Resources International Ltd., a corporation
organized and existing under the laws of Bermuda;
"CRI Shares" means the common shares in the capital of CRI;
"Currency Exchange Rate" means the noon spot rate of exchange of US
dollars to Canadian dollars announced by the Bank of Canada on the day
preceding the date of calculation;
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"Depositary" means Montreal Trust Company of Canada at its principal
office in Calgary, Alberta;
"Dissent Procedures" has the meaning attributed thereto in Section
3.1;
"Effective Date" means the date shown on the certificate of
arrangement issued by the Registrar under the ABCA giving effect to the
Arrangement;
"Effective Time" means 12:01 a.m. on the Effective Date;
"Election Deadline" means that date which is two (2) days prior to the
date of the Meeting;
"Exchange Ratio" has the meaning attributed thereto in Section 2.2;
"Exchangeable Share Consideration" has the meaning attributed thereto
in the Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares;
"Exchangeable Shares" means the exchangeable shares in the capital of
US Co Sub;
"Final Order" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any time prior to
the Effective Time;
"Gabon Securities" has the meaning attributed thereto in Section
2.1(b);
"Gabon Subsidiaries" has the meaning attributed thereto in Section
2.1(b);
"ITA" means the Income Tax Act (Canada), as amended;
"Joint Proxy Statement" means the Joint Management Information
Circular and Proxy Statement of Chauvco and US Co dated ,
1997;
"Letter of Transmittal and Election Form" has the meaning attributed
thereto in Section 2.1(h);
"Liquidation Call Purchase Price" has the meaning attributed thereto
in Section 5.1;
"Liquidation Call Right" has the meaning attributed thereto in Section
5.1;
"Liquidation Date" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Meeting" means the special meeting of the shareholders of Chauvco to
be held to consider the Arrangement;
"NYSE" means the New York Stock Exchange;
"Optionholders" means holders of Chauvco Options;
"Option Letter of Transmittal and Election Form" has the meaning
attributed thereto in Section 2.1(f);
"Option Payment" has the meaning attributed thereto in Section 2.1(e);
"Record Date" means that date which is three trading days prior to the
Effective Date;
"Redemption Call Purchase Price" has the meaning attributed thereto in
Section 5.2;
"Redemption Call Right" has the meaning attributed thereto in Section
5.2;
"Subsidiary" has the meaning attributed thereto in the Exchangeable
Share Provisions;
"US Co" means Pioneer Natural Resources Company, a corporation
organized and existing under the laws of the State of Delaware and any
successor corporation;
<PAGE> 49
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"US Co Common Stock" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"US Co Stock Price" has the meaning attributed thereto in Section 2.2;
"US Co Sub" means Pioneer Natural Resources (Canada) Ltd., a
corporation organized and existing under the laws of British Columbia and
any successor corporation;
"US Co Sub Common Shares" means the common shares in the capital of US
Co Sub;
"Westoil" means Westoil Marine & Transport Co Ltd., a corporation
organized and existing under the laws of Bermuda; and
"Voting and Exchange Trust Agreement" has the meaning attributed
thereto in the Exchangeable Share Provisions.
1.2 Sections and Headings. The division of this Plan of Arrangement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to a section or an Appendix
refers to the specified section of or Appendix to this Plan of Arrangement.
1.3 Number, Gender and Persons. In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, corporations, partnerships, associations,
trusts, unincorporated organizations, governmental bodies and other legal or
business entities of any kind.
1.4 Currency. Unless otherwise specified, all references herein to
"dollars" or "$" shall mean Canadian dollars.
ARTICLE 2
ARRANGEMENT
2.1 Arrangement. At the Effective Time, the following transactions shall
occur and shall be deemed to occur in the following order without any further
act or formality:
(a) Chauvco shall subscribe for that number of CRI Shares as is equal
to (i) the number of Chauvco Common Shares which are issued and outstanding
on the Record Date, (ii) plus that number of Chauvco Common Shares which
all Optionholders would otherwise be entitled to acquire on the exercise of
their Chauvco Options on a fully vested basis on the Record Date, (iii)
less that number of CRI Shares then held by Chauvco, and (iv) less that
number of Chauvco Common Shares held by shareholders who have exercised
their rights of dissent in accordance herewith and who are ultimately
entitled to be paid the fair value for such shares. The subscription price
for the CRI Shares shall be paid for in cash in the aggregate amount equal
to US$5,000,000 plus the fair market value on the Effective Date (as
determined and adjusted in accordance with Section 2.3) of the Gabon
Securities;
(b) CRI shall purchase from CR for cash in an aggregate amount equal
to the fair market value thereof on the Effective Date (as determined and
adjusted in accordance with Section 2.3), (i) all of the issued and
outstanding securities of Chauvco Resources (Gabon) S.A., Chauvco Resources
(Gabon-Ngalo) S.A., Chauvco Resources (Gabon-Maga) S.A., Chauvco Resources
(Gabon-Avomo) S.A. and CR Trading Co. Ltd. (collectively, the "Gabon
Subsidiaries"), (ii) 75% of the issued and outstanding securities of
Westoil, and (iii) all of its rights under a loan in the amount of U.S.
$909,421.60 made by CR to Olympic Marine Services International, Inc.
(which owns the remaining 25% of the issued and outstanding securities of
Westoil), any and all advances made by CR to Westoil, and any and all
advances made by Chauvco (all of which shall have first been assigned by
Chauvco to CR) to the Gabon Subsidiaries and Westoil (such securities in
Section 2.1(b)(i), (ii) and (iii) collectively, the "Gabon Securities");
(c) Chauvco shall transfer, assign and convey to CRI, in consideration
for $1.00, all of Chauvco's right, title, benefit and interest in and to
any and all trademarks (including registrations and applications
<PAGE> 50
-4-
therefor), trade names and the internet domain name "chauvco.com" owned by
Chauvco as at the Effective Time, and the other assets and property which
are set out in Exhibit I;
(d) US Co Sub shall purchase from Chauvco all of the issued and
outstanding CRI Shares in consideration of the payment by way of promissory
note of US Co Sub to Chauvco in an amount equal to the subscription price
paid for such CRI Shares by Chauvco under Section 2.1(a);
(e) each of the outstanding options to purchase Chauvco Common Shares
which has not been exercised prior to the Record Date (collectively, the
"Chauvco Options") (which includes all outstanding options granted under
Chauvco's stock option plan as amended and restated on November 10, 1995)
will vest, if not already vested, and be transferred to US Co Sub in
consideration for one (1) CRI Share and, in accordance with the election of
each Optionholder and the remainder of this Section 2.1(e) and Section
2.1(f), a number of shares of US Co Common Stock determined in accordance
with the Exchange Ratio in which event, in addition to transferring the
Chauvco Options to US Co Sub, the Optionholder will be required to make a
payment to US Co Sub (the "Option Payment") in an amount equal to the
aggregate exercise price which the Optionholder would otherwise be required
to pay on the exercise of such options. As an alternative to making the
Option Payment, Optionholders will be entitled to elect to reduce the
number of shares of US Co Common Stock to be received by the number
obtained by dividing the Option Payment by the US Co Stock Price (converted
into Canadian dollars using the Currency Exchange Rate). Each Optionholder
will receive only a whole number of shares of US Co Common Stock resulting
from the transfer of his Chauvco Options. In lieu of fractional shares of
US Co Common Stock, each Optionholder who would otherwise be entitled to
receive such fractional shares shall be paid by US Co Sub an amount
determined in accordance herewith in full satisfaction of such fractional
entitlement;
(f) an Optionholder electing to make the Option Payment and receive
the applicable number of shares of US Co Common Stock under Section 2.1(e)
above must have given effect to the election by depositing with the
Depositary, prior to the Election Deadline, a duly completed letter of
transmittal and election form (the "Option Letter of Transmittal and
Election Form") in the form provided by Chauvco along with the Joint Proxy
Statement indicating such holder's election and by agreeing to pay the
Option Payment to the Depositary as agent for US Co Sub. Coincident with
the receipt of the CRI Shares and shares of US Co Common Stock, such
Optionholder shall pay the Option Payment to the Depositary as agent for US
Co Sub less any amounts receivable by such Optionholder in connection with
fractional entitlements hereunder. In the event that an Optionholder who
has elected to make the Option Payment fails to make the Option Payment on
or before the delivery of the securities to the Optionholder, the
Depositary shall be entitled to sell all or any portion of the shares of US
Co Common Stock held on behalf of such Optionholder to satisfy the Option
Payment and remit the same to US Co Sub. In the event that an Optionholder
has failed to validly make an election in the Option Letter of Transmittal
and Election Form pursuant to this paragraph, such Optionholder shall be
deemed to have elected the option to receive the reduced number of shares
of US Co Common Stock by not making the Option Payment;
(g) each of the outstanding Chauvco Common Shares will be transferred
to US Co Sub in consideration for one (1) CRI Share and, at the election of
the holders of the Chauvco Common Shares:
(i) a number of shares of US Co Common Stock determined in
accordance with the Exchange Ratio. Each such holder of Chauvco
Common Shares will receive only a whole number of shares of US
Co Common Stock resulting from the transfer of such holder's
Chauvco Common Shares to US Co Sub. In lieu of fractional
shares of US Co Common Stock, each holder of a Chauvco Common
Share who otherwise would be entitled to receive such
fractional share shall be paid by US Co Sub an amount
determined in accordance herewith in full satisfaction of such
fractional entitlement; or
(ii) a number of shares of Exchangeable Shares determined in
accordance with the Exchange Ratio. Each such holder of
Chauvco Common Shares will receive only a whole number of
Exchangeable Shares resulting from the transfer of such
holder's Chauvco Common Shares to US Co Sub. In lieu of
fractional Exchangeable Shares, each holder of a Chauvco
<PAGE> 51
-5-
Common Share who otherwise would be entitled to receive such
fractional share shall be paid by US Co Sub an amount determined
in accordance herewith in full satisfaction of such fractional
entitlement;
provided that, for greater certainty, such holders shall be entitled to
elect to receive a combination of shares of US Co Common Stock and
Exchangeable Shares on the transfer of their Chauvco Common Shares;
(h) a holder of Chauvco Common Shares must have given effect to the
election in Section 2.1(g) above by depositing with the Depositary, prior
to the Election Deadline, a duly completed letter of transmittal and
election form (the "Letter of Transmittal and Election Form") in the form
provided by Chauvco along with the Joint Proxy Statement indicating such
holder's election. In the event that a holder of Chauvco Common Shares has
failed to validly make an election under Section 2.1(g) in the Letter of
Transmittal and Election Form pursuant to this paragraph, such holder shall
be deemed to have elected the option under Section 2.1(g)(i).
Notwithstanding any provision to the contrary, holders of Chauvco Common
Shares who are not residents of Canada for the purposes of the ITA will not
be entitled to receive Exchangeable Shares under Section 2.1(g)(ii). Each
holder of Chauvco Common Shares who, prior to the Election Deadline,
returned to Chauvco a duly completed Letter of Transmittal and Election
Form (containing a declaration of residency status) shall be treated as a
resident shareholder or non-resident shareholder, as applicable, in
accordance with his declaration. Any holder of Chauvco Common Shares who
did not complete such declaration by the Election Deadline and who has an
address on the register of holders of Chauvco Common Shares which is
outside of Canada shall be deemed to be a non-resident shareholder;
(i) upon the transfer of shares referred to in Section 2.1(g) above:
(i) each holder of a Chauvco Common Share shall cease to be such a holder,
shall have his name removed from the register of holders of Chauvco Common
Shares and shall become a holder of the number of fully paid CRI Shares and
Exchangeable Shares and/or shares of US Co Common Stock to which he is
entitled as a result of the transfer of shares referred to in Section
2.1(g) and such holder's name shall be added to the register of holders of
such securities accordingly; and (ii) US Co Sub shall become the legal and
beneficial owner of all of the Chauvco Common Shares so transferred;
(j) holders of Chauvco Common Shares who are residents of Canada for
the purposes of the ITA and who have elected to receive Exchangeable Shares
under Section 2.1(g)(ii) shall be entitled to make an income tax election
pursuant to subsection 85(1) of the ITA with respect to the transfer of
their Chauvco Common Shares to US Co Sub by providing two signed copies of
the necessary election forms to US Co Sub within 90 days following the
Effective Date, duly completed with the details of the number of shares
transferred and the applicable agreed amounts for the purposes of such
elections. Thereafter, subject to the election forms complying with the
provisions of the ITA, the forms will be signed by US Co Sub and returned
to such holders of Chauvco Common Shares for filing with Revenue Canada,
Customs, Excise and Taxation; and
(k) US Co Sub shall be continued as a corporation under the ABCA.
2.2 Exchange Ratio. As used herein, the term "Exchange Ratio" means in
respect of Exchangeable Shares or US Co Common Stock to be delivered upon the
transfer of Chauvco Common Shares or Chauvco Options to US Co Sub, a ratio of
the number of Exchangeable Shares or shares of US Co Common Stock per Chauvco
Common Share or Chauvco Option equal to:
(a) if the US Co Stock Price is less than US$33.50, (.493827);
(b) if the US Co Stock Price is at least US$33.50 but less than
US$39.01,
.493827-((US Co Stock Price -- 33.50) X .042360)
5.51
and
(c) if the US Co Stock Price is equal to or greater than $39.01,
(.451467).
<PAGE> 52
-6-
The Exchange Ratio as so determined in each case shall be rounded to six decimal
places. The "US Co Stock Price" shall mean the average closing sales price,
regular way, per share of the US Co Common Stock on the NYSE in United States
dollars as reported in the Wall Street Journal over the ten (10) consecutive
trading days ending on the third trading day next preceding the date of the
Meeting. Notwithstanding the foregoing, if the Exchange Ratio is above .465116,
US Co may elect to cause US Co Sub to deliver, in lieu of Exchangeable Shares
and shares of US Co Common Stock, a number of Exchangeable Shares or shares of
US Co Common Stock for each Chauvco Common Share or Chauvco Option based on the
Exchange Ratio as set forth above equal to (.465116) and an amount in cash (in
Canadian dollars) per Chauvco Common Share or Chauvco Option equal to the
product of (x) the US Co Stock Price multiplied by the Currency Exchange Rate
and (y)
Exchange Ratio -- .465116.
2.3 Fair Market Value. (a) Chauvco determined that the fair market value
of the Gabon Securities on September 3, 1997 was approximately US$60,000,000
relying on (i) the bidding process in connection with the sale of Chauvco, (ii)
the reserve and evaluation reports prepared by Chauvco's independent engineers,
(iii) the review and recommendation of Chauvco's senior management which
established a range of values at various discount factors and an assessment of
the exploration and development potential of the applicable properties, and (iv)
a fairness opinion supporting such valuation from its professional advisors. The
fair market value of the Gabon Securities on the Effective Date shall be
revalued and determined by Chauvco using consistent principles.
(b) Notwithstanding the determination of the fair market value of the Gabon
Securities on the Effective Date under Section 2.3(a), unless Chauvco and US Co
otherwise agree, the amount which will be payable with respect to such value may
not exceed US$100,000,000.
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent. Holders of Chauvco Common Shares may exercise
rights of dissent with respect to such shares pursuant to and in the manner set
forth in section 184 of the ABCA and this Section 3.1 (the "Dissent Procedures")
in connection with the Arrangement and holders who duly exercise such rights of
dissent and who:
(a) are ultimately entitled to be paid the fair value for their
Chauvco Common Shares shall be deemed to have transferred such Chauvco
Common Shares to Chauvco for cancellation on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid the fair
value for their Chauvco Common Shares shall be deemed to have participated
in the Arrangement on the same basis as any non-dissenting holder of
Chauvco Common Shares,
but in no case shall Chauvco be required to recognize such holders as holders of
Chauvco Common Shares on and after the Effective Date, and the names of such
holders of Chauvco Common Shares shall be deleted from the register of holders
of Chauvco Common Shares on the Effective Date.
3.2 Dissent Payments. The obligations to make payments in respect of
dissenting shareholders (the "Dissent Obligations") shall be apportioned between
Chauvco and CRI as follows:
(a) CRI shall pay that portion of the Dissent Obligations equal to the
result determined by applying the following formula:
<TABLE>
<S> <S> <C>
Fair market value of the Gabon Securities determined in
accordance with Section 2.3 X the Currency Exchange Rate
------------------------------------------------------------------------------------- X Total Dissent Obligations
(US Co Stock Price X the Currency Exchange Rate) X (the total number of Chauvco Common
Shares outstanding on the Effective
Date
X the Exchange Ratio)
</TABLE>
<PAGE> 53
-7-
(b) Chauvco shall pay the remaining portion of the Dissent
Obligations.
ARTICLE 4
CERTIFICATES, CASH PAYMENT AND FRACTIONAL SHARES
4.1 Delivery of Certificates and Cash Payment. At or promptly after the
Effective Time, US Co Sub shall deposit with the Depositary, for the benefit of
the holders of Chauvco Common Shares and Chauvco Options transferred pursuant to
the Arrangement, the Certificates and Cash Payment, if any, to which each such
holder is entitled pursuant to the Arrangement. Upon surrender to the
Depositary:
(a) in the case of holders of Chauvco Common Shares, for cancellation
of a certificate which immediately prior to the Effective Time represented
outstanding Chauvco Common Shares, together with a duly completed Letter of
Transmittal and Election Form; and
(b) in the case of Optionholders of a duly completed Option Letter of
Transmittal and Election Form and, if applicable, the Option Payment;
and, in either case, of such additional documents and instruments as the
Depositary may reasonably require, each such holder shall be entitled to
receive, and the Depositary shall deliver to each such holder, the Certificates
and the Cash Payment to which such holder has the right to receive pursuant to
the Arrangement (together with any dividends or distributions with respect to
the Exchangeable Shares, US Co Common Stock or CRI Shares, as applicable,
pursuant to Section 4.2 and any cash in lieu of fractional shares pursuant to
Section 4.3), and any certificates so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Chauvco Common Shares which is not
registered in the transfer records of Chauvco, the Certificates may be issued
and the Cash Payment, if any, may be paid and delivered to a transferee if the
certificate representing such Chauvco Common Shares is presented to the
Depositary, accompanied by all documents required to evidence and effect such
transfer. Until surrendered as contemplated by this Section 4.1, each
certificate which immediately prior to the Effective Time represented
outstanding Chauvco Common Shares and the Chauvco Options that were transferred
pursuant to the Arrangement shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender (a) the Certificates
and the Cash Payment, if any, to which the holder of Chauvco Common Shares or
Chauvco Options has the right to receive pursuant to the Arrangement, (b) a cash
payment in lieu of any fractional shares as contemplated by Section 4.3 and (c)
any dividends or distributions with a record date after the Effective Time
theretofore paid or payable with respect to the Exchangeable Shares, US Co
Common Stock and CRI Shares, as applicable, as contemplated by Section 4.2. No
interest will be paid from or after the Effective Date in respect of the Cash
Payment.
4.2 Distributions Limited. No dividends or other distributions declared or
made after the Effective Time with respect to the Exchangeable Shares, US Co
Common Stock and CRI Shares, as applicable, with a record date after the
Effective Time shall be paid to the holder of any unsurrendered certificate and
who has not returned a Letter of Transmittal and Election Form which,
immediately prior to the Effective Time, represented outstanding Chauvco Common
Shares or to any Optionholder who has not returned an Option Letter of
Transmittal and Election Form, duly completed and, if applicable, paid the
Option Payment pursuant to Section 2.1(e), and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 4.3, (and
no interest will be earned or payable on these proceeds) unless and until such
certificate and Letter of Transmittal and Election Form or Option Letter of
Transmittal and Election Form and Option Payment, if applicable, shall be
received by the Depositary in accordance with Section 4.1. Subject to applicable
law and to Section 4.5, at the time of such surrender of any such certificate
and Letter of Transmittal and Election Form or Option Letter of Transmittal and
Election Form and Option Payment, if applicable, (or, in the case of clause (c)
below, at the appropriate payment date), there shall be paid to the record
holder of such certificate or to the applicable Optionholder without interest,
(a) the amount of any cash payable in lieu of fractional shares to which such
holder is entitled pursuant to Section 4.3, (b) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to the Exchangeable Shares, US Co Common Stock and CRI Shares, as
applicable, and (c) the amount of
<PAGE> 54
-8-
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to the Exchangeable Shares, US Co Common Stock and CRI Shares, as
applicable.
4.3 No Fractional Shares. No fractional Exchangeable Shares or shares of
US Co Common Stock shall be issued upon the surrender for transfer of
certificates and Letter of Transmittal and Election Form or upon delivery of an
Option Letter of Transmittal and Election Form and Option Payment, if
applicable, pursuant to Section 4.1 and such fractional interests shall not
entitle the owner thereof to vote or to exercise any rights as a security holder
of Chauvco, US Co or US Co Sub. In lieu of any such fractional securities, each
person entitled to a fractional interest in an Exchangeable Share or share of US
Co Common Stock will receive an amount of cash (rounded to the nearest whole
cent), without interest, equal to the product of (a) such fraction multiplied by
(b) the Average Closing Price of the US Co Common Stock, such amount to be
provided to the Depositary by US Co Sub upon request.
4.4 Lost Certificates. If any certificate which immediately prior to the
Effective Time represented outstanding Chauvco Common Shares that were
transferred pursuant to Section 2.1 has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed, the Depositary will issue and deliver in exchange
for such lost, stolen or destroyed certificate, the Certificates and Cash
Payment, if any, to which the holder of such certificate is entitled pursuant to
the Arrangement (and any dividends or distributions with respect thereto and any
cash pursuant to Section 4.3) deliverable in respect thereof as determined in
accordance with Section 2.1. The person who is entitled to receive such
Certificates and Cash Payment, if any, and other payments shall, as a condition
precedent to the receipt thereof, give a bond satisfactory to US Co Sub and US
Co Sub's transfer agent (the "Transfer Agent"), as the case may be, in such form
as US Co Sub may direct or otherwise indemnify US Co Sub in a manner
satisfactory to US Co Sub and the Transfer Agent against any claim that may be
made against US Co Sub or the Transfer Agent with respect to the certificate
alleged to have been lost, stolen or destroyed.
4.5 Extinguishment of Rights. Any certificate which immediately prior to
the Effective Time represented outstanding Chauvco Common Shares that were
transferred pursuant to Section 2.1 and has not been deposited, and any Chauvco
Options with respect to which an Option Letter of Transmittal and Election Form
and the Option Payment, if applicable, has not been deposited or paid, in each
case with all other instruments required by Section 4.1, on or prior to the
tenth anniversary of the Effective Date shall cease to represent a claim or
interest of any kind or nature as a shareholder of Chauvco or an Optionholder.
On such date, the consideration and other payments to which the former
registered holder of the certificate or Optionholder referred to in the
preceding sentence was ultimately entitled shall be deemed to have been
surrendered to US Co together with all entitlements to dividends, distributions
and interest thereon held for such former registered holder for no
consideration.
ARTICLE 5
CERTAIN RIGHTS OF US CO TO ACQUIRE EXCHANGEABLE SHARES
5.1 US Co Liquidation Call Right.
(a) US Co shall have the overriding right (the "Liquidation Call Right"),
in the event of and notwithstanding the proposed liquidation, dissolution or
winding-up of US Co Sub pursuant to Article 5 of the Exchangeable Share
Provisions, to purchase from all but not less than all of the holders (other
than US Co and any Subsidiary thereof) of Exchangeable Shares on the Liquidation
Date all but not less than all of the Exchangeable Shares held by each such
holder on payment by US Co to the holder of the Exchangeable Share Price
applicable on the last Business Day prior to the Liquidation Date (the
"Liquidation Call Purchase Price"). In the event of the exercise of the
Liquidation Call Right by US Co, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to US Co on the Liquidation Date on
payment by US Co to the holder of the Liquidation Call Purchase Price for each
such share.
(b) To exercise the Liquidation Call Right, US Co must notify US Co Sub's
Transfer Agent in writing, as agent for the holders of Exchangeable Shares, and
US Co Sub of US Co's intention to exercise such right at
<PAGE> 55
-9-
least 55 days before the Liquidation Date in the case of a voluntary
liquidation, dissolution or winding-up of US Co Sub and at least five Business
Days before the Liquidation Date in the case of an involuntary liquidation,
dissolution or winding-up of US Co Sub. The Transfer Agent will notify the
holders of Exchangeable Shares as to whether or not US Co has exercised the
Liquidation Call Right forthwith after the expiry of the date by which the same
may be exercised by US Co. If US Co exercises the Liquidation Call Right, on the
Liquidation Date US Co will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to the
Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, US Co shall deposit with the Transfer
Agent, on or before the Liquidation Date, the Exchangeable Share Consideration
representing the total Liquidation Call Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with the Transfer Agent,
on and after the Liquidation Date the rights of each holder of Exchangeable
Shares will be limited to receiving such holder's proportionate part of the
total Liquidation Call Purchase Price payable by US Co without interest upon
presentation and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be the holder of
the US Co Common Stock delivered to such holder. Upon surrender to the Transfer
Agent of a certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under applicable law and such additional
documents and instruments as the Transfer Agent may reasonably require, the
holder of such surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf of US Co shall
deliver to such holder, the Exchangeable Share Consideration to which the holder
is entitled. If US Co does not exercise the Liquidation Call Right in the manner
described above, on the Liquidation Date the holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the liquidation price otherwise
payable by US Co Sub in connection with the liquidation, dissolution or
winding-up of US Co Sub pursuant to Article 5 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such Exchangeable Share
Consideration is delivered to the holder, the holder shall be deemed to still be
a holder of Exchangeable Shares for purposes of all voting rights with respect
thereto under the Voting and Exchange Trust Agreement.
5.2 US Co Redemption Call Right.
(a) US Co shall have the overriding right (the "Redemption Call Right"),
notwithstanding the proposed redemption of the Exchangeable Shares by US Co Sub
pursuant to Article 7 of the Exchangeable Share Provisions, to purchase from all
but not less than all of the holders (other than US Co or any Subsidiary
thereof) of Exchangeable Shares on the Automatic Redemption Date all but not
less than all of the Exchangeable Shares held by each such holder on payment by
US Co to the holder of the Exchangeable Share Price applicable on the last
Business Day prior to the Automatic Redemption Date (the "Redemption Call
Purchase Price"). In the event of the exercise of the Redemption Call Right by
US Co, each holder shall be obligated to sell all the Exchangeable Shares held
by the holder to US Co on the Automatic Redemption Date on payment by US Co to
the holder of the Redemption Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, US Co must notify the Transfer
Agent in writing, as agent for the holders of Exchangeable Shares, and US Co Sub
of US Co's intention to exercise such right at least 125 days before the
Automatic Redemption Date. The Transfer Agent will notify the holders of the
Exchangeable Shares as to whether or not US Co has exercised the Redemption Call
Right forthwith after the date by which the same may be exercised by US Co. If
US Co exercises the Redemption Call Right, on the Automatic Redemption Date US
Co will purchase and the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, US Co shall deposit with the Transfer
Agent, on or before the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Redemption Call Purchase Price payable by US Co
<PAGE> 56
-10-
without interest upon presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the holder shall on
and after the Automatic Redemption Date be considered and deemed for all
purposes to be the holder of the US Co Common Stock delivered to such holder.
Upon surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and such additional documents and instruments as the Transfer
Agent may reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the Transfer
Agent on behalf of US Co shall deliver to such holder, the Exchangeable Share
Consideration to which the holder is entitled. If US Co does not exercise the
Redemption Call Right in the manner described above, on the Automatic Redemption
Date the holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the redemption price otherwise payable by US Co Sub in
connection with the redemption of the Exchangeable Shares pursuant to Article 7
of the Exchangeable Share Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder, the holder shall be
deemed to still be a holder of Exchangeable Shares for purposes of all voting
rights with respect thereto under the Voting and Exchange Trust Agreement.
ARTICLE 6
AMENDMENT
6.1 Plan of Arrangement Amendment. Chauvco reserves the right to amend,
modify and/or supplement this Plan of Arrangement at any time and from time to
time provided that any such amendment, modification, or supplement must be
contained in a written document that is (a) agreed to by US Co, (b) filed with
the Court and, if made following the Meeting, approved by the Court and (c)
communicated to holders of Chauvco Common Shares in the manner required by the
Court (if so required).
Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by Chauvco at any time prior to or at the Meeting (provided that US
Co shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted by the persons voting at the
Meeting (other than as may be required under the Court's interim order), shall
become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement that
is approved by the Court following the Meeting shall be effective only (a) if it
is consented to by Chauvco (b) if it is consented to by US Co and (c) if
required by the Court or applicable law, it is consented to by the holders of
the Exchangeable Shares.
<PAGE> 57
EXHIBIT B
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ____ day of ____,1997,
BETWEEN:
PIONEER NATURAL RESOURCES COMPANY, a corporation incorporated
under the laws of the State of Delaware and having its head
and principal office at Irving, Texas (hereinafter referred
to as "US Co")
OF THE FIRST PART,
- and -
PIONEER NATURAL RESOURCES (CANADA) LTD., a
corporation continued under the laws of the Province of
Alberta and having its head and principal office at Calgary,
Alberta (hereinafter referred to as "US Co Sub")
OF THE SECOND PART.
WHEREAS pursuant to a combination agreement dated as of September 3,
1997, by and between US Co and Chauvco Resources Ltd. ("Chauvco") (such
agreement as it may be amended or restated is hereinafter referred to as the
"Combination Agreement"), the parties agreed that on the Effective Date (as
defined in the Combination Agreement), US Co and US Co Sub would execute and
deliver a Support Agreement containing the terms and conditions set forth in
Exhibit B to the Combination Agreement together with such other terms and
conditions as may be agreed to by the parties to the Combination Agreement
acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated ___, 1997 filed pursuant to the Business
Corporations Act (Alberta) certain of the issued and outstanding common shares
of Chauvco ("Chauvco Common Shares") were exchanged for, among other things,
issued and outstanding Exchangeable Shares of US Co Sub (the "Exchangeable
Shares");
AND WHEREAS the Articles of US Co Sub set forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
<PAGE> 58
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AND WHEREAS the parties hereto desire to make appropriate provision
and to establish a procedure whereby US Co will take certain actions and make
certain payments and deliveries necessary to ensure that US Co Sub will be able
to make certain payments and to deliver or cause to be delivered shares of US
Co Common Stock in satisfaction of the obligations of US Co Sub under the
Exchangeable Share Provisions with respect to the payment and satisfaction of
dividends, Liquidation Amounts, Retraction Prices and Redemption Prices, all in
accordance with the Exchangeable Share Provisions;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
1. DEFINITIONS AND INTERPRETATION
(a) Defined Terms. Each term denoted herein by initial capital
letters and not otherwise defined herein shall have the
meaning attributed thereto in the Exchangeable Share
Provisions, unless the context requires otherwise.
(b) Interpretation Not Affected by Headings, etc. The division of
this Agreement into articles, sections and paragraphs and the
insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of
this Agreement.
(c) Number, Gender, etc. Words importing the singular number
only shall include the plural and vice versa. Words importing
the use of any gender shall include all genders.
(d) Date for any Action. If any date on which any action is
required to be taken under this Agreement is not a Business
Day, such action shall be required to be taken on the next
succeeding Business Day.
2. COVENANTS OF US CO AND US CO SUB
(a) Covenants of US Co Regarding Exchangeable Shares. So long as
any Exchangeable Shares are outstanding, US Co will:
(i) not declare or pay any dividend on US Co Common
Stock unless (A) US Co Sub will have sufficient
assets, funds and other property available to enable
the due declaration and the due and punctual payment
in accordance with applicable law of an equivalent
dividend on the Exchangeable Shares and (B) US Co
Sub shall simultaneously declare or pay, as the case
may be, an equivalent dividend on the Exchangeable
Shares, in each case in accordance with the
Exchangeable Share Provisions;
(ii) advise US Co Sub sufficiently in advance of the
declaration by US Co of any dividend on US Co Common
Stock and take all such other actions as are
necessary, in cooperation with US Co Sub, to ensure
that the respective declaration date, record date
and payment date for a dividend on the
<PAGE> 59
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Exchangeable Shares shall be the same as the record
date, declaration date and payment date for the
corresponding dividend on US Co Common Stock and
such dividend on the Exchangeable Shares shall
correspond with any requirement of the principal
stock exchange on which the Exchangeable Shares are
listed;
(iii) ensure that the record date for any dividend
declared on US Co Common Stock is not less than 10
calendar days after the declaration date for such
dividend;
(iv) take all such actions and do all such things as are
necessary or desirable to enable and permit US Co
Sub, in accordance with applicable law, to pay and
otherwise perform its obligations with respect to
the satisfaction of the Liquidation Amount in
respect of each issued and outstanding Exchangeable
Share upon the liquidation, dissolution or
winding-up of US Co Sub, including without
limitation all such actions and all such things as
are necessary or desirable to enable and permit US
Co Sub to cause to be delivered shares of US Co
Common Stock to the holders of Exchangeable Shares
in accordance with the provisions of Article 5 of
the Exchangeable Share Provisions;
(v) take all such actions and do all such things as are
necessary or desirable to enable and permit US Co
Sub, in accordance with applicable law, to pay and
otherwise perform its obligations with respect to
the satisfaction of the Retraction Price and the
Redemption Price, including without limitation all
such actions and all such things as are necessary or
desirable to enable and permit US Co Sub to cause to
be delivered shares of US Co Common Stock to the
holders of Exchangeable Shares, upon the retraction
or redemption of the Exchangeable Shares in
accordance with the provisions of Article 6 or
Article 7 of the Exchangeable Share Provisions, as
the case may be; and
(vi) not exercise its vote as a direct or indirect
shareholder to initiate the voluntary liquidation,
dissolution or winding-up of US Co Sub nor take any
action or omit to take any action that is designed
to result in the liquidation, dissolution or
winding-up of US Co Sub.
(b) Segregation of Funds. US Co will cause US Co Sub to deposit
a sufficient amount of funds in a separate account and
segregate a sufficient amount of such assets and other
property as is necessary to enable US Co Sub to pay or
otherwise satisfy the applicable dividends, Liquidation
Amount, Retraction Price or Redemption Price, in each case
for the benefit of holders from time to time of the
Exchangeable Shares, and to use such funds, assets and other
property so segregated exclusively for the payment of
dividends and the payment or other satisfaction of the
Liquidation Amount, the Retraction Price or the Redemption
Price, as applicable, net of any corresponding withholding
tax obligations and for the remittance of such withholding
tax obligations.
<PAGE> 60
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(c) Reservation of Shares of US Co Common Stock. US Co hereby
represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available,
free from pre-emptive and other rights, out of its authorized
and unissued capital stock such number of shares of US Co
Common Stock (or other shares or securities into which US Co
Common Stock may be reclassified or changed as contemplated
by section 2(g) hereof) (i) as is equal to the sum of (A) the
number of Exchangeable Shares issued and outstanding from
time to time and (B) the number of Exchangeable Shares
issuable upon the exercise of all rights to acquire
Exchangeable Shares outstanding from time to time and (ii) as
are now and may hereafter be required to enable and permit US
Co Sub to meet its obligations hereunder, under the Voting
and Exchange Trust Agreement, under the Exchangeable Share
Provisions and under any other security or commitment
pursuant to the Arrangement with respect to which US Co may
now or hereafter be required to issue shares of US Co Common
Stock.
(d) Notification of Certain Events. In order to assist US Co to
comply with its obligations hereunder, US Co Sub will give US
Co notice of each of the following events at the time set
forth below:
(i) in the event of any determination by the Board of
Directors of US Co Sub to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to US Co Sub or to effect any other
distribution of the assets of US Co Sub among its
shareholders for the purpose of winding-up its
affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution;
(ii) immediately, upon the earlier of (A) receipt by US
Co Sub of notice of, and (B) US Co Sub otherwise
becoming aware of, any threatened or instituted
claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution
or winding-up of US Co Sub or to effect any other
distribution of the assets of US Co Sub among its
shareholders for the purpose of winding-up its
affairs;
(iii) immediately, upon receipt by US Co Sub of a
Retraction Request (as defined in the Exchangeable
Share Provisions);
(iv) at least 130 days prior to any accelerated Automatic
Redemption Date determined by the Board of Directors
of US Co Sub in accordance with the Exchangeable
Share Provisions; and
(v) as soon as practicable upon the issuance by US Co
Sub of any Exchangeable Shares or rights to acquire
Exchangeable Shares.
(e) Delivery of Shares of US Co Common Stock. In furtherance of
its obligations hereunder, upon notice of any event which
requires US Co Sub to cause to be delivered shares of US Co
Common Stock to any holder of Exchangeable Shares, US Co
shall forthwith issue and deliver the requisite shares of US
Co Common Stock to or to the order of the former holder of
the surrendered Exchangeable Shares, as US
<PAGE> 61
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Co Sub shall direct. All such shares of US Co Common Stock
shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim, encumbrance,
security interest or adverse claim.
(f) Qualification of Shares of US Co Common Stock. US Co
covenants that if any shares of US Co Common Stock (or other
shares or securities into which US Co Common Stock may be
reclassified or changed as contemplated by section 2(g)
hereof) to be issued and delivered hereunder, including for
greater certainty, pursuant to the Exchangeable Share
Provisions, or pursuant to the Exchange Right or the
Automatic Exchange Rights (both as defined in the Voting and
Exchange Trust Agreement) require registration or
qualification with or approval of or the filing of any
document including any prospectus or similar document or the
taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory
authority under any Canadian or United States federal,
provincial or state law or regulation or pursuant to the
rules and regulations of any regulatory authority or the
fulfillment of any other legal requirement (collectively, the
"Applicable Laws") before such shares (or other shares or
securities into which US Co Common Stock may be reclassified
or changed as contemplated by section 2(g) hereof) may be
issued and delivered by US Co to the initial holder thereof
(other than US Co Sub) or in order that such shares may be
freely traded thereafter (other than any restrictions on
transfer by reason of a holder being a "control person" of US
Co for purposes of Canadian federal or provincial securities
law or an "affiliate" of US Co or, prior to the Effective
Date, of Chauvco for purposes of United States federal or
state securities law), US Co will in good faith expeditiously
take all such actions and do all such things as are necessary
to cause such shares of US Co Common Stock (or other shares
or securities into which US Co Common Stock may be
reclassified or changed as contemplated by section 2(g)
hereof) to be and remain duly registered, qualified or
approved. US Co represents and warrants that it has in good
faith taken all actions and done all things as are necessary
under Applicable Laws as they exist on the date hereof to
cause the shares of US Co Common Stock (or other shares or
securities into which US Co Common Stock may be reclassified
or changed as contemplated by section 2(g) hereof) to be
issued and delivered hereunder, including for greater
certainty, pursuant to the Exchangeable Share Provisions, or
pursuant to the Exchange Right and the Automatic Exchange
Right to be freely tradeable thereafter (other than
restrictions on transfer by reason of a holder being a
"control person" of US Co for the purposes of Canadian
federal and provincial securities law or an "affiliate" of US
Co or, prior to the Effective Date, of Chauvco for the
purposes of United States federal or state securities law).
US Co will in good faith expeditiously take all such actions
and do all such things as are necessary to cause all shares
of US Co Common Stock (or other shares or other securities
into which US Co Common Stock may be reclassified or changed
as contemplated by section 2(g) hereof) to be delivered
hereunder, including for greater certainty, pursuant to the
Exchangeable Share Provisions, or pursuant to the Exchange
Right or the Automatic Exchange Rights to be listed, quoted
or posted for trading on all stock exchanges and quotation
systems on which such shares are listed, quoted or posted for
trading at such time. US Co will in good faith expeditiously
take all such action and do all such things as are necessary
to cause all Exchangeable Shares to be and to continue to be
listed and posted for trading on The Toronto Stock Exchange.
<PAGE> 62
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(g) Equivalence.
(i) US Co will not without the prior approval of US Co
Sub and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section
9.2 of the Exchangeable Share Provisions:
(A) issue or distribute shares of US Co Common
Stock (or securities exchangeable for or
convertible into or carrying rights to
acquire shares of US Co Common Stock) to
the holders of all or substantially all of
the then outstanding US Co Common Stock by
way of stock dividend or other
distribution; or
(B) issue or distribute rights, options or
warrants to the holders of all or
substantially all of the then outstanding
shares of US Co Common Stock entitling them
to subscribe for or to purchase shares of
US Co Common Stock (or securities
exchangeable for or convertible into or
carrying rights to acquire shares of US Co
Common Stock); or
(C) issue or distribute to the holders of all
or substantially all of the then
outstanding shares of US Co Common Stock
(I) shares or securities of US Co of any
class other than US Co Common Stock (other
than shares convertible into or
exchangeable for or carrying rights to
acquire shares of US Co Common Stock), (II)
rights, options or warrants other than
those referred to in subsection 2(g)(i)(B)
above, (III) evidences of indebtedness of
US Co or (IV) assets of US Co;
unless
(D) US Co Sub is permitted under applicable law
to issue or distribute the economic
equivalent on a per share basis of such
rights, options, securities, shares,
evidences of indebtedness or other assets
to holders of the Exchangeable Shares; and
(E) US Co Sub shall issue or distribute the
economic equivalent on a per share basis of
such rights, options, securities, shares,
evidences of indebtedness or other assets
simultaneously to holders of the
Exchangeable Shares.
(ii) US Co will not without the prior approval of US Co
Sub and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section
9.2 of the Exchangeable Share Provisions:
(A) subdivide, divide or change the then
outstanding shares of US Co Common Stock
into a greater number of shares of US Co
Common Stock; or
<PAGE> 63
- 7 -
(B) reduce, combine or consolidate or change
the then outstanding shares of US Co Common
Stock into a lesser number of shares of US
Co Common Stock; or
(C) reclassify or otherwise change the shares
of US Co Common Stock or effect an
amalgamation, merger, reorganization or
other transaction affecting the shares of
US Co Common Stock;
unless (I) US Co Sub is permitted under applicable
law to simultaneously make the same or an equivalent
change to, or in the rights of holders of, the
Exchangeable Shares and (II) the same or an
equivalent change is made to, or in the rights of
the holders of, the Exchangeable Shares.
(iii) US Co will ensure that the record date for any event
referred to in section 2(g)(i) or 2(g)(ii) above, or
(if no record date is applicable for such event) the
effective date for any such event, is not less than
10 calendar days after the date on which such event
is declared or announced by US Co (with simultaneous
notice thereof to be given by US Co to US Co Sub).
(h) Tender Offers, etc. In the event that a tender offer, share
exchange offer, issuer bid, take-over bid or similar
transaction with respect to US Co Common Stock (an "Offer")
is proposed by US Co or is proposed to US Co or its
shareholders and is recommended by the Board of Directors of
US Co, or is otherwise effected or to be effected with the
consent or approval of the Board of Directors of US Co, US Co
shall take all such actions and do all such things as are
necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same
extent and on an equivalent basis as the holders of shares of
US Co Common Stock, without discrimination, including,
without limiting the generality of the foregoing, US Co will
use its good faith efforts expeditiously to (and shall, in
the case of a transaction proposed by US Co or where US Co is
a participant in the negotiation thereof) ensure that holders
of Exchangeable Shares may participate in all such Offers
without being required to retract Exchangeable Shares as
against US Co Sub (or, if so required, to ensure that any
such retraction shall be effective only upon, and shall be
conditional upon, the closing of the Offer and only to the
extent necessary to tender or deposit to the Offer).
(i) Ownership of Outstanding Shares. Without the prior approval
of US Co Sub and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of
the Exchangeable Share Provisions, US Co covenants and agrees
in favour of US Co Sub that, as long as any outstanding
Exchangeable Shares are owned by any person or entity other
than US Co or any of its Subsidiaries, US Co will be and
remain the direct or indirect beneficial owner of all issued
and outstanding shares in the capital of US Co Sub and all
outstanding securities of US Co Sub carrying or otherwise
entitled to voting rights in any circumstances, in each case
other than the Exchangeable Shares.
(j) US Co Not to Vote Exchangeable Shares. US Co covenants and
agrees that it will appoint and cause to be appointed
proxyholders with respect to all Exchangeable
<PAGE> 64
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Shares held by US Co and its Subsidiaries for the sole
purpose of attending each meeting of holders of Exchangeable
Shares in order to be counted as part of the quorum for each
such meeting. US Co further covenants and agrees that it will
not, and will cause its Subsidiaries not to, exercise any
voting rights which may be exercisable by holders of
Exchangeable Shares from time to time pursuant to the
Exchangeable Share Provisions or pursuant to the provisions
of any corporate statute by which US Co Sub may be governed
with respect to any Exchangeable Shares held by it or by its
Subsidiaries in respect of any matter considered at any
meeting of holders of Exchangeable Shares.
(k) Due Performance. On and after the Effective Date, US Co shall
duly and timely perform all of its obligations provided for
in connection with the Plan of Arrangement including any
obligations that may arise upon the exercise of US Co's
rights under the Exchangeable Share Provisions.
(l) Appointment to US Co Board. US Co shall cause James R.
Baroffio to be appointed as a director of US Co on or prior
to the date hereof as a Class II Director to serve until US
Co's 1999 annual stockholders' meeting; Guy J. Turcotte to be
nominated as a director of US Co for election at US Co's 1998
annual stockholders' meeting and Mr. Baroffio to be nominated
for re-election at US Co's 1999 annual stockholders' meeting.
US Co shall put forth Messrs. Turcotte and Baroffio for
election to its board of directors as aforesaid and will
cause to be solicited proxies for its stockholder's meetings
in favour of the election of such individual.
3. GENERAL
(a) Term. This Agreement shall come into force and be effective
as of the date hereof and shall terminate and be of no
further force and effect at such time as no Exchangeable
Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire securities
Exchangeable Shares) are held by any party other than US Co
and any of its Subsidiaries.
(b) Changes in Capital of US Co and US Co Sub. Notwithstanding
the provisions of section 3(d) hereof, at all times after the
occurrence of any event effected pursuant to section 2(g) or
2(h) hereof, as a result of which either US Co Common Stock
or the Exchangeable Shares or both are in any way changed,
this Agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which US
Co Common Stock or the Exchangeable Shares or both are so
changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
(c) Severability. If any provision of this Agreement is held to
be invalid, illegal or unenforceable, the validity, legality
or enforceability of the remainder of this Agreement shall
not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
<PAGE> 65
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(d) Amendments, Modifications, etc. This Agreement may not be
amended or modified except by an agreement in writing
executed by US Co Sub and US Co and approved by the holders
of the Exchangeable Shares in accordance with Section 9.2 of
the Exchangeable Share Provisions.
(e) Ministerial Amendments. Notwithstanding the provisions of
section 3(d), the parties to this Agreement may in writing,
at any time and from time to time, without the approval of
the holders of the Exchangeable Shares, amend or modify this
Agreement for the purposes of:
(i) adding to the covenants of either or both parties
for the protection of the holders of the
Exchangeable Shares;
(ii) making such amendments or modifications not
inconsistent with this Agreement as may be necessary
or desirable with respect to matters or questions
which, in the opinion of the board of directors of
each of US Co Sub and US Co, it may be expedient to
make, provided that each such boards of directors
shall be of the opinion that such amendments or
modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares;
or
(iii) making such changes or corrections which, on the
advice of counsel to US Co Sub and US Co, are
required for the purpose of curing or correcting any
ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error,
provided that the boards of directors of each of US
Co Sub and US Co shall be of the opinion that such
changes or corrections will not be prejudicial to
the interests of the holders of the Exchangeable
Shares.
(f) Meeting to Consider Amendments. US Co Sub, at the request of
US Co, shall call a meeting or meetings of the holders of the
Exchangeable Shares for the purpose of considering any
proposed amendment or modification requiring approval of such
shareholders. Any such meeting or meetings shall be called
and held in accordance with the by-laws of US Co Sub, the
Exchangeable Share Provisions and all applicable laws.
(g) Amendments Only in Writing. No amendment to or modification
or waiver of any of the provisions of this Agreement
otherwise permitted hereunder shall be effective unless made
in writing and signed by both of the parties hereto.
(h) Inurement. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and the holders, from time
to time, of Exchangeable Shares and each of their respective
heirs, successors and assigns.
(i) Notices to Parties. All notices and other communications
between the parties shall be in writing and shall be deemed
to have been given if delivered personally or by confirmed
telecopy to the parties at the following addresses (or at
such other address for either such party as shall be
specified in like notice):
<PAGE> 66
- 10 -
(i) if to US Co at:
Pioneer Natural Resources Company
1400 Williams Square West
5205 N. O'Connor Blvd.
Irving, Texas 75039-3746
Attention: President
Telecopy: (972) 402-7057
(ii) if to US Co Sub at:
Pioneer Natural Resources (Canada) Ltd.
2900, 255 - 5th Avenue S.W.
Calgary, Alberta
T2P 3G6
Attention: President
Telecopy: (403) 231-3247
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof
and if given by telecopy shall be deemed to have been given
and received on the date of confirmed receipt thereof unless
such day is not a Business Day in which case it shall be
deemed to have been given and received upon the immediately
following Business Day.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
(k) Jurisdiction. This Agreement shall be construed and enforced
in accordance with the laws of the Province of Alberta and
the laws of Canada applicable therein.
(l) Attornment. US Co agrees that any action or proceeding
arising out of or relating to this Agreement may be
instituted in the courts of Alberta, waives any objection
which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction
of the said courts in any such action or proceeding, agrees
to be bound by any judgment of the said courts and not to
seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby
appoints US Co Sub at its registered office in the Province
of Alberta as US Co's attorney for service of process.
<PAGE> 67
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
PIONEER NATURAL
RESOURCES COMPANY
Per:
---------------------------
Per:
---------------------------
PIONEER NATURAL RESOURCES
(CANADA) LTD.
Per:
---------------------------
Per:
---------------------------
<PAGE> 68
EXHIBIT C
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ____ day of ____, 1997,
AMONG:
PIONEER NATURAL RESOURCES COMPANY, a corporation
incorporated under the laws of the State of Delaware
and having its head and principal office at Irving, Texas
(hereinafter referred to as "US Co")
OF THE FIRST PART,
- and -
PIONEER NATURAL RESOURCES (CANADA) LTD., a
corporation continued under the laws of the Province
of Alberta and having its head and principal office
at Calgary, Alberta (hereinafter referred to as
"US Co Sub")
OF THE SECOND PART,
- and -
MONTREAL TRUST COMPANY OF CANADA, a trust company
existing under the laws of Canada (hereinafter
referred to as the "Trustee")
OF THE THIRD PART.
WHEREAS pursuant to a combination agreement dated as of September 3,
1997, by and between US Co and Chauvco Resources Ltd. ("Chauvco") (such
agreement as it may be amended or restated is hereinafter referred to as the
"Combination Agreement"), the parties agreed that on the Effective Date (as
defined in the Combination Agreement), US Co and US Co Sub would execute and
deliver a Voting and Exchange Trust Agreement containing the terms and
conditions set forth in Exhibit C to the Combination Agreement together with
such other terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably;
<PAGE> 69
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AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated ____, 1997 filed pursuant to the Business
Corporations Act (Alberta), certain of the issued and outstanding common shares
of Chauvco ("Chauvco Common Shares") were exchanged for, among other things,
issued and outstanding Exchangeable Shares of US Co Sub (the "Exchangeable
Shares");
AND WHEREAS the Articles of US Co Sub set forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
AND WHEREAS US Co is to provide voting rights in US Co to each holder
(other than US Co and its Subsidiaries) from time to time of Exchangeable
Shares, such voting rights per Exchangeable Share to be equivalent to the
voting rights per share of US Co Common Stock (the "US Co Common Stock");
AND WHEREAS US Co is to grant to and in favour of the holders (other
than US Co and its Subsidiaries) from time to time of Exchangeable Shares the
right, in the circumstances set forth herein, to require US Co to purchase from
each such holder all or any part of the Exchangeable Shares held by the holder;
AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in US Co shall be exercisable by
holders (other than US Co and its Subsidiaries) from time to time of
Exchangeable Shares by and through the Trustee, which will hold legal title to
one (1) share of US Co Special Preferred Voting Stock (the "US Co Special
Voting Stock") to which voting rights attach for the benefit of such holders
and whereby the rights to require US Co to purchase Exchangeable Shares from
the holders thereof (other than US Co and its Subsidiaries) shall be
exercisable by such holders from time to time of Exchangeable Shares by and
through the Trustee, which will hold legal title to such rights for the benefit
of such holders;
AND WHEREAS these recitals and any statements of fact in this
Agreement are made by US Co and US Co Sub and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
1. DEFINITIONS AND INTERPRETATION
(a) Definitions. In this Agreement, the following terms shall
have the following meanings:
"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of US Co Common Stock are
entitled to vote, consent or otherwise act, the product of (i) the
number of shares of Exchangeable Shares issued and outstanding and
held by Holders multiplied by (ii) the Equivalent Vote Amount.
<PAGE> 70
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"Arrangement" has the meaning attributed thereto in the recitals
hereto.
"Automatic Exchange Rights" means the benefit of the obligation of US
Co to effect the automatic exchange of shares of US Co Common Stock
for Exchangeable Shares pursuant to Section 5(1) hereof.
"Board of Directors" means the Board of Directors of US Co Sub.
"Business Day" has the meaning attributed thereto in the Exchangeable
Share Provisions.
"Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of US Co Common Stock are
entitled to vote, consent or otherwise act, the number of votes to
which a holder of one share of US Co Common Stock is entitled with
respect to such matter, proposition or question.
"Exchange Right" has the meaning attributed thereto in Article 5
hereof.
"Exchangeable Share Consideration" has the meaning attributed thereto
in the Exchangeable Share Provisions.
"Exchangeable Share Price" has the meaning attributed thereto in the
Exchangeable Share Provisions.
"Exchangeable Share Provisions" has the meaning attributed thereto in
the recitals hereto.
"Exchangeable Shares" has the meaning attributed thereto in the
recitals hereto.
"Holder Votes" has the meaning attributed thereto in Section 4(b)
hereof.
"Holders" means the registered holders from time to time of
Exchangeable Shares, other than US Co and its Subsidiaries.
"Insolvency Event" means the institution by US Co Sub of any
proceeding to be adjudicated a bankrupt or insolvent or to be
dissolved or wound-up, or the consent of US Co Sub to the institution
of bankruptcy, insolvency, dissolution or winding-up proceedings
against it, or the filing of a petition, answer or consent seeking
dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, including without limitation the Companies' Creditors'
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act
(Canada), and the failure by US Co Sub to contest in good faith any
such proceedings commenced in respect of US Co Sub within 15 days of
becoming aware thereof, or the consent by US Co Sub to the filing of
any such petition or to the appointment of a receiver, or the making
by US Co Sub of a general assignment for the benefit of creditors, or
the admission in writing by US Co Sub of its inability to pay its
debts generally as they become due, or US Co Sub not being permitted,
pursuant to liquidity or solvency requirements of applicable law, to
redeem any Retracted Shares pursuant to Section 6.6 of the
Exchangeable Share Provisions.
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"Liquidation Call Right" has the meaning attributed thereto in the
Exchangeable Share Provisions.
"Liquidation Event" has the meaning attributed thereto in subsection
5(l)(ii) hereof.
"Liquidation Event Effective Date" has the meaning attributed thereto
in subsection 5(l)(iii) hereof.
"List" has the meaning attributed thereto in Section 4(f) hereof.
"Officers' Certificate" means, with respect to US Co or US Co Sub, as
the case may be, a certificate signed by any two of the Chairman of
the Board, the Vice-Chairman of the Board, the President, any
Vice-President or any other senior officer of US Co or US Co Sub, as
the case may be.
"Person" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Plan of Arrangement" has the meaning attributed thereto in the
Exchangeable Share Provisions.
"Redemption Call Right" has the meaning attributed thereto in the
Exchangeable Share Provisions.
"Retracted Shares" has the meaning attributed thereto in Section 5(g)
hereof.
"Retraction Call Right" has the meaning attributed thereto in the
Exchangeable Share Provisions.
"Subsidiary" has the meaning attributed thereto in the Exchangeable
Share Provisions.
"Support Agreement" means that certain support agreement made as of
even date hereof between US Co Sub and US Co.
"Trust" means the trust created by this Agreement.
"Trust Estate" means the Voting Share, any other securities, the
Exchange Right, the Automatic Exchange Rights and any money or other
property which may be held by the Trustee from time to time pursuant
to this Agreement.
"Trustee" means Montreal Trust Company of Canada and, subject to the
provisions of Article 10 hereof, includes any successor trustee or
permitted assigns.
"US Co Common Stock" has the meaning attributed thereto in the
recitals hereto.
"US Co Consent" has the meaning attributed thereto in Section 4(b)
hereof.
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"US Co Meeting" has the meaning attributed thereto in Section 4(b)
hereof.
"US Co Special Voting Stock" has the meaning attributed thereto in the
recitals hereto.
"US Co Successor" has the meaning attributed thereto in subsection
11(a)(ii) hereof.
"Voting Rights" means the voting rights attached to the Voting Shares.
"Voting Share" means the one (1) share of US Co Special Voting Stock,
U.S. $0.01 par value, issued by US Co to and deposited with the
Trustee, which entitles the holder of record to a number of votes at
meetings of holders of US Co Common Stock equal to the Aggregate
Equivalent Vote Amount.
(b) Interpretation Not Affected by Headings, etc. The division of
this Agreement into articles, sections and paragraphs and the
insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of
this Agreement.
(c) Number, Gender, etc. Words importing the singular number only
shall include the plural and vice versa. Words importing the
use of any gender shall include all genders.
(d) Date for any Action. If any date on which any action is
required to be taken under this Agreement is not a Business
Day, such action shall be required to be taken on the next
succeeding Business Day.
2. PURPOSE OF AGREEMENT
The purpose of this Agreement is to create the Trust for the benefit
of the Holders, as herein provided. The Trustee will hold the Voting
Share in order to enable the Trustee to exercise the Voting Rights and
will hold the Exchange Right and the Automatic Exchange Rights in
order to enable the Trustee to exercise such rights, in each case as
Trustee for and on behalf of the Holders as provided in this
Agreement.
3. VOTING SHARE
(a) Issuance and Ownership of the Voting Share. US Co hereby
issues to and deposits with the Trustee the Voting Share to
be hereafter held of record by the Trustee as trustee for and
on behalf of, and for the use and benefit of, the Holders and
in accordance with the provisions of this Agreement. US Co
hereby acknowledges receipt from the Trustee as the trustee
for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) and $1 in hand paid
for the issuance of the Voting Share by US Co to the Trustee.
During the term of the Trust and subject to the terms and
conditions of this Agreement, the Trustee shall possess and
be vested with full legal ownership of the Voting Share and
shall be entitled to exercise all of the rights and powers of
an owner with respect to the Voting Share, provided that the
Trustee shall:
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(i) hold the Voting Share and the legal title thereto as
trustee solely for the use and benefit of the
Holders in accordance with the provisions of this
Agreement; and
(ii) except as specifically authorized by this Agreement,
have no power or authority to sell, transfer, vote
or otherwise deal in or with the Voting Share and
the Voting Share shall not be used or disposed of by
the Trustee for any purpose other than the purposes
for which this Trust is created pursuant to this
Agreement.
(b) Legended Share Certificates. US Co Sub will cause each
certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Holders of their right to
instruct the Trustee with respect to the exercise of the
Voting Rights with respect to the Exchangeable Shares held by
a Holder.
(c) Safe Keeping of Certificate. The certificate representing the
Voting Share shall at all times be held in safe keeping by
the Trustee or its agent.
4. EXERCISE OF VOTING RIGHTS
(a) Voting Rights. The Trustee, as the holder of record of the
Voting Share, shall be entitled to all of the Voting Rights,
including the right to consent to or to vote in person or by
proxy the Voting Share, on any matter, question or
proposition whatsoever that may properly come before the
stockholders of US Co at a US Co Meeting or in connection
with a US Co Consent (in each case, as hereinafter defined).
The Voting Rights shall be and remain vested in and exercised
by the Trustee. Subject to Section 7(o) hereof, the Trustee
shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Holders
entitled to instruct the Trustee as to the voting thereof at
the time at which a US Co Consent is sought or a US Co
Meeting is held. To the extent that no instructions are
received from a Holder with respect to the Voting Rights to
which such Holder is entitled, the Trustee shall not exercise
or permit the exercise of such Holder's Vote.
(b) Number of Votes. With respect to all meetings of stockholders
of US Co at which holders of shares of US Co Common Stock are
entitled to vote (a "US Co Meeting") and with respect to all
written consents sought by US Co from its stockholders
including the holders of shares of US Co Common Stock (a "US
Co Consent"), each Holder shall be entitled to instruct the
Trustee to cast and exercise, in the manner instructed, a
number of votes equal to the Equivalent Vote Amount for each
Exchangeable Share owned of record by such Holder on the
record date established by US Co or by applicable law for
such US Co Meeting or US Co Consent, as the case may be (the
"Holder Votes") in respect of each matter, question or
proposition and be voted on at such US Co Meeting or to be
consented to in connection with such US Co Consent.
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(c) Mailings to Shareholders. With respect to each US Co Meeting
and US Co Consent, the Trustee will mail or cause to be
mailed (or otherwise communicate in the same manner as US Co
utilizes in communications to holders of US Co Common Stock,
subject to the Trustee's ability to provide this method of
communication and upon being advised in writing of such
method) to each of the Holders named in the List on the same
day as the initial mailing or notice (or other communication)
with respect thereto is given by US Co to its stockholders:
(i) a copy of such notice, together with any proxy or
information statement and related materials to be
provided to stockholders of US Co;
(ii) a statement that such Holder is entitled to instruct
the Trustee as to the exercise of the Holder Votes
with respect to such US Co Meeting or US Co Consent,
as the case may be, or, pursuant to Section 4(g)
hereof, to attend such US Co Meeting and to exercise
personally the Holder Votes thereat;
(iii) a statement as to the manner in which such
instructions may be given to the Trustee, including
an express indication that instructions may be given
to the Trustee to give:
(A) a proxy to such Holder or his designee to
exercise personally the Holder Votes; or
(B) a proxy to a designated agent or other
representative of the management of US Co
to exercise such Holder Votes;
(iv) a statement that if no such instructions are
received from the Holder, the Holder Votes to which
such Holder is entitled will not be exercised;
(v) a form of direction whereby the Holder may so direct
and instruct the Trustee as contemplated herein; and
(vi) a statement of (A) the time and date by which such
instructions must be received by the Trustee in
order to be binding upon it, which in the case of a
US Co Meeting shall not be later than the close of
business on the Business Day prior to such meeting,
and (B) the method for revoking or amending such
instructions.
The materials referred to above are to be provided by US Co
to the Trustee, but shall be subject to review and comment by
the Trustee.
For the purpose of determining Holder Votes to which a Holder
is entitled in respect of any such US Co Meeting or US Co
Consent, the number of Exchangeable Shares owned of record by
the Holder shall be determined at the close of business on
the record date established by US Co or by applicable law for
purposes of determining stockholders entitled to vote at such
US Co Meeting or to give written consent in connection with
such US Co Consent. US Co will notify the Trustee in writing
of
<PAGE> 75
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any decision of the board of directors of US Co with respect
to the calling of any such US Co Meeting or the seeking of
any such US Co Consent and shall provide all necessary
information and materials to the Trustee in each case
promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this
Section 4(c).
(d) Copies of Stockholder Information. US Co will deliver to the
Trustee copies of all proxy materials (including notices of
US Co Meetings but excluding proxies to vote shares of US Co
Common Stock), information statements, reports (including
without limitation all interim and annual financial
statements) and other written communications that are to be
distributed from time to time to holders of US Co Common
Stock in sufficient quantities and in sufficient time so as
to enable the Trustee to send those materials to each Holder
at the same time as such materials are first sent to holders
of US Co Common Stock. The Trustee will mail or otherwise
send to each Holder, at the expense of US Co, copies of all
such materials (and all materials specifically directed to
the Holders or to the Trustee for the benefit of the Holders
by US Co) received by the Trustee from US Co at the same time
as such materials are first sent to holders of US Co Common
Stock. The Trustee will make copies of all such materials
available for inspection by any Holder at the Trustee's
principal office in the cities of Calgary and Toronto.
(e) Other Materials. Immediately after receipt by US Co or any
stockholder of US Co of any material sent or given generally
to the holders of US Co Common Stock by or on behalf of a
third party, including without limitation dissident proxy and
information circulars (and related information and material)
and tender and exchange offer circulars (and related
information and material), US Co shall use its best efforts
to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward
such material (unless the same has been provided directly to
Holders by such third party) to each Holder as soon as
possible thereafter. As soon as practicable after receipt
thereof, the Trustee will mail or otherwise send to each
Holder, at the expense of US Co, copies of all such materials
received by the Trustee from US Co. The Trustee will also
make copies of all such materials available for inspection by
any Holder at the Trustee's principal office in the cities of
Toronto and Calgary.
(f) List of Persons Entitled to Vote. US Co Sub shall, (i) prior
to each annual, general and special US Co Meeting or the
seeking of any US Co Consent and (ii) forthwith upon each
request made at any time by the Trustee in writing, prepare
or cause to be prepared a list (a "List") of the names and
addresses of the Holders arranged in alphabetical order and
showing the number of Exchangeable Shares held of record by
each such Holder, in each case at the close of business on
the date specified by the Trustee in such request or, in the
case of a List prepared in connection with a US Co Meeting or
a US Co Consent, at the close of business on the record date
established by US Co or pursuant to applicable law for
determining the holders of US Co Common Stock entitled to
receive notice of and/or to vote at such US Co Meeting or to
give consent in connection with such US Co Consent. Each such
List shall be delivered to the Trustee promptly after receipt
by US Co Sub of such request or the
<PAGE> 76
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record date for such meeting or seeking of consent, as the
case may be, and in any event within sufficient time as to
enable the Trustee to perform its obligations under this
Agreement. US Co agrees to give US Co Sub written notice
(with a copy to the Trustee) of the calling of any US Co
Meeting or the seeking of any US Co Consent together with the
record dates therefor, sufficiently prior to the date of the
calling of such meeting or seeking of such consent so as to
enable US Co Sub to perform its obligations under this
Section 4(f).
(g) Entitlement to Direct Votes. Any Holder named in a List
prepared in connection with any US Co Meeting or any US Co
Consent will be entitled (i) to instruct the Trustee in the
manner described in Section 4(c) hereof with respect to the
exercise of the Holder Votes to which such Holder is entitled
or (ii) to attend such meeting and personally to exercise
thereat (or to exercise with respect to any written consent),
as the proxy of the Trustee, the Holder Votes to which such
Holder is entitled.
(h) Voting by Trustee, and Attendance of Trustee Representative,
at Meeting.
(i) In connection with each US Co Meeting and US Co
Consent, the Trustee shall exercise, either in
person or by proxy, in accordance with the
instructions received from a Holder pursuant to
Section 4(c) hereof, the Holder Votes as to which
such Holder is entitled to direct the vote (or any
lesser number thereof as may be set forth in the
instructions); provided, however, that such written
instructions are received by the Trustee from the
Holder prior to the time and date fixed by it for
receipt of such instructions in the notice given by
the Trustee to the Holder pursuant to Section 4(c)
hereof.
(ii) The Trustee shall cause such representatives as are
empowered by it to sign and deliver, on behalf of
the Trustee, proxies for Voting Rights to attend
each US Co Meeting. Upon submission by a Holder (or
its designee) of identification satisfactory to the
Trustee's representatives, and at the Holder's
request, such representatives shall sign and deliver
to such Holder (or its designee) a proxy to exercise
personally the Holder Votes as to which such Holder
is otherwise entitled hereunder to direct the vote,
if such Holder either (A) has not previously given
the Trustee instructions pursuant to Section 4(c)
hereof in respect of such meeting, or (B) submits to
the Trustee's representatives written revocation of
any such previous instructions. At such meeting, the
Holder exercising such Holder Votes shall have the
same rights as the Trustee to speak at the meeting
in respect of any matter, question or proposition,
to vote by way of ballot at the meeting in respect
of any matter, question or proposition and to vote
at such meeting by way of a show of hands in respect
of any matter, question or proposition.
(i) Distribution of Written Materials. Any written materials to
be distributed by the Trustee to the Holders pursuant to this
Agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner as US Co utilizes in
communications to holders of US Co Common Stock) to each
Holder at its address
<PAGE> 77
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as shown on the books of US Co Sub. US Co Sub shall provide
or cause to be provided to the Trustee for this purpose, on a
timely basis and without charge or other expense:
(A) current lists of the Holders; and
(B) upon the request of the Trustee, mailing
labels to enable the Trustee to carry out
its duties under this Agreement.
The materials referred to above are to be provided by US Co
to the Trustee, but shall be subject to review and comment by
the Trustee.
(j) Termination of Voting Right. Except as otherwise provided
herein or in the Exchangeable Share Provisions, all of the
rights of a Holder with respect to the Holder Votes
exercisable in respect of the Exchangeable Shares held by
such Holder, including the right to instruct the Trustee as
to the voting of or to vote personally such Holder Votes,
shall be deemed to be surrendered by the Holder to US Co and
such Holder Votes and the Voting Rights represented thereby
shall cease immediately upon the delivery by such Holder to
the Trustee of the certificates representing such
Exchangeable Shares in connection with the exercise by the
Holder of the Exchange Right or the occurrence of the
automatic exchange of Exchangeable Shares for shares of US Co
Common Stock, as specified in Article 5 hereof (unless in
either case US Co shall not have delivered the Exchangeable
Share Consideration deliverable in exchange therefor to the
Trustee for delivery to the Holders), or upon the redemption
of Exchangeable Shares pursuant to Article 6 or Article 7 of
the Exchangeable Share Provisions, or upon the effective date
of the liquidation, dissolution or winding-up of US Co Sub
pursuant to Article 5 of the Exchangeable Share Provisions,
or upon the purchase of Exchangeable Shares from the holder
thereof by US Co pursuant to the exercise by US Co of the
Retraction Call Right, the Redemption Call Right or the
Liquidation Call Right.
5. EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
(a) Grant and Ownership of the Exchange Right. US Co hereby
grants to the Trustee as trustee for and on behalf of, and
for the use and benefit of, the Holders (i) the right (the
"Exchange Right"), upon the occurrence and during the
continuance of an Insolvency Event, to require US Co to
purchase from each or any Holder all or any part of the
Exchangeable Shares held by such Holders, and (ii) the
Automatic Exchange Rights, all in accordance with the
provisions of this Agreement.
US Co hereby acknowledges receipt from the Trustee as
trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the grant of the
Exchange Right and the Automatic Exchange Rights by US Co to
the Trustee. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall
possess and be vested with full legal ownership of the
Exchange Right and the Automatic Exchange Rights and shall
be entitled to exercise
<PAGE> 78
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all of the rights and powers of an owner with respect to the
Exchange Right and the Automatic Exchange Rights, provided
that the Trustee shall:
(i) hold the Exchange Right and the Automatic Exchange
Rights and the legal title thereto as trustee solely
for the use and benefit of the Holders in accordance
with the provisions of this Agreement; and
(ii) except as specifically authorized by this Agreement,
have no power or authority to exercise or otherwise
deal in or with the Exchange Right or the Automatic
Exchange Rights, and the Trustee shall not exercise
any such rights for any purpose other than the
purposes for which this Trust is created pursuant to
this Agreement.
(b) Legended Share Certificates. US Co Sub will cause each
certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Holders of:
(i) their right to instruct the Trustee with respect to
the exercise of the Exchange Right in respect of the
Exchangeable Shares held by a Holder; and
(ii) the Automatic Exchange Rights.
(c) General Exercise of Exchange Right. The Exchange Right shall
be and remain vested in and exercised by the Trustee. Subject
to Section 7(o) hereof, the Trustee shall exercise the
Exchange Right only on the basis of instructions received
pursuant to this Article 5 from Holders entitled to instruct
the Trustee as to the exercise thereof To the extent that no
instructions are received from a Holder with respect to the
Exchange Right, the Trustee shall not exercise or permit the
exercise of the Exchange Right.
(d) Purchase Price. The purchase price payable by US Co for each
Exchangeable Share to be purchased by US Co under the
Exchange Right shall be an amount equal to the Exchangeable
Share Price on the last Business Day prior to the day of
closing of the purchase and sale of such Exchangeable Share
under the Exchange Right. In connection with each exercise of
the Exchange Right, US Co will provide to the Trustee an
Officer's Certificate setting forth the calculation of the
Exchangeable Share Price for each Exchangeable Share. The
Exchangeable Share Price for each such Exchangeable Share so
purchased may be satisfied only by US Co issuing and
delivering or causing to be delivered to the Trustee, on
behalf of the relevant Holder, the Exchangeable Share
Consideration representing the total Exchangeable Share
Price.
(e) Exercise Instructions. Subject to the terms and conditions
herein set forth, a Holder shall be entitled, upon the
occurrence and during the continuance of an Insolvency Event,
to instruct the Trustee to exercise the Exchange Right with
respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of US Co
Sub. To cause the exercise of the Exchange Right by the
Trustee, the Holder shall deliver to the Trustee, in person
or by certified or registered mail, at
<PAGE> 79
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its principal offices in Calgary, Alberta or Toronto, Ontario
or at such other places in Canada as the Trustee may from
time to time designate by written notice to the Holders, the
certificates representing the Exchangeable Shares which such
Holder desires US Co to purchase, duly endorsed in blank, and
accompanied by such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of US Co Sub and such
additional documents and instruments as the Trustee may
reasonably require together with (i) a duly completed form of
notice of exercise of the Exchange Right, contained on the
reverse of or attached to the Exchangeable Share
certificates, stating (A) that the Holder thereby instructs
the Trustee to exercise the Exchange Right so as to require
US Co to purchase from the Holder the number of Exchangeable
Shares specified therein, (B) that such Holder has good title
to and owns all such Exchangeable Shares to be acquired by US
Co free and clear of all liens, claims and encumbrances, (C)
the names in which the certificates representing US Co Common
Stock issuable in connection with the exercise of the
Exchange Right are to be issued and (D) the names and
addresses of the persons to whom the Exchangeable Share
Consideration should be delivered and (ii) payment (or
evidence satisfactory to the Trustee, US Co Sub and US Co of
payment) of the taxes (if any) payable as contemplated by
Section 5(h) of this Agreement. If only a part of the
Exchangeable Shares represented by any certificate or
certificates delivered to the Trustee are to be purchased by
US Co under the Exchange Right, a new certificate for the
balance of such Exchangeable Shares shall be issued to the
Holder at the expense of US Co Sub.
(f) Delivery of Exchangeable Share Consideration; Effect of
Exercise. Promptly after receipt of the certificates
representing the Exchangeable Shares which the Holder desires
US Co to purchase under the Exchange Right (together with
such documents and instruments of transfer and a duly
completed form of notice of exercise of the Exchange Right),
duly endorsed for transfer to US Co the Trustee shall notify
US Co and US Co Sub of its receipt of the same, which notice
to US Co and US Co Sub shall constitute exercise of the
Exchange Right by the Trustee on behalf of the Holder of such
Exchangeable Shares, and US Co shall immediately thereafter
deliver or cause to be delivered to the Trustee, for delivery
to the Holder of such Exchangeable Shares (or to such other
persons, if any, properly designated by such Holder), the
Exchangeable Share Consideration deliverable in connection
with the exercise of the Exchange Right; provided, however,
that no such delivery shall be made unless and until the
Holder requesting the same shall have paid (or provided
evidence satisfactory to the Trustee, US Co Sub and US Co of
the payment of) the taxes (if any) payable as contemplated by
Section 5(h) of this Agreement. Immediately upon the giving
of notice by the Trustee to US Co and US Co Sub of the
exercise of the Exchange Right, as provided in this Section
5(f), the closing of the transaction of purchase and sale
contemplated by the Exchange Right shall be deemed to have
occurred, and the Holder of such Exchangeable Shares shall be
deemed to have transferred to US Co all of its right, title
and interest in and to such Exchangeable Shares and in the
related interest in the Trust Estate and shall cease to be a
holder of such Exchangeable Shares and shall not be entitled
to exercise any of the rights of a holder in respect thereof,
other than the right to receive his proportionate part of the
total purchase price therefor, unless such Exchangeable Share
Consideration is not
<PAGE> 80
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delivered by US Co to the Trustee, for delivery to such Holder
(or to such other persons, if any, properly designated by such
Holder), within three Business Days of the date of the giving
of such notice by the Trustee, in which case the rights of the
Holder shall remain unaffected until such Exchangeable Share
Consideration is delivered by US Co and any cheque included
therein is paid. Concurrently with such Holder ceasing to be
a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the
shares of US Co Common Stock delivered to it pursuant to the
Exchange Right.
(g) Exercise of Exchange Right Subsequent to Retraction. In the
event that a Holder has exercised its right under Article 6 of
the Exchangeable Share Provisions to require US Co Sub to
redeem any or all of the Exchangeable Shares held by the
Holder (the "Retracted Shares") and is notified by US Co Sub
pursuant to Section 6.6 of the Exchangeable Share Provisions
that US Co Sub will not be permitted as a result of liquidity
or solvency requirements of applicable law to redeem all such
Retracted Shares, subject to receipt by the Trustee of written
notice to that effect from US Co Sub and provided that US Co
shall not have exercised the Retraction Call Right with
respect to the Retracted Shares and that the Holder has not
revoked the retraction request delivered by the Holder to US
Co Sub pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be
deemed to constitute notice from the Holder to the Trustee
instructing the Trustee to exercise the Exchange Right with
respect to those Retracted Shares which US Co Sub is unable to
redeem. In any such event, US Co Sub hereby agrees with the
Trustee and in favour of the Holder immediately to notify the
Trustee of such prohibition against US Co Sub redeeming all of
the Retracted Shares and immediately to forward or cause to be
forwarded to the Trustee all relevant materials delivered by
the Holder to US Co Sub or to the transfer agent of the
Exchangeable Shares (including without limitation a copy of
the retraction request delivered pursuant to Section 6.1 of
the Exchangeable Share Provisions) in connection with such
proposed redemption of the Retracted Shares and the Trustee
will thereupon exercise the Exchange Right with respect to the
Retracted Shares that US Co Sub is not permitted to redeem and
will require US Co to purchase such shares in accordance with
the provisions of this Article 5.
(h) Stamp or Other Transfer Taxes. Upon any sale of Exchangeable
Shares to US Co pursuant to the Exchange Right or the
Automatic Exchange Rights, the share certificate or
certificates representing US Co Common Stock to be delivered
in connection with the payment of the total purchase price
therefor shall be issued in the name of the Holder of the
Exchangeable Shares so sold or in such names as such Holder
may otherwise direct in writing without charge to the holder
of the Exchangeable Shares so sold, provided, however, that
such Holder (i) shall pay (and neither US Co, US Co Sub nor
the Trustee shall be required to pay) any documentary, stamp,
transfer or other similar taxes that may be payable in respect
of any transfer involved in the issuance or delivery of such
shares to a person other than such Holder or (ii) shall have
established to the satisfaction of the Trustee, US Co and US
Co Sub that such taxes, if any, have been paid.
<PAGE> 81
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(i) Notice of Insolvency Event. Immediately upon the occurrence
of an Insolvency Event or any event which with the giving of
notice or the passage of time or both would be an Insolvency
Event US Co Sub and US Co shall give written notice thereof to
the Trustee. As soon as practicable after receiving notice
from US Co Sub and US Co or from any other Person of the
occurrence of an Insolvency Event, the Trustee will mail to
each Holder, at the expense of US Co, a notice of such
Insolvency Event in the form provided by US Co, which notice
shall contain a brief statement of the right of the Holders
with respect to the Exchange Right.
(j) Qualification of US Co Common Stock. US Co covenants that if
any shares of US Co Common Stock to be issued and delivered
pursuant to the Exchange Right or the Automatic Exchange
Rights require registration or qualification with or approval
of or the filing of document including any prospectus or
similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or
United States federal, provincial or state law or regulation
or pursuant to the rules and regulations of any regulatory
authority or the fulfillment of any other legal requirement
(collectively, the "Applicable Laws") before such shares may
be issued and delivered by US Co to the initial holder thereof
(other than US Co Sub) or in order that such shares may be
freely traded thereafter (other than any restrictions on
transfer by reason of a holder being a "control person" of US
Co for purposes of Canadian federal or provincial securities
law or an "affiliate" of US Co or, prior to the date hereof,
of Chauvco for purposes of United States federal or state
securities law), US Co will in good faith expeditiously take
all such actions and do all such things as are necessary to
cause such shares of US Co Common Stock to be and remain duly
registered, qualified or approved. US Co represents and
warrants that it has in good faith taken all actions and done
all things as are necessary under Applicable Laws as they
exist on the date hereof to cause the shares of US Co Common
Stock to be issued and delivered pursuant to the Exchange
Right and the Automatic Exchange Rights and to be freely
tradeable thereafter (other than restrictions on transfer by
reason of a holder being a "control person" of US Co for the
purposes of Canadian federal and provincial securities law or
an "affiliate" of US Co or, prior to the date hereof, of
Chauvco for the purposes of United States federal or state
securities law). US Co will in good faith expeditiously take
all such actions and do all such things as are necessary to
cause all shares of US Co Common Stock to be delivered
pursuant to the Exchange Right or the Automatic Exchange
Rights to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which such shares are
listed, quoted or posted for trading at such time.
(k) Reservation of Shares of US Co Common Stock. US Co hereby
represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available,
free from pre-emptive and other rights, out of its authorized
and unissued capital stock such number of shares of US Co
Common Stock (i) as is equal to the sum of (A) the number of
Exchangeable Shares issued and outstanding from time to time
and (B) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares
outstanding from time to time and (ii) as are now and may
hereafter be required to enable and permit US Co Sub and US Co
to
<PAGE> 82
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meet their respective obligations hereunder, under the Support
Agreement, under the Exchangeable Share Provisions and under
any other security or commitment pursuant to the Arrangement
with respect to which US Co may now or hereafter be required
to issue shares of US Co Common Stock.
(l) Automatic Exchange on Liquidation of US Co.
(i) US Co will give the Trustee written notice of each of
the following events at the time set forth below:
(A) in the event of any determination by the
board of directors of US Co to institute
voluntary liquidation, dissolution or
winding-up proceedings with respect to US Co
or to effect any other distribution of assets
of US Co among its stockholders for the
purpose of winding-up its affairs, at least
60 days prior to the proposed effective date
of such liquidation, dissolution, winding-up
or other distribution; and
(B) immediately, upon the earlier of (I) receipt
by US Co of notice of and (II) US Co
otherwise becoming aware of any threatened or
instituted claim, suit, petition or other
proceedings with respect to the involuntary
liquidation, dissolution or winding- up of US
Co or to effect any other distribution of
assets of US Co among its stockholders for
the purpose of winding-up its affairs.
(ii) Immediately following receipt by the Trustee from US
Co of notice of any event (a "Liquidation Event")
contemplated by Section 5(l)(i) above, the Trustee
will give notice thereof to the Holders. Such notice
will be provided by US Co to the Trustee and shall
include a brief description of the automatic exchange
of Exchangeable Shares for shares of US Co Common
Stock provided for in Section 5(l)(iii) below.
(iii) In order that the Holders will be able to participate
on a PRO RATA basis with the holders of US Co Common
Stock in the distribution of assets of US Co in
connection with a Liquidation Event, immediately
prior to the effective time (the "Liquidation Event
Effective Time") of a Liquidation Event all of the
then outstanding Exchangeable Shares shall be
automatically exchanged for shares of US Co Common
Stock. To effect such automatic exchange, US Co
shall be deemed to have purchased each Exchangeable
Share outstanding immediately prior to the
Liquidation Event Effective Time and held by Holders,
and each Holder shall be deemed to have sold the
Exchangeable Shares held by it at such time, for a
purchase price per share equal to the Exchangeable
Share Price applicable at such time. In connection
with such automatic exchange, US Co will provide to
the Trustee an Officers' Certificate setting forth
the calculation of the purchase price for each
Exchangeable Share.
<PAGE> 83
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(iv) The closing of the transaction of purchase and sale
contemplated by Section 5(l)(iii) above shall be
deemed to have occurred immediately prior to the
Liquidation Event Effective Time, and each Holder of
Exchangeable Shares shall be deemed to have
transferred to US Co all of the Holder's right, title
and interest in and to such Exchangeable Shares and
the related interest in the Trust Estate and shall
cease to be a holder of such Exchangeable Shares and
US Co shall deliver to the Holder the Exchangeable
Share Consideration deliverable upon the automatic
exchange of Exchangeable Shares. Concurrently with
such Holder ceasing to be a holder of Exchangeable
Shares, the Holder shall be considered and deemed for
all purposes to be the holder of the shares of US Co
Common Stock issued to it pursuant to the automatic
exchange of Exchangeable Shares for US Co Common
Stock and the certificates held by the Holder
previously representing the Exchangeable Shares
exchanged by the Holder with US Co pursuant to such
automatic exchange shall thereafter be deemed to
represent the shares of US Co Common Stock issued to
the Holder by US Co pursuant to such automatic
exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share
certificates deemed to represent shares of US Co
Common Stock, duly endorsed in blank and accompanied
by such instruments of transfer as US Co may
reasonably require, US Co shall deliver or cause to
be delivered to the Holder certificates representing
the shares of US Co Common Stock of which the Holder
is the holder.
6. RESTRICTIONS ON ISSUANCE OF US CO SPECIAL VOTING STOCK
During the term of this Agreement, US Co will not issue any shares of
US Co Special Voting Stock in addition to the Voting Share.
7. CONCERNING THE TRUSTEE
(a) Powers and Duties of the Trustee. The rights, powers and
authorities of the Trustee under this Agreement, in its
capacity as trustee of the Trust, shall include:
(i) receipt and deposit of the Voting Share from US Co as
trustee for and on behalf of the Holders in
accordance with the provisions of this Agreement;
(ii) granting proxies and distributing materials to
Holders as provided in this Agreement;
(iii) voting the Holder Votes in accordance with the
provisions of this Agreement;
(iv) receiving the grant of the Exchange Right and the
Automatic Exchange Rights from US Co as trustee for
and on behalf of the Holders in accordance with the
provisions of this Agreement;
(v) exercising the Exchange Right and enforcing the
benefit of the Automatic Exchange Rights, in each
case in accordance with the provisions of this
<PAGE> 84
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Agreement, and in connection therewith receiving from
Holders Exchangeable Shares and other requisite
documents and distributing to such Holders the shares
of US Co Common Stock and cheques, if any, to which
such Holders are entitled upon the exercise of the
Exchange Right or pursuant to the Automatic Exchange
Rights, as the case may be;
(vi) holding title to the Trust Estate;
(vii) investing any monies forming, from time to time, a
part of the Trust Estate as provided in this
Agreement;
(viii) taking action at the direction of a Holder or Holders
to enforce the obligations of US Co under this
Agreement; and
(ix) taking such other actions and doing such other things
as are specifically provided in this Agreement.
In the exercise of such rights, powers and authorities the
Trustee shall have (and is granted) such incidental and
additional rights, powers and authority not in conflict with
any of the provisions of this Agreement as the Trustee, acting
in good faith and in the reasonable exercise of its
discretion, may deem necessary, appropriate or desirable to
effect the purpose of the Trust. Any exercise of such
discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For
greater certainty, the Trustee shall have only those duties as
are set out specifically in this Agreement.
The Trustee in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith
with a view to the best interests of the Holders and shall
exercise the care, diligence and skill that a reasonably
prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give any notice or do or
take any act, action or proceeding by virtue of the powers
conferred on it hereby unless and until it shall be
specifically required to do so under the terms hereof; nor
shall the Trustee be required to take any notice of, or to do
or to take any act, action or proceeding as a result of any
default or breach of any provision hereunder, unless and until
notified in writing of such default or breach, which notices
shall distinctly specify the default or breach desired to be
brought to the attention of the Trustee and in the absence of
such notice the Trustee may for all purposes of this Agreement
conclusively assume that no default or breach has been made in
the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained
herein.
(b) No Conflict of Interest. The Trustee represents to US Co Sub
and US Co that at the date of execution and delivery of this
Agreement there exists no material conflict of interest in
the role of the Trustee as a fiduciary hereunder and the role
of the Trustee in any other capacity. The Trustee shall,
within 90 days after it becomes aware that such a material
conflict of
<PAGE> 85
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interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified
in Article 10 hereof. If, notwithstanding the foregoing
provisions of this Section 7(b), the Trustee has such a
material conflict of interest, the validity and enforceability
of this Agreement shall not be affected in any manner
whatsoever by reason only of the existence of such material
conflict of interest. If the Trustee contravenes the
foregoing provisions of this Section 7(b), any interested
party may apply to the Alberta Court of Queen's Bench for an
order that the Trustee be replaced as trustee hereunder.
(c) Dealings with Transfer Agents, Registrars, etc. US Co Sub and
US Co irrevocably authorize the Trustee, from time to time,
to:
(i) consult, communicate and otherwise deal with the
respective registrars and transfer agents, and with
any such subsequent registrar or transfer agent, of
the Exchangeable Shares and US Co Common Stock; and
(ii) requisition, from time to time, (A) from any such
registrar or transfer agent any information readily
available from the records maintained by it which the
Trustee may reasonably require for the discharge of
its duties and responsibilities under this Agreement
and (B) from the transfer agent of US Co Common
Stock, and any subsequent transfer agent of such
shares, the share certificates issuable upon the
exercise from time to time of the Exchange Right and
pursuant to the Automatic Exchange Rights in the
manner specified in Article 5 hereof.
US Co Sub and US Co irrevocably authorize their respective
registrars and transfer agents to comply with all such
requests. US Co covenants that it will supply its transfer
agent with duly executed share certificates for the purpose of
completing the exercise from time to time of the Exchange
Right and the Automatic Exchange Rights, in each case pursuant
to Article 5 hereof.
(d) Books and Records. The Trustee shall keep available for
inspection by US Co and US Co Sub, at the Trustee's principal
office in Calgary, Alberta, correct and complete books and
records of account relating to the Trustee's actions under
this Agreement, including without limitation all information
relating to mailings and instructions to and from Holders and
all transactions pursuant to the Voting Rights, the Exchange
Right and the Automatic Exchange Rights for the term of this
Agreement. On or before March 31, 1998, and on or before
March 31 in every year thereafter, so long as the Voting Share
is on deposit with the Trustee, the Trustee shall transmit to
US Co and US Co Sub a brief report, dated as of the preceding
December 31, with respect to:
(i) the property and funds comprising the Trust Estate as
of that date;
(ii) the number of exercises of the Exchange Right, if
any, and the aggregate number of Exchangeable Shares
received by the Trustee on behalf of Holders in
consideration of the issue and delivery by US Co of
shares of US Co
<PAGE> 86
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Common Stock in connection with the Exchange Right,
during the calendar year ended on such date; and
(iii) all other actions taken by the Trustee in the
performance of its duties under this Agreement which
it had not previously reported.
(e) Income Tax Returns and Reports. The Trustee shall, to the
extent necessary, prepare and file on behalf of the Trust
appropriate United States and Canadian income tax returns and
any other returns or reports as may be required by applicable
law or pursuant to the rules and regulations of any securities
exchange or other trading system through which the
Exchangeable Shares are traded and, in connection therewith,
may obtain the advice and assistance of such experts as the
Trustee may consider necessary or advisable. If requested by
the Trustee, US Co shall retain such experts for purposes of
providing such advice and assistance.
(f) Indemnification Prior to Certain Actions by Trustee. The
Trustee shall exercise any or all of the rights, duties,
powers or authorities vested in it by this Agreement at the
request, order or direction of any Holder upon such Holder
furnishing to the Trustee reasonable funding, security and
indemnity against the costs, expenses and liabilities which
may be incurred by the Trustee therein or thereby, provided
that no Holder shall be obligated to furnish to the Trustee
any such funding, security or indemnity in connection with the
exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Voting Share pursuant to
Article 4 hereof, subject to Section 7(o) hereof, and with
respect to the Exchange Right pursuant to Article 5 hereof,
subject to Section 7(o) hereof, and with respect to the
Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this Agreement shall
require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the exercise of any of
its rights, powers, duties or authorities unless funded, given
funds, security and indemnified as aforesaid.
(g) Actions by Holders. No Holder shall have the right to
institute any action, suit or proceeding or to exercise any
other remedy authorized by this Agreement for the purpose of
enforcing any of its rights or for the execution of any trust
or power hereunder unless the Holder has requested the Trustee
to take or institute such action, suit or proceeding and
furnished the Trustee with the funding, security and indemnity
referred to in Section 7(f) hereof and the Trustee shall have
failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder shall be entitled to take
proceedings in any court of competent jurisdiction such as the
Trustee might have taken; it being understood and intended
that no one or more Holders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby
created by any such action, or to enforce any right hereunder
or under the Voting Rights, the Exchange Right or the
Automatic Exchange Rights, except subject to the conditions
and in the manner herein provided, and that all powers and
trusts hereunder shall be exercised and all proceedings at law
shall be instituted, had and
<PAGE> 87
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maintained by the Trustee, except only as herein provided, and
in any event for the equal benefit of all Holders.
(h) Reliance upon Declarations. The Trustee shall not be
considered to be in contravention of any of its rights,
powers, duties and authorities hereunder if, when required, it
acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions,
reports or other papers or documents furnished pursuant to the
provisions hereof or required by the Trustee to be furnished
to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices,
statutory declarations, certificates, opinions, reports or
other papers or documents comply with the provisions of
Section 7(i) hereof, if applicable, and with any other
applicable provisions of this Agreement.
(i) Evidence and Authority to Trustee. US Co Sub and/or US Co
shall furnish to the Trustee evidence of compliance with the
conditions provided for in this Agreement relating to any
action or step required or permitted to be taken by US Co Sub
and/or US Co or the Trustee under this Agreement or as a
result of any obligation imposed under this Agreement,
including, without limitation, in respect of the Voting Rights
or the Exchange Right or the Automatic Exchange Rights and the
taking of any other action to be taken by the Trustee at the
request of or on the application of US Co Sub and/or US Co
forthwith if and when:
(i) such evidence is required by any other section of
this Agreement to be furnished to the Trustee in
accordance with the terms of this Section 7(i); or
(ii) the Trustee, in the exercise of its rights, powers,
duties and authorities under this Agreement, gives US
Co Sub and/or US Co written notice requiring it to
furnish such evidence in relation to any particular
action or obligation specified in such notice.
Such evidence shall consist of an Officers' Certificate of US
Co Sub and/or US Co or a statutory declaration or a
certificate made by persons entitled to sign an Officer's
Certificate stating that any such condition has been complied
with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the
Voting Rights or the Exchange Right or the Automatic Exchange
Rights, and except as otherwise specifically provided herein,
such evidence may consist of a report or opinion of any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give
authority to a statement made by him provided that if such
report or opinion is furnished by a director, officer or
employee of US Co Sub and/or US Co it shall be in the form of
an Officers' Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report
furnished to the Trustee as evidence of compliance with a
condition provided for in this Agreement shall include a
statement by the person giving the evidence:
<PAGE> 88
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(iii) declaring that he has read and understands the
provisions of this Agreement relating to the
condition in question;
(iv) describing the nature and scope of the examination or
investigation upon which he based the statutory
declaration, certificate, statement or opinion; and
(v) declaring that he has made such examination or
investigation as he believes is necessary to enable
him to make the statements or give the opinions
contained or expressed therein.
(j) Experts, Advisors and Agents. The Trustee may:
(i) in relation to these presents act and rely on the
opinion or advice of or information obtained from or
prepared by any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by US Co Sub and/or US Co
or otherwise, and may employ such assistants as may
be necessary to the proper determination and
discharge of its powers and duties and determination
of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other
advice or assistance as aforesaid; and
(ii) employ such agents and other assistants as it may
reasonably require for the proper determination and
discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services
performed for it (and shall be entitled to receive
reasonable remuneration for all services performed by
it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and
expenses made or incurred by it in the determination
and discharge of its duties hereunder and in the
management of the Trust.
(k) Investment of Monies Held by Trustee. Unless otherwise
provided in this Agreement, any monies held by or on behalf of
the Trustee which under the terms of this Agreement may or
ought to be invested or which may be on deposit with the
Trustee or which may be in the hands of the Trustee may be
invested and reinvested in the name or under the control of
the Trustee in securities in which, under the laws of the
Province of Alberta trustees are authorized to invest trust
unit monies, provided that such securities are stated to
mature within two years after their purchase by the Trustee,
and the Trustee shall so invest such monies on the written
direction of US Co Sub. Pending the investment of any monies
as hereinbefore provided, such monies may be deposited in the
name of the Trustee in any chartered bank in Canada or, with
the consent of US Co Sub, in the deposit department of the
Trustee or any other loan or company authorized to accept
deposits under the laws of Canada or any province thereof at
the rate of interest then current on similar deposits.
<PAGE> 89
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(l) Trustee Not Required to Give Security. The Trustee shall not
be required to give any bond or security in respect of the
execution of the trusts, rights, duties, powers and
authorities of this Agreement or otherwise in respect of the
premises.
(m) Trustee Not Bound to Act on Request. Except as in this
Agreement otherwise specifically provided, the Trustee shall
not be bound to act in accordance with any direction or
request of US Co Sub and/or US Co or of the directors thereof
until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have
been delivered to the Trustee, and the Trustee shall be
empowered to act and rely upon any such copy purporting to be
authenticated and believed by the Trustee to be genuine.
(n) Authority to Carry on Business. The Trustee represents to US
Co Sub and US Co that at the date of execution and delivery by
it of this Agreement it is authorized to carry on the business
of a trust company in the Province of Alberta but if,
notwithstanding the provisions of this Section 7(n), it ceases
to be so authorized to carry on business, the validity and
enforceability of this Agreement and the Voting Rights, the
Exchange Right and the Automatic Exchange Rights shall not be
affected in any manner whatsoever by reason only of such event
but the Trustee shall, within 90 days after ceasing to be
authorized to carry on the business of a trust company in the
Province of Alberta, either become so authorized or resign in
the manner and with the effect specified in Article 10 hereof.
(o) Conflicting Claims. If conflicting claims or demands are made
or asserted with respect to any interest of any Holder in any
Exchangeable Shares, including any disagreement between the
heirs, representatives, successors or assigns succeeding to
all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands
being made in connection with such interest, then the Trustee
shall be entitled, at its sole discretion, to refuse to
recognize or to comply with any such claim or demand. In so
refusing, the Trustee may elect not to exercise any Voting
Rights, Exchange Right or Automatic Exchange Rights subject to
such conflicting claims or demands and, in so doing, the
Trustee shall not be or become liable to any person on account
of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be
entitled to continue to refrain from acting and to refuse to
act until:
(i) the rights of all adverse claimants with respect to
the Voting Rights, Exchange Right or Automatic
Exchange Rights subject to such conflicting claims or
demands have been adjudicated by a final judgment of
a court of competent jurisdiction; or
(ii) all differences with respect to the Voting Rights,
Exchange Right or Automatic Exchange Right subject to
such conflicting claims or demands have been
conclusively settled by a valid written agreement
binding on all such adverse claimants, and the
Trustee shall have been furnished with an executed
copy of such agreement.
<PAGE> 90
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If the Trustee elects to recognize any claim or comply with
any demand made by any such adverse claimant, it may in its
discretion require such claimant to furnish such surety bond
or other security satisfactory to the Trustee as it shall deem
appropriate fully to indemnify it as between all conflicting
claims or demands.
(p) Acceptance of Trust. The Trustee hereby accepts the Trust
created and provided for by and in this Agreement and agrees
to perform the same upon the terms and conditions herein set
forth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons
who shall from time to time be Holders, subject to all the
terms and conditions herein set forth.
8. COMPENSATION
US Co and US Co Sub jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under this
Agreement and will reimburse the Trustee for all reasonable expenses (including
but not limited to taxes, compensation paid to experts, agents and advisors and
travel expenses) and disbursements, including the cost and expense of any suit
or litigation of any character and any proceedings before any governmental
agency reasonably incurred by the Trustee in connection with its rights and
duties under this Agreement; provided that US Co and US Co Sub shall have no
obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted in bad faith or with negligence or willful
misconduct.
9. INDEMNIFICATION AND LIMITATION OF LIABILITY
(a) Indemnification of the Trustee. US Co and US Co Sub jointly
and severally agree to indemnify and hold harmless the Trustee
and each of its directors, officers, employees and agents
appointed and acting in accordance with this Agreement
(collectively, the "Indemnified Parties") against all claims,
losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal
counsel on a solicitor and his own client basis) which,
without fraud, negligence, willful misconduct or bad faith on
the part of such Indemnified Party, may be paid, incurred or
suffered by the Indemnified Party by reason of or as a result
of the Trustee's acceptance or administration of the Trust,
its compliance with its duties set forth in this Agreement, or
any written or oral instructions delivered to the Trustee by
US Co or US Co Sub pursuant hereto. In no case shall US Co or
US Co Sub be liable under this indemnity for any claim against
any of the Indemnified Parties unless US Co and US Co Sub
shall be notified by the Trustee of the written assertion of a
claim or of any action commenced against the Indemnified
Parties, promptly after any of the Indemnified Parties shall
have received any such written assertion of a claim or shall
have been served with a summons or other first legal process
giving information as to the nature and basis of the claim.
Subject to (ii), below, US Co and US Co Sub shall be entitled
to participate at their own expense in the defense and, if US
Co or US Co Sub so elect at any time after receipt of such
notice, either of them may assume the defense of any suit
brought to enforce any such claim. The Trustee shall have the
right to employ separate counsel in any such suit and
participate in the defense thereof but the fees and expenses
of such counsel shall
<PAGE> 91
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be at the expense of the Trustee unless: (i) the employment of
such counsel has been authorized by US Co or US Co Sub, such
authorization not to be unreasonably withheld; or (ii) the
named parties to any such suit include both the Trustee and US
Co or US Co Sub and the Trustee shall have been advised by
counsel acceptable to US Co or US Co Sub that there may be one
or more legal defenses available to the Trustee that are
different from or in addition to those available to US Co or
US Co Sub and that an actual or potential conflict exists (in
which case US Co and US Co Sub shall not have the right to
assume the defense of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of
counsel for the Trustee).
(b) Limitation of Liability. The Trustee shall not be held liable
for any loss which may occur by reason of depreciation of the
value of any part of the Trust Estate or any loss incurred on
any investment of funds pursuant to this Agreement except to
the extent that such loss is attributable to the fraud,
negligence, willful misconduct or bad faith on the part of the
Trustee.
10. CHANGE OF TRUSTEE
(a) Resignation. The Trustee, or any trustee hereafter appointed,
may at any time resign by giving written notice of such
resignation to US Co and US Co Sub specifying the date on
which it desires to resign, provided that such notice shall
never be given less than 60 days before such desired
resignation date unless US Co and US Co Sub otherwise agree
and provided further that such resignation shall not take
effect until the date of the appointment of a successor
trustee and the acceptance of such appointment by the
successor trustee. Upon receiving such notice of resignation,
US Co and US Co Sub shall promptly appoint a successor trustee
by written instrument in duplicate, one copy of which shall be
delivered to the resigning trustee and one copy to the
successor trustee. Failing acceptance by a successor trustee,
a successor trustee may be appointed by an order of the
Alberta Court of Queen's Bench upon application of one or more
of the parties hereto.
(b) Removal. The Trustee, or any Trustee hereafter appointed, may
be removed with or without cause, at any time on 60 days'
prior notice by written instrument executed by US Co and US Co
Sub, in duplicate, one copy of which shall be delivered to the
trustee so removed and one copy to the successor trustee,
provided that, in connection with such removal, provision is
made for a replacement trustee similar to that contemplated in
Section 10(a).
(c) Successor Trustee. Any successor trustee appointed as
provided under this Agreement shall execute, acknowledge and
deliver to US Co and US Co Sub and to its predecessor trustee
an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor under this
Agreement, with like effect as if originally named as trustee
in this Agreement. However, on the written request of US Co
and US Co Sub or of the successor trustee,
<PAGE> 92
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the trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of this Agreement,
execute and deliver an instrument transferring to such
successor Trustee all the rights and powers of the trustee so
ceasing to act. Upon the request of any such successor
trustee, US Co, US Co Sub and such predecessor trustee shall
execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee
all such rights and powers.
(d) Notice of Successor Trustee. Upon acceptance of appointment
by a successor trustee as provided herein, US Co and US Co Sub
shall cause to be mailed notice of the succession of such
trustee hereunder to each Holder specified in a List. If US
Co or US Co Sub shall fail to cause such notice to be mailed
within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of US Co and US Co Sub.
11. US CO SUCCESSORS
(a) Certain Requirements in Respect of Combination, etc. US Co
shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger,
transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking, property and assets
would become the property of any other Person or, in the case
of a merger, of the continuing corporation resulting therefrom
unless:
(i) such other Person or continuing corporation (the "US
Co Successor"), by operation of law, becomes, without
further action, bound by the terms and provisions of
this Agreement or, if not so bound, executes, prior
to or contemporaneously with the consummation of such
transaction an agreement supplemental hereto and such
other instruments (if any) as are satisfactory to the
Trustee and in the opinion of legal counsel to the
Trustee are necessary or advisable to evidence the
assumption by the US Co Successor of liability for
all monies payable and property deliverable hereunder
and the covenant of such US Co Successor to pay and
deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants
and obligations of US Co under this Agreement; and
(ii) such transaction shall, to the satisfaction of the
Trustee and in the opinion of legal counsel to the
Trustee, be upon such terms as substantially to
preserve and not to impair in any material respect
any of the rights, duties, powers and authorities of
the Trustee or of the Holders hereunder.
(b) Vesting of Powers in Successor. Whenever the conditions of
Section 11(a) hereof have been duly observed and performed,
the Trustee, if required, by Section 11(a) hereof, the US Co
Successor and US Co Sub shall execute and deliver the
supplemental agreement provided for in Article 12 hereof and
thereupon the US Co Successor shall possess and from time to
time may exercise each and every right and power of US Co
under this Agreement in the name of US Co or otherwise and any
act or proceeding by any provision of this Agreement required
to be done or
<PAGE> 93
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performed by the board of directors of US Co or any officers
of US Co may be done and performed with like force and effect
by the directors or officers of such US Co Successor.
(c) Wholly-Owned Subsidiaries. Nothing herein shall be construed
as preventing the amalgamation or merger of any wholly-owned
subsidiary of US Co with or into US Co or the winding-up,
liquidation or dissolution of any wholly-owned subsidiary of
US Co provided that all of the assets of such subsidiary are
transferred to US Co or another wholly-owned subsidiary of US
Co, and any such transactions are expressly permitted by this
Article 11.
12. AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
(a) Amendments, Modifications, etc. This Agreement may not be
amended or modified except by an agreement in writing executed
by US Co Sub, US Co and the Trustee and approved by the
Holders in accordance with Section 9.2 of the Exchangeable
Share Provisions.
(b) Ministerial Amendments. Notwithstanding the provisions of
Section 12(a) hereof, the parties to that agreement may in
writing, at any time and from time to time, without the
approval of the Holders, amend or modify this Agreement for
the purposes of;
(i) adding to the covenants of any or all of the parties
hereto for the protection of the Holders hereunder;
(ii) making such amendments or modifications not
inconsistent with this Agreement as may be necessary
or desirable with respect to matters or questions
which, in the opinion of the board of directors of
each of US Co and US Co Sub and in the opinion of the
Trustee and its counsel having in mind the best
interests of the Holders as a whole, it may be
expedient to make, provided that such boards of
directors and the Trustee and its counsel shall be of
the opinion that such amendments and modifications
will not be prejudicial to the interests of the
Holders as a whole; or
(iii) making such changes or corrections which, on the
advice of counsel to US Co Sub, US Co and the
Trustee, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest
error, provided that the Trustee and its counsel and
the board of directors of each of US Co Sub and US Co
shall be of the opinion that such changes or
corrections will not be prejudicial to the interests
of the Holders as a whole.
(c) Meeting to Consider Amendments. US Co Sub, at the request of
US Co, shall call a meeting or meetings of the Holders for the
purpose of considering any proposed amendment or modification
requiring approval pursuant hereto. Any such meeting or
meetings shall be called and held in accordance with the
by-laws of US Co Sub, the Exchangeable Share Provisions and
all applicable laws.
<PAGE> 94
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(d) Changes in Capital of US Co and US Co Sub. At all times after
the occurrence of any event effected pursuant to Section 2(g)
or Section 2(h) of the Support Agreement, as a result of which
either US Co Common Stock or the Exchangeable Shares or both
are in any way changed, this Agreement shall forthwith be
amended and modified as necessary in order that it shall apply
with full force and effect, mutatis mutandis, to all new
securities into which US Co Common Stock or the Exchangeable
Shares or both are so changed and the parties hereto shall
execute and deliver a supplemental agreement giving effect to
and evidencing such necessary amendments and modifications.
(e) Execution of Supplemental Agreements. No amendment to or
modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective
unless made in writing and signed by all of the parties
hereto. From time to time US Co Sub (when authorized by a
resolution of its Board of Directors), US Co (when authorized
by a resolution of its board of directors) and the Trustee
may, subject to the provisions of these presents, and they
shall, when so directed by these presents, execute and deliver
by their proper officers, agreements or other instruments
supplemental hereto, which thereafter shall form part hereof,
for any one or more of the following purposes:
(i) evidencing the succession of any US Co Successors to
US Co and the covenants of and obligations assumed by
each such US Co Successors in accordance with the
provisions of Article 11, and the successor of any
successor trustee in accordance with the provisions
of Article 10;
(ii) making any additions to, deletions from or
alterations of the provisions of this Agreement or
the Voting Rights, the Exchange Right or the
Automatic Exchange Rights which, in the opinion of
the Trustee and its counsel, will not be prejudicial
to the interests of the Holders as a whole or are in
the opinion of counsel to the Trustee necessary or
advisable in order to incorporate, reflect or comply
with any legislation the provisions of which apply to
US Co, US Co Sub, the Trustee or this Agreement; and
(iii) for any other purposes not inconsistent with the
provisions of this Agreement, including without
limitation to make or evidence any amendment or
modification to this Agreement as contemplated
hereby, provided that, in the opinion of the Trustee
and its counsel, the rights of the Trustee and the
Holders as a whole will not be prejudiced thereby.
13. TERMINATION
(a) Term. The Trust created by this Agreement shall continue
until the earliest to occur of the following events:
(i) no outstanding Exchangeable Shares are held by a
Holder;
<PAGE> 95
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(ii) each of US Co Sub and US Co elects in writing to
terminate the Trust and such termination is approved
by the Holders of the Exchangeable Shares in
accordance with Section 9.2 of the Exchangeable Share
Provisions; and
(iii) twenty-one (21) years after the death of the last
survivor of the descendants of His Majesty King
George VI of the United Kingdom of Great Britain and
Northern Ireland living on the date of the creation
of the Trust.
(b) Survival of Agreement. This Agreement shall survive any
termination of the Trust and shall continue until there are no
Exchangeable Shares outstanding held by a Holder; provided,
however, that the provisions of Articles 8 and 9 hereof shall
survive any such termination of this Agreement.
14. GENERAL
(a) Severability. If any provision of this Agreement is held to
be invalid, illegal or unenforceable, the validity, legality
or enforceability of the remainder of this Agreement shall not
in any way be affected or impaired thereby and the agreement
shall be carried out as nearly as possible in accordance with
its original terms and conditions.
(b) Inurement. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective
successors and permitted assigns and to the benefit of the
Holders.
(c) Notices to Parties. All notices and other communications
between the parties hereunder shall be in writing and shall be
deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses
(or at such other address for such party as shall be specified
in like notice):
(i) if to US Co at:
Pioneer Natural Resources Company
1400 Williams Square West
5205 N. O'Connor Blvd.
Irving, Texas 75039-3746
Attention: President
Telecopy: (972) 402-7057
<PAGE> 96
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(ii) if to US Co Sub at:
Pioneer Natural Resources (Canada) Ltd.
2900, 255 - 5th Avenue S.W.
Calgary, Alberta
T2P 3G6
Attention: President
Telecopy: (403) 231-3247
(iii) if to the Trustee at:
if by mail or delivery:
Montreal Trust Company of Canada
710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Attention:
Telecopy: (403) 267-6598
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof
and if given by telecopy shall be deemed to have been given
and received on the date of receipt thereof unless such day is
not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following
Business Day.
(d) Notice of Holders. Any and all notices to be given and any
documents to be sent to any Holders may be given or sent to
the address of such Holder shown on the register of Holders of
Exchangeable Shares in any manner permitted by the
Exchangeable Share Provisions and shall be deemed to be
received (if given or sent in such manner) at the time
specified in such Exchangeable Share Provisions, the
provisions of which the Exchangeable Share Provisions shall
apply mutatis mutandis to notices or documents as aforesaid
sent to such Holders.
(e) Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Holder by the Trustee, by US
Co Sub or by US Co or by such Holder to the Trustee or to US
Co or US Co Sub, the making of such payment or sending of such
document sent through the post shall be at the risk of US Co
Sub or US Co, in the case of payments made or documents sent
by the Trustee or US Co Sub or US Co, and the Holder, in the
case of payments made or documents sent by the Holder.
(f) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
<PAGE> 97
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(g) Jurisdiction. This Agreement shall be construed and enforced
in accordance with the laws of the Province of Alberta and the
laws of Canada applicable therein.
(h) Attornment. US Co agrees that any action or proceeding
arising out of or relating to this Agreement may be instituted
in the courts of Alberta, waives any objection which it may
have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of the
said courts in any such action or proceeding, agrees to be
bound by any judgment of the said courts and agrees not to
seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby
appoints US Co Sub at its registered office in the Province of
Alberta as US Co's attorney for service of process.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed as of the date first above written.
PIONEER NATURAL
RESOURCES COMPANY
Per:
-------------------------------------
Per:
-------------------------------------
PIONEER NATURAL RESOURCES (CANADA) LTD.
Per:
-------------------------------------
Per:
-------------------------------------
MONTREAL TRUST COMPANY
OF CANADA
Per:
-------------------------------------
Per:
-------------------------------------
<PAGE> 98
EXHIBIT D
TERMS AND CONDITIONS OF US CO SPECIAL PREFERRED VOTING STOCK
Section ____.1 Special Preferred Voting Stock Designated. A series of
Preferred Stock, consisting of one share of such stock, is hereby designated as
"Special Preferred Voting Stock." The outstanding share of Special Preferred
Voting Stock shall be entitled at any relevant date to the number of votes
(including for purposes of determining the presence of a quorum) determined in
accordance with the terms and conditions of the "Exchangeable Shares" and the
"Plan of Arrangement" (as such terms are defined in that certain "Combination
Agreement" dated as of September 3, 1997, by and between the Corporation and
Chauvco Resources Ltd. ("Chauvco")) on all matters presented to the holders of
Common Stock of the Corporation, with the Special Preferred Voting Stock and
Common Stock voting together as a single class. The Special Preferred Voting
Stock shall have no other voting rights except as required by law. No dividend
shall be paid to the holder of Special Preferred Voting Stock. The share of
Special Preferred Voting Stock shall be entitled to $1.00 on liquidation of the
Corporation in preference to any shares of Common Stock of the Corporation, but
only after the liquidation preference of any other shares of Preferred Stock of
the Corporation has been paid in full. The Special Preferred Voting Stock is
not convertible into any other class or series of the capital stock of the
Corporation or into cash, property or other rights, and may not be redeemed,
except pursuant to the last sentence of this Section ____.1. The share of
Special Preferred Voting Stock purchased or otherwise acquired by the
Corporation shall be deemed retired and shall be canceled and may not
thereafter be reissued or otherwise disposed of by the Corporation. So long as
any Exchangeable Shares shall be outstanding, the number of shares comprising
the Special Preferred Voting Stock shall not be increased or decreased and no
other term of the Special Preferred Voting Stock shall be amended, except upon
the approval of the holder of the outstanding share of Special Preferred Voting
Stock. At such time as no Exchangeable Shares shall be outstanding, the
Special Preferred Voting Stock shall automatically be redeemed, with the $1.00
liquidation preference due and payable upon such redemption.
Section ____.2 Restriction. So long as the share of Special Voting
Stock is outstanding, the Corporation shall (i) fully comply with all terms of
the Exchangeable Shares and with all contractual obligations of the Corporation
associated with such Exchangeable Shares and (ii) not amend, alter, change or
repeal this Section ____.2 except upon the unanimous approval of the holder of
the outstanding share of Special Voting Stock.
<PAGE> 99
EXHIBIT E
LIST OF LOCK-UP SHAREHOLDERS
A. CHAUVCO
1. Trimac Corporation
2. Gendis Inc.
3. Guy J. Turcotte
B. US CO
1. Richard E. Rainwater
2. Scott D. Sheffield
3. I. Jon Brumley
<PAGE> 100
EXHIBIT F
All of Chauvco's right, title, estate and interest in and to
(a) property, assets and rights relating to petroleum, natural
gas and related hydrocarbons;
(b) International Data Files;
(c) country correspondence and administration background files;
(d) Gabon correspondence, administration and background files;
(e) computer hardware and software; and
(f) office furniture and contents;
all as relating to countries other than Canada, Argentina and U.S.A., all as
more particularly agreed to in writing by Chauvco and US Co.
<PAGE> 101
EXHIBIT G
SCHEDULE A
The Corporation is authorized to issue:
(a) one class of shares, to be designated as "Common Voting
Shares", in an unlimited number; and
(b) one class of shares, to be designated as "Exchangeable
Shares", in an unlimited number;
such shares having attached thereto the following rights, privileges,
restrictions and conditions:
A. COMMON VOTING SHARES
The Common Voting Shares in the capital of the Corporation shall have
attached thereto the following rights, privileges, restrictions and conditions:
(a) the holders of the Common Voting Shares shall be entitled to
receive notice of and to attend any meeting of the
shareholders of the Corporation and shall be entitled to one
vote for each Common Voting Share held;
(b) subject to the prior rights and privileges attaching to any
other class of shares of the Corporation, the right to
receive any dividend declared by the Corporation; and
(c) subject to the prior rights and privileges attaching to any
other class of shares of the Corporation, the right to
receive the remaining property and assets of the Corporation
upon dissolution.
B. EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have
the following rights, privileges, restrictions and conditions:
<PAGE> 102
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ARTICLE I
INTERPRETATION
For the purposes of these share provisions:
1.1 "Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of US Co Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of shares of
Exchangeable Shares issued and outstanding and held by holders thereof (other
than US Co and its Subsidiaries) multiplied by (ii) the number of votes to
which a holder of one share of US Co Common Stock is entitled with respect to
such matter, proposition or question.
"Automatic Redemption Date" means the date for the automatic
redemption by the Corporation of Exchangeable Shares pursuant to Article 7 of
these share provisions, which date shall be the fifth anniversary of the date
of the first issuance of Exchangeable Shares unless (a) such date shall be
extended at any time or from time to time to a specified later date by the
Board of Directors but not later than December 31, 2005 or (b) such date shall
be accelerated at any time to a specified earlier date (but no earlier than the
third anniversary of the first issuance of Exchangeable Shares) by the Board of
Directors if at such time there are issued and outstanding less than 5% of the
number of Exchangeable Shares initially issued and outstanding pursuant to the
Plan of Arrangement (other than Exchangeable Shares held by US Co and its
Subsidiaries) and as such number of shares may be adjusted as deemed
appropriate by the Board of Directors to give effect to any subdivision or
consolidation of or stock dividend on the Exchangeable Shares, any issuance or
distribution of rights to acquire Exchangeable Shares or securities
exchangeable for or convertible into Exchangeable Shares, any issue or
distribution of other securities or rights or evidences of indebtedness or
assets, or any other capital reorganization or other transaction affecting the
Exchangeable Shares, in each case upon at least 60 days' prior written notice
of any such extension or acceleration, as the case may be, to the registered
holders of the Exchangeable Shares, in which case the Automatic Redemption Date
shall be such later or earlier date; provided, however, that the accidental
failure or omission to give any such notice of extension or acceleration, as
the case may be, to less than 10% of such holders of Exchangeable Shares shall
not affect the validity of such extension or acceleration.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in either or both of Dallas, Texas and
Calgary, Alberta.
"Current Market Price" means, in respect of a share of US Co Common
Stock on any date, the average of the closing prices of US Co Common Stock
during a period of 20 consecutive trading days ending not more than five
trading days before such date on the New York Stock Exchange, or, if the US Co
Common Stock is not then traded on the New York Stock Exchange, on such other
principal U.S. stock exchange or automated quotation system on which the US Co
Common Stock is listed or quoted, as the case may be, as may be selected by the
Board of Directors for such purpose; provided, however, that if in the opinion
of the Board of Directors the public distribution or trading activity of US Co
Common Stock during such period does not create a market which reflects the
fair market value of a share of US Co Common Stock, then the Current Market
Price of a share of US Co Common Stock shall be determined by the Board of
Directors based upon the
<PAGE> 103
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advice of such qualified independent financial advisors as the Board of
Directors may deem to be appropriate, and provided further that any such
selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"Exchangeable Share Consideration" means, for any acquisition of
Exchangeable Shares pursuant to these share provisions, the Plan of
Arrangement, the Support Agreement or the Voting and Exchange Trust Agreement:
(a) certificates representing the aggregate number of shares of
US Co Common Stock deliverable in connection with such
acquisition;
(b) a cheque or cheques payable at par at any branch of the
bankers of the payor in the amount of declared and unpaid
cash dividends deliverable in connection with such
acquisition; and
(c) such stock or property constituting any declared and unpaid
non-cash dividends deliverable in connection with such
acquisition;
provided that any such stock or property shall be duly issued as fully paid and
non-assessable, in the case of stock, and free and clear of any lien, claim and
encumbrance, security interest or adverse claim and provided further that such
consideration shall be paid less any tax required to be deducted and withheld
therefrom and without interest.
"Exchangeable Share Price" means, for each Exchangeable Share:
(a) the Current Market Price of a share of US Co Common Stock,
which shall be satisfied in full by causing to be delivered
one share of US Co Common Stock; plus
(b) an additional amount equal to the full amount of all cash
dividends declared and unpaid on such Exchangeable Share;
plus
(c) the stock or other non-cash assets, if any, representing
non-cash dividends declared and unpaid on such Exchangeable
Share.
"Exchangeable Shares" mean the Exchangeable Shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein.
"Liquidation Amount" has the meaning attributed thereto in Section 5.1
of these share provisions.
"Liquidation Call Right" has the meaning attributed thereto in the
Plan of Arrangement.
"Liquidation Date" has the meaning attributed thereto in Section 5.1
of these share provisions.
"Plan of Arrangement" means the plan of arrangement contemplated in
that Combination Agreement dated September 3, 1997 between US Co and Chauvco
Resources Ltd.
<PAGE> 104
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"Purchase Price" has the meaning attributed thereto in Section 6.3 of
these share provisions.
"Redemption Call Purchase Price" has the meaning attributed thereto in
the Plan of Arrangement.
"Redemption Call Right" has the meaning attributed thereto in the Plan
of Arrangement.
"Redemption Price" has the meaning attributed thereto in Section 7.1
of these share provisions.
"Retracted Shares" has the meaning attributed thereto in Subsection
6.1(i) of these share provisions.
"Retraction Call Right" has the meaning attributed thereto in
Subsection 6.1(iii) of these share provisions.
"Retraction Date" has the meaning attributed thereto in Subsection
6.1(ii) of these share provisions.
"Retraction Price" has the meaning attributed thereto in Section 6.1
of these share provisions.
"Retraction Request" has the meaning attributed thereto in Section 6.1
of these share provisions.
"Subsidiary" of any person means each partnership, joint venture,
corporation, association or other business entity of which more than 50% of the
total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
"Support Agreement" means the Support Agreement between US Co and the
Corporation, made as of ___________, 1997.
"Transfer Agent" means Montreal Trust Company of Canada or such other
person as may from time to time be the registrar and transfer agent for the
Exchangeable Shares.
"Trustee" means Montreal Trust Company of Canada and any successor
trustee appointed under the Voting and Exchange Trust Agreement.
"US Co" means Pioneer Natural Resources Company, a corporation
organized and existing under the laws of the State of Delaware and any
successor corporation.
"US Co Call Notice" has the meaning ascribed thereto in Section 6.3 of
these share provisions.
"US Co Common Stock" mean the shares of common stock of US Co, with a
par value of U.S. $0.01 per share, having voting rights of one vote per share,
and any other securities into which such shares may be changed.
<PAGE> 105
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"US Co Dividend Declaration Date" means the date on which the board of
directors of US Co declares any dividend on the US Co Common Stock.
"US Co Special Share" means the share of Special Preferred Voting
Stock of US Co with a par value of U.S. $0.01 and having voting rights at
meetings of holders of US Co Common Stock equal to the Aggregate Equivalent
Vote Amount.
"Voting and Exchange Trust Agreement" means the Voting and Exchange
Trust Agreement among the Corporation, US Co and the Trustee, made as of
__________, 199___.
ARTICLE II
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the Common
Voting Shares and any other shares ranking junior to the Exchangeable Shares,
with respect to the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
ARTICLE III
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, on each US Co Dividend
Declaration Date, declare a dividend on each Exchangeable Share (a) in the case
of a cash dividend declared on the US Co Common Stock, in an amount in cash for
each Exchangeable Share equal to the cash dividend declared on each share of US
Co Common Stock or (b) in the case of a stock dividend declared on the US Co
Common Stock to be paid in US Co Common Stock, in such number of Exchangeable
Shares for each Exchangeable Share as is equal to the number of shares of US Co
Common Stock to be paid on each share of US Co Common Stock or (c) in the case
of a dividend declared on the US Co Common Stock in property other than cash or
securities of US Co in such type and amount of property for each Exchangeable
Share as is the same as the type and amount of property declared as a dividend
on each share of US Co Common Stock or (d) in the case of a dividend declared
on the US Co Common Stock to be paid in securities of US Co other than US Co
Common Stock, in such number of either such securities or economically
equivalent securities of the Corporation, as the Board of Directors determines,
for each Exchangeable Share as is equal to the number of securities of US Co to
be paid on each share of US Co Common Stock. Such dividends shall be paid out
of money, assets or property of the Corporation properly applicable to the
payment of dividends, or out of authorized but unissued shares of the
Corporation.
<PAGE> 106
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3.2 Cheques of the Corporation payable at par at any branch of the bankers of
the Corporation shall be issued in respect of any cash dividends contemplated
by Subsection 3.1(a) hereof and the sending of such a cheque to each holder of
an Exchangeable Share (less any tax required to be deducted and withheld from
such dividends paid or credited by the Corporation) shall satisfy the cash
dividend represented thereby unless the cheque is not paid on presentation.
Certificates registered in the name of the registered holder of Exchangeable
Shares shall be issued or transferred in respect of any stock dividends or
dividends payable in other securities contemplated by Subsections 3.1(b) or (d)
hereof and the sending of such a certificate to each holder of an Exchangeable
Share shall satisfy the stock dividend or dividend payable in other securities
represented thereby. Such other type and amount of property in respect of any
dividends contemplated by Subsection 3.1(c) hereof shall be issued, distributed
or transferred by the Corporation in such manner as it shall determine and the
issuance, distribution or transfer thereof by the Corporation to each holder of
an Exchangeable Share shall satisfy the dividend represented thereby (subject
to any adjustment for the tax required to be deducted and withheld from such
dividends paid or credited by the Corporation). No holder of an Exchangeable
Share shall be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has not been duly
presented to the Corporation's bankers for payment or that otherwise remains
unclaimed for a period of six years from the date on which such dividend was
payable.
3.3 The record date for the determination of the holders of Exchangeable Shares
entitled to receive payment of, and the payment date for, any dividend declared
on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the US Co Common Stock.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under Section 3.1 hereof the dividends are not paid in full on all of
the Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of
Directors on which the Corporation shall have sufficient moneys, assets or
property properly applicable to the payment of such dividends (subject to any
adjustment for the tax required to be deducted and withheld from such dividends
paid or credited by the Corporation).
3.5 Except as provided in this Article 3, the holders of Exchangeable Shares
shall not be entitled to receive dividends in respect thereof.
ARTICLE IV
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the Corporation
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in Section 9.2 of these
share provisions:
(a) pay any dividends on the Common Voting Shares, or any other
shares ranking junior to the Exchangeable Shares, other than
stock dividends payable in any such other shares ranking
junior to the Exchangeable Shares;
<PAGE> 107
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(b) redeem or purchase or make any capital distribution in
respect of Common Voting Shares or any other shares ranking
junior to the Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation
ranking equally with the Exchangeable Shares with respect to
the payment of dividends or on any liquidation distribution;
(d) issue any Exchangeable Shares or any other shares of the
Corporation ranking equally with, or superior to, the
Exchangeable Shares other than by way of stock dividends
(including rights to acquire Exchangeable Shares) to the
holders of such Exchangeable Shares or distributions of
securities as contemplated by the Support Agreement; or
(e) amend the articles or by-laws of the Corporation.
The restrictions in Subsections 4.1(a), 4.1(b), and 4.1(c) above shall not
apply if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared to date on the US Co Common Stock shall have been declared
on the Exchangeable Shares and paid in full.
ARTICLE V
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to applicable law, to receive
from the assets of the Corporation in respect of each Exchangeable Share held
by such holder on the effective date (the "Liquidation Date") of such
liquidation, dissolution or winding-up, before any distribution of any part of
the assets of the Corporation to the holders of the Common Voting Shares or any
other shares ranking junior to the Exchangeable Shares, an amount equal to the
Exchangeable Share Price applicable on the last Business Day prior to the
Liquidation Date (the "Liquidation Amount"). In connection with payment of the
Liquidation Amount, the Corporation shall be entitled to liquidate some of the
US Co Common Stock that would otherwise be deliverable to the particular holder
of Exchangeable Shares in order to fund any statutory withholding tax
obligation.
5.2 On or promptly after the Liquidation Date, and subject to the exercise by
US Co of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and the by-laws of the Corporation and
such additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to the holders
of the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the
<PAGE> 108
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Corporation by notice to the holders of Exchangeable Shares, on behalf of the
Corporation of the Exchangeable Share Consideration representing the total
Liquidation Amount. On and after the Liquidation Date, the holders of the
Exchangeable Shares shall cease to be holders of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation
Amount has been paid in the manner hereinbefore provided. The Corporation shall
have the right at any time on or after the Liquidation Date to deposit or cause
to be deposited the Exchangeable Share Consideration in respect of the
Exchangeable Shares represented by certificates that have not at the
Liquidation Date been surrendered by the holders thereof in a custodial account
or for safe keeping, in the case of non-cash items, with any chartered bank or
trust company in Canada. Upon such deposit being made, the rights of the
holders of Exchangeable Shares after such deposit shall be limited to receiving
their proportionate part of the total Liquidation Amount for such Exchangeable
Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of such Exchangeable Share
Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be the holders of the US Co Common
Stock delivered to them.
5.3 After the Corporation has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant
to Section 5.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of the Corporation.
ARTICLE VI
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by US Co of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount equal to the Exchangeable Share Price applicable on the
last Business Day prior to the Retraction Date (the "Retraction Price"). In
connection with payment of the Retraction Price, the Corporation shall be
entitled to liquidate some of the US Co Common Stock that would otherwise be
deliverable to the particular holder of Exchangeable Shares in order to fund
any statutory withholding tax obligation. To effect such redemption, the holder
shall present and surrender at the registered office of the Corporation or at
any office of the Transfer Agent as may be specified by the Corporation by
notice to the holders of Exchangeable Shares the certificate or certificates
representing the Exchangeable Shares which the holder desires to have the
Corporation redeem, together with such other documents and instruments as may
be required to effect a transfer of Exchangeable Shares under applicable law
and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Exhibit A
hereto or in such other form as may be acceptable to the Corporation:
<PAGE> 109
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(i) specifying that the holder desires to have all or
any number specified therein of the Exchangeable
Shares represented by such certificate or
certificates (the "Retracted Shares") redeemed by
the Corporation;
(ii) stating the Business Day on which the holder desires
to have the Corporation redeem the Retracted Shares
(the "Retraction Date"), provided that the
Retraction Date shall be not less than three
Business Days nor more than 10 Business Days after
the date on which the Retraction Request is received
by the Corporation and further provided that, in the
event that no such Business Day is specified by the
holder in the Retraction Request, the Retraction
Date shall be deemed to be the tenth Business Day
after the date on which the Retraction Request is
received by the Corporation; and
(iii) acknowledging the overriding right (the "Retraction
Call Right") of US Co to purchase all but not less
than all the Retracted Shares directly from the
holder and that the Retraction Request shall be
deemed to be a revocable offer by the holder to sell
the Retracted Shares to US Co in accordance with the
Retraction Call Right on the terms and conditions
set out in Section 6.3 below.
6.2 Subject to the exercise by US Co of the Retraction Call Right, upon receipt
by the Corporation or the Transfer Agent in the manner specified in Section 6.1
hereof of a certificate or certificates representing the number of Exchangeable
Shares which the holder desires to have the Corporation redeem, together with a
Retraction Request, and provided that the Retraction Request is not revoked by
the holder in the manner specified in Section 6.7, the Corporation shall redeem
the Retracted Shares effective at the close of business on the Retraction Date
and shall cause to be delivered to such holder the total Retraction Price with
respect to such shares. If only a part of the Exchangeable Shares represented
by any certificate are redeemed (or purchased by US Co pursuant to the
Retraction Call Right), a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the Corporation
shall immediately notify US Co thereof. In order to exercise the Retraction
Call Right, US Co must notify the Corporation in writing of its determination
to do so (the "US Co Call Notice") within two Business Days of notification to
US Co by the Corporation of the receipt by the Corporation of the Retraction
Request. If US Co does not so notify the Corporation within such two Business
Day period, the Corporation will notify the holder as soon as possible
thereafter that US Co will not exercise the Retraction Call Right. If US Co
delivers the US Co Call Notice within such two Business Day time period, and
provided that the Retraction Request is not revoked by the holder in the manner
specified in Section 6.7, the Retraction Request shall thereupon be considered
only to be an offer by the holder to sell the Retracted Shares to US Co in
accordance with the Retraction Call Right. In such event, the Corporation shall
not redeem the Retracted Shares and US Co shall purchase from such holder and
such holder shall sell to US Co on the Retraction Date the Retracted Shares for
a purchase price (the "Purchase Price") per share equal to the Retraction Price
per share. For the purposes of completing a purchase pursuant to the Retraction
Call Right, US Co shall deposit with the Transfer Agent, on or before the
Retraction Date the Exchangeable Share Consideration representing the total
Purchase Price. Provided that such Exchangeable Share Consideration has been so
deposited with
<PAGE> 110
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the Transfer Agent, the closing of the purchase and sale of the Retracted
Shares pursuant to the Retraction Call Right shall be deemed to have occurred
as at the close of business on the Retraction Date and, for greater certainty,
no redemption by the Corporation of such Retracted Shares shall take place on
the Retraction Date. In the event that US Co does not deliver a US Co Call
Notice within such two Business Day period or otherwise comply with these
Exchangeable Share provisions in respect thereto, and provided that Retraction
Request is not revoked by the holder in the manner specified in Section 6.7,
the Corporation shall redeem the Retracted Shares on the Retraction Date and in
the manner otherwise contemplated in this Article 6.
6.4 The Corporation or US Co, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of the Corporation for the Exchangeable
Shares or at the address specified in the holder's Retraction Request or by
holding for pick up by the holder at the registered office of the Corporation
or at any office of the Transfer Agent as may be specified by the Corporation
by notice to the holders of Exchangeable Shares, the Exchangeable Share
Consideration representing the total Retraction Price or the total Purchase
Price, as the case may be, and such delivery of such Exchangeable Share
Consideration to the Transfer Agent shall be deemed to be payment of and shall
satisfy and discharge all liability for the total Retraction Price or total
Purchase Price, as the case may be, unless any cheque included therein is not
paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made, in which case the rights of such holder
shall remain unaffected until the total Retraction Price or the total Purchase
Price, as the case may be, has been paid in the manner hereinbefore provided.
On and after the close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the total Retraction
Price or the total Purchase Price, as the case may be, has been made in
accordance with the foregoing provisions, the holder of the Retracted Shares so
redeemed by the Corporation or purchased by US Co shall thereafter be
considered and deemed for all purposes to be a holder of the US Co Common Stock
delivered to it.
6.6 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it
would not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that US Co shall not have
exercised the Retraction Call Right with respect to the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to liquidity or solvency
requirements or other provisions of applicable law, the Corporation shall
redeem Retracted Shares
<PAGE> 111
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in accordance with Section 6.2 of these share provisions on a PRO RATA
basis and shall issue to each holder of Retracted Shares a new certificate, at
the expense of the Corporation, representing the Retracted Shares not redeemed
by the Corporation pursuant to Section 6.2 hereof. Provided that the Retraction
Request is not revoked by the holder in the manner specified in Section 6.7,
the holder of any such Retracted Shares not redeemed by the Corporation
pursuant to Section 6.2 of these share provisions as a result of liquidity or
solvency requirements of applicable law shall be deemed by giving the
Retraction Request to require US Co to purchase such Retracted Shares from such
holder on the Retraction Date or as soon as practicable thereafter on payment
by US Co to such holder of the Purchase Price for each such Retracted Share,
all as more specifically provided in the Voting and Exchange Trust Agreement,
and US Co shall make such purchase.
6.7 A holder of Retracted Shares may, by notice in writing given by the holder
to the Corporation before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to US Co shall be deemed to have been revoked.
ARTICLE VII
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law and the Redemption Call Right, the Corporation
shall on the Automatic Redemption Date redeem the whole of the then outstanding
Exchangeable Shares for an amount equal to the Exchangeable Share Price
applicable on the last Business Day prior to the Automatic Redemption Date (the
"Redemption Price"). In connection with payment of the Redemption Price, the
Corporation shall be entitled to liquidate some of the US Co Common Stock that
would otherwise be deliverable to the particular holder of Exchangeable Shares
in order to fund any statutory withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this Article 7,
the Corporation shall, at least 120 days before the Automatic Redemption Date,
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by the Corporation or the purchase by US Co under the
Redemption Call Right, as the case may be, of the Exchangeable Shares held by
such holder. Such notice shall set out the formula for determining the
Redemption Price or the Redemption Call Purchase Price, as the case may be, the
Automatic Redemption Date and, if applicable, particulars of the Redemption
Call Right.
7.3 On or after the Automatic Redemption Date and subject to the exercise by US
Co of the Redemption Call Right, the Corporation shall cause to be delivered to
the holders of the Exchangeable Shares to be redeemed the Redemption Price for
each such Exchangeable Share upon presentation and surrender at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation in such notice of the certificates representing
such Exchangeable Shares, together with such other documents and instruments as
may be required to effect a transfer of Exchangeable Shares under applicable
law and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require. Payment of the total
Redemption Price for such Exchangeable Shares shall be made by delivery to each
holder, at the address of the holder recorded in the securities register of the
Corporation or by
<PAGE> 112
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holding for pick up by the holder at the registered office of the Corporation
or at any office of the Transfer Agent as may be specified by the Corporation
in such notice, on behalf of the Corporation of the Exchangeable Share
Consideration representing the total Redemption Price. On and after the
Automatic Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and shall not
be entitled to exercise any of the rights of holders in respect thereof, other
than the right to receive their proportionate part of the total Redemption
Price, unless payment of the total Redemption Price for such Exchangeable
Shares shall not be made upon presentation and surrender of certificates in
accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Redemption Price has been paid
in the manner hereinbefore provided. The Corporation shall have the right at
any time after the sending of notice of its intention to redeem the
Exchangeable Shares as aforesaid to deposit or cause to be deposited the
Exchangeable Share Consideration with respect to the Exchangeable Shares so
called for redemption, or of such of the said Exchangeable Shares represented
by certificates that have not at the date of such deposit been surrendered by
the holders thereof in connection with such redemption, in a custodial account
or for safe keeping, in the case of non-cash items, with any chartered bank or
trust company in Canada named in such notice. Upon the later of such deposit
being made and the Automatic Redemption Date, the Exchangeable Shares in
respect whereof such deposit shall have been made shall be redeemed and the
rights of the holders thereof after such deposit or Automatic Redemption Date,
as the case may be, shall be limited to receiving their proportionate part of
the total Redemption Price for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of
such Exchangeable Share Consideration, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be holders of the
US Co Common Stock delivered to them.
ARTICLE VIII
VOTING RIGHTS
8.1 Except as required by applicable law and the provisions hereof, the holders
of the Exchangeable Shares shall not be entitled as such to receive notice of
or to attend any meeting of the shareholders of the Corporation or to vote at
any such meeting.
ARTICLE IX
AMENDMENT AND APPROVAL
9.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
9.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to
the Exchangeable Shares or any other matter requiring the approval or consent
of the holders of the Exchangeable Shares shall be deemed to have been
sufficiently given if it shall have been given in accordance with applicable
law subject to a minimum requirement that such approval be evidenced by
resolution passed by not less than two-thirds of the votes cast on such
resolution by persons represented in person or by proxy at a
<PAGE> 113
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meeting of holders of Exchangeable Shares duly called and held at which the
holders of at least 50%(excluding Exchangeable Shares beneficially owned by US
Co or its Subsidiaries) of the outstanding Exchangeable Shares at that time are
present or represented by proxy. If at any such meeting the holders of at least
50% (excluding Exchangeable Shares beneficially owned by US Co or its
Subsidiaries) of the outstanding Exchangeable Shares at that time are not
present or represented by proxy within one-half hour after the time appointed
for such meeting then the meeting shall be adjourned to such date not less than
10 days thereafter and to such time and place as may be designated by the
Chairman of such meeting. At such adjourned meeting the holders of Exchangeable
Shares present or represented by proxy thereat may transact the business for
which the meeting was originally called and a resolution passed thereat by the
affirmative vote of not less than two-thirds of the votes cast on such
resolution by holders of Exchangeable Shares represented in person or by proxy
at such meeting shall constitute the approval or consent of the holders of the
Exchangeable Shares.
ARTICLE X
RECIPROCAL CHANGES, ETC. IN RESPECT OF US CO COMMON STOCK
10.1 (a) Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that US Co will not without the prior approval of
the Corporation and the prior approval of the holders of the Exchangeable
Shares given in accordance with Section 9.2 of these share provisions:
(i) issue or distribute US Co Common Stock (or securities
exchangeable for or convertible into or carrying rights to
acquire US Co Common Stock) to the holders of all or
substantially all of the then outstanding US Co Common Stock
by way of stock dividend or other distribution; or
(ii) issue or distribute rights, options or warrants to the
holders of all or substantially all of the then outstanding
US Co Common Stock entitling them to subscribe for or to
purchase shares of US Co Common Stock (or securities
exchangeable for or convertible into or carrying rights to
acquire shares of US Co Common Stock); or
(iii) issue or distribute to the holders of all or substantially
all of the then outstanding shares of US Co Common Stock (A)
shares or securities of US Co of any class other than US Co
Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire US Co Common
Stock), (B) rights, options or warrants other than those
referred to in Section 10.1(a)(ii) above, (C) evidences of
indebtedness of US Co or (D) assets of US Co;
unless the Corporation is permitted under applicable law to issue or
distribute the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other assets to
holders of the Exchangeable Shares and the Corporation shall issue or
distribute the economic equivalent on a per share basis of such rights,
options,
<PAGE> 114
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securities, shares, evidences of indebtedness or other assets
simultaneously to holders of the Exchangeable Shares.
(b) Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that US Co will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of these share
provisions:
(i) subdivide, redivide or change the then outstanding shares
of US Co Common Stock into a greater number of shares of US Co Common
Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of US Co Common Stock into a lesser number of
shares of US Co Common Stock; or
(iii) reclassify or otherwise change the shares of US Co
Common Stock or effect an amalgamation, merger, reorganization or
other transaction affecting the shares of US Co Common Stock;
unless the Corporation is permitted under applicable law to
simultaneously make the same or an equivalent change to, or in the
rights of holders of, the Exchangeable Shares and the same or an
equivalent change is made to, or in the rights of the holders of, the
Exchangeable Shares.
The Support Agreement further provides, in part, that the aforesaid provisions
of the Support Agreement shall not be changed without the approval of the
holders of the Exchangeable Shares given in accordance with Section 9.2 of
these share provisions.
ARTICLE XI
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
11.1 The Corporation will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by US Co with all provisions of the Support Agreement and the
Voting Trust and Exchange Agreement in accordance with the terms thereof
including, without limitation, taking all such actions and doing all such
things as shall be necessary or advisable to enforce to the fullest extent
possible for the direct benefit of the Corporation all rights and benefits in
favour of the Corporation under or pursuant thereto.
11.2 The Corporation shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement or the Voting Trust and Exchange Agreement or without the
approval of the holders of the Exchangeable Shares given in accordance with
Section 9.2 of these share provisions other than such amendments, waivers
and/or forgiveness as may be necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the
holders of Exchangeable Shares; or
<PAGE> 115
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(b) making such provisions or modifications not inconsistent with
such agreement as may be necessary or desirable with respect
to matters or questions arising thereunder which, in the
opinion of the Board of Directors, it may be expedient to
make, provided that the Board of Directors shall be of the
opinion, after consultation with counsel, that such
provisions and modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement
which, on the advice of counsel to the Corporation, are
required for the purpose of curing or correcting any
ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error contained therein,
provided that the Board of Directors shall be of the opinion,
after consultation with counsel, that such changes or
corrections will not be prejudicial to the interests of the
holders of the Exchangeable Shares.
ARTICLE XII
LEGEND
12.1 The certificates evidencing the Exchangeable Shares shall contain or have
affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right and the Redemption Call
Right, and the Voting and Exchange Trust Agreement (including the provisions
with respect to the voting rights, exchange right and automatic exchange
thereunder).
ARTICLE XIII
MISCELLANEOUS
13.1 Any notice, request or other communication to be given to the Corporation
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of the Corporation and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
13.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction or redemption of Exchangeable Shares shall be
made by registered mail (postage prepaid) or by delivery to the registered
office of the Corporation or to such office of the Transfer Agent as may be
specified by the Corporation, in each case addressed to the attention of the
President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent, as the case
may be. Any such presentation and surrender of certificates made by registered
mail shall be at the sole risk of the holder mailing the same.
<PAGE> 116
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13.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
13.4 All Exchangeable Shares acquired by the Corporation upon the redemption or
retraction thereof shall be canceled.
<PAGE> 117
EXHIBIT A
NOTICE OF RETRACTION
To the Corporation and Pioneer Natural Resources Company
This notice is given pursuant to Article 6 of the provisions (the
"Share Provisions") attaching to the share(s) represented by this certificate
and all capitalized words and expressions used in this notice which are defined
in the Share Provisions have the meanings attributed to such words and
expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] share(s) only.
----------------------
The undersigned hereby notifies the Corporation that the Retraction
Date shall be
--------------------------------- .
NOTE: The Retraction Date must be a Business Day and must not be less
than three Business Days nor more than 10 Business Days after the
date upon which this notice is received by the Corporation. In
the event that no such Business Day is specified above, the
Retraction Date shall be deemed to be the tenth Business Day
after the date on which this notice is received by the
Corporation.
The undersigned acknowledges the Retraction Call Right of Pioneer
Natural Resources Company to purchase all but not less than all the Retracted
Shares from the undersigned and that this notice shall be deemed to be a
revocable offer by the undersigned to sell the Retracted Shares to Pioneer
Natural Resources Company in accordance with the Retraction Call Right on the
Retraction Date for the Retraction Price and on the other terms and conditions
set out in Section 6.3 of the Share Provisions. If Pioneer Natural Resources
Company determines not to exercise the Retraction Call Right, the Corporation
will notify the undersigned of such fact as soon as possible. This notice of
retraction, and offer to sell the Retracted Shares to Pioneer Natural Resources
Company may be revoked and withdrawn by the undersigned by notice in writing
given to the Corporation at any time before the close of business on the
Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of liquidity or
solvency provisions of applicable law, the Corporation is unable to redeem all
Retracted Shares, the undersigned will be deemed to have exercised the Exchange
Right (as defined in the Voting and Exchange Trust Agreement) so as to require
Pioneer Natural Resources Company to purchase the unredeemed Retracted Shares.
<PAGE> 118
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The undersigned hereby represents and warrants to the Corporation and
Pioneer Natural Resources Company that the undersigned has good title to, and
owns, the share(s) represented by this certificate to be acquired by the
Corporation or Pioneer Natural Resources Company as the case may be, free and
clear of all liens, claims and encumbrances.
- ------------------- ------------------------------- ------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the legal or beneficial owner of the Retracted
Shares is a non-resident of Canada.
[ ] Please check box if the securities and any cheque(s) or other non-cash
assets resulting from the retraction or purchase of the Retracted
Shares are to be held for pick-up by the shareholder at the principal
transfer office of Montreal Trust Company of Canada (the "Transfer
Agent") in Calgary, Alberta, failing which the securities and any
cheque(s) or other non-cash assets will be delivered to the last
address of the shareholder as it appears on the register by such means
as the Corporation deems appropriate.
NOTE: This panel must be completed and this certificate, together
with such additional documents as the Transfer Agent may
require, must be deposited with the Transfer Agent at its
principal transfer office in Calgary, Alberta. The securities
and any cheque(s) or other non-cash assets resulting from the
retraction or purchase of the Retracted Shares will be issued
and registered in, and made payable to, or transferred into,
respectively, the name of the shareholder as it appears on the
register of the Corporation and the securities, cheque(s) and
other non-cash assets resulting from such retraction or
purchase will be delivered to such shareholder as indicated
above, unless the form appearing immediately below is duly
completed.
Date
- ------------------------------------------------------ --------------------
Name of Person in Whose Name Securities or Cheque(s)
or Other Non-cash Assets Are To Be Registered, Issued
or Delivered (please print)
- ------------------------------------------------------ ------------------------
Street Address or P.O. Box Signature of Shareholder
- ------------------------------------------------------ ------------------------
City - Province Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the
share(s) represented by this certificate, a certificate
representing the remaining shares of the Corporation will be
issued and registered in the name of the shareholder as it
appears on the register of the Corporation, unless the Share
Transfer Power on the share certificate is duly completed in
respect of such shares.
<PAGE> 119
SCHEDULE B
The Corporation's business and activities shall be restricted to
participating in those transactions and activities contemplated by that
Combination Agreement dated September 3, 1997 between Pioneer Natural Resources
Company and Chauvco Resources Ltd. and the agreements contemplated therein, as
the same may be amended, supplemented or restated from time to time. The
Corporation shall not carry on any other business and the capacity of the
Corporation to carry on business is restricted and withheld except to the
extent necessary to carry out the activities described above; provided that all
of the foregoing restrictions shall cease and be at an end on the date upon
which the Corporation is amalgamated with Chauvco Resources Ltd. or Chauvco
Resources Ltd. is wound-up and dissolved into the Corporation or the
Corporation and Chauvco Resources Ltd. are otherwise merged, whereupon the
Corporation will not be restricted in any way from carrying on any business.
<PAGE> 120
SCHEDULE C
So long as any of the Exchangeable Shares of the Corporation are
outstanding, the Corporation shall not at any time without, but may at any time
with, the approval of the holders of such shares issue any further Exchangeable
Shares of the Corporation, except as contemplated in accordance with the
rights, privileges, restrictions and conditions attaching to the Exchangeable
Shares of the Corporation.
<PAGE> 1
EXHIBIT 2.2
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT, dated as of September 3, 1997 (this
"Agreement"), is made and entered into by and among PIONEER NATURAL RESOURCES
COMPANY, a Delaware corporation ("US Co"), and GUY J. TURCOTTE, an individual,
(the "Shareholder").
W I T N E S S E T H
WHEREAS, concurrently herewith, US Co and Chauvco Resources Ltd.
("Chauvco") are entering into a Combination Agreement (as such agreement may
hereafter be amended from time to time, the "Combination Agreement"), providing
for the arrangement (the "Arrangement") as contemplated by the Combination
Agreement; capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Combination Agreement; and
WHEREAS, as an inducement and a condition to entering into the
Combination Agreement, US Co has required that the Shareholder agrees, and the
Shareholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Combination
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter of
intent, proposal or offer (other than the transactions
contemplated in the Combination Agreement) involving Chauvco
or any of the Chauvco Subsidiaries for, or an inquiry or
indication of interest that reasonably could be expected to
lead to: (i) any arrangement, merger, consolidation, share
exchange, recapitalization, reorganization, dissolution,
liquidation, business combination, or other similar
transaction with Chauvco or any of the Chauvco Subsidiaries,
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of a material portion of the assets of
Chauvco and the Chauvco Subsidiaries, taken as a whole, in a
single transaction or series of transactions, or (iii) any
tender offer or exchange offer for all or any portion of the
outstanding shares of capital stock of Chauvco or any of the
Chauvco Subsidiaries or the filing of documentation under
applicable Canadian securities legislation in connection
therewith, but shall not include the transactions
contemplated in the Combination Agreement.
(b) "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first
Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of
such securities (as determined pursuant to
<PAGE> 2
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Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act")) including pursuant to any agreement,
arrangement or understanding, whether or not in writing and
Beneficial Owner has a corresponding meaning. Without
duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall
include securities Beneficially Owned by all other Persons
(who are Affiliates of such Person) who together with such
Person would constitute a "group" within the meaning of
Section 13(d)(3) of the Exchange Act and in any event with
respect to the Shareholder shall include Shares held of
record by any of the Shareholder's spouses and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association,
trust or unincorporated organization.
(e) "Shares" shall mean Chauvco Common Shares.
(f) "Shareholder's Shares" shall mean all Shares held of record
or Beneficially Owned by such Shareholder, whether currently
issued or hereafter acquired except by way of option exercise
where such shares are sold within 10 days of exercise.
(g) "Termination Date" shall mean the date that the Combination
Agreement has been terminated.
2. PROVISIONS CONCERNING COMMON STOCK
From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the Termination Date, at any meeting of the
holders of Shares, however called, or in any other circumstance upon which the
vote, consent or other approval of holders of Shares is sought, the Shareholder
shall vote (or cause to be voted) the Shareholder's issued and outstanding
Shareholders Shares, (i) in favour of the Arrangement and the other
transactions contemplated thereby, the execution and delivery by Chauvco of the
Combination Agreement and the approval of the terms thereof and each of the
other actions contemplated by the Combination Agreement and this Agreement and
any actions required in furtherance thereof and hereof; (ii) against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other material obligation or
agreement of Chauvco under the Combination Agreement; and (iii) against the
following actions (other than the Arrangement and the transactions contemplated
by the Combination Agreement): (A) any Acquisition Proposal other than an
Acquisition Proposal with US Co or any Affiliate thereof and (B) to the extent
that such (1) are intended to, or could reasonably be expected to, impede,
interfere with, delay, postpone, or materially adversely affect the Arrangement
or the transactions contemplated by the Combination Agreement or this Agreement
or (2) are intended to, or could reasonably be expected to, implement or lead
to any Acquisition Proposal (other than an Acquisition Proposal with US Co or
any Affiliate thereof): (x) any change in a majority of the persons who
constitute the board of directors of Chauvco; (y) any change in the present
capitalization of Chauvco or any amendment of Chauvco's Articles or Bylaws; or
(z) any other a material change in Chauvco's corporate structure or business.
In addition to the other covenants and agreements of the Shareholder provided
for elsewhere in this Agreement, during the above-described period the
Shareholder shall not enter into any agreement or understanding with any Person
the effect of which would be inconsistent with or violate the provisions and
agreements
<PAGE> 3
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contained in this Section 2. Nothing herein shall in any way restrict or limit
the Shareholder from taking any action in his capacity as a director or officer
of Chauvco to fulfill his duties and fiduciary obligations as a director or
officer of Chauvco.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
(a) The Shareholder hereby severally represents, warrants and
covenants to US Co as follows:
(i) Ownership. The Shareholder is either (A) the record
and Beneficial Owner of, or (B) the Beneficial Owner
but not the record holder of, the number of issued
and outstanding Shares set forth on Schedule A
hereto. As of the date of this Agreement, the Shares
set forth on Schedule A hereto constitute all of the
issued and outstanding Shares owned of record or
Beneficially Owned by the Shareholder. Except as
otherwise set forth in Schedule A, the Shareholder
has sole power of disposition, sole power of
conversion, sole power to demand appraisal rights
and sole power to agree to all of the matters set
forth in this Agreement, in each case with respect
to all of the Shares attributable to the Shareholder
set forth on Schedule A hereto, with no material
limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and
the terms of this Agreement.
(ii) Power; Binding Agreement. The Shareholder has the
legal capacity, power and authority to enter into
and perform all of the Shareholder's obligations
under this Agreement. This Agreement has been duly
and validly executed and delivered by the
Shareholder and constitutes a valid and binding
agreement of the Shareholder, enforceable against
the Shareholder in accordance with its terms. There
are no beneficiaries or holders of a voting trust
certificate or other interest of any trust of which
the Shareholder is a trustee whose consent is
required for the execution and delivery of this
Agreement or the consummation by the Shareholder of
the transactions contemplated hereby. If the
Shareholder's Shares constitute community property,
this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and
binding agreement of, the Shareholder's spouse,
enforceable against such person in accordance with
its terms.
(iii) No Conflicts. Other than filings that may be
required under the Exchange Act and such other
consents as are described in the Combination
Agreement no filing with, and no permit,
authorization, consent or approval of, any state or
federal public body or authority is necessary for
the execution of this Agreement by the Shareholder
and the consummation by the Shareholder of the
transactions contemplated hereby, except where the
failure to obtain the consent, permit,
authorization, approval or filing would not
interfere with the Shareholder's ability to perform
his obligations hereunder, and none of the execution
and delivery of this Agreement by the Shareholder,
the consummation by the Shareholder of the
transactions contemplated hereby or compliance by
the Shareholder with any of the provisions hereof
shall (A)
<PAGE> 4
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result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a
default (or give rise to any third party right of
termination, cancellation, material modification or
acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement,
understanding, agreement or other instrument or
obligation of any kind to which the Shareholder is a
party or by which the Shareholder or any of his
properties or assets may be bound, or (B) violate
any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to the
Shareholder or any of its properties or assets, in
each such case except to the extent that any
conflict, breach, default or violation would not
interfere with the ability of the Shareholder to
perform the obligations hereunder.
(iv) No Encumbrances. Except as required by Section 2, at
all times during the term hereof, all of the
Shareholder's Shares will be held by the
Shareholder, Affiliates of the Shareholder, or by
nominees or custodians for the benefit of the
Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or
agreement, understandings or arrangements or any
other liens, claims, understanding or arrangements
that do not limit or impair the Shareholder's
ability to perform his obligations under this
Agreement.
(v) No Solicitation. The Shareholder shall comply with
the terms of Section 4.2(n) of the Combination
Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this
Agreement and ending as of the first to occur of the
Effective Time or the Termination Date, the
Shareholder shall not, and the Shareholder shall
cause each of his Affiliates who Beneficially Own
any of the Shareholder's Shares of such Shareholder
not to, directly or indirectly without the consent
of US Co in respect of any Acquisition Proposal or
otherwise: (A) offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or
other arrangement or understanding with respect to
or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shareholder's
Shares of the Shareholder, or any interest therein,
(B) grant any proxies or powers of attorney, deposit
any Shareholder's Shares of the Shareholder into a
voting trust or enter into a voting agreement with
respect to any Shareholder's Shares of the
Shareholder, (C) enter into any agreement or
arrangement providing for any of the actions
described in clause (A) or (B) above or (D) take any
action that could reasonably be expected to have
effect of preventing or disabling the Shareholder
from performing the Shareholder's obligations under
this Agreement, provided however that the
Shareholder shall be entitled to dispose of the
Shares currently held in the Shareholder's RRSP
which holds approximately 36,000 Shares.
(vii) Waiver of Appraisal Rights. The Shareholder hereby
waives and agrees not to assert, and shall cause any
of his Affiliates who hold of record any of the
<PAGE> 5
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Shareholder's Shares to waive and agree not to
assert, any rights of appraisal or rights to dissent
in respect of the Arrangement that the Shareholder
or such Affiliate may have.
(viii) Further Assurances. From time to time, at US Co's
reasonable request and without further
consideration, the Shareholder shall execute and
deliver such additional documents as may be
necessary or desirable to consummate and make
effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
4. STOP TRANSFER
From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the Termination Date, the Shareholder will
not request that Chauvco register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Shareholder's
Shares, except as contemplated by Section 3(a)(vi) hereof or as otherwise
contemplated hereby.
5. RECAPITALIZATION
In the event of a stock dividend or distribution, or any change in the
Shares (or any class thereof) by reason of any split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall include,
without limitation, all such stock dividends and distributions and any shares
or other securities into which or for which any or all of the Shares (or any
class thereof) may be changed or exchanged as may be appropriate to reflect
such event.
6. MISCELLANEOUS
(a) Entire Agreement. This Agreement and the Combination
Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter
hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly received if so
given) by hand delivery or telecopy, or by mail (registered
or certified mail, postage prepaid, return receipt requested)
or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following
addresses or the addresses set forth on the signature pages
hereto:
<PAGE> 6
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If to
the Shareholder: Chauvco Resources Ltd.
2900, 255 5th Ave S.W.
Calgary, AB, T2P 3G6
Attn: Guy J. Turcotte - PRIVATE AND CONFIDENTIAL
Telecopy: (403) 231-3248
and
copy to: Bennett Jones Verchere
4500 Bankers Hall East
355 - 2nd Street S.W.
Calgary, AB, T2P 4K7
Attn: Martin Lambert
Telecopy: (403) 265-7219
If to US Co: Pioneer Natural Resources Company
1400 Williams Square West
5205 N. O'Connor Blvd.
Irving, Texas 75039
Attn: General Counsel
Telecopy: (972) 402-7028
and
copy to: Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attn: Michael D. Wortley
Telecopy: (214) 220-7716
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
<PAGE> 7
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(e) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by the Shareholder of any
covenants or agreements contained in this Agreement will
cause US Co to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such
breach US Co shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative,
and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise
any such or other right, power or remedy or to demand such
compliance.
(h) No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by,
any person or entity who or which is not a party hereto;
provided that, in the event of the Shareholder's death, the
benefits and obligations of such Shareholder hereunder shall
inure to his successors and heirs.
(i) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of Alberta.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of Alberta in any action, suit or
proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on
forum non conveniens or any other objection to venue
therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this
paragraph and shall not be deemed to be a general submission
to the jurisdiction of Alberta other than for such purposes.
(k) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or
interpretation of this Agreement.
(l) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same
Agreement. This Agreement shall not be effective as to any
party hereto until such time as this Agreement or a
counterpart thereof has been executed and delivered by each
party hereto.
<PAGE> 8
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7. TERMINATION
This Agreement shall terminate without any further action on the part
of any party hereto upon the earlier to occur of the Effective Time or the
Termination Date. Upon such termination, this Agreement shall forthwith become
void and of no further force or effect; provided that a party shall be liable
for any breaches of the Agreement that occurred prior to such termination.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 3rd day of September, 1997.
PIONEER NATURAL
RESOURCES COMPANY
Per: /s/ Scott D. Sheffield
------------------------------------
Per: /s/ Mark L. Withrow
------------------------------------
/s/ W.G. Russell /s/ Guy J. Turcotte
- ------------------------------- ----------------------------------------
WITNESS GUY J. TURCOTTE
<PAGE> 1
EXHIBIT 2.3
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT, dated as of September 3, 1997 (this
"Agreement"), is made and entered into by and among PIONEER NATURAL RESOURCES
COMPANY, a Delaware corporation ("US Co"), Chauvco Resources Ltd., an Alberta
corporation ("Chauvco") and DNR-MESA Holdings, L.P., SCOTT D. SHEFFIELD and I.
JON BRUMLEY (collectively, the "Shareholders").
W I T N E S S E T H
WHEREAS, concurrently herewith, US Co and Chauvco are entering into a
Combination Agreement (as such agreement may hereafter be amended from time to
time, the "Combination Agreement"), providing for the arrangement (the
"Arrangement") as contemplated by the Combination Agreement; capitalized terms
used and not defined herein have the respective meanings ascribed to them in
the Combination Agreement; and
WHEREAS, as an inducement and a condition to entering into the
Combination Agreement, Chauvco has required that each Shareholder agrees, and
each Shareholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Combination
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement:
(a) "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first
Person.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of
such securities (as determined pursuant to Rule 13d-3 under
the Securities Exchange Act of 1934 (the "Exchange Act"))
including pursuant to any agreement, arrangement or
understanding, whether or not in writing and Beneficial Owner
has a corresponding meaning. Without duplicative counting of
the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons (who are Affiliates
of such Person excluding officers and directors of US Co) who
together with such Person would constitute a "group" within
the meaning of Section 13(d)(3) of the Exchange Act and in
any event with respect to the Shareholders shall include
Shares held of record by any of the Shareholders' spouses and
children.
(c) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association,
trust or unincorporated organization.
<PAGE> 2
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(d) "Shares" shall mean US Co Common Stock.
(e) "Shareholder's Shares" shall mean all Shares held of record
or Beneficially Owned by such Shareholder, whether currently
issued or hereafter acquired except by way of option exercise
where such shares are sold within 10 days of exercise.
(f) "Termination Date" shall mean the date that the Combination
Agreement has been terminated.
2. PROVISIONS CONCERNING COMMON STOCK
From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the Termination Date, at any meeting of the
holders of Shares, however called, or in any other circumstance upon which the
vote, consent or other approval of holders of Shares is sought, each
Shareholder shall vote (or cause to be voted) the Shareholder's issued and
outstanding Shareholders' Shares (and each class thereof), (i) in favour of the
Arrangement and the other transactions contemplated thereby, the execution and
delivery by US Co of the Combination Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Combination Agreement
and this Agreement and any actions required in furtherance thereof and hereof;
(ii) against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
material obligation or agreement of US Co under the Combination Agreement; and
(iii) against the following actions (other than the Arrangement and the
transactions contemplated by the Combination Agreement): to the extent that
such are intended to, or could reasonably be expected to, impede, interfere
with, delay, postpone, or materially adversely affect the Arrangement or the
transactions contemplated by the Combination Agreement or this Agreement (A)
any change in a majority of the persons who constitute the board of directors
of US Co; (B) any change in the present capitalization of US Co or any
amendment of US Co's Articles or Bylaws; or (C) any other a material change in
US Co's corporate structure or business. In addition to the other covenants and
agreements of the Shareholders provided for elsewhere in this Agreement, during
the above-described period no Shareholder shall enter into any agreement or
understanding with any Person the effect of which would be inconsistent with or
violate the provisions and agreements contained in this Section 2. Nothing
herein shall in any way restrict or limit any Shareholder from taking any
action in his capacity as a director or officer of US Co to fulfill his duties
and fiduciary obligations as a director or officer of US Co.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
(a) Each Shareholder hereby severally represents, warrants and
covenants to Chauvco, with respect to himself and his
Shareholder Shares only, as follows:
(i) Ownership. Each Shareholder is either (A) the record
and Beneficial Owner of, or (B) the Beneficial Owner
but not the record holder of, the number of issued
and outstanding Shares set forth with respect to
such Shareholder on Schedule A hereto. As of the
date of this Agreement, the Shares set forth on
Schedule A hereto constitute all of the issued and
outstanding Shares owned of record or Beneficially
Owned by such Shareholder. Except as otherwise set
forth in Schedule A, such Shareholder has sole power
of disposition, sole
<PAGE> 3
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power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with
respect to all of the Shares attributable to such
Shareholder set forth on Schedule A hereto, with no
material limitations, qualifications or restrictions
on such rights, subject to applicable securities
laws and the terms of this Agreement.
(ii) Power; Binding Agreement. Each Shareholder has the
legal capacity, power and authority to enter into
and perform all of such Shareholder's obligations
under this Agreement. This Agreement has been duly
and validly executed and delivered by such
Shareholder and constitutes a valid and binding
agreement of such Shareholder, enforceable against
such Shareholder in accordance with its terms. There
are no beneficiaries or holders of a voting trust
certificate or other interest of any trust of which
such Shareholder is a trustee whose consent is
required for the execution and delivery of this
Agreement or the consummation by such Shareholder of
the transactions contemplated hereby. If such
Shareholder is married and such Shareholder's Shares
constitute community property, this Agreement has
been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such
Shareholder's spouse, enforceable against such
person in accordance with its terms.
(iii) No Conflicts. Other than filings that may be
required under the Exchange Act and such other
consents as are described in the Combination
Agreement no filing with, and no permit,
authorization, consent or approval of, any state or
federal public body or authority is necessary for
the execution of this Agreement by such Shareholder
and the consummation by such Shareholder of the
transactions contemplated hereby, except where the
failure to obtain the consent, permit,
authorization, approval or filing would not
interfere with such Shareholder's ability to perform
its obligations hereunder, and none of the execution
and delivery of this Agreement by such Shareholder,
the consummation by such Shareholder of the
transactions contemplated hereby or compliance by
such Shareholder with any of the provisions hereof
shall (A) result in a violation or breach of, or
constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party
right of termination, cancellation, material
modification or acceleration) under any of the
terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other
instrument or obligation of any kind to which such
Shareholder is a party or by which such Shareholder
or any of its properties or assets may be bound, or
(B) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation
applicable to such Shareholder or any of its
properties or assets, in each such case except to
the extent that any conflict, breach, default or
violation would not interfere with the ability of
such Shareholder to perform the obligations
hereunder.
<PAGE> 4
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(iv) No Encumbrances. Except as required by Section 2, at
all times during the term hereof, all of such
Shareholder's Shares will be held by such
Shareholder, Affiliates of such Shareholder, or by
nominees or custodians for the benefit of such
Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or
agreement, understandings or arrangements or any
other liens, claims, understanding or arrangements
that do not limit or impair such Shareholder's
ability to perform its obligations under this
Agreement.
(v) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this
Agreement and ending as of the first to occur of the
Effective Time or the Termination Date, no
Shareholders shall, and each Shareholder shall cause
each of his Affiliates who Beneficially Owns any of
the Shareholder's Shares of such Shareholder not to,
directly or indirectly without the consent of
Chauvco: (A) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement
or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any
or all of the Shareholders' Shares of such
Shareholder, or any interest therein, (B) grant any
proxies or powers of attorney, deposit any
Shareholders' Shares of such Shareholder into a
voting trust or enter into a voting agreement with
respect to any Shareholders' Shares of such
Shareholder, (C) enter into any agreement or
arrangement providing for any of the actions
described in clause (A) or (B) above or (D) take any
action that could reasonably be expected to have
effect of preventing or disabling any Shareholder
from performing such Shareholder's obligations under
this Agreement.
(vi) Further Assurances. From time to time, at Chauvco's
reasonable request and without further
consideration, each Shareholder shall execute and
deliver such additional documents as may be
necessary or desirable to consummate and make
effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
(b) US Co hereby represents and warrants to Chauvco that the
Board of Directors of US Co has approved the terms of this
Agreement and the transactions contemplated herein in such a
manner as to satisfy the corporate laws of Delaware
applicable to US Co.
4. STOP TRANSFER
From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the Termination Date, no Shareholder will
request that US Co register (and US Co agrees not to register) the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shareholders' Shares of such Shareholder, except as
contemplated by Section 3(a)(v) hereof or as otherwise contemplated hereby.
<PAGE> 5
- 5 -
5. RECAPITALIZATION
In the event of a stock dividend or distribution, or any change in the
Shares (or any class thereof) by reason of any split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall include,
without limitation, all such stock dividends and distributions and any shares
or other securities into which or for which any or all of the Shares (or any
class thereof) may be changed or exchanged as may be appropriate to reflect
such event.
6. MISCELLANEOUS
(a) Entire Agreement. This Agreement and the Combination
Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter
hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto; provided
that all of the provisions of this Agreement other than
Sections 3(b), 4 and this Section 6(b) may be amended without
the consent of US Co.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly received if so
given) by hand delivery or telecopy, or by mail (registered
or certified mail, postage prepaid, return receipt requested)
or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following
addresses or the addresses set forth on the signature pages
hereto:
If to US Co or the c/o Pioneer Natural Resources Company
Shareholders: 1400 Williams Square West
5205 N. O'Connor Blvd.
Irving, Texas 75039
Attn: General Counsel
Telecopy: (972) 402-7028
and
copy to: Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attn: Michael D. Wortley
Telecopy: (214) 220-7716
and
<PAGE> 6
- 6 -
DNR-MESA Holdings, L.P.
777 Main Street
2700 Fort Worth, Texas 76102
Attn: Ken Hersh
Telecopy: (817) 820-6650
If to
Chauvco: Chauvco Resources Ltd.
2900, 255-5th Avenue S.W.
Calgary, Alberta
T2P 3G6
Attn: President
Telecopy: (403) 269-9497
and
copy to: Bennett Jones Verchere
4500 855-2 Street S.W.
Calgary, Alberta T2P 4K7
Attn: Martin A. Lambert
Telecopy: (403) 265-7219
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by any Shareholder of any
covenants or agreements contained in this Agreement will
cause Chauvco to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any
such breach Chauvco shall be entitled to the remedy of
specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in
equity.
(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative,
and the exercise of any thereof by any party shall not
<PAGE> 7
- 7 -
preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise
any such or other right, power or remedy or to demand such
compliance.
(h) No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by,
any person or entity who or which is not a party hereto;
provided that, in the event of any of the Shareholder's
deaths, the benefits and obligations of such Shareholder
hereunder shall inure to his successors and heirs.
(i) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of Delaware.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of Alberta in any action, suit or
proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on
forum non conveniens or any other objection to venue
therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this
paragraph and shall not be deemed to be a general submission
to the jurisdiction of Alberta other than for such purposes.
(k) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or
interpretation of this Agreement.
(l) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same
Agreement. This Agreement shall not be effective as to any
party hereto until such time as this Agreement or a
counterpart thereof has been executed and delivered by each
party hereto.
7. TERMINATION
This Agreement shall terminate without any further action on the part
of any party hereto upon the earlier to occur of the Effective Time or the
Termination Date. Upon such termination, this Agreement shall forthwith become
void and of no further force or effect.
<PAGE> 8
- 8 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 3rd day of September, 1997.
PIONEER NATURAL
RESOURCES COMPANY
Per: /s/ Scott D. Sheffield
----------------------------------
Per: /s/ Mark L. Withrow
----------------------------------
CHAUVCO RESOURCES, LTD.
Per: /s/ Guy J. Turcotte
----------------------------------
Per: /s/ W.G. Russell
----------------------------------
DNR-MESA HOLDINGS L.P. BY ITS
SOLE GENERAL PARTNER RAINWATER INC.
Per: /s/ Ken Hersh
----------------------------------
Ken Hersh, Vice-President
/s/ Mark L. Withrow /s/ Scott D. Sheffield
- -------------------------------- --------------------------------------
WITNESS SCOTT D. SHEFFIELD
/s/ Garrett Smith /s/ I. Jon Brumley
- -------------------------------- --------------------------------------
WITNESS I. JON BRUMLEY
<PAGE> 9
SCHEDULE A TO SHAREHOLDERS AGREEMENT
<PAGE> 10
OWNERSHIP SUMMARY REPORT
Pioneer Natural Resources Company - (As of 9/2/1997)
Brumley, I. Jon
5205 N. O'Connor Blvd., Suite 1400
Irving, TX 75039
Relationship: Director, Officer
Title: Chairman
<TABLE>
<CAPTION>
NON-DERIVATIVE NATURE OF OWNERSHIP AMOUNT
- -------------- ------------------- -----------
<S> <C> <C>
Common Direct 59,000.0000
</TABLE>
<TABLE>
<CAPTION>
CONVERSION/ NUMBER OF
DERIVATIVE NATURE OF OWNERSHIP EXERCISE EXPIRATION UNDERLYING
- ---------- ------------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Employee Stock Direct 22.75 228,571.0000
Option
</TABLE>
<PAGE> 11
OWNERSHIP SUMMARY REPORT
Pioneer Natural Resources Company - (As of 9/2/1997)
Sheffield, Scott D.
5205 N. O'Connor Blvd., Suite 1400
Irving, TX 75039
Relationship: Director, Officer
Title: President & Chief Executive Officer
<TABLE>
<CAPTION>
NON-DERIVATIVE NATURE OF OWNERSHIP AMOUNT
- -------------- ------------------- ------------
<S> <C> <C>
Common Direct 371,465.0000
Common 401(k) 755.7980
Common By daughter (CJB) 100.0000
</TABLE>
<TABLE>
<CAPTION>
CONVERSION/ NUMBER OF
DERIVATIVE NATURE OF OWNERSHIP EXERCISE EXPIRATION UNDERLYING
- ---------- ------------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Employee Stock Direct 19.125 11/16/2000 50,000.0000
Option (right to buy)
Employee Stock Direct 29.75 11/19/2001 70,000.0000
Option (right to buy)
Employee Stock Direct 13.125 12/31/2000 50,000.0000
Option (right to buy)
</TABLE>
<PAGE> 12
OWNERSHIP SUMMARY REPORT
Pioneer Natural Resources Company - (As of 9/2/1997)
DNR-MESA Holdings, L.P.
777 Main Street, Suite 2700
Fort Worth, TX 76102
Relationship: 10% Owner
<TABLE>
<CAPTION>
NON-DERIVATIVE NATURE OF OWNERSHIP AMOUNT
- -------------- ------------------- ---------------
<S> <C> <C>
Common Direct 11,370,165.0000
</TABLE>
No Derivative Transactions found for this Reporting Person
<PAGE> 1
EXHIBIT 2.4
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT, dated as of September 3, 1997 (this
"Agreement"), is made and entered into by and among PIONEER NATURAL RESOURCES
COMPANY, a Delaware corporation ("US Co"), and TRIMAC CORPORATION, an Alberta
Corporation, and GENDIS INC., a Canadian federal corporation (collectively, the
"Shareholders").
W I T N E S S E T H
WHEREAS, concurrently herewith, US Co and Chauvco Resources Ltd.
("Chauvco) are entering into a Combination Agreement dated September 3, 1997
(the "Combination Agreement"), providing for the arrangement (the
"Arrangement") as contemplated by the Combination Agreement; capitalized terms
used and not defined herein have the respective meanings ascribed to them in
the Combination Agreement; and
WHEREAS, as an inducement and a condition to entering into the
Combination Agreement, US Co has required that each Shareholder agrees, and
each Shareholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Combination
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter of
intent, proposal or offer (other than the transactions
contemplated in the Combination Agreement) involving Chauvco
or any of the Chauvco Subsidiaries for, or an inquiry or
indication of interest that reasonably could be expected to
lead to: (i) any arrangement, merger, consolidation, share
exchange, recapitalization, reorganization, dissolution,
liquidation, business combination, or other similar
transaction with Chauvco or any of the Chauvco Subsidiaries,
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of a material portion of the assets of
Chauvco and the Chauvco Subsidiaries, taken as a whole, in a
single transaction or series of transactions, or (iii) any
tender offer or exchange offer for all or any portion of the
outstanding shares of capital stock of Chauvco or any of the
Chauvco Subsidiaries or the filing of documentation under
applicable Canadian securities legislation in connection
therewith, but shall not include the transactions
contemplated in the Combination Agreement.
(b) "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, is
controlled by, or is under common control with, such first
Person.
<PAGE> 2
- 2 -
(c) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association,
trust or unincorporated organization.
(d) "Shares" shall mean Chauvco Common Shares.
(e) "Shareholders' Shares" shall mean:
(i) in respect of Trimac Corporation, the 6,873,392
Shares beneficially owned by and registered in the
name of Trimac Corporation;
(ii) in respect of Gendis Inc., the 14,688,610 Shares
indirectly held through its indirectly wholly-owned
subsidiary, 3106829 Canada Inc. ("3106829");
(iii) any Shares acquired by Trimac Corporation or its
Affiliates or Gendis Corporation or its Affiliates
after the date of this Agreement; and
(iv) any Shares transferred to Affiliates as contemplated
by 3(iv) hereof.
(f) "Termination Date" shall mean the date that the Combination
Agreement has been terminated.
2. PROVISIONS CONCERNING COMMON STOCK
From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the Termination Date, at any meeting of the
holders of Shares, however called, or in any other circumstance upon which the
vote, consent or other approval of holders of Shares is sought, each
Shareholder shall vote (or cause to be voted) such Shareholder's issued and
outstanding Shareholders' Shares, (i) in favour of the Arrangement and the
other transactions contemplated thereby, the execution and delivery by Chauvco
of the Combination Agreement and the approval of the terms thereof and each of
the other actions contemplated by the Combination Agreement and this Agreement
and any actions required in furtherance thereof and hereof; (ii) against any
action or agreement that would result in a breach in any material respect of
any covenant, representation or warranty or any other material obligation or
agreement of Chauvco under the Combination Agreement; and (iii) against the
following actions (other than the Arrangement and the transactions contemplated
by the Combination Agreement): (A) any Acquisition Proposal other than an
Acquisition Proposal with US Co or any Affiliate thereof and (B) to the extent
that such (1) are intended to, or could reasonably be expected to, impede,
interfere with, delay, postpone, or materially adversely affect the Arrangement
or the transactions contemplated by the Combination Agreement or this Agreement
or (2) are intended to, or could reasonably be expected to, implement or lead
to any Acquisition Proposal (other than an Acquisition Proposal with US Co or
any Affiliate thereof): (x) any change in a majority of the persons who
constitute the board of directors of Chauvco; (y) any change in the present
capitalization of Chauvco or any amendment of Chauvco's Articles or Bylaws; or
(z) any other a material change in Chauvco's corporate structure or business.
In addition to the other covenants and agreements of the Shareholders provided
for elsewhere in this Agreement, during the above-described period no
Shareholder shall enter into any agreement or understanding with any Person the
effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit any director
<PAGE> 3
- 3 -
or officer of the Shareholders from taking any action in his capacity as a
director or officer of Chauvco to fulfill his duties and fiduciary obligations
as a director or officer of Chauvco.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby severally represents, warrants and covenants
to US Co as follows:
(i) Ownership. Such Shareholder (and in the case of
3106829, 3106829) is either (A) the record holder
and beneficial owner of, or (B) the beneficial owner
but not the record holder of, the number of issued
and outstanding Shares attributed thereto herein. As
of the date of this Agreement, the Shares attributed
to each Shareholder pursuant to the definition of
Shareholders' Shares in 1(e) herein constitute all
of the issued and outstanding Shares owned of record
or beneficially owned by such Persons. Except as
otherwise attributed to each Shareholder pursuant to
the definition of Shareholders' Shares in 1(e)
herein, each such Person has sole power of
disposition, sole power of conversion, sole power to
demand appraisal rights and, in the case of the
Shareholders, the sole power to agree to all of the
matters set forth in this Agreement, in each case
with respect to all of the Shares attributed to each
Shareholder pursuant to the definition of
Shareholder Shares in 1(e) herein, with no material
limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and
the terms of this Agreement.
(ii) Power; Binding Agreement. Such Shareholder has the
legal capacity, power and authority to enter into
and perform all of such Shareholder's obligations
under this Agreement. This Agreement has been duly
and validly executed and delivered by such
Shareholder and constitutes a valid and binding
agreement of such Shareholder, enforceable against
such Shareholder in accordance with its terms. There
are no beneficiaries or holders of a voting trust
certificate or other interest of any trust of which
such Shareholder is a trustee whose consent is
required for the execution and delivery of this
Agreement or the consummation by such Shareholder of
the transactions contemplated hereby.
(iii) No Conflicts. Other than filings that may be
required under the Exchange Act and such other
consents as are described in the Combinatin
Agreement, no filing with, and no permit,
authorization, consent or approval of, any state or
federal public body or authority is necessary for
the execution of this Agreement by such Shareholder
and the consummation by such Shareholder of the
transactions contemplated hereby, except where the
failure to obtain such consent, permit,
authorization, approval or filing would not
interfere with such Shareholder's ability to perform
its obligations hereunder, and none of the execution
and delivery of this Agreement by such Shareholder,
the consummation by such Shareholder of the
transactions contemplated hereby or compliance by
such Shareholder with any of the provisions hereof
shall (A) conflict with or result in any breach of
any applicable organizational documents applicable
to such Shareholder, (B) result in a violation or
breach
<PAGE> 4
- 4 -
of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any
third party right of termination, cancellation,
material modification or acceleration) under any of
the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which
such Shareholder is a party or by which such
Shareholder or any of its properties or assets may
be bound, or (C) violate any order, writ,
injunction, decree, judgment, order, statute, rule
or regulation applicable to such Shareholder or any
of its properties or assets, in each such case
except to the extent that any conflict, breach,
default or violation would not interfere with the
ability of such Shareholder to perform its
obligations hereunder.
(iv) No Encumbrances. Except as required by Section 2, at
all times during the term hereof, all of such
Shareholder's Shares will be held by such
Shareholder, Affiliates of such Shareholder (to
whom, not withstanding anything else herein
contained, transfers shall be permitted as long as
such Shareholder remains bound by this Agreement
with respect to its portion of the Shareholders'
Shares), or by nominees or custodians for the
benefit of such Shareholder, free and clear of all
liens, claims, security interests, proxies, voting
trusts or agreement, understandings or arrangements
or any other liens, claims, understanding or
arrangements that would limit or impair such
Shareholder's ability to perform its obligations
under this Agreement. For greater certainty, it is
acknowledged that the Shares of 3106829 are pledged
to Bank of Montreal, as security agent. Gendis
confirms that such pledge is pursuant to terms that
would not provide such limitation or impairment. It
is acknowledged that the Shares of Trimac
Corporation are or will be pledged to Royal Bank of
Canada. Trimac confirms that any such pledge is or
will be pursuant to terms that would not provide
such limitation or impairment.
(v) No Solicitation. Each Shareholder shall comply with
the terms of Section 4.2(n) of the Combination
Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. Except as contemplated in Section
3(iv), from and after the date of this Agreement and
ending as of the first to occur of the Effective
Time or the Termination Date, no Shareholders shall,
and each Shareholder shall cause each of its
Affiliates who beneficially owns any of the
Shareholder's Shares of such Shareholder not to,
directly or indirectly without the consent of US Co
in respect of any Acquisition Proposal or otherwise:
(A) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or
understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any
or all of the Shareholders' Shares of such
Shareholder, or any interest therein, (B) grant any
proxies or powers of attorney, deposit any
Shareholders' Shares of such Shareholder into a
voting trust or enter into a voting agreement with
respect to any Shareholders' Shares of such
<PAGE> 5
- 5 -
Shareholder, (C) enter into any agreement or
arrangement providing for any of the actions
described in clause (A) or (B) above or (D) take any
action that could reasonably be expected to have the
effect of preventing or disabling any such
Shareholder from performing such Shareholder's
obligations under this Agreement.
(vii) Waiver of Appraisal Rights. Each Shareholder hereby
waives and agrees not to assert, and shall cause any
of its Affiliates who hold of record any of such
Shareholder's Shares to waive and agree not to
assert, any rights of appraisal or rights to dissent
in respect of the Arrangement that such Shareholder
or such Affiliate may have.
(viii) Further Assurances. From time to time, at US Co's
reasonable request and without further
consideration, each Shareholder shall execute and
deliver such additional documents as may be
necessary or desirable to consummate and make
effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
4. STOP TRANSFER
Subject to Section 3(iv) or (vi) or except as otherwise contemplated
hereby, from and after the date of this Agreement and ending as of the first to
occur of the Effective Time or the Termination Date, no Shareholder will
request that Chauvco register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Shareholders'
Shares of such Shareholder.
5. RECAPITALIZATION
In the event of a stock dividend or distribution, or any change in the
Shares (or any class thereof) by reason of any split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall include,
without limitation, all such stock dividends and distributions and any shares
or other securities into which or for which any or all of the Shares (or any
class thereof) may be changed or exchanged as may be appropriate to reflect
such event.
6. MISCELLANEOUS
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties
with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly
<PAGE> 6
- 6 -
received if so given) by hand delivery or telecopy, or by
mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal
Express, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the
following addresses or the addresses set forth on the
signature pages hereto:
If to
Trimac Corporation: Trimac Corporation
2100, 800 - 5th Avenue S.W.
Calgary, Alberta
T2P 5A3
Attn: Mr. Terry Owen
Telecopy: (403) 298-5258
If to Gendis: Gendis Inc.
1370 Sony Place
Winnipeg, Manitoba
R3C 3C3
Attn: Mr. N. Paul Cloutier
Telecopy: (204) 474-5469
and
copy to: Burnet, Duckworth & Palmer
1400, 350 - 7th Avenue S.W.
Calgary, Alberta
T2P 3N9
Attn: Mr. Allan R. Twa
Telecopy: (403) 260-0332
If to US Co: Pioneer Natural Resources Company
1400 Williams Square
5205 N. O'Connor Blvd.
Irving, Texas 75039
Attn: General Counsel
Telecopy: (927) 402-7028
and
copy to: Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attn: Michael D. Wortley
Telecopy: (214) 220-7716
<PAGE> 7
- 7 -
or to such other address as the person to whom notice is
given may have previously furnished to the others in writing
in the manner set forth above.
(d) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein
(e) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by any Shareholder of any
covenants or agreements contained in this Agreement will
cause US Co to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such
breach US Co shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative,
and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise
any such or other right, power or remedy or to demand such
compliance.
(h) No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by,
any person or entity who or which is not a party hereto.
(i) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of Alberta.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of Alberta in any action, suit or
proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on
forum non conveniens or any other objection to
<PAGE> 8
- 8 -
venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this
paragraph and shall not be deemed to be a general submission
to the jurisdiction of Alberta other than for such purposes.
(k) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or
interpretation of this Agreement.
(l) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same
Agreement. This Agreement shall not be effective as to any
party hereto until such time as this Agreement or a
counterpart thereof has been executed and delivered by each
party hereto.
7. TERMINATION
This Agreement shall terminate without any further action on the part
of any party hereto upon the earlier of the Termination Date and the Effective
Time except for Section 8 which will continue in full force and effect for each
Shareholder as long as such Shareholder or any Affiliate is the beneficial
owner of any Exchangeable Shares and except for Section 9 which will remain in
full force and effect for each Shareholder for a period of 6 months after the
Effective Date. Upon such termination, this Agreement shall forthwith become
void and of no further force or effect; provided that a party shall be liable
for any breaches of the Agreement that occurred prior to such termination.
8. EXCHANGEABLE SHARES
(a) Each Shareholder agrees that such Shareholder will not
exchange or permit the exchange of any Exchangeable Shares
(as defined in the Combination Agreement) beneficially owned
by such Shareholder unless either (i) such Shareholder has
obtained the prior consent of US Co, which consent will be
given if no Blackout Period (hereafter defined) is in effect
as of the date the consent is requested, or (ii) pursuant to
the following procedure:
(A) such Shareholder will tender the Exchangeable Shares
for exchange and notify US Co that it has completed
an order for the sale of the underlying shares of US
Co Common Stock (as defined in the Combination
Agreement) or that it will complete such order for
the sale of such underlying shares of US Co Common
Stock on the same business day as the tender of the
Exchangeable Shares for exchange; and
(B) such Shareholder will notify US Co on the same
business day when it has completed an order for the
sale of a number of underlying shares of US Co
Common Stock that is equal to or greater than the
number of Exchangeable Shares to be exchanged.
<PAGE> 9
- 9 -
US Co agrees to have any exchange consented to by US Co under
subparagraph (i) or the subject of a notice from a Shareholder under
subparagraph (ii)(B) effected within two business days after the
request for exchange has been received. For purposes hereof, "Blackout
Period" shall mean any period during which US Co has not disclosed
information about the business and affairs of US Co, which information
would otherwise be required to be disclosed in the Form S-3 (as
defined in the Combination Agreement).
(b) US Co covenants and agrees to minimize the length of any
Blackout Periods to the extent reasonably practicable and
disclose the information contemplated in Section 8(a) as soon
as reasonably practicable and in any event within the time
limits prescribed by applicable law and that during any
period when US Co is in breach of this Section 8(b), Section
8(a) will not apply.
(c) US Co covenants and agrees that in the event US Co refuses to
consent to any exchange of any Exchangeable Shares as
requested by any Shareholder because a Blackout Period is in
effect, US Co will forthwith notify such Shareholder on the
termination of such Blackout Period.
(d) This Section 8 shall not apply to any Shares which have been,
or are in the future, pledged or encumbered to an
arm's-length party in accordance with this Agreement.
<PAGE> 10
9. RULE 144
If the Shareholder is not subject to the volume limitations set forth
in paragraph (e)(i) in rule 144 under the Exchange Act during the first 6
months after the Effective Time (whether by application of rule 145 under the
Exchange Act, or otherwise), Shareholder will nevertheless comply with such
volume limitations during the first 6 months after the Effective Time as if
such Shareholder were subject to paragraph (e)(i) of rule 144 unless it obtains
the consent of Pioneer.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 3rd day of September, 1997.
PIONEER NATURAL RESOURCES COMPANY
Per: /s/ Scott D. Sheffield
------------------------------
Per: /s/ Mark L. Withrow
------------------------------
TRIMAC CORPORATION
Per: /s/ Jeff McCaig
------------------------------
Per: /s/ Terry Owen
------------------------------
GENDIS INC.
Per: /s/ G. Allan McKenzie
------------------------------
Per: /s/ N. Paul Cloutier
------------------------------
<PAGE> 1
Exhibit 99
FOR IMMEDIATE RELEASE
Contact: Garrett Smith, Sr. Vice President (972) 402-7013
PIONEER NATURAL RESOURCES COMPANY
TO ACQUIRE CHAUVCO RESOURCES LTD.
ACQUISITION TO ADD SUBSTANTIAL GROWTH
DALLAS, TEXAS, September 3, 1997 -- Pioneer Natural Resources Company [NYSE:
PXC] announced today the signing of an agreement to acquire Chauvco Resources
Limited ("Chauvco"), one of the premier Canadian oil and gas companies, with
high quality reserves, significant growth potential and low debt, in a stock
acquisition with an enterprise value of approximately $1.2 billion. The
transaction represents one of the largest cross border stock acquisitions in
the history of the exploration and production industry.
The acquisition will be a accretive to cash flow per share, add production and
reserve growth potential and result in a significant improvement in Pioneer's
balance sheet. Pioneer estimates, based on data provided by Chauvco, that total
proved reserves from the acquisition will equal approximately 153 million BOE
at year-end 1997. Of the purchase price, Pioneer has allocated approximately
$700 million to proved reserves and the balance to probable and possible
reserves, exploration potential, proprietary seismic data and the net assets
and working capital of Chauvco.
The acquisition complements Pioneer's premier long life, balanced oil and gas
reserves. The assets are concentrated in Canada and Argentina and include 1,740
gross producing wells and significant development and exploration potential on
approximately 1.5 million net acres. Following the closing, Pioneer will have
nine percent of its proved reserves outside of North America.
Pioneer Chairman Jon Brumley stated "This acquisition is an indication that
Pioneer's employees, management team and Board of Directors have reached full
stride in a remarkably short period of time. We are establishing a new core
area in Canada and expanding our existing core area in Argentina, combined are
expected to increase production in excess of 25 percent per year over the next
few years. When we created Pioneer, we wanted it to be opportunity driven;
opportunity is looking us in the eye!"
Pioneer CEO Scott Sheffield added, "This acquisition will have a terrific
positive effect on the future of Pioneer. Based on our current prices, it will
provide projected incremental discretionary cash flow of more than $185 million
in 1998 and will give us additional high-impact growth, featuring a balance of
exploration and exploitation that perfectly matches Pioneer's strategy."
Commenting further, Mr. Sheffield said "Guy Turcotte, Chauvco's CEO, has
created a leading Canadian growth company and our goal is to build on his
accomplishments. We are proud to welcome the Chauvco employees to the Pioneer
team." Mr. Turcotte and Mr. James R. Baroffio, both of whom are directors of
Chauvco, will join the Pioneer Board.
Pioneer has identified over 1,700 potential drilling locations. It is intended
that up to 500 of these wells will be drilled during 1998 and 1999, with a
capital requirement of approximately $270 million during that period.
<PAGE> 2
DESCRIPTION OF NEW CORE AREAS
The properties being acquired are located in Canada and Argentina with
approximately 40 percent of the proved reserves in Canada and 60 percent in
Argentina. Pioneer will operate properties representing approximately 63
percent of the production in these countries and expects to initiate
exploitation and exploration activities immediately upon closing.
Canada
The Canadian assets are located in the provinces of Alberta and British
Columbia. Fields in northern areas include Chinchaga, Martin Creek, and
Rycoft/Spirit River while southern regions include Swalwell/Nevis and Provost.
Twenty properties will account for 80% of production providing an excellent
platform to enhance efficiencies and economies of scale.
Argentina
The Argentine assets are concentrated in Tierra del Fuego and the Neuquen
Basin. In the Neuquen Basin, Pioneer will operate three contiguous concessions
consisting of Loma Negra/NI, Dadin, and Al Norte de la Dorsal. Pioneer's
interests in Tierra del Fuego are both operated properties and production
operated by an Argentine oil and gas joint venture.
EFFECTS OF THE ACQUISITION ON PIONEER
Commenting on the financial effects of the transaction, Garrett Smith, Senior
Vice President - Finance, said, "One of the most appealing aspects of this
acquisition is the beneficial effect of reduced leverage and improved credit
ratios. We had been considering a number of ways to accomplish this including
property sales, an equity offering in conjunction with a debt refinancing and
acquisitions using our stock. We are certainly pleased to have improved our
financial position by making an acquisition that is accretive to cash flow per
share."
Pioneer expects the acquisition to improve the company in a number of ways:
o The expansion of Pioneer's reserve base will make it the second
largest publicly traded, U.S. independent oil and gas company. At year
end 1996, pro forma for the acquisition, Pioneer had over 740 MMBbls
of equivalent oil reserves, comprised of 2.4 trillion cubic feet of
natural gas and 342 million barrels of crude oil and liquids.
o Pioneer's reserve base will continue to be well-balanced, with 54%
natural gas and 46% crude oil and liquids, and long-lived, with an
aggregate reserve life index of approximately 12 years.
o On a pro forma basis, as of June 30, 1997, Pioneer's debt to book
ratio will decrease from 45 percent to 39 percent.
TERMS OF AGREEMENT
Under the agreement, Pioneer will effectively acquire the capital stock of
Chauvco, consisting of approximately 50 million common shares, by issuing a
number of shares of Pioneer common stock based on the average closing price of
Pioneer Natural Resources during a period of 10 days ending 3 days prior to the
Chauvco shareholder vote. Based on today's closing prices, Pioneer would issue
approximately 23 million shares of common stock, with each share of Chauvco
receiving approximately .4515 Pioneer
<PAGE> 3
shares valued at $19.22 or C$26.69. Pioneer will also assume approximately
$220 million in liabilities. Pioneer currently has approximately 74 million
outstanding shares.
Specifically, the acquisition by Pioneer of Chauvco will proceed by way of a
Plan of Arrangement utilizing shares of Pioneer common stock or exchangeable
shares whereby holders of Chauvco will receive:
o A number of common shares or exchangeable shares of a newly created
Canadian subsidiary of Pioneer based on the average trading price of
Pioneer during the period described above, ranging from a maximum of
.4938 shares if Pioneer's stock price averages below $33.50, to a
minimum of .4515 if Pioneer's stock averages at $39 or above, and
o Shares in two new entities, one of which will own Chauvco's assets in
West Africa and the Middle East, and the other which will own
Chauvco's former assets in the Alliance pipeline project, each of
which will be spun off to Chauvco's shareholders prior to or
simultaneously with the acquisition by Pioneer.
Chauvco's largest shareholders, Gendis Inc. and Trimac Corporation, and Mr.
Turcotte, who together own approximately 48% of the outstanding common stock of
Chauvco, have entered into agreements to vote for the transaction at a special
stockholders meeting to be held later this year. Richard E. Rainwater,
Pioneer's largest shareholder, Mr. Brumley and Mr. Sheffield, who own or
control 16% of the outstanding Pioneer common stock, also have entered into
agreements to vote for the acquisition.
The acquisition is subject to approval by both Pioneer's and Chauvco's
stockholders and the necessary regulatory bodies. The acquisition has been
unanimously approved by Chauvco's and Pioneer's Boards of Directors and is
expected to be completed in December.
Goldman Sachs has rendered its opinion to Pioneer's Board of Directors
with respect to the fairness of the consideration to be paid by Pioneer in the
transaction. Salomon Brothers Inc. and RBC Dominion Securities Inc. are serving
as financial advisors to Chauvco.
This announcement includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
include without limitation, estimates with respect to reserves, production
levels, cash flows, and capital expenditures. Although Pioneer believes that
the expectations reflected in such forward-looking statements are reasonable,
they can give no assurance that such expectations will prove to have been
correct. Forward-looking statements are qualified as may be provided in
Pioneer's annual, quarterly, and current reports and registration statements
filed with the Securities and Exchange Commission.
