<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CANADIAN 88 ENERGY CORP.
(Name of Issuer)
COMMON STOCK CLASS A - EQUITY
(Title of Class of Securities)
13566G509
(CUSIP Number)
WADE A. HOEFLING
C/O DUKE ENERGY HYDROCARBONS, L.L.C.
10777 WESTHEIMER, SUITE 650
HOUSTON, TEXAS 77042
(713) 260-1800
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Copy to:
T. MARK KELLY
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
1001 FANNIN
HOUSTON, TEXAS 77002-6760
(713) 758-2222
March 24, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. [ ]
(Continued on following pages)
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CUSIP NO. 13566G509
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
DUKE ENERGY CORPORATION; 560205520
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC use only
- -------------------------------------------------------------------------------
4 Source of Funds N/A
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization NORTH CAROLINA,
UNITED STATES
- -------------------------------------------------------------------------------
Number of Shares Beneficially
Owned by Each Reporting 7 Sole Voting Power 0
----------------------------------------------
Person With 8 Shared Voting Power* 25,792,700
----------------------------------------------
9 Sole Dispositive Power 0
----------------------------------------------
10 Shared Dispositive Power* 25,792,700
----------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
25,792,700
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 19.6%
- -------------------------------------------------------------------------------
14 Type of Reporting Person CO
- -------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group and
(b) beneficial ownership with respect to any shares other than the shares
owned of record by such reporting person.
** Includes (1) 24,412,500 shares purchased pursuant to the Subscription
Agreement between the Issuer and Duke Energy Hydrocarbons, L.L.C., and (2)
1,380,200 shares purchased in the open market by DTMSI Management Ltd., an
affiliate of Duke Energy Hydrocarbons, L.L.C., as agent for Duke Energy
Hydrocarbons, L.L.C.
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CUSIP NO. 13566G509
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1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
DUKE ENERGY MERCHANTS HOLDINGS, L.L.C.; 760612548
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC use only
- -------------------------------------------------------------------------------
4 Source of Funds N/A
- ------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization DELAWARE, UNITED STATES
- -------------------------------------------------------------------------------
Number of Shares Beneficially
Owned by Each Reporting 7 Sole Voting Power 0
----------------------------------------------
Person With 8 Shared Voting Power* 25,792,700
----------------------------------------------
9 Sole Dispositive Power 0
----------------------------------------------
10 Shared Dispositive Power* 25,792,700
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
25,792,700
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 19.6%
- -------------------------------------------------------------------------------
14 Type of Reporting Person OO
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* The Reporting Person expressly disclaims (a) the existence of any group and
(b) beneficial ownership with respect to any shares other than the shares
owned of record by such reporting person.
** Includes (1) 24,412,500 shares purchased pursuant to the Subscription
Agreement between the Issuer and Duke Energy Hydrocarbons, L.L.C., and (2)
1,380,200 shares purchased in the open market by DTMSI Management Ltd., an
affiliate of Duke Energy Hydrocarbons, L.L.C., as agent for Duke Energy
Hydrocarbons, L.L.C.
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CUSIP NO. 13566G509
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
DUKE ENERGY HYDROCARBONS, L.L.C.; 562140027
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC use only
- -------------------------------------------------------------------------------
4 Source of Funds WC
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization DELAWARE, UNITED STATES
- -------------------------------------------------------------------------------
Number of Shares Beneficially
Owned by Each Reporting 7 Sole Voting Power 0
----------------------------------------------
Person With 8 Shared Voting Power* 25,792,700
----------------------------------------------
9 Sole Dispositive Power 0
----------------------------------------------
10 Shared Dispositive Power* 25,792,700
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
25,792,700
- -------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 19.6%
- -------------------------------------------------------------------------------
14 Type of Reporting Person OO
- -------------------------------------------------------------------------------
* The Reporting Person expressly disclaims the existence of any group.
** Includes (1) 24,412,500 shares purchased pursuant to the Subscription
Agreement between the Issuer and Duke Energy Hydrocarbons, L.L.C., and (2)
1,380,200 shares purchased in the open market by DTMSI Management Ltd., an
affiliate of Duke Energy Hydrocarbons, L.L.C., as agent for Duke Energy
Hydrocarbons, L.L.C.
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CUSIP NO. 13566G509
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this Schedule 13D (this
"Statement") relates is the Common Stock Class A - Equity (the "Common Shares"),
of Canadian 88 Energy Corp., a corporation incorporated under the laws of Canada
(the "Issuer"). The address of the Issuer's principal executive offices is 400
Third Avenue S.W., Suite 700, Calgary, Alberta, Canada T2P 4H2.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Name of Persons Filing this Statement (the "Reporting Persons"):
(1) Duke Energy Corporation, a North Carolina corporation ("Duke");
(2) Duke Energy Merchants Holdings, L.L.C., a Delaware limited
liability company ("Merchants"); and
(3) Duke Energy Hydrocarbons, L.L.C., a Delaware limited liability
company ("DEH").
(b) The business addresses of the Reporting Persons:
(1) Duke Energy Corporation 526
South Church Street Charlotte,
North Carolina 28201-1006
(2) Duke Energy Merchants Holdings, L.L.C.
10777 Westheimer, Suite
650 Houston, Texas 77042
(3) Duke Energy Hydrocarbons, L.L.C.
10777 Westheimer, Suite 650
Houston, Texas 77042
(c) Present Principal Occupation or Employment of the Reporting Persons:
(1) Duke Energy Corporation is an integrated energy and energy
services provider with the ability to offer physical delivery and
management of both electricity and natural gas throughout the
U.S. and abroad.
(2) Duke Energy Merchants Holdings, L.L.C. is an intermediate level
holding company that invests directly and indirectly in other
companies.
(3) Duke Energy Hydrocarbons, L.L.C. invests in companies involved in
oil and gas exploration and production companies.
(d) The Reporting Persons identified in this Item 2 have not, during
the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) The Reporting Persons identified in this Item 2 have not, during
the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violations with respect to such laws.
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CUSIP NO. 13566G509
(f) Each of the Reporting Persons identified in this Item 2 is a United
States citizen.
3. ITEM SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
DEH obtained funds to purchase the Common Shares out of working
capital.
4. ITEM PURPOSE OF THE TRANSACTION.
DEH purchased the Common Shares described herein as a strategic
investor and to form an ongoing alliance with the Issuer. As a result of the
transactions described herein, Duke Energy Marketing Limited Partnership, an
affiliate of DEH, will market the Issuer's natural gas production and seek to
optimize the value of the Issuer's natural gas gathering and processing assets.
Although DEH has no current intention of acquiring additional Common
Shares or other securities of the Issuer, DEH intends to review continuously its
position in the Issuer. Depending upon future evaluations of the business
prospects of the Issuer and upon other developments, including, but not limited
to, general economic and business conditions and stock market conditions, DEH
may retain or from time to time increase its holdings or dispose of all or a
portion of its holdings, subject to the terms and provisions of the Shareholders
Agreement (as defined below) and any applicable legal restrictions on its
ability to undertake such actions.
Except as set forth in this Item 4 (including the matters described in
Item 6 below which are incorporated in this Item 4 by reference), DEH has no
present plans or proposals that relate to or that would result in any of the
actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the
Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the matters
set forth in Item 6 below are incorporated in this Item 4 by reference as if
fully set forth herein.
5. ITEM INTEREST IN SECURITIES OF THE ISSUER.
(a)
(1) Duke, as the ultimate parent of DEH, may, pursuant to Rule 13d-3
of the Exchange Act, be deemed to be the beneficial owner of
25,792,700 Common Shares, which, based on the calculations made
in accordance with Rule 13d-3 of the Exchange Act, and there
being 131,706,640 Common Shares outstanding, represents 19.6% of
the Common Shares outstanding.
(2) Merchants, as the sole member of DEH, may, pursuant to Rule 13d-3
of the Exchange Act, be deemed to be the beneficial owner of
25,792,700 Common Shares, which, based on the calculations made
in accordance with Rule 13d-3 of the Exchange Act, and there
being 131,706,640 Common Shares outstanding, represents 19.6% of
the Common Shares outstanding.
(3) DEH is the beneficial owner of 25,972,700 Common Shares, which,
based on the calculations made in accordance with Rule 13d-3 of
the Exchange Act and there being 131,706,640 Common Shares
outstanding, represents 19.6% of the Common Shares outstanding.
Of the 25,972,700 Common Shares beneficially owned by DEH,
24,412,500 Common Shares are owned of record. The remaining
1,380,200 Common Shares beneficially owned by DEH are owned of
record by DTMSI Management Ltd., an affiliate of DEH.
Duke and Merchants expressly disclaim (a) the existence of any
group, and (b) beneficial ownership with respect to any Common Shares other than
the Common Shares owned of record by them. DEH expressly disclaims the existence
of any group.
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CUSIP NO. 13566G509
(b) The information set forth in Items 7 through 11 of the cover
pages hereto is incorporated herein by reference.
(c) DTMSI Management Ltd. ("DTMSI"), an affiliate of DEH, acquired,
as agent for DEH, an aggregate of 1,380,200 Common Shares through
open market purchases on January 28, 2000 and January 31, 2000 at
an average price of CDN $1.78 per Common Share. The funds for
these purchases were provided to DTMSI by DEH. Except as set
forth in this Item 5(c), none of the Reporting Persons have
effected any transactions in the Issuer's Common Shares during
the past 60 days.
(d) The right to receive dividends on, and proceeds from the sale
of, the Common Shares owned by DEH is governed by the limited
liability company agreement of DEH, and such dividends or
proceeds may be distributed in accordance therewith.
6. ITEM CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Subscription Agreement
Pursuant to a Subscription Agreement between the Issuer and DEH (the
"Subscription Agreement"), on March 24, 2000, the Issuer sold to DEH 24,412,500
Common Shares at a purchase price of CDN $2.00 per share, or an aggregate
purchase price of CDN $ 48,825,000.00. The Subscription Agreement, a copy of
which is filed herewith as Exhibit 10.1, is incorporated herein by reference.
Shareholders Agreement
On March 24, 2000, the Issuer, DEH and Gregory S. Noval, an individual
resident in Turner Valley, Alberta ("Noval") and former President and Chief
Executive Officer of the Issuer, entered into a Shareholders' Agreement (the
"Shareholders' Agreement"). Pursuant to the Shareholder's Agreement, the parties
agreed to reconstitute the board of directors of the Issuer (the "Board"), and
to restrict, subject to certain conditions, the ability of DEH and Noval to
purchase additional securities of the Issuer or to engage in business
combinations or related party transactions with the Issuer. In addition, the
Shareholders Agreement grants DEH and Noval certain rights with respect to
maintaining their current percentage ownership in the Issuer.
Pursuant to the Shareholders' Agreement, the existing Board was
reconstituted and the number of directors increased from eight to nine. Each of
DEH and Noval have the right to nominate such number of candidates for election
to the Board equal to the greater of (i) two, or (ii) the number (rounded to the
nearest whole number) obtained by multiplying the total number of directors
comprising the entire Board by the percentage of securities held by DEH and
Noval, respectively, having the right to vote for the election of directors. The
members of the Board other than those nominated by DEH and Noval are to be
independent directors. DEH and Noval have agreed not to vote against or abstain
from voting for, the election of the other party's nominees. The executive,
audit and nominating committees will be comprised of three members of the Board,
one of which shall be a nominee of each of DEH and Noval, with the remaining
director being an independent director. The Shareholders' Agreement provides
that the Board will not be further increased without consent of DEH and Noval.
The Board, after giving effect to the provisions of the Shareholders'
Agreement, will be comprised of James D. Raymond (Chairman), Gregory S. Noval,
T.J. (Jake) Harp, John E. Panneton, John S. Burns, Donald R. Gardner, Joseph L.
Pritchett, III, and Alfred R. Mitchell. Mr. Harp will not stand or be nominated
for re-election and his term will expire at the next shareholders meeting. Mr.
Harp's replacement will be agreed upon by DEH and Noval. Mr. Bradley C. Karp
will be nominated at the next shareholders meeting as the ninth director.
Messrs. Panneton, Burns, Gardner, Pritchett and Mr. Harp's replacement will be
considered independent directors. Messrs. Karp and Mitchell will considered DEH
nominees and Messrs. Raymond and Noval will be considered Noval nominees.
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CUSIP NO. 13566G509
Under the terms of the Shareholders' Agreement DEH is generally
prohibited from acquiring ownership or control of more than 25% of the
securities of the Issuer having the right to vote for election of directors,
including Common Shares, without the consent of a majority of independent
directors. Noval also is generally prohibited from increasing his ownership or
control of securities of the Issuer having the right to vote for election of
directors, including Common Shares, to more than 15% without such consent.
Notwithstanding the foregoing, DEH and Noval will each have the right to acquire
additional securities of the Issuer, including Common Shares, in order to
preserve their pro rata percentage ownership position. The Shareholders'
Agreement also provides that each of DEH and Noval have mutual rights of first
refusal, subject to various exceptions, in respect of any sale of their shares
in the Issuer.
The Shareholders' Agreement terminates on March 24, 2003 or by the
mutual written consent of the Issuer, DEH, and Noval. The Shareholders'
Agreement will terminate prior to March 24, 2003 with respect to DEH if DEH's
percentage ownership is less than 5% of the outstanding securities of the
Issuer. The Shareholders' Agreement will terminate prior to March 24, 2003 with
respect to Noval if Noval's percentage ownership is less than 2% of the
outstanding securities of the Issuer. The Shareholders' Agreement will terminate
prior to March 24, 2003 with respect to both of DEH and Noval if the percentage
ownership of DEH and Noval, respectively, is less than 5% and 2%.
The foregoing description of the Shareholders Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Shareholders Agreement, a copy of which is filed herewith as Exhibit 10.2
and is incorporated herein by reference.
Registration Rights Agreement
At Closing, the Issuer and DEH entered into a Registration Rights
Agreement (the "Registration Rights Agreement"), pursuant to which DEH has
"demand" registration rights with respect to public offerings of the securities
of the Issuer held by DEH, including Common Shares. Each such "demand" must be
for a minimum of 2,000,000 shares, and DEH is entitled to no more than two such
"demands" during any 12 month period. In addition, DEH has "piggyback" rights
pursuant to which DEH is entitled to register the Common Shares or other
securities it holds in connection with offerings of securities by the Issuer.
DEH is also entitled to request the Issuer's assistance in the sale of the
Issuer's securities, including Common Shares, held by DEH in private placements.
The Issuer has the right to postpone the filing of such documents for a
period not exceeding 120 days if the Board believes that such offering would
have a material adverse effect on certain transactions of the Issuer, including
material acquisitions or dispositions or any merger, or on any proposed public
offering. Subject to applicable securities law, the expenses of such offering
shall be borne by DEH and the Issuer in proportion to their respective relative
proportion of the proceeds of such offering. The Issuer has also agreed to
indemnify DEH in respect of certain liabilities which may arise in connection
with any such offering.
The foregoing description of the Registration Rights Agreement is not,
and does not purport to be, complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which is filed
herewith as Exhibit 10.3 and is incorporated herein by reference.
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CUSIP NO. 13566G509
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1: Subscription Agreement, dated as of March 14, 2000,
between the Issuer and DEH, relating to the purchase and sale
of Common Shares of Canadian 88 Energy Corp.
Exhibit 10.2: Shareholders' Agreement, dated as of March 24, 2000, between
the Issuer, DEH and Greg S. Noval.
Exhibit 10.3: Registration Rights Agreement, dated as of March 24, 2000,
between the Issuer and DEH.
Exhibit 99.1 Joint Filing Statement.
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CUSIP NO. 13566G509
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
April 3, 2000
DUKE ENERGY CORPORATION
By: /s/ EDWARD MARSH
-------------------------------------
Name: Edward Marsh
Assistant Secretary
DUKE ENERGY MERCHANTS HOLDINGS, L.L.C.
By: /s/ WADE A. HOEFLING
-------------------------------------
Name: Wade A. Hoefling
Senior Vice President
DUKE ENERGY HYDROCARBONS, L.L.C.
By: /s/ WADE A. HOEFLING
-------------------------------------
Name: Wade A. Hoefling
Senior Vice President
S-1
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.1 Subscription Agreement, dated as of March 17, 2000,
between the Issuer and DEH, relating to the purchase and sale
of Common Shares of Canadian 88 Energy Corp.*
10.2 Registration Rights Agreement, dated as of March 24, 2000
between the Issuer and DEH.*
10.3 Shareholder's Agreement, dated as of March 24, 2000, by and
among the Issuer, DEH and Greg S. Noval.*
99.1 Joint Filing Statement.*
</TABLE>
- ------------------
* Filed herewith
<PAGE> 1
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
BETWEEN
DUKE ENERGY HYDROCARBONS, L.L.C.
- AND -
CANADIAN 88 ENERGY CORP.
MARCH 17, 2000
<PAGE> 2
SUBSCRIPTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1 INTERPRETATION
<S> <C>
1.1 DEFINITIONS..........................................................1
1.2 GENDER AND NUMBER....................................................3
1.3 HEADINGS.............................................................4
1.4 CALCULATION OF TIME PERIODS..........................................4
1.5 APPLICABLE LAW.......................................................4
1.6 SEVERABILITY.........................................................4
1.7 ENTIRE AGREEMENT.....................................................4
1.8 AMENDMENTS...........................................................4
1.9 WAIVER...............................................................5
1.10 TIME OF ESSENCE.....................................................5
1.11 SUCCESSORS AND ASSIGNS..............................................5
1.12 COUNTERPARTS........................................................5
1.13 FURTHER ACTS........................................................5
1.14 NO DEALER REPRESENTATIONS...........................................5
ARTICLE 2 SUBSCRIPTION
2.1 SUBSCRIPTION.........................................................5
2.2 U.S. $ SUBSCRIPTION..................................................6
ARTICLE 3 CLOSING
3.1 CLOSING..............................................................6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................6
4.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR..........................15
ARTICLE 5 CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.........................17
5.2 CONDITIONS TO THE OBLIGATIONS OF INVESTOR...........................18
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY........................19
5.4 WAIVER OF CONDITIONS................................................20
ARTICLE 6 COMPANY'S COVENANTS
6.1 CONDUCT OF BUSINESS.................................................20
6.2 COOPERATION.........................................................20
6.3 CERTAIN ACTS........................................................21
6.4 ACCESS AND INFORMATION..............................................21
6.5 NO SHOPPING.........................................................21
ARTICLE 7 INVESTOR'S COVENANTS
7.1 COOPERATION.........................................................22
7.2 CERTAIN ACTS........................................................22
ARTICLE 8 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
8.1 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE........................22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 9 MISCELLANEOUS
9.1 PUBLICITY...........................................................23
9.2 NOTICES.............................................................23
9.3 ASSIGNMENT BY INVESTOR..............................................24
9.4 TERMINATION OF LETTER OF INTENT.....................................24
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................24
9.6 SOLICITATIONS.......................................................24
9.7 EXPENSES............................................................25
9.8 EXHIBITS AND SCHEDULES..............................................25
</TABLE>
Exhibit A - Preferential Rights Agreement
Exhibit B - Registration Rights Agreement
Exhibit C - Shareholder Agreement
Schedule 4.1(o)
Schedule 4.1(r)
Schedule 4.1(jj)
Schedule 4.1(kk)
<PAGE> 4
THIS SUBSCRIPTION AGREEMENT made the 17th day of March, 2000,
BETWEEN:
DUKE ENERGY HYDROCARBONS, L.L.C. a corporation incorporated
pursuant to the laws of Delaware (hereinafter referred to as
"INVESTOR")
OF THE FIRST PART
- and -
CANADIAN 88 ENERGY CORP., a corporation incorporated pursuant to
the laws of Canada (hereinafter referred to as the "COMPANY")
OF THE SECOND PART
WHEREAS the Company believes that it is in the best interests of its
shareholders to enter into an equity transaction with a strategic investor to
provide additional capital for the Company to allow it to continue to actively
develop its inventory of exploration and development prospects in western
Canada;
AND WHEREAS the parties hereto have executed a letter of intent dated
February 7, 2000 (the "LETTER OF INTENT") that contains certain of the terms
upon which Investor is prepared to subscribe for and purchase certain securities
of the Company from the treasury of the Company;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and conditions herein contained, and other good and valuable
consideration (the receipt and sufficiency whereof is hereby acknowledged by
each party hereto), the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
"AFFILIATE" has the meaning set forth in the Securities Act (Alberta).
"AGREEMENT", "THIS AGREEMENT", "HERETO", "HEREIN", "HEREBY",
"HEREUNDER", "HEREOF" and similar expressions refer to this Agreement
in its entirety and not to any particular Article, Section, Subsection,
Clause, Subdivision or other portion hereof and include any and every
amending agreement and agreement supplemental hereto.
"APPLICABLE LAWS" means all applicable securities, corporate,
environmental and other laws, rules, regulations, notices and policies.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day
when banks in the City of Calgary are not generally open for business.
"CDN $" means Canadian Dollars.
"CLOSING" means the completion of the sale and purchase of the
Purchased Securities contemplated by this Agreement.
<PAGE> 5
-2-
"CLOSING DATE" means Friday, March 24, 2000.
"COMMON SHARES" means the shares designated as "common shares" in the
Company's articles.
"CONFIDENTIALITY AGREEMENT" means the confidentiality agreement dated
July 7, 1999 between Investor and the Company.
CORPORATE GOVERNANCE AND TRANSITION ARRANGEMENTS LETTER AGREEMENT"
means the letter agreement of even date herewith between the Company
and Investor, which letter agreement relates to certain corporate
governance and transition arrangements.
"EXCHANGES" means The Toronto Stock Exchange and the American Stock
Exchange.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.1(aa).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.1(s).
"GAAP" means generally accepted accounting principles as recognized
from time to time by the Canadian Institute of Chartered Accountants or
any applicable successor institute.
"GOVERNMENTAL AUTHORITY" means any government, any political
subdivision, any agency and any entity or person exercising executive,
legislative, judicial, regulatory or administrative functions of
government.
"INDEBTEDNESS" means: (a) obligations for borrowed money or
representing reimbursement obligations in respect of any letter of
credit (whether secured or unsecured); (b) the principal amount of
obligations representing the deferred purchase price of property other
than accounts payable arising in connection with purchases in the
ordinary course of business; (c) the present value of obligations in
respect of operating or capital leases, whether or not such obligations
would be required to be shown as a liability on a balance sheet under
GAAP; and (d) any guarantee, grant of security or contingent liability
in respect of any obligations of the type referred to in items (a), (b)
or (c) above or any agreement to purchase or repurchase any
indebtedness of another Person or any agreement contingently to supply
or advance funds.
"LIEN" means any mortgage, lien, security interest, lease or other
claim, charge or encumbrance.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
(or any condition, event or development involving a prospective change)
in, or effect on, the business, operations, results of operations,
assets, capitalization, financial condition, licences, permits,
concessions, rights, liabilities, prospects or privileges, whether
contractual or otherwise, of the Company or its Subsidiaries which is
materially adverse to the business of the Company and its Subsidiaries,
taken as a whole, or which would have a material adverse effect on the
ability of the Company to consummate the transactions contemplated
hereby.
"NOVAL" means Gregory S. Noval, an individual residing in Turner
Valley, Alberta.
"NOVAL REPRESENTATION AGREEMENT" means the agreement dated of even date
herewith among the Company, Investor and Noval relating to certain
representations of Noval being provided in connection with the
transactions contemplated hereby.
"PERSON" includes an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a stock exchange,
trustee in bankruptcy, receiver or any Governmental Authority.
<PAGE> 6
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"PREFERENTIAL RIGHTS AGREEMENT" means the preferential rights agreement
among the Company, Canadian 88 Resources Corp. and Canadian 88 Energy
(U.S.A.) Inc. and Investor, in the form of Exhibit A hereto.
"PUBLIC RECORD" means all information filed with the securities
commissions, or similar regulatory authorities in Canada and the United
States, including without limitation, annual information forms,
information circulars, proxy statements, financial statements,
management's discussion and analysis of results of operations, periodic
reports, current and other reports, prospectuses, offering memoranda
and registration statements and any other information filed with any
securities commission or similar regulatory authorities in Canada and
the United States in compliance, or intended compliance, with any
Applicable Laws.
"PURCHASED SECURITIES" has the meaning set forth in Section 2.1 hereof.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement
between the Company and Investor, substantially in the form of Exhibit
B hereto.
"RETURNS" has the meaning set forth in Section 4.1(dd)(i)(B).
"SHAREHOLDER AGREEMENT" means the shareholder agreement among the
Company, Investor and Noval, in the form of Exhibit C hereto.
"SHAREHOLDER RIGHTS PLAN" means the shareholder rights plan of the
Company governed by the Shareholder Rights Plan Agreement dated
December 22, 1994 between the Company and Montreal Trust Company of
Canada.
"STOCK OPTION PLAN" means the stock option plan of the Company which
provides for the grant of options to purchase up to an aggregate of
10,606,611 Common Shares of the Company pursuant to which options to
purchase 8,248,340 Common Shares have been granted and remain
outstanding.
"SUBSIDIARY" has the meaning set forth in the Securities Act (Alberta),
and in the case of the Company, also includes The Canadian 88 1990 Oil
& Gas Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88 Diversified
Energy Fund 1991 Limited Partnership and Longview Resource Management
Corporation.
"TAXES" has the meaning set forth in Section 4.1(dd)(i).
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the
Registration Rights Agreement, the Shareholder Agreement, the
Preferential Rights Agreement, the Noval Representation Agreement and
the Corporate Governance and Transition Arrangements Letter Agreement
and the agreements referred to in the latter agreement.
"YEAR 2000 COMPLIANT" and "YEAR 2000 COMPLIANCE" has the meaning set
forth in Section 4.1(ff).
1.2 GENDER AND NUMBER
Words importing the singular number only shall include the plural, and
vice-versa and words importing the masculine gender shall include the feminine
gender and neuter gender.
<PAGE> 7
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1.3 HEADINGS
The division of this Agreement into Articles and Sections and the
Article and Section headings are for convenience of reference only and shall not
affect the interpretation or construction of this Agreement.
1.4 CALCULATION OF TIME PERIODS
Unless otherwise specified herein, the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement
shall be calculated by excluding the day on which the period commences and
including the day on which the period ends. If the last day of such period is
not a Business Day, the period in question shall end on the next Business Day.
1.5 APPLICABLE LAW
This Agreement shall be interpreted and governed in accordance with the
laws of the Province of Alberta (being the forum conveniens) and the parties
hereby submit to the jurisdiction of the courts of Alberta in connection with
any dispute concerning this Agreement or the subject matter thereof. Service of
any documents on the parties hereto in connection with any legal proceedings
shall be effective if the same are delivered by courier: (i) in the case of
Investor, to Duke Energy Hydrocarbons, L.L.C., Suite 650, 10777 Westheimer,
Houston, Texas, 77042, Attention: President; and (ii) in the case of the
Company, to Canadian 88 Energy Corp., 700, 400 Third Avenue S.W., Calgary,
Alberta, T2P 4H2, Attention: Chief Financial Officer.
1.6 SEVERABILITY
If any provision of this Agreement or any application thereof shall be
declared or held to be invalid, illegal or unenforceable in whole or in part
whether generally or in any particular jurisdiction, such provision shall be
deemed to be amended to the extent necessary to cure such invalidity, illegality
or unenforceability, and the validity, legality or enforceability of the
remaining provisions of this Agreement, both generally and in every other
jurisdiction, shall not in any way be affected or impaired thereby.
1.7 ENTIRE AGREEMENT
(a) This Agreement, the other Transaction Documents and the other
agreements and instruments to be delivered at Closing in
connection with the transactions contemplated hereby and
thereby represent the entire agreement of the Company and
Investor with respect to the subject matter hereof, and there
are no promises, agreements, undertakings, representations or
warranties by the Company or Investor relative to the subject
matter hereof not expressly set forth or referred to herein or
therein.
(b) The Company agrees to waive the standstill provisions of
section C.11 of the Confidentiality Agreement to the extent
necessary in order to permit the consummation of the
transactions contemplated hereby and upon the Closing such
section C.11 shall terminate.
1.8 AMENDMENTS
No amendment or modification of this Agreement shall be binding unless
in writing and signed by all of the parties hereto.
<PAGE> 8
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1.9 WAIVER
No waiver by any party hereto of any breach of any of the provisions of
this Agreement shall take effect or be binding upon the party unless in writing
and signed by such party. Unless otherwise provided therein, such waiver shall
not limit or affect the rights of such party with respect to any other breach.
1.10 TIME OF ESSENCE
Time shall be of the essence of this Agreement.
1.11 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
1.12 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall constitute one and the same agreement.
1.13 FURTHER ACTS
The parties hereto agree to execute and deliver such further and other
documents and perform and cause to be performed such further and other acts and
things as may be reasonably necessary or desirable in order to give full effect
to this Agreement and every part thereof.
1.14 NO DEALER REPRESENTATIONS
No dealer or salesman has been authorized by the Company to give any
information or to make any representations in connection with the issue or sale
of the Purchased Securities and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company.
ARTICLE 2
SUBSCRIPTION
2.1 SUBSCRIPTION
Investor hereby agrees to subscribe for and purchase from the treasury
of the Company such number of Common Shares (the "PURCHASED SECURITIES") not to
exceed the lesser of:
(a) 25,000,000 Common Shares less the number of Common Shares, not
to exceed 2,500,000, which will be purchased, directly or
indirectly, by directors, officers and key employees of the
Company on a flow-through basis from the treasury of the
Company on the Closing Date and in respect of which written
notice has been provided to Investor at least two Business
Days prior to the Closing Date; and
(b) such number of Common Shares which when added to the 1,380,200
Common Shares currently owned by Investor and its Affiliates
would constitute 20% less one Common Share of the issued and
outstanding Common Shares of the Company as of the Closing
Date;
and the Company agrees to sell to Investor the Purchased Securities for a
consideration of CDN $2.00 per share, subject to the terms and conditions set
forth herein. Investor shall pay the purchase price for the Purchased Securities
at the Closing by certified cheque or bank draft or such other means that is
acceptable to
<PAGE> 9
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Investor and the Company in U.S. $ or CDN $. The Company hereby accepts the
subscription by Investor, and agrees to issue to Investor the Purchased
Securities in accordance with the provisions of this Agreement.
2.2 U.S. $ SUBSCRIPTION
For the purposes hereof, the U.S. $ equivalent of the subscription
price in CDN $ shall be determined based upon the spot rate of exchange for such
conversion as quoted by the Bank of Canada at approximately 10:00 a.m. (Calgary
time) one day prior to the Closing Date.
ARTICLE 3
CLOSING
3.1 CLOSING
The Closing shall take place on the Closing Date at 11:00 a.m. at the
offices of McCarthy Tetrault, or at such other place and at such other time
as the Company and Investor shall mutually agree in writing; PROVIDED HOWEVER,
where a condition to Closing cannot be satisfied on or before March 24, 2000,
the Closing Date may be extended, at the option of the party having the
condition in its favour, to a date no later than April 14, 2000 and during such
extension the other party shall be obliged to use all reasonable commercial
efforts to satisfy such condition to the extent the circumstances giving rise to
the unsatisfied condition are capable of being remedied or are within the
control of such party in order to satisfy the condition.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor as follows:
(a) each of the Company and its Subsidiaries:
(i) has been duly incorporated (or formed in the case of
Subsidiaries that are not corporations) and organized
and is validly subsisting under the laws of its
jurisdiction of incorporation;
(ii) is current with all filings required to be made under
the laws of Canada, the provinces of Canada, the
United States and all other jurisdictions in which it
is incorporated or carries on any business, except
where failure to do so would not in the aggregate
have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole;
(iii) has all requisite power and authority, and except
where failure to be so qualified would not in the
aggregate have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, is
duly qualified, to carry on its business as it is now
conducted and as currently proposed to be conducted,
and to own, lease and operate its properties and
assets in each of the jurisdictions in which it
carries on its business or owns, leases or operates
its properties or assets;
(b) each of the Company and its Subsidiaries has conducted and is
conducting its business in compliance in all respects with all
Applicable Laws of each jurisdiction in which its business is
carried on and holds and maintains in good standing all
necessary licences, leases, permits, authorizations and other
approvals necessary to permit it to conduct its respective
business or
<PAGE> 10
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to own, lease or operate its properties and assets (including
without limitation any rights or registrations relating to any
intellectual property rights) except where the failure to
conduct its business or to obtain any license, lease, permit,
authorization or other approval would not have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a
whole, and none of the Company or any of its Subsidiaries has
received any notice of proceedings relating to the revocation
or modification of any such licence, lease, permit,
authorization or other approval which may singly or in the
aggregate have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole;
(c) the Company has authorized the issuance and sale of the
Purchased Securities;
(d) subject to receipt by the Company of the consideration
referred to in Section 2.1, the Purchased Securities will be,
at the time of Closing, duly and validly created and issued
and outstanding as fully paid and non-assessable shares;
(e) all of the Subsidiaries of the Company are wholly owned,
either directly or indirectly, by the Company, except The
Canadian 88 1990 Oil & Gas Exploration and Development
Partnership, The Canadian 88 1990 Hydrocarbon Processing Gas
Plant Joint Venture, Canadian 88 Diversified Energy Fund 1991
Limited Partnership, RMX Exploration Ltd. and Longview
Resource Management Corporation;
(f) each of the Company and its Subsidiaries has the necessary
corporate power and authority to execute and deliver, as
applicable, this Agreement and the other Transaction Documents
to which it is a party, and to perform its obligations
hereunder and thereunder and to carry out the transactions
contemplated hereby and thereby, including the issuance of the
Purchased Securities, and this Agreement has been, and the
other Transaction Documents to which each respectively is a
party will as at the time of Closing be, duly authorized,
executed and delivered by the Company or the relevant
Subsidiary of the Company and constitute legal, valid and
binding obligations of the Company or the relevant Subsidiary
of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization and other laws and
equitable principles affecting creditors' rights generally,
the statutory and equitable powers of the courts to stay
proceedings before them and the execution of judgments and the
fact that specific performance and injunctive relief are
equitable remedies which may be ordered by a court in its
discretion and, accordingly, may not be available as a remedy
in an action to enforce a covenant;
(g) the execution and delivery of this Agreement and the other
Transaction Documents to which the Company or the relevant
Subsidiary of the Company is a party, the performance by the
Company or the relevant Subsidiary of the Company of their
respective obligations hereunder and thereunder, including the
sale and delivery of the Purchased Securities at the time of
Closing:
(i) do not and will not result in a breach of, and do not
and will not create a state of facts which, after
notice or lapse of time or both, will result in a
breach of, and do not and will not create a right of
termination or acceleration under, and do not and
will not conflict with:
(A) any Applicable Laws applicable to the
Company or the relevant Subsidiary;
(B) any terms, conditions or provisions of the
articles, by-laws, or resolutions of the
directors or shareholders, of the Company or
the relevant Subsidiary;
<PAGE> 11
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(C) any terms, conditions or provisions of any
indenture, agreement or instrument to which
the Company or the relevant Subsidiary is a
party or by which it is contractually bound
as at the date hereof or the Closing Date;
or
(D) any judgment, decree or order of any court
or Governmental Authority having
jurisdiction over or binding any of the
Company or its Subsidiaries or their
properties or assets;
except, in the case of Sections 4.1(g)(i)(A), (C) and
(D) above, for such breaches, rights or conflicts
with that, alone or in the aggregate, would not have
a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole; and
(ii) will not result in the creation or imposition of any
Lien upon any properties or assets of the Company or
any of its Subsidiaries pursuant to any mortgage,
note, indenture, contract, agreement, instrument,
lease or other document to which the Company or any
of its Subsidiaries is a party or by which it is
bound or to which any of the property or assets of
the Company or any of its Subsidiaries is subject;
(h) the issued and outstanding Common Shares at the date hereof
are listed and posted for trading on the Exchanges;
(i) the authorized share capital of the Company consists of an
unlimited number of Common Shares, an unlimited number of
Class B non-voting common shares and an unlimited number of
six classes of preferred shares designated First through Sixth
Preferred Shares, issuable in series, of which only
106,706,640 Common Shares and no other shares are currently
issued and outstanding, each of which is validly issued, fully
paid and non-assessable;
(j) except for the approval of the Exchanges on customary
conditions (including the absence of any requirement for
shareholder approval) and the filing of reports and payment of
fees respecting exempt trades under the securities legislation
of the Province of Alberta, no consent, approval,
authorization or order of or filing, registration or
qualification with any court, Governmental Authority or any
other Person is required under Applicable Laws for the
execution, delivery and performance by the Company or the
relevant Subsidiaries of the Company of this Agreement or any
of the other Transaction Documents or the consummation by it
of the transactions contemplated herein or therein, unless
such consents, approvals, authorizations, orders, filings,
registrations or qualifications are specifically contemplated
by the other Transaction Documents to be sought or to occur
after the Closing Date;
(k) none of the Company or any of its Subsidiaries has received
notice from any court or Governmental Authority of any
jurisdiction in which it carries on part of its business or
owns or leases any property of any restriction on its ability
to or of a requirement for it to qualify (in addition to any
qualification already obtained) to, nor is the Company or any
of its Subsidiaries otherwise aware of any restriction on its
ability to or of a requirement for it to qualify (in addition
to any qualification already obtained) to, conduct its
business as it is now conducted and as currently proposed to
be conducted, and own, lease and operate its properties, other
than any such restriction or requirement that would not have a
Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole;
(l) none of the Company or any of its Subsidiaries is in violation
of its constating documents or by-laws, and other than in
respect of a default that would not have a Material Adverse
Effect on the Company or its Subsidiaries, taken as a whole,
none of the Company or any of its Subsidiaries is in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note,
<PAGE> 12
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lease or other instrument to which it is a party or by which
it may be bound or to which any of its property or assets is
subject;
(m) no person has any agreement, option, right or privilege with
or against the Company or any Subsidiary thereof, for the
purchase, subscription or issuance of shares, issued or
unissued, in the capital of the Company or any Subsidiary
thereof, except for the issuance of Common Shares pursuant to
this Agreement, the other Transaction Documents, certain
Resource Agreements dated December 31, 1999 to issue up to
1,363,636 flow-through Common Shares, the Company's Stock
Option Plan, the Company's Employee Share Savings Plan and the
Company's Shareholder Rights Plan;
(n) no event of default under any agreement or instrument pursuant
to which Indebtedness of the Company or any of its
Subsidiaries has been issued, and no event which with the
giving of notice or the passage of time, or both, would
constitute an event of default under any such agreement or
instrument, has occurred and is continuing, other than any
event of default or such other event that would not have a
Material Adverse Effect on the Company or its Subsidiaries,
taken as a whole;
(o) except as set forth in Schedule 4.1(o), there are no actions,
suits or proceedings, whether on behalf of or against the
Company or its Subsidiaries pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or
affecting the Company or its Subsidiaries at law or in equity,
before or by any court or Governmental Authority, commission,
board, bureau, agency or instrumentality, domestic or foreign,
and which may in any way have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole;
(p) no order, ruling or determination having the effect of
ceasing, suspending or restricting trading in any securities
of the Company or the sale of the Purchased Securities has
been issued and remains in effect and no proceedings,
investigations or inquiry for such purpose are pending or, to
the knowledge of the Company, contemplated or threatened;
(q) there has been no Material Adverse Change (actual or proposed,
whether financial or otherwise) since September 30, 1999 in
the business, affairs, operations, assets, liabilities
(contingent or actual), capital or ownership of the Company
and its Subsidiaries, taken as a whole;
(r) except as set forth in Schedule 4.1(r), the Company has not
entered into or amended or modified any written or oral
contract that is currently in force for the employment or
services of any senior manager or officer of the Company or
its Subsidiaries, except for such contracts not in excess of
$25,000 individually or $100,000 in the aggregate;
(s) the Company has furnished to Investor true, complete and
accurate copies of the Company's audited consolidated
financial statements as of and for the fiscal period ended
December 31, 1998, and unaudited consolidated financial
statements as of and for the periods ended March 31, 1999,
June 30, 1999 and September 30, 1999, which statements
include, among other things, consolidated balance sheets of
the Company as of December 31, 1997 and 1998 and March 31,
1999, June 30, 1999 and September 30, 1999, the related
consolidated statements of earnings and retained earnings and
of statements of changes in financial position or cash flows
for the years or periods ended December 31, 1997 and 1998 and
March 31, 1999, June 30, 1999 and September 30, 1999
(hereinafter collectively referred to as the "FINANCIAL
STATEMENTS"). Each of the Financial Statements was prepared in
accordance with the books and records of the Company and the
Subsidiaries (other than The Canadian 88 1990 Oil & Gas
Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, RMX
Exploration Ltd. and Longview Resource Management Corporation
which in accordance with GAAP, are not consolidated in the
statements of Canadian 88), and presents fairly in accordance
with GAAP the financial position and results of operations and
changes in financial position of the Company and its
Subsidiaries (other than The Canadian 88 1990 Oil & Gas
Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, RMX
Exploration Ltd. and Longview Resource Management Corporation
which,
<PAGE> 13
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in accordance with GAAP, are not consolidated in the
statements of Canadian 88) as of the date thereof or for the
period which it purports to cover and includes the liabilities
of the Company and all of its Subsidiaries other than RMX
Exploration Ltd. and Longview Resource Management Corporation;
(t) the Company is a registrant and a "foreign private issuer"
under the U.S. Securities Exchange Act of 1934, as amended,
and is a "reporting issuer" under the securities laws of each
of those provinces of Canada that have the "reporting issuer"
concept in their securities legislation. The Company is not in
default or violation of any material requirement of any
securities laws or related rules, regulations, notices and
policies in Canada or the United States. The information and
statements set forth in the Public Record, when filed, were
true, correct, and complete in all material respects and did
not, when filed, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading and the information
and statements set forth in the Public Record, when filed,
complied in all material respects with all applicable
requirements of all Applicable Laws. The Company has complied
with all Applicable Laws with respect to making full, true and
timely disclosure of all material facts relating to the
Company (taken with its Subsidiaries as a whole), and their
business and operations, taken as a whole, and the Company has
not filed any confidential material change reports which
remain confidential. For purposes of this Section 4.1(t),
"material fact" shall have the meaning ascribed thereto under
applicable securities laws in Canada;
(u) since September 30, 1999, each of the Company and its
Subsidiaries has conducted its business in the ordinary course
consistent with prior practice, and has not changed materially
any aspect of their respective current businesses, including
without limitation, taking or permitting any action to (i)
declare or pay dividends or make distributions on the Common
Shares or purchase or issue any Common Shares or other
securities of the Company, other than purchasing 27,900 Common
Shares pursuant to the Company's normal course issuer bid,
agreeing to issue up to 1,363,636 flow-through Common Shares
pursuant to certain Resource Agreements dated December 31,
1999, distributing those common shares of Prize Energy Inc.
held by the Company to the holders of the Company's Common
Shares as a dividend in specie and issuances of Common Shares
pursuant to existing option agreements under the Company's
Stock Option Plan and its Employee Share Savings Plan; (ii)
affect or change the capital structure of the Company; (iii)
merge, amalgamate, consolidate or enter into any business
combination or other similar transaction with any other Person
or acquire any stock or equity interest in any other Person or
acquire substantially all the assets of any other Person; (iv)
amend the Company's charter or bylaws; or (v) agree or commit
to do any of the foregoing, except pursuant to this Agreement,
the other Transaction Documents or existing stock option
agreements and the Company's Employee Share Savings Plan;
(v) the data and information in respect of each of the Company and
its Subsidiaries and their respective assets, reserves,
liabilities, business and operations, taken as a whole,
provided by the Company or its advisors to Investor or its
advisors was and is accurate and correct in all material
respects as at the respective dates thereof and did not and
does not omit any data or information necessary to make any
data or information provided not misleading as at the
respective dates thereof;
<PAGE> 14
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(w) except:
(i) as disclosed or reflected in the consolidated
unaudited financial statements of the Company as at
September 30, 1999, previously delivered to Investor;
and
(ii) for liabilities and obligations:
(A) incurred in the ordinary course of business
and consistent with past practice, or
(B) incurred pursuant to the terms of this
Agreement,
the Company and its Subsidiaries, taken as a
whole, have not incurred any material
liabilities of any nature, whether accrued,
contingent or otherwise or which would be
required by generally accepted accounting
principles applicable in Canada to be
reflected on a consolidated balance sheet of
the Company as of the date hereof;
(x) the Company has not retained nor will it retain any financial
advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this
Agreement, any transaction contemplated hereby or any
transaction presently ongoing or contemplated. (Investor
acknowledges that it has been informed of a claim by Griffiths
McBurney and Goepel McDermid for possible entitlement to a
commission arising from the within transaction, which claim
has been denied by the Company. Such claim, even if it is
eventually determined to be valid, shall not be considered a
breach of the representations contained in this subclause
4.1(x));
(y) all material assets or properties of the Company and its
Subsidiaries, taken as a whole, which generate the revenues of
the Company and its Subsidiaries, taken as a whole (other than
that share of the revenues attributable to the minority
interests in the Company's Subsidiaries, the financial
statements of which are not consolidated with the Company),
are legally and beneficially owned by the Company or one of
its Subsidiaries or are leased or licensed on commercial terms
for the benefit of the Company or its Subsidiaries;
(z) the corporate records and minute books of the Company and each
of its Subsidiaries have been maintained in accordance with
all applicable statutory requirements and are complete and
accurate in all material respects;
(aa) to the best of the knowledge of the Company:
(i) neither the Company nor any of its Subsidiaries is
(or knowingly is, in respect of non-operated
properties) in material violation of any applicable
federal, provincial, municipal or local laws,
regulations, orders, government decrees or ordinances
with respect to environmental, health or safety
matters (collectively, the "ENVIRONMENTAL LAWS");
(ii) the Company and each of its Subsidiaries has operated
its business at all times and has received, handled,
used, stored, treated, shipped and disposed of all
contaminants without material violation of
Environmental Laws;
(iii) there have been no material spills, releases,
deposits or discharges of hazardous or toxic
substances, contaminants or wastes which have not
been rectified or are in the process of being
rectified on any of the real property owned or leased
by the Company or any of its Subsidiaries during the
period of its ownership or tenure or under its
control during the period in which it has had
control;
<PAGE> 15
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(iv) there have been no releases, deposits or discharges,
in material violation of Environmental Laws, of any
hazardous or toxic substances, contaminants or wastes
into the earth, air or into any body of water or any
municipal or other sewer or drain water systems by
the Company or any of its Subsidiaries;
(v) no material orders, directions or notices have been
issued and remain outstanding pursuant to any
Environmental Laws relating to the business or assets
of the Company or any of its Subsidiaries other than
abandonment and similar notices issued in connection
with the Company's normal course of business taken as
a whole; and
(vi) the Company and each of its Subsidiaries holds all
material licences, permits and approvals required
under any Environmental Laws in connection with the
operation of its business and the ownership and use
of its assets and all such licences, permits and
approvals are in full force and effect;
(bb) neither the Company nor any of its Subsidiaries has received
notice of any proposed environmental policies or laws which
the Company reasonably believes would constitute a Material
Adverse Change in respect of any natural gas midstream
business or any oil and/or gas exploration, development or
production operations of the Company, taken as a whole, other
than those that apply to the industry generally;
(cc) policies of insurance in force as of the date hereof naming
the Company or any of its Subsidiaries, as the case may be, as
an insured adequately cover all risks reasonably and prudently
foreseeable in the operation and conduct of the business of
the Company, taken as a whole, including, without limitation,
directors' and officers' insurance, as would be customary in
respect of the businesses carried on by the Company, including
indirectly through its Subsidiaries. All such policies of
insurance shall remain in force and effect and shall not be
cancelled or otherwise terminated as a result of the
transactions contemplated hereby;
(dd) (i) for purposes of this Agreement, the following definitions
shall apply:
(A) the term "TAXES" shall mean all taxes,
however denominated, including any interest,
penalties or other additions that may become
payable in respect thereof, imposed by any
federal, provincial, territorial, state,
municipal, local or foreign government or
any agency or political subdivision of any
such government, which taxes shall include,
without limiting the generality of the
foregoing, all income or profits taxes
(including, but not limited to, federal
income taxes and provincial income taxes),
payroll and employee withholding taxes,
employment insurance, social insurance
taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross
receipts taxes, business license taxes,
occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation and
other governmental charges, and other
obligations of the same or of a similar
nature to any of the foregoing, which the
Company or any of its Subsidiaries is
required to pay, withhold or collect;
(B) the term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax,
information statements and returns relating
to, or required to be filed in connection
with, any Taxes;
(ii) all Returns required to be filed by or on behalf of
the Company or any of its Subsidiaries have been duly
filed on a timely basis and such Returns are true,
complete and correct in all material respects. All
Taxes shown to be payable on the
<PAGE> 16
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Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis or
have been accrued on the Company's financial
statements and no other Taxes are payable by the
Company or any of its Subsidiaries with respect to
items or periods covered by such Returns;
(iii) the Company and each of its Subsidiaries has paid or
provided adequate accruals in its unaudited financial
statements for the period ended September 30, 1999
for Taxes, including income taxes and related
deferred taxes, in conformity with generally accepted
accounting principles applicable in Canada;
(iv) for all periods ending on and after December 31,
1995, the Company has made available to Investor true
and complete copies of:
(A) relevant portions of income tax audit
reports, statements of deficiencies or other
agreements received or entered into by the
Company or any of its Subsidiaries or on
behalf of the Company or any of its
Subsidiaries relating to Taxes; and
(B) all separate federal and provincial income
or franchise tax returns for the Company or
any of its Subsidiaries;
(v) no material deficiencies exist or have been asserted
with respect to Taxes of the Company or any of its
Subsidiaries. Neither the Company nor any of its
Subsidiaries is a party to any action or proceeding
for assessment or collection of Taxes, nor has such
event been asserted or threatened against the Company
or any of its Subsidiaries or any of its assets. No
waiver or extension of any statute of limitations is
in effect with respect to Taxes or Returns of the
Company or any of its Subsidiaries. The Returns of
the Company or any of its Subsidiaries have never
been materially adversely audited by a government or
taxing authority and have not been audited for any
tax year after 1995, nor is any such audit in
process, pending or to the knowledge of the Company
threatened;
(ee) the Company and each of its Subsidiaries:
(i) have no defined benefit plans;
(ii) have provided adequate accruals in their audited
financial statements for the year ended December 31,
1998 and in their unaudited financial statements for
the period ended September 30, 1999 (or such amounts
are fully funded) for all pension or other employee
benefit obligations of the Company and each of its
Subsidiaries arising under or relating to each of the
pension or retirement income plans or other employee
benefit plans or agreements or policies maintained by
or binding on the Company and each of its
Subsidiaries as well as for any other payment
required to be made by the Company or any of its
Subsidiaries in connection with the termination of
employment or retirement of any employee of the
Company or any of its Subsidiaries in respect of the
fiscal period ended September 30, 1999; and
(iii) have no stock option or purchase plans or similar
arrangements other than the Company's Stock Option
Plan and its Employee Share Savings Plan;
(ff) the Company has taken as part of its Year 2000 Compliance
program all reasonable and prudent steps to ensure that its
computer systems and programs are Year 2000 Compliant. The
Company is not aware of any material issues relating to the
business and operations (including computer applications) of
the Company, taken as a whole, that are not Year 2000
<PAGE> 17
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Compliant, although no representation is made as to the Year
2000 Compliance of the Company's suppliers and customers. As
of the date hereof the Company has not experienced any
material Year 2000 Compliance problems or incidents. "YEAR
2000 COMPLIANT" means that all computer systems and programs
of the Company integral to the Company's business operations:
(i) have been designed to be used prior to, during and
after the calendar year 2000 A.D. without material
error relating to date data;
(ii) are capable of operating without material error
relating to the production of date data which
represents or refers to different centuries or more
than one century; and
(iii) are designed so that all data fields, date-related
user interfaces, and other interfaces include the
indication of century;
and "YEAR 2000 COMPLIANCE" has a similar meaning;
(gg) there is no default or breach, threatened pending or
otherwise, by the Company of its obligations under the 1996
Exploration Program Agreement, as amended, between the Company
and RMX Exploration Ltd., except as disclosed in writing on or
prior to March 17, 2000;
(hh) the Board of Directors of the Company has, upon prior written
notice delivered to Montreal Trust Company of Canada,
determined to waive the application of the Shareholder Rights
Plan to the acquisition by Investor of the Purchased
Securities and such waiver remains in full force and effect,
neither amended nor withdrawn.
(ii) the Company and all Persons controlled by the Company
(i) do not hold assets located in the United States
having an aggregate book value of U.S. $15 million or
more; and
(ii) have not made aggregate sales in or into the United
States of U.S. $25 million or more during the year
ended December 31, 1999;
(jj) Schedule 4.1(jj) represents the full and complete list of all
present Affiliates of the Company; and
(kk) as of the date of this Agreement and as of the Closing Date,
Schedule 4.1(kk) represents the full and complete list of all
existing agreements (other than Transaction Documents) between
the Company or any of its present Subsidiaries, on the one
hand, and Related Parties, on the other hand (whether as
direct, indirect or beneficial parties thereto), and any
existing agreements between the Company or its present
Affiliates and third parties, in any such case pursuant to
which Related Parties derive benefits or the Company or any of
its Affiliates assumes obligations in favor of such Related
Parties (provided that no Related Party shall be considered to
derive benefits by reason solely of being a shareholder of a
public company holding less than 2% of a class of the
outstanding issues of such company).
"Related Parties" in this Section 4.1(kk) shall include the
Company's present Affiliates, former Affiliates of the Company
or of the Company's present Affiliates, former or present
directors and officers of the Company or of its former or
present Affiliates, all legal Persons (including all legal
entities) which currently or formerly have shared office space
with the Company or its former or present Affiliates, or have
shared directors or officers with the Company or any of its
former or present Affiliates, or have had in common owners or
<PAGE> 18
-15-
shareholders holding directly, indirectly or beneficially 10%
or more of the shares or ownership of such legal Persons as
well as 10% or more of the shares of the Company or its former
or present Affiliates at the time an existing agreement was
entered into;
4.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
(a) Investor is duly incorporated and validly subsisting under the laws of
its jurisdiction of incorporation;
(b) Investor has the necessary power and authority to execute and deliver
this Agreement and the other Transaction Documents to which it is a
party, and to perform its obligations hereunder and thereunder and to
carry out the transactions contemplated hereby and thereby and this
Agreement has been, and the other Transaction Documents to which it is
a party, will at the time of Closing be, duly authorized, executed and
delivered by Investor and are or will upon such execution and delivery
be legal, valid and binding obligations of Investor enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization and other laws and
equitable principles affecting creditors' rights generally, the
statutory and equitable powers of the courts to stay proceedings before
them and the execution of judgments and the fact that specific
performance and injunctive relief are equitable remedies which may be
ordered by a court in its discretion and, accordingly, may not be
available as a remedy in an action to enforce a covenant;
(c) the execution and delivery of this Agreement and the other Transaction
Documents to which it is a party, the performance by Investor of its
obligations hereunder and thereunder do not and will not result in a
breach of, and do not and will not create a state of facts which, after
notice or lapse of time or both, will result in a breach of, and do not
and will not create a right of termination or acceleration under, and
do not and will not conflict with:
(i) any Applicable Laws applicable to Investor;
(ii) any terms, conditions or provisions of the constating
documents, or resolutions of the directors or shareholders, of
Investor;
(iii) any terms, conditions or provisions of any indenture,
agreement or instrument to which Investor is a party or by
which it is contractually bound as at the date hereof or the
Closing Date; or
(iv) any judgment, decree or order of any court or Governmental
Authority having jurisdiction over or binding any of Investor
or their properties or assets;
except, in the case of Sections 4.2(c)(i), (iii) and (iv) above, for
such breaches, rights or conflicts with that, alone or in the
aggregate, would not have a Material Adverse Effect on Investor;
(d) Investor is purchasing the Purchased Securities for its own account for
investment purposes and not with a view to, or for resale in connection
with, any distribution thereof in violation of the United States
Securities Act of 1933, as amended (the "1933 ACT"). Investor
represents that it is experienced in evaluating and making investments
of the type contemplated by this Agreement and is financially able to
bear the risks of such investment. Investor acknowledges that the
Company is issuing and selling the Purchased Securities in reliance
upon the exemption from registration provided in Section 4(2) of the
1933 Act and is relying upon these representations, and agrees that the
Purchased Securities may be transferred only
<PAGE> 19
-16-
if registered under the 1933 Act or pursuant to an exemption from such
registration requirements. Investor is an "accredited investor" as
defined in Regulation D under the 1933 Act. Investor acknowledges that
it has been provided with a copy of the Financial Statements and has
had access to such additional information, if any, concerning the
Company as it has considered necessary in connection with its
investment decision to acquire the Purchased Securities. Investor also
acknowledges that it has not purchased the Purchased Securities as a
result of any form of general solicitation or general advertising, as
such terms are defined in Rule 502(c) under the 1933 Act. Investor
understands that Rule 144 promulgated under the 1933 Act is not
presently available with respect to the Purchased Securities and that
absent registration of such securities under the 1933 Act, compliance
with an applicable exemption under the 1933 Act is required for a sale
or other disposition of such securities. Investor agrees that the
following legend may be placed on any certificates evidencing its
Purchased Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE PLEDGED OR HYPOTHECATED, AND MAY NOT BE
RE-OFFERED, RESOLD OR OTHERWISE TRANSFERRED, EXCEPT (A) TO THE
COMPANY, (B) IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, (C) OUTSIDE OF THE UNITED STATES IN ACCORDANCE WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE)
OR (E) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION AFTER
PROVIDING A FAVOURABLE OPINION OF COUNSEL OR EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
OFFER, SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.
A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM THE
TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN FORM SATISFACTORY TO THE TRANSFER
AGENT AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT;
(e) Investor is not a resident of Alberta;
(f) Investor acknowledges that:
(i) no securities commission or similar regulatory
authority has reviewed or passed on the merits of the
Purchased Securities;
(ii) there is no government or other insurance covering
the Purchased Securities;
(iii) there are risks associated with the purchase of the
Purchased Securities;
<PAGE> 20
-17-
(iv) there are restrictions on Investor's ability to
resell the Purchased Securities and it is Investor's
responsibility to find out what these restrictions
are and to comply with them before selling the
Purchased Securities; and
(v) the Company has advised Investor that the Company is
relying on an exemption from the requirements to
provide Investor with a prospectus and to sell
securities through a person or company registered to
sell securities under the Securities Act (Alberta)
and, as a consequence of acquiring the Purchased
Securities pursuant to such exemption, certain
protections, rights and remedies provided by the
Securities Act (Alberta), including statutory rights
of recission or damages, will not be available to
Investor.
Investor agrees that the following legend may be placed on any
certificates evidencing its Purchased Securities:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE
RE-OFFERED, RESOLD OR OTHERWISE TRANSFERRED IN
ALBERTA ON OR BEFORE MARCH 24, 2001 EXCEPT (A) IN
COMPLIANCE WITH THE PROSPECTUS REQUIREMENTS OF THE
SECURITIES ACT (ALBERTA), OR (B) PURSUANT TO AN
EXEMPTION FROM THE PROSPECTUS REQUIREMENTS PROVIDED
BY APPLICABLE SECURITIES LEGISLATION AND PROVIDED
THAT (1) NO UNUSUAL EFFORT IS MADE TO PREPARE THE
MARKET OR TO CREATE A DEMAND FOR THE SECURITIES BEING
TRANSFERRED, (2) NO EXTRAORDINARY COMMISSION OR
CONSIDERATION IS PAID TO A PERSON OR COMPANY OTHER
THAN THE VENDOR OF THE SECURITIES IN RESPECT OF THE
TRADE, AND (3) THE FIRST TRADE IS NOT FROM THE
HOLDINGS OF A CONTROL PERSON, AS DEFINED IN THE
SECURITIES ACT (ALBERTA) UNLESS THE PROVISIONS OF
SECTION 112 OF THE SECURITIES ACT (ALBERTA) HAVE BEEN
COMPLIED WITH.
A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED
FROM THE TRANSFER AGENT UPON DELIVERY OF THIS
CERTIFICATE AND A DULY EXECUTED DECLARATION OF THE
HOLDER AND AN OPINION OF COUNSEL, IN FORM
SATISFACTORY TO THE TRANSFER AGENT AND THE COMPANY,
TO THE EFFECT THAT THE SALE OF THE SECURITIES
REPRESENTED HEREBY IS MADE IN COMPLIANCE WITH
APPLICABLE SECURITIES LAW.
(g) Investor and its Affiliates currently own 1,380,200 Common
Shares of the Company.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The obligations of Investor and the Company to consummate the
transactions contemplated hereby that are to occur at or by Closing are subject
to the satisfaction of the following conditions:
(a) no condition or restriction of any court or Governmental
Authority shall be in effect, and there shall not be pending
or threatened any action or proceeding by or before any court
or Governmental Authority, which condition or restriction, or
pending or threatened action or proceeding, purports to, or
seeks or threatens, to restrain, prohibit or enjoin any of the
parties hereto from entering into, or performing any of the
transactions contemplated by this
<PAGE> 21
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Agreement or any of the Transaction Documents, or alters the
terms and conditions of the transactions contemplated herein;
and
(b) all filings with all Governmental Authorities of Canada and
the United States required to be made in connection with the
transactions contemplated by this Agreement or any of the
other Transaction Documents prior to the Closing Date shall
have been made, all waiting periods thereunder shall have
expired or terminated and all consents, orders, permits,
waivers, authorizations, exemptions, and approvals of such
entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this
Agreement or any of the other Transaction Documents shall have
been issued; PROVIDED HOWEVER, that no provision of this
Agreement or any of the other Transaction Documents shall be
construed as requiring any party hereto to accept, in
connection with obtaining any requisite approval, any
condition that would alter the terms and conditions of the
transactions contemplated herein in a manner which is
materially adverse to any such party.
5.2 CONDITIONS TO THE OBLIGATIONS OF INVESTOR
The obligations of Investor under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived in whole or in part by
Investor in writing:
(a) on the Closing Date, the representations and warranties of the
Company set forth in this Agreement shall be true and correct
with the same effect as though such representations and
warranties had been made at and as of such time except for
such changes or transactions as are contemplated herein;
(b) the Company shall have performed and complied with all
agreements, covenants, and conditions contained herein
required to be performed or complied with by it prior to or at
the Closing;
(c) Investor shall have received from McCarthy Tetrault and
Carscallen Lockwood, counsel for the Company, one or more
written opinions satisfactory to Investor;
(d) the Company shall have delivered to Investor a certificate or
certificates representing the Purchased Securities registered
in the name of Investor containing the legends contemplated by
Sections 4.2(d) and 4.2(f);
(e) all consents, approvals or waivers from Persons, including
Governmental Authorities, if any, required prior to the
Closing Date in connection with the consummation of the
transactions contemplated hereby or by the other Transaction
Documents shall have been obtained upon terms and conditions
which are not materially adverse to Investor;
(f) contemporaneously with the execution hereof, Noval shall have
executed the Noval Representation Agreement, the Company shall
have executed and delivered the Corporate Governance and
Transition Arrangements Letter Agreement and the Company and
the other Persons referred to in the Corporate Governance and
Transition Arrangements Letter Agreement shall have executed
and delivered the agreements referred to therein;
(g) on the Closing Date, the Company and Noval shall have executed
and delivered the Shareholder Agreement, the Company shall
have executed and delivered the Registration Rights Agreement
and the Company and the relevant Subsidiaries shall have
executed the Preferential Rights Agreement;
<PAGE> 22
-19-
(h) on the Closing Date all of the obligations of the parties set
out in the Corporate Governance and Transition Arrangements
Letter Agreement and the agreements referred to therein shall
have been fulfilled and all of the arrangements contemplated
therein shall have been implemented except for such
obligations or arrangements expressly contemplated therein to
be performed or implemented after Closing;
(i) the Company shall have delivered to Investor all of the
following:
(i) copies (certified by the Corporate Secretary of the
Company) of the resolutions duly adopted by the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents and all other agreements
referred to herein or therein as being executed at or prior to the
Closing;
(ii) evidence reasonably satisfactory to Investor that the
Company has obtained all necessary approvals or consents or satisfied
all applicable requirements of Governmental Authorities or other
Persons required to be obtained or satisfied at or prior to the Closing
for the transactions entered into, or to be entered into, by the
Company as contemplated in this Agreement and the other Transaction
Documents; and
(iii) evidence reasonably satisfactory to Investor that the
Company has obtained all required approvals of the Exchanges for the
transactions described in this Agreement and the other Transaction
Documents and that the Purchased Securities are, at the time of
Closing, listed and posted for trading on the Exchanges;
(j) all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated by this
Agreement and the other Transaction Documents (including,
without limitation, those matters set forth in the Corporate
Governance and Transition Arrangements Letter Agreement) to be
consummated at the Closing shall have been consummated and all
documents incidental thereto shall be reasonably satisfactory
in form and substance to Investor.
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived in whole or in part by the
Company in writing:
(a) on the Closing Date, the representations and warranties of
Investor set forth in this Agreement shall be true and correct
with the same effect as though such representations and
warranties were made at and as of such time;
(b) Investor shall have performed and complied with all
agreements, covenants and conditions contained herein required
to be performed by or complied with by it prior to or at the
Closing;
(c) the Company shall have received a written opinion or opinions
from Canadian or U.S. counsel for Investor satisfactory to the
Company;
(d) Investor shall have delivered to the Company the aggregate
purchase price for the Purchased Securities being purchased
hereunder;
(e) all consents, approvals or waivers from Persons, including
Governmental Authorities, if any, required prior to the
Closing Date in connection with the consummation of the
transactions
<PAGE> 23
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contemplated hereby or by the other Transaction Documents
shall have been obtained upon terms and conditions which are
not materially adverse to the Company; and
(f) contemporaneously with the execution hereof, Investor shall
have executed and delivered the Corporate Governance and
Transition Arrangements Letter Agreement and on the Closing
Date, Investor shall have executed the Shareholder Agreement,
the Registration Rights Agreement, and the Preferential Rights
Agreement.
5.4 WAIVER OF CONDITIONS
Any condition set forth herein in favour of a party may be waived in
whole or in part by that party.
ARTICLE 6
COMPANY'S COVENANTS
The Company covenants and agrees (the fulfillment of which covenants
and agreements shall be conditions to Investor's obligations hereunder) that,
between the date hereof and the Closing:
6.1 CONDUCT OF BUSINESS
Each of the Company and its Subsidiaries shall conduct its business in
the ordinary course consistent with prior practice, and shall promptly notify
Investor of any event or occurrence or emergency material to, or not in the
ordinary course consistent with prior practice of, the Company and its
Subsidiaries, taken as a whole; and shall not change materially any aspect of
their respective current businesses, including without limitation, taking or
permitting any action to:
(a) declare or pay dividends or make distributions on the Common
Shares or purchase or issue any Common Shares or other
securities of the Company, other than agreeing to issue up to
1,363,636 flow-through Common Shares pursuant to certain
Resource Agreements dated December 31, 1999 and issuances of
Common Shares pursuant to options presently outstanding under
the Company's Stock Option Plan and its Employee Share Savings
Plan;
(b) affect or change the capital structure of the Company or its
Subsidiaries;
(c) merge, amalgamate, consolidate or enter into any business
combination or other similar transaction with any other Person
or acquire any stock or equity interest in any other Person or
acquire substantially all the assets of any other Person;
(d) amend the Company's charter or bylaws;
(e) incur Indebtedness not in the ordinary course of business
consistent with past practice in excess of $2,000,000;
(f) enter into any material contracts outside of the ordinary
course of business; or
(g) agree or commit to do any of the foregoing.
6.2 COOPERATION
Without the prior written consent of Investor, the Company shall not
take any action that would cause the conditions to the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by the Company herein not to
be true, correct and accurate as of the Closing Date; PROVIDED
<PAGE> 24
-21-
HOWEVER that, notwithstanding the foregoing, the Company shall be entitled to
exercise any right or remedy available to it under those of the Transaction
Documents entered into prior to the Closing Date, including, without limitation,
not consummating the transactions contemplated under the Transaction Documents
as a result of the failure by the Company to waive a condition in the Company's
favour in such agreements. The Company will use its reasonable efforts to
vigorously defend any lawsuits or other legal proceedings brought against the
Company, whether judicial or administrative, challenging this Agreement, the
other Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, including seeking to have any stay or temporary restraining
order entered by any court or Governmental Authority vacated or reviewed.
6.3 CERTAIN ACTS
The Company shall use its reasonable efforts to cause to be fulfilled
the conditions precedent to Investor's obligations to consummate the
transactions contemplated hereby that are dependent upon the actions of the
Company or its Affiliates, including without limitation, diligently prosecuting
all requests to Governmental Authorities, the Exchanges or others for required
approvals, consents or waivers. Furthermore, the Company covenants and agrees to
execute or cause the execution of the Transaction Documents to which it or its
Affiliates is a party and perform its obligations thereunder and cause the
performance of the other parties' obligations thereunder and the Company agrees
not to waive any compliance therewith or its rights thereunder or consent to any
amendment thereto without the prior written consent of Investor; PROVIDED
HOWEVER that, notwithstanding the foregoing, the Company shall be entitled to
exercise any right or remedy under the Transaction Documents entered into prior
to the Closing Date, including, without limitation, not consummating the
transactions contemplated under the Transaction Documents as a result of the
failure to waive a condition in the Company's favour in such agreements.
6.4 ACCESS AND INFORMATION
Subject to the terms of the Confidentiality Agreement, prior to the
Closing the Company shall permit the authorized representatives of Investor to
have reasonable access to all facilities, equipment, employees, agents,
properties, books, records and documents related to the Company and its
Subsidiaries and shall furnish to Investor such information, financial records
and other documents with respect to the Company's and its Subsidiaries'
operations and businesses as Investor shall reasonably request in connection
with the transactions contemplated herein.
6.5 NO SHOPPING
The Company hereby agrees that, without the consent of Investor, it
shall not, nor shall it permit any of its officers, directors, employees,
Affiliates, agents, investment bankers, consultants, advisors or representatives
to, prior to the Closing, solicit, initiate, encourage, entertain or consider
any discussions, negotiations, inquiries or proposals (including by way of
furnishing information) with any third party concerning: (a) any sale of any
material portion of the business or assets of the Company or its Affiliates; (b)
any acquisition, disposition or issuance of shares or other securities of the
Company or its Affiliates; (c) any merger, amalgamation, consolidation, business
combination or other similar transaction involving the Company or its
Affiliates; or (d) any transaction inconsistent with the consummation of the
Transaction Documents; PROVIDED HOWEVER that, notwithstanding this Section 6.5,
the Company and its Board of Directors shall be entitled to comply with their
statutory duties in response to a take-over bid not arising as a result of a
breach of this Agreement and shall be entitled to respond as necessary in order
to properly discharge their fiduciary duties in respect of a bona fide written
proposal with respect to any of the transactions referred to in paragraphs (a) -
(d) of this Section 6.5. Nothing in this Section 6.5 shall permit the Company to
terminate or fail to perform its obligations hereunder or under the Transaction
Documents.
<PAGE> 25
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ARTICLE 7
INVESTOR'S COVENANTS
Investor covenants and agrees (the fulfillment of which covenants and
agreements shall be conditions to the Company's obligations hereunder) that,
between the date hereof and the Closing:
7.1 COOPERATION
Without the prior written consent of the Company, Investor shall not
take any action that would cause the conditions to the obligations of such
parties to effect the transactions contemplated hereby not to be fulfilled
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by Investor herein not to be
true, correct and accurate as of the Closing Date; PROVIDED HOWEVER that,
notwithstanding the foregoing, Investor shall be entitled to exercise any right
or remedy under the Transaction Documents, including, without limitation, not
consummating the transactions contemplated under those of the Transaction
Documents entered into prior to the Closing Date as a result of the failure by
Investor to waive a condition in Investor's favour in such agreements. Investor
will use its reasonable efforts to vigorously defend any lawsuits or other legal
proceedings, whether judicial or administrative brought against Investor,
challenging this Agreement, the other Transaction Documents or the consummation
of the transactions contemplated hereby or thereby, including seeking to have
any stay or temporary restraining order entered by any court or Governmental
Authority vacated or reviewed.
7.2 CERTAIN ACTS
Investor shall use its reasonable efforts to cause to be fulfilled the
conditions precedent to the Company's obligations to consummate the transactions
contemplated hereby that are dependant upon the actions of Investor, including
without limitation, diligently prosecuting all requests to Governmental
Authorities or others for required approvals, consents or waivers. Furthermore,
Investor covenants and agrees to execute the Transaction Documents to which it
is a party; PROVIDED HOWEVER that, notwithstanding the foregoing, Investor shall
be entitled to exercise any right or remedy under those of the Transaction
Documents entered into prior to the Closing Date, including, without limitation,
not consummating the transactions contemplated under the Transaction Documents
as a result of the failure to waive a condition in Investor's favour in such
agreements.
ARTICLE 8
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
8.1 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Upon expiration of the officers' and directors' liability insurance
currently in place under the Company's insurance program for the directors and
officers of the Company and its Subsidiaries and until six years after the
Closing, the Company shall, provide or arrange for the provision of directors'
and officers' liability insurance covering the directors and officers of the
Company and its Subsidiaries who are now covered by directors' and officers'
liability insurance or will be so covered at the Closing with respect to actions
and omissions occurring prior to or on the Closing on terms no less favourable,
to the extent permitted by law, to such persons than such insurance currently
maintained in effect by the Company for the directors and officers of the
Company and its Subsidiaries on the date hereof in terms of coverage and amount.
The Company shall, indemnify to the extent currently provided for in the by-laws
of the Company such persons who are now or will be entitled on the Closing to
indemnification thereunder with respect to actions or omissions occurring prior
to or on the Closing. Notwithstanding the foregoing, the Company may, at its
option, purchase a run-off directors' and officers' liability insurance policy
on or prior to the Closing.
<PAGE> 26
-23-
ARTICLE 9
MISCELLANEOUS
9.1 PUBLICITY
The Company and Investor agree that neither they nor any of their
respective officers, directors, employees, Affiliates, agents, investment
bankers, consultants, advisors or representatives will disclose the existence of
this Agreement or the other Transaction Documents or any of the terms hereof or
thereof to any person, except as otherwise permitted hereunder or thereunder or
required by applicable Canadian or United States law, regulatory policies or
stock exchange requirements or policies. The Company and Investor shall be
entitled to make disclosure of this Agreement and the other Transaction
Documents to their respective financial advisors, lawyers and other professional
advisors and, in the case of Investor, to Affiliates of Investor. The Company
and Investor shall cooperate with each other in the development of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement and the other Transaction Documents. Each of the Company and
Investor shall not issue or make, or cause to have issued or made, any press
release or announcement concerning the transactions contemplated by this
Agreement and the other Transaction Documents without making reasonable efforts
to obtain the prior approval of the form and substance thereof by the other
party, acting reasonably, unless otherwise required by applicable Canadian or
United States law, regulatory policies or stock exchange requirements or
policies. The parties acknowledge that the Company must make public disclosure
of the transactions resulting from its execution of this Agreement.
9.2 NOTICES
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopier) and, unless
otherwise expressly provided herein, shall be delivered during normal business
hours by hand, by Federal Express, United Parcel Service or other reputable
overnight commercial delivery service, or by telecopier notice, confirmation of
receipt received, addressed as follows, or to such other address as may be
hereafter notified by the respective parties hereto:
COMPANY:
Canadian 88 Energy Corp.
700, 400 Third Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Donald R. Gardner, Chief Financial Officer
Fax No.: (403) 216-2358
with a copy to: and:
<TABLE>
<S> <C>
McCarthy Tetrault Carscallen Lockwood
Barristers & Solicitors Barristers and Solicitors
Suite 3300 Suite 1500
421 - 7th Avenue SW 407 - 2nd Street S.W.
Calgary, Alberta Calgary, Alberta
T2P 4K9 T2P 2Y3
Attention: Mr. David F. Phillips Attention: Stan Carscallen
Fax No.: (403) 260-3501 Fax No.: (403) 262-2952
</TABLE>
<PAGE> 27
-24-
INVESTOR:
Duke Energy Hydrocarbons, L.L.C.
10777 Westheimer
Suite 650
Houston, Texas 77042
Attention: President
Fax No.: (713) 260-8601
with a copy to:
Bennett Jones
Barristers & Solicitors
4500 Bankers Hall East
855 - 2nd Street SW
Calgary, Alberta
T2P 4K7
Attention: John D. MacNeil and Margaret G. Lemay
Fax No.: (403) 265-7219
Any notice, request or demand delivered personally or by telecopier shall be
deemed to have been given and received on the day it is so delivered if that day
is a Business Day or the next Business Day, as the case may be.
9.3 ASSIGNMENT BY INVESTOR
Investor may assign all or any part of its benefits under this
Agreement or under any agreement contemplated hereby, only to an Affiliate
unless consent to a third party assignment is obtained from the other parties
hereto.
9.4 TERMINATION OF LETTER OF INTENT
It is acknowledged that the Letter of Intent has expired and has no
further force and effect.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties contained herein shall survive the
Closing until the date that is eighteen months after the Closing Date.
9.6 SOLICITATIONS
The Company represents and warrants to Investor that neither it, any
Affiliate nor any person acting on its or their behalf:
(a) will solicit offers to buy any securities under circumstances
that would require registration of the Purchased Securities
under the 1933 Act, except as otherwise required pursuant to
the Registration Rights Agreement;
(b) has engaged or will engage in any form of general solicitation
or general advertising (as those terms are defined in Rule
502(c) under the 1933 Act in connection with any offer or sale
of Purchased Securities; or
<PAGE> 28
-25-
(c) directly or indirectly, has sold or offered for sale any of
the Purchased Securities to, or solicited any offers to buy
any Purchased Securities from, or otherwise approached or
negotiated in respect of the Purchased Securities with, any
person or entity other than Investor.
9.7 EXPENSES
Each of the parties hereto shall, whether or not the transactions
contemplated hereby are consummated, bear its own solicitors', attorneys',
accountants' or other fees, costs and expenses incurred in connection with the
negotiation, execution and performance of this Agreement or any of the
transactions contemplated hereunder.
9.8 EXHIBITS AND SCHEDULES
All Exhibits and Schedules to this Agreement are incorporated herein
and made a part hereof for all purposes.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement
as of the date first written above.
DUKE ENERGY HYDROCARBONS, L.L.C.
Per: /s/ JOSEPH L. PRITCHETT, III
------------------------------------
Joseph L. Pritchett, III
Executive Vice President,
Exploration and Production
CANADIAN 88 ENERGY CORP.
Per: /s/ JAMES D. RAYMOND
------------------------------------
James D. Raymond
Chairman
Per: /s/ DONALD R. GARDNER
------------------------------------
Donald R. Gardner
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
MARCH 24, 2000
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT made the 24th day of March, 2000,
BETWEEN:
CANADIAN 88 ENERGY CORP., a corporation incorporated pursuant to
the laws of Canada (hereinafter referred to as "CANADIAN 88")
OF THE FIRST PART
- and -
DUKE ENERGY HYDROCARBONS, L.L.C., a corporation incorporated
under the laws of Delaware (hereinafter referred to as "DEH")
OF THE SECOND PART
WHEREAS DEH and Canadian 88 have entered into a subscription agreement
dated the same date as this Agreement (the "Subscription Agreement"), pursuant
to which DEH will acquire - Common Shares and Canadian 88, DEH and Greg Noval
have entered into a Shareholders' Agreement dated the same date as this
Agreement (the "SHAREHOLDERS' AGREEMENT"); and
WHEREAS DEH may in the future choose to sell all or any portion of the
Common Shares of Canadian 88 owned by it in an Offering as contemplated by the
Shareholders' Agreement; and
WHEREAS Canadian 88 believes it to be in its best interests to provide
for certain matters related to the sale of securities of Canadian 88 in
connection with an Offering;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and promises contained herein and other good and valuable
consideration (the receipt and adequacy whereof is hereby acknowledged), the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
For the purpose of this Agreement, the following terms shall have the
meanings ascribed thereto below unless otherwise specified:
"AGREEMENT", "THIS AGREEMENT", "HERETO", "HEREIN", "HEREBY", "HEREUNDER",
"HEREOF" and similar expressions refer to this Agreement in its entirety and not
to any particular Article, Section, Subsection, Clause, Subdivision or other
portion hereof and include any and every amending agreement and agreement
supplemental hereto.
<PAGE> 3
-2-
"AFFILIATE" has the meaning set forth in the Securities Act (Alberta).
"BOARD OF DIRECTORS" means the board of directors of Canadian 88.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day when banks
in the City of Calgary are not generally open for business.
"COMMON SHARES" means the shares designated as "common shares" in Canadian 88's
articles.
"COMPANY SECURITIES" means any Voting Shares or Convertible Securities or both.
"CONVERTIBLE SECURITIES" means any securities convertible into, exchangeable for
or exercisable for Voting Shares, including convertible debentures, convertible
preferred shares, warrants and rights but excluding employee stock options,
other convertible securities of Canadian 88 issued pursuant to a share
compensation arrangement (as defined in Section 627 of The Toronto Stock
Exchange Company Manual) and any rights issued pursuant to the Shareholder
Rights Plan Agreement dated December 22, 1994 between Canadian 88 and Montreal
Trust Company of Canada, as amended or replaced.
"DEH" means Duke Energy Hydrocarbons, L.L.C. and its successors and assigns.
"EXEMPT OFFERING" means a distribution for cash (other than pursuant to a share
compensation arrangement, as defined in Section 627 of The Toronto Stock
Exchange Company Manual) under an exemption from the requirement to file and
obtain a receipt for a prospectus from, or file and have declared effective a
registration statement by, the securities regulatory authority of a jurisdiction
under the securities legislation of that jurisdiction.
"EXEMPT OFFERING DOCUMENTS" means, in connection with an Exempt Offering,
documents in a form which counsel to DEH and counsel to Canadian 88 shall
consider suitable for private placement or sale in the jurisdiction in which
such Exempt Offering is effected or proposed to be effected and which shall
comply with all applicable Securities Laws.
"MISREPRESENTATION" and "MATERIAL FACT" shall have the meanings ascribed thereto
under applicable Securities Laws in Canada.
"OFFERING" means an Exempt Offering or a Public Offering, or both.
"PERSON" includes an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture or
other entity, or a stock exchange, trustee in bankruptcy, receiver or any
government, any political subdivision, any agency and any entity or person
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
"PUBLIC OFFERING" means a "best efforts" agency offering, a firm commitment
underwritten offering or a "bought deal" for cash pursuant to a prospectus for
which a final receipt has been issued, or in respect of which a registration
statement has been declared effective, by the securities regulatory authority of
a jurisdiction under the securities legislation of that jurisdiction.
"PUBLIC OFFERING DOCUMENTS" means, in connection with a Public Offering, a
prospectus (preliminary and final), a registration statement or other form of
disclosure document in a form which counsel to DEH and counsel to Canadian 88
shall consider suitable for the Public Offering in accordance with the intended
method thereof, and which complies with all applicable Securities Laws.
<PAGE> 4
-3-
"RULE 144" and "RULE 144A" mean Rule 144 and Rule 144A, respectively,
promulgated under the United States Securities Act of 1933, as amended.
"SECURITIES LAWS" means, with respect to any particular jurisdiction, the
securities legislation and rules and regulations, including policy statements
and notices adopted or issued by securities regulatory authorities, in such
jurisdiction.
"SHAREHOLDERS' AGREEMENT" has the meaning set forth in the first recital hereof.
"SUBSCRIPTION AGREEMENT" has the meaning set forth in the first recital hereof.
"SUBSIDIARY" has the meaning set forth in the Securities Act (Alberta) and, for
greater certainty in the case of Canadian 88, includes Canadian 88 Diversified
Energy Fund 1991 Limited Partnership, Longview Resource Management Corporation,
The Canadian 88 1990 Oil & Gas Exploration and Development Partnership and The
Canadian 88 1990 Hydrocarbon Processing Gas Plant Joint Venture.
"UNDERWRITERS" means any underwriter(s) or agent(s) in connection with a Public
Offering or Exempt Offering, which shall be selected by the party initiating the
same.
"VOTING SHARES" means the Common Shares and any other securities of Canadian 88
having voting rights under ordinary circumstances with respect to the election
of directors of Canadian 88.
1.2 CONSTRUCTION
Whenever the context requires, the gender of all words used herein shall
include the masculine, feminine and neuter, and the number of all words shall
include the singular and plural.
1.3 REFERENCES
Unless otherwise specified, the references herein to "Sections",
"Subsections" or "Articles" refer to the sections, subsections or articles in
this Agreement.
ARTICLE II
REGISTRATION RIGHTS
2.1 PUBLIC OFFERING
(a) DEH shall be entitled to request, from time to time (each, a "REQUEST"),
but not more than twice in any 12 month period, by written notice to
Canadian 88, that Canadian 88 assist DEH in connection with a Public
Offering of all or part of the Company Securities, as may be held from
time to time by DEH, through a lead Underwriter, in jurisdictions and in
accordance with a plan of distribution specified therein, provided that
no request may be made for fewer than two million Voting Shares. DEH
shall be entitled to require that the Public Offering be made in any
jurisdiction where Canadian 88 is, at that time, a reporting issuer,
registrant, or the equivalent thereof, and in any other jurisdiction
provided that Canadian 88 shall not, solely as a result thereof, be
required to qualify generally to do business, subject itself to taxation
or consent to general service of process in such jurisdiction other than
service of process in connection with such offering, or assume
obligations substantially similar to those of a reporting issuer. Upon
receipt by Canadian 88 of a Request, Canadian 88 shall, in conjunction
with DEH, proceed as expeditiously as reasonably possible to complete
the steps and procedures necessary or desirable
-4-
<PAGE> 5
-4-
to complete the Public Offering, and without limiting the generality of
the foregoing, Canadian 88 shall:
(i) subject to section 2.1(d), during the period commencing from the
receipt of the Request until 90 days (or such shorter period as
may be provided in respect of issuances or sales of Company
Securities by Canadian 88 in the relevant underwriting, agency,
distribution or similar agreement) after closing of the Public
Offering, agree that, except for the grant of options to
employees, officers and directors in the ordinary course of
business, it shall not, without the consent of DEH, which consent
shall not be unreasonably withheld, allot or issue any Company
Securities or announce publicly any intention to do so, provided
that Canadian 88 shall be permitted to fulfil any pre-existing
contractual obligations to issue Company Securities including,
without limitation, its obligations under the Company stock
option plan;
(ii) prepare Public Offering Documents in the form appropriate for the
type of Public Offering specified in the Request incorporating
therein any information required with respect to the intended
distribution and with respect to DEH to be supplied by DEH, and
have the same, when and as requested by DEH, filed (accompanied
by any documentation required under applicable Securities Laws)
with the relevant securities regulatory authorities in all
relevant jurisdictions and use its best efforts to cause the
final versions of any such filed Public Offering Documents to
become and remain effective for a period of 12 months after its
effective date or, if shorter, until the distribution of the
securities contemplated thereby is completed;
(iii) prior to filing a Public Offering Document, furnish to DEH and
each Underwriter, if any, selected by DEH in the transaction,
copies of such Public Offering Document as are proposed to be
filed or delivered, and thereafter furnish to DEH and each
Underwriter, if any, selected by DEH in the transaction, such
number of copies of such Public Offering Document (in each case
including all exhibits thereto and all documents incorporated by
reference therein) and such other documents as DEH or each such
Underwriter may reasonably request in order to facilitate the
intended transaction;
(iv) promptly notify DEH and any Underwriter of the occurrence of an
event which could reasonably be considered to result in a
misrepresentation or a material misstatement or omission in such
Public Offering Document, and prepare a supplement or amendment
to such Public Offering Document in form and substance reasonably
satisfactory to DEH so that, as thereafter delivered to the
purchasers or proposed purchasers, such Public Offering Document
(taken together with the amendment or supplement) will contain
full, true and plain disclosure relating to the Company and the
Company Securities and will not 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 not
misleading, in light of the circumstances in which they are made;
and cause the amendment or supplement to be filed as provided
under applicable Securities Laws and promptly make available to
DEH and any Underwriter in the transaction copies of any such
supplement or amendment;
(v) make available for inspection by DEH and any Underwriter
participating in the transaction and any solicitor, accountant,
reserve engineer or other professional retained by DEH or an
Underwriter (collectively, the "PROFESSIONALS"), all financial
and other records, pertinent corporate documents and properties
of Canadian 88 (collectively, the "RECORDS") as shall be
reasonably necessary to enable DEH, any Underwriter and the
<PAGE> 6
-5-
Professionals to complete their respective due diligence and
cause Canadian 88's officers, directors and employees to supply
all information reasonably requested by any Professionals in
connection with such Public Offering Document.
(vi) use its best efforts to furnish to DEH and to each Underwriter,
if any, in a transaction, a signed counterpart, addressed to DEH
or each Underwriter, of:
(A) an opinion or opinions of counsel to Canadian 88; and
(B) a comfort letter or comfort letters from Canadian 88's
auditors;
each covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as DEH or the
Underwriter(s) reasonably request and in form and substance
satisfactory to counsel to DEH and the Underwriter(s);
(vii) use its best efforts to cause all Company Securities to be issued
in connection with the Public Offering, to be listed on each
stock exchange on which securities of that type issued by
Canadian 88 are then listed, if not already listed;
(viii) enter into customary agreements including underwriting or agency
agreements among Canadian 88, DEH, and the Underwriter(s) on
usual commercial terms, and take such steps as are customary for
transactions of a similar nature, including signing and
certifying Public Offering Documents and any supplement or
amendment thereto in the customary manner and take such other
actions as are reasonably required in order to expedite or
facilitate the intended transaction;
(ix) use its best efforts to complete the Public Offering under the
Securities Laws of the applicable jurisdictions and do any and
all other acts and things that may be reasonably necessary or
advisable to facilitate completion of the Public Offering; and
(X) make available the officers of Canadian 88 for any "road show" or
other presentations to potential investors in the Offering.
(b) DEH shall promptly furnish in writing to Canadian 88 such information
regarding the distribution of Company Securities as Canadian 88 may from
time to time reasonably request and such other information as may be
legally required in connection with the preparation or filing of any
Public Offering Document.
(c) DEH agrees that upon receipt of any notice from Canadian 88 pursuant to
Section 2.1(a)(iv), it shall forthwith discontinue the distribution of
Company Securities pursuant to such Public Offering Document applicable
to such Company Securities until it shall have received copies of such
amendment or supplement, and if so directed by Canadian 88, DEH shall
deliver to Canadian 88 all copies, other than permanent file copies,
then in its possession, of such Public Offering Document covering such
Company Securities at the time of receipt of such notice.
(d) Canadian 88 may postpone for a reasonable period of time (but not
exceeding the lesser of 120 days from the date of a Request or 90 days
from the closing of the transaction referred to in Sections 2.1(d)(i) or
(ii)) the filing or effectiveness of any Public Offering Document
required pursuant to this Section 2.1 if the Board of Directors of
Canadian 88 determines (in good faith in a written resolution) that such
event:
<PAGE> 7
-6-
(i) would have a material adverse effect upon any plan or proposal,
then under active consideration by the Board of Directors, for
Canadian 88 or any of its material Subsidiaries to engage in a
material acquisition or disposition of assets (other than in the
ordinary course of business) or any material merger,
consolidation, tender offer or similar material business
combination, or
(ii) would have a material adverse effect on a proposed public
offering of Company Securities for the account of Canadian 88, if
Canadian 88 then expects, and has taken substantial steps prior
to receipt of the applicable Request, to make such offering.
Any such postponement shall begin when Canadian 88 gives written notice
thereof to DEH and shall continue until Canadian 88 gives written notice
of the termination thereof to DEH, provided that, with respect to such
postponement, Canadian 88 shall give such notice of termination as soon
as the condition giving rise thereto has ceased to exist and, during
such postponement (other than during a postponement pursuant to Clause
(ii) above), shall take such steps as are necessary to insure that the
requested Public Offering will be effected in accordance with the
provisions of this Agreement as soon as practicable after such
postponement is terminated; and provided further that Canadian 88 may
only exercise the rights set forth in Clauses (i) and (ii) above one
time each during any period of 365 consecutive days. Each such notice of
postponement shall specify the basis for the postponement and an
approximation of the anticipated delay and shall include a copy of the
resolution setting forth the relevant determination of the Board of
Directors.
(e) If Canadian 88 proposes to sell any Company Securities (other than by a
registration on Form S-4, Form S-8 or any successor or similar form
under Securities Laws, or in connection with a tender offer, merger or
other acquisition), Canadian 88 shall as soon as practicable (and, in
the case of a "bought deal", at least five Business Days and otherwise,
at least ten Business Days before the anticipated filing date) give
notice of such proposed sale (a "PROPOSED SALE") to DEH, including the
material terms thereof. DEH shall have no less than 48 hours, in the
case of a bought deal, and otherwise no less than five Business Days,
from receipt of such notice to advise Canadian 88 that it wishes to sell
Company Securities in such Proposed Sale, in which event DEH shall be
entitled to participate in the Proposed Sale; provided if (i) a Proposed
Sale pursuant to this Section 2.1(e) involves an underwritten offering
of Company Securities for the account of Canadian 88, to be distributed
(on a firm commitment basis) by or through one or more Underwriters of
recognized national or regional standing under underwriting terms
appropriate for such a transaction, and (ii) the managing Underwriter of
such underwritten offering shall inform Canadian 88 and DEH by letter of
its belief that the number of securities requested to be included in
such registration exceeds the number which can be sold in (or during the
time of) such offering or that the inclusion would adversely affect the
marketing of the securities to be sold by Canadian 88 therein, then
Canadian 88 may include all securities proposed to be sold by Canadian
88 to be sold for its own account and may decrease the number of Company
Securities so proposed to be sold by DEH and so requested to be included
in such registration by DEH to the extent necessary to reduce the number
of securities to be included in the registration statement to the level
recommended by the managing Underwriter. If Canadian 88 at any time
after it has given notice of a Proposed Sale, determines for any reason
not to proceed with or to delay the sale specified in such notice,
Canadian 88 will promptly give written notice of such determination and,
thereupon, (i) in the case of a determination not to proceed with such
sale, shall be relieved of its obligations hereunder to register any DEH
Company Securities in connection with such sale, and (ii) in the case of
a determination to delay such sale, Canadian 88 shall be permitted to
delay registering any DEH Company Securities for the same period as the
delay in such sale, which period shall not be in excess of 21 days. No
registration of DEH Company Securities
<PAGE> 8
-7-
effected under this Section 2.1(e) shall, subject to Section 2.1(a),
relieve Canadian 88 of its obligations with respect to any Request made
by DEH pursuant to Section 2.1(a).
2.2 EXEMPT OFFERING
DEH shall be entitled to request, from time to time, but not more than
twice in any 12 month period, by written notice to Canadian 88 to, and Canadian
88 shall provided that the number of Voting Shares of Canadian 88 referred to in
such notice shall not be less than two million, comply with such provisions of
Section 2.1 that are applicable to Exempt Offerings and Exempt Offering
Documents to the same extent as if such Exempt Offerings and Exempt Offering
Documents were referred to therein.
2.3 EXPENSES
Subject to applicable Securities Laws, all reasonable expenses incurred
with respect to each Public Offering or Exempt Offering hereunder (whether or
not effective), including, without limitation, the following:
(a) all reasonable fees and expenses of counsel and independent accountants
to Canadian 88 (including fees and expenses relating to any opinions)
delivered pursuant hereto;
(b) all fees and expenses in connection with the qualification of Company
Securities to be registered for offering and sale under provincial,
state securities and "Blue Sky" laws, if applicable, including
reasonable fees and disbursements of counsel for any placement or sales
agents or underwriters in connection therewith;
(c) all expenses relating to the preparation, printing, distribution and
reproduction of the Public Offering Documents or Exempt Offering
Documents, as the case may be, each amendment or supplement to the
foregoing, the certificates representing Company Securities to be sold,
each agreement with and among any placement or sales agents or
underwriters and all documents delivered pursuant thereto; and
(d) all prospectus, registration and filing fees;
(e) all fees, commissions, discounts and expenses of any Underwriter engaged
(including reasonable fees and expenses of its counsel), if provided for
in any agreement with any Underwriter; and
(f) all out-of-pocket and other expenses of DEH (including fees and expenses
of its counsel);
shall be borne by DEH and Canadian 88 in proportion to their respective relative
proportion of the proceeds or anticipated proceeds (in the event the Offering
does not proceed) of the Offering. Except as aforesaid, each party shall bear
its own costs and expenses incurred in connection with such matters.
2.4 INDEMNITY
(a) Canadian 88 agrees to indemnify and hold harmless DEH and the
Affiliates, officers, directors, employees, partners and agents of DEH
from and against any and all losses, claims, damages, liabilities and
expenses, including costs of investigation and reasonable fees and
expenses of legal counsel which arise out of, or are based upon any
misrepresentation or alleged misrepresentation, breach of warranty, or
untrue statement or alleged untrue statement of a material fact
contained in any Public Offering Document or Exempt Offering Document
(including an amendment or supplement thereto) relating to a Public
Offering or an Exempt Offering, or arising out of or
<PAGE> 9
-8-
based upon any omission or alleged omission to state in any such Public
Offering Document or Exempt Offering Document (including any amendment
or supplement thereto) a fact necessary to make the Public Offerings
Document or Exempt Offering Document not misleading; provided, however,
that Canadian 88 shall not be liable to DEH in any such case to the
extent that any such losses, claims, damages, liabilities or expenses
arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission made in such Public Offering
Document or Exempt Offering Document (including any amendment or
supplement) in reliance upon and in conformity with written information
furnished to Canadian 88 by DEH specifically for use in the preparation
thereof.
(b) Canadian 88 also agrees, upon request by DEH, to indemnify any
Underwriters in connection with the Public Offering, their officers,
directors, employees and agents and each person who controls such
Underwriters on substantially the same basis as the indemnification of
DEH provided herein.
(c) Canadian 88 may require, as a condition to including any Company
Securities in any Public Offering Document or Exempt Offering Document
filed, pursuant to Sections 2.1 and 2.2 and to entering into any agency
or underwriting agreement with respect thereto, that Canadian 88 shall
have received an undertaking from DEH to indemnify and hold harmless
Canadian 88 and each of its Affiliates, officers, directors, employees,
partners and agents from and against any and all losses, claims,
damages, liabilities and expenses, including costs of investigation and
reasonable fees and expenses of legal counsel which arise out of, or are
based upon an untrue statement or alleged untrue statement of a material
fact in such Public Offering Document or Exempt Offering Document
(including an amendment or supplement thereto) or any omission or
alleged omission to state a material fact, required to be stated therein
or necessary to make a statement therein not misleading, in light of the
circumstances in which it is made, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to Canadian 88 for inclusion therein
by DEH; provided however that DEH shall not be required to undertake
liability under this Subsection 2.4(c) for any amounts in excess of the
dollar amount of the gross proceeds received by DEH from the sale of its
Company Securities pursuant to such offering, in such case as reduced by
any damages or other amounts that DEH was otherwise required to pay by
reason of such untrue statement or omission.
(d) Any Person entitled to indemnification hereunder agrees to give prompt
written notice to the indemnifying party after the receipt by such
Person of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which
such Person may claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party a conflict of interest shall exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to such indemnified party. If the indemnifying
party is not entitled to, or elects not to assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more
than one counsel with respect to such claim, unless in the reasonable
judgment of counsel to such indemnified party a conflict of interest
shall exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels. No indemnified party will be
required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation and no
indemnified party will be required to consent to entry of any judgment
or enter into any settlement which provides for
<PAGE> 10
-9-
any remedy other than the payment of money damages. The indemnified
party will not be subject to any liability for any settlement made
without its consent, which shall not be unreasonably withheld.
2.5 CONTRIBUTION
If the indemnification provided for in Section 2.4 is unavailable or
insufficient to hold harmless DEH and/or Canadian 88, as the case may be, in
respect of any losses, claims, damages or liabilities or actions in respect
thereof, then Canadian 88 and DEH, as the case may be, shall in lieu of
indemnifying DEH or Canadian 88, as the case may be, contribute to the amount
paid or payable by Canadian 88 and/or DEH, as the case may be, as a result of
such losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of Canadian 88 or DEH, as the case may
be, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or actions as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by Canadian 88 or DEH, as the case may be, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Canadian 88 and DEH agree that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this paragraph. The amount paid or payable by Canadian 88 or DEH, as the case
may be, as a result of the losses, claims, damages, liabilities or actions in
respect thereof referred to above in this paragraph shall be deemed to include
any legal or other expenses reasonably incurred by Canadian 88 or DEH, as the
case may be, in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this paragraph, the amount that DEH
shall be required to contribute shall not exceed the total price at which the
securities sold by DEH was offered to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the United States
Securities Act of 1933 (the "SECURITIES ACT") shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
2.6 RULE 144
Canadian 88 covenants to and with DEH that Canadian 88 shall timely file
the reports required to be filed by it under the Securities Act and the United
States Securities Exchange Act of 1934 (the "EXCHANGE ACT") (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the Securities and Exchange
Commission (the "COMMISSION") under the Securities Act) and the rules and
regulations adopted by the Commission thereunder (or, if Canadian 88 is not
required to file such reports, will, upon the request of any holder of Company
Securities, make publicly available other information) and will take such
further action as any holder of Company Securities may reasonably request, all
to the extent required from time to time to enable such holder to sell Company
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of Company
Securities, Canadian 88 will deliver to such holder a written statement as to
whether it has complied with such requirements.
2.7 COMPLIANCE WITH SECURITIES LAWS
DEH agrees that it will at all times comply with the requirements of all
applicable Securities Laws with respect to its transactions in securities of
Canadian 88.
<PAGE> 11
-10-
2.8 COVENANTS IN CONNECTION WITH FUTURE GRANTS OF REGISTRATION RIGHTS
From and after the date of this Agreement, Canadian 88 shall not enter
into any agreement with any holder or prospective holder of Company Securities
which provides for the granting to such holder of registration rights unless
such agreement is subject to the rights of DEH or unless Canadian 88 first
obtains the written consent of DEH.
ARTICLE III
MISCELLANEOUS
3.1 NOTICES
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopier) and, unless
otherwise expressly provided herein, shall be delivered during normal business
hours by hand, by Federal Express or other reputable overnight commercial
delivery service, or by telecopier notice, confirmation of receipt received,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
CANADIAN 88:
Canadian 88 Energy Corp.
700, 400 Third Avenue SW
Calgary, Alberta
T2P 4H2
Attention: President
Fax: (403) 974-8811
with a copy to:
McCarthy Tetrault
Barristers & Solicitors
Suite 3300, 421 - 7th Avenue SW
Calgary, Alberta
T2P 4K9
Attention: Mr. David F. Phillips
Fax: (403) 260-3501
and:
Carscallen Lockwood
Barristers and Solicitors
Suite 1500, 407 - 2nd Street S.W.
Calgary, Alberta
T2P 2Y3
Attention: Stan Carscallen
Fax (403) 262-2952
<PAGE> 12
-11-
DEH:
Duke Energy Hydrocarbons, L.L.C.
10777 Westheimer
Suite 650
Houston, Texas 77042
Attention: President
Fax: (713) 260-8601
with a copy to:
Bennett Jones
Barristers & Solicitors
4500 Bankers Hall East
855 - 2nd Street SW
Calgary, Alberta
T2P 4K7
Attention: John D. MacNeil and Margaret G. Lemay
Fax No.: (403) 265-7219
Any notice, request or demand delivered personally or by telecopier shall be
deemed to have been given and received on the day it is so delivered if that day
is a Business Day or the next Business Day, as the case may be.
3.2 CALCULATION OF TIME PERIODS
Unless otherwise specified herein, the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement
shall be calculated by excluding the day on which the period commences and
including the day on which the period ends. If the last day of such period is
not a Business Day, the period in question shall end on the next Business Day.
3.3 APPLICABLE LAW
This Agreement shall be interpreted and governed in accordance with the
laws of the Province of Alberta (being the forum conveniens) and the parties
hereby submit to the jurisdiction of the courts of Alberta in connection with
any dispute concerning this Agreement or the subject matter thereof. Service of
any documents on the parties hereto in connection with any legal proceedings
shall be effective if the same are delivered by courier to the addresses for
notice set forth herein.
3.4 SEVERABILITY
If any provision of this Agreement or any application thereof shall be
declared or held to be invalid, illegal or unenforceable in whole or in part
whether generally or in any particular jurisdiction, such provision shall be
deemed to be amended to the extent necessary to cure such invalidity, illegality
or unenforceability, and the validity, legality or enforceability of the
remaining provisions of this Agreement, both generally and in every other
jurisdiction, shall not in any way be affected or impaired thereby.
<PAGE> 13
-12-
3.5 AMENDMENTS
No amendment or modification of this Agreement shall be binding unless
in writing and signed by all of the parties hereto.
3.6 WAIVER
No waiver by any party hereto of any breach of any of the provisions of
this Agreement shall take effect or be binding upon the party unless in writing
and signed by such party. Unless otherwise provided therein, such waiver shall
not limit or affect the rights of such party with respect to any other breach.
3.7 TIME OF ESSENCE
Time shall be of the essence of this Agreement.
3.8 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. DEH shall
be entitled to assign, in whole or in part, the rights and obligations hereunder
to a purchaser of Company Securities, provided that the assignee agrees in
writing to be bound by the terms hereof and becomes a party hereto.
3.9 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall constitute one and the same agreement.
3.10 FURTHER ACTS
The parties hereto agree to execute and deliver such further and other
documents and perform and cause to be performed such further and other acts and
things as may be reasonably necessary or desirable in order to give full effect
to this Agreement and every part thereof.
IN WITNESS WHEREOF the parties hereto have executed this agreement on
the date first above written.
CANADIAN 88 ENERGY CORP.
Per:
-------------------------------------
Donald R. Gardner
Chief Financial Officer
Per:
-------------------------------------
Robert A. Pilling
Vice President, Administration
DUKE ENERGY HYDROCARBONS, L.L.C.
Per:
-------------------------------------
Joseph L. Pritchett, III
Executive Vice President,
Exploration and Development
<PAGE> 1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
SHAREHOLDERS' AGREEMENT
AMONG
CANADIAN 88 ENERGY CORP.,
DUKE ENERGY HYDROCARBONS, L.L.C.
AND
GREG S. NOVAL
DATED MARCH 24, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
INTERPRETATION...........................................................................................4
1.1 Definitions.....................................................................................4
1.2 Rules of Construction...........................................................................5
1.3 Recitals and Headings...........................................................................5
ARTICLE 2
BOARD OF DIRECTORS AND OFFICERS..........................................................................5
2.1 Nominees for Election to the Board of Directors.................................................5
2.2 Resident Canadian Requirements..................................................................6
2.3 Transitional Provisions re Directors............................................................6
2.4 Future Changes to the Board of Directors........................................................7
2.5 Size of the Board of Directors..................................................................7
2.6 Committees of the Board of Directors............................................................8
2.7 Qualification as a Director or Committee Member.................................................8
2.8 Chairman, President and Chief Executive Officer.................................................8
2.9 Carrying Out Agreement..........................................................................9
ARTICLE 3
BUSINESS COMBINATION TRANSACTIONS AND SOLICITATIONS......................................................9
3.1 Limitation on Business Combination Transactions.................................................9
3.2 Limitation on Solicitations, Etc................................................................9
3.3 Share Price Performance Exception..............................................................10
ARTICLE 4
DEH ACQUISITION RIGHTS..................................................................................12
4.1 Limitation on Acquisition of Additional Shares by DEH..........................................12
4.2 Right to Make Market Purchases.................................................................12
4.3 Right to Participate in Private Placements.....................................................12
4.4 Right to Participate in Public Offerings.......................................................13
4.5 Acquisition of Additional Shares Due to Share Compensation Arrangement.........................13
4.6 Right to Participate in Other Distributions....................................................14
4.7 Acquisition of Additional Shares if Take-over Bid Commenced....................................14
4.8 Consequential Canadian 88 Restrictions.........................................................14
ARTICLE 5
NOVAL ACQUISITION RIGHTS................................................................................15
5.1 Limitation on Acquisition of Additional Shares by Noval........................................15
5.2 Right to Make Market Purchases.................................................................15
5.3 Right to Participate in Issues.................................................................15
ARTICLE 6
DEH TRANSFER RIGHTS.....................................................................................15
6.1 Permitted Transfers of Shares by DEH...........................................................15
6.2 Right of First Refusal.........................................................................16
</TABLE>
<PAGE> 3
3
<TABLE>
<S> <C> <C>
ARTICLE 7
VOTING MATTERS..........................................................................................17
7.1 Voting With Respect to Directors...............................................................17
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS...............................................................17
8.1 Representations and Warranties.................................................................17
8.2 Cooperation Regarding Filings, Etc.............................................................19
ARTICLE 9
TERMINATION.............................................................................................19
9.1 Termination....................................................................................19
ARTICLE 10
GENERAL PROVISIONS......................................................................................19
10.1 Notices........................................................................................19
10.2 Amendment and Waiver...........................................................................21
10.3 Injunctive Relief..............................................................................21
10.4 Governing Law..................................................................................21
10.5 Further Assurances.............................................................................21
10.6 Severability...................................................................................21
10.7 Entire Agreement...............................................................................22
10.8 Assignment.....................................................................................22
10.9 Benefit of Agreement...........................................................................22
10.10 Counterparts...................................................................................22
10.11 Fax Delivery...................................................................................22
</TABLE>
<PAGE> 4
SHAREHOLDERS' AGREEMENT
Made as of March 24, 2000,
AMONG:
CANADIAN 88 ENERGY CORP., a corporation incorporated under the
laws of Canada ("CANADIAN 88"),
- and -
DUKE ENERGY HYDROCARBONS, L.L.C., a limited liability company
incorporated under the laws of Delaware ("DEH"),
- and -
GREG S. NOVAL, an individual resident in Turner Valley,
Alberta ("NOVAL").
WHEREAS Canadian 88 has offered DEH the opportunity to act as a
strategic equity investor so as to allow Canadian 88 to continue to actively
develop its inventory of exploration and development prospects in Western
Canada;
WHEREAS DEH has, pursuant to the Subscription Agreement, acquired
24,412,500 Common Shares of Canadian 88, which when combined with 1,380,200
Common Shares previously acquired by DEH constitutes 19.6% of the outstanding
number of Common Shares; and
WHEREAS Noval is the Beneficial Owner of 7,273,410 Common Shares of
Canadian 88, being 5.5% of the outstanding number of Common Shares, and also
holds options to acquire a further 1,250,000 Common Shares.
NOW THEREFORE the parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "ADDITIONAL DIRECTORS" has the meaning set forth in Section
2.1(c);
(b) "AFFILIATE" has the meaning set forth in the Securities Act
(Alberta);
(c) "BENEFICIAL OWNERSHIP" means direct or indirect beneficial
ownership of, or control or direction over, and "BENEFICIALLY
OWN" and "BENEFICIAL OWNER" have corresponding meanings;
<PAGE> 5
2
(d) "BUSINESS COMBINATION TRANSACTION" means:
(i) an amalgamation, arrangement, merger, share exchange,
reorganization or similar transaction (a
"Transaction") involving Canadian 88;
(ii) a sale, lease, exchange, transfer or other
disposition of 50% or more of the assets of Canadian
88 and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions; or
(iii) the acquisition by a person or entity, or any persons
or entities acting jointly or in concert, of
Beneficial Ownership or the right to acquire
Beneficial Ownership of 50% or more of the
outstanding Voting Shares, by Take-over Bid or
otherwise;
provided that a Transaction in which the Beneficial Ownership
of the share capital of Canadian 88 or other resulting entity
of the Transaction immediately after the consummation of the
Transaction is substantially the same as the Beneficial
Ownership of the share capital of Canadian 88 immediately
prior to the consummation of the Transaction shall be deemed
not to be a Business Combination Transaction;
(e) "BOARD OF DIRECTORS" means the board of directors of
Canadian 88;
(f) "BUSINESS DAY" means any day excluding Saturdays, Sundays and
statutory holidays in Alberta or Texas;
(g) "CANADA BUSINESS CORPORATIONS ACT" means the Canada Business
Corporations Act, as amended, or any successor statute, as in
effect from time to time;
(h) "COMMON SHARES" means the common shares of Canadian 88 as
constituted on the date hereof;
(i) "CONVERTIBLE SECURITIES" means any securities convertible
into, exchangeable for or exercisable for Voting Shares,
including convertible debentures, convertible preferred
shares, warrants and rights but excluding employee stock
options and other convertible securities of Canadian 88 issued
pursuant to a Share Compensation Arrangement;
(j) "CURRENT MARKET PRICE" means, in respect of a Common Share or
other securities valued hereunder (for the purposes of this
definition, the "shares") at any date, the weighted average
price per share for the ten consecutive trading days ending on
the trading day prior to such date on The Toronto Stock
Exchange (or on any other Canadian or United States stock
exchange on which the shares are then listed and designated by
the directors of Canadian 88 for such purpose if the shares
are not then listed on The Toronto Stock Exchange). The
weighted average price shall be determined by dividing the
aggregate of the sale prices of all such shares sold on the
said exchange during the said ten consecutive trading days by
the total number of such shares so sold. If (i) the shares are
not listed on a stock exchange in Canada or the United States
or (ii) within such ten consecutive trading days there have
not been at least five days in which at least 100 shares have
traded, the Current Market Price in respect of a share shall
be determined, subject to regulatory approval, by agreement
between Canadian 88, DEH and Noval or, failing such agreement,
by an investment banking firm of national reputation selected
by a majority of the
<PAGE> 6
3
Additional Directors, with the consent of DEH and Noval, which
consent shall not be unreasonably withheld. Any determination
of the Current Market Price of the shares shall be made within
three Business Days of the date of selection and notification
of the investment banking firm. The costs and expenses of any
such investment banking firm shall be borne as to one half by
Canadian 88 and as to the remaining one half by DEH and Noval
in proportion to their respective interest in the transaction
for which the determination of Current Market Price is made;
(k) "DEH NOMINEES" has the meaning set forth in Section 2.1(a);
(l) "DEH OWNERSHIP PERCENTAGE" means the percentage of the Voting
Shares Beneficially Owned by DEH at the time of determination,
including for the purposes hereof any unissued Common Shares
which may be issued under any Convertible Securities held by
DEH;
(m) "EXCHANGEABLE SECURITY" means a security of any type,
including but not limited to debt, equity, warrants or other
rights, issued by DEH and which includes or represents the
right to acquire Voting Shares from DEH upon exchange,
conversion or exercise thereof;
(n) "FUNDAMENTAL CHANGE" means the approval by the holders of
Voting Shares of any of the matters referred to in Sections
173, 183, 188, 189 or 192 of the Canada Business Corporations
Act;
(o) "NOVAL NOMINEES" has the meaning set forth in Section 2.1(b);
(p) "NOVAL OWNERSHIP PERCENTAGE" means the percentage of the
Voting Shares Beneficially Owned by Noval at the time of
determination, including for the purposes hereof any unissued
Common Shares which may be issued under any Convertible
Securities held by Noval;
(q) "PERSON" has the meaning assigned to such term in the
Securities Act (Alberta);
(r) "PRIVATE PLACEMENT" means a distribution for cash (other than
pursuant to a Share Compensation Arrangement) under an
exemption from the requirement to file and obtain a receipt
for a prospectus from, or file and have declared effective a
registration statement by, the securities regulatory authority
of a jurisdiction under the securities legislation of that
jurisdiction;
(s) "PUBLIC OFFERING" means a "best efforts" agency offering, a
firm commitment underwritten offering or a "bought deal" for
cash pursuant to a prospectus for which a final receipt has
been issued, or in respect of which a registration statement
has been declared effective, by the securities regulatory
authority of a jurisdiction under the securities legislation
of that jurisdiction;
(t) "QUALIFIED BID" means a Take-over Bid for Voting Shares that:
(i) is made to all holders of Voting Shares, Convertible
Securities and employee stock options or other
convertible securities of Canadian 88 issued pursuant
to a Share Compensation Arrangement, as registered on
the books of Canadian 88, other than the offeror;
<PAGE> 7
4
(ii) is for a price per Voting Share at least 10% greater
than the Current Market Price of the Voting Shares
calculated on the date of the public announcement of
such Take-over Bid or the date of public announcement
of any previously announced Take-over Bid that has
not been withdrawn;
(iii) contains, and the take-up and payment for Voting
Shares tendered or deposited is subject to, an
irrevocable and unqualified provision that no Voting
Shares will be taken up or paid for pursuant to the
Take-over Bid unless more than 50% of the Voting
Shares held by holders of Voting Shares other than
the offeror, its Affiliates or any person acting
jointly or in concert with the offeror shall have
been deposited or tendered pursuant to the Take-over
Bid and not withdrawn;
(iv) contains an irrevocable and unqualified provision
that if the deposit condition set forth in (iii)
above is satisfied the offeror will make a public
announcement of that fact and the Take-over Bid will
remain open for deposits and tenders of Voting Shares
for not less than ten Business Days from the date of
such public announcement; and
(v) is subject to no conditions other than customary
conditions;
(u) "RELATED PARTY TRANSACTION" has the meaning assigned to such
term in Ontario Securities Commission Policy 9.1 (until April
30, 2000) or Rule 61-501 (from May 1, 2000);
(v) "RESIDENT CANADIAN" has the meaning set forth in the Canada
Business Corporations Act;
(w) "SECURITIES ACT (ALBERTA)" means the Securities Act (Alberta),
as amended, or any successor statute, as in effect from time
to time;
(x) "SHARE COMPENSATION ARRANGEMENT" has the meaning assigned to
such term in Section 627 of The Toronto Stock Exchange Company
Manual;
(y) "SUBSIDIARY" means, with respect to any Person, any other
Person of which at least a majority of the voting power of the
voting equity securities or voting equity interest is
Beneficially Owned by such Person;
(z) "SUBSCRIPTION AGREEMENT" means the subscription agreement
dated March 17, 2000 between DEH and Canadian 88;
(aa) "TAKE-OVER BID" has the meaning assigned to such term in the
Securities Act (Alberta);
(bb) "TRANSFER" has the meaning set forth in Section 6.1; and
(cc) "VOTING SHARES" means the Common Shares and any other
securities of Canadian 88 having voting power under ordinary
circumstances with respect to the election of directors of
Canadian 88.
<PAGE> 8
5
1.2 RULES OF CONSTRUCTION
Unless the context otherwise requires, as used in this Agreement:
(a) a term has the meaning ascribed to it; (b) an accounting term not
otherwise defined has the meaning ascribed to it in accordance with
generally accepted accounting principles as in effect in Canada from
time to time; (c) "ACTING JOINTLY AND IN CONCERT" shall be interpreted
in accordance with the provisions of the Securities Act (Alberta); (d)
"INCLUDING" means "INCLUDING, WITHOUT LIMITATION"; and (e) words in the
singular include the plural and words in the plural include the
singular.
1.3 RECITALS AND HEADINGS
The recitals and descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
ARTICLE 2
BOARD OF DIRECTORS AND OFFICERS
2.1 NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
In connection with each election of directors of Canadian 88, whether
at an annual or special meeting, Canadian 88 will nominate for election
to its Board of Directors, in accordance with its procedures for the
nomination of directors as provided in its by-laws and applicable law:
(a) the number of persons designated by DEH (the "DEH Nominees")
that is equal to the greater of:
(i) two; and
(ii) the product (rounded to the nearest whole number, but
subject to Section 2.1(b)(i)) of: (A) the total
number of directors constituting the entire Board of
Directors, multiplied by (B) the DEH Ownership
Percentage;
(b) the number of persons designated by Noval, one of whom may be
Noval (the "Noval Nominees"), that is equal to the greater of:
(i) two; and
(ii) the product (rounded to the nearest whole number, but
subject to Section 2.1(a)(i)) of: (A) the total
number of directors constituting the entire Board of
Directors, multiplied by (B) the Noval Ownership
Percentage; and
(c) as the remaining nominees for election, persons who are
independent of DEH and Noval within the meaning of Ontario
Securities Commission Policy 9.1 (until April 30, 2000) or
Rule 61-501 (from May 1, 2000) (the "Additional Directors")
(provided that the initial Additional Directors appointed on
the date of this agreement shall be the persons named in the
Corporate Governance and Transition Arrangements letter dated
March 17, 2000 from DEH to Canadian 88 and Noval). The
Additional Directors shall be chosen in the following manner:
<PAGE> 9
6
(i) if the number of Additional Directors to be nominated
for election is the same as the number of Additional
Directors then in office who have indicated a
willingness to be nominated for re-election, then the
Additional Directors then in office shall be
nominated for re-election;
(ii) if the number of Additional Directors to be nominated
for election is greater than the number of Additional
Directors then in office who have indicated a
willingness to be nominated for re-election, then
such Additional Directors then in office shall be
nominated for re-election and the remaining persons
to be nominated for election as Additional Directors
shall be chosen by the nominating committee of the
Board of Directors; or
(iii) if the number of Additional Directors to be nominated
for election is less than the number of Additional
Directors then in office who have indicated a
willingness to be nominated for re-election, then the
persons to be nominated for election as Additional
Directors shall be chosen by the nominating committee
of the Board of Directors from the Additional
Directors then in office.
(d) Canadian 88 shall, for so long as DEH is entitled to designate
DEH Nominees and Noval is entitled to designate Noval Nominees
under this Agreement, solicit proxies for the election of DEH
Nominees and Noval Nominees in the same manner and at the same
time as it solicits proxies for the election of the Additional
Directors to the Board of Directors.
2.2 RESIDENT CANADIAN REQUIREMENTS
(a) The DEH Nominees shall be Resident Canadians in the numbers
set forth below, unless waived by a majority of the Additional
Directors:
NUMBER OF DEH NOMINEES MINIMUM NUMBER OF RESIDENT CANADIANS
2 0
3 1
4 or 5 2
6 or more 3
(b) Each of the Noval Nominees shall be Resident Canadians.
(c) The Additional Directors shall be Resident Canadians in the
numbers as will result in the Board of Directors as a whole
meeting the Resident Canadian requirements of the Canada
Business Corporations Act.
2.3 TRANSITIONAL PROVISIONS RE DIRECTORS
(a) DEH shall advise Canadian 88 and Noval on the date of this
Agreement (or has previously advised) who the initial DEH
Nominees will be. Canadian 88 shall use reasonable efforts to
cause two of the current members of the Board of Directors to
resign on the date of this Agreement (in a sequential manner,
if required) so that the vacancies resulting thereby may be
filled by the remaining directors of Canadian 88 with the
initial DEH Nominees.
<PAGE> 10
7
(b) Noval shall advise Canadian 88 and DEH on the date of this
Agreement (or has previously advised) who the initial Noval
Nominees are among the current directors of Canadian 88.
(c) DEH and Noval shall advise Canadian 88 on the date of this
Agreement (or have previously advised) who the initial
Additional Directors will be. To the extent that the initial
Additional Directors are not among the current directors of
Canadian 88, Canadian 88 shall use reasonable efforts to cause
current members of the Board of Directors to resign on the
date of this Agreement (in a sequential manner, if required)
so that the vacancies resulting thereby may be filled by the
remaining directors of Canadian 88 with such initial
Additional Directors.
2.4 FUTURE CHANGES TO THE BOARD OF DIRECTORS
(a) If any DEH Nominee shall cease to serve or fails to be elected
as a director of Canadian 88 for any reason other than as set
forth in Section 2.4(d), then the vacancy resulting thereby
shall be filled by the remaining directors of Canadian 88 with
a new DEH Nominee, and such new DEH Nominee shall thereafter
serve until the expiration of the term of the DEH Nominee
replaced by such new DEH Nominee.
(b) If any Noval Nominee shall cease to serve or fails to be
elected as a director of Canadian 88 for any reason other than
as set forth in Section 2.4(e), then the vacancy resulting
thereby shall be filled by the remaining directors of Canadian
88 with a new Noval Nominee, and such new Noval Nominee shall
thereafter serve until the expiration of the term of the Noval
Nominee replaced by such new Noval Nominee.
(c) If any Additional Director shall cease to serve as a director
of Canadian 88 for any reason, then the vacancy resulting
thereby shall be filled by the remaining directors of Canadian
88 with a new Additional Director chosen by the nominating
committee of the Board of Directors, and such new Additional
Director shall thereafter serve until the expiration of the
term of the Additional Director replaced by such new
Additional Director.
(d) If at any time the DEH Ownership Percentage decreases so that
DEH is no longer entitled to designate DEH Nominees to be
nominated for election as directors of Canadian 88, then DEH
shall, unless a majority of the Additional Directors determine
otherwise, use reasonable efforts to cause the DEH Nominees
serving as Canadian 88 directors to immediately resign.
(e) If at any time the Noval Ownership Percentage decreases so
that Noval is no longer entitled to designate Noval Nominees
to be nominated for election as directors of Canadian 88, then
Noval shall, unless a majority of the Additional Directors
determine otherwise, use reasonable efforts to cause the Noval
Nominees serving as Canadian 88 directors to immediately
resign.
2.5 SIZE OF THE BOARD OF DIRECTORS
The number of persons to be elected to the Board of Directors at any
meeting of the shareholders of Canadian 88 will be set at nine and
shall not be increased without the consent of DEH and Noval.
<PAGE> 11
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2.6 COMMITTEES OF THE BOARD OF DIRECTORS
(a) The Board of Directors shall, on the date of this Agreement,
create (if not already created) and appoint the members of the
following committees of the Board of Directors, each of which
shall have three members:
(i) an audit committee, which shall perform the functions
required by applicable law;
(ii) an executive committee, which shall have the powers
and authority, consistent with applicable law,
determined from time to time by the Board of
Directors. Notwithstanding the by-laws of Canadian
88, motions made at any meeting of the executive
committee shall be carried only by a unanimous vote;
and
(iii) a nominating committee, which shall perform the
functions described in this Agreement.
(b) The Board of Directors shall appoint one director then serving
as a DEH Nominee, one director then serving as a Noval Nominee
and one director then serving as an Additional Director to
each of the audit, executive and nominating committees of the
Board of Directors and to each other committee of the Board of
Directors as may be appointed from time to time. Each such
appointee must meet the individual requirements for committee
membership contained in the Canada Business Corporations Act
and the respective residency of the members of each committee
must meet the Resident Canadian requirements of the Canada
Business Corporations Act. DEH shall not be obligated to
nominate any Resident Canadians for committee membership.
2.7 QUALIFICATION AS A DIRECTOR OR COMMITTEE MEMBER
All DEH Nominees and Noval Nominees shall have consented in writing to
serve as a director of Canadian 88 (unless they have previously done
so) and shall meet the qualification requirements to serve as a
director and, if applicable, a committee member under the Canada
Business Corporations Act, provided that DEH Nominees will be required
to be Resident Canadians only to the extent required by Section 2.2.
2.8 CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
(a) James D. Raymond shall continue as the chairman of the Board
of Directors for so long as the Board of Directors determines.
(b) On the date of this Agreement:
(i) Noval shall resign as the President and Chief
Executive Officer of Canadian 88; and
(ii) Joseph L. Pritchett, III (the current Executive Vice
President Exploration and Production of DEH) shall be
appointed as the President and Chief Executive
Officer of Canadian 88 in place of Noval. Upon such
appointment, Canadian 88 shall enter into the
executive employment agreement with Mr. Pritchett
that is referred to in and attached to Corporate
Governance and Transition Arrangements letter dated
March 17, 2000 from DEH to Canadian 88 and Noval.
<PAGE> 12
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2.9 CARRYING OUT AGREEMENT
(a) DEH and Noval will use their respective best efforts to cause
the DEH Nominees and the Noval Nominees, if they are elected
to the Board of Directors and to the extent permitted by law,
to act and vote as directors of Canadian 88 so as to carry out
the provisions and intent of this Agreement.
(b) Notwithstanding (a) above, Canadian 88, DEH and Noval
acknowledge that all members of the Board of Directors have an
obligation to act as directors in a manner that is consistent
with their statutory and fiduciary duties and that nothing in
this Agreement is intended to interfere with the proper
discharge by them of those duties.
ARTICLE 3
BUSINESS COMBINATION TRANSACTIONS AND SOLICITATIONS
3.1 LIMITATION ON BUSINESS COMBINATION TRANSACTIONS
DEH and Noval shall not engage in any Business Combination Transaction
or any Related Party Transaction with Canadian 88, except in the
following cases:
(a) where otherwise permitted by this Agreement; or
(b) with the prior written consent of a majority of the Additional
Directors.
3.2 LIMITATION ON SOLICITATIONS, ETC.
Except as otherwise permitted by this Agreement or unless a majority of
the Additional Directors shall have consented in writing to such
action, DEH and Noval shall not (except through a DEH Nominee or a
Noval Nominee, as the case may be, acting in his capacity as a director
of Canadian 88 at a meeting of the Board of Directors):
(a) solicit proxies or consents or become a participant in a
"solicitation" (as such term is defined in the Securities Act
(Alberta)) of proxies or consents with respect to securities
of Canadian 88 with regard to:
(i) the election of directors of Canadian 88; or
(ii) any Business Combination Transaction, Fundamental
Change or Related Party Transaction involving
Canadian 88 or the holders of Voting Shares;
(b) do any of the following:
(i) seek to control the Board of Directors, except
through the participation of the DEH Nominees and the
Noval Nominees as directors of Canadian 88 and the
exercise by DEH and Noval of the voting rights
attached to the Voting Shares Beneficially Owned by
DEH and Noval (subject to compliance with Article 7);
<PAGE> 13
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(ii) seek to advise, encourage or influence any Person
with respect to the voting of any securities of
Canadian 88 against:
(A) the nominees for election to the Board of
Directors named in; or
(B) a recommendation with respect to any
proposed Business Combination Transaction,
Fundamental Change or Related Party
Transaction contained in;
a management proxy circular of Canadian 88; or
(iii) seek to induce or in any manner to assist any Person
to initiate any shareholder proposal in respect of a
meeting of shareholders of Canadian 88, requisition a
meeting of shareholders of Canadian 88 or initiate
any Business Combination Transaction, Fundamental
Change, Related Party Transaction, Take-over Bid for
securities of Canadian 88 or other extraordinary
transaction involving Canadian 88, including the
entering into of any "lock-up" or similar agreement
for such purpose (except that DEH, any of its
Affiliates or Noval may make a confidential proposal
to the Board of Directors with respect to any such
matter);
(c) make any public announcement (except as required by law or
stock exchange policy) or make any written or oral proposal
relating to any Business Combination Transaction, Fundamental
Change, Related Party Transaction, Take-over Bid for
securities of Canadian 88 or other extraordinary transaction
involving DEH, any of its Affiliates or Noval and Canadian 88
(except that DEH, any of its Affiliates or Noval may make a
confidential proposal to the Board of Directors with respect
to any such transaction);
(d) deposit any securities of Canadian 88 in a voting trust or
subject any securities of Canadian 88 to any arrangement or
agreement with respect to the voting of securities of Canadian
88; or
(e) form, join or in any way participate in a partnership, limited
partnership, syndicate or other group (or otherwise act
jointly or in concert with any other Person) for the purpose
of acquiring, holding, voting or disposing of securities of
Canadian 88 or taking or resulting in any other actions
restricted or prohibited under clauses (a) through (d) of this
Section 3.2.
3.3 SHARE PRICE PERFORMANCE EXCEPTION
(a) If the Current Market Price of the Common Shares is less than:
(i) Cdn. $3.00 as at March 24, 2001 or any time after
such date; or
(ii) Cdn. $4.00 as at September 24, 2001 or any time after
such date;
then DEH and Noval (as the case may be) shall be released from
Sections 3.1, 3.2, 4.1, 5.1, 6.1 and 6.2 and DEH or Noval may
(i) make to, engage in with or propose to Canadian 88 or the
holders of Voting Shares a Business Combination Transaction,
Fundamental Change, Related Party Transaction, Take-over Bid
or any other transaction involving Canadian 88 or the holders
of Voting Shares or (ii) encourage a third party to make or
propose any of the
<PAGE> 14
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foregoing; and DEH, Noval or such third party may take all
action necessary in respect of the foregoing.
(b) Canadian 88 shall, in connection with any transaction referred
to in (a) above:
(i) provide DEH, Noval or any third party identified by
DEH or Noval with access to confidential information
concerning Canadian 88 and its operations, upon the
entering into of a customary form of confidentiality
agreement (but which agreement does not obligate DEH,
Noval or such third party to obtain the consent of
the Board of Directors to make a proposal to Canadian
88 or the holders of Voting Shares for a transaction
referred to in (a) above if all holders of Voting
Shares are treated equally under such transaction);
(ii) supervise the preparation of any formal valuation
required by applicable law;
(iii) if shareholder approval is required by applicable
law, place such transaction before the holders of
Voting Shares at a meeting of such holders;
(iv) expeditiously convene any meeting of holders of
Voting Shares requisitioned by DEH or Noval; and
(v) refrain from acting in a manner which prevents
holders of Voting Shares from voting in respect of or
accepting a transaction referred to in (a) above.
(c) Without derogating from the specific obligations of Canadian
88 described therein, nothing in (b) above shall:
(i) obligate Canadian 88 or the Board of Directors to
enter into any agreement (other than the
confidentiality agreement referred to in (b)(i)
above), recommend any transaction or take any other
action unless to do so would be in the best interests
of Canadian 88 and consistent with the discharge by
the Board of Directors of its fiduciary duties; or
(ii) prevent Canadian 88 or the Board of Directors from:
(A) obtaining advice from financial and legal
advisers to assist Canadian 88 or the Board
of Directors in considering a proposed
transaction and any alternatives to such
transaction; or
(B) taking any other action that would be in the
best interests of Canadian 88 and consistent
with the discharge by the Board of Directors
of its fiduciary duties.
<PAGE> 15
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ARTICLE 4
DEH ACQUISITION RIGHTS
4.1 LIMITATION ON ACQUISITION OF ADDITIONAL SHARES BY DEH
DEH shall not acquire Beneficial Ownership of any Voting Shares or
Convertible Securities in addition to the Voting Shares Beneficially
Owned by DEH as of the date hereof, except in the following cases:
(a) where otherwise permitted by this Agreement; or
(b) with the prior written consent of a majority of the Additional
Directors; or
(c) pursuant to the exercise of rights under Section 6.2.
4.2 RIGHT TO MAKE MARKET PURCHASES
DEH shall have the right, notwithstanding any other provision of this
Agreement, to purchase at any time, subject to compliance with
applicable securities laws and stock exchange rules, in market, private
or other transactions, Beneficial Ownership of previously issued Voting
Shares so as to increase its Beneficial Ownership of Voting Shares to
25%, less one Voting Share.
4.3 RIGHT TO PARTICIPATE IN PRIVATE PLACEMENTS
(a) If Canadian 88 determines to issue any Voting Shares,
Convertible Securities or combination thereof in a Private
Placement, then Canadian 88 shall provide written notice of
such determination to DEH, which notice shall include the
proposed size and other terms of the Private Placement and
shall offer to DEH the right to purchase, at the same price
and on the same terms (or as otherwise required by applicable
stock exchange rules), Beneficial Ownership of up to the DEH
Ownership Percentage of the Voting Shares or Convertible
Securities (or both in the case of a combined offering) to be
included in the Private Placement (for the purposes of this
Section 4.3, the "Offer Notice").
(b) If DEH determines to accept the offer contained in the Offer
Notice, DEH shall deliver a written notice to Canadian 88
indicating its acceptance within five Business Days after its
receipt of the Offer Notice, which notice shall indicate
whether DEH has accepted such offer and specifying the number
or amount of Voting Shares or Convertible Securities (or both
in the case of a combined offering) that DEH is willing to
purchase (for the purposes of this Section 4.3, an "Acceptance
Notice").
(c) Any acceptance of the offer contained in an Offer Notice by
delivery of an Acceptance Notice shall be irrevocable and
shall constitute a commitment by DEH to purchase from Canadian
88, upon the terms contained in the Offer Notice, the number
or amount of Voting Shares or Convertible Securities (or both
in the case of a combined offering) covered by such Acceptance
Notice, limited to the DEH Ownership Percentage of the total
number or amount of Voting Shares or Convertible Securities
(or both) actually issued in the Private Placement.
<PAGE> 16
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4.4 RIGHT TO PARTICIPATE IN PUBLIC OFFERINGS
(a) If Canadian 88 determines to issue any Voting Shares,
Convertible Securities or combination thereof by way of a
Public Offering, then Canadian 88 shall provide written notice
of such determination to DEH, which notice shall include the
proposed size and other terms of the Public Offering and may
include a minimum and maximum size and price range, to the
extent then known, the name of the managing underwriter for
the Public Offering and the date when it is proposed that such
Public Offering will be made (for the purposes of this Section
4.4, the "Offer Notice").
(b) If DEH determines to participate in the Public Offering, DEH
shall deliver a written notice to Canadian 88, within five
Business Days after its receipt of the Offer Notice in the
case of a marketed transaction or within one Business Day
after its receipt of the Offer Notice in the case of a "bought
deal", indicating its desire to participate and specifying the
number or amount of Voting Shares or Convertible Securities
(or both in the case of a combined offering) that DEH is
willing to purchase, up to the DEH Ownership Percentage of the
Voting Shares or Convertible Securities (or both in the case
of a combined offering) to be included in the Public Offering
(for the purposes of this Section 4.4, the "Acceptance
Notice").
(c) Any Acceptance Notice shall be irrevocable if the terms of the
Public Offering are within the parameters contained in the
Offer Notice and Canadian 88 shall cause the underwriters of
the Public Offering to offer to DEH the right to purchase from
the underwriters of the Public Offering, at the public
offering price set forth on the cover page of the prospectus
or prospectus supplement for the Public Offering, the number
or amount of Voting Shares or Convertible Securities (or both
in the case of a combined offering) specified by DEH in the
Acceptance Notice, limited to the DEH Ownership Percentage of
the total number or amount of Voting Shares or Convertible
Securities (or both) actually issued in the Public Offering,
and DEH shall accept such offer.
4.5 ACQUISITION OF ADDITIONAL SHARES DUE TO SHARE COMPENSATION ARRANGEMENT
(a) If Canadian 88 issues any Voting Shares pursuant to a Share
Compensation Arrangement, then Canadian 88 shall provide
written notice of such issuance to DEH, which notice may be in
the form of a copy sent to DEH of the periodic reporting
notice of such issuance required to be sent by Canadian 88 to
any stock exchange on which its securities are listed for
trading (the "Issue Notice").
(b) DEH shall have the right, exercisable until the end of the
calendar quarter following the calendar quarter in which the
Issue Notice is dated, to purchase Beneficial Ownership of up
to the DEH Ownership Percentage of the total number of Voting
Shares indicated in the Issue Notice as having been issued,
plus those issued to DEH pursuant to this Section 4.5, in the
following manner:
(i) if the Current Market Price of the Voting Shares to
be purchased by DEH is less than Cdn. $500,000, then
DEH may purchase Voting Shares in market, private or
other transactions; and
<PAGE> 17
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(ii) if the Current Market Price of the Voting Shares to
be purchased by DEH is Cdn. $500,000 or more or if
DEH is prevented by applicable securities laws from
purchasing Voting Shares in market, private or other
transactions, then DEH shall have the right to
require Canadian 88 to issue the Voting Shares to
DEH, at the greater of the Current Market Price and
the price required by applicable stock exchange
rules.
4.6 RIGHT TO PARTICIPATE IN OTHER DISTRIBUTIONS
(a) If Canadian 88 determines to issue any Voting Shares,
Convertible Securities or combination thereof in a transaction
other than a Private Placement, Public Offering or Share
Compensation Arrangement (an "Issue"), then Canadian 88 shall
provide written notice of such determination to DEH, which
notice shall include the proposed size and other terms of the
Issue and shall offer to DEH the right to purchase, at the
greater of the Current Market Price and the price required by
applicable stock exchange rules, Beneficial Ownership of up to
the DEH Ownership Percentage of the total number or amount of
the Voting Shares or Convertible Securities (or both in the
case of a combined offering) to be included in the Issue, plus
those issued to DEH pursuant to this Section 4.6 (for the
purposes of this Section 4.6, the "Offer Notice").
(b) If DEH determines to accept the offer contained in the Offer
Notice, DEH shall deliver a written notice to Canadian 88
indicating its acceptance within five Business Days after its
receipt of the Offer Notice, which notice shall indicate
whether DEH has accepted such offer and specifying the number
or amount of Voting Shares or Convertible Securities (or both
in the case of a combined offering) that DEH is willing to
purchase (for the purposes of this Section 4.6, an "Acceptance
Notice").
(c) Any acceptance of the offer contained in an Offer Notice by
delivery of an Acceptance Notice shall be irrevocable and
shall constitute a commitment by DEH to purchase from Canadian
88, upon the terms contained in the Offer Notice, the number
or amount of Voting Shares or Convertible Securities (or both
in the case of a combined offering) covered by such Acceptance
Notice, limited to the DEH Ownership Percentage of the total
number or amount of Voting Shares or Convertible Securities
(or both) actually issued in the Issue, plus those issued to
DEH pursuant to this Section 4.6.
4.7 ACQUISITION OF ADDITIONAL SHARES IF TAKE-OVER BID COMMENCED
DEH may acquire, by a Qualified Bid, Beneficial Ownership of previously
issued Voting Shares and Convertible Securities if any Person (other
than DEH or any Affiliate of DEH) has commenced a Take-over Bid for
Voting Shares.
4.8 CONSEQUENTIAL CANADIAN 88 RESTRICTIONS
Canadian 88 shall not repurchase any of its Voting Shares for
cancellation:
(a) if the result of doing so would be to increase the DEH
Ownership Percentage to 20% or more in the first instance or
25% or more in the second instance, except with (in each such
instance) the prior written consent of DEH; or
<PAGE> 18
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(b) pursuant to a normal course issuer bid or a substantial issuer
bid, except with the prior written consent of DEH.
ARTICLE 5
NOVAL ACQUISITION RIGHTS
5.1 LIMITATION ON ACQUISITION OF ADDITIONAL SHARES BY NOVAL
Noval shall not acquire Beneficial Ownership of any Voting Shares or
Convertible Securities in addition to the Voting Shares Beneficially
Owned by Noval as of the date hereof, except in the following cases:
(a) where otherwise permitted by this Agreement; or
(b) with the prior written consent of a majority of the Additional
Directors; or
(c) pursuant to the exercise of rights under Section 6.2.
5.2 RIGHT TO MAKE MARKET PURCHASES
Noval shall have the right, notwithstanding any other provision of this
Agreement, to purchase at any time, subject to compliance with
applicable securities laws and stock exchange rules, in market, private
or other transactions, Beneficial Ownership of previously issued Voting
Shares so as to increase his Beneficial Ownership of Voting Shares to
15%, less one Voting Share.
5.3 RIGHT TO PARTICIPATE IN ISSUES
If Canadian 88 determines to issue any Voting Shares, Convertible
Securities or combination thereof, then Noval shall have the right to
purchase up to the Noval Ownership Percentage of the Voting Shares or
Convertible Securities (or both in the case of a combined offering) to
be included in such issue, in the same manner as described in Sections
4.3, 4.4, 4.5 and 4.6, with the necessary changes.
ARTICLE 6
DEH TRANSFER RIGHTS
6.1 PERMITTED TRANSFERS OF SHARES BY DEH
DEH may sell, transfer or otherwise convey ("Transfer") Beneficial
Ownership of any Voting Shares or Convertible Securities (including
Voting Shares or Convertible Securities subject to Exchangeable
Securities) only in the following cases:
(a) a Transfer to an Affiliate of DEH if the Affiliate agrees to
be bound by all of the terms of this Agreement otherwise
applicable to DEH;
(b) a Transfer pursuant to an unsolicited broker's transaction or
transactions of Voting Shares in the open market (including
pre-arranged or "cross" trades), limited in each calendar
quarter to 10% of the number of Voting Shares that DEH
Beneficially Owns on the date of this Agreement;
<PAGE> 19
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(c) a Transfer to Noval pursuant to exercise of the right of first
refusal described in Section 6.2;
(d) in respect of any Voting Shares or Convertible Securities for
which Noval does not exercise the right of first refusal
described in Section 6.2:
(i) a Transfer pursuant to:
(A) a Public Offering;
(B) a Private Placement, including for this
purpose a distribution for other than cash;
or
(C) the procedures for a distribution from the
holdings of a control person contained in
Section 112 of the Securities Act (Alberta)
(and/or the corresponding provisions of
other applicable securities laws) and the
rules of The Toronto Stock Exchange;
if DEH can evidence to the satisfaction of Canadian
88 that no Person will be or become the Beneficial
Owner of 10% or more of the then outstanding Voting
Shares as a consequence of the Transfer; or
(ii) a Transfer to any Person (other than DEH or any
Affiliate of DEH) who has commenced a Take-over Bid
for Voting Shares.
6.2 RIGHT OF FIRST REFUSAL
(a) If either DEH or Noval (the "Offeror") desires to sell all or
any of its or his Beneficial Ownership in Voting Shares, the
Offeror shall give notice of such proposed sale (the "Offer
Notice") to Canadian 88 and the other party to this Agreement
and shall set out in the Offer Notice:
(i) the number of its or his Voting Shares proposed to be
sold (the "Offered Shares");
(ii) the "Purchase Price", being (as the case may be):
(A) the price at which it or he desires to sell
the Offered Shares;
(B) a range of prices (with the "high" price not
more than 20% greater than the "low" price)
in the case of a Transfer by DEH pursuant to
a Public Offering described in Section
6.1(d)(i)(A) or a control person
distribution described in Section
6.1(d)(i)(C); or
(C) the Take-over Bid offer price in the case of
a Transfer to any Person (other than DEH,
any Affiliate of DEH or Noval) who has
commenced a Takeover Bid for Voting
Shares; and
(iii) any other material terms of the proposed sale.
<PAGE> 20
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(b) Upon the Offer Notice being given, DEH or Noval, as the case
may be (the "Offeree"), shall have the right to purchase all,
but not less than all, of the Offered Shares for the Purchase
Price.
(c) If the Offeree desires to purchase the Offered Shares, it or
he shall give notice to the Offeror and to Canadian 88 within
10 days days of having been given the Offer Notice and the
transaction of purchase and sale shall be completed in
accordance with the terms set out in the Offer Notice.
(d) If the Offeree does not give notice in accordance with the
provisions of Section 6.2(c) that it or he is willing to
purchase all of the Offered Shares, the rights of the Offeree,
subject as hereinafter provided, to purchase the Offered
Shares shall cease and the Offeror may sell the Offered Shares
to any Person within 30 days after the expiry of the 10 period
referred to in Section 6.2(c), for a price not less than the
Purchase Price, on other terms no more favourable to such
person than those set forth in the Offer Notice and in
compliance with Section 6.1. If the Offered Shares are not
sold within such 30 day period on such terms, the rights of
the Offeree pursuant to this Section 6.2 shall again take
effect and so on from time to time.
(e) Each of DEH and Noval may sell in each calendar quarter,
exempt from the procedures set forth in Sections 6.2(a) to (d)
above, up to 10% of the number of Voting Shares that DEH or
Noval (as the case may be) owns at the date of this Agreement,
pursuant to an unsolicited broker's transaction or
transactions of Voting Shares in the open market (including
prearranged or "cross" trades).
ARTICLE 7
VOTING MATTERS
7.1 VOTING WITH RESPECT TO DIRECTORS
(a) DEH agrees that, at any meeting of holders of Voting Shares at
which an item of business is the election of members of the
Board of Directors, it will not withhold from voting any of
its Voting Shares in respect of, or vote any of its Voting
Shares against, the election of the Noval Nominees or the
Independent Directors.
(b) Noval agrees that, at any meeting of holders of Voting Shares
at which an item of business is the election of members of the
Board of Directors, he will not withhold from voting any of
his Voting Shares in respect of, or vote any of his Voting
Shares against, the election of the DEH Nominees or the
Independent Directors.
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS AND WARRANTIES
(a) Canadian 88 represents and warrants to DEH and Noval that:
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(i) Canadian 88 is a corporation duly organized, validly
existing and in good standing under the Canada
Business Corporations Act and has the corporate power
and authority to enter into this Agreement and to
carry out its obligations hereunder;
(ii) the execution and delivery of this Agreement by
Canadian 88 and the consummation by Canadian 88 of
the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the
part of Canadian 88 and no other corporate
proceedings on the part of Canadian 88 are necessary
to authorize this Agreement or any of the
transactions contemplated hereby; and
(iii) this Agreement has been duly executed and delivered
by Canadian 88 and constitutes a valid and binding
obligation of Canadian 88, and, assuming this
Agreement constitutes a valid and binding obligation
of DEH and Noval, is enforceable against Canadian 88
in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting
creditors' rights generally from time to time and to
general principles of equity.
(b) DEH represents and warrants to Canadian 88 and Noval that:
(i) DEH is a limited liability company duly organized,
validly existing and in good standing under the
Limited Liability Company Act (Delaware) and has the
corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder;
(ii) the execution and delivery of this Agreement by DEH
and the consummation by DEH of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of DEH and no
other corporate proceedings on the part of DEH are
necessary to authorize this Agreement or any of the
transactions contemplated hereby; and
(iii) this Agreement has been duly executed and delivered
by DEH and constitutes a valid and binding obligation
of DEH, and, assuming this Agreement constitutes a
valid and binding obligation of Canadian 88 and
Noval, is enforceable against DEH in accordance with
its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent
conveyance and similar laws affecting creditors'
rights generally from time to time and to general
principles of equity.
(c) Noval represents and warrants to Canadian 88 and DEH that:
(i) Noval has the capacity to enter into this Agreement
and to carry out his obligations hereunder; and
(ii) this Agreement has been duly executed and delivered
by Noval and constitutes a valid and binding
obligation of Noval and, assuming this Agreement
constitutes a valid and binding obligation of
Canadian 88 and DEH, is enforceable against Noval in
accordance with its terms, subject to applicable
bankruptcy, fraudulent conveyance and similar laws
affecting creditors' rights generally from time to
time and to general principles of equity.
<PAGE> 22
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8.2 COOPERATION REGARDING FILINGS, ETC.
DEH, Noval and Canadian 88 will cooperate with each other in connection
with the making of any filings with securities commissions, stock
exchanges or other regulatory authorities as may be required as a
result of the entering into or performance of this Agreement and DEH
and Noval (as the case may be) will promptly advise the other parties
hereto of any changes in their Beneficial Ownership of Voting Shares.
ARTICLE 9
TERMINATION
9.1 TERMINATION
(a) This Agreement may be terminated in its entirety by the mutual
written consent of the parties hereto.
(b) This Agreement shall terminate on March 24, 2003.
(c) This Agreement shall terminate before March 24, 2003:
(i) with respect to DEH if the DEH Ownership Percentage
decreases to less than 5%;
(ii) with respect to Noval if the Noval Ownership
Percentage decreases to less than 2%; or
(iii) in its entirety if the DEH Ownership Percentage
decreases to less than 5% and the Noval Ownership
Percentage decreases to less than 2%.
(d) If this Agreement is terminated with respect to DEH or Noval
pursuant to Sections 9.1(c)(i) or 9.1(c)(ii), then the rights
and obligations of DEH or Noval, as the case may be, under
this Agreement will be terminated but this Agreement will
continue in force with respect to the rights and obligations
of Canadian 88 and the other remaining party.
(e) No termination shall relieve any party from liability for any
breach of this Agreement that occurred prior to its
termination.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES
(a) The addresses and fax number of each party for notices shall
be as follows:
(i) to Canadian 88:
<PAGE> 23
20
<TABLE>
<S> <C> <C>
Canadian 88 Energy Corp. with a copy to:
Suite 700 McCarthy Tetrault
400 - 3rd Avenue S.W. Suite 3300, 421 - 7th Avenue S.W.
Calgary, AB T2P 4H2 Calgary, AB T2P 4K9
Attn: Donald R. Gardner Attn: David F. Phillips
Fax: (403) 216-2359 Fax: (403) 260-3501
and:
Carscallen Lockwood
#1500, 407 - 2nd Street S.W.
Calgary, AB T2P 2Y3
Attn: Stan Carscallen
Fax: (403) 262-2952
</TABLE>
(ii) to DEH:
<TABLE>
<S> <C> <C>
Duke Energy Hydrocarbons, L.L.C. with a copy to:
10777 Westheimer Bennett Jones
Suite 650 4500, 855 - 2nd Street S.W.
Houston, TX 77042 Calgary, AB T2P 4K7
Attn: President Attn: John MacNeil/Margaret Lemay
Fax: (713) 260-8601 Fax: (403) 265-7219
</TABLE>
(iii) to Noval:
<TABLE>
<S> <C> <C>
Greg S. Noval with a copy to:
c/o Canadian 88 Energy Corp. Fraser Milner
700, 400 - 3rd Avenue S.W. 3000, 234 - 4th Avenue S.W.
Calgary, AB T2P 4H2 Calgary, AB T2P 4X7
Attn: Greg S. Noval Attn: William K. Jenkins
Fax: (403) 974-8868 Fax: (403) 268-3100
</TABLE>
(b) Any notice, communication or statement (a "notice") required,
permitted or contemplated hereunder shall be in writing and
shall be delivered as follows:
(i) by delivery to a party between 8:00 a.m. and 4:00
p.m. on a Business Day at the address of such party
for notices, in which case the notice shall be deemed
to have been received by that party when it is
delivered; or
(ii) by fax to a party to the fax number of such party for
notices, in which case, if the notice was faxed prior
to 4:00 p.m. on a Business Day the notice shall be
deemed to have been received by that party when it
was faxed and if it is faxed on a day which is not a
Business Day or is faxed after 4:00 p.m. on a
Business Day, it shall be deemed to have been
received on the next following Business Day.
<PAGE> 24
21
(c) A party may from time to time change its address for service
or its fax number for service by giving written notice of such
change to the other party.
10.2 AMENDMENT AND WAIVER
No amendment to this Agreement shall be valid or binding unless set
forth in writing and duly executed by all of the parties hereto. No
waiver of any breach of any provision of this Agreement shall be
effective or binding unless made in writing and signed by the party
purporting to give the same and, unless otherwise provided in the
written waiver, shall be limited to the specific breach waived.
10.3 INJUNCTIVE RELIEF
Each of the parties hereto hereby acknowledges that, in the event of a
breach by any of them of any material provision of this Agreement, the
aggrieved party may be without an adequate remedy of law. Each of the
parties therefore agrees that in the event of a breach of any material
provision of this Agreement the aggrieved party may elect to institute
and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement.
By seeking or obtaining any such relief, the aggrieved party will not
be precluded from seeking or obtaining any other relief to which it may
be entitled in equity or at law.
10.4 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of Alberta and the laws of Canada applicable therein. Each
party attorns to the jurisdiction of the courts of Alberta.
10.5 FURTHER ASSURANCES
Each party to this Agreement shall, from time to time, at the request
of either of the other parties, and without further consideration, do
all such acts and execute and deliver all such further documents as are
reasonably required to fully perform the terms of this Agreement.
10.6 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
<PAGE> 25
22
10.7 ENTIRE AGREEMENT
This Agreement and the Corporate Governance and Transition Arrangements
letter dated March 17, 2000 from DEH to Canadian 88 and Noval
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
10.8 ASSIGNMENT
Except as may be expressly provided in this Agreement (including, in
particular, in Section 6.1(a)), none of the parties hereto may assign
it or his rights or obligations under this Agreement without the prior
written consent of all of the other parties hereto, which consent may
be arbitrarily withheld.
10.9 BENEFIT OF AGREEMENT
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of
this Agreement.
10.10 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
10.11 FAX DELIVERY
This Agreement may be executed in one place and delivered to another by
fax and, when received, shall be deemed to be the delivery of an
originally executed signature.
<PAGE> 26
23
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first written above.
CANADIAN 88 ENERGY CORP.
By:
------------------------------------
James D. Raymond,
Chairman
By:
------------------------------------
Donald R. Gardner,
Chief Financial Officer
DUKE ENERGY HYDROCARBONS, L.L.C.
By:
------------------------------------
Name:
Title:
SIGNED by Greg S. Noval in the presence of: )
)
)
)
)
)
WITNESS as to the signature of ) GREG S. NOVAL
Greg S. Noval )
)
<PAGE> 1
CUSIP NO. 13566G509
Exhibit 99.1
JOINT FILING STATEMENT
Each of the undersigned agrees that (i) the statement on Schedule 13D
relating to the Common Shares of Canadian 88 Energy Corp., has been adopted and
filed on behalf of each of them, (ii) all future amendments to such statement on
Schedule 13D will, unless written notice to the contrary is delivered as
described below, be jointly filed on behalf of each of them, and (iii) the
provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of 1934 apply
to each of them. This agreement may be terminated with respect to the
obligations to jointly file future amendments to such statement on Schedule 13D
as to any of the undersigned upon such person giving written notice thereof to
each of the other persons signatory hereto, at the principal office thereof.
April 3, 2000
DUKE ENERGY CORPORATION
By: /s/ EDWARD MARSH
-------------------------------------
Name: Edward Marsh
Assistant Secretary
DUKE ENERGY MERCHANTS HOLDINGS, L.L.C
By: /s/ WADE A. HOEFLING
-------------------------------------
Name: Wade A. Hoefling
Senior Vice President
DUKE ENERGY HYDROCARBONS, L.L.C.
By: /s/ WADE A. HOEFLING
-------------------------------------
Name: Wade A. Hoefling
Senior Vice President
