Exhibit 10.1

 

 

UNOCAL CANADA LIMITED

 

UNOCAL CANADA ALBERTA HUB LIMITED

 

UNOCAL CORPORATION

 

and

 

POGO CANADA, ULC

 

POGO PRODUCING COMPANY

 

--------------------------------------------------------------------------------

 

SHARE PURCHASE AGREEMENT

 

July 8, 2005

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

SHARE PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE 1
DEFINITIONS AND INTERPRETATION

 

 

 

 

 

1.1

 

Definitions

 

 

1.2

 

Certain Rules of Interpretation

 

 

1.3

 

Knowledge

 

 

1.4

 

Entire Agreement

 

 

1.5

 

Applicable Law

 

 

1.6

 

Accounting Principles

 

 

1.7

 

Disclosure

 

 

1.8

 

Schedules

 

 

1.9

 

Joint and Several Liability

 

 

1.10

 

Interpretation If Closing Does Not Occur

 

 

1.11

 

Conflicts

 

 

1.12

 

Guarantees

 

 

 

 

 

 

 

ARTICLE 2
PURCHASE AND SALE

 

 

 

2.1

 

Actions by Vendor and Purchaser Regarding Purchase

 

 

2.2

 

Place of Closing

 

 

2.3

 

Tender

 

 

 

 

 

 

 

ARTICLE 3
PURCHASE PRICE

 

 

 

3.1

 

Purchase Price

 

 

3.2

 

Payment of Purchase Price

 

 

3.3

 

Post Closing Adjustment to the Net Working Capital Amount

 

 

 

 

 

 

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VENDOR

 

 

 

4.1

 

Incorporation and Registration

 

 

4.2

 

Right to Sell

 

 

4.3

 

Capitalization

 

 

4.4

 

Corporation and Subsidiaries

 

 

4.5 [a05-12039_1ex10d1.htm#a4_5DueAuthorization_022347]

 

Due Authorization [a05-12039_1ex10d1.htm#a4_5DueAuthorization_022347]

 

 

4.6 [a05-12039_1ex10d1.htm#a4_6ResidenceOfVendor_022351]

 

Residence of Vendor [a05-12039_1ex10d1.htm#a4_6ResidenceOfVendor_022351]

 

 

4.7 [a05-12039_1ex10d1.htm#a4_7EnforceabilityOfObligations_022353]

 

Enforceability of Obligations
[a05-12039_1ex10d1.htm#a4_7EnforceabilityOfObligations_022353]

 

 

4.8 [a05-12039_1ex10d1.htm#a4_8NoAdvisorsOrConsultants_022356]

 

No Advisors or Consultants
[a05-12039_1ex10d1.htm#a4_8NoAdvisorsOrConsultants_022356]

 

 

4.9 [a05-12039_1ex10d1.htm#a4_9GovernmentAuthorizations_022358]

 

Government Authorizations
[a05-12039_1ex10d1.htm#a4_9GovernmentAuthorizations_022358]

 

 

4.10 [a05-12039_1ex10d1.htm#a4_10BenefitPlansAndLabourMatters_022400]

 

Benefit Plans and Labour Matters
[a05-12039_1ex10d1.htm#a4_10BenefitPlansAndLabourMatters_022400]

 

 

4.11 [a05-12039_1ex10d1.htm#a4_11FinancialStatements_022406]

 

Financial Statements [a05-12039_1ex10d1.htm#a4_11FinancialStatements_022406]

 

 

4.12 [a05-12039_1ex10d1.htm#a4_12Distributions_022409]

 

Distributions [a05-12039_1ex10d1.htm#a4_12Distributions_022409]

 

 

4.13 [a05-12039_1ex10d1.htm#a4_13BusinessCarriedOnInTheOrdina_022411]

 

Business Carried on in the Ordinary Course
[a05-12039_1ex10d1.htm#a4_13BusinessCarriedOnInTheOrdina_022411]

 

 

4.14 [a05-12039_1ex10d1.htm#a4_14EnvironmentalMatters_022415]

 

Environmental Matters [a05-12039_1ex10d1.htm#a4_14EnvironmentalMatters_022415]

 

 

4.15 [a05-12039_1ex10d1.htm#a4_15Assets_022419]

 

Assets [a05-12039_1ex10d1.htm#a4_15Assets_022419]

 

 

4.16 [a05-12039_1ex10d1.htm#a4_16MaterialObligations_022425]

 

Material Obligations [a05-12039_1ex10d1.htm#a4_16MaterialObligations_022425]

 

 

 

--------------------------------------------------------------------------------

 

4.17 [a05-12039_1ex10d1.htm#a4_17Litigation_022429]

 

Litigation [a05-12039_1ex10d1.htm#a4_17Litigation_022429]

 

 

4.18 [a05-12039_1ex10d1.htm#a4_18IntellectualProperty_022433]

 

Intellectual Property [a05-12039_1ex10d1.htm#a4_18IntellectualProperty_022433]

 

 

4.19 [a05-12039_1ex10d1.htm#a4_19Taxes_022435]

 

Taxes [a05-12039_1ex10d1.htm#a4_19Taxes_022435]

 

 

4.20 [a05-12039_1ex10d1.htm#a4_20AbsenceOfCertainChanges_022455]

 

Absence of Certain Changes
[a05-12039_1ex10d1.htm#a4_20AbsenceOfCertainChanges_022455]

 

 

4.21 [a05-12039_1ex10d1.htm#a4_21CertainContractsAgreementsPl_022457]

 

Certain Contracts, Agreements, Plans and Commitments
[a05-12039_1ex10d1.htm#a4_21CertainContractsAgreementsPl_022457]

 

 

4.22 [a05-12039_1ex10d1.htm#a4_22ResourcePoolsAndUndepreciate_022502]

 

Resource Pools and Undepreciated Capital Cost Balances
[a05-12039_1ex10d1.htm#a4_22ResourcePoolsAndUndepreciate_022502]

 

 

4.23 [a05-12039_1ex10d1.htm#a4_23OperationOfAssets_022504]

 

Operation of Assets [a05-12039_1ex10d1.htm#a4_23OperationOfAssets_022504]

 

 

4.24 [a05-12039_1ex10d1.htm#a4_24MinuteBooks_022508]

 

Minute Books [a05-12039_1ex10d1.htm#a4_24MinuteBooks_022508]

 

 

4.25 [a05-12039_1ex10d1.htm#a4_25CorporateRegisters_022510]

 

Corporate Registers [a05-12039_1ex10d1.htm#a4_25CorporateRegisters_022510]

 

 

4.26 [a05-12039_1ex10d1.htm#a4_26BooksAndRecordsAndInternalCo_022518]

 

Books and Records and Internal Controls
[a05-12039_1ex10d1.htm#a4_26BooksAndRecordsAndInternalCo_022518]

 

 

4.27 [a05-12039_1ex10d1.htm#a4_27SmogRun_022523]

 

SMOG Run [a05-12039_1ex10d1.htm#a4_27SmogRun_022523]

 

 

4.28 [a05-12039_1ex10d1.htm#a4_28HartScottRodinoInformation_022525]

 

Hart Scott Rodino Information
[a05-12039_1ex10d1.htm#a4_28HartScottRodinoInformation_022525]

 

 

 

 

 

 

 

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
[a05-12039_1ex10d1.htm#Article5RepresentationsAndWarrant_022527]

 

 

 

5.1 [a05-12039_1ex10d1.htm#a5_1Incorporation_022529]

 

Incorporation [a05-12039_1ex10d1.htm#a5_1Incorporation_022529]

 

 

5.2 [a05-12039_1ex10d1.htm#a5_2DueAuthorization_022532]

 

Due Authorization [a05-12039_1ex10d1.htm#a5_2DueAuthorization_022532]

 

 

5.3 [a05-12039_1ex10d1.htm#a5_3EnforceabilityOfObligations_022536]

 

Enforceability of Obligations
[a05-12039_1ex10d1.htm#a5_3EnforceabilityOfObligations_022536]

 

 

5.4 [a05-12039_1ex10d1.htm#a5_4InvestmentCanada_022539]

 

Investment Canada [a05-12039_1ex10d1.htm#a5_4InvestmentCanada_022539]

 

 

5.5 [a05-12039_1ex10d1.htm#a5_5Authorizations_022540]

 

Authorizations [a05-12039_1ex10d1.htm#a5_5Authorizations_022540]

 

 

5.6 [a05-12039_1ex10d1.htm#a5_6Financing_022543]

 

Financing [a05-12039_1ex10d1.htm#a5_6Financing_022543]

 

 

5.7 [a05-12039_1ex10d1.htm#a5_7Brokers_022547]

 

Brokers [a05-12039_1ex10d1.htm#a5_7Brokers_022547]

 

 

5.8 [a05-12039_1ex10d1.htm#a5_8PurchaserAsPrincipal_022549]

 

Purchaser as Principal [a05-12039_1ex10d1.htm#a5_8PurchaserAsPrincipal_022549]

 

 

 

 

 

 

 

ARTICLE 6
REGARDING REPRESENTATIONS, WARRANTIES
AND COVENANTS [a05-12039_1ex10d1.htm#Article6RegardingRepresentationsW_022552]

 

 

 

6.1 [a05-12039_1ex10d1.htm#a6_1Materiality_022553]

 

Materiality [a05-12039_1ex10d1.htm#a6_1Materiality_022553]

 

 

6.2 [a05-12039_1ex10d1.htm#a6_2NatureOfSurvivalOfVendorsRepr_022557]

 

Nature of Survival of Vendor’s Representations, Warranties, Covenants and
Indemnities and Limitations on Claims
[a05-12039_1ex10d1.htm#a6_2NatureOfSurvivalOfVendorsRepr_022557]

 

 

6.3 [a05-12039_1ex10d1.htm#a6_3NatureOfSurvivalOfPurchasersR_022602]

 

Nature of Survival of Purchaser’s Representations, Warranties, Covenants and
Indemnities [a05-12039_1ex10d1.htm#a6_3NatureOfSurvivalOfPurchasersR_022602]

 

 

6.4 [a05-12039_1ex10d1.htm#a6_4NoConsequentialDamages_022607]

 

No Consequential Damages
[a05-12039_1ex10d1.htm#a6_4NoConsequentialDamages_022607]

 

 

6.5 [a05-12039_1ex10d1.htm#a6_5NoOtherRepresentationsWarrant_022609]

 

No Other Representations, Warranties or Covenants of Vendor
[a05-12039_1ex10d1.htm#a6_5NoOtherRepresentationsWarrant_022609]

 

 

6.6 [a05-12039_1ex10d1.htm#a6_6NoOtherRepresentationWarranti_022616]

 

No Other Representation, Warranties or Covenants of Purchaser
[a05-12039_1ex10d1.htm#a6_6NoOtherRepresentationWarranti_022616]

 

 

6.7 [a05-12039_1ex10d1.htm#a6_7RestrictionsOnClaimsAndAction_022620]

 

Restrictions on Claims and Actions
[a05-12039_1ex10d1.htm#a6_7RestrictionsOnClaimsAndAction_022620]

 

 

 

 

 

 

 

ARTICLE 7
PURCHASER’S CONDITIONS
[a05-12039_1ex10d1.htm#Article7PurchasersConditions_022625]

 

 

 

7.1 [a05-12039_1ex10d1.htm#a7_1CorrectnessAndAccuracyOfRepre_022627]

 

Correctness and Accuracy of Representations and Warranties
[a05-12039_1ex10d1.htm#a7_1CorrectnessAndAccuracyOfRepre_022627]

 

 

7.2 [a05-12039_1ex10d1.htm#a7_2PerformanceOfObligations_022630]

 

Performance of Obligations
[a05-12039_1ex10d1.htm#a7_2PerformanceOfObligations_022630]

 

 

7.3 [a05-12039_1ex10d1.htm#a7_3GovernmentalApprovalsConsents_022632]

 

Governmental Approvals, Consents, and Authorizations
[a05-12039_1ex10d1.htm#a7_3GovernmentalApprovalsConsents_022632]

 

 

7.4 [a05-12039_1ex10d1.htm#a7_4OtherConsentsAndApprovals_022636]

 

Other Consents and Approvals
[a05-12039_1ex10d1.htm#a7_4OtherConsentsAndApprovals_022636]

 

 

7.5 [a05-12039_1ex10d1.htm#a7_5NoInjunctionsOrRestraints_022637]

 

No Injunctions or Restraints
[a05-12039_1ex10d1.htm#a7_5NoInjunctionsOrRestraints_022637]

 

 

7.6 [a05-12039_1ex10d1.htm#a7_6VendorsClosingDeliveries_022641]

 

Vendor’s Closing Deliveries
[a05-12039_1ex10d1.htm#a7_6VendorsClosingDeliveries_022641]

 

 

 

 

 

 

 

ARTICLE 8
VENDOR’S CONDITIONS [a05-12039_1ex10d1.htm#Article8VendorsConditions_022646]

 

 

 

8.1 [a05-12039_1ex10d1.htm#a8_1CorrectnessAndAccuracyOfRepre_022650]

 

Correctness and Accuracy of Representations and Warranties
[a05-12039_1ex10d1.htm#a8_1CorrectnessAndAccuracyOfRepre_022650]

 

 

8.2 [a05-12039_1ex10d1.htm#a8_2PerformanceOfObligations_022653]

 

Performance of Obligations
[a05-12039_1ex10d1.htm#a8_2PerformanceOfObligations_022653]

 

 

 

ii

--------------------------------------------------------------------------------

 

8.3 [a05-12039_1ex10d1.htm#a8_3GovernmentalApprovalsConsents_022655]

 

Governmental Approvals, Consents, and Authorizations
[a05-12039_1ex10d1.htm#a8_3GovernmentalApprovalsConsents_022655]

 

 

8.4 [a05-12039_1ex10d1.htm#a8_4OtherConsentsAndApprovals_022659]

 

Other Consents and Approvals
[a05-12039_1ex10d1.htm#a8_4OtherConsentsAndApprovals_022659]

 

 

8.5 [a05-12039_1ex10d1.htm#a8_5NoInjunctionsOrRestraints_022819]

 

No Injunctions or Restraints
[a05-12039_1ex10d1.htm#a8_5NoInjunctionsOrRestraints_022819]

 

 

8.6 [a05-12039_1ex10d1.htm#a8_6PurchasersClosingDeliveries_022822]

 

Purchaser’s Closing Deliveries
[a05-12039_1ex10d1.htm#a8_6PurchasersClosingDeliveries_022822]

 

 

8.7 [a05-12039_1ex10d1.htm#a8_7Deposit_022827]

 

Deposit [a05-12039_1ex10d1.htm#a8_7Deposit_022827]

 

 

 

 

 

 

 

ARTICLE 9
OTHER COVENANTS [a05-12039_1ex10d1.htm#Article9OtherCovenants_022829]

 

 

 

9.1 [a05-12039_1ex10d1.htm#a9_1ConductOfBusinessPriorToClosi_022830]

 

Conduct of Business Prior to Closing
[a05-12039_1ex10d1.htm#a9_1ConductOfBusinessPriorToClosi_022830]

 

 

9.2 [a05-12039_1ex10d1.htm#a9_2NegativeCovenants_022835]

 

Negative Covenants [a05-12039_1ex10d1.htm#a9_2NegativeCovenants_022835]

 

 

9.3 [a05-12039_1ex10d1.htm#a9_3DealingsOrOperationsRegarding_022841]

 

Dealings or Operations Regarding Assets
[a05-12039_1ex10d1.htm#a9_3DealingsOrOperationsRegarding_022841]

 

 

9.4 [a05-12039_1ex10d1.htm#a9_4IntercorporateObligations_022849]

 

Intercorporate Obligations
[a05-12039_1ex10d1.htm#a9_4IntercorporateObligations_022849]

 

 

9.5 [a05-12039_1ex10d1.htm#a9_5AccessToBooksAndRecordsAndOth_022853]

 

Access to Books and Records and Other Assets
[a05-12039_1ex10d1.htm#a9_5AccessToBooksAndRecordsAndOth_022853]

 

 

9.6 [a05-12039_1ex10d1.htm#a9_6Confidentiality_022857]

 

Confidentiality [a05-12039_1ex10d1.htm#a9_6Confidentiality_022857]

 

 

9.7 [a05-12039_1ex10d1.htm#a9_7ActionsToSatisfyClosingCondit_022859]

 

Actions to Satisfy Closing Conditions
[a05-12039_1ex10d1.htm#a9_7ActionsToSatisfyClosingCondit_022859]

 

 

9.8 [a05-12039_1ex10d1.htm#a9_8PreservationOfRecords_022902]

 

Preservation of Records [a05-12039_1ex10d1.htm#a9_8PreservationOfRecords_022902]

 

 

9.9 [a05-12039_1ex10d1.htm#a9_9CompetitionActFilingAndInvest_022905]

 

Competition Act Filing and Investment Canada Act Filing
[a05-12039_1ex10d1.htm#a9_9CompetitionActFilingAndInvest_022905]

 

 

9.10 [a05-12039_1ex10d1.htm#a9_10AssignmentOfConfidentialityA_022910]

 

Assignment of Confidentiality Agreements
[a05-12039_1ex10d1.htm#a9_10AssignmentOfConfidentialityA_022910]

 

 

9.11 [a05-12039_1ex10d1.htm#a9_11Insurance_022913]

 

Insurance [a05-12039_1ex10d1.htm#a9_11Insurance_022913]

 

 

9.12 [a05-12039_1ex10d1.htm#a9_12EmployeeRelatedMatters_022916]

 

Employee Related Matters
[a05-12039_1ex10d1.htm#a9_12EmployeeRelatedMatters_022916]

 

 

9.13 [a05-12039_1ex10d1.htm#a9_13ConsentToJurisdiction_021953]

 

Consent to Jurisdiction
[a05-12039_1ex10d1.htm#a9_13ConsentToJurisdiction_021953]

 

 

9.14 [a05-12039_1ex10d1.htm#a9_14UsFinancialStatements_021958]

 

US Financial Statements
[a05-12039_1ex10d1.htm#a9_14UsFinancialStatements_021958]

 

 

9.15 [a05-12039_1ex10d1.htm#a9_15ReservesReportus_022000]

 

Reserves Report (US) [a05-12039_1ex10d1.htm#a9_15ReservesReportus_022000]

 

 

9.16 [a05-12039_1ex10d1.htm#a9_16PurchaseNotConditionalOnFina_022004]

 

Purchase Not Conditional on Financing
[a05-12039_1ex10d1.htm#a9_16PurchaseNotConditionalOnFina_022004]

 

 

9.17 [a05-12039_1ex10d1.htm#a9_17ComplianceWithPrivacyLaws_022006]

 

Compliance with Privacy Laws
[a05-12039_1ex10d1.htm#a9_17ComplianceWithPrivacyLaws_022006]

 

 

9.18 [a05-12039_1ex10d1.htm#a9_18BankAccounts_022008]

 

Bank Accounts [a05-12039_1ex10d1.htm#a9_18BankAccounts_022008]

 

 

 

 

 

 

 

ARTICLE 10
INDEMNIFICATION [a05-12039_1ex10d1.htm#Article10Indemnification_022015]

 

 

 

10.1 [a05-12039_1ex10d1.htm#a10_1MutualIndemnificationsForBre_022027]

 

Mutual Indemnifications for Breaches of Covenants and Warranties
[a05-12039_1ex10d1.htm#a10_1MutualIndemnificationsForBre_022027]

 

 

10.2 [a05-12039_1ex10d1.htm#a10_2ProceduresRelatingToIndemnif_022032]

 

Procedures Relating to Indemnification Between Vendor and Purchaser
[a05-12039_1ex10d1.htm#a10_2ProceduresRelatingToIndemnif_022032]

 

 

10.3 [a05-12039_1ex10d1.htm#a10_3IndemnificationProceduresFor_022034]

 

Indemnification Procedures for Third Party Claims
[a05-12039_1ex10d1.htm#a10_3IndemnificationProceduresFor_022034]

 

 

10.4 [a05-12039_1ex10d1.htm#a10_4HoldingOfIndemnities_022037]

 

Holding of Indemnities [a05-12039_1ex10d1.htm#a10_4HoldingOfIndemnities_022037]

 

 

10.5 [a05-12039_1ex10d1.htm#a10_5ClaimsNetOfInsuranceAndTaxes_022038]

 

Claims Net of Insurance and Taxes
[a05-12039_1ex10d1.htm#a10_5ClaimsNetOfInsuranceAndTaxes_022038]

 

 

10.6 [a05-12039_1ex10d1.htm#a10_6Mitigation_022040]

 

Mitigation [a05-12039_1ex10d1.htm#a10_6Mitigation_022040]

 

 

10.7 [a05-12039_1ex10d1.htm#a10_7AdjustmentToPurchasePrice_022041]

 

Adjustment to Purchase Price
[a05-12039_1ex10d1.htm#a10_7AdjustmentToPurchasePrice_022041]

 

 

10.8 [a05-12039_1ex10d1.htm#a10_8Subrogation_022043]

 

Subrogation [a05-12039_1ex10d1.htm#a10_8Subrogation_022043]

 

 

 

 

 

 

 

ARTICLE 11
TAX MATTERS [a05-12039_1ex10d1.htm#Article11TaxMatters_022045]

 

 

 

11.1 [a05-12039_1ex10d1.htm#a11_1LiabilitiesForTaxes_022048]

 

Liabilities for Taxes [a05-12039_1ex10d1.htm#a11_1LiabilitiesForTaxes_022048]

 

 

11.2 [a05-12039_1ex10d1.htm#a11_2TaxReturns_022051]

 

Tax Returns [a05-12039_1ex10d1.htm#a11_2TaxReturns_022051]

 

 

11.3 [a05-12039_1ex10d1.htm#a11_3ConfidentialityOfTaxInformat_022053]

 

Confidentiality of Tax Information
[a05-12039_1ex10d1.htm#a11_3ConfidentialityOfTaxInformat_022053]

 

 

11.4 [a05-12039_1ex10d1.htm#a11_4Section338Election_022055]

 

Section 338 Election [a05-12039_1ex10d1.htm#a11_4Section338Election_022055]

 

 

11.5 [a05-12039_1ex10d1.htm#a11_5TaxClaims_022059]

 

Tax Claims [a05-12039_1ex10d1.htm#a11_5TaxClaims_022059]

 

 

11.6 [a05-12039_1ex10d1.htm#a11_6AssistanceAndCooperation_022100]

 

Assistance and Cooperation
[a05-12039_1ex10d1.htm#a11_6AssistanceAndCooperation_022100]

 

 

 

iii

--------------------------------------------------------------------------------

 

ARTICLE 12
TERMINATION AND CLOSING
[a05-12039_1ex10d1.htm#Article12TerminationAndClosing_022103]

 

 

 

12.1 [a05-12039_1ex10d1.htm#a12_1Termination_022104]

 

Termination [a05-12039_1ex10d1.htm#a12_1Termination_022104]

 

 

12.2 [a05-12039_1ex10d1.htm#a12_2RegardingTerminationByPurcha_022139]

 

Regarding Termination by Purchaser
[a05-12039_1ex10d1.htm#a12_2RegardingTerminationByPurcha_022139]

 

 

12.3 [a05-12039_1ex10d1.htm#a12_3RegardingTerminationByVendor_022141]

 

Regarding Termination by Vendor
[a05-12039_1ex10d1.htm#a12_3RegardingTerminationByVendor_022141]

 

 

12.4 [a05-12039_1ex10d1.htm#a12_4Deposit_022142]

 

Deposit [a05-12039_1ex10d1.htm#a12_4Deposit_022142]

 

 

12.5 [a05-12039_1ex10d1.htm#a12_5NoticeOfTermination_022143]

 

Notice of Termination [a05-12039_1ex10d1.htm#a12_5NoticeOfTermination_022143]

 

 

12.6 [a05-12039_1ex10d1.htm#a12_6EffectOfTermination_022146]

 

Effect of Termination [a05-12039_1ex10d1.htm#a12_6EffectOfTermination_022146]

 

 

 

 

 

 

 

ARTICLE 13
GENERAL [a05-12039_1ex10d1.htm#Article13General_022149]

 

 

 

13.1 [a05-12039_1ex10d1.htm#a13_1Nonwaiver_022150]

 

Non-Waiver [a05-12039_1ex10d1.htm#a13_1Nonwaiver_022150]

 

 

13.2 [a05-12039_1ex10d1.htm#a13_2PublicNotices_022150]

 

Public Notices [a05-12039_1ex10d1.htm#a13_2PublicNotices_022150]

 

 

13.3 [a05-12039_1ex10d1.htm#a13_3Notices_022153]

 

Notices [a05-12039_1ex10d1.htm#a13_3Notices_022153]

 

 

13.4 [a05-12039_1ex10d1.htm#a13_4Assignment_022155]

 

Assignment [a05-12039_1ex10d1.htm#a13_4Assignment_022155]

 

 

13.5 [a05-12039_1ex10d1.htm#a13_5FurtherAssurances_022156]

 

Further Assurances [a05-12039_1ex10d1.htm#a13_5FurtherAssurances_022156]

 

 

13.6 [a05-12039_1ex10d1.htm#a13_6NoRecourse_022157]

 

No Recourse [a05-12039_1ex10d1.htm#a13_6NoRecourse_022157]

 

 

13.7 [a05-12039_1ex10d1.htm#a13_7TimeOfTheEssence_022159]

 

Time of the Essence [a05-12039_1ex10d1.htm#a13_7TimeOfTheEssence_022159]

 

 

13.8 [a05-12039_1ex10d1.htm#a13_8Amendment_022201]

 

Amendment [a05-12039_1ex10d1.htm#a13_8Amendment_022201]

 

 

13.9 [a05-12039_1ex10d1.htm#a13_9Invalidity_022202]

 

Invalidity [a05-12039_1ex10d1.htm#a13_9Invalidity_022202]

 

 

13.10 [a05-12039_1ex10d1.htm#a13_10Counterparts_022203]

 

Counterparts [a05-12039_1ex10d1.htm#a13_10Counterparts_022203]

 

 

13.11 [a05-12039_1ex10d1.htm#a13_11Enforcement_022204]

 

Enforcement [a05-12039_1ex10d1.htm#a13_11Enforcement_022204]

 

 

13.12 [a05-12039_1ex10d1.htm#a13_12NoThirdpartyBeneficiaries_022207]

 

No Third-Party Beneficiaries
[a05-12039_1ex10d1.htm#a13_12NoThirdpartyBeneficiaries_022207]

 

 

13.13 [a05-12039_1ex10d1.htm#a13_13Expenses_022208]

 

Expenses [a05-12039_1ex10d1.htm#a13_13Expenses_022208]

 

 

13.14 [a05-12039_1ex10d1.htm#a13_14RemovalOfName_022209]

 

Removal of Name [a05-12039_1ex10d1.htm#a13_14RemovalOfName_022209]

 

 

 

iv

--------------------------------------------------------------------------------

 

SCHEDULES

 

Schedule 1.1(a)

 

Escrow Agreement

Schedule 1.1(b)

 

SMOG Run

Schedule 1.1(c)

 

Unaudited Financial Statements

Schedule 1.3

 

Vendor Knowledge Individuals

Schedule 4.4(c)

 

Subsidiaries

 

 

Part 1

Corporate Subsidiaries (Alberta)

 

 

Part 2

Corporate Subsidiary (Nova Scotia)

 

 

Part 3

Partnership Subsidiaries

Schedule 4.5(c)

 

Defaults Due to this Agreement

Schedule 4.5(e)

 

Change of Control Provisions

Schedule 4.9

 

Material Government Authorizations – Vendor and Unocal

Schedule 4.10

 

Benefit Plans

Schedule 4.14

 

Environmental Matters

Schedule 4.15(a)

 

Permitted Encumbrances

Schedule 4.15(c)

 

Notices of Defaults

Schedule 4.15(d)

 

Government Proceedings

Schedule 4.15(e)

 

Authorizations for Expenditure

Schedule 4.15(g)

 

Marketing and Transportation Agreements

Schedule 4.16

 

Material Contracts and Liabilities

Schedule 4.17

 

Open Litigation Claims

Schedule 4.18

 

Intellectual Property

Schedule 4.19(a)

 

Tax Matters

Schedule 4.19(h)

 

Tax Elections

Schedule 4.19(i)

 

Subpart F Income

Schedule 4.19(j)

 

United States Property

Schedule 4.22

 

Estimated Resource Pools

Schedule 4.23

 

Areas of Mutual Interest

Schedule 5.5

 

Material Government Authorizations – Purchaser and Pogo

Schedule 7.6(e)

 

Vendor’s Opinions

Schedule 8.6(e)

 

Purchaser’s Opinions

 

v

--------------------------------------------------------------------------------

 

SHARE PURCHASE AGREEMENT

 

THIS AGREEMENT is made as of July 8, 2005 among:

 

UNOCAL CANADA LIMITED

a corporation continued under the laws of Alberta

 

 - and –

 

UNOCAL CANADA ALBERTA HUB LIMITED

a corporation incorporated under the laws of Alberta

 

(Unocal Canada Limited and Unocal Canada Alberta Hub Limited are hereinafter
collectively called “Vendor”)

 

- and –

 

UNOCAL CORPORATION
a corporation incorporated under the laws of Delaware
(hereinafter called “Unocal”)

 

- and –

 

POGO CANADA, ULC

an Alberta unlimited liability corporation
(hereinafter called “Purchaser”)

 

- and –

 

POGO PRODUCING COMPANY
a corporation incorporated under the laws of Delaware
(hereinafter called “Pogo”)

 

RECITALS:

 

A.            Vendor is the legal and beneficial owner of all of the Purchased
Shares.

 

B.            Vendor has agreed to sell to Purchaser, and Purchaser has agreed
to purchase from Vendor, all of the Purchased Shares, on the terms and
conditions of this Agreement.

 

IN CONSIDERATION of the covenants, agreements, representations, warranties and
payments herein set forth, the Parties, together with Unocal and Pogo, covenant
and agree as follows:

 

--------------------------------------------------------------------------------

 

ARTICLE 1
DEFINITIONS AND INTERPRETATION

 

1.1          DEFINITIONS

 

Whenever used in this Agreement or the Schedules to this Agreement, the
following words and terms shall have the meanings set out below:

 

“Abandonment and Reclamation Obligations” means all past, present and future
obligations under Contracts, Applicable Laws, equity or common law to:

 

(A)           ABANDON WELLS;

 

(B)           CLOSE, DECOMMISSION, DISMANTLE AND REMOVE TANGIBLE EQUIPMENT AND
FACILITIES THAT WERE OR THAT ARE BEING USED IN CONNECTION WITH THE ASSETS;

 

(C)           RESTORE, REMEDIATE AND RECLAIM THE SURFACE OR SUBSURFACE OF THE
LANDS USED IN CONNECTION WITH THE WELLS, TANGIBLE EQUIPMENT AND FACILITIES THAT
WERE OR THAT ARE BEING USED IN CONNECTION WITH THE ASSETS, INCLUDING LANDS IN OR
ON WHICH THEY ARE OR WERE LOCATED AND LANDS WHICH ARE OR WERE USED TO GAIN
ACCESS TO THEM; AND

 

(D)           RESTORE, REMEDIATE AND RECLAIM THE SURFACE OR SUBSURFACE OF LANDS
AFFECTED BY SEISMIC OR OTHER GEOLOGICAL OR GEOPHYSICAL EXPLORATION ACTIVITIES
CONDUCTED BY OR ON BEHALF OF THE CORPORATION OR ANY OF THE SUBSIDIARIES;

 

including such obligations relating to wells, facilities and tangibles which
were abandoned or decommissioned, dismantled or removed prior to the Closing
Date (whether or not included in the Assets).

 

“ABCA” means the Business Corporations Act (Alberta).

 

“Accounting Firm” means a mutually agreed on, nationally recognized accounting
firm.

 

“Affiliate” means, as to a Person, any other Person controlling, controlled by
or under common control with that Person where “control”, “controlling” or
“controlled” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of another Person, whether
through the ownership of voting securities or by contract, partnership
agreement, trust arrangement or other means, either directly or indirectly, that
results in control in fact; provided that direct or indirect ownership of shares
of a corporation carrying more than 50% of the voting rights shall constitute
control of that corporation; and further provided that:

 

(A)           THE CORPORATION AND EACH OF THE SUBSIDIARIES SHALL BE CONCLUSIVELY
DEEMED TO BE AFFILIATES OF VENDOR AS TO ANY MATTER OR THING RELATING TO THE
PERIOD BEFORE THE CLOSING; AND

 

(B)           THE CORPORATION AND EACH OF THE SUBSIDIARIES SHALL BE CONCLUSIVELY
DEEMED TO BE AFFILIATES OF PURCHASER AS TO ANY MATTER OR THING RELATING TO THE
PERIOD FROM AND AFTER THE CLOSING.

 

“Agreement” means this Share Purchase Agreement, including the recitals and all
Schedules hereto, and includes all written instruments supplementing, amending
or confirming this Share Purchase Agreement agreed to by the Parties after the
date hereof.

 

“Applicable Laws” means all laws (including Environmental Laws and Privacy
Laws), statutes, rules, regulations, official directives and orders of
Government Authorities (whether

 

2

--------------------------------------------------------------------------------

 

administrative, regulatory, legislative, executive or otherwise) including
judgments, orders and decrees of courts, commissions or bodies exercising
similar functions.

 

“Asset Acquisition Statement” has the meaning given to that term in
Section 11.4(b).

 

“Assets” means all of the tangible and intangible property (whether real,
personal or mixed), rights, benefits, privileges and other assets owned or
leased by the Corporation and the Subsidiaries, including all oil and gas
properties and the tangible equipment and miscellaneous interests owned or held
by the Corporation and the Subsidiaries in connection therewith and any such
assets in respect of which the Corporation or any of the Subsidiaries share
ownership with third parties, or have a right to use.

 

“Audited Financial Statements” means the audited consolidated financial
statements of the Corporation and the Subsidiaries for the fiscal years ended
December 31, 2004 and 2003, in each case consisting of a consolidated balance
sheet, a consolidated statement of earnings and retained earnings and a
consolidated statement of cash flows, and the audited consolidated statement of
earnings and retained earnings and a consolidated statement of cash flows for
the fiscal year ended December 31, 2002, in each case prepared in accordance
with generally accepted accounting principles.

 

“Authorizations” means all permits, licenses, exemptions, orders, variances,
approvals, consents, authorizations, registrations, qualifications and filings
with or under any Applicable Laws and having the force of law.

 

“Banking Facilities” means, collectively, the credit facilities available to the
Corporation under the Syndicated Credit Agreement and the Demand Credit
Agreement.

 

“Base Price” has the meaning given to that term in Section 3.1(a).

 

“Benefit Plans” means all plans and arrangements to which the Corporation or any
of the Subsidiaries is a party or by which the Corporation or any of the
Subsidiaries is bound or under which the Corporation or any of the Subsidiaries
has, or will have, any liability or contingent liability, relating to:

 

(A)           PENSION PLANS;

 

(B)           INSURANCE PLANS; OR

 

(C)           COMPENSATION PLANS;

 

with respect to any of its Employees or former Employees (or any dependants or
beneficiaries of any such Employees or former Employees), other than statutory
plans with which the Corporation or any of the Subsidiaries are required to
comply, including the Canada Pension Plan and the Canada Employment Insurance
Plan, and plans administered pursuant to applicable provincial health and
workers’ compensation legislation.

 

“Books and Records” means all books and records of the Corporation and the
Subsidiaries, including financial, corporate, operations and sales books,
inventory and other asset records, books of account, sales and purchase records,
the Title and Operating Documents, customer files, production data, equipment
maintenance data, accounting records, sales and promotional data, advertising
materials, cost and pricing information, supplier lists, customer lists,
business reports, plans and projections and all other similar documents,
surveys, plans, files, records,

 

3

--------------------------------------------------------------------------------

 

correspondence, and other data and information, financial or otherwise,
including all data and information stored on computer-related or other
electronic media but excepting therefrom all Proprietary Information.

 

“Business” means the business of the Corporation and the Subsidiaries.

 

“Business Day” means a day, other than a Saturday or Sunday, on which the
principal commercial banks located at the cities of Calgary, Alberta and
Houston, Texas are open for business during normal banking hours.

 

“Claim” means any action, claim, demand, lawsuit, audit, proceeding, arbitration
or any proceeding or investigation by a Government Authority including a Tax
Claim.

 

“Closing” means the completion of the Purchase pursuant to the terms and
conditions of this Agreement.

 

“Closing Date” means:

 

(A)           THE FIFTH BUSINESS DAY FOLLOWING THE DAY ON WHICH ALL OF THE
CONDITIONS SET FORTH IN SECTIONS 7.3(A), 7.3(B), 7.4, 8.3(A), 8.3(B), AND 8.4 
HAVE BEEN SATISFIED OR DULY WAIVED BY THE PARTY ENTITLED TO WAIVE THE SAME AND
NOTICE OF SATISFACTION OR WAIVER HAS BEEN GIVEN BY THE APPLICABLE PARTY TO THE
OTHER PARTY WHICH NOTICE EACH PARTY AGREES TO GIVE PROMPTLY TO THE OTHER;
PROVIDED THAT, UNLESS THE PARTIES DETERMINE OTHERWISE, THE CLOSING DATE SHALL
NOT IN ANY EVENT BE BEFORE THE EARLIER OF:

 

(I)            THE FIFTH BUSINESS DAY AFTER PURCHASER RECEIVES THE AUDITED
FINANCIAL STATEMENTS AND UNAUDITED FINANCIAL STATEMENTS REFERRED TO IN
SECTION 9.14 AND THE RESERVES REPORT (US); AND

 

(II)           THE 90TH DAY AFTER THE DATE OF THIS AGREEMENT; OR

 

(B)           SUCH OTHER DATE AS THE PARTIES MAY AGREE IN WRITING AS THE DATE ON
WHICH THE CLOSING SHALL TAKE PLACE.

 

“Closing Time” means 9:00 a.m. on the Closing Date, or such other time on such
date as the Parties may agree in writing as the time at which the Closing shall
take place.

 

“Code” means the United States Internal Revenue Code of 1986.

 

“Commissioner” means the Commissioner of Competition appointed pursuant to the
Competition Act.

 

“Compensation Plans” means any and all employment benefits and plans relating to
bonuses, incentive pay or compensation, performance compensation, deferred
compensation, profit sharing or deferred profit sharing, share purchase, share
option, stock appreciation, phantom stock, vacation or vacation pay, sick pay,
severance or termination pay, employee loans or separation from service
benefits, and any other type of arrangement providing for compensation
additional to base pay or salary.

 

“Competition Act” means the Competition Act (Canada).

 

4

--------------------------------------------------------------------------------

 

“Competition Act Approval” means, in respect of the Purchase, that:

 

(A)           AN ADVANCE RULING CERTIFICATE (AN “ARC”) PURSUANT TO SECTION 102
OF THE COMPETITION ACT SHALL HAVE BEEN ISSUED BY THE COMMISSIONER; OR

 

(B)           A “NO ACTION LETTER” HAS BEEN RECEIVED FROM THE COMMISSIONER
INDICATING THAT THE COMMISSIONER HAS DETERMINED THAT SHE DOES NOT AT THAT TIME
INTEND TO MAKE AN APPLICATION FOR AN ORDER UNDER SECTION 92 OF THE COMPETITION
ACT IN RESPECT OF THE PURCHASE; OR

 

(C)           IN THE EVENT THAT NEITHER AN ARC NOR A “NO ACTION LETTER” IS
ISSUED OR RECEIVED, THE RELEVANT WAITING PERIOD UNDER SECTION 123 OF THE
COMPETITION ACT SHALL HAVE EXPIRED AND THERE SHALL BE NO THREATENED OR ACTUAL
APPLICATION BY THE COMMISSIONER FOR AN ORDER UNDER SECTIONS 92 OR 100 OF THE
COMPETITION ACT.

 

“Conditions” means, either or both of Vendor’s Conditions and Purchaser’s
Conditions, as applicable.

 

“Confidentiality Agreement” means the Confidentiality Agreement dated June 7,
2005 between Unocal, on behalf of itself and its Affiliates, and Pogo.

 

“constating document” means the articles of incorporation, bylaws, memorandum of
association, partnership agreement or similar constituting documents of a
Person.

 

“Contracts” means, with respect to any Person, any contracts, licences, leases,
arrangements, agreements and commitments of that Person, and includes all
quotations, orders or tenders for contracts which remain open for acceptance and
all manufacturers’ or suppliers’ warranties, guarantees or commitments (express
or implied), but excludes any oral contract, arrangement, agreement or
commitment relating to goods or services (including the sale of Petroleum
Substances) entered into in the Ordinary Course of the Business.

 

“Corporate Subsidiaries” means the Subsidiaries described in Part 1 and Part 2
of Schedule 4.4(c).

 

“Corporation” means Northrock Resources Ltd., a corporation incorporated under
the laws of Alberta.

 

“Corporation Trade-marks” means any and all trade-marks owned by the Corporation
or the Subsidiaries.

 

“Damage or Destruction Event” means damage, destruction or other casualty losses
with respect to the Assets or any part or parts of the Assets.

 

“Demand Credit Agreement” means the agreement dated May 21, 2002 among Unocal
Canada Limited and the Corporation, as borrowers, Unocal, Union Oil Company of
California and the Corporation, as guarantors, and The Toronto-Dominion Bank, as
lender.

 

“Deposit” has the meaning given to that term in Section 3.2(a).

 

“Disclosed Environmental Liabilities” means any and all Environmental
Liabilities (whether presently realized or projected) caused by, arising from,
incurred in connection with or otherwise relating in any way to the matters in
the Environmental Documentation and any of the health,

 

5

--------------------------------------------------------------------------------

 

safety and environmental records or reports of the Corporation and the
Subsidiaries made available to Purchaser or its Representatives for review
before the date of this Agreement.

 

“Disclosed Personal Information” has the meaning given to that term in
Section 9.17(a).

 

“Distributions” means the aggregate amount of the dividends, returns of capital
or other distributions, of cash or other property, that may be made by the
Corporation and the Subsidiaries to any of Vendor and Vendor’s Affiliates (other
than the Corporation and the Subsidiaries); but shall not include any payment
pursuant to Section 9.4 including any amounts paid or property distributed to
Unocal Canada Limited on the redemption of the Preferred Shares referred to in
Section 9.4(b).

 

“Employees” means all individuals employed by the Corporation or any of the
Subsidiaries including those employees on long term disability leave or other
absence.

 

“Encumbrances” means any lien, charge, Security Interest or other encumbrance of
any kind or character whatsoever.

 

“Environment” means the atmosphere, the surface and sub-surface of the earth,
groundwater and surface waters and plants and animals; and “Environmental” means
relating to or in respect of the Environment.

 

“Environmental Approvals” means all Government Authorizations issued or required
pursuant to Environmental Laws with respect to the Assets or the operation of
the Business.

 

“Environmental Documentation” means all environmental site assessments,
environmental audits, environmental reports and other reports relating to the
application of Environmental Laws to the Corporation, the Subsidiaries, the
Assets or the Business.

 

“Environmental Laws” means all Applicable Laws relating in whole or in part to
the protection of the Environment, and includes those Applicable Laws relating
to the storage, generation, use, handling, manufacture, processing,
transportation, treatment, release and disposal of Hazardous Substances.

 

“Environmental Liabilities” means all past, present and future Liabilities
associated with or arising from any of the following and all costs associated
therewith:

 

(A)           THE MANUFACTURE, CONSTRUCTION, PROCESSING, DISTRIBUTION, USE,
HOLDING, COLLECTION, ACCUMULATION, GENERATION, TREATMENT, STABILIZATION,
STORAGE, DISPOSAL, HANDLING OR TRANSPORTATION OF HAZARDOUS SUBSTANCES, PETROLEUM
SUBSTANCES, OILFIELD WASTES OR PRODUCED WATER;

 

(B)           COMPLIANCE WITH PRESENT AND FUTURE ENVIRONMENTAL LAWS AND
APPLICABLE LAWS RELATED TO EMPLOYEE AND PUBLIC HEALTH AND SAFETY MATTERS
INCLUDING THE PROTECTION, RECLAMATION, REMEDIATION OR RESTORATION OF THE
ENVIRONMENT;

 

(C)           ABANDONMENT AND RECLAMATION OBLIGATIONS;

 

(D)           RELEASES OF HAZARDOUS SUBSTANCES, PETROLEUM SUBSTANCES, OILFIELD
WASTES, PRODUCED WATER OR OTHER SUBSTANCES; AND

 

6

--------------------------------------------------------------------------------

 

(E)           THE REMOVAL, ASSESSMENT, MONITORING, SAMPLING, RESPONSE,
ABATEMENT, CLEAN-UP, INVESTIGATION AND REPORTING OF CONTAMINATION OR POLLUTION
OF OR OTHER ADVERSE EFFECTS ON THE ENVIRONMENT, INCLUDING COMPENSATION OF THIRD
PARTIES FOR LOSSES SUFFERED BY THEM IN RESPECT THEREOF;

 

that relate to the Assets or any previously owned assets or that have arisen or
hereafter arise from or in respect of any past, present or future operations and
activities related to the Assets, or any other activities (including activities
related to the previously owned assets and any seismic programs) conducted by or
on behalf of the Corporation or any of the Subsidiaries.

 

“Environmental Matters” means any activity, event or circumstance in respect of
any of the Assets or the conduct of the Business pertaining to the storage, use,
holding, collection, accumulation, assessment, generation, manufacture,
processing, treatment, stabilization, disposition, handling, transportation or
release of Hazardous Substances or Petroleum Substances on, at or into the
Environment;

 

“Environmental Order” means any environmental protection order, enforcement
order, control order, stop order, remedial order, or other administrative
complaint, direction, order or sanction issued, filed or imposed by a Government
Authority pursuant to Environmental Laws and having the force of law.

 

“Escrow Agent” means CIBC Mellon Trust Company, a corporation existing under the
federal laws of Canada.

 

“Escrow Agreement” means an agreement among Vendor, Purchaser and the Escrow
Agent in the form provided in Schedule 1.1(a).

 

“Exchange Act” means the United States Securities Exchange Act of 1934.

 

 “Final Working Capital Statement” has the meaning given to that term in
Section 3.3(b).

 

“Futures Transaction” means any derivatives transaction (including an agreement
with respect thereto) which is commonly referred to as a hedge transaction, rate
swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transactions (including any option with respect to any of these transaction) or
any combination of these transactions.

 

“Goldman Sachs Commitment” has the meaning given to that term in Section 5.6.

 

 “Government Authority” means any government, regulatory or administrative
authority, government department, agency, commission, board or tribunal or court
having jurisdiction on behalf of any nation, province or state or subdivision
thereof or any municipality, district or subdivision thereof.

 

“Government Authorization” means all Authorizations, including any Environmental
Approvals, issued to, or required by, the Corporation or any of the Subsidiaries
by or from, any Government Authorities.

 

7

--------------------------------------------------------------------------------

 

“Hazardous Substance” means any pollutant, contaminant, hazardous substance,
hazardous material, toxic substance, dangerous substance or dangerous good as
defined, judicially interpreted or identified in any Environmental Law.

 

“Indemnification Notice” has the meaning given to that term in Section 10.2.

 

 “Indemnified Environmental Liabilities” has the meaning given to that term in
Section 10.1(b)(i).

 

“Indemnified Environmental Matters” has the meaning given to that term in
Section 10.1(b)(i).

 

“Indemnified Party” has the meaning given to that term in Section 10.1(a).

 

“Indemnified Person” means a Vendor Indemnified Person or a Purchaser
Indemnified Person, as applicable.

 

“Indemnifying Party” has the meaning given to that term in Section 10.1(a).

 

“Information Memorandum” means the document entitled “Information Memorandum”
issued by CIBC World Markets Inc. and Waterous & Co. dated June 2005, as amended
and supplemented from time to time before the date of this Agreement.

 

“Insurance Plans” means any and all employment benefits and plans relating to
disability or wage continuation during periods of absence from work (including
short term disability and long term disability), hospitalization, health,
medical or dental treatments or expenses, life insurance, death or survivor’s
benefits and supplementary employment insurance, in each case regardless of
whether or not those benefits are insured or self-insured.

 

“Intellectual Property” means all registered patents, copyrights, trade-marks
(including the Corporation Trade-marks), trade-names, service marks, logos,
commercial symbols and industrial designs, (including applications for all of
the foregoing, and renewals, divisions, extensions and reissues, where
applicable, relating thereto) owned by or licensed to the Corporation or any of
the Subsidiaries.

 

“Interim Period” means the period from the Working Capital Date to and including
the Closing Date.

 

“Investment Canada Act” means the Investment Canada Act (Canada).

 

“Investment Canada Approval” means the approval (or deemed approval) by the
responsible Minister designated pursuant to the Investment Canada Act, of the
completion of the Purchase under this Agreement.

 

“Liabilities” means any and all liabilities and obligations, whether under
common law, in equity, under Applicable Law or otherwise, whether tortious,
contractual, vicarious, statutory or otherwise, whether absolute or contingent,
and whether based on fault, strict liability or otherwise.

 

“Losses” means, in respect of a Person and in relation to a matter, any and all
losses, damages, costs, expenses, charges (including all penalties, assessments
and fines) which that Person suffers, sustains, pays or incurs in connection
with that matter and includes reasonable costs of legal counsel (on a solicitor
and client basis) and other professional advisors and consultants and

 

8

--------------------------------------------------------------------------------

 

reasonable costs of investigating and defending Claims arising from the matter,
regardless of whether those Claims are sustained; and also includes Taxes on a
settlement payment or damage award in respect of that matter, but does not
include consequential or indirect losses or loss of profits.

 

“Marketing Agreement” means the Marketing Agreement dated effective September 1,
2000 between the Corporation and Unocal Canada Limited.

 

“Material” or “Materially” means material in relation to the Assets taken as a
whole.

 

“Material Adverse Effect” means any adverse effect or change that results or
could reasonably be expected to result in a reduction in the fair market value
of the Purchased Shares in excess of $30,000,000, whether that reduction arises
from:

 

(a)           a diminution in the fair market value of the Assets (including as
a result of the loss of any Assets, the impairment or loss of interests in any
Assets or the forfeiture or non-existence of any Assets);

 

(b)           an increase in the amount of Liabilities of the Corporation and
the Subsidiaries (on a consolidated basis);

 

(c)           the Corporation and the Subsidiaries (on a consolidated basis)
being unable to operate the Business after the Closing Date on substantially the
same basis as the Corporation and the Subsidiaries (on a consolidated basis)
operated the Business before the Closing Date; or

 

(d)           (without duplication) a combination of the foregoing;

 

but does not include any adverse effect or change caused by general economic
conditions or fiscal or monetary policies of Government Authorities, or
resulting from any changes in the price of Petroleum Substances or any changes
in the oil and gas business generally (including any change or effect resulting
from any regulatory action or intervention of general application, including
that resulting from changes to Applicable Law), or resulting from changes in
interest rates, currency exchange rates and stock markets generally, or
resulting from changes in Applicable Laws.

 

“Material Claim” has the meaning given to that term in Section 6.1(a).

 

“Material Contract” means any Contract of any of the following types:

 

(A)           A CONTRACT INVOLVING PAYMENTS IN EXCESS OF $5,000,000 BY OR TO THE
CORPORATION OR ANY SUBSIDIARY IN ANY CONSECUTIVE TWELVE MONTH PERIOD (EXCLUDING
ANY PAYMENT BY WAY OF PENALTY OR LIQUIDATED DAMAGES), WHICH CANNOT BE TERMINATED
BY THE CORPORATION WITHOUT PENALTY ON THREE MONTHS’ NOTICE OR LESS;

 

(B)           A CONTRACT EVIDENCING INDEBTEDNESS OR GUARANTEES FOR BORROWED
MONEY OR THE DEFERRED PURCHASE PRICE OF PROPERTY, EXCEPTING ANY GUARANTEES BY
THE CORPORATION OF ANY OBLIGATIONS OF ANY OF THE SUBSIDIARIES AND ANY GUARANTEES
BY ANY OF THE SUBSIDIARIES OF ANY OBLIGATIONS OF ANY OF THE OTHER SUBSIDIARIES
OR OF THE CORPORATION; OR

 

(C)           ANY OF THE AGREEMENTS GOVERNING THE PARTNERSHIP SUBSIDIARIES;

 

9

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but does not include:

 

(I)            TITLE AND OPERATING DOCUMENTS;

 

(II)           BENEFIT PLANS; OR

 

(III)          CONTRACTS EXCLUSIVELY BETWEEN SUBSIDIARIES OR BETWEEN THE
CORPORATION AND ONE OR MORE SUBSIDIARIES.

 

“Net Working Capital Amount” means an amount calculated as of the Working
Capital Date for the Corporation and the Subsidiaries equal to the aggregate of
all of their:

 

(A)           CASH ON HAND OR ON DEPOSIT WITH BANKS OR OTHER DEPOSITORIES;

 

(B)           ACCOUNTS RECEIVABLE AND ACCRUED RECEIVABLES LESS THE ALLOWANCE FOR
DOUBTFUL ACCOUNTS;

 

(C)           PREPAID EXPENSES INCLUDING PREPAID TAXES; AND

 

(D)           OTHER CURRENT ASSETS NOT DESCRIBED ABOVE;

 

minus:

 

(E)           ACCOUNTS PAYABLE AND ACCRUED CURRENT LIABILITIES;

 

(F)            TAXES PAYABLE BY THEM RELATING TO ANY PERIOD ON OR BEFORE THE
WORKING CAPITAL DATE, WHETHER OR NOT THE SAME HAVE BECOME DUE, AND CALCULATED ON
THE ASSUMPTION THAT THE CORPORATION AND EACH OF THE SUBSIDIARIES HAD A FISCAL
YEAR FOR PURPOSES OF THE TAX ACT ENDING ON THE WORKING CAPITAL DATE; AND

 

(G)           OTHER CURRENT LIABILITIES NOT DESCRIBED ABOVE, BUT SPECIFICALLY
EXCLUDING LONG TERM ASSET RETIREMENT OBLIGATIONS (INCLUDING AS PART OF THAT
EXCLUSION PROVISIONS FOR FUTURE LEASE RECLAMATION).

 

Deferred income taxes shall not be treated as a current asset or a current
liability and will not affect the calculation of the Net Working Capital Amount.

 

For the purposes of this definition of Net Working Capital Amount:

 

(I)            ALL OF THOSE AMOUNTS INCLUDED IN THE DEFINITION SHALL BE
CALCULATED ON A CONSOLIDATED BASIS FOR THE CORPORATION AND THE SUBSIDIARIES IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; AND

 

(II)           THE NOTE RECEIVABLE OWED BY UNOCAL CANADA LIMITED TO THE
CORPORATION THAT IS REFERRED TO IN SECTION 9.4(B) SHALL BE EXCLUDED.

 

“Notice” has the meaning given to that term in Section 13.3.

 

“Office Lease” means the Lease of Office Space dated as of November 1, 2001
between Scotia Centre Limited, as landlord, and the Corporation, as tenant.

 

“Ordinary Course” means, with respect to an action or actions taken by a Person,
that such action or actions is or are consistent with prudent industry practice
and the past practices of the

 

10

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Person and is or are taken in the ordinary course of normal day-to-day
operations of that Person; and when used with reference to the Corporation and
the Subsidiaries specifically includes any transfers of any of the Assets
between or among the Corporation and the Subsidiaries or any of the
Subsidiaries, and any arrangements or agreements between or among the
Corporation and the Subsidiaries or between or among any of the Subsidiaries.

 

“Outside Date” means December 31, 2005.

 

“Parties” means Vendor and Purchaser collectively; and “Party” means the
applicable one of them.

 

“Partnership Subsidiaries” means the Subsidiaries described in Part 3 of
Schedule 4.4(c).

 

“Pension Plans” means arrangements relating to retirement savings or pensions,
including pension plans, pensions or supplemental pensions whether registered or
unregistered, funded or unfunded, “registered retirement savings plans” (as
defined in the Tax Act), “registered pension plans” (as defined in the Tax Act)
and “retirement compensation arrangements” (as defined in the Tax Act).

 

“Permitted Contest” means action taken by the Corporation or any Subsidiary in
good faith by appropriate proceedings diligently pursued to contest any Taxes,
Claim or Encumbrance, provided that proceeding with that action will not create
a material risk of the forfeiture or loss of, or interference with the use of
operation of, a Material part of the Assets.

 

“Permitted Encumbrance” has the meaning given to that term in Schedule 4.15(a).

 

“Person” means any individual, sole proprietorship, partnership, limited
partnership, corporation, limited or unlimited liability company, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate, Government Authority, or any other entity, and a natural person in
such person’s capacity as trustee, executor, administrator or other legal
representative.

 

“Personal Information” means information about an Employee, but does not include
an individual’s name, position name or title, business telephone number,
business address, business email or business fax number.

 

“Petroleum Substances” means petroleum, natural gas and all related hydrocarbons
(including liquid hydrocarbons) and all other mineral substances, whether solid
or gaseous and whether hydrocarbon or not (including sulphur and hydrogen
sulphide) produced in association with petroleum, natural gas or related
hydrocarbons.

 

“Pogo” means Pogo Producing Company, a corporation incorporated under the laws
of Delaware.

 

“Preferred Shares” means the unlimited number of Class A preferred shares that
may be issued by the Corporation.

 

“Preliminary Net Working Capital Amount” has the meaning given to that term in
Section 3.3(a).

 

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“Prime Rate” means the annual rate of interest announced from time to time by
The Bank of Nova Scotia as its reference rate then in effect for determining
interest rates it will charge on Canadian dollar commercial loans made by it in
Canada.

 

“Privacy Laws” means any and all Applicable Laws relating to privacy and the
collection, use and disclosure of Personal Information in all applicable
jurisdictions, including the Personal Information Protection and Electronic
Documents Act (Canada) and/or any comparable provincial law (including the
Personal Information Protection Act (Alberta)).

 

“Prohibited Name and Marks” has the meaning given to that term in Section 13.14.

 

“Proprietary Information” means all Books And Records in respect of or in
connection with:

 

(A)           THE VALUATION OF THE CORPORATION, THE SUBSIDIARIES, THE ASSETS OR
THE BUSINESS;

 

(B)           ANY ADVICE FROM VENDOR’S COUNSEL, VENDOR’S INVESTMENT BANKERS AND
ANY OTHER CONSULTANT OR ADVISOR OF VENDOR, THE CORPORATION OR THE SUBSIDIARIES
WITH RESPECT TO THE DIVESTITURE OF THE CORPORATION, THE SUBSIDIARIES OR THEIR
RESPECTIVE ASSETS OR PARTS OF THE BUSINESS; AND

 

(C)           THE PROCESS AND PROCEEDINGS WITH RESPECT TO ANY SUCH PROPOSED
DIVESTITURE.

 

“Purchase” means the purchase by Purchaser of the Purchased Shares from Vendor
in accordance with the provisions of this Agreement.

 

“Purchase Money Obligation” means any secured debt of the Corporation or any
Subsidiary created or assumed to finance any part of the purchase price of real
or tangible personal property, including any extensions, renewals or refunding
of any of that debt.

 

“Purchase Price” has the meaning given to that term in Section 3.1.

 

“Purchased Shares” means all of the issued and outstanding shares in the capital
of the Corporation; and for certainty “Purchased Shares” shall not include any
Preferred Shares that are redeemed pursuant to Section 9.4.

 

“Purchaser” means Pogo Canada, ULC, an Alberta unlimited liability corporation.

 

“Purchaser Indemnified Persons” has the meaning given to that term in
Section 10.1(a)

 

“Purchaser’s Conditions” has the meaning given to that term in Article 7.

 

“Purchaser’s Objection” has the meaning given to that term in Section 3.3(c).

 

“Purchaser’s Process Agent” has the meaning given to that term in Section 9.13.

 

“PWC” means PricewaterhouseCoopers LLP, Chartered Accountants.

 

“Related Party” means, in reference to a Party:

 

(A)           ITS AFFILIATES, SUCCESSORS AND ASSIGNS;

 

(B)           ITS DIRECTORS, OFFICERS AND EMPLOYEES;

 

12

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(C)           ITS AFFILIATES’ DIRECTORS, OFFICERS AND EMPLOYEES; AND

 

(D)           ITS REPRESENTATIVES.

 

“Releases” means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Hazardous
Substance, oilfield wastes or produced water into or through the Environment.

 

“Representatives” means, in reference to a Party, its and its Affiliates’
representatives, agents, legal counsel, consultants and advisors; and with
regard to Vendor includes Vendor’s Counsel and Vendor’s Investment Bankers.

 

“Required Approvals” means the Competition Act Approval and the Investment
Canada Approval.

 

“Reserves Report (Can)” means a report (National Instrument 51-101 compliant)
containing estimates of the proved reserves of Petroleum Substances attributable
to the Assets to be prepared by Ryder Scott using escalating and constant
pricing, including a Form 51-101F2 - Report on Reserves Data by Independent
Qualified Reserves Evaluator or Auditor and a Form 51-101F3 — Report of
Management and Directors on Oil and Gas Disclosure of the Corporation.

 

“Reserves Report (US)” means a report containing estimates of the proved
reserves of Petroleum Substances attributable to the Assets to be prepared by
Ryder Scott.

 

“Resource Pools” means

 

(A)           CUMULATIVE CANADIAN EXPLORATION EXPENSES;

 

(B)           CUMULATIVE CANADIAN DEVELOPMENT EXPENSES;

 

(C)           CUMULATIVE CANADIAN OIL AND GAS PROPERTY EXPENSES;

 

(D)           UNDEPRECIATED CAPITAL COST; AND

 

(E)           NON-CAPITAL LOSS CARRY FORWARDS;

 

as those terms are defined in the Tax Act.

 

“Ryder Scott” means Ryder Scott Company Petroleum Engineers.

 

“SEC” means the United States Securities and Exchange Commission.

 

“section 338 election” has the meaning given to that term in Section 11.4(a).

 

“Securities Act of 1933” means the United States Securities Act of 1933.

 

“Security Interest” has the meaning given to that term under the Personal
Property Security Act (Alberta).

 

“Senior Officers” means with respect to:

 

(A)           VENDOR, PRESIDENT AND CHAIRMAN AND THE VICE-PRESIDENTS;

 

13

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(B)           THE CORPORATION OR ANY SUBSIDIARY, THE PRESIDENT, THE SENIOR
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER AND THE VICE-PRESIDENT CORPORATE
DEVELOPMENT; AND

 

(C)           PURCHASER, THE CHIEF EXECUTIVE OFFICER, THE PRESIDENT AND THE
VICE-PRESIDENT FINANCE.

 

“SMOG Run” means the Northrock Standard Measure of Oil and Gas Reserves Year-End
Data Input in respect of the Assets prepared by Unocal for its 2004 annual
report year, a copy of which document is attached as Schedule 1.1(b).

 

“Straddle Period” means, in the case of the Corporation or any Corporate
Subsidiary, any taxation year and, in the case of any Partnership Subsidiary,
any fiscal year, in any case beginning on or before and ending after the Working
Capital Date.

 

“Subsidiaries” means the entities listed in Part 1, Part 2 and Part 3 of
Schedule 4.4(c).

 

“Syndicated Credit Agreement” means the Amended and Restated Credit and
Guarantee Agreement dated as of November 24, 2004 among Unocal Canada Limited
and the Corporation, as borrowers, Unocal, Union Oil Company of California,
Unocal Canada Limited and the Corporation, as guarantors, the Lenders party
thereto, BNP Paribas (Canada), as Administrative Agent, and The Bank of Nova
Scotia, as Syndication Agent.

 

“Tax Act” means the Income Tax Act (Canada).

 

“Tax Benefit” has the meaning given to that term in Section 10.5(b).

 

“Tax Claim” has the meaning given to that term in Section 11.5(a).

 

“Tax Rate” has the meaning given to that term in Section 10.5(b).

 

“Tax Returns” includes all returns, reports, declarations, elections, notices,
filings, forms, information returns and statements filed or required to be filed
in respect of Taxes.

 

“Taxes” means all taxes, duties, fees, premiums, assessments, imposts, levies
and other charges of any kind whatsoever imposed by any Government Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as, income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, harmonized sales, use,
value-added, excise, stamp, withholding, business, franchising, property,
employer health, payroll, employment, health, social services, education and
social security taxes, all surtaxes, all customs duties and import and export
taxes, all license and registration fees and all employment insurance, health
insurance and Canada and other Government Authority pension plan premiums or
contributions.

 

“Title and Operating Documents” means documents of title including:

 

(A)           PETROLEUM AND/OR NATURAL GAS LEASES, PERMITS AND LICENSES (WHETHER
FREEHOLD OR CROWN) AND SIMILAR INSTRUMENTS; AND

 

(B)           OPERATING PROCEDURES; UNIT AGREEMENTS; UNIT OPERATING AGREEMENTS;
AGREEMENTS FOR THE CONSTRUCTION, OWNERSHIP AND OPERATION OF GAS PLANTS,
PIPELINES, GAS GATHERING SYSTEMS AND SIMILAR FACILITIES; POOLING AGREEMENTS;
ROYALTY AGREEMENTS; FARMIN AND FARMOUT AGREEMENTS; PARTICIPATION AND
SUBPARTICIPATION AGREEMENTS; TRUST DECLARATIONS AND

 

14

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AGREEMENTS; AGREEMENTS PROVIDING FOR THE GATHERING, MEASUREMENT, PROCESSING,
COMPRESSION OR TRANSPORTATION OF PETROLEUM SUBSTANCES; WELL OPERATING CONTRACTS
AND SURFACE LEASES, PIPELINE EASEMENTS, ROAD USE AGREEMENTS AND OTHER CONTRACTS
GRANTING SURFACE INTERESTS;

 

BY VIRTUE OF WHICH THE ASSETS ARE HELD OR WHICH PERTAIN TO THE OWNERSHIP,
DEVELOPMENT OR OPERATION OF THE ASSETS.

 

“Unaudited Financial Statements” means the unaudited consolidated financial
statements of the Corporation and the Subsidiaries for the fiscal years ended
December 31, 2003 and 2004, and the unaudited consolidated financial statements
of the Corporation and the Subsidiaries for the three month period ended
March 31, 2005, in each case consisting of a consolidated balance sheet and a
consolidated statement of earnings prepared in accordance with generally
accepted accounting principles, which financial statements are attached as
Schedule 1.1(c).

 

“Undepreciated Capital Cost” means “undepreciated capital cost”, as defined in
and for the purposes of the Tax Act.

 

“Unocal” means Unocal Corporation, a corporation incorporated under the laws of
Delaware.

 

“Unused Tax Credits” has the meaning given to that term in Section 11.4(e).

 

“US$” or “US Dollars” means lawful currency of the United States.

 

“Vendor” means, collectively, Unocal Canada Limited, a corporation continued
under the laws of Alberta, and Unocal Canada Alberta Hub Limited, a corporation
incorporated under the laws of Alberta.

 

“Vendor Indemnified Persons” has the meaning given to that term in
Section 10.1(a).

 

“Vendor’s Conditions” has the meaning given to that term in Article 8.

 

“Vendor’s Counsel” means Stikeman Elliott LLP.

 

“Vendor’s Insurance” has the meaning given to that term in Section 9.11(a).

 

“Vendor’s Interest Rate” means the rate per annum for three month Government of
Canada Treasury Bills from time to time, as posted on Bloomberg screen GGR, plus
0.025% per annum.

 

“Vendor’s Investment Bankers” means, collectively, CIBC World Markets Inc. and
Waterous & Co.

 

“Vendor’s Process Agent” has the meaning given to that term in Section 9.13.

 

“Vendor’s Review Period” has the meaning given to that term in Section 3.3(d).

 

“Working Capital Date” means June 30, 2005.

 

1.2          CERTAIN RULES OF INTERPRETATION

 

In this Agreement (including the Schedules):

 

(A)           ALL REFERENCES TO A TIME ARE REFERENCES TO LOCAL TIME IN CALGARY,
ALBERTA;

 

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(B)           EXCEPT FOR REFERENCES TO MONEY AMOUNTS IN ARTICLE 3, AND IN
SECTION 6.2(C)(II) WHICH REFERENCES SHALL BE TO US DOLLARS, OR AS OTHERWISE
EXPRESSLY SPECIFIED IN THIS AGREEMENT, ALL REFERENCES TO MONEY AMOUNTS ARE TO
CANADIAN CURRENCY;

 

(C)           REFERENCES TO ARTICLE OR SECTION MEAN AND REFER TO THE SPECIFIED
ARTICLE OR SECTION OF THIS AGREEMENT;

 

(D)           DESCRIPTIVE HEADINGS OR TITLES OF ARTICLES AND SECTIONS HAVE BEEN
INSERTED SOLELY FOR CONVENIENCE OF REFERENCE AND ARE NOT INTENDED AS COMPLETE OR
ACCURATE DESCRIPTIONS OF THE CONTENT OF THOSE ARTICLES OR SECTIONS, AND SHALL
NOT BE USED IN INTERPRETING THOSE ARTICLES OR SECTIONS;

 

(E)           USE OF WORDS IN THE SINGULAR OR PLURAL, OR WITH A PARTICULAR
GENDER, SHALL INCLUDE THE OTHER AND SHALL NOT LIMIT THE SCOPE OR EXCLUDE THE
APPLICATION OF ANY PROVISION OF THIS AGREEMENT, TO ANY PERSON OR PERSONS OR
CIRCUMSTANCES AS THE CONTEXT OTHERWISE PERMITS;

 

(F)            WHENEVER A PROVISION OF THIS AGREEMENT REQUIRES AN APPROVAL OR
CONSENT BY A PARTY TO THIS AGREEMENT:

 

(I)            UNLESS OTHERWISE PROVIDED HEREIN, THAT APPROVAL OR CONSENT MAY
NOT BE UNREASONABLY WITHHELD OR DELAYED; AND

 

(II)           IF NOTIFICATION OF THAT APPROVAL OR CONSENT (OR THE REFUSAL OF
THAT APPROVAL OR CONSENT) IS NOT DELIVERED WITHIN THE APPLICABLE TIME LIMIT,
THEN, UNLESS OTHERWISE EXPRESSLY SPECIFIED HEREIN, THE PARTY WHOSE CONSENT OR
APPROVAL IS REQUIRED SHALL BE CONCLUSIVELY DEEMED NOT TO HAVE PROVIDED ITS
APPROVAL OR CONSENT;

 

(G)           UNLESS OTHERWISE EXPRESSLY SPECIFIED HEREIN, TIME PERIODS WITHIN
OR FOLLOWING WHICH ANY PAYMENT IS TO BE MADE OR ACT IS TO BE DONE SHALL BE
CALCULATED BY EXCLUDING THE DAY ON WHICH THE PERIOD COMMENCES AND INCLUDING THE
DAY ON WHICH THE PERIOD ENDS, AND BY EXTENDING THE PERIOD TO THE NEXT BUSINESS
DAY FOLLOWING, IF THE LAST DAY OF THE PERIOD IS NOT A BUSINESS DAY;

 

(H)           WHENEVER ANY PAYMENT IS TO BE MADE OR ACTION TO BE TAKEN UNDER
THIS AGREEMENT IS REQUIRED TO BE MADE OR TAKEN ON A DAY OTHER THAN A BUSINESS
DAY, THAT PAYMENT SHALL BE MADE OR ACTION TAKEN ON THE NEXT BUSINESS DAY
FOLLOWING THAT DAY;

 

(I)            WHERE THE WORDS “INCLUDING” OR “INCLUDES” APPEAR IN THIS
AGREEMENT, INCLUDING THE SCHEDULES, THOSE WORDS MEAN “INCLUDING (OR INCLUDES)
WITHOUT LIMITATION”;

 

(J)            ANY REFERENCES HEREIN TO AN AGREEMENT, INSTRUMENT OR WRITING
SHALL BE A REFERENCE TO THAT AGREEMENT, INSTRUMENT OR WRITING, AS AMENDED FROM
TIME TO TIME PRIOR TO THE DATE HEREOF;

 

(K)           ANY REFERENCE HEREIN TO A LAW, STATUTE, REGULATION OR OTHER
ENACTMENT SHALL BE A REFERENCE TO THAT LAW, STATUTE, REGULATION OR ENACTMENT AS
AMENDED, REPLACED OR SUPERSEDED FROM TIME TO TIME;

 

(L)            ALL REFERENCES IN THIS AGREEMENT TO THE WORDS “HEREIN”, “HEREBY”,
“HEREOF”, “HERETO”, AND WORDS OF SIMILAR IMPORT REFER TO THIS AGREEMENT AS A
WHOLE AND NOT TO ANY PARTICULAR ARTICLE, SECTION OR SCHEDULE UNLESS OTHERWISE
EXPRESSLY STATED; AND

 

16

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(M)          WHERE ANY CONVERSION OF CANADIAN CURRENCY OR US DOLLARS FROM ONE TO
THE OTHER IS REQUIRED, THE PARTIES SHALL USE THE AVERAGE OF THE BANK OF CANADA
POSTED NOON SPOT EXCHANGE RATES ON THE BUSINESS DAY PRIOR TO THE BUSINESS DAY ON
WHICH THE CONVERSION TAKES PLACE.

 

1.3          KNOWLEDGE

 

Any reference in this Agreement (including in the Schedules) to “the knowledge”
or “to the best of the knowledge” of Vendor, the Corporation or a Subsidiary or
of which Vendor, the Corporation or any Subsidiary is “aware” will be deemed to
mean a reference to the actual knowledge of the applicable individuals set forth
in Part 1 of Schedule 1.3 without any obligation on those individuals to make
investigation or inquiry.

 

1.4          ENTIRE AGREEMENT

 

This Agreement, including the Schedules, constitutes the entire agreement among
the Parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of the Parties.  The Confidentiality Agreement shall terminate on
Closing.

 

1.5          APPLICABLE LAW

 

This Agreement shall be governed by and interpreted in accordance with the laws
of Alberta and the laws of Canada applicable therein, and shall be treated in
all respects as an Alberta contract.

 

1.6          ACCOUNTING PRINCIPLES

 

Except as otherwise provided herein:

 

(A)           REFERENCES TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES HEREIN
MEANS A REFERENCE TO PRINCIPLES RECOMMENDED FROM TIME TO TIME; AND

 

(B)           ALL ACCOUNTING TERMS NOT OTHERWISE DEFINED IN THIS AGREEMENT HAVE
THE MEANINGS ASSIGNED TO THEM;

 

in accordance with generally accepted accounting principles in the United
States.

 

1.7          DISCLOSURE

 

Reference to any matter on any Schedule shall not be deemed to be an
acknowledgement by Vendor, or to otherwise imply, that the matter meets or
exceeds any applicable threshold of materiality or any other relevant threshold.

 

1.8          SCHEDULES

 

The Schedules to this Agreement, as listed below, are attached to and are an
integral part of this Agreement:

 

Schedule 1.1(a)

 

Escrow Agreement

 

Schedule 1.1(b)

 

SMOG Run

 

Schedule 1.1(c)

 

Unaudited Financial Statements

 

Schedule 1.3

 

Vendor Knowledge Individuals

 

Schedule 4.4(c)

 

Subsidiaries

 

 

 

Part 1

Corporate Subsidiaries (Alberta)

 

 

Part 2

Corporate Subsidiary (Nova Scotia)

 

 

Part 3

Partnership Subsidiaries

 

17

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Schedule 4.5(c)

 

Defaults Due to this Agreement

 

Schedule 4.5(e)

 

Change of Control Provisions

 

Schedule 4.9

 

Material Government Authorizations – Vendor and Unocal

 

Schedule 4.10

 

Benefit Plans

 

Schedule 4.14

 

Environmental Matters

 

Schedule 4.15(a)

 

Permitted Encumbrances

 

Schedule 4.15(c)

 

Notices of Defaults

 

Schedule 4.15(d)

 

Government Proceedings

 

Schedule 4.15(e)

 

Authorizations for Expenditure

 

Schedule 4.15(g)

 

Marketing and Transportation Agreements

 

Schedule 4.16

 

Material Contracts and Liabilities

 

Schedule 4.17

 

Open Litigation Claims

 

Schedule 4.18

 

Intellectual Property

 

Schedule 4.19(a)

 

Tax Matters

 

Schedule 4.19(h)

 

Tax Elections

 

Schedule 4.19(i)

 

Subpart F Income

 

Schedule 4.19(j)

 

United States Property

 

Schedule 4.22

 

Estimated Resource Pools

 

Schedule 4.23

 

Areas of Mutual Interest

 

Schedule 5.5

 

Material Government Authorizations – Purchaser and Pogo

 

Schedule 7.6(e)

 

Vendor’s Opinions

 

Schedule 8.6(e)

 

Purchaser’s Opinions

 

 

1.9          JOINT AND SEVERAL LIABILITY

 

Unocal Canada Limited and Unocal Canada Alberta Hub Limited shall be jointly and
severally liable for all of their covenants, liabilities and obligations under
this Agreement.

 

1.10        INTERPRETATION IF CLOSING DOES NOT OCCUR

 

If Closing does not occur, each provision of this Agreement which presumes that
Purchaser has acquired the Purchased Shares shall be construed as having been
contingent on Closing having occurred.

 

1.11        CONFLICTS

 

Except as specifically provided herein, if there is any conflict or
inconsistency between a provision of the body of this Agreement and that of a
Schedule or a conveyance document, the provision of the body of this Agreement
shall prevail.

 

1.12        GUARANTEES

 

(A)           UNOCAL HEREBY GUARANTEES THE PERFORMANCE BY UNOCAL CANADA LIMITED
AND UNOCAL CANADA ALBERTA HUB LIMITED OF ALL OF THEIR COVENANTS, OBLIGATIONS AND
LIABILITIES UNDER THIS AGREEMENT AND COVENANTS WITH PURCHASER THAT UNOCAL IS AND
THAT IT SHALL BE DIRECTLY LIABLE AS PRINCIPAL OBLIGOR FOR THE PERFORMANCE OF ANY
OF THOSE COVENANTS, OBLIGATIONS AND LIABILITIES WITHOUT NECESSITY OR REQUIREMENT
FOR PURCHASER TO PURSUE OR EXHAUST ITS REMEDIES OR RECOURSE AGAINST UNOCAL
CANADA LIMITED OR UNOCAL CANADA ALBERTA HUB LIMITED.

 

(B)           POGO HEREBY GUARANTEES THE PERFORMANCE BY PURCHASER OF ALL OF
PURCHASER’S COVENANTS, OBLIGATIONS AND LIABILITIES UNDER THIS AGREEMENT AND
COVENANTS WITH VENDOR THAT POGO IS AND THAT IT SHALL BE DIRECTLY LIABLE AS
PRINCIPAL OBLIGOR FOR THE PERFORMANCE OF ANY OF THOSE COVENANTS, OBLIGATIONS AND
LIABILITIES WITHOUT NECESSITY OR REQUIREMENT FOR VENDOR TO PURSUE OR EXHAUST ITS
REMEDIES OR RECOURSE AGAINST PURCHASER.

 

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ARTICLE 2
PURCHASE AND SALE

 

2.1          ACTIONS BY VENDOR AND PURCHASER REGARDING PURCHASE

 

Subject to the terms and conditions of this Agreement, at the Closing Time:

 

(A)           VENDOR SHALL SELL, TRANSFER AND DELIVER TO PURCHASER, AND
PURCHASER SHALL PURCHASE AND RECEIVE FROM VENDOR, THE PURCHASED SHARES IN
CONSIDERATION FOR THE PAYMENT BY PURCHASER TO VENDOR OF THE PURCHASE PRICE, AS
ADJUSTED AND PAYABLE AS PROVIDED FOR IN THIS AGREEMENT; AND

 

(B)           EACH PARTY SHALL DELIVER TO THE OTHER PARTY ALL DOCUMENTS REQUIRED
TO BE DELIVERED BY IT AT THE CLOSING TIME PURSUANT TO ARTICLE 7 AND ARTICLE 8.

 

2.2          PLACE OF CLOSING

 

The Closing shall take place at the Closing Time at the offices of Vendor’s
Counsel located at Suite 4300, Bankers Hall West, 888 – 3rd Street SW, Calgary,
Alberta, or at such other place as may be agreed on in writing by Vendor and
Purchaser.

 

2.3          TENDER

 

Any tender of documents or money under this Agreement may be made on the Parties
or their respective counsel and, subject to any express provisions of this
Agreement to the contrary, money shall be tendered by wire transfer of
immediately available funds in the applicable currency specified herein to the
account specified by the Party to which payment is being made.

 

ARTICLE 3
PURCHASE PRICE

 

3.1          PURCHASE PRICE

 

The amount payable by Purchaser to Vendor for the Purchased Shares (the
“Purchase Price”) shall be an aggregate amount equal to:

 

(A)           US$1,800,000,000 (THE “BASE PRICE”);

 

(B)           PLUS THE NET WORKING CAPITAL AMOUNT (IF POSITIVE); OR MINUS THE
NET WORKING CAPITAL AMOUNT (IF NEGATIVE); MINUS

 

(C)           ANY DISTRIBUTIONS MADE DURING THE INTERIM PERIOD.

 

The Purchase Price shall be subject to adjustment in accordance with
Section 3.3.

 

3.2          PAYMENT OF PURCHASE PRICE

 

The Purchase Price shall be paid by Purchaser to Vendor as follows:

 

(A)           ON EXECUTION AND DELIVERY OF THIS AGREEMENT, PURCHASER SHALL PAY
TO THE ESCROW AGENT TO BE HELD BY THE ESCROW AGENT PURSUANT TO THE ESCROW
AGREEMENT AN AMOUNT EQUAL TO US$180,000,000 (THE “DEPOSIT”) AS A DEPOSIT AGAINST
THE PAYMENT OF THE PURCHASE PRICE; AND

 

(B)           AT THE CLOSING TIME, SUBJECT TO ARTICLE 12, PURCHASER SHALL PAY TO
VENDOR, AN AGGREGATE AMOUNT EQUAL TO:

 

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(I)            THE SUM OF THE BASE PRICE AND THE PRELIMINARY NET WORKING CAPITAL
AMOUNT (IF POSITIVE); MINUS

 

(II)           THE SUM OF THE DEPOSIT (INCLUDING INTEREST THEREON, LESS
APPLICABLE WITHHOLDING TAXES), THE PRELIMINARY NET WORKING CAPITAL AMOUNT (IF
NEGATIVE) AND ANY DISTRIBUTIONS MADE DURING THE INTERIM PERIOD.

 

The Deposit shall be paid by the Escrow Agent to Vendor as part of the Purchase
Price.  Subject to this Agreement and the Escrow Agreement, the Parties shall
cause the Escrow Agent to deliver the Deposit to Vendor at the Closing Time.

 

3.3          POST CLOSING ADJUSTMENT TO THE NET WORKING CAPITAL AMOUNT

 

(A)           VENDOR SHALL, NOT LATER THAN THREE BUSINESS DAYS BEFORE THE
CLOSING DATE, PROVIDE TO PURCHASER A STATEMENT SETTING FORTH VENDOR’S GOOD FAITH
ESTIMATE (THE “PRELIMINARY NET WORKING CAPITAL AMOUNT”) OF THE NET WORKING
CAPITAL AMOUNT AND THE ACTUAL AMOUNT OF THE DISTRIBUTIONS MADE OR TO BE MADE
DURING THE INTERIM PERIOD.  THE AMOUNT OF THOSE DISTRIBUTIONS SHALL BE CONVERTED
FROM CANADIAN CURRENCY INTO US DOLLARS AS OF THE DATE OF THAT STATEMENT.  THE
PRELIMINARY NET WORKING CAPITAL AMOUNT AND THE AMOUNT OF THE DISTRIBUTIONS MADE
DURING THE INTERIM PERIOD PROVIDED IN THAT STATEMENT SHALL BE INCLUDED IN
CALCULATING THE AMOUNTS PAYABLE BY PURCHASER TO VENDOR AT THE CLOSING TIME
PURSUANT TO SECTION 3.2(B)(I) OR SECTION 3.2(B)(II), AS APPLICABLE.

 

(B)           VENDOR, WITH THE ASSISTANCE OF THE CORPORATION AND THE
SUBSIDIARIES, SHALL PREPARE AND DELIVER TO PURCHASER, WITHIN 30 DAYS AFTER THE
CLOSING DATE, A STATEMENT SETTING FORTH VENDOR’S DETERMINATION OF THE NET
WORKING CAPITAL AMOUNT (THE “FINAL WORKING CAPITAL STATEMENT”) BASED ON:

 

(I)            THE ACTUAL INFORMATION AVAILABLE FROM ACCOUNTING SYSTEMS OF
VENDOR AND THE RECORDS OF THE CORPORATION AND THE SUBSIDIARIES; AND

 

(II)           A CONVERSION OF THE NET WORKING CAPITAL AMOUNT FROM CANADIAN
CURRENCY TO US DOLLARS AS OF THE EFFECTIVE DATE OF THE FINAL WORKING CAPITAL
STATEMENT.

 

(C)           PURCHASER SHALL, WITHIN 30 DAYS AFTER VENDOR’S DELIVERY OF THE
FINAL WORKING CAPITAL STATEMENT, COMPLETE ITS REVIEW OF THE FINAL WORKING
CAPITAL STATEMENT.  IF PURCHASER DISPUTES VENDOR’S DETERMINATION OF ANY OF THE
NET WORKING CAPITAL AMOUNT AS SET FORTH IN THE FINAL WORKING CAPITAL STATEMENT,
PURCHASER WILL SO NOTIFY VENDOR, ON OR BEFORE THE LAST BUSINESS DAY OF THAT 30
DAY PERIOD, IN WRITING (THE “PURCHASER’S OBJECTION”).  THAT NOTICE WILL SET
FORTH A SPECIFIC DESCRIPTION OF THE BASIS OF PURCHASER’S OBJECTION AND THE
ADJUSTMENTS TO THE FINAL WORKING CAPITAL STATEMENT THAT PURCHASER BELIEVES
SHOULD BE MADE.  IF PURCHASER DOES NOT DELIVER A PURCHASER’S OBJECTION WITHIN
THAT PERIOD, THE FINAL WORKING CAPITAL STATEMENT SHALL BE CONCLUSIVE AND BINDING
ON THE PARTIES.

 

(D)           VENDOR WILL HAVE 30 DAYS (“VENDOR’S REVIEW PERIOD”) FROM ITS
RECEIPT OF PURCHASER’S OBJECTION TO REVIEW AND RESPOND TO IT, AND THE PARTIES
WILL THEREAFTER ATTEMPT IN GOOD FAITH TO REACH AN AGREEMENT WITH RESPECT TO ANY
MATTERS IN DISPUTE.  IF VENDOR AND PURCHASER ARE UNABLE TO RESOLVE THEIR
DISAGREEMENT WITHIN 15 DAYS FOLLOWING VENDOR’S REVIEW PERIOD, THEY WILL REFER
THAT DISAGREEMENT TO THE ACCOUNTING FIRM, WHO WILL, ACTING AS EXPERTS AND NOT AS
ARBITRATORS, DETERMINE, ONLY WITH RESPECT TO THE REMAINING DIFFERENCES SO
SUBMITTED, WHETHER AND TO WHAT EXTENT, IF ANY, ANY OF THE FINAL WORKING CAPITAL
STATEMENT REQUIRES ADJUSTMENT.

 

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Vendor and Purchaser will direct the Accounting Firm to use its best efforts to
render its determination within 20 Business Days. The Accounting Firm’s
determination will be conclusive and binding on Vendor and Purchaser.  In
resolving any disputed item, the Accounting Firm must not assign a value to that
item greater than the greatest value for that item claimed by either Vendor or
Purchaser or less than the smallest value for that item claimed by either Vendor
or Purchaser.  Vendor and Purchaser will each pay one half of the fees and
disbursements incurred by the Accounting Firm.

 

(E)           THE NET WORKING CAPITAL AMOUNT AS SET FORTH IN THE FINAL WORKING
CAPITAL STATEMENT, SHALL BE REVISED TO REFLECT ANY REVISIONS AGREED TO BY THE
PARTIES OR DETERMINED BY THE ACCOUNTING FIRM.  IF THE NET WORKING CAPITAL AMOUNT
(INCLUDING ANY REVISIONS REQUIRED TO BE MADE TO THE FINAL WORKING CAPITAL
STATEMENT) IS:

 

(i)            greater than the Preliminary Net Working Capital Amount then
Purchaser shall pay Vendor an amount equal to that difference; or

 

(ii)           less than the Preliminary Net Working Capital Amount then Vendor
shall pay Purchaser an amount equal to that difference.

 

Notwithstanding the foregoing, if there is a disagreement between Vendor and
Purchaser as to any items in the Final Working Capital Statement which
disagreement is required to be resolved by the Accounting Firm in accordance
with the procedures provided in Section 3.3(d) then no payment pursuant to
paragraph (i) or paragraph (ii) above, as applicable, shall be required to be
made by the applicable Party unless the difference between the Preliminary Net
Working Capital Amount and the Net Working Capital Amount incorporating the
Accounting Firm’s determinations is greater than US $1,500,000.

 

Any payment required pursuant to this Section 3.3(e) is to be made within five
Business Days following the final determination of the Net Working Capital
Amount rendered by the Accounting Firm or as agreed to by the Parties.  Any
payments required pursuant to the foregoing shall be made together with interest
thereon at a rate per annum equal to the Prime Rate calculated for the period
from the Working Capital Date to but excluding the date of payment.  No further
adjustments shall be made to the Purchase Price with respect to the Net Working
Capital Amount.  Any such payment (excluding the part thereof that is interest)
shall be treated by Vendor and Purchaser as an adjustment to the Purchase Price.

 

(F)            VENDOR AND PURCHASER SHALL COOPERATE AND PURCHASER SHALL CAUSE
THE CORPORATION AND THE SUBSIDIARIES TO COOPERATE TO FACILITATE THE PREPARATION
AND DELIVERY OF THE FINAL WORKING CAPITAL STATEMENT IN ACCORDANCE WITH THIS
SECTION 3.3. DURING THE PERIOD OF TIME FROM AND AFTER THE CLOSING DATE THROUGH
TO THE TIME OF DELIVERY OF THE FINAL WORKING CAPITAL STATEMENT, AND, IF
APPLICABLE, THE ACCOUNTING FIRM’S DETERMINATIONS, PURCHASER SHALL AFFORD, AND
SHALL CAUSE THE CORPORATION AND THE SUBSIDIARIES TO AFFORD, TO THE ACCOUNTING
FIRM, VENDOR, COUNSEL OR FINANCIAL ADVISORS RETAINED BY VENDOR IN CONNECTION
WITH ANY ADJUSTMENT TO THE PRELIMINARY NET WORKING CAPITAL AMOUNT CONTEMPLATED
BY THIS SECTION 3.3, REASONABLE ACCESS DURING NORMAL BUSINESS HOURS TO ALL THE
PROPERTIES, CONTRACTS, PERSONNEL AND BOOKS AND RECORDS OF THE CORPORATION AND
THE SUBSIDIARIES AND WORK PAPERS RELEVANT TO THE ADJUSTMENT CONTEMPLATED BY THIS
SECTION 3.3.

 

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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VENDOR

 

Vendor represents and warrants to Purchaser the matters set out below:

 

4.1          INCORPORATION AND REGISTRATION

 

(A)           UNOCAL CANADA LIMITED IS A CORPORATION CONTINUED AND EXISTING
UNDER THE ABCA AND UNOCAL CANADA ALBERTA HUB LIMITED IS A CORPORATION
INCORPORATED AND EXISTING UNDER THE ABCA.  EACH OF UNOCAL CANADA LIMITED AND
UNOCAL CANADA ALBERTA HUB LIMITED IS CURRENT IN THE FILING OF ALL NECESSARY
CORPORATE RETURNS UNDER THE ABCA.

 

(B)           THE CORPORATION AND EACH OF THE CORPORATE SUBSIDIARIES SET FORTH
IN PART 1 OF SCHEDULE 4.4(C) IS A CORPORATION INCORPORATED AND EXISTING UNDER
THE ABCA, IS CURRENT IN THE FILING OF ALL NECESSARY CORPORATE RETURNS UNDER THE
ABCA AND HAS ALL NECESSARY CORPORATE POWER AND CAPACITY TO OWN AND LEASE THE
ASSETS OWNED AND LEASED BY IT AND TO CARRY ON ITS BUSINESS AS PRESENTLY
CONDUCTED.

 

(C)           THE CORPORATE SUBSIDIARY SET FORTH IN PART 2 OF SCHEDULE 4.4(C) IS
AN UNLIMITED LIABILITY COMPANY EXISTING UNDER THE LAWS OF NOVA SCOTIA, IS
CURRENT IN THE FILING OF ALL NECESSARY COMPANY RETURNS AND HAS ALL NECESSARY
CORPORATE POWER AND CAPACITY TO OWN AND LEASE THE ASSETS OWNED AND LEASED BY IT
AND TO CARRY ON ITS BUSINESS AS NOW CONDUCTED.

 

(D)           EACH OF THE PARTNERSHIP SUBSIDIARIES OTHER THAN BENNETT ENERGY AND
TETHYS ENERGY PARTNERSHIP (WHICH ARE FORMED PURSUANT TO THE LAWS OF UTAH AND
BERMUDA, RESPECTIVELY) IS A GENERAL PARTNERSHIP FORMED PURSUANT TO THE
PARTNERSHIP ACT (ALBERTA), EACH OF THE PARTNERSHIP SUBSIDIARIES IS VALIDLY
EXISTING UNDER THE LAWS OF ITS JURISDICTION OF FORMATION AND EACH OF THE
PARTNERSHIP SUBSIDIARIES IS DULY ORGANIZED AND HAS ALL NECESSARY PARTNERSHIP
POWER AND AUTHORITY TO OWN AND LEASE THE ASSETS OWNED AND LEASED BY IT AND TO
CARRY ON ITS BUSINESS AS PRESENTLY CONDUCTED.

 

(E)           NEITHER THE NATURE OF THE BUSINESS NOR THE LOCATIONS OR CHARACTER
OF THE ASSETS OWNED OR LEASED BY THE CORPORATION OR ANY OF THE SUBSIDIARIES
REQUIRES THE CORPORATION OR ANY OF THE SUBSIDIARIES TO BE REGISTERED, LICENSED
OR OTHERWISE QUALIFIED AS AN EXTRA-PROVINCIAL OR FOREIGN CORPORATION IN ANY
JURISDICTION WHERE THEY ARE NOT SO REGISTERED, LICENSED OR QUALIFIED EXCEPT FOR
ANY REGISTRATION, LICENCE OR QUALIFICATION IN ANY JURISDICTION WHERE THE SOLE
REASON FOR THAT REGISTRATION, LICENCE OR QUALIFICATION IS THE OWNERSHIP BY THE
CORPORATION OR A CORPORATE SUBSIDIARY OF ITS INTEREST IN THE PARTNERSHIP
SUBSIDIARY THAT IS CARRYING ON BUSINESS IN THAT JURISDICTION.

 

(F)            THE CORPORATION AND EACH OF THE SUBSIDIARIES IS A “PRIVATE
ISSUER” AS DEFINED IN MULTILATERAL INSTRUMENT 45-103 “CAPITAL RAISING
EXEMPTIONS” ADOPTED BY, AMONG OTHERS, THE ALBERTA SECURITIES COMMISSION.

 

4.2          RIGHT TO SELL

 

(A)           VENDOR IS THE SOLE REGISTERED AND BENEFICIAL OWNER OF THE
PURCHASED SHARES WITH GOOD LEGAL AND BENEFICIAL TITLE THERETO, FREE AND CLEAR OF
ALL ENCUMBRANCES AND ADVERSE CLAIMS OTHER THAN RESTRICTIONS ON TRANSFERS AND
PERMITTED NUMBER OF BENEFICIAL OWNERS SET OUT IN THE ARTICLES OF INCORPORATION
OF THE CORPORATION AND ANY ENCUMBRANCES ARISING OUT OF ANY ACTION TAKEN BY, OR
IN FAVOUR OF, PURCHASER.

 

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(B)           VENDOR HAS THE EXCLUSIVE RIGHT TO SELL, ASSIGN AND TRANSFER THE
PURCHASED SHARES AS PROVIDED IN THIS AGREEMENT.

 

(C)           AT THE CLOSING TIME ANY RESTRICTIONS ON TRANSFERS OF THE PURCHASED
SHARES THAT ARE SET OUT IN THE ARTICLES OF INCORPORATION OF THE CORPORATION WILL
HAVE BEEN COMPLIED WITH SO AS TO PERMIT THE TRANSFER OF THE PURCHASED SHARES TO
PURCHASER.

 

(D)           ON THE COMPLETION OF THE PURCHASE, PURCHASER SHALL ACQUIRE FROM
VENDOR GOOD LEGAL AND BENEFICIAL TITLE TO THE PURCHASED SHARES, FREE AND CLEAR
OF ANY ENCUMBRANCES AND ADVERSE CLAIMS, EXCEPT RESTRICTIONS ON TRANSFERS AND
PERMITTED NUMBER OF BENEFICIAL OWNERS SET OUT IN THE ARTICLES OF INCORPORATION
OF THE CORPORATION AND ANY ENCUMBRANCES ARISING OUT OF ANY ACTION TAKEN BY, OR
IN FAVOUR OF, PURCHASER.

 

(E)           THERE IS NO CONTRACT, OPTION OR OTHER RIGHT BINDING ON VENDOR OR
WHICH MAY BECOME BINDING ON VENDOR TO SELL, ASSIGN OR TRANSFER THE PURCHASED
SHARES OR THE SHARES, PARTNERSHIP UNITS OR OTHER EQUITY INTERESTS OF THE
SUBSIDIARIES, OTHER THAN PURSUANT TO THIS AGREEMENT.

 

4.3          CAPITALIZATION

 

(A)           THE AUTHORIZED CAPITAL OF THE CORPORATION CONSISTS OF AN UNLIMITED
NUMBER OF CLASS A COMMON SHARES, AN UNLIMITED NUMBER OF CLASS B COMMON SHARES
AND AN UNLIMITED NUMBER OF CLASS A PREFERRED SHARES OF WHICH THE FOLLOWING ARE
ISSUED AND OUTSTANDING:

 

Shareholder

 

Class A Common

 

Class B Common

 

Class A Preferred

Unocal Canada Limited

 

731,659

 

62,886,476

 

5,000, less the number of Preferred Shares to be redeemed pursuant to
Section 9.4(b) on or before the Closing Date

Unocal Canada Alberta Hub Limited

 

29,588

 

 

 

 

 

(B)           THE AUTHORIZED CAPITAL OF NORTHROCK ENERGY LTD. CONSISTS OF AN
UNLIMITED NUMBER OF COMMON SHARES AND THE AUTHORIZED CAPITAL OF 832507 ALBERTA
LTD. CONSISTS OF AN UNLIMITED NUMBER OF CLASS “A”, “B”, “C”, “D”, “E”, “F”, “G”,
“H” AND “I” SHARES.

 

4.4          CORPORATION AND SUBSIDIARIES

 

(A)           THE ONLY PERSONS IN WHICH THE CORPORATION HOLDS SHARES, UNITS,
PARTNERSHIP INTERESTS OR OTHER SECURITIES ARE THE SUBSIDIARIES.

 

(B)           THE CORPORATION IS THE SOLE REGISTERED AND BENEFICIAL OWNER OF ALL
OF THE ISSUED AND OUTSTANDING SHARES OF THE CORPORATE SUBSIDIARIES SET FORTH IN
PART 1 OF SCHEDULE 4.4(C) AND THE CORPORATION AND/OR ONE OR MORE OF THE
SUBSIDIARIES ARE THE SOLE OWNERS OF THE SHARES OF EACH OF THE CORPORATE
SUBSIDIARIES SET FORTH IN PART 2 OF SCHEDULE 4.4(C) AND THE UNITS OF OR
PARTNERSHIP INTERESTS IN EACH OF THE PARTNERSHIP SUBSIDIARIES SET FORTH IN PART
3 OF SCHEDULE 4.4(C).

 

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(C)           THE OWNERSHIP OF THE SUBSIDIARIES IS SET FORTH IN SCHEDULE 4.4(C).

 

(D)           EACH OF THE SHARES, UNITS AND PARTNERSHIP INTERESTS REFERRED TO IN
SECTION 4.4(B) ARE FREE AND CLEAR OF ALL ENCUMBRANCES OTHER THAN RESTRICTIONS ON
TRANSFERS AND PERMITTED NUMBER OF BENEFICIAL OWNERS SET OUT IN THE ARTICLES OF
INCORPORATION OF THE CORPORATE SUBSIDIARIES OR IN THE APPLICABLE PARTNERSHIP
AGREEMENT IN RESPECT OF A PARTNERSHIP SUBSIDIARY AND ANY ENCUMBRANCES ARISING
OUT OF ANY ACTION TAKEN BY, OR IN FAVOUR OF, PURCHASER.

 

(E)           ALL OF THE PURCHASED SHARES AND ALL OF THE ISSUED AND OUTSTANDING
SHARES OF THE CORPORATE SUBSIDIARIES AND THE UNITS OF OR THE PARTNERSHIP
INTERESTS IN THE PARTNERSHIP SUBSIDIARIES, AS APPLICABLE, HAVE BEEN DULY AND
VALIDLY ISSUED AND ARE OUTSTANDING AS FULLY PAID AND NON-ASSESSABLE SHARES,
UNITS OR PARTNERSHIP INTERESTS, AS APPLICABLE.

 

(F)            NO OPTIONS, WARRANTS, PRE-EMPTIVE RIGHTS, COMMITMENTS,
SUBSCRIPTIONS OR OTHER RIGHTS TO PURCHASE ISSUED OR UNISSUED SHARES OR OTHER
SECURITIES OF THE CORPORATION OR ANY OF THE CORPORATE SUBSIDIARIES OR UNITS OF
OR PARTNERSHIP INTERESTS IN ANY OF THE PARTNERSHIP SUBSIDIARIES, OR CREATE ANY
ADDITIONAL CLASS OF SHARES, AND NO SECURITIES OR OBLIGATIONS CONVERTIBLE INTO OR
EXCHANGEABLE FOR SHARES OR OTHER SECURITIES OF OR UNITS OF OR PARTNERSHIP
INTERESTS IN ANY OF THE CORPORATION OR ANY OF THE SUBSIDIARIES, HAVE BEEN
ISSUED, GRANTED, AUTHORIZED, ALLOTTED OR AGREED TO BE ISSUED OR ARE OUTSTANDING
OTHER THAN:

 

(I)            IN THE CASE OF THE PURCHASED SHARES, RIGHTS IN FAVOUR OF
PURCHASER PURSUANT TO THIS AGREEMENT; AND

 

(II)           OPTIONS TO PURCHASE THE CORPORATION’S CLASS B COMMON SHARES
PURSUANT TO THE NORTHROCK RESOURCES LTD. AMENDED AND RESTATED JUNE 2000 STOCK
OPTION PLAN, WHICH OPTIONS WILL EXPIRE AND BE OF NO FURTHER FORCE OR EFFECT ON
THE CLOSING.

 

4.5          DUE AUTHORIZATION

 

(A)           VENDOR HAS ALL NECESSARY CORPORATE POWER, AUTHORITY AND CAPACITY
TO ENTER INTO THIS AGREEMENT AND TO PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT.

 

(B)           THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPLETION OF
THE PURCHASE AND THE PERFORMANCE OF VENDOR’S OBLIGATIONS UNDER THIS AGREEMENT
HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION ON THE PART OF
VENDOR.

 

(C)           EXCEPT AS PROVIDED IN SCHEDULE 4.5(C), THE EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE COMPLETION OF THE PURCHASE AND THE PERFORMANCE OF
VENDOR’S OBLIGATIONS UNDER THIS AGREEMENT WILL NOT CONFLICT WITH OR RESULT IN
THE VIOLATION OR BREACH OF, OR RENDER VENDOR IN DEFAULT OF, OR RESULT IN THE
TERMINATION OR IN A RIGHT OF TERMINATION OR CANCELLATION OF, OR ACCELERATE THE
PERFORMANCE REQUIRED BY OR RESULT IN BEING DECLARED VOID, VOIDABLE OR WITHOUT
FURTHER BINDING EFFECT, ANY OF THE TERMS, CONDITIONS OR PROVISIONS OF:

 

(I)            ANY PROVISION OF VENDOR’S CONSTATING DOCUMENTS;

 

(II)           ANY CONTRACT TO WHICH VENDOR IS A PARTY OR BY WHICH VENDOR IS
BOUND THAT IS MATERIAL; OR

 

(III)          ANY APPLICABLE LAWS OR LICENCES APPLICABLE TO VENDOR.

 

(D)           NO ENCUMBRANCES, RIGHTS OF FIRST REFUSAL OR PREFERENTIAL RIGHTS TO
PURCHASE WILL BE CREATED OR TRIGGERED BY, AND NO MATERIAL CONSENT OR APPROVAL OF
ANY THIRD PARTY WILL BE REQUIRED

 

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IN CONJUNCTION WITH THE EXECUTION, DELIVERY OR PERFORMANCE OF OBLIGATIONS UNDER
THIS AGREEMENT BY VENDOR EXCEPT IN FAVOUR OF PURCHASER AND EXCEPT FOR THE
REQUIRED APPROVALS.

 

(E)           EXCEPT AS PROVIDED IN SCHEDULE 4.5(E), THE EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE COMPLETION OF THE PURCHASE AND THE PERFORMANCE OF
VENDOR’S OBLIGATIONS UNDER THIS AGREEMENT WILL NOT RESULT IN ANY “CHANGE OF
CONTROL” OR SIMILAR EVENT OR CIRCUMSTANCE UNDER THE TERMS OF ANY CONTRACT TO
WHICH THE CORPORATION OR ANY SUBSIDIARY IS A PARTY THAT IS MATERIAL.

 

4.6          RESIDENCE OF VENDOR

 

Vendor is not a non-resident of Canada for the purposes of the Tax Act.

 

4.7          ENFORCEABILITY OF OBLIGATIONS

 

This Agreement constitutes a legal, valid and binding obligation of Vendor,
enforceable against Vendor in accordance with its terms, subject to bankruptcy,
winding-up, insolvency, moratorium, arrangement, reorganization and other
similar laws affecting creditors’ rights generally, and to general principles of
equity.

 

4.8          NO ADVISORS OR CONSULTANTS

 

Neither the Corporation nor any Subsidiary has employed, or is subject to the
valid Claim of, any advisor, finder, consultant or other similar intermediary in
connection with the Purchase who will be entitled to a fee, commission or other
similar payment contingent on the completion of the Purchase.  Vendor is solely
responsible for any fee, commission or other payment that may be due to Vendor’s
Investment Bankers and other advisors in connection with the Purchase.

 

4.9          GOVERNMENT AUTHORIZATIONS

 

No material Government Authorizations are required on the part of Vendor or
Unocal in connection with the Purchase or the performance of its other
obligations under this Agreement except for those set forth in Schedule 4.9.

 

4.10        BENEFIT PLANS AND LABOUR MATTERS

 

(A)           EXCEPT AS DISCLOSED IN SCHEDULE 4.10, NEITHER THE CORPORATION NOR
ANY OF THE SUBSIDIARIES:

 

(I)            IS A PARTY TO OR BOUND BY OR SUBJECT TO ANY AGREEMENT OR
ARRANGEMENT WITH RESPECT TO BENEFIT PLANS;

 

(II)           IS IN ARREARS FOR ANY PAYMENT, CONTRIBUTION OR ASSESSMENT
REQUIRED TO BE MADE BY IT PURSUANT TO ANY BENEFIT PLANS SET OUT IN SCHEDULE
4.10;

 

(III)          IS A PARTY TO OR BOUND BY OR SUBJECT TO ANY COLLECTIVE BARGAINING
AGREEMENT OR ARRANGEMENT WITH ANY LABOUR UNION OR EMPLOYEE ASSOCIATION; OR

 

(IV)          IS A PARTY TO OR BOUND BY OR SUBJECT TO ANY WRITTEN EMPLOYMENT
AGREEMENT, WRITTEN OR ORAL, CONSULTING OR SERVICE AGREEMENT WITH OR RESPECTING
ITS EMPLOYEES.

 

(B)           NO COLLECTIVE BARGAINING AGREEMENT IS CURRENTLY BEING NEGOTIATED
BY THE CORPORATION OR ANY OF ITS SUBSIDIARIES WITH RESPECT TO ANY EMPLOYEE. 
THERE ARE NO CERTIFICATION PROCEEDINGS OUTSTANDING IN RESPECT OF THE EMPLOYEES
AND, TO THE KNOWLEDGE OF VENDOR, THERE ARE NO ATTEMPTS TO ORGANIZE OR CERTIFY
ANY OF THE EMPLOYEES.  THERE IS NO CURRENT OR PENDING LABOUR STRIKE, DISPUTE,
WORK SLOWDOWN OR WORK STOPPAGE AGAINST THE

 

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CORPORATION OR ANY OF ITS SUBSIDIARIES OR, TO THE KNOWLEDGE OF VENDOR,
THREATENED AGAINST THE CORPORATION OR ANY OF ITS SUBSIDIARIES.  TO THE KNOWLEDGE
OF VENDOR, NO TRADE UNION OR EMPLOYEE ASSOCIATION HAS APPLIED TO HAVE THE
CORPORATION OR ANY OF ITS SUBSIDIARIES DECLARED A RELATED OR SUCCESSOR EMPLOYER
PURSUANT TO ANY APPLICABLE LAW.

 

(C)           TO THE KNOWLEDGE OF VENDOR, NEITHER THE CORPORATION NOR ANY OF ITS
SUBSIDIARIES HAS COMMITTED ANY UNFAIR LABOUR PRACTICES.  NO UNFAIR LABOUR
PRACTICE COMPLAINT, GRIEVANCE OR ARBITRATION PROCEEDING IS PENDING OR, TO THE
KNOWLEDGE OF VENDOR, THREATENED AGAINST THE CORPORATION OR ANY OF ITS
SUBSIDIARIES.

 

(D)           ALL BENEFIT PLANS HAVE BEEN ADMINISTERED BY THE CORPORATION OR ANY
OF ITS SUBSIDIARIES IN MATERIAL COMPLIANCE WITH APPLICABLE LAWS AND THEIR
RESPECTIVE TERMS.  NO PROMISES HAVE BEEN MADE IN RESPECT OF CHANGES TO ANY OF
THE BENEFIT PLANS, OTHER THAN THOSE THAT ARE SET OUT IN THE CURRENT TEXTS OF THE
BENEFIT PLANS.  NO PENSION PLAN IS A MULTI-EMPLOYER PENSION PLAN AS THAT TERM IS
DEFINED IN PENSION BENEFITS LEGISLATION.  NEITHER THE CORPORATION NOR ANY OF ITS
SUBSIDIARIES HAS EVER SPONSORED OR PARTICIPATED IN A PENSION PLAN THAT IS A
REGISTERED PENSION PLAN.

 

4.11        FINANCIAL STATEMENTS

 

The Unaudited Financial Statements are, and the Audited Financial Statements
delivered pursuant to Section 9.14 will be:

 

(A)           COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS;

 

(B)           IN ACCORDANCE WITH THE BOOKS AND RECORDS; AND

 

(C)           PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES CONSISTENTLY APPLIED DURING THE PERIODS INVOLVED;

 

and fairly present or, with respect to the Audited Financial Statements, will
fairly present in all material respects the consolidated financial position of
the Corporation and the Subsidiaries as of the dates thereof and the
consolidated results of their operations and their cash flows for the periods
then ended.

 

4.12        DISTRIBUTIONS

 

No Distributions have been made from or after the Working Capital Date, except
for cash Distributions as may be set forth in the statement to be provided
pursuant to Section 3.3(a).

 

4.13        BUSINESS CARRIED ON IN THE ORDINARY COURSE

 

Since December 31, 2004:

 

(A)           THE BUSINESS HAS BEEN CARRIED ON IN THE ORDINARY COURSE EXCEPT
WITH RESPECT TO THE SALE PROCESS COMMENCED BY THE CORPORATION AS SET OUT IN THE
INFORMATION MEMORANDUM; AND

 

(B)           OTHER THAN AS SET FORTH IN SCHEDULE 4.17, THE BUSINESS HAS BEEN
CONDUCTED IN MATERIAL COMPLIANCE WITH ALL APPLICABLE LAWS.

 

4.14        ENVIRONMENTAL MATTERS

 

(A)           ON OR BEFORE THE CLOSING TIME, VENDOR SHALL PROVIDE OR CAUSE TO BE
PROVIDED OR MADE AVAILABLE TO PURCHASER ALL ENVIRONMENTAL DOCUMENTATION IN THE
POSSESSION OR CONTROL OF VENDOR OR THE CORPORATION OR ANY OF THE SUBSIDIARIES IN
RESPECT OF THE BUSINESS OR THE ASSETS PRODUCED FOR OR RECEIVED BY VENDOR, THE
CORPORATION OR THE SUBSIDIARIES SINCE

 

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JUNE 1, 2000.  TO VENDOR’S KNOWLEDGE, EXCEPT AS DESCRIBED IN SCHEDULE 4.14,
THERE ARE NO MATERIAL ENVIRONMENTAL LIABILITIES THAT HAVE OCCURRED SINCE JUNE 1,
2000 THAT HAVE NOT BEEN REMEDIED.

 

(B)           EXCEPT AS SET OUT IN SCHEDULE 4.14, NEITHER THE CORPORATION NOR
ANY SUBSIDIARY HAS RECEIVED:

 

(I)            ANY ENVIRONMENTAL ORDER WHICH RELATES TO ENVIRONMENTAL
LIABILITIES AND WHICH REQUIRES ANY WORK, REPAIRS, CONSTRUCTION OR CAPITAL
EXPENDITURES WHICH IS OUTSTANDING, WHERE THAT ENVIRONMENTAL ORDER HAS NOT BEEN
COMPLIED WITH IN ALL MATERIAL RESPECTS; OR

 

(II)           ANY DEMAND OR NOTICE ISSUED WITH RESPECT TO THE BREACH OF
ENVIRONMENTAL LAWS, WHICH DEMAND OR NOTICE REMAINS OUTSTANDING.

 

(C)           WITHOUT LIMITATION OF ANY OTHER PROVISIONS OF THIS AGREEMENT,
EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 4.14, VENDOR MAKES NO
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE EXTENT OF ANY EXISTING OR
FUTURE LIABILITY RELATING TO ANY ENVIRONMENTAL MATTER, ENVIRONMENTAL LIABILITY
OR THE APPLICATION OF ANY ENVIRONMENTAL LAWS, INCLUDING IN RESPECT OF OR
RELATING TO HAZARDOUS SUBSTANCES.

 

4.15        ASSETS

 

(A)           VENDOR DOES NOT WARRANT TITLE TO THE ASSETS, BUT DOES WARRANT
THAT, TO VENDOR’S KNOWLEDGE, THE INTERESTS OF THE CORPORATION AND THE
SUBSIDIARIES IN AND TO THE ASSETS ARE NOW, AND WILL BE AT CLOSING DATE, FREE AND
CLEAR OF ALL ENCUMBRANCES CREATED BY, THROUGH OR UNDER VENDOR, THE CORPORATION
OR THE SUBSIDIARIES OR OF WHICH VENDOR IS AWARE OTHER THAN:

 

(I)            PERMITTED ENCUMBRANCES; AND

 

(II)           OTHER RESTRICTIONS ON TRANSFERS AND PERMITTED NUMBER OF
BENEFICIAL OWNERS SET OUT IN THE CONSTATING DOCUMENTS OF THE CORPORATION AND THE
SUBSIDIARIES.

 

(B)           NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES:

 

(I)            IS IN DEFAULT OR WILL BE IN DEFAULT ON THE COMPLETION OF THE
PURCHASE UNDER ANY MATERIAL CONTRACT OR, TO VENDOR’S KNOWLEDGE, ANY TITLE AND
OPERATING DOCUMENT; OR

 

(II)           HAS FAILED TO COMPLY WITH, PERFORM, OBSERVE OR SATISFY, IN ANY
MATERIAL RESPECT, ANY TERM, CONDITION, OBLIGATION OR LIABILITY WHICH HAS
HERETOFORE ARISEN UNDER THE PROVISIONS OF ANY MATERIAL CONTRACT OR ANY TITLE AND
OPERATING DOCUMENT;

 

which defaults or failures could reasonably be expected to have a Material
Adverse Effect.

 

(C)           EXCEPT AS DESCRIBED IN SCHEDULE 4.15(C), NEITHER THE CORPORATION
NOR ANY SUBSIDIARY HAS RECEIVED NOTICE OF DEFAULT UNDER, AND NONE OF THEM IS TO
VENDOR’S KNOWLEDGE IN DEFAULT UNDER, ANY OBLIGATION, AGREEMENT OR DOCUMENT OR
UNDER ANY ORDER, WRIT, INJUNCTION OR DECREE OF ANY GOVERNMENT AUTHORITY, NOR IS
THE CORPORATION OR ANY SUBSIDIARY TO VENDOR’S KNOWLEDGE IN BREACH OF ANY
APPLICABLE LAWS WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.

 

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(D)           EXCEPT AS DESCRIBED IN SCHEDULE 4.15(D) OR RELATING TO
ENVIRONMENTAL MATTERS DISCLOSED IN ACCORDANCE WITH SECTION 4.14 PRIOR TO THE
DATE HEREOF, NO ACTION BEFORE ANY GOVERNMENT AUTHORITY HAS BEEN COMMENCED OR, TO
VENDOR’S KNOWLEDGE, IS THREATENED, AGAINST THE CORPORATION OR ANY SUBSIDIARY
WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(E)           EXCEPT AS SET FORTH IN SCHEDULE 4.15(E) AND EXCEPT FOR OPERATING
COSTS INCURRED IN THE ORDINARY COURSE OF THE BUSINESS, THERE ARE NO OUTSTANDING
AUTHORIZATIONS FOR EXPENDITURE OR OTHER FINANCIAL COMMITMENTS RESPECTING THE
ASSETS WHICH ARE DUE AS AT THE DATE HEREOF PURSUANT TO WHICH INDIVIDUAL
EXPENDITURES OF GREATER THAN $100,000 MAY BE REQUIRED BY THE CORPORATION OR ANY
SUBSIDIARY AFTER THE CLOSING DATE.

 

(F)            TO VENDOR’S KNOWLEDGE, ALL AD VALOREM, PROPERTY, ROYALTIES,
PRODUCTION, SEVERANCE AND SIMILAR TAXES BASED ON OR MEASURED BY THE OWNERSHIP OF
THE ASSETS, THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE ASSETS OR THE
RECEIPT OF PROCEEDS THEREFROM HAVE BEEN PAID AND DISCHARGED.

 

(G)           WITHOUT LIMITING THE GENERALITY OF THE FOREGOING PROVISIONS OF
THIS SECTION 4.15, EXCEPT FOR AGREEMENTS THAT CAN BE TERMINATED WITHOUT PENALTY
ON NOTICE OF 90 DAYS OR LESS OR AS SET OUT IN SCHEDULE 4.15(G), NEITHER THE
CORPORATION NOR ANY OF THE SUBSIDIARIES IS A PARTY TO OR BOUND BY ANY MATERIAL:

 

(I)            CONTRACTS FOR THE SALE OF PETROLEUM SUBSTANCES;

 

(II)           GAS BALANCING OR SIMILAR AGREEMENTS PERTAINING TO PETROLEUM
SUBSTANCES;

 

(III)          AGREEMENTS FOR THE TRANSPORTATION, PROCESSING OR DISPOSAL OF
PETROLEUM SUBSTANCES OTHER THAN TITLE AND OPERATING DOCUMENTS; OR

 

(IV)          TAKE OR PAY ARRANGEMENTS;

 

relating to the Assets.

 

(H)           THE CORPORATION AND THE SUBSIDIARIES ARE NOT PARTY TO ANY FUTURES
TRANSACTIONS, EITHER AS PRINCIPAL OR SURETY.

 

(I)            AFTER CLOSING THERE ARE NO SUPPORT AGREEMENTS OR OTHER SERVICES,
PERSONNEL, ASSETS OR FACILITIES THAT NEED TO BE PROVIDED BY VENDOR OR ANY OF ITS
AFFILIATES IN ORDER FOR THE CORPORATION AND THE SUBSIDIARIES TO BE ABLE TO
CONDUCT THE BUSINESS SUBSTANTIALLY IN THE MANNER AS PRESENTLY CONDUCTED; AND NO
SUCH AGREEMENTS WILL EXIST, IT BEING ACKNOWLEDGED BY PURCHASER THAT VENDOR’S
INSURANCE AND THE MARKETING AGREEMENT, WILL BOTH TERMINATE ON CLOSING.

 

4.16        MATERIAL OBLIGATIONS

 

(A)           NEITHER THE CORPORATION NOR ANY SUBSIDIARY IS A PARTY TO OR BOUND
BY ANY AGREEMENT OF ANY NATURE TO ACQUIRE ANY SHARES OR OTHER SECURITIES OF ANY
CORPORATION, PARTNERSHIP INTERESTS IN ANY PARTNERSHIPS OR ANY OTHER EQUITY
INTERESTS OR TO MERGE OR CONSOLIDATE WITH ANY OTHER ENTITY, TO SELL OR ACQUIRE
ANY ASSETS HAVING A FAIR MARKET VALUE IN EXCESS OF $10,000,000 OR TO ACQUIRE,
CAPITALIZE OR INVEST IN ANY BUSINESS.

 

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(B)           NEITHER THE CORPORATION NOR ANY SUBSIDIARY HAS CURRENTLY
GUARANTEED, ENDORSED, ASSUMED OR INDEMNIFIED, CONTINGENTLY OR OTHERWISE, THE
OBLIGATIONS OR INDEBTEDNESS OF ANY PERSON EXCEPT:

 

(I)            IN THE ORDINARY COURSE OF THE BUSINESS;

 

(II)           PURSUANT TO THE TITLE AND OPERATING DOCUMENTS; AND

 

(III)          PURSUANT TO THE BANKING FACILITIES TO BE CANCELLED OR FROM WHICH
THE CORPORATION AND ANY SUBSIDIARY WILL BE RELEASED ON OR BEFORE CLOSING.

 

(C)           THERE EXISTS NO SHAREHOLDER OR OTHER AGREEMENT WHICH AFFECTS THE
TRANSFERABILITY OF THE PURCHASED SHARES AND NONE OF THE CORPORATION, ANY
SUBSIDIARY OR VENDOR IS A PARTY TO ANY VOTING TRUST AGREEMENT, UNANIMOUS
SHAREHOLDER AGREEMENT, SHARE POOLING AGREEMENT, OR OTHER CONTRACT, COMMITMENT,
PLAN, OR UNDERSTANDING RESTRICTING OR OTHERWISE RELATING TO VOTING OR DIVIDEND
RIGHTS WITH RESPECT TO THE PURCHASED SHARES.

 

(D)           NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES WILL HAVE ANY
INDEBTEDNESS FOR BORROWED MONEY AT THE CLOSING TIME.

 

(E)           NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES WILL HAVE ANY
LIABILITIES AT THE CLOSING TIME THAT ARE MATERIAL, WHETHER THOSE LIABILITIES ARE
ABSOLUTE OR CONTINGENT, OTHER THAN:

 

(I)            ENVIRONMENTAL LIABILITIES;

 

(II)           LIABILITIES UNDER THE TITLE AND OPERATING DOCUMENTS AND UNDER THE
MATERIAL CONTRACTS LISTED IN SCHEDULE 4.16;

 

(III)          LIABILITIES INCURRED OR ARISING IN THE ORDINARY COURSE OF THE
BUSINESS (INCLUDING LIABILITIES ARISING IN THE ORDINARY COURSE OF THE BUSINESS
FOR TAXES);

 

(IV)          LIABILITIES DESCRIBED OR REFERRED TO IN THE UNAUDITED FINANCIAL
STATEMENTS; AND

 

(V)           LIABILITIES DESCRIBED OR REFERRED TO IN SCHEDULE 4.16 AND IN THE
OTHER SCHEDULES TO THIS AGREEMENT INCLUDING THE COMMITMENTS DESCRIBED IN
SCHEDULE 4.15(E);

 

and at the Closing Time no Person will hold any power of attorney from the
Corporation or a Subsidiary other than powers of attorney granted by a
Subsidiary to the Corporation or another Subsidiary or as may have been provided
under the Title and Operating Documents in the Ordinary Course of the Business.

 

4.17        LITIGATION

 

(A)           SCHEDULE 4.17 SETS FORTH A LIST OF OPEN LITIGATION CLAIMS
(INCLUDING THOSE WHICH ARE THE SUBJECT OF ARBITRATION AND, TO VENDOR’S
KNOWLEDGE, ANY THREATENED CLAIMS) WHICH, AS OF THE DATE OF THIS AGREEMENT, HAVE
BEEN DULY SERVED ON THE CORPORATION OR ANY OF THE SUBSIDIARIES WHERE THE AMOUNTS
CLAIMED EXCEEDS OR COULD REASONABLY BE EXPECTED TO EXCEED $500,000.  VENDOR
MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO VALIDITY OR EFFECT OF ANY
OF THOSE CLAIMS.

 

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(B)           EXCEPT AS SET FORTH IN SCHEDULE 4.17, THERE ARE NO UNSATISFIED
JUDGMENTS AGAINST THE CORPORATION OR ANY SUBSIDIARY OR ANY CONSENT DECREES OR
INJUNCTIONS TO WHICH THE CORPORATION OR SUBSIDIARY IS SUBJECT.

 

4.18        INTELLECTUAL PROPERTY

 

As of the date of this Agreement, Schedule 4.18 sets forth and describes all
material Intellectual Property used in whole or part in the Business and
specifies, for each item, whether the Intellectual Property is owned by the
Corporation or a Subsidiary, or whether the Intellectual Property is used by the
Corporation or a Subsidiary under a license agreement or other arrangement with
another Person.

 

4.19        TAXES

 

(A)           VENDOR HAS CAUSED THE CORPORATION AND THE SUBSIDIARIES TO DULY AND
TIMELY:

 

(I)            FILE ALL TAX RETURNS REQUIRED TO BE FILED BY THEM PRIOR TO THE
DATE HEREOF AND, THOSE TAX RETURNS ARE TRUE, COMPLETE AND ACCURATE IN ALL
MATERIAL RESPECTS;

 

(II)           PAY ALL TAXES (INCLUDING INSTALMENTS) DUE AND PAYABLE BY THEM
PRIOR TO THE DATE HEREOF; AND

 

(III)          COLLECT OR WITHHOLD AND REMIT TO THE APPROPRIATE GOVERNMENT
AUTHORITIES ALL TAXES REQUIRED TO BE COLLECTED OR WITHHELD BY THEM;

 

and except as provided in Schedule 4.19(a) there are no Claims pending or, to
Vendor’s knowledge, threatened by any Government Authority against the
Corporation or any Subsidiary in respect of Taxes.

 

(B)           EXCEPT AS PROVIDED IN SCHEDULE 4.19(A) AND SCHEDULE 4.19(H),
NEITHER THE CORPORATION NOR ANY SUBSIDIARY HAS ENTERED INTO ANY AGREEMENT,
WAIVER OR OTHER ARRANGEMENT WITH ANY GOVERNMENT AUTHORITY RESPECTING TAXES
PAYABLE BY THEM OR TAX RETURNS REQUIRED TO BE FILED BY THEM.

 

(C)           THE CORPORATION AND EACH OF THE CORPORATE SUBSIDIARIES ARE TAXABLE
CANADIAN CORPORATIONS (AS DEFINED IN THE TAX ACT); AND EACH OF THE PARTNERSHIP
SUBSIDIARIES IS A CANADIAN PARTNERSHIP (AS DEFINED IN THE TAX ACT) EXCEPT FOR
TETHYS ENERGY PARTNERSHIP AND BENNETT ENERGY.

 

(D)           THE CORPORATION AND EACH OF THE SUBSIDIARIES ARE DULY REGISTERED
UNDER SUBDIVISION (D) OF DIVISION V OF PART IX OF THE EXCISE TAX ACT (CANADA)
WITH RESPECT TO THE GOODS AND SERVICES TAX.

 

(E)           EXCEPT AS PROVIDED IN SCHEDULE 4.19(A), THERE ARE NO MATTERS UNDER
AUDIT OR APPEAL WITH ANY GOVERNMENT AUTHORITY RELATING TO TAXES OF THE
CORPORATION OR ANY OF THE SUBSIDIARIES.

 

(F)            NONE OF SECTION 78, 80, 80.01, 80.02, 80.03 OR 80.04 OF THE TAX
ACT OR ANY EQUIVALENT PROVISION OF THE TAX LEGISLATION OF ANY OF THE PROVINCES
OR ANY OTHER JURISDICTION, HAVE APPLIED OR WILL APPLY TO ANY OF THE CORPORATION
OR THE SUBSIDIARIES AT ANY TIME UP TO AND INCLUDING THE CLOSING DATE.

 

(G)           NONE OF THE CORPORATIONS OR THE SUBSIDIARIES HAS ACQUIRED PROPERTY
FROM A NON-ARM’S LENGTH PERSON, WITHIN THE MEANING OF THE TAX ACT, FOR
CONSIDERATION, THE VALUE OF WHICH IS

 

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LESS THAN THE FAIR MARKET VALUE OF THE PROPERTY ACQUIRED IN CIRCUMSTANCES WHICH
WOULD SUBJECT IT TO A LIABILITY UNDER SECTION 160 OF THE TAX ACT.

 

(H)           FOR ALL TRANSACTIONS BETWEEN ANY OF THE CORPORATION AND THE
SUBSIDIARIES AND ANY NON-RESIDENT PERSON WITH WHOM ANY OF THEM WAS NOT DEALING
AT ARM’S LENGTH DURING A TAXATION YEAR ENDING ON OR BEFORE THE CLOSING DATE,
EACH HAS MADE OR OBTAINED RECORDS OR DOCUMENTS THAT MEET THE REQUIREMENTS OF
PARAGRAPHS 247(4)(A) TO (C) OF THE TAX ACT.

 

(I)            THE TAXATION YEAR END OF EACH OF THE CORPORATION AND THE
CORPORATE SUBSIDIARIES IS AS FOLLOWS WITH RESPECT TO:

 

(I)            THE CORPORATION, DECEMBER 31;

 

(II)           NORTHROCK ENERGY LTD., DECEMBER 31;

 

(III)          832507 ALBERTA LTD., DECEMBER 31; AND

 

(IV)          3094725 NOVA SCOTIA COMPANY, TO BE SELECTED.

 

The fiscal period end of each of the Partnership Subsidiaries is as follows with
respect to:

 

(I)            NORTHROCK RESOURCES PARTNERSHIP, JANUARY 1;

 

(II)           TETHYS ENERGY PARTNERSHIP, JANUARY 31;

 

(III)          BENNETT ENERGY PARTNERSHIP,  SEPTEMBER 14; AND

 

(IV)          EACH OF NORTHROCK RESOURCES (SOUTHERN ALBERTA), NORTHROCK
RESOURCES (NORTHERN ALBERTA AND B.C.), NORTHROCK RESOURCES (WEST CENTRAL
ALBERTA), NORTHROCK RESOURCES (NWT), NORTHROCK RESOURCES (SW SASK) AND NORTHROCK
RESOURCES (SE SASK), TO BE SELECTED.

 

(J)            NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES HAS AN
OBLIGATION TO FILE ON OR BEFORE THE CLOSING DATE ANY TAX RETURN REQUIRED TO BE
MADE, PREPARED OR FILED UNDER THE LAWS OF ANY JURISDICTION OTHER THAN CANADA IN
RESPECT OF ANY TAXES OR WILL BE OBLIGATED TO FILE ANY SUCH TAX RETURN AFTER THE
CLOSING DATE AS A RESULT OF ASSETS OWNED OR ACTIVITIES CONDUCTED ON OR BEFORE
THE CLOSING DATE.

 

(K)           EXCEPT AS PROVIDED IN SCHEDULE 4.19(H), NO ELECTION PURSUANT TO
U.S. TREASURY REGULATIONS SECTION 301.7701-3 HAS BEEN MADE WITH RESPECT TO THE
CORPORATION OR ANY OF THE SUBSIDIARIES.

 

(L)            EXCEPT AS PROVIDED IN SCHEDULE 4.19(I), NONE OF THE CORPORATION
OR ANY OF THE SUBSIDIARIES AT ANY TIME DURING 2005 AND ON OR BEFORE THE CLOSING
DATE HAD OR WILL HAVE SUBPART F INCOME, WITHIN THE MEANING OF SECTION 952 OF THE
CODE.

 

(M)          EXCEPT AS PROVIDED IN SCHEDULE 4.19(J), NONE OF THE CORPORATION OR
ANY OF THE SUBSIDIARIES AT ANY TIME DURING 2005 AND ON OR BEFORE THE CLOSING
DATE OWNED OR WILL OWN ANY UNITED STATES PROPERTY, WITHIN THE MEANING OF SECTION
956 OF THE CODE.

 

(N)           NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES OWNS ANY
UNITED STATES REAL PROPERTY INTEREST, WITHIN THE MEANING OF SECTION 897(C)(1)(A)
OF THE CODE.

 

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(O)           NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES OWNS ANY
ASSET, GAIN ON THE SALE OF WHICH WOULD BE EFFECTIVELY CONNECTED OR TREATED AS
EFFECTIVELY CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED
STATES, WITHIN THE MEANING OF SECTION 882(B)(2) OF THE CODE.

 

4.20        ABSENCE OF CERTAIN CHANGES

 

Except as disclosed to Purchaser in this Agreement or the Schedules to this
Agreement, since December 31, 2004, there has not been:

 

(A)           ANY CHANGE IN THE FINANCIAL CONDITION, ASSETS, BUSINESS,
OPERATIONS OR PROSPECTS OF THE CORPORATION AND THE SUBSIDIARIES TAKEN AS A WHOLE
THAT HAS HAD A MATERIAL ADVERSE EFFECT, WHICH CHANGE AROSE FROM DEVELOPMENTS
SPECIFIC TO THE CORPORATION OR THE SUBSIDIARIES NOT GENERALLY AFFECTING OTHER
ENTITIES SIMILARLY SITUATED IN THE PETROLEUM AND NATURAL GAS INDUSTRY IN CANADA;

 

(B)           ANY UNINSURED DAMAGE OR DESTRUCTION EVENT TO ANY OF THE ASSETS
THAT HAS HAD A MATERIAL ADVERSE EFFECT;

 

(C)           OTHER THAN AS CONTEMPLATED HEREIN, A REDUCTION IN THE
CORPORATION’S OR ANY OF THE SUBSIDIARIES’ STATED CAPITAL, AS APPLICABLE; AND

 

(D)           ANY BONUS OR SIMILAR PAYMENT NOT IN THE ORDINARY COURSE OF
BUSINESS THAT HAS BEEN AUTHORIZED OR PAID TO ANY OFFICER OR DIRECTOR OF THE
CORPORATION OR THE SUBSIDIARIES IN EXCESS OF $100,000 PER OFFICER OR DIRECTOR OR
IN THE AGGREGATE FOR ALL OFFICERS AND DIRECTORS, $1,000,000.

 

4.21        CERTAIN CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS

 

Other than in respect of the Title and Operating Documents and the agreements
required to be disclosed on a Schedule to this Agreement, Schedule 4.16 is a
complete and correct list of all Material Contracts to which the Corporation or
any of the Subsidiaries is a party or by which it is bound, or to which any of
them adhere or in which any of them participates (complete and correct copies of
descriptions of each of which, as in effect on the date hereof, have been made
available to Purchaser), including:

 

(A)           ANY WRITTEN AGREEMENTS THAT CONTAIN ANY LIABILITY OF THE
CORPORATION OR ANY SUBSIDIARY AFTER THE CLOSING DATE FOR SEVERANCE PAY OR ANY
LIABILITIES IN RESPECT OF TERMINATION OR SEVERANCE OF EMPLOYMENT;

 

(B)           ANY CONTRACT OR AGREEMENT UNDER WHICH THE CORPORATION OR ANY
SUBSIDIARY HAS OUTSTANDING INDEBTEDNESS FOR BORROWED MONEY OR THE DEFERRED
PURCHASE PRICE OF PROPERTY IN AN AMOUNT WHICH IS IN THE AGGREGATE IN EXCESS OF
$1,000,000 OR HAS THE OBLIGATION TO INCUR ANY SUCH INDEBTEDNESS;

 

(C)           ANY GUARANTEE OR SURETY ENTERED INTO BY THE CORPORATION OR ANY
SUBSIDIARY THAT CONTINUES AFTER CLOSING;

 

(D)           ANY CONFIDENTIALITY OR NON-COMPETITION AGREEMENT OUTSIDE THE
ORDINARY COURSE OF BUSINESS WHICH MATERIALLY RESTRICTS THE RIGHT OF THE
CORPORATION OR ANY SUBSIDIARY TO CONTINUE THE BUSINESS AS CURRENTLY CONDUCTED
AFTER CLOSING; AND

 

(E)           ANY LEASE OR SUBLEASE ENTERED INTO BY THE CORPORATION OR ANY
SUBSIDIARY FOR OFFICE SPACE.

 

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4.22        RESOURCE POOLS AND UNDEPRECIATED CAPITAL COST BALANCES

 

The information concerning the estimated Resource Pools and Undepreciated
Capital Cost balances with respect to the Corporation and the Subsidiaries, as
at January 1, 2005, is set forth in Schedule 4.22.  The Corporation and the
Subsidiaries will not claim or renounce amounts in respect of the Resource Pools
or Undepreciated Capital Cost balances prior to Closing except to reduce income
for tax purposes of the Corporation and the Corporate Subsidiaries for their
taxation years ending immediately before the Closing Date or as permitted by
Section 11.1(d) or Section 11.2(a).

 

4.23        OPERATION OF ASSETS

 

(A)           EXCEPT AS PROVIDED IN SCHEDULE 4.23, TO VENDOR’S KNOWLEDGE,
NEITHER THE CORPORATION NOR ANY OF THE SUBSIDIARIES ARE PARTY TO A CONTRACT
CONTAINING AREA OF MUTUAL INTEREST OR AREA OF EXCLUSION PROVISIONS APPLICABLE TO
OR BINDING ON THE CORPORATION OR THE SUBSIDIARIES THAT MATERIALLY RESTRICTS THE
RIGHT OF THE CORPORATION OR ANY SUBSIDIARY TO CONTINUE THE BUSINESS AS CURRENTLY
CONDUCTED AFTER CLOSING.

 

(B)           NO OFFICER, DIRECTOR OR CONSULTANT OF THE CORPORATION OR ANY OF
THE SUBSIDIARIES, ANY ASSOCIATE OR AFFILIATE OF ANY SUCH PERSON OR ANY PARTY NOT
AT ARM’S LENGTH TO THE CORPORATION WILL OWN OR WILL HAVE OR BE ENTITLED TO ANY
ROYALTY, NET PROFITS INTEREST, CARRIED INTEREST OR OTHER ENCUMBRANCE OF ANY
NATURE WHATSOEVER WHICH ARE BASED ON PRODUCTION FROM THE ASSETS OR ANY REVENUE
OR RIGHTS ATTRIBUTED THERETO.

 

(C)           TO VENDOR’S KNOWLEDGE, SINCE JUNE 2000, ALL OPERATIONS IN RESPECT
OF THE ASSETS HAVE BEEN CONDUCTED IN ACCORDANCE WITH GOOD OILFIELD PRACTICES IN
CANADA IN EFFECT AT THE TIME THAT THE OPERATIONS WERE CONDUCTED.

 

(D)           THE CORPORATION AND THE SUBSIDIARIES HAVE OBTAINED ALL MATERIAL
PERMITS, LICENSES AND OTHER AUTHORIZATIONS WHICH ARE REQUIRED UNDER APPLICABLE
LAW TO OWN OR OPERATE THE ASSETS.

 

4.24        MINUTE BOOKS

 

The minute books of the Corporation and the Subsidiaries are complete and
correct in all material respects with respect to all significant resolutions of
the directors and shareholders.

 

4.25        CORPORATE REGISTERS

 

The register of shareholders, register of partners and register of transfers of
the Corporation and the Subsidiaries contained in their respective minute books
are complete and accurate in all material respects since the later of June 1,
2000 or the date that the applicable Subsidiary was incorporated or formed.

 

4.26        BOOKS AND RECORDS AND INTERNAL CONTROLS

 

(A)           AS OF DECEMBER 31, 2004, THE CORPORATION AND THE SUBSIDIARIES
EXISTING AT THAT DATE EACH HAVE IN PLACE:

 

(I)            THE “DISCLOSURE CONTROLS AND PROCEDURES” (AS DEFINED IN RULES
13A-15(E) AND 15D-15(E) OF THE EXCHANGE ACT);

 

(II)           A PROCESS OF “INTERNAL CONTROL OVER FINANCIAL REPORTING” (AS
DEFINED IN RULES 13A-15(F) AND 15D-15(F) OF THE EXCHANGE ACT); AND

 

(III)          A SYSTEM OF INTERNAL ACCOUNTING CONTROLS;

 

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in each case as required in order for Unocal to comply with the requirements of
the Exchange Act and the United States Sarbanes-Oxley Act of 2002, including
Section 13(b)(2)(B) under the Exchange Act and the certification requirements of
Sections 302 and 906 of the United States Sarbanes -Oxley Act of 2002.

 

(B)           THE CORPORATION AND THE SUBSIDIARIES MAKE AND KEEP BOOKS, RECORDS
AND ACCOUNTS WHICH, IN REASONABLE DETAIL, ACCURATELY AND FAIRLY REFLECT THEIR
TRANSACTIONS AND DISPOSITIONS.

 

4.27        SMOG RUN

 

The SMOG Run complies in all material respects with the applicable requirements
of federal securities laws of the United States, including Regulation S-X
promulgated by the SEC and Industry Guide 2 under the Securities Act of 1933.

 

4.28        HART SCOTT RODINO INFORMATION

 

Neither the Corporation nor any of the Subsidiaries has assets in the United
States of a value of US $53,000,000 or greater nor have they individually or
collectively made direct sales to any Persons in the United States of a value of
US $53,000,000 or greater in the last two years.

 

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to Vendor the matters set out below:

 

5.1          INCORPORATION

 

Purchaser is a duly incorporated unlimited liability corporation and validly
existing under the laws of Alberta.

 

5.2          DUE AUTHORIZATION

 

(A)           PURCHASER HAS ALL NECESSARY CORPORATE POWER, AUTHORITY AND
CAPACITY TO ENTER INTO THIS AGREEMENT AND TO CARRY OUT ITS OBLIGATIONS UNDER
THIS AGREEMENT.

 

(B)           THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE COMPLETION OF
THE PURCHASE AND THE PERFORMANCE OF PURCHASER’S OBLIGATIONS UNDER THIS AGREEMENT
HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION ON THE PART OF
PURCHASER.

 

(C)           NONE OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPLETION OF THE PURCHASE AND THE PERFORMANCE OF PURCHASER’S OBLIGATIONS UNDER
THIS AGREEMENT WILL CONFLICT WITH OR RESULT IN THE VIOLATION OR BREACH OF OR
RENDER PURCHASER IN DEFAULT OF, OR RESULT IN THE TERMINATION OR IN A RIGHT OF
TERMINATION OR CANCELLATION OF, OR ACCELERATE THE PERFORMANCE REQUIRED BY OR
RESULT IN BEING DECLARED VOID, VOIDABLE OR WITHOUT FURTHER BINDING EFFECT, ANY
OF THE TERMS, CONDITIONS OR PROVISIONS OF:

 

(I)            ANY PROVISIONS OF THE CONSTATING DOCUMENTS OF PURCHASER;

 

(II)           ANY CONTRACT TO WHICH PURCHASER IS A PARTY OR BY WHICH PURCHASER
IS BOUND THAT IS MATERIAL TO THE BUSINESS OF PURCHASER; OR

 

(III)          ANY APPLICABLE LAWS OR LICENCES APPLICABLE TO PURCHASER.

 

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5.3          ENFORCEABILITY OF OBLIGATIONS

 

This Agreement constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
bankruptcy, winding-up, insolvency, moratorium, arrangement, reorganization and
other similar laws affecting creditors’ rights generally, and to general
principles of equity.

 

5.4          INVESTMENT CANADA

 

Purchaser is a “WTO Investor” within the meaning of the Investment Canada Act
and shall comply with that act.

 

5.5          AUTHORIZATIONS

 

Assuming the accuracy of Section 4.28, no material Government Authorizations are
required on the part of Purchaser or Pogo in connection with the Purchase or the
performance of its other obligations under this Agreement except for those set
forth in Schedule 5.5.

 

5.6          FINANCING

 

Purchaser has received and delivered to Vendor a true and complete copy of the
commitment letter from Goldman Sachs Credit Partners L.P. to Pogo dated July 5,
2005 that relates to the provision of all of the financing required by Purchaser
in connection with the Purchase contemplated by this Agreement, and all
agreements, arrangements or undertakings related to that commitment letter to
which Purchaser, Pogo or any of their Affiliates is a party and all schedules,
annexes, exhibits or other attachments to any thereof, other than those
documents relating solely to fee arrangements in connection with that letter
(collectively, the “Goldman Sachs Commitment”).  For greater certainty, the
documents relating solely to fee arrangements do not contain any conditions
precedent relating to the provision of the financing referred to in the Goldman
Sachs Commitment.  The Goldman Sachs Commitment is in effect and neither
Purchaser nor Pogo has agreed to any material amendment or modification thereof
that would adversely affect Purchaser’s ability to obtain financing as
contemplated thereby and neither Purchaser nor Pogo is in material breach or
default thereunder.  Purchaser or Pogo is in a position to satisfy all
conditions to advances under the Goldman Sachs Commitment to the extent such
conditions are within their control.  The aggregate proceeds of the financings
to which the Goldman Sachs Commitment relates are, together with available funds
of Purchaser (details in respect of which have been delivered by Purchaser to
Vendor), sufficient to pay the Purchase Price, as it may be adjusted pursuant to
this Agreement.

 

5.7          BROKERS

 

Purchaser has not incurred any liability or obligation for any brokerage fees,
commissions, finders’ fees or similar compensation with respect to this
Agreement or the transactions contemplated hereby for which Vendor will be
liable.

 

5.8          PURCHASER AS PRINCIPAL

 

Purchaser is acquiring the Purchased Shares, in its capacity as principal, and
is not purchasing those Purchased Shares for the purpose of resale or
distribution to a third party.

 

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ARTICLE 6
REGARDING REPRESENTATIONS, WARRANTIES
AND COVENANTS

 

6.1          MATERIALITY

 

Purchaser may not refuse to complete the Purchase on the basis of any
representations or warranties by Vendor in this Agreement being incorrect or
inaccurate, or any covenants of Vendor being breached, unless, as a result
thereof:

 

(A)           THERE OCCURS OR COULD REASONABLY BE EXPECTED TO OCCUR A REDUCTION
IN THE FAIR MARKET VALUE OF THE PURCHASED SHARES OR THE ASSETS IN EXCESS OF
$3,000,000 IN THE CASE OF ANY SINGLE INCORRECT OR INACCURATE REPRESENTATION OR
WARRANTY OR BREACH OF A COVENANT (A “MATERIAL CLAIM”) FOR ANY REASON INCLUDING:

 

(I)            A DIMINUTION IN THE FAIR MARKET VALUE OF THE ASSETS (INCLUDING AS
A RESULT OF THE LOSS OF ANY ASSETS, TITLE DEFECTS IN RELATION TO SUCH ASSETS,
THE IMPAIRMENT OR LOSS OF INTERESTS IN ANY ASSETS OR THE FORFEITURE OR
NON-EXISTENCE OF ANY ASSETS);

 

(II)           AN INCREASE IN THE AMOUNT OF LIABILITIES OF THE CORPORATION AND
THE SUBSIDIARIES (ON A CONSOLIDATED BASIS);

 

(III)          THE CORPORATION AND THE SUBSIDIARIES (ON A CONSOLIDATED BASIS)
BEING UNABLE TO OPERATE THE BUSINESS AFTER THE CLOSING DATE ON SUBSTANTIALLY THE
SAME BASIS AS THE CORPORATION AND THE SUBSIDIARIES (ON A CONSOLIDATED BASIS)
OPERATED THE BUSINESS BEFORE THE CLOSING DATE; OR

 

(IV)          (WITHOUT DUPLICATION) A COMBINATION OF THE FOREGOING;

 

and the aggregate amount of all Material Claims of Purchaser exceeds
$300,000,000 and those inaccuracies or breaches have not been cured before the
Closing Time; or

 

(B)           PURCHASER WOULD BE UNABLE TO COMPLETE THE PURCHASE SUBSTANTIALLY
IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT.

 

For purposes of this Section 6.1, any applicable representation and warranty or
covenant of Vendor shall be deemed not to be qualified by any reference in the
text thereof to Material or to a Material Adverse Effect.

 

6.2          NATURE OF SURVIVAL OF VENDOR’S REPRESENTATIONS, WARRANTIES,
COVENANTS AND INDEMNITIES AND LIMITATIONS ON CLAIMS

 

(A)           THE REPRESENTATIONS AND WARRANTIES OF VENDOR SET FORTH IN
ARTICLE 4 SHALL SURVIVE THE CLOSING FOR THE BENEFIT OF PURCHASER FOR A PERIOD OF
EIGHTEEN MONTHS FROM THE CLOSING, AFTER WHICH TIME PURCHASER SHALL NOT BE
ENTITLED TO ADVANCE, MAKE OR BRING ANY CLAIMS WHATSOEVER AGAINST VENDOR WITH
RESPECT TO THOSE REPRESENTATIONS AND WARRANTIES, OR ANY INDEMNITIES RELATING
THERETO; PROVIDED THAT NOTWITHSTANDING THE FOREGOING:

 

(I)            THE REPRESENTATIONS AND WARRANTIES IN SECTION 4.2 AND SECTION 4.4
AND THE INDEMNITIES RELATED THERETO SHALL SURVIVE FOR AN INDEFINITE PERIOD FROM
THE CLOSING; AND

 

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(II)           THE REPRESENTATIONS AND WARRANTIES IN SECTION 4.19 AND THE
INDEMNITIES RELATED THERETO (INCLUDING THE INDEMNITIES IN ARTICLE 11 SHALL
CONTINUE IN FULL FORCE AND EFFECT FOR THE BENEFIT OF PURCHASER UNTIL 120 DAYS
AFTER THE LATER OF:

 

(A)          THE LAST DATE ON WHICH AN ASSESSMENT OR REASSESSMENT FOR TAXES
UNDER THE TAX ACT OR UNDER ANY OTHER APPLICABLE LAWS IMPOSING TAXES CAN BE MADE
AGAINST THE CORPORATION OR THE SUBSIDIARIES IN RESPECT OF THE DATES OR PERIODS
COVERED BY THOSE REPRESENTATIONS AND WARRANTIES; AND

 

(B)           THE DATE ON WHICH THE PERIOD FOR AN APPEAL FROM AN ASSESSMENT,
REASSESSMENT OR OTHER DETERMINATION OF THOSE TAXES, OR DECISION OF A COURT OR
OTHER COMPETENT TRIBUNAL IN RESPECT THEREOF MAY BE FILED HAS EXPIRED AND THAT
APPEAL HAS NOT BEEN FILED.

 

(B)           PURCHASER SHALL NOT BE ENTITLED TO MAKE ANY CLAIM UNDER THIS
AGREEMENT UNLESS EACH SUCH CLAIM IS IN EXCESS OF $2,000,000 IN THE CASE OF ANY
SINGLE INCORRECT OR INACCURATE REPRESENTATION OR WARRANTY OR BREACH OF A
COVENANT AND THE AGGREGATE AMOUNT OF ALL OF THOSE CLAIMS AS A RESULT OF ALL
INCORRECT OR INACCURATE REPRESENTATIONS AND WARRANTIES AND THE BREACHES OF ALL
COVENANTS OF VENDOR CONTAINED IN THIS AGREEMENT (INCLUDING ANY CLAIMS FOR
INDEMNITY ARISING OUT OF THOSE INCORRECT OR INACCURATE REPRESENTATIONS OR
WARRANTIES AND THOSE BREACHES OF COVENANTS) IS EQUAL TO OR GREATER THAN
$50,000,000, IN WHICH CASE PURCHASER WILL BE ENTITLED (SUBJECT TO
SECTION 6.2(C)) TO RECOVER ALL LOSSES OF PURCHASER RELATED TO THOSE CLAIMS.  FOR
PURPOSES OF THIS SECTION 6.2(B), INCLUDING ANY APPLICABLE CLAIMS PURSUANT TO
ARTICLE 10, AFTER CLOSING ANY APPLICABLE REPRESENTATION AND WARRANTY OR COVENANT
OF VENDOR SHALL BE DEEMED NOT TO BE QUALIFIED BY ANY REFERENCE IN THE TEXT
THEREOF TO MATERIAL OR TO A MATERIAL ADVERSE EFFECT AND VENDOR’S REPRESENTATION
AND WARRANTY IN SECTION 4.15(A) SHALL NOT BE DEEMED NOT TO BE QUALIFIED BY ANY
REFERENCE IN THE TEXT THEREOF TO “TO VENDOR’S KNOWLEDGE” OR WORDS TO THAT
EFFECT.

 

The foregoing dollar minimums in this Section 6.2(b) shall not apply to any
Claims in respect of inaccurate or incorrect representations and warranties or
breaches of covenants in Section 4.2, Section 4.4, Section 4.12, Section 4.16(d)
or Section 4.19 nor shall they apply to amounts owing to Purchaser or the
Corporation pursuant to Section 3.3 or Section 9.11.

 

(C)           NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, THE
MAXIMUM CUMULATIVE LIABILITY OF VENDOR IN THE AGGREGATE IN RESPECT OF ALL
MATERIAL CLAIMS REGARDING:

 

(I)            INCORRECT OR INACCURATE REPRESENTATIONS AND WARRANTIES IN
SECTION 4.2 OR SECTION 4.4 (INCLUDING ON INDEMNITIES ARISING THEREFROM) WILL BE
LIMITED TO AN AMOUNT NOT GREATER THAN THE AMOUNT EQUAL TO THE DIFFERENCE BETWEEN
THE PURCHASE PRICE MINUS THE AMOUNT OF ALL LIABILITIES OF VENDOR REFERRED TO IN
SECTION 6.2(C)(II); AND

 

(II)           INCORRECT OR INACCURATE REPRESENTATIONS AND WARRANTIES (OTHER
THAN THOSE CONTAINED IN SECTION 4.2 OR SECTION 4.4) AND BREACHES OF COVENANTS IN
THIS AGREEMENT (INCLUDING ON INDEMNITIES ARISING THEREFROM) WILL BE LIMITED TO
US$450,000,000.

 

6.3          NATURE OF SURVIVAL OF PURCHASER’S REPRESENTATIONS, WARRANTIES,
COVENANTS AND INDEMNITIES

 

The representations and warranties of Purchaser set forth in Article 5 shall
survive the Closing for the benefit of Vendor for a period of eighteen months
from the Closing, after which time Vendor shall

 

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not be entitled to advance, make or bring any Claims whatsoever against
Purchaser with respect to those representations and warranties, or any other
indemnities relating thereto.

 

6.4          NO CONSEQUENTIAL DAMAGES

 

Neither Party will, in any circumstances whatsoever, be liable under this
Agreement to the other Party for indirect, incidental, consequential, exemplary
or punitive damages, suffered, sustained, paid, incurred or claimed by the other
Party or the other Party’s Related Parties; provided that the foregoing does not
restrict Purchaser after Closing from recovering damages (other than the
foregoing kinds of damages) from Vendor for Losses suffered by the Corporation
or any one or more of the Subsidiaries.  However, nothing in this Agreement
shall in any way limit the right of any Indemnified Person to be indemnified
pursuant to Article 10 for any and all indirect, incidental, consequential,
exemplary or punitive damages of every nature and kind whatsoever, including
loss of profits and revenues, that are part of any Claim by a Person other than
a Party to this Agreement or a Related Party.

 

6.5          NO OTHER REPRESENTATIONS, WARRANTIES OR COVENANTS OF VENDOR

 

Purchaser acknowledges to, and agrees with, Vendor as follows:

 

(A)           VENDOR MAKES NO OTHER REPRESENTATIONS, WARRANTIES, COVENANTS OR
AGREEMENTS TO OR WITH PURCHASER EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
AND THIS AGREEMENT CONTAINS ALL THE REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF VENDOR RELATING TO THE PURCHASE, INCLUDING WITH RESPECT TO THE
CORPORATION, THE SUBSIDIARIES, THE ASSETS AND THE BUSINESS.  NO ORAL STATEMENTS
OR REPRESENTATIONS (WHETHER EXPRESS OR IMPLIED) BY ANY PERSON (INCLUDING ANY
INFORMATION CONTAINED IN THE INFORMATION MEMORANDUM) HAVE INDUCED OR INFLUENCED
PURCHASER TO ENTER INTO THIS AGREEMENT OR TO AGREE TO ANY OF ITS TERMS, OR HAVE
BEEN RELIED ON IN ANY WAY BY PURCHASER AS BEING ACCURATE OR HAVE BEEN TAKEN INTO
ACCOUNT BY PURCHASER AS BEING IMPORTANT TO PURCHASER’S DECISION TO ENTER INTO
THIS AGREEMENT OR AGREE TO ANY OF ITS TERMS;

 

(B)           EXCEPT AS SET FORTH IN ARTICLE 4 AND ARTICLE 9 OF THIS AGREEMENT,
NEITHER VENDOR, THE CORPORATION NOR ANY SUBSIDIARY NOR ANYONE ACTING ON ANY OF
THEIR BEHALVES (INCLUDING ANY OF THEIR RELATED PARTIES) HAVE MADE ANY
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT WHATSOEVER, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE CORPORATION OR ANY OF THE SUBSIDIARIES, OR THEIR
RESPECTIVE ASSETS, LIABILITIES OR BUSINESS ACTIVITIES.  WITHOUT LIMITING THE
FOREGOING PROVISIONS OF THIS SECTION 6.5(B), NO REPRESENTATION, WARRANTY,
COVENANT OR AGREEMENT HAS BEEN MADE BY VENDOR, THE CORPORATION, ANY SUBSIDIARY
OR ANY OTHER SUCH PERSON IN RELATION TO:

 

(I)            EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY PROVIDED
IN ARTICLE 4, ANY DATA OR INFORMATION PROVIDED OR MADE AVAILABLE TO PURCHASER BY
VENDOR’S INVESTMENT BANKERS, ON PLANT OR SITE VISITS, IN MANAGEMENT
PRESENTATIONS, IN MEETINGS WITH VENDOR’S MANAGEMENT OR EMPLOYEES OR OTHERWISE;

 

(II)           THE VALUE OF THE ASSETS OR THE FUTURE CASH FLOW THEREFROM;

 

(III)          EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 4, THE ENVIRONMENTAL
CONDITION OF ANY ASSET OR ANY ENVIRONMENTAL LIABILITY;

 

(IV)          ANY ENGINEERING OR GEOLOGICAL INFORMATION OR INTERPRETATIONS
THEREOF OR ANY ECONOMIC EVALUATIONS;

 

(V)           EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 4, TITLE TO THE ASSETS;

 

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(VI)          EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 4, LIABILITIES OR CLAIMS
RELATED TO THE ASSETS OR ANY OPERATIONS RELATED TO THE ASSETS;

 

(VII)         THE PAST, PRESENT OR FUTURE EXERCISE OF ANY REGULATORY,
ADMINISTRATIVE OR MINISTERIAL DISCRETION UNDER ANY APPLICABLE LAW;

 

(VIII)        THE PAST, PRESENT OR FUTURE PERFORMANCE, ACTION, OPERATION,
OWNERSHIP OR PROFITABILITY OF THE OIL AND GAS INDUSTRY IN WESTERN CANADA;

 

(IX)           THE EXISTENCE OF ANY PRESENT OR FUTURE BUSINESS OPPORTUNITIES OF
THE CORPORATION OR THE SUBSIDIARIES OF ANY TYPE WHATSOEVER, INCLUDING IN RESPECT
OF THE OIL AND GAS INDUSTRY IN WESTERN CANADA; OR

 

(X)            THE STATE OR CONDITION OF THE ASSETS (WHICH ARE ACKNOWLEDGED BY
PURCHASER TO BE ON AN “AS-IS” BASIS), INCLUDING THE PHYSICAL CONDITION OF THE
ASSETS OR THE FITNESS FOR A PARTICULAR PURPOSE THEREOF, OR THE MERCHANTABILITY,
ENVIRONMENTAL CONDITION, EXISTENCE OF LATENT OR PATENT DEFECTS, QUALITY OR OTHER
ASPECT OR CHARACTERISTIC OF THE ASSETS;

 

provided that nothing in this Section 6.5(b) shall be deemed to limit the scope
or effect of the express provisions of Article 4 and Article 9;

 

(C)           VENDOR HAS PROVIDED PURCHASER WITH THE OPPORTUNITY TO CONDUCT ALL
SUCH ENQUIRIES, INVESTIGATIONS AND DUE DILIGENCE REGARDING THE CORPORATION, THE
SUBSIDIARIES, AND THE RESPECTIVE ASSETS, LIABILITIES AND BUSINESS ACTIVITIES OF
THE CORPORATION AND THE SUBSIDIARIES AND ALL SUCH OTHER MATTERS AS PURCHASER
CONSIDERED NECESSARY OR DESIRABLE IN CONNECTION WITH THE COMPLETION OF THE
PURCHASE IN ACCORDANCE WITH THIS AGREEMENT, AND PURCHASER HAS ENTERED INTO THIS
AGREEMENT AS A RESULT OF ITS OWN DUE DILIGENCE, INVESTIGATIONS, ENQUIRIES,
ADVICE AND KNOWLEDGE, AND PURCHASER ASSUMES FULL BUSINESS AND FINANCIAL RISK IN
CONNECTION WITH THE PURCHASE INCLUDING THE ASSETS AND THE BUSINESS;

 

(D)           PURCHASER HAS KNOWLEDGE AND EXPERIENCE IN THE OIL AND GAS INDUSTRY
GENERALLY, AND IS CAPABLE OF EVALUATING THE MERITS ASSOCIATED WITH ENTERING INTO
AND PERFORMING ITS OBLIGATIONS UNDER THIS AGREEMENT; AND

 

(E)           EXCEPT FOR ITS RIGHTS UNDER THIS AGREEMENT AND THE ESCROW
AGREEMENT, PURCHASER HEREBY WAIVES ALL RIGHTS AND REMEDIES (WHETHER NOW EXISTING
OR HEREAFTER ARISING AND INCLUDING ALL COMMON LAW, TORT, CONTRACTUAL, EQUITABLE
AND STATUTORY RIGHTS AND REMEDIES) AGAINST VENDOR, THE CORPORATION OR ANY
SUBSIDIARY OR ANYONE ACTING ON ANY OF THEIR BEHALVES IN RESPECT OF THE PURCHASED
SHARES, THE ASSETS, THE BUSINESS OR ANY REPRESENTATIONS OR STATEMENTS MADE, OR
INFORMATION OR DATA FURNISHED, TO PURCHASER OR ANYONE ACTING ON PURCHASER’S
BEHALF IN CONNECTION THEREWITH OR OTHERWISE (WHETHER MADE OR FURNISHED BY OR ON
BEHALF OF VENDOR AND WHETHER MADE OR FURNISHED ORALLY OR BY ELECTRONIC, FAXED,
WRITTEN OR OTHER MEANS): PROVIDED THAT NOTHING IN THIS SECTION 6.5(E) SHALL BE
DEEMED TO LIMIT THE SCOPE OR EFFECT OF THE EXPRESS PROVISIONS OF ARTICLE 4 AND
ARTICLE 9.

 

6.6          NO OTHER REPRESENTATION, WARRANTIES OR COVENANTS OF PURCHASER

 

Vendor acknowledges to, and agrees with, Purchaser as follows:

 

(A)           PURCHASER MAKES NO OTHER REPRESENTATIONS, WARRANTIES, COVENANTS OR
AGREEMENTS TO OR WITH VENDOR EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
AND THIS AGREEMENT CONTAINS ALL THE REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF PURCHASER

 

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RELATING TO THE PURCHASE.  NO OTHER STATEMENTS OR REPRESENTATIONS (WHETHER
EXPRESS OR IMPLIED) BY ANY PERSON HAVE INDUCED OR INFLUENCED VENDOR TO ENTER
INTO THIS AGREEMENT OR TO AGREE TO ANY OF ITS TERMS, OR HAVE BEEN RELIED ON IN
ANY WAY BY VENDOR AS BEING ACCURATE OR HAVE BEEN TAKEN INTO ACCOUNT BY VENDOR AS
BEING IMPORTANT TO VENDOR’S DECISION TO ENTER INTO THIS AGREEMENT OR AGREE TO
ANY OF ITS TERMS; AND

 

(B)           EXCEPT FOR ITS RIGHTS UNDER THIS AGREEMENT AND THE ESCROW
AGREEMENT, VENDOR HEREBY WAIVES ALL RIGHTS AND REMEDIES (WHETHER NOW EXISTING OR
HEREAFTER ARISING AND INCLUDING ALL COMMON LAW, TORT, CONTRACTUAL, EQUITABLE AND
STATUTORY RIGHTS AND REMEDIES) AGAINST PURCHASER, THE CORPORATION OR ANY
SUBSIDIARY OR ANYONE ACTING ON ANY OF THEIR BEHALVES IN RESPECT OF THE PURCHASED
SHARES, THE ASSETS, THE BUSINESS OR ANY REPRESENTATIONS OR STATEMENTS MADE, OR
INFORMATION OR DATA FURNISHED, TO VENDOR OR ANYONE ACTING ON VENDOR’S BEHALF IN
CONNECTION THEREWITH OR OTHERWISE (WHETHER MADE OR FURNISHED BY OR ON BEHALF OF
PURCHASER AND WHETHER MADE OR FURNISHED ORALLY OR BY ELECTRONIC, FAXED, WRITTEN
OR OTHER MEANS); PROVIDED THAT NOTHING IN THIS SECTION 6.6(B) SHALL BE DEEMED TO
LIMIT THE SCOPE OR EFFECT OF THE EXPRESS PROVISIONS OF ARTICLE 5 AND ARTICLE 9.

 

6.7          RESTRICTIONS ON CLAIMS AND ACTIONS

 

Without in any way restricting the provisions of Section 6.5, Purchaser
acknowledges to and agrees with Vendor that Vendor will not be liable for, and
Purchaser will not make or advance, any Claim to the extent that:

 

(A)           THERE MAY BE ANY DIFFERENCE BETWEEN THE FORECASTS, PROJECTIONS OR
ESTIMATES OF THE QUANTITIES, VALUES AND OTHER MATTERS REGARDING THE OIL AND GAS
RESERVES APPLICABLE TO THE ASSETS CONTAINED IN THE RESERVES REPORT (US), THE
RESERVES REPORT (CAN) OR OTHER MATERIALS THAT MAY BE PREPARED BY RYDER SCOTT AS
COMPARED TO THE ESTIMATES OF THOSE RESERVES CONTAINED IN THE SMOG RUN OR IN
UNOCAL’S REGULATION S-X FILINGS WITH THE SEC;

 

(B)           THE CLAIM IS BASED ON ANY FACT, MATTER OR CIRCUMSTANCE WHICH,
BEFORE THE DATE OF THIS AGREEMENT, HAD BEEN DISCLOSED IN WRITING TO PURCHASER OR
PURCHASER’S REPRESENTATIVES BY VENDOR, THE CORPORATION, ANY SUBSIDIARY OR ANY
PERSON ACTING ON BEHALF OF VENDOR, THE CORPORATION OR ANY SUBSIDIARY, INCLUDING
VENDOR’S INVESTMENT BANKERS, VENDOR’S COUNSEL, OR ANY OFFICER, EMPLOYEE, AGENT,
CONSULTANTS OR ADVISER OF ANY OF THEM;

 

(C)           PROVISION HAS BEEN MADE IN THE UNAUDITED FINANCIAL STATEMENTS FOR
ANY FACT, MATTER OR CIRCUMSTANCE ON WHICH THE CLAIM IS BASED;

 

(D)           THE CLAIM IS BASED ON ANY RISK (ACTUAL OR POTENTIAL), FACT, MATTER
OR CIRCUMSTANCE WHICH WAS RECORDED ON OR REFERRED TO IN THE PERSONAL PROPERTY
REGISTRIES OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN AND THE NORTHWEST
TERRITORIES WITH RESPECT TO VENDOR, THE CORPORATION AND THE SUBSIDIARIES, OTHER
THAN NORTHROCK RESOURCES (NWT) AS AT THE DATE OF THIS AGREEMENT;

 

(E)           EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 4, THE CLAIM IS BASED ON
ANY FORECASTS, PROJECTIONS OR ESTIMATES (INCLUDING ANY CONTAINED IN THE
INFORMATION MEMORANDUM) AS TO THE FUTURE OF THE BUSINESS (INCLUDING ANY REVENUE
OR PROFITS WHICH MAY BE DERIVED FROM THE BUSINESS) GIVEN BY VENDOR, THE
CORPORATION, ANY SUBSIDIARY, ANY PERSON REPRESENTING VENDOR, THE CORPORATION OR
ANY SUBSIDIARY (INCLUDING ITS DIRECTORS, OFFICERS, EMPLOYEES, CONSULTANTS,
AGENTS OR ADVISORS, INCLUDING VENDOR’S INVESTMENT BANKERS AND VENDOR’S COUNSEL)
TO PURCHASER OR PURCHASER’S REPRESENTATIVES;

 

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(F)            THE CIRCUMSTANCES GIVING RISE TO THE CLAIM RESULT IN A SAVINGS IN
TAXES TO PURCHASER OR ANY AFFILIATE OF PURCHASER (BUT ONLY TO THE EXTENT THAT
SUCH CLAIM WOULD BE REDUCED BY THE NET PRESENT VALUE OF A TAX BENEFIT PURSUANT
TO SECTION 10.5(B) IF PURCHASER WERE ENTITLED TO INDEMNIFICATION FOR THAT
CLAIM); OR

 

(G)           THE CLAIM IS AS A RESULT OF, IN RESPECT OF OR ARISES FROM ANY ACT,
OMISSION, TRANSACTION, FACT, MATTER OR CIRCUMSTANCE WHICH WOULD NOT HAVE
OCCURRED BUT FOR ANY APPLICABLE LAW NOT IN FORCE AT THE DATE OF THIS AGREEMENT
OR ANY CHANGE OF ANY LAW OR ADMINISTRATIVE PRACTICE OF ANY GOVERNMENT AUTHORITY,
INCLUDING ANY SUCH APPLICABLE LAW OR CHANGE WHICH TAKES EFFECT RETROSPECTIVELY.

 

All disclosures in writing by or on behalf of Vendor on or before the date of
this Agreement, including those in this Agreement (including the Schedules to
this Agreement), are to be taken as relating to each of Vendor’s
representations, warranties, covenants and agreements in this Agreement to the
extent that the relationship is reasonably apparent, and to Vendor’s indemnities
provided in this Agreement.

 

ARTICLE 7
PURCHASER’S CONDITIONS

 

The obligation of Purchaser to complete the Purchase in accordance with this
Agreement shall be subject to the satisfaction of, or compliance with, at or
before the Closing Time, each of the following conditions (collectively, the
“Purchaser’s Conditions”) each of which is acknowledged to be inserted for the
exclusive benefit of Purchaser and may be waived by Purchaser in whole or in
part:

 

7.1          CORRECTNESS AND ACCURACY OF REPRESENTATIONS AND WARRANTIES

 

The representations and warranties of Vendor contained in Article 4 shall be
correct and accurate in all material respects as at the Closing Time with the
same effect as if made at and as of the Closing Time (except to the extent those
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be correct and accurate in all
material respects on and as of such earlier date, and except to the extent those
representations and warranties are affected by actions or omissions consented to
or waived by Purchaser), and Purchaser shall have received a certificate to that
effect at or before the Closing Time from a Senior Officer of Vendor.

 

7.2          PERFORMANCE OF OBLIGATIONS

 

Vendor shall, at or before the Closing Time, have performed or complied with, in
all material respects, all its obligations, covenants and agreements under this
Agreement required to be performed or complied with by it prior to or on the
Closing Time, and Purchaser shall have received a certificate to that effect at
or before the Closing Time from a Senior Officer of Vendor.

 

7.3          GOVERNMENTAL APPROVALS, CONSENTS, AND AUTHORIZATIONS

 

(A)           THE REQUIRED APPROVALS SHALL HAVE BEEN OBTAINED AND SHALL BE IN
FULL FORCE AND EFFECT.

 

(B)           ALL OTHER AUTHORIZATIONS OF ANY GOVERNMENT AUTHORITY REQUIRED IN
CONNECTION WITH THE COMPLETION OF THE PURCHASE IN ACCORDANCE WITH THIS AGREEMENT
SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT, OTHER THAN ANY SUCH
AUTHORIZATIONS, THE FAILURE OF WHICH TO OBTAIN WOULD NOT ENJOIN, MATERIALLY
RESTRICT, PROHIBIT OR MAKE ILLEGAL THE PURCHASE.

 

(C)           THERE SHALL NOT BE IN EFFECT ANY APPLICABLE LAW WHICH ENJOINS,
MATERIALLY RESTRICTS, PROHIBITS OR MAKES ILLEGAL THE PURCHASE, PROVIDED THAT ALL
AUTHORIZATIONS FROM GOVERNMENT AUTHORITIES HAVE BEEN OBTAINED.

 

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7.4          OTHER CONSENTS AND APPROVALS

 

All Authorizations (other than Authorizations from a Government Authority)
required in connection with the completion of the Purchase in accordance with
this Agreement shall have been obtained, other than those consents and
approvals, the failure of which to obtain, individually or in the aggregate,
would not enjoin, materially restrict, prohibit or make illegal the completion
of the Purchase in accordance with this Agreement.

 

7.5          NO INJUNCTIONS OR RESTRAINTS

 

No restraining order, injunction or other order or decree issued by any
Government Authority of competent jurisdiction enjoining, restraining or
otherwise preventing the completion of the Purchase in accordance with this
Agreement shall be in effect; provided, however, that each of the Parties shall
use commercially reasonable efforts to prevent the entry of any such restraining
order, injunction or other order or decree and to cause any such restraining
order, injunction or other order or decree that may be entered to be vacated or
otherwise rendered of no effect.

 

7.6          VENDOR’S CLOSING DELIVERIES

 

(A)           AT LEAST THREE BUSINESS DAYS BEFORE THE CLOSING TIME VENDOR SHALL
DELIVER TO PURCHASER:

 

(I)            THE STATEMENT REFERRED TO IN SECTION 3.3(A) SETTING FORTH
VENDOR’S ESTIMATE OF THE PRELIMINARY NET WORKING CAPITAL AMOUNT AND THE AMOUNT
OF DISTRIBUTIONS MADE DURING THE INTERIM PERIOD; AND

 

(II)           THE LIST OF BANK ACCOUNTS AND SAFETY DEPOSIT BOXES REFERRED TO IN
SECTION 9.18; AND

 

(B)           AT OR BEFORE THE CLOSING TIME, VENDOR SHALL HAVE DELIVERED TO
PURCHASER THE FOLLOWING, IN FORM AND SUBSTANCE SATISFACTORY TO PURCHASER, ACTING
REASONABLY:

 

(I)            SHARE CERTIFICATES REPRESENTING THE PURCHASED SHARES, DULY
ENDORSED IN BLANK FOR TRANSFER, OR ACCOMPANIED BY IRREVOCABLE SECURITY TRANSFER
POWERS OF ATTORNEY DULY EXECUTED IN BLANK, IN EITHER CASE BY THE HOLDERS OF
RECORD, TOGETHER WITH EVIDENCE SATISFACTORY TO PURCHASER (ACTING REASONABLY)
THAT PURCHASER OR ITS NOMINEE(S) HAVE BEEN ENTERED ON THE BOOKS OF THE
CORPORATION AS THE REGISTERED HOLDER OF THE PURCHASED SHARES;

 

(II)           CERTIFIED COPIES OF:

 

(A)          THE ARTICLES OF INCORPORATION AND BYLAWS OF VENDOR, UNOCAL, THE
CORPORATION AND EACH SUBSIDIARY AND THE PARTNERSHIP AGREEMENTS AND OTHER
CONSTATING DOCUMENTS OF THE SUBSIDIARY PARTNERSHIPS AND THE PARTNERS THEREOF;

 

(B)           ALL RESOLUTIONS OF THE BOARDS OF DIRECTORS OF VENDOR AND UNOCAL
AND OF THE CORPORATION AND A RESOLUTION OF THE SHAREHOLDERS OF THE CORPORATION
APPROVING THE ENTERING INTO AND COMPLETION OF THE PURCHASE (IN THE CASE OF
VENDOR) AND THE TRANSFER OF THE PURCHASED SHARES (IN THE CASE OF THE
CORPORATION); AND

 

(C)           A LIST OF THE OFFICERS OF VENDOR AND UNOCAL AUTHORIZED TO SIGN
AGREEMENTS, CERTIFICATES, TRANSFERS AND ANY OTHER WRITINGS IN RESPECT OF THE
PURCHASE, TOGETHER WITH THEIR SPECIMEN SIGNATURES;

 

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(III)          CERTIFICATES OF STATUS WITH RESPECT TO VENDOR AND UNOCAL, THE
CORPORATION AND EACH OF THE CORPORATE SUBSIDIARIES, ISSUED BY THE APPROPRIATE
GOVERNMENT AUTHORITY;

 

(IV)          A CERTIFICATE CONFIRMING THE MATTERS DESCRIBED IN SECTION 7.1 AND
SECTION 7.2;

 

(V)           AN OPINION OF COUNSEL TO VENDOR AND COUNSEL TO UNOCAL AS TO THE
MATTERS SET FORTH IN SCHEDULE 7.6(E) WHICH OPINION REGARDING UNOCAL MAY BE GIVEN
BY OR IN RELIANCE ON AN OPINION FROM IN-HOUSE COUNSEL OF UNOCAL AND MAY BE
SUBJECT TO CUSTOMARY ASSUMPTIONS, QUALIFICATIONS AND LIMITATIONS.  WITH RESPECT
TO ANY FACTUAL MATTERS RELEVANT TO THE OPINIONS, COUNSEL MAY RELY ON
CERTIFICATES OF A SENIOR OFFICER OF VENDOR AND UNOCAL, AS APPLICABLE;

 

(VI)          A DULY EXECUTED RESIGNATION, EFFECTIVE AS OF THE CLOSING TIME, OF
EACH DIRECTOR OF THE CORPORATION AND OF EACH OF THE SUBSIDIARIES;

 

(VII)         A RECEIPT FOR PAYMENT OF THE AMOUNT PROVIDED IN SECTION 3.2(B);

 

(VIII)        ORIGINAL SHARE BOOKS, SHARE LEDGERS AND MINUTE BOOKS AND CORPORATE
SEALS AND AN UNDERTAKING FROM VENDOR TO DELIVER TO PURCHASER PROMPTLY AFTER
CLOSING ALL BOOKS AND RECORDS; AND

 

(IX)           ANY OTHER DOCUMENTS REASONABLY REQUIRED TO BE DELIVERED BY VENDOR
TO PURCHASER AT CLOSING TIME PURSUANT TO THIS AGREEMENT.

 

ARTICLE 8
VENDOR’S CONDITIONS

 

The obligation of Vendor to complete the Purchase in accordance with this
Agreement shall be subject to the satisfaction of, or compliance with, at or
before the Closing Time, each of the following conditions (collectively, the
“Vendor’s Conditions”) each of which is acknowledged to be inserted for the
exclusive benefit of Vendor and may be waived by Vendor in whole or in part:

 

8.1          CORRECTNESS AND ACCURACY OF REPRESENTATIONS AND WARRANTIES

 

The representations and warranties of Purchaser contained in Article 5 shall be
correct and accurate in all material respects as at the Closing Time with the
same effect as if made at and as of the Closing Time (except to the extent those
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be correct and accurate in all
material respects on and as of such earlier date, and except to the extent that
such representations and warranties are affected by actions and omissions
consented to or waived by Vendor), and Vendor shall have received a certificate
to that effect at or before the Closing Time from a Senior Officer of Purchaser.

 

8.2          PERFORMANCE OF OBLIGATIONS

 

Purchaser shall, at or before the Closing Time, have performed or complied with,
in all material respects, all its obligations, covenants and agreements under
this Agreement required to be performed or complied with by it prior to or on
the Closing Time, and Vendor shall have received a certificate to that effect at
or before the Closing Time from a Senior Officer of Purchaser.

 

8.3          GOVERNMENTAL APPROVALS, CONSENTS, AND AUTHORIZATIONS

 

(A)           THE REQUIRED APPROVALS SHALL HAVE BEEN OBTAINED AND SHALL BE IN
FULL FORCE AND EFFECT.

 

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(B)           ALL OTHER AUTHORIZATIONS OF ANY GOVERNMENT AUTHORITY REQUIRED IN
CONNECTION WITH THE COMPLETION OF THE PURCHASE IN ACCORDANCE WITH THIS AGREEMENT
SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT, OTHER THAN ANY SUCH
AUTHORIZATIONS, THE FAILURE OF WHICH TO OBTAIN WOULD NOT ENJOIN, MATERIALLY
RESTRICT, PROHIBIT OR MAKE ILLEGAL THE PURCHASE.

 

(C)           THERE SHALL NOT BE IN EFFECT ANY APPLICABLE LAW WHICH ENJOINS,
MATERIALLY RESTRICTS, PROHIBITS OR MAKES ILLEGAL THE PURCHASE, PROVIDED THAT ALL
AUTHORIZATIONS FROM GOVERNMENT AUTHORITIES HAVE BEEN OBTAINED.

 

8.4          OTHER CONSENTS AND APPROVALS

 

All Authorizations (other than Authorizations from a Government Authority)
required in connection with the completion of the Purchase in accordance with
this Agreement shall have been obtained, other than those consents and
approvals, the failure of which to obtain, individually or in the aggregate,
would not enjoin, materially restrict, prohibit or make illegal the completion
of the Purchase in accordance with this Agreement.

 

8.5          NO INJUNCTIONS OR RESTRAINTS

 

No restraining order, injunction or other order or decree issued by any
Government Authority of competent jurisdiction enjoining, restraining or
otherwise preventing the completion of the Purchase in accordance with this
Agreement shall be in effect; provided, however, that each of the Parties shall
use commercially reasonable efforts to prevent the entry of any such restraining
order, injunction or other order or decree and to cause any such restraining
order, injunction or other order or decree that may be entered to be vacated or
otherwise rendered of no effect.

 

8.6          PURCHASER’S CLOSING DELIVERIES

 

At or before the Closing Time, Purchaser shall have delivered to Vendor the
following, in form and substance satisfactory to Vendor, acting reasonably:

 

(A)           AMOUNT OF THE PURCHASE PRICE PROVIDED IN SECTION 3.2(B) BY WIRE
TRANSFER IN ACCORDANCE WITH SECTION 2.3;

 

(B)           CERTIFIED COPIES OF:

 

(I)            THE CONSTATING DOCUMENTS OF PURCHASER AND POGO;

 

(II)           ALL RESOLUTIONS OF THE BOARD OF DIRECTORS OF PURCHASER AND POGO
APPROVING THE ENTERING INTO AND COMPLETION OF THE PURCHASE CONTEMPLATED BY THIS
AGREEMENT;  AND

 

(III)          A LIST OF THE OFFICERS AND DIRECTORS OF PURCHASER AND POGO
AUTHORIZED TO SIGN AGREEMENTS AND ANY CERTIFICATES, TRANSFERS AND OTHER WRITINGS
IN RESPECT OF THE PURCHASE, TOGETHER WITH THEIR SPECIMEN SIGNATURES;

 

(C)           A CERTIFICATE OF STATUS WITH RESPECT TO PURCHASER AND POGO ISSUED
BY AN APPROPRIATE GOVERNMENT AUTHORITY;

 

(D)           A CERTIFICATE CONFIRMING THE MATTERS DESCRIBED IN SECTION 8.1 AND
SECTION 8.2;

 

(E)           AN OPINION OF COUNSEL TO PURCHASER AND COUNSEL TO POGO AS TO THE
MATTERS SET FORTH IN SCHEDULE 8.6(E) WHICH OPINION REGARDING POGO MAY BE GIVEN
BY OR IN RELIANCE ON AN OPINION FROM IN-HOUSE COUNSEL OF POGO OR OTHER UNITED
STATES COUNSEL AND MAY BE SUBJECT

 

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TO CUSTOMARY ASSUMPTIONS, QUALIFICATIONS AND LIMITATIONS.  WITH RESPECT TO ANY
FACTUAL MATTERS RELEVANT TO THE OPINIONS, COUNSEL MAY RELY ON CERTIFICATES OF A
SENIOR OFFICER OF PURCHASER AND POGO, AS APPLICABLE;

 

(F)            COPIES OF THE REQUIRED APPROVALS AND OTHER REQUIRED
AUTHORIZATIONS;

 

(G)           A NOTICE TO THE ESCROW AGENT IN THE FORM PRESCRIBED BY THE ESCROW
AGREEMENT AUTHORIZING THE ESCROW AGENT TO RELEASE THE DEPOSIT (AND ANY INTEREST
EARNED THEREON LESS ANY APPLICABLE WITHHOLDING TAXES) TO VENDOR; AND

 

(H)           ANY OTHER DOCUMENTS REASONABLY REQUIRED TO BE DELIVERED BY
PURCHASER TO VENDOR AT CLOSING TIME PURSUANT TO THIS AGREEMENT.

 

8.7          DEPOSIT

 

The Deposit and any interest earned on the Deposit (less any applicable
withholding Taxes) shall have been paid to Vendor by the Escrow Agent.

 

ARTICLE 9
OTHER COVENANTS

 

9.1          CONDUCT OF BUSINESS PRIOR TO CLOSING

 

From the date of this Agreement until the Closing Time, Vendor shall cause the
Corporation and the Subsidiaries to do the following:

 

(A)           CONDUCT THE BUSINESS IN THE ORDINARY COURSE EXCEPT AS OTHERWISE
SPECIFICALLY CONTEMPLATED OR PERMITTED BY THIS AGREEMENT;

 

(B)           USE COMMERCIALLY REASONABLE EFFORTS TO MAINTAIN GOOD RELATIONS
WITH PERSONS HAVING BUSINESS RELATIONSHIPS WITH THE CORPORATION AND ANY OF THE
SUBSIDIARIES AND WITH THE EMPLOYEES; AND

 

(C)           COMPLY IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE LAWS
APPLICABLE TO THE CORPORATION, ANY OF THE SUBSIDIARIES AND THE ASSETS;

 

provided that where the Corporation or any Subsidiary is not the operator of any
Asset, Vendor shall be obligated to cause to be done only that which a prudent
non-operator would be expected to do in similar circumstances in accordance with
accepted Canadian oilfield industry practices.

 

9.2          NEGATIVE COVENANTS

 

From the date of this Agreement until the Closing Time Vendor shall not, without
the consent of Purchaser:

 

(A)           AMEND THE CONSTATING DOCUMENTS OR BYLAWS OF THE CORPORATION OR OF
ANY SUBSIDIARY; OR

 

(B)           CAUSE OR PERMIT THE CORPORATION OR ANY SUBSIDIARY TO:

 

(I)            ISSUE, SELL OR AGREE TO ISSUE OR SELL:

 

(A)          ANY SHARES OF ITS CAPITAL STOCK OR ANY OF ITS UNITS OR PARTNERSHIP
INTERESTS, AS APPLICABLE; OR

 

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(B)           ANY SECURITIES CONVERTIBLE INTO, OR OPTIONS WITH RESPECT TO, OR
WARRANTS TO PURCHASE OR RIGHTS TO SUBSCRIBE FOR, ANY SHARES OF ITS CAPITAL STOCK
OR ANY OF ITS UNITS OR PARTNERSHIP INTERESTS, AS APPLICABLE;

 

(II)           MERGE INTO, AMALGAMATE INTO, OR WITH OR CONSOLIDATE WITH ANY
OTHER PERSON OR ACQUIRE ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OR ASSETS OF
ANY OTHER PERSON;

 

(III)          DECLARE, SET ASIDE, MAKE OR PAY ANY DISTRIBUTIONS OR REDEMPTIONS,
EXCEPT IN CASH;

 

(IV)          SELL, TRANSFER OR OTHERWISE DISPOSE OF ANY OF ITS OIL AND GAS
PROPERTIES HAVING A FAIR MARKET VALUE FOR ANY SUCH PROPERTY OF GREATER THAN
$1,000,000 OR IF THE AGGREGATE FAIR MARKET VALUES OF ANY SUCH PROPERTIES THAT
ARE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE CORPORATION AND THE
SUBSIDIARIES DURING THIS PERIOD WOULD EXCEED $5,000,000;

 

(V)           SELL, LEASE, TRANSFER OR OTHERWISE DISPOSE OF ANY ASSETS OTHER
THAN THE OIL AND GAS PROPERTIES THAT ARE REFERRED TO IN SECTION 9.2(B)(IV),
HAVING AN INDIVIDUAL OR AGGREGATE FAIR MARKET VALUE IN EXCESS OF $10,000,000
EXCEPT:

 

(A)          THE SALE OF PETROLEUM SUBSTANCES AND ANY ASSETS, OTHER THAN THE OIL
AND GAS PROPERTIES THAT ARE REFERRED TO IN SECTION 9.2(B)(IV), IN THE ORDINARY
COURSE OF THE BUSINESS;

 

(B)           TO THE CORPORATION OR ANY SUBSIDIARY; OR

 

(C)           PURSUANT TO PERMITTED ENCUMBRANCES;

 

(VI)          CREATE ANY NEW ENCUMBRANCES ON THE ASSETS OTHER THAN PERMITTED
ENCUMBRANCES EXCEPT IN THE ORDINARY COURSE OF THE BUSINESS AND PURSUANT TO THE
TITLE AND OPERATING DOCUMENTS;

 

(VII)         EXCEPT TO THE EXTENT REQUIRED BY THE TERMS OF WRITTEN EMPLOYMENT
OR CONSULTING AGREEMENTS AS IN EFFECT ON THE DATE OF THIS AGREEMENT, OR AS
OTHERWISE EXPRESSLY CONTEMPLATED BY THE TERMS OF THIS AGREEMENT:

 

(A)          INCREASE THE BENEFITS PURSUANT TO BENEFIT PLANS EXCEPT IN THE
ORDINARY COURSE OF THE BUSINESS;

 

(B)           ENTER INTO ANY CONTRACTS OF EMPLOYMENT INVOLVING ANNUAL BASE
COMPENSATION IN EXCESS OF $200,000 (OTHER THAN THE CONTRACTS TERMINABLE BY
PURCHASER WITHOUT LIABILITY IMMEDIATELY FOLLOWING THE CLOSING); OR

 

(C)           INCREASE, EXCEPT CONSISTENT WITH PREVIOUS PRACTICE OF THE
CORPORATION, ANY SALARY, WAGES OR OTHER COMPENSATION PAYABLE TO EMPLOYEES BY
MORE THAN $50,000 PER EMPLOYEE OR $1,000,000 IN THE AGGREGATE FOR ALL EMPLOYEES;

 

(VIII)        MAKE ANY SINGLE CAPITAL EXPENDITURE IN EXCESS OF $5,000,000 OR
MAKE ANY CAPITAL EXPENDITURES IN THE AGGREGATE (INCLUDING THE VALUE OF NEW
EQUIPMENT SUBJECT TO LEASE AS SPECIFIED IN SECTION 9.2(B)(XI)) IN EXCESS OF
$25,000,000, EXCEPT IN CASE OF:

 

(A)          AN EMERGENCY; OR

 

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(B)           AMOUNTS WHICH THE CORPORATION OR ANY SUBSIDIARY MAY BE COMMITTED
TO EXPEND AND HAS BEEN SPECIFICALLY DISCLOSED TO PURCHASER INCLUDING AS PROVIDED
IN SCHEDULE 4.15(E);

 

(IX)           EXCEPT AS PROVIDED IN SECTION 9.2(B)(XI), INCUR ANY INDEBTEDNESS
FOR BORROWED MONEY, OTHER THAN INDEBTEDNESS FOR BORROWED MONEY INCURRED IN THE
ORDINARY COURSE OF THE BUSINESS THAT IS PAID IN FULL BEFORE THE CLOSING;

 

(X)            ENTER INTO, AMEND IN ANY MATERIAL RESPECT OR TERMINATE BEFORE THE
END OF THE TERM THEREOF ANY MATERIAL CONTRACT OR ANY TITLE AND OPERATING
DOCUMENT, EXCEPT IN THE ORDINARY COURSE OF THE BUSINESS (INCLUDING PROCESSING OF
ASSIGNMENTS BY THIRD PARTIES IN THE ORDINARY COURSE OF THE BUSINESS);

 

(XI)           ENTER INTO ANY LEASES FOR NEW EQUIPMENT IF THE EQUIPMENT WHICH IS
THE SUBJECT MATTER OF ANY SUCH LEASE HAS A VALUE IN EXCESS OF $5,000,000;

 

(XII)          EXCEPT IN THE ORDINARY COURSE OF THE BUSINESS, ENTER INTO ANY
JOINT VENTURE, PARTNERSHIP OR OTHER SIMILAR ARRANGEMENT OR FORM ANY OTHER NEW
MATERIAL ARRANGEMENT FOR THE CONDUCT OF THE BUSINESS OR ACQUIRE, PURCHASE OR
LEASE ANY INTEREST IN PETROLEUM AND NATURAL GAS, REAL PROPERTY OR REAL PROPERTY
INTERESTS;

 

(XIII)         PURCHASE ANY SECURITIES OF ANY PERSON, EXCEPTING ANY SHARES OF
THE CORPORATION OR SHARES, UNITS OR PARTNERSHIP INTERESTS IN ANY OF THE
SUBSIDIARIES; OR

 

(XIV)        ENTER INTO ANY COMMITMENTS TO TAKE ANY OF THE ACTIONS PROHIBITED BY
ANY OF THE FOREGOING.

 

9.3          DEALINGS OR OPERATIONS REGARDING ASSETS

 

Except in an emergency in order to prevent loss of life, injury to persons or
damage to or loss of property and subject to Section 9.2, from the date of this
Agreement until the Closing Time Vendor shall not permit the Corporation or any
Subsidiary, without the prior written consent of Purchaser, to:

 

(A)           VOLUNTARILY ASSUME ANY OBLIGATION OR COMMITMENT WITH RESPECT TO
THE ASSETS, WHERE THE CORPORATION’S OR THE APPLICABLE SUBSIDIARY’S SHARE OF THE
EXPENDITURE ASSOCIATED WITH THAT OBLIGATION OR COMMITMENT IS ESTIMATED BY VENDOR
OR THE CORPORATION, ACTING REASONABLY, TO EXCEED $5,000,000;

 

(B)           SURRENDER, ABANDON OR ALLOW TO EXPIRE ANY OF THE ASSETS EXCEPT:

 

(I)            ASSETS WHICH HAVE BECOME WORN OUT OR OBSOLETE;

 

(II)           WHERE THE RIGHTS OF THE CORPORATION OR THE SUBSIDIARIES TO THOSE
ASSETS HAVE EXPIRED OR TERMINATED; OR

 

(III)          OTHERWISE IN THE ORDINARY COURSE OF THE BUSINESS;

 

(C)           PROPOSE OR INITIATE THE EXERCISE OF ANY RIGHT (INCLUDING BIDDING
RIGHTS AT CROWN SALES, RIGHTS UNDER AREAS OF MUTUAL INTEREST PROVISIONS AND
RIGHTS OF FIRST REFUSAL) OR OPTION RELATIVE TO, OR ARISING AS A RESULT OF THE
OWNERSHIP OF, ANY OF THE ASSETS, OR PROPOSE OR INITIATE ANY OPERATIONS ON THE
ASSETS WHICH HAVE NOT COMMENCED OR HAVE NOT BEEN COMMITTED TO BY THE CORPORATION
OR ANY SUBSIDIARY AS OF THE DATE HEREOF IN EXCESS OF

 

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$5,000,000 OR THAT WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE VALUE OF ANY OF
THE ASSETS; OR

 

(D)           RESIGN, OR TAKE ANY ACTION WHICH WOULD RESULT IN ITS RESIGNATION
OR REPLACEMENT, AS OPERATOR OF ANY OF THE ASSETS.

 

If Vendor, the Corporation or any Subsidiary makes expenditures or takes actions
necessary to prevent loss of life or injury to individuals, damage to or loss of
property, Vendor shall, or shall cause the Corporation or the applicable
Subsidiary to, give notice to Purchaser of those expenditures or actions and
Vendor’s, the Corporation’s or the applicable Subsidiary’s estimate of the
amounts expended or to be expended in connection therewith as soon as reasonably
possible in the circumstances.

 

9.4          INTERCORPORATE OBLIGATIONS

 

On or before the Closing Date and notwithstanding anything to the contrary
provided herein:

 

(A)           VENDOR SHALL CAUSE ANY INDEBTEDNESS OF THE CORPORATION AND THE
SUBSIDIARIES TO UNOCAL CANADA LIMITED OR VENDOR’S AFFILIATES TO BE PAID OR
OTHERWISE SATISFIED, INCLUDING BY SET-OFF;

 

(B)           VENDOR SHALL, AND SHALL CAUSE ITS AFFILIATES TO, PAY OR OTHERWISE
SATISFY ANY AMOUNTS OWED BY THEM TO THE CORPORATION AND THE SUBSIDIARIES AND TO
FACILITATE THAT PAYMENT SHALL CAUSE AN AMOUNT IN VALUE OF THE PREFERRED SHARES
HELD BY UNOCAL CANADA LIMITED EQUAL TO THE AMOUNT OF THE NOTE RECEIVABLE
OUTSTANDING ON THE DATE HEREOF AND OWED BY UNOCAL CANADA LIMITED TO THE
CORPORATION TO BE REDEEMED BY THE CORPORATION IN EXCHANGE FOR THE DISTRIBUTION
TO UNOCAL CANADA LIMITED OF CASH OF THAT AMOUNT;

 

(C)           VENDOR SHALL USE REASONABLE COMMERCIAL EFFORTS TO CAUSE ANY
GUARANTEES, CREDIT SUPPORT OR OTHER FINANCIAL ASSURANCES PROVIDED BY VENDOR OR
ITS AFFILIATES TO COUNTERPARTIES WHO HAVE CONTRACTS WITH THE CORPORATION OR ANY
SUBSIDIARY TO BE RELEASED IN A MANNER THAT DOES NOT HAVE A MATERIAL ADVERSE
EFFECT SUBJECT TO PURCHASER COMPLYING WITH ITS OBLIGATIONS IN THIS SECTION 9.4;
AND

 

(D)           VENDOR SHALL CAUSE THE SYNDICATED CREDIT AGREEMENT TO BE AMENDED
TO REMOVE THE CORPORATION AS A BORROWER THEREUNDER AND THE DEMAND CREDIT
AGREEMENT TO BE CANCELLED.

 

Purchaser will at Vendor’s request at any time as part of the Closing furnish
any guarantees, credit support or other financial assurances as may be required
by the counterparties referred to in Section 9.4(c) so that Vendor and its
Affiliates can be released from their obligations in that regard.

 

9.5          ACCESS TO BOOKS AND RECORDS AND OTHER ASSETS

 

(A)           VENDOR SHALL PERMIT PURCHASER AND ITS REPRESENTATIVES, BETWEEN THE
DATE OF THIS AGREEMENT AND THE CLOSING TIME, ON REASONABLE NOTICE TO THE SENIOR
OFFICERS OF VENDOR, THE CORPORATION AND ANY SUBSIDIARY, TO HAVE ACCESS DURING
NORMAL BUSINESS HOURS TO:

 

(I)            ALL LOCATIONS OF THE CORPORATION OR ANY SUBSIDIARY WHERE BOOKS
AND RECORDS OR OTHER MATERIAL RELEVANT TO THE BUSINESS IS STORED;

 

(II)           ALL THE BOOKS AND RECORDS; AND

 

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(III)          THE ASSETS OF THE CORPORATION AND THE SUBSIDIARIES AND OTHER
MATERIAL RELEVANT TO THE BUSINESS AND IN THE POSSESSION OR CONTROL OF THE
CORPORATION OR ANY SUBSIDIARY;

 

provided that such access does not unreasonably interfere with the operation of
the Business in the Ordinary Course.

 

(B)           VENDOR SHALL PERMIT PURCHASER AND ITS REPRESENTATIVES, BETWEEN THE
DATE OF THIS AGREEMENT AND THE CLOSING TIME, ON REASONABLE NOTICE TO THE SENIOR
OFFICERS OF VENDOR, THE CORPORATION AND ANY SUBSIDIARY, TO HAVE REASONABLE
ACCESS TO THE EMPLOYEES, AUDITORS AND INSIDE COUNSEL OF THE CORPORATION AND ANY
SUBSIDIARY DURING NORMAL BUSINESS HOURS; PROVIDED THAT SUCH ACCESS DOES NOT
UNREASONABLY INTERFERE WITH SUCH EMPLOYEES’, AUDITORS’ AND COUNSELS’
RESPONSIBILITIES OR THE OPERATION OF THE BUSINESS IN THE ORDINARY COURSE.

 

(C)           NOTWITHSTANDING SECTION 9.5(A), VENDOR SHALL NOT BE REQUIRED TO
DISCLOSE ANY INFORMATION, RECORDS, FILES OR OTHER DATA TO PURCHASER:

 

(I)            WHERE VENDOR, THE CORPORATION OR ANY SUBSIDIARY IS PROHIBITED BY
ANY APPLICABLE LAW (INCLUDING THE COMPETITION ACT); OR

 

(II)           WHERE TO DO SO WOULD CAUSE VENDOR, THE CORPORATION OR ANY
SUBSIDIARY TO BE IN VIOLATION OF A CONFIDENTIALITY OBLIGATION TO ANOTHER PERSON,
EXCEPT IF THE INFORMATION SUBJECT TO THAT CONFIDENTIALITY OBLIGATION IS
MATERIAL, PURCHASER AGREES TO KEEP THAT MATERIAL INFORMATION CONFIDENTIAL AND TO
INDEMNIFY VENDOR AND VENDOR’S RELATED PARTIES AND HOLD VENDOR AND VENDOR’S
RELATED PARTIES HARMLESS FROM AND AGAINST ANY LOSSES, LIABILITIES OR CLAIMS THAT
VENDOR AND VENDOR’S RELATED PARTIES MAY SUFFER AS A RESULT OF ANY DISCLOSURE.

 

If any consent of any Person is required to permit the release of any
information to Purchaser, Vendor shall, on the request of Purchaser, make all
commercially reasonable efforts to obtain that consent.  Vendor shall provide
Purchaser with notice as to any disclosure that is not provided for the reasons
in this Section 9.5(c).

 

9.6          CONFIDENTIALITY

 

Prior to the Closing, Purchaser shall keep, and shall cause its Related Parties
to keep, confidential all information disclosed to it by Vendor or Vendor’s
Representatives relating to Vendor and Vendor’s Related Parties in accordance
with the provisions of the Confidentiality Agreement.

 

9.7          ACTIONS TO SATISFY CLOSING CONDITIONS

 

Without derogating from any Party’s rights or obligations under this Agreement,
it is agreed that Vendor shall act in good faith and use commercially reasonable
efforts to satisfy, or cause to be satisfied, all of the Conditions set forth in
Article 7, and Purchaser shall act in good faith and use commercially reasonable
efforts to satisfy, or cause to be satisfied, the Conditions set out in
Article 8.  Each Party shall cooperate with the other Party and provide the
other Party or its Representatives with information in its possession, and not
otherwise available to the other Party, necessary to seek the approvals or
waivers referred to in Article 7 and Article 8.  Each of Purchaser and Vendor
shall act in good faith in determining whether or not a Condition in its favour
has been satisfied.

 

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9.8          PRESERVATION OF RECORDS

 

Purchaser shall take all reasonable steps to preserve and keep the Books and
Records for a period of ten years from the Closing Date, or for any longer
period as may be required by any Applicable Law or Government Authority or by
Section 11.2(d), and shall make those Books and Records available to Vendor as
may be reasonably required by Vendor in connection with a Claim by Purchaser or
any other Person against Vendor under or relating to this Agreement.  Vendor
acknowledges that Purchaser shall not be liable to Vendor in the event of any
accidental destruction of those Books and Records, caused otherwise than by the
negligence or wilful misconduct of Purchaser.

 

9.9          COMPETITION ACT FILING AND INVESTMENT CANADA ACT FILING

 

Without limiting the provisions of Section 9.7:

 

(A)           PURCHASER AND VENDOR SHALL, AND SHALL USE ALL COMMERCIALLY
REASONABLE EFFORTS TO CAUSE THEIR RESPECTIVE OFFICERS, EMPLOYEES,
REPRESENTATIVES, ADVISORS AND AGENTS TO:

 

(I)            WITHIN FOURTEEN DAYS AFTER THE DATE OF THIS AGREEMENT, MAKE THE
FILINGS REQUIRED OF PURCHASER, VENDOR, THE CORPORATION OR ANY OF THEIR
AFFILIATES TO OBTAIN THE COMPETITION ACT APPROVAL AND THE INVESTMENT CANADA
APPROVAL;

 

(II)           COMPLY AT THE EARLIEST PRACTICABLE DATE WITH ANY REQUEST FOR
ADDITIONAL INFORMATION OR DOCUMENTARY MATERIAL RECEIVED BY PURCHASER, VENDOR,
THE CORPORATION OR ANY OF THEIR AFFILIATES FROM THE CANADIAN COMPETITION BUREAU
PURSUANT TO THE COMPETITION ACT, THE INVESTMENT REVIEW DIVISION OF INDUSTRY
CANADA PURSUANT TO THE INVESTMENT CANADA ACT OR ANY OTHER GOVERNMENT AUTHORITY,
AS THE CASE MAY BE; AND

 

(III)          CONSULT AND COOPERATE IN CONNECTION WITH ANY INVESTIGATION,
REVIEW OR OTHER INQUIRY IN EACH CASE CONCERNING THE PURCHASE COMMENCED BY ANY
GOVERNMENT AUTHORITY;

 

(B)           EACH PARTY SHALL:

 

(I)            PROMPTLY INFORM THE OTHER PARTY OF ANY MATERIAL, APPLICABLE,
COMMUNICATION RECEIVED BY THAT PARTY FROM THE CANADIAN COMPETITION BUREAU, THE
INVESTMENT REVIEW DIVISION OF INDUSTRY CANADA OR ANY OTHER GOVERNMENT AUTHORITY
REGARDING THE PURCHASE;

 

(II)           NOT AGREE TO PARTICIPATE IN ANY SUBSTANTIVE MEETING OR DISCUSSION
WITH THE CANADIAN COMPETITION BUREAU OR ANY REPRESENTATIVE THEREOF OR THE
INVESTMENT REVIEW DIVISION OF INDUSTRY CANADA IN RESPECT OF ANY FILINGS,
INVESTIGATION OR INQUIRY CONCERNING THE PURCHASE CONTEMPLATED BY THIS AGREEMENT,
WHETHER ORAL OR IN PERSON, UNLESS IT CONSULTS WITH THE OTHER PARTY IN ADVANCE
AND, TO THE EXTENT PERMITTED BY THE CANADIAN COMPETITION BUREAU OR ANY
REPRESENTATIVE THEREOF OR THE INVESTMENT REVIEW DIVISION OF INDUSTRY CANADA OR
ANY REPRESENTATIVE THEREOF, GIVES THE OTHER PARTY THE OPPORTUNITY TO ATTEND AND
PARTICIPATE THEREAT; AND IF THAT PARTICIPATION IS EITHER DECLINED OR NOT
PERMITTED, TO FURNISH PROMPTLY THEREAFTER A MEMORANDUM SETTING FORTH THE
MATERIAL TERMS OF THAT MEETING OR THOSE DISCUSSIONS; AND

 

(III)          FURNISH THE OTHER PARTY IN ADVANCE WITH COPIES OF ALL
CORRESPONDENCE, FILINGS AND COMMUNICATIONS BETWEEN THEM AND THEIR AFFILIATES AND
THEIR RESPECTIVE

 

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REPRESENTATIVES, ON THE ONE HAND, AND THE CANADIAN COMPETITION BUREAU OR ANY
REPRESENTATIVE THEREOF OR THE INVESTMENT REVIEW DIVISION OF INDUSTRY CANADA OR
MEMBERS OF ITS STAFF, ON THE OTHER HAND, WITH RESPECT TO THIS AGREEMENT AND THE
PURCHASE AND PROVIDE THE OTHER PARTY A REASONABLE OPPORTUNITY TO COMMENT THEREON
AND AGREES TO CONSIDER THOSE COMMENTS IN GOOD FAITH;

 

(C)           PURCHASER SHALL ADVISE VENDOR PROMPTLY IN ADVANCE OF ANY
UNDERSTANDINGS, UNDERTAKINGS OR AGREEMENTS WHICH PURCHASER AND THE CORPORATION
PROPOSE TO MAKE OR ENTER INTO WITH THE CANADIAN COMPETITION BUREAU OR THE
INVESTMENT REVIEW DIVISION OF INDUSTRY CANADA IN CONNECTION WITH THE PURCHASE;
AND

 

(D)           WITHOUT LIMITING THE FOREGOING PROVISIONS OF THIS SECTION 9.9,
PURCHASER AGREES TO USE COMMERCIALLY REASONABLE EFFORTS TO OBTAIN ANY
AUTHORIZATION OF ANY GOVERNMENT AUTHORITY (INCLUDING THE INVESTMENT CANADA
APPROVAL) NECESSARY TO ENABLE THE PARTIES TO CONSUMMATE THE PURCHASE AS SOON AS
PRACTICABLE, BUT IN ANY EVENT NO LATER THAN THE OUTSIDE DATE, INCLUDING
COMMITTING TO UNDERTAKINGS UNDER THE INVESTMENT CANADA ACT AND/OR REGISTRATION
OF A CONSENT AGREEMENT UNDER THE COMPETITION ACT, ON TERMS AND CONDITIONS
(INCLUDING SUCH UNDERTAKINGS AND CONSENT AGREEMENT, IF ANY) WHICH WILL NOT CAUSE
A MATERIAL ADVERSE EFFECT.

 

9.10        ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS

 

Vendor shall assign to Purchaser and, to the extent necessary shall cause the
Corporation to assign to Purchaser, at or prior to, and with effect from and
after, the Closing Time, all of its respective rights under any confidentiality
agreements relating to the Corporation with third parties, but only to the
extent that those agreements permit those assignments without consent.  To the
extent those agreements do not permit assignments without consent, at
Purchaser’s request and at Purchaser’s expense, provided that Vendor receives an
indemnity from Purchaser in form and substance satisfactory to Vendor in its
sole discretion, Vendor shall, to the extent permitted by Applicable Law and the
terms of such confidentiality agreements, appoint Purchaser as Vendor’s
representative and agent in respect of the confidential information relating to
the Business, the Assets, and the Corporation or the Subsidiaries under those
confidentiality agreements, and any amounts recovered or expenses incurred by
Purchaser or Vendor in connection therewith shall be for the account of
Purchaser.

 

9.11        INSURANCE

 

(A)           INSURANCE COVERAGE REQUIRED BY THE CORPORATION AND THE
SUBSIDIARIES IS MAINTAINED AND PROVIDED BY VENDOR OR VENDOR’S AFFILIATES
(“VENDOR’S INSURANCE”).  PURCHASER ACKNOWLEDGES THAT, FROM AND AFTER THE
CLOSING, THE CORPORATION AND THE SUBSIDIARIES WILL NO LONGER HAVE THE BENEFIT OF
THE VENDOR’S INSURANCE.  VENDOR WILL REFUND TO THE CORPORATION AN AMOUNT EQUAL
TO THE PORTION OF THE INSURANCE PREMIUMS PAID BY THE CORPORATION TO VENDOR FOR
THE VENDOR’S INSURANCE FOR THE PERIOD FROM THE CLOSING TIME TO THE EXPIRY DATE
OF THE COVERAGE PAID FOR UNDER EACH APPLICABLE POLICY PROVIDING VENDOR’S
INSURANCE, TO THE EXTENT THAT THOSE AMOUNTS ARE RECOVERABLE FROM THE APPLICABLE
INSURER PROVIDING THE VENDOR’S INSURANCE.

 

(B)           VENDOR SHALL CAUSE VENDOR’S INSURANCE TO BE MAINTAINED UNTIL
CLOSING.

 

9.12        EMPLOYEE RELATED MATTERS

 

(A)           FROM AND AFTER THE CLOSING, PURCHASER WILL ENSURE THAT THE
CORPORATION AND THE SUBSIDIARIES WILL:

 

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(I)            HONOUR THEIR OBLIGATIONS TO PRESENT AND FORMER EMPLOYEES RELATING
TO THEIR EMPLOYMENT WITH THE CORPORATION OR ANY SUBSIDIARY, INCLUDING ALL
OBLIGATIONS AND LIABILITIES RELATING TO THE BENEFIT PLANS, REGARDLESS OF WHETHER
THOSE OBLIGATIONS AROSE OR RELATE TO ANY PERIOD BEFORE, ON OR AFTER CLOSING; AND

 

(II)           RECOGNIZE EACH EMPLOYEE’S ORIGINAL HIRE DATE WITH THE CORPORATION
OR ANY SUBSIDIARY, AND CREDIT THE EMPLOYEE WITH ALL SERVICE SO RECOGNIZED BY THE
CORPORATION OR ANY SUBSIDIARY IN THEIR BENEFIT PLANS, INCLUDING ALL PERIODS OF
EMPLOYMENT LEAVE, FOR ALL PURPOSES INCLUDING DEFINED CONTRIBUTION PARTICIPATION
SERVICE CREDIT (AS RECOGNIZED IN BENEFIT PLANS), ELIGIBILITY FOR, VESTING OF AND
LOCKING IN OF BENEFITS, AS APPLICABLE, UNDER EACH OF THE BENEFIT PLANS, AND IN
THE EVENT OF FUTURE TERMINATION OF EMPLOYMENT, ENTITLEMENT TO SEVERANCE
PAYMENTS.

 

(B)           VENDOR ACKNOWLEDGES THAT CERTAIN OF THE EMPLOYEES PARTICIPATE IN
STOCK BASED AND OTHER COMPENSATION PLANS SPONSORED BY UNOCAL OR ITS AFFILIATES
(OTHER THAN THE BENEFIT PLANS).  FROM AND AFTER THE DATE OF EXECUTION OF THIS
AGREEMENT, VENDOR SHALL PERMIT ACCESS BY PURCHASER TO THE EMPLOYEES FOR THE
PURPOSE OF COMMUNICATING PURCHASER’S PLANS FOR COMPENSATION AND BENEFIT PROGRAMS
AND PRACTICES AND PURCHASER MAY ENTER INTO AGREEMENTS WITH ONE OR MORE OF THOSE
EMPLOYEES RELATING TO EMPLOYMENT, COMPENSATION AND/OR BENEFITS FROM AND AFTER
THE CLOSING DATE.  PURCHASER SHALL PROVIDE TO VENDOR A COPY OF ANY WRITTEN
(INCLUDING ELECTRONIC) COMMUNICATIONS THAT PURCHASER PROPOSES BE PROVIDED TO
EMPLOYEES OR ANY OF THEM BEFORE THAT COMMUNICATION IS PROVIDED AND PURCHASER
WILL NOT UNREASONABLY REFUSE TO INCORPORATE VENDOR’S REQUESTED CHANGES IN ANY OF
THOSE COMMUNICATIONS.

 

9.13        CONSENT TO JURISDICTION

 

Each of the Parties and Unocal and Pogo:

 

(A)           IRREVOCABLY ATTORNS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF EACH COURT OF COMPETENT JURISDICTION SITTING IN CALGARY, ALBERTA IN ANY CLAIM
ARISING OUT OF OR RELATED TO THIS AGREEMENT AND IRREVOCABLY AGREES THAT ALL
CLAIMS MAY BE HEARD AND DETERMINED IN THAT ALBERTA COURT;

 

(B)           IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH CLAIM;

 

(C)           AGREES THAT A FINAL JUDGMENT IN ANY SUCH CLAIM SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY APPLICABLE LAW; AND

 

(D)           WAIVES TRIAL BY JURY TO ANY CLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND WAIVES ANY CLAIM TO PUNITIVE DAMAGES WITH RESPECT TO ANY
CLAIM.

 

Each of Purchaser and Pogo irrevocably appoints Fraser Milner Casgrain LLP  (the
“ Purchaser’s Process Agent”), with an office on the date hereof at Calgary,
Alberta, for the attention of Dale Skinner, as its agent to receive on its
behalf service of copies of a statement of claim and any other process which may
be served in any such Claim.  That service may be made by delivering a copy of
that statement of claim or other process to Purchaser in care of Purchaser’s
Process Agent at Purchaser’s Process Agent’s address above.

 

Each of Vendor and Unocal irrevocably appoint Vendor’s Counsel (the “Vendor’s
Process Agent”), with an office on the date hereof at Calgary, Alberta, for the
attention of Glenn

 

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Cameron, as its agent to receive on its behalf service of copies of a statement
of claim and any other process which may be served in any such Claim.  That
service may be made by delivering a copy of that statement of claim or other
process to Vendor or Unocal, as the case may be, in care of Vendor’s Process
Agent at Vendor’s Process Agent’s address above.

 

9.14        US FINANCIAL STATEMENTS

 

(A)           VENDOR WILL REQUEST THAT PWC PROVIDE TO PURCHASER, WITH COPIES TO
VENDOR, AS SOON AS REASONABLY POSSIBLE:

 

(I)            THE AUDITED FINANCIAL STATEMENTS, ALONG WITH ANY CONSENTS,
OPINIONS AND REPORTS OF PWC, THAT:

 

(A)          WOULD BE REQUIRED TO BE FILED BY PURCHASER WITH THE SEC TO ISSUE
AND SELL SECURITIES IN ONE OR MORE OFFERINGS REGISTERED UNDER THE SECURITIES ACT
OF 1933; AND

 

(B)           ARE OTHERWISE REQUIRED FOR PURCHASER TO COMPLY TIMELY WITH
APPLICABLE FEDERAL SECURITIES LAWS OF THE UNITED STATES, INCLUDING RULE 3-05 OF
REGULATION S-X AND ITEM 9.01 OF FORM 8-K PROMULGATED BY THE SEC; AND

 

(II)           UNAUDITED FINANCIAL STATEMENTS OF THE CORPORATION AND THE
SUBSIDIARIES (OR THEIR PREDECESSORS) FOR:

 

(A)          THE SIX MONTH PERIODS ENDED JUNE 30, 2005 AND 2004; AND

 

(B)           UNLESS THE CLOSING HAS OCCURRED, THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2005 AND 2004 BY NOVEMBER 10, 2005.

 

(B)           ALL OF THE UNAUDITED FINANCIAL STATEMENTS REFERRED TO IN
SECTION 9.14(A)(II) SHALL BE PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, AND SHALL OTHERWISE BE IN SUCH FORM AS IS REQUIRED FOR
PURCHASER TO COMPLY IN A TIMELY MANNER WITH THE APPLICABLE FEDERAL SECURITIES
LAWS OF THE UNITED STATES, INCLUDING THOSE APPLICABLE TO THE ISSUANCE AND SALE
OF SECURITIES IN OFFERINGS REGISTERED UNDER THE SECURITIES ACT OF 1933.

 

(C)           VENDOR FURTHER AGREES TO USE COMMERCIALLY REASONABLE EFFORTS TO
ASSIST PURCHASER IN THE PREPARATION OF:

 

(I)            THE PRO FORMA FINANCIAL INFORMATION WITH RESPECT TO THE PURCHASE
REQUIRED BY ARTICLE 11 OF REGULATION S-X TO BE INCLUDED BY PURCHASER IN FILINGS
WITH THE SEC; AND

 

(II)           INFORMATION REGARDING THE BUSINESS AND OPERATIONS OF THE
CORPORATION AND THE SUBSIDIARIES NECESSARY OR APPROPRIATE, IN THE JUDGMENT OF
PURCHASER, ACTING REASONABLY, TO BE INCLUDED IN OFFERING DOCUMENTS, LOAN
SYNDICATION MATERIALS OR OTHER MATERIALS REFERRED TO IN SECTION 13.2(D) THAT MAY
BE USED BY PURCHASER IN OBTAINING FINANCING FOR THE PURCHASE.

 

9.15        RESERVES REPORT (US)

 

Vendor will request that Ryder Scott prepare and provide to Purchaser, with copy
to Vendor, as soon as reasonably possible, the Reserves Report (US).  Vendor
will request that in preparing the Reserves Report (US) Ryder Scott’s estimates
of reserves and present values of reserves reflected in the

 

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Reserves Report (US) comply in all material respects with the applicable
requirements of the federal securities laws of the United States, including,
without limitation, Regulation S-X promulgated by the SEC and Industry Guide 2
under the Securities Act of 1933.

 

9.16        PURCHASE NOT CONDITIONAL ON FINANCING

 

Nothing in Section 5.6, Section 9.14, Section 9.15, Section 13.2 or any other
provision of this Agreement shall make Purchaser’s obligation to complete the
Purchase, including Purchaser’s obligation to make the payments referred to in
Section 3.2 on a timely basis, conditional on Purchaser being able to obtain or
complete any financing for the Purchase pursuant to the Goldman Sachs Commitment
or otherwise.

 

The breach or failure of Vendor, PWC, Ryder Scott or any other relevant Person
to comply with any of the covenants and obligations contained in the Sections
referred to above in this Section 9.16 or in providing the financial statements
or Reserves Reports (US) referred to therein shall not be a default by Vendor
under this Agreement including for purposes of Section 12.1(d) or any basis for
Purchaser to refuse to complete the Purchase or to make any Claim against Vendor
and Vendor shall have no liability to Purchaser, Pogo, any of their Related
Parties or any other Persons for or in respect thereof.

 

9.17        COMPLIANCE WITH PRIVACY LAWS

 

(A)           VENDOR ACKNOWLEDGES AND CONFIRMS THAT THE CORPORATION AND THE
SUBSIDIARIES HAVE COMPLIED IN ALL MATERIAL RESPECTS AT ALL TIMES WITH PRIVACY
LAWS WHICH GOVERN THE COLLECTION, USE AND DISCLOSURE OF PERSONAL INFORMATION
DISCLOSED TO PURCHASER PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT (THE
“DISCLOSED PERSONAL INFORMATION”).  VENDOR HEREBY COVENANTS AND AGREES TO ADVISE
PURCHASER OF ALL PURPOSES FOR WHICH DISCLOSED PERSONAL INFORMATION WAS INITIALLY
COLLECTED FROM OR IN RESPECT OF THE EMPLOYEE TO WHICH THAT DISCLOSED PERSONAL
INFORMATION RELATES AND ALL ADDITIONAL PURPOSES WHERE VENDOR HAS NOTIFIED THE
EMPLOYEE OF THAT ADDITIONAL PURPOSE, AND DISCLOSURE OF PERSONAL INFORMATION, IF
ANY, UNLESS THAT USE OR DISCLOSURE IS PERMITTED OR AUTHORIZED BY LAW, WITHOUT
NOTICE TO, OR CONSENT FROM, THAT EMPLOYEE; PROVIDED, HOWEVER, THAT IN SUCH CASE
VENDOR SHALL HAVE ADVISED PURCHASER OF THE LEGISLATIVE PROVISIONS ON WHICH
VENDOR IS RELYING.

 

(B)           BEFORE CLOSING, NONE OF THE PARTIES SHALL USE THE DISCLOSED
PERSONAL INFORMATION FOR ANY PURPOSES OTHER THAN THOSE RELATED TO THE
PERFORMANCE OF THIS AGREEMENT AND THE COMPLETION OF THE PURCHASE.

 

(C)           EACH OF THE PARTIES ACKNOWLEDGES AND CONFIRMS THAT THE DISCLOSURE
OF PERSONAL INFORMATION IS NECESSARY FOR THE PURPOSES OF DETERMINING IF THE
PARTIES SHALL PROCEED WITH THE PURCHASE, AND THAT THE DISCLOSURE OF PERSONAL
INFORMATION RELATES SOLELY TO THE CARRYING ON OF THE BUSINESS, OR THE COMPLETION
OF THE PURCHASE.

 

(D)           PURCHASER SHALL AT ALL TIMES KEEP STRICTLY CONFIDENTIAL ALL
DISCLOSED PERSONAL INFORMATION PROVIDED TO IT, AND SHALL INSTRUCT THOSE
EMPLOYEES RESPONSIBLE FOR PROCESSING SUCH DISCLOSED PERSONAL INFORMATION TO
PROTECT THE CONFIDENTIALITY OF THAT INFORMATION IN A MANNER CONSISTENT WITH
PURCHASER’S OBLIGATIONS HEREUNDER.  PURCHASER SHALL ENSURE THAT ACCESS TO THE
DISCLOSED PERSONAL INFORMATION SHALL BE RESTRICTED TO THOSE EMPLOYEES OR SERVICE
PROVIDERS OF PURCHASER WHO HAVE A BONA FIDE NEED TO ACCESS TO THAT INFORMATION
IN ORDER TO FULFIL THEIR OBLIGATIONS IN THE COURSE OF THEIR EMPLOYMENT OR IN
PROVIDING SERVICES TO PURCHASER.

 

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(E)           THE PARTIES SHALL FULLY CO-OPERATE WITH ONE ANOTHER, WITH THE
EMPLOYEES TO WHOM THE PERSONAL INFORMATION RELATES, AND ANY GOVERNMENT AUTHORITY
CHARGED WITH ENFORCEMENT OF PRIVACY LAWS, IN RESPONDING TO INQUIRIES,
COMPLAINTS, REQUESTS FOR ACCESS, AND CLAIMS IN RESPECT OF DISCLOSED PERSONAL
INFORMATION.

 

(F)            PURCHASER UNDERTAKES, AFTER CLOSING, TO UTILIZE THE DISCLOSED
PERSONAL INFORMATION ONLY FOR THOSE PURPOSES FOR WHICH THE DISCLOSED PERSONAL
INFORMATION WAS INITIALLY COLLECTED FROM OR IN RESPECT OF THE APPLICABLE
EMPLOYEES.

 

(G)           IF CLOSING DOES NOT OCCUR, ON THE REQUEST OF VENDOR, PURCHASER
SHALL FORTHWITH CEASE ALL USE OF THE DISCLOSED PERSONAL INFORMATION ACQUIRED BY
PURCHASER IN CONNECTION WITH THIS AGREEMENT AND WILL RETURN TO VENDOR OR, AT
VENDOR’S REQUEST, DESTROY IN A SECURE MANNER, THE DISCLOSED PERSONAL INFORMATION
(AND ANY COPIES THEREOF) AND PROVIDE VENDOR WITH A CERTIFICATE OF A SENIOR
OFFICER OF PURCHASER CONFIRMING SUCH DESTRUCTION.

 

9.18        BANK ACCOUNTS

 

Vendor will provide Purchaser at least five Business Days before the Closing
Date a complete and correct list of all bank accounts and safety deposit boxes
maintained by the Corporation and the Subsidiaries.

 

ARTICLE 10
INDEMNIFICATION

 

10.1        MUTUAL INDEMNIFICATIONS FOR BREACHES OF COVENANTS AND WARRANTIES

 

(A)           FROM AND AFTER THE CLOSING, VENDOR COVENANTS AND AGREES WITH
PURCHASER, AND PURCHASER COVENANTS AND AGREES WITH VENDOR (THE PARTY COVENANTING
AND AGREEING TO INDEMNIFY THE OTHER PARTY BEING CALLED IN THIS AGREEMENT THE
“INDEMNIFYING PARTY” AND THE PARTY BEING INDEMNIFIED BEING CALLED IN THIS
AGREEMENT THE “INDEMNIFIED PARTY”) TO INDEMNIFY AND HOLD HARMLESS, THE
INDEMNIFIED PARTY, ITS AFFILIATES AND ITS AND THEIR RESPECTIVE SUCCESSORS AND
PERMITTED ASSIGNS AND THE DIRECTORS, OFFICERS, EMPLOYEES, SHAREHOLDERS, AGENTS,
MEMBERS AND PARTNERS OF ANY OF THEM (COLLECTIVELY, THE “VENDOR INDEMNIFIED
PERSONS” OR THE “PURCHASER INDEMNIFIED PERSONS”, AS APPLICABLE) FROM AND AGAINST
ALL CLAIMS AND LOSSES WHICH MAY BE MADE OR BROUGHT AGAINST ANY OF THE
INDEMNIFIED PERSONS, OR WHICH THEY MAY SUFFER OR INCUR, DIRECTLY OR INDIRECTLY,
AS A RESULT OF, ARISING OUT OF, OR IN CONNECTION WITH ANY BREACH OF ANY COVENANT
ON THE PART OF THE INDEMNIFYING PARTY UNDER THIS AGREEMENT OR ANY INACCURACY OR
INCORRECTNESS OF ANY REPRESENTATION OR WARRANTY OF THE INDEMNIFYING PARTY
CONTAINED IN THIS AGREEMENT, OR OTHER DOCUMENT OR CERTIFICATE FURNISHED BY THE
INDEMNIFYING PARTY PURSUANT TO THIS AGREEMENT INCLUDING WITH RESPECT TO ANY TAX
MATTERS.

 

(B)           IN ADDITION TO AND WITHOUT LIMITING ITS OBLIGATIONS TO INDEMNIFY
VENDOR AND THE OTHER VENDOR INDEMNIFIED PERSONS FROM AND AFTER THE CLOSING,
PURCHASER COVENANTS AND AGREES WITH VENDOR TO INDEMNIFY, DEFEND, SAVE AND HOLD
HARMLESS VENDOR INDEMNIFIED PERSONS FROM AND AGAINST ANY AND ALL LOSSES OF ANY
KIND WHICH MAY BE BROUGHT AGAINST OR SUFFERED BY THEM OR ANY ONE OR MORE OF THEM
OR WHICH ANY ONE OR MORE OF THEM MAY SUSTAIN, PAY OR INCUR, IN EACH CASE WHICH
ARE CAUSED BY, ARISE FROM, ARE INCURRED IN CONNECTION WITH OR RELATE IN ANY WAY
DIRECTLY OR INDIRECTLY TO:

 

(I)            ANY PAST, PRESENT OR FUTURE ENVIRONMENTAL MATTERS OR PAST,
PRESENT OR FUTURE ENVIRONMENTAL LIABILITIES, INCLUDING ALL DISCLOSED
ENVIRONMENTAL LIABILITIES, BUT EXCLUDING ANY ENVIRONMENTAL MATTERS OR
ENVIRONMENTAL LIABILITIES OR LOSSES OR

 

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CLAIMS WHICH MAY BE MADE OR BROUGHT AGAINST ANY OF VENDOR INDEMNIFIED PERSONS,
OR WHICH THEY MAY SUFFER OR INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF,
ARISING OUT OF OR IN CONNECTION WITH ANY BREACH OF ANY COVENANT HEREUNDER ON THE
PART OF VENDOR INDEMNIFIED PERSONS RELATING TO ENVIRONMENTAL MATTERS OR
ENVIRONMENTAL LIABILITIES OR ANY INACCURACY OR INCORRECTNESS OF ANY
REPRESENTATION OR WARRANTY OF VENDOR RELATING TO ENVIRONMENTAL MATTERS CONTAINED
IN THIS AGREEMENT, OR OTHER DOCUMENT OR CERTIFICATE FURNISHED BY VENDOR PURSUANT
TO THIS AGREEMENT OR THE EXISTENCE OF WHICH ENVIRONMENTAL MATTERS OR
ENVIRONMENTAL LIABILITIES REFLECTS AN INACCURACY OR MISREPRESENTATION IN ANY OF
VENDOR’S REPRESENTATIONS OR WARRANTIES IN SECTION 4.14 (ENVIRONMENTAL MATTERS
AND ENVIRONMENTAL LIABILITIES IN RESPECT OF WHICH VENDOR AND THE OTHER VENDOR
INDEMNIFIED PERSONS ARE INDEMNIFIED PURSUANT TO THIS SECTION 10.1(B) ARE
REFERRED TO AS THE “INDEMNIFIED ENVIRONMENTAL MATTERS” AND THE “INDEMNIFIED
ENVIRONMENTAL LIABILITIES”, RESPECTIVELY) AND PURCHASER HEREBY ASSUMES ALL
LOSSES, COVENANTS AND LIABILITIES IN RESPECT OF ANY SUCH INDEMNIFIED
ENVIRONMENTAL MATTERS AND INDEMNIFIED ENVIRONMENTAL LIABILITIES, REGARDLESS OF
WHETHER SUCH INDEMNIFIED ENVIRONMENTAL MATTERS OR INDEMNIFIED ENVIRONMENTAL
LIABILITIES ARE ATTRIBUTABLE TO, OCCURRED, AROSE OR ACCRUED ON, BEFORE OR
SUBSEQUENT TO THE CLOSING DATE.

 

Purchaser shall have no rights to recovery, indemnification or contribution
against Vendor Indemnified Persons for Indemnified Environmental Liabilities or
Indemnified Environmental Matters under this Agreement, under Applicable Laws,
in equity or otherwise, and all rights and remedies which Purchaser may have at
or under Applicable Law (including any past, present or future Environmental
Law) or in equity, including any right of contribution or reimbursement, against
Vendor Indemnified Persons with respect to any such Indemnified Environmental
Liabilities or Indemnified Environmental Matters are expressly waived.

 

Purchaser does hereby release, acquit and forever discharge Vendor Indemnified
Persons from any and all Losses, including all claims for contribution and
indemnity under Applicable Laws or in equity, which may be asserted now or in
the future (or both) and that in any way relate to or arise out of Indemnified
Environmental Liabilities or Indemnified Environmental Matters, regardless of
whether those Indemnified Environmental Matters or Indemnified Environmental
Liabilities are attributable to, occurred, arose or accrued on, before or
subsequent to the Closing Date; and Purchaser covenants not to make any Claim or
other demand, or institute any action or other proceeding against Vendor
Indemnified Persons for indemnity and contribution for any of those Indemnified
Environmental Liabilities or Indemnified Environmental Matters or against a
Person other than a Vendor Indemnified Person where a Claim for contribution or
indemnity may be brought against a Vendor Indemnified Person;

 

(II)           ALL CLAIMS BY A PERSON WHO IS NOT VENDOR OR A VENDOR RELATED
PARTY TO THE EXTENT THAT THOSE CLAIMS DIRECTLY OR INDIRECTLY RELATE TO THE
PURCHASED SHARES, THE CORPORATION, ANY SUBSIDIARY, THE ASSETS OR THE BUSINESS,
EXCEPT FOR ANY CLAIMS WHICH ARE THE SUBJECT OF INDEMNIFICATION PROVIDED BY
VENDOR AS EXPRESSLY SET FORTH IN THIS AGREEMENT; AND

 

(III)          ANY FINANCING REFERRED TO IN SECTION 13.2(D) EXCEPT TO THE EXTENT
THAT THE LOSS, LIABILITY OR CLAIM SUFFERED BY A VENDOR INDEMNIFIED PERSON
RESULTS OR ARISES FROM

 

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ANY MISSTATEMENT OR OMISSION IN INFORMATION FURNISHED BY ANY VENDOR INDEMNIFIED
PERSON TO PURCHASER OR POGO.

 

(C)           ANY OBLIGATION OF INDEMNIFICATION PURSUANT TO THIS ARTICLE 10 OR
PURSUANT TO ARTICLE 11 SHALL BE SUBJECT TO:

 

(I)            THE LIMITATIONS SET FORTH IN ARTICLE 6 RESPECTING THE SURVIVAL OF
THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES AND OTHER MATTERS
INCLUDING THE LIMITATIONS IN SECTION 6.2(B) AND SECTION 6.2(C), ALL OF WHICH
LIMITATIONS SHALL, TO THE EXTENT APPLICABLE, APPLY TO ANY CLAIMS UNDER THIS
INDEMNITY;

 

(II)           THE RESTRICTIONS IN SECTION 6.5 OR SECTION 6.7;

 

(III)          THE REQUIREMENT THAT THE INDEMNIFYING PARTY SHALL, IN RESPECT OF
ANY CLAIM MADE BY ANY THIRD PERSON, TO THE EXTENT REASONABLY POSSIBLE, BE
AFFORDED AN OPPORTUNITY AT ITS SOLE EXPENSE TO RESIST, DEFEND AND COMPROMISE
THAT CLAIM;

 

(IV)          THE LIMITATION THAT, FOR CLAIMS MADE IN CONNECTION WITH ANY
INACCURACY OR INCORRECTNESS OF ANY REPRESENTATION OR WARRANTY CONTAINED HEREIN
OR BREACH OF ANY COVENANT CONTAINED HEREIN, THE INDEMNIFYING PARTY SHALL NOT BE
REQUIRED TO PAY ANY SUCH AMOUNT UNTIL THE AGGREGATE AMOUNT IS FINALLY
ADJUDICATED OR AGREED AS BEING PAYABLE BY THAT INDEMNIFIED PARTY AND, IF
APPLICABLE, THAT FINAL AMOUNT EXCEEDS THE THRESHOLDS SET OUT IN ARTICLE 6, AND
THEN SUBJECT TO THE LIMITS SET FORTH IN ARTICLE 6; AND

 

(V)           THE LIMITATION THAT, FOR ANY CLAIM IN RESPECT OF WHICH PURCHASER
IS THE INDEMNIFIED PARTY, IF SPECIFIC PROVISION OR RESERVE WAS MADE FOR THAT
CLAIM IN THE FINAL WORKING CAPITAL STATEMENT AND BY VIRTUE THEREOF THE AMOUNT OF
THAT PROVISION OR RESERVE WAS DEDUCTED IN DETERMINING THE PURCHASE PRICE, THEN
THE AMOUNT OF THAT PROVISION OR RESERVE SHALL ALSO BE DEDUCTED FROM THAT CLAIM
BEFORE DETERMINING THE AMOUNT OF THAT CLAIM WHICH MAY BE SUBJECT TO
INDEMNIFICATION UNDER THIS AGREEMENT.

 

10.2        PROCEDURES RELATING TO INDEMNIFICATION BETWEEN VENDOR AND PURCHASER

 

Following the discovery of any facts or conditions which could reasonably be
expected to give rise to a Claim for which indemnification is provided under
this Agreement, the Indemnified Party shall, as promptly as reasonably possible
thereafter, provide written notice to the Indemnifying Party, setting forth the
specific facts and circumstances, in reasonable detail, relating to that Claim
and the amount of that Claim (or a reasonable, good-faith estimate thereof if
the actual amount is not known or not capable of reasonable calculation)
(“Indemnification Notice”); provided, however, that failure to give that
Indemnification Notice on a timely basis shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually and materially prejudiced as a result of that failure.  Notwithstanding
the foregoing:

 

(A)           A PURCHASER INDEMNIFIED PERSON SHALL NOT BE ENTITLED TO MAKE A
CLAIM AGAINST VENDOR UNDER SECTION 10.1 UNLESS AND UNTIL:

 

(I)            PURCHASER SHALL HAVE PROVIDED VENDOR WRITTEN NOTICE OF DEFAULT;
AND

 

(II)           VENDOR SHALL HAVE FAILED TO CURE THAT DEFAULT WITHIN 60 DAYS
AFTER VENDOR’S RECEIPT OF PURCHASER’S NOTICE; AND

 

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(B)           A VENDOR INDEMNIFIED PERSON SHALL NOT BE ENTITLED TO MAKE A CLAIM
AGAINST PURCHASER UNDER SECTION 10.1 UNLESS AND UNTIL:

 

(I)            VENDOR SHALL HAVE PROVIDED PURCHASER WRITTEN NOTICE OF DEFAULT;
AND

 

(II)           PURCHASER SHALL HAVE FAILED TO CURE THAT DEFAULT WITHIN 60 DAYS
AFTER PURCHASER’S RECEIPT OF VENDOR’S NOTICE.

 

10.3        INDEMNIFICATION PROCEDURES FOR THIRD PARTY CLAIMS

 

(A)           IN THE CASE OF CLAIMS MADE BY A THIRD PARTY WITH RESPECT TO WHICH
INDEMNIFICATION IS SOUGHT HEREUNDER, THE INDEMNIFIED PARTY SHALL GIVE PROMPT
WRITTEN NOTICE, AND IN ANY EVENT WITHIN 20 DAYS AFTER IT RECEIVES NOTICE OF THAT
CLAIM, TO THE INDEMNIFYING PARTY OF ANY SUCH CLAIM MADE ON IT STATING THE NATURE
AND BASIS FOR THAT CLAIM.  A FAILURE TO GIVE THAT NOTICE WITHIN THAT PERIOD
SHALL NOT PRECLUDE THE INDEMNIFIED PARTY FROM OBTAINING THAT INDEMNIFICATION BUT
ITS RIGHT TO INDEMNIFICATION SHALL BE REDUCED TO THE EXTENT THAT ANY SUCH DELAY
MATERIALLY PREJUDICED THE DEFENSE OF THE CLAIM OR MATERIALLY INCREASED THE
AMOUNT OF LIABILITY OR COST OF DEFENSE.

 

(B)           THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT, BY NOTICE TO THE
INDEMNIFIED PARTY GIVEN NOT LATER THAN 30 DAYS AFTER ITS RECEIPT OF THE NOTICE
DESCRIBED IN SECTION 10.3(A), TO ASSUME THE CONTROL OF THE DEFENCE, COMPROMISE
OR SETTLEMENT OF THAT CLAIM, PROVIDED THAT SUCH ASSUMPTION SHALL, BY ITS TERMS,
BE WITHOUT COST TO THE INDEMNIFIED PARTY.  IF THE INDEMNIFYING PARTY ASSUMES THE
CONTROL OF THE DEFENCE, COMPROMISE OR SETTLEMENT OF SUCH CLAIM, AS AGAINST THE
INDEMNIFIED PARTY, IT WILL BE CONCLUSIVELY ESTABLISHED FOR THE PURPOSES OF THIS
AGREEMENT THAT THOSE CLAIMS ARE WITHIN THE SCOPE OF THE INDEMNIFICATION SET OUT
IN ARTICLE 10 AND THE INDEMNIFYING PARTY SHALL BE RESPONSIBLE FOR REIMBURSING
THE INDEMNIFIED PARTY FOR ALL PRIOR REASONABLE LEGAL FEES AND EXPENSES ON A
SOLICITOR AND CLIENT BASIS IN CONNECTION THEREWITH.  THE INDEMNIFYING PARTY
SHALL THEREAFTER KEEP EACH INDEMNIFIED PARTY REASONABLY INFORMED WITH RESPECT TO
THE STATUS OF THAT CLAIM.

 

(C)           ON THE ASSUMPTION OF CONTROL OF ANY CLAIM BY THE INDEMNIFYING
PARTY PURSUANT TO SECTION 10.3(B), THE INDEMNIFYING PARTY SHALL DILIGENTLY
PROCEED WITH THE DEFENCE, COMPROMISE OR SETTLEMENT OF THAT CLAIM AT ITS SOLE
EXPENSE, INCLUDING, IF NECESSARY, EMPLOYMENT OF COUNSEL SATISFACTORY TO THE
INDEMNIFIED PARTY (ACTING REASONABLY) AND, IN CONNECTION THEREWITH, THE
INDEMNIFIED PARTY SHALL COOPERATE FULLY, BUT AT THE EXPENSE OF THE INDEMNIFYING
PARTY WITH RESPECT TO ANY OUT-OF-POCKET EXPENSES INCURRED, TO MAKE AVAILABLE TO
THE INDEMNIFYING PARTY ALL PERTINENT INFORMATION AND WITNESSES UNDER THE
INDEMNIFIED PARTY’S CONTROL AND TAKE SUCH OTHER STEPS AS IN THE OPINION OF
COUNSEL FOR THE INDEMNIFYING PARTY ARE REASONABLY NECESSARY TO ENABLE THE
INDEMNIFYING PARTY TO CONDUCT THAT DEFENCE.  THE INDEMNIFYING PARTY SHALL NOT
SETTLE THAT CLAIM UNLESS THAT SETTLEMENT INCLUDES, AS AN UNCONDITIONAL TERM
THEREOF, THE GIVING BY THE CLAIMANT OR THE PLAINTIFF OF A FULL AND COMPLETE
RELEASE OF THE INDEMNIFIED PARTY FROM ANY AND ALL LIABILITY WITH RESPECT TO THAT
CLAIM.  AS LONG AS THE INDEMNIFYING PARTY IS CONTESTING ANY SUCH CLAIM IN GOOD
FAITH AND ON A TIMELY BASIS, THE INDEMNIFIED PARTY SHALL NOT PAY OR SETTLE ANY
SUCH CLAIM WITHOUT THE CONSENT OF THE INDEMNIFYING PARTY, ACTING REASONABLY. 
NOTWITHSTANDING THE ASSUMPTION BY THE INDEMNIFYING PARTY OF THE DEFENCE OF THAT
CLAIM AS PROVIDED IN SECTION 10.3(B), THE INDEMNIFIED PARTY SHALL ALSO HAVE THE
RIGHT TO PARTICIPATE IN THE NEGOTIATION, SETTLEMENT OR DEFENCE OF ANY CLAIM AT
ITS OWN EXPENSE; PROVIDED, HOWEVER, THAT IF THE DEFENDANTS IN ANY SUCH CLAIM
SHALL INCLUDE BOTH AN INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY AND SUCH
INDEMNIFIED PARTY SHALL HAVE REASONABLY CONCLUDED THAT COUNSEL SELECTED BY THE
INDEMNIFYING PARTY HAS A CONFLICT OF INTEREST BECAUSE OF THE AVAILABILITY OF
DIFFERENT OR ADDITIONAL DEFENCES TO THAT INDEMNIFIED

 

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PARTY, THAT INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO SELECT SEPARATE COUNSEL TO
PARTICIPATE IN THE DEFENCE OF THAT CLAIM ON ITS BEHALF, AT THE EXPENSE OF THE
INDEMNIFYING PARTY; AND PROVIDED FURTHER THAT THE INDEMNIFYING PARTY SHALL NOT
BE OBLIGATED TO PAY THE EXPENSES OF MORE THAN ONE SEPARATE COUNSEL FOR ALL
INDEMNIFIED PARTIES.

 

(D)           IF THE INDEMNIFYING PARTY SHALL FAIL TO NOTIFY THE INDEMNIFIED
PARTY OF ITS DESIRE TO ASSUME THE DEFENCE OF ANY CLAIM WITHIN THE PERIOD OF TIME
PRESCRIBED IN SECTION 10.3(B), OR SHALL NOTIFY THE INDEMNIFIED PARTY THAT IT
WILL NOT ASSUME THE DEFENSE OF ANY SUCH CLAIM, THEN THE INDEMNIFIED PARTY MAY
ASSUME THE DEFENSE OF ANY SUCH CLAIM, IN WHICH EVENT IT MAY DO SO IN SUCH MANNER
AS IT MAY DEEM APPROPRIATE, AND THE INDEMNIFYING PARTY SHALL BE BOUND BY ANY
DETERMINATION MADE IN THAT CLAIM OR ANY SETTLEMENT THEREOF EFFECTED BY THE
INDEMNIFIED PARTY; PROVIDED THAT ANY SUCH DETERMINATION OR SETTLEMENT SHALL NOT
AFFECT THE RIGHT OF THE INDEMNIFYING PARTY TO DISPUTE THE INDEMNIFIED PARTY’S
CLAIM FOR INDEMNIFICATION.  THE INDEMNIFYING PARTY SHALL BE PERMITTED TO JOIN IN
THE DEFENSE OF THAT CLAIM AND TO EMPLOY COUNSEL AT ITS OWN EXPENSE.

 

(E)           THE FINAL DETERMINATION OF ANY CLAIM PURSUANT TO THIS
SECTION 10.3, INCLUDING ALL RELATED COSTS AND EXPENSES, WILL BE BINDING AND
CONCLUSIVE ON THE PARTIES AS TO THE VALIDITY OR INVALIDITY, AS THE CASE MAY BE,
OF THAT CLAIM AGAINST THE INDEMNIFYING PARTY.

 

(F)            AMOUNTS PAYABLE BY THE INDEMNIFYING PARTY TO THE INDEMNIFIED
PARTY IN RESPECT OF ANY CLAIMS FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO
INDEMNIFICATION HEREUNDER SHALL BE PAYABLE BY THE INDEMNIFYING PARTY AS INCURRED
BY THE INDEMNIFIED PARTY.

 

10.4        HOLDING OF INDEMNITIES

 

Vendor and Purchaser shall hold the indemnities contained in Section 10.1 in
trust on behalf of Vendor Indemnified Persons or Purchaser Indemnified Persons,
as applicable, and may enforce those indemnities on its and their respective
behalf.  In furtherance of the foregoing the term “Indemnified Party” as used
herein shall mean or include, as applicable, any Vendor Indemnified Person or
Purchaser Indemnified Person that the Indemnified Party may represent in the
circumstances.

 

10.5        CLAIMS NET OF INSURANCE AND TAXES

 

(A)           THE AMOUNT OF ANY AND ALL CLAIMS UNDER THIS ARTICLE 10 AND
ELSEWHERE UNDER THIS AGREEMENT SHALL BE DETERMINED NET OF ANY AMOUNTS RECOVERED
BY THE INDEMNIFIED PARTY UNDER INSURANCE POLICIES, INDEMNITIES OR OTHER
REIMBURSEMENT ARRANGEMENTS WITH RESPECT TO THOSE CLAIMS.  EACH PARTY HEREBY
WAIVES, OR WILL PROCURE THE WAIVER OF, ANY SUBROGATION RIGHTS THAT ITS INSURER
MAY HAVE WITH RESPECT TO ANY INDEMNIFIABLE CLAIMS.

 

(B)           IN DETERMINING THE AMOUNT OF ANY CLAIM FOR WHICH EITHER PARTY IS
ENTITLED TO INDEMNIFICATION UNDER THIS ARTICLE 10, THE GROSS AMOUNT THEREOF
SHALL BE REDUCED BY ANY NET PRESENT VALUE OF THE TAX BENEFIT REALIZED BY THAT
PARTY IN CONNECTION WITH THAT CLAIM TO THE EXTENT THAT TAX BENEFIT RESULTS
DIRECTLY FROM THE INCURRENCE OF THAT CLAIM.  IF AN INDEMNIFICATION PAYMENT
HEREUNDER RESULTS IN INCREMENTAL TAX BEING PAYABLE BY THE INDEMNIFIED PARTY, THE
AMOUNT OF THE APPLICABLE CLAIM SHALL BE EQUAL TO:

 

(I)            THE GROSS AMOUNT OF THAT CLAIM MINUS THE NET PRESENT VALUE OF THE
TAX BENEFIT REALIZED BY THAT INDEMNIFIED PARTY AS DETERMINED ABOVE;

 

DIVIDED BY:

 

(II)           ONE MINUS THE TAX RATE;

 

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provided, however, that no additional indemnification payment for any applicable
incremental Tax shall be payable until final settlement of that Tax liability
with the relevant Tax authority, and only on receipt by the Indemnifying Party
of a copy of an official communication issued by the relevant Tax authority
which evidences that final settlement of the Tax liability and, in those
circumstances, the Indemnifying Party will also pay to the Indemnified Party
interest, at Vendor’s Interest Rate, on the indemnification amount payable from
the date the obligation to make that indemnification payment arose until the
date on which that indemnification payment is made.  For purposes of this
Section 10.5:

 

“Tax Benefit” means, as to a Party, the Tax Rate multiplied by the amount of any
income tax deduction or allowance in any year arising from any Claim that
entitles the Indemnified Party to indemnity under this Agreement. If a change in
Applicable Law replaces or otherwise supplements the federal or provincial
income tax on corporations with another method of taxation, the Parties agree to
negotiate in good faith a new definition of Tax Benefit; and

 

“Tax Rate” means the rate of Tax exigible under the Applicable Laws to a
relevant Person for any relevant period of time.

 

10.6        MITIGATION

 

Each Party shall take all reasonable steps and use all commercially reasonable
efforts to mitigate any and all Claims.

 

10.7        ADJUSTMENT TO PURCHASE PRICE

 

Any indemnity payment under this Agreement shall be treated as an adjustment to
the Purchase Price.

 

10.8        SUBROGATION

 

Each Party shall assign to the other Party and subrogate the other Party to all
its rights and remedies against any Person (other than, with respect to rights
and remedies of Vendor and Purchaser, those against its Related Parties) in
respect of any payment made by the other Party in respect of any indemnification
or liability assumed by the other Party pursuant to this Agreement or as a
result of this Agreement (including legal fees and other costs of litigation). 
Each Party shall provide all reasonable cooperation of assistance required by
the other Party in making and prosecuting any Claim for recovery against that
Person to the extent that payment is made by the other Party.  Neither Party
shall knowingly take any action to impair any such right or remedy of the other
Party to recover any such payment.

 

ARTICLE 11
TAX MATTERS

 

11.1        LIABILITIES FOR TAXES

 

(A)           AFTER CLOSING AND SUBJECT TO THE TERMS OF THIS ARTICLE 11, VENDOR
SHALL BE LIABLE FOR AND SHALL PAY AND SHALL INDEMNIFY, DEFEND AND SAVE AND HOLD
HARMLESS PURCHASER, THE CORPORATION AND THE SUBSIDIARIES FROM AND AGAINST:

 

(I)            ALL INCOME TAXES OF THE CORPORATION AND EACH CORPORATE
SUBSIDIARY:

 

(A)          FOR TAXATION YEARS OF THE CORPORATION AND EACH CORPORATE SUBSIDIARY
ENDING ON OR BEFORE THE WORKING CAPITAL DATE; OR

 

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(B)           ATTRIBUTABLE TO INCOME EARNED OR REALIZED BY THE PARTNERSHIP
SUBSIDIARIES FOR FISCAL YEARS OF THE PARTNERSHIP SUBSIDIARIES ENDING ON OR
BEFORE THE WORKING CAPITAL DATE;

 

(II)           ALL PUTATIVE INCOME TAXES OF THE CORPORATION AND EACH CORPORATE
SUBSIDIARY FOR TAXATION YEARS OF THE CORPORATION OR CORPORATE SUBSIDIARY, AS THE
CASE MAY BE, ENDING AFTER THE WORKING CAPITAL DATE, TO THE EXTENT SUCH INCOME
TAXES ARE ATTRIBUTABLE (X) TO INCOME EARNED OR REALIZED BY ANY PARTNERSHIP
SUBSIDIARY DURING THE PERIOD IN A STRADDLE PERIOD OF THE PARTNERSHIP THAT
NOTIONALLY ENDED ON OR BEFORE THE WORKING CAPITAL DATE, OR (Y) TO INCOME EARNED
OR REALIZED BY THE CORPORATION OR CORPORATE SUBSIDIARY, AS THE CASE MAY BE,
OTHERWISE THAN AS A MEMBER OF ANY PARTNERSHIP SUBSIDIARY, DURING THE PERIOD IN A
STRADDLE PERIOD OF THE CORPORATION OR CORPORATE SUBSIDIARY, AS THE CASE MAY BE,
THAT NOTIONALLY ENDED ON OR BEFORE THE WORKING CAPITAL DATE, ALL AS CALCULATED
ON THE BASIS AND USING THE ASSUMPTIONS SET FORTH IN SECTION 11.1(C); AND

 

(III)          ALL OTHER TAXES ATTRIBUTABLE TO PERIODS ENDING (OR PORTIONS
THEREOF NOTIONALLY ENDING) ON OR BEFORE THE WORKING CAPITAL DATE;

 

in all such cases to the extent that such Taxes are not reflected in Net Working
Capital Amount.  After Closing and subject to the terms of this Article 11,
Vendor shall be liable for and shall pay and shall indemnify and save and hold
harmless Purchaser, the Corporation and the Subsidiaries from and against all
Taxes of the Corporation and each Subsidiary attributable to or which arise as a
result of any Distributions made during the Interim Period.  Vendor shall be
entitled to any refund of (or credit for) Taxes allocable to any period with
respect to which Vendor is liable for Taxes in accordance with the foregoing
and, to the extent applicable, shall also be entitled to any amount not
reflected in the Net Working Capital Amount by which any pre-paid or estimated
Tax payments remitted before the Closing Date with respect to any such taxation
year or any such part of any Straddle Period exceeds the Tax due and payable
therefor.

 

(B)           AFTER CLOSING AND SUBJECT TO THE TERMS OF THIS ARTICLE 11,
PURCHASER SHALL BE LIABLE FOR AND SHALL PAY OR SHALL CAUSE THE CORPORATION AND
THE SUBSIDIARIES TO PAY AND SHALL INDEMNIFY, DEFEND AND SAVE AND HOLD HARMLESS
VENDOR FROM AND AGAINST

 

(I)            ALL INCOME TAXES OF THE CORPORATION AND EACH CORPORATE SUBSIDIARY
FOR TAXATION YEARS ENDING AFTER THE WORKING CAPITAL DATE TO THE EXTENT SUCH
INCOME TAXES ARE NOT INCOME TAXES FOR WHICH VENDOR IS LIABLE UNDER SECTION
11.1(A);

 

(II)           ALL OTHER TAXES ATTRIBUTABLE TO PERIODS BEGINNING (OR PORTIONS
THEREOF NOTIONALLY BEGINNING) AFTER THE WORKING CAPITAL DATE; AND

 

(III)          ANY TAXES THAT ARE REFLECTED IN THE NET WORKING CAPITAL AMOUNT.

 

(C)           FOR PURPOSES OF SECTION 11.1(A) AND SECTION 11.1(B), WHENEVER IT
IS NECESSARY TO DETERMINE THE LIABILITY FOR TAXES OF THE CORPORATION OR ANY
SUBSIDIARY FOR A PART OF ANY STRADDLE PERIOD, THE TAXES FOR THE PART OF THE
STRADDLE PERIOD ENDING ON OR BEFORE, AND THE PART OF THE STRADDLE PERIOD
BEGINNING AFTER THE WORKING CAPITAL DATE SHALL BE DETERMINED BY ASSUMING THAT:

 

(I)            THE STRADDLE PERIOD CONSISTS OF TWO TAXATION YEARS (OR IN THE
CASE OF THE PARTNERSHIP SUBSIDIARIES, TWO FISCAL YEARS), ONE WHICH ENDED AT THE
CLOSE OF THE

 

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WORKING CAPITAL DATE AND THE OTHER OF WHICH BEGAN AT THE BEGINNING OF THE DAY
IMMEDIATELY AFTER THE WORKING CAPITAL DATE;

 

(II)           ITEMS OF INCOME, GAIN, DEDUCTION, LOSS OR CREDIT OF THE
CORPORATION OR ANY SUBSIDIARY FOR THE STRADDLE PERIOD SHALL BE ALLOCATED BETWEEN
THOSE TWO ASSUMED TAXATION YEARS BASED ON A CLOSING OF THE BOOKS; AND

 

(III)          TAXES OTHER THAN INCOME TAXES WILL BE ALLOCATED TO EACH OF THE
TAXATION YEARS IN PROPORTION TO THE NUMBER DAYS IN EACH SUCH TAXATION YEAR
RELATIVE TO THE NUMBER OF DAYS IN THE ENTIRE STRADDLE PERIOD.

 

(D)           FOR PURPOSES OF SECTION 11.1(A), SECTION 11.1(B) AND SECTION
11.1(C), VENDOR SHALL CAUSE TO BE PREPARED NOTIONAL TAX RETURNS FOR THE
CORPORATION AND EACH SUBSIDIARY FOR, IN THE CASE OF EACH PARTNERSHIP SUBSIDIARY,
THE FISCAL PERIOD OF THE PARTNERSHIP SUBSIDIARY THAT IS DEEMED UNDER SECTION
11.1(C) TO HAVE ENDED AT THE CLOSE OF THE WORKING CAPITAL DATE AND, FOR THE
CORPORATION AND EACH CORPORATE SUBSIDIARY, THE TAXATION YEAR OF THE CORPORATION
OR CORPORATE SUBSIDIARY, AS THE CASE MAY BE, THAT IS DEEMED UNDER SECTION
11.1(C) TO HAVE ENDED AT THE CLOSE OF THE WORKING CAPITAL DATE, FOR THE PURPOSE
OF DETERMINING THE PUTATIVE INCOME TAXES FOR WHICH VENDOR IS LIABLE UNDER
SECTION 11.1(A).  VENDOR SHALL BE ENTITLED, IN PREPARING SUCH NOTIONAL TAX
RETURNS, TO CLAIM THE MAXIMUM ALLOWABLE AMOUNTS (TAKING INTO ACCOUNT ANY
LIMITATIONS APPLICABLE TO SHORT PERIODS) IN RESPECT OF DISCRETIONARY DEDUCTIONS,
INCLUDING WITHOUT LIMITATION RESOURCE POOLS AS SET OUT IN SCHEDULE 4.22. 
PURCHASER SHALL HAVE AN OPPORTUNITY TO REVIEW AND COMMENT ON THOSE TAX RETURNS,
ACTING REASONABLY, AND VENDOR SHALL REASONABLY CONSIDER AND ADDRESS ANY COMMENTS
OF PURCHASER IN THAT REGARD.  THE TAXES REPORTED ON THE NOTIONAL TAX RETURNS
SHALL THEN BE INCLUDED IN THE FINAL WORKING CAPITAL STATEMENT; PROVIDED,
HOWEVER, THAT ANY FAILURE OF THE PARTIES TO AGREE ON THE AMOUNT OF TAXES THAT
SHOULD BE REFLECTED ON ANY NOTIONAL TAX RETURN SHALL BE RESOLVED PURSUANT TO
SECTION 3.3(D).  IF A DETERMINATION BY ANY GOVERNMENT AUTHORITY WITH RESPECT TO
THE ACTUAL TAX RETURN TO WHICH SUCH NOTIONAL TAX RETURN RELATES IS INCONSISTENT
WITH SUCH NOTIONAL TAX RETURN, THE TAXES REPORTED ON THE NOTIONAL TAX RETURN
SHALL BE RECOMPUTED CONSISTENT WITH SUCH DETERMINATION, AND THE PARTIES SHALL
REIMBURSE EACH OTHER, AS APPROPRIATE, WITHIN 30 DAYS AFTER SUCH REDETERMINATION.

 

(E)           THE INDEMNITIES PROVIDED IN THIS SECTION 11.1 ARE IN ADDITION TO
BUT SUBJECT TO THE APPLICABLE PROVISIONS OF ARTICLE 6 (OTHER THAN SECTION 6.1,
SECTION 6.2(B) AND SECTION 6.2(C)).

 

11.2        TAX RETURNS

 

(A)           VENDOR SHALL CAUSE TO BE PREPARED AND FILED ON A TIMELY BASIS ALL
TAX RETURNS (IF ANY) FOR THE CORPORATION AND THE SUBSIDIARIES FOR ANY TAXATION
YEAR WHICH ENDS ON OR BEFORE THE CLOSING DATE AND FOR WHICH TAX RETURNS HAVE NOT
BEEN FILED AS OF THAT DATE.  PURCHASER SHALL HAVE AN OPPORTUNITY TO REVIEW AND
COMMENT ON THOSE TAX RETURNS, ACTING REASONABLY, BEFORE THE FILING OF THOSE TAX
RETURNS AND VENDOR SHALL REASONABLY CONSIDER AND ADDRESS ANY COMMENTS OF
PURCHASER IN THAT REGARD.  VENDOR SHALL BE ENTITLED, IN PREPARING SUCH TAX
RETURNS, TO CLAIM THE MAXIMUM ALLOWABLE AMOUNTS IN RESPECT OF DISCRETIONARY
DEDUCTIONS, INCLUDING WITHOUT LIMITATION RESOURCE POOLS.

 

(B)           PURCHASER SHALL CAUSE TO BE PREPARED AND FILED ON A TIMELY BASIS
ALL TAX RETURNS FOR THE CORPORATION AND THE SUBSIDIARIES FOR ANY TAXATION YEAR
WHICH ENDS AFTER THE CLOSING DATE AND FOR WHICH TAX RETURNS HAVE NOT BEEN FILED
AS OF THAT DATE.  VENDOR SHALL HAVE AN OPPORTUNITY TO REVIEW AND COMMENT ON ANY
OF THOSE TAX RETURNS TO THE EXTENT THEY RELATE

 

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TO ANY PERIOD BEFORE THE CLOSING DATE, AND TO APPROVE THEM, ACTING REASONABLY,
BEFORE THE FILING OF THOSE TAX RETURNS.

 

(C)           VENDOR SHALL PAY AND REMIT ANY TAXES DUE IN RESPECT OF TAX RETURNS
REFERRED TO IN SECTION 11.2(A).  PURCHASER SHALL OR SHALL CAUSE THE CORPORATION
OR ANY OF THE SUBSIDIARIES TO PAY AND REMIT ANY TAXES DUE IN RESPECT OF THE TAX
RETURNS REFERRED TO IN SECTION 11.2(B).  VENDOR OR PURCHASER SHALL REIMBURSE THE
OTHER PARTY FOR ANY TAXES FOR WHICH VENDOR OR PURCHASER IS LIABLE PURSUANT TO
SECTION 11.1(A) OR SECTION 11.1(B), AS APPLICABLE, BUT WHICH ARE PAYABLE WITH
TAX RETURNS TO BE FILED BY THE OTHER PARTY PURSUANT TO SECTION 11.2(A) AND
SECTION 11.2(B), AS APPLICABLE, ON THE WRITTEN REQUEST OF THE PARTY ENTITLED TO
REIMBURSEMENT, SETTING FORTH IN DETAIL THE COMPUTATION OF THE AMOUNT OWED BY
VENDOR OR PURCHASER, AS APPLICABLE, BUT IN NO EVENT EARLIER THAN TEN DAYS BEFORE
THE DUE DATE FOR THE FILING OF ANY APPLICABLE TAX RETURNS, EXCEPT TO THE EXTENT
SUCH AMOUNTS HAVE ALREADY BEEN PAID AS ADJUSTMENTS TO THE PURCHASE PRICE.  FOR
GREATER CERTAINTY, SECTION 10.7 SHALL APPLY TO ANY PAYMENT MADE BY ONE PARTY TO
THE OTHER PURSUANT TO THIS SECTION 11.2(C).

 

(D)           BEFORE CLOSING VENDOR SHALL, AND AFTER CLOSING PURCHASER SHALL,
CAUSE THE CORPORATION AND THE SUBSIDIARIES TO COOPERATE FULLY WITH EACH OTHER
AND MAKE AVAILABLE TO EACH OTHER IN A TIMELY FASHION SUCH DATA AND OTHER
INFORMATION AS MAY REASONABLY BE REQUIRED FOR THE PREPARATION OF ANY OF THOSE
TAX RETURNS REFERRED TO IN THIS SECTION 11.2 AND SHALL PRESERVE THAT DATA AND
OTHER INFORMATION UNTIL THE EXPIRATION OF ANY APPLICABLE LIMITATION PERIOD UNDER
ANY APPLICABLE LAWS WITH RESPECT TO TAXES.

 

(E)           ANY TAX RETURN TO BE PREPARED PURSUANT TO THE PROVISIONS OF THIS
SECTION 11.2 SHALL BE PREPARED IN A MANNER CONSISTENT WITH PRACTICES FOLLOWED IN
PRIOR YEARS WITH RESPECT TO SIMILAR TAX RETURNS OF THE CORPORATION AND THE
SUBSIDIARIES PROVIDED SUCH HISTORICAL PRACTICES ARE PROPER.

 

(F)            PURCHASER SHALL NOT AND SHALL NOT ALLOW THE CORPORATION OR ANY
SUBSIDIARY TO AMEND, REFILE OR OTHERWISE MODIFY OR GRANT AN EXTENSION OF ANY
STATUTE OF LIMITATIONS WITH RESPECT TO ANY TAX RETURN FOR THE CORPORATION OR THE
SUBSIDIARIES FOR ANY TAXATION YEAR ENDING ON OR BEFORE THE WORKING CAPITAL DATE
OR THAT INCLUDES ANY STRADDLE PERIOD AND SHALL NOT REQUEST AN AUDIT OR
ASSESSMENT OF ANY SUCH TAX RETURN, IN EACH CASE WITHOUT PRIOR WRITTEN CONSENT OF
VENDOR.  VENDOR SHALL NOT FILE AN AMENDED TAX RETURN FOR THE CORPORATION OR THE
SUBSIDIARIES FOR ANY TAXABLE PERIOD ENDING ON OR BEFORE THE CLOSING DATE AND
SHALL NOT REQUEST AN AUDIT OR ASSESSMENT OF ANY SUCH TAX RETURN, IN EACH CASE
WITHOUT WRITTEN CONSENT OF PURCHASER.

 

11.3        CONFIDENTIALITY OF TAX INFORMATION

 

Unless otherwise required by Applicable Laws, securities regulatory authority or
stock exchange regulations or legal proceedings, each Party shall, and shall
cause its Representatives to, keep confidential and non-public Tax information,
records, and documents disclosed by the other Party, or to which that Party has
received or been granted access, pursuant to this Article 11 and will not use
that Tax information for any purpose other than making the determinations and
taking such other actions contemplated by this Article 11.

 

11.4        SECTION 338 ELECTION

 

(A)           PURCHASER HAS THE RIGHT TO MAKE AN ELECTION UNDER SECTION 338(G)
OF THE CODE (“SECTION 338 ELECTION”) WITH RESPECT TO THE PURCHASE AND THE DEEMED
PURCHASE OF THE SHARES OF ANY ELIGIBLE SUBSIDIARY.  SHOULD PURCHASER MAKE A
SECTION 338 ELECTION,

 

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PURCHASER AND VENDOR SHALL COOPERATE FULLY WITH EACH OTHER IN THE MAKING OF THAT
ELECTION.

 

(B)           PROVIDED THAT PURCHASER MAKES A SECTION 388 ELECTION, THE PURCHASE
PRICE SHALL BE ALLOCATED AMONG THE ASSETS IN A MANNER REQUIRED BY SECTION 338 OF
THE CODE.  WITHIN 60 DAYS AFTER THE CLOSING DATE, PURCHASER WILL PROVIDE TO
VENDOR COPIES OF IRS FORM 8883 AND ANY REQUIRED EXHIBITS THERETO (THE “ASSET
ACQUISITION STATEMENT”) WITH PURCHASER’S PROPOSED ALLOCATION OF THE PURCHASE
PRICE (TOGETHER WITH ANY ASSUMABLE LIABILITIES).  WITHIN 15 DAYS AFTER THE
RECEIPT OF THAT ASSET ACQUISITION STATEMENT, VENDOR WILL PROPOSE TO PURCHASER
ANY CHANGES IN THAT ASSET ACQUISITION STATEMENT.  IF NO SUCH CHANGES ARE
PROPOSED IN WRITING TO PURCHASER, VENDOR SHALL BE DEEMED TO HAVE AGREED TO, AND
ACCEPTED THE ASSET ACQUISITION STATEMENT).  PURCHASER AND VENDOR WILL ENDEAVOUR
IN GOOD FAITH TO RESOLVE ANY DIFFERENCES WITH RESPECT TO THE ASSET ACQUISITION
STATEMENT WITHIN 15 DAYS AFTER PURCHASER’S RECEIPT OF WRITTEN NOTICE OF
OBJECTION FROM VENDOR.  SHOULD THE PARTIES FAIL TO REACH AN AGREEMENT AS
REQUIRED UNDER THIS SECTION 11.4(B) THE PARTIES FURTHER AGREE TO ENGAGE, AS A
SHARED EXPENSE, THE ACCOUNTING FIRM TO RESOLVE THE ISSUE.

 

(C)           PROVIDED THAT PURCHASER MAKES A SECTION 338 ELECTION, VENDOR WILL,
AT THE REQUEST OF PURCHASER, COOPERATE WITH PURCHASER TO CAUSE ELECTIONS UNDER
SECTION 754 OF THE CODE TO BE IN EFFECT ON THE CLOSING DATE WITH RESPECT TO ANY
ENTITY:

 

(I)            IN WHICH THE CORPORATION OR ITS SUBSIDIARIES HOLDS AN INTEREST;
AND

 

(II)           THAT IS TREATED AS A PARTNERSHIP FOR UNITED STATES FEDERAL INCOME
TAX PURPOSES.

 

Any increase or decrease in the adjusted basis of the property of any such
partnership resulting from the section 338 election shall be allocated among the
assets of the partnership in a manner required by section 755 of the Code and
agreed on by the Parties under procedures consistent with those described in
Section 11.4(b).

 

(D)           IF PURCHASER DOES NOT MAKE A SECTION 338 ELECTION, PURCHASER SHALL
CAUSE THE CORPORATION NOT TO MAKE ANY DISTRIBUTIONS THAT WOULD REDUCE THE AMOUNT
VENDOR MUST INCLUDE IN INCOME AS A DIVIDEND UNDER SECTION 964(E) OF THE CODE
WITH RESPECT TO THE PURCHASE.

 

(E)           PROVIDED THAT PURCHASER MAKES A SECTION 338 ELECTION AND, EXCEPT
AS PROVIDED BELOW, PURCHASER SHALL PAY TO VENDOR THE EXCESS, IF ANY (THE TOTAL
EXCESS BEING THE “UNUSED TAX CREDITS”), OF:

 

(I)            THE DEEMED PAID CREDIT THAT WOULD HAVE BEEN ALLOWED BY SECTION
960 OF THE CODE TO VENDOR’S UNITED STATES SHAREHOLDERS (AS DEFINED IN SECTION
951(B) OF THE CODE) AS A RESULT OF VENDOR’S SALE OF THE PURCHASED SHARES TO
PURCHASER, IF THE LIMITATIONS OF SECTIONS 904 AND 907 OF THE CODE WERE APPLIED
WITHOUT REGARD TO THE SECTION 338 ELECTION; LESS

 

(II)           THE DEEMED PAID CREDIT ACTUALLY ALLOWED BY SECTION 960 OF THE
CODE (SUBJECT TO THE LIMITATIONS OF SECTIONS 904 AND 907 OF THE CODE) TO
VENDOR’S UNITED STATES SHAREHOLDERS AS A RESULT OF VENDOR’S SALE OF THE
PURCHASED SHARES TO SELLER, AFTER A FINAL DETERMINATION BY THE APPROPRIATE
GOVERNMENTAL AUTHORITY.

 

The payment for the Unused Tax Credits shall be made within 30 days after the
final determination by the appropriate Governmental Authority and shall include
any

 

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penalties and interest assessed in that final determination as a result of a
disallowance of the Unused Tax Credits.  Notwithstanding the foregoing
provisions of Section 11.4(e), Purchaser shall have no obligation to make any
payment for the Unused Tax Credits, penalties or interest unless:

 

(A)          VENDOR’S UNITED STATES SHAREHOLDERS CLAIM ON THEIR ORIGINAL TAX
RETURNS THE DEEMED PAID CREDITS DESCRIBED IN SECTION 11.4(E)(I);

 

(B)           VENDOR’S UNITED STATES SHAREHOLDERS DEFEND THE POSITION TAKEN ON
THEIR ORIGINAL TAX RETURNS FOR THE DEEMED PAID CREDITS DESCRIBED IN
SECTION 11.4(E)(I) TO THE POINT OF A FINAL DETERMINATION BY AN APPROPRIATE
GOVERNMENTAL AUTHORITY;

 

(C)           PURCHASER IS ENTITLED TO REVIEW AND COMMENT ON VENDOR’S UNITED
STATES SHAREHOLDERS’ DEFENSE; AND

 

(D)          VENDOR’S UNITED STATES SHAREHOLDERS DO NOT ACCEPT A DETERMINATION
FROM AN APPROPRIATE GOVERNMENT AUTHORITY THAT INCREASES UNUSED TAX CREDITS
WITHOUT THE WRITTEN CONSENT OF PURCHASER.

 

11.5        TAX CLAIMS

 

(A)           EACH PARTY SHALL PROMPTLY NOTIFY THE OTHER PARTY IN WRITING ON
RECEIPT BY THAT PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES (INCLUDING FOR
PURCHASER THE CORPORATION AND THE SUBSIDIARIES) OR REPRESENTATIVES OF NOTICE OF
ANY PENDING OR THREATENED FEDERAL, PROVINCIAL, STATE, LOCAL OR FOREIGN TAX
AUDITS, EXAMINATIONS, CLAIMS OR ASSESSMENTS (A “TAX CLAIM”) FOR WHICH THAT PARTY
IS ENTITLED TO SEEK, OR IS SEEKING OR INTENDS TO SEEK, INDEMNIFICATION PURSUANT
TO THE APPLICABLE PART OF SECTION 11.1.

 

(B)           PURCHASER SHALL REPRESENT THE INTERESTS OF THE CORPORATION AND THE
SUBSIDIARIES IN AND WITH RESPECT TO ANY TAX CLAIM RELATING TO TAXATION YEARS
ENDING ON OR BEFORE THE WORKING CAPITAL DATE AND EMPLOY COUNSEL OF ITS OWN
CHOICE FOR THAT PURPOSE.  VENDOR SHALL BE ENTITLED TO PARTICIPATE IN OR WITH
RESPECT TO THAT TAX CLAIM RELATING (IN WHOLE OR IN PART) TO TAXES ATTRIBUTABLE
TO TAXATION YEARS ENDING ON OR BEFORE THE WORKING CAPITAL DATE AND, WITH THE
WRITTEN CONSENT OF PURCHASER, AND AT VENDOR’S SOLE EXPENSE, MAY ASSUME THE
ENTIRE CONTROL OF THAT TAX CLAIM.  PURCHASER, WITH THE WRITTEN CONSENT OF
VENDOR, SHALL HAVE THE RIGHT TO SETTLE, EITHER ADMINISTRATIVELY OR AFTER THE
COMMENCEMENT OF LITIGATION, ANY PROCEEDING RELATING TO TAXES OF THE CORPORATION
AND ANY OF THE SUBSIDIARIES FOR ANY TAXATION YEAR ENDING ON OR BEFORE THE
WORKING CAPITAL DATE.  IN THE CASE OF ANY STRADDLE PERIOD, VENDOR SHALL BE
ENTITLED TO PARTICIPATE AT ITS EXPENSE IN OR WITH RESPECT TO ANY TAX CLAIM
RELATING (IN WHOLE OR IN PART) TO TAXES ATTRIBUTABLE TO THE PART OF THAT
STRADDLE PERIOD ENDING ON OR BEFORE THE WORKING CAPITAL DATE, AND WITH THE
WRITTEN CONSENT OF PURCHASER, AND AT VENDOR’S SOLE EXPENSE, MAY ASSUME THE
ENTIRE CONTROL OF THAT TAX CLAIM.  FROM AND AFTER THE CLOSING, NEITHER
PURCHASER, THE CORPORATION, ANY SUBSIDIARY NOR ANY OF THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES SHALL SETTLE OR COMPROMISE, OR AGREE TO SETTLE OR
COMPROMISE, ANY TAX CLAIM WHICH MAY BE THE SUBJECT OF INDEMNIFICATION BY VENDOR
UNDER SECTION 11.1 WITHOUT THE PRIOR WRITTEN CONSENT OF VENDOR.

 

(C)           IF THE RESULTS OF ANY TAX CLAIM INVOLVE AN ISSUE THAT:

 

(I)            RECURS IN ANY TAXATION YEAR (OR PART THEREOF) OF THE CORPORATION
OR ANY SUBSIDIARY ENDING ON OR AFTER THE CLOSING DATE; OR

 

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(II)           OTHERWISE MAY REASONABLY BE EXPECTED TO MATERIALLY AND ADVERSELY
AFFECT PURCHASER, THE CORPORATION OR ANY SUBSIDIARY FOR ANY TAXATION YEAR (OR
PART THEREOF) ENDING ON OR AFTER THE CLOSING DATE, THEN THERE SHALL BE NO
SETTLEMENT, CLOSING OR OTHER AGREEMENT WITH RESPECT TO THAT ISSUE WITHOUT THE
CONSENT OF SUCH AFFECTED PARTY, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD
OR DELAYED.  PURCHASER SHALL HAVE THE RIGHT TO CONTROL THE CONDUCT OF ANY TAX
CLAIM RELATING TO THE CORPORATION OR ANY SUBSIDIARY WITH RESPECT TO ANY TAX
MATTER ARISING IN A PERIOD (OR PART THEREOF) ENDING AFTER THE CLOSING DATE.

 

11.6        ASSISTANCE AND COOPERATION

 

After the Closing, Vendor and Purchaser shall (and shall cause their respective
Affiliates to):

 

(A)           COOPERATE IN A TIMELY MANNER IN PREPARING FOR ANY AUDITS OF, OR
DISPUTES WITH TAXING AUTHORITIES REGARDING, ANY TAX RETURNS OF THE CORPORATION
AND THE SUBSIDIARIES;

 

(B)           MAKE AVAILABLE TO THE OTHER PARTY AND TO ANY TAXING AUTHORITY IN A
TIMELY MANNER AS REASONABLY REQUESTED ALL INFORMATION, RECORDS, AND DOCUMENTS
RELATING TO TAXES AND TAX PLANNING OF THE CORPORATION AND THE SUBSIDIARIES OR
THEIR ASSETS OR THE BUSINESS;

 

(C)           PROVIDE TIMELY NOTICE TO THE OTHER IN WRITING OF ANY PENDING OR
THREATENED TAX AUDITS OR ASSESSMENT OF THE CORPORATION OR THE SUBSIDIARIES FOR
TAXATION YEAR OR OTHER PERIODS FOR WHICH THE OTHER MAY HAVE A LIABILITY UNDER
THIS ARTICLE 11;

 

(D)           WITHIN 30 DAYS OF THE RECEIPT OF A WRITTEN REQUEST THEREFOR,
FURNISH THE OTHER WITH COPIES OF ALL CORRESPONDENCE RECEIVED FROM ANY TAXING
AUTHORITY IN CONNECTION WITH ANY TAX AUDIT OR INFORMATION REQUEST WITH RESPECT
TO ANY SUCH TAXATION YEAR OR OTHER PERIODS OF THE CORPORATION OR ANY OF THE
SUBSIDIARIES;

 

(E)           TIMELY PROVIDE TO THE OTHER PARTY POWERS OF ATTORNEY OR SIMILAR
AUTHORIZATIONS NECESSARY TO CARRY OUT THE PURPOSES OF THIS ARTICLE 11; AND

 

(F)            USE REASONABLE EFFORTS TO PROPERLY RETAIN AND MAINTAIN ACCOUNTING
AND TAX RECORDS AND INFORMATION, IN A TIMELY MANNER CONSISTENT WITH TAXING
AUTHORITY GUIDELINES, TO THE EXTENT THOSE RECORDS AND INFORMATION RELATE TO THE
CORPORATION AND THE SUBSIDIARIES OR ANY OF THE ASSETS AND THE BUSINESS UNTIL 120
DAYS FOLLOWING THE EXPIRATION OF THE APPLICABLE STATUTE OF LIMITATIONS PERIOD,
AND PROMPTLY NOTIFY THE OTHER PARTY PRIOR TO DESTRUCTION OF ANY OF THOSE TAX
RECORDS OR THAT INFORMATION AND PROVIDE THE OTHER PARTY A REASONABLE OPPORTUNITY
TO MAKE AND RETAIN COPIES OF ANY OF THOSE TAX RECORDS OR THAT INFORMATION.

 

ARTICLE 12
TERMINATION AND CLOSING

 

12.1        TERMINATION

 

This Agreement may be terminated at any time before Closing:

 

(A)           BY MUTUAL WRITTEN CONSENT OF VENDOR AND PURCHASER;

 

(B)           BY PURCHASER, SUBJECT TO SECTION 6.1, IF ANY OF PURCHASER’S
CONDITIONS SHALL HAVE NOT BEEN FULFILLED BY THE TIME REQUIRED OR SHALL HAVE
BECOME INCAPABLE OF FULFILLMENT OTHER THAN AS A RESULT OF PURCHASER’S BREACH OF
THIS AGREEMENT, AND SHALL NOT HAVE BEEN WAIVED BY PURCHASER;

 

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(C)           BY VENDOR, IF ANY OF VENDOR’S CONDITIONS SHALL HAVE NOT BEEN
FULFILLED OTHER THAN AS A RESULT OF VENDOR’S BREACH OF THIS AGREEMENT BY THE
TIME REQUIRED OR SHALL HAVE BECOME INCAPABLE OF FULFILLMENT, AND SHALL NOT HAVE
BEEN WAIVED BY VENDOR; AND

 

(D)           BY EITHER VENDOR OR PURCHASER, IF THE CLOSING DOES NOT OCCUR ON OR
BEFORE THE OUTSIDE DATE; PROVIDED THAT THE RIGHT TO TERMINATE THIS AGREEMENT
UNDER THIS SECTION 12.1(D) SHALL NOT BE AVAILABLE TO A PARTY WHOSE FAILURE TO
FULFILL ANY OBLIGATION UNDER THIS AGREEMENT, EXCEPT AS PROVIDED IN SECTION 9.16,
HAS CAUSED OR RESULTED IN THE FAILURE OF THE CLOSING TO OCCUR ON OR BEFORE THE
OUTSIDE DATE.

 

12.2        REGARDING TERMINATION BY PURCHASER

 

Any termination of this Agreement by Purchaser pursuant to Section 12.1 shall be
without prejudice to any Claims Purchaser may have arising hereunder out of any
incorrect or inaccurate representations or warranties of Vendor in this
Agreement or any breach by Vendor of any of its covenants in this Agreement, but
subject always to the limitations set forth in Article 6.

 

12.3        REGARDING TERMINATION BY VENDOR

 

Any termination of this Agreement by Vendor pursuant to Section 12.1 shall be
without prejudice to any Claims Vendor may have arising out of any incorrect or
inaccurate representations or warranties of Purchaser in this Agreement or any
breach by Purchaser of any of its covenants, but subject always to the
limitations set forth in Article 6 and, if applicable, Section 12.4(b).

 

12.4        DEPOSIT

 

(A)           AT OR BEFORE THE CLOSING TIME OR AT SUCH TIME AS THIS AGREEMENT IS
TERMINATED BEFORE CLOSING, AS APPLICABLE, VENDOR AND PURCHASER SHALL PROVIDE
WRITTEN NOTICE TO THE ESCROW AGENT WHICH NOTICE SHALL DIRECT THE ESCROW AGENT AS
TO THE PAYMENT OF THE DEPOSIT.

 

(B)           IF THE CLOSING DOES NOT OCCUR BECAUSE ANY REPRESENTATIONS OR
WARRANTIES MADE BY PURCHASER ARE INCORRECT OR INACCURATE OR BECAUSE PURCHASER
FAILED TO PERFORM ANY OF ITS OBLIGATIONS OR COVENANTS UNDER THIS AGREEMENT, THE
FULL AMOUNT OF THE DEPOSIT TOGETHER WITH ALL ACCRUED INTEREST (LESS ANY
APPLICABLE WITHHOLDING TAXES) SHALL BECOME THE PROPERTY OF, SHALL BE PAID BY THE
ESCROW AGENT TO AND MAY BE RETAINED BY, VENDOR AS LIQUIDATED DAMAGES (AND NOT AS
A PENALTY) TO COMPENSATE VENDOR FOR THE EXPENSES INCURRED AND OPPORTUNITIES
FOREGONE AS A RESULT OF THE FAILURE OF THE PURCHASE TO CLOSE.  TO THE EXTENT THE
DEPOSIT IS PAID TO VENDOR IN THE CIRCUMSTANCES DESCRIBED IN THIS
SECTION 12.4(B), VENDOR SHALL RETAIN THE DEPOSIT, PLUS ANY INTEREST THEREON
(LESS APPLICABLE WITHHOLDING TAXES), AS GENUINE PRE-ESTIMATE BY VENDOR AND
PURCHASER OF VENDOR’S LIQUIDATED DAMAGES, NOT AS A PENALTY AND AS VENDOR’S SOLE
REMEDY HEREUNDER AGAINST PURCHASER FOR ALL BREACHES HEREOF PRIOR TO THE CLOSING
OR IN CONNECTION WITH THE TERMINATION OF THE PURCHASE.

 

(C)           IF THE CLOSING DOES NOT OCCUR FOR ANY REASON OTHER THAN A DEFAULT
BY PURCHASER IN THE PERFORMANCE OF ITS OBLIGATIONS OR COVENANTS UNDER THIS
AGREEMENT OR ANY REPRESENTATIONS OR WARRANTIES MADE BY PURCHASER BEING INCORRECT
OR INACCURATE, THE FULL AMOUNT OF THE DEPOSIT TOGETHER WITH ALL ACCRUED INTEREST
(LESS ANY APPLICABLE WITHHOLDING TAXES) SHALL BE IMMEDIATELY RETURNED TO
PURCHASER.

 

12.5        NOTICE OF TERMINATION

 

In the event of termination by Vendor or Purchaser pursuant to this Article 12,
written notice thereof shall forthwith be given to the other Party and the
transactions contemplated by this Agreement

 

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(including the Parties’ obligation to consummate the Purchase) shall be
terminated without further action by either Party.  If the transactions
contemplated by this Agreement are terminated as provided herein:

 

(A)           PURCHASER SHALL RETURN TO VENDOR ALL DOCUMENTS AND COPIES AND
OTHER MATERIALS RECEIVED FROM OR ON BEHALF OF VENDOR RELATING TO THE
TRANSACTIONS CONTEMPLATED HEREBY, WHETHER SO OBTAINED BEFORE OR AFTER THE
EXECUTION HEREOF; AND

 

(B)           ALL CONFIDENTIAL INFORMATION RECEIVED BY PURCHASER WITH RESPECT TO
THE BUSINESS, THE ASSETS AND THE PURCHASED SHARES SHALL BE TREATED IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THE CONFIDENTIALITY AGREEMENT, WHICH SHALL
REMAIN IN FULL FORCE AND EFFECT NOTWITHSTANDING THE TERMINATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

12.6        EFFECT OF TERMINATION

 

Each Party’s right of termination under this Article 12 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies.  Nothing in this
Article 12 shall limit or affect any other rights or causes of action either
Purchaser or Vendor may have with respect to the representations, warranties,
covenants and indemnities in its favour contained in this Agreement.  Nothing in
this Article 12  shall be deemed to release either Party from any liability for
any breach by that Party of the terms and provisions of this Agreement or to
impair the right of either Party to compel specific performance by the other
Party of its obligations under this Agreement.

 

ARTICLE 13
GENERAL

 

13.1        NON-WAIVER

 

No waiver of any condition or other provision, in whole or in part, shall
constitute a waiver of any other condition or provision (whether or not similar)
nor shall such waiver constitute a continuing waiver unless otherwise expressly
provided.

 

13.2        PUBLIC NOTICES

 

(A)           VENDOR AND PURCHASER AGREE TO KEEP THE TERMS OF THIS AGREEMENT
CONFIDENTIAL, EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE LAWS OR FOR FINANCIAL
REPORTING PURPOSES OR AS OTHERWISE PROVIDED HEREIN AND EXCEPT THAT THE PARTIES
MAY DISCLOSE THOSE TERMS TO THEIR RESPECTIVE REPRESENTATIVES AS NECESSARY IN
CONNECTION WITH THE ORDINARY CONDUCT OF THEIR RESPECTIVE BUSINESSES (SO LONG AS
THOSE PERSONS AGREE TO KEEP THE TERMS OF THIS AGREEMENT CONFIDENTIAL).

 

(B)           NEITHER PARTY WILL MAKE ANY PRESS RELEASE OR OTHER PUBLIC
ANNOUNCEMENT RESPECTING THIS AGREEMENT:

 

(I)            WITHOUT THE CONSENT OF THE OTHER PARTY, NOT TO BE UNREASONABLY
WITHHELD OR DELAYED; OR

 

(II)           UNLESS:

 

(A)          THE PARTY DESIRING TO MAKE THE PRESS RELEASE OR OTHER PUBLIC
ANNOUNCEMENT IS ADVISED BY ITS COUNSEL THAT THE RELEASE OR ANNOUNCEMENT IS
REQUIRED TO COMPLY WITH ANY APPLICABLE LAW OR THE RULES OF ANY SECURITIES
REGULATORY AUTHORITY, LISTING AUTHORITY OR STOCK

 

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exchange with which the disclosing Party or any Affiliate of either Party is
bound to comply; and

 

(B)           THAT PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT DOES NOT DISCLOSE
MORE INFORMATION REGARDING THIS AGREEMENT OR THE SUBJECT MATTER HEREOF THAN IS
REQUIRED TO COMPLY WITH ANY APPLICABLE LAW OR THE RULES OF ANY SECURITIES
REGULATORY AUTHORITY, LISTING AUTHORITY OR STOCK EXCHANGE WITH WHICH DISCLOSING
PARTY OR ANY AFFILIATE OF EITHER PARTY IS BOUND TO COMPLY.

 

(C)           NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED HEREIN OR IN THE
CONFIDENTIALITY AGREEMENT SHALL PREVENT A PARTY FROM FURNISHING ANY INFORMATION
TO:

 

(I)            ANY GOVERNMENT AUTHORITY IF REQUIRED BY APPLICABLE LAW OR THE
RULES OF A SECURITIES REGULATORY AUTHORITY, LISTING AUTHORITY OR STOCK EXCHANGE;
OR

 

(II)           OBTAIN THE COMPETITION ACT APPROVAL OR THE INVESTMENT CANADA
APPROVAL;

 

or from making an announcement regarding this Agreement to its employees
(including the Employees).

 

(D)           PURCHASER OR POGO SHALL BE ENTITLED TO USE INFORMATION RESPECTING
THE ASSETS IN DRAFTS OR FINAL COPIES OF ANY PROSPECTUS, OFFERING DOCUMENT OR
LOAN SYNDICATION MATERIALS PREPARED PURSUANT TO THE GOLDMAN SACHS COMMITMENT IN
WHICH PURCHASER OR POGO PROPOSES TO DESCRIBE THE PURCHASE TO THE EXTENT THAT ANY
SUCH INFORMATION IS REQUIRED TO COMPLY WITH ANY APPLICABLE LAW OR THE RULES OF
ANY SECURITIES REGULATORY AUTHORITY, LISTING AUTHORITY OR STOCK EXCHANGE WITH
WHICH PURCHASER OR POGO IS BOUND TO COMPLY OR IS REASONABLY REQUIRED WITH
RESPECT TO THAT PROSPECTUS, OFFERING DOCUMENT OR LOAN SYNDICATION; PROVIDED THAT
VENDOR IS GIVEN DRAFT COPIES OF THE PROSPECTUS, OFFERING DOCUMENT OR THOSE LOAN
SYNDICATION MATERIALS AND APPROVES, IN ADVANCE OF THE FILING OR DISTRIBUTION OF
ANY OF THOSE DOCUMENTS OR MATERIALS, ACTING REASONABLY, ANY REFERENCES TO
VENDOR, UNOCAL OR THE PURCHASE THAT MAY BE PROVIDED THEREIN.

 

(E)           A PARTY WHICH PROPOSES TO MAKE ANY SUCH DISCLOSURE AS DESCRIBED IN
SECTIONS 13.2(B), (C) OR (D) SHALL, TO THE EXTENT REASONABLY POSSIBLE, PROVIDE
THE OTHER PARTY (OR, IN THE CASE OF COMPETITIVELY SENSITIVE INFORMATION, THE
OTHER PARTY’S OUTSIDE COUNSEL) WITH A DRAFT OF THE APPLICABLE PRESS RELEASE OR
OTHER DOCUMENT CONTAINING THE DISCLOSURE AT LEAST TWO BUSINESS DAYS BEFORE ITS
RELEASE, FILING OR DELIVERY OR REGARDING ANY PROSPECTUS, OFFERING DOCUMENT OR
ANY LOAN SYNDICATION MATERIALS TO ENABLE THE OTHER PARTY TO REVIEW THAT DRAFT
AND ADVISE OF ANY COMMENTS IT MAY HAVE WITH RESPECT THERETO.  THE PARTY
PROPOSING TO MAKE THE DISCLOSURES WILL NOT UNREASONABLY REFUSE TO INCORPORATE
THE REQUESTED CHANGES OF THE OTHER PARTY TO THE APPLICABLE PRESS RELEASE OR
OTHER DOCUMENT EXCEPT TO THE EXTENT ITS COUNSEL ADVISES THAT DOING SO WILL
RESULT IN NON COMPLIANCE WITH APPLICABLE LAW OR THE RULES OF THE APPLICABLE
SECURITIES REGULATORY AUTHORITY, LISTING AUTHORITY OR STOCK EXCHANGE.

 

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13.3        NOTICES

 

Any notice or other writing required or permitted to be given under this
Agreement or for the purposes of this Agreement (in this Section 13.3 referred
to as a ”Notice”) shall be in writing and shall be sufficiently given if
delivered, or if transmitted by facsimile to:

 

(A)           IN THE CASE OF A NOTICE TO VENDOR OR TO UNOCAL:

 

c/o Unocal Corporation
2141 Rosecrans Avenue
Suite 4000
El Segundo, CA
90245 USA

 

Attention:  Douglas M. Miller
Fax:   310.726.7819

 

with a copy to:

 

Stikeman Elliott LLP
4300 Bankers Hall, West Tower
888 – 3rd Street S.W.
Calgary, Alberta
T2P 5C5

 

Attention:   Glenn Cameron
Fax:   403.266.7803;

 

(B)           IN THE CASE OF A NOTICE TO PURCHASER OR TO POGO:

 

c/o Pogo Producing Company
5 Greenway Plaza, Suite 3000
Houston, Texas 77046 0504

 

Attention: General Counsel
Fax:  713.297.5050;

 

with a copy to:

 

Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-3995

 

Attention:  Stephen A. Massad
Fax:  713.229.7775

 

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and to:

 

Fraser Milner Casgrain LLP
30th Floor
Fifth Avenue Place
237-4th Avenue S.W.
Calgary, Alberta,
T2P 4X7 Canada

 

Attention:  Dale E. Skinner
Fax:  403.268.3100,

 

or at such other address or number as the Person to whom that Notice is to be
given shall have last notified the Person giving the same in the manner provided
in this Section 13.3.  Any Notice will be deemed to have been validly and
effectively given (i) if personally delivered, on the date of that delivery if
that date is a Business Day and that delivery was made before 4:00 p.m. (Calgary
time), and otherwise on the next Business Day; or (ii) if transmitted by
facsimile or similar means of recorded communication on the Business Day
following the date of transmission if receipt of the transmission has been
confirmed back.

 

13.4        ASSIGNMENT

 

Neither this Agreement nor any benefits, rights or obligations under this
Agreement shall be assignable by either Party, by operation of Applicable Law or
otherwise, without the prior express written consent of the other Party which
consent may be arbitrarily withheld.  Notwithstanding the foregoing prohibition
on assignment, Purchaser may assign all of its benefits, rights and obligations
under this Agreement to an Affiliate of Purchaser (but not if that assignment
would extend the time for, or render less certain, the completion of the
Purchase) provided that such assignment shall not release Purchaser from any of
its obligations under this Agreement and provided further that such Affiliate
enters into an agreement with Vendor satisfactory to Vendor, pursuant to which
that Affiliate expressly assumes all of Purchaser’s obligations under this
Agreement and, if that assignment occurs before the Closing, that Affiliate
covenants to remain an Affiliate of Purchaser until Closing.  Subject to the
foregoing provisions of this Section 13.4, this Agreement shall inure to the
benefit of, be enforceable by and be binding on the Parties, Unocal and Pogo and
their respective successors (including any successor by reason of amalgamation
of any Party or by Unocal or Pogo) and permitted assigns.

 

13.5        FURTHER ASSURANCES

 

Each Party, Unocal and Pogo shall use all commercially reasonable efforts to
provide such further documents or instruments required by any other Party,
Unocal and Pogo as are reasonably necessary to carry out the provisions of this
Agreement, whether before or after the Closing.

 

13.6        NO RECOURSE

 

Notwithstanding anything that may be expressed or implied in this Agreement,
except as provided in Section 1.12 and Section 13.4, each Party covenants,
agrees and acknowledges that no recourse under this Agreement shall be had
against any current or future shareholders or agents of either Party or any of
its Affiliates, or any current, former or future director, officer, employee,
shareholder or agent of any of the foregoing, whether by any legal or equitable
proceeding, or by virtue of any Applicable Law, it being expressly agreed and
acknowledged that no personal liability whatsoever shall attach to, be imposed
on or otherwise be incurred by any current or future shareholder or agent of
either Party, or any of its Affiliates, or any current or former or future
director, officer, employee, shareholder or agent of any of the foregoing, for
any obligation of the Parties under this Agreement.

 

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13.7        TIME OF THE ESSENCE

 

Time shall be of the essence of this Agreement.

 

13.8        AMENDMENT

 

This Agreement (including the Schedules hereto) may not be amended, waived or
modified except by an express instrument in writing signed on behalf of each of
the Parties.

 

13.9        INVALIDITY

 

In the event that any one or more provisions contained in this Agreement or in
any other instrument referred to herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument.

 

13.10      COUNTERPARTS

 

This Agreement may be executed by the Parties in separate counterparts, each of
which when so executed and delivered shall be an original, and all such
counterparts shall together constitute one and the same instrument and a signed
counterpart delivered by facsimile or other electronic means shall be considered
as valid as an original counterpart.

 

13.11      ENFORCEMENT

 

The Parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms, or were otherwise breached.  It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement.

 

13.12      NO THIRD-PARTY BENEFICIARIES

 

This Agreement, other than as provided in Sections 10.1, 13.4 and 13.6 and in
the provisions of Article 10 and Article 11 relating to indemnification, is not
intended to confer on any Person other than the Parties any rights or remedies.

 

13.13      EXPENSES

 

Each of the Parties shall pay their respective legal, accounting, and other
professional advisory and all other fees, costs and expenses incurred in
connection with the Purchase and the negotiation, preparation, execution and
delivery of this Agreement and all documents and instruments executed pursuant
to this Agreement and any other costs and expenses incurred.

 

13.14      REMOVAL OF NAME

 

Following the Closing, Purchaser, and its Affiliates will not be entitled to use
the name “Unocal” or any variation or derivation thereof, including any logo,
trademark or design containing either or both of those names (the “Prohibited
Name and Marks”). Accordingly, promptly following the Closing, Purchaser shall
cause the Corporation and the Subsidiaries to cause the destruction, disposal or
replacement of stationery, business cards and similar assets containing such
Prohibited Name and Marks, and shall cause the Corporation and the Subsidiaries
to avoid the use of the Prohibited Names and Marks.  In addition, as soon as
reasonably practicable, but in any event within the earlier of 60 days following
Closing or the date required by Applicable Law, Purchaser shall:

 

(A)           REMOVE ANY SIGNAGE FROM THE ASSETS THAT REFERS TO THE PROHIBITED
NAME AND MARKS; AND

 

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(B)           MAKE ALL REQUISITE FILINGS WITH, AND PROVIDE REQUISITE NOTICES TO,
THE APPROPRIATE GOVERNMENT AUTHORITIES TO PLACE TITLE OR OTHER EVIDENCE OF
OPERATION OR OWNERSHIP IN A NAME OTHER THAN THE PROHIBITED NAME AND MARKS.

 

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IN WITNESS WHEREOF the Parties, Unocal and Pogo have duly executed this
Agreement as of the date and year above written.

 

 

UNOCAL CANADA LIMITED

 

By:

/s/ Douglas M. Miller

 

 

Name:

Douglas M. Miller

 

 

Title:

Vice President

 

 

 

 

 

 

UNOCAL CANADA ALBERTA HUB LIMITED

 

By:

/s/ Douglas M. Miller

 

 

Name:

Douglas M. Miller

 

 

Title:

Vice President, Corp. Dev. Unocal Corp.

 

 

 

 

 

 

UNOCAL CORPORATION

 

By:

/s/ Douglas M. Miller

 

 

Name:

Douglas M. Miller

 

 

Title:

Vice President, Corporate Development

 

 

 

 

 

 

POGO CANADA, ULC

 

By:

/s/ Stephen R. Brunner

 

 

Name:

Stephen R. Brunner

 

 

Title:

President

 

 

 

 

By:

/s/ Michael J. Killelea

 

 

Name:

Michael J. Killelea

 

 

Title:

Secretary

 

 

 

 

 

 

POGO PRODUCING COMPANY

 

 

 

By:

/s/ Stephen R. Brunner

 

 

Name:

Stephen R. Brunner

 

 

Title:

Executive Vice President

 

 

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