Exhibit 10.1

 

SHARE AND DEBT PURCHASE AGREEMENT

 

 

 

among

 

 

 

1143928 ALBERTA LTD.

 

as Purchaser

 

 

and

 

 

EXCO RESOURCES, INC.

 

and

 

 

TAURUS ACQUISITION, INC.

 

 

as Seller

 

 

January 12, 2005

 

 

BURNET, DUCKWORTH & PALMER LLP
Barristers and Solicitors
1400, 350 - 7th Avenue S.W.
Calgary, AB T2P 3N9

BLAKE, CASSELS & GRAYDON LLP
Barristers and Solicitors
3500, 855 - 2nd Street S.W.
Calgary, AB T2P 4J8

BENNETT JONES LLP
Barristers and Solicitors
4500, 855 – 2nd Street S.W.
Calgary, AB T2P 4K7

 

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

 

TABLE OF CONTENTS

 

ARTICLE 1

DEFINITIONS AND INTERPRETATION

 

1.1

Defined Terms

 

1.2

References and Titles

 

1.3

Interpretation

 

1.4

Schedules

 

 

 

 

ARTICLE 2

PURCHASE AND SALE

 

2.1

Agreement to Purchase and Sell

 

2.2

Purchase Price and Manner of Payment

 

2.3

Allocation of Purchase Price

 

2.4

Payment of Credit Facility

 

2.5

Joint and Several Liability

 

2.6

Parental Guarantee

 

2.7

Closing

 

2.8

Taking of Necessary Action; Further Action

 

2.9

Deliveries at Closing

 

2.10 [a05-1646_1ex10d1.htm#a2_10WithholdingTax_041537]

Withholding Tax [a05-1646_1ex10d1.htm#a2_10WithholdingTax_041537]

 

 

 

 

ARTICLE 3 [a05-1646_1ex10d1.htm#Article3_042623]

REPRESENTATIONS AND WARRANTIES OF SELLER
[a05-1646_1ex10d1.htm#RepresentationsAndWarrantiesOfSel_042626]

 

3.1 [a05-1646_1ex10d1.htm#a3_1SellersRepresentationsRegardi_041601]

Seller’s Representations Regarding Seller
[a05-1646_1ex10d1.htm#a3_1SellersRepresentationsRegardi_041601]

 

3.2 [a05-1646_1ex10d1.htm#a3_2SellersRepresentationsRegardi_041607]

Seller’s Representations Regarding the Purchased Entities
[a05-1646_1ex10d1.htm#a3_2SellersRepresentationsRegardi_041607]

 

3.3 [a05-1646_1ex10d1.htm#a3_3Disclaimer_041621]

Disclaimer [a05-1646_1ex10d1.htm#a3_3Disclaimer_041621]

 

 

 

 

ARTICLE 4 [a05-1646_1ex10d1.htm#Article4_042651]

REPRESENTATIONS AND WARRANTIES OF PURCHASER
[a05-1646_1ex10d1.htm#RepresentationsAndWarrantiesOfPur_042653]

 

4.1 [a05-1646_1ex10d1.htm#a4_1PurchasersRepresentation_041624]

Purchaser’s Representation
[a05-1646_1ex10d1.htm#a4_1PurchasersRepresentation_041624]

 

 

 

 

ARTICLE 5 [a05-1646_1ex10d1.htm#Article5_042706]

COVENANTS [a05-1646_1ex10d1.htm#Covenants_042709]

 

5.1 [a05-1646_1ex10d1.htm#a5_1ConductOfBusinessByTheCompany_041627]

Conduct of Business by the Company Pending Closing
[a05-1646_1ex10d1.htm#a5_1ConductOfBusinessByTheCompany_041627]

 

5.2 [a05-1646_1ex10d1.htm#a5_2ExistingAfes_041630]

Existing AFEs [a05-1646_1ex10d1.htm#a5_2ExistingAfes_041630]

 

5.3 [a05-1646_1ex10d1.htm#a5_3AccessToAssetsPersonnelAndInf_041631]

Access to Assets, Personnel and Information
[a05-1646_1ex10d1.htm#a5_3AccessToAssetsPersonnelAndInf_041631]

 

5.4 [a05-1646_1ex10d1.htm#a5_4AdditionalArrangements_041632]

Additional Arrangements [a05-1646_1ex10d1.htm#a5_4AdditionalArrangements_041632]

 

5.5 [a05-1646_1ex10d1.htm#a5_5PublicAnnouncementsConfidenti_041634]

Public Announcements; Confidentiality
[a05-1646_1ex10d1.htm#a5_5PublicAnnouncementsConfidenti_041634]

 

5.6 [a05-1646_1ex10d1.htm#a5_6PaymentOfExpenses_041637]

Payment of Expenses [a05-1646_1ex10d1.htm#a5_6PaymentOfExpenses_041637]

 

 

i

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5.7 [a05-1646_1ex10d1.htm#a5_7ResignationOfDirectorsAndOffi_041638]

Resignation of Directors and Officers
[a05-1646_1ex10d1.htm#a5_7ResignationOfDirectorsAndOffi_041638]

 

5.8 [a05-1646_1ex10d1.htm#a5_8Exclusivity_041639]

Exclusivity [a05-1646_1ex10d1.htm#a5_8Exclusivity_041639]

 

5.9 [a05-1646_1ex10d1.htm#a5_9ProhibitedAcquisitions_041640]

Prohibited Acquisitions [a05-1646_1ex10d1.htm#a5_9ProhibitedAcquisitions_041640]

 

5.10 [a05-1646_1ex10d1.htm#a5_10Insurance_041641]

Insurance [a05-1646_1ex10d1.htm#a5_10Insurance_041641]

 

5.11 [a05-1646_1ex10d1.htm#a5_11SecuritiesInformationAndAudi_041643]

Securities Information and Audited Financial Statements
[a05-1646_1ex10d1.htm#a5_11SecuritiesInformationAndAudi_041643]

 

5.12 [a05-1646_1ex10d1.htm#a5_12PurchasersDisclosure_041645]

Purchaser’s Disclosure [a05-1646_1ex10d1.htm#a5_12PurchasersDisclosure_041645]

 

5.13 [a05-1646_1ex10d1.htm#a5_13ProductAndOtherHedgingContra_041646]

Product and Other Hedging Contracts
[a05-1646_1ex10d1.htm#a5_13ProductAndOtherHedgingContra_041646]

 

 

 

 

ARTICLE 6 [a05-1646_1ex10d1.htm#Article6_042745]

TITLE DEFECTS; ADJUSTMENTS TO BASE PURCHASE PRICE
[a05-1646_1ex10d1.htm#TitleDefectsAdjustmentsToBasePurc_042747]

 

6.1 [a05-1646_1ex10d1.htm#a6_1TitleDefects_041648]

Title Defects [a05-1646_1ex10d1.htm#a6_1TitleDefects_041648]

 

6.2 [a05-1646_1ex10d1.htm#a6_2UncuredTitleDefects_034640]

Uncured Title Defects [a05-1646_1ex10d1.htm#a6_2UncuredTitleDefects_034640]

 

6.3 [a05-1646_1ex10d1.htm#a6_3AdditionalAdjustmentsToBasePu_034656]

Additional Adjustments to Base Purchase Price
[a05-1646_1ex10d1.htm#a6_3AdditionalAdjustmentsToBasePu_034656]

 

 

 

 

ARTICLE 7 [a05-1646_1ex10d1.htm#Article7_034736]

CONDITIONS [a05-1646_1ex10d1.htm#Conditions_034738]

 

7.1 [a05-1646_1ex10d1.htm#a7_1ConditionsToEachPartysObligat_034705]

Conditions to Each Party’s Obligation to Proceed with Closing
[a05-1646_1ex10d1.htm#a7_1ConditionsToEachPartysObligat_034705]

 

7.2 [a05-1646_1ex10d1.htm#a7_2ConditionsToObligationsOfPurc_034710]

Conditions to Obligations of Purchaser
[a05-1646_1ex10d1.htm#a7_2ConditionsToObligationsOfPurc_034710]

 

7.3 [a05-1646_1ex10d1.htm#a7_3ConditionsToObligationsOfSell_034715]

Conditions to Obligations of Seller
[a05-1646_1ex10d1.htm#a7_3ConditionsToObligationsOfSell_034715]

 

7.4 [a05-1646_1ex10d1.htm#a7_4CompetitionActFilings_034718]

Competition Act Filings [a05-1646_1ex10d1.htm#a7_4CompetitionActFilings_034718]

 

7.5 [a05-1646_1ex10d1.htm#a7_5EffortsToSatisfyConditions_034722]

Efforts to Satisfy Conditions
[a05-1646_1ex10d1.htm#a7_5EffortsToSatisfyConditions_034722]

 

7.6 [a05-1646_1ex10d1.htm#a7_6WaiverOfACondition_034727]

Waiver of a Condition [a05-1646_1ex10d1.htm#a7_6WaiverOfACondition_034727]

 

 

 

 

ARTICLE 8 [a05-1646_1ex10d1.htm#Article8_034748]

TERMINATION [a05-1646_1ex10d1.htm#Termination_034751]

 

8.1 [a05-1646_1ex10d1.htm#a8_1TerminationRights_034754]

Termination Rights [a05-1646_1ex10d1.htm#a8_1TerminationRights_034754]

 

8.2 [a05-1646_1ex10d1.htm#a8_2EffectOfTermination_034758]

Effect of Termination [a05-1646_1ex10d1.htm#a8_2EffectOfTermination_034758]

 

 

 

 

ARTICLE 9 [a05-1646_1ex10d1.htm#Article9_034803]

INDEMNIFICATION [a05-1646_1ex10d1.htm#Indemnification_034805]

 

9.1 [a05-1646_1ex10d1.htm#a9_1PurchasersIndemnificationOfSe_034809]

Purchaser’s Indemnification of Seller
[a05-1646_1ex10d1.htm#a9_1PurchasersIndemnificationOfSe_034809]

 

9.2 [a05-1646_1ex10d1.htm#a9_2SellersIndemnities_034813]

Seller’s Indemnities [a05-1646_1ex10d1.htm#a9_2SellersIndemnities_034813]

 

9.3 [a05-1646_1ex10d1.htm#a9_3ResponsibilityExtendsToLegalC_034819]

Responsibility Extends to Legal Costs and Settlements
[a05-1646_1ex10d1.htm#a9_3ResponsibilityExtendsToLegalC_034819]

 

9.4 [a05-1646_1ex10d1.htm#a9_4LimitationsOnSellersAndPurcha_034824]

Limitations on Seller’s and Purchaser’s Indemnity Obligation
[a05-1646_1ex10d1.htm#a9_4LimitationsOnSellersAndPurcha_034824]

 

9.5 [a05-1646_1ex10d1.htm#a9_5IndemnificationProcedure_034828]

Indemnification Procedure
[a05-1646_1ex10d1.htm#a9_5IndemnificationProcedure_034828]

 

9.6 [a05-1646_1ex10d1.htm#a9_6TaxLossIndemnityProcedure_034833]

Tax Loss Indemnity Procedure
[a05-1646_1ex10d1.htm#a9_6TaxLossIndemnityProcedure_034833]

 

9.7 [a05-1646_1ex10d1.htm#a9_7ConsequentialDamages_034839]

Consequential Damages [a05-1646_1ex10d1.htm#a9_7ConsequentialDamages_034839]

 

9.8 [a05-1646_1ex10d1.htm#a9_8LimitationOnRightsOrRemedies_034845]

Limitation on Rights or Remedies
[a05-1646_1ex10d1.htm#a9_8LimitationOnRightsOrRemedies_034845]

 

 

ii

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ARTICLE 10 [a05-1646_1ex10d1.htm#Article10_034852]

INFORMATION, MATERIALS, POST-CLOSING COVENANTS AND EMPLOYEES
[a05-1646_1ex10d1.htm#InformationMaterialsPostclosingCo_034858]

 

10.1 [a05-1646_1ex10d1.htm#a10_1AccessToInformation_034902]

Access to Information [a05-1646_1ex10d1.htm#a10_1AccessToInformation_034902]

 

10.2 [a05-1646_1ex10d1.htm#a10_2RetentionPeriod_034906]

Retention Period [a05-1646_1ex10d1.htm#a10_2RetentionPeriod_034906]

 

10.3 [a05-1646_1ex10d1.htm#a10_3PreparationOfTaxReturns_034910]

Preparation of Tax Returns
[a05-1646_1ex10d1.htm#a10_3PreparationOfTaxReturns_034910]

 

10.4 [a05-1646_1ex10d1.htm#a10_4Employees_034916]

Employees [a05-1646_1ex10d1.htm#a10_4Employees_034916]

 

 

 

 

ARTICLE 11 [a05-1646_1ex10d1.htm#Article11_034922]

MISCELLANEOUS [a05-1646_1ex10d1.htm#Miscellaneous_043253]

 

11.1 [a05-1646_1ex10d1.htm#a11_1SurvivalOfRepresentationsAnd_034925]

Survival of Representations and Warranties
[a05-1646_1ex10d1.htm#a11_1SurvivalOfRepresentationsAnd_034925]

 

11.2 [a05-1646_1ex10d1.htm#a11_2Amendment_034930]

Amendment [a05-1646_1ex10d1.htm#a11_2Amendment_034930]

 

11.3 [a05-1646_1ex10d1.htm#a11_3ConversionOfMonetaryAmounts_034936]

Conversion of Monetary Amounts
[a05-1646_1ex10d1.htm#a11_3ConversionOfMonetaryAmounts_034936]

 

11.4 [a05-1646_1ex10d1.htm#a11_4Notices_034942]

Notices [a05-1646_1ex10d1.htm#a11_4Notices_034942]

 

11.5 [a05-1646_1ex10d1.htm#a11_5RightToChangeAddress_034956]

Right to Change Address [a05-1646_1ex10d1.htm#a11_5RightToChangeAddress_034956]

 

11.6 [a05-1646_1ex10d1.htm#a11_6Counterparts_035003]

Counterparts [a05-1646_1ex10d1.htm#a11_6Counterparts_035003]

 

11.7 [a05-1646_1ex10d1.htm#a11_7Time_035039]

Time [a05-1646_1ex10d1.htm#a11_7Time_035039]

 

11.8 [a05-1646_1ex10d1.htm#a11_8Severability_035043]

Severability [a05-1646_1ex10d1.htm#a11_8Severability_035043]

 

11.9 [a05-1646_1ex10d1.htm#a11_9EntireAgreementNoThirdPartyB_035047]

Entire Agreement; No Third Party Beneficiaries
[a05-1646_1ex10d1.htm#a11_9EntireAgreementNoThirdPartyB_035047]

 

11.10 [a05-1646_1ex10d1.htm#a11_10GoverningLaw_035059]

Governing Law [a05-1646_1ex10d1.htm#a11_10GoverningLaw_035059]

 

11.11 [a05-1646_1ex10d1.htm#a11_11Assignment_035103]

Assignment [a05-1646_1ex10d1.htm#a11_11Assignment_035103]

 

11.12 [a05-1646_1ex10d1.htm#a11_12Waivers_035107]

Waivers [a05-1646_1ex10d1.htm#a11_12Waivers_035107]

 

11.13 [a05-1646_1ex10d1.htm#a11_13ConfidentialityAgreement_035112]

Confidentiality Agreement
[a05-1646_1ex10d1.htm#a11_13ConfidentialityAgreement_035112]

 

11.14 [a05-1646_1ex10d1.htm#a11_14Incorporation_035116]

Incorporation [a05-1646_1ex10d1.htm#a11_14Incorporation_035116]

 

11.15 [a05-1646_1ex10d1.htm#a11_15CooperationAfterClosing_035121]

Co-operation After Closing
[a05-1646_1ex10d1.htm#a11_15CooperationAfterClosing_035121]

 

 

iii

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SHARE AND DEBT PURCHASE AGREEMENT

 

THIS AGREEMENT is made as of the 12th day of January, 2005.

 

BETWEEN:

 

1143928 ALBERTA LTD., a corporation duly organized and existing under the laws
of the Province of Alberta (“Purchaser”)

 

- and -

 

EXCO RESOURCES, INC., a corporation duly organized and existing under the laws
of the State of Texas (“EXCO”)

 

- and -

 

TAURUS ACQUISITION, INC., a corporation duly organized and validly existing
under the laws of the State of Texas (“Taurus”)

 

(EXCO and Taurus are herein collectively referred to as “Seller”)

 

WHEREAS:

 

A.                                   The Company Stock is currently owned by
EXCO.

 

B.                                     The Taurus Notes are currently owned by
Taurus.

 

C.                                     Purchaser desires to buy and Seller
desires to sell the Company Stock and the Taurus Notes, upon the terms and
subject to the conditions set forth in this Agreement.

 

D.                                    Purchaser and Seller desire to make
certain representations, warranties, covenants and agreements in connection with
such purchase and sale of the Company Stock and the Taurus Notes provided for in
this Agreement and also to prescribe various conditions to such purchase and
sale of Company Stock and the Taurus Notes.

 

NOW THEREFORE, in consideration of the recitals and the mutual covenants and
agreements set forth in this Agreement, the Parties hereby agree as follows:

 

ARTICLE 1

DEFINITIONS AND INTERPRETATION

 

1.1                               Defined Terms

 

As used in this Agreement, each of the following terms has the meaning given in
this Section 1.1 or in the Sections referred to below:

 

(a)                                  “Abandonment and Reclamation Obligations”
means all remediation and reclamation obligations of the Purchased Entities,
including:

 

(i)                                     the abandonment and reclamation of any
Wells; and

 

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

 

(ii)                                the closure, decommissioning and dismantling
of Tangibles, and the restoration of the surface in respect thereto;

 

all in accordance with good oil and gas field practices in the Province of
Alberta, and in compliance with Applicable Law.

 

(b)                                 “Affected Assets” has the meaning set forth
in Section 6.1(b).

 

(c)                                  “Affiliate” means, with respect to any
Person, each other Person that directly or indirectly (through one or more
intermediaries or otherwise) controls, is controlled by, or is under common
control with such Person and for the purposes of this definition, “control”
means the possession, directly or indirectly, by such Person or group of Persons
acting in concert, of the power to direct or cause the direction of the
management or policies of the first mentioned Person, whether through the
ownership of voting securities or otherwise; provided that prior to Closing but
not thereafter, the Purchased Entities will be Affiliates of Seller and after
Closing, but not prior thereto, the Purchased Entities will be Affiliates of
Purchaser.

 

(d)                                 “Agreement” means this Share and Debt
Purchase Agreement, as amended, supplemented or modified from time to time.

 

(e)                                  “Applicable Law” means, in relation to any
Person, transaction or event, all applicable provisions of laws, statutes,
rules, regulations, official directives and orders of all federal, provincial,
territorial, municipal and local governmental bodies (whether administrative,
legislative, executive or otherwise) and final, non-appealable judgments, orders
and decrees of all courts, commissions or bodies exercising similar functions in
actions or proceedings in which the Person in question is a party, by which it
is bound or having application to the transaction or event in question.

 

(f)                                    “Arm’s Length” has the meaning set forth
in the Tax Act.

 

(g)                                 “Assessment” has the meaning set forth in
Section 9.6(c).

 

(h)                                 “Audited Historical Statements” means,
collectively:

 

(i)                                   the consolidated audited financial
statements (including the statement of operations, balance sheet and cash flow
statement) of the Company as of December 31, 2002 (and for the year then ended)
and as of December 31, 2003 (and for the 209 day period from January 1, 2003 to
July 28, 2003 and the 156 day period from July 29, 2003 to December 31, 2003);

 

(ii)                                the consolidated audited financial
statements (including the statement of operations, balance sheet and cash flow
statement) of the Company as of September 30, 2004 (and for the 9 month period
then ended), provided that if the Purchaser provides EXCO with the notice
referred to in Section 5.11(b) by the 7th day following the date hereof, such
statements shall be unaudited; and

 

(iii)                             if Closing occurs after March 31, 2005 but
prior to May 15, 2005, the consolidated audited financial statements (including
the statement of operations, balance sheet and cash flow statement) of the
Company as of December 31, 2004 (and for the year then ended);

 

2

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

 

and appropriate footnotes and schedules prepared in accordance with GAAP
accompanied by a signed opinion of Ernst & Young LLP for the 2002 financial
statements and PricewaterhouseCoopers, LLP for the 2003 and 2004 financial
statements; provided however, that such financial statements shall not include
any footnote in respect of the Company’s oil and gas reserves.

 

(i)                                     “Base Purchase Price” has the meaning
set forth in Section 2.2(a).

 

(j)                                     “Benefits Plans” has the meaning set
forth in Section 3.2(r)(vii).

 

(k)                                  “Business Day” means any day on which
commercial banks are open for business in each of Calgary, Alberta and Dallas,
Texas, but does not in any event include a Saturday or Sunday or a statutory
holiday under Applicable Law.

 

(l)                                     “Closing” means the completion of the
purchase and sale of the Company Stock and the Taurus Notes on the Closing Date
and at the Place of Closing, as contemplated by this Agreement.

 

(m)                               “Closing Date” means 9:00 a.m. on the 30th day
following the date that the Audited Historical Statements are delivered (in
accordance with the provisions of Section 11.4) by Seller to Purchaser, or such
other date as the Parties may agree.

 

(n)                                 “Closing Statements” has the meaning set
forth in Section 6.3(c).

 

(o)                                 “Company” means Addison Energy Inc., an
Alberta corporation.

 

(p)                                 “Company Certificate” means, collectively,
the certificates representing shares of the Company Stock.

 

(q)                                 “Company Contribution Agreement” means a
contribution agreement dated January 7, 2005 between the Company, the
Partnership and Subco relating to the contribution of property by the Company to
the Partnership.

 

(r)                                    “Company Stock” means all of the issued
and outstanding common stock of the Company.

 

(s)                                  “Competition Act” means the Competition Act
R.S.C. 1985, c. C-34.

 

(t)                                    “Competition Act Approval” means that:

 

(i)                                   the Commissioner of Competition (the
“Commissioner”) appointed under the Competition Act has issued an advance ruling
certificate pursuant to section 102 of the Competition Act in respect of the
transactions contemplated herein on terms and conditions satisfactory to the
Parties, acting reasonably; or

 

(ii)                                notification of the transactions
contemplated herein pursuant to section 114 of the Competition Act has been
given and either:

 

(A)                              the applicable waiting period under section 123
of the Competition Act has expired without the Commissioner having advised the
Parties that he intends to apply to the Competition Tribunal established
pursuant to

 

3

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

 

subsection 3(1) of the Competition Tribunal Act (Canada) for an order under
section 92 or section 100 of the Competition Act in respect of the transactions
contemplated herein; or

 

(B)                              the Commissioner has advised Purchaser that the
Commissioner does not intend to apply to the Competition Tribunal for an order
under section 92 of the Competition Act in respect of the transactions
contemplated herein.

 

(u)                               “Confidentiality Agreement” means the letter
agreement dated the 15th day of October, 2004 between the Company and NAL
Resources.

 

(v)                               “Credit Agreement” means the Third Amended and
Restated Credit Agreement, as amended, between the Company and Bank One, NA,
Canada Branch, as Administrative Agent for itself and the lenders named therein,
dated the 27th day of January, 2004.

 

(w)                             “Credit Facility” means the credit facility
provided pursuant to the Credit Agreement and all of the indebtedness (including
accrued interest) of the Company thereunder.

 

(x)                                 “Debt” means, for any Person, without
duplication:  (i) all obligations of such Person for borrowed money; (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) all indebtedness of such Person on which interest
charges are customarily paid or accrue; (iv) the unfunded or unreimbursed
portion of all letters of credit issued for the account of such Person; (v) the
present value of all obligations in respect of leases that are capitalized on
the books and records of such Person; (vi) any obligation of such Person
representing the deferred purchase price of property or services purchased by
such Person other than trade payables incurred in the ordinary course of
business and which are not more than 90 days past invoice date; (vii) any
indebtedness, liability or obligation secured by a Lien on the assets of such
Person whether or not such indebtedness, liability or obligation is otherwise
non-recourse to such Person; and (viii) any other obligation or liability of
such Person that is debt within the meaning of GAAP.

 

(y)                               “Defect Adjustment Threshold” means an amount
equal to $7,500,000.

 

(z)                                 “Defect Notice Date” means the date which is
10 Business Days prior to the Closing Date.

 

(aa)                          “Defect Termination Threshold” means an amount
equal to $50,000,000.

 

(bb)                        “Deposit” has the meaning set forth in Section
2.2(b).

 

(cc)                          “Deposit Interest” has the meaning set forth in
Section 2.2(b)(iii).

 

(dd)                        “Disclosure Schedule” means, collectively, those
schedules attached hereto as Schedule A and expressly incorporated herein by
reference pursuant to Section 1.4.

 

(ee)                          “Employee Disclosure Letter” has the meaning set
forth in 3.2(r)(i).

 

(ff)                              “Employees” has the meaning set forth in
Section 3.2(r)(i).

 

4

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

 

(gg)                          “Encumbrance Discharge” means, with respect to a
Lien (which is not a Permitted Encumbrance) affecting all or a portion of the
Oil and Gas Assets, Company Stock, Subco Stock or partnership interests of the
Partnership, one or more registrable discharges executed by the holder of such
Lien which results in a discharge of such Lien; provided that, to the extent of
any Lien affecting all or a portion of the Oil and Gas Assets, Company Stock,
Subco Stock or such partnership interests, but which is not specifically
registered against or in respect of any such Oil and Gas Assets, Company Stock,
Subco Stock or such partnership interests, a letter of no interest executed by
the holder of the Lien wherein the holder acknowledges it has no interest in
such Oil and Gas Assets, Company Stock, Subco Stock or such partnership
interests shall be deemed to be an Encumbrance Discharge.

 

(hh)                        “Engineering Report” has the meaning set forth in
Section 3.2(bb)(xii).

 

(ii)                                  “Environmental Law” means Applicable Law
respecting the protection of, or the control, remediation or reclamation of
contamination or pollution of, soil, air or water (including ground water).

 

(jj)                                  “Escrow Agreement (Deposit)” means an
agreement dated the date hereof and executed among Purchaser, Seller and
Seller’s Solicitors in the form included at Part I of Schedule C.

 

(kk)                            “Escrow Agreement (Withholding)” means an
agreement dated the Closing Date and executed among Purchaser, Seller and
Seller’s Solicitors in the form included at Part II of Schedule C.

 

(ll)                                  “Exchange Rate” means, for a particular
day, the Bank of Canada Noon Day Rate, expressed in C$/US$ or US$/C$, as the
case may be for such day, as set out on the Bank of Canada’s web site.

 

(mm)                      “EXCO” has the meaning set forth in the introductory
paragraph of this Agreement.

 

(nn)                          “Facilities” means the major gas plants, oil
batteries, compressors, gas gathering systems and pipelines in which the
Purchased Entities have an interest, as described in Schedule 1.1(nn)

 

(oo)                          “GAAP” means generally accepted accounting
principles, as recognized by the Canadian Institute of Chartered Accountants (or
any generally recognized successor), and “U.S. GAAP” means generally accepted
accounting principles, as recognized by the U.S. Financial Accounting Standards
Board (or any generally recognized successor).

 

(pp)                          “Governmental Authority” means any federal,
provincial, territorial, state, county, municipal or local government, domestic
or foreign, any agency, board, bureau, commission, court, department or other
instrumentality of any such government, or any arbitrator in any case that has
jurisdiction over the Purchased Entities, Purchaser or Seller or any of their
respective properties or assets.

 

(qq)                          “Indemnity Agreement” means an indemnity agreement
dated January 7, 2005 between Purchaser, NAL, the Company and Seller.

 

(rr)                                “Indemnity Issues” has the meaning set forth
in Section 9.4(e).

 

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(ss)                            “Indemnity Threshold” means an amount equal to
$7,500,000.

 

(tt)                                “Inter-Company Agreement” means an
inter-company agreement dated effective August 1, 2004 between EXCO and the
Company.

 

(uu)                          “Interest Amount” has the meaning set forth in
Section 2.3(a)(ii).

 

(vv)                          “Lands” means, collectively, all of the lands set
forth in Schedule 1.1(tt), and includes the Petroleum Substances within, upon or
under such lands, together with the right to explore for and produce such
Petroleum Substances.

 

(ww)                      “Leases” means, collectively, all of the leases,
options for leases, subleases, licences and documents of title (and any
replacements, renewals or extensions thereof or leases derived therefrom)
covering the Lands, including those set forth in the Property Schedule, by
virtue of which the holder thereof is granted certain rights with respect to
Petroleum Substances within, upon or under the Lands or by virtue of which the
holder thereof is deemed to be entitled to a share of Petroleum Substances
removed from the Lands or any lands with which the Lands are pooled, unitized or
otherwise combined.

 

(xx)                              “Lien” means any lien, mortgage, security
interest, pledge, deposit, restriction, burden, encumbrance, right of conversion
or reduction of interest, rights of a vendor under any title retention or
conditional sale agreement, or lease or other arrangement substantially
equivalent thereto, but does not include any production payment obligation.

 

(yy)                          “Management Team” means Steve Fagan, Dennis
McIntyre, Terry Trudeau, Greg Robb and Terry Pidkowa.

 

(zz)                              “Material” or “Material Adverse Effect” means
a result or consequence that would adversely affect the financial condition,
results of operations or business of the Purchased Entities, taken as a whole,
by more than:  (i) for the purpose of Sections 7.2(a), 7.2(b), 7.2(c) and
8.1(c), $30,000,000; and (ii) for all other purposes, $1,000,000.

 

(aaa)                      “Material Agreement” means:

 

(i)                                     any Product and Other Hedging Contract
by which a Purchased Entity is bound or to which a Purchased Entity is a party;

 

(ii)                                  any contract for the processing,
transportation, gathering, compressing, disposing or sale of Petroleum
Substances by which a Purchased Entity is bound or to which a Purchased Entity
is a party that is not cancellable by the Purchased Entity without penalty on
notice of 60 days’ or less;

 

(iii)                               other than pursuant to the Title and
Operating Documents and other than in the ordinary course of business, any
agreement whereby a Purchased Entity guarantees, assumes or indemnifies (A) an
obligation of Seller or any of its Affiliates other than such Purchased Entity,
or (B) an obligation of a third party;

 

(iv)                              any construction, ownership and operation
agreement for capital expenditures or the acquisition or construction of fixed
assets related to the Oil and Gas Assets that requires future payments by a
Purchased Entity in excess of $250,000;

 

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(v)                                 any lease of office premises by which a
Purchased Entity is bound or to which a Purchased Entity is a party; and

 

(vi)                              any agreement for the purchase or sale of any
asset (other than sales of Petroleum Substances in the ordinary course of
business and agreements for the sale of surplus or used equipment or supplies)
requiring future purchase consideration.

 

(bbb)                   “NAL” means NAL Oil & Gas Trust, an Alberta trust.

 

(ccc)                      “Notice of Claim” means a notice by Seller or
Purchaser, as applicable, of a claim for losses pursuant to Sections 9.1 or 9.2,
as applicable, together with detailed particulars as to the nature and amount of
the claim, the basis upon which it is sought and the provisions of this
Agreement applicable to such claim.

 

(ddd)                   “116 Certificate” has the meaning set forth in Section
2.10(a)(i).

 

(eee)                      “Oil and Gas Assets” means all of the working
interests, royalty interests, gross overriding royalty interests, production
payments, profit and net profit interests, reversionary interests and other
interests of the Purchased Entities in the Leases, Lands and Tangibles,
including those payments and interests attributed to “Addison” described in the
Property Schedule, and the miscellaneous interests directly related to such
interests or Tangibles.

 

(fff)                            “Outside Date” means the later of:

 

(i)                                     March 15, 2005; or

 

(ii)                                  30 days following the date that the
Audited Historical Statements are delivered (in accordance with the provisions
of Section 11.4) by Seller to Purchaser, or such other date as the Parties may
agree;

 

but, in any event, no later than May 15, 2005.

 

(ggg)                   “Parties” means Purchaser and Seller and “Party” means
any one of them.

 

(hhh)                   “Partnership” means Addison Energy Limited Partnership,
an Alberta limited partnership.

 

(iii)                               “Partnership Agreement” means the limited
partnership agreement in respect of the formation of the Partnership made
between the Company and Subco as of the same date as the Company Contribution
Agreement.

 

(jjj)                               “Payout Statement” means the statement
prepared by JPMorgan Chase Bank, National Association, Canada Branch (as
successor by merger to Bank One, N.A., Canada Branch) detailing the outstanding
indebtedness (including accrued interest) of the Company under the Credit
Facility as of the Closing Date.

 

(kkk)                      “Permitted Encumbrances” means:

 

(i)                                     Liens for Taxes, assessments or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent;

 

7

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(ii)                                  Liens of carriers, warehousemen,
mechanics, labourers, materialmen, landlords, vendors, workmen and operators
arising by operation of law in the ordinary course of business incident to the
exploration, development, operation and maintenance of Petroleum Substances
properties and related facilities and assets for sums not yet due or delinquent;

 

(iii)                               Liens incurred in the ordinary course of
business in connection with worker’s compensation, unemployment insurance and
other social security legislation for sums not yet due;

 

(iv)                              easements, rights-of-way and similar
encumbrances not materially interfering with the ordinary conduct of the
business of a Purchased Entity or rights to any of its assets;

 

(v)                                 undetermined or inchoate liens (including
processors’, operators’, mechanics, builders’, materialmen’s and similar liens)
incurred or created as security in favour of the Person conducting the operation
of any of the assets arising in the ordinary course of business for a Purchased
Entity’s proportionate share of the costs and expenses of such operations except
in respect of costs due or delinquent at the Closing Date;

 

(vi)                              all rights to consent by, required notices to,
filings with, or other actions of Governmental Authorities to the extent
customarily obtained subsequent to closing;

 

(vii)                           leases, farmout, carried working interest, joint
operating, unitization, royalty, overriding royalty, sales and similar
agreements relating to the exploration or development of, or production from,
Petroleum Substances properties entered into in the ordinary course of business
and not in violation of Section 5.1 and provided the effect thereof on the
working interest and net revenue of the Purchased Entity has been properly
reflected in the Property Schedule;

 

(viii)                        valid, subsisting and applicable laws, rules or
orders of any Governmental Authority;

 

(ix)                                Liens or defects described in the Property
Schedule or the Disclosure Schedule (including Schedule 1.1(kkk)(ix));

 

(x)                                   the rights reserved to or vested in any
grantor or Governmental Authority by the terms of any Lease or by any Applicable
Law, including any rights to terminate any Lease or require annual or other
periodic payments as a condition of the continuance thereof;

 

(xi)                                rights reserved to or vested in any
Governmental Authority to levy Taxes on minerals or the income therefrom or to
limit, control or regulate any of the Purchased Entities’ assets in any manner;

 

(xii)                             the reservations, limitations, provisos and
conditions in any original grants or transfers from the Crown of any of the
Lands or interests therein and exceptions to title under any Applicable Law;

 

8

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(xiii)                          penalties which have arisen under operating
procedures or similar agreements as a consequence of elections by a Purchased
Entity prior to the date hereof not to participate in operations on the Lands to
which the penalty applies and which are accurately reflected in the Property
Schedule;

 

(xiv)                         Liens granted in the ordinary course of business
to a public utility, municipality or Governmental Authority in connection with
operations pertaining to the assets of a Purchased Entity;

 

(xv)                            terms and conditions of the Material Agreements
listed in the Disclosure Schedule;

 

(xvi)                         Liens granted in connection with the Credit
Facility in respect of which an Encumbrance Discharge or the release and
undertaking set forth at Section 2.9(a)(xv) will be delivered at Closing;

 

(xvii)                      Liens granted in connection with the credit facility
under the U.S. Credit Agreement in respect of which an Encumbrance Discharge or
the release and undertaking set forth at Section 2.9(a)(xvi) will be delivered
at Closing;

 

(xviii)                   pre-emptive or preferential rights of purchase, rights
of first refusal or other restrictions on transfer arising under any agreements
applicable to a Purchased Entity that are not triggered by this Agreement or the
sale of the Company Stock or Taurus Notes pursuant hereto; and

 

(xix)                           the rights of third parties to purchase
Petroleum Substances produced from the Lands, or any lands with which the Lands
have been pooled or unitized, pursuant to the contracts for the sale of
Petroleum Substances listed in Schedule 1.1(aaa).

 

(lll)                               “Person” means any natural person,
corporation, company, limited or general partnership, joint stock company, joint
venture, association, limited liability company, trust, bank, trust company,
land trust, business trust or other entity or organization, whether or not a
Governmental Authority.

 

(mmm)             “Petroleum Substances” means petroleum, natural gas and all
related hydrocarbons (including all liquid hydrocarbons) and all other
substances, whether liquids, gaseous or solids and whether hydrocarbons or not
(except coal but including sulphur) produced or producible in association with
such petroleum, natural gas or related hydrocarbons.

 

(nnn)                   “Place of Closing” means the offices of Seller’s
Solicitors located at 3500, 855 - 2nd Street S.W., Calgary, Alberta or such
other place as may be agreed to by the Parties.

 

(ooo)                   “Prime Rate” means the rate of interest, expressed as a
rate per annum, designated by the main branch in Calgary of the Canadian
Imperial Bank of Commerce as the reference rate used by it to determine rates of
interest charged by it on Canadian dollar commercial loans made in Canada and
which is announced by such bank, from time to time, as its prime rate, provided
that whenever such bank announces a change in such reference rate, the “Prime
Rate” shall correspondingly change effective on the date the change in such
reference rate is effective.

 

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(ppp)                   “Principal Manulife and NAL Subsidiaries” means:

 

(i)                                     The Manufacturers Life Insurance Company
(Canada), NAL Resources Management Limited, FNA Financial Inc. (Canada), The
Manufacturers Investment Corporation (Michigan), Manulife Bank of Canada
(Canada), Manulife (International) Limited (Bermuda), Manulife (Singapore) Pte.
Ltd. (Singapore), Elliott & Page Limited (Ontario), John Hancock Life Insurance
Company (U.S.A.), Manulife-Sinochem Life Insurance Co. Ltd. (China), P.T.
Asuransi Jiwa Manulife Indonesia (Indonesia), The Manufacturers Life Insurance
Company of New York (New York), The Manufacturers Life Insurance Co. (Phils.),
Inc. (Philippines), Manulife (Vietnam) Limited (Vietnam), Manulife Life
Insurance Company (Japan), John Hancock Financial Services, Inc. and Maritime
Life Assurance Company; and

 

(ii)                                  NAL Ventures Trust, NAL Ventures Inc., NAL
Energy Holdings Ltd., NAL Petroleum Limited Partnership II, NAL Oil & Gas Ltd.,
NAL Petroleum Limited Partnership, NAL Petroleum Inc., 991631 Alberta Ltd.,
857356 Alberta Ltd., NAL Properties Inc., NAL Energy Ltd. and 1143928 Alberta
Ltd.

 

(qqq)                   “Product and Other Hedging Contracts” means any
agreement providing for options, swaps, floors, caps, collars, forward sales or
forward purchases involving commodities, commodity prices, indices, interest
rates, foreign exchange or other derivatives.

 

(rrr)                            “Prohibited Property” means any property the
fair market value of which is wholly or partly attributable to, or the fair
market value of which is determined primarily by reference to, the fair market
value of any of the property owned by a Purchased Entity on the Closing Date, or
the proceeds of disposition therefrom, but does not include money.

 

(sss)                      “Property Schedule” means the property schedule
attached hereto as Schedule B.

 

(ttt)                            “Purchased Entities” means the Company, Subco
and the Partnership or any one or more of them as the context requires; and
“Purchased Entity” means any one of them.

 

(uuu)                   “Purchased Entity Representative” means any director,
officer, employee, agent, advisor (including legal, accounting and financial
advisors) or other representative of a Purchased Entity.

 

(vvv)                   “Purchase Price” has the meaning set forth in Section
2.2(a).

 

(www)           “Purchaser” has the meaning set forth in the introductory
paragraph of this Agreement.

 

(xxx)                       “Purchaser Note” means a demand promissory note
dated as of the Closing Date issued by the Company in favour of Purchaser for a
principal amount equal to the amount specified in the Payout Statement.

 

(yyy)                 “Purchaser’s Group” has the meaning set forth in Section
9.2.

 

(zzz)                       “Purchaser’s Losses” has the meaning set forth in
Section 9.2.

 

10

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(aaaa)              “Purchaser Representative” means any director, officer,
employee, agent, advisor (including legal, accounting and financial advisors),
Affiliate or other representative of Purchaser or its Subsidiaries.

 

(bbbb)          “Representatives” has the meaning set forth in Section 5.8(a).

 

(cccc)              “Retention Bonus Payments” means the aggregate amount of all
payments paid or payable by the Company after the Valuation Date pursuant to the
Addison Energy Inc., Employee Bonus Retention Plan.

 

(dddd)          “Retention Period” has the meaning set forth in Section 10.2.

 

(eeee)              “Seller” has the meaning set forth in the introductory
paragraph of this Agreement.

 

(ffff)                      “Seller’s Solicitors” means Blake, Cassels & Graydon
LLP, Barristers and Solicitors of Calgary, Alberta.

 

(gggg)          “Services Agreement” means the Services Agreement made between
the Company and the Partnership as of the same date as the Company Contribution
Agreement.

 

(hhhh)          “Severance Adjustment” has the meaning set forth in Section
10.4(b).

 

(iiii)                          “Severance Payment” has the meaning set forth in
Section 10.4(i).

 

(jjjj)                          “Share Purchase Price” has the meaning set forth
in Section 2.3(b).

 

(kkkk)              “Specified Shareholder” means, in respect of Seller:

 

(i)                                     any Person who did not, at any time
during the course of the series of transactions or events that includes the
completion of the transactions contemplated by this Agreement, deal at Arm’s
Length with Seller;

 

(ii)                                  any corporation of which Seller or a
Person described in (i) above, at any time during the course of the series of
transactions or events that includes the completion of the transactions
contemplated by this Agreement and after the acquisition of control of the
Company by Purchaser, a “specified shareholder” (as that term applies to
subparagraph 88(1)(c)(vi) of the Tax Act); or

 

(iii)                               any trust or partnership of which Seller or
a Person described in (i) above would have been, at any time during the course
of the series of transactions or events that includes the transactions
contemplated by this Agreement and after the acquisition of control of the
Company by Purchaser, a “specified shareholder” (as that term applies to
subparagraph 88(1)(c)(vi) of the Tax Act) if the rules in subparagraph
88(1)(c.2)(ii) of the Tax Act were applied.

 

(llll)                          “Statement” has the meaning set forth in Section
9.6(c).

 

(mmmm)  “Subco” means 1144259 Alberta Ltd., an Alberta corporation.

 

(nnnn)          “Subco Stock” means all of the issued and outstanding common
stock of Subco.

 

11

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(oooo)          “Subco Subscription Agreement” means a subscription agreement
dated January 7, 2005 between Subco and the Partnership relating to the
contribution of cash by Subco to the Partnership.

 

(pppp)            “Subsidiary(ies)” means, as to a particular Person, an entity
100 percent owned, directly or indirectly, by such Person.

 

(qqqq)            “Survival Period” means:

 

(i)                                     for all representations and warranties
of Seller or Purchaser set forth in this Agreement, other than those listed in
Sections 1.1(qqqq)(ii) and (iii), a period of 15 months following the Closing
Date;

 

(ii)                                  for EXCO’s representations and warranties
in Sections 3.1(d), 3.2(h) and 3.2(i), 90 days following the limitation period
under Applicable Law during which a claim may be made; and

 

(iii)                               for EXCO’s representations and warranties in
Sections 3.2(t) and 3.2(u), 90 days after the expiry of the reassessment period
in respect of any taxation years, or similar reporting periods, of a Purchased
Entity which end on or prior to the Closing Date without taking into account any
extension to such periods resulting from any agreement, waiver, act or omission
after Closing.

 

(rrrr)                      “Tangibles” means the Facilities and interests of
the Purchased Entities in and to all tangible depreciable property and assets
that are situate in, on or about the Lands or lands with which the Lands have
been pooled or unitized, or used or intended for use in connection with
production of Petroleum Substances from the Lands or lands with which the Lands
have been pooled or unitized or for the gathering, compression, dehydration,
scrubbing, injection, processing, transmission, treatment, separation,
extracting, collecting, refining, measuring, transporting, shipping or storage
of such Petroleum Substances including the Wells, casing, production tubing,
wellheads, pipelines, flowlines, pipeline connections, gathering systems,
batteries, compressors, plants, buildings, extraction facilities, meters,
generators, refineries, communications and other equipment.

 

(ssss)                “Taurus” has the meaning set forth in the introductory
paragraph of this Agreement.

 

(tttt)                        “Taurus Notes” means:  (i) the Promissory Note
between the Company and Taurus in the amount of U.S. $98,800,167.66, dated April
13, 2004; and (ii) the Promissory Note between the Company and Taurus in the
face amount of Cdn. $125,000,000, dated June 29, 2004; as amended and restated,
together with all amounts of unpaid interest payable before the Closing Date and
all amounts of interest accrued and not yet payable at the Closing Date.

 

(uuuu)            “Tax Act” means the Income Tax Act R.S.C. 1985, c.1 (5th
Supplement), as amended.

 

(vvvv)            “Tax Returns” has the meaning set forth in Section 3.2(t).

 

(wwww)  “Taxes” means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, including income, goods and services,
gross receipts, ad valorem, value added, excise, real or personal property,
asset, sales, use, licence, payroll,

 

12

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transaction, capital, net worth and franchise taxes, estimated taxes,
withholding, employment, social security, workers’ compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes or other governmental taxes, or required
installments thereof, imposed or payable to any federal, state, local, province,
territory or foreign governmental subdivision or agency thereof, and in each
instance such term shall include any interest, penalties or additions to tax
attributable to any such Tax, including penalties related thereto.

 

(xxxx)                    “Third-Party Consent” means the consent or approval of
any Person other than the Purchased Entities, Purchaser, Seller or any
Governmental Authority.

 

(yyyy)            “Thirteenth Month Adjustment” means a reconciliation payment
made pursuant to an agreement which provides that during a period (usually a
calendar year) revenues and/or expenses will be distributed to or paid by one or
more parties to the agreement on the basis of estimates thereof and following
the end of the period (usually the first calendar month after the end of the
period), the actual amount of the revenues or costs will be determined and a
reconciliation between the estimated amounts and the actual amounts will be
made.

 

(zzzz)                    “Title and Operating Documents” means:

 

(i)                                     petroleum and/or natural gas leases,
permits and licenses (whether freehold or Crown) and similar instruments
pertaining to the ownership, operation or development of the Oil and Gas Assets;
and

 

(ii)                                  agreements relating to the ownership,
operation or development of the Oil and Gas Assets entered into in the normal
course of the oil and gas business, including:  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 agreements; purchase and sale agreements, asset exchange agreements,
conveyance and transfer agreements and any other agreements relating to the
ownership of the Oil and Gas Assets or the recognition of the Partnership’s
interest therein; agreements providing for the gathering, measurement,
processing, compression or transportation of Petroleum Substances; common steam
agreements; well operating contracts and surface leases, pipeline easements,
road use agreements and other contracts granting surface interests.

 

(aaaaa)          “Title Defect” means:

 

(i)                                     either:

 

(A)                              a defect or deficiency (other than a Permitted
Encumbrance) in or affecting, or the absence of satisfactory evidence as to, the
chain of title of a Purchased Entity to any particular property; or

 

(B)                                the existence of any encumbrance that is not
a Permitted Encumbrance or any Permitted Encumbrance that exceeds in magnitude
the description of that particular Permitted Encumbrance set forth in the
Property Schedule;

 

13

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which is sufficiently material and adverse that it would not be acceptable to a
knowledgeable and prudent purchaser of the property affected thereby but only
where the reasonably anticipated negative impact to the value of such property
to such Purchased Entity to account for such defect would exceed $75,000; or

 

(ii)                                  a discrepancy between the Engineering
Report and the Property Schedule which consists of:

 

(A)                              an interest evaluated in the Engineering Report
not being listed in the Property Schedule or being larger than the interest
listed in the Property Schedule; or

 

(B)                                an interest evaluated in the Engineering
Report being shown in the Engineering Report as not being subject to a royalty
listed in the Property Schedule or being shown in the Engineering Report as
being subject to a royalty which is stated in the Property Schedule to be
greater than as shown in the Engineering Report;

 

but only where the reasonably anticipated negative impact of such discrepancy on
the value of the property affected thereby would exceed $75,000.

 

(bbbbb)     “Title Evaluator” means an independent senior oil and gas solicitor
as may be agreed to by the Parties.

 

(ccccc)          “Unaudited Financial Statements” means, collectively:

 

(i)                                     the unaudited consolidated financial
statements (including the statement of operations, balance sheet and cash flow
statement) of the Company as of December 31, 2002 (and for the year then ended)
and as of December 31, 2003 (and for the 209 day period from January 1, 2003 to
July 28, 2003 and the 156 day period from July 29, 2003 to December 31, 2003);
and

 

(ii)                                  the unaudited financial statements
(including the statement of operations, balance sheet and cash flow statement)
of the Company as of September 30, 2004 (and for the 9 months then ended);

 

as set forth in Schedule 1.1(ccccc).

 

(ddddd)     “Uncured Title Defects” has the meaning set forth in Section 6.2(a).

 

(eeeee)          “U.S. Credit Agreement” means the Third Amended and Restated
Credit Agreement, as amended, between EXCO and Bank One, NA, as administrative
agent for itself and the lenders named therein, dated the 27th day of January,
2004.

 

(fffff)                    “Valuation Date” means February 1, 2005 unless
Closing occurs in a calendar month other than February, 2005 (but no later than
May 15, 2005) in which event the Valuation Date shall be the 1st day of such
calendar month; provided that if Seller does not deliver (in accordance with the
provisions of Section 11.4) the Audited Historical Statements to Purchaser on or
prior to January 28, 2005, the Valuation Date shall remain February 1, 2005
regardless of when Closing occurs.

 

14

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(ggggg)     “Wells” means all wells, including producing, shut-in, suspended,
abandoned, injection and disposal wells, located on the Lands or any lands with
which the Lands have been pooled or unitized.

 

(hhhhh)     “Working Capital Balance” has the meaning set forth in Section
6.3(b).

 

1.2                               References and Titles

 

All references in this Agreement to Exhibits, Schedules, Articles, Sections,
subsections and other subdivisions refer to the corresponding Exhibits,
Schedules, Articles, Sections, subsections and other subdivisions of or to this
Agreement unless expressly provided otherwise.  Titles appearing at the
beginning of any Articles, Sections, subsections or other subdivisions of this
Agreement are for convenience only, do not constitute any part of this
Agreement, and shall be disregarded in construing the language hereof.  The
words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words
of similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited.  The words “this Article,” “this
Section” and “this subsection,” and words of similar import, refer only to the
Article, Section or subsection hereof in which such words occur.

 

1.3                               Interpretation

 

(a)                                  The word “or” is not exclusive, and the
word “including” (in its various forms) means including without limitation.
Pronouns in masculine, feminine or neuter genders shall be construed to state
and include any other gender, and words, terms and titles (including terms
defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.

 

(b)                                 If there is any conflict or inconsistency
between the provisions of the body of this Agreement and those of a Schedule,
the provisions of the body of this Agreement shall prevail.

 

(c)                                  All documents executed and delivered
pursuant to the provisions of this Agreement are subordinate to the provisions
hereof and the provisions hereof shall govern and prevail in the event of a
conflict.

 

(d)                                 Any reference to a statute shall include and
shall be deemed to be a reference to such statute and to the regulations made
pursuant thereto, and all amendments made thereto and in force at the date
hereof.

 

(e)                                  Where in this Agreement or any document
delivered pursuant hereto, any statement or representation or warranty is made
on the basis of knowledge or awareness of Seller, such knowledge or awareness
consists only of the actual knowledge of the current officers of Seller and the
directors and officers of the Company designated in Schedule 2.9(a)(viii) after
reasonable inquiry by such individuals.  For those purposes, knowledge does not
include knowledge of any other Person or constructive knowledge.  Neither
Seller, nor any of such officers or directors has any obligation to make inquiry
of any field personnel (other than Del Denison and Wes Roberts) or any other
employee of Seller or the Company (as the case may be) who is not primarily
responsible for the matter in question in the course of their normal duties, nor
any files and any records of any Governmental Authority in connection with any
statement, representation or warranty that is made on the basis of knowledge or
awareness of Seller.

 

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(f)                                    All references to time shall mean
Mountain Standard Time or Mountain Daylight Time, as applicable.

 

(g)                                 Whenever any payment 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, such payment shall be made or action taken on the next
Business Day following.

 

(h)                                 The Parties acknowledge that their
respective legal counsel have reviewed and participated in settling the terms of
this Agreement, and the Parties hereby agree that any rule of construction to
the effect that any ambiguity is to be resolved against the drafting Party will
not be applicable in the interpretation of this Agreement.

 

(i)                                     Unless otherwise specifically indicated
herein, all dollar and monetary amounts shall in be in Canadian dollars.

 

1.4                               Schedules

 

The following schedules are attached to, form part of and are incorporated in
the Agreement:

 

Schedule A - Disclosure Schedule

Schedule 1.1(kkk)(ix) - Liens, Burdens or Defects to Title

Schedule 1.1(aaa) and 3.2(o) - Material Agreements

Schedule 1.1(ccccc) – Unaudited Financial Statements

Schedule 2.9(a)(viii) - Directors and Officers of Company and Subco

Schedule 2.9(a)(ix) - Releases

Schedule 3.2(e) - Right of Termination / Loss of Benefit

Schedule 3.2(p) - Purchased Entity Debt

Schedule 3.2(q) – Purchased Entity/Affiliate Contracts

Schedule 3.2(r) - Employment Matters

Schedule 3.2(s) - Litigation, Arbitrations, Investigations or Other Proceedings

Schedule 3.2(u) - Tax Matters

Schedule 3.2(y) - Environmental Matters

Schedule 3.2(bb)(iii) - Claims Adverse in Interest

Schedule 3.2(bb)(iv) - Authorities for Expenditure

Schedule 3.2(bb)(v) - Leased Tangibles

Schedule 3.2(bb)(vii) – Production Penalties

Schedule 3.2(bb)(ix) – AMI’s and Areas of Exclusion

Schedule 3.2(bb)(x) – Rights of First Refusal

Schedule 3.2(bb)(xi) - Offset Obligations

Schedule 3.2(dd) - Dividends and Distributions

Schedule 3.2(gg) – Change of Control

Schedule 3.2(hh) – Bank Accounts

Schedule 5.1 - Conduct of Business

Schedule 5.10 - Insurance

Schedule B - Property Schedule

Schedule 1.1(mm) - Facilities

Schedule 1.1(tt) - Lands

Schedule C

Part I - Escrow Agreement (Deposit)

Part II - Escrow Agreement (Withholding)

Schedule D - Privacy Legislation

 

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ARTICLE 2

PURCHASE AND SALE

 

2.1                               Agreement to Purchase and Sell

 

At the Closing:

 

(a)                                  EXCO shall sell, assign and transfer to
Purchaser, and Purchaser shall purchase from EXCO, the Company Stock; and

 

(b)                                 Taurus shall sell, assign and transfer to
Purchaser, and Purchaser shall purchase from Taurus, the Taurus Notes;

 

all upon the terms and subject to the conditions set forth in this Agreement. 
At Closing, Seller shall deliver to Purchaser the Company Certificate, free and
clear of all Liens, which certificate shall be duly endorsed to Purchaser or
accompanied by duly executed stock powers in form satisfactory to Purchaser.

 

2.2                               Purchase Price and Manner of Payment

 

(a)                                  Base Purchase Price.  The purchase price
for the Company Stock and the Taurus Notes shall be $550,000,000 (collectively,
the “Base Purchase Price”) minus the payment in respect of the Credit Facility
payable pursuant to Section 2.4 and plus or minus the adjustments determined
pursuant to Article 6 (the Base Purchase Price as so adjusted is the “Purchase
Price”).

 

(b)                                 Deposit.  Contemporaneous with the execution
and delivery of this Agreement:

 

(i)                                     Purchaser shall pay the amount of
$50,000,000 (the “Deposit”) to Seller’s Solicitors; and

 

(ii)                                  Purchaser, Seller and Seller’s Solicitors
shall enter into the Escrow Agreement (Deposit) whereupon Seller’s Solicitors
shall receive and hold the Deposit pursuant to the terms of the Escrow Agreement
(Deposit) in an interest-bearing solicitor’s trust account.

 

The Deposit and interest earned thereon shall be applied in accordance with the
following terms:

 

(iii)                               if Closing occurs, the Deposit together with
the interest actually earned thereon while held by Seller’s Solicitors (the
“Deposit Interest”) shall be paid by Seller’s Solicitors to Seller at the
Closing in partial satisfaction of Purchaser’s obligation to pay the Purchase
Price;

 

(iv)                              if Closing does not occur due to the exercise
by Seller of a right to terminate this Agreement specified in Section 8.1(b) or
8.1(d)(i) where such right arises due to a breach of any representation or
warranty or failure to perform any covenant or obligation under this Agreement
by Purchaser, Seller shall be entitled to the Deposit and the Deposit Interest
which Seller’s Solicitors shall pay to EXCO, on

 

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its behalf and on behalf of Taurus, not later than the second Business Day after
this Agreement terminates.  The Deposit and the Deposit Interest shall thereupon
be forfeited by Purchaser to EXCO, on its behalf and on behalf of Taurus, on
account of the damages suffered by Seller as a consequence of such breach.  The
Parties agree that such amount constitutes their genuine pre-estimate of the
damages suffered by Seller by virtue of such breach.  Seller agrees that
forfeiture of the Deposit and the Deposit Interest will be its sole remedy as a
result of Closing not occurring due to a breach of this Agreement by Purchaser;
and

 

(v)                                 if Closing does not occur for any reason or
circumstance other than that described in Section 2.2(b)(iv), Purchaser shall be
entitled to the Deposit and Deposit Interest which Seller’s Solicitors shall pay
to Purchaser not later than the second Business Day after this Agreement
terminates.

 

(c)                                  Payment at Closing.  At the Closing,
subject to Section 2.10, Purchaser shall pay to EXCO, on its behalf and on
behalf of Taurus, an amount equal to the Purchase Price minus the Deposit and
the Deposit Interest by wire transfer of immediately available funds to the
account set forth in Section 2.9(b)(i) or as otherwise instructed by Seller.

 

2.3                               Allocation of Purchase Price

 

The Purchase Price shall be allocated, for all purposes, as follows:

 

(a)                                  to Taurus for the Taurus Notes, as follows:

 

(i)                                     as to principal, the sum of:

 

(A)                              $97,874,177.10; and

 

(B)                                that amount of Canadian dollars that would be
required to purchase U.S. $98,800,167.66 using the Exchange Rate on the 5th
Business Day immediately preceding the Closing Date; and

 

(ii)                                  as to interest, the amount of Canadian
dollars that would be required to purchase the sum of:

 

(A)                              U.S. $5,710,512.47; and

 

(B)                                the product of U.S. $19,897.26 and that
number of days falling between (and including) February 1, 2005 and (but
excluding) the Closing Date;

 

using the Exchange Rate on the 5th Business Day immediately preceding the
Closing Date (the “Interest Amount”); and

 

(b)                                 to EXCO for the Company Stock, the balance
of the Purchase Price (the “Share Purchase Price”).

 

If the Receiver General (Canada) asserts at any time that the amount of the
Purchase Price allocated to the Taurus Notes is other than the amount specified
in Section 2.3(a), Seller shall reimburse Purchaser for any additional amounts
that the Receiver General (Canada) claims is due

 

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from Purchaser, and Purchaser shall remit to Seller any amounts the Receiver
General (Canada) refunds to Purchaser or that Purchaser is not otherwise
required to remit.

 

2.4                               Payment of Credit Facility

 

(a)                                  Concurrent with Closing, Purchaser shall
loan to the Company a principal amount equal to the amount set forth in the
Payout Statement by advancing such amount to JPMorgan Chase Bank, NA, Canada
Branch (by wire transfer to the following account) to retire the Credit
Facility:

 

Royal Bank of Canada (swift ROYCCAT2)

Account No.:                        071721000405

For account:                             JPMorgan Chase Bank, Canada Branch
(swift CHASCATT)

Reference:                                        Addison Energy Inc.

Attention:                                         Loans Department

 

(b)                                 Upon JPMorgan Chase Bank’s receipt of the
amount referred to in Section 2.4(a), Seller shall cause the Company to issue
the Purchaser Note to Purchaser.

 

2.5                               Joint and Several Liability

 

EXCO and Taurus shall be jointly and severally liable for all of their
liabilities and obligations under this Agreement.

 

2.6                               Parental Guarantee

 

Seller acknowledges receipt of a guarantee by NAL dated the date hereof, of the
obligations of Purchaser pursuant to this Agreement and all other documents
executed and delivered pursuant to this Agreement.

 

2.7                               Closing

 

The Closing shall take place on the Closing Date at the Place of Closing.

 

2.8                               Taking of Necessary Action; Further Action

 

Seller and Purchaser shall use all reasonable efforts to take all such actions
as may be necessary or appropriate in order to effectuate the Closing as
promptly as commercially practicable.  If at any time after the Closing, any
further action is necessary or desirable to carry out the purposes of this
Agreement, both Parties shall use all reasonable efforts to take all such lawful
and necessary action.

 

2.9                               Deliveries at Closing

 

(a)                                  Deliveries of Seller at Closing.  At
Closing, Seller shall deliver or cause to be delivered to and in favour of
Purchaser, against those deliveries required to be made by Purchaser, the
following:

 

(i)                                     the Company Certificate issued in the
name of EXCO, duly endorsed for transfer or accompanied by a written instrument
of transfer;

 

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(ii)                                  the Taurus Notes, accompanied by an
assignment thereof, in form and substance satisfactory to Purchaser, acting
reasonably, duly executed by Taurus;

 

(iii)                               a release, signed by Taurus, of all
liability of the Company under the Taurus Notes (including in respect of the
payment of the principal amount thereof and interest accrued thereon) and of all
Liens on the assets of the Company arising pursuant to the Taurus Notes, all
satisfactory to Purchaser, acting reasonably.

 

(iv)                              the original minute books and corporate seals
of the Company and Subco;

 

(v)                                 the original minute book and all records of
the Partnership;

 

(vi)                              certificates of status from appropriate
authorities, dated as of or about the Closing Date, as to the legal existence of
EXCO, Taurus, the Company and Subco and qualification of the Company and Subco
to do business in the jurisdictions in which they operate;

 

(vii)                           evidence, dated as of or about the Closing Date,
as to the legal existence of the Partnership, and its qualification to do
business in the jurisdictions in which the Oil and Gas Assets are located;

 

(viii)                        resignations of those representatives of the
Company and Subco listed in Schedule 2.9(a)(viii), unless otherwise agreed to by
Purchaser in writing;

 

(ix)                                a release and discharge, executed by each of
the representatives listed in Schedule 2.9(a)(viii), of the Company and Subco,
and a release and discharge, executed by EXCO on its own behalf, and on behalf
of its Affiliates, of the Company, in each case, in the appropriate form set
forth in Parts I and II of Schedule 2.9(a)(ix), respectively;

 

(x)                                   a certified copy of a resolution of the
board of directors of EXCO authorizing the execution and delivery of this
Agreement and the completion of the sale of the Company Stock and all other
transactions related thereto herein;

 

(xi)                                a certified copy of a resolution of the
board of directors of Taurus authorizing the execution and delivery of this
Agreement and the completion of the sale of the Taurus Notes and all other
transactions related thereto herein;

 

(xii)                             a certified copy of a resolution of the EXCO
as the sole shareholder of the Company authorizing the contribution of all of
the Oil and Gas Assets to the Partnership in exchange for a partnership interest
in the Partnership pursuant to the Company Contribution Agreement;

 

(xiii)                          original executed copies of the Services
Agreement, the Company Contribution Agreement and Subco Subscription Agreement;

 

(xiv)                         signed copies of all agreements and resolutions
entered into by the Company or its directors in connection with the declaration
of dividends payable in cash, as disclosed in the Disclosure Schedule;

 

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(xv)                            a release and acknowledgement, signed by
JPMorgan Chase Bank, NA, confirming repayment of all indebtedness of the Company
under the Credit Facility and releasing all Liens granted in respect of a
Purchased Entity pursuant to or in respect of the Credit Facility, and JPMorgan
Chase Bank’s undertaking to discharge all such Liens, all satisfactory to
Purchaser, acting reasonably;

 

(xvi)                         a release, signed by JPMorgan Chase Bank, NA,
releasing all Liens granted by EXCO in respect of the Company Stock pursuant to
or in respect of the U.S. Credit Agreement, and JPMorgan Chase Bank’s
undertaking to discharge all such Liens, all satisfactory to Purchaser, acting
reasonably;

 

(xvii)                      a release, signed by Wilmington Trust Company, of
all Liens granted by EXCO in respect of the Company Stock, and Wilmington Trust
Company’s undertaking to discharge all such Liens, satisfactory to Purchaser,
acting reasonably;

 

(xviii)                   an officer’s certificate of Seller confirming the
matters referred to in Article 3;

 

(xix)                           an assignment by EXCO and, if applicable, its
Affiliates of all confidentiality and/or exclusion agreements entered into in
contemplation of the sale of the Company or the Oil and Gas Assets;

 

(xx)                              a certified copy of a resolution of the board
of directors of the Company authorizing the transfer of the Company Stock from
EXCO to Purchaser as contemplated by this Agreement;

 

(xxi)                           a copy of any 116 Certificate obtained by Seller
prior to Closing;

 

(xxii)                        the Escrow Agreement (Withholding) executed by
Seller and Seller’s Solicitors, if required pursuant to Section 2.10;

 

(xxiii)                     an irrevocable direction to Seller’s Solicitors to
release the Deposit and the Deposit Interest to EXCO, on its behalf and on
behalf of Taurus, or as Seller otherwise directs as partial payment of the
Purchase Price payable pursuant to Section 2.2, except to the extent otherwise
required pursuant to Section 2.10;

 

(xxiv)                    an agreement between each individual member of the
Management Team and Purchaser, in form and substance satisfactory to the
Parties, acting reasonably, executed by such member of the Management Team and
Purchaser pursuant to which, for a period of 6 months following the Closing
Date, each such member of the Management Team agrees to not make any employment
offer or contract offer to any employee of Purchaser, any Affiliate of Purchaser
or any manager of Purchaser who was an employee of any Purchased Entity on the
date hereof, without prior written consent of Purchaser, unless such Person
ceased to be an employee of Purchaser or any Affiliate of Purchaser or any
manager of Purchaser after the Closing Date;

 

(xxv)                       the Purchaser Note, signed by the Company;

 

(xxvi)                    a termination agreement in respect of the
Inter-Company Agreement, in form and substance satisfactory to the Parties,
acting reasonably, executed by EXCO and the Company;

 

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(xxvii)      evidence reasonably satisfactory to Purchaser that each Product and
Other Hedging Contract has either been terminated prior to Closing or assumed by
EXCO on a basis whereby the Purchased Entities have no liabilities thereunder
after Closing; and

 

(xxviii)     any and all other documents which are required to be delivered by
Seller to Purchaser pursuant to this Agreement.

 

(b)           Deliveries of Purchaser at Closing.  At Closing, Purchaser shall
deliver or cause to be delivered to and in favour of Seller, against those
deliveries required to be made by Seller, the following:

 

(i)            payment of the Purchase Price less the Deposit and the Deposit
Interest, each as set forth in the Closing Statement, and, if applicable, less
any amounts required to be withheld pursuant to Section 2.10, payable in
immediately available funds to EXCO, on its behalf and on behalf of Taurus, by
wire transfer in Canadian dollars to the following account of EXCO in accordance
with Seller’s instructions at Closing, together with such bank’s confirmations
of receipt and deposit of such payments:

 

Royal Bank of Canada, Toronto (swift ROYCCAT2)

Local Routing:      09591

Account Name:    JPMorgan Chase Bank, Houston Branch

Account No.:        095912461713

FFC:                        EXCO Resources, Inc.

Account No.:        1586272658

 

or such other account as EXCO may direct no later than 5 Business Days prior to
Closing;

 

(ii)           payment of amounts required to be withheld pursuant to Section
2.10 to Seller’s Solicitors in accordance with the Escrow Agreement
(Withholding);

 

(iii)          payment of the Credit Facility, as set forth in the Payout
Statement, payable in immediately available funds to JPMorgan Chase Bank,
National Association, Canada Branch, by wire transfer in Canadian dollars to the
account of JPMorgan Chase Bank set forth in Section 2.4, together with such
bank’s confirmation of receipt and deposit of such payment;

 

(iv)          certificates of status from appropriate authorities, dated as of
the date of the Closing Date, as to the legal existence of Purchaser;

 

(v)           releases and discharges, executed by the Company and Subco and
approved by Purchaser, of each of the representatives of the Company and Subco
listed in Schedule 2.9(a)(viii), in the appropriate form set forth in Part III
of Schedule 2.9(a)(ix);

 

(vi)          an officer’s certificate of Purchaser confirming the matters
referred to in Article 4;

 

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(vii)         the Escrow Agreement (Withholding), executed by Purchaser, if
required pursuant to Section 2.10;

 

(viii)        an irrevocable direction to Seller’s Solicitors to release the
Deposit and the Deposit Interest to EXCO, on its behalf and on behalf of Taurus,
or as Seller otherwise directs as partial payment of the Purchase Price payable
pursuant to Section 2.2; and

 

(ix)           any and all other documents which are required to be delivered by
Purchaser to Seller pursuant hereto.

 

2.10        Withholding Tax

 

(a)           Seller and Purchaser acknowledge that pursuant to section 116 of
the Tax Act:

 

(i)            Purchaser must withhold one quarter of the amount, if any, by
which the Share Purchase Price exceeds the certificate limit on the certificate
(the “116 Certificate”) obtained for the purposes of section 116 of the Tax Act
by Seller; and

 

(ii)           Purchaser must remit amounts, as determined pursuant to Section
2.10(b) to the Receiver General (Canada) on the date determined pursuant to
Section 2.10(b).

 

(b)           Purchaser shall, unless a 116 Certificate with a certificate limit
of not less than the Share Purchase Price has been provided to Purchaser on or
prior to Closing, withhold one quarter of the amount by which the Share Purchase
Price exceeds the certificate limit of any 116 Certificate provided by Seller
and shall deposit such amount in trust with Seller’s Solicitors pursuant to the
Escrow Agreement (Withholding), who shall remit:

 

(i)            to the Receiver General (Canada) on the third last Business Day
of the month following the month in which Closing occurs (or on such later date
as the Canada Revenue Agency shall confirm is acceptable, in a manner
satisfactory to Purchaser, acting reasonably), the amount withheld, unless a 116
Certificate has been provided by Seller and delivered to Seller’s Solicitors and
Purchaser after Closing and prior to that date;

 

(ii)           to EXCO forthwith, upon delivery of a 116 Certificate having a
certificate limit not less than the Share Purchase Price, the amount withheld;
or

 

(iii)          upon delivery of a 116 Certificate having a certificate limit
less than the Share Purchase Price:

 

(A)          to the Receiver General (Canada), on a timely basis, such amount as
will satisfy Purchaser’s obligation under subsection 116(5) of the Tax Act); and

 

(B)           to EXCO, the balance.

 

When the matters contemplated in this Section 2.10(b) are completed, Seller
shall cause Seller’s Solicitors to provide Seller and Purchaser with proof that
all amounts required to

 

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be remitted to the Receiver General (Canada) have been timely remitted and to
account to Seller and Purchaser in respect of such matters.

 

(c)           Interest earned on any amount withheld by Purchaser and deposited
in trust with Seller’s Solicitors pursuant to Section 2.10(b) will be paid by
Seller’s Solicitors as follows:

 

(i)            as to 10% (or any greater or lesser percentage that may be
required at the applicable time pursuant to the Tax Act or a tax treaty) of the
interest, to the Receiver General (Canada); and

 

(ii)           as to the balance remaining thereafter, to EXCO.

 

Seller will, by the end of the month following the month in which payment of
interest to EXCO occurs, cause Seller’s Solicitors to provide Seller and
Purchaser with proof that the amount in Section 2.10(c)(i) has been timely
remitted.

 

(d)           If, at any time prior to the date stipulated in Section
2.10(b)(i), EXCO is required to make a payment on account for Canadian income
tax pursuant to Section 116 of the Tax Act in order to obtain a 116 Certificate
then, if requested to do so by EXCO, and only in accordance with any written
direction received therefrom and provided Seller’s Solicitors have given
Purchaser at least two Business Days’ notice of its intention to do so, Seller’s
Solicitors shall promptly release and forward to the Receiver General (Canada),
such portion of amounts withheld pursuant to Section 2.10(b) on the condition
that such funds be used for the sole purpose of making the aforementioned
payment on account of EXCO’s Canadian income tax liability.

 

(e)           If, pursuant to Section 6.3(d), Purchaser makes a further payment
on account of the Share Purchase Price, the Parties hereby agree to adhere to
the procedure set out in this Section 2.10 in respect of the withholding Tax
thereon, all as more specifically provided in the Escrow Agreement
(Withholding).

 

(f)            Seller hereby covenants that it will provide Seller’s Solicitors
with such funds as are required to permit Seller’s Solicitors to comply with its
obligations as described under Section 2.10(b) and 2.10(c) hereof, the Escrow
Agreement (Withholding) and Purchaser’s obligations under subsection 116(5) of
the Tax Act within the time stipulated therein.

 

(g)           Seller and Purchaser acknowledge that pursuant to Part XIII of the
Tax Act, Purchaser must withhold 10% of the Interest Amount and remit same
forthwith after Closing to the Receiver General (Canada).

 

(h)           If the amount required by any Tax authority to be withheld by
Purchaser in respect of the transactions contemplated by this Agreement exceeds
the amounts withheld pursuant to the foregoing provisions of this Section 2.10,
Seller shall indemnify, defend and save harmless Purchaser’s Group from and
against any and all loss, liability, damage, cost or expense suffered or
incurred by any of them, as a direct or indirect result thereof.  The provisions
of Section 9.5 shall be applicable with respect to any claim made by any Tax
authority which may reasonably be expected to give rise to a claim for
indemnification of Purchaser’s Group under this Section 2.10(h). 
Notwithstanding the provisions of Section 9.4, Purchaser’s Group shall be
entitled to make a claim under this Section 2.10(h) until 90 days after the
expiry of the period within which a Tax authority is entitled to make a claim
against Purchaser’s Group which gives rise to a claim for indemnification under

 

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this Section.  None of the provisions of Section 9.4 shall be applicable to a
claim by Purchaser’s Group under this Section 2.10(h).

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER

 

3.1          Seller’s Representations Regarding Seller

 

Seller hereby represents and warrants to Purchaser as follows:

 

(a)           Authority and Enforceability.  Seller has the requisite corporate
power and authority to enter into and deliver this Agreement and to consummate
the transactions contemplated hereby.  The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Seller, if applicable, and no other corporate proceedings on the part of Seller
are necessary to authorize the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.  This Agreement has been
duly and validly executed and delivered by Seller and all other documents
executed and delivered pursuant hereto will, when executed and delivered, be
duly authorized, executed and delivered by Seller and this Agreement does, and
such documents will when executed and delivered and (assuming that this
Agreement constitute a valid and binding obligation of Purchaser) constitute a
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms.

 

(b)           No Conflict.  The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and compliance
by Seller with the provisions hereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under or result in the creation of any
Lien on any of the properties or the assets of Seller under, any provision of:

 

(i)            its articles of incorporation or bylaws;

 

(ii)           upon receipt of the consent referred to in Sections 7.2(f) and
7.3(f), any loan or credit agreement, note, bond, mortgage, indenture, lease,
permit, concession or franchise, licence or other agreement or instrument
applicable to Seller; or

 

(iii)          assuming the consents, approvals, authorizations, permits,
filings and notifications referred to in Section 3.1(c) are duly and timely
obtained or made, any Applicable Law applicable to Seller or its respective
properties or assets.

 

(c)           Consents and Approvals.  No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to Seller or a Purchased
Entity in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for the following: 
(i) any such consent, approval, order, authorization, registration, declaration,
filing or permit which the failure to obtain or make would not, individually or
in the aggregate, have a Material Adverse Effect, (ii) the Competition Act
Approval, and (iii) the filing of a Current Report on Form 8-K as required to be
made by EXCO

 

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with the United States Securities and Exchange Commission in accordance with the
Securities Exchange Act of 1934.

 

(d)           Title to Shares.  EXCO owns the Company Stock and will continue to
own the Company Stock until the time of Closing.  EXCO is (and at the Closing
will be) the sole record and beneficial owner of the Company Stock, free and
clear of all Liens, other than:  (i) Liens for which the release and
undertakings identified at Sections 2.9(a)(xv), 2.9(a)(xvi) and 2.9(a)(xviii) or
an Encumbrance Discharge will be delivered at Closing, or (ii) those that may
arise by virtue of any actions taken by or on behalf of Purchaser or its
Affiliates or by virtue of the by-laws and articles of the Company.  Upon
Closing, Purchaser will acquire good and marketable title to the Company Stock
free and clear of all Liens, other than:  (iii) those that may arise by virtue
of any actions taken by or on behalf of Purchaser or its Affiliates or by virtue
of the by-laws and articles of the Company.

 

(e)           No Intention to Acquire.  Seller does not own any of the following
and does not have nor will it have at the Closing Date any intention or plan to
acquire any of the following:  (i) units of NAL; (ii) debt issued by NAL,
Manulife Financial Corporation or any Principal Manulife and NAL Subsidiary;
(iii) shares of Manulife Financial Corporation or any Principal Manulife and NAL
Subsidiary; or (iv) property that may reasonably be expected to become
Prohibited Property.

 

(f)            Carrying on Business in Canada.  Seller has never carried on
business in Canada.

 

3.2          Seller’s Representations Regarding the Purchased Entities

 

Seller hereby represents and warrants to Purchaser as follows:

 

(a)           Organization - Company.  The Company:

 

(i)            is a corporation duly organized, validly existing and in good
standing under the laws of Alberta;

 

(ii)           has the requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted;

 

(iii)          is duly qualified to do business and is in good standing in each
jurisdiction where the character of the properties owned or leased by it or the
nature of its activities makes such qualification necessary; and

 

(iv)          has no Subsidiaries, other than Subco and the Partnership.

 

(b)           Organization – Subco.  Subco:

 

(i)            is a corporation duly organized, validly existing and in good
standing under the laws of Alberta;

 

(ii)           has the requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted;

 

(iii)          is duly qualified to do business and is in good standing in the
Province of Alberta and will, as of the Closing Date, be qualified to do
business and be in good

 

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standing in all other jurisdictions where the character of the properties owned
or leased by it or the nature of its activities makes such qualification
necessary; and

 

(iv)          has no Subsidiaries.

 

(c)           Organization - Partnership.  The Partnership:

 

(i)            is a limited partnership duly organized, validly existing and in
good standing under the laws of Alberta;

 

(ii)           has the requisite power and authority to own, lease and operate
its properties and to conduct its business as it is presently being conducted;
and

 

(iii)          is duly qualified to do business and is in good standing in the
Province of Alberta and will as of the Closing Date, be qualified to do business
and be in good standing in all other jurisdictions where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary; and

 

(iv)          has no Subsidiaries.

 

(d)           Authority and Enforceability.  The execution and delivery of those
agreements and documents required to be delivered by the Purchased Entities
hereunder have been duly and validly authorized by all necessary corporate
action on the part of the Purchased Entities, and no other corporate proceedings
on the part of the Purchased Entities are necessary to authorize the execution
or delivery of such agreements and documents.

 

(e)           No Violations.  Except as set forth in Schedule 3.2(e), the
execution and delivery of this Agreement do not conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under, or result in the creation of any
Lien on any of the properties or assets of a Purchased Entity under, any
provision of:

 

(i)            its constating documents;

 

(ii)           the Credit Agreement or other loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, licence or
other agreement or instrument applicable to the Purchased Entity; or

 

(iii)          assuming the consents, approvals, authorizations, permits,
filings and notifications referred to in Section 3.1(c) are duly and timely
obtained or made, any Applicable Law applicable to the Purchased Entity or its
properties or assets.

 

(f)            Unaudited Financial Statements.  The Unaudited Financial
Statements were prepared in accordance with U.S. GAAP applied on a consistent
basis during the periods involved (except they are not accompanied by notes or
other textual disclosure required by U.S. GAAP) and fairly present, in
accordance with applicable requirements of U.S. GAAP (subject to normal,
recurring adjustments), the financial position of the Company as of their
respective dates and the results of operations and the cash flows of the Company
for the periods presented therein.  The Unaudited Financial Statements are
consistent with the books and records of the Company.  The Audited Historical
Statements will be prepared in accordance with GAAP applied on a consistent
basis during the periods

 

27

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involved and will fairly present the financial position of the Company as of
their respective dates and the results of operations and the cash flows of the
Company for the periods presented therein.  Since September 30, 2004, except (i)
as disclosed in the Unaudited Financial Statements or in any production
information in respect of the Company provided to Purchaser or its Affiliates
prior to the date hereof, (ii) as contemplated in this Agreement, the Company
Contribution Agreement, the Partnership Agreement or the Services Agreement, or
(iii) in respect of normal production declines, there have been no material
adverse changes in the business, assets, operations or financial condition of
the Company, taken as a whole, excluding, however, changes resulting from
commodity price movements, Product and Other Hedging Contracts disclosed in the
Disclosure Schedule, or resulting from legislation, regulatory action or general
economic conditions that may impact the energy industry.

 

(g)           Capital Structure of Company and Subco.

 

(i)            The authorized capital stock of the Company consists of an
unlimited number of shares of the Company Stock.  The authorized capital stock
of Subco consists of an unlimited number of shares of the Subco Stock.

 

(ii)           There are, as of the execution date of this Agreement, issued and
outstanding (A) 9,000 common shares of Company Stock, and (B) 10,000 common
shares of Subco Stock.

 

(iii)          Except as set forth in Section 3.2(g)(ii), there are issued and
outstanding:  (A) no shares of capital stock or other voting securities of the
Company or Subco; (B) no securities of the Company, Subco or any other Person
convertible into or exchangeable or exercisable for shares of capital stock or
other voting securities of the Company or Subco; and (C) no subscriptions,
options, warrants, calls, rights (including pre-emptive rights), commitments,
understandings or agreements to which the Company or Subco is a party or by
which it is bound obligating the Company or Subco to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock or other voting securities
of the Company or Subco (or securities convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of the
Company or Subco) or obligating the Company or Subco to grant, extend or enter
into any such subscription, option, warrant, call, right, commitment,
understanding or agreement.

 

(iv)          All outstanding shares of Company Stock and Subco Stock are
validly issued, fully paid and non-assessable and not subject to any pre-emptive
right.

 

(v)           There is not and there will not be at the time of Closing any
stockholder agreement, voting trust or other agreement or understanding to which
the Company or Subco is a party or by which it is bound relating to the voting
of any shares of the capital stock of the Company or Subco.

 

(h)           Title to Subco Shares.  The Company is the registered and
beneficial owner of the Subco Stock and will continue to own the Subco Stock
until the time of Closing.  The Subco Stock is owned by the Company, free and
clear of all Liens, other than:  (i) Liens for which the release and undertaking
identified at Section 2.9(a)(xv) or an Encumbrance

 

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Discharge will be delivered at Closing, (ii) those that may arise by virtue of
the by-laws and articles of Subco.

 

(i)            Title to Partnership Interests.

 

(i)            The Company is the registered and beneficial owner of 99.8% of
the limited partnership interests in the Partnership, free and clear of all
Liens, other than:  (A) Liens for which the release and undertaking identified
at Section 2.9(a)(xv) or an Encumbrance Discharge will be delivered at Closing,
and (B) those that may arise by virtue of the Partnership Agreement.

 

(ii)           Subco is the registered and beneficial owner of 0.2% of the
limited partnership interests in the Partnership and is the general partner of
the Partnership, free and clear of all Liens, other than: (A) Liens for which
the release and undertaking identified at Section 2.9(a)(xv) or an Encumbrance
Discharge will be delivered at Closing, and (B) those that may arise by virtue
of the Partnership Agreement.

 

(j)            Partnership Interests.  Except as set forth in Section 3.2(i)(i)
and (ii), there are issued and outstanding (i) no partnership interests of the
Partnership; (ii) no securities of the Partnership or any other Person
convertible into or exchangeable or exercisable for partnership interests of the
Partnership; and (iii) no subscriptions, options, warrants, calls, rights
(including pre-emptive rights), commitments, understandings or agreements to
which the Partnership is a party or by which it is bound obligating the
Partnership to issue, deliver, sell, purchase, assign, pledge, mortgage, charge,
redeem or acquire partnership interests of the Partnership (or securities
convertible or exchangeable or exercisable for partnership interests of the
Partnership) or all or any portion of the Oil and Gas Assets or obligating the
Partnership to grant, extend or enter into any such subscription, option,
warrant, call, right, commitment, understanding or agreement.

 

(k)           Partners of the Partnership.  At all times since the formation of
the Partnership, the only partners (limited or general) of the Partnership have
been the Company and Subco.

 

(l)            No Undisclosed Liabilities.  To the knowledge of Seller, except
for:  (i) liabilities assumed by the Partnership or Subco pursuant to the
Inter-Company Agreement, security granted in respect of the Credit Agreement and
Credit Facility, the Indemnity Agreement, the Services Agreement, the Company
Contribution Agreement, the Subco Subscription Agreement or the Partnership
Agreement; (ii) liabilities arising in the ordinary course of the Partnership or
Subco; or (iii) liabilities which are provided for in the Unaudited Financial
Statements or the Audited Historical Statements (to the extent assumed by the
Partnership or Subco), the Partnership and Subco shall have no liabilities which
would be required by GAAP to be disclosed in a balance sheet of Subco or the
Partnership.

 

(m)          Taurus Notes.  The Taurus Notes are owned by Taurus free and clear
of all Liens.

 

(n)           GST Registrant.  Each of the Company, Subco and the Partnership
are registrants for the purposes of the Excise Tax Act (Canada).  The goods and
services tax registration number of the Company, Subco and the Partnership are
885151597RT0001, 858099575RT0001 and 858050776RT0001, respectively.

 

(o)           Material Agreements.  The Disclosure Schedule contains a complete
list of the Material Agreements and except as contemplated in the Disclosure
Schedule:

 

29

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(i)            none of the interests of the Purchased Entities in or arising
under such Material Agreements has been assigned (other than from the Company to
the Partnership pursuant to the Company Contribution Agreement) or at the time
of Closing will be subject to any Lien, other than Liens for which the release
and undertaking identified at Section 2.9(a)(xv) or an Encumbrance Discharge
will be delivered at Closing;

 

(ii)           the Purchased Entities have not terminated or cancelled any term
or condition of any such Material Agreement;

 

(iii)          each Material Agreement listed in the Disclosure Schedule
(assuming that such Material Agreements constitute a valid and binding
obligation of the counterparty thereto) constitutes a valid and binding
obligation of the applicable Purchased Entity and, to the knowledge of Seller,
the counterparties thereto, enforceable in accordance with its terms, subject to
limitations with respect to enforcement imposed by Applicable Law in connection
with bankruptcy or similar proceedings and to the extent that equitable remedies
such as specific performance and injunction are in the discretion of the courts
from which they are sought;

 

(iv)          no term or condition of any such Material Agreement has been
modified, amended or waived where the effect of such modification, amendment or
waiver extends beyond the Valuation Date; and

 

(v)           other than the termination of the Inter-Company Agreement and
termination of Product and Other Hedging Contracts in accordance with Section
5.13, no proposal or discussion with third parties for any such termination,
modification, amendment or waiver of a Material Agreement is ongoing.

 

Other than the Product and Other Hedging Contracts set out in the Disclosure
Schedule, there will be no Product and Other Hedging Contracts in effect from
and after the Valuation Date.

 

(p)           Outstanding Debt.  The Disclosure Schedule provides a complete and
accurate description of all Debt of the Purchased Entities outstanding as of the
date hereof.  At Closing, other than the Taurus Notes, there will be no Debt
between the Purchased Entities and Seller (and its Affiliates, excluding the
Purchased Entities).  The Purchased Entities are not in default in payment of
any Debt with respect to which it is an obligor, or to Seller’s knowledge, in
default of any covenant, agreement, representation, warranty or other term of
any document, instrument or agreement evidencing, securing or otherwise
pertaining to any such Debt.

 

(q)           Affiliate Transactions.  The Disclosure Schedule contains a
complete and accurate description of all current contracts, agreements and other
arrangements (whether written, oral, express or implied) between the Purchased
Entities and any Affiliate of the Purchased Entities.

 

(r)            Employment Matters.

 

(i)            Employees List.  The list of employees set out under the heading
“Employees” in the letter dated and provided by Seller to Purchaser as of the
date hereof (the

 

30

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“Employee Disclosure Letter”) is a complete and accurate list of all employees
of the Company (the “Employees”) as of the date hereof and includes the job
title or office and date of hire of each such Employee.

 

(ii)           Consultants.  The list of consultants set out under the heading
“Consultants” in the Employee Disclosure Letter is a complete and accurate list
of all consultants who provide consulting services to the Purchased Entities
(the “Consultants”) as of the date hereof.

 

(iii)          Employment Contracts.  No Employee has any written employment
agreement or any agreement with the Purchased Entities for any purpose,
including as to length of notice or severance payment required to terminate his
or her employment or retention bonus arrangement, other than as disclosed in
Schedule 3.2(r)(iii).

 

(iv)          Compliance.  To Seller’s knowledge, the Purchased Entities are in
compliance with all terms and conditions of employment and all Applicable Laws
respecting employment, including pay equity, employment equity, wages, overtime,
vacation and hours of work, and as of the date hereof, there are no claims,
complaints, investigations or orders ongoing or threatened under Applicable Law
regarding employment, including any claims for wrongful dismissal or breach of
human rights.  To Seller’s knowledge, all accruals for employment related
liabilities including, any unpaid vacation pay, premiums for employment
insurance, health care premiums, Canada Pension Plan premiums, accrued wages,
overtime, salaries, commissions, bonuses and any employment benefits provided by
any Purchased Entity to any Employee, are accurately reflected in such Purchased
Entity’s books and records.

 

(v)           OHAS.  Seller has made available to Purchaser all orders and
inspection reports under applicable occupational health and safety legislation
(“OHAS”) regarding all Employees, together with the minutes of any applicable
joint health and safety committee meetings for the past three years.  As of the
date hereof, there are no charges pending or threatened under OHAS with respect
to any Employee and, to Seller’s knowledge the Purchased Entities have complied
in all respects with any orders issued under OHAS.

 

(vi)          Union Contracts.  There is no collective agreement with any trade
union or employee association currently in force with the Purchased Entities
(whether or not the expiry date of that collective agreement has passed), the
Purchased Entities are not certified by any trade union, the Purchased Entities
have not voluntarily recognized any trade union or employee association as
representative of all or any employees and, as of the date hereof, there are no
pending or anticipated applications for certification of any bargaining unit,
notice of which has been served upon the Purchased Entities, or of which Seller
has knowledge.

 

(vii)         Benefit Plans.  The Employee Disclosure Letter sets forth a true
and complete list of each written or oral bonus, current or deferred
compensation, incentive compensation, stock purchase, stock option, severance or
termination pay, hospitalization or other medical benefits, life or other
insurance, supplemental unemployment benefits, profit sharing, pension, or
retirement plan, program, agreement or arrangement, and each other written or
oral employee benefit plan,

 

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program, policy, agreement or arrangement sponsored, maintained or contributed
to or required to be contributed to by the Purchased Entities for the benefit of
any Employee (collectively, the “Benefit Plans”).  Seller has made available to
Purchaser true, correct and complete copies of each of the Benefit Plans.  The
Purchased Entities have no formal plan or commitment, whether legally binding or
not, to create any additional Benefit Plan or to modify or change any existing
Benefit Plan that would affect any Employee, except such modification or
amendment as may be required to be made to secure the continued registration of
any existing Benefit Plan pursuant to Applicable Law, nor has any intention or
commitment to do any of the foregoing been communicated to any Employee.

 

(viii)        Agreements in Force.  Each of the Partnership Agreement, the
Company Contribution Agreement and the Services Agreement are in full force and
effect, unamended.

 

(ix)           No Employees/Subco or Partnership.  Subco and the Partnership
have not had and will, as of the Closing Date, not have any employees or
consultants.

 

(s)           Litigation.  Except as set forth in the Disclosure Schedule:  (i)
no litigation, arbitration, investigation or other proceeding is pending or, to
the knowledge of Seller, threatened against a Purchased Entity, or any of its
assets before any court, arbitrator or Governmental Authority; and (ii) the
Purchased Entities are not subject to any outstanding injunction, judgment,
order, decree or ruling (other than routine oil and gas field regulatory
orders).  There is no litigation, proceeding or investigation pending or, to
Seller’s knowledge, threatened against or affecting a Purchased Entity or Seller
that questions the validity or enforceability of this Agreement or any other
document, instrument or agreement to be executed and delivered by Seller or a
Purchased Entity in connection with the transactions contemplated hereby.

 

(t)            Tax Returns.  The Company and Subco have filed all returns,
declarations, reports, estimates, information returns and statements (“Tax
Returns”) required to be filed by the Company before Closing, or have legally
extended such returns.  All Taxes (including instalments) which are due and
payable by the Company and Subco on the date hereof have been paid and the
Company and Subco have withheld and properly remitted all amounts to be withheld
and remitted with respect to the Tax liability of any other Person.  All Tax
liabilities of the Company to September 30, 2004 are adequately provided for in
the Unaudited Financial Statements and no Tax liability of the Company has been
proposed or asserted by any Governmental Authority for Taxes in excess of those
already paid or reserved against in the Unaudited Financial Statements.

 

(u)           Tax Matters.  Except as listed in the Disclosure Schedule:

 

(i)            neither the Company nor Subco have entered into any agreement,
waiver, extension or other arrangement with any taxation authority respecting
Taxes payable by it or Tax Returns;

 

(ii)           neither the Company, Subco nor any other Person acting on its
behalf is engaged in any discussions or negotiations with any taxation
authorities in respect of Taxes of the Company or Subco, except as listed in
Schedule 3.2(u);

 

32

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(iii)          the taxation year (as defined in the Tax Act) of the Company and
Subco ends on December 31;

 

(iv)          Subco has not determined the fiscal year end of the Partnership
pursuant to Section 2.10 of the Partnership Agreement;

 

(v)           each of the Company and Subco has been, is now and will be at
Closing a taxable Canadian corporation within the meaning of the Tax Act;

 

(vi)          neither the Company nor Subco is the subject of a proposed or
actual adverse assessment or reassessment of Taxes and, to Seller’s knowledge,
no such adverse assessment or reassessment is anticipated;

 

(vii)         except as specifically disclosed to Purchaser, the undepreciated
capital cost of depreciable property (“UCC”), cumulative Canadian oil and gas
property expense (“CCOGPE”), cumulative Canadian development expense (“CCDE”),
share issue costs (“SIC”), non-capital losses (“NCL”) and cumulative Canadian
exploration expense (“CCEE”) of the Company has not been increased or reduced
since January 1, 2004, except by the Company’s operations in the ordinary course
of business.  The Company’s UCC, CCOGPE, CCDE, SIC, NCL and CCEE balances,
including successor pools, for the period commencing January 1, 2004 were
$43,031,169, $82,219,359, $33,807,346, $1,626,047, $0.00 and $0.00 respectively;

 

(viii)        since December 31, 2003, neither the Company nor Subco has
forgiven any debt or otherwise triggered any of the provisions of the Tax Act
respecting debt forgiveness; and

 

(ix)           all Debt represented by the Taurus Notes are represented by one
or more promissory notes.

 

(v)           Title to Oil and Gas Assets.  Except for Permitted Encumbrances:

 

(i)            to Seller’s knowledge, none of the Purchased Entities have done
or failed to do any act or thing (excluding any failure to drill a well which it
was not obligated to drill) whereby any of the Oil and Gas Assets may be liable
or subject to termination, surrender, forfeiture, cancellation, alienation or
reduction; and

 

(ii)           the Oil and Gas Assets are now and will be at the time of Closing
free and clear of any Lien created by, through or under the Purchased Entities.

 

(w)          Compliance with Laws.  No Purchased Entity is in violation or
default in any respect under, and no event has occurred that (with notice or the
lapse of time or both) would constitute a violation of or default under, its
constating documents; and to Seller’s knowledge, no Purchased Entity is in
violation or default in any respect under:  (i) Applicable Law (including, for
clarity, Environmental Law); or (ii) any agreement or Lease in respect of the
Oil and Gas Assets.

 

(x)            Proprietary Rights.  The Purchased Entities have ownership of, or
valid licences to use, all trademarks, copyrights, patents and other proprietary
rights and intellectual property (including seismic data) used in its business. 
To the knowledge of Seller, the operation

 

33

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of the business of the Purchased Entities does not infringe any patent,
copyright, trademark or other proprietary rights of others, and, the Purchased
Entities have not received any notice from any third party of any such alleged
infringement by any of the Purchased Entities.

 

(y)           Environmental Matters.  Except as set forth in the Disclosure
Schedule:

 

(i)            the Purchased Entities have not received any, and to Seller’s
knowledge there are no, orders or directives which relate to environmental
matters and which require any work, repairs, construction or capital
expenditures with respect to the Oil and Gas Assets, where such orders or
directives have not been complied with in all respects; and

 

(ii)           the Purchased Entities have not received any, and to Seller’s
knowledge there are no, demands or notices issued with respect to the breach of
any Environmental Law applicable to the Oil and Gas Assets, including with
respect to the use, storage, treatment, transportation or disposition of
environmental contaminants, which demand or notice remains outstanding on the
Closing Date.

 

(z)            Insurance.   The Company maintains, and through the Closing Date
the Company will maintain, the insurance described in the Disclosure Schedule.

 

(aa)         Brokers.   No broker, finder, investment banker or other Person is
or will be, in connection with the transactions contemplated by this Agreement,
entitled to any brokerage, finder’s or other fee or compensation based on any
arrangement or agreement made by or on behalf of the Purchased Entities and for
which Purchaser or any of the Purchased Entities will have any obligation or
liability.

 

(bb)         Oil and Gas Matters.

 

(i)            Good Oilfield Practices.  All operations in respect of the Oil
and Gas Assets operated by a Purchased Entity have been conducted in accordance
with good oilfield practices and all Applicable Laws and, to Seller’s knowledge,
all operations in respect of the Oil and Gas Assets not operated by a Purchased
Entity have been conducted in accordance with good oilfield practices and all
Applicable Laws.

 

(ii)           Gas Balancing Agreements.  The Purchased Entities have not
entered into any, and to the knowledge of Seller, there are no, agreements or
arrangements (commonly known as a gas balancing, swap, over-production or
underlift overlift agreements or arrangements) which are among two or more
Persons owning interests in a portion of the Lands or lands pooled or unitized
therewith, nor to the knowledge of Seller, has there been any circumstance or
case whereby one of such Persons has taken, or may hereafter take, a share of
the production of Petroleum Substances from such lands greater than it would
otherwise be entitled to by virtue of its interest in such Lands and which
excess taking entitles the other Persons to a credit in respect of subsequent
production from such lands by which a Purchased Entity is bound and which
pertain to any of the Oil and Gas Assets.

 

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(iii)          Claims Adverse in Interest.  Other than as listed in the
Disclosure Schedule, the Purchased Entities have not received notice from any
Person claiming an interest in, or that a Purchased Entity is not the beneficial
owner of, the interests in the Oil and Gas Assets claimed by a Purchased Entity
as set forth in the Property Schedule and, to Seller’s knowledge, no such claim
been threatened or is pending.

 

(iv)          AFEs.  Except as set forth in the Disclosure Schedule there are no
authorizations for expenditure, similar approvals or other financial commitments
approved by Seller or a Purchased Entity with respect to the Oil and Gas Assets
for amounts in which a Purchased Entity’s expenditure is in excess of $100,000
for which such Purchased Entity has not been completely billed and there are no
outstanding cash calls with respect to the Oil and Gas Assets for amounts in
which a Purchased Entity’s expenditure is in excess of $100,000.

 

(v)           Leased Tangibles.  Except as listed in Schedule 3.2(bb)(v), none
of the Tangibles which are operated by a Purchased Entity will be leased on or
after the Valuation Date at a monthly lease rental payment in excess of
$25,000.  The aggregate value of all leased Tangibles does not exceed $600,000.

 

(vi)          Condition of Tangibles.  To the knowledge of Seller, (A) all
Tangibles are in the condition that would reasonably be expected if they were
installed, constructed, operated and maintained in accordance with good oilfield
practices, (B) all Tangibles are in suitable condition for the purpose for which
they are currently being used, and (C) any of the Tangibles which, in accordance
with good engineering practices or in compliance with Applicable Law, should
have been replaced or repaired prior to the date hereof, has been replaced or
repaired.

 

(vii)         Production Penalties.  Except for production limits of general
application under Applicable Law, Permitted Encumbrances and as set forth in the
Disclosure Schedule (A) none of the Wells is subject to a production penalty
arising under a contract as a result of an election by a Purchased Entity or any
of the Predecessor Affiliates not to participate in a drilling or other
operation and (B) none of the Wells operated by a Purchased Entity and, to
Seller’s knowledge, none of the Wells operated by any other Person is subject to
a production or other penalty imposed under Applicable Law as a result of
overproduction or the Well being at a location for which an off-target penalty
is applicable under Applicable Law.

 

(viii)        Take or Pay and Prepayment Obligations.  To the knowledge of
Seller, none of the Purchased Entities are subject to any agreement or other
instrument requiring the repayment of payments previously made by buyers of
Petroleum Substances produced from or allocated to the Lands (or lands pooled or
unitized therewith) for volumes not delivered to such buyers and, to the
knowledge of Seller, none of the Purchased Entities are obligated to deliver any
Petroleum Substances or provide services after the Valuation Date without
receiving full payment therefor.

 

(ix)           AMIs and Areas of Exclusion.  Except as set forth in the
Disclosure Schedule, to the knowledge of Seller, there are no area of mutual
interest or area of exclusion provisions binding upon the Company.

 

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(x)            Rights of First Refusal.  Except as set forth in the Disclosure
Schedule, to the knowledge of Seller, no rights of first refusal, pre-emptive
purchase rights or similar rights applicable to the Assets have been triggered
by this Agreement and none will be triggered by the completion of the
transaction contemplated hereby.

 

(xi)           Offset Obligations.  Except as set forth in the Disclosure
Schedule, no Purchased Entity has received any notice of an offset well
obligation under any Lease that will not be satisfied prior to the Valuation
Date by the drilling of a well or the surrender of the Lease in accordance with
the provisions set forth in Sections 5.1 and 5.2.

 

(xii)          Engineering Report.  In regard to the Engineering Report (the
“Engineering Report”) dated October 11, 2004 in respect of certain of the Oil
and Gas Assets prepared by Lee Keeling and Associates, Inc. (the “Engineers”),
the Company and EXCO made available to the Engineers all information in the
possession or control of EXCO and the Company which the Engineers requested in
connection therewith and, to the knowledge of Seller, such information was
accurate and complete in all respects; provided that Seller does not represent
or warrant the accuracy of any estimates of future production or operating costs
provided by the Company or EXCO to the Engineers and provided that, except as
expressly set forth in this Subsection, Seller does not make any representation
or warranty with respect to the Engineering Report.

 

(cc)         Books and Records.  All minute books, books, records and files of
the Purchased Entities have been prepared, assembled and maintained in
accordance with usual and customary industry policies and procedures.

 

(dd)         Dividends and Distributions.  Except as set forth in Schedule
3.2(dd):

 

(i)            since September 30, 2004, none of the Company or Subco has
declared, authorized or paid any dividends or made or obligated itself to make
any other distributions or payments to its shareholder(s);

 

(ii)           there are no dividends declared or other distributions or
payments that are unpaid or due to be paid by the Company or Subco to its
shareholder(s); and

 

(iii)          since September 30, 2004, other than pursuant to the Services
Agreement, none of the Company or Subco has paid any corporate, management or
other fee or amount to Seller, its Affiliates or any of their directors,
officers or employees (other than salary and benefits paid in accordance with
past practices).

 

(ee)         Non-Arm’s Length Receivables and Payables.  At Closing, none of the
Purchased Entities will have any accounts, notes or loans receivable from or
payable to any of its directors, officers or employees, or to Seller or its
Affiliates (other than the Severance Payments, the Taurus Notes and salary and
benefits paid in accordance with past practices).

 

(ff)           All Documents and Records Made Available.  To the knowledge of
Seller, all documents, records and files respecting the Purchased Entities, the
Company Stock and the Oil and Gas Assets, including the financial, tax and
operational records in the possession or under the control of Seller or the
Purchased Entities that is reasonably required to evaluate and assess the
Purchased Entities, the Assets and the business and liabilities of the Purchased

 

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Entities, other than title files, matters relating to environmental liabilities
and matters in the public domain have been made available to Purchaser prior to
the date hereof.

 

(gg)         No Change of Control Provisions.  To the knowledge of Seller, other
than as set forth in the Disclosure Schedule, there are no provisions of any
contracts to which any of the Purchased Entities are a party or by which they
are bound which, individually or in the aggregate, will result in a Material
Adverse Effect because of the transfer of the Company Stock to Purchaser
pursuant hereto, including provisions of seismic licensing agreements which will
require the payment of a fee because of such transfer.

 

(hh)         Bank Accounts.  The Disclosure Schedule contains a complete and
correct list of all bank accounts and safety deposit boxes maintained by the
Purchased Entities.

 

(ii)           No Merger Agreements.  The Purchased Entities are not party to
any contract or agreement to merge or consolidate with any other Person, to
acquire from and after the date hereof substantially all of the assets or shares
of any other Person, to capitalize or invest in any business or entity or to
sell all or any part of the Assets.

 

(jj)           Partnership and Subco’s Activities.

 

(i)            Prior to December 23, 2004, Subco owned no assets, properties,
rights or interests.

 

(ii)           Prior to January 7, 2005, the Partnership owned no assets,
properties, rights or interests.

 

(iii)          Since December 23, 2004 (A) the only activities of Subco have
been in respect of its acquisition and ownership of its partnership interest in
the Partnership and serving as general partner of the Partnership, and (B) the
activities and business, as the case may be, of Subco have been carried on in
the ordinary course.

 

(iv)          Since January 7, 2005 (A) the only activities or business of the
Partnership has been the business conducted by it in respect of the Oil and Gas
Assets (and no other assets), and (B) the activities and business, as the case
may be, of the Partnership have been carried on in the ordinary course.

 

(kk)         Company’s Business.  The only business conducted by the Company
prior to January 7, 2005 was the ownership, exploration, development and
operation of oil and gas assets (including the Oil and Gas Assets) and
activities incidental thereto and after January 7, 2005 is, and as of the
Closing Date will be, the ownership of partnership interests in the Partnership
and shares in Subco and all activities incidental thereto (including pursuant to
the Services Agreement).  As of the Closing Date, the Company will have never
conducted any business other than the ownership of the partnership interests in
the Partnership and all activities incidental thereto and ownership,
exploration, development and operation of oil and gas properties in Canada and
activities incidental thereto.  The Purchased Entities have never carried on
business in any jurisdiction (whether inside or outside Canada) except Alberta,
Saskatchewan and British Columbia.

 

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3.3          Disclaimer

 

Except as specifically provided in this Article 3, Seller does not warrant title
to the Oil and Gas Assets, nor does Seller make any other representation or
warranty to Purchaser including in respect of any matter or thing related to the
environment.  On Closing, Purchaser shall be deemed to have acknowledged that it
has had an opportunity to inspect and review the Oil and Gas Assets, including
all environmental matters relating to the Oil and Gas Assets and the Lands, the
Purchased Entities, and all books records, accounts, documents and information
of the Purchased Entities, and, except for the representations set forth in this
Article 3, is relying solely upon its own counsel, environmental consultants and
due diligence respecting the Purchased Entities and the Oil and Gas Assets and
the Lands.  Except as specifically provided in this Article 3, Seller makes no
warranty or representation, express or implied in fact or by law, with respect
to:

 

(a)           merchantability or fitness for any particular purpose of the
Tangibles;

 

(b)           the environmental condition or any environmental liability of any
Oil and Gas Asset or any Lands;

 

(c)           the value of the Purchased Entities, or the Oil and Gas Assets or
the future revenues applicable thereto; or

 

(d)           any engineering information or interpretations thereof, economic
evaluations or environmental assessments or any other information or documents
supplied to Purchaser or its representatives or professional advisers respecting
the Oil and Gas Assets and the Lands.

 

Seller expressly negates and disclaims, and shall not be liable for, any
representation or warranty which may have been made or alleged to be made in any
other document or instrument in connection herewith or in any statement or
information made or communicated to Purchaser in any manner (including
engineering reports, environmental assessments and any opinion, information or
advice which may have been provided by Seller, a Purchased Entity, or any
officer, employee, agent, solicitor, accountant, consultant, professional
advisor or representative of Seller or a Purchased Entity).

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

4.1          Purchaser’s Representation

 

Purchaser represents and warrants to Seller as follows:

 

(a)           Organization.  Purchaser:  (i) is a corporation duly organized,
validly existing and in good standing under the laws of its place of
incorporation; (ii) has the requisite power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted; and (iii) is duly qualified to do business, and is in good standing,
in each jurisdiction where the character of the properties owned or leased by it
or the nature of its activities makes such qualification necessary.

 

(b)           Authority and Enforceability.  Purchaser has the requisite
corporate power and authority to enter into and deliver this Agreement and to
consummate the transactions contemplated hereby.  The execution and delivery of
this Agreement and the

 

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consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser, including
approval by the board of directors of Purchaser, and no other corporate
proceedings on the part of Purchaser are necessary to authorize the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby.  This Agreement has been duly and validly executed and delivered by
Purchaser and all other documents executed and delivered pursuant hereto will,
when executed and delivered, be duly authorized, executed and delivered by
Purchaser and this Agreement does, and such documents will when executed and
delivered and (assuming that this Agreement constitutes a valid and binding
obligation of Seller) constitute a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.

 

(c)           No Violations.  The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and compliance
by Purchaser with the provisions hereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under, or result in the creation of any
Lien on any of the properties or assets of Purchaser under, any provision of:

 

(i)            the certificate or articles of incorporation or by-laws or other
governing documents of Purchaser;

 

(ii)           any loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, licence or other agreement or instrument
applicable to Purchaser; or

 

(iii)          assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 4.1(d) are duly and timely
obtained or made, any Applicable Law applicable to Purchaser or any of its
respective properties or assets.

 

(d)           Consents and Approvals.  No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to Purchaser in connection
with the execution and delivery of this Agreement by Purchaser or the
consummation by Purchaser of the transactions contemplated hereby, except for
the Competition Act Approval.  No Third-Party Consent is required by or with
respect to Purchaser in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

 

(e)           Litigation.  There is no litigation, proceeding or investigation
pending or, to the knowledge of Purchaser, threatened against or affecting
Purchaser that questions the validity or enforceability of this Agreement or any
other document, instrument or agreement to be executed and delivered by
Purchaser in connection with the transactions contemplated hereby.

 

(f)            Funding.  Purchaser has available adequate funds in an aggregate
amount sufficient to pay:  (i) all amounts, including the Purchase Price,
required to be paid by Purchaser under this Agreement; and (ii) all expenses
which have been or will be incurred by Purchaser in connection with this
Agreement and the transactions contemplated hereby.

 

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(g)           Brokers.  No broker, finder, investment banker or other Person is
or will be, in connection with the transactions contemplated by this Agreement,
entitled to any brokerage, finder’s or other fee or compensation based on any
arrangement or agreement made by or on behalf of Purchaser and for which Seller
will have any obligation or liability.

 

(h)           Acting as Principal.  Purchaser is acquiring the Company Stock and
Taurus Notes as principal and will acquire on its own behalf all of the Company
Stock and Taurus Notes on the Closing Date for cash payable on the Closing Date.

 

(i)            Income Tax Act Residency.  Purchaser is not a non-resident of
Canada for the purposes of the Tax Act.

 

(j)            Future Existence.  There is no present plan or intention for
Purchaser to cease to remain in existence.

 

(k)           Investment Canada Act.  Purchaser is a Canadian for the purposes
of the Investment Canada Act.

 

ARTICLE 5
COVENANTS

 

5.1          Conduct of Business by the Company Pending Closing

 

Except as contemplated by this Agreement, and as otherwise set forth in the
Disclosure Schedule, or to the extent that Purchaser shall otherwise consent in
writing, during the period from the date of this Agreement to the Closing,
Seller shall take all such action such that a Purchased Entity will not take any
action except in the ordinary course of business and the applicable Purchased
Entity will operate and maintain the Oil and Gas Assets that it operates in a
proper and prudent manner in accordance with good oil, gas and engineering
practices and will use all reasonable efforts to ensure other operators do the
same.  Without limiting the generality of the foregoing, except as contemplated
by this Agreement, the Purchased Entities will not engage in any practice, take
any action, or enter into any transaction outside the ordinary course of
business.  Without limiting the generality of the foregoing, Seller shall take
all such action such that the Company, the Partnership or Subco (as appropriate)
will not take any of the following actions, except in an emergency in order to
prevent loss of life, injury to persons or damage to or loss of property and
except as set forth in the Disclosure Schedule, without the written consent of
Purchaser, which consent shall not be unreasonably withheld or delayed:

 

(a)           authorize or effect any change in its constating documents, except
that the Company may amend its certificate of incorporation prior to Closing to
change its name (to a name selected by Purchaser and not containing the name
“Addison”);

 

(b)           grant any options, warrants or other rights to purchase or obtain
any of the capital stock of the Company or Subco or issue, sell or otherwise
dispose of any of the capital stock of the Company or Subco;

 

(c)           grant any options, warrants or other rights to purchase or obtain
any of the partnership interests of the Partnership or issue, sell or otherwise
dispose of any of the partnership interests of the Company or Subco, except in
each case as contemplated in the Company Contribution Agreement and Subco
Subscription Agreement;

 

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(d)           issue any note, bond or other Debt security or create, incur,
assume, or guarantee any indebtedness for borrowed money or capitalized lease
obligation other than the Purchaser Note, the Debt incurred under the Product
and Other Hedging Contracts disclosed in the Disclosure Schedule and Debt
reflected by the Taurus Notes and the Credit Facility (for the purposes
described in the Disclosure Schedule) and interest accruing on all such Debt in
accordance with the terms thereof;

 

(e)           mortgage, encumber or impose any security interest upon any of the
Oil and Gas Assets;

 

(f)            make any capital investment in, make any loan to, or acquire the
securities or assets of any other Person outside the ordinary course of business
or in an amount of more than $100,000;

 

(g)           enter into, adopt or amend any employment agreement or pension,
retirement, profit sharing, deferred compensation, change-in-control, retention,
severance, stock or cash bonuses, stock option, incentive, health, life
insurance, disability or other benefit or, employee related plan, or grant, or
become obligated to grant, any increase in the compensation payable or to become
payable to any of its officers or employees or any increases in the compensation
payable or to become payable to its employees, other than actions otherwise
contemplated by Section 10.4;

 

(h)           acquire (including by lease) any assets or properties with a value
of $100,000 or greater, and except for Lands, Leases and Oil and Gas Assets that
are scheduled to expire according to their terms, no Purchased Entity shall
dispose of or surrender any of its Oil and Gas Assets except for any agreements
previously agreed to and identified in the Disclosure Schedule;

 

(i)            waive, release, terminate, grant or transfer any rights or
modify, change or enter into in any respect any licence, lease, contract or
other document with a value of $50,000 or greater, other than actions otherwise
contemplated by this Agreement;

 

(j)            make any individual or series of related capital expenditures of
$100,000 or more net to the applicable Purchased Entity’s interest;

 

(k)           hire any employees (other than temporary employees) or, other than
as contemplated in Section 10.4, terminate (without cause) any employees serving
the Company;

 

(l)            change in any respect its bookkeeping, record keeping or
accounting methods and procedures;

 

(m)          enter into any transaction with Seller or any Person not dealing at
Arm’s Length with Seller; or

 

(n)           commit to any of the foregoing.

 

If Seller or a Purchased Entity reasonably determines that any such expenditures
or actions are necessary to prevent loss of life or injury to persons or damage
to or loss of property, Seller shall, or shall cause the applicable Purchased
Entity to, give prompt notice to Purchaser of such expenditures or actions and
Seller’s or such Purchased Entity’s estimate of the costs and expenses expended
or to be expended in connection therewith.

 

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5.2          Existing AFEs

 

Notwithstanding the provisions of Section 5.1, a Purchased Entity shall be
entitled to conduct those activities and operations arising out of or incidental
to the authorizations for expenditures existing and effective as of the date
hereof (including all such authorizations as may be set forth on the Disclosure
Schedule).

 

5.3          Access to Assets, Personnel and Information

 

(a)           From the date hereof until the Closing, Seller shall cause the
Purchased Entities to afford to Purchaser and Purchaser Representatives
reasonable access to any of the assets, books, records, contracts, facilities,
audit work papers and payroll records of the Purchased Entities and any of the
officers of the Company and Subco; provided that all site visits in respect of
the Oil and Gas Assets shall be subject to the following:

 

(i)            each site visit shall be at the sole cost, risk and expense of
Purchaser;

 

(ii)           Purchaser shall, and shall cause Purchaser Representatives to,
comply with the operator’s safety and other applicable requirements applicable
to site visits; and

 

(iii)          Purchaser shall indemnify and save harmless Seller and its
directors, officers, employees, agents, advisors (including legal, accounting
and financial advisers), Affiliates or other representatives of Seller or its
Subsidiaries from all losses, damages, costs and expenses arising in connection
with the site visit, other than such losses, damages, costs and expenses arising
as a direct result of the negligence or wilful misconduct of Seller or its
Subsidiaries or their employees or agents.

 

During such period, the Purchased Entities will make available to a reasonable
number of Purchaser Representatives adequate office space and facilities at the
office facilities of the Company in Calgary, Alberta.

 

(b)           The Confidentiality Agreement will be applicable to information
made available pursuant to this Section 5.3.

 

(c)           Notwithstanding anything in this Section 5.3 to the contrary, the
Purchased Entities shall not be obligated under the terms of this Section 5.3 to
disclose to Purchaser or Purchaser Representatives, or grant Purchaser or
Purchaser Representatives access to, information that is within a Purchased
Entity’s possession or control but is subject to a valid and binding
confidentiality agreement with a third party that prohibits such disclosure
without first obtaining the consent of such third party, and Seller shall cause
such Purchased Entity, to the extent reasonably requested by Purchaser, to use
reasonable efforts to obtain any such consent.

 

(d)           The Parties shall comply with the provisions of Schedule D
regarding Privacy Legislation attached hereto.

 

5.4          Additional Arrangements

 

Subject to the terms and conditions herein provided, each of Seller and
Purchaser shall take, or cause to be taken, all action and shall do, or cause to
be done, all things necessary, appropriate or

 

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desirable under Applicable Law or under applicable governing agreements to
consummate and make effective the transactions contemplated by this Agreement,
including using reasonable efforts to obtain all necessary waivers, consents and
approvals and effecting all necessary registrations and filings.  Each of Seller
and Purchaser shall take, or cause to be taken (including actions which Seller
shall cause the Purchased Entities to take), all action or shall do, or cause to
be done, all things necessary, appropriate or desirable to cause the covenants
and conditions applicable to the transactions contemplated hereby to be
performed or satisfied as soon as practicable.  In addition, if any Governmental
Authority shall have issued any order, decree, ruling or injunction, or taken
any other action that would have the effect of restraining, enjoining or
otherwise prohibiting or preventing the consummation of the transactions
contemplated hereby, each of Seller and Purchaser shall use reasonable efforts
to have such order, decree, ruling or injunction or other action declared
ineffective as soon as practicable.

 

5.5          Public Announcements; Confidentiality

 

Prior to the Closing, Seller and Purchaser shall consult with each other before
any of them issues any press release or otherwise makes any public statement
with respect to the transactions contemplated by this Agreement, and Seller and
Purchaser shall not issue any press release or make any such public statement
prior to obtaining the approval of the other Parties; provided, however, that
such approval shall not be required where such release or announcement is
required by Applicable Law or the rules of a stock exchange on which securities
of the Party making the press release are listed for trading; and provided
further that Seller, a Purchased Entity or Purchaser may respond to inquiries by
the press or others regarding the transactions contemplated by this Agreement,
so long as such responses are consistent with such Party’s previously issued
press releases.  Seller and Purchaser each acknowledge and agree that non-public
information concerning the progress of the transaction contemplated by this
Agreement is confidential information.

 

5.6          Payment of Expenses

 

Except as provided in the Indemnity Agreement, each Party hereto shall pay its
own expenses incidental to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, whether
or not Closing occurs (including, in the case of Seller, expenses incurred by
the Purchased Entities) and the Purchased Entities shall not pay or reimburse
Seller for such expenses incurred prior to Closing.

 

5.7          Resignation of Directors and Officers

 

Seller shall cause each director and officer of the Company and Subco to resign
his/her position effective at Closing.

 

5.8          Exclusivity

 

(a)           Seller and its Affiliates will immediately cease and cause to be
terminated any existing solicitations, initiations, encouragement, activity,
discussions or negotiations with any parties conducted heretofore by a Purchased
Entity, Seller, or any of Seller’s or a Purchased Entity’s officers, directors,
employees, financial advisors, representatives and agents (collectively,
“Representatives”) with respect to all Take-over Proposals (as defined below).

 

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(b)           Seller will not and shall cause the Purchased Entities to not
release any third party from any confidentiality, area of exclusion or
standstill agreement between Seller or the Purchased Entities and such third
party or amend any of the foregoing.

 

(c)           From and after the date hereof, Seller will not and shall cause
the Purchased Entities to not authorize or permit any of its Representatives to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing information) or participate in or take any action to facilitate any
enquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to a Take-over Proposal from any Person, or engage in any
discussion, negotiations or inquiries relating thereto or accept any Take-over
Proposal.

 

(d)           In this Section 5.8, “Take-over Proposal” means a proposal or
offer (verbal or written) by a third party (other than by Purchaser or an
Affiliate of Purchaser), whether or not subject to a due diligence condition, to
acquire in any manner, directly or indirectly, beneficial ownership of any of
the assets of the Company or to acquire in any manner, directly or indirectly,
beneficial ownership of or control or direction over any of the outstanding
securities of the Company, whether by way of an arrangement, amalgamation,
merger, consolidation or other business combination, by means of a sale of
shares, sale of assets, tender offer or exchange offer or similar transaction
involving the Company or Seller, including any single or multi-step transaction
or series of related transactions that are structured to permit such third party
to acquire beneficial ownership of any of the assets of the Company or to
acquire in any manner, directly or indirectly, beneficial ownership of or
control or direction over any of the outstanding securities of the Company (in
all cases other than the transactions contemplated by this Agreement).

 

5.9          Prohibited Acquisitions

 

(a)           Seller shall not acquire (and shall make reasonable efforts to
ensure that no Specified Shareholder acquires) at any time during a series of
transactions or events which includes the completion of the transactions
contemplated by this Agreement any of the following:

 

(i)            units of NAL;

 

(ii)           shares of Manulife Financial Corporation or the Principal
Manulife and NAL Subsidiaries; or

 

(iii)          debt issued by NAL, Manulife Financial Corporation or the
Principal Manuflife and NAL Subsidiaries.

 

(b)           Seller shall make reasonable efforts to ensure that neither it nor
any Specified Shareholder acquires property that is Prohibited Property (or can
reasonably be expected to become Prohibited Property) at any time during a
series of transactions or events which includes the completion of the
transactions contemplated by this Agreement.

 

5.10        Insurance

 

EXCO shall: (a) maintain or cause the Company to maintain for the benefit of the
Purchased Entities the insurance set forth in the Disclosure Schedule, and (b)
at its option, cause the Company to extend the control of well insurance
described in the Disclosure Schedule to producing and non-producing wells
forming part of the Oil and Gas Assets (the “Optional

 

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Coverage”).  If any destruction or damage of the Oil and Gas Assets in excess of
$250,000 on a replacement cost basis occurs at or before the Closing Date,
Seller shall forthwith give notice thereof to Purchaser.  Seller shall in a
timely manner prepare and file or cause to be prepared and filed with its
insurers all proof of loss and claims forms.  Subject to the provisions of
Section 8.1(e), where any destruction or damage to the Oil and Gas Assets occurs
prior to the Closing Date, Purchaser shall nevertheless complete the purchase
without reduction of the Purchase Price (provided that on the Closing Date all
insurance proceeds are or have been assigned and/or made payable to the
Purchased Entities).  If an event occurs between the date hereof and the Closing
Date in respect of which the Company would have received insurance proceeds
pursuant to the Optional Coverage but which it does not receive because EXCO did
not cause the Company to maintain the Optional Coverage or caused the Company to
maintain the Optional Coverage effective after the date hereof, then the Base
Purchase Price shall be reduced by the amount of insurance proceeds in respect
of such event which the Company does not receive which it would have received if
EXCO had caused the Company to maintain the Optional Coverage effective at the
date hereof.  After the Closing, Purchaser shall maintain and cause the
Purchased Entities to maintain insurance as Purchaser deems appropriate.  There
shall be no adjustment to the Base Purchase Price in respect of amounts paid or
payable by the Purchased Entities to maintain the Optional Coverage.  If Closing
does not occur, Purchaser shall reimburse the Purchased Entities for all costs
incurred by the Company (as the case may be) to maintain the Optional Coverage.

 

5.11        Securities Information and Audited Financial Statements

 

(a)           EXCO shall prepare and deliver to Purchaser, the Audited
Historical Statements for use by the Purchaser or its Affiliates in connection
with the filing of any public disclosure documents required to be disclosed by
Purchaser or its Affiliates under Applicable Law.  Seller shall create, generate
or otherwise prepare such reports, summaries or documents in relation to its
obligations under this Section as Purchaser, acting reasonably, may request, and
all such work shall be performed at Purchaser’s cost.  Purchaser agrees not to
use the name of Seller or their Affiliates in any securities or other public
disclosure without the prior written consent of Seller, which consent may not be
unreasonably withheld, delayed or conditioned.

 

(b)           Purchaser acknowledges that NAL has filed (with the applicable
Governmental Authority) an application seeking an exemption to the requirement
under applicable securities laws for the preparation (in connection with the
proposed equity financing of NAL relating to the completion of the transactions
contemplated herein) of audited financial statements of the Company for the year
ended December 31, 2001.  Purchaser shall or shall cause NAL to diligently
pursue and make reasonable efforts to obtain, by the 7th day following the date
hereof, an order or acknowledgement from such Governmental Authority granting
such exemption.  In the event NAL or any of its Affiliates obtains such order or
acknowledgement, Purchaser shall promptly notify EXCO of same.

 

(c)           The Audited Historical Statements shall be provided by Seller to
Purchaser, its Affiliates or their respective successors and assigns on the
condition that Seller (and its Affiliates) assumes no liability whatsoever to
Purchaser (subject to the provisions of Article 9, other than pursuant to a
breach of Seller’s representation and warranty set forth in Sections 3.2(f) and
3.2(l), in each case as they pertain only to the Audited Historical Statements),
its Affiliates or their respective successors and assigns or any other Person in
respect of such Audited Historical Statements, or the accuracy or sufficiency
thereof or in

 

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connection with any claim arising out of the Audited Historical Statements and
Purchaser acknowledges for itself, and on behalf of its Affiliates and their
respective successors and assigns, that (other than as set forth in Sections
3.2(f) and 3.2(l)) Seller makes no representation or warranty with respect to
any of the Audited Historical Statements and expressly disclaims any implied or
constructive representation or warranty.

 

(d)           To the extent that Purchaser or its Affiliates uses any
information provided by Seller or its Affiliates in respect of the Purchased
Entities or the Oil and Gas Assets in connection with the proposed equity
financing of NAL relating to the completion of the transaction contemplated
herein, Purchaser (on behalf of itself, its Affiliates and their respective
successors and assigns) acknowledges that Seller (and its Affiliates) shall
assume no liability whatsoever to Purchaser or its Affiliates or their
respective successors and assigns or any other Person in connection with any
claim by a third party arising out of the use of, or reliance on, such
information by a third party in connection with such equity financing.

 

5.12        Purchaser’s Disclosure

 

From the date hereof until Closing, Purchaser will notify Seller of any
information that it or Purchaser Representatives discover (whether before or
after the date hereof) and is brought to the attention of Don Driscoll, Paul
Belliveau, Johnathon Lexier (after reasonable inquiry of Jon Myles), Evelyn
Vandenhengel, Troy Wagner and/or Stacy Stetski and by virtue of which they (or
any of them) ought to have reasonably concluded that any of the representations
and warranties of Seller set out herein are not true and accurate in all
Material respects.

 

5.13        Product and Other Hedging Contracts

 

Prior to Closing, Seller shall cause each Product and Other Hedging Contract to
be terminated or assumed by EXCO on a basis whereby there will be no liability
to any Purchased Entity in respect thereof after Closing.

 

ARTICLE 6
TITLE DEFECTS; ADJUSTMENTS TO BASE PURCHASE PRICE

 

6.1          Title Defects

 

(a)           Purchaser shall conduct its review and inspection of the title to
the Oil and Gas Assets with reasonable diligence.

 

(b)           Upon becoming aware, and in any event not later than the Defect
Notice Date, Purchaser shall give Seller written notice of the Title Defects
which are not Permitted Encumbrances and which Purchaser does not waive.  Such
notice shall specify such Title Defects in reasonable detail and the Oil and Gas
Assets directly affected thereby (the “Affected Assets”).  Such notice shall
include Purchaser’s bona fide estimate of the reduction in value of the Affected
Assets resulting from each Title Defect, broken down on an asset by asset basis.

 

(c)           If Seller receives a notice pursuant to Section 6.1(b), Seller
shall, to the extent it agrees with such notice pursuant to Section 6.1(d),
cause the Company to make reasonable efforts to cure such Title Defects not
later than 3 days prior to the Closing Date, provided

 

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that such reasonable efforts shall not require Seller or the Company to make any
payment with respect to the curing of any such Title Defect.

 

(d)           If Seller receives a notice pursuant to Section 6.1(b), then
within 7 days of such receipt, Seller shall provide notice to Purchaser as to
whether it agrees with the existence of one or more Title Defects, Purchaser’s
estimate of the reduction in value of the Affected Assets affected by such Title
Defects, and if it does not agree, provide its reasons regarding the
non-existence of one or more Title Defects, and Purchaser’s estimate of the
reduction in value of the Affected Assets affected by such Title Defects.

 

6.2          Uncured Title Defects

 

(a)           If Seller receives a notice pursuant to Section 6.1(b) in respect
of Title Defects and does not cure such Title Defects (the “Uncured Title
Defects”) then:

 

(i)            if the cumulative amount by which the value of the Affected
Assets has been reduced as a result of the Uncured Title Defects is less than or
equal to the Defect Adjustment Threshold, Purchaser shall complete the purchase
of the Company Stock and Taurus Notes without adjustments to the Purchase Price
on account of such Title Defects;

 

(ii)           subject to Section 6.2(a)(iii), if the cumulative amount by which
the value of the Affected Assets has been reduced as a result of the Uncured
Title Defects is greater than the Defect Adjustment Threshold but less than the
Defect Termination Threshold, Purchaser may elect on or before the Closing Date
to:

 

(A)          with the agreement of Seller, grant a further period of time within
which Seller may cure or remove the Uncured Title Defects;

 

(B)           waive the Uncured Title Defects and proceed with Closing; or

 

(C)           not waive the Uncured Title Defects, in which event the Purchase
Price (by adjustment to the Base Purchase Price or by post-Closing adjustment if
required as a result of the application of Section 6.2(a)) shall be reduced by
the value agreed to in accordance with Section 6.1(d) or determined in
accordance with Section 6.2(b) which is above the Defect Adjustment Threshold
and proceed with Closing; and

 

(iii)          if the cumulative amount by which the Base Purchase Price has
been reduced as a result of the Uncured Title Defects not waived by Purchaser is
equal to or greater than the Defect Termination Threshold, then Seller or
Purchaser may elect to terminate this Agreement in its entirety by written
notice to the other no later than one Business Day prior to Closing.

 

Failure by Purchaser to elect or to elect in a timely manner shall be
conclusively deemed to be an election to waive all Uncured Title Defects.

 

(b)           If Seller delivers a notice regarding Title Defects pursuant to
Section 6.1(d) disagreeing with Purchaser on the validity or the amount of a
Title Defect, then for purposes of the allocation of value to any particular
portion of the Oil and Gas Assets for the purposes of Section 6.2(a), Seller and
Purchaser shall meet and use reasonable efforts to agree on the

 

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validity of the Title Defect and the amount of any required adjustment to the
Base Purchase Price.  In determining any required adjustment to the Base
Purchase Price, it is the intent of the Parties to include, when possible, only
that portion of the Oil and Gas Assets adversely affected by the Uncured Title
Defect.  If the Parties cannot mutually agree on the adjustment to the Base
Purchase Price for an Uncured Title Defect, then within 3 Business Days of
notice of disagreement being given by Seller to Purchaser pursuant to Section
6.1(d), each Party shall submit the determination of the reduction in the value
of the Oil and Gas Assets adversely affected by the Uncured Title Defects
(which, in the case of Purchaser, need not be, but may not be higher than, the
reduction in values of such Affected Assets set forth in its notice delivered in
accordance with Section 6.1(b) or which, in the case of Seller, need not be, but
may not be lower than, the reduction in values of such Affected Assets set forth
in its notice delivered in accordance with Section 6.1(d)), together with a
written statement as to how such reduction in values was determined, to the
Title Evaluator, together with written instructions that:

 

(i)            the Title Evaluator, to the extent that it may be necessary, may
engage an independent expert to advise the Title Evaluator on the value of an
Uncured Title Defect;

 

(ii)           the Title Evaluator, in accordance with good legal, engineering
and evaluation practices, shall determine the validity of the Title Defect and
shall select a value for each of the Affected Assets from and based only upon
the written statements and values submitted by the Parties to the Title
Evaluator, provided that the Title Evaluator must select either Purchaser’s or
Seller’s proposed value and shall not be entitled to propose a compromise
settlement;

 

(iii)          such evaluation must be completed within 5 Business Days from the
date of submission; and

 

(iv)          in the event the aggregate values for the Title Defects are agreed
or determined by the Title Evaluator to be higher than the Defect Termination
Threshold, then either Seller or Purchaser may elect to terminate this Agreement
in its entirety by written notice to the other.

 

The fees and other costs to be paid to the Title Evaluator in respect to the
services performed by it shall be borne in equal shares by Seller and
Purchaser.  If a Party fails to provide a written statement of reduction in
value to the Title Evaluator together with its written instructions as set out
herein, then the Title Evaluator shall select the other Party’s determination of
reduction in value and the transaction shall proceed.

 

(c)           Notwithstanding the reduction of the Purchase Price pursuant to
Section 6.2(a)(ii)(C), Purchaser agrees that if Seller is able to cure or
rectify a Title Defect with respect to any particular portion or portions of the
Affected Assets within a period of 180 days after the Closing Date, Purchaser
shall pay to Seller, as an increase in the Purchase Price, the amount by which
the Purchase Price was reduced in respect of such Affected Assets, within ten
days after Purchaser has been notified of such cure or rectification, provided
Purchaser is satisfied (acting reasonably) that such Title Defect has been cured
or rectified.

 

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6.3          Additional Adjustments to Base Purchase Price

 

(a)           The Base Purchase Price will be adjusted, without duplication:

 

(i)            upward or downward, as applicable, by the Company’s positive or
negative consolidated Working Capital Balance as of the Valuation Date;

 

(ii)           upward by an amount equal to all capital contributions and loan
advances provided to the Company by Seller after the Valuation Date and through
to Closing;

 

(iii)          except to the extent taken into account in the determination of
the Working Capital Balance, downward by the aggregate amount of the Severance
Adjustments for all Employees terminated pursuant to Sections 10.4(b), (c) and
(d);

 

(iv)          except to the extent taken into account in the determination of
the Working Capital Balance, downward by the aggregate amount of the Retention
Bonus Payments;

 

(v)           except to the extent taken into account in the determination of
the Working Capital Balance, upward or downward, as applicable, by:

 

(A)          the aggregate of all settlement amounts on account of the
Inter-Company Agreement paid or payable to EXCO by the Company after the
Valuation Date and through to Closing less the aggregate of all settlement
amounts on account of the Inter-Company Agreement paid or payable by EXCO to the
Company after the Valuation Date and through to Closing; and

 

(B)           the aggregate of all amounts on account of all Product and Other
Hedging Contracts (other than the Inter-Company Agreement) paid or payable to
any third party by the Company after the Valuation Date and through to Closing
less the aggregate of all amounts on account of such Product and Other Hedging
Contracts paid or payable to the Company by any third party after the Valuation
Date and through to Closing;

 

(vi)          except to the extent taken into account in the determination of
the Working Capital Balance, downward by the amount of any dividends (other than
the dividend described in Schedule 5.1), corporate, management or other fees or
amounts, distributions, interest payments made to Seller or its Affiliates
(excluding the Company) after the Valuation Date and through to Closing and
repayments of the principal amount of intercorporate loans made to the Company;

 

(vii)         downward by the amount of any prepayment obligation, change of
control penalty or other payment, liability or obligation of the Company arising
out of or in connection with the Credit Facility that is triggered as a result
of the prepayment or early termination thereof, any change of control of the
Company or any increase of the borrowing base under the Credit Agreement and
which was not included in the Payout Statement;

 

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(viii)        downward by the amount of any adjustment required pursuant to
Section 5.10; and

 

(ix)           upward by the amount of interest calculated on the Base Purchase
Price at the annual rate equal to the Prime Rate from and after the Valuation
Date to but excluding the Closing Date.

 

(b)           For purposes hereof, the Company’s consolidated “Working Capital
Balance” shall be equal, without duplication, to the aggregate cash and
equivalents, accounts receivable, inventory, prepaid expenses, intercompany
receivables and other current assets of the Company, Subco and the Partnership
as of the Valuation Date, less the aggregate accounts payable, accrued
liabilities, current portion of asset retirement obligations, derivative
financial instruments, interest payables (excluding interest accrued on
intercorporate debt) and other current liabilities as of the Valuation Date
(including liabilities for Taxes estimated for the period ending on the
Valuation Date but excluding deferred Taxes and costs, if any, incurred by the
Company in respect of the maintenance of the Optional Coverage and also
excluding all Taxes and other amounts Purchaser is liable to reimburse to the
Purchased Entities or indemnify the Purchased Entities for pursuant to the
Indemnity Agreement).  The Working Capital Balance will be determined in
accordance with GAAP applied on a basis consistent with past practices (except
as modified by the definition of Working Capital Balance set forth above).

 

(c)           No later than 5 Business Days before Closing, Seller will deliver
to Purchaser a statement setting forth:

 

(i)            the Base Purchase Price as adjusted pursuant to Sections 6.2 and
6.3, other than Severance Adjustments to be made after Closing pursuant to
Section 6.3(g)(ii); and

 

(ii)           the Payout Statement;

 

(collectively, the “Closing Statements”).

 

At Closing, Purchaser shall be required to pay Seller based on the Closing
Statements.

 

(d)           Within 90 days following Closing, the Parties shall co-operate in
preparing, on the basis of information available within such period, a final
statement of the Working Capital Balance, including any adjustments for any
pre-Valuation Date occurrence items recorded or that should have been recorded
subsequent to the Valuation Date, and upon agreement on such adjustments the net
amount thereof shall be remitted by the Party who is obliged to make payment
within 30 days of determination of such net amount.  In this regard Purchaser
shall provide reasonable access to Seller or its representatives to any general
ledger information pertaining to the Company.  If amounts are not paid when due,
such amounts will thereafter bear interest until paid at the Prime Rate.

 

(e)           A Party will be required to make an adjustment pursuant to this
Section after the period referenced in Section 6.3(d) if:

 

(i)            the adjustment arises from a Crown royalty audit commenced not
later than 48 months after the calendar year in which Closing occurs and a
written request for

 

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the adjustment is given by one Party to the other Party within 120 days of the
requesting Party’s receipt of the results of the audit;

 

(ii)           the adjustment arises from a joint venture audit under a Title
and Operating Document commenced not later than 26 months after the end of the
calendar year in which Closing occurs and a written request for the adjustment
is given by one Party to the other Party within 120 days of the requesting
Party’s receipt of the final results of the audit;

 

(iii)          the adjustment arises from a Thirteenth Month Adjustment within
12 months after the Closing Date and a written request for the adjustment is
given by one Party to the other Party within 120 days of the requesting Party’s
receipt of the results of the Thirteenth Month Adjustment; or

 

(iv)          the adjustment is made pursuant to Section 6.3(g)(ii)).

 

Purchaser shall promptly notify Seller of any adjustments received by Purchaser
or a Purchased Entity after the Closing Date pursuant to the foregoing
subsections which are for the benefit of Seller.

 

(f)            If the Parties fail to reach agreement as to the additional
adjustments in accordance with this Section other than the determination of a
Severance Adjustment, then the Parties shall, as soon as possible after such
disagreement is identified, submit the matter to a mutually agreeable accounting
firm (the “Third Party Accountants”) for final determination.  The decision of
the Third Party Accountants shall be final and binding upon the Parties.  The
Parties shall each submit to the Third Party Accountants all relevant
information in their possession regarding the matter in dispute and shall use
all reasonable efforts to supply such further information as may be requested,
from time to time, by the Third Party Accountants.  The Third Party Accountants
shall be required to render their decision in respect of the dispute within 5
Business Days of being supplied all information in respect thereof, and shall be
jointly instructed as such by the Parties.  The Party required to pay the other
in accordance with the decision of the Third Party Accountants, shall do so
within 5 days of their receipt of the Third Party Accountants’ decision.  Each
of the Parties shall bear its own expenses in connection with this dispute
resolution procedure and shall each bear equally the expenses of the Third Party
Accountants.

 

(g)           A Severance Adjustment in respect of an Employee shall be made as
follows:

 

(i)            if the amount of the Severance Adjustment has been determined at
least 5 Business Days prior to Closing, the Severance Adjustment shall be made
at Closing by a downward adjustment of the amount payable by Purchaser at
Closing; and

 

(ii)           otherwise, the Severance Adjustment shall be made by payment of
the amount thereof by Seller to Purchaser not later than 15 days after the
amount of the Severance Adjustment is determined.

 

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ARTICLE 7
CONDITIONS

 

7.1          Conditions to Each Party’s Obligation to Proceed with Closing

 

The respective obligations of each Party to proceed with Closing shall be
subject to the satisfaction, at or prior to the Closing, of the following
conditions:

 

(a)           Approvals.  All filings required to be made prior to the Closing
with, and all consents, approvals, permits and authorizations required to be
obtained prior to the Closing from, any Governmental Authority or other Person
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Parties shall have
been made or obtained (as the case may be) including the Competition Act
Approval, except where the failure to obtain such consents, approvals, permits
and authorizations would not be reasonably likely to result in a materially
adverse impact on Purchaser (assuming Closing has taken place) or have a
materially adverse impact on the consummation of the transactions contemplated
by this Agreement or are not required to be obtained until after Closing.

 

(b)           No Injunctions or Restraints.  No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transaction contemplated by this Agreement shall be in
effect; provided, however, that prior to invoking this condition, each Party
shall use all reasonable efforts to have any such decree, ruling, injunction or
order vacated, and, if necessary, the Closing shall be delayed for up to 60 days
while such efforts are taking place.

 

7.2          Conditions to Obligations of Purchaser

 

The obligations of Purchaser to proceed with Closing are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Purchaser:

 

(a)           Representations and Warranties.  The representations and
warranties of Seller set forth in Article 3 shall be true and correct in all
respects as of the date hereof and as of the Closing Date as though made on and
as of that time (except that any such representations and warranties which
expressly relate only to an earlier date shall be true and correct on the
Closing Date as of such earlier date) except to the extent that does not, in the
aggregate, have a Material Adverse Effect on the value of the Company Stock, the
Subco Stock, the partnership interests of the Partnership and the Oil and Gas
Assets, as a whole, and Purchaser shall have received a certificate signed by an
officer of Seller to such effect; provided, however, that the condition set
forth in this Section 7.2(a) shall not be applicable to the representations and
warranties regarding title in Section 3.2(v).

 

(b)           Performance of Covenants and Agreements by the Company and
Seller.  The Purchased Entities and Seller shall have performed in all respects
all covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing Date except to the extent that does not, in
the aggregate, have a Material Adverse Effect on the value of the Company Stock,
the Subco Stock, the partnership interests of the Partnership and the Oil and
Gas Assets, as a whole, and Purchaser shall have received a certificate signed
by an officer of Seller to such effect.

 

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(c)           No Material Adverse Change.  Since the date of this Agreement,
there shall not have been any changes in the business, assets, results of
operations or condition (financial or otherwise) of the Company which,
individually or in the aggregate, has or could reasonably be expected to have, a
Material Adverse Effect, excluding, however, changes resulting from the Company
Contribution Agreement, commodity price movements, the Product and Other Hedging
Contracts disclosed in the Disclosure Schedule or resulting from legislation,
regulatory action or general economic conditions that may impact the energy
industry and Purchaser shall have received a certificate signed by an officer of
the Seller certifying that to the knowledge of Seller no such Material Adverse
Effect has occurred.

 

(d)           Closing Documents.  Purchaser shall have received delivery of all
documents required to be delivered by Seller pursuant to Section 2.9(a).

 

(e)           Board Approval.  The board of directors of EXCO shall have
ratified the execution and delivery of this Agreement and shall have approved
the entering into of the transactions contemplated by this Agreement no later
than 5 Business Days from the date hereof.

 

(f)            Lender Consent.  The lenders under the U.S. Credit Agreement
shall have provided written consent to the entering into of the transactions
contemplated by this Agreement no later than 5 Business Days from the date
hereof.

 

7.3          Conditions to Obligations of Seller

 

The obligations of Seller to proceed with Closing are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Seller:

 

(a)           Representations and Warranties.  The representations and
warranties of Purchaser set forth in Article 4 shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as though
made on and as of that time (except that any such representations and warranties
which expressly relate only to an earlier date shall be true and correct on the
Closing Date as of such earlier date), and Seller shall have received a
certificate signed by an officer of Purchaser to such effect.

 

(b)           Performance of Covenants and Agreements by Purchaser.  Purchaser
shall have performed all covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing Date, and Seller shall have
received a certificate signed by an officer of Purchaser to such effect.

 

(c)           Payment.  All amounts and other consideration to be paid by
Purchaser to Seller shall have been paid to Seller by Purchaser in accordance
with this Agreement.

 

(d)           Closing Documents.  Seller shall have received delivery of all
documents to be delivered by Purchaser pursuant to Section 2.9(b).

 

(e)           Board Approval.  The board of directors of EXCO shall have
ratified the execution and delivery of this Agreement and shall have approved
the entering into of the transactions contemplated by this Agreement no later
than 5 Business Days from the date hereof.

 

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(f)            Lender Consent.  The lenders under the U.S. Credit Agreement
shall have provided written consent to the entering into of the transactions
contemplated by this Agreement no later than 5 Business Days from the date
hereof.

 

7.4          Competition Act Filings

 

Purchaser shall promptly (and, in any event, within 7 days following the
granting of the ratification and approval specified in Sections 7.2(e) and
7.3(e) and the consent specified in Sections 7.2(f) and 7.3(f)) file a request
for an advance ruling certificate under the Competition Act  in respect of the
transactions herein, and the applicable filing fee and all Taxes thereon shall
be for the account of Purchaser.  Notwithstanding the foregoing, Seller shall
co-operate with and provide reasonable assistance to Purchaser in the
preparation of such request.  Purchaser shall provide to Seller in advance
copies of all applications and filings for approval by Seller, not to be
unreasonably withheld.  Purchaser shall provide Seller with copies of all such
approvals immediately upon receipt of same.

 

7.5          Efforts to Satisfy Conditions

 

Each Party shall use all commercially reasonable efforts to cause the conditions
set forth in Sections 7.1, 7.2 and 7.3 that are within its reasonable control to
be satisfied.  EXCO shall use its reasonable efforts to cause its board of
directors to hold such meetings on or prior to 5 Business Days from the date
hereof to consider the ratification of this Agreement and the approval of the
entering into of the transactions contemplated by this Agreement, as may be
applicable.  Each Party shall provide such information and co-operation to the
other Parties as they may reasonably request in connection with the satisfaction
of such conditions.  Upon satisfaction of same, EXCO shall provide written
notice to Purchaser that the conditions set forth in Sections 7.3(e) and 7.3(f)
were satisfied, such notice to be provided to Purchaser no earlier than 3:00
p.m. on the day which is the 5th Business Day from the date hereof.

 

7.6          Waiver of a Condition

 

A Party may waive a condition in Sections 7.1, 7.2 or 7.3 that is for its
benefit in whole or in part without prejudice to:

 

(a)           any of its rights in the event of non-satisfaction of any other
condition set forth in Sections 7.1, 7.2 or 7.3 that is for its benefit;

 

(b)           any of its rights in respect of the breach of any representation
or warranty made by the other Party in this Agreement, whether similar or
dissimilar to the condition waived; or

 

(c)           any of its rights in respect of the non-performance by Seller of
any covenant of the other Party in this Agreement, whether similar or dissimilar
to the condition waived.

 

ARTICLE 8
TERMINATION

 

8.1          Termination Rights

 

This Agreement may be terminated at any time prior to the Closing:

 

(a)           by mutual written consent of Purchaser and Seller;

 

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(b)           by either Seller or Purchaser if (i) the Closing has not occurred
on or before the Outside Date (provided, however, that the right to terminate
this Agreement pursuant to this clause (i) shall not be available to any Party
whose breach of any representation or warranty or failure to perform any
covenant or obligation under this Agreement (which, in the case of Seller, shall
include breach or failure of a Purchased Entity) has been the cause of or
resulted in the failure of Closing to occur on or before such date); or (ii) any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting Closing
and such order, decree, ruling or other action shall have become final and
non-appealable (provided, however, that the right to terminate this Agreement
pursuant to this clause (ii) shall not be available to any Party until such
Party has used all reasonable efforts to remove such injunction, order or decree
and such efforts may continue up to thirty (30) days after the Closing Date);

 

(c)           by Purchaser (i) if Seller has failed to comply in any Material
respect with any of its covenants or agreements contained in this Agreement and
such failure has not been, or cannot be, cured within a reasonable time after
notice and demand for cure thereof but not later than the time Closing is
scheduled to occur; or (ii) in the circumstances provided in Section 6.2(a)(iii)
or 6.2(b)(iv);

 

(d)           by Seller (i) if Purchaser has failed to comply in any material
respect with any of its respective covenants or agreements contained in this
Agreement, and such breach or failure has not been, or cannot be, cured within a
reasonable time after notice and a demand for cure thereof but not later than
the time Closing is scheduled to occur, or (ii) in the circumstance provided in
Sections 6.2(a)(iii) or 6.2(b)(iv); or

 

(e)           if a condition in Section 7.1, 7.2 or 7.3 has not been satisfied
within the time provided therefor and such condition has not been waived in
writing by the Party for whose benefit such condition has been included herein,
such Party may terminate this Agreement by written notice to the other Party on
or before the completion of Closing on the Closing Date, provided that a Party
shall not be permitted to exercise or purport to exercise any right of
termination pursuant to this Section 8.1(e) if the event or circumstances giving
rise to such right is due to the breach of any representation or warranty or
failure to perform any covenant or obligation under this Agreement by such
Party.

 

8.2          Effect of Termination

 

(a)           If this Agreement is terminated by either Seller or Purchaser
pursuant to the provisions of Section 8.1, this Agreement shall forthwith become
void, and there shall be no further obligation on the part of any Party or its
respective Affiliates, directors, officers, or stockholders except pursuant to
the provisions of Sections 2.2(b) (with respect to the disposition of the
Deposit), 4.1(g) (with respect to the indemnification provisions contained
therein), 5.3(d), 5.5 (with respect to the confidentiality provisions contained
therein), and 5.6, Schedule D, and the Confidentiality Agreement (which shall
continue pursuant to its terms).

 

(b)           If this Agreement is terminated by Purchaser pursuant to the
provisions of Section 8.1 and the event or circumstances giving rise to such
termination results from a breach of any representation or warranty or failure
to perform any covenant or obligation under this Agreement by Seller:  (i)
Purchaser shall be entitled to the Deposit and the Deposit

 

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Interest which Seller’s Solicitors shall pay to Purchaser not later than the
second Business Day after this Agreement terminates; and (ii) Purchaser shall be
entitled to recover all losses, damages, costs and expenses which it has
suffered, sustained, paid or incurred as a consequence thereof, including loss
of bargain except to the extent such losses, damages, costs and expenses exceeds
$50,000,000.  Purchaser agrees that recovery of any such losses, damages, costs
and expenses (to a maximum of $50,000,000) constitutes its sole remedy as a
result of any such termination.

 

ARTICLE 9
INDEMNIFICATION

 

9.1          Purchaser’s Indemnification of Seller

 

After the Closing, subject to Purchaser’s rights and remedies under Sections 6.3
and 9.2 and without limiting such rights and remedies, Purchaser shall
indemnify, defend and save harmless Seller, its successors and assigns and each
of their respective Affiliates, directors, officers, employees, agents and
representatives from and against any and all loss, liability, damage, cost or
expense suffered or incurred by any of them (except to the extent Purchaser is
indemnified by Seller elsewhere in this Agreement) as a direct or indirect
result of (whether before, on or after the Valuation Date):

 

(a)           any claim pertaining to a Purchased Entity, or any assets
(including the Oil and Gas Assets) or liabilities of a Purchased Entity,
including the failure to pay any liability accurately disclosed in the
Disclosure Schedule or included in the calculation of the Working Capital
Balance pursuant to Section 6.3;

 

(b)           as a direct or indirect result of the breach of any covenant,
representation or warranty of Purchaser set forth herein or a breach of any
covenant, representation or warranty of Purchaser in any document delivered at
Closing;

 

(c)           all environmental liabilities pertaining to the Oil and Gas Assets
or any Purchased Entity, whether arising prior to, on or after the Valuation
Date, including obligations and liabilities related to:

 

(i)            Abandonment and Reclamation Obligations;

 

(ii)           ground water, surface water or aquifer contamination, soil
contamination and air pollution; or

 

(iii)          improper management or disposal of toxic or hazardous substances;

 

including the effects of, and the costs of complying with any order, direction
or claim of any Governmental Authority.  Except for Purchaser’s rights and
remedies hereunder in respect of the representations and warranties contained in
Article 3 and without limiting them, none of Purchaser, the Purchased Entities,
nor any of their respective Affiliates, directors, officers, employees, agents
or representatives shall be entitled to any rights or remedies under the common
law or in equity or under any law, rule or regulation pertaining to such
environmental liabilities as against Seller or any of its Affiliates, including
the right to name Seller or any of its Affiliates as a third party to any action
commenced by any third party against Purchaser; or

 

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(d)           any claim by any third party relating to or arising from any use
of the Audited Historical Statements or any information in respect of the
Purchased Entities or the Oil and Gas Assets by Purchaser, NAL, Manufacturers
Life Assurance Company or any of their Affiliates, including any claim by any
third party that it relied on the Audited Historical Statements or any such
information in connection with its purchase or subscription of securities of
Purchaser, NAL, Manufacturers Life Assurance Company or any of their Affiliates.

 

9.2          Seller’s Indemnities

 

After the Closing, Seller shall indemnify, defend and save harmless Purchaser,
its successors and assigns and each of their respective Affiliates, directors,
officers, employees, agents and representatives (“Purchaser’s Group”) from and
against any and all loss, liability, damage, cost or expense suffered or
incurred by any of them, as a direct or indirect result of Seller’s breach of
any covenant, representation or warranty set forth herein (the “Purchaser’s
Losses”).

 

9.3          Responsibility Extends to Legal Costs and Settlements

 

Notwithstanding any provision to the contrary contained in this Article 9,
references to costs in the liability and indemnification obligations prescribed
by Sections 9.1 and 9.2 shall be deemed to include legal (on a solicitor-client
basis) and other professional fees and disbursements on a full indemnity basis,
and shall extend to settlements, satisfactions or other compromises with respect
to claims by third parties.

 

9.4          Limitations on Seller’s and Purchaser’s Indemnity Obligation

 

The indemnification obligations of Seller and Purchaser under this Article 9 are
subject to the following restrictions and limitations:

 

(a)           Purchaser’s Group shall not be entitled to seek indemnification
from Seller pursuant to Section 9.2 in respect of any act, omission,
circumstance or other matter actually known to the individuals identified in
Section 5.12 prior to or at Closing which Purchaser is required to disclose to
Seller pursuant to Section 5.12.

 

(b)           No claim by Purchaser’s Group shall be made against Seller
pursuant to Section 9.2 for any Purchaser’s Losses arising from or in respect of
Seller’s individual breach of any representation or warranty set forth herein
unless the aggregate of all Purchaser’s Losses in respect of such individual
breach exceeds an amount equal to $100,000 in which event, subject to Sections
9.4(c) and 9.4(d), Seller’s obligations for Purchaser’s Losses shall include the
entire amount of such Purchaser’s Losses.

 

(c)           No claim by Purchaser’s Group shall be made against Seller
pursuant to Section 9.2 for any Purchaser’s Losses arising from or in respect of
Seller’s breach of any representation or warranty set forth herein unless the
aggregate of all of Purchaser’s Losses in respect of all such breaches
(excluding Purchaser’s Losses in respect of Seller’s individual breach of any
representation or warranty set forth herein that are less than or equal to
$100,000) exceeds an amount equal to the Indemnity Threshold.  If the total
amount of all such Purchaser’s Losses exceeds the Indemnity Threshold, then
subject to Section 9.4(d), Seller’s obligations for Purchaser’s Losses under
Section 9.2 shall be limited to the amount by which the aggregate amount of all
of such Purchaser’s Losses exceeds the Indemnity Threshold.

 

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(d)           In no event shall Seller’s liability pursuant hereto for
Purchaser’s Losses in respect of Seller’s breach of covenant set forth herein
(other than pursuant to Sections 2.10(h) and 6.3) and the representations and
warranties set out at Sections 3.2(f), 3.2(l), 3.2(o), 3.2(r), 3.2(s), 3.2(t),
3.2(u), 3.2(v), 3.2(w), 3.2(x), 3.2(y), 3.2(bb), 3.2(cc), 3.2(ff), and 3.2(gg)
be greater, on an aggregate basis, than 50% of the Base Purchase Price. 
Inclusive of the Purchaser’s Losses described in the preceding sentence, in no
event (other than pursuant to Section 2.10(h)) shall Seller’s liability pursuant
hereto for Purchaser’s Losses be greater, on an aggregate basis, than 100% of
the Base Purchase Price.

 

(e)           Notwithstanding any other provision of this Agreement to the
contrary, Seller will not be liable for any claim for any matter in respect of
which there is a Purchaser’s Losses relating to a breach of the representations
contained in Section 3.2(t) and Section 3.2(u) (such matters, “Indemnity
Issues”) to the extent that such Purchaser’s Losses results from (i) the waiver
of any time limitation, statutory or otherwise, for any Indemnity Issue; or (ii)
a review, ruling or opinion of any Indemnity Issue by a Tax authority if
requested or initiated by Purchaser’s Group.

 

(f)            Seller shall have no liability in connection with Purchaser’s
Losses unless Purchaser shall, prior to the expiry of the applicable Survival
Period, have provided Seller with a Notice of Claim.

 

9.5          Indemnification Procedure

 

The following procedures shall be applicable to any claim by a Party (the
“Indemnitee”) for indemnification pursuant to this Agreement from the other
Party (the “Indemnitor”) in respect of a claim by a third Person:

 

(a)           upon the third Person claim being made against or commenced
against the Indemnitee, the Indemnitee shall within 10 Business Days of its
receipt thereof provide notice thereof to the Indemnitor.  The notice shall
describe the third Person claim in reasonable detail and indicate the estimated
amount, if practicable, of the indemnifiable losses that has been or may be
sustained by the Indemnitee in respect thereof.  If the Indemnitee does not
provide notice to the Indemnitor within such 10 Business Day period, then such
failure shall only lessen or limit the Indemnitee’s rights to indemnity
hereunder to the extent that the defence of the third Person claim was
prejudiced by such lack of timely notice;

 

(b)           if the Indemnitor acknowledges to the Indemnitee in writing that
the Indemnitor is responsible to indemnify the Indemnitee in respect of the
third Person claim pursuant hereto, the Indemnitor shall have the right to do
either or both of the following:

 

(i)            assume carriage of the defence of the third Person claim using
legal counsel of its choice and at its sole cost; and/or

 

(ii)           settle the third Person claim provided the Indemnitor pays the
full monetary amount of the settlement and the settlement does not impose any
restrictions or obligations on the Indemnitee;

 

(c)           the Indemnitee and the Indemnitor shall co-operate with the other
in the defence of the third Person claim, including making available to the
other Party, its directors, officers,

 

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employees and consultants whose assistance, testimony or presence is of material
assistance in evaluation and defending the third Person claim;

 

(d)           the Indemnitee shall not enter into any settlement, consent order
or other compromise with respect to the third Person claim without the prior
written consent of the Indemnitor (which consent shall not be unreasonably
withheld or delayed), unless the Indemnitee waives its rights to indemnification
in respect of the third Person claim;

 

(e)           upon payment of the third Person claim, the Indemnitor shall be
subrogated to all claims the Indemnitee may have relating thereto.  The
Indemnitee shall give such further assurances and co-operate with the Indemnitor
to permit the Indemnitor to pursue such subrogated claims as reasonably
requested by it; and

 

(f)            if the Indemnitor has paid an amount pursuant to the
indemnification obligations herein and the Indemnitee shall subsequently be
reimbursed from any source in respect of the third Person claim from any other
Person, the Indemnitee shall promptly pay the amount of the reimbursement
(including interest actually received) to the Indemnitor, net of Taxes required
to be paid by the Indemnitee as a result of any such receipt.

 

9.6          Tax Loss Indemnity Procedure

 

(a)           Without the written consent of Seller, Purchaser shall not allow
or permit any person to:

 

(i)            waive any time limitation, statutory or otherwise for any
Indemnity Issue; or

 

(ii)           request or initiate a review, ruling or opinion of any Indemnity
Issue by a Tax authority.

 

(b)           Purchaser’s Group shall, within 10 days, inform Seller of any
audit or other inquiries received by it from any Tax authority related to
Indemnity Issues.  Purchaser’s Group shall afford Seller the opportunity to
participate in all communications with Tax authorities relating to Indemnity
Issues (but only to such extent).  Seller, as agent for each Purchased Entity,
shall have the right at its own expense and employing counsel of its own choice
to communicate with the Tax authorities on all matters relating to Indemnity
Issues (but only to such extent).  Purchaser’s Group  shall not communicate with
Tax authorities in respect of Indemnity Issues unless Seller has consented to
the communication.

 

(c)           Each time that Purchaser’s Group or a Purchased Entity receives an
assessment, reassessment, confirmation or appeal or other notice in writing of
any Indemnity Issue (each of which is hereinafter referred to as an
“Assessment”), Purchaser’s Group shall deliver to Seller within 20 days of
receiving the Assessment, a copy of the Assessment together with a statement
(the “Statement”) setting out an estimate of Purchaser’s Losses arising
therefrom, on the assumption that the Assessment is valid.

 

(d)           Seller shall review the Statement and notify Purchaser’s Group
within 20 days of receiving the Statement of any disagreement with respect to
the estimate of Purchaser’s Losses contained therein, which disagreement shall
be resolved by the Parties, acting reasonably.  Should Seller elect not to
contest the Assessment in respect of Indemnity Issues, Seller shall remit the
amount of Tax comprising Purchaser’s Losses to the

 

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appropriate Tax authority within the time prescribed therefor by the Applicable
Law relating to Tax.

 

(e)           Provided that Seller has remitted to the Receiver General
(Canada), Canada Revenue Agency or such other Tax authority, as applicable, the
amount of Taxes in respect of such Indemnity Issues required to be remitted to
challenge an Assessment under any Applicable Laws, (i) Seller, as agent for each
Purchased Entity shall have the right, at its own expense and employing counsel
of its own choice to contest any Assessment to the extent that it relates to
Indemnity Issues (but only to such extent), provided that Seller gives written
notice to Purchaser of its intention to dispute the Indemnity Issues within 45
days of Seller’s receipt of a copy of the Assessment and the Statement in
respect thereof; (ii) Purchaser’s Group and the Purchased Entities shall not
communicate with any Tax authorities with respect to such Indemnity Issues
unless Seller has consented to such communication; (iii) Purchaser’s Group and
the Purchased Entities shall not take any action or agree to any settlement with
a Tax authority which pertains to such Indemnity Issues without the written
consent of Seller; and (iv) if Seller subsequently decides to abandon all or a
portion of the contest, Seller shall deliver a written notice to Purchaser of
their intention to do so at least 10 days before abandoning the contest.

 

(f)            If an Assessment relates to Indemnity Issues and to other issues,
Purchaser’s Group shall, at its own expense and employing counsel of its own
choice, have full carriage and control of the dispute of the portion of the
Assessment relating to such other issues.

 

(g)           Purchaser, the Purchased Entities, and Seller shall co-operate
with each other with respect to Indemnity Issues and shall keep each other
reasonably informed of the status or conduct related to Indemnity Issues.

 

(h)           If Seller has provided any security or paid any Tax to a Tax
authority in respect of Indemnity Issues and if any such security or Tax is
surrendered or refunded, as the case may be, by the Tax authority to any member
of Purchaser’s Group (including the Company), provided that Seller has honoured
its indemnity obligations under this Article 9, such member shall receive such
security or refund as a trustee for the benefit of Seller and shall forthwith
deliver such security or refund (net of reasonable expenses, if any, incurred
for the purpose of obtaining such security or refund) to Seller.

 

(i)            Provided that Seller has honoured its indemnity obligations under
this Article 9, if a Purchased Entity is or becomes entitled to a refund of an
amount paid to a Tax authority by a Purchased Entity or Seller on behalf of a
Purchased Entity in respect of taxation years ending on or before the Closing,
such refund, including any interest received by a Purchased Entity (net of
reasonable expenses, if any, incurred for the purpose of obtaining such refund,
and net of incremental taxes, if any, whether federal, provincial or foreign,
which as a result only of the receipt of such interest is or becomes payable or
would have become or remained payable had the Purchased Entity or the tax
authority not applied any other discretionary deductions from income or loss
carry-forwards or carry-backs against any amount included in income in respect
thereof or utilized any available tax credits) shall be paid to Seller forthwith
upon receipt thereof and, to the extent that the amount of such refund and
interest is applied as a credit against any other liability of the Purchased
Entity, upon receipt of notification of such credit.  Any amount so received by
Purchaser’s Group or a Purchased Entity which is required to pay to Seller
pursuant to this paragraph (i) shall be received by such party as a trustee for
Seller.

 

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(j)            Wherever in this Section 9.6 a Purchased Entity is required to do
any act or thing or is stated to be under any obligation of any kind whatsoever,
Purchaser’s Group shall cause such party to do such act or thing or fulfil such
obligation.

 

(k)           Notwithstanding any other provision of this Agreement to the
contrary, Seller shall not be liable for any claim in respect of an Indemnity
Issue to the extent voluntary adjustment of discretionary deductions made by or
in respect of Purchaser’s Group or a Purchased Entity after the Closing but
affecting periods ending on or prior to Closing (other than any activities,
transactions and filings to which Seller has expressly consented) increase the
Taxes of a Purchased Entity, or reduce credits or deductions otherwise available
to reduce Taxes of a Purchased Entity.

 

9.7          Consequential Damages

 

In no event shall a Party be liable in respect of the covenants, agreements,
representations, warranties and indemnities contained in this Agreement or in
any certification, agreement or other document furnished pursuant to this
Agreement for consequential, indirect or punitive damages (including any special
or incidental loss of any kind but excluding the forfeiture and return of the
Deposit and the Deposit Interest referred to in Sections 2.2 and 8.2(b),
respectively, and the damages to which Purchaser is entitled to recover pursuant
to Section 8.2(b)) suffered, sustained, paid or incurred by the other Party or
its respective Affiliates, directors, officers, employees, agents and
representatives provided that this Section shall not preclude a Party from
entitlement to indemnification for such Party’s liability to a third Person for
consequential, indirect or punitive damages which such third Person suffers,
sustains, pays or incurs.

 

9.8          Limitation on Rights or Remedies

 

Other than the Indemnity Agreement, this Article sets forth the sole rights and
remedies of each Party and its respective Affiliates, directors, officers,
employees, agents and representatives after Closing in connection with (a) the
transactions contemplated herein, and (b) any act, omission, circumstance or
other matter arising out of, resulting from, attributable to or connected with
the breach of any covenant, representation or warranty herein or in any document
delivered at Closing made by the other Party, and such first mentioned Party and
its Affiliates, directors, officers, employees, agents and representatives shall
have no further right or remedy (whether legal, equitable, fiduciary or in tort)
whatsoever, against the other Party, or its Affiliates, directors, officers,
employees, agents and representatives.

 

ARTICLE 10
INFORMATION, MATERIALS, POST-CLOSING COVENANTS AND EMPLOYEES

 

10.1        Access to Information

 

After the Closing Date, Seller may, upon reasonable notice to Purchaser and
subject to contractual restrictions relative to disclosure, have access during
business hours to the Leases and other operating documents, the Material
Agreements, books, accounts, records, minute books, Tax Returns, Tax receipts,
filings, maps, documents, files, information and materials of the Purchased
Entities that existed as at the Closing Date or relate to matters occurring
prior to the Closing Date, to the extent Seller reasonably requires such access
for the following purposes:

 

(a)           in connection with audits and filings to be made pursuant to
Section 3.2(t);

 

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(b)           in connection with Seller’s dealings with taxing or other
Governmental Authorities;

 

(c)           in connection with post-Closing rectification of Title Defects
pursuant to Section 6.2(a)(ii)(A);

 

(d)           in connection with Seller’s financial accounting and reporting
matters;

 

(e)           to comply with any Applicable Laws or ruling by any Governmental
Authority having jurisdiction;

 

(f)            in connection with any action, suit or proceeding commenced or
threatened by Purchaser, a Purchased Entity or any third party against Seller,
its Affiliates, their directors, officers, employees, agents, solicitors,
engineers, accountants or consultants or for which Seller may have any
liability; or

 

(g)           in connection with any other rights or obligations of Seller
hereunder.

 

At its cost, Seller may copy any of such information in respect of matters
arising or relating to any period of time up to and including the Closing Date,
if copies of such records would be reasonably required by Seller or its
Affiliates for any of the purposes described above.  Purchaser acknowledges that
EXCO has copied and retained, or will prior to the Closing Date copy and retain,
information disclosing the name, social insurance number, accrued salaries from
July 29, 2003 to Closing and salary as at the Closing Date of certain of the
Employees.  EXCO shall comply with all applicable privacy law in respect of such
information.

 

10.2        Retention Period

 

(a)           The general corporate records, the financial and accounting
records and the Tax Returns of the Purchased Entities that relate to or were
created with respect to matters arising or relating to the period of time to and
including the Closing Date, shall be retained, maintained in good order and good
condition and kept in a reasonably accessible location by Purchaser and the
Purchased Entities for a period of time (the “Retention Period”) beginning on
the Closing Date and ending on the later of:

 

(i)            the expiration of all applicable limitations periods for all Tax
periods beginning before the Closing Date, as such limitations periods are
provided for under the Applicable Laws or the pronouncements of all relevant
taxing authorities; or

 

(ii)           the end of such period as may be required by the Applicable Laws
or the ruling by a Governmental Authority having jurisdiction.

 

(b)           At any time prior to the expiration of the Retention Period,
Purchaser may destroy or give up possession of any such information or materials
if it first offers Seller the opportunity (by delivery of at least 60 days’
prior written notice to Seller, which notice shall contain a detailed listing of
the information and materials proposed to be destroyed, with an additional copy
of such notice delivered to the attention of Seller’s tax department), at
Seller’s expense (without any payment to Purchaser), to obtain delivery of or a
copy of so much of such information or materials as Seller, in its sole
discretion, desires.

 

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10.3        Preparation of Tax Returns

 

Seller shall prepare, consistent with past practice, all Tax Returns for the
Company and Subco which are required to be filed in respect of taxation periods
ended on or before the Closing (the “Pre-Closing Tax Returns”).  The Purchaser’s
Group shall, after its review and comment, and any reasonable revisions required
to conform to Applicable Law, cause the filing of the Pre-Closing Tax Returns
within the period prescribed under subsection 150(1) of the Tax Act.  The
Parties shall cooperate with one another and use all reasonable efforts to
complete the Pre-Closing Returns within 75 days following the Closing.  The
Purchaser’s Group shall cause the Seller to be provided with reasonable access
to the Company’s and Subco’s books and records for such purpose and for the
purpose of the preparation by EXCO of its consolidated financial statements for
the period ended December 31, 2004.

 

10.4        Employees

 

(a)           From and after the date of this Agreement and prior to the Closing
Date, Seller acknowledges that Purchaser or any Affiliate may interview the
Employees and Consultants for the purpose of assessing their potential role
within the Purchased Entities or an Affiliate or manager of Purchaser after
Closing.  Purchaser agrees that it will not commence interviews with Employees
or Consultants until Seller and Purchaser agree upon an orderly process for
scheduling and conducting such interviews, each Party to act reasonably in that
regard in order to develop that process as soon as reasonably practicable.

 

(b)           Seller shall cause the Company to terminate the employment of
Steve Fagan, Dennis McIntyre, Terry Trudeau, Greg Robb and Neil Burrows
effective on the Closing Date and subject to Closing occurring.

 

(c)           If Purchaser advises Seller not later than 5 Business Days prior
to the Closing Date that Purchaser has not identified a permanent role for an
Employee within the Purchased Entities or an Affiliate or manager of Purchaser
after Closing, EXCO shall cause the Company to terminate its employment of such
Employee effective on the Closing Date and subject Closing occurring.

 

(d)           After Closing, Purchaser may advise Seller not later than May 31,
2005 that Purchaser has not identified a permanent role for any other Employee
within the Purchased Entities or an Affiliate or manager of Purchaser and that
Purchaser has terminated the employment of such Employee.

 

(e)           If an Employee’s employment is terminated pursuant to Section
10.4(b), (c) or (d), the Base Purchase Price shall be reduced by an amount (a
“Severance Adjustment”) equal to:

 

(i)            if the Employee is terminated on the Closing Date pursuant to
Section 10.4(b) or (c) and agrees to accept an amount in full satisfaction of
his or her entitlement to a Severance Payment and delivers a release of his or
her entitlement to any Severance Payment in excess of that amount to the Company
at or before Closing, the Severance Adjustment for such Employee shall be equal
to the amount the Employee has agreed to accept; and

 

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(ii)           in all other cases, the Severance Adjustment for such terminated
Employee will be equal to the estimated Severance Payment to which the Employee
is entitled as agreed to by the Parties, provided that if the Parties do not
agree on such amount within 30 days of the termination of the Employee’s
employment, at the election of either Party at any time thereafter, the
estimated Severance Payment shall be determined by arbitration pursuant to the
Arbitration Act (Alberta).

 

(f)            For purposes hereof, “Severance Payment” means, in respect of an
Employee whose employment is terminated pursuant to Section 10.4(b), (c) or (d),
the amount to which such Employee is entitled under Applicable Law and the
Benefits Plans by virtue of the termination of his or her employment, including,
without duplication, payment in lieu of notice of termination, accrued vacation
pay and compensation for lost employment benefits.

 

(g)           Subject only to Purchaser’s rights and remedies under Section 9.2
and 10.4(e), Purchaser shall be responsible for all obligations to the Employees
(whether or not terminated pursuant to Section 10.4(b), (c) or (d)) arising
after the Closing Date.  For greater certainty, Purchaser agrees that, for the
purposes of calculating the amount of any Severance Payments that are or may in
the future be payable to any Employees, Purchaser will accept and recognize all
of the years of service of such Employee as recognized by the Company at the
Closing Date.

 

(h)           If Purchaser or any Affiliate or manager of Purchaser, makes an
offer of employment to any Employee whose employment was terminated at Closing
pursuant to Section 10.4(b) or (c) within 6 months after Closing or makes an
offer of employment to any Employee whose employment was terminated after
Closing pursuant to or Section 10.1(d) and such Employee accepts such offer,
then Purchaser shall promptly pay EXCO an amount equal to the Severance
Adjustment for such Employee.

 

(i)            For a period of 12 months following the Closing Date, Seller
shall not make any employment offers or contract offers to an Employee, without
the prior written consent of Purchaser, not be unreasonably withheld or delayed,
unless such Employee’s employment was terminated pursuant to Section 10.4(b),
(c) or (d) or such Person ceased to be an employee of the Company, Purchaser, an
Affiliate of Purchaser or any manager of Purchaser after the Closing Date
without breach by Seller of its obligations in this Section 10.4(i).

 

ARTICLE 11
MISCELLANEOUS

 

11.1        Survival of Representations and Warranties

 

The representations and warranties contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing in
accordance with the applicable Survival Period.  After Closing no Party shall
have any liability to any other Party based on any representation or warranty
made herein or in any instrument delivered pursuant to this Agreement unless
written notice of a claim, together with reasonable particulars thereof, shall
have been provided to the other Party within the Survival Period related
thereto.

 

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11.2        Amendment

 

This Agreement may not be amended except by a written instrument signed on
behalf of each of the Parties.

 

11.3        Conversion of Monetary Amounts

 

Whenever to carry out the terms and intent of this Agreement it is necessary to
convert a monetary amount from Canadian Dollars to United States Dollars or from
United States Dollars to Canadian Dollars, as the case may be, such conversion
shall be done using the Exchange Rate.

 

11.4        Notices

 

Any notice, communication or statement required, permitted or contemplated
hereunder shall be in writing and shall be delivered as follows:

 

(a)           by delivery to a Party between 8:00 a.m. and 5:00 p.m. on a
Business Day at the address of such Party for notices, in which case the notice
shall be deemed to have been received by that Party when it is delivered;

 

(b)           by fax to a Party to the fax number of such Party for notices, in
which case, if the notice was faxed prior to 5:00 p.m. on a Business Day at the
address of such Party for notices, the notice shall be deemed to have been
received by that Party when it was faxed and if it is faxed on a day which is
not a Business Day at that address or is faxed after 5:00 p.m. on a Business Day
at that address, it shall be deemed to have been received on the next following
Business Day at that address; or

 

(c)           except in the event of an actual or threatened postal strike or
other labour disruption that may affect mail service, by first class registered
postage prepaid mail to a Party at the address of such Party for notices, in
which case the notice shall be deemed to have been received by that Party on the
5th Business Day at the address of such Party for notices following the date of
mailing.

 

The Addresses and fax number for each Party shall be as follows:

 

If to Purchaser:

 

1143928 Alberta Ltd.

c/o NAL Resources Management Limited

600, 550 – 6th Avenue S.W.

Calgary, Alberta T2P 0S2

Attention:

 

President

Facsimile:

 

(403) 294-3614

 

 

 

and to:

 

 

 

 

 

Bennett Jones LLP

4500, 855 – 2nd Street S.W.

Calgary, Alberta T2P 4K7

Attention:

 

Rob Desbarats

Facsimile:

 

(403) 265-7219

 

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If to Seller:

 

EXCO Resources, Inc.

12377 Merit Drive

Suite 1700, LB82

Dallas, Texas 75251

Attention:

 

General Counsel

Facsimile:

 

(214) 706-3409

 

 

 

and to:

 

 

 

 

 

Taurus Acquisition, Inc.

12377 Merit Drive

Suite 1700, LB82

Dallas, Texas 75251

Attention:

 

General Counsel

Facsimile:

 

(214) 706-3409

 

 

 

and, prior to Closing, to:

 

 

 

Addison Energy Inc.

1100, 635 - 8th Avenue S.W.

Calgary, Alberta T2P 3M3

Attention:

 

President

Facsimile:

 

(403) 216-8315

 

 

 

and to:

 

 

 

 

 

Blake, Cassels & Graydon LLP

3500, 855 - 2nd Street S.W.

Calgary, Alberta T2P 4J8

Attention:

 

Michael J. Laffin

Facsimile:

 

(403) 260-9700

 

 

 

and to:

 

 

 

 

 

Haynes and Boone, LLP

4000, 2505 N. Plano Road

Richardson, Texas 75080

Attention:

 

William L. (Lanny) Boeing

Facsimile:

 

(972) 692-9053

 

11.5        Right to Change Address

 

Either Party may change its address for service by notice to the other Party,
and such changed address for service thereafter shall be effective for all
purposes of this Agreement.

 

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11.6        Counterparts

 

This Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the Parties and delivered to the
other Parties by facsimile transmission, electronic delivery, or in original, it
being understood that all Parties need not sign the same counterpart.

 

11.7        Time

 

Time shall be of the essence in this Agreement.

 

11.8        Severability.

 

Any term or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.  If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.

 

11.9        Entire Agreement; No Third Party Beneficiaries

 

This Agreement (together with the Confidentiality Agreement, the Indemnity
Agreement and the documents and instruments delivered by the Parties in
connection with this Agreement): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the Parties with respect to the subject matter hereof; and (b) except as
provided in Section 5.3, is solely for the benefit of the Parties and their
respective successors, legal representatives and assigns and does not confer on
any other Person any rights or remedies hereunder.

 

11.10      Governing Law

 

This Agreement shall in all respects be subject to and be interpreted, construed
and enforced in accordance with the laws in effect in the Province of Alberta
and the federal laws of Canada applicable therein.  Each Party accepts the
jurisdiction of the Province of Alberta and all courts of appeal therefrom.

 

11.11      Assignment

 

Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the Parties (whether by operation of law or
otherwise) without the prior written consent of the other Parties, except that
Purchaser may assign, in its sole discretion, its rights, interests and
obligations hereunder to any wholly-owned Subsidiary of Purchaser, provided that
Purchaser shall notify Seller of any such assignment and remain responsible for
all of its obligations hereunder.  Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.

 

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11.12      Waivers

 

At any time prior to the Closing, a Party may, to the extent legally allowed:
(a) extend the time for the performance of any of the obligations or other acts
of the other Party; (b) waive any inaccuracies in the representations and
warranties by the other Party contained herein or in any document delivered
pursuant hereto; and (c) waive performance of any of the covenants or agreements
of the other Party contained herein or in any document delivered pursuant
hereto, or satisfaction of any of the conditions that are for the waiving
Party’s benefit.  Any agreement on the part of a Party to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such Party.  Except as provided in this Agreement, no action taken pursuant
to this Agreement, including any investigation by or on behalf of any Party,
shall be deemed to constitute a waiver by the Party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.  The waiver by any Party of a breach of any
provision hereof shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provisions hereof.

 

11.13      Confidentiality Agreement

 

The Confidentiality Agreement is hereby incorporated herein by reference and
shall constitute a part of this Agreement for all purposes and shall remain in
full force and effect following the execution of this Agreement until terminated
in accordance with its terms.  Any and all information received by Purchaser
pursuant to the terms and provisions of this Agreement shall be governed by the
applicable terms and provisions of the Confidentiality Agreement.

 

11.14      Incorporation

 

Exhibits and Schedules referred to herein are attached to and by this reference
incorporated herein for all purposes.

 

11.15      Co-operation After Closing

 

Each Party shall, at any time and from time to time after Closing, execute,
acknowledge where appropriate and deliver such further instruments and documents
and take such other action as may be reasonably requested by another Party in
order to carry out the intent and purpose of this Agreement.  Seller agrees that
upon receipt after Closing of checks, mail or other property or documents which
are the property of the Company, it will promptly forward such items to the
Company at Purchaser’s address as set forth in Section 11.4.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives, on the date first written above.

 

“Purchaser”

 

 

 

 

 

1143928 ALBERTA LTD.

 

 

 

 

 

By:

  /s/ JONATHAN LEXIER

 

 

 

Name:  Jonathan Lexier, MBA, P. Eng.

 

 

 

Title:    Chief Operating Officer

 

 

 

 

 

 

By:

  /s/ PAUL E. BELLIVEAU

 

 

 

Name:  Paul E. Belliveau

 

 

 

Title:    Vice President, Finance and CFO

 

 

 

 

 

 

 

 

 

 

“Seller”

 

 

 

 

 

 

EXCO RESOURCES, INC.

 

 

 

 

 

 

By:

  /s/ DOUGLAS H. MILLER

 

 

 

Name:  Douglas H. Miller

 

 

 

Title:    Chief Executive Officer

 

 

 

 

 

 

TAURUS ACQUISITION, INC.

 

 

 

 

 

 

By:

  /s/ J. DOUGLAS RAMSEY

 

 

 

Name:  J. Douglas Ramsey

 

 

 

Title:    Vice President

 

 

 

 

This is the execution page to the Share and Debt Purchase Agreement dated
January 12, 2005 among 1143928 Alberta Ltd., EXCO Resources, Inc. and Taurus
Acquisition, Inc.

 

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Schedule A

 

DISCLOSURE SCHEDULE

 

Schedule 1.1(kkk)(ix) - Liens, Burdens or Defects to Title

Schedule 1.1(aaa) and 3.2(o) - Material Agreements

Schedule 1.1(ccccc) – Unaudited Financial Statements

Schedule 2.9(a)(viii) - Directors and Officers of Company and Subco

Schedule 2.9(a)(ix) - Releases

Schedule 3.2(e) - Right of Termination / Loss of Benefit

Schedule 3.2(p) - Purchased Entity Debt

Schedule 3.2(q) – Purchased Entity/Affiliate Contracts

Schedule 3.2(r) - Employment Matters

Schedule 3.2(s) - Litigation, Arbitrations, Investigations or Other Proceedings

Schedule 3.2(u) - Tax Matters

Schedule 3.2(y) - Environmental Matters

Schedule 3.2(bb)(iii) - Claims Adverse in Interest

Schedule 3.2(bb)(iv) - Authorities for Expenditure

Schedule 3.2(bb)(v) - Leased Tangibles

Schedule 3.2(bb)(vii) – Production Penalties

Schedule 3.2(bb)(ix) – AMI’s and Areas of Exclusion

Schedule 3.2(bb)(x) – Rights of First Refusal

Schedule 3.2(bb)(xi) - Offset Obligations

Schedule 3.2(dd) - Dividends and Distributions

Schedule 3.2(gg) – Change of Control

Schedule 5.1 - Conduct of Business

Schedule 5.10 - Insurance

 

Schedule B

 

PROPERTY SCHEDULE

 

Schedule 1.1(nn) - Facilities

Schedule 1.1(tt) – Lands

 

Schedule C

 

ESCROW AGREEMENTS

 

Part I – Escrow Agreement (Deposit)

Part II – Escrow Agreement (Withholding)

 

Schedule D

 

PRIVACY LEGISLATION

 

These schedules will be made available to the Securities and Exchange Commission
upon request.

 

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