Document:

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

  	
  Withholding Tax

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  
	
  REPRESENTATIONS
  AND WARRANTIES OF SELLER

  
	
   

  
	
  3.1

  	
  Seller’s
  Representations Regarding Seller

  	
   

  
	
  3.2

  	
  Seller’s
  Representations Regarding the Purchased Entities

  	
   

  
	
  3.3

  	
  Disclaimer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  
	
  REPRESENTATIONS
  AND WARRANTIES OF PURCHASER

  
	
   

  
	
  4.1

  	
  Purchaser’s
  Representation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5

  
	
  COVENANTS

  
	
   

  
	
  5.1

  	
  Conduct
  of Business by the Company Pending Closing

  	
   

  
	
  5.2

  	
  Existing AFEs

  	
   

  
	
  5.3

  	
  Access
  to Assets, Personnel and Information

  	
   

  
	
  5.4

  	
  Additional Arrangements

  	
   

  
	
  5.5

  	
  Public
  Announcements; Confidentiality

  	
   

  
	
  5.6

  	
  Payment of Expenses

  	
   

  

 

i

 

	
  5.7

  	
  Resignation
  of Directors and Officers

  	
   

  
	
  5.8

  	
  Exclusivity

  	
   

  
	
  5.9

  	
  Prohibited Acquisitions

  	
   

  
	
  5.10

  	
  Insurance

  	
   

  
	
  5.11

  	
  Securities
  Information and Audited Financial Statements

  	
   

  
	
  5.12

  	
  Purchaser’s Disclosure

  	
   

  
	
  5.13

  	
  Product and
  Other Hedging Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  
	
  TITLE
  DEFECTS; ADJUSTMENTS TO BASE PURCHASE PRICE

  
	
   

  
	
  6.1

  	
  Title Defects

  	
   

  
	
  6.2

  	
  Uncured Title Defects

  	
   

  
	
  6.3

  	
  Additional
  Adjustments to Base Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  
	
  CONDITIONS

  
	
   

  
	
  7.1

  	
  Conditions
  to Each Party’s Obligation to Proceed with Closing

  	
   

  
	
  7.2

  	
  Conditions
  to Obligations of Purchaser

  	
   

  
	
  7.3

  	
  Conditions to
  Obligations of Seller

  	
   

  
	
  7.4

  	
  Competition Act Filings

  	
   

  
	
  7.5

  	
  Efforts to Satisfy
  Conditions

  	
   

  
	
  7.6

  	
  Waiver of a Condition

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  
	
  TERMINATION

  
	
   

  
	
  8.1

  	
  Termination Rights

  	
   

  
	
  8.2

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  
	
  INDEMNIFICATION

  
	
   

  
	
  9.1

  	
  Purchaser’s
  Indemnification of Seller

  	
   

  
	
  9.2

  	
  Seller’s Indemnities

  	
   

  
	
  9.3

  	
  Responsibility
  Extends to Legal Costs and Settlements

  	
   

  
	
  9.4

  	
  Limitations
  on Seller’s and Purchaser’s Indemnity Obligation

  	
   

  
	
  9.5

  	
  Indemnification Procedure

  	
   

  
	
  9.6

  	
  Tax Loss Indemnity
  Procedure

  	
   

  
	
  9.7

  	
  Consequential Damages

  	
   

  
	
  9.8

  	
  Limitation on
  Rights or Remedies

  	
   

  

 

ii

 

	
  ARTICLE
  10

  
	
  INFORMATION,
  MATERIALS, POST-CLOSING COVENANTS AND EMPLOYEES

  
	
   

  
	
  10.1

  	
  Access to Information

  	
   

  
	
  10.2

  	
  Retention Period

  	
   

  
	
  10.3

  	
  Preparation of Tax Returns

  	
   

  
	
  10.4

  	
  Employees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  
	
  MISCELLANEOUS

  
	
   

  
	
  11.1

  	
  Survival
  of Representations and Warranties

  	
   

  
	
  11.2

  	
  Amendment

  	
   

  
	
  11.3

  	
  Conversion of
  Monetary Amounts

  	
   

  
	
  11.4

  	
  Notices

  	
   

  
	
  11.5

  	
  Right to Change Address

  	
   

  
	
  11.6

  	
  Counterparts

  	
   

  
	
  11.7

  	
  Time

  	
   

  
	
  11.8

  	
  Severability

  	
   

  
	
  11.9

  	
  Entire
  Agreement; No Third Party Beneficiaries

  	
   

  
	
  11.10

  	
  Governing Law

  	
   

  
	
  11.11

  	
  Assignment

  	
   

  
	
  11.12

  	
  Waivers

  	
   

  
	
  11.13

  	
  Confidentiality
  Agreement

  	
   

  
	
  11.14

  	
  Incorporation

  	
   

  
	
  11.15

  	
  Co-operation After
  Closing

  	
   

  

 

iii

 

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).

 

5

 

(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;

 

6

 

(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

 

(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

 

(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.

 

9

 

(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

 

(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

 

(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

 

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

 

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

 

(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.

 

15

 

(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

 

16

 

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

 

17

 

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

 

18

 

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;

 

19

 

(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;

 

20

 

(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;

 

21

 

(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;

 

22

 

(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

 

23

 

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

 

24

 

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

 

25

 

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

 

26

 

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

 

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

 

28

 

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

 

(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

 

“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,

 

31

 

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

 

(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

 

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.

 

34

 

(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.

 

35

 

(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

 

36

 

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.

 

37

 

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

 

38

 

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.

 

39

 

(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;

 

40

 

(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.

 

41

 

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

 

42

 

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).

 

43

 

(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

 

44

 

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

 

45

 

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

 

46

 

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

 

47

 

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.

 

48

 

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;

 

49

 

(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

 

50

 

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.

 

51

 

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.

 

52

 

(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.

 

53

 

(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;

 

54

 

(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

 

55

 

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

 

56

 

(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.

 

57

 

(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,

 

58

 

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

 

59

 

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.

 

60

 

(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);

 

61

 

(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.

 

62

 

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

 

63

 

(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.

 

64

 

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

  
					

 

65

 

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.

 

66

 

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.

 

67

 

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.

 

68

 

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.

 

 

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.Exhibit 10.1

 

1996 STOCK INCENTIVE PLAN, AS AMENDED

 

Table of Contents

 

	
  1.

  	
  Purpose

  	
   

  
	
  2

  	
  Definitions

  	
   

  
	
  3.

  	
  Shares and Performance Units
  Available under the Plan

  	
   

  
	
  4.

  	
  Option Rights

  	
   

  
	
  5.

  	
  Appreciation
  Rights

  	
   

  
	
  6.

  	
  Restricted
  Shares

  	
   

  
	
  7.

  	
  Deferred Shares

  	
   

  
	
  8.

  	
  Performance Shares
  and Performance Units.

  	
   

  
	
  9.

  	
  Transferability

  	
   

  
	
  10.

  	
  Adjustments

  	
   

  
	
  11.

  	
  Fractional Shares

  	
   

  
	
  12.

  	
  Withholding Taxes

  	
   

  
	
  13.

  	
  Participation
  by Directors, Officers and Other Key Employees of or Consultants to a Less-Than-80-Percent
  Subsidiary

  	
   

  
	
  14.

  	
  Certain
  Terminations of Employment, Hardship and Approved Leaves of Absence

  	
   

  
	
  15.

  	
  Foreign
  Participants

  	
   

  
	
  16.

  	
  Administration
  of the Plan

  	
   

  
	
  17.

  	
  Amendments
  and Other Matters

  	
   

  

 

1996 STOCK INCENTIVE PLAN, AS AMENDED

 

1.                                       Purpose. The
purpose of this Plan is to attract and retain directors, officers and other key
employees of and consultants to Ebix, Inc. (the “Corporation”) and its
Subsidiaries and to provide such persons with incentives and rewards for
superior performance.

 

2.                                       Definitions. (a) As
used in this Plan:

 

“Appreciation Right” means a right granted pursuant to
Section 5 of this Plan, including a Free-Standing Appreciation Right and a
Tandem Appreciation Right.

 

“Base Price” means the price to be used as the basis
for determining the Spread upon the exercise of a Free-Standing Appreciation
Right.

 

“Board” means the Board of Directors of the
Corporation.

 

“Code” means the Internal Revenue Code of
1986, as amended from time to time.

 

“Committee” means a committee of not less than two “Non-Employee
Directors” (as defined in Rule 16b-3(b)(3)(i) under
Section 16(b) of the Exchange Act) appointed by and serving at the
pleasure of the Board.

 

“Common Shares” means (i) shares of the Common
Stock, par value $.10 per share, of the Corporation and (ii) any security
into which Common Shares may be converted by reason of any transaction or event
of the type referred to in Section 10 of this Plan.

 

“Date of Grant” means the date specified by the Board
on which a grant of Option Rights, Appreciation Rights or Performance Shares or
Performance Units or a grant or sale of Restricted Shares or Deferred Shares
shall become effective, which shall not be earlier than the date on which the
Board takes action with respect thereto.

 

“Deferral Period” means the period of time during which
Deferred Shares are subject to deferral limitations under Section 7 of
this Plan.

 

“Deferred Shares” means an award pursuant to
Section 7 of this Plan of the right to receive Common Shares at the end of
a specified Deferral Period.

 

“Exchange Act” means the Securities Exchange Act of
1934, as amended from time to time.

 

“Free-Standing
Appreciation Right” means
an Appreciation Right granted pursuant to Section 5 of this Plan that is
not granted in tandem with an Option Right or similar right.

 

“Incentive Stock Option” means an Option Right that is intended
to qualify as an “incentive stock option” under Section 422 of the Code or
any successor provision thereto.

 

“Less-Than-80-Percent
Subsidiary” means
a Subsidiary with respect to which the Corporation directly or indirectly owns
or controls less than 80 percent of the total combined voting or other
decision-making power.

 

“Management Objectives” means the achievement or performance
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Board, Restricted Shares.

 

“Market Value per Share” means the fair market value of the
Common Shares as determined by the Board from time to time.

 

“Nonqualified Option” means an Option Right that is not
intended to qualify as a Tax-Qualified Option.

 

1

 

“Optionee” means the person so designated in an
agreement evidencing an outstanding Option Right.

 

“Option Price” means the purchase price payable upon
the exercise of an Option Right.

 

“Option Right” means the right to purchase Common
Shares from the Corporation upon the exercise of a Nonqualified Option or a
Tax-Qualified Option granted pursuant to Section 4, or a Replacement
Option Right granted pursuant to Section 17(c), of this Plan.

 

“Participant” means a person who is selected by the
Board to receive benefits under this Plan and (i) is at that time a
director or an officer (including officers who are also directors) or other key
employee of or a consultant to the Corporation or any Subsidiary or
(ii) has agreed to commence serving in any such capacity.

 

“Performance Period” means, in respect of a Performance
Share or Performance Unit, a period of time established pursuant to
Section 8 of this Plan within which the Management Objectives relating
thereto are to be achieved.

 

“Performance Share” means a bookkeeping entry that records
the equivalent of one Common Share awarded pursuant to Section 8 of this
Plan.

 

“Performance Unit” means a bookkeeping entry that records
a unit equivalent to $1.00 awarded pursuant to Section of this Plan.

 

“Replacement Option Right” means as Option Right granted pursuant
to Section 17(c) of this Plan in exchange for the surrender and
cancellation of an option to purchase shares of another corporation that is
acquired by the Corporation or a Subsidiary by merger or otherwise.

 

“Restricted Shares” means Common Shares granted or sold
pursuant to Section 6 of this Plan as to which neither the substantial
risk of forfeiture nor the restrictions on transfer referred to in
Section 6 hereof has expired.

 

“Spread” means, in the case of a Free-Standing Appreciation
Right, the amount by which the Market Value per Share on the date when the
Appreciation Right is exercised exceeds the Base Price specified therein or, in
the case of a Tandem Appreciation Right, the amount by which the Market Value
per Share on the date when the Appreciation Right is exercised exceeds the
Option Price specified in the related Option Right.

 

“Subsidiary” means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation
has a direct or indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, “Subsidiary” means any corporation in which the
Corporation owns or controls directly or indirectly more than 50 percent
of the total combined voting power represented by all classes of stock issued
by such corporation at the time of the grant.

 

“Tandem Appreciation Right” means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an
Option Right or any similar right granted under any other plan of the
Corporation.

 

“Tax-Qualified Option” means an Option Right that is intended
to qualify under particular provisions of the Code, including but not limited
to an Incentive Stock Option.

 

3.                                       Shares
and Performance Units
Available under the Plan. (a) Subject to adjustment as provided
in Section 10 of this Plan, the aggregate number of Common Shares covered
by outstanding awards, except Replacement Option Rights, granted under this
Plan and issued or transferred upon the exercise or payment thereof, and the
aggregate number of Performance Units granted under this Plan, shall not

 

2

 

exceed 1,137,500. Common Shares issued or transferred under this Plan
may be Common Shares of original issuance or Common Shares held in treasury or
a combination thereof.

 

(b)                                 Subject to adjustment as provided in
Section 10 of this Plan, the aggregate number of Common Shares covered by
Replacement Option Rights granted under this Plan during any calendar year
shall not exceed five percent of the Common Shares outstanding on
January 1 of that year.

 

(c)                                  For the purposes of this Section 3:

 

(i)                                     Upon payment in cash of the benefit provided
by any award granted under this Plan, any Common Shares that were covered by
that award shall again be available for issuance or transfer hereunder.

 

(ii)                                  Common Shares covered by any award granted
under this Plan shall be deemed to have been issued or transferred, and shall
cease to be available for future issuance or transfer in respect of any other
award granted hereunder, at the earlier of the time when they are actually
issued or transferred or the time when dividends or dividend equivalents are
paid thereon; provided, however,
that Restricted Shares shall be deemed to have been issued or transferred at
the earlier of the time when they cease to be subject to a substantial risk of
forfeiture or the time when dividends are paid thereon.

 

(iii)                               Performance Units that are granted under this
Plan, but are not earned by the Participant at the end of the Performance
Period, shall be available for future grants of Performance Units hereunder.

 

(d)                                 Subject to adjustment as provided in
Section 10 of this Plan, the maximum number of shares of Common Stock that
may be covered by Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares and Performance Shares, in the aggregate, granted to any one
Participant during any calendar year shall be 125,000 shares.

 

4.                                       Option Rights. The
Board may from time to time authorize grants to Participants of Option Rights
upon such terms and conditions as the Board may determine in accordance with
the following provisions:

 

(a)                                  Each grant shall specify the number of Common
Shares to which it pertains.

 

(b)                                 Each grant shall specify an Option Price per
Common Share, which shall be equal to or greater than the Market Value per
Share on the Date of Grant; provided,
however, that the Option Price per Common Share of a Replacement
Option Right may be less that the Market Value per Share on the Date of Grant.

 

(c)                                  Each grant shall specify the form of
consideration to be paid in satisfaction of the Option Price and the manner of
payment of such consideration, which may include (i) cash in the form of
currency or check or other cash equivalent acceptable to the Corporation,
(ii) nonforfeitable, unrestricted Common Shares that are already owned by
the optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Board may deem
appropriate, including but not limited to any form of consideration authorized
under Section (d) below, on such basis as the Board may determine in
accordance with this Plan and (iv) any combination of the foregoing.

 

(d)                                 On or after the Date of Grant of any
Nonqualified Option, the Board may determine that payment of the Option Price
may also be made in whole or in part in the form of Restricted Shares or other
Shares that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Board on or after the Date of Grant,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this

 

3

 

Section 4(d), the
Common Shares received by the Optionee upon the exercise of the Nonqualified
Option shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the
optionee; provided, however, that
such risks of forfeiture and restrictions on transfer shall apply only to the
same number of Common Shares received by the optionee as applied to the
forfeitable or restricted Common Shares surrendered by the Optionee.

 

(e)                                  Any grant may provide for deferred payment of
the Option Price from the proceeds of sale through a broker on the date of
exercise of some or all of the Common Shares to which the exercise relates.

 

(f)                                    Successive grants may be made to the same
Participant regardless of whether any Option Rights previously granted to the
Participant remain unexercised.

 

(g)                                 Each grant may specify a period or periods of
continuous employment of the Optionee by the Corporation or any Subsidiary that
are necessary before the Option Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercise of the Option
Rights in the event of a change in control of the Corporation or other similar
transaction or event.

 

(h)                                 Option Rights granted pursuant to this
Section 4 may be Nonqualified Options or Tax-Qualified Options or
combinations thereof.

 

(i)                                     On or after the Date of Grant of any
Nonqualified Option, the Board may provide for the payment to the Optionee of
dividend equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis, or the Board may provide that any dividend equivalents shall
be credited against the Option Price.

 

(j)                                     No Option Right granted pursuant to this Section 4
may be exercised more than 10 years from the Date of Grant.

 

(k)                                  Each grant shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by an officer
thereof and delivered to and accepted by the Optionee and shall contain such
terms and provisions as the Board may determine consistent with this Plan.

 

5.                                       Appreciation Rights. The Board may also authorize grants to Participants of Appreciation
Rights. An Appreciation Right shall be a right of the Participant to receive
from the Corporation an amount, which shall be determined by the Board and
shall be expressed as a percentage (not exceeding 100 percent) of the
Spread at the time of the exercise of an Appreciation Right. Any grant of
Appreciation Rights under this Plan shall be upon such terms and conditions as
the Board may determine in accordance with the following provisions:

 

(a)                                  Any grant may specify that the amount payable
upon the exercise of an Appreciation Right may be paid by the Corporation in
cash, Common Shares or any combination thereof and may (i) either grant to
the Participant or reserve to the Board the right to elect among those
alternatives or (ii) preclude the right of the Participant to receive and
the Corporation to issue Common Shares or other equity securities in lieu of
cash.

 

(b)                                 Any grant may specify that the amount payable
upon the exercise of an Appreciation Right shall not exceed a maximum specified
by the Board on the Date of Grant.

 

(c)                                  Any grant may specify (i) a waiting
period or periods before Appreciation Rights shall become exercisable and
(ii) permissible dates or periods on or during which Appreciation Rights
shall be exercisable.

 

(d)                                 Any grant may specify that an Appreciation
Right may be exercised only in the event of a change in control of the
Corporation or other similar transaction or event.

 

4

 

(e)                                  On or after the Date of Grant of any
Appreciation Rights, the Board may provide for the payment to the Participant
of dividend equivalents thereon in cash or Common Shares on a current, deferred
or contingent basis.

 

(f)                                    Each grant shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by any officer
thereof and delivered to and accepted by the Optionee and shall describe the
subject Appreciation Rights, identify any related Option Rights, state that the
Appreciation Rights are subject to all of the terms and conditions of this Plan
and contain such other terms and provisions as the Board may determine consistent
with this Plan.

 

(g)                                 Regarding Tandem Appreciation Rights only:
Each grant shall provide that a Tandem Appreciation Right may be exercised only
(i) at a time when the related Option Right (or any similar right granted
under any other plan of the Corporation) is also exercisable and the Spread is
positive and (ii) by surrender of the related Option Right (or such other
right) for cancellation.

 

(h)                                 Regarding Free-Standing Appreciation Rights
only:

 

(i)                                     Each grant shall specify in respect of each
Free-Standing Appreciation Right a Base Price per Common Share, which shall be
equal to or greater than the Market Value per Share on the Date of Grant;

 

(ii)                                  Successive grants may be made to the same
Participant regardless of whether any Free-Standing Appreciation Rights
previously granted to the Participant remain unexercised;

 

(iii)                               Each grant shall specify the period or
periods of continuous employment of the Participant by the Corporation or any
Subsidiary that are necessary before the Free-Standing Appreciation Rights or
installments thereof shall become exercisable, and any grant may provide for
the earlier exercise of the Free-Standing Appreciation Rights in the event of a
change in control of the Corporation or other similar transaction or event; and

 

(iv)                              No Free-Standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the Date of
Grant.

 

6.                                       Restricted Shares. The Board may also authorize grants
or sales to Participants of Restricted Shares upon such terms and conditions as
the Board may determine in accordance with the following provisions:

 

(a)                                  Each grant or sale shall constitute an
immediate transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling the Participant to
dividend, voting and other ownership rights, subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.

 

(b)                                 Each grant or sale may be made without
additional consideration from the Participant or in consideration of a payment
by the Participant that is less than the Market Value per Share on the Date of
Grant.

 

(c)                                  Each grant or sale shall provide that the
Restricted Shares covered thereby shall be subject to a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code for a period to
be determined by the Board on the Date of Grant, and any grant or sale may
provide for the earlier termination of such period in the event of a change in
control of the Corporation or other similar transaction or event.

 

(d)                                 Each grant or sale shall provide that, during
the period for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Board on the Date of Grant. Such
restrictions may include, but are not limited to, rights of repurchase or first
refusal in the

 

5

 

Corporation or provisions
subjecting the Restricted Shares to a continuing substantial risk of forfeiture
in the hands of any transferee.

 

(e)                                  Any grant or sale may require that any or all
dividends or other distributions paid on the Restricted Shares during the
period of such restrictions be automatically sequestered and reinvested on an
immediate or deferred basis in additional Common Shares, which may be subject
to the same restrictions as the underlying award or such other restrictions as
the Board may determine.

 

(f)                                    Each grant or sale shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by any officer
thereof and delivered to and accepted by the Participant and shall contain such
terms and provisions as the Board may determine consistent with this Plan.
Unless otherwise directed by the Board, all certificates representing
Restricted Shares, together with a stock power that shall be endorsed in blank
by the Participant with respect to the Restricted Shares, shall be held in
custody by the Corporation until all restrictions thereon lapse.

 

7.                                       Deferred Shares. The
Board may also authorize grants or sales to Participants of Deferred Shares
upon such terms and conditions as the Board may determine in accordance with
the following provisions:

 

(a)                                  Each grant or sale shall constitute the agreement
by the Corporation to issue or transfer Common Shares to the Participant in the
future in consideration of the performance of services, subject to the
fulfillment during the Deferral Period of such conditions as the Board may
specify.

 

(b)                                 Each grant or sale may be made without
additional consideration from the Participant or in consideration of a payment
by the Participant that is less than the Market Value per Share on the Date of
Grant.

 

(c)                                  Each grant or sale shall provide that the
Deferred Shares covered thereby shall be subject to a Deferral Period, which
shall be fixed by the Board on the Date of Grant, and any grant or sale may
provide for the earlier termination of the Deferral Period in the event of a
change in control of the Corporation or other similar transaction or event.

 

(d)                                 During the Deferral Period, the Participant
shall not have any right to transfer any rights under the subject award, shall
not have any rights of ownership in the Deferred Shares and shall not have any
right to vote the Deferred Shares, but the Board may on or after the Date of
Grant authorize the payment of dividend equivalents on the Deferred Shares in
cash or additional Common Shares on a current, deferred or contingent basis.

 

(e)                                  Each grant or sale shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by any officer
thereof and delivered to and accepted by the Participant and shall contain such
terms and provisions as the Board may determine consistent with this Plan.

 

8.                                       Performance Shares and Performance Units. The Board may also authorize grants of
Performance Shares and Performance Units, which shall become payable to the
Participant upon the achievement of specified Management Objectives, upon such
terms and conditions as the Board may determine in accordance with the
following provisions:

 

(a)                                  Each grant shall specify the number of
Performance Shares or Performance Units to which it pertains, which may be
subject to adjustment to reflect changes in compensation or other factors.

 

(b)                                 The Performance Period with respect to each
Performance Share or Performance Unit shall be determined by the Board on the
Date of Grant and may be subject to earlier termination in the event of a
change in control of the Corporation or other similar transaction or event.

 

6

 

(c)                                  Each grant shall specify the Management
Objectives that are to be achieved by the Participant, which may be described
in terms of Corporation-wide objectives or objectives that are related to the
performance of the individual Participant or the Subsidiary, division,
department or function within the Corporation or Subsidiary in which the
Participant is employed.

 

(d)                                 Each grant shall specify in respect of the
specified Management Objectives a minimum acceptable level of achievement below
which no payment will be made and shall set forth a formula for determining the
amount of any payment to be made if performance is at or above the minimum
acceptable level but falls short of full achievement of the specified
Management Objectives.

 

(e)                                  Each grant shall specify the time and manner
of payment of Performance Shares or Performance Units that shall have been
earned, and any grant may specify that any such amount may be paid by the Corporation
in cash, Common Shares or any combination thereof and may either grant to the
Participant or reserve to the Board the right to elect among those
alternatives.

 

(f)                                    Any grant of Performance Shares may specify
that the amount payable with respect thereto may not exceed a maximum specified
by the Board on the Date of Grant. Any grant of Performance Units may specify
that the amount payable, or the number of Common Shares issuable, with respect
thereto may not exceed maximums specified by the Board on the Date of Grant.

 

(g)                                 On or after the Date of Grant of Performance
Shares, the Board may provide for the payment to the Participant of dividend
equivalents thereon in cash or additional Common Shares on a current, deferred
or contingent basis.

 

(h)                                 The Board may adjust Management Objectives
and the related minimum acceptable level of achievement if, in the sole
judgment of the Board, events or transactions have occurred after the Date of
Grant that are unrelated to the performance of the Participant and result in
distortion of the Management Objectives or the related minimum acceptable level
of achievement.

 

(i)                                     Each grant shall be evidenced by an
agreement, which shall be executed on behalf of the Corporation by any officer
thereof and delivered to and accepted by the Participant and shall contain such
terms and provisions as the Board may determine consistent with this Plan.

 

9.                                       Transferability. (a) Any
grant of an Option Right or other “derivative security” (as defined in
Rule 16a-1 (c) under Section 16(a) of the Exchange Act) under
this Plan may permit the transfer thereof by the Participant upon such terms
and conditions as the Board shall specify.

 

(b)                                 Any grant made under this Plan may provide
that all or any part of the Common Shares that are to be issued or transferred
by the Corporation upon the exercise of Option Rights or Appreciation Rights or
upon the termination of the Deferral Period applicable to Deferred Shares or in
payment of Performance Shares or Performance Units, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions upon
transfer.

 

10.                                 Adjustments. The
Board may make or provide for such adjustments in the number of Common Shares
covered by outstanding Option Rights, Appreciation Rights, Deferred Shares and
Performance Shares granted hereunder, the Option Prices per Common Share or
Base Prices per Common Share applicable to any such Option Rights and
Appreciation Rights, and the kind of shares (including shares of another
issuer) covered thereby, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
Participants that otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Corporation or (b) any merger, consolidation,
spin-off, spin-out, split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance

 

7

 

of
warrants or other rights to purchase securities or any other corporate
transaction or event having an effect similar to any of the foregoing. In the
event of any such transaction or event, the Board may provide in substitution
for any or all outstanding awards under this Plan such alternative
consideration as it may in good faith determine to be equitable under the
circumstances and may require in connection therewith the surrender of all
awards so replaced. Moreover, the Board may on or after the Date of Grant
provide in the agreement evidencing any award under this Plan that the holder
of the award may elect to receive an equivalent award in respect of securities of
the surviving entity of any merger, consolidation or other transaction or event
having a similar effect, or the Board may provide that the holder will
automatically be entitled to receive such an equivalent award. The Board may
also make or provide for such adjustments in the numbers of Common Shares
specified in Sections 3(a)(i) and 3(a)(ii) of this Plan as the Board
may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 10.

 

11.                                 Fractional Shares. The
Corporation shall not be required to issue any fractional Common Shares
pursuant to this Plan. The Board may provide for the elimination of fractions
or for the settlement thereof in cash.

 

12.                                 Withholding Taxes. To
the extent that the Corporation is required to withhold federal, state, local
or foreign taxes in connection with any payment made or benefit realized by a
Participant or other person under this Plan, and the amounts available to the
Corporation for the withholding are insufficient, it shall be a condition to
the receipt of any such payment or the realization of any such benefit that the
Participant or such other person make arrangements satisfactory to the
Corporation for payment of the balance of any taxes required to be withheld. At
the discretion of the Board, any such arrangements may include relinquishment
of a portion of any such payment or benefit. The Corporation and any
Participant or such other person may also make similar arrangements with
respect to the payment of any taxes with respect to which withholding is not
required.

 

13.                                 Participation by Directors, Officers and Other Key Employees of or
Consultants to a Less-Than-80-Percent Subsidiary. As a condition to the effectiveness of any
grant or award to be made hereunder to a Participant who is a director or an
officer or other key employee of or a consultant to a Less-Than-80-Percent
Subsidiary, regardless of whether the Participant is also employed by the
Corporation or another Subsidiary, the Board may require the Less-Than-80-Percent
Subsidiary to agree to transfer to the Participant (as, if and when provided
for under this Plan and any applicable agreement entered into between the
Participant and the Less-Than-80-Percent Subsidiary pursuant to this Plan) the
Common Shares that would otherwise be delivered by the Corporation upon receipt
by the Less-Than 80-Percent Subsidiary of any consideration then otherwise
payable by the Participant to the Corporation. Any such award may be evidenced
by an agreement between the Participant and the Less-Than-80-Percent
Subsidiary, in lieu of the Corporation, on terms consistent with this Plan and
approved by the Board and the Less-Than-80-Percent Subsidiary. All Common
Shares so delivered by or to a Less-Than-80-Percent Subsidiary will be treated
as if they had been delivered by or to the Corporation for purposes of
Section 3 of this Plan, and all references to the Corporation in this Plan
shall be deemed to refer to the Less-Than-80-Percent Subsidiary except with
respect to the definitions of the Board and the Committee and in other cases
where the context otherwise requires.

 

14.                                 Certain Terminations of Employment, Hardship and Approved Leaves of
Absence. Notwithstanding any
other provision of this Plan to the contrary, in the event of termination of
employment by reason of death, disability, normal retirement, early retirement
with the consent of the Corporation, termination of employment to enter public
service with the consent of the Corporation or leave of absence approved by the
Corporation, or in the event of hardship or other special circumstances, of a
Participant who holds an Option Right or Appreciation Right that is not
immediately and fully exercisable, any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Shares as to which the Deferral Period is not
complete, any Performance Shares or Performance Units that have not been fully
earned,

 

8

 

or
any Common Shares that are subject to any transfer restriction pursuant to
Section 9[(b)] of this Plan, the Board may take any action that it deems
to be equitable under the circumstances or in the best interests of the
Corporation, including without limitation waiving or modifying any limitation
or requirement with respect to any award under this Plan.

 

15.                                 Foreign Participants. In order to facilitate the making of any award or combination of
awards under this Plan, the Board may provide for such special terms for awards
to Participants who are foreign nationals, or who are employed by the
Corporation or any Subsidiary outside of the United States of America, as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to,
or amendments, restatements or alternative versions of, this Plan as it may
consider necessary or appropriate for such purposes without thereby affecting
the terms of this Plan as in effect for any other purpose; provided, however that no such
supplements, amendments, restatements or alternative versions shall include any
provisions that are inconsistent with the terms of this Plan, as then in
effect, unless this Plan could have been amended to eliminate the inconsistency
without further approval by the stockholders of the Corporation.

 

16.                                 Administration of the Plan. (a) This Plan shall be administered by the Board, which may
delegate any or all of its authority hereunder to the Committee. To the extent
of any such delegation, references in this Plan to the Board shall be deemed to
refer to the Committee, unless the context requires otherwise. A majority of
the Board shall constitute a quorum, and the acts of the members of the Board
who are present at any meeting thereof at which a quorum is present, or acts
unanimously approved by the members of the Board in writing, shall be the acts
of the Board.

 

(b)                                 The interpretation and construction by the
Board of any provision of this Plan or any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares or Performance Units, and any determination
by the Board pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the Board
shall be liable for any such action taken or determination made in good faith.

 

17.                                 Amendments and Other Matters. (a) This Plan may be amended from time
to time by the Board; provided, howeverexcept
as expressly authorized by this Plan, no such amendment shall increase the
numbers of Common Shares specified in Sections 3(a)(i) and
3(a)(ii) hereof or the number of Performance Units specified in
Section 3(b) hereof without the further approval of the stockholders of
the Corporation.

 

(b)                                 With the concurrence of the affected
Participant, the Board may cancel any agreement evidencing Option Rights or any
other award granted under this Plan. In the event of any such cancellation, the
Board may authorize the granting of new Option Rights or other awards
hereunder, which may or may not cover the same number of Common Shares as had
been covered by the cancelled Option Rights or other award, at such Option
Price, in such manner and subject to such other terms, conditions and
discretion as would have been permitted under this Plan had the cancelled
Option Rights or other award not been granted.

 

(c)                                  The Board may grant under this Plan any award
or combination of awards authorized under this Plan, including but not limited
to Replacement Option Rights, in exchange for the surrender and cancellation of
an award that was not granted under this Plan, including but not limited to an
award that was granted by the Corporation or a Subsidiary, or by another
corporation that is acquired by the Corporation or a Subsidiary by merger or
otherwise, prior to the adoption of this Plan by the Board, and any such award
or combination of awards so granted under this Plan may or may not cover the same
number of Common Shares as had been covered by the cancelled award and shall be
subject to such other terms, conditions and discretion as would have been
permitted under this Plan had the cancelled award not been granted.

 

9

 

(d)                                 This Plan shall not confer upon any
Participant any right with respect to continuance of employment with the
Corporation or any Subsidiary and shall not interfere in any way with any right
that the Corporation or any Subsidiary would otherwise have to terminate any
Participant’s employment at any time.

 

(e)                                  To the extent that any provision of this Plan
would prevent any Option Right that was intended to qualify as a Tax-Qualified
Option from so qualifying, any such provision shall be null and void with
respect to any such Option Right; provided,
however that any such provision shall remain in effect with respect
to other Option Rights, and there shall be no further effect on any provision
of this Plan.

 

(f)                                    Notwithstanding the foregoing, neither the
Board nor any committee of the Board shall (i) amend an Option Right to
reduce its Option Price, (ii) cancel an Option Right and regrant an Option
Right with a lower Option Price than the original Option Price of the cancelled
Option Right, or (iii) take any other action (whether in the form of an
amendment, cancellation or replacement grant) that has the effect of repricing
an Option Right.

 

10

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