Court File No.: CV-16-11363-00CL SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

Court File No.: CV-16-11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PACIFIC EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P
HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS
INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA
CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU
S.R.L., PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA
ENERGY CORP., PRE-PSIE COOPERATIEF U.A., PETROMINERALES
COLOMBIA CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
MOTION RECORD
(Returnable May 26, 2016)
May 20, 2016
NORTON ROSE FULBRIGHT CANADA LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
[email protected]
Virginie Gauthier LSUC #410970
Tel: 416.216.4853
[email protected]
Alexander Schmitt LSUC #63860F
Tel: 416.216.2419
[email protected]
Fax: 416.216.3930
Lawyers for the Applicants
CAN_DMS: \102639995\1
INDEX
Court File No.: CV-16.,11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PACIFIC EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P
HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS
INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA
CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU
S.R.L., PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA
ENERGY CORP., PRE-PSIE COOPERATIEF U.A., PETROMINERALES
COLOMBIA CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
;
Tab:
Document:
...................................
1
I Notice of Motion dated
2
II Affidavit of Peter Volk sworn May 20, 2016
May 20, 2016
!
i
l
I
Paae No.:
1
17
A
A copy of the CRO Engagement Letter dated May 12, 2016
30
B
A copy of the GMP Engagement Letter dated May 19, 2016
42
c
A copy of the Initial Order dated April 27, 2016
51
..................
D
.J
of a presentation summarizing the Corporate Steps
80
E
A copy of a press release of Pacific Exploration & Production
Corporation dated May 18, 2016
90
F
A copy of the decision of the Superintendencia de Sociedades de
Colombia dated May 18,2016
97
CAN_DMS: \102639995\1
TAB 1
Court File No.: CV-16-11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE- COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PACIFIC EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P
HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS
INTERNATIONAL ENERGY LTO., PACIFIC STRATUS ENERGY COLOMBIA
CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU S.R.L.,
PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY
CORP., PRE-PSIE COQPERATIEF U.A., PETROMINERALES COLOMBIA
CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
NOTICE OF MOTION
(Returnable May 26, 2016)
The Applicants will make a motion to a Judge presiding over the Ontario Superior Court
of Justice (Commercial List), on May 26, 2016, at 10 a.m., or as soon after that time as the
motion can be heard, at 330 University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
THE MOTION IS FOR:
1
The granting of an Order (the "Order"),
(a)
extending the stay of proceedings granted by this Court pursuant to the
Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended (the
"CCAA") to and including August 26, 2016;
(b)
approving the engagement of Blackhill Partners, LLC, as Chief Restructuring
Officer of Pacific Exploration & Production Corporation ("Pacific"), and GMP
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-2-
Securities Emerging Markets Corp. ("GMP") as financial advisor to The Catalyst
Capital Group Inc. ("Catalyst"); and
(c)
amending the initial order of this Court issued April 27, 2016 in respect of the
Applicants (the "Initial Order") such that (i) Blackhill Partners, LLC, (ii) Deloitte
Restructuring Inc., (iii) Acquest Advisors, LLC, and (iv) GMP will each have the
benefit of the Administration Charge (as defined in the Initial Order) created to
secure professional fees;
(d)
authorizing each Applicant to grant, from time to time, with the prior consent of
the Monitor, unsecured guarantees of the obligations of any other Applicant
under any oil and gas-related exploration & production contract, joint operating
agreement, licence, or other similar arrangement with the Agencia Nacional de
Hidrocarburos
(the
"ANH"),
Ecopetrol
S.A.
("Ecopetrol")
or
any
other
governmental agency or body in Colombia, to the extent required by such
governmental agency or body in order to keep such contract, agreement or
licence in good standing, and
2
Such further and other relief as counsel may request and this Court deems just.
THE GROUNDS FOR THE MOTION ARE:
Background
1
The Applicants commenced proceedings under the CCAA and obtained the Initial Order
in these proceedings on April 27, 2017;
2
In the Initial Order, the Court, among other things,
-2CAN_DMS: \102639659\1
- 3-
(a)
granted a stay of proceedings in favour of the Applicants until and including May
27, 2016, or such later date as the Court may order (the "Stay Period");
(b)
authorized the Applicants to take all steps and actions in respect of, and comply
with, the terms and conditions of a Restructuring Support Agreement dated April
20, 2016, among the Applicants, The Catalyst Capital Group Inc. ("Catalyst"),
and certain holders of claims under Pacific's unsecured senior notes and
unsecured credit facilities (the "Support Agreement"); and
(c)
authorized and empowered the Applicants to issue senior secured notes (the
"DIP Notes") in an amount of up to US$500 million and borrow under a letter of
credit facility (the "L/C Facility") in an amount of up to US$134 million;
Addition of beneficiaries to Administration Charge and Approval of CRO and GMP's
Engagement
3
It is a key term of the Support Agreement that Pacific appoint a chief restructuring officer
and a new deputy chief financial officer;
4
In keeping with this obligation, Pacific has retained Blackhill Partners, LLC as Chief
Restructuring Officer (in such capacity, the "CRO"), and Deloitte Restructuring Inc. as Deputy
Chief Financial Officer (in such capacity, the "Deputy CFO");
5
It is a term of the CRO's mandate to engage Acquest Advisors LLC ("Acquest") to assist
with operational issues including providing Latin American upstream and midstream expertise;
6
The addition of the CRO, Deputy CFO and Acquest to the list of beneficiaries of the
Administration Charge, as well as the approval of the CRO Engagement Letter, is appropriate in
the circumstances as each will be working closely with the Applicants through the course of their
- 3CAN_DMS: \102639659\1
-4-
restructuring and the retainer of a CRO and Deputy CFO was required by the terms of the
Support Agreement.
7
Each of the independent committee of the board of directors of Pacific, Catalyst, the ad
hoc committee of holders of Pacific's unsecured notes and PricewaterhouseCoopers Inc. in its
capacity as court-appointed Monitor (the "Monitor") support the approval of the engagement
letter amongst Pacific and the CRO dated May 12, 2016 and the payment of the amounts set
out therein.
8
GMP serves as financial advisor to Catalyst and had worked with Catalyst through the
course of the solicitation process (the "Solicitation Process") that the Applicants conducted
prior to the commencement of these proceedings;
9
However, at the time the Initial Order was being sought, there were outstanding
discussions still to be had about the quantum of its success fees set out in its engagement letter
with Catalyst, then dated April 25, 2016.
10
Discussions with respect to those success fees have now been resolved, and
accordingly, the Applicants seek approval of the terms of the engagement letter, as amended to
and including May 19, 2016 (the "GMP Engagement Letter");
11
Approval of the GMP Engagement Letter is appropriate in the circumstances as GMP
has worked with Catalyst through the course of the solicitation process and has worked together
with the Applicants and each of the other primary interested parties to make the Recapitalization
possible. Each of Catalyst and the Ad Hoc Committee support the approval of the GMP
Engagement Letter and payment of the amounts set out therein.
- 4CAN_DMS: \102639659\1
-5-
Stay Extension
12
Since the granting of the Initial Order, the Applicants have continued to operate their
business in the normal course with the benefit of the stay of proceedings and have worked
diligently to effect their restructuring;
13
Additional time will be required to implement the claims procedure recently ordered by
the Court on May 10, 2016, allow for the continued operation of the Applicants' business, and
complete and implement the documentation and security necessary for funds to be advanced
under the DIP Notes and L/C Facility;
14
Subject to receipt of funds under the DIP Notes, the Applicants have sufficient resources
to meet their post-filing obligations during the Stay Extension period;
Approval of Regulatory Guarantees
15
The Pacific Group holds interests in its hydrocarbon properties in Colombia through
exploration and production contracts ("E&P Contracts") and licences with, among others, the
ANH, the Colombian national hydrocarbons agency, and Ecopetrol, a Colombian state-run oil
and gas company.
16
Each E&P Contract with the ANH requires the relevant contractor to maintain certain
financial, technical and operational capacity standards during the life of the E&P Contract.
17
The ANH has notified one of the Applicants, Petrominerales, that it no longer meets
certain financial capacity standards as required under one contract in particular relating to the
"Corcel'' oil block (the "Corcel Contract").
18
In circumstances where a contractor under an E&P Contract no longer meets the
financial capacity standards required thereunder, the ANH's standard practice is to request an
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- 6-
unsecured guarantee of the contractor's obligations under the E&P Contract from a an affiliate
that does meet the required financial capacity standard. This guarantee is required by the ANH
in order for the E&P Contract to remain in good standing.
19
In Petrominerales' case with respect to the Corcel Contract, the Applicants propose that
Pacific Stratus Colombia Corp., another Applicant, provide this guarantee, as the ANH has
already assured the Applicants that Pacific Stratus meets the financial capacity requirements
under the Corcel Contract.
20
As Petrominerales is party to more E&P Contracts than the Corcel Contract, the
Applicants anticipate that further such requests may be made by the ANH in due course. In light
of the Applicants current financial difficulties, it is also foreseeable that such requests for
unsecured guarantees may be made in respect of other Applicants.
21
Should a guarantee of its obligations under the Corcel Contract not be granted, the
Applicants have been advised by ANH that it may be terminated.
General
22
The provisions of the CCAA; and
23
Such further and other grounds as counsel may advise and the Court may permit.
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion:
1
The Affidavit of Peter Volk sworn May 20, 2016, and the Exhibits attached thereto;
2
The Second Report of the Monitor, to be filed; and
3
Such further and other material as counsel may advise and the Court may permit.
- 6CAN_DMS: \102639659\1
-7-
May 20, 2016
Norton Rose Fulbright Canada LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
tony. reyes@nortonrosefulbrig ht. com
Virginie Gauthier LSUC #410970
Tel: 416.216.4853
[email protected]
Alexander Schmitt LSUC #63860F
Tel: 416.216.2419
[email protected]
Fax: +1 416.216.3930
Lawyers for the Applicants
TO:
THE SERVICE LIST
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g
Court File No.:
CV-16-11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR
ARRANGEMENT OF PACIFIC EXPLORATION & PRODUCTION
CORPORATION, PACIFIC E&P HOLDINGS CORP., META PETROLEUM
CORP., PACIFIC STRATUS INTERNATIONAL ENERGY LTD., PACIFIC
STRATUS ENERGY COLOMBIA CORP., PACIFIC STRATUS ENERGY
S.A., PACIFIC OFF SHORE PERU S.R.L., PACIFIC RUBIALES
GUATEMALA S.A., PACIFIC GUATEMALA ENERGY CORP., PRE-PSIE
COOPERATIEF U.A., PETROMINERALES COLOMBIA CORP. AND
GRUPO C&C ENERGIA (BARBADOS) LTD.
Applicants
SERVICE LIST
(as of May 12, 2016)
Tony Reyes
NORTON ROSE FULBRIGHT CANADA Tel:
.4
416216 825
LLP
E-mail: [email protected]
200 Bay St., Suite 3 800
Royal Banlc Plaza, South Tower
Virginie Gauthier
Toronto, ON M5J 2Z4
Tel: 416.216.4853
Canada
E-mail:
[email protected]
Lawyers for the Applicants
Orestes Pasparakis
Tel: 416.216.4815
E-mail:
[email protected]
Evan Cobb
Tel: 416.216.1929
E-mail: [email protected]
Alexander Schmitt
Tel: 416.216.2419
E-mail:
[email protected]
Martin J. Bienenstock
Tel: 212.969.4530
E-mail: [email protected]
PROSKAUER ROSE LLP
Eleven Times Square
New York, NY 10036
United States of America
Geoffrey T. Raicht
Tel: 212.969.3165
E-mail: [email protected]
U.S. Lawyers for the Applicants
Judy G.Z. Liu
Tel: 212.969.4512
E-mail: [email protected]
Timothy Q. Karcher
Tel: 212.969.4750
Email: [email protected]
Greg Prince
Tel: 416.814.5752
E-mail: [email protected]
PRICEWATERHOUSECOOPERS INC.
PwC Tower
18 Y ark Street, Suite 2600
Toronto, ON M5J OB2
Mica Arlette
Tel: 416.814.5834
E-mail: [email protected]
Court-appointed Monitor of the Applicants
Tracey Weaver
Tel: 416.814.5735
E-mail: [email protected]
Neil Bunker
Tel: 604.806.7209
E-mail: [email protected]
2
Robert I. Thornton
Tel: 416.304.0560
E-mail: [email protected]
THORNTON GROUT FINNIGAN LLP
Suite 3 200, 100 Wellington Street West
P. 0. Box 329, Toronto-Dominion Centre
Toronto, ON M5K 1K7
Canada
John L. Finnigan
Tel: 416.304.0558
Lawyers for PricewaterhouseCoopers Inc. E-mail: [email protected]
in its capacity as Court-appointed Monitor
Rebecca Kennedy
of the Applicants
Tel: 416.304.0603
E-mail: [email protected]
Asimlqbal
Tel: 416.304.0595
E-mail: [email protected]
Marc Wasserman
Tel: 416.862.4908
E-mail: [email protected]
OSLER, HOSKIN & HARCOURT LLP
100 King Street West
1 First Canadian Place
Suite 6200, P.O. Box 50
Toronto, ON M5X 1B8
Canada
Mark Trachuk
Tel: 416.862.4749
E-mail: [email protected]
Lawyers for the Independent Committee of
Jeremy Dacks
the Board of Directors of Pacific
Tel: 416.862.4923
Exploration & Production Corporation an
E-mail: [email protected]
Applicant
'
Brendan O'Neill
Tel: 416.849.6017
E-mail: [email protected]
GOODMANS LLP
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, ON M5H 2S7
Canada
Celia Rhea
Tel: 416.597.4178
E-mail: [email protected]
Lawyers for the Ad Hoc Committee and
certain of the DIP Note Purchasers
Ryan Baulke
Tel: 416.597.6954
E-mail: [email protected]
Dan Dedic
Tel: 416.597.4232
E-mail: [email protected]
3
Alan W. Kornberg
Tel: 212.373.3209
E-mail: [email protected]
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP
1285 Avenue ofthe Americas
New York, NY 10019
United States of America
Jacob A. Adlerstein
Tel: 212.373.3142
E-mail: [email protected]
U.S. Lawyers for the Ad Hoc Committee
and certain of the DIP Note Purchasers
AnnK. Young
Tel: 212.373.3234
E-mail: [email protected]
Scott Bomhof
Tel: 416.865.7370
E-mail: [email protected]
TORYSLLP
79 Wellington St. W. 30th Floor
Box 270, TD South Tower
Toronto, Ontario M5K 1N2
Canada
Tony DeMarinis
Tel: 416.865.8162
Lawyers for Bank of America, N.A., Lender E-mail: [email protected]
and Administrative Agent under the
David Bish
Revolving Credit Facility
Tel: 416.865.7353
E-mail: dbish@torys. com
Damian Schaible
Tel: 212.450.4580
E-mail: damian. schaible@davispo lk. com
DAVIS POLK & WARDWELL LLP
450 Lexington A venue
New York, NY 10017
United States of America
Angela M. Lib by
Lawyers for Bank of America, N.A., Lender Tel: 212.450.4433
and Administrative Agent under the E-mail: [email protected]
Revolving Credit Facility
Benjamin M. Schak
Tel: 212.450.3113
Fax: 212.701.6113
E-mail: Benjamin. schak@davispo lk. com
Andrew J.F. Kent
Tel: 416.865.7160
E-mail: andrew .kent@mcmillan. ca
MCMILLAN LLP
Brookfield Place
Suite 4400, 181 Bay Street
Toronto, ON M5J 2T3
Canada
Caitlin Fell
Tel: 416.865.7841
Lawyers for The Catalyst Capital Group E-mail: [email protected]
Inc.
4
Michael Hanlon
Tel: 1.514.987.5061
Fax: 1.514.987.1213
E-mail: [email protected]
Jeffrey L. Jonas
Tel: 212.209.4800
E-mail: jj [email protected]
BROWN RUDNICK LLP
7 Times Square
New York, NY 10036
United States of America
Brian T. Rice
U.S. Lawyers for The Catalyst Capital Tel: 617.856.8200
Group Inc.
E-mail: [email protected]
Jeffrey Carhart
Tel: 416.595.8615
E-mail: [email protected]
MILLER THOMSON LLP
Scotia Plaza
40 King Street West, Suite 5800
Toronto, ON M5H 3Sl
Canada
Lawyers for Lazard Freres & Co. LLC
Steven J. Reisman
Tel: 212.696.6065
E-mail: [email protected]
CURTIS, MALLET-PREVOST, COLT &
MOSLELLP
101 Park Avenue
New York, NY 10178-0061
United States of America
Theresa Foudy
Tel: 212.696.8860
E-mail: [email protected]
U.S. Lawyers for Lazard Freres & Co. LLC
Roger J aipargas
Tel: 416.367.6266
E-mail: RJ [email protected]
BORDEN LADNER GERVAIS LLP
Scotia Plaza
40 King Street West, 44th Floor
Toronto, ON M5H 3Y4
Canada
Lawyers
for
Corporation
International
Martin Sclisizzi
Tel: 416.367.6027
Finance E-mail: [email protected]
Douglas Smith
Tel: 416.367.6015
E-mail: [email protected]
Bevan Brooksbank
Tel: 416.367.6604
E-mail: [email protected]
5
Bruce Darlington
Tel: 416.365.3529
E-mail: bruce. darlington@dlapiper. com
DLA PIPER (CANADA) LLP
Suite 6000, 1 First Canadian Place
P.O. Box 367, 100 King Street West
Toronto, ON M5X 1E2
Canada
Susan Friedman
Tel: 416.365.3503
E-mail: [email protected]
Lawyers for The Bank of New York Mellon
as Trustee, Security Registrar and Paying
Mary Buttery
Agent under the series of Indentures issued
Tel: 604.643.6478
by the subject company
E-mail: mary. buttery@dlapiper. com
STIKEMAN ELLIOTT LLP
199 Bay Street
5300 Commerce Court West
Toronto, ON M5L 1B9
Canada
David Byers
Tel: 416.869.5697
.E-mail: [email protected]
Maria Konyukhova
Tel: 416.869.5230
E-mail: [email protected]
Lawyers for EIG Pacific Holdings Ltd.
Kathryn Esaw
Tel: 416.869.6820
Fax: (416) 947-0866
E-mail: [email protected]
James Gadsden
Tel: 212.238.8607
Cell: 914.629.8121
Fax: 212.732.3232
E-mail: [email protected]
CARTER LEDYARD & MILBURN LLP
2 Wall Street
New York, New York 10005
Lawyers for The Bank of New York Mellon
Indenture Trustee under the Indentures
'
6
Robert J. Gayda
Tel: 212.574.1490
E-mail: [email protected]
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY 10004
US Lawyers for HSBC as Agent on the Andrew Silverstein
HSBC Facility
Tel: 212.574.1383
E-mail: [email protected]
Gregg Bateman
Tel: 212.574.1436
E-mail: [email protected]
Catherine LoTempio
Tel: 212.574.1632
E-mail: [email protected]
Line Rogers
Tel: 416.863.4168
Email: [email protected]
BLAKE, CASSELS & GRAYDON LLP
Barristers and Solicitors
199 Bay Street
Suite 4000, Commerce Court West
Toronto, ON M5L 1A9
Aryo Shalviri
Tel: 416.863.2962
Fax: 416.863.2653
Email: [email protected]
Lawyers for Gran Tierra Energy Inc.
James D. Gage
Tel: 416.601.7539
Email: [email protected]
McCARTHY TETRAULT LLP
Suite 5300, TD Ban1c Tower
Toronto, ON M5K 1E6
Heather L. Meredith
Tel: 416-601-8342
Fax: 416.868.0673
Lawyers for O'Hara Administration Co.,
Email: [email protected]
S.A.
Robin B. Schwill
DAVIES WARD PIDLLIPS & VINEBERG
Tel: 416.863.5502
LLP
Fax: 416.863.0871
155 Wellington Street West
E-mail: [email protected]
Toronto, ON M5V 3J7
Lawyers for Alfa S.A. de C.V.
7
COURTESY COPIES
SITRICK AND COMPANY
7 Times Square, Suite 2600
New York, NY 10036
United States of America
Tom Becker
Tel: 212.573.6100
E-mail: [email protected]
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985,
c. C-36, AS AMENDED
Court File No.: CV-16-11363-00CL
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PACIFIC
EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P HOLDINGS CORP., META
PETROLEUM CORP., PACIFIC STRATUS INTERNATIONAL ENERGY LTD., PACIFIC STRATUS
ENERGY COLOMBIA CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU
S.R.L., PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY CORP., PREPSIE COOPERATIEF U.A., PETROMINERALES COLOMBIA CORP. AND GRUPO C&C ENERGIA
(BARBADOS) LTD.
Applicants
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
NOTICE OF MOTION
(Returnable May 26, 2016)
NORTON ROSE FULBRIGHT CANADA LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
[email protected]
Virginie Gauthier LSUC #41 0970
Tel: 416.216.4853
[email protected]
Alexander Schrnitt LSUC #63860F
Tel: 416.216.2419
[email protected]
Lawyers for the Applicants
CAN_DMS: \1 02639659\1
TAB2
Court File No.: CV-16-11363-00CL
1
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PACIFIC EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P
HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS
INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA
CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU S.R.L.,
PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY
CORP., PRE-PSIE COOPERATIEF U.A., PETROMINERALES COLOMBIA
CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
AFFIDAVIT OF PETER VOLK
(Sworn May 20, 2016)
I, Peter Volk, of the city of Toronto, in the Province of Ontario, MAKE OATH AND SAY:
I am the General Counsel of Pacific Exploration & Production Corporation ("Pacific"),
which is the direct or indirect parent of over 100 subsidiaries and Colombian branches
(collectively, the "Pacific Group"), including the other Applicants. I have held that position since
February, 2008. As such, I have personal knowledge of the matters to which I hereinafter
depose, except where otherwise stated, and where so stated I believe that information to be
true.
2
I swear this Affidavit in support of a motion brought by the Applicants for an Order:
(a)
extending the stay of proceedings granted by this Court pursuant to the
Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended (the
"CCAA") to and including August 26, 2016;
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(b)
approving the engagement of Blackhill Partners, LLC, as Chief Restructuring
Officer of Pacific, and GMP Securities Emerging Markets Corp. ("GMP") as
financial advisor to The Catalyst Capital Group Inc. ("Catalyst");
(c)
amending the initial order of this Court issued April 27, 2016 in respect of the
Applicants (the "Initial Order'') such that (i) Blackhill Partners, LLC, (ii) Deloitte
Restructuring Inc., (iii) Acquest Advisors, LLC, and (iv) GMP will each have the
benefit of the Administration Charge (as defined in the Initial Order) created to
secure professional fees; and
(d)
approving the granting of an guarantee to be given by Pacific Stratus Energy
Colombia Corp. ("Pacific Stratus") of the obligations of Petrominerales Colombia
Corp. ("Petrominerales") under the Coree! Contract (as defined below) with the
Agencia Nacional de Hidrocarburos (the "ANH"), the Colombian national
hydrocarbons agency, and, with the consent of the Monitor (as defined below),
such additional guarantees as may be required from time to time to keep the
Applicants' obligations under similar such oil and gas-related contracts,
concessions and licences in good standing.
I.
3
BACKGROUND
On April 27, 2016 (the "Filing Date"), the Applicants were granted protection under the
CCM pursuant to the Initial Order. In the Initial Order, the Court, among other things:
(a)
granted a stay of proceedings in favour of the Applicants until and including May
27, 2016, or such later date as the Court may order (the "Stay Period");
(b)
appointed PricewaterhouseCoopers Inc. as the monitor of the Applicants (in such
capacity, the "Monitor");
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CJ
(c)
authorized the Applicants to issue up to U.S. $500 million in senior secured notes
(the "DIP Notes") to be purchased by Catalyst and certain current holders of
Pacific's unsecured senior notes;
(d)
authorized the Applicants to request the issuance, renewal or extension of letters
of credit under a letter of credit facility (the "L/C Facility"), in an amount up to
U.S. $134 million; and
(e)
authorized the Applicants to perform its obligations under a Restructuring
Support Agreement dated April 20, 2016, among the Applicants, Catalyst, and
certain creditors (the "Support Agreement").
4
As of the date of the Initial Order, the Support Agreement evidenced support from the
holders of approximately 55% of the claims of Pacific's current noteholders and bank lenders,
which are collectively owed approximately U.S. $5.32 billion in principal as at the date hereof,
for the implementation of a restructuring and financing transaction (the "Recapitalization").
5
Since the Initial Order was granted, the Applicants have continued to operate their
business in the normal course with the benefit of the stay of proceedings, and have taken a
number of other steps to advance their restructuring.
6
On April 29, 2016, the Monitor filed a petition for recognition of these proceedings in the
United States as "foreign main proceedings" under chapter 15 of title 11 of the United States
Code. Shortly thereafter, on May 2, 2016, the Applicants filed for recognition of the within
proceedings in Colombia under Law 1116 of 2006 (Ley 1116 de 2006) with respect to their
Colombian branches.
7
The Applicants continued to solicit support for the Recapitalization from other
noteholders and bank lenders and now have the support of approximately 78.37% of those
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creditors (such creditors being, the "Supporting Creditors") pursuant to the Support
Agreement. Over 1,500 creditors have now signed the Support Agreement.
8
On May 10, 2016, the Applicants obtained a claims procedure order (the "Claims
Procedure Order") in these proceedings and have begun to implement that process within the
timelines required.
9
The Applicants have also continued to advance the preparation of the definitive
documents required to put the DIP Notes and the L/C Facility in place. This includes numerous
security documents necessary to secure the Applicants' obligations thereunder in 16 of the
jurisdictions in which they operate.
II.
APPOINTMENT OF THE CRO AND THE DEPUTY CFO
10
A key term of the Recapitalization and the Support Agreement is that Pacific would
appoint by May 6, 2016 (with a five day cure period thereafter) a chief restructuring officer and a
new deputy chief financial officer acceptable to Catalyst, certain Supporting Creditors and the
independent committee (the "Independent Committee") of the board of directors of Pacific (the
"Board").
11
Following a comprehensive search process conducted by Pacific, in consultation with
Catalyst, the relevant Supporting Creditors and the Independent Committee, Pacific selected
and has retained Blackhill Partners, LLC as Chief Restructuring Officer (in such capacity, the
"CRO"), and Deloitte Restructuring Inc. as Deputy Chief Financial Officer (in such capacity, the
"Deputy CFO"), with the consent of Catalyst, the relevant Supporting Creditors and the
Independent Committee.
12
Their mandate (and in particular that of the CRO) is to, among other things,
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l
(a)
review and assist Pacific and the other Applicants with the cash flow projections
required to be delivered to the purchasers of the DIP Notes and the lenders
under the UC Facility;
(b)
fully assess key company processes and controls, organizational structure,
controls, risks, and certain positions of Pacific;
(c)
provide ongoing reporting to the Independent Committee, Catalyst and the ad
hoc committee of noteholders (the "Ad Hoc Committee") and the Consenting
Lenders (as such term is defined in the Support Agreement);
(d)
oversee preparation of a detailed 2017 budget and a five year business plan for
the Pacific Group, including with respect to operations, capital expenditures and
identification of core and non-core assets;
(e)
engage Acquest Advisors LLC ("Acquest") to assist with operational issues,
including providing Latin American upstream and midstream expertise, and in
addition to financial analysis support, assess specific assets of the company, as
requested by the CRO, to incorporate fully the issues, options, and strategic
considerations regarding such specific assets,
as well as contemplated
transactions involving those assets; and
(f)
13
assist generally with managing Pacific's financial planning and analysis.
To secure the fees and expenses incurred in connection with services rendered by each
of the CRO, Deputy CFO and Acquest in connection with their respective engagements, the
Applicants seek to have these advisors designated as "Assistants" under the Initial Order, such
that they would have the benefit of the existing Administration Charge created thereunder.
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2
14
The Applicants also seek the Court's approval and confirmation of both the retention of
the CRO and of the terms of its engagement letter with Pacific, dated May 12, 2016 (the "CRO
Engagement Letter"). A copy of the CRO Engagement Letter is attached as Exhibit "A"
hereto.
15
The addition of the CRO, Deputy CFO and Acquest to the list of beneficiaries of the
Administration Charge, as well as the approval of the CRO Engagement Letter, is appropriate in
the circumstances as each will be working closely with the Applicants through the course of their
restructuring. Their retention of a CRO and Deputy CFO was required by the terms of the
Support Agreement and each of the Independent Committee, Catalyst, the Ad Hoc Committee,
the Consenting Lenders and the Monitor support the approval of the CRO Engagement Letter
and the-payment of the amounts set out therein.
16
The Applicants have also recently received a request from counsel to the CRO for
provisions to be added to the Order being sought, which provisions would provide certain
protections to the CRO and to Acquest during the course of their engagement, and the
Applicants and other interested parties are considering the same. To the extent that these
protective provisions are ultimately sought by the Applicants in the Order, they will be provided
to the Service List and the Court in advance of the May 26 return of this motion.
Ill.
17
APPROVAL OF GMP ENGAGEMENT
GMP, which serves as financial advisor to Catalyst, was approved as an "Assistant" in
the Initial Order, but at the time that order was being sought there were outstanding discussions
still to be had amongst the parties about the quantum of the success fees set out in its
engagement letter. No approval of the engagement letter with Catalyst, then dated April 25,
2016, was requested at that time.
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18
Discussions with respect to those success fees have now been resolved, and
accordingly, the Applicants now seek approval of a new engagement letter, as amended to and
including May 19 (the "GMP Engagement Letter". A copy of the GMP Engagement Letter is
attached hereto as Exhibit "8".
19
Approval of the GMP Engagement Letter is appropriate in the circumstances as GMP
has worked with Catalyst through the course of the solicitation process that the Applicants
conducted and has worked together with the Applicants and each of the other primary interested
parties to make the Recapitalization possible. Each of Catalyst and the Ad Hoc Committee
support the approval of the GMP Engagement Letter and payment of the amounts set out
therein.
IV.
20
STAY EXTENSION
The Applicants have continued to operate their business in the normal course with the
benefit of the stay of proceedings, which has provided stability to the business. I believe that the
Applicants have acted and are continuing to act in good faith and with due diligence in these
CCAA proceedings.
21
The Applicants seek an extension of the Stay Period up to and including August 26,
2016. This extension is appropriate in the circumstances to allow for the continued operation of
the Applicants' business and the completion of the claims process as stipulated by the Claims
Procedure Order as well as to permit the Applicants, the purchasers of the DIP Notes and the
providers of letters of credit to complete and implement the documentation and security
necessary for funds to be advanced under the DIP Notes and the UC Facility.
22
Subject to the receipt of funding under the DIP Notes, I understand that the cash flow
forecast to be filed with the Monitor's Second Report will show that the Applicants have
sufficient liquidity to fund their operations through the requested extension of the Stay Period.
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2Y
23
The Monitor has expressed its support for the extension of the Stay Period to August 26,
2016.
V.
APPROVAL OF GUARANTEES TO ANH
24
The Pacific Group holds interests in its hydrocarbon properties in Colombia through
exploration and production contracts ("E&P Contracts") and licences with, among others, the
ANH, the Colombian national hydrocarbons agency, and Ecopetrol S.A. ("Ecopetrol"), a
Colombian state-run oil and gas company.
25
Each E&P Contract with the ANH requires the relevant contractor to maintain certain
financial, technical and operational capacity standards during the life of the E&P Contract.
Recently, and further to the recent downturn in the oil industry generally, ANH began conducting
a review of contractors to confirm whether they continue to meet such standards. In connection
with that review, the ANH has notified one of the Applicants, Petrominerales, that it no longer
meets certain financial capacity standards as required under one contract in particular relating
to the "Corcel'' oil block (the "Corcel Contract").
26
In circumstances where a contractor under an E&P Contract no longer meets the
financial capacity standards required thereunder, the ANH's standard practice is to request an
unsecured guarantee of the contractor's obligations under the E&P Contract from a an affiliate
that does meet the required financial capacity standard. This guarantee is required by the ANH
in order for the E&P Contract to remain in good standing.
27
In Petrominerales' case with respect to the Corcel Contract, the Applicants propose that
Pacific Stratus, another Applicant, provide this guarantee, as the ANH has already assured the
Applicants that Pacific Stratus meets the financial capacity requirements under the Corcel
Contract.
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28
As Petrominerales is party to more E&P Contracts than the Coree! Contract, the
Applicants anticipate that further such requests may be made by the ANH in due course. In light
of the Applicants current financial difficulties, it is also foreseeable that such requests for
unsecured guarantees may be made in respect of other Applicants.
29
Paragraph 11 of the Initial Order (a copy of which is attached hereto for reference as
Exhibit "C") stipulates that " ... the Applicants are [ ... ] directed, until further Order of this Court
[ ... ] to not grant credit or incur liabilities except in the ordinary course of the Business".
30
The granting of such unsecured guarantees to the ANH and other similar such
regulatory bodies is a common practice and has been done several times before by members of
the Pacific Group. Still, the granting of guarantees is perhaps outside the ordinary course of the
business. Therefore the Applicants seek approval of:
(a)
the proposed granting of the guarantee by Pacific Stratus; and
(b)
the granting from time to time, with the prior consent of the Monitor, of any other
unsecured guarantee by an Applicant of the obligations of any other Applicant
under any oil and gas-related exploration & production contract, joint operating
agreement, licence or other similar arrangement, to the extent required by the
ANH, Ecopetrol or any other similar governmental agency or body in order to
keep such contract, licence or other arrangement in good standing.
31
In Petrominerales' case, should a guarantee of its obligations under the Coree! Contract
not be granted, the Applicants have been advised by ANH that it may be terminated. This would
be a significant blow to the Applicants' business as the Coree! Contract represented
approximately 3% of the Pacific Group's total net oil production in 2015.
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VI.
32
INTERNATIONAL FINANCIAL CORPORATION
International Finance Corporation ("IFC") and related entities are currently shareholders
in a number of the Pacific Group's subsidiaries. In particular, they held as at December 4, 2015
a 27.96% interest in Pacific Infrastructure Ventures, Inc., and as at December 31, 2015 a
36.36% interest in Pacific Midstream Ltd., each of which hold material infrastructure assets.
33
On the Filing Date, counsel to IFC came to agreement with counsel to the DIP
Noteholders and requested that Justice Newbould, in his endorsement, note the following:
The Applicants and the DIP lenders have agreed that they will not create security over
the shares or assets of Pacific Midstream Holding Corp., Pacific Midstream Ltd., Pacinfra
Holding Ltd. or Pacific Infrastructure Ventures Inc. or any of their direct or indirect
subsidiaries or entities in which they have an interest until after the comeback hearing,
unless otherwise agreed by International Finance Corporation ("IFC").
The making of the order today shall not prejudice any argument of IFC about whether or
not the security should or should not be created that it may wish to make at the
Comeback hearing.
34
By the return date for the comeback hearing (May 10, 2016), no agreement had been
reached with respect to obtaining the consent of IFC to a grant of security over the assets at
issue. As a result, the parties requested at the comeback hearing that Justice Newbould include
a further proviso in his endorsement, which he did, reading as follows:
Further to the Endorsement dated April 27, 2016, the agreement of the Applicants and
the DIP Lenders referred to in the Endorsement dated April 27, 2016 that they will not
create security over the shares or assets of Pacific Midstream Holdings Corp., Pacific
Midstream Ltd., Pacific Holding Ltd. or Pacific Infrastructure Ventures Inc. or any of their
direct or indirect subsidiaries or entities in which they have an interest shall continue until
May 26, 2016, or unless otherwise agreed by International Finance Corporation.
35
With a view to resolving this matter and obtaining IFC's consent to a grant of security
over the assets at issue, counsel to the Ad Hoc Committee, Catalyst and the Applicants have
been in discussions with counsel to IFC since the Filing Date and in earnest since the May 10,
2016 comeback hearing.
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36
l
While these parties have not been able to agree on a mutually acceptable set of terms
for IFC's consent to a grant of security, the purchasers of the DIP Notes have determined that,
in the alternative, they would accept from Pacific unsecured guarantees (as opposed to grants
of full security) from Pacific Midstream Holding Corp. and Pacinfra Holding Ltd. as the direct
corporate parents of the two entities in which IFC has an equity interest. Such guarantees would
not require consent of the IFC. Accordingly, this matter has been resolved in substance.
37
However, language with respect to an Order or endorsement has not yet been settled;
this will be provided to the Service List and the Court prior to the return of the May 26 1h motion.
VII.
38
TAX AND CORPORATE PLANNING
Pacific is executing a series of intercompany debt repayment and subordination
transactions (the "Corporate Steps") among itself and its subsidiaries, to minimize certain
European tax liabilities that may be due under Swiss and Luxembourg law in respect of two
Applicants, Meta Petroleum Corp. and Pacific E&P Holdings Corp.
39
These transactions are also required to resolve a requirement under Swiss law that
Meta maintain a certain minimum level of equity value, and it is this requirement that the
proposed subordination of certain intercompany amounts owed by Meta to other members of
the Pacific Group is intended to address.
40
A summary presentation explaining these Corporate Steps is attached hereto as Exhibit
"D". It is important to note that while cash transfers have or are to be made under the Corporate
Steps, all of the cash will stay within the cash management system approved in the Initial Order
and, moreover, will ultimately remain within the Applicants to these CCAA proceedings.
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2
41
Pacific obtained the consent of Catalyst and the Ad Hoc Committee to execute the
Corporate Steps. The lenders under Pacific's unsecured credit facilities and the Monitor were
also advised of these proposed Corporate Steps and did not object.
VIII.
42
CONSIDERATION OF THE EIGHTH EIG OFFER
At the hearing on May 10, 2016, counsel for EIG Management Holdings LLC ("EIG")
advised that EIG was making another bid, which it submitted to Pacific on May 7, 2016. This
was in fact the eighth bid that EIG has made since the commencement of the solicitation
process that began months ago.
43
The Independent Committee and its advisors, in consultation with Pacific's creditors and
the Applicants and their advisors, reviewed this latest offer from EIG.
44
As was noted by counsel to EIG at the hearing on May 101h, the terms of the Support
Agreement allow Pacific to terminate the Support Agreement if the Board determines that the
Recapitalization is not in the best interests of Pacific having regard to the reasonable
expectations of current noteholders and the lenders under its unsecured credit facilities.
45
After completing its review, the Independent Committee reported to the Board on May
16, 2016 and concluded that the Recapitalization continues to be in the best interests of Pacific
and that Pacific should continue to support it. The Independent Committee therefore
unanimously recommended to the Board that the Board not accept this eighth offer from EIG
and not exercise the termination right contained in the Support Agreement.
46
The Board, having received the advice of its outside counsel and financial advisors,
unanimously accepted the recommendation of the Independent Committee and determined that
the Recapitalization continues to be in the best interests of Pacific and that it should not accept
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29
the revised EIG offer. A copy of a detailed press release announcing that decision is attached
hereto as Exhibit "E".
47
EIG had also applied to the Superintendencia de Sociedades de Colombia (the
"Superintendencia"), the regulatory and judicial authority that oversees insolvencies in
Colombia, for an adjournment of the recognition proceedings before it. On May 18, 2016, the
Superintendencia rejected that postponement request.
A copy of the Superintendencia's
decision made on May 18, 2016 is attached hereto as Exhibit "F", and a certified translation
will be provided in advance of return of the May 261h motion.
SWORN BEFORE ME at the City of Toronto,
in the Province of Ontario, this 20th day of
May, 2016.
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TABA
This is Exhibit "A" referred to in the
Affidavit of Peter Volk
sworn before me, this 20th day
of May, 2016
~
~Onerf0ftillrl9i\ffvits
L
CAN_DMS: \65405557\1
~.
~~
Blackhill
Blackhill Partners, LLC
2651 North Harwood St.
· Suite 120
Dallas, Texas 75201
tel: 214.382.3750
fax: 214.382.3755
EXECUTION COPY
May 12,2016
Pacific Exploration & Production Corporation
333 Bay Street
Suite 1100
Toronto, ON M5I:I2R2
Attn: Peter Volk and Michael Galego
RE:
Engagement of BlackhiU Partners LLC by Pacific Exploration & Production Corporation, on its own behalf and on behalf of certain of its direct and indirect affiliates and subsidiaries
Gentlemen:
On April 27, 2016, Pacific Exploration & Production Corporation (the "Company") and
certain o:f its direct and indirect affiliates and subsidiaries (collectively, with the Company, the
"CCAA Applicants"), sought and received protection under the Companies' Creditors Arrangement Act, R.S.C. 1985, c.C-36, as amended (the ''CCAA") pursuant to an order of the Ontario
Superior Court of Justice (the "CCAA Court"). PricewaterhouseCoopers Inc. was appointed as
monitor of the CCAA Applicants (the "Monitor'') in the CCAAproceedings.
This letter confirms our understanding that the CCAA Applicants have engaged Blackhill
Partners LLC ("we'; or "us" or ''Black:hill") to act as their chief restructudng officer (the "CRO")
to provide the services set f01ih below and other professional services as may be expressly requested and authorized by the Independent Committee of the Companis current board of the
directors (the "Independent Committee") from the date of the agreement (this ''Agreement")
through the end of the Engagement Period (as hereinafter defined). Blackhill will report only to
the Independent Committee and will be authorized to provide information directly to the Plan
Sponsor, the Ad Hoc Committee (or Goodmans LLP and/or Evercore Partners, as designated by
the Ad Hoc Committee from time to time) and the Requisite Consenting Lenders (or Davis Polk
& Wardwell, Torys LLP, FTI Consulting, Inc. and Seward & Kissel LLP, as designated by the
Requisite Consenting Lenders from time to time). All references in this letter to tllis Agreement
shall include Schedule 1 hereto. Capitalized terms used herein and not otherwise defined shall
have the meaning attributed to them in the Restructuring Support Agreement (as amended, supplemented or otherwise modified from time to time) dated April20, 2016 (the "RSA").
~ Blackhill
2
2
The "Engagement Period" shall mean that period commencing on May 13, 2016, and
continuing through the tetmination date as detem1ined by the process provided for below, The
parties to this Agreement agree and acknowledge that this Agreement is supported by adequate
and valuable mutual consideration, the mutual covenants and agreements of the parties, the ser~
vices to be performed here1..mder, and the fees and other monetary payments to be paid andreceived by the parties hereunder.
1. Services
Subject to the approval ofthe CCAA Court, Blackhill is hereby engaged in the capacity of CRO
to the CCAA Applicants. In order to fulfill that mandate, Blackhill shall provide the professional
services of James R Latimer, III C'Latimer") and such other members ofBlackhill as needed or
requested by the Independent Committee through the end of the Engagement Period, for such
amounts of time and in such of the Company's locations to be in accordance with the tenus of ,
the RSA, the specific details of which shall be agreed upon by the CRO, the Independent Committee, the Plan Sponsor, the Ad Hoc Committee (or Goodmans LLP and/or Evercore Partners,
as designated by the Ad Hoc Committee from time to time) and the Requisite Consenting Lendei's (or Davis Polk & Wardwell, Torys LLP, FTI Consulting, Inc., and Seward & Kissel LLP, as
designated by the Requisite Consenting Lenders from time to time).
The services to be provided by the CRO will be those necessary to oversee and facilitate
the financial and operational restructuring of the CCAA Applicants and perfonn the management
services described below. The CRO shall work in cooperation with and receive support from
DeloHtes Restructuring Inc., in its capacity as the Deputy Chief Financial Officer ("DCFO") of
the Company, and shall consult with the Plan Sponsor, the Ad Hoc Committee (or Goodmans
LLP and/or Evercore Partners; as designated by the Ad Hoc Committee from time to time) and
the Requisite Consenting Lenders (or Davis Polk & Wardwell, Torys LLP, FTI Consulting, Inc.,
and Seward & Kissel LLP, as designated by the Requisite Consenting Lenders from time to time)
throughout the Engagement Period. The CRO shall:
·
D Mal<e Latimer available to lead this engagement asthe CRO for the Company's benefit in order to provide executive leadership and problem-solving.
D
Perform the CRO services expressly contemplated in the RSA .
0
Conduct analysis and due diligence, with the assistance of the DCFO, on the existing
condition of the Company including the operational and financial condition and identify value drivers.
D
With the assistance of the DCFO, identify and make imrt1ediate operational improvements, undertake G&A cost saving initiatives and authorize capital expenditures with
a view to reducing the overall cost per barrel of production and establishing a sustain"'
able exploration plan, provided that significant initiatives. and capital expenditures
shall be done in consultation with the Independent Committee, the Plan Sponsor, the
Ad Hoc Committee (or Goodmans LLP and/or Evercore Partners, as designated by
the Ad Hoc Committee from time to time) and the Requisite Consenting Lenders (or
~ Blackhill
3
3
Davis Polk & Wardwell, Torys LLP, FTI Consulting, Inc., and Seward & Kissel LLP,
as designated by the Requisite Consenting Lenders from time to time).
D In consultation with management and with the assistance of the DCFO, oversee preparation of a detailed 2017 budget and a five year business plan for the Company, including with respect to operations, capital expenditures and identification Qf core and
non-core assets.
D With assistance of the DCFO, make a full assessment of management, Jcey processes,
systems and controls of the CCAA Applicants, including their cash management systems and management information systems, and implement any modifications or
changes thereto, provided that significant modifications and changes will be done in
consultation with the Independent Committee, the Plan Sponsor, the Ad Hoc Committee (or Goodmans LLP and/or Evercore .Partners, as designated by the Ad Hoc
Committee from time to time) and the Requisite Consenting Lenders (or Davis Polk
& Wardwell, Torys LLP, FTI Consulting, Inc., and Seward & Kissel LLP; as designated by the Requisite Consenting Lenders from time to time).
D
With assistance of the Monitor and the DCFO, review 13 week cash flow forecasts
for the identification of capital gaps/needs .of the Company. True up cash flow forecasts originally prepared by Company with the assistance of the Monitor. Approve all
cash disbursements above an established threshold in order to maximize the Company's liquidity.
0 Prepare weekly report for the Independent Committee, the Plan Sponsor, the Ad Hoc
Committee (or Goodmans LLP and/ot Evercore Partners, as designated by the Ad
Hoc Committee from time to time) and the Requisite Consenting Lenders (or Davis
Polk & Wardwell, Torys LLP, FTI Consulting, Inc., and Seward & Kissel LLP, as
designated by the Requisite Consenting Lenders from time to time) documenting progress-to-date in the implementation of initiatives.
0
Engage Acquest Advisors LLC ("Acquest Advisors") to assist with operational issues, including providing Latin American upstream and midstream expertise, provided that the CCAA Applicants shall not incur obligations to Acquest Advisors beyond
those set forth in this Agreement.
D Communicate with the Monitor, the DCFO and other professionals and their outside
counsel, as appropriate, in regard to the operational restructuring activities and strategies through and during the course of the CCAA proceedings.
D Lead communications and/or negotiations with the stakeholders with respect to the
CCM Applicants' operational turnaround plan, cash and vendor/ service provider
management and any other matters as needed.
D Perform such additional tasks on behalf of the CCAA Applicants as are considered
necessary and appropriate by the Independent Committee acting in consultation with
the Plan Sponsor, the Ad Hoc Committee (or Goodmans LLP and/or Evercore Part,.
~Blackhill
4
ners, as designated by the Ad Hoc Committee from time to time) and the Requisite
Consenting Lenders (or Davis Polk & Wardwell, Torys LLP, FTI Consulting, Inc.,
and Seward & Kissel LLP, as designated by the Requisite Consenting Lenders from
tim{1 to time).
0 Assist the Company in liaising with the Superintendent in Colombia and other
appli~
cable governmental authorities.
2. Fees and Expenses
As compensation for the commitment of time and resources and the services provided by
Blackhill hereunder, the CCAA Applicants agree topay Blackhill, as follows:
1.
A retainer in U.S. dollars to be paid on the date hereof (the 11 Retainer") in an
amount estimated in good faith by Blackhill to represent the professional fees
earned or to be earned in a one-month period, including the fees of Acquest Advisors (the ~~Monthly Fee Estimate"). The Retainer is to be replenished to the thenappropriate level of the Monthly Fee Estimate every two weeks. The parties
acknowledge and agree that the Retainer may be applied by Blackhill to its
monthly invoice described in Section 2(iii) and any other invoices of Blackhill
that shall remain unpaid at the conclusion of the engagement hereunder. Any unused portion of the Retainer shall be refunded upon the completion of the engagement hereunder.
.11.
Professionalfees in the amounts as described below
a) For Blackhill and Acquest Advisors team members :
o
o
o
o
o
o
o
Managing Directors- $650-$795 per hour
Directors - $500 - $625 per hour
Vice Presidents- $400 - $500 per hour
Associates- $325- $395 per hour
Analysts- $200 - $300 perhour
Senior Advisers- $450- $550 per hour
Administrative and supportpersonnel- $175- $225 perhour
b) Success Fee: (i) A fee in the amotmt ofUSD $1 million to be earned and
payable upon the date immediately following consummation of the Plan;
and (ii) a variable fee of up to USD $500,000 payable upon achievement
of certain metrics of operational success to be mutually agreed upon by the
Independent Committee, the Plan Sponsor, the Ad Hoc Committee (or
Goodmans LLP and/or Evercore Partners, as designated by the Ad Hoc
Committee from time to time) and the Requisite Consenting Lenders (or
Davis Polk & Wardwell, Torys LLP, FTI Consulting, Inc., and Seward &
Kissel LLP, as designated by the Requisite Consenting Lenders from time
to time), provided, however, no Success Fee shall be payable if this
Agreement has been terminated by (a) the Company, for gross negligence
~ Blackhill
5
or willful misconduct, as described in Section 4(ii) below or (b) Blackhill
pursuant to Section 4(i) below.
Notwithstanding the foregoing, the CCAA Applicants shall not incur fees for time
spent on nonworking travel by Blackhill and Acquest Advisors team members.
iii. For each month of the engagement hereunder, Blacld1ill shall provide the CCAA
Applicants a monthly invoice for its services hereunder, which hwoiee shall also
include the fees and expenses of Acquest Advisors. Each Blackhill invoice shall
be due and payable in full by wire transfer within five (5) days of its submission
by Blackhi11 to the CCAA Applicants. For each month of the engagement hereunder, Blackhill shall provide to the CCAA Applicants a monthly invoice that shall
include the total out-of-pocket expenses ofBlackhill and Acquest Advisors, as·incurred in the perfmmance oftheir duties under this Agreement. Blackhill's and
Acquest Advisors' reimbursable expenses shall include, but not be limited to, (i)
the reasonable and documented fees of counsel, which fees shall be subject to a
cap of$70,000 unless the CCAA Applicants provide prior consent (not to be unreasonably withheld); (ii) travel costs incurred by Blacldllll and Acquest Advisors, including reimbursement of the cost of business class or equivalent airline
tickets for travel lasting more than 3 hours; (iii) any sales, use or similar taxes
misingin connection with any matter referenced in this Agreement; an:d (iv) subject to a maximum amount to be agreed upon by the Company and Blackhill, security costs for protection of Blackhill and Acquest Advisors personnel as required. Blackhill may apply any or all of the Retainer or Expense Retainer to any
invoice issued to the CCAA Applicants, in which case the amount due and payable to Blackhill shall be reduced by the amount of the Retainer or Expense Retainer so applied. All payments hereunder shall be payable in U.S. dollars from a
U.S. institution.
1v.
An expense retainer (the "Expense Retainer") in U.S. dollars in an amount estimated in good .faith by Blackhill to represent the estimated out-of-pocket expens.,.
es, including travel expenses incurred or to be incurred in a one-month period by
Blackhill and Acquest Advisors (the "Monthly Expense Estimate"). The Expense
Retainer is to be replenished to the then-appropriate level ofthe Monthly Expense
Estimate every two weeks. The parties acknowledge and agtee that the Expense
Retainer may be applied by Blackhill to its monthly invoice for reimbursable expenses described in Section 2(iii) and the final expenses of Blackhill or any other
expenses of Blackhill that shall remain unpaid at the conclusion of the engagement hereunder. Any unused pmiion of the Expense Retainer shall be refunded
upon the completion of the engagement hereunder.
3. Information to be Supplied
Under the terms of this Agreement, we will be actmg under the authority of the Independent Committee. In connection with our engagement, the CCAA Applicants will furnish us
'with all information concerning the CCAA Applicants that we reasonably deem app:I;opriate and
will provide us with reasonable access to the CCAA Applicants' managers, employees, account-
~ Blackhill
6
ants, counsel and other representatives (collectively, the "Representatives"), it being tmderstood
that we will rely solely upon such information supplied by the CCAA Applicants and their Rep:resentatives without assuming any responsibility for independent investigation or verification
thereof. All confidential information concerning the CCAA Applicants that is given to us will be
used solely in the course of the perfofll1ance of our services hereunder. Except as otherwise required by law, we will not disclose this information to a third party without the CCAA Applicants' consent.
No advice rendered or decisions taken by us, whether fonnal or informal) may be disclosed, in whole or in part, or summarized, excerpted from or otherwise referred to without our
prior written consent, which 'will not be unreasonably denied or withheld. In addition, we may
not be otherwise refe1red to without our prior written consent.
4. Termination
Our engagement hereunder may be terminated by (i) Blackhill, at any time during the
Engagement Period, upon 30 days prior Wiitten notice thereof to the Company, such notice to be
given by Registered, Certified or Express Mail or (ii) the Company, any time during the Engagemertt Period, upon 30 days prior WI·itten notice thereof to Blackhill, such notice to be given
by Registered, Certified or Express Mail, unless if Blackhill has engaged in gross negligence or
willful misconduct in connection with their services hereunder, in which case its engagement
hereunder may be terminated by the Company immediately upon written notice thereof to
Blacld1ill; provided, however, that in the event of any termination of our engagement, we will
continue to be entitled to receive payment for any accrued but unpaid professional fees, the outof-pocket expenses provided for herein through the date of such termination and other than in
respect of termination as a result of gross negligence, payment of the Success Fee. Any termination shall not affect the Company's agreementto indemnify Blacldlill and certain related persons
as provided in Schedule I attached hereto. Upon termination of this engagement for any reason,
Blackhill shall be deemed to have resigned, as of the time of such termination, from any and all
positions thert held with the CCAA Applicants (whether as an officer, limited liability company
manager or otherwise) and ·each of its subsidiaries and/or affiliates.
5. Other Matters
In connection with this engagement, Blacldlill is acting as an independent contractor with
duties owing solely to the CCAA Applicants. This Agreement sets forth the entire agreement be~
tween the parties as to the subject matter hereof and supersedes all previous agreements between
the parties hereto, whether written, oral or otherwise. The parties to this Agreement each hereby
agree and acknowledge that none of the actions contemplated hereby is or shall be deemed (i) a
contract or arrangement to sell real property, or (ii) an arrangement to which the laws, rules and
regulations of any applicable agency goveming the payment of real estate commission applies.
The CCAA Applicants hereby irrevocably agree not to, as part of any proceeding Gudicial or
otherwise) assert a defertse that any of the fees (including amounts payable to Blackhill under
Section 2) payable to Blaclchill are not payable by virtue of the application of any laws, rules or
regulations governing payment of real estate commissions.
·
~ B1ackhill
7
Any amendments to this Agreement shall only be valid if made in writing and signed by
all parties hereto. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.
The CCAA Applicants shall include Blackhill and Acquest Advisors within the CCAA
Applicants' directors and officers liability insurance coverage.
The fees and expehse owing to Blackhill and Acquest Advisors under this Agreement
shall also be subject to the Administration Charge approved by the CCAA Comi:.
Any notice given pursuant to any of the provisions of this Agreement shall be in writing
and shall be given by Registered, Certified or Express Mail (i) if to the CCAA Applicants, at the
address set forth above, and (ii) if to Blackhill Partners LLC, at our offices at Blackhill Partners
LLC; 2651 North Harwood Street, Suite 120; Dallas, Texas 75201; Attn: JamesR. Latimer, III.
This Agreement and the terms hereof, are subject to approval by the CCAA Court, pursu~
ant to an order acceptable to the CRO and the CCAA Applicants, in consultation with the Plan
Sponsor, the Ad Hoc Committee (or Goodmans LLP and/or Evercore Partners, as designated by
the Ad Hoc Committee from time to time) and the Requisite Consenting Lenders (or Davis Polk
& Wardell and/or FTI Consulting, as designated bythe Requisite Consenting Lenders from time
to time), which approval shall be sought as soon as practicable by the CCAA Applicants.
This Agreei11ent may be executed simultaneously in two or more counterpmi:s, each of
which shall be deemed an original, but all of which shall constitute one and the same 'instrument.
This Agreement may not be assigned by either party hereto, without the prior written consent of
the other, to be given in the sole discretion of the party from whom such consent is being requested. Any attempted assignment of this Agreement made without such consent may be void,
at the option of the non~assigning paity. This Agreement has been and is made solely for the
benefit of the CCAA Applicants and Blackhill and their respective successors and assigns, and
no other shall acquire or have any right under or by virtue of this Agreement.
6. Miscellaneous
The CCAA Applicants recognize and confinn that Blackhill in acting pursuant to tlus engagement will be using information in reports and other inf01mation provided by others, including, wit11out limitation, information provided by or on behalf of the CCAA Applicants and any
potential acquirers, and that Blackhill does not assume responsibility for and may rely, with~
out independent verification; on the accuracy and completeness of any such reports and information. In addition, the CCAA Applicants represent and warrant that a11y information relating to the CCAA Applicants that is furnished to Blackhill by or on behalf of the CCAA Appli~
cants or other relevant parties Will be true, complete and corre.ct in all material respects. The
foregoing shall remain operative and in f1.lil force and effect regardless of any investigation
made by or on behalf of any Indemnified Party (as defined elsewhere in this Agreement).
The CCAA Applicants agree that any information or advice (written or oral) rendered by
Blackhill, its affiliates or any of its representatives in connection with this engagement is for the
confidential use of the CCAA Applicants only and the CCAA Applicants will not and will not
~ Blackhill
8
2)
permit any third party to disclose or. othenvise refer to such advice or illfonnation in any mailller
without Blackhill's prior written consent.
The CCAA Applicants agree to provide indemnification to and to limit liability of Blackhill and certain other persons in connection with Blackhill's engagement hereunder in accordance with Schedule I, which is attached hereto and made a part hereof.
Any controversy or claim arising out of or relating to this Agreement or the services provided by Blackhill pursuant hereto (including any such matter involving any parent, subsidiary,
affiliate, successor in interest, or agent of the Company or ofBlackhill) shall be resolved by the
CCAACourt.
The CCAA Applicants expressly acknowledge that Black:hill has been retained solely
as CRO to the CCAA Applicants, and not as an advisor to or an age1it of any other person, and
that the CCAA Applicants' engagement of Blackhill is not intended to confer rights i.lpOn any
persons not a party hereto (including shareholders, employees or creditors of the Company) as
against Blackhill, Blaclchill 's affiliates or their respective directors, members, officers, agents
and employees. It is further understood and agreed that Blackhill will act under this Agreement as an independent contractor with duties solely to the CCAA Applicants as and to the
extent set forth herein and nothing in this Agreement or the nature ofBlackhill's services shall
he deemed to create a fiduciary or agency relationship between Blackhill and the Company or
its shareholders, employees or creditors. The obligations of Blackhill are solely entity obligations, and no officer, director, member, employee, agent, member, or controlling person shall
be subjected to any personal liability whatsoever to any person, nor will any such claim be
asserted by or on behalf of any other party to this Agreement.
7. Governing Law
This Agreement is to be governed by the laws of the Province of Ontario, without giving
effect to the principles of conflict oflaws,
We are delighted to accept this engagement and look forward to worldng with you. on this assignment. Please confirm that the foregoing is in accordance with your understanding by signing
and retuming to us the enclosed duplicate of this letter.
Very truly yours,
tckhill Partners
\
\
By:,
Nam :
Titl :
es R. Latimer, III
naging Director
~ Blackhill
9
SCHEDULE I
TI1e CCAA Applicants will indemnify and hold hannlessBlackhill, James R. Latimer, III
("Latimer"), Blackhill's aftlliates, and their respective directors, officers, employees, agents, representatives and controlling persons, and Acquest Advisors and its affiliates, directors, officers,
employees, agents, representatives and controlling persons (Blackhill, Latimer, Acquest Advisors and each such entity or person being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities; joint or several, to which such Indemnified Party may become subject, provided the same are related to or arising out of activities performed by or on behalf of an Indemnified Party pursuant to this Agreement, any transactions contemplated thereby
or Blackhill's or Latimer's role in connection thereWith; provided further that the CCAA Applicants will not be. liable to the extent that any loss, claim, damage or liability is finallyjudicially
determined to have resulted primarily from the Indemnified Party's gross negligence or willful
misconduct. The CCAA Applicants agree to reimburse any Indemnified Pmiy for all reasonable
costs and expenses (including counsel fees and disbursements) as they are incurred in connection
with the. investigation of, preparation for or defense of any pending or threatened claim, or any
action, investigation, suit or proceeding arising therefrom, whether or not such Indel11Ilified Party
is a party, including the enforcement of this Agreement. CCAA Applicants agree that no Indemnified Party shall have any liability {whether direct or indirect, in contract .or tort or otherwise) to
the CCAA Applicants, their own or affiliated entities or its security holders or creditors, related
to or arising out of the engagement of Blackhill, Latimer or Acquest pursuant to, or the performance by Blackhill or Latimer of the services contemplated by, this Agreement exceptto the extent that any loss, claim, damage or liability is finally judicially determined to have resulted from
the Indemnified Party's gross negligence or willful misconduct.
If the indemnification provided for in this Agreement is for any reason held unenforceable, CCAA Applicants agree to contribute to the losses, claims, damages and liabilities, as incurred by any Indemnified Person, for which such indemnification is held unenforceable in such
proportion as is appropriate to reflect the relative benefits to CCAA Applicants and its owned or
affiliated entities, on the one hand, and Blaokhill, on the other hand, of the engagement of BlackhilL CCAA Applicants agree that for the purposes of this paragraph the relative benefits to the
CCM Applicants and Blackhill shall be deemed to be in the same proportion that the total value
of the transactions under consideration by the CCAA Applicants compared to the professional
fees paid or to be paid to Blackhill under this Agreement; provided that, to the extent pmmitted
by applicable law, in no event shall the Indemnified Parties be required to contribute an aggre-.
gate amount in excess of the aggregate professional fees actually paid to Blackhill under this
Agreement.
In the event CCAA Applicants are considering entering into one transaction or a series of
transactions involving a merger or other business combination or a dissolution or liquidation of
all or a significant portion of CCAA Applicants'· assets, CCAA Applicants shall promptly notifY
Blackhill in writing. If requested by Blackhill and/or its assigns, CCAA Applicants shall then
establish alternative means of providing for their obligations set forth herein on terms and conditions reasonably satisfactory to Blackhill and/or its assigns, if any.
Promptly after receipt by an Indemnified Pmi:y of notice of any claim or the commencement of any action, suit or proceeding with respect to which an Indemnified Party may be enti-
~ Blacklrill
tied to indemnity hereunder, the Indemnified Parties will notify CCAA Applicants in writing of
such claim or of the commencement of such action or proceeding, and CCAA Applicants will
assume the defense of such action, suit or proceeding and will employ and instruct counsel reasonably satisfactory to the Indemnified Parties and will pay the fees and disbursements of such
be encounsel, as incurred. Notwithstanding the preceding sentence, any Indemnified Party
titled to employ counsel separate from counsel for CCAA Applicants and any other party in such
action if such Indemnified Party reasonably determines based upon legal advice that a substantial
conflict of interest exists which cannot otherwise be reasonably addressed and which makes representation by counsel instructed by CCAA Applicants not practicable. In such event, the reasonable fees and disbursements of such separate counsel will be paid by CCAA Applicants.
will
CCAA Applicants agree that, without Blackhill's prior written consent (which consent
will not be unreasonably withheld), they will not settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification could be sought under the indemnification provision of this Agreement (whether
or not Blackhill or any other Indemnified Party is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent includes an tmconditional
release of each Indemnified Party from all liability arising out of such claim, action or proceeding. Blackhill agrees that, without CCAA Applicants' prior written consent, it will not settle,
compromise or consent to the entry of any judgment in any pending or threatened claim, action
or proceeding in respect of which indemnification could be sought under the indemnification
provision of this Agreement (whether or not CCAA Applicants are an actual or potential party to
such claim, action or proceeding\ unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding.
In the event any Indemnified Party is requested or required to appear as a witness in any
action, suit or proceeding brought by or on behalf of or against CCAA Applicants in which such
Indemnified Party is not named as a defendant, CCAA Applicants agree to reimburse Blackhill
for all reasonable disbursements incurred by it in connection with such Indemnified Party's appearing and preparing to appear as a witness, including, without limitation, the fees and disbursements of its legal counsel, and to cornpensate Blacldull in an amount to be mutually agreed
upon consistent with the rates contemplated in this Agreement
The provisions of this Schedule I shall be in addition to any liability which the CCAA
Applicants may otherwise have under the Agreement. It is understood and agreed that, notwithstanding anything else in the Agreement or this Schedule I, Acquest Advisors is an intended tlurd
party beneficiary of the rights of indemnification provided in this Schedule I, and such rights
may not be amended or modified without Acquest Advisors' consent.
~Blackhill
TABB
4
This is Exhibit "B" referred to in the
Affidavit of Peter Volk
sworn before me, this 20 1h day
of May, 2016
CAN_DMS: \65405557\1
GMP
\Capital Inc.
CAPlTAL INC.
145 King Street West, S\Jite 300
Toronto, Ontario MSH lJS
Tel: (416) 367-8600 Fax: (416) 367-8164
PRIVATE & CONFIDENTIAL
May 19, 2016
The Catalyst Capital Group Inc.
181 Bay St #4700
Toronto, Ontario
M5J 2T3
Attention:
Gabriel de Alba
Re:
Pacific Exploration & Production Corporation
Dear Sir:
GMP Securities Emerging Markets Corp. or one of its affiliates (collectively "GMP") understands that The
Catalyst Capital Group Inc. (on behalf of those investment funds managed by it, "Catalyst") recently entered into
a definitive support agreement with Pacific Exploration and Production Corp. ("Pacific" or the "Company"), and
certain members of the Company's supporting creditors in connection with a comprehensive financial
restructuring (the "Proposed Transaction"). The purpose of this agreement is to confirm the appointment of
GMP as financial advisor to Catalyst to offer advice to Catalyst in connection with the Proposed Transaction.
This agreement confirms our mutual understanding and agreement regarding the terms and scope of our
engagement to render financial advisory services to Catalyst in connection with the Proposed Transaction.
1.
Currency.
Except as otherwise indicated, all amounts expressed herein in terms of money refer to lawful currency of the
United States of America and all payments to be made hereunder shall be made in such currency.
2.
Services to be Rendered by the Financial Advisor.
GMP shall perform such financial advisory services as are required by and/or reasonably requested by Catalyst
in connection with the Proposed Transaction including the following:
a)
assist Catalyst in the preparation of any confidential information memorandum or other
documents appropriate for the solicitation of expressions of interest from third parties in the
Proposed Transaction;
b)
assist Catalyst in identifying, approaching and conducting discussions with prospective
investors, purchasers, targets and strategic partners;
c)
assist and advise Catalyst with respect to negotiating the form, structure, term·s and price of a
Proposed Transaction;
d)
provide Catalyst with analysis and advice as to the financial implications of a Proposed
Transaction
e)
if and to the extent requested by Catalyst, assist in the negotiations in respect of any Proposed
Transaction including the provision of advice as to the form, structure and terms of a Proposed
Transaction;
-1-
3.
f)
together with Catalyst's counsel, assist in negotiating documentation necessary to complete a
Proposed Transaction; and
g)
providing such other financial advisory services as Catalyst and GMP agree are appropriate in
the circumstances
Financial Advisor.
GMP is acting as financial advisor and is not an expert on, and cannot render opinions regarding, legal,
accounting, regulatory or tax matters. You should consult with your other professional advisors concerning these
matters before undertaking a Proposed Transaction.
4.
Consideration for Services.
The fees payable to GMP for the foregoing services shall be as follows:
(a) A success fee of US$4,000,000 (the "Success Fee"), where Success shall be defined as adoption in
whole of the Proposed Transaction to be submitted by you, of which (i) US$3,000,000 shall be payable
by Pacific and/or its affiliates and (ii) US$1,000,000 shall be payable by Catalyst (which amounts shall
be payable upon exit).
(b) A monthly work fee (the "Work Fee"), which shall be payable to GMP by Pacific and/or its affiliates in the
following manner:
(i)
From January 1, 2016 to June 30, 2016, a Work Fee of US$150,000 shall be payable
on the first day of each month and shall be for the sole account of GMP; and
(ii)
From July 1, 2016 until the completion of the Proposed Transaction, a Work Fee of
US$75,000 shall be payable on the first day of each month and shall be credited pro
rata against the Success Fee (i.e., 75% in favor of Pacific and/or its affiliates and 25% in
favor of Catalyst).
If Catalyst agrees to pay a commission or fee to anyone else, such commission or fee shall be for Catalyst's
account and shall not reduce the amount payable to GMP under this agreement.
Other than Catalyst's obligations with respect to the Success Fee, no amounts or other obligations or liabilities
shall be due or payable to GMP under this letter agreement unless such amounts, obligations. or liabilities are
satisfied by Pacific and/or its affiliates.
In addition to the foregoing, in consideration for GMP's agreement to render the services described herein,
Catalyst will attempt to obtain favorable consideration for future investment banking mandates for GMP with
respect to Pacific and/or its affiliates.
5.
Additional Services.
In the event that GMP is requested to perform additional services in addition to those described in this
agreement, GMP shall receive additional fees as may be agreed upon between GMP and Catalyst and the
terms and conditions relating to such services shall be outlined in a separate agreement.
6.
Counsel to GMP.
In the event that GMP requires counsel, GMP will be entitled to retain counsel of choice, experienced in these
- 2-
types of matters and reasonably acceptable to Catalyst, to assist GMP in the discharge of duties hereunder, the
full cost of which shall be payable by Catalyst upon presentation of invoices which include reasonable particulars
of the services provided to GMP. To date, GMP has not retained counsel and does not expect to. do so.
7.
Expenses and Taxes
Whether or not the Proposed Transaction is completed, Catalyst will reimburse GMP for all reasonable out-ofpocket expenses incurred by GMP in entering into and performing this agreement including (but not limited to)
travel and communication expenses, courier charges and the reasonable fees and disbursements of GMP's
legal counsel and other professional advisors.
Where tax is applicable to any amount payable under this agreement, an additional amount of tax owing on such
amouht will be charged to and shall be payable by Catalyst. GMP will supply Catalyst with sufficient
documentation regarding expenses incurred by GMP to allow Catalyst to accurately manage accounts and file
any applicable claims.
8.
Indemnification.
Catalyst hereby agrees to indemnify GMP in accordance with Schedule "A" hereto, which Schedule forms part of
this agreement and the consideration for which is the entering into of this agreement. Such indemnity (the
"Indemnity") shall be executed and delivered to us on the execution of this agreement and shall be in addition
to, and not in substitution for, any liability which Catalyst or any other party may have to us or other parties may
have apart from such Indemnity.
9.
Confidentiality.
GMP and each of its directors, officers, employees and agents will keep strictly confidential and will use only for
the purpose of performing its obligations hereunder all information, whether written or oral, acquired from
Catalyst and its subsidiaries and their respective agents and advisors in connection with GMP's work hereunder
except information that was made available to the public prior to GMP's engagement or that thereafter becomes
available to the public other than through a breach by GMP of its obligations hereunder or was known by GMP
prior to its engagement that was provided and/or obtained on a non-confidential basis and except to the extent
that GMP is required by law or in connection with any legal process or regulatory proceedings to disclose such
information in which case GMP shall only disclose that information specifically required to be so disclosed, after
receiving advice of counsel. If GMP is so required to disclose any such information, GMP will provide Catalyst
with advance written notice of such requirement so that Catalyst may seek an appropriate protective order.
10.
Information.
Catalyst will provide to GMP, on a timely basis, all information and documentation concerning Catalyst and the
Transaction which might reasonably be considered material to this engagement or which GMP may reasonably
request in the performance of its services, including reasonable access to the officers, directors, employees,
independent auditors and other advisors and consultants of Catalyst. Subject to compliance .by Catalyst with
applicable securities laws and stock exchange rules, Catalyst will advise GMP, on a timely basis, of any change,
that is known to Catalyst, in any material or significant element in any of the data or information previously
furnished to GMP by Catalyst or any change in circumstances or new development concerning Catalyst which
might reasonably be considered material to this engagement.
Catalyst acknowledges and agrees that GMP shall be relying upon the accuracy and completeness of the
information and documentation furnished to it pursuant to the preceding paragraph and, subject to the exercise
of its professional judgment, shall be under no obligation to verify independently the accuracy and completeness
of such information and documentation or to investigate whether any changes have occurred to the facts set out
- 3-
or referred to in such information or documentation subsequent to the date thereof (but shall consider the impact
of any such changes of which it is aware or that are brought to its attention).
11.
Advertisements.
If a Transaction is consummated, Catalyst agrees that GMP has the right to place advertisements in financial
and other newspapers and journals, at its own expense, describing its services hereunder, provided that GMP
shall submit a copy of any such advertisements to Catalyst for its approval, such approval not to be
unreasonably withheld.
12.
Survival of Terms.
The provisions of this letter agreement and the Indemnity shall survive the completion of our engagement
hereunder. In addition, representation, warranties, indemnities and other agreements provided by Catalyst in
connection with this letter agreement shall remain in full force and effect regardless of any investigation made by
us or on our behalf.
13.
Miscellaneous.
This agreement will enure to the benefit of and be binding upon the parties to this agreement and their
respective successors and assigns. This agreement incorporates the entire agreement between the parties with
respect to the subject matter hereof and may not be amended or modified except by written agreement signed
by all parties. If any provision hereof shall be determined to be invalid or unenforceable in any respect, such
determination shall not affect such provision in any other respect or any other provision hereof. This agreement
may be executed in one or more counterparts and delivered by fax, e-mail or portable document format (pdf), in
which case such counterparts shall constitute one and the same legally binding agreement. Headings used in
this agreement are for convenience of reference only and shall not affect the interpretation or construction of this
agreement.
14.
Notices.
Any notice or other communication required or permitted to be given under this letter agreement shall be in
writing and shall be sufficiently given or made by delivery or by telecopy or similar facsimile transmission, e-mail
or portable document format (pdf) (receipt confirmed) to the respective parties as follows:
If to GMP:
GMP Securities Emerging Markets Corp.
145 King· Street West, Suite 300
Toronto, Ontario
Canada M5H 1J8
Attention:
Fax:
Office:
Email:
If to Catalyst:
Gene McBurney
416-943-6160
416-943-6101
[email protected]
The Catalyst Capital Group Inc.
181 Bay Street, #4700
Toronto, Ontario
Canada M5J 2T3
Attention:
Office:
Email:
-4-
Gabriel de Alba
416-945-3020
[email protected]
Any notice so given shall be deemed conclusively to have been given and received when so personally
delivered or so telecopied or transmitted. Any party may change its address by notice to the others in the
manner set out above.
15.
Securities Laws.
GMP acknowledges its responsibility to comply with applicable securities laws as they relate to trading securities
with knowledge of a material fact or a material change that has not been generally disclosed. Further, GMP has
internal procedures which provide for the placing of relevant securities on a "grey list" or "restricted list" and for
restrictions on trading by GMP and its investment banking personnel for their account in accordance with such
procedures.
16.
Governing Law.
The agreement resulting from the acceptance of this engagement letter shall be governed by and construed in
accordance with the laws of the Province of Ontario and any applicable federal laws therein.
17.
Termination.
The period of GMP's engagement hereunder shall terminate on the earlier of: (i) the completion of the
Transaction; (ii) the termination of this letter agreement by either party for any reason upon thirty (30) days prior
written notice to the other party; or (iii) eighteen (18) months from the date hereof unless extended as mutually
agreed to by the parties in writing. Notwithstanding this Paragraph 17, the fees outlined in Paragraph 4 hereby
shall remain in full force and effect.
The remainder of this page is intentionally left blank
- 5-
If the foregoing is in accordance with your understanding, please indicate your agreement to the above terms
and conditions by signing the enclosed duplicate copy of this letter and returning it to us.
Yours very truly,
GMP Securities Emerging Markets Corp.
By:
Eugene McBurney
Chairman
AGREED AND ACCEPTED as of the date first mentioned above.
The Catalyst Capital Group Inc., on behalf of those investment funds managed by it,
-6-
SCHEDULE "A"
The Catalyst Capital Group Inc. (on behalf of those investment funds managed by it, the "Indemnitor") hereby
agrees to indemnify and hold harmless GMP Securities L.P. ("GMP") and each and every one of the trustees,
directors, officers, employees, direct and indirect shareholders, consultants, advisors and agents of GMP, its
general partner, Griffiths McBurney Canada Corp. and each of its affiliated entities (hereinafter collectively
referred to as the "Personnel") from and against any and all expenses, losses, claims, actions, damages or
liabilities (excluding any loss of profits), joint or several (including the aggregate amount paid in settlement of
any actions, suits, proceedings or claims and the reasonable fees and expenses of its counsel that may be
incurred in advising with respect to and/or defending any claim that may be made or threatened against GMP or
its Personnel) to which GMP and/or its Personnel may become subject or otherwise involved in any capacity
under any statute or common law or otherwise insofar as such expenses, losses, claims, damages, liabilities or
actions arise out of or are based, directly or indirectly, upon the performance of professional services rendered
to the Indemnitor by GMP and its Personnel hereunder or otherwise in connection with the matters referred to in
the attached agreement and to reimburse GMP and its Personnel forthwith, upon demand, for any legal or other
expenses reasonably incurred by such party in connection with any action, suit, proceeding or claim; provided,
however, that this indemnity shall not apply to GMP or particular Personnel to the extent that a court of
competent jurisdiction in a final judgment that has become non-appealable shall determine that:
(i)
GMP or those Personnel, as the case may be, have been grossly negligent or dishonest or have
committed any fraudulent act in the course of such performance; and
(ii)
the expenses, losses, claims, damages or liabilities, as to which indemnification is claimed, were
directly caused by the gross negligence, dishonesty or fraud referred to in (i).
If for any reason (other than the occurrence of both of the events itemized in (i) and (ii) above), the foregoing
indemnification is unavailable to GMP or its Personnel or is insufficient to hold them harmless, then the
Indemnitor shall contribute to the amount paid or payable by GMP or its Personnel as a result of such expense,
loss, claim, action, damage or liability in such proportion as is appropriate to reflect not only the relative benefits
received by the Indemnitor on the one hand and GMP or its Personnel on the other hand but also the relative
fault of the Indemnitor and GMP or its Personnel, as well as any equitable considerations, provided that the
Indemnitor shall, in any event, contribute to the amount paid or payable by GMP or its Personnel as a result of
such expense, loss, claim, action, damage or liability any excess of such amount over the amount of the
consideration actually received by GMP or its Personnel pursuant to the agreement to which this indemnity is.
attached.
The Indemnitor agrees that in case any legal, regulatory or other proceeding shall be brought against the
Indemnitor and/or GMP or any of its Personnel by any court, governmental or regulatory authority, or any stock
exchange or if any other entity having regulatory authority, either domestic or foreign, shall investigate the
Indemnitor and/or GMP and any Personnel of GMP shall be required to testify in connection therewith or shall be
required to respond to procedures designed to discover information regarding GMP or, in connection with or by
reason of the performance of, professional services rendered to the Indemnitor by GMP, GMP shall have the
right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel
as well as the reasonable costs (including an amount to reimburse GMP for time spent by its Personnel in
connection therewith) and out-of-pocket expenses incurred by its Personnel in connection therewith shall be
paid by the Indemnitor as they occur.
Promptly after receipt of notice of the commencement of any legal proceeding against GMP or any of its
Personnel or after receipt of notice of the commencement of any investigation, which is based, directly or
indirectly, upon any matter in respect of which indemnification may be sought from the Indemnitor, GMP will
notify the Indemnitor in writing of the commencement thereof and, throughout the course thereof, will provide
copies of all relevant documentation to the Indemnitor, will keep the Indemnitor advised of the progress thereof
and will discuss with the Indemnitor all significant actions proposed. The omission to notify the Indemnitor shall
- 7-
not relieve the Indemnitor of any liability which the Indemnitor may have to GMP, except only to the extent any
such delay in giving or failure to give notice as herein required materially prejudices the defence of such action,
suit, proceeding, claim or investigation.
The indemnity and contribution obligations of the Indemnitor shall be in addition to any liability which the
Indemnitor may otherwise have, shall extend upon the same terms and conditions to the Personnel of GMP (and
GMP agrees to act as trustee for its Personnel for the covenants under this indemnity and to hold and enforce
such covenants on behalf of its Personnel) and shall be binding upon and enure to the benefit of any
successors, assigns, heirs and personal representatives of the Indemnitor, GMP and any of the Personnel. The
foregoing provisions shall survive the completion of professional services rendered under the agreement to
which this is attached or any termination of the authorization given by the agreement to which this is attached.
Remainder of this page intentionally left blank
62462153 vS-WorkSiteUS-026794/0160
- 8-
TABC
This is Exhibit "C" referred to in the
Affidavit of Peter Volk
sworn before me, this 20th day
of May, 2016
CAN_DMS: \65405557\1
Court File No .. CV-16-11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE
)
WEDNESDAY, THE 27TH
)
MR. JUSTICE NEWBOULD
)
DAY OF APRIL, 2016
IN THE MAITER OF THE COMPANIES' CREDITORS
ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR
ARRANGEMENT OF PACIFIC EXPLORATION & PRODUCTION
CORPORATION,
PACIFIC
E&P
HOLDINGS
CORP.,
META
PETROLEUM CORP., PACIFIC STRATUS INTERNATIONAL ENERGY
LTD., PACIFIC STRATUS ENERGY COLOMBIA CORP., PACIFIC
STRATUS ENERGY SA, PACIFIC OFF SHORE PERU S.R.L., PACIFIC
RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY
CORP.,
PRE-PSIE
COOPERATIEF
U.A,
PETROMlNERALES
COLOMBIA CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTD.
Applicants
INITIAL ORDER
THIS APPLICATION, made by Pacific Exploration & Production Corporation ("Pacific"),
Pacific E&P Holdings Corp., Meta Petroleum Corp., Pacific Stratus International Energy Ltd.,
Pacific Stratus Energy Colombia Corp., Pacific Stratus Energy SA, Pacific Off Shore Peru
S.R.L, Pacific Rubiales Guatemala S.A, Pacific Guatemala Energy Corp., PRE-PSJE
Cooperatief U.A, Petrominerales Colombia Corp. and Grupo C&C Energia (Barbados) Ltd.
(collectively, the "Applicants"), pursuant to the Companies' Creditors Arrangement Act, R.S.C.
1985, c. C-36, as amended (the "CCAA") was heard this day at 330 University Avenue, Toronto,
Ontario.
ON· READING the affidavit of Peter Volk sworn April 27, 2016 and the Exhibits thereto
(the "Volk Affidavit"), the supplementary affidavit of Peter Volk sworn April 27, 2016 (the
CAN_DMS: \!02302437\9
1
"Supplementary Volk Affidavif') and the pre-filing report of the proposed Monitor dated April
26, 2016 (the "Proposed Monitor's Reporf'), and on hearing the submissions of counsel for
the Applicants, PricewaterhouseCoopers Inc. (as the proposed Monitor), the ad hoc committee
acting for certain holders of Note Claims (the "Ad Hoc Noteholder Committee"), Bank of
America N.A. and HSBC Bank USA, N.A. as administrative agents with respect to certain Bank
Claims (the "Agents"), The Catalyst Capital Group Inc. (the "Plan Sponsor"), the UC Providers
(as those terms are defined herein), the independent committee of the board of directors of
Pacific, Lazard Fn3res & Co. LLC, International Finance Corporation, and those other parties
present, no one else appearing although duly served as appears from the affidavit of service of
Alex
Schmitt
sworn
April
27,
2016,
filed,
and
on
reading
the
consent
of
PricewaterhouseCoopers Inc. to act as the Monitor,
AND ON BEING ADVISED that the Applicants intend to commence recognition
proceedings under Law 1116 of 2006 of the Republic of Colombia (the "Colombian
Proceedings") and proceedings under chapter 15 of title 11 of the United States Code in the
Southern District of New York (the "U.S. Proceedings", and collectively with the Colombian
Proceedings, the "Foreign Proceedings"),
SERVICE
1.
THIS COURT ORDERS that the time for service of the Notice of Application and the
Application Record is hereby abridged and validated so that this Application is properly
returnable today and hereby dispenses with further service thereof.
APPLICATION
2.
THIS COURT ORDERS AND DECLARES that each of the Applicants is a company to
which the CCAA applies.
REFERENCES TO DOLLARS
3.
Unless otherwise stated, all references to dollars or $ herein are to dollars of the United
States of America.
CAN_DMS: \102302437\9
2
PLAN OF ARRANGEMENT
4.
THIS COURT ORDERS that the Applicants shall have the authority to file and may,
subject to further order of this Court, file with this Court a plan of compromise or arrangement
(hereinafter referred to as the "Plan").
POSSESSION OF PROPERTY AND OPERATIONS
5.
THIS COURT ORDERS that the Applicants shall remain in possession and control of
their current and future assets, undertakings and properties of every nature and kind
whatsoever, and wherever situate including all proceeds thereof (the "Property"). Subject to
further Order of this Court, the Applicants shall continue to carry on business in a manner
consistent with the preservation of their business (the "Business") and Property.
The
Applicants are authorized and empowered to continue to retain, employ or compensate the
employees, consultants, agents, experts, accountants, counsel and such other persons
(collectively "Assistants", including without limitation those Assistants named in Schedule A to
this Order) currently retained, employed or compensated by any of them (and whether such
Assistants are providing advice to the Applicants, or to other stakeholders), with liberty to retain
such further Assistants as they deem reasonably necessary or desirable in the ordinary course
of business or for the carrying out of the· terms of this Order.
6.
THIS COURT ORDERS that the Applicants shall be entitled to continue to utilize the
cash management system currently in place as described in the Volk Affidavit or, with the
approval of the DIP Note Purchasers (as defined herein), replace it with another substantially
similar central cash management system including such modifications as may be required in
order to comply with the terms of the DIP Financing Documents (as defined herein) (the "Cash
Management System") and that any present or future bank providing the Cash Management
System shall not be under any obligation whatsoever to inquire into the propriety, validity or
legality of any transfer, payment, collection or other action taken under the Cash Management
System, or as to the use or application by the Applicants of funds transferred, paid, collected or
otherwise dealt with in the Cash Management System, shall be entitled to provide the Cash
Management System without any liability in respect thereof to any Person (as hereinafter
defined) other than the Applicants, pursuant to the terms of the documentation applicable to the
CAN_))MS: \102302437\9
3
s
Cash Management System, and shall be, in its capacity as provider of the Cash Management
System or any part thereof, an unaffected creditor under the Plan with regard to any claims or
expenses it may suffer or incur in connection with the provision of the Cash Management
System.
7.
THIS COURT ORDERS that, subject to the terms and conditions of the Restructuring
Support Agreement among the Applicants, the Plan Sponsor, certain holders of Note Claims
and certain holders of Bank Claims (each as defined in Schedule B hereto) dated April 20,
2016 (the "RSA") and the DIP Financing Documents, including the Cash Flow Projections (as
defined in the DIP Financing Documents), the Applicants shall be entitled but not required to
pay the following expenses whether incurred prior to or after this Order:
(a)
all outstanding and future wages, salaries, employee and pension benefits, vacation
pay and expenses payable on or after the date of this Order, in each case incurred in
the ordinary course of business and consistent with existing compensation policies
and arrangements;
(b)
the fees and disbursements of any Assistants retained, employed or compensated
by an Applicant in respect of these proceedings or any similar or ancillary
proceedings in other jurisdictions or in respect of related corporate matters at their
standard rates and charges;
(c)
amounts owing for goods and services actually supplied by trade creditors to the
Applicants in the ordinary course of business;
(d)
any other costs and expenses, with the consent of the Monitor if any single payment
exceeds $200,000; and
(e)
the reasonable fees and disbursements of the indenture trustee for Pacific's senior
unsecured notes, including the reasonable fees and expenses of counsel to the
indenture trustee.
8.
·THIS COURT ORDERS that, subject to the terms of the RSA and the DIP Financing
Documents, including the Cash Flow Projections, and except as otherwise provided to the
CAN_DMS: \102302437\9
4
contrary herein, the Applicants shall be entitled but not required to pay all reasonable expenses
incurred by the Applicants in carrying on the Business in the ordinary course after this Order,
and in carrying out the provisions of this Order, which expenses shall include, without limitation:
(a)
all expenses and capital expenditures reasonably necessary for the preservation of
the Property or the Business including, without limitation, payments on account of
insurance (including directors and officers insurance), maintenance and security
services; and
(b)
payment for goods or services actually supplied to the Applicants or to the Business
following the date of this Order.
9.
THIS COURT ORDERS that the Applicants shall remit, in accordance with legal
requirements, or pay:
(a)
any statutory deemed trust amounts in favour of the Crown in right of Canada or of
any Province thereof or any other Canadian taxation authority which are required to
be deducted from employees' wages, including, without limitation, amounts in
respect of (i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec Pension
Plan, and (iv) income taxes;
(b)
all goods and services or other applicable sales taxes in Canada (collectively, "Sales
Taxes") required to be remitted by the Applicants or any of them in connection with
the sale of goods and services by the Applicants or any of them, but only where such
Sales Taxes are accrued or collected after the date of this Order, or where such
Sales Taxes were accrued or collected prior to the date of this Order but not required
to be remitted until on or after the date of this Order, and
(c)
any amount payable to the Crown in right of Canada or of any Province thereof or
any political subdivision thereof or any other Canadian taxation authority in respect of
municipal realty, municipal business or other taxes, assessments or levies of any
nature or kind which are entitled at law to be paid in priority to claims of secured
creditors and which are attributable to or in respect of the carrying on of the Business
by the Applicants or any of them.
CAN_DMS: \10230243719
5
10.
THIS COURT ORDERS that until a real property lease is disclaimed in accordance with
the CCAA, the Applicants shall pay all amounts constituting rent or payable as rent under real
property leases (including, for greater certainty, common area maintenance charges, utilities
and realty taxes and any other amounts payable to the landlord under the lease) or as otherwise
may be negotiated between the Applicants and the landlord from time to time ("Rent"), for the
period commencing from and including the date of this Order, twice-monthly in equal payments
on the first and fifteenth day of each month, in advance (but not in arrears). On the date of the
first of such payments, any Rent relating to the period commencing from and including the date
of this Order shall also be paid.
11.
THIS COURT ORDERS that, except as specifically permitted herein and subject to the
terms of the DIP Financing Documents, the Applicants are hereby directed, until further Order of
this Court: (a) to make no payments of principal, interest thereon or otherwise cin account of
amounts owing by any of the Applicants to any of their creditors as of this date; (b) to grant no
security interests, trust, liens, charges or encumbrances upon or in respect of any of its
respective Property; and (c) to not grant credit or incur liabilities except in the ordinary course of
the Business, provided however that the Applicants shall be entitled to make payments with
respect to the provision of goods and services to the Applicants, or any of them, and any other
liabilities arising in the ordinary course of business and not contested by the Applicants, whether
such liabilities arise prior to or after the date of this Order, including without limitation payments
with respect to the liabilities identified on Schedule C to this Order.
RESTRUCTURING
12.
THIS COURT ORDERS that, subject to such requirements as are imposed by the CCAA
and the terms and conditions of the RSA and the DIP Financing Documents, and unless
otherwise specified in this Order, Pacific shall have the right to:
(a)
permanently or temporarily cease, downsize or shut down any of its Business or
operations in Canada;
(b)
retain a solicitation agent (the "Solicitation Agent") and permit it to obtain proxies
and/or voting information from creditors in respect of the Plan and any amendments
thereto; and
CAN_DMS: \102302437\9
6
(c)
terminate the employment of such of its employees or temporarily lay off such of its
employees as it deems appropriate,
all of the foregoing to permit the Applicants to proceed with the Restructuring (as defined in the
RSA).
13.
THIS COURT ORDERS that an Applicant shall provide each of the relevant landlords
with notice of that Applicant's intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord disputes the applicable Applicant's entitlement to remove any such fixture under the
provisions of the lease, such fixture shall remain on the premises and shall be dealt with as
agreed between any applicable secured creditors, such landlord and the applicable Applicant, or
by further Order of this Court upon application by the Applicants on at least two (2) days' notice
to such landlord and any such secured creditors. If an Applicant disclaims the lease governing
such leased premises in accordance with Section 32 of the CCAA, it shall not be required to pay
Rent under such lease pending resolution of any such dispute (other than Rent payable for the
notice period provided for in Section 32(5) of the CCAA), and the disclaimer of the lease shall
be without prejudice to that Applicant's claim to the fixtures in dispute.
14.
THIS COURT ORDERS that if a notice of disclaimer is delivered pursuant to Section 32
of the CCAA, then (a) during the notice period prior to the effective time of the disclaimer, the
landlord may show the affected leased premises to prospective tenants during normal business
hours, on giving the Applicants and the Monitor 24 hours' prior written notice, and (b) at the
effective time of the disclaimer, the relevant landlord shall be entitled to take possession of any
such leased premises without waiver of or prejudice to any claims or rights such landlord may
have against an Applicant in respect of such lease or leased premises, provided that nothing
herein shall relieve such landlord of its obligation to mitigate .any damages claimed in
connection therewith.
15.
THIS COURT ORDERS that each of the Applicants is authorized and empowered to
take all steps and actions in respect of, and to comply with all of its obligations pursuant to, the
CAN_DMS: \102302437\9
7
RSA, and that nothing in this Order shall be construed as waiving or modifying any of the rights,
commitments or obligations of any of the Applicants under the RSA.
16.
THIS COURT ORDERS that Pacific is authorized and empowered to take all steps and
actions in respect of (i) the commitment letter between Pacific and the Plan Sponsor (the "Plan
Sponsor Commitment Letter"), (ii) the commitment letter between Pacific and the Ad Hoc DIP
Lenders (as defined herein) (the "Ad Hoc Commitment Letter"), and (iii) the commitment letter
between Pacific and the UC Providers (as defined herein") (the "L/C Commitment Letter", and
together with the Ad Hoc Commitment Letter and the Plan Sponsor DIP Commitment Letter, the
"Commitment Letters"), each dated as of April 20, 2016 and attached to the Volk Affidavit.
NO PROCEEDINGS AGAINST THE APPLICANTS OR THE PROPERTY
17.
THIS COURT ORDERS that until and including May 27, 2016, or such later date as this
Court may order (the "Stay Period"), no proceeding or enforcement process in any court or
tribunal (each, a "Proceeding") shall be commenced or continued against or in respect of the
Applicants (or any of them) or any of their branches, or the Monitor, or affecting the Business or
the Property, except with the written consent of the Applicants and the Monitor, or with leave of
this Court, and any and all Proceedings currently under way against or in respect of any of the
Applicants or affecting the Business or the Property are hereby stayed and suspended pending
further Order of this Court, provided however that nothing in this paragraph shall prevent any
Proceedings duly authorized in the Colombian Proceedings with respect to Property not owned
directly by any of the Applicants or any part of the Business not operated directly by the
Applicants.
NO EXERCISE OF RIGHTS OR REMEDIES
18.
THIS COURT ORDERS that during the Stay Period, all rights and remedies of any
individual, firm, corporation, governmental body or agency, or any other entities (all of the
foregoing, collectively being "Persons" and each being a "Person") against or in respect of any
of the Applicants (or any of them) or any of their branches, or the Monitor, or affecting the
Business or the Property, are hereby stayed and suspended except with the written consent of
the Applicants and the Monitor, or leave of this Court, provided that nothing in this Order shall (i)
stay or suspend any rights or remedies duly authorized in the Colombian Proceedings with
CAN_DMS: \102302437\9
8
respect to Property not owned directly by any of the Applicants or any part of the Business not
operated directly by the Applicants, (ii) empower the Applicants to carry on any business which
the Applicants are not lawfully entitled to carry on, (iii) affect such investigations, actions, suits
or proceedings by a regulatory body as are permitted by Section 11.1 of the CCAA, (iv) prevent
the filing of any registration to preserve or perfect a security interest, or (v) prevent the
registration of a claim for lien.
NO INTERFERENCE WITH RIGHTS
19.
THIS COURT ORDERS that during the Stay Period, no Person shall discontinue, fail to
honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right,
contract, agreement, licence or permit in favour of or held by any of the Applicants, or any of
their branches, except (i) for those parties to the RSA in accordance with the terms thereof, (ii)
with the written consent of the Applicants and the Monitor, or (iii) with leave of this Court.
CONTINUATION OF SERVICES
20.
THIS COURT ORDERS that during the Stay Period, all Persons having oral or written
agreements with any of the Applicants or statutory or regulatory mandates for the supply of
goods and/or services, including without limitation all computer software, communication and
other data services, centralized banking services, payroll services, insurance, transportation
services, utility or other services to the Business or any of the Applicants, or any of their
branches, are hereby restrained until further Order of this Court from discontinuing, altering,
interfering with or terminating the supply of such goods or services as may be required by any of
the Applicants, and that the Applicants shall be entitled to the continued use of their current
premises, telephone numbers, facsimile numbers, internet addresses and domain names,
provided in each case that the normal prices or charges for all such goods or services received
after the date of this Order are paid by the applicable Applicant in accordance with normal
payment practices of that Applicant or such other practices as may be agreed upon by the
supplier or service provider and each of the Applicants and the Monitor, or as may be ordered
by this Court.
CAN_DMS: \102302437\9
9
NON-DEROGATION OF RIGHTS
21.
THIS COURT ORDERS that, notwithstanding anything else in this Order, no Person
shall be prohibited from requiring immediate payment for goods, services, use of lease or
licensed property or other valuable consideration provided on or after the date of this Order, nor
shall any Person be under any obligation on or after the date of this Order to advance or readvance any monies or otherwise extend any credit to any of the Applicants. Nothing in this
Order shall derogate from the rights conferred and obligations imposed by the CCAA.
PROCEEDINGS AGAINST DIRECTORS AND OFFICERS
22.
THIS COURT ORDERS that during the Stay Period, and except as permitted by
subsection 11.03(2) of the CCAA, no Proceeding may be commenced or continued against any
of the former, current or future directors or officers of any of the Applicants with respect to any
claim against the directors or officers that arose before the date hereof and that relates to any
obligations of any of the Applicants whereby the directors or officers are alleged under any law
to be liable in their capacity as directors or officers for the payment or performance of such
obligations, until a compromise or arrangement in respect of the Applicants, if one is filed, is
sanctioned by this Col.lrt or is refused by the creditors of the Applicants or this Court..
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND CHARGE
23.
THIS COURT ORDERS that each Applicant shall indemnify its directors and officers
against obligations and liabilities that they may incur as directors or officers of that Applicant (i)
after the commencement of the within proceedings, or (ii)
in respect of actions taken as
directors and officers of that Applicant relating to the within proceedings, the Foreign
Proceedings, the Restructuring and the development and implementation of the Plan, except in
each case to the extent that, with respect to any officer or director, the obligation or liability was
incurred as a result of the director's or officer's gross negligence or wilful misconduct.
24.
THIS COURT ORDERS that the directors and officers of the Applicants shall be entitled
to the benefit of and are hereby granted a charge (the "D&O Charge") on the Property, which
charge shall not exceed an aggregate amount of $11,000,000, as security for the indemnity
CAN_DMS: \102302437\9
10
provided in paragraph 23 of this Order.
The D&O Charge shall have the priority set out in
paragraphs 54 and 56 herein.
25.
THIS COURT ORDERS that, notwithstanding any language in any applicable insurance
policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim the benefit of
the D&O Charge, and (b) an Applicant's directors and officers shall only be entitled to the
benefit of the D&O Charge to the extent that they do not have coverage under any directors'
and officers' insurance policy, or to the extent that such coverage is insufficient to pay amounts
indemnified in accordance with paragraph 23 of this Order.
APPOINTMENT OF MONITOR
26.
THIS COURT ORDERS that PricewaterhouseCoopers Inc. is hereby appointed pursuant
to the CCAA as the Monitor, an officer of this Court, to monitor the business and financial affairs
of the Applicants with the powers and obligations set out in the CCAA or set forth herein and
that the Applicants and their shareholders (or members, as applicable), officers, directors, and
Assistants shall advise the Monitor of all material steps taken by the Applicants pursuant to this
Order, and shall co-operate fully with the Monitor in the exercise of its powers and discharge of
its obligations and provide the Monitor with the assistance that is necessary to enable the
Monitor to adequately carry out the Monitor's functions.
THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and
27.
obligations under the CCAA, is hereby directed and empowered to:
(a)
monitor receipts and disbursements of the Pacific Group (as defined in the Volk
Affidavit) and make such inquiries as it deems appropriate with respect to the Cash
Management System and the movement of cash within the Business;
(b)
report to this Court at such times and infervals as the Monitor may deem appropriate
with respect to matters relating to the Property, the Business, the Foreign
Proceedings, and such other matters as may be relevant to the proceedings herein;
(c)
provide updates, from time to time, to the Superintendencia de Sociedades of
Colombia on the status of these proceedings;
CAN_DMS: \102302437\9
11
(d)
assist the Applicants, to the extent required by the Applicants, in their dissemination,
to the DIP Lenders and/or their counsel or financial advisors of financial and other
information as agreed to between the Applicants and the DIP Lenders including
reporting on a basis to be agreed with the DIP Lenders;
(e)
advise the Applicants in their preparation of the Applicants' cash flow statements and
reporting required by the DIP Lenders and/or their counsel or financial advisors,
which information shall be reviewed with the Monitor and delivered to the DIP
Lenders and/or their counsel or financial advisors in accordance with the DIP
Financing Documents;
(f)
advise the Applicants in their development of the Plan and any amendments to the
Plan;
(g)
assist the Applicants, to the extent required by the Applicants, with the holding and
administering of creditors' meetings for voting on the
(h)
Plan~
assist the Applicants, to the extent required by the Applicants, with their restructuring
activities;
(i)
Assist the Applicants, to the extent required by the Applicants, with any matters
relating to the Foreign Proceedings and any other foreign proceedings commenced
in relation to the Applicants;
U)
have full and complete access to the Property, including the premises, books,
records, data, including data in electronic form, and other financial documents of the
Applicants, to the extent that is necessary to adequately assess the Applicants'
business and financial affairs or to perform its duties arising under this Order;
(k)
be at liberty to engage independent legal counsel or such other persons as the
Monitor deems necessary or advisable respecting the exercise of its powers and
performance of its obligations under this Order; and
(I)
perform such other duties as are required by this Order or by this Court from time to
time.
CAN_DMS: \102302437\9
12
I
28.
THIS COURT ORDERS that without limiting paragraph 27 above, in carrying out its
rights and obligations in connection with this Order, the Monitor shall be entitled to take such
reasonable steps and use such services as it deems necessary in discharging its powers and
obligations,
including,
without
limitation,
utilizing
the
services
of
any
other
PricewaterhouseCoopers network firms.
29.
THIS COURT ORDERS that the Monitor shall not take possession of the Property and
shall take no part whatsoever in the management or supervision of the management of the
Business and shall not, by fulfilling its obligations hereunder, be deemed to have taken or
maintained possession or control of the Business or Property, or any part thereof.
30.
THIS COURT ORDERS that nothing herein contained shall require the Monitor to
occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmental Protection Act, the Ontario Environmental Protection Act, the Ontario
Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Monitor from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Monitor shall not, as a result of this Order or anything done in
pursuance of the Monitor's duties and powers under this Order, be deemed to be in Possession
of any of the Property within the meaning of any Environmental Legislation, unless it is actually
in possession.
31.
THIS COURT ORDERS that the Monitor shall provide any creditor of an Applicant and
the DIP Lenders and/or their respective counsel or financial advisors with information provided
by that Applicant in response to reasonable requests for information made in writing by such
creditor addressed to the Monitor. The Monitor shall not have any responsibility or liability with
respect to the information disseminated by it pursuant to this paragraph.
In the case of
information that the Monitor has been advised by any of the Applicants is confidential, the
CAN_DMS: \102302437\9
13
Monitor shall not provide such information to creditors unless otherwise directed by this Court or
on such terms as the Monitor and the Applicants may agree.
32.
THIS COURT ORDERS that, in addition to the rights and protections afforded the
Monitor under the CCM or as an officer of this Court, the Monitor shall incur no liability or
obligation as a result of its appointment or the carrying out of the provisions of this Order, save
and except for any gross negligence or wilful mi,sconduct on its part. Nothing in this Order shall
derogate from the protections afforded the Monitor by the CCAA or any applicable legislation.
33.
THIS COURT ORDERS that the Monitor, counsel to the Monitor, and each of the
Assistants shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by the Applicants as part of the costs of these proceedings; for greater
certainty, the Financial Advisors (as defined in Schedule B) shall be paid their fee·s and
disbursements in accordance with the terms of their respective engagement or commitment
letters, in each case including such success fees as and when due under such engagement or
commitment letters. The Applicants are hereby authorized and directed to pay the accounts of
the Monitor, counsel to the Monitor, and the Assistants on a twice-monthly basis and, in
addition, the Monitor, counsel to the Monitor, and the Assistants may retain such retainers as
they hold as of the date of this Order, to be held by them as security for payment of their
respective fees ahd disbursements outstanding from time to time.
34.
THIS COURT ORDERS that the Monitor and its legal counsel shall pass their accounts
from time to time, and for this purpose the accounts of the Monitor and its legal counsel are
hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.
35.
THIS COURT ORDERS that the Monitor, counsel to the Monitor, and the Assistants
shall be entitled to the benefit of and are hereby granted a charge (the "Administration
Charge") on the Property, which charge shall not exceed an aggregate amount of $45,000,000
(inclusive of succ;ess fees payable to Financial Advisors), as security for their professional fees
and disbursements incurred (i) at the standard rates and charges of the Monitor, counsel to the
Monitor, and each such Assistant, both before and after the making of this Order in respect of
these proceedings; or (ii) as prescribed in the Financial Advisors' respective engagement or
commitment letters. The fees and disbursements of the trustee or trustees under the DIP Notes
CAN_DMS: \102302437\9
14
----------
-------------------
and the warrant indenture related thereto, as well as any collateral agent, common depositary,
transfer agent, paying agent, settlement agent, listing agent, security registrar and any other
similar service provider in respect thereof of in connection therewith, shall also be secured by
the Administration Charge, at their standard rates and charges. The Administration Charge shall
have the priority set out in paragraphs 54 and 56 hereof.
APPROVAL OF KERP I AMENDMENTS TO EMPLOYMENT TERMS
36.
THIS COURT ORDERS that the Key Employee Retention Program (the "KERP")
described in the Supplemental Volk Affidavit, the details of which are included as Exhibit C-1 to
the Supplementary Volk Affidavit, is hereby approved and that the Applicants are authorized
and directed to make payments in accordance with the terms thereof to the maximum aggregate
amount of $14,120,000.
37.
THIS COURT ORDERS that the KERP Participants (as such term is defined in the
Supplementary Volk Affidavit) shall be entitled to the benefit of and are hereby granted a charge
(the "KERP Charge") on the Property, to secure the amounts payable to the KERP Participants
pursuant to paragraph 36 of this Order. The KERP Charge shall be in the amount and shall
have the priority set out in paragraphs 54 and 56 hereof
38.
THIS COURT ORDERS that the KERP Charge shall be a silent, passive charge, and
that the KERP Participants shall not be entitled to enforce the KERP Charge without the prior .
leave of this Court on notice to the DIP Note Purchasers and the Monitor.
APPROVAL OF FINANCIAL ADVISORS' ENGAGEMENTS
39.
THIS COURT ORDERS that the Applicants are authorized to continue the engagement
of the Company's Financial Advisor (as defined in Schedule A) on the terms and conditions set
out in the Company's Financial Advisor engagement letter dated December 17, 2015, as
amended by a letter dated April 18, 2016.
40.
THIS COURT ORDERS that the Applicants are authorized to continue the engagement
of the IC Financial Advisor (as defined in Schedule A) on the terms and conditions set out in
the IC Financial Advisor engagement letter dated March 10, 2016.
CAN_DMS: \102302437\9
15
41.
THIS COURT ORDERS that the Applicants are authorized to continue the engagement
of the Noteholders' Financial Advisor (as defined in Schedule A) on the terms and conditions
set out in the Noteholders' Financial Advisor engagement letter dated February 16, 2016.
42.
THIS COURT ORDERS that the Applicants are authorized to continue the engagement
of the Agents' Financial Advisor (as defined in Schedule A) on the terms and conditions set out
in the Agents' Financial Advisor engagement letter dated December 7, 2015.
43.
THIS COURT ORDERS that each of the Financial Advisor engagement letters (attached
as confidential Exhibits C-1, ·C-2, C-3 and C-4 to the Volk Affidavit) is hereby ratified and
confirmed and the Applicants are authorized to perform their obligations thereunder, and that
the claims of the Financial Advisors shall be treated as unaffected in any Plan.
DIP FINANCING AND LETTER OF CREDIT FACILITY
44.
THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
issue senior secured notes (the "DIP Notes") to be purchased by the Plan Sponsor and certain
members of the Ad Hoc Noteholders Committee (the "Ad Hoc DIP Lenders", together with the
Plan Sponsor, the "DIP Note Purchasers", and any subsequent transferee of the DIP Notes
shall be considered a DIP Note Purchaser for the purposes of this Order) pursuant to the
Commitment Documents (defined below) in order to finance the Applicants' working capital
requirements and other general corporate purposes and capital expenditures, provided that the
aggregate principal amount of the DIP Notes shall not exceed $500,000,000 unless permitted
by further Order of this Court.
45.
THIS COURT ORDERS that the DIP Notes shall be on the terms and subject to the
conditions set forth in the Commitment Letters and the DIP/Exit Term Sheet attached thereto.
46.
THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
request the issuance, renewal or extension of letters of credit under a letter of credit facility (the
"LIC Facility") from Banco Davivienda, Banco Corpbanca Colombia SA, Citibank Colombia
S.A.,
Banco Latinoamericano de Comercio Exterior, S.A and Bank of America N.A.
(collectively,
the "L/C Providers") in order to finance the Applicants' letter of credit
requirements, provided that borrowings under such L/C Facility shall not exceed $134,000,000
CAN_DMS: \102302437\9
16
unless permitted by further Order of this Court. The DIP Note Purchasers, together with the UC
Providers, are herein collectively referred to as the "DIP Lenders").
47.
THIS COURT ORDERS that the UC Facility shall be on the terms and subject to the
conditions set forth in the L/C Commitment Letter. The Commitment Letters and the DIP/Exit
Term Sheet attached thereto, and the L/C Commitment Letter and the DIP LC Facility Term
Sheet attached thereto, are collectively herein referred to as the "Commitment Documents").
48.
THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
execute and deliver such note purchase agreements, indentures, collateral trust agreements,
intercreditor agreements, credit agreements, mortgages, charges, hypothecs, debentures,
pledges, cash collateral agreements, bank account control agreements, security account control
agreements, and other security documents, guarantees and other definitive documents
(collectively, the "Definitive Documents"), as are contemplated by the Commitment Documents
(the Commitment Documents, together with the Definitive Documents, the "DIP Financing
Documents") or as may be reasonably required by the DIP Note Purchasers or the LIC
Providers, as the case may be, pursuant to the terms thereof, and the Applicants are hereby
authorized and directed to pay and perform all of their indebtedness, guarantees, interest, fees,
liabilities and obligations to the DIP Lenders under and pursuant to the DIP Financing
Documents as and when the same become due and are to be performed, notwithstanding any
other provision of this Order.
49.
THIS COURT ORDERS that the DIP Note Purchasers shall be entitled to the benefit of
and are hereby granted a charge (the "DIP Note Charge") on the Property, as security for
amounts owing to them from time to time under the DIP Financing Documents, including the
payment of the Break Fee (as defined in the DIP/Exit Term Sheet) (the "Break Fee"), which DIP
Note Charge shall not secure an obligation that exists before this Order is made. The DIP Note
Charge shall have the priority set out in paragraphs 54 and 56 hereof. For greater certainty, on
approval of this Order by the Court the amounts secured from time to time under the DIP
Financing Documents shall not be treated as obligations which existed prior to the date this
Order is made.
CAN_DMS: \102302437\9
17
50.
THIS COURT ORDERS that the L/C Providers shall be entitled to the benefit of and are
hereby granted a charge (the "UC Providers' Charge" and, together with the DIP Note Charge,
the "DIP Lenders' Charge") on the Property, as security for amounts owing from time to time to
them under the DIP Financing Documents, which L/C Providers' Charge shall secure any
reimbursement obligations that arises or matures after the date hereof in respect of any existing
or outstanding letters of credit issued by the L/C
Provide~s
or any of them prior to the date of
this Order, but shall not secure any reimbursement obligation that exists before this Order is
made.
The L/C Providers' Charge shall have the priority set out in paragraphs 54 and 56
hereof.
51.
THIS COURT ORDERS that, notwithstanding any other provision of this Order:
(a)
each of the DIP Lenders may take such steps from time to time as it may deem
necessary or appropriate to file, register, record or perfect the DIP Note Charge or
the LIC Providers' Charge, as the case may be, and their respective DIP Financing
Documents;
(b)
upon the occurrence of an event of default under the DIP Financing Documents,
t~e
DIP Note Charge, or the L/C Providers' Charge, in each case as applicable, then the
DIP Note Purchasers or the L/C Providers, as the case may be and if so entitled
under their own DIP Financing Documents, upon five (5) days' notice to the
Applicants and the Monitor, may exercise any and all of its rights and remedies
against the Applicants or the Property under or pursuant to the applicable DIP
Financing Documents and the applicable DIP Lender's Charge, including without
limitation, to cease making advances or providing letters of credit to the Applicants
and set off and/or consolidate any amounts. owing by such DIP Lender to the
Applicants against the obligations of the Applicants to such DIP Lender under the the
applicable DIP Financing Documents or the applicable DIP Lender's Charge, to
make demand, accelerate payment and give other notices, or to apply to this Court
for the appointment of a receiver, receiver and manager or interim receiver, or for a
bankruptcy order against the Applicants and for the appointment of a trustee in
bankruptcy of the Applicants; and
CAN_DMS: \102302437\9
18
(c)
the foregoing rights and remedies of the DIP Note Purchasers and the L/C Providers
shall be enforceable against any trustee in bankruptcy, Interim receiver, receiver or
receiver and manager of the Applicants or the Property.
52.
THIS COURT ORDERS AND DECLARES that, except as provided in the DIP Financing
Documents,
each of the DIP Lenders shall be treated as unaffected in any Plan, or any
proposal filed by any of the Applicants under the Bankruptcy and Insolvency Act of Canada {the
"BIA''), with respect to any advances made under the DIP Financing Documents.
53.
THIS COURT ORDERS that the Break Fee is hereby approved and shall be payable in
accordance with the terms of the Commitment Documents in lieu of any liability of Pacific, under
any theory, that Pacific would have to the DIP Lenders for any indirect, consequential, special or
punitive damages (including, without limitation, any loss of profits, business or anticipated
savings) to the extent that they are in connection with or as a result of (i) the failure of the
issuance of the DIP Notes to occur, or (ii) the Plan (including the equity warrants) and the
recapitalization contemplated by the RSA not being fully consummated, on or before the DIP
Maturity Date (as defined in the DIP Financing Documents); provided, however, that nothing in
this paragraph is intended to limit Pacific's obligations and liabilities to the DIP lenders under
(a) the DiP Financing Documents, or {b) the Commitment Documents (including, for avoidance
of doubt, with respect to the indemnification and Pacific's obligations to the Plan Sponsor under
Article XIV of the Plan Sponsor Commitment Letter, as applicable).
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
54.
THIS COURT ORDERS that the priorities of the Administration Charge, the DIP Note
Charge, the KERP Charge, the D&O Charge, and the LIC Providers' Charge, as among them,
shall be as follows:
First- Administration Charge (to the maximum amount of $45,000,000);
Second - DIP Note Charge and KERP Charge (with respect to the KERP
Charge, to the maximum amount of $14, 120,000), ranking pari passu;
Third- D&O Charge {to the maximum amount of $11 ,000,000); and
CAN_DMS: \102302437\9
19
Fourth- L/C Providers' Charge.
55.
THIS COURT ORDERS that the filing, registration or perfection of the Administration
Charge, the DIP Note Charge, the KERP Charge, the D&O Charge, and the L/C Providers'
Charge (collectively, the "Charges") shall not be required, and that the Charges shall be valid
and enforceable for all purposes, including as against any right, title or interest filed, registered,
recorded or perfected subsequent to the Charges coming into existence, notwithstanding any
such failure to file, register, record or perfect.
56.
THIS COURT ORDERS that each of the Charges shall constitute a charge on the
Property and such Charges shall rank in priority to all other security interests, trusts, liens,
charges and encumbrances, claims of secured creditors, statutory or otherwise (collectively,
"Encumbrances") in favour of any Person.
57.
THIS COURT OROERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, the Applicants shall not grant any Encumbrances over any
Property that ranks in priority to, or pari passu with, any of the Charges, unless the Applicants
also obtain the prior written consent of the Monitor, the beneficiaries of each of the Charges, or
further Order of this Court.
58.
THIS COURT ORDERS that Charges shall not be rendered invalid or unenforceable and
the rights and remedies of the chargees entitled to the benefit of the Charges (collectively, the
"Chargees") and/or the DIP Lenders thereunder shall not otherwise be limited or impaired in
any way by (a) the pendency of these proceedings and the declarations of insolvency made
herein; (b) any application(s) for bankruptcy order(s) issued pursuant to the BIA, or any
bankruptcy order made pursuant to such applications; (c) the filing of any assignments for the
general benefit of creditors made pursuant to the BIA; (d) the provisions of any federal or
provincial statutes; or (e) any negative covenants, prohibitions or other similar provisions with
respect to borrowings, incurring debt or the creation of Encumbrances, contained in any existing
loan documents, lease, sublease, offer to lease or other agreement (collectively, an
"Agreement") which binds any of the Applicants, and notwithstanding any provision to the
contrary in any Agreement:
CAN_DMS: \102302437\9
20
(a)
neither the creation of the Charges nor the execution, delivery, perfection,
registration or performance of the DIP Financing Documents shall create or be
deemed to constitute a breach by an Applicant of any Agreement to which it is a
party;
(b)
none of the Chargees shall have any liability to any Person whatsoever as a result of
any breach of any Agreement caused by or resulting from an Applicant entering into
the Commitment Documents, the creation of the Charges, or the execution, delivery
or performance of the other DIP Financing Documents; and
(c)
the payments made by any of the Applicants pursuant to this Order or the DIP
Financing Documents, and the granting of the Charges, do not and will not constitute
preferences, fraudulent conveyances, transfers at undervalue, oppressive conduct,
or other challengeable or voidable transactions under any applicable law.
59.
THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in an Applicant's interest in such real property
leases.
POSTPONEMENT OF ANNUAL GENERAL MEETING
60.
THIS COURT ORDERS that Pacific be and is hereby relieved of any obligation to call
and hold an annual meeting of its shareholders until further Order of this Court.
SERVICE AND NOTICE
61.
THIS COURT ORDERS that the Monitor shall (i) without delay, publish in the Globe &
Mail (National Edition) and the Wall Street Journal (International Edition), a notice containing the
information prescribed under the CCAA, (ii) within five days after the date of this Order, (A)
make this Order publicly available in the manner prescribed under the CCAA, (B) send, in the
prescribed manner, a notice to every known creditor of Pacific who has a claim against Pacific
of more than CON $1000, and (C) prepare a list showing the names and addresses of those
creditors and the estimated amounts of those claims, and make it publicly available in the
CAN_DMS; \102302437\9
21
prescribed manner, all in accordance with Section 23(1)(a) of the CCAA and the regulations
made thereunder.
62.
THIS. COURT ORDERS that the Monitor is hereby discharged from the requirement to
send notices as prescribed in paragraph 23(1)(a)(ii)(B) of the CCAA to the creditors of the
Applicants, save and except for the creditors of Pacific as described in paragraph 61 hereof.
63.
THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
"Protocol") is approved and adopted by reference herein and, in these proceedings, the service
of documents made in accordance with the Protocol (which can be found on the Commercial
List
website
at
http://www.ontariocourts.ca/scj/practice/practice-directions/toronto/eservice-
commercial/) shall be valid and effective service.
Subject to Rule 17.05 this Order shall
constitute an order for substituted service pursuant to Rule 16.04 of the Rules of Civil
Procedure. Subject to Rule 3.01 (d) of the Rules of Civil Procedure and paragraph 21 of the
Protocol, service of documents in accordance with the Protocol will be effective on transmission.
This Court further orders that a Case Website shall be established in accordance with the
Protocol with the following URL 'www.pwc.com/ca/pacific'.
64.
THIS COURT ORDERS that if.the service or distribution of documents in accordance
with the Protocol is not practicable, the Applicants and the Monitor are at liberty to serve or
distribute this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier, personal
delivery or electronic transmission to the Applicants' creditors or other interested parties at their
respective addresses as last shown on the records of the Applicants and that any such service
or distribution by courier, personal delivery or electronic transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
SEALING
65.
THIS COURT ORDERS that the volume of Confidential Exhibits to the Volk Affidavit and
Supplementary Volk Affidavit be and are hereby sealed pending further Order of the Court and
shall not form part of the public record.
CAN_DMS: \102302437\9
22
GENERAL
66.
THIS COURT ORDERS that the Applicants or the Monitor may from time to time apply
to this Court for advice and directions in the discharge of their powers and duties hereunder.
67.
THIS COURT ORDERS that nothing in this Order shall prevent the Monitor from acting
as an interim receiver, a receiver, a receiver and manager, or a trustee in bankruptcy of any
Applicant, the Business or the Property.
68.
THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada, in the United States, in the
Republic of Colombia, or elsewhere, to give effect to this Order and to assist the Applicants, the
Monitor and their respective ·agents in carrying out the terms of this Order. All courts, tribunals,
regulatory and administrative bodies are hereby respectfully requested to make such orders and
to provide such· assistance to the Applicants and to the Monitor, as an officer of this Court, as
may be necessary or desirable to give effect to this Order, to grant representative status to the
Monitor, as the case may be, in any foreign proceeding, or to assist the Applicants and the
Monitor and their respective agents in carrying out the terms of this Order.
69.
THIS COURT ORDERS that each of the Applicants and the Monitor be at liberty and is
hereby authorized and empowered to apply to any court, tribunal, regulatory or administrative
body, wherever located, for the recognition of this Order and for assistance in carrying out the
terms of this Order, and that the Monitor is authorized and empowered to act as a foreign
representative in respect of the within proceedings for the purpose of having these proceedings
recognized in a jurisdiction outside Canada, including without limitation in the United States with
respect to the U.S. Proceedings, and in Colombia with respect to the Colombian Proceedings.
70.
THIS COURT ORDERS that any interested party (including the Applicants and the
Monitor) may apply to this Court to vary or amend this Order on not less than seven (7) days'
notice to any other party or parties likely to be affected by the order sought or upon such other
notice, if any, as this Court may order; provided, however, that the DIP Lenders shall be entitled
to rely on this Order for all advances, loans made and note purchases completed, the payment
of the Break Fee and other amounts paid under the DIP Notes, the LIC Facility and DIP
Financing Documents up to and including the date that this Order may be varied or amended.
CAN_DMS: \102302437\9
23
7
71.
THIS COURT ORDERS that a comeback hearing in this matter shall be held on May
I0,
2016 at 10:00 a.m. All materials with respect to such comeback hearing shall be filed with the
~
5, 20161 ~brro ..Jo Furth-er
Order oF -TVJt~ Cow-t .v
COURT ORDERS that this Order and all of its provisions are effective as of
Court and served on the Service List herein by no later than May
72.
THIS
/,.-,
j...J.
12:01 a.m. Eastern Standard/Daylight Time on the date of this Order.
ENTERED AT I INSCRIT ATORONTO
01\1/ BOOK NO:
lEI DANS LE REGISTRE NO:
APR 2 7 2016
PER/PAR:
CAN_DMS: \102302437\9
24
Rt-v
Schedule A
List of Assistants retained as of the date of this Order
(a) the legal and financial advisors to the Company, including without limitation (i) Norton Rose
Fulbright Canada LLP, (ii) Proskauer Rose LLP, (iii) J&A Garrigues S.L.P., (iv) Lazard Freres &
Co. LLC (the "Company's Financial Advisor"), (v) Zolfo Cooper Management LLC, (vi) Osler
Hoskin & Harcourt LLP (for the Independent Committee), and (vii) UBS Securities Canada Inc.
(for the Independent Committee, the "IC Financial Advisor");
(b) the legal and financial advisors to the Ad Hoc Noteholder Committee, including, without
limitation, (i) Goodmans LLP, (ii) Paul, Weiss, Rifkind, Wharton & Garrison LLP, (iii) Cardenas &
Cardenas Abogados, and (iv) Evercore Group LLC. and Evercore Partners LLP (the
"Noteholders' Financial Advisor'');
(c) the legal and financial advisors to each administrative agent under the bank credit facilities,
including, without limitation, (i) Torys LLP, (ii) Davis Polk & Wardwell LLP, (iii) G6mez-Pinz6n
Zuleta Abogados, (iv) Seward & Kissel LLP, and (v) FTI Consulting Inc. (the "Agents' Financial
Advisor"); and
(d) the legal and financial advisors to the Plan Sponsor, including, without limitation, (i) Brown
Rudnick LLP, (ii) McMillan LLP, and (iii) GMP Securities L.P.
The term "Financial Advisors" shall mean, collectively, the Company's. Financial Advisor, the
IC Financial Advisor, the Noteholders' Financial Advisor, and the Agents' Financial Advisor.
CAN_DMS: \102302437\9
1
Schedule B
Definitions of Note Claims and Bank Debt Claims
"Note Claims" means all claims by holders under (i) the 5.375% senior unsecured notes due
January 26, 2019 issued by the Company (the "2019 Notes"); (ii) the 7.25% senior unsecured
notes due December 12, 2021 issued by the Company (the "2021 Notes"); (iii) the 5.125%
senior unsecured notes due March 28, 2023 issued by the Company (the "2023 Notes"); and/or
(iv) the 5.625% senior unsecured notes due January 19, 2025 (the "2025 Notes", and together
with the 2019 Notes, 2021 Notes and 2023 Notes, the "Notes," and the claims and other
obligations arising thereunder, and/or under the indentures and supplemental indentures
governing the Notes.
"Bank Debt Claims" means all claims of lenders under each of (i) the $75,000,000 Master
Credit Agreement dated as of April 4, 2014 among the Company, as borrower, the guarantors
party thereto, and Banco Latinoamericano de Comercio Exterior, S.A. .as lender (as amended,
modified, restated or supplemented from time to time, the "Biadex Facility"); (ii) the
$109,000,000 Credit and Guaranty Agreement dated as.of May 2, 2013 among the Company,
as borrower, the guarantors party thereto, and Bank of America, N.A. as lender (as amended,
modified, restated or supplemented from time to time, the "BofA Facility"); (iii) the
$250,000,000 Credit and Guaranty Agreement dated as of April 8, 2014 among the Company,
as borrower, the guarantors party thereto, the lenders party thereto and HSBC Bank USA, N.A.,
as administrative agent (as amended, modified, restated or supplemented from time to time, the
"HSBC Facility"); and/or (iv) the $1,000,000,000 Revolving Credit and Guaranty Agreement
dated as of April30, 2014 among the Company, as borrower, the guarantors party thereto, Bank
of America, N.A. as administrative agent and the lenders party thereto (as amended, modified,
restated or supplemented from time to time, the "Revolving Facility," and together with the
Bladex Facility, the BofA Facility and the HSBC Facility, the "Credit Facilities" and the loans,
commitments, and other obligations held by the applicable lenders pursuant to the Credit
Facilities.
CAN_DMS: \102302437\9
1
Schedule C
Unaffected Claims
The claims of the following Persons providing good or services to or in respect of any parts of
the Business in Colombia or Peru:
Employees, tax authorities, counterparties in joint operating agreements and overriding royalty
agreements, field service providers, utility providers of any kind, administrative service providers
of any kind, the Agenda National de Hidrocarburos, other governmental agencies or entities
including Ecopetrol, S.A. , social agencies (including Colombian social security, health and
retirement/pension institutions and/or agencies) and providers of social programs to which the
Applicants or their affiliates contribute.
CAN_DMS: \102302437\9
1
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985,
c. C-36, AS AMENDED
Court File No.: CV-16-11363-00CL
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PACIFIC EXPLORATION &
PRODUCTION CORPORATION, PACIFIC E&P HOLDINGS CORP., META PETROLEUM CORP., PACIFIC
STRATUS INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA CORP., PACIFIC
STRATUS ENERGY SA, PACIFIC OFF SHORE PERU S.R.L., PACIFIC RUBIALES GUATEMALA SA,
PACIFIC GUATEMALA ENERGY CORP., PRE-PSIE COOPERATIEF UA, PETROMINERALES COLOMBIA
.
CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
ONTARIO
SUPERIOR COURT OF _JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
INITIAL ORDER
(Returnable April 27, 2016)
NORTON ROSE FULBRIGHT CANADA LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.0. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
tony. reyes@norton rosefu lb right. com
Orestes Pasparakis LSUC #36851T
Tel: 416.216.4815
[email protected]
Virginie Gauthier LSUC #410970
Tel: 416.216.4853
[email protected]
Lawyers for the Applicants
__.;,.C)
CAN_DMS; \102145245\1
TABD
This is Exhibit "D" referred to in the
Affidavit of Peter Volk
1
sworn before me, this 20 h day
of May, 2016
CAN_DMS: \65405557\1
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Pacific E& P Holdings
(Switz erland)
,
,
,,
,,
I
I
I
I
I
/
\
/
\
/
\.
'
...
$467~- -
- - - - - - -
/
I$ 26M
\.
-
/
/
I
I
''
' .... .... :::,;:::.
_______
I
Meta Petroleum AG
(Switzerland)
\
$124M
\
' ' .......
'\
\
I
Pacific Stratus Energy
Colombia Corp
(Panama)
'
I
I
l
....
\
I
---
... ... "'
.,. .,.
/
/
------- + Downstream loan - undocumented
- - - - - - - + Downstream loan - documented
- - - - - - - + Upstream loan - undocumented
-----------+ Interest owing to- documented
FiNANCE
2
Exploration & Production
\
I
I
I
I
Pre-DIP Financing Tax Steps
To address European legal and tax issues:
• Luxembourg tax leakage on interest income and Swiss 1°/o stamp duty
• Swiss minimum equity requirements
);>
Subordination of loans from PGC to Meta*
• Swiss deemed return of capital
);>
Under Swiss law, where a related entity receives revenues on behalf of the Swiss
entity, a deemed return of capital may result.
• All amounts are in $USD
*_It is also contemplated that loans from Pacific Stratus Energy to Meta will be subordinated
U:J
20/05/2016
3
Expk~rat~on
& Production
Loans from P
to
eta
The following loans are outstanding:
Loan date
5~
Due date
7
'
"*}'
,f
7r
~-
<i;.,)t
7
~
%:}
1:
iJ
fu~
l
356,000,000
4
FiNANCE
Exploration & Production
roposed Steps 1 -3
Step 1: Pacific Canada repays US$ 124M to Meta in 4 tranches:
~ $22M, $35M, $35M, and $32M
Step 2: Meta repays the US$40M and $66M (total $106M) loans to PGC in 4
tranches:
~ $33M, $35M, $35M, and $3M
Step 3: PGC repays the US$40M and $66M (total $106M) loans to Pacific
Canada in 4 tranches:
~ $35M, $35M, $35M, and $3M
5
FiNANCE
Exp1aratlon & PrMuct(on
tatus a er Steps 1 -3
Pacific Exploration &
Production Corporation
(British Columbia)
I
MRPS
Pacific Stratus
International Energy Ltd
(British Columbia)
Pacific Global Capital
(Luxembourg)
I
1
I
Pacific Stratus Energy
Colombia Corp
(Panama)
\
'$250M
\
\
''
\
'
',,~~
-- -----
$467M
''
""
' .... ..... '
--------------~~~
------- + Downs.tream loan - undocumented
------- + Downstream loan - documented
------- +
Downstream loan - undocumented
------------..-
Interest owing to- documented
FINANCE
6
I
rojected Equity Shortfall 2016-2020
(Million US$)
2015
I 2016 I 2017 I 2018 I 2019 I 2020
To address the projected equity shortfall, sufficient amounts of the loans from
_PGC to Meta and from PSE to Meta should be subordinated amounting US$
550M to cover equity shortfall.
7
FINANCE
Exploration & Pr-oduction
Proposed Steps 4 - 7
Step 4: Pacific Stratus Energy Colombia Corp (Panama) subordinates its
$467M loans to Meta
Step 5: To the extent required to address equity shortfalls, PGC subordinates
up to US$250M loans to Meta
Step 6: Pacific Canada pays interest owing to Pacific E&P Swiss of $2,155,313
~ To initiate concurrently with Step 1
Step 7: Pacific E&P Swiss repays $2,155,313 of its $26,752,784 AP to Meta
8
FINANCE
fxpioration & Production
Status a er Steps 4-7
Pacific Exploration &
Production Corporation
(British Columbia)
I
MRPS
Pacific Stratus
International Energy Ltd
(British Columbia)
Pacific Global Capital
(Luxembourg)
l
Pacific E&P International
Holdings
(Luxembourg)
T
I
I
\
Pacific Stratus Energy
Colombia Corp
(Panama)
\
\$250M*
Pacific E&P Holdings
(Switzerland)
\
\
\
\
\
\
\
''
', ',
'
~~
--~
$467M
\
''
''
--- -------------:~~
'
------- +
Subordinated downstream loans documented
------- +
Upstream loan - undocumented
$24.5M
I
I
I
I
Meta Petroleum AG
(Switzerland)
...
/
* PGC to subordinate up to $250M (to extent required to address equity shortfall
FINANCE
9
Expioration & Prvductkm
TABE
This is Exhibit "E" referred to in the
Affidavit of Peter Volk
sworn before me, this 20 1h day
of May, 2016
A Commissioner for taking Affidavits
CAN_DMS: \65405557\1
q
PACIFIC EXPLORATION & PRODUCTION CORP.
NEWS RELEASE
PACIFIC'S BOARD REAFFIRMS CREDITOR/CATALYST RESTRUCTURING
TRANSACTION
COLOMBIAN SUPERINTEND ENCIA DE SOCIEDADES REJECTS EIG REQUEST TO
POSTPONE RECOGNITION APPLICATION
Toronto, Canada, Wednesday, May 18, 2016- Pacific Exploration & Production Corp. (TSX: PRE)
(BVC: PREC) today provided an update on the proposed comprehensive restructuring transaction with
creditors holding more than 78% of the principal amount of the Company's approximately US$5.3 billion
of affected bank and unsecured note debt and The Catalyst Capital Group Inc. (the ttCreditor/C.ttalyst
Restructuring Transaction"), as follows:
•
The Company's Board of Directors (the "Board") has reaffirmed that this transaction
continues to be in the best interests of the Company, including as compared to the offer
received from EIG Management Company, LLC (the "Latest EIG Offer") on May 7, 2016.
•
The Board concluded that there was no reason for it to exercise its Fiduciary Termination
Right (defined below) in relation to the Latest EIG Offer.
•
The Board made its determination after consulting with, through its Independent Committee,
the Supporting Creditors (defmed below) through advisors to the Ad Hoc Committee (defined
below) and administrative agents for the bank lenders.
•
The Colombian Superintendencia de Sociedades issued a decision today in which they
rejected an application by EIG to postpone the granting of a recognition order in Colombia
relating to the Creditor/Catalyst Restructuring Transaction.
Reaffirmation of Creditor/Catalyst Restructuring Transaction
After, among other things, seeking the views of the Supporting Creditors, the Board has dete1mined that
the Creditor/Catalyst Restructuring Transaction continues to be in the best interests of the Company. In
coming to its decision, the Board (through the Independent Committee of the Board) collllllunicated with
the advisors to the ad hoc colll1llittee of the Company's unsecured noteholders (the "Ad Hoc
Committee") and the advisors to the Supporting Bank Lenders (defined below) with respect to the Latest
EIG Offer. During the course of its evaluation of the Latest EIG Offer, the Independent Committee kept
the Ad Hoc Committee and their advisors and the Supporting Bank Lenders' advisors apprised of the
Company's decision-making process. The Ad Hoc Committee and the Supporting Bank Lenders have
each reviewed the Latest EIG Offer and continue to support the Creditor/Catalyst Restructuring
Transaction under the terms of the Support Agreement (defined below).
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100-333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 FAX: (416) 360~7783
2
In arriving at its recommendation, the Board also received the advice of external legal and financial
advisors (Norton Rose Fulbright Canada LLP and Lazard Freres & Co. LLC, respectively).
Decision of the Superintendencia de Sociedades
Today the Colombian Superintendencia de Sociedades issued a decision in which it rejected an
application by EIG to postpone the granting of a recognition order in Colombia relating to the
Creditor/Catalyst Restructuring Transaction until the Superintendencia de Sociedades had considered the
Latest EIG Offer.
Background to date on the Creditor/Catalyst Restructuring Transaction
The Creditor/Catalyst Restructuring Transaction involves, among other things, the provision of US$500
million of DIP financing to the Company by early June, which DIP financing was approved by the
Ontario Superior Court of Justice (the "CCAA Court") on April 27, 2016 and will be provided to the
Company by (i) The Catalyst Capital Group Inc., on behalf of investment funds managed by it
("Catalyst"), who will provide US$250 million of the DIP financing, and (ii) certain holders of the
Company's unsecured notes, \vho v;rill provide the other US$250 million of DIP financing. The
Creditor/Catalyst Restructuring Transaction also involves a US$134 million letter of credit facility for the
Company, which will be provided by certain of the Company's bank lenders under its credit facilities. The
DIP financing will be used mainly to fund the Company's operations in Colombia, including to pay the
pre-filing and post-filing claims of the Company's local trade creditors, suppliers and employees, in
accordance with the terms of the DIP fmancing, as approved by the CCAA Court.
The Company has entered into a support agreement (the "Support Agreement") with Catalyst and the
holders of approximately 78.37% of the aggregate principal amount of the Company's unsecured notes
and bank debt (collectively, the "Supporting Noteholders", the "Supporting Bank Lenders" and, all
together, the "Supporting Creditors") pursuant to which the Supporting Creditors have coll11Ilitted to
support and vote in favour of the Creditor/Catalyst Restructuring Transaction, subject to the terms and
conditions of the Support Agreement. Tins level of support fi·om the affected creditors is well in excess of
the 66 2/3% test that is required for creditor approval of the Creditor/Catalyst Restructuring Transaction
under the Companies' Creditors Arrangement Act.
Under its tenus, the Company can terrninate the Support Agreement if the Board detennines (after
receiving the advice of outside counsel and the recommendation of the Independent Committee of the
Board) that the Creditor/Catalyst Restructuring Transaction is not in the best interests of the Company
(having regard to the reasonable expectations of holders of the Company's senior unsecured notes and its
bank debt, "Claims") and continued support of the Creditor/Catalyst Restructurjng Transaction would be
inconsistent mth the directors' fiduciary obligations (having regard to the reasonable expectations of
holders of Claims) (the "Fiduciary Termination Right").
Accordingly, the Independent Committee of the Board was asked to review the Latest EIG Offer and
make a recommendation to the Board v;rith respect to whether the Company should exercise the Fiducimy
Temunation Right. After careful consideration of all relevant factors, the Independent Committee
concluded that the Creditor/Catalyst Restructuring Transaction continues to be in the best interests of the
Company (having regard to the reasonable expectations of holders of Claims) and that the Company
should continue to support the Creditor/Catalyst Restructuring Transaction. The Independent Committee
therefore unanimously recommended to the Board that the Board not accept the Latest EIG Offer and that
the Company not exercise the Fiduciary Termination Right. The Independent Committee received the
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100- 333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 FAX: (416) 360-7783
advice of its own independent legal and financial advisors (Osler, Hoskin & Harcourt LLP and UBS
Securities Canada Inc., respectively) and was satisfied that the Supporting Creditors continue to support
the Creditor/Catalyst Restructuring Transaction under the tem1S of the Support Agreement.
The Board, having received the advice of its outside counsel and financial advisors, has unanimously
accepted the reconunendation of the Independent Committee and has detemuned that the
Creditor/Catalyst Restructuring Transaction continues to be in the best interests of the Company, that it
should not accept the Latest EIG Offer, and that the Company will not exercise the Fiduciary Tem1ination
Right.
The Creditor/Catalyst Restructuring Transaction, once effected, will significantly reduce debt, improve
liquidity, and best position the Company to navigate the current oil price enviromnent. In addition:
•
the Creditor/Catalyst Restructuring Transaction has the current, confinned and overwhelming
support of the Supporting Creditors; and
•
the US$500 million of DIP financing contemplated by the Creditor/Catalyst Restructuring
Transaction has already been approved by the CCAA Court and is scheduled to be provided to the
Company by early June, once certain standard conditions precedent are met
As a result, the Creditor/Catalyst Restructuring Transaction is uniquely positioned to provide the
Company with the additional liquidity that it requires in the near tenn in order to continue to meet its
impmtant obligations to its local trade creditors, suppliers and employees in full and to continue
operations as a going concern. Given the lack of creditor support for the Latest EIG Offer, and the fact
that no aspect of the Latest BIG Offer has been approved by the CCAA Court, the Company does not
believe that the Latest BIG Offer is capable of meeting this important funding requirement for the
Company and its local trade creditors, suppliers and employees.
The Company entered into the Suppmt Agreement to effect the Creditor/Catalyst Restructuring
Transaction only after a long process that involved the solicitation and consideration of multiple bids. EI G
participated in that process, along with others, and submitted bids on multiple occasions, each of which
was duly considered not only by the Independent Committee and the Company, but also by the Ad Hoc
Committee and certain of the Supporting Bank Lenders. As part of the process by wluch the
determination was made to proceed with the Creditor/Catalyst Restructuring Transaction, bidders were
provided with the opportunity to meet directly with the Ad Hoc Conunittee and the Supporting Bank
Lenders and to negotiate the terms of their proposals directly with them. BIG and the other bidders
availed themselves of these opportunities. The decision to implement the Creditor/Catalyst Restructuring
Transaction (through entering into the Support Agreement) was only made after the Independent
Committee received advice that it was the most likely transaction proposed by bidders to result in a
consensual arrangement with the Ad Hoc Committee and the Supporting Bank Lenders, with the prospect
of obtaining the best result for the Company's stakeholders. As noted above, Supporting Creditors
holding approximately 78.37% of the aggregate principal amount of the debt held by the Company's
noteholders and lenders under the Company's credit facilities have confirmed their support for the
Creditor/Catalyst Restmcturing Transaction by entering into the Support Agreement. The Company
believes, based on the process unde1taken by the Independent Committee, that the Supporting Creditors
continue to strongly support the Creditor/Catalyst Restructuring Transaction under the tenns of the
Support Agreement.
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100-333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 FAX: (416) 360-7783
TI1e Company also believes that the Creditor/Catalyst Restructuring Transaction continues to be in the
best interests of the Company, that the announcement of it has provided much-needed stability and that its
implementation will best position the Company for the future. Accordingly, the Company continues to
work towards the completion of the Creditor/Catalyst Restructuring Transaction which it expects to occur
by the end of the third quarter of 2016, subject to obtaining all relevant and required regulatory, creditor
and court approvals. The US$500 million of DIP financing that is a key first part of the Creditor/Catalyst
Restructuring Transaction is expected to be funded to the Company shortly and no later than early June.
All operations of the Company's subsidiaries, including the Colombian branches (the "Pacific
Subsidiaries") of each of Meta Petroleum Corp, Pacific Stratus Energy Colombia Corp., Petrominerales
Colombia Corp. and Grupo C&C Energia (Barbados) Ltd. are expected to continue as nonnal throughout
this process. Importantly, the Company expects regular payments will be made to all of the Pacific
Subsidiaries' suppliers, trade partners, and contractors across the jurisdictions in which they operate in
accordance with local regulations. Additionally, obligations to employees will also be honoured in the
normal course. The Company's bank indebtedness and indebtedness in respect of its senior unsecured
notes will be restructured pursuant to the terms of the Creditor/Catalyst Restructuring Transaction.
Shareholder Contact Information
Shareholders are reminded that any questions or concerns can be directed to the Company at
ir@lpacificcorp. energy.
Noteholder Contact Information
Noteholders with questions concerning the Creditor/Catalyst Restructuring Transaction are encouraged to
contact Kingsdale Shareholder Services at 1-877-659-1821 toll-free in North America or call collect at 1416-867-2272 outside of North America or by email at [email protected].
About Pacific:
Pac{fic Exploration & Production Corp. is a Canadian public company and a leading explorer and
producer of natural gas and crude oil, with operations focused in Latin America. The Company has a
divers{fied portfolio of assets with interests in more than 70 exploration and production blocks in various
countries including Colombia, Peru, Guatemala, Brazil, Guyana and Belize. The Company's strategy is
focused on sustainable growth in production & reserves and cash generation. Pac{fic Exploration &
Production is committed to conducting business safely, in a socially and environmentally responsible
manner.
Advisories:
Cautionary Note Conceming Forward-Looking Statements
This news release contains forHJard-looking statements. All statements, other than statements of historical
fact, that address activities, events or developments that the Company believes, expects or anticipates will
or may occur in the future (including, without limitation, statements regarding estimates and/or
assumptions in respect of production, revenue, cash flow and costs, reserve and resource estimates,
potential resources and reserves and the Company's exploration and development plans and objectives
and its strategy) are forward-looking statements. These fmward-looking statements reflect the current
expectations or beliefs of the Company based on infonnation currently available to the Company.
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100-333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 FAX: (416) 360-7783
Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual
results of the Company to differ materially from those discussed in the fmward-looking statement:..~ and
even if such actual results are realized or substantially realized, there can be no assurance that they will
have the expected consequences to, or effects on, the Company. Factors that could cause actual results or
events to differ materially .from current expectations include, among other things: the Company's ability
to continue as a going concern; volatility in market prices for oil and natural gas; a continued depressed
oil price environment with a potential of further decline; default under the Company's credit facilities
and/or the Company's senior notes due to a breach of covenants therein; amounts becoming due and
payable under the credit facilities and/or the senior note!.~ notwithstanding the entering into of support
arrangements, whether through the actions of holders of senior notes or the trustee under the respective
senior note indentures or othe1wise; the impact of events of defaults in re,I]Ject of the credit facilities
and/or senior notes on other material contracts of the Company, including but not limited to, crossdefaults resulting in acceleration of amounts payable thereunder or the termination of such agreements
notwithstanding the protection obtained by the Company under the CCAA proceedings in Canada and/or
sought in proceedings under other applicable jurisdictions (including Colombia and the United States);
failure of the Company to complete the Creditor/Catalyst Restructuring Transaction, which is subject to a
number of conditions and other risks and uncertainties including, without limitation, court, creditor and
required regulatory approvals or otherwise; failure to satisfy any terms or conditions of any other
agreement with the Company's creditors on a proposed restructuring; any negative impact on the
Company's current operations as a result of the Creditor/Catalyst Restructuring Transaction or any other
proposed restructuring or.failure to reach any other agreement lVith the creditors thereon; perceptions of
the Company's pro.\]Jects and the prospects of the oil and gas industry in Colombia and the other
countries lVhere the Company operates and/or has investments as the result of the entering into of the
Creditor/Catalyst Restructuring Transaction or commencing voluntary insolvency proceedings or
otherwise; expectations regarding the Company's ability to raise capital and to continually add to
rese11'es through acquisitions and development; inability to continue meeting the lis#ng requirements of
the exchanges on ~which the Company's securities are listed due to the Creditor/Catalyst Restructuring
Transaction; the cancellation or extensive dilution of the Company's equity securities as a result of the
Creditor/Catalyst Restructuring Transaction,· the effect of the Creditor/Catalyst Restructuring
Transaction on the Company's business and operations; political developments in Colombia, Guatemala,
Peru, Brazil, Guyana and Mexico; liabilities inherent in oil and gas operations; unce11ainties associated
with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of
reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions
and/or past integration problems; geological, technical, drilling and processing problems; fluctuations in
foreign exchange or interest rates and stock market volatility; delays in obtaining required environmental
and other licences; uncertainty of estimates of capital and operating costs, production estimates and
estimated economic return; the possibility that actual circumstances will d~fler from estimates and
assumptions; uncertainties relating to the availability and costs of financing needed in the future;
changes in income tax laws or changes in tax laws, accounting principles and incentive programs
relating to the oil and gas industry; and the other factors discussed under the heading entitled "Risk
Factors" and elsewhere in the Company's AIF dated March 18, 2016 filed on SEDAR at lvww.sedar.com.
Any fonvard-looking statement speaks only as of the date on which it is made and, except as may be
required by applicable securities laws, the Company disclaims any intent or obligation to update any
fonvard-looking statement, ~whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the fOJward-looking statements are
reasonable, forward-looking statements are not guarantees offuture pe1formance and accordingly undue
reliance should not be put on such statements due to the inherent uncertainty therein.
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100- 333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 :VAX: (416) 360-7783
Translation
This news release 1vas prepared in the English language and subsequently translated into Spanish. In the
case of any differences between the English version and its translated countet]Jart.\~ the English document
should be treated as the governing version.
FOR FURTHER INFORMATION:
Frederick Kozak
Corporate Vice President, Investor Relations
+1 (403) 705-8816
+1 (403) 606-3165
Roberto Puente
Sr. Manager, Investor Relations
+57 (1) 511-2298
+507 (6) 205-1400
Richard Oyelovvo
Manager, Investor Relations
+1 (416) 362-7735
MEDIA CONTACT:
Tom Becker
Sitrick & Company
+ 1 (212) 573-6100
PACIFIC EXPLORATION & PRODUCTION CORPORATION
1100-333 BAY STREET, TORONTO, ONTARIO M5H2R2
TELEPHO~'E: (416) 362-7735 FAX: (416) 360-7783
- - - - - - - - - -
TAB F
-
---
--------------------~---------
This is Exhibit "F" referred to in the
Affidavit of Peter Volk
sworn before me, this 20 1h day
of May, 2016
~~
4~
.~~k'Affd
omm1ss1oner or a 1ng
CAN_DMS: \65405557\1
1 av1'ts
1111111111111111111111111111111111111111111111111111
AI contestar cite el No,
2016-01-277906
Tlpo: Salida
Fecha: 17/05/2016 07:11:15 PM
Tramlte: 16021 • PETICIONES VARIAS (NO DEL PROMOTOR 0 Ll
Sociedad: 830126302 - META PETROLEUM COR
Exp. 39978
Remitente: 400 - DELEGATURA PARA PROCEDIMIENTOS DE INS
Destlno: 4151 - ARCHIVO APOYO JUDICIAL
Folios: 2
Anexos: NO
Tlpo Documental: AUTO
Consecutive: 400-007779
SUPER!NT!iNOI'lNCIA
UE $()ClEbAUEi$
AUTO
SUPERINTENDENCIA DE SOCIEDADES
Sujeto del proceso
Pacific Exploration and Production Corp.
Meta Petroleum Corp. Sucursal Colombia (Nit. 830.126.302)
Pacific Stratus Energy Colombia Corp. Sucursal Colombia (Nit. 800.128.549)
Petrominerales Colombia Corp. Sucursal Colombia (Nit. 830.029.881)
Representante extranjero
PriceWaterHuseCoopers Inc.
As unto
Tramite de reconocimiento de proceso extranjero
Expediente
39978
I.
ANTECEDENTES
1. Mediante memorial2016-01-247484 de 2 de mayo de 2016, el apoderado especial de
Pacific Exploration & Production Corp, Meta Petroleum Corp. Sucursal Colombia,
Pacific Stratus Energy Colombia Corp. Sucursal Colombia y Petrominerales Colombia
Corp. Sucursal Colombia, junto con el apoderado de PriceWaterhouseCoopers Inc.,
quien actua como monitory representante extranjero designado porIa Corte Superior
de Justicia de Ontario, solicitaron el reconocimiento del proceso extranjero iniciado
con arreglo a Ia Ley de Arreglos de acreedores de Compafiias (Companies Creditors
Arrangement Act- "CCAA'), ante Ia Corte Superior de Justicia de Ontario, Canada.
Fundamentaron su pretension en lo dispuesto en el Capitulo Ill del Titulo Ill de Ia Ley
1116 de 2006 y el Decreta 1749 de 2011.
2. Mediante mensaje de datos, el Superintendente de Sociedades (e) remitio por
competencia una comunicacion que le fue enviada por el Presidente y Director
Ejecutivo de EIG Management Company, LLC y Ia Directora General y Directora
Ejecutiva de Harbour Energy Ltda.
3. En el memorial, los firmantes pusieron de presente Ia propuesta de financiacion
realizada al grupo Pacific, y pidieron que sea considerada por este Despacho antes
de que se profiera cualquier decision de reconocimiento o procedimiento respecto del
proceso de reorganizacion canadiense y/o de Ia propuesta de Catalyst.
II.
CONSIDERACIONES DEL DESPACHO
1. Siempre que se trate de procesos de insolvencia, esta Superintendencia, de
conformidad con lo dispuesto en el inciso 3 del articulo 116 de Ia Constitucion
Polftica, actua en ejercicio de funciones jurisdiccionales, razon por Ia cual sus
atribuciones y las de los sujetos procesales estan enmarcadas dentro de tales
facultades, con las limitaciones y alcances que ha definido Ia propia ley con pleno
aval de Ia jurisprudencia.
2. En efecto, las decisiones del juez del concurso se profieren con estricta sujecion a los
terminos y etapas jurisdiccionales y preclusivas establecidos en el regimen concursal,
En Ia Superintendencia de Sociedades trabajamos con
integridad por un Pals sin corrupci6n.
Entidad No. 1 en el lndice de Transparencia de las Entidades Publicas, ITEP.
(j)M!NCIT
www.supersocledades.gov.co f [email protected] Colombia
2/2
AUTO
2016-01-277906
META PETROLEUM CORP SUCURSAL COLOMBIA
SUPEFUNTENDENCIA
llE SOCUi1PAOES
que es prevalente, transitorio y excepcional 1 , y en lo no regulado expresamente, .se
aplican las normas del C6digo General del Proceso (articulo 124, Ley 1116 de 2006).
3. Desde esta 6ptica, y analizada Ia solicitud formulada, su tramite se estima
improcedente a Ia luz de las facultades jurisdiccionales otorgadas a esta
Superintendencia por Ia Constituci6n y por Ia Ley 1116 de 2006, en atenci6n al
contexte procesal promovido, esto es, el reconocimiento de un proceso extranjero.
4. Por lo demas, este Despacho advierte que, en virtud de lo previsto en el articulo 251
del C6digo General del Proceso, para que los documentos procedentes del extranjero
que esten en idioma distinto del castellano puedan ser valorados en el proceso,
deben venir acompariados de traducci6n oficial, condici6n que no acredita el
memorial en estudio.
En merito de lo expuesto, el Superintendente Delegado para Procedimientos de
lnsolvencia,
RESUELVE
Rechazar por improcedente Ia solicitud contenida en memorial 2016-01-276317, suscrito
por el Presidente y Director Ejecutivo de EIG Management Company, LLC y por Ia
Directora General y Directora Ejecutiva de Harbour Energy Ltda.
Notiflquese,
NICOLAS POLANfA TELLO
Superintendente Delegado para Procedimientos de lnsolvencia
RD: ACTUACIONES
2016-01-276317
1
Auto 400-014040 de 21 de octubre de 2015
En Ia Superintendencia de Sociedades trabajamos con
integridad por un Pais sin corrupci6n.
@) MINCIT
Entidad No. 1 en el lndice de Transparencia de las Entidades Publicas, ITEP.
www.supersociedades.gov.co / [email protected],co- Colombia
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS
AMENDED
Court File No.: CV-16-1136~-00CL
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PACIFIC EXPLORATION &
PRODUCTION CORPORATION, PACIFIC E&P HOLDINGS CORP., META PETROLEUM CORP., PACIFIC
STRATUS INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA CORP., PACIFIC
STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU S.R.L., PACIFIC RUBIALES GUATEMALA S.A.,
PACIFIC GUATEMALA ENERGY CORP., PRE-PSIE COOPERATIEF U.A., PETROMINERALES COLOMBIA
CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTD.
APPlicants
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
AFFIDAVIT OF PETER VOLK
(Sworn May 20, 2016)
NORTON ROSE FULBRIGHT CANADA LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
tony. reyes@n orton rosefu lb right. com
Virginia Gauthier LSUC #41 0970
Tel: 416.216.4853
[email protected]
Alexander Schmitt LSUC #63860F
Tel: 416.216.2419
[email protected]
Lawyers for the Applicants
CAN_DMS: \102632234\7
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985,
c. C-36, AS AMENDED
Court File No.: CV-16-11363-00CL
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PACIFIC
EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P HOLDINGS CORP., META
PETROLEUM CORP., PACIFIC STRATUS INTERNATIONAL ENERGY LTO., PACIFIC
STRATUS ENERGY COLOMBIA CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF
SHORE PERU S.R.L., PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA
ENERGY CORP., PRE-PSIE COOPERATIEF U.A., PETROMINERALES COLOMBIA CORP.
AND GRUPO C&C ENERGIA (BARBADOS) LTO.
Applicants
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
MOTION RECORD
(Returnable May 26, 2016)
NORTON ROSE FULBRIGHT CANADA LLP
Royal Bank Plaza, South Tower, Suite 3800
200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4 CANADA
Tony Reyes LSUC #28218V
Tel: 416.216.4825
[email protected]
Virginie Gauthier LSUC #41 0970
Tel: 416.216.4853
[email protected]
Alexander Schmitt LSUC #63860F
Tel: 416.216.2419
[email protected]
Lawyers for the Applicants
CAN_DMS: \102639995\1