Court File No.: CV-16-11363-00CL COMPANIES' CREDITORS ARRANGEMENT ACT, ONTARIO SUPERIOR COURT OF JUSTICE

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
REDACTED VOLUME OF CONFIDENTIAL EXHIBITS TO THE
VOLK AFFIDAVIT AND SUPPLEMENTARY VOLK AFFIDAVIT
(Initial Order)
(Returnable April 27, 2016)
April 27, 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.reyesnortonrosefulbriqht.com
Orestes Pasparakis LSUC #36851T
Tel: 416.216.4815
orestes.pasparakisAnortonrosefulbriciht.com
Virginie Gauthier LSUC #41097D
Tel: 416.216.4853
virqinie.qauthierAnortonrosefulbright.com
Fax: 416.216.3930
Lawyers for the Applicants
CAN DMS: 02287969 \ 2
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
INDEX
Confidential Exhibits to the Affidavit of Peter Volk sworn April 27,
2016
1
Lazard Engagement Letter dated December 17, 2015 and
amendment thereto dated April 18, 2016 [unredacted]
2
Lazard Investment Solicitation Update dated March 1, 2016
[redacted]
15
3
Lazard Investment Solicitation Update dated March 8, 2016
[redacted]
17
4
Lazard Investment Solicitation Update dated March 16, 2016
[redacted]
19
5
Report of the Independent Committee to the Board of Directors
dated April 11, 2016 [redacted]
21
6
Supplement to the Report of the Independent Committee April 25
2016 [redacted]
49
7
UBS Engagement Letter and UBS Indemnity Agreement dated
57
CANDMS: \102287969\2
1
Tab:
Document:
Page No.:
March 10, 2016 [redacted]
8
FTI Engagement Letter dated December 7, 2015 [redacted]
73
9
Evercore Engagement Letter dated February 16, 2016
[unredacted]
90
Confidential Exhibits to the Supplementary Affidavit of Peter Volk
sworn April 27, 2016
B
1
Key Employee Retention Plan [redacted]
CAN_DMS: \ 102287969 \2
TAB A
This is Exhibit "C-1" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS:\65405557\1
tre---ase-
LAZARD
As of December 17, 2015
Pacific Exploration & Production Corp.
Carp.
333 Bay Street, Suite 1100
Toronto, Ontario, M5H 2R2
Canada
Attention;
Ronald Pantin
Chief Executive Officer
Qfdcor
Dear Ladies and Gentlemen;
Gentlemen:
This letter agreement (the "Agreement")
"Agreement') confirms
confirms the
the understanding and agreement between
Lazard Freres
8.A, (together, "Lazard")
Financieros, S.A.
`tiazardn) and
Freres.&
&Co.
co-. LLC and Lazard Asesores Finaneieros,
Pacific Exploration & Production Corp. ("Pacific Exploration") and its controlled
fanned or used for the purposes set forth herein, the
subsidiaries (collectively With any entity formed
"Company").
fissiktlitietit Scope,
Assignment*
Scam
The Company hereby retains Lazard as its sole investment banker to provide Pacific
Exploration with general restructuring advice and to advise it in connection with any
Restructuring, Sale Transaction and/or
and/or Filiation%
PinaWng. (each
(each as
as defined
defined below) on the terms and
conditions set forth herein. As used in this Agreement, the term "Restructuring"
"Resttuctming" shall mean,
collectively, any restructuring, reorganization (whether or not pursuant to Chapter II of the
Act in Canada or the
United States Bankruptcy Code, the Companies' Creditors Arrangement Aot
insolvency laws of any other jurisdiction (collectively, "Bankruptcy Proceedings") and/or
recapitalization of all or a significant portion of the Company's outstanding indebtedness
debt, Mid
and other on and off balance sheet indebtedness), trade olefins,
claims,
(including bank debt, bond debt,
leases (both on and
and off
off balance
balance sheet),
sheet),asbestos
asbestosand.
and other
other Litigation-related
litigation-related claims and
obligations, unfunded pension and retiree medical liabilities, or other liabilities (collectively, the
"Existing Obligations")
Obligations') that
that isis achieved,
achieved, without
without limitation,
limitation, through a solicitation of waivers and
consents trofft
from the
the holders.
holders of
of Existing
Existing Obligations (collectively, the "Stakeholders");
rescheduling of the maturities of Existing Obligations; a change in interest rates, repurchase,
settlement or forgiveness of Existing Obligations; conversion of Existing Obligations into equity;
an exchange offer involving
involving thethe issuance
for Existing
Existing Obligations;Obligations;
issuance of
of new
new securities
sectaities in exchange for
the issuance of new securities, sale or disposition of assets, sale of debt or equity securities or
signing this
this Agreement,
other interests or other similar transaction or series
aeries of
of transactions.
transactions. By
By. signing
we hereby accept our appointment as investment banker under the terms
terms hereof.
hereof
Lrawd
taard Freres
FlaresSi
Co.LLC
'a (:e
31T
$0 fnrki“oller
ritMler P4011
cow yosk N Iii112
0$'2
t;evekw,
i2.311:A42)::2:taagg-r::C;1511 .15;';::;g%1MCWKi-V2 P:11114A;V!$2-1;:-eS:'.1112.
1;:f71
3
Description
Descriptionof
ofServices:
Services:
1,
1. Lazard agrees, in consideration of the compensation provided in Section 2 below, to
perform such of the following investment banking services as the Company may reasonably
request, including:
(a)
Reviewing and analyzing the Company's business, operations and
financial projections;
())
in light of its projected
Evaluating the Company's potential debt capacity itt
projeeted
cash flows;
(c)
Assisting in the determination of a capital structure for the Company;
(d)
Assisting in the determination of na range of values for the Company on a
going concern basis;
(e)
Advising the Company on tactics and strategies
strategies for
for negotiating
negotiating with the
Stakeholders;
(I)
Rendering financial advice to the Company and participating in meetings
or
or negotiations
negotiations with
with the
the Stakeholders
Stakeholders and/or rating agencies or other
appropriate parties in connection with any Restructuring;
(g)
Advising the Company on the timing, nature, and terms of new securities,
other consideration or other inducements to be offered pursuant to any
Restructuring;
(h)
Advising and assisting the Company in evaluating any potential
Financing' transaction by the Company, and, subject to Lazard's
agreement so to act and, if requested by Lazard, to execution of
or
contacting potential
appropriate agreements, on behalf or the
the Company,
Company contacting
sources of capital as the Company may designate and assisting the
Company in implementing such Financing;
(i)
Assisting the Company in preparing documentation within our area of
expertise that is
Is required
required in
in connection
connectionwith
with any Restructuring;
(j)
0)
Assisting the
the Company.
Company in identifying and evaluating candidates for any
Assisting
hi connection with
potential Sale Transaction, advising the Company in
negotiations amd
and aiding
Transactions;
aiding in
in the
the consummation
consummation of any Sale Tratisantionl;
nubile or private issonneo,
aria,
series of
ef traneuriions
As nevri
used iu
the terns
term "ltinoncing"
"Itinuneitie Ritual
trentactions involving the piddle
issuance, side,
iiiOils
Ihis Agreement,
Agri:taunt., the
retunl any
nay ininsurifou
trartsvcden or stoles
or
placentent of
of newly...issued
newlyossued (including
held in
in tteasury)
(tummy) equity,
oquity•iinkeelorordebt
dad seenritied, instruments,
Manimmill, rn
or oblIgigions
obilgrulonv of the
tr rdocerneni
fincludirtri stemiaeS
seem-Mel held
quit?, equity-110M
hay delitoPin-tiossesslott
dehmr-inlosscslion blunting
or or
exit
Code.'regally
'equity
Company, Including tiny
Emmet%
arklitinneing
financinginIncennectlon
connectionoddi
widea case
a raseunder
underMu
theBurilrroptcy
theigniptey Coda.
dintinclie sludluican
Finnriningthat
thatnik0.0
takes the form
form ofermily,
°tenuity, hybrid
hybrid or
nrpreferred
preferredsecurities.
laall100.
shnlinuntn any l'intoming
rime-wine
of
rtoreenetrans
involving
(e.)
ire
acquisition,
merger;
As used
in this
this Agnrettient,
Agreciiitni, I1ie
"Sole Traiwnetiun"
imytraninicnan
transaction rtt
OrSerit4,
series trinisnetions involving to) nn [requisition, merger,
end iii
the term "Sulu
"itrinstiertun'Means
Maas cry
ooristslittotion,(Ir
Ortuber
otherhustnests
husirawsemnitinutinn
combinationpm:somata
pursuant lawhich
whichthe
theLiminess
businessM
at nssctx
tarots of
enosolifintion,
of the Company
Compuny we,
me, directly
directly or
ur htdireoily,
irrdiraatiy. Ontobined
entobirrod with
another
thethe
angels
fittni, directly
or or
indirectly,
by try
tt buyer
or buyers
(which
hamluny
shallshall
Include
It "(1110155"
persons we
la Inerinett
14 Reit io
in
smothercoinpuny;
eninprinv.OS
(h).
netiolshion,
direelly
indirectly.
it buyeror bayet
(which
include.
'groan" orofpersons
cupnondiloutirm
goinhillatimi thereof
rhercor constituting
cons-Wiling no
Station
or of
thethe
SecuritieS
lischunge
ActAct
of or
1934.
at as
amended),
Scotian IS(i)
1:341)
Seetniiiv,4
azettonge
153i,
mended),ofofequity
equityintenuas
intonnttvorornotions,
uniitm,ororcoy
compny (txr.w.
t he,Company
imiturgy orals:
taw Own
ine then
sating power of
(exceptus
is
majority
nonoutettualtrol
ootsitoollog dock
mockofofthe
theCompany
Companyorporsessing
orpcsiseenigaaMajority
mapotty of Me
then oragnialing
ourninding voling
or she
boyer
use OrOrmrvirrivittnit,
or or
indirectly,
by-abye
May
occur with earnan
cancel Stakeholders as
al 0a MAD
gestructurIngh(e)
(c)nny
any(der
otherpi:sellpinelmse
nerprishloa.directly
directly
indirectly,
hum dr
linty (weal
rottit ofofnnRestructuring);
buyeta
oldiguiliconi
;mots,
steirdtica
or
other
eeriest
of
Ma
Company
or
(d)
the
fornuition
of
olefin
Yernara
or
ptioncrship
with
the
Comity
of
sigoilleani
;mate,
steruilles
or
other
infOroste
of
lie
Cumpuny
(in
the
lbnnotion
of
njoin)
Yciinitt
errparincmhip
with,
the
Compaoy
buyels.
or lin
nitro:on
thirdgutty.
PortY. For
for purposes hereof,
he t ilt
or diract
rpost ol'with-clingn
ler of
direct toveriment
trIVeshrzeniininthe
theCompany
Companyfurforthe
thepanarricse
ortaibcriiiR itloom
tutigi rcr
imotoYiininthe
lireCompany
annininY toIa an third
any sale
senorities(iteildlintsegitrales
(atehalitig.etrrith kid
Safe Transaction.
aloft
oddof
of newly
newly Naomi
eidodaseeddlies
heldLIlitteemary)
lalOanly)shah
shallbebedecreed
declareda aFinancing
Financingandnot
'indentaeSele
Toinstiction,
3:2-1155,
,I=Riftgifd
(k)
Attending meetings of the Board of Directors of Pacific Exploration with
respect to matters on which we have been engaged to advise hereunder;
(I)
(1)
Providing testimony, as necessary, with respect to matters on which we
have been engaged to advise hereunder in any proceeding before the
relevant bankruptcy court or other insolvency authority (the "Bankruptcy
Court"); and
(m)
advice.
Providing the Company with other financial restructuring advice,
Fees'
Fees:
2. As consideration for the services to be provided, the Company shall pay Lazard the
following fees:
(a)
A monthly fee of US$150,000 (the "Monthly Fee"), payable on execution
of this Agreement and on the 1st day of each month thereafter until the
earlier of the completion of the Restructuring or the termination of
Lazard's
engagement pursuant
pursuant to
to Section
Section 10.
10. $50,000 of each Monthly
Lazares engagement
Fee paid to Lazard shall be credited (without duplication) against any
Restructuring Fee, Sale Transaction Fee, or Financing Fee payable;
provided, however, that in the event of Bankruptcy Proceedings, such
credit shall -apply
apply only
only to
to the
the extent
extent that
that such
such fees
fees are approved in their
entirety by the
Court, if
if applicable.
applicable. Notwithstanding the
the Bankruptcy
Bankuptcy Court,
foregoing, the Company may suspend the Monthly Fee for any month
during which services are not anticipated to be provided by Lazard by
providing notice to Lazard on or prior to the in
Pt day of such month, with
are requested
requested by
the Monthly Fee to be resumed at such time as services are
Company
the Company,
(b)
US$1,500,000 (the "Amendment Fee"), payable upon
An additional fee of LIS$1,500,000
each transaction which takes the form of substantially only the execution
of any material amendment or material waiver or material consent to any
Company credit facility (an "Amendment"); one-half of any such payment
be credited (without duplication) against any fee payable pursuant to
will he
clause (c), (d) or (e); provided, however, that if more than one Company
Amendment at
at the
the same time, the
credit facility
facility is
is subject
subjectto
to an
on Amendment
Amendment Fee shall only be payable once for any such simultaneous
amendments, waivers, or consents; provided, further, that for any
Amendment Pee
Fee in connection with a waiver of 90 days or fewer; the
Amendment Fee shall be equal to $400,000 for each 30 day period (prorated for periods of less than 30 days). For the avoidance of any doubt, it
is agreed that Lazard
Dmitri is entitled to be paid the foregoing fee with respect to
the waivers executed by the Company and described in the Company's
press release of December 28, 2015,
(C)
(c)
A fee, payable upon the consummation of a Restructuring, equal to 0.4%
value of
of the
the Existing
Existing Obligations
Obligations involved.
involved in such
of the aggregate face value
Restructuring (the "Restructuring Fee"); provided, however, that if a
Restructuring is to be completed through
through.aa"pre-packaged"
"prepackaged" or "prearranged" plan of reorganization, the Restructuring Fee shall be earned
5
and shall be payable upon the earlier of (1) execution of definitive
(ii) delivery of binding consents
agreements with respect to such plan and (li)
to such plan by a sufficient number of creditors and/or bondholders, as the
case
ease may be, to bind the creditors or bondholders, as the case may be to
/briber, that in the event that Lazard is paid a fee in
the plan; provided, further,
plan and a plan of
connection with a "pre-packaged" or "pre-arranged"
'pre-arranged" plan
reorganization is not consummated, Lazard shall return such fee to the
Company,
Company.
(d)
If; whether in connection with the consummation of a Restrueturing
Restructuring or
If,
otherwise, the Company consummates a Sale Transaction (other than an
immaterial transaction consummated without any significant assistance of
constumnation thereof Lavern
L" and shall be paid a fee
Lazard), upon consummation
fec (the "Sale
Transaction Fee") equal to the greater of 0.8% of the Aggregate
Consideration; provided, however, that the Sale
shall not
sale Transaction Fee shalt
apply to any Sale Transaction involving substantially only (i) the sale of
any equity interest in Pacific Midstream Holding Corp.
Corp, or Pacific
Midstream Limited, (ii) the sale of any equity interest in Pacinfre
Pacinfra Holding
Ltd or
Ltd,
or Sociedad
Socied adPortuaria
PortuariaPuerto
PuertoBahia
Bahia S.A.,
S.A,, as
as applicable,
applicable, or (iii) the
S.A.S. or its -underlying
sale of Agrocascada S,A.S.
underlying assets and of Promotora
Limos) unless the Company and Lazard mutually agree
Agricola de las Llano*
that Lazard will provide services in commotion
connection therewith, and the parties
agree, in writing, that consummation of such transactions will entitle
Lazard to a Sale Transaction Fee in and amount to be agreed upon in good
faith and consistent with the compensation customarily received by
similar standing
standing acting
acting in
in shnilar.
similar situations,
investment bankers of similar
(e)
(d)
A fee, payable upon consummation of any Financing, equal 2% of the
aggregate proceeds of any Equity Financing and 1% of the aggregate
proceeds of any other Financing (the "Financing Fee");
provided, however, that to the extent that any Equity Financing or other
Financing (including debtor in possession .financing) Is
is provided by a
current holder of 10% or more of the outstanding equity interests of
Pacific Exploration, and (i) such holder agrees in writing to provide such
Financing prior
prior to
to the
the tithe
the that
thatLazard
Lazardcontacts
contacts any
any other
other potential
potential
Financing providers, then no fee will he payable with respect to the
proceeds provided by
by such
such current
current holder
holder oror (ii)
(ii) such holder agrees in
writing to provide such Financing idler
after the tithe that Lavern
Lazard has contacted
any other potential Financing providers, the Financing Fee payable with
respect to the proceeds provided by such current holder shall be 50% of
the foregoing percentages (i.e.
(i.e, 1% for Equity Financing and 0.5% for
other
other.Financings%
Finaneings); and, provided, further, that for any proposed "debtor-inpossession" Financing, the Financing Fee shall be earned and shall be
payable upon the execution of a definitive agreement with respect to the
Financing; and, provided, further, that to the extent that Lazard is paid a
fee in connection
Financing and
connection with
withaaproposed
proposed'debtorAtt-possession"
"debtort-possession" Financing
the Bankruptcy Court does not provide any required approval with respect
thereto, Lazard
Lazard shall
shall return
return such
suchfee
feeto.
to the
the Company,
Company, One-half
One-half of any
Financing Fee(s) paid (and not returned pursuant to the preceding
,-t,A:1;;'AiNiKWaM43 rz :
;fErt:0.;:-V= V.1 n*::1-i'Cq'274 .11
't Kg
'4,-%-55f
I
6
sentence) shall be credited (without duplication) against any Restructuring
Fee or Sale Transaction Fee subsequently payable,
payable.
(f)
(1)
For the avoidance,
avoidance of
of any
any doubt,
doubt, more than one fee may be payable
pursuant to each of clauses (b), (e),
(c), (d) and (e) above.
(g)
In addition to any fees that may be payable to Lazard and, regardless of
whether any transaction occurs, the Company shall promptly reimburse
Lazard for all.
all reasonable
reasonable expenses
expenses incurred by Tazard
Lazard (including travel data processing
processing and
and e,ornmunications
communications charges, courier
and lodging, data
services and other expenditures) and the reasonable fees and expenses of
counsel, if any, retained by Lazard; provided, however, that reimbursable
expenses shall not exceed U.S.$100,000 without the consent of the
Company (not to be unreasonably withheld).
(h)
As part of the compensation payable to Lazard hereunder, simultaneously
herewith the Company is entering into an indemnification agreement with
Lazard, effective as of the commencement of our services (the
"Indemnification
`Insietnnifteation Letter"). The Company agrees that the Indemnification
Letter applies to our engagement hereunder and that all of the obligations
incorporated herein
herein and.
and =are
joint
jointand
andseveral
severalobligations
obligations of
of the
the
therein are incorporated
Company. For the avoidance of any doubt, it is agreed that the expense
limitation set forth in clause (g) above shall not apply to the
Indemnification Letter.
(i)
(I)
All amounts
ammats.referenced
referenced hereunder
hereunder reflect
reflect United
United States
States currency and shall
be paid promptly in cash after such amounts accrue hereunder. If
necessary for purposes of calculating any fee or payment hereunder, any
currency other than US dollars will be converted to OS
US dollars based on
recent closing exchange rain
the most regent
rate with respect to such currency and
the US dollar (as published by the Federal Reserve Bank of New York, or,
consummation of
if not available, the prevailing market rate) prior to the consturunation
the relevant transaction. All sums- payable by the Company under this
Agreement shall be paid free and clear of all deductions or withholdings
unless the deduction or withholding
withholding is
is required
required by
by law,.
law, in which event the
Company shall pay such additional amount as shall be required
requited to ensure
that the net amount received by us hereunder will equal the full amount
which would have been received by us had no such deduction or
withholding been required to be made. All sums quoted are exclusive of
any goods and services, value added or similar tax, and the Company will
pay to us any additional
additional goods
goods and
and services,
services,value
valueadded
added(ior
similar tax, if
.r similar
applicable, chargeable in respect of payments made to us or otherwise
chargeable in respect of this Agreement or the Indemnification Letter.
iteteniton
Retentionin
inChapter
Chapter11
11Proceedings:
Proceedinz:
3. In the event of the commencement
conuneneement of Bankruptcy Proceedings, the Company agrees
that it will use
use hest
best -efforts,
efforts totoobtain,prompt
authorizationfrom
fromthe
theBankruptcy
Bankruptcy Court
Court to retain
obtain...promptauthorization
an the terms and conditions set forth in this Agreement under the provisions of Section
Lazard on
328(a) of the U.S. Bankruptcy Code, with the benefit of a court-ordered charge with appropriate
77
priority to secure amounts
amounts payable
payable to
to Lazard
Lazardin
inCanada,
Canada,or
orotherother similar
similar provisions.
provisions in another
jurisdiction, Subject to being so retained, Lazard agrees that during the pendency of any such
proceedings, it shall continue to perform its obligations under this Agreement and that it shall file
expanses payable to it
interim and final applications, as necessary, for allowance of the fees and expenses
under the terms of this Agreement pursuant to rules and order of the relevant Bankruptcy Coact.
Court.
The Company shall supply Lazard with a draft of the application and proposed retention order
authorizing Lazard's retention sufficiently in advance of the filing of such application and
Lazard and
and its
its counsel
counsel to
to review
review and
andCOT11111Cilt
comment thereon.
thereon. Lazard
Lazard shall be
proposed order to enable Lazard
under no obligation to provide any services under this agreement in the event that the Company
becomes
becomes,aadebtor
debtor in
in Bankruptcy
Bankruptcy Proceedings
Proceedings in
in the
the US
US unless
unless Lazard's retention under the terms
of this Agreement is approved under
under section
section 328(a)
328(a) of
of The
the Bankruptcy
Bankruptcy Code by final order of the
Bankruptcy Court, which.
order is
is acceptable
acceptable to Lszard.
Lazard. In
In the
the event of Bankruptcy Proceedings
which order
in the US, the retention application
application shall
shall note
not that
thatin
inso
soagreeing
agreeing to
to seek
seek Lazard's
Lazard's retention
retention under
Section 328(a)
the Company
Company acknowledges
acknowledges that it believes that
328(a) of
of the
the Bankruptcy
nankroptcy Code,
code, the
Lazard's general restructuring experience and expertise, its knowledge of the capital markets and
its merger and acquisition capabilities will inure to the benefit of the Company in pursuing any
Amendment, Restructuring, Sale Transaction or Financing, that the value to the Company of
Lazard's services hereunder derives in substantial part from that expertise and experience and
that, accordingly, the structure and amount of the deferred fees,
fees, including
including the
the Restructuring
Restructuring Yee,
Fee,
Amendment Fee, Salo
Sale Transaction Fee and Financing Fee is reasonable regardless of the number
of hours to be expended by Lazard's professionals in the performance of the services to be
provided hereunder, and that the deferred fees shall not be considered to be "bonuses" or fee
enhancements under applicable law.
Other:
4. No fee payable to any third party, by the Company or any other person or entity, shall
reduce or otherwise affect any fee payable hereunder to us.
5, The
TheCompany
Companywill
willfurnish
furnish or
or cause
cause to
to be
be famished
furnished to
to Lazard
Lazard such
such current and
historical financial information and other information regarding the business of the Company as
Lazard may request in connection with this engagement. The Company represents and warrants
to Lazard that all of the foregoing information will be accurate arid complete at the time it is
furnished, and agrees to keep Lazard advised of all developments materially affecting the
Company or its financial position. In performing Its
its services pursuant to this Agreement, Lazard
shall be entitled to rely upon informatirin
information furnished to it by the Company or any third party and
information that is publicly available, may assume the accuracy and
end completeness of such
information and shall not assume any responsibility for independent verification of any such
information. Lazard will not, as part of its engagement, undertake any independent valuation or
appraisal of any of the assets or liabilities of
of the
the Company
Company or
or of
of any
any third
third party.
party
6.
inperforming
performing its
its services
services pursuant
pursuant to
to this
this Agreement,
Agreement, Lazard is not assuming any
6, In
responsibility for the decision of the Company
Company Or
or any other party to pursue (or not to pursue) any
business strategy or to effect (or not to effect) any Amendment, Restructuring, Sale Transaction,
Financing or other transaction. Lazard shall not have any obligation or responsibility to provide
"crisis management" for or business consultant services to the Company, and shall have no
responsibility for designing
designing or
or implementing
implementing operating,
operating,organizational,organizational, administrative,
acintinistrative,cash_
cash
management or liquidity improvements; nor shall Lazard be responsible for providing or deemed
to have provided any tax, accounting, actuarial, legal or other specialist advice.
ne&alinion:nr.noamnzn
o,n;nnan,onktannt.znnnn- ( ;
7. It is understood and
and agreed
agreed that
that nothing
nothing contained
contained in.
in this Agreement shall constitute
commitment by
by La
Lazard
or any
any of
of our.
our affiliates to underwrite, place or
an express or implied commitment
and or
securities in
in aa financing
financing or
or otherwise,
otherwise, which
which commitment
commitmentshall
shallonly
onlybe
beset
se forth in
purchase any securities
a separate underwriting, placement agency or purchase agreement, as applicable, relating to the
financing.
8. Simultaneously herewith, the parties hereto are entering into the Indemnification
The Indemnification
Letter. 'Inie
Indemnification Letter
Letter shall survive any termination or expiration of our engagement
hereunder.
9. In order to coordinate our efforts on behalf of the Company during the period of our
Company will
will promptly
promptly inform.
inform Lazard of any discussions,
engagement hereunder, the Company
negotiations, or inquiries regarding a potential transaction, including any such discussions or
inquiries that have occurred during the six month period prior to the date of this Agreement. In
the event that Lazard receives an inquiry concerning any transaction, we will promptly inform
the Company of such inquiry.
10. Our engagement hereunder will automatically expire on consummation of a
Restructuring involving all or substantially all of the Existing Obligations and may be earlier
terminated by Pacific Exploration or us at any time without liability or continuing obligation to
the Company
Cempany or us following any termination or expiration, except that (a) following any
termination or expiration of our
our engagement
engagement we
we shall
shall remain.
remain entitled to any fees accrued
pursuant to Section 2 but not yet paid prior to such termination or expiration, as the case may be,
and to reimbursement of expenses incurred prior to such termination or expiration, as the case
ease
may he,
be, and (b) in the case of termination by Pacific Exploration or any expiration of our
engagement, we shall remain entitled to full
full payment
payment of
of all
all fees
fees contemplated
contemplated by
by Section
Section 2.
2
hereof in respect of any Amendment, any Restructuring, any Sale Transaction and any Financing
announced or resulting from negotiations occurring during the period from the date hereof until
one year following such termination or expiration, us
be.
as the case may he,
Lazard has
has been
been retained
retained .under
under this Agreement as an independent contractor to
11,
11. Lazard
Pacific Exploration, and nothing herein is intended
intended to
to confer
confer any
any rights
rights or
or remedies
remedies as
as against
againg
Lazard upon any person (including the management, Board of Directors, employees,
securityholders and creditors of the Company) other than Pacific Exploration. In addition, it is
understood and
Understood
and agreed
agreed that
that this
this Agreement
Agreement and
and our engagement do not create a fiduciary
relationship between Lazard and any person, including the Company or its management, Board
of Directors, employees,
employees, securityholders
securityholdersand
andcreditors..
creditors. No
No one, other than senior management or
the Board of Directors of Pacific Exploration (in their capacities as such) is authorized to rely
upon the Company's engagement of Lazard or any statements, advice, opinions or conduct by
Lazard. Without limiting the foregoing,
tbregoing, any advice, written or oral, rendered in the course of
the Company's engagement of Lazard are solely for the purpose of assisting senior management
or the Board of Directors of Pacific Exploration (in their capacities as such) in evaluating the
Sale Transaction
Transaction or
or Financing
Financing and
and does
does not
not constitute
constitute a
relevant Amendment, Restructuring, Sale
recommendation to any stakeholder of the Company that such stakeholder might or should take
in connection 'with
any Amendment,
Amendment, Restructuring,
Restructuring, Sale Transaction or Financing. The
with any
Company agrees that, notwithstanding any termination or expiration of our engagement, any
advice, written or oral, rendered by Lazard and the terms of our engagement hereunder may not
he
publicly or
or made
made available
available .to..third
to third parties
be disclosed publicly
parties without
without the
the prior
prior written
written consent of _
Lazard
Lazard.Notwithstanding
Notwithstanding the
the foregoing,
foregoing, nothing
nothing herein
herein shall prohibit the Company from
lira
tePereeteeeeeel
eeeeeeer- weeteKeee.:Peeteeet
disclosing to any and all persons the tax treatment and tax structure of any transaction and the
portions of any materials that relate to such tax treatment or tax structure.
12, hi
In connection
Connectionwith
withthe
the services
services to
to be
be provided
provided hereunder,
hereunder, Lazard may employ the
services of its affiliates (including, without limitation, MBA Lazard Holding S.A. and MBA
Lazard
La7crd Holdings Spain S.A.
S,A. and their subsidiaries) and may share with any such entity any
information concerning the Company, provided that Lazard and such entities shall hold any nonpublic information confidential in accordance with their respective customary policies relating to
nonpublic information. Any such entity
entity so.
so employed
employed shall
shall be entitled to all of the benefits
afforded to Lazard hereunder and under the Indemnification Letter and shall be entitled to be
reimbursed
reimbursed for
for its
its expenses
expenseson
onthe
the same
satirebasis
basisas
asLazard.
Lazard.in
inaddition,
addition, Lazard
Lazard may share a
portion of the fees payable to Lazard hereunder with any such entity or, at the written request of
Company may
may pay
pay aa portion
p'ortionof
ofany
any such
such fees
fees to
to such
such entities.
Lazard, The
the Company
13, The provisions
pro-visionshereof
hereofshall
shallinure
inureto
tothe
the benefit
benefit of
of and
and be
be binding
binding upon the successors
and assigns of the Company, Lazard and any other person entitled to indemnity under the
Indemnification
Letter, The Company's obligations pursuant to this Agreement shall be joint
indemnification Letter.
and severaL This Agreement and the related Indemnification Letter embody the entire
agreement and understanding among the parties hereto and supersede any and all prior
agreements, arrangements, and understandings, related to the matters provided for herein. No
waiver, amendment or other modification of this agreement shall be effective unless in writing
and signed by cacti
each party to be bound thereby,
thereby.
14. This Agreement and any Mahn
claim related directly or indirectly to this Agreement
(including any claim concerning advice provided pursuant to our engagement hereunder) shall be
governed by and construed in accordance with the laws of the State of New York without regard
to the principle of conflicts of law, No such claim shall be commenced, prosecuted or continued
in any forum other than the courts of the State of New York located in the City and County of
New York or the United States District Court for the Southern District of New York, and each of
courts, The Company hereby waives on
the parties hereby submits to the jurisdiction of such courts.
behalf of itself and its successors and assigns any and all right to argue that the choice of fortnn
forum
provision is or has become unreasonable in any legal proceeding.
proceeding, The Company waives all right
to trial by jury in any action,
action, proceeding
proceeding or:
or counterclaim (whether based
based elpon
upon contract,
eontract, tort or
otherwise) related to or arising out of this Agreement or the engagement of Lazard pursuant to,
or the performance by Lazard of the services contemplated by, this Agreement The Company
shall at all times maintain an agent for service of process
process and
and any
any other
other dobuments
documents in
proceedings in the State of New York or any other proceedings in connection with this letter
agreement. Such agent
agent shall
shall be
be CT
CT Corp.
Corp.of
of111
I it 8th Avenue, NeW
New York,
York, NY
NY 10011
10011 and any
writ, judgment or other notice of legal process shall be sufficiently served on the Company if
delivered to such agent at its address for the time being, The Company irrevocably undertakes
not to revoke the authority of the above agent mid,
and, if for any reason we request you to do so, the
Company shall promptly appoint another such agent with an address in the State of New York
and advise us of such
suoh appointment. If following such a request the Company fails
falls to appoint
another agent, we shall be entitled to appoint one on the Company's behalf.
10
If the foregoing Agreement is in accordance with your understanding of the terms of our
engagement, please sign and return to us the enclosed duplicate hereof
Very truly yours,
LAZARD
FRERES &
& CO.
CO. LLC
LLC
LAZA
D FRERES
Ya
By:
By:• ••
)
Ari Lefkovits
Ark
Managing Director
Dircadr
LAZARD ASESORES FINANCIEROS, S.A.
By:
Pasqutn
Pedro Pasqum
Managing.Director
irector
Managing
AGREED TO AND ACCEPTED
as of the date first
above written:
PACIFIC EXPLORATION &
PRODUCTION CORP.,
'PACIFIC
&PRODUCTION
on behalf of itself and its cobtroiled
controlled subsidiaries
By
wint_
(V
-Ile
/.
.a.tYr.A.FAM".• •
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
Lazard Asesores Financieros, S.A.
Edificio Fortuny
c/ Rafael Calve 39A
28010 Madrid
As of April 18, 2016
Pacific Exploration & Production Corp.
333 Bay Street, Suite 1100
Toronto, Ontario, M5I1 2R2
Canada
Attention:
Ronald Pantin
Chief Executive Officer
Dear Ladies and Gentlemen:
Reference is made to the letter agreement dated as of December 17, 2015 (the
"Engagement Agreement") between Lazard Freres & Co. LLC and Lazard Asesores Financieros,
S.A. (together, "Lazard") and Pacific Exploration & Production Corp. ("Pacific
Exploration") and its controlled subsidiaries (collectively with any entity formed or used for the
purposes set forth herein, the "Company") pursuant to which Lazard was engaged as the
Company's investment banker. This letter agreement (this "Letter Agreement") amends the
Engagement Agreement upon the terms and subject to the conditions hereinafter set forth.
Capitalized terms used but not defined herein have the meanings given to such terms in the
Engagement Agreement.
1.
In consideration of certain commitments made by various parties under the Restructuring
Support Agreement, dated as of April 20, 2016, entered into by the Company, certain
Consenting Creditors (as defined therein) and The Catalyst Capital Group Inc. (the
"Restructuring Support Agreement"), and as consideration for the services that have been
and are to be provided from and after the date of this Letter Agreement, the Company
shall pay Lazard the following fees in lieu of the fees set forth in subsections (a)—(e) of
Section 2 the Engagement Agreement:
(a)
25227691
A monthly fee of US$150,000 (the "Monthly Fee"), payable on the 1st day of
each month until the earlier of the issuance of a court order (the "DIP
Approval Order"), which shall be sought by the Company as part of or
simultaneously with the Initial CCAA Order (as defined in the Restructuring
Support Agreement), approving a debtor-in-possession financing facility (the
"DIP Financing") or the termination of Lazard's engagement pursuant to
Section 10 of the Engagement Agreement. Upon issuance of the DIP
Approval Order (the date of such issuance, the "DIP Approval Date"), the
amount of the Monthly Fee will increase to US$250,000, and will be payable
I
on the 1st day of each month until the earlier of the completion of the
Restructuring (as defined in the Engagement Letter) or the termination of
Lazard's
Lazard' sengagement
engagement pursuant
pursuant to
to Section
Section 10
10 of
of the
the Engagement
Engagement Agreement.
Each Monthly Fee paid to Lazard subsequent to the DIP Approval Date shall
be credited (without duplication) against any Closing Fee (as defined below)
payable; provided, however, that in the event of Bankruptcy Proceedings (as
defined in the Engagement Letter) or Canadian Proceedings (as defined in the
Restructuring Support Agreement), such credit shall apply only to the extent
that such fees are approved in their entirety by the Bankruptcy Court (as
defined in the Engagement Letter) or the Canadian Court (as defined in the
Restructuring Support Agreement), respectively and if applicable. No portion
of any fees paid prior to the date of this Letter Agreement shall be credited
against the Restructuring Fee or the Closing Fee (each as defined below).
Notwithstanding the foregoing, the Company may suspend the Monthly Fee
for any month during which services are not anticipated to be provided by
Lazard by providing notice to Lazard on or prior to the 1st day of such month,
with the Monthly Fee to be resumed at such time as services are requested by
the Company.
25227691
(b)
The Amendment Fee, as described in Section 2(b) of the Engagement Letter
(which will continue to be applicable to all subsequent amendments).
(c)
A fee equal to US$12,000,000 (the "Restructuring Fee"), payable upon the
earlier of: (i) immediately following the purchase
purchase of
of the
the DIP
DIP Notes
Notes {as
(as
defined DIP/Exit Term Sheet (as defined in the Restructuring Support
Agreement); (ii) the DIP Approval Order
Order becoming
becoming aa final
final order;
order; or
or {iii)
(iii)
June 15, 2016.
(d)
A fee, equal to US$6,000,000 {the
(the "Closing Fee"), payable upon the
consummation of a Restructuring (as defined in the Engagement Letter) or
Sale Transaction (as defined in the Engagement Letter) that is voted for or
otherwise supported by the requisite amount of creditors necessary in
order for the Restructuring or Sale Transaction to be approved under the
Insolvency Laws (as defined in the Restructuring Support Agreement).
(e)
An additional fee (the "Additional Fee"), earned upon the consummation of a
Restructuring (as defined in the Engagement Letter) or Sale Transaction (as
defined in the Engagement Letter) that is voted for or otherwise supported by
the requisite amount of creditors necessary in order for the Restructuring or
Sale Transaction to be approved under the Insolvency Laws (as defined in the
Restructuring Support Agreement) and payable within 45 days after such
consummation. The Additional Fee shall be equal to the recovery that an
unsecured creditor of the Company with a claim of US$2,000,000 would
receive under the Restructuring or Sale Transaction. In the event that such
consideration is in the form of
of seeurities_or
securities or other interests in the Company,
the recovery value shall be equal to the 30-day volume-weighted average
trading price of such security or interest, as the case may be. In the event that
there is not a readily available, reliable quotation available for such security
or interest, as the case
ease may be, such recovery value shall be agreed by Lazard
and the Company in good faith.
2
!ifa.T47,02=g--r L...!:245,1:4%[
I
• •,'42;;',
i33
2.
The Administration Charge to be created under the Initial CCAA Order (as defined in the
Restructuring Support Agreement) shall apply to the payment of all fees and expenses
provided for by the Engagement Letter as amended by this Letter Agreement.
3.
For the avoidance of doubt, Section 10(b) of the Engagement Agreement shall apply to the
fees payable under this Letter Agreement.
4.
The Indemnification Letter dated December 17, 2015 entered into between the Company and
Lazard in connection with the Engagement Agreement remains in full force
farce and effect and
will survive any termination or expiration of the Engagement Agreement and/or this Letter
Agreement.
5.
5,
Except as expressly amended hereby, the Engagement Agreement shall remain in full force
and effect in accordance with its terms. This Letter Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which together shall
constitute
constitute one
oneagreement.
agreement. •
6.
6.
This Letter Agreement shall be governed by the laws of the State of New York.
If the foregoing Letter Agreement is in accordance with your understanding of the terms
of our engagement, please sign and return to us the enclosed duplicate hereof.
[remainder of page intentionally left blank]
25227691
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11)
14
Very truly
Very
truly yours,,
LAZARD FRERES & CO. LLC
ry
Ari Leficovitg.
Lefkovi
Managing Director
ASESORES FINANCIEROS,
PlNANCIEROS,S.A.
SA.
LAZARD ASESORES
/s/ Pedro Pasouin
Pasquin
By: is/
Pedro Pasquin
Managing Director
AGREED TO AND ACCEPTED
as of the date first above written:
&PRODUCTION
PRODUCTION CORP.,
PACIFIC LORATION
L RATION &
on behalf it eh and its controlled subsidiaries
7f
/ I(
10 1
By
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•,,
15
This is Exhibit "C-2" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS: \ 65405557 41
lb
REDACTED
This is Exhibit "C-3" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CANDMS: \65405557\1
la
REDACTED
•
• I
-C;
57--?$-::e.-" • • ',LI
1
,
This is Exhibit "C-4" referred to in the
Affidavit of Peter
Peter Volk
sworn before me, this 27th day
2016
of April,
April, 2016
A Commissioner for taking Affidavits
CAN
DMS: \65405557\1
CAR_DMS:16540565711
20
REDACTED
.timnmimu1
2
This
"C-5" referred to in the
This is
is Exhibit
lcxhibit "C-5"
Affidavit of Peter Volk
sworn before me, this 27th day
of April,
April, 2016
2016
A
for taking
taking Affidavits
Affidavits
A Commissioner
Commissioner for
CAN_DMS:
CAN_DIVIS:N65405557
16540555711
\1
REDACTED VERSION APRIL 26, 2016 FINAL
PACIFIC EXPLORATION & PRODUCTION CORPORATION
REPORT OF THE INDEPENDENT COMMITTEE
TO
THE BOARD OF DIRECTORS
APRIL 11, 2016
LEGAL 1:39238558.3
PACIFIC EXPLORATION & PRODUCTION CORPORATION
(the "Corporation")
REPORT OF THE INDEPENDENT COMMITTEE
TO THE
BOARD OF DIRECTORS
Introduction
The Independent Committee of the Board of Directors of the Corporation (the "Independent
Committee") presents the following report to the Board of Directors of the Corporation (the
"Board") in respect of the Catalyst/Creditor Proposal (as defined below). This Report provides
an overview of the process adopted by the Independent Committee in its exploration and
consideration of strategic alternatives available to the Corporation to maximize value and ensure
a viable capital structure going forward in light of the current financial condition of the
Corporation, including its evaluation of the Catalyst/Creditor Proposal, sets out the background
to the Catalyst/Creditor Proposal, refers to the relevant factors considered by the Independent
Committee, and provides a recommendation to the Board in respect of the Catalyst/Creditor
Proposal.
Advisors
The following advisors have been engaged by the Corporation, the Independent Committee, the
ad hoc committee (the "Ad Hoc Committee") of certain holders (the "Noteholders") of the
Corporation's 5.375% senior notes due 2019 and 5.625% senior notes due 2025 (the "Notes")
and the steering committee (the "Bank Lenders Steering Committee") formed by the lenders
and counterparties (collectively, the "Bank Lenders") under the following credit agreements: (i)
U.S.$1 billion revolving credit and guaranty agreement with a syndicate of lenders and Bank of
America, N.A. as administrative agent; (ii) U.S.$250 million credit and guaranty agreement with
HSBC Bank USA, N.A., as lender; (iii) U.S.$109 million credit and guaranty agreement with
Bank of America, N.A., as lender; and (iv) U.S.$75 million master credit agreement with Banco
Latino Americano de Comercio Exterior S.A., as lender (collectively, the "Credit Agreements")
in connection with the exploration and consideration of strategic alternatives to date:
Advisor
Role
Lazard Freres & Co. LLC ("Lazard")
Financial advisor to the Corporation
Norton Rose Fulbright Canada LLP ("Norton
Rose")
Canadian legal counsel to the Corporation
Proskauer Rose LLP ("Proskauer")
U.S. legal counsel to the Corporation
Zolfo Cooper
Restructuring advisor to the Corporation
J&A Garrigues, S.L.P. ("Garrigues")
Colombian legal counsel to the Corporation
Oster, Hoskin & Harcourt LLP ("Osler")
Legal counsel to the Independent Committee
LEGAL 1:392385583
-2-
Advisor
Role
UBS Securities Canada Inc. and its affiliates
("UBS")
Financial advisor to the Independent
Committee
Evercore Group LLC (U.S.) ("Evercore")
Financial advisor to the Ad Hoc Committee
Goodmans LLP (Canada) ("Goodmans")
Canadian legal counsel to the Ad Hoc
Committee
Paul, Weiss, Rifkind, Wharton & Garrison LLP
U.S. legal counsel to the Ad Hoc Committee
Cardenas y Cardenas Abogados
Colombian legal advisor to the Ad Hoc
Committee
FTI Consulting ("FTI")
Financial advisor to the Bank Lenders
Steering Committee
Torys LLP
Canadian legal counsel to the Bank Lenders
Steering Committee
Davis Polk & Wardwell LLP
U.S. legal counsel to the Bank Lenders
Steering Committee
Pinz6n Zuleta Abogados
Colombian legal advisor to the Bank Lenders
Steering Committee
PricewaterhouseCoopers
Monitor
Thornton Grout Finnigan
Legal counsel to the Monitor
Background to the Catalyst/Creditor Proposal
Over the course of 2015 and early 2016, the Corporation has operated in a challenging industry
environment characterized by sharp declines in the price of crude oil driven by a perceived
excess supply of oil. This has resulted in negative impacts on the economic wellbeing of oil and
gas companies and oil and gas producing countries around the world. During this period, the
Corporation has sought to address the low price environment by cutting operating costs and
general and administrative expenses, and reducing capital expenditures.
On May 5, 2015, the Corporation entered into exclusive discussions with ALFA, S.A.B. de C.V.
("ALFA") and Harbour Energy Ltd. ("Harbour Energy") in connection with a proposed offer
from ALFA and Harbour Energy whereby all of the issued and outstanding common shares in
the capital of the Corporation (the "Common Shares") not owned by ALFA were to be
purchased for a price of C$6.50 per Common Share, including the assumption of the
Corporation's debt (the "ALFA-Harbour Transaction"). On May 20, 2015, the Corporation,
ALFA and Harbour Energy entered into an arrangement agreement in connection with the
ALFA-Harbour Transaction subject to, among other things, a consent of creditors to waive
certain change of control provisions, which consent was successfully received. On July 8, 2015,
in light of declared intentions by a significant minority shareholder group to dissent, ALFA and
Harbour Energy requested the arrangement agreement be terminated. As a result of the
termination, certain senior note consent solicitations and amendments to the Corporation's senior
LEGAL 139238558.3
-3credit agreements did not become effective as they were conditional on closing of the ALFAHarbour Transaction.
On August 31, 2015, pursuant to a nomination agreement with ALFA and Alejandro Betancourt,
O'Hara Administration Co., S.A. ("O'Hara") and the various shareholders they represent
(collectively, the "O'Hara Group"), the Corporation appointed Messrs. Jose de Jesits Valdez
Simancas, Raul Millares, Alejandro Betancourt and Orlando Alvarado to the Board. In
connection with these appointments Messrs. Miguel Rodriguez, Neil Woodyer, Victor Rivera
and German Efromovich resigned from the Board.
On September 29, 2015, the Corporation obtained waivers (the "September 29 Waivers") from
the Bank Lenders, in respect of the covenant in the Credit Agreements that requires the
Corporation to maintain its consolidated net worth above U.S.$1 billion (the "Net Worth
Covenant"). The September 29 Waivers were scheduled to terminate on December 28, 2015,
allowing the Corporation to enter into discussions with the Bank Lenders and other creditors
during this period.
Beginning on October 1, 2015 and through to the date of this Report, the Corporation's advisors
solicited interest from over 60 parties to determine their interest in making a proposal to the
Corporation. The Corporation also entered into non-disclosure agreements with a broad and
diverse group of prospective investors to enable the Corporation and its advisors to engage in
discussions, and to share confidential information, with third parties as part of the Corporation's
consideration of strategic alternatives. Certain of these non-disclosure agreements are listed in
the following table.
[LIST HAS BEEN REDACTED]
The Corporation, the Independent Committee and their respective advisors carefully considered
various strategic alternatives and the appropriate form of proceedings to implement any potential
transaction in this regard. [REDACTED] Throughout the ensuing process of considering
strategic alternatives, the legal and financial advisors of the Corporation and the Independent
Committee engaged in discussions directly with the Bank Lenders, the Noteholders and the
various bidders, and indirectly through their respective advisors, regarding the appropriate
process and jurisdiction to implement any proposed proceedings.
On December 17, 2015, certain of the Bank Lenders formed the Bank Lenders Steering
Committee to negotiate the extension of the waivers of the Net Worth Covenant and a covenant
in respect of the Corporation's consolidated leverage ratio of 4:50:1:00, which reflects the
permitted gross debt to trailing twelve month adjusted EBITDA (the "Consolidated Leverage
Ratio Covenant").
On December 17, 2015, Lazard was engaged by the Corporation to provide restructuring advice.
Throughout the remainder of December and January 2016, Lazard conducted an analysis on the
financial position of the Corporation in order to develop a proposal for pursuing various strategic
alternatives.
On December 22, 2015, the Corporation received a letter from Goodmans LLP on behalf of the
Ad Hoc Committee describing the make-up of the Ad Hoc Committee and offering to engage
with the Corporation in discussions.
LEGAL_1:39233558 3
-4On December 28, 2015, the Corporation obtained an extension of the September 29 Waivers
previously granted by the Bank Lenders in respect of the Net Worth Covenant as well as a
waiver in respect of the Consolidated Leverage Ratio Covenant, both in respect of the Credit
Agreements (the "December 28 Waivers"). The December 28 Waivers were scheduled to
terminate on February 26, 2016, subject to the satisfaction of certain terms and conditions
(including the Corporation and the Bank Lenders Steering Committee reaching an agreement on
or before January 14, 2016 (the "Liquidity Deadline") with respect to a covenant providing for
the minimum amount of unrestricted cash to be retained by the Corporation through the period
ending February 26, 2016). As consideration for entering into the December 28 Waivers, the
Corporation agreed to certain restrictions on non-ordinary course transactions and agreed to work
with the Bank Lenders and their financial and legal advisors during the waiver period.
On January 13, 2016, EIG, a subsidiary of Harbour Energy, announced tender offers to purchase
all the Corporation's outstanding 7.25% Senior Notes, the 5.125% Senior Notes, the 5.375%
Senior Notes and the 5.625% Senior Notes (collectively, the "Senior Notes") and proposed to
sponsor a restructuring of the Corporation (the "EIG Tender Offer"). The EIG Tender Offer
was originally set to expire on February 10, 2016. Since its initial announcement, EIG has
amended certain terms of the EIG Tender Offer and extended the offer to March 24, 2016. The
early participation offer price for the Senior Notes under the EIG Tender Offer was $0.17 per
$1.00 and $0.12 thereafter. EIG subsequently withdrew its offer on March 25, 2016.
a)
Also on January 13, 2016, the Board met with representatives of Lazard to discuss process and
strategy.
On January 14, 2016, the Corporation elected to utilize the 30 day grace period (the "Grace
Period") pursuant to the indentures governing its 5.625% Senior Notes due January 19, 2025 and
its 5.375% Senior Notes due January 26, 2019 rather than make the interest payments due on
January 19, 2016 and January 26, 2016, respectively, under these notes. Also on January 14,
2016, the Corporation and the Bank Lenders agreed to extend the Liquidity Deadline to January
21, 2016, or such later date as the Corporation and the Bank Lenders might agree.
On January 14, 2016, the Corporation formed the Independent Committee to explore and
consider strategic alternatives, including but not limited to a restructuring and/or recapitalization
of all, or part, of the business and/or capital structure of the Corporation and its subsidiaries. The
Independent Committee was given broad powers to fulfil its mandate, including the ability to
retain independent financial and legal advisors. The full mandate of the Independent Committee
is attached hereto as Exhibit "A". The Independent Committee proceeded to engage Osler as its
legal advisor.
ag)
bt
On January 21, 2016, the Corporation and the Bank Lenders agreed to extend the Liquidity
Deadline to February 4, 2016, or such later date as the Corporation and the Bank Lenders might
agree.
in late January 2016, Zolfo Cooper was engaged by the Corporation to provide restructuring
advice.
On January 26, 2016, the Independent Committee received a letter from Goodmans requesting
that the Ad Hoc Committee be consulted by the Independent Committee throughout the process.
The letter also outlined some of the Ad Hoc Committee's key concerns.
LEGAL 1:39238558.3
-5-
2?
[REDACTED]
Throughout late January and early February 2016, the Corporation, together with its financial
advisors, developed a 5-year business plan and 13-week rolling liquidity forecast for the
business. Based on the analysis of the financial information of the Corporation and certain
assumptions regarding the price of oil and gas, it became evident to the Corporation, the
Independent Committee and their respective advisors that the Corporation will need to raise a
significant amount of cash in the near future in order to successfully continue operations.
Representatives of Lazard met with both the Bank Lenders and the Noteholders to present this
analysis on the cash needs of the Corporation and to discuss alternatives for restructuring.
Also throughout late January and early February 2016, the Corporation and its advisors consulted
with the Superintendencia de Industria y Comercio (the "Superintendencia") in order to
determine the Superintendencia's position in respect of the Corporation's restructuring process.
[REDACTED]
On February 2, 2016, a meeting between the Corporation, the Bank Lenders, the Noteholders and
their respective advisors took place in New York City (the "First Creditor Meeting") in order
to negotiate a forbearance on the Notes to the end of March 2016. [REDACTED]
On February 4, 2016, the Corporation and the Bank Lenders Steering Committee agreed to
extend the Liquidity Deadline to 11:59 p.m. (EST) on February 26, 2016.
On February 18, 2016, the Corporation reached an agreement (the "Noteholder Extension
Agreement") with the Noteholders in respect of its 5.375% senior notes due 2019 (the "2019
Notes") and its 5.625% senior notes due 2025 (the "2025 Notes", and together with the 2019
Notes, the "Notes") pursuant to which the Noteholders agreed, subject to certain terms and
conditions, to forbear from declaring the principal amounts of such Notes (and certain additional
amounts) due and payable (the "Forbearance") until March 31, 2016 (the "Extension Period").
The Forbearance is in respect of the Corporation's decision to not make the scheduled interest
payments under the 2025 Notes due on January 19, 2016 and under the 2019 Notes due on
January 26, 2016 and to utilize the Grace Period pursuant to the applicable indentures (the
"Indentures") governing the Notes to assess strategic alternatives with respect to its capital
structure.
hi addition to the Noteholder Extension Agreement, on February 19, 2016, the Corporation
entered into forbearance agreements (the "Bank Lender Forbearance Agreements" and
together with the Noteholder Extension Agreement, the "Extension Agreements") in respect of
the Credit Agreements. Under the terms of the Bank Lender Forbearance Agreements, the
requisite lenders pursuant to the Credit Agreements agreed, subject to certain terms and
conditions, to forbear from declaring the principal amounts of such Credit Agreements due and
payable as a result of certain specified defaults during the Extension Period.
The Corporation, together with its legal and financial advisors and through the Independent
Committee of the Board, used the Extension Period to work with the Bank Lenders and the
Noteholders to formulate a comprehensive plan to address the current oil price environment and
ensure the long-term viability of its business. During this period, the Corporation remained
LEGAL 1:3 9238558 .3
-6-
aZ
current with its suppliers, trade partners and contractors and normal operations continued in
Colombia and the other jurisdictions within which the Corporation operates.
Subject to the satisfaction of certain terms and conditions, the Extension Agreements were
effective through March 31, 2016. Under the terms of the Extension Agreements, the
Corporation agreed with the Noteholders and the Bank Lenders that interest would not be paid
pursuant to the Indentures or Credit Agreements during the Extension Period.
On February 19, 2016, Lazard distributed a process letter (the "February
"February 19 19
Process
Process
Letter")
Letter")
to
interested parties describing the requirements for submitting preliminary proposals no later than
5:00 p.m., New York time, on February 26, 2016 with respect to an acquisition of substantially
all or a portion of the Corporation's assets or an investment to support a recapitalization.
In accordance with the February 19 Process Letter, Lazard received the following preliminary
proposals:
[LIST HAS
[LIST
HASBEEN
BEENREDACTED]
REDACTED]
In light of the participation in the process by the co-chairs of the Corporation (the "Co-Chairs"),
"Co-Chairs"),
the Corporation implemented certain protocols in order to protect the integrity of its process,
including excluding the Co-Chairs from such portions of Board meetings where bids were
discussed and not providing information regarding competing bids to the Co-Chairs.
Lazard advised that certain parties were not inclined to submit proposals due to the overall status
of the hydrocarbon industry and risks associated with investments in Latin America. The
Corporation, the Independent Committee and their respective advisors carefully analyzed and
considered each proposal. Lazard also discussed such proposals with the Bank Lenders and
Noteholders and their advisors. and engaged in negotiations with the bidders in order to
eliminate any conditionality in the proposals and to encourage them to either sponsor a plan or
offer to make an outright purchase of the Corporation. Mark-ups of their respective proposals
were provided to each of the bidders in this regard.
Throughout early March 2016, the Corporation continued to update its business plan, and more
specifically to review and attempt to reduce its planned capital expenditure levels in 2017 in
order to reduce its cash needs for such period.
On February 29, 2016, the Independent Committee engaged UBS as its independent financial
advisor.
Throughout March 2016, the Corporation entered into confidentiality agreements with the
following Noteholders so as to facilitate the sharing of confidential information regarding the
proposals, including copies of the Willi sheets received:
[LIST HAS
[LIST
HASBEEN
BEENREDACTED]
REDACTED]
On March 9, 2016, Lazard distributed a process letter (the "March
"March 99Process
Process
Letter")
Letter")
to
interested parties who had submitted preliminary proposals describing the requirements for
submitting binding final round proposals ("Final
("Final Round
Round
Proposals").
Proposals").
Pursuant to the March 9
Process Letter, the Final Round Proposals were required, among other things, to be open for 45
LEGAL 1392385583
92385583
2 c1
-7-
days, to contain no diligence, financing or other conditions and were to be submitted no later
than 5:00 p.m., New York time, on March 16, 2016.
In response to the March 9 Process Letter, Lazard received the following revised proposals:
Party
Date of Proposal
[REDACTED]
March 15, 2016
[REDACTED]
March 16, 2016
[REDACTED]
March 16, 2016
[REDACTED]
March 16, 2016
[REDACTED]
March 16, 2016
[REDACTED]
March 16, 2016
The Corporation, the Independent Committee and their respective advisors carefully analyzed
and considered each proposal. Lazard also discussed such proposals with the Bank Lenders and
Noteholders and their advisors.
On March 18, 2016, Lazard delivered a "Key Issue List" to each bidder communicating to each
bidder the Corporation's concerns with their second round proposal. The Key Issue Lists were
developed jointly by the Independent Committee, the Corporation and their respective advisors,
with input from the advisors to the Ad Hoc Committee and the Bank Lenders Steering
Committee. On March 20, 2016, Lazard conducted follow-up calls with each of the bidders
and/or their advisors to discuss the Key Issue Lists and requested that such bidders respond by
March 22, 2016.
On March 21, 2016, the Corporation elected to not make the interest payment due on March 28,
2016 in connection with its 5.125% notes due 2023 (the "2023 Notes"). The failure to make such
interest payment (of U.S.$25.6 million in the aggregate) on the scheduled date does not
constitute an event of default under the indenture governing the 2023 Notes as the Corporation
has a 30 day period from the scheduled payment date to cure the failure to make such payment.
On March 22, 2016, at the request of the Noteholders and the Bank Lenders, Catalyst met with
the Noteholders and the Bank Lenders (and their respective advisors) to review their Final Round
Proposal and answer questions. Representatives of the Corporation and the Independent
Committee were in attendance. On March 23, 2016, at the request of the Noteholders and the
Bank Lenders, each of [REDACTED] met with the Noteholders and the Bank Lenders (and
their respective advisors) to review their Final Round Proposals and answer questions.
Representatives of the Corporation and the Independent Committee were in attendance. EIG
withdrew its bid on March 25, 2016 and did not meet with the Noteholders and the Bank
Lenders.
Following the meetings with the Noteholders and the Bank Lenders, the advisors to the Ad Hoc
Committee expressed to the Independent Committee's advisors as well as to the Corporation's
advisors their strong desire to continue to work with [REDACTED] (the [REDACTED] and
LEGAL 1392385583
-8[REDACTED] final round proposals having been assessed as non-competitive) and that they did
not want the Corporation to agree to exclusivity with any of the bidders at this time or otherwise
limit in any way the ability of the Noteholders and the Bank Lenders to continue their
negotiations with the bidders. The Noteholders and the Bank Lenders expressed their belief that
this would be the best way to achieve a consensual arrangement with one of the bidders that
could be implemented through a pre-packaged or pre-arranged insolvency filing. Counsel to the
Ad Hoc Committee also noted that if the Corporation were to enter into any restructuring
transaction or exclusivity arrangement with any of the bidders without the consent of the
Noteholders, there would be an "Extension Default" under the existing extension agreement
dated February 18, 2016 between the Corporation and the Noteholders, pursuant to which the
Noteholders agreed, subject to certain terms and conditions, to forbear from declaring the
principal amounts of the Notes (and certain additional amounts) due and payable until March 31,
2016, which would allow termination of the existing extension by the Noteholders.
• y-4
Goodmans, as counsel to the Ad Hoc Committee, also made it clear that they were aware that the
Catalyst Final Round Proposal (the "Catalyst Proposal") may expire on March 23, 2016 if
exclusivity was not granted as requested in the Catalyst Proposal. However, Goodmans advised
that in no circumstances was the Ad Hoc Committee in favour of granting exclusivity to Catalyst
at this time. Goodmans indicated that the Bank Lenders shared this view. Goodmans also noted
that that the Ad Hoc Committee and the Bank Lenders understood that if the Catalyst Proposal
expired, Catalyst may no longer be interested in pursuing the opportunity, which would only
leave the [REDACTED] proposals as the remaining two bidders. [REDACTED]
[REDACTED]
The Catalyst Proposal was set to expire at 6:00 p.m. on Wednesday, March 23, 2016. Following
negotiations, Catalyst agreed to an extension until 3:00 p.m. on Thursday, March 24, 2016 and
then provided an additional extension until 4:30 p.m. on Thursday, March 24, 2016, at which
point the Catalyst Proposal expired. However, Catalyst continued to engage in discussions with
the Noteholders and Bank Lenders following the expiration time.
On March 24, 2016, the Extension Agreements were extended to April 29, 2016, subject to
certain terms and conditions.
Over the course of March 25, 2016 to March 28, 2016, the Noteholders and the Bank Lenders
engaged in ongoing discussions and negotiations with each of Catalyst, [REDACTED]. On
March 29, 2016, [REDACTED] provided submitted a non-binding expression of interest to the
Corporation and such proposal was shared with the Noteholders and the Bank Lenders. The
Noteholders and the Bath Lenders organized additional meetings with each of Catalyst,
[REDACTED] over the course of March 30, 2016 and March 31, 2016.
[REDACTED]
On April 1, 2016, members and representatives of the Ad Hoc Committee and the Bank Lenders
Steering Committee met with the Independent Committee to provide their views on the various
proposals and to discuss timing and next steps.
Over the course of April 2, 2016 to April 4, 2016, the Bank Lenders and Noteholders continued
to engage in negotiations with Catalyst, [REDACTED].
LEGAL_119238558.3
-9On April 5, 2016, following extensive deliberation and in light of the desirability of entering into
a definitive agreement on an expedited basis, management of the Corporation, Norton Rose,
Lazard, UBS, and Osier were instructed by the Independent Committee to terminate the proposal
solicitation process and negotiation of proposals with other bidders and engage with Catalyst to
finalize a transaction as quickly as possible. The Ad Hoc Committee and the Bank Lenders were
encouraged to do the same.
From April 5, 2016 to April 11, 2016 the Bank Lenders, Noteholders, Catalyst and Corporation
with the help of their legal and financial advisors proceeded to settle the documents (collectively
the "Documents") required in respect of the Catalyst Proposal including:
1.
2.
3.
4.
5.
6.
7.
8.
Commitment Letter re Catalyst;
Commitment Letter re DIP and Exit LC Facility (Bonds and Banks);
Recapitalization Term Sheet;
Secured DIP and Exit Financing Term Sheet;
Exit DIP LC Facility Term Sheet;
Restructuring Support Agreement;
Press Release; and
Cleansing Release.
Copies of current drafts of each of the Documents were provided to the Independent Committee
prior to its meeting on April 11, 2016.
a)
On April 6, 2016, the Corporation met with the Superintendencia to provide an update on the bid
solicitation process and to discuss Canadian law and practice regarding the conduct of
independent committees. Norton Rose, UBS and Garrigues were also in attendance.
Overview of the Independent Committee Process
In connection with its exploration and consideration of strategic alternatives for the Corporation,
the Independent Committee met formally a total of 30 times by telephone, with its independent
counsel present, between the months of January to April of 2016. During the course of the
Independent Committee's review of the strategic alternatives, each formal Independent
Committee meeting was also attended by Osier, 21 of the Independent Committee meetings were
attended by representatives of UBS, 15 of the Independent Committee meetings were attended
by representatives of Lazard, 8 of the Independent Committee meetings were attended by
representatives of the Corporation, 5 of the Independent Committee meetings were attended by
representatives of the Monitor, 4 of the Independent Committee meetings were attended by
representatives of Norton Rose, and 1 of the Independent Committee meetings was attended by
representatives of Zolfo Cooper. Minutes were taken at each formal meeting of the Independent
Committee and are available for the Board to review. [REDACTED]
In addition to the formal Independent Committee meetings, there have been numerous informal
discussions of the strategic alternatives and related matters between members of the Independent
Committee, on the one hand, and members of the Board, management, Norton Rose, Lazard,
Osier and UBS, on the other hand.
[REDACTED]
LEG
9238558.3
- 10 On January 21, 2016, the Independent Committee discussed a proposal for the potential sale by
the Corporation of its interest in Puerto Bahia as well as a letter received by the Corporation on
January 18, 2016 from Trafigura Pte Ltd., significant shareholder of the Corporation,
encouraging the Corporation to pursue potential transactions relating to Puerto Bahia so as to
improve the liquidity of the Corporation. The Independent Committee was informed that
[REDACTED] would present a proposal at the Board meeting on January 22, 2016 and was in
the process of finalizing a non-disclosure agreement with the Corporation. The Independent
Committee was advised that the Corporation would require expert advice from Lazard before
proceeding with any proposal and that in this regard, Lazard was in the process of completing its
analysis on the financial position of the Corporation with a view to providing a proposal
regarding how best to pursue a refinancing for the Corporation. The Independent Committee also
discussed the need to retain its own independent financial advisor. Following a discussion
regarding potential candidates, and having regard for their credentials, the Independent
Committee determined to seek an engagement proposal from UBS.
[REDACTED]
The Independent Committee also discussed the selection of an independent financial advisor
during the meeting on January 27, 2016. It had received two proposals from UBS to act as
financial advisor to the Independent Committee and expected a proposal from the Bank of
Montreal later that day.
During the meeting on February 4, 2016, Lazard provided a report to the Independent Committee
on the ongoing solicitation processes, the status of discussions with the Bank Lenders and the
Noteholders, investor proposals received, the status of negotiations relating to such proposals,
and investor prospects including [REDACTED]. Lazard also reported that, based on its analysis
of the financial information of the Corporation at the time and certain assumptions regarding the
price of oil, the Corporation will need to raise a significant amount of cash in the near future in
order to successfully operate. Lazard indicated that it had met with the Bank Lenders and
Noteholders to present their analysis on the cash needs of the Corporation and to discuss
alternatives for restructuring. The Independent Committee received Lazard's view on the
potential of receiving investment proposals from the various parties and was informed that nondisclosure agreements had been entered into with a number of parties.
Oster provided a summary to the Independent Committee of the events of the First Creditor
Meeting, including further details on the liquidity forecast provided by Lazard and the
negotiations for a forbearance on the Notes to the end of March 2016. [REDACTED]
The Independent Committee met on February 9, 2016 to receive an update on the investment
proposals expected to be received by the Corporation and to discuss its role and the process
involved in the review and evaluation of any proposals received.
On February 16, 2016, the Independent Committee was provided with the initial proposal from
[REDACTED] and met with Lazard to receive a summary of the principal terms. Lazard
informed the Independent Committee that it was continuing discussions with [REDACTED] in
hopes of receiving an improved proposal and that [REDACTED] had been in discussions
directly with the Bank Lenders, with Lazard in attendance. The Independent Committee was also
informed that [REDACTED] had entered into a non-disclosure agreement with the Corporation
and was expected to make a proposal to the Corporation. The Independent Committee discussed
LEGAL_1339238558 3
a request made by [REDACTED] for the Independent Committee to waive certain restrictions of
the non-disclosure agreement that would allow [REDACTED] to contact Evercore and FTI.
Having received the views of Lazard and Oster, the Independent Committee approved permitting
[REDACTED] to enter into discussions with Evercore and FTI and their counsel and requested
that Lazard participate in any such discussions where practicable.
On February 19, 2016, the Corporation received an initial proposal from [REDACTED]. The
Independent Committee and its counsel were provided with the initial proposal from
[REDACTED] on February 21, 2016 and met to discuss and receive the views of Oster on the
implications of the initial proposal from [REDACTED] and possible outcomes. The
Independent Committee was informed that Lazard was reviewing the initial proposal from
[REDACTED] and would discuss any recommended changes to the proposal with
[REDACTED]. The Independent Committee further discussed its role in evaluating the
proposals received and maintaining independence through the process.
The Corporation received further proposals from [REDACTED] on February 23, 2016, and
Catalyst and [REDACTED] on February 26, 2016, which were provided to the Independent
Committee and its counsel for review.
On February 29, 2016, the Independent Committee met with Lazard to discuss, among other
things, the principal terms, strengths and weaknesses of the proposals received. The possibility of
[REDACTED] making a qualified bid was also discussed. The Independent Committee agreed
that a competitive process should be used in order to obtain formal, binding bids by March 15,
2016 with a view to entering into a definitive agreement by the end of March 2016. Oster
advised the Independent Committee that an agreement with the Noteholders was being
negotiated in order to facilitate the sharing of confidential information regarding the proposals.
The Independent Committee discussed the key terms of the proposed agreement, including the
standstill provisions and the requirement for the Corporation to publicly disclose certain
information by March 31, 2016 (with an option for the Independent Committee to extend
disclosure date past March 31, 2016).
At this meeting, UBS was invited to introduce themselves and present their credentials to the
Independent Committee. After considering its experience with the Corporation through its
previous engagement by the Independent Committee, professional expertise, industry reputation,
experience with transactions of a similar nature, resources, availability to start working
immediately, background of individual advisors, as well as fee quotes, the Independent
Committee determined to engage UBS as its independent financial advisor.
Later that day, the Corporation received initial proposals from [REDACTED]
On March 1, 2016, the Independent Committee met with Lazard to receive updates on the
investment solicitation process and to further discuss the principal terms of the six proposals
received from [REDACTED] Catalyst/Co-Chairs, [REDACTED]. The Independent Committee
also discussed the parties, including [REDACTED] that did not submit proposals and the
general reasons why such parties were dissuaded from submitting proposals, including the
overall status of the hydrocarbon industry and risks associated with investments in Latin
America. The Independent Committee, with input from Oster and UBS, discussed the role to be
played by UBS in participating in negotiations and in advising the Independent Committee. The
Independent Committee directed Lazard to continue to engage in discussions with the various
LEGAL 1392385583
- 12 bidder to communicate the Corporation's preferred structuring alternatives and encourage
revised bids.
At the meeting held on March 4, 2016, the Independent Committee further reviewed and
discussed the bids received and received updates from Lazard on the solicitation process and its
discussions with the bidders. The Independent Committee received Lazard's views on the
relative strengths and weaknesses of each bids and was advised that Lazard had informed bidders
of the same and was encouraging the bidders to submit revised binding bids. Lazard also
informed the Independent Committee that O'Hara was willing to deploy capital to support
another bidder. Lazard advised that management was reviewing the Corporation's capital
expenditures budget in 2017 in order to reduce its cash needs for such period.
On March 8, 2016, management and representatives of Zolfo Cooper met with the Independent
Committee to provide a summary of the Corporation's updated business plan and Management's
views on certain of the assumptions in the business plan summary. The Independent Committee
discussed minimum requirements for qualified bids, how such requirements would be impacted
by the revised business plan and the process by which the revised business plan would be shared
with bidders. The Independent Committee also discussed whether it would be advisable to allow
certain bidders to partner in order to improve the terms of their respective offers. Management
also expressed its concern to the Independent Committee that any extension to the bid process
could be problematic to the Corporation from an operational perspective.
(1)
The Independent Committee continued its review and discussion of the revised bids and received
the views of Lazard, Osier and UBS on the strength and weaknesses of each proposal. The
Independent Committee directed Lazard to deliver a process letter to bidders on March 9, 2016
advising them that binding bids containing no diligence, financing or other conditions and
providing an overview of the bidder's proposed timeline would be due by end of day
Wednesday, March 16, 2016 and any submitted bid would be required to remain open for 30
days, with a view to having the Corporation enter into a definitive transaction by the end of
March 2016 and file by March 31, 2016.
The Independent Committee received a letter on March 8, 2016 from Goodmans regarding the
bid process and timeline for proposals. The Independent Committee met on March 9, 2016 to
discuss the solicitation timeline and determined to maintain the March 16, 2016 deadline for
proposals. The Independent Committee agreed to consider a time extension for proposals once
the deadline had passed if the Independent Committee felt it was appropriate at that time. At the
direction of the Independent Committee, Osier prepared a response to Goodmans reflecting the
Independent Committee's input.
On March 10, 2016, the Independent Committee met to discuss a number of requests received
from the Bank Lenders, Noteholders, International Finance Corporation ("IFC") and various
bidders. Osier communicated to the Independent Committee a request received from the
Noteholders' advisors to allow the Noteholders to share with the various bidders any of their
work product, such as any forecasts and financial models they have prepared, and any
information the Noteholders received from the Corporation. Having received the
recommendations of UBS and Osier, the Independent Committee permitted the request on the
condition that the Noteholders provide an acknowledgment that the confidentiality provisions of
the non-disclosure agreement entered into between the Noteholders and the Corporation covers
any such work product that is being shared with the bidders and directed Osier to communicate
LEGAL_1:39238551.7
- 13 this decision to the Noteholders' advisors. The advisors for the Bank Lenders and Noteholders
also requested assistance in facilitating their request to have [REDACTED] allow them to
release [REDACTED]'s term sheet to the Banks and Noteholders, as it had been provided to the
advisors only. The Independent Committee requested Osier prepare a response to
[REDACTED]'s advisors to assist in facilitating the release of the term sheet.
The Independent Committee declined to consider a request from IFC to see the bids received by
the Corporation to date until all proposals have been received by the bid deadline on March 16,
2016 and the Independent Committee had the opportunity to evaluate and identify proposals that
will be further pursued. Osier was directed to communicate this decision to IFC.
The Independent Committee declined [REDACTED] request for an additional week to submit
their bid given the importance of maintaining the same timeline for all potential bidders,
[REDACTED].
The Independent Committee also declined [REDACTED]'s request for an indication of a
purchase price that would be acceptable to the Independent Committee and agreed that it will
maintain the current bid process and that it would not be appropriate at this time to engage in
such discussions with any bidder.
On March 15, 2016 and March 16, 2016, the Corporation received binding proposals from
[REDACTED], Catalyst and [REDACTED], which were provided to the Independent
Committee and its advisors to review. On March 17, 2016, the Independent Committee met with
Lazard to receive a summary and their initial analysis of the principal terms of the proposals and
with Management to receive their views of the proposals. The Independent Committee also
discussed the absence of a binding offer from [REDACTED] and directed Lazard, UBS and
Osier to reach out to [REDACTED] for a better understanding of their reasons for not
submitting a bid at this time. The Independent Committee directed Lazard to prepare a "Key
Issues List" and to communicate to each bidder the Corporation's concerns with the bid received.
The Independent Committee further directed Lazard to provide restricted Noteholders with a
summary of the binding bids received and directed Osler to provide IFC with a copy of the
binding bids in response to their previous request. The Independent Committee also requested
that a summary be prepared and presented by Lazard to non-conflicting directors at the Board
meeting on March 18, 2016.
On March 21, 2016, the Independent Committee and its advisors met with management and the
Hay Group to receive a summary of the proposed key employee retention plan and approved the
plan in principal subject to the results of consultations with the Bank Lenders and Noteholders.
The Independent Committee also received an update from Lazard on the ongoing discussions
with the various bidders since the March 16, 2016 deadline. The Independent Committee
declined the request from FTI and Evercore to solicit a bid from [REDACTED] following the
close of the bidding process in order to maintain the integrity of the solicitation process and
agreed to adhere to the timeline and bid process as outlined in the process letter delivered to all
interested parties. The Independent Committee directed Osler and UBS to instruct Lazard to
inform the Independent Committee if [REDACTED] proposes to submit a bid.
On March 23, 2016, following the completion of the creditor meetings in New York, the
Independent Committee met to receive a report from its advisors who had attended the meetings
and from Lazard. In addition, the Independent Committee considered whether it would be
LEGAL_1392385583
- 14 necessary to take any additional steps with respect to the Catalyst Proposal, which was to expire
at 6:30 p.m. on March 23, 2016. The Independent Committee met several times over March 23,
2016 and March 24, 2016 to discuss the status of the Final Round Proposals and in particular,
which of the Final Round Proposals appeared to be the most likely to result in a consensual
arrangement with the Ad Hoc Committee and the Bank Lenders and which could be
implemented through a pre-packed or pre-arranged insolvency filing. The Independent
Committee instructed its advisors to work with Catalyst to try and achieve an extension of the
Catalyst Proposal.
On March 28, 2016, the Independent Committee met to discuss feedback received from FTI and
Evercore on the continued discussions between Catalyst, [REDACTED] on their proposals.
0 00,00
In consideration of the possibility that [REDACTED] and other parties may deliver a proposal
despite the close of the bidding process on March 16, 2016, the Independent Committee met on
March 29, 2016 to discuss the Corporation's contractual obligation to deliver any bid that could
be considered a "final round proposal" under the Forbearance Agreement Protocol attached to
the Forbearance Agreement with the Noteholders and Bank Lenders. In light of the in-person
meetings scheduled on Wednesday, March 30, 2016 and Thursday March 31, 2016 in New York
City between the Noteholders, Bank Lender and each of Catalyst, [REDACTED], the
Independent Committee, with the benefit of advice of counsel, determined to defer its
recommendation until it had the benefit of the information received from these meetings.
On March 30, 2016, the Independent Committee met to discuss the requests received by the
Corporation from the SFC for disclosure of certain information on the SIMEV. The Independent
Committee also discussed the submission of a non-binding expression of interest from
[REDACTED] on March 29, 2016. The Independent Committee received updates from 1113S on
the meetings that occurred between the Noteholders and Bank Lenders and each of
[REDACTED. The Independent Committee unanimously approved the extension of the expiry
date for the Exclusivity Agreement for an additional six weeks.
On March 31, 2016, the Independent Committee met to further discuss the requests received by
the Corporation from the SFC. In light of the proposals received from [REDACTED] and
[REDACTED], the Noteholders and Bank Lenders arranged in-person meetings with these
bidders in addition to those scheduled with Catalyst, [REDACTED]. The Independent
Committee received an overview from UBS on the presentations made by the various bidders to
the Noteholders and Bank Lenders and decided to postpone its recommendation until it received
feedback from the creditors. The Independent Committee directed Osler to arrange a meeting
with the Noteholders and Bank Lenders to obtain their views on the proposals.
The Ad-Hoc Committee and the Steering Committee, with their respective advisors, met with the
Independent Committee and its advisors, management, Lazard and Norton Rose on April 1, 2016
to provide their feedback on the proposals received from Catalyst, [REDACTED], an overview
of the process undertaken and the discussions they have engaged in with all the bidders. The AdHoc Committee and Steering Committee requested that the Independent Committee approve the
Corporation entering into a non-disclosure agreement with [REDACTED] in order to allow the
creditors to further explore the possibility of [REDACTED] being a replacement to the existing
management as part of any potential proposal. The Independent Committee met with its advisors
following the meeting with the Ad-Hoc Committee and Steering Committee and having received
the views of Osler and UBS, approved the entering into of a non-disclosure agreement between
LEGAL_1:39238558.3
- 15 [REDACTED] and the Corporation. The Independent Committee directed Osler to inform the
Ad-Hoc Committee and Steering Committee that the Independent Committee was not prepared
to comment on the acceptability of any bidders at this time, but strongly encouraged them to
continue their negotiations over the weekend and provide updates to UBS and Osler on
negotiations as they proceed.
On April 4, 2015 the Independent Committee met to receive its advisors' reports on the meetings
that took place between the Ad-Hoc Committee and the Steering Committee and each of the
bidders. The Independent Committee also received a review from Lazard of the current proposals
from Catalyst, [REDACTED], including their initial analysis and general observations on the
principal terms. The Independent Committee continued to discuss the requests received by the
Corporation from the SFC and agreed to the public disclosure of the Independent Committee
mandate as requested.
On April 5, 2016, having received advice from UBS and Osler that, having participated in the
creditor meetings over the last two days and having received the view of the Noteholders and
Bank Lenders, the view of each of UBS and Osler was that the Catalyst Proposal, as renegotiated
with the Noteholders and Bank Lenders (the "Catalyst/Creditor Proposal") appeared to be the
most likely to result in a consensual arrangement with the Ad Hoc Committee and the Bank
Lenders that could be implemented through a pre-packed or pre-arranged insolvency filing with
the prospects of obtaining the best result for the Corporation's stakeholders, including the Bank
Lenders and the Noteholders, the Independent Committee unanimously resolved to instruct
management of the Corporation, Norton Rose, Lazard, UBS, and Osler to proceed to terminate
the proposal solicitation process and negotiation of proposals with other bidders and engage with
Catalyst to take all reasonable steps to reach an agreement and documentation on final terms of a
transaction (including those related to the deal, DIP and LC facility) as quickly as possible and to
encourage the Ad Hoc Committee and the Bank Lenders to do the same.
0
U
On April 8, 2016, the Independent Committee met to discuss the status of the Documents being
negotiated between the Noteholders, Bank Lenders and Catalyst and the Corporation and the
timeline for its recommendation The Independent Committee directed Osler and UBS to
encourage the parties to finalize all transaction documents by April 11, 2016. The Independent
Committee also received a report from UBS on the meeting between the Corporation and the
Superintendencia that took place on April 6, 2016 and was also attended by Norton Rose and
Garrigues.
On April 9, 2016, the Independent Committee met to get an update on the status of the
transactions documents being negotiated and in particular the participation of the Bank Lenders
in the DIP facility. The Independent Committee further directed Osler and UBS to encourage the
parties to finalize all transaction documents by April 11, 2016.
C)
On April 11, 2016, the Independent Committee met to review current drafts of the Documents
provided to it by counsel, consider its recommendation and finalize its report to the Board of
Directors of the Corporation. [REDACTED]
ra—al
Recommendation
In making its recommendation to the Board, the Independent Committee received the advice and
assistance of its legal and financial advisors, considered the terms of the Catalyst/Creditor
LEGAL y39238558.3
- 16 Proposal and the other proposals received through the solicitation process and otherwise. It also
considered the Corporation's current business, financial position and future plans and prospects
and took into account the potential effects of the proposed restructuring on the Corporation's
business having regard to the implications for all stakeholders, including but not limited to,
Noteholders, Bank Lenders, trade creditors and suppliers of the Corporation, the employees of
the Corporation, the Superintendencia and existing shareholders.
In reaching its recommendation the Independent Committee also considered, among other things,
the following:
•
Robust Solicitation: The Corporation, through its financial advisors, Lazard,
have undertaken an extensive and prolonged solicitation and negotiation of
multiple proposals which has resulted in a robust and competitive bidding
process. The process was conducted in consultation with, and with full and
transparent participation by, both the Bank Lenders and Ad-Hoc Committee and
their respective legal and financial advisors.
•
Consensual Arrangement: The Independent Committee has received advice
from UBS and Osler that the Ad Hoc Committee and the Bank Lenders advisors
have indicated that that the proposal from Catalyst is the most likely proposal
received through the solicitation process to result in a consensual arrangement
with the Ad Hoc Committee and the Bank Lenders which could be implemented
through a pre-packed or pre-arranged insolvency filing with the prospects of
obtaining the best result for the Corporation's stakeholders. The Independent
Committee has been advised that approximately 53% and 100% of the
Noteholders and the Bank Lenders, respectively, are prepared to support the
Catalyst/Creditor Proposal
•
Going Concern: The Catalyst/Creditor Proposal gives the Corporation the best
opportunity to continue as a going concern and represents the best offer for the
Corporation's stakeholders to maximize recovery on their claims. The
Independent Committee has been advised that the Corporation's Colombian trade
creditors will be unaffected by the Catalyst/Creditor Proposal.
•
Insolvent: Since there is a real prospect that the Corporation will not have
sufficient cash flow to meet its obligations in the near term if a restructuring is not
advanced soon, the Independent Committee believes that if the Catalyst/Creditor
Proposal is not implemented, it is likely there will be a "free-fall" bankruptcy of
the Corporation and/or appointment of a receiver over all of the assets and
undertakings of the Corporation or the Superintendencia will take actions to take
control of the Corporation, either of which would not be in the best interests of the
Corporation.
•
Returns: The compensation offered to the Corporation's Noteholders and Bank
Lenders under the Catalyst/Creditor Proposal is likely to be significantly higher
than they would be expected to receive in the event of a "free-fall" bankruptcy
liquidation and/or receivership or any Colombian proceedings.
LEGAL_1:39238558.3
•
Fair and Reasonable: The Independent Committee believes that in the
circumstances the Catalyst/Creditor Proposal is fair and reasonable and, including
by virtue of its consensual nature, will produce a more favourable result for all
stakeholders, other than existing shareholders, than on a "free-fall" bankruptcy
liquidation and/or insolvency.
•
Business Uncertainties: The results of a review of financial and business
information respecting the Corporation, including the impact of the significant
decline in the price of oil on the Corporation's significant financial obligations
and working capital deficiency, the difficulties and challenges faced in financing
the Corporation given current industry and economic conditions, the short and
long-term expectations regarding the Corporation's cash flow and operating
performance and the expectations of the future of the industry and the risks and
uncertainties affecting the Corporation and its business require that a restructuring
be implementing as quickly as possible.
•
Capital Markets Risk: The results of an assessment of the current and
anticipated future state of the credit, debt and equity markets that could be
available to the Corporation given its present leverage and the downturn in oil
prices to provide the Corporation with the full amount of funding it requires to
finance its existing business and operations and future opportunities, including the
risk that such funding may not be obtained in a reasonable time or in full or on
terms satisfactory to the Corporation, as well as an assessment of current and
anticipated market conditions including commodity prices for oil.
•
Arm's-Length Negotiations: The terms and conditions of the Catalyst/Creditor
Proposal were negotiated at arm's-length between Catalyst, the Noteholders, the
Bank Lenders, the Corporation and the Independent Committee and their
respective advisors, with such negotiations resulting in a material increase in the
return be offered to Noteholders and Bank Lenders of the Corporation.
•
Dual Vote: To be effective, the Catalyst/Creditor Proposal must be supported by
each class of affected creditors by a dual vote representing more than half in
number and two-thirds in value of those creditors appearing in person or by proxy
at the meetings of the creditors by class.
•
Court Approval: The Catalyst/Creditor Proposal must be approved by a
Canadian court through a plan of arrangement under the Companies' Creditors
Arrangement Act, and the proposal will only become effective if, after hearing
from all interested persons who choose to appear before it, the court determines
that the terms and conditions are fair and reasonable.
•
Documentation: The Independent Committee has reviewed the draft Documents
in their current form with the assistance of Osler and Norton Rose and has
concluded that the draft Documents substantially reflect the terms of the
Catalyst/Creditor Proposal.
LEGA) :39238558.3
- 18 Management Support: The Independent Committee has also received advice
from management that the Corporation would also support the Catalyst/Creditor
Proposal in a pre-packed or pre-arranged insolvency filing.
•
On that basis, and after careful consideration of all relevant factors relating to the
Catalyst/Creditor Proposal and the Corporation, the Independent Committee determined that the
Catalyst/Creditor Proposal is in the best interest of the Corporation and UNANIMOUSLY
RECOMMENDS that the Board approve the Catalyst/Creditor Proposal and enter into the draft
Documents, as applicable, substantially in the form reviewed by the Independent Committee.
* **
We hope you find this Report of assistance. We would be pleased to meet with the Board at its
convenience to discuss these recommendations in more detail.
Dated at Toronto, Canada the 11 th day of April, 2016.
Dennis Mills, Chairman
It
LEGAL 139238558.3
EXHIBIT "A"
Independent Committee Mandate
PACIFIC EXPLORATION & PRODUCTION CORP.
INDEPENDENT COMMITTEE MANDATE
CONSTITUTION AND COMPOSITION
1.1
Independent Committee
The Independent Committee is established by the Board of Directors (the "Board") of Pacific
Exploration & Production Corp. (the "Corporation") to explore and consider strategic
alternatives ("Strategic Alternatives") available to the Corporation to maximize value in light of
the current financial condition of the Corporation, including but not limited to a restructuring
and/or recapitalization of all, or part, of the business and/or capital structure of the Corporation
and its subsidiaries.
1.2
Composition
The Independent Committee shall be composed of four (4) independent directors as determined
by the Board. The Independent Committee shall appoint one of its members to be Chair of the
Independent Committee. Initially, the members of the Independent Committee, each of whom
the Board has determined is independent shall be:
Dennis Mills - Chair
Heman Martinez
Francisco Sole
Monica de Greiff
1.3
Term
The Independent Committee shall continue until such as time as the Board shall determine that
its mandate has been completed.
1.4
Removal
Any member of the Independent Committee may be removed or replaced at any time by the
Board and shall, in any event, cease to be a member of the Independent Committee upon ceasing
to be a member of the Board.
LEGAL_13923 8558.3
2
COMMITTEE PROCEDURE
2.1
Meetings
The time at which and the place where the meetings of the Independent Committee shall be held,
the calling of meetings and the procedure at such meetings shall be determined by either the
Chair of the Independent Committee or by the Independent Committee. The Independent
Committee shall meet as many times as it considers necessary to carry out its responsibilities
effectively.
2.2
Quorum
Unless otherwise determined by the Independent Committee, at least three (3) members of the
Independent Committee shall constitute a quorum.
2.3
6 1-61
ai)
Attendance
The Independent Committee may invite such officers, directors or employees of the Corporation,
financial, technical or legal advisors, or other persons as it sees fit, from time to time, to attend at
meetings of the Independent Committee and to assist in the discussion of matters being
considered by the Independent Committee.
2.4
Chair and Secretary
The Chair shall preside at all meetings of the Independent Committee. In the absence of the
Chair, the Independent Committee shall appoint one of its members to act as chair. The
Independent Committee shall also identify a Secretary, who need not be a member of the
Independent Committee, but who shall attend and record minutes of all meetings of the
Independent Committee.
Cfts0)
2.5 Decisions
Decisions of the Independent Committee shall be evidenced by resolutions passed at meetings of
the Independent Committee and recorded in the minutes of such meetings or by an instrument in
writing signed by all of the members of the Independent Committee.
2.6
ad)
bt
Minutes
Minutes of the Independent Committee will be recorded and maintained by the Secretary of the
Independent Committee.
2.7
Reporting to the Board of Directors
The Independent Committee shall report to the Board on such matters and questions relating to
the activities of the Independent Committee as the Independent Committee may deem
•
•
;••••(
LhGAL_1 39238558 3
appropriate or as the Board may from time to time request or refer to the Independent
Committee.
2.8
Authority to Engage Advisors
The Independent Committee shall have the authority to engage, at the expense of the
Corporation, such outside advisors as it determines necessary or advisable to carry out its duties,
including one or more legal, financial, technical and accounting advisors, and establish the
compensation of such advisors.
2.9
Authority to Determine Policies and Procedures
The Independent Committee shall have the authority to determine its policies and procedures as
may be necessary to carry out its responsibilities, provided that the Independent Committee's
policies and procedures shall at all times be consistent with this mandate.
3
MANDATE OF THE COMMITTEE
3.1
Responsibilities Relating to Strategic Alternatives
In connection with Strategic Alternatives, the Independent Committee's responsibilities shall
include, inter cilia, the following:
(a)
examining and reviewing Strategic Alternatives available to the Corporation in
conjunction with independent financial, legal and other advisors and considering
whether any Strategic Alternative is in the best interests of the Corporation;
(b)
authorizing and directing senior management of the Corporation as to actions on
the part of the Corporation that are necessary or advisable by reason of the fact
that a Strategic Alternative is under consideration, or are necessary or advisable
for the proper performance by the Independent Committee of its responsibilities
(including providing the Independent Committee and its advisors with such
information as the Independent Committee may request and directing the
execution on behalf of the Corporation of necessary or advisable documents and
agreements, such as "standstill" and confidentiality agreements with potential
parties);
(c)
managing all communications and public disclosures in connection with the
foregoing and overseeing the preparation of all filings, applications or similar
materials necessary or desirable, for any applicable approvals in connection with a
Strategic Alternative;
(d)
making recommendations to the Board regarding all necessary agreements with
equity sponsors, lenders, creditors, stakeholders and any other interested parties,
including, without limitation, any amendments, waivers, extensions and/or
LEGAL_ 139238558.3
forbearances that may be necessary or desirable in connection with a Strategic
Alternative or otherwise in the best interests of the Corporation;
13.)
O
U
bt
C)
• va--4
considering and advising the Board as to what recommendation should be made to
the Corporation's shareholders in respect of a Strategic Alternative;
(0
providing such other advice and assistance to the Board in relation to Strategic
Alternatives as may be requested by the Board from time to time;
(g)
determining when and whether the responsibilities of the Independent Committee
have been performed and are at an end;
(h)
working as necessary with management of the Corporation and external advisors
in connection with the foregoing;
(i)
reporting to the Board in respect of the foregoing as appropriate;
(i)
overseeing and directing the implementation of any Strategic Alternative that is
approved by the Board; and
(k)
taking all such other steps as the Independent Committee considers to be
necessary or appropriate and in the best interests of the Corporation with respect
to the foregoing.
4
GENERAL MATTERS
4.1
Not to Bind Board
Notwithstanding any other provision herein, the Independent Committee shall not bind the Board
in respect of any Strategic Alternative. Any Strategic Alternative shall only be entered into upon
the approval and authorization of the Board meeting as a whole.
4.2
C)
(e)
Co-operation with the Independent Committee
The Independent Committee shall, to the fullest extent that the Independent Committee
determines is appropriate to fulfil its mandate, have access: (a) to all records, documents or other
information in the possession of the Corporation or available to the Corporation, including being
regularly informed of the status of discussions regarding any Strategic Alternative, the terms of
any agreement related to any Strategic Alternative and the terms of any financing relating thereto
(including supporting materials); and (b) to the personnel of the Corporation, including all
directors, officers and employees, and the legal, technical, accounting, audit, tax and other
professional advisors or consultants of the Corporation.
4.3
Compensation
LEGAL 1:39238558.3
The Independent Committee will be considered a committee of the Board and its members shall
be entitled to fees and expenses in accordance with the Corporation's applicable policies in
respect thereof (such fees and expenses to be in addition to the fees and expenses to which
members of the Independent Committee are otherwise entitled).
4.4 [REDACTED]
4.5
Effectiveness
The Independent Committee, the Corporation and its directors and officers are hereby authorized
and directed to take any and all such actions as may be necessary or advisable to give effect to
the foregoing.
4.6
Currency of this Mandate
This mandate was approved by the Board on January 14, 2016.
LEGAL _1:39238558 3
(lb
EXHIBIT "B"
[REDACTED]
LEGAL 1992385583
EXHIBIT "C"
[REDACTED]
LEGAL 1:392385583
Lib
EXHIBIT "D"
[REDACTED]
LEGALI :392385583
This is Exhibit "C-6" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS: \65405557\1
6540555711
REDACTED VERSION APRIL 26, 2016 FINAL
PACIFIC EXPLORATION & PRODUCTION CORPORATION
Supplement to the Report of the Independent Committee to the Board of Directors dated
April 11, 2016 (the "Report")
Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the
Report.
In light of the discussions that took place during the meeting of Board on April 13, 2016, the
Independent Committee tables this Supplement for inclusion in the Corporation's records and to
clarify certain matters for the benefit of all members of the Board.
1. Time is of the Essence. [REDACTED]
Additionally, in order for a proceeding to be "admitted" under Law 1116 for a stay of
proceedings to be effective in Colombia, the Corporation needs to file financial
statements for the month preceding the application. As a result, there is a window for
getting any necessary relief in Colombia. If the Corporation does not file by April 29
(with financial statements for March, 2016), the Corporation will not be in a position to
make a complete filing (and obtain protection) until the second half of May, 2016, at the
earliest, when the financial statements for the month of April, 2016 will be available. The
Independent Committee considered this timing with respect to the Colombian
proceedings in their deliberation and decisions.
[REDACTED] The Independent Committee was also aware that the forbearance
negotiated with the Noteholders and Bank Lenders expired at the end of April, 2016.
Both the expiration of the forbearance and the urgency of the Corporation's liquidity
situation were crucial in the Independent Committee's consideration of the appropriate
timeline for the solicitation process and its recommendation to the Board.
2. Solicitation Process and Value of Catalyst/Creditor Proposal. On April 5, 2016, in light of
the desirability of entering into a definitive agreement on a basis that allowed the
Corporation to preserve value (and taking into account the significant time required to
draft and negotiate definitive agreements for a complex transaction of this nature),
management of the Corporation, Norton Rose, Lazard, UBS, and Osler were instructed
by the Independent Committee to terminate the proposal solicitation process and engage
with Catalyst to finalize a transaction as quickly as possible. This decision was informed
by the Ad Hoc Committee's and the Bank Lenders' support for proceeding with the
Catalyst Proposal and only made following input from management of the Corporation,
Norton Rose, Lazard, UBS, and Osler and extensive deliberations. [REDACTED] Even
though the Independent Committee directed the advisors to focus on the Catalyst
Proposal on April 5, subsequent improvements (if any) to the remaining bids still result in
recoveries to creditors being roughly equal across all the bids. In the Independent
Committee's view, having received advice from UBS and Lazard, respectively, nothing
was lost by focusing on the Catalyst/Creditor Proposal and much was gained, having
regard to the clear creditor support and the increasing urgency of the situation, as set forth
above. Furthermore, the Independent Committee's recommendation of the
Catalyst/Creditor Proposal also took into account the various benefits and issues beyond
economic recovery of each of the bids, including, but not limited to, creditor support,
LEGAL 1;39236559.2
-2funding commitment amount, conditionality, pro forma leverage, business plan and
execution risk.
Bids received subsequent to April 5, 2016, the terms and economics of which are
reflected in Lazard's presentation to the Board, were provided to the Ad Hoc Committee
and the Bank Lenders. The Ad Hoc Committee expressed no desire to further consider
these subsequent bids and the Bank Lenders were unclear in their communications.
Furthermore, in anticipation that this will be a process under the CCAA and a court
appointed monitor will be required to make a report to the Court on the appropriateness
of the process, PricewaterhouseCoopers LLP ("PwC") was retained by the Corporation
on February 3, 2016 to assist it in preparing for a CCAA filing and will be appointed as
the monitor when the Corporation makes its CCAA filing, if the court makes such an
appointment. PwC has been in attendance for much of the negotiations, including during
the period leading up to the decision to focus on the Catalyst Proposal and was provided
with all proposals and has confirmed in its preliminary report that, in its view, the
Independent Committee's support for the Creditor/Catalyst Proposal appears reasonable
based on everything (including the other proposals) that PwC has seen.
3. Terms of Lazard's Engagement. Lazard's engagement and mandate, which was approved
by the Corporation's Executive Committee (comprised of Messrs. Pantin, Iacono, de la
Campa, Valdez and Betancourt) on December 7, 2015, does not contemplated that Lazard
would make a recommendation or provide any other form of opinion to the Board.
Rather, Lazard was engaged to advise the Corporation and the Independent Committee
and to run a solicitation process (which process was subject to the supervision of the
Independent Committee, as was appropriate given the need to appropriately deal with the
potential conflicts that led the Board to form the Independent Committee in the first
place). We refer the Board to page 2 of the Lazard engagement letter dated December 17,
2015 (the "Lazard Engagement Letter"), which specifically lists the services to be
provided as follows:
(a)
Reviewing and analyzing the Corporation's business, operations and financial
projections;
(b)
Evaluating the Corporation's potential debt capacity in light of its projected cash
flows;
(c)
Assisting in the determination of a capital structure for the Corporation;
(d)
Assisting in the determination of a range of values for the Corporation on a going
concern basis;
(e)
Advising the Corporation on tactics and strategies for negotiating with the
Stakeholders (as defined in the Lazard Engagement Letter);
(f)
Rendering financial advice to the Corporation and participating in meetings or
negotiations with the Stakeholders and/or rating agencies or other appropriate
parties in connection with any Restructuring (as defined in the Lazard
Engagement Letter);
LEGAL1:39238559.2
-3-
(g)
Advising the Corporation on the timing, nature, and terms of new securities, other
consideration or other inducements to be offered pursuant to any Restructuring;
(h)
Advising and assisting the Corporation in evaluating any potential Financing
transaction by the Corporation, and, subject to Lazard's agreement so to act and,
if requested by Lazard, to execution of appropriate agreements, on behalf of the
Corporation, contacting potential sources of capital as the Corporation may
designate and assisting the Corporation in implementing such Financing;
(i)
Assisting the Corporation in preparing documentation within our area of expertise
that is required in connection with any Restructuring;
Assisting the Corporation in identifying and evaluating candidates for any
potential Sale Transaction2, advising the Corporation in connection with
negotiations and aiding in the consummation of any Sale Transaction;
(k)
Attending meetings of the Board of Directors of the Corporation with respect to
matters on which we have been engaged to advise hereunder;
Providing testimony, as necessary, with respect to matters on which we have been
engaged to advise hereunder in any proceeding before the relevant bankruptcy
court or other insolvency authority; and
(m)
Providing the Corporation with other financial restructuring advice.
• 1 11
It was never contemplated, nor would it be appropriate for Lazard, as financial advisor, to
take decisions on behalf of the Corporation. The Independent Committee had the benefit
of Lazard's advice throughout the process, with each of Lazard and the Independent
Committee acting within their respective mandates.
0
4. Mandate of the Independent Committee. The Independent Committee was given the
mandate to make recommendations to the Board. Specifically, the Independent
U
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o ritY°1
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The term "Financing" means any transaction or series of transactions involving the public or private issuance,
sale, or placement of newly-issued (including securities held in treasury) equity, equity-linked or debt securities,
instruments, or obligations of the Corporation, including any debtor-in-possession financing or exit financing in
connection with a case under the Bankruptcy Code. "Equity Financing" shall mean any Financing that takes the
form of equity, hybrid or preferred securities.
2
The term "Sale Transaction" means any transaction or series of transactions involving (a) an acquisition,
merger, consolidation, or other business combination pursuant to which the business or assets of the
Corporation are, directly or indirectly, combined with another company; (b) the acquisition, directly or
indirectly, by a buyer or buyers (which term shall include a "group" of persons as defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended), of equity interests or options, or any combination thereof
constituting a majority of the then outstanding stock of the Corporation or possessing a majority of the then
outstanding voting power of the Corporation (except as may occur with current Stakeholders as a result of a
Restructuring); (c) any other purchase or acquisition, directly or indirectly, by a buyer or buyers or significant
assets, securities or other interests of the Corporation or (d) the formation of a joint venture or partnership with
the Corporation or direct investment in the Corporation for the purpose of effecting a transfer of an interest in
the Corporation to a third party. For purposes hereof, any sale of newly issued securities (including securities
held in treasury) shall be deemed a Financing and not a Sale Transaction.
;IIMMU4
LEGAL 1792385592
PIM(
-4Committee's mandate provides that "In connection with Strategic Alternatives, the
Independent Committee's responsibilities shall include, inter alio, the following: [...] (d)
making recommendations to the Board regarding all necessary agreements with equity
sponsors, lenders, creditors, stakeholders and any other interested parties, including,
without limitation, any amendments, waivers, extensions and/or forbearances that may be
necessary or desirable in connection with a Strategic Alternative or otherwise in the best
interests of the Corporation". In this regard, the Independent Committee made its
recommendation to the Board on April 13, 2016. The Independent Committee received
advice from counsel throughout its process regarding the scope of its authority and
responsibility and is satisfied that it has discharged its responsibility as contemplated by
the mandate and has acted within the scope of its authority. We refer the Board to section
3.1 of the Mandate (attached in full as Exhibit A to the Report) which delegates the
following responsibilities to the Independent Committee related to the Strategic
Alternatives:
(a)
examining and reviewing Strategic Alternatives available to the Corporation in
conjunction with independent financial, legal and other advisors and considering
whether any Strategic Alternative is in the best interests of the Corporation;
(b)
authorizing and directing senior management of the Corporation as to actions on
the part of the Corporation that are necessary or advisable by reason of the fact
that a Strategic Alternative is under consideration, or are necessary or advisable
for the proper performance by the Independent Committee of its responsibilities
(including providing the Independent Committee and its advisors with such
information as the Independent Committee may request and directing the
execution on behalf of the Corporation of necessary or advisable documents and
agreements, such as "standstill" and confidentiality agreements with potential
parties);
(c)
managing all communications and public disclosures in connection with the
foregoing and overseeing the preparation of all filings, applications or similar
materials necessary or desirable, for any applicable approvals in connection with a
Strategic Alternative;
(d)
making recommendations to the Board regarding all necessary agreements with
equity sponsors, lenders, creditors, stakeholders and any other interested parties,
including, without limitation, any amendments, waivers, extensions and/or
forbearances that may be necessary or desirable in connection with a Strategic
Alternative or otherwise in the best interests of the Corporation;
(e)
considering and advising the Board as to what recommendation should be made to
the Corporation's shareholders in respect of a Strategic Alternative;
(0
providing such other advice and assistance to the Board in relation to Strategic
Alternatives as may be requested by the Board from time to time;
(g)
determining when and whether the responsibilities of the Independent Committee
have been performed and are at an end;
(2)
To
O
U
n
ci
bt
C)
• re(
LEGAL 0392385592
-5(h)
working as necessary with management of the Corporation and external advisors
in connection with the foregoing;
(i)
reporting to the Board in respect of the foregoing as appropriate;
)
overseeing and directing the implementation of any Strategic Alternative that is
approved by the Board; and
(k)
taking all such other steps as the Independent Committee considers to be
necessary or appropriate and in the best interests of the Corporation with respect
to the foregoing.
The Independent Committee would not have been in a position to have presented a
meaningful recommendation to the Board in the absence of a fully-advanced proposal. In
order to be in a position to make an appropriate recommendation, the Independent
Committee had to make various decisions regarding process and timing (including
whether and when to focus on particular proposals) and only did so (as its mandate
permitted) after consultation with the Corporation and its own financial and legal
advisors.
5. Role of Co-Chairs and CEO. As per the statements read into the minutes at the start of the
Board meeting on April 13, 2016 [REDACTED], prior to making its recommendation,
the Independent Committee confirmed that neither the Co-Chairs nor the CEO are a party
to the Catalyst/Creditor Proposal and are not entitled to receive any fee or collateral
benefit if the Catalyst/Creditor Proposal is implemented.
Dated at Toronto, Canada the 25th day of April, 2016.
Dennis Mills, Chairman
LEGAL _1:39238559.2
SCHEDULE "A"
[REDACTED]
LEGAL1:39238559.2
510
SCHEDULE "B"
[REDACTED]
LEGAL 1:39238559.2
I
This is Exhibit "C-7" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS:
\1
CAN_DMS: \65405557
\6540555711
t:§:
1-477,57.fgE;EVA.--E.,-1,i:!..,z,.f,::;,
•
-ORS'EtaltilieSeUritiesranadwint.
$ -Canada-inc.
UBS
Brookiierd Place
Place
Brookfield
P.O. Box 617, 161 Bay Street
Toronto, ONT
OW M5i
M51251
251
Tel: +416-350-2201
.416-350-2201
March 10, 2016
Private and Confidential
The Independent Committee of the Board of Directors of Pacific Exploration & Production Corporation
33 Bay Street, Suite 1100
M5R 2R2
Toronto, Ontario M5112R2
Ladies and Gentlemen:
Gentlemen; This letter agreement (this "Agreement") confirms the terms under which
Pacific Exploration & Production Corporation
Corporation (the
(the "Company"),
"Company"), has
has engaged
engagedUBS
UBSSecurities
SecuritiesCanada
CanadaInc_
Inc,
("U138")
actasasexclusive
exclusivefinancial
financialadvisor
advisorand
andcapital
capitalmarkets
marketsadvisor
advisor to
to an
an independent
independent committee
("UM") totoact
(the "Independent Committee" of the board of directors) of the Company with respect to any
Restructuring Transaction (each as defined below). The term of -UBS's
UBS's engagement hereunder shall be
effective as of March 1,
I, 2016
2016 (the
(the "Effective
"Effective Date") and shall continue until terminated in accordance
with Section 9 hereof (the "Term"). UBS
CBS may perform services hereunder through one or more affiliates,
including UBS Securities LLC, and such affiliates performing services hereunder shall be entitled to the
protections of this Agreement. The Company has
has engaged
engaged UBS
UBS at
at the
the request
request and
and on
on behalf
behalf of,
of and UBS
will report solely to, the Independent Committee, notwithstanding that UBS's fees and expenses will be
paid by the Company, and that certain covenants and representations and the obligations under the
Indemnification Agreement, are made by the Company herein.
Assignment Scope
As used in this Agreement, the term "Restructuring Transaction" means, whether effected
directly or indirectly, by the Company and/or through its affiliates and/or subsidiaries, any restructuring
of the Company's (and/or its affiliates' and/or subsidiaries') liabilities outstanding on the date of this
Agreement and listed on Annex A hereto (approximately US$5.1 billion principal amount), including,
without limitation, any exchange, conversion, repurchase, or repayment of any such liabilities, or any
modification, amendment, deferral, restructuring, recapitalization, rescheduling, moratorium, or
adjustment of the terms and/or conditions of any such liabilities, or a sale of all or substantially all of the
Company's
Company's assets,
assets, whether effectuated prior to or during the pendency of a bankruptcy or insolvency case.
Description of
ofServices
Services
On the terms and subject to the conditions of this Agreement, UBS will provide
I.
1.
the Independent Committee, upon request by the Independent Committee, the following financial
and market related advisory services:
(a)
advising and assisting the Independent Committee in reviewing, analyzing, structuring,
and negotiating the financial aspects of any Restructuring Transaction as follows:
0
advising and assisting the Independent Committee in reviewing, analyzing,
structuring, and negotiating the financial aspects of potential Restructuring
Transactions, including, but not limited to, debt to equity conversions, debt
maturity extensions, modifications to interest rates, and financial covenants of
debt obligations; and
...................................
(ii)
(b)
advising and attending meetings of the Independent Committee, the Company's
board of directors, creditor groups, official constituencies and other interested
parties as the Independent Committee determines to be necessary or desirable;
and
advising and assisting the Independent Committee in evaluating a plan of reorganization
or arrangement andfor
and/or analyzing any proposed plan, including assisting in the plan
plan
negotiation and confirmation process, and assisting the Company in connection with any
Restructuring Transaction.
Any advice and work product generated by UBS is intended to assist the Independent
Committee's counsel in connection with one or more Restructuring Transactions (as well as in connection
with any potential Proceeding, as defined in the attached Indemnification Agreement) and is intended and
shall be protected by the work product doctrine and attorney-client privilege.
Fees and Expenses
For UBS's services hereunder, the Company agrees to pay to UBS the following
2.
nonrefundable fees
fees (the
(the"UBS
"UBSFees'
Feesainsnik
subject
nonrefundable
1p cash,_s
the provisions
provisions hereof:
. tlaiecttotothe
To the extent that the Independent Committee wishes to expand UBS's mandate to include
additional services, UBS and the Independent Committee will discuss, and if mutually agreed, enter into a
separate agreement containing terms and fees customary for UBS regarding such additional services,
which may include, without limitation:
•__ F,i,..",,i'rx'7 atee:iiYiSk
-41
=7E9
-3assisting the Independent Committee and the Company in raising any financing,
including any debtor in possession, equity or other exit financing;
(ii)
assisting the Independent Committee in valuing the Company and/or, as
appropriate, valuing the Company's assets or operations (including on a going
concern or liquidation basis);
(iii)
providing expert advice and testimony regarding financial matters related to any
Restructuring Transaction or any other proceeding before the competent
bankruptcy or insolvency authorities (including after any sale of substantially all
the assets of the Company and including in connection with any Chapter 11 plan
of reorganization or Chapter 11 plan of liquidation or under similar Canadian
Bankruptcy Laws);
(iv)
assisting the Independent Committee in identifying and evaluating candidates for
potential sale
transactions involving any assets or operations of the Company,
salt transactions
effectuated either prior to, during the pendency of, or subsequent to
consummation of a bankruptcy or insolvency case, including advising the
Independent Committee in connection with negotiations and aiding in the
consummation of such sale transactions; and
(v)
undertaking a study to enable it to render an opinion (the "Opinion") with respect
to the fairness, from a financial point of view, to the Company as to the
consideration to be received by securityholders of the company pursuant to any
Restructuring Transaction
Transaction.. The nature and scope
scope of
of UB
CBS's
S's investigation,
investigation, as well
as the scope, form and substance of any such Opinion, shall be such as UBS may
consider appropriate. If such services are agreed to be provided, such opinion
would be addressed to the Independent Committee and, if requested, would be in
written form.
If a bankruptcy or insolvency cage
case is commenced, Men
then all of the remaining fees due hereunder
will be subject to the rules and procedures under the Bankruptcy Code or Canadian Bankruptcy Laws, the
Federal Rules of Bankruptcy Procedure, and applicable local rules, guidelines, and bankruptcy or
insolvency court orders under United States bankruptcy and insolvency laws, and other similar local rules
or guidelines under Canadian Bankruptcy Laws, each to the extent applicable.
If (x) no Restructuring Transaction Fee shall have been earned by UBS as of the expiration or
hereunder and
and (y)
(y) at
at any
any time
time during
during the
the 12.
12 months following such
termination of UBS's engagement hereunder
expiration or termination (the "Tail Period"), the Company consummates a Restructuring Transaction or
the Company enters into an agreement to effect a Restructuring Transaction which subsequently becomes
effective or is consummated, then the Company (or its bankruptcy estate) shall pay to UBS the
Restructuring Transaction Fee immediately
immediately upon
upon the
the closing
closing of
of stitch
such transaction.
transaction. The Independent
Committee and the Company agree not to object
object to
to LIBS's
UBS's request to the bankruptcy or insolvency court
and any appellate court to allow such fees, as long as such request is consistent with the terms of this
Agreement.
Whether or not any Restructuring Transaction is consummated, and in addition to any fees
payable to UBS, the Company shall reimburse
reimburse UBS,
UBS, upon
upon UBS's
UBS's request
request from.
from time to time, for all
reasonable expenses incurred by UBS in entering into and performing services pursuant to this Agreement,
including the reasonable fees, disbursements, and other charges of UBS's outside legal counsel, except as
contemplated by the Indemnification Agreement attached hereto.
E
-4
UBS will make a substantial commitment of professional time and effort hereunder, which may
foreclose other opportunities. Moreover,
the actual time and commitment required for the engagement
Ivloreover,tho
may vary substantially from time to time. In light of the numerous issues that may arise in engagements
such as this, UBS's commitment of the time and effort necessary to address the issues that will arise in
this engagement, UBS's expertise and capabilities that the Independent Committee will require in this
engagement, and the market rate for professionals of UBS's stature and reputation, the parties agree that
the fee
foe arrangement provided for herein is just and reasonable, fairly compensates UBS, and provides the
requisite certainty to the Independent Committee.
UBS's compensation and expense reimbursement in this Section 2 and payments made pursuant
to the indemnification
Indemnification and contribution provisions in the Indemnification Agreement attached hereto shall
be entitled to priority as administrative expenses under Sections 503 (b)(I)(A) and 507(4)(2)
507(a)(2) of the
Bankruptcy Code in any bankruptcy
bankruptcy case
case and/or•
and/or shall
shall be
be entitled
entitled to
to the
the protection of a court ordered
charge under Canadian Bankruptcy Laws.
It is understood and agreed that nothing contained herein shall constitute a commitment or
obligation by UBS or any of its affiliates to underwrite, place, or purchase any securities or to arrange or
provide any other form of financing.
-5from any and all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of
action, and liabilities related to
to the
the Independent
Independent CommitteeCommittee and
and the Company and/or the
engagement described in this Agreement.
Other
7.
Except to the extent required by court or similar order (after consultation with, and approval as to
form and substance by, LIES
(I) the name of UBS, (ii) any advice
UBS and its counsel), none of (i)
rendered by UBS to the Independent
Independent Committee
Committee (or
(or any
any Opinion
Opinion ifif provided
providedpursuant
pursuantto
lathe
the
father mutual
further
mutualagreement
agreementof
ofthe
theIndependent
Independent Committee
Committee and
and UBS),
UBS), or
or (iii)
(iii) the terms of this
Agreement or any communication from UBS in connection with the services performed by UBS
pursuant to this Agreement will be quoted, or referred to orally or in writing, or in the case of (ii)
and (iii), reproduced or disseminated, by the Independent Committee, the Company, or any of
their respective agents, without UBS's prior written consent.
8.
The Company shall furnish UBS (and, if negotiations proceed with a potential transaction party,
shall request that such transaction party furnish UBS) with such information as UBS believes
appropriate to its assignment (all such information so furnished being the "Information"),
"Information"). The
Independent Committee and the Company recognize and confirm that UBS (a) will use and rely
primarily on the Information and on information
infonnation available from generally recognized public
sources in performing the services contemplated by this Agreement without having assurd
responsibility for independently verifying the same, (b) does not assume responsibility f6r
far the
accuracy, completeness, or reasonableness of the Information and such other information, and (c)
will not make an appraisal of any assets or liabilities (contingent or otherwise) of the Company or
a potential transaction party. To the best of the Independent Committee's
Committee's arid
and the Company's
knowledge, the Information regarding the Company to be furnished by or on behalf of the
Company which is intended for the benefit of any current or potential investors in connection
with the transactions contemplated by this Agreement, when delivered, will be complete and
correct in all material respects and will not contain any untrue statement of material fact or omit
to state any material fact necessary to make the statements contained therein (in the aggregate)
not misleading in Light
light of
ofthe
the circumstances
circumstances under
under which
which such statements are made.
made, The
Independent Committee and the Company shall promptly notify UBS if the Company learns of
any material inaccuracy or misstatement in, or material omission from, any Information
previously delivered to UBS.
The Information the Company provides to UBS is used for the purposes of advising and guiding
Companyregarding
regarding certain
certain transactions
transactions subject
subject to
to this
this Agreement,
Agreement, UBS may request, and the
rn,the
24 `xtheCompany
Company shall provide, information and/or documents that UBS requires or deems appropriate in
UBS'ss compliance
connection with UBS'
compliance with
with the
the USA
USA Patriot
Patriot Act and other applicable law. The Independent
.
sue
At,PiMat-P:**
-6Committee and the Company agrees and acknowledges that UBS may
may share
share such information or
documents as necessary or appropriate
appropriate to
to comply
comply with applicable law.
PefecS to
to the
the senior management, facilities,
In addition, the Company will provide UBS
IRIS with
with access
employees, auditors
employees,
auditors and legal counsel
counsel and
and consultants
consultants of
of and
and to the Company which
which are
are reasonably
perform its
its services
serviceshereunder.
hereunder.
necessary and
and sufficient to allow LIDS
UBS totoperform
9.
UB
UBS's
S' $services
servicesunder
underthis
thisAgreement
Agreementshall
shall terminate
terminateupon
uponthe
the earlier
earlierof
of (i)
(i) either
either UBS or the
Company giving
giving the
the other
other party thirty
thirty (30)
(30) days prior written
written notice
notice at any time or (ii) the
payment by the Company to UBS
UBSof
ofthe
theRestructuring
RestructuringTransaction
Transaction Fee
Fee(the
(the"Termination
"Termination Date").
If this Agreement is so terminated,
terminated, UBS shall (a)
(a) be
be compensated
compensated as
as provided
provided herein
herein to the
Termination Date, provided that
that the
the Monthly
Monthly Advisory
Advisory Fees (including
(including any
any Initial
Initial Increment)
Increment)
shall be payable for at least six months
months from
from the date hereof; (b) be entitled
entitled to
to reimbursement
reimbursement as
provided in Section 22 of
of this
this Agreement
Agreementfor
for expenses
expensesincurred
incurred through
through the Termination Date; (c)
have no further
further obligations or responsibilities
responsibilities under
under this
this Agreement
Agreement after
after the
the Termination
Tetmination Date;
(d) have no liability
liability based
based in
in whole
wholeor
orin
inpart
part upon, arising out of,
of, or
or related to this Agreement,
including, without limitation, any failure
failure to
to complete
complete any services covered by this Agreement;
and (e) be paid all amounts withheld pursuant
pursuant to any order(s)
order(s) of the court(s) presiding over the
bankruptcy or
Sections I1(the
(thelast
lastparagraph),
paragraph), 2 (the penultimate
penultimate
bankruptcy
orinsolvency
insolvency proceedings. Sections
paragraph),
7, 8S (other
(other than
than the
the first
firstsentence
sentence thereof)
thereof) and
and 99 through
through 16
16 hereof shall remain in full
paragraph), 7,
force and effect regardless
regardless of
of such
such termination,
termination, For
For greater certainty, notwithstanding any such
termination described
described above,
above, UBS shall be
termination
be entitled
entitled to
to payment
payment in full
full of
ofthe
the Restructuring
Restructuring
Transaction
Transaction Fee set forth in Section 2(c)
2(c) ififat
at any
any time
timeduring
during the
the Term
Term and
and the Tail Period a
Restructuring Transaction
Restructuring
Transaction isis consummated
consummated or
or creditors
creditors of
of the Company agree to a plan of
reorganization or liquidation or
or the
the Company files a plan of
of reorganization
reorganization or
or liquidation or enters
into a letter of intent or any agreement that subsequently
subsequently results
results in
in aa Restructuring
Restructuring Transaction.
10.
TO.
UBS may,
may, at
at its own
own expense
expenseand
and after
after review
review of
of the
the announcement
announcement by the Company, place
UBS
customary tombstone announcements
announcements or
or advertisements
advertisements in
infinancial
financialnewspapers
newspapersand
andjournals
journals
describing its services
serviceshereunder,
hereunder, at
at any
any time
time after
after the
the earlier
earlier of
of the
the date
date that
that (a)
(a) aa Restructuring
Restructuring
Transaction has been consummated; or (b) the Company becomes
becomes aa debtor
debtor under Chapter
Chapter 11
11 of
the Bankruptcy Code or Canadian Bankruptcy Laws.
11.
11.
Independent Committee and
The Independent
and the
the Company
Company acknowledge
acknowledge and agree that
that UBS
UBS has been
retained to act solely as
as an
an advisor to the
the Independent Committee, and not as an advisor to any
other
other person,
person, and
and the
theIndependent
IndependentCommittee's
Committees engagement
engagement of
of UBS is not intended to confer
rights upon any person (including, without limitation, the Company, shareholders,
shareholders, employees,
employees, or
creditors of
of the
the Company)
Company) not
not aa party
partyhereto
heretoasasagainst
againstU135
UBS or UBS's affiliates,
creditors
affiliates, or
or their
respective directors,
directors, officers,
officers, employees,
employees, agents, successors, or
or assigns.
assigns. UBS shall act solely as
contractor under
underthis
this Agreement,
Agreement, and
and not
not in
in any
any other
other capacity
capacity including as a
an independent contractor
fiduciary or
or agent,
agent, and
andany
anyduties
dutiesarising
arisingout
outofofUBS's
BBS's engagement
engagement shall
shall be
be owed
owed solely to the
-fiduciary
Committee,
Independent Committee.
In rendering
rendering its
its services
services to the Company hereunder,
hereunder, UBS
UBS is not assuming any responsibility for
the Independent Committee's or the Company's
Company's underlying
underlying business
business decision to
to pursue
pursue or not to
pursue any business strategy or to effect or
or not to effect
effect any
any Restructuring
Restructuring Transaction,
Transaction. The
Independent Committee
Committee and
and the
the Company
Company agree
agree that
thatUBS
UBS shall not have any obligation or
Independent
responsibility to provide "crisis management" services for the Company or to provide any
solvency or
solvency
or fairness
fairness opinion
opinion in
in connection
connectionwith
withany
anyRestructuring
Restructuring Transaction,
Transaction,
'411,2i,trAritameskl iminsnicsaa=virip
r
12.
UBS Group AG (the parent of UBS) and its subsidiaries, branches, and affiliates (collectively, the
"UBS
are involved
involved in a wide range of commercial banking, investment banking and
"UBSGroup")
Grote) are
other activities (including investment management, corporate finance, securities issuing, trading,
and research) from which conflicting interests, or duties, may arise. Information which is held
elsewhere within UBS or within the UBS Group but of which none of the individuals in the
Investment Banking Department of UBS involved in providing the services contemplated by this
engagement actually has (or without breach of internal procedures can properly obtain)
knowledge, will not for any purpose be taken into account in determining UBS's responsibilities
Neither UBS nor any other part of the
to the Independent Committee under this engagement_
engagement. Neither
UBS Group will have any duty to disclose to the Independent Committee or the Company or
utilize for the Independent Committee or the Company's benefit any non-public information
acquired in the course of providing services to any other person, engaging in any transaction (on
its own account or otherwise), or otherwise carrying on its business. In addition, each of the
Company and the Independent Committee understand and acknowledge that, in the ordinary
course of business, UBS and its affiliates and their respective employees may trade the securities
of the Company and any potential party to a Restructuring Transaction for its own account and
for the accounts of customers, and may at any time hold a long or short position in such securities.
13.
The
Tice Independent
Independent Committee
Committee and
and the
the Company
Company agrees to the indemnification and other
agreements set forth in the Indemnification Agreement attached hereto, the provisions of which
are incorporated herein by reference mid
and shall survive the termination, expiration, or supersession
of this Agreement.
14.
THIS AGREEMENT AND ANY CLAIM, COUNTERCLAIM, OR DISPUTE OF ANY KIND
OR NATURE WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT ("CLAIM"), DIRECTLY OR INDIRECTLY, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
EXCEPT AS SET FORTH BELOW, NO CLAIM MAY BE COMMENCED, PROSECUTED,
OR CONTINUED IN ANY COURT OTHER THAN IN COURTS OF THE STATE OF NEW
YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (OR
DURING THE PENDENCY OF THE REORGANIZATION CASE, THE BANKRUPTCY
COURT OR THE CANADIAN COURT PRESIDING OVER CANADIAN BANKRUPTCY OR
INSOLVENCY PROCEEDINGS, AS APPROPRIATE), WHICH COURTS SHALL HAVE
EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS, AND
THE COMPANY AND UBS CONSENT TO THE JURISDICTION OF SUCH COURTS AND
PERSONAL SERVICE WITH RESPECT THERETO, THE COMPANY HEREBY
CONSENTS TO PERSONAL JURISDICTION, SERVICE, AND VENUE IN ANY COURT IN
WHICH ANY CLAIM ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT IS BROUGHT BY ANY THIRD PARTY AGAINST UBS OR ANY
INDEMNIFIED PARTY, EACH OF UBS AND THE COMPANY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT, OR OTHERWISE) IN ANY WAY ARISING OUT OF OR
RELATING TO THIS AGREEMENT. THE COMPANY AGREES THAT A FINAL
JUDGMENT IN ANY PROCEEDING OR COUNTERCLAIM BROUGHT IN ANY SUCH
COURT SHALL BE CONCLUSIVE AND BINDING UPON THE COMPANY AND MAY BE
ENFORCED IN ANY OTHER COURTS TO THE JURISDICTION OF WHICH THE
COMPANY IS OR MAY BE SUBJECT, BY SUIT UPON SUCH JUDGMENT.
15.
IS.
This Agreement (including the attached Indemnification Agreement) embodies the entire
agreement and understanding between the parties hereto and supersedes all prior agreements and
i
.1
-8understandings relating to the subject
subject matter
matter hereof.
hereof If any provision of this Agreement is
determined to be invalid or unenforceable in any respect, such determination will not affect such
full
provision in any other respect or any other provision of this Agreement, which
will remain in fill(
whin-1mill
force and
and effect.
affect This Agreement may not be amended
amended or
or otherwisemodified
othenvisemodifiedor
orwaived
waivedexempt
except by
an instrument in writing signed by UBS, the Independent
independent Committee, and the Company. This
Agreement
Agreentent may be executed intwa
intwo or
or more
more counterparts,
counterparts, each
each ofwhich
ofwhich shall
shall be
be deemed
deemed an
as
Original,
but all
all of
of which
which shall constitute one and the same Agreement
original, but
16.
I&
This Agreement shalt
Committee and the Company
shall be
he binding upon UBS and the Independent
Independent-Committee
and their respective successors
euccessOr and assigns and any successor or assign of any substantial portion
of the Company's
Compawys and UBS's respective businesses and/or assets or successor in
hi role to the
Independent Committee. In the event
that a Restructuring Transaction is effected
through an
effected-through
event-that
entity other than the Company, then the Company
Company shall
shalt cause
cause such
suchentity
entity to assume and honor,
jointly and severally with.
with the
ofthe
the Company,
Company, the obligations and liabilities of
the Company
Company hereunder,
including, without limitation,.
limitation, the
the Company's
Company's obligations
obligations and liabilities pursuant to provisions
concerning indemnification, contribution, and the Company's obfif,ution
to pay fees and to
ObtigatiOnto
reimburse expenses contained herein and in the attached Indemnification Agreement
If the foregoing correctly sets forth your understanding, please indicate your acceptance thereof
in
hi the space provided
provided below,
below, whereupon
whereupon this
this Agreetnentand
Ageetneotoad your acceptance shall constitute a binding
agreement between
betweenus_
us.
Very
-Very truly
truly yours,
MS
CANADAINC,
OBSSECURITIES
SECURITIES CANADA
MC, .
Br
By:
NAME:
NAME= C11ILB:
LILLE:
'11,auteinibi
Kscrif
v,
LE:
TITLE:
mp
MP
CAI-
Accepted and agreed to
to as
as of
of the
the date
date first
firstabove
abovewritten
writtenby
bythe
theCompany,
Company,atatthe
therequest
requestofelite
the
Independent Committee ofthe Board
Beard of Directors of the Company—
, •
PACIFIC
PACJPIC EXP
EMIL
TION /RODUCTION
RODUCT1ONCORPORATION.
CORPORATION.
Byt NA 4/1
NA
Michael
lego
Michael rralegu
Deputy General
GeneralCounsel
CounselBe
&
TUE Deputy
'an,
Secretary
Company Signature
Signature Date:
)Date:March
March1.G,
IG,2(116
2016
of Directorn of Pacific Exploration &Production
Corporation
Signaturo
D
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Annex A
(Outstanding Liabilities)
1. Approximately US$4.1 billion of senior notes outstanding
2. Approximately US$1.3 billion outstanding under credit agreements with Bank of America, N.A.,
HSBC
TISEC Bank
Bank USA,
USA, NA.
N.A.and
andBanco
BancoLatino
LatinoAmericana
Americana de
de Comercio
Comercio Exterior, S.A.
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4tUBS
413, UBS
UBS Securities
U135
Sect.IritiesCanada
Canada Inc.
Brookfield Place
Place
Street
P.O. Box 617, 161 Bay Street
Toronto, ONT
ONT M53
M5J 251
251
Toronto,
Tel +416-350-2201
Tel;
+416-350-2201
UBS SECURITIES CANADA INC. INDEMNIFICATION AGREEMENT
March 10, 2016
Private and Confidential
Gentlemen:
Ladies and Gentlemen;
UBS Securities Canada Inc. ("UBS") to advise and assist
In connection with the engagement of Ul3S
die board of directors of Pacific
the Independent Committee (the " Independent Committee") of the
Exploration &
& Production Corporation (the "Company") with the matters set forth in the Agreement,
Exploration
2016, between
between the
the Independent
Independent Committee,
Committee,the.
the Company and UBS
UM (the
dated March 10, 2016,
(the"Agreement"),
'Agreement"),
in the event that UBS becomes involved in any capacity
capacity M
in any claim, suit, action, proceeding,
investigation or inquiry, actual or threatened, (including, without limitation, any shareholder or derivative
action or arbitration proceeding) (collectively, a "proceeding") (i) in connection with or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any information provided to
any prov
prospective
transaction parties
parties by
by or
or on
on behalf
behalf of
of the
the Company
Company (which
(which shall be deemed to include the
active transaction
Company's public filings) or any omission or alleged omission to state therein a material fact necessary to
therein, in
in light
light of
of the
the circumstances
circumstancesunder
underwhich
whichthey
theywere
weremade,
mad; not misleading or
make the statements therein,
(ii) otherwise in connection with any matter in any way relating to or referred to in the Agreement or
arising out of the matters contemplated by the Agreement, including, without limitation, related services
and activities provided prior to the Effective Date of the Agreement, the Company agrees to indemnify,
from and against any losses, claims,
defend and hold UBS harmless to the fullest extent permitted by law, front
damages, liabilities and
and expenses
expenses in
in connection
connectionwith
withany
anymatter
matterininany
anyway
wayrelating
relatingtotoororreferred
referredtotoin_
in the
Agreement or arising out of the matters contemplated by the Agreement, including, without limitation,
related services and activities provided prior to the Effective Date of the Agreement, except in the case of
clause (ii) above only, to the extent that it shall be determined by a court of competent jurisdiction in a
judgment that has become final inthat it is no longer subject to appeal or other review that such losses,
claims, damages, liabilities and expenses resulted primarily from the gross negligence or willful
misconduct of UBS (including the gross negligence or willful misconduct of any UBS party entitled to
indemnification hereunder). In addition, in the event that UBS becomes involved in any capacity in any
Proceeding in connection with any matter in any way relating to or referred to in the Agreement or arising
out of the matters contemplated by the Agreement, the Company shall reimburse UBS for its reasonable
legal and other expenses (including the cost of any investigation and preparation) as such expenses are
in connection
incurred by UBS in.
connection therewith.
therewith. If
If such
such indemnification
indemnification were not to be available for any reason,
the Company agrees to contribute to the losses, claims, damages, liabilities and expenses involved (i) in
the proportion appropriate to reflect the relative benefits received or sought to be received by the
Company and its stockholders and affiliates and other constituencies, on the one hand, and UBS, on the
other hand, in connection with the matters contemplated by the Agreement or (ii) if (but only if and to the
extent) the allocation provided for in clause (i) is for any reason held unenforceable, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of
the Company and its stockholders and affiliates and other constituencies, on the one hand, and the party
patty
entitled to contribution, on the other hand, as well as any other relevant equitable considerations. The
Company agrees that for the purposes of this paragraph the relative benefits received, or sought to be
received, by the Company and its stockholders and affiliates and other constituencies, on the one hand,
and the party entitled to contribution, on the other hand, in connection with the matters contemplated by
the Agreement shall be deemed to be in the same proportion that the total value received or paid or
contemplated to be received or paid by the Company or its stockholders or affiliates and other
constituencies, as the case may be, as a result of or in connection with the matters (whether or not
consummated) for which UBS has been retained to perform financial services bears to the fees paid to
UBS wider
under the Agreement; provided that, in no event shall the Company contribute less than the amount
.UBS
necessary to assure that UBS is not liable for losses, claims, damages, liabilities and expenses in excess of
the amount of fees actually received by UBS pursuant to the Agreement. Relative fault shall be
determined by reference to, among other things, whether any alleged untrue statement or omission or any
other alleged conduct relates to information provided by the Company or other conduct by the Company
(or its employees or other agents), on the one hand, or by UBS, on the other hand. The Independent
Committee and/or the Company shall not settle any Proceeding in respect of which indemnity may be
sought hereunder, whether or not UBS
UBS is
is an
an actual
actual or
or potential
potential party
party to
to such
suchProceeding,
Proceeding,without
withoutUBS'
UBS'ss
prior written consent, which may not be unreasonably withheld, delayed or conditioned). For purposes of
this Indemnification Agreement, UBS shall include UBS Securities LLC, any of its affiliates, each other
person, if any, controlling UBS or any of its affiliates, their respective officers, current and former
directors, employees and agents, and the successors and assigns of all of the foregoing persons. The
foregoing indemnity and contribution agreement shall be in addition to any rights that any indemnified
party may have at common law or otherwise.
The Independent Committee and the Company agrees that neither UBS nor any of its affiliates,
directors, agents, employees or controlling persons shall have any liability to the Independent Committee
and/or the Company or any person asserting claims on behalf of or in right of the Independent Committee
and/or the Company in connection with or as a result of either
either UBS1s
UBS's engagement under the Agreement
or any matter referred to in the Agreement, including, without limitation, related services and activities
provided prior to the Effective Date of the Agreement, except to the extent that it shall be determined by a
court of competent jurisdiction in a judgment that has become final in that it is no longer subject to appeal
or other review that any losses, claims, damages, liabilities or expenses incurred by the Independent
Committee and/or the Company resulted primarily from the gross negligence or willful misconduct of
UBS (including the gross negligence or willful misconduct of any UBS party entitled to indemnification
hereunder) in performing the services that are the subject of the Agreement.
Promptly after its receipt of notice of the commencement of any Proceeding, UBS will, if a claim
in respect thereof is to be made against it pursuant to the Agreement, notify the Company in writing of the
commencement thereof; but omission to so notify the Company will not relieve the Company from any
liability that the Company may have to UBS, except its obligation to indemnify for losses, claims,
damages, liabilities or expenses to the extent that the Company suffers substantial prejudice as a result of
such failure or delay, as determined by a court of competent jurisdiction in a judgment that has become
final in that it is no longer subject to appeal or other review, but will not relieve the Company from its
obligation to provide reimbursement of expenses and any liability that the Company may have to UBS
otherwise than under this agreement. If the Company so elects, the Company may assume the defense of
such Proceeding in a timely manner, including the employment of counsel (reasonably satisfactory to
UBS) and payment of expenses, provided, that the Company permits UBS and counsel retained by UBS
at its own expense to participate in such defense. Notwithstanding the foregoing, (i) in the event the
Company fails promptly to assume the defense and employ counsel reasonably satisfactory to UBS, UBS
may employ separate counsel (in addition to any local counsel) to represent or defend UBS
CBS in such
disbursements of
of such
such separate
separate counsel
counsel as
Proceeding, and the Company will pay the reasonable fees and disbursements
incurred, and (ii) unless otherwise agreed by UBS, the Company shall not be entitled to assume the
defense of any Proceeding (x) for which UBS reasonably determines, after receipt of advice of counsel,
that there exist actual or potential conflicting interests between the Company or its counsel and UBS, or
(y) that is commenced in connection with any reorganization or liquidation under the Bankruptcy Code
(as defined in the Agreement), Canadian bankruptcy or insolvency proceeding under Canadian
Bankruptcy Law or similar proceedings involving the Company; provided, however, that the Company
will not, in connection with any one such Proceeding, or separate but substantially similar Proceedings
arising out of the same general allegations, be liable for reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel).
THIS INDEMNIFICATION AGREEMENT AND ANY CLAIM, COUNTERCLAIM OR
DISPUTE OF ANY KIND OR NATURE WHATSOEVER ARISING OUT OF OR IN ANY WAY
RELATING TO THIS AGREEMENT ("CLAIM"), DIRECTLY OR INDIRECTLY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. EXCEPT AS SET FORTH BELOW, NO CLAIM MAY BE COMMENCED,
PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN THE COURTS OF THE STATE
OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (OR DURING THE
PENDENCY OF THE REORGANIZATION CASE, THE BANKRUPTCY COURT), WHICH COURTS
SHALL HAVE EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS,
AND THE COMPANY AND UBS CONSENT TO THE JURISDICTION OF SUCH COURTS AND
PERSONAL SERVICE WITH RESPECT THERETO, THE COMPANY HEREBY CONSENTS TO
PERSONAL JURISDICTION, SERVICE AND VENUE IN ANY COURT IN WHICH ANY CLAIM
ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT IS BROUGHT BY ANY
THIRD PARTY AGAINST UBS OR ANY INDEMNIFIED PARTY. EACH OF UBS AND THE
COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING OR CLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR IN ANY
WAY RELATING TO THIS AGREEMENT. THE COMPANY AGREES THAT A FINAL
JUDGMENT IN ANY PROCEEDING OR CLAIM ARISING OUT OF OR IN ANY WAY RELATING
TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT SHALL BE CONCLUSIVE AND
BINDING UPON THE COMPANY AND MAY BE ENFORCED IN ANY OTHER COURTS TO THE
JURISDICTION OF WHICH THE COMPANY IS OR MAY BE SUBJECT, BY SUIT WON SUCH
JUDGMENT.
The foregoing Indemnification Agreement shall remain in full force and effect notwithstanding
any termination of UBS's engagement. This Indemnification Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same
agreement.
Very truly yours,
The Company, at the request of the Independent Committee of the Board of Directors of the Company —
PACIFIC EXPLORATI & PRODUCTION
CORPORATION
y:
NAME: -Michael Galego
TITLE: Deputy General Counsel & Secretary
I
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Acknowledged and agreed to with effect from the
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written:
date first -above
Chair
theIndependent
IndependentCoIntnittee
Committee of
of the
the Board
Mir ofofthe
of Directors
of Pacific Exploration
Exploration S4
& Production
Directov ofilacific
Corporation
Signature
By:
Date: '
Date:
NAME:
Accepted and agreed to as of
the date first above written:
DES
UBS SECURITIES CANADA INC.
By:
By:
NAME:
NAME;
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This is Exhibit "C-8"
referred to
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in the
of Peter
Peter Volk
Volk
Affidavit of
sworn before me, this 27th day
April, 2016
of April,
2016
A Commissioner
for taking
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Commissioner for
CANDMS:
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EFT
CONSULTING
CONSULTING
0T1
ID1 Consulting, Inc.
Inc.
2001ROSS
Ross Avenue
2001
Avenue
Suite 400
Dallas, TX
TX 75201
75201
Dallas,
214.397,1600
214.397,1600 telephone
telephone
214.397.1790 facsimile
facsmule
214.397.1790
wn.lticonsulling.com
www.fticonsulting.vam
PRIVILEGED AND CONFIDENTIAL
December 7, 2015
Damian S. Schaible
Partner
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Re: Pacific Exploration & Production
Dear Mr. Schaible:
1. Introduction
'[his
This letter
letter confirms
confirms the
the engagement
engagement (the
(the "Engagement")
"Engagement") of
of FT1
FTI Consulting, Inc. ("FTI" or "we" or
"our") by Davis Polk & Wardwell LLP ("Davis Polk" or "you" or "your"), to provide certain
financial advisory and consulting services (the "Services") in relation to Davis Polk's representation
Bank of America, National Association, in its capacity as administrative agent (the
of
"Administrative Agent") under the Revolving Credit and Guaranty Agreement, dated as of April 30,
2014 (as amended, restated or otherwise modified from time to tune,
time, the "Credit Agreement"), among
Pacific Rubiales Energy Corp. (predecessor entity to Pacific Exploration & Production Corp.) (the
"Company"), the Administrative Agent and the lenders party thereto from time to time (the "Lending
Group").
Group"), We understand that we will be working solely for and at the direction of Davis Polk to
assist Davis Polk and its client in matters related to the Credit Agreement and that the Services will be
provided solely for Davis Polk and not for the Company, any of its principals or any holder of debt
(other than the Lending Group) or equity of the Company or any other party,
party. This letter of
engagement and the related Standard Terms and Conditions constitute the engagement contract (the
"Engagement Contract") pursuant to which the Services will be provided,
provided.
2. Scope of Our Services
The Services, to be performed at your direction, are expected to include the following, including with
respect to any exchange, liability management exercise, financing, restructuring transaction, or
potential litigation:
•
•
•
M87937705v8
#879377050
Review the Company's business plan and any related financial projections provided by
Company's management and the related assumptions;
Review the Company's short and medium term cash flow forecast;
Assess the nature and value of the Company's assets;
WW:VAP
';'P1004:4
•
-1 5
1
Damian S. Schaible
Davis Polk & Wardwell LLP
December 7, 2015
Review and analyze the Company's total indebtedness;
Analyze the Company's reserve report based upon the current strip pricing for crude oil
and natural gas;
• Reconcile the management reserve report to the business plan and cash flow forecast;
• Review the Company's capital expenditure plan and reconcile to the business plan and
cash flow forecast;
• Provide technical review of the development plan, including the assistance of FTI Platt
Sparks, as requested;
• Sensitize the business plan, cash flow projections and other projections for the movement
in
iu commodity prices, capital expenditures and cost adjustments;
• Develop strategic alternatives and advise the Lending Group on available options;
with Davis
Davis Polk
Polk and
and the
the Administrative
Administrative Agent in any negotiations with the
• Participate with,
Company and/or their various stakeholders;
• If necessary, assist the Lending Group in the development of a debtor-in-possession
financing proposal including the amount, terms and conditions;
• Advise the Lending Group on potential or proposed asset dispositions;
• Review the Company's present and prospective compliance with financial covenants
under the Credit Agreement;
• Review the Company's present and prospective compliance with financial incurrence and
maintenance tests under the Company's outstanding unsecured senior bonds;
• Review such aspects of the Company's financial reporting as may be requested; and
▪
• Perform any other services as may be mutually agreed to by FTI,
FT!, Davis Polk and the
Administrative
Administrative Agent.
Agent
•
•
The Services may be performed by FTI or by any subsidiary of FT[, as FTI may determine, FTI may
also provide Services through its or its subsidiaries' agents or independent contractors; provided,
however, that (i) no such subsidiaries, agents or independent contractors shall have any right to
compensation under the Engagement Contract; (ii) FTI
FT! shall not be entitled to any additional
compensation for the use of subsidiaries, agents or independent contractors; (iii) FTI shall notify and
consult with Davis Polk prior to delegating work to agents or independent contractors; and (iv) FTI
acknowledges and agrees that Charles W.
W. Carroll,
Carroll, Sanjeev
Sanjeev Khernlani,
Khenilani, and
and Sam
Sam Aguirre
Aguirre will
will be the
individuals at FTI with primary responsibility for the Services to be provided pursuant to the
Engagement Contract. References herein to FTI and its employees shall be deemed to apply also,
unless the context shall otherwise indicate, to employees of each such subsidiary and to any such
agents or independent contractors and their employees,
employees.
The Services, as outlined above, are subject to change as mutually agreed between us and the
Administrative Agent.
In order for us to provide the Services, it will be necessary for our personnel to have access to certain
books, records and reports of the Company and to have discussions with its personnel.
3. Privileged and Confidential Work Product
We understand that FTI will act at the direction of and under the supervision of attorneys at Davis
performing legal
legal services for the
Polk, to assist such attorneys in rendering legal advice and performing
.2,
(187937705
v8
f87937705v8
Damian S. Schaible
Davis
Davis Polk
Polk &
&Wardwell
WardwellLLP
UP
December 7, 2015
Administrative Agent. We will submit our evaluations and analyses to Davis Polk and the
Administrative Agent in periodic oral or written reports, Written reports, memoranda or status
summaries that we prepare under the Engagement Contract will he maintained in accordance with our
retention procedures and shall be prominently labeled "Privileged and Confidential; Attorney Work
Product," Except as may be required by law, regulation or valid judicial or administrative process,
and subject to section 4.1 of the Standard Terms and Conditions, we will not disclose to anyone,
without prior written authorization from Davis Polk, the content of any oral or written confidential
communication received during the course of the Engagement or any information gained from the
inspection or review of any records or documents provided by you that are identified as confidential,
confidential.
4. Fees and Limitation of Liability
Fees in connection with the Engagement will be based upon the following:
-a//87937705va
//87937705v$
Damian S. Schaible
8r. Wardwell LLP
Davis Polk &
December
7,2015
December 7,
2015
In addition to the fees outlined above, FT1
FTI will
will bill for reasonable direct and documented expenses
which are incurred on your behalf during this Engagement. Direct expenses include reasonable and
customary out-of-pocket expenses which are billed directly to the Engageinent such as certain
telephone, overnight mail, messenger, travel, meals, accommodations and other expenses specifically .
related to this Engagement. All
MI direct expenses will be billed at actual costs.
Unless directed by you to the contrary, we will submit to the Company, on a regular basis, invoices
payable upon receipt, for our fees and expenses incurred in connection with the Engagement, with
copies provided to the Administrative Agent. It is our understanding that all invoices will be paid by
the Company.
Cotnpany. It is also our understanding, however, that the payment of our invoices will ultimately
be the responsibility of the Administrative Agent in the event that the Company fails or refuses to pay
such invoices (or if any payments are made but are subsequently avoided or disgorged). We
understand that the Administrative Agent has the right under the Credit Agreement to be reimbursed
by the Company for any invoices paid by the Administrative Agent and also to be reimbursed by the
Lending Group for at least their pro rata share of any invoices paid by the Administrative Agent;
nothing herein is intended to limit those reimbursement rights or any other rights of the
Administrative Agent under the Credit Agreement or applicable law. We will repay all amounts paid
by the Administrative Agent to the extent the Company subsequently remits payments to us.
In no event shall Davis Polk be liable for any invoices, fees, expenses, lost profits, damages or any
other amount in connection with the Engagement. Without limiting the generality of the foregoing,
we acknowledge that Davis Polk is providing no indemnity or any other similar type of undertaking
to us or otherwise for our benefit in connection with the Engagement. FTI reserves the right to
immediately stop work should the Administrative Agent fail to pay our outstanding fees and expenses
within a reasonable period of time of being notified of the Company's failure to pay.
In addition, if FT1
and/or any
any of
of its
its employees are subpoenaed as a result of any work performed for
FTI and/or
you in connection with the Engagement or any FT1
FTI employee is required to testify in connection with
any judicial or administrative proceeding relating to this matter, Fri
Ell will be
he compensated at its
regular hourly rates and reimbursed for reasonable direct and documented expenses (including
reasonable outside counsel fees and expenses) with respect thereto.
All
Ail amounts due to us will be billed and paid in United States dollars, free arid
and clear of all local taxes
including any withholding
withholding or
or similar
similar tax„
tax.
5. Terms and Conditions
The attached terms and conditions set forth the duties of each party with respect to the Services.
Further, this letter and the Standard Terms and Conditions attached comprise the entire Engagement
Contract for the provision of the Services to the exclusion of any other express or implied terms,
whether expressed orally or in writing, including any conditions, warranties and representations, and
supersede all previous proposals, letters of engagement, undertakings, agreements, understandings,
correspondence and other communications, whether oral or written, regarding the Services.
-4#8793710514
M937705.4
Damian S. Schaible
Davis Polk & Wardwell LLP
December 7, 2015
6. Conflicts of Interest
Based on the list of interested parties (die "Potentially Interested Parties"), provided by you, we have
undertaken a limited review of our records to determine FTI's professional relationships with the
Company. From the results of such review, we were not made aware of any conflicts of interest or
relationships that we believe would preclude us from performing the Services.
As you know, however, we are a large consulting firm with numerous offices and affiliates
throughout the United States. We are regularly engaged by new clients, which may include one or
more of the Potentially Interested Parties. We will not knowingly accept an engagement that directly
conflicts (under legal principles of conflicts of interest for consulting firms) with this Engagement
without the Administrative Agent's prior written consent If any such conflicts arise, we will advise
Davis Polk and the Administrative Agent as promptly as possible.
7, Acknowledgement and Acceptance
Please acknowledge your acceptance of the terms of the Engagement Contract by signing both the
confirmation below and the attached Standard Terms and Conditions and returning a copy of each to
us at the above address.
If you have any questions regarding this letter or the attached Standard Terms and Conditions, please do
not hesitate to contact Chuck Carroll at (214) 397-1603.
Yours faithfully,
FTI CONSULTING, INC.
By:
US,
Charles W. Carroll
Senior Managing Director
Attachment — As stated
1/87937705v8
Damian S. Schaible
Davis Polk & Wardwell LLP
December 7, 2015
Confirmation of Terms of Engagement
Consulting, the,
Inc, upon
upon the
the terms
terms se(
set forth hereini
and in
in the
the attached
engage Fri
Fri Consulting,
burein and
We agree to engage
Standard Terms and Conditions.
ardwell LLP
Davis Po & Wardwell
By'
By:
Damian S. Schaible
Partner
Patti e
Date:
[001//C—
Acknowledged byt
by;
N.A.
Bank of America, N.A.
By:
Edna A. Mitchell
Director
Date;
Acknowledged by:
Pacific Exploration and Production Corp.
By:
Name:
Title;
Titio:
Date:
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Confirmation of
of Standard
Standard Terms and Conditions
We agree
engageFTC
FTE Consulting,
Consulting, Inc.
Standard Terms
Terms and
and Conditions
Conditions
agree to engage
Inc. upon the terms set forth in
in these
these Standard
as outlined
outlined above.
as
above,
Davis Polk
Polk &
& Wardwell
Wardwell LLP
By:
Damian S. Schaible
Partner
Date:
Acknowledged by:
Bank
of Ame
Amer•
Bank of
By:
Edna A
Edna
A
Director
Date;
Date:
peC, 14,2-015
/4 r2+0/5Pec,
Acknowledged by:
Pacific Exploration and
and Production
ProductionCorp_
Corp.
By:
Name:
Title:
Date:
//879377050
1187937703y8
Confirmation of Standard Terms and Conditions
We agree to engage FTI Consulting, Inc. upon the terms set kith in these Standard Terms and Conditions
as outlined above.
Davis Polk & Wardwell LLP
By:
Damian S. Schaible
Partner
Date:
Acknowledged by:
Bank of America, N.A.
By:
Edna Aguilar Mitchell
Director
Date:
Acknowledged by:
P .oduction Corp.
Date:
IP3793770Sv8
41,$.04wgRwi
FTI CONSULTING, INC.
STANDARD TERMS
TERMS AND
AND CONDITIONS
CONDITIONS
STANDARD
The following are the Standard Terms and Conditions on which we will provide the Services to you set
forth within the attached letter of Engagement with Damian S. Schaible, Davis Polk & Wardwell LLP,
dated December 5, 2015 (the "Engagement Letter"). The Engagement Letter and the Standard Terms and
Conditions (collectively, the "Engagement Contract") form the entire agreement between us relating to
the Services and replace and supersede any previous proposals, letters of engagement, undertakings,
agreements, understandings, correspondence and other communications, whether written or oral,
regarding the Services.
Services, The headings and titles in the Engagement Contract are included to make it easier
to read but do not form part of the Engagement Contract, Capitalized terms used herein but not defined
herein shall have the meanings ascribed to such terms in the Engagement Letter.
Reportsand
andAdvice
Advice
I. Reports
1.
advicegiven
givenororreport
reportissued
issuedby
byus
usisis provided
provided solely
1.1 Use and
and purpose
- Any
purposeof
ofadvice
adviceand
andreports
reports
- Anyadvice
for the use and benefit of Davis Polk, the Administrative Agent or members of the Lending Group
respect of
of which
which the Services arc provided. Unless
and only in connection with the purpose
purpose in respect
required by law, or as otherwise provided in Clause 4.3 of the Standard Terms and Conditions, Davis
Polk or the Administrative Agent shall not provide any advice given or report issued by us to
td any
third party or refer to us or the Services without our prior written consent, which shall not
unreasonably be withheld. It is understood and agreed that "third party" does not include members of
the Lending Group or other holders of Company debt who arc
are patty to a common interest and
confidentiality agreement with the Administrative Agent and members of the Lending Group
("Common Interest Parties"), and that such parties can receive copies of our reports. In no event,
regardless of whether consent has been provided, shall we assume any responsibility to any third
party to which any advice or report is disclosed or otherwise made available, and shall be conditioned
on the execution of
or a third party release letter in
in the
the form
form provided
provided by
by FTI.
FIT
Informationand
andAssistance
Assistance
2. Information
data--While
Whileour
ourwork
work may
may include
include an
an analysis
analysis of
of financial and
2.1 No
No assurance
assurance on financial
2.1
financial data
accounting data, the Services will not include an audit, compilation or review of any kind of any
financial statements or components thereof. Company management will be responsible for any and
all financial information they provide us during the course or
of the Engagement, and we will not
examine or compile or verify any such financial information,
information. Moreover, the circumstances of the
Engagement may cause our advice to be limited in certain respects based upon, among other matters,
the extent of sufficient and available data and the opportunity for supporting investigations in the time
period. Accordingly, as part of the Engagement, we will not express any opinion or other form of
assurance on financial statements of the Company.
theevent
eventthe
theServices
Servicesinvolve
involve prospective
prospective financial
financial
2.2 Prospective
Prospective financial information
information--InInthe
2.2
information, our work will not constitute an examination or compilation, or apply agreed-upon
procedures, in accordance with standards established by the American Institute of Certified Public
Accountants, or otherwise, and we will express no assurance of any kind on such information. There
will usually be differences between estimated and actual results, because events and circumstances
frequently do not occur as expected, and those differences may be material. We will take no
481937705v8
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ievability of
of results
results or
or events
events projected
projected or
or anticipated
anticipated by
by the
the management of
responsibility for the ach
achievability
the Company.
Services
Additional Services
3. Additional
3.
Responsibility
for
other
parties
- You and Agent shall be solely responsible for
for other
parties
- You
and the Administrative
3.1 Responsibility
the work and fees of any other party engaged by you or the Administrative Agent to provide services
in connection with the Engagement regardless of whether such party was introduced to you or the
Administrative Agent by us. Except as provided in the Engagement Contract, we shall not be
responsible for providing or reviewing the advice or services of any such third party, including advice
as to legal, regulatory, accounting or taxation matters, Further, we acknowledge that we are not
authorized under our Engagement Contract to engage any third party to provide services or advice to
you, other than our agents or independent contractors engaged to provide Services, without your and
the Administrative Agent's written authorization.
Confidentiality
4.
4. Confidentiality
4,1Restrictions
Restrictions
on confidential
All parties (you and
— the Administrative Agent, on the
4,1
on confidential
information —information
one hand, and FTI, on the other hand) agree that any confidential information received from the other
party shall only be used for the purposes of providing or receiving Services under the Engagement
Contract. Except as provided below, no party to the Engagement Contract will disclose the other
party's confidential information to any third party without the other party's consent. Confidential
information shall not include information that:
4.1.1
is or becomes generally available to the public other than as a result of a breach of an
obligation under this Clause 4.1;
4.1.2
4,1.2
is acquired from a third party who, to the recipient party's knowledge, owes no obligation
of confidence in respect of the information; or
4.1.3
is or has been independently developed by the recipient,
Disclosing
confidential
information
- Clause 4.1 above, any party to the
confidential
information
- Notwithstanding
4.2 Disclosing
Engagement Contract will be entitled to disclose confidential information of the other to a third party
to the extent that this is required by valid legal process, or to such party's examiners or regulators,
provided that (and without breaching any legal or regulatory requirement) where reasonably
practicable not less than 2 business days' notice in writing is first given to the other party, it being
understood that if 2 business days' notice is not reasonably practicable, the party shall use reasonable
efforts to provide as much advance notice as possible to the other party, and the other party has an
opportunity to object to disclosure, including on the grounds that the confidential information is
privileged.
4.3 Disclosing
Disclosing
confidential
information
the - Lending
GroupClause
- Notwithstanding
Clause 1.1
confidential
information
to the Lendingto
Group
Notwithstanding
1.1 or 4.1
above, any party to the Engagement Contract will be
he entitled to disclose FTI's
EFI's advice and written
reports to other members of the Lending Group or Common Interest Parties, so long as such parties
agree not to distribute such information other than to members of the Lending Group or Common
Interest Parties without the prior written consent of the parties to the Engagement Contract. Further,
upon execution of a non-reliance agreement reasonably satisfactory to FTI, prospective assignees may
be provided written reports produced
produced by
by FT1
FYI under
under the
the Engagement
Engagement Contract,
Contract You and the
-2#57937705v8
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Administrative Agent are also permitted to disclose FTI's advice and written reports to any Bank of
America affiliate or subsidiary.
reviews —Notwithstanding the above, we may disclose any information referred to
quality reviews
4.4 Internal quality
in tins
this Clause 4 to any other FTI entity not subject to an ethical wall or use it for internal quality
reviews.
prejudice to
to Clause 4.1 and Clause 4.2 above, to the extent our
4.5 Citation of engagement - Without prejudice
engagement is or becomes known to the public, we may cite the performance of the Services to our
clients and prospective clients as an indication of our experience, without reference to the
Administrative Agent specifically or to any particular outcome or result unless the Administrative
Agent specifically agrees otherwise in writing.
4.6 Maintenance of workpapers - Notwithstanding the above, we may keep one archival set of our
working papers from the Engagement, including working papers containing or reflecting confidential
information, in accordance with our professional standards and internal policies.
Termination
5. Termination
5.1 Termination of Engagement with notice — Any party to the Engagement Contract (you, the
Administrative Agent or FTI}
FTI) may terminate the Engagement Contract for whatever reason upon
written notice to the other party,
wilt stop all work immediately. All
party. Upon receipt of such notice, we will
fees and expenses incurred by us through the date the termination notice is received will continue to
be payable as provided in Clause 4 of the Engagement letter.
letter,
5.2 Continuation of terms - The terms of the Engagement that by their context are intended to be
performed after termination or expiration of the Engagement Contract, including but not limited to,
Clauses 3 and 4 of the Engagement letter, and Clauses 1.1, 4, 6 and 7 of the Standard Term and
Conditions, are intended to survive such termination or expiration and shall continue to bind all
parties.
6.
6, Liability Limitation
Limitation and
and 'Waiver
Waiver of Jury Trial
determined by
by aa court
can't of competent jurisdiction
61
6.1 Limitation
Limitationof
ofliability
liability - Except to the extent Finally determined
to have resulted from its own willful misconduct, gross negligence or fraudulent behavior, neither
anyof
ofits
itssubsidiaries,
subsidiaries, affiliates,
affiliates, officers,
officers, directors,
directors, principals,
principals, shareholders, agents,
FT], nor any
FTI,
independent contractors or employees, shall be liable to you, the Administrative Agent or any other
party as a result of your retention of FT1,
FTI, the execution and delivery of the Engagement Contract; the
provision of Services or other matters relating to or arising from the Engagement Contract, whether
a claim be in tort, contract or otherwise:
6,1.1
For any
any amount
amount in
in excess
excess of the total professional fees paid to Ell
FTCby
bythe
theCompany
Company and/or
andtor
61.1 For
the Administrative Agent under the Engagement Contract; or
6.1.2 For any consequential, indirect, lost
lost profit
profit or
or similar
similar damages
damages relating
relating to
to FT1's
FTI's Services
provided under this Engagement Contract.
-3PS793770514
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the generality
generality of
of the
the foregoing,
foregoing, FTC
FIT will
Without limiting the
will be deemed an agent of the Administrative
Agent for the Services performed by FTI under the Engagement Contract, and will be entitled to the
benefits of any and all liability limiting provisions of the Credit Agreement.
—TOFACILITATE
FACILITATEJUDICIAL
JUDICIALRESOLUTION
RESOLUTION AND
AND SAVE TIME
WAIVEROF
OFJURY
JURY'TRIAL
TRIAL—TO
6.2 WAIVER
AND EXPENSE, YOU, THE ADMINISTRATIVE AGENT AND FTI IRREVOCABLY AND
UNCONDITIONALLY AGREE NOT TO DEMAND A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE SERVICES
OR ANY SUCH OTHER MATTER.
TheEngagement
EngagementContract
Contractshall
shallbe
begoverned
governedby
byand.
and interpreted
Law and
andJurisdiction
Jurisdiction—
—The
7. Governing Law
in accordance with the laws of the State of New York, without giving effect to the choice of law
provisions thereof. The United States District Court for the Southern District of New York and the
Courts of
of the
the State
Stag of New York sitting in the Borough of Manhattan, City of New York
appropriate Courts
shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning the
Engagement Contract and any matter arising from it, The parties submit to the jurisdiction of such
Courts and irrevocably waive any right they may have to object to any action being brought in these
Courts, to claim that the action has been brought in an inconvenient forum or to claim that those
Courts do not have jurisdiction.
venture,
8. Independent Contractor — This Engagement Contract does not create a partnership, joint venture,
agency relationship or any other form of legal association among the parties that would impose
liability upon one party for the act or omission of any other party. None of the parties shall have the
right, power or authority (express or implied) to legally bind or commit any other party to any
contract, duty or other obligation. The parties intend that an independent contractor relationship will
be created by this Engagement Contract. As an independent
independent contractor,
contractor, FT!
FT' will be solely responsible
and operation of its business, including hiring and paying the wages and other
for the management arid
compensation of all its employees and agents, and paying all bills,
bills, expenses
expenses and other charges
incurred or payable with respect to the operation of its business. Employees of FTI will not be
entitled to receive from Davis Polk, the Administrative Agent or any Lender any vacation pay, sick
workers'compensation,
compensation, disability,
securitybenefits,
benefits,workers'
disability,
leave, retirement,
retirement, pension
pension or
orsocial
socialsecurity
benefits. F11
FTl will be solely responsible for
unemployment insurance benefits or any other employee benefits,
other taxes incurred in connection with the operation and
all employment, withholding, income and oilier
conduct of its business,
business. FTI will
will comply
comply with
with all
all applicable
applicable .federal,
federal, state and municipal laws,
regulations, codes, ordinances and orders in performing the services described in this Engagement
Contract
Contract.
9. Attorney Work
Weunderstand
understandthat
that our
our work
work will
will be
be done
done at the direction of Davis Polk
Work Product
Product—
—We
to assist Davis Polk in rendering legal advice to the Administrative Agent, and that work performed
by us as part of the engagement, including, without limitation, any written evaluations and analyses,
or any other findings or summaries we prepare, may be privileged and confidential and may be
deemed to constitute attorney work product which we (a) will prominently label "Privileged and
Confidential; Attorney Work Product; Prepared at the Direction of Counsel" (provided that the failure
he deemed to be a waiver of any applicable privileges or doctrines) and
to affix such label shall not be
(b) will
will not disclose to any other third party (other than Davis Polk or the Administrative Agent)
except at the written direction of Davis Polk or otherwise in accordance with the terms hereof.
Specifically, FTI's work contemplates services of the character and quality that would be a necessary
adjunct to Davis Polk's services as counsel to the Administrative Agent. We understand that any
documents prepared or obtained by us are prepared or obtained solely for the use and benefit of Davis
.41157937705v/1
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•
Polk in connection with its representation of the Administrative Agent, and are subject to Davis
Polk's right to request that they be delivered into their possession at any time they are still in our
possession.
Limitation ofofthe
In no
no event
event shall
shall Davis Polk be liable to FTI
MI for
for fees,
fees, expenses,
expenses, lost profit,
10. Limitation
theFirm
Firm—
— In
damages or any other amount in respect of this engagement, the Engagement Contract or FTI's
services hereunder.
— This
This Engagement
Engagement Contract
Contract shall
shall not
not be assignable by FTI without the prior written
IL Miscellaneous
Miscellaneous —
11.
consent of Davis Polk and the Administrative Agent, is intended to be solely for the benefit of the
parties hereto, and is not intended to confer any benefits upon, or create any rights in favor of, any
or any
any provision
provision
person other than the parties hereto, This Engagement Contract may not be amended or
hereof waived or modified except by an instrument in writing signed by each of the parties hereto,
hereto.
This Engagement Contract may be executed in any number of counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one agreement. Delivery of an
executed counterpart of a signature page of this Engagement Contract by facsimile, email or other
transmission shall be effective as delivery of a manually executed counterpart hereof
FTI CONSULTING,
CONSULTING,INC.
NC.
-6178793770.5v8
Ii87937705v8
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SCPAIA F
SCHAIBLE
9148352629
12/1112815 11:15
12/11/2015
11:15 9148352629
PAGE B1/91
Confirmation of
Confirmation
ofStandard
Standard Terms and
and Conditions
We agree to engage
engage Fit
FT1ConsultingConsulting.Inc,.
Inc. upon the terms
terms set
set forth
forth in these Standard
Standard Terms
Terms and
and Conditions
Conditions
as outlined
outlined above.
as
Davis P
41t. Wardwenr-IP
13y:
at slant 5- Sella:Me
Partner
PateDate-
1:270(
Acknowledged by:
Bank of
N.A.
Bank
of America_.
America:NA.
By:
Edna
Aguilar Mitchell
Mitchell
Edna Aguilar
Director
Date:
Acknowledged by:
Pacific
pacific Exploration
Explorationand
andProduction
ProductionCorp_
CowBy:
Name:
Name::
Title:
Date:
-e.819:177050
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Damian S. Schaible
Davis Polk & Wardwell LLP
December 10, 2015
Confirmation of Terms of Engagement
We agree
agree to engage
engage FTI
PT1Consulting,
Consulting,Inc.
Inc.upon
uponthe
theterms
termsset
setforth
forth herein
herein and
and in the
the attached
Standard
and Conditions,
Standard Terms and
Davis Polk & Wardwell LLP
By:
By;
Damian S.
S, Schaible
Partner
Date:
Acknowledged by:
hy;
Bank
• el N.A.
BankofofAme
Ameri
tesehtsoir'
ialedigair•
apad
,0111641
1ZAVAM
441.1...driOhell
Edn':. 4ratir
firrrehei
Direotor
Director
Date:
UPC.
111,2-01sDec /6420C
Acknowledged by:
Pacific
Pacific Exploration
Exploration and
and Production Corp.
By:
Name:
Title:
Title;
Date:
-61487931705v8
n793770503
S, Schaible
Damian S.
Wardwell LLP
Davis Polk &
& Wardwell
December 7, 2015
Confirmation of Terms of Engagement
Consulting, Inc,
Inc. upon the terms set
set forth
forth herein
herein and
and in
in the
the attached
attached
We agree to engage FTI Consulting,
Standard Terms
Terms and
and Conditions,.
Conditions,
Standard
Davis Polk
Polk 8c
& Wardwell LLP
By:
By;
Damian S. Schaible
Partner
Date;
by:
Acknowledged byt
Bank of America, N.A.
By:
Edna A.
A, Mitchell
Director
Date:
Acknowledged by:
Pacific
Exploratiot ad
rid Production
Production Corp.
Paci c Explor'atiot
By
By:
Na
Title;
Date;
Data;
-6-
1/37937)050
thr7937)0,50
This is Exhibit "C-9" referred to in the
Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS:165405557\1
EVERCO RE
February16, 2016
Goodmans LLP
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, Ontario M5H 257
For the attention of Brendan O'Neill, Partner
Pacific Exploration & Production Corporation
333 Bay Street, Suite 1100
Toronto, ON M511 2R2
For the attention of Michael Galego, Deputy General Counsel and Secretary
Gentlemen:
This engagement letter (this "Agreement") confirms the arrangement among Evercore
Group LI,C. ("Evercore Group"), Evercore Partners International LLP ("Evercore
Partners", and, together with Evercore Group, "Evercore"), Goodmans LLP
("Goodman" or the "Client") as counsel to the Steering Committee (as defined below)
and Pacific Exploration & Production Corporation (together with its direct and indirect
subsidiaries, the "Company"), whereby Evercore shall act as financial advisor to
Goodmans, who is acting for and on behalf of a steering committee (as constituted from
time to time, the "Steering Committee") of holders of, or investment managers of certain
holders of, the Company's 5.375% senior unsecured notes due January 26, 2019, 7,25%
senior unsecured notes due December 12, 2021, 5,125% senior unsecured notes due
March 28, 2023 and 5,625% senior unsecured notes due January 19, 2025 (collectively,
the "Notes"), Goodmans represents and warrants to Evercore that (i) Goodmans is
authorized by the. Steering Committee to retain Evercore to work under Goodmans'
direction and to report directly to Goodmans, and (ll) Goodmans, as attorney in fact, is
authorized by the Steering Committee to agree, on behalf of the Steering Committee, to
the terms of this Agreement. This Agreement shall be effective as of January 15, 2016
(the "Effective Date"),
Assignment Scone:
Goodmans, in connection with its retention by the Steering Committee and on the terms
and conditions set forth herein, hereby retains Evercore on an exclusive basis as its
financial advisor and investment banker in connection with a possible Transaction (as
defined below).
As used in this Agreement, "Transaction" shall mean, collectively, (i) any material
restructuring, reorganization and/or recapitalization of the Company (including, but not
limited to, a Transaction pursuant to an in-court proceeding), including without
limitation, a material cancellation, forgiveness, satisfaction, retirement, purchase and/or
modification or amendment to the terms of the Notes including, without limitation,
pursuant to a tender offer(s), sale, a repurchase or exchange transaction, a plan of
13vEttotout Pmertonts INTEMNATIONALLLP 11 Stanhope Gate London WIK ILN Td 020 7663 61)00
notianralla Mead Nn: 0C357957. Auilitwistd culd rcgutdal by iht Finnndzl Candno-Authelity
q2
reorganization pursuant to an in-court proceeding, a solicitation of consents, waivers,
acceptances or authorizations, or any assignment or other transfer, whether completed
solely with respect to the Notes by holders thereof or in conjunction with a third-party
strategic or sponsor, or (ii) the tender by holders of Notes holding 66 2/3% or more of the
total principal amount of the Notes outstanding on the date on which any third party
tender offer for the Notes, as such offer may be amended from time to time, is first
announced, For greater certainty, the negotiation and implementation of a debtor-inpossession financing arrangement between the Company and the Steering Committee in
connection with proceedings under Chapter 11 of the United States Bankruptcy Code, the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or similar legislation shall not constitute a Transaction and the Transaction Fee
shall not be payable in connection with such debtor-in-possession financing.
Description of Services:
1. Evercore agrees, In consideration of the compensation provided in Section 2 below, to
perform the following services, in coordination with Goodmans' provision of legal
advice to the Steering Committee, and to the extent it deems such services necessary,
appropriate and feasible:
a. Reviewing and analyzing the Company's business, operations, assets,
investments, financial condition, prospects, and financial projections;
b. Analyzing the liquidity, financial obligations, debt capacity and financing
needs of the Company and evaluating alternatives to address such needs;
c. Assisting with evaluating strategic options with respect to the Company and
Its assets;
d. Preparing and analyzing, as needed, Transaction proposals and alternatives,
including but not limited to any tender offer for the Notes;
e, Providing financial advice- to Goodmans as legal advisor to the Steering
Committee and assisting In negotiations with the Company and its other
stakeholders in relation to any Transaction on Goodmans' behalf;
f. Advising and assisting Goodmans in facilitating a Transaction, If the
Company and/or the Steering Committee determine to undertake such a
Transaction; and
B. Providing such other financial advisory services as may from time to time be
specifically agreed upon in writing by Evercore and Goodmans.
In rendering its services to Goodmans hereunder, Evercore is not assuming any
responsibility for Goodmans', the Steering Committee's or any member thereof; or the
Company's or the Steering Committee's or any member of the Steering Committee's
underlying business decision to pursue or not to pursue any business strategy or to effect
or not to effect any Transaction.
'
Evercore shall not have any obligation or responsibility to provide accounting, audit,
"crisis management" or business consultant services to Goodmans, the Steering
Committee or any member, subsidiary and/or affiliate thereof, the Company or any other
party, and shall have no responsibility for design or implementation of operating,
organizational, administrative, cash management or liquidity improvements; nor shall
Evercore be responsible for providing any tax, legal or other similar specialist advice,
Goodmans confirms that it will rely on its
Its own counsel, accountants and similar expert
advisors for legal, accounting, tax and other similar advice.
Fees:
Fees;
2, As
2.
M compensation
compensation for
for the
the services
services rendered
rendered by
by Evercore
Evereore under Section 1 of this
Agreement, the Company shall pay to Evercore on behalf of Goodmans the following
fees in cash as and when set forth below:
January 15,
8, 2016,
2016,
a. A monthly fee of $150,000 ("Monthly Fee"), beginning January
payable upon execution of this Agreement and thereafter on the fifteenth day of
each subsequent calendar month until the earlier of the consummation of the
Transaction or the termination of Evercore's engagement. Beginning on the sixth
monthly anniversary of this Agreement 50% of the subsequent Monthly Fees
actually paid (for a maximum of up to six months) shall be credited against the
Transaction Fee described below;
b. A fee of $5,000,000 ("Transaction
("Transaction Fee"),
Fee"), payable
payable upon
upon the
the consummation
consummationof
ofan.y
any
Transaction;
c. In addition to any fees payable to Evercore, the Company shall promptly
c,
reimburse Evercore for all reasonable and documented out-of-pocket expenses,
including fees and expenses of outside counsel to Evercore, if any; provided,
however, that reimbursable expenses shall not exceed $150,000 without the
consent of Goodmans (which consent shall not be unreasonably withheld);
limitatioti shall in no way affect or limit the obligations of the
provided that such limitationCompany as set forth on Schedule I attached hereto.
ci,
d, All
Allamounts
amountsreferenced
referencedhereunder
hereunderreflect
reflectUnited
United States
States currency
currency and
and shall be paid
promptly In cash after such amounts accrue hereunder.
Conunittee directs Goodmans to seek assistance from Evercore
To the extent the Steering Committee
in obtaining additional capital for the Company from one or more members of the
Steering Committee, then the Steering Committee may In
in its sole discretion determine
that Evercore should be paid an additional financing fee for any such financing by the
Company in an amount to be determined by the Steering Committee in its sole discretion
up to a maximum of $2,000,000 for each such financing, which additional financing fee
shall be credit against the Transaction Fee described above, For the avoidance of doubt,
the Steering Committee shall not be required to authorize any payments 'to Evercore
except as otherwise agreed in writing between Goodmans and Evercore,
Evercore.
3
733:Ziellg51.-'1:';`,'4.--i_t-VO::::11 I
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Other:
3.
TheCompany
Companyshall
shallbe
besolely
solelyresponsible
responsiblefor
forthe
thepayment
paymentof
of all
all fees
fees and
and expenses
expenses of
of
3. The
Evercore required to be paid under this Agreement (Including
(including but not limited to the
Transaction Fee, if any) and neither Goodmans nor any member of the Steering
Committee shall have any obligation to pay Evercore's fees and expenses,
4,
4. Evercore is retained by Goodmans, as counsel to the Steering Committee,
notwithstanding that Evercore's fees will be paid by the Company, As such, Evercore
is not authorized, and will not purport, to act on behalf, or at the direction, of the
Company for any purpose, unless otherwise agreed to by the Steering Committee,
Goodmans, and the Company. Notwithstanding the Company's agreement to pay the
fees of Evercore in accordance with this Agreement, the parties acknowledge that the
work product produced by Evercore pursuant to this Agreement is for the purposes of
facilitating the rendering by Goodmans of legal advice to the Steering Committee and
constitutes attorney work product, which shall be regarded as protected from
disclosure and subject to all applicable privileges, and nothing herein shall constitute
Evercore, the
the Steering
Steering Committee
Committeeor
orGoodmans
Goodman that the Company or
an agreement of Evercore,
any other party is entitled to review or obtain copies of Evercore's analysis, advice,
recommendations or work product or to question Evercore's representatives
concerning the foregoing in connection with this Agreement,
Agreement. In the event that the
Company seeks protection from any court, regardless of jurisdiction, the Company
and Goodmans undertake to seek approval from such court of any and all motions
required to enable the Company to meet all of its obligations to Evercore under this
Agreement, including but not limited to seeking priority status or a charge or other
relevant arrangement over the assets of the Company to ensure that such obligations
are met.
5.
5, Evercore's engagement hereunder is premised on the assumption that Goodmans, the
Steering
Committeeand
andthe
theCompany
Companywill
willmake
makeavailable.
availableto
toEvercore
Evercore all
steering Committee
information and data that Evercore reasonably deems appropriate In
in connection with
its activities on Goodmans' behalf and will not omit or withhold any material
information, subject to the Company's and the Steering Committee's duties of
confidentiality to third parties. Goodmans and the Company recognize and consent to
the fact that (a) Evercore will use and rely on the accuracy and completeness of
public reports and other information provided by others, including information
provided by any third party or its respective officers, employees, auditors, attorneys
or other agents in performing the services contemplated by this Agreement, and (b)
Hyman
Evercoredoes
doesnot
notassume
assumeresponsibility
responsibilityfor,
for,and
andmay
may rely
rely without
without Independent
verification upon, the accuracy and completeness of any such information.
6. Evercore's
Evercore'sengagement
engagementhereunder
hereundermay
may be
be terminated
terminated by
by Goodmans
Goodmans or Everbore at
(5) days
dayswritten
writtennotice
noticeand
and without
without liability
liability or
or continuing
continuing
Eve (5)
any time upon five
obligation to Goodmans, the Company or .Evercore, except that following such
termination Evercore shall remain entitled to any fees accrued pursuant to Section 2
but not yet paid prior to such termination, and to reimbursement of reasonable
expenses incurred prior to such termination pursuant to Section 2, and the
4
Indemnification Agreement (as defined below) and each of the paragraphs below
shall survive any such termination.
termination. In
In addition,
addition, Evercore
Evercore Shall
shall remain entitled to full
payment of all fees contemplated by Section 2 hereof in respect of any Transaction
announced or occurring during the period from the date hereof until twelve months
following such termination whether such Transaction was initiated before, upon or
after the date of this Agreement.
7. Nothing in this Agreement, expressed or implied, is intended to confer or does confer
on any person or entity other than the parties hereto and their respective successors
and assigns, and to the extent expressly set forth in accordance with the
indemnification agreement ("Indemnification Agreement") attached to this
Agreement as Schedule I, the Indemnified Persons (as defined in the Indemnification
Agreement), any rights or remedies under or by reason of this Agreement or as a
result of the services to be rendered by Evercore hereunder, Goodmans and the
Company each acknowledge that Evercore is not acting as an agent of Goodmans, the
Steering Committee or any member thereof, the Company or any other party, or in a
fiduciary capacity to Goodmans, the Steering Committee or any member thereof, or
any other party, and that Evercore is not assuming any duties or obligations other than
those expressly set forth in this Agreement Nothing contained herein shall be
construed as creating, or be deemed to create, the relationship of employer and
employee between the parties
patties to this Agreement or between Evercore and any
member of the Steering Committee, nor any agency, joint venture or partnership,
Evercore shall at all
ail times be and be deemed to be an independent contractor with
respect to the services to be rendered by Evercore hereunder. Nothing herein is
intended to create or shall be construed as
A creating a fiduciary relationship between
Evercore, Goodmans, the Steering Committee or any member thereof or of Company,
Company.
Except as otherwise specified herein, no party to this Agreement nor its employees or
agents shall have any authority to act for or to bind the other party in any way or to
sign the name of the other party or to represent that the other party is in any way
responsible for the acts or omissions of such party.
agrees-to----8. As part of the compensation payable to Evercore hereunder, the Company agrees-to--indemnify Evercore and certain related persons in accordance with the
Indemnification Agreement,
indemnification provisions
provisions are
are an
an Integral
integral'art
Agreement. Such indemnification
part of
of
this Agreement, and the terms thereof are incorporated by reference herein. Each of
Goodman
Goodmansand
andthe
theCompany
Companyagrees
agreesthat
that no
no Indemnified
Indemnified Person
Person shall
shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to Goodmans or
the Company or any of their respective members, security holders, partners or
Evercore's engagement
creditors related to, arising out of or in connection with Evcrcore's
hereunder, Evercore's performance
performance of
of any
any service
service in
in connectionconnection herewith or any
transaction contemplated hereby, except where such liability is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to have
resulted primarily and directly from the fraud, gross negligence, bad faith or willful
misconduct of such Indemnified Person. Evercore acknowledges that neither
Goodmans nor any member of.
of. the.
the Steering
Steering Committee
Committee shall have any obligation to
indemnify Evercore pursuant to the Indemnification Agreement,
Agreement.
5
:•:-.;eite.eeArstaeAs
:eVA;ST...§t
--LKarese:5-.7„,,astsi,Lftsee..e.st
9, Each of Goodmans and the Company agrees that Evercore is not responsible for any .
the Steering
Steering Committee
Committee or
or any
any 'member
member thereof
decision taken by any of Goodmans, the
regarding a Transaction, regardless
regardless of
of the
the advice
advice provided
provided by
by Evercore.
Evercore hereunder,
Each of Goodmans
Goodmans and
and the
the Company
Companyacknowledges
acknowledgesthat
thatEvercore
Entente is
is not in a position
to guarantee the achievement or closing of any Transaction,
10, Each of Goodmans and the Company recognizes that Evercore has been engaged only
by Goodmans and that Goodmans`
Goodmans' engagement
be on
engagement of
of Evercore
Evercore is
is not
not deemed to
to.be
behalf of and is not intended to confer rights on the Company or any shareholder,
partner or other owner of Goodmans or the Company or any other person not a party
hereto or any of its affiliates or their respective directors, officers, members, agents,
employees or representatives.
representatives, Unless otherwise expressly agreed in a separate written
agreement (including but
but not
not limited
limited to
to an
an agreement:
agreement substantially in the form
attached hereto as Schedule In,
II), no
no one,
one, other
other than
than senior
senior management
management of
of Goodman%
Goodmans,
is authorized to rely upon Goodmans`
Goodmans' engagement of Evercore or any statements,
advice, opinions or conduct by Evercore, Without limiting the foregoing, any advice,
written or oral, rendered to Goodmans during the term of this Agreement is solely for
the purpose of assisting Goodmans in advising the Steering Committee and does not
constitute a recommendation to Goodmans, the Steering Committee, any member
thereof or the Company that such entity might or should take in connection with a
Transaction or otherwise,
otherwise Any
Any advice,
advice, written
written or oral, rendered by Evcrcore
Evercore may not
be disclosed publicly or made available to third parties without the prior written
Evercore,
Consent of Evercore.
11. This Agreement (including the Indemnification Agreement) embodies th6
the entire
understanding between
between Evercore,
&emote, Goodmans
agreement and understanding
Goodmans and the Company, and
supersedes all prior agreements and understandings,
understandings, relating
relating to
to the
the subject
subject 'matter
matter
hereof.
hereof, If
if any provision of this Agreement is determined to be invalid or
unenforceable in_
anyrespect,
respect,such
suchdetermination
determination will
will not
not affect
affect this
this Agreement
Agreement in
in any
any other respect, which will remain in full force and effect,
effect. This Agreement may not
be amended or modified except in writing signed by each of the parties.
12, In the event that, as a result of or in connection with Evercore's
Evereore's engagement
hereunder, EVOICOM
&emote becomes
involved
ininany
hereunder,
becomes
involved
anylegal
legalproceeding
proceedingororinvestigation
investigation or
or is
required by government regulation, subpoena or other legal process to produce
documents, or to make its current or former personnel available as witnesses at
deposition or trial, Evercore's reasonable and documented fees and expenses of its
incurred in responding to such a request shall be paid in accordance with
counsel Incurred
paragraph 2(c) hereof,
hereof. Nothing in this paragraph shall affect in any way the
Company's obligations pursuant to the separate Indemnification Agreement attached
hereto,
hereto.
13. The identity of the Steering Committee members shall be held as confidential by the
Company and Evercore and shall not be disclosed without the prior written consent of
Goodmans, and such confidentiality obligation and restriction shall continue
notwithstanding any termination of this Agreement; provided that such information
may be disclosed (a) to Evercore's affiliates, partners, employees, agents, advisors
_
and representatives in connection with its engagement hereunder who shall be
informed of the confidential nature of the information and that such Information is
subject to a confidentiality obligation, (b) to any person with the consent of the
Goodmans, or (c) as may he required by law or regulatory authority or judicial
process.
14. Evercore shall have the right to place advertisements in financial and other
newspapers and journals at its own expense describing its services hereunder
following completion of a Transaction; provided, however, that Evercore shall not
disclose the identity of the Steering Committee members in any such advertisement,
15, Each of Goodmans and the Company acknowledges that Evercore, in the ordinary
course of its business, may have received information and may receive information
front third parties which could be relevant to this engagement but is nevertheless
subject to a contractual, equitable or statutory obligation of confidentiality, and that
Evercore is under no obligation hereby to disclose any such information or include
such information In its analysis or advice provided hereunder. In addition, Evercore
or one or more of its affiliates may in the past have had, and may currently or in the
future have, Investment banking, investment management, financial advisory or other
relationships with the Company and its affiliates, potential parties to a Transaction
and their affiliates or persons that are competitors, customers or suppliers of (or have
other relationships with) the Company or its affiliates or potential parties to a
Transaction or their affiliates, and from which conflicting interests or duties may
arise, Nothing contained herein shall limit or preclude Evercore or any of its
affiliates from carrying on (1) any business with or from providing any financial or
non-financial services to any party whatsoever, including, without limitation, any
competitor, supplier or customer of the Company, or any other party which may have
interests different from or adverse to Goodmans, the Steering Committee or any
member thereof or the Company, or (ii) its business as currently conducted or as such
business may be conducted in the future, Evercore has in place specific procedures
designed to ensure that the flow of confidential and proprietary information supplied
by its clients in relation to engagements such as this one are separated from those
areas within Evercore that carry out the transactions in securities referred to above.
Each of Goodman and the Company also acknowledges that Evercore and its
affiliates engage in a wide range of activities for their own accounts and the accounts
of customers, including corporate finance, mergers and acquisitions, equity sales,
trading and research, private equity, asset management and related activities, In
connection with these businesses or otherwise, Evercore and its affiliates and/or their
respective employees, as well as investment funds in which any of them may have a
financial interest, may at any time, directly or indirectly, hold long or short positions
and may trade or otherwise effect transactions for their own accounts or the accounts
of customers, in debt or equity securities, senior loans and/or derivative products
relating to the Company or its affiliates, potential parties to a Transaction and their
affiliates or persons that are competitors, customers or suppliers of the Company,
Evercore shall not
-Notwithstanding the foregoing, during the term of this
be engaged to provide investment banking financial advisory services to any party in
connection with a Transaction other than Goodmans,
7
Tsismalnamid ,agamtivx.tq41:EJ2-, 1 ;.-;_Ffiliaamgamazzl
Furthermore, Goodmans (acting as agent for and on behalf of the Steering
Steeling
Committee) and the Company hereby acknowledge and agree that Evercore's
overriding role under this Agreement will be to provide assistance to Goodmans in
dutiesand
andresponsibilities
responsibilities hereunder
hereunder shall not
relation to the Transaction.
Transaction. Evercore's
Evercore duties
include Evercore giving any advice or taking any
any action
action which
which in
in Evercore's
Evercores absolute
discretion may give rise to a conflict of interest or conflict with any responsibility or
duty accepted by Evercore under the terms of this Agreement. Without limiting the
generality of the foregoing, Goodmans and the Company recognize and understand
that Evercore will by virtue of its agreement to perform the role described in this
letter, be required to comply With
instructions from
from Goodmans only. Evercore,
with instructions
Goodmans and the Company agree that based on the circumstances presently known
to (hem
them there is no mason
reason to believe that, by Evercore acting for Goodmans, who are
acting for and on behalf of the Steering Committee, where the Company is
performing its payment arid
and indemnity obligations under this agreement, that a
conflict of interest will arise. Goodmans and the Company agree however that should
a conflict of interest arise in
In the future, neither Goodmans nor the Company will hold
Evercore responsible for any losses, liabilities, damages or costs that may be incurred
by Goodmans and/or the Company respectively as a result of such conflict,
16. Evercore Partners is authorized and regulated by the Financial Conduct Authority
("FCA")
("ECA") and all the services will be subject to the rules and regulations for the time
dine
being in force of the FCA. The rules of the FCA require Evercore Partners to
categorise all of its clients as Retail Clients, Professional Clients or Eligible
Counterpartles and notify all clients of their classification, Evercore Partners has
Counterparties
categorised Goodmans
Goodmans us
as aa Professional
ProfessionalClient
Clientfor
forthe
theservices
servicesthat
thatHhis
providingLa
to
is providing
the Company, Under the FCA rules, Goodmans has the right to request that Evercore
Partners re-categorise itit as
as aa Retail
Retail Client
Client however,•
however, Evercore
Evercore Partners is under no
Partners
Ever-core Partners
obligation to agree to any such request. Goodmans must notify Evercore
immediately if it suspects or becomes aware that it may no longer qualify to be
classified as a Professional Client.
17. Should Goodmans wish to make a complaint against Evercore Partners, it should
submit the complaint in writing to Raj Bahia at Evercore Partners International LLP,
15
1.5Stanhope
StanhopeGate,
Gate,London
London W1K
W1K 11,N,
1LN. Evercore Partners will aim to handle any
complaint received fairly and promptly and in accordance with Evercore Partners'
internal complaints handling
handling procedures,
procedures, In
In the
the event
event that
that Evercore
EvercorePartners
PartnersLs
is not
able to handle the complaint to Goodmans' satisfaction, Goodmans may resolve to
refer its complaint to the Financial Ombudsman Service directly,
directly. Evercore Partners
cart provide
provide further
further information in relation to its internal complaints handling
can
procedures and the Financial
Financial Ombudsman
Ombudsman Service,
Service, on
en request.
request
18. Evercore may, in the performance of its services hereunder, delegate the performance
of all or certain services as it may select to any of its affiliated entities; provided that
affiliated-entitles"-agree
entities agree to
tothe
thesame
sameconfidentiality
confidentiality- terms
terms hereof,
hereof, no such
the -affiliated
delegation by Evercore shall in any respect affect the terms hereof, and Evercore shall
8
in the
be responsible for any acts or omissions by any of its affiliated entities In
performance of any services delegated to such entity.
19, Goodmans agrees to provide and procure all corporate, financial and other
19.
information regarding Goodmans as Evercore may reasonably require to satisfy its
obligations as a U.S. financial institution under the USA PATRIOT Act.
20, For the convenience of the parties hereto, any number of counterparts of this
20.
Agreement may be executed by the parties hereto, each of which shall be an original
instrument and all of which taken together shall constitute one and the same
Agreement. Delivery of a signed counterpart of this Agreement by facsimile
transmission shall constitute valid sufficient delivery thereof,
thereof.
21, Goodmans,
Goodrnuns, Evercore
Evercore and
and the
the Company
Company irrevocably (i) consent to the exclusive
jurisdiction of any New York State or United States federal court sitting in the
Borough of Manhattan of the City of New York over any action or proceeding arising
out of or relating to this Agreement
Agreement and
and (11)
(II) agree
agree that
that alt
all claims
claims in respect of such
action or proceeding may be heard in such New York State or federal court; provided
that such consent and agreement shall not be deemed to require any bankruptcy or
insolvency proceedings involving the Company to be filed in such courts, and if the
Company becomes subject to proceedings under Chapter 11 of the United States
Creditors Arrangement
ArrangementAct
Bankruptcy Code, the Companies' Creditors
Act (Canada), the Canada
Business Corporations Act, or the Bankruptcy and Insolvency Act (Canada), during
any such proceedings, the adjudication of any claims or matters under this Agreement
may also be heard and determined before the court seized of jurisdiction in such
proceedings. Goodmans, Evercore and the Company irrevocably agree to waive all
rights to trial by Jury
jury in any such action
action or
or proceeding
proceeding and
and irrevocably
irrevocablyconsent•
consent to the
service of any and all process in any such action or proceeding by the mailing of
copies of such process to each party at its address set forth above. The parties agree
that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The Agreement
related directly or indirectly to this
Agreement and
and any
any claim,
claim related
Agreement shall be governed by and construed in accordance with the laws of the
State of New York (without regard to conflicts of law principles). Goodmans,
Evercote and the Company waive any objection to venue in the State of New York
Evercore
and objection to any action or proceeding in such state on the basis of forum non
convettiens.
conveniens.
9
If the foregoing correctly sets forth the understanding and agreement between Evercore,
Goodmans and the Company, please so indicate In
in the space provided below, whereupon
this letter shall constitute a binding agreement as of the date hereof.
Very truly yours,
Evercore rano Lie,
By:
Daniel Celentano
Senior Managing Director
Evercore
Evercore Mors
leersInternational
International LLP
LLP
By:
Daniel Celentano
Senior Managing Director
Agreed to and Accepted as of February 16, 2016:
Goodmans LLP, as
counsel to the SteeringC nnn ttee
By'
Brendan O'Neill
Partner
Agreed to and Accepted as of February 16, 2016:
Pacific Exploration & Production Corporation
By:
&mild
Ittmild Paulin
Chief Executive Officer
Schedule I
Indemnification Agreement
In connection with the engagement of Evercore Group L.L.C, ("Evercore
Group"), and Evercore Partners International LLP ("Evercore Partners", and, together
with Evercore Group, "Evercore") to render financial advisory services to Goodman
LLP ("Goodman" or the "Client") who is acting for and on behalf of a steering
committee for an a hoc committee of holders of, or investment managers of certain
holders of, the 5.375% senior unsecured notes due January 26, 2019, 7,25%, senior
unsecured notes due December 12, 2021, 5,125% senior unsecured notes due March 28,
2023 and 5.625% senior unsecured notes due January 19, 2025 (collectively, the "Notes")
of Pacific Exploration & Production Corporation (together with its subsidiaries,, the
"Company") pursuant to the engagement letter, dated February 16, 2016 (the
"Engagement Letter"), the Company and Evercore are entering into this agreement.
In the 'event that Evercore or any of its members, partners, officers,
1.
directors, advisors, representatives, employees, agents, affiliates or controlling persons, if
any (each of the foregoing, including Evercore, an "Indemnified Person"), become
involved in any capacity In any claim, action, proceeding or investigation brought or
threatened by or against any person, including the Company's security holders or
creditors, related' to, arising out of or in connection with Evercore'S engagement,
Evercore's performance of any service in connection therewith or any transaction
contemplated thereby, the Company will promptly reimburse each such Indemnified
Person for its reasonable legal and other expenses (including the reasonable cost of any
investigation and preparation) as and when incurred.
The Company will indemnify and hold harmless each Indemnified Person
2,
from and against, and agrees that no Indemnified Person shall have any liability (whether
in contract, tort or otherwise) to the Company or its security holders or creditors related
to, arising out of or in connection with, any and all losses, claims, damages, liabilities or
expense to which any Indemnified Person may become subject related to, arising out of
or in connection with Evercore's engagement, Evercore's performance of any service In
connection therewith or any transaction contemplated thereby (whether or not arising out
of any pending or threatened claim, action, proceeding or investigation initiated or
brought by or on the Company's behalf and whether or not the Company or an
Indemnified Person is a party thereto), except to the extent that any such loss, claim,
damage, liability or expense Is found by a court of competent jurisdiction in a final, nonappealable judgment to have resulted primarily from such Indemnified Person's fraud,
gross. negligence, bad faith or willful misconduct,
If for any reason the foregoing indemnification is unavailable or
3,
insufficient, then the Company shall contribute to the loss, claim, damage, liability or
expense for which such indemnification is unavailable or insufficient in such proportion
as is appropriate to reflect the relative benefits received, or sought to be received, by the
Company and its security holders on the one hand and the party entitled to contribution
on the other hand tu the matters contemplated by Evercore's engagement as well as the
relative fault of the Company and such party with respect to such loss, claim, damage,
ii
Iniceg6i,gf:f:1
liability or expense and any other relevant equitable considerations. The Company agrees
that for the purposes hereof the relative benefits received, or sought to be received, by the
Company and its security holders and Evercore shall be deemed to be in the same
proportion as (i) the aggregate consideration paid or contemplated to be paid or received
its security holders, as the case may
or contemplated to be received by the Company or Its
be, pursuant to a transaction contemplated by the engagement (whether or not
consummated) for which Evercore has been engaged to perform financial advisory
services bears to (ii) the fees paid to Evercore in connection with such engagement;
proVided, however,
however, that,
that, to
to the
the extent
extent permitted
permitted by applicable law, in no event shall
provided,
Evercore or any other Indemnified Person be required to contribute an aggregate amount
in excess of the aggregate fees actually paid to Evercore for such financial advisory
services,
4,
The Company's reimbursement, indemnity and contribution obligations
in addition to any liability which the Company may
under this agreement shall be In
otherwise have, shall not limit or be limited by any rights Evercore or any other
Indemnified Person may otherwise have and shall
shalt be binding upon and inure .to
'to the
benefit of any successors, assigns, heirs and personal representatives of the Company,
Evercore, and any other Indemnified Persons.
If any claim, action, proceeding or Investigation
investigation shall be brought,
5.
threatened or asserted against
against au,
an Indemnified
Indemnified Person
Person in respect of which indemnity may
be sought against the Company, Evercore shall promptly notify the Company if the
Company is not a party to such claim, action, proceeding or investigation, provided that
the failure to so notify the Company will not relieve the Company from any liability that
the Company may have on account of this agreement except to the extent the Company
shall not have otherwise learned of such claim, action, proceeding or investigation and
such failure results in the forfeiture by the Company of substantial rights and defenses,
defenses.
The Company agrees that, without Evercore's prior written consent, It
it will
6.
not settle, compromise or consent to the entry of any judgment In
in any pending or
threatened claim, action, proceeding or investigation (whether or not Evercore or any
other Indemnified Person is an actual or potential party) in respect of which
indemnification or contribution is reasonably likely to be sought hereunder, unless such
settlement, compromise or consent includes an unconditional release from the settling,
compromising or consenting party of each Indemnified Person from all liability arising
out of such claim, action, proceeding or investigation and does not contain any adverse
statement with respect to Evercore,
Evercore. No waiver, amendment or other modification of this
agreement shall be effective unless in writing and signed by each party to be bound
thereby,
For the convenience of the parties hereto, any number of counterparts of
7.
this agreement may be executed by the parties hereto, each of which shall be an original
instrument and all of which taken together shall constitute one and the same agreement.
Delivery of a signed counterpart of this agreement by facsimile transmission or other
electronic or digital transmission shall constitute valid sufficient delivery thereof,
thereof.
12
72
'01:,4-4.1j:t;'•'...;:.",:';'.'i.41-MitlIe;?X;::
V;42,ARWAT-ffin:2';4tiAT','9Z;I:i:.-1
• •!a--"".:,..,.n...,S::t.Y.5•Atif..W-W..-1-Rhi
The parties hereby irrevocably consent to the exclusive Jurisdiction
jurisdiction of any
8,
8.
New York state or United States federal court sitting in New York County over any
action or proceeding arising out of or relating to this agreement, and the parties hereby
irrevocably agree that all claims in respect of such action or proceeding may be heard in
such New York state or federal court. Evercore and the Company (on its own behalf and,
to the extent permitted by applicable law, on behalf of its security holders and creditors)
irrevocably
Irrevocably agree to waive all rights to trial by jury in any such action or proceeding and
irrevocably consent to the service of arty
any and all process hi
in any such action or proceeding
by the mailing of copies of such process to each party at its address set forth above, The
parties agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced In
in other jurisdictions by suit on the judgment or in any other manner
provided by law. The
The agreement
agreement and
and any
any claim
claimrelated
relateddirectly
directlyr or indirectly to this
agreement shall be governed by and construed in accordance with the laws of the State of
New York (without regard to conflicts of law principles), The parties further waive any
objection to
to venue
venue in
in the
the State
State of
of New
New York
York and any objection to any action or
objectio❑
convenlens,
proceeding in such state on the basis of forum non convenlans.
9.
9.
Each party has all legally necessary power and authority to enter into this
agreement. All legally necessary action has been taken by each party for the
authorization, execution, delivery of, and the performance of its respective obligations
under, this Agreement, and each signatory below is duly authorized to sign this
agreement on behalf of the party it represents,
10,
This agreement shall survive any termination of Everoore's
Evercore's engagement.
{signature
[signaturepage
page
follows]
lbws]
13
........
written,
The parties are signing this agreement as of the date first above written.
Evercore roup LL,C,
By;
By.
DanielCelentano
Ceientano
Dune
Senior Managing Director
Partners
Evercore Pu
tners International LLP
cia ,
GS% .
By;
By:
Da e, Celentan
Celent4n
Dade
Senior Managing Director
Agreed to and Accepted as of February 16, 2016:
2016;
Pacific Exploration
Exploration_4Prorketion
Pacific
e,4Prothiction Corporation
Corporation
f3t:
Ronald Pantin
Chief Executive Officer
14
4:
;
:i
"65
Schedule
II
Schedule 11
Ladies and Gentlemen:
Evercore Group L.L.C. and Evercore Partners International LLP (together "Evercore")
have been engaged to provide certain advice, materials and assistance (collectively, the
LLP("Goodmats"),
("Goodmans"),Who
whoisis acting
acting for
for and
and on
en behalf of a steering
"Services") to Goodmans
Goodman LLP
committee comprised of the institutions set out on confidential Schedule Ito the Engagement
Letter (as defined below) (as constituted from time to time, the "Steering Committee") for an a
hoc committee (the "Ad Hoc Committee") of holders of, or investment managers of certain
holders of, the 5,375%
5.375% senior unsecured notes due January 26, 2019, 7,25% senior unsecured
notes due December 12, 2021, 5.125% senior unsecured notes due March 28, 2023 and 5.625%
senior unsecured notes due January 19, 2025 (collectively, the "Notes") issued by Pacific
Exploration & Production Corporation (the "Company") , in connection with a transaction
involving the Notes
Notes (the
(the "Transaction").
"Transaction"). Our
Our engagement
engagementletter
letterwith
withGoodmans
Goodman dated
February 1 6, 2016 (the "Engagement Letter") provides that the Services were prepared solely
inconnection
connection with
with the
the Transaction,
Transaction, and prohibits
for the confidential use of Goodmans
Goodman in
Goodmans from sharing the Services with any other person without our prior written consent.
We have been requested by Goodmans to share the Services with you ("you" or the
"Recipient"),
willconsent
consenttotosharing
sharingthe
the Services
Services with
with you only
"Recipient"), We
We have
have indicated
indicatedthat
thatwe
wewill
after we have received from you an acknowledgment of, and agreement to, the following
(the "Agreement"):
You acknowledge that the Services were provided solely for, and delivered
1.
solely to, Goodmans under the terms set forth in the Engagement Letter and are based on and
subject to the assumptions, limitations and qualifications set forth therein.
therein, Notwithstanding the
foregoing, you may rely on the information and advice contained in the Services subject to the
terms, conditions and limitations applicable to Goodmans contained in the Engagement Letter.
You understand that in connection with this matter we may from time to time receive
confidential, non-public information from the Company, its advisors and advisors retained by us
in connection with this matter (the "Information"), including pursuant to confidentiality
agreements agreed among us and the Company. Unless otherwise provided to you by the
Company pursuant to an appropriate confidentiality agreement, or until such time as you
otherwise notify us in writing, you hereby agree that you do not wish to receive such
Information from us, Accordingly, you hereby consent to our receipt of Information and waive
any claims or causes of action against us solely to the extent such claims or causes of action
arise as a result of our receipt, and nondisclosure, of the Information,
Information.
The existence of the Services and the contents thereof, as well as any other
2.
information received from Evercore or its affiliates during any discussions related thereto,
are confidential, and, save as required by law, regulation, regulatory examination, subpoena
or court order, may not be disclosed, reproduced, disseminated,
disseminated, 5urtunarized,
summarized, quoted from or
referred to, in whole
whole or
or in
in part
part without
withoutEverCOr&s
Evereore's prior
prior written
written consent,
consent, except to other
15
members of the Steering Committee who have signed an agreement in the form of this
Schedule 11 and except for reproductions and summaries kept internally by a Steering
Committee member (provided that such reproductions and summaries shall be subject to this
Agreement).
You acknowledge and agree that neither Evercore nor any of its members,
3.
partners, officers, directors, advisors, representatives, employees, agents, affiliates or controlling
persons shall have any liability (whether in contract, tort or otherwise) which relates to the
Services and/or of any discussions related thereto, except to the extent that such liability is found
by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from
Evercore's fraud, gross negligence, bad faith or willful misconduct and (b) you understand that
Evercore is not qualified to provide legal, tax or accounting advice in any jurisdiction.
You acknowledge and agree that Goodman has authorized the sharing of the
4.
Services with you and your discussion of them with Evercore.
The Agreement set forth herein shall survive until one year following the
5,
expiration of the longest applicable statute of limitations, and shall be binding on your successors
and assigns. If any provision of this Agreement is found by a court of competent jurisdiction to
be unenforceable, such provision shall not affect the other provisions, but such unenforceable
provision shall be deemed modified to the extent necessary to render it enforceable, preserving to
the fullest extent permissible the intent of the parties set forth In this Agreement. This Agreement
constitutes the entire agreement of the parties hereto with respect to its subject matter, and
supersedes all other oral or written representations, understandings or agreement relating to such
subject matter,
This Agreement shall be governed by, and construed in accordance with, the laws
6.
of the State of New York applicable to contracts made and to be performed therein. The parties
hereby irrevocably consent to the exclusive jurisdiction of any New York state or United States
federal court sitting in New York County over any action or proceeding arising out of or relating
to this agreement, and the parties hereby irrevocably agree that all claims In respect of such
action or proceeding may be heard in such New York state or federal court; provided that such
consent and agreement shall not be deemed to require any bankruptcy or insolvency proceedings
involving the Company to be filed in such courts, and if the Company becomes subject to
proceedings under Chapter 11 of the United States Bankruptcy Cod; the Companies' Creditors
Arrangement Act (Canada), the Canada Business Corporations Act, or the Bankruptcy and
Insolvency Act (Canada), during any such proceedings, the adjudication of any claims or matters
under this Agreement may also be heard and determined before the court seized of jurisdiction in
such proceedings,
[signature page follows]
16
1
...
Accepted and agreed to as of the date written below:
EVERCORE PARTNERS INTERNATIONAL EVERCORE GROUP L.L.C.
LLP
I3y:
By;
Name: Daniel
Daniel CeIonian()
Celentano
Title: Senior Managing Director
By:
Name; Daniel Celentano
Ceientano
Title: Senior Managing Director
By:
Name:
Name;
Title:
17
TAB B
10
This is Exhibit "C-1" referred to in the
Supplementary Affidavit of Peter Volk
sworn before me, this 27th day
of April, 2016
A Commissioner for taking Affidavits
CAN_DMS:
CAN DM5: 16540555711
\65405557\1
KEY EMPLOYEE RETENTION PLAN
1. Purpose of the Plan. The purpose of this Plan is to aid in the retention of certain key employees of
Pacific Exploration & Production Corporation and certain of its subsidiaries (collectively, the "Pacific
Group"), by providing a retention bonus for such employees in consideration of their continued
employment in contemplation of, and pending, the restructuring of the Pacific Group pursuant to the
CCAA and insolvency laws of other jurisdictions.
2.
Effective Date Termination Date and Survival of Provisions.
(a)
Effective Date. The effective date of the Plan (the "Effective Date") shall be the date this
key employee retention plan receives approval from the applicable Court, following the
Plan being approved by the Independent Committee. In the event the Plan is not
approved by the applicable Court, or the Independent Committee, the Plan shall be null
and void ab initio, and the Company shall have no obligation to make, and shall not
make, any payments hereunder.
(b)
Termination Date. The Plan shall terminate upon the first to occur of (i) Implementation of
a Plan of Reorganization, (H) a Closing of a Sale of the Company's Assets, or (iii) the
Dissolution or Liquidation of the Company (the "Termination Date").
(c)
Survival of Provisions. Notwithstanding paragraph 2(b), the provisions of the Plan shall
survive to the extent necessary to provide for the payment and administration of benefits
and claims accrued on or prior to the Termination Date.
3. Definitions. As used herein, the following definitions shall apply:
(a)
"Applicable Laws" means all applicable national, federal, provincial, state and local laws,
rules and regulations.
(b)
"Applicable Pro Rata Fraction" means, for purposes of determining the amount of any pro
rata retention bonus payable to a Participant as provided in sub-paragraph 4(a)(iii) below,
a fraction, (x) the numerator of which shall be the number of days between the Effective
Date of the Plan and the date of the Participant's Qualifying Termination of Employment,
and (y) the denominator of which shall be the number of days between the Effective Date
of the Plan and the date on which the applicable Payment Event occurs.
(c)
"Bankruptcy Code" means Title 11 of the United States Code, as amended and as the
same may be further amended.
(d)
"Bankruptcy Court" means the court as may have jurisdiction over the Proceedings in the
Southern District of New York, United States.
(e)
"Beneficiary" means the person(s), trust(s) or estate designated by a Participant in writing
to receive any benefits payable under this Plan in the event of the death of such
Participant.
"Benefits Plans" means all health, welfare, supplemental unemployment benefit and other
material employee compensation or benefits plans, policies, trusts, funds, agreements or
arrangements as set out in the Employment Agreement of any Participant.
(g)
"Board" means the Board of Directors of the Company.
(h)
"CCAA" means the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as
amended and as the same may be further amended;
CAN_DMS: \ 102296559 \1
1
"CCAA Court" means the court as may have jurisdiction over the Proceedings in Toronto,
Ontario, Canada.
(i)
"Closing of a Sale of the Company's Assets" means the date on which the transactions
contemplated by an agreement in respect of a Sale of the Company's Assets are
completed.
(k)
"Chief Restructuring Officer" means the chief restructuring officer of the Pacific Group to
be appointed in the Proceedings.
(I)
"Company" means Pacific Exploration & Production Corporation (or any successors
thereto as provided in paragraph 7(d) below).
(m)
"Court" means the CCAA Court, the Bankruptcy Court and/or the court seized of
jurisdiction in a Colombian proceeding under Law 1116, as applicable.
(n)
"Disability" shall have the meaning set forth in the Company's long-term disability plan, as
in effect as of the Effective Date. Notwithstanding the foregoing, if an employment or
severance agreement between the Participant and the applicable member of the Pacific
Group, as in effect as of immediately prior to the commencement of the Proceedings,
contains a different definition of "Disability", such other definition as in effect as of such
time shall apply for purposes of this Plan, regardless whether such employment or
severance agreement is subsequently disclaimed, approved or rejected by such member
of the Pacific Group, or the Court.
(o)
"Dissolution or Liquidation" means the entry of a Final Order by the Court dismissing or
converting the Proceedings.
(p)
"Effective Date" shall have the meaning ascribed to such term in paragraph 2(a).
(q)
"Employee" means a full-time employee of the Pacific Group.
(r)
"Emergence Event" shall have the meaning ascribed to such term in the definition of
Payment Event.
(s)
"Employment Agreement" means the employment agreement entered into between the
applicable member of the Pacific Group and the Participant, as amended from time to
time.
(t)
"Final Order" means an order of the Court as to which the time to appeal, to petition for
certiorari, or to move for reargument or rehearing has expired and as to which no appeal,
petition for certiorari or other proceedings for reargument or rehearing shall then be
pending or as to which any right to appeal, petition for certiorari, reargue or rehear shall
have been waived in writing in form and substance satisfactory to the Company or, in the
event an appeal, writ of certiorari, reargument or rehearing thereof has been sought, such
order of the Court shall have been affirmed by the highest court to which such order was
appealed, or certiorari, reargument or rehearing shall have been denied and the time to
take any further appeal, petition for certiorari, or move for reargument or rehearing shall
have expired.
(u)
"Implementation of a Plan of Reorganization" means the date on which the transactions
contemplated by the Plan of Reorganization are completed such that the arrangements,
compromises and other transactions effected pursuant to the Plan of Reorganization are
implemented.
CAN_DMS: U02296559 \ 1
2
(v)
"Independent Committee" means the Independent Committee of the Board, or any
person, committee or other entity designated from time to time by the Independent
Committee to administer the Plan and determine benefit eligibility hereunder, in whole or
in part.
"Initial Payment Award" means the first retention bonus paid to the Participant upon the
Initial Payment Event.
(x)
"Initial Payment Event" means, following the Effective Date, no later than the date of the
second payroll of the applicable member of the Pacific Group following the receipt by a
Participant of a Notice of Participation.
(y)
"KERP Charge" shall have the meaning ascribed to such term in Section 8.
(z)
"Monitor" shall mean PricewaterhouseCoopers Inc. in its capacity as monitor in the
Pacific Group's Proceedings.
(aa)
"New Employee Agreement" means the new, standard-form employment agreement
appended to the Notice of Participation of those Participants that have existing
Employment Agreements that provide for change of control arrangements and/or
severance arrangements that exceed 1.5 times their base salary. Such Participants will
have to execute their New Employment Agreement appended to their Notice of
Participation as a condition of being entitled to a retention bonus pursuant to the Plan.
(bb)
"Notice of Participation" means a notice provided to an Employee that he or she has
been designated by the Independent Committee initially, or the Chief Restructuring
Officer thereafter, as a Participant in the Plan, and setting forth the Retention Bonus
Amount the Employee would be entitled to receive upon the occurrence of a Payment
Event during the Term of the Plan, the form of which is attached hereto as Schedule
"13",
(cc)
"Partial Sale of the Pacific Group's Business" means any lease, sale, transfer or other
disposition of some portion of the Pacific Group's business that does not constitute a
Sale of the Pacific Group's Assets.
(dd)
"Participant" means any Employee designated by action of the Independent Committee
initially, and the Chief Restructuring Officer thereafter, as a Participant in the Plan, and
includes those Participants listed in Schedule "A" on the Effective Date.
(ee)
"Payment Event" means the occurrence of (i) an Initial Payment Event, (ii)
Implementation of a Plan of Reorganization or (iii) Closing of a Sale of the Pacific Group's
Assets (each of (H) and (Hi), an "Emergence Event"), in either case during the Term of
the Plan. provided, that if a Dissolution or Liquidation shall occur prior to the occurrence
of an Emergence Event, no Payment Event shall occur and no retention bonus shall be
payable under the Plan.
(ft)
"Plan" means this Pacific Exploration & Production Corporation Key Employee Retention
Plan, as amended or supplemented from time to time, including for the purpose of adding
additional Participants.
(gg)
"Plan of Reorganization" means a plan of reorganization, arrangement and/or
compromise in respect of the Pacific Group in the Proceedings.
(hh)
"Proceedings" means, as applicable, the proceedings in respect of the Pacific Group
pursuant to the CCAA and/or the proceedings in respect of the Pacific Group pursuant to
CAN_DMS: \ 102296559 \ 1
3
12
Chapter 15 of the Bankruptcy Code and/or similar proceedings in respect of the Pacific
Group pursuant to the laws of another jurisdiction.
"Qualifying Termination of Employment" means, with respect to any Participant, the
termination of the Participant's employment with the applicable member of the Pacific
Group during the Term of the Plan (i) by reason of the Participant's death or Disability, (H)
by reason of a Partial Sale of the Pacific Group's Business, (iii) without cause, or (iv) as
otherwise approved by the Monitor and set forth in the Participant's Notice of
Participation. Termination of a Participant's employment for any other reason shall not
constitute a Qualifying Termination of Employment.
"Retention Bonus Amount" means the amount of the cash retention bonus that a
Participant would be eligible to receive upon a Payment Event, as set forth in Schedule
"A" hereto (as such Schedule may be amended by the Independent Committee to add
Participants pursuant and subject to the terms of this Plan), and in the Participant's
Notice of Participation.
(kk)
"Sale of the Pacific Group's Assets" means the lease, sale or other disposition of all, but
not less than all, of the assets of the Pacific Group unless the Board declares that a
transaction involving the sale or other transfer of the securities of a subsidiary or the
lease, sale or disposition of assets of the Pacific Group constitutes a sale of substantially
all of the Pacific Group's assets, which determination may be made by the Board in its
sole and absolute discretion and need not be determined for the purposes of all
Participants but may be determined on a case by case basis for each individual
Participant.
(II)
"Term of the Plan" means the period commencing on the Effective Date of the Plan and
ending upon the Termination Date of the Plan.
(mm) "Termination Date" shall have the meaning ascribed to such term in Paragraph 2(b).
4. Payment of Retention Bonuses,
(a)
Entitlement of Participants to Retention Bonus. Retention bonuses shall be payable
under the Plan to Participants as follows:
(i)
The Participant has countersigned and returned the Notice of Participation and
the New Employment Agreement (if applicable) to the General Counsel of the
Company and the Chief Restructuring Officer, once appointed.
(ii)
Upon the occurrence of a Payment Event during the Term of the Plan, each
Participant whose employment with a member of the Pacific Group has not
terminated prior to the date of such Payment Event shall be entitled to receive
the Retention Bonus Amount set forth in Schedule "A" hereto and in his or her
Notice of Participation.
(Hi)
If a Participant incurs a Qualifying Termination of Employment during the Term of
the Plan and prior to the occurrence of a Payment Event, then, upon the
subsequent occurrence of a Payment Event during the Term of the Plan, such
Participant (or Beneficiary, as applicable) shall be entitled to receive a pro rata
retention bonus. Such pro rata retention bonus shall be determined by multiplying
the Retention Bonus Amount set forth in the Participant's Notice of Participation
by the Applicable Pro Rata Fraction. If, in contrast, no Payment Event occurs
subsequent to such Qualifying Termination of Employment, no pro rata retention
bonus shall be payable under this subsection.
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113
(iv)
If, prior to the occurrence of a Payment Event, a Participant's employment with
the Company shall terminate for any reason other than a Qualifying Termination
of Employment, no retention bonus shall be payable to such Participant
hereunder.
(b)
Retention Bonus Amount Paid as a Lump Sum. Any retention bonus amounts payable
pursuant to paragraph 4(a) above shall be paid as a lump sum on the date of the
Payment Event or as soon as reasonably practicable thereafter. Any retention bonus
payment under this Plan shall be subject to all applicable withholdings.
(c)
Initial Payment Award. The Initial Payment Award for any Participant shall not, without
the Monitor's prior consent, exceed 25% of the total retention bonus amounts to which
the Participant may be entitled pursuant to the Plan and his or her Notice of Participation.
(d)
Claw-back of Retention Bonus Amount. In the event that a Participant receives a
retention bonus pursuant to an Initial Payment Event and resigns, or is terminated for
cause, prior to the occurrence of Emergence Event, the Company and, if applicable,
other member of the Pacific Group, shall require that such retention bonus be paid back
to the applicable member of the Pacific Group and the Participant shall have no further
entitlement hereunder. Notwithstanding the foregoing, if an Emergence Event has not
occurred prior to the date that is one (1) year following the Initial Payment Event, the
Participant shall have the right to retain the retention bonus paid on such Initial Payment
Award, without further obligations on any member of the Pacific Group's part to pay any
further Retention Bonus Amount to such Participant.
(e)
Particular Participants to Enter into New Employment Agreements. As a condition of
being entitled to any Retention Bonus Amounts, or to any other benefits pursuant to this
Plan, those Participants that have existing Employment Agreements that provide for
change of control arrangements and/or severance arrangements that exceed 1.5 times
their base salary must countersign the New Employment Agreement attached to the
Participant's Notice of Participation and return it to the General Counsel of the Company
and the Chief Restructuring Officer, once appointed. The New Employment Agreement
shall not contain any granting stock option or change of control provisions, nor shall it
provide for severance entitlements that are in excess of 1,5 times the Participant's annual
base salary.
Existing Entitlements. Subject to paragraph 4(d), a Participant's entitlement to Retention
Bonus Amounts pursuant to this Plan is in addition to, and not as replacement for, such
Participant's entitlement pursuant to the Pacific Group's benefit and incentive programs,
or pursuant to his or her New Employment Agreement.
5. Administration of the Plan
(a)
Administrator. The Plan shall be administered by the Chief Restructuring Officer, and
shall be subject to the oversight of the Monitor.
(b)
Selection of Participants and Determination of Retention Bonus Amounts and Qualifying
Terminations of Employment. The Chief Restructuring Officer, after consultation with the
Monitor, shall have the authority to determine the following:
(i)
Which additional Employees shall be Participants in the Plan;
(ii)
The Retention Bonus Amount applicable to each additional Participant, and
whether such Retention Bonus Amount shall be payable in part or on an Initial
Payment Event; and
CAN_DMS: \ 102296559 \ 1
5
(Hi)
What events shall be deemed a Qualifying Termination of Employment with
respect to each Participant.
(c)
Terms of the Plan and the Notices of Participation. The Independent Committee, initially,
and the Chief Restructuring Officer thereafter, need not recommend all Employees at a
particular level of employment within the Pacific Group to be Participants in the Plan; they
need not recommend applying an identical formula for determining the Retention Bonus
Amount payable to all Participants in the Plan, or to all Participants at the same level of
employment; and they need not recommend that identical events shall constitute a
Payment Event or Qualifying Termination of Employment with respect to all Participants
in the Plan or to each Participant at the same level of employment. For greater certainty,
the Chief Restructuring Officer may not remove any Participant from being a Participant
once the Participant has been designated as a Participant pursuant to paragraph 3(dd)
above.
(d)
Errors in Notices of Participation. In the event that, through clerical error or otherwise, an
individual Notice of Participation does not accurately reflect the determination of the
Independent Committee or the Chief Restructuring Officer as provided above, the Chief
Restructuring Officer can correct such Notice of Participation, and the determination of
the Chief Restructuring Officer shall control.
(e)
Criteria to be Considered. The Independent Committee initially, and the Chief
Restructuring Officer thereafter, will consider the following criteria, amongst others, when
identifying Participants for recommendation in the Plan:
(I)
The operational importance of an employee;
(H)
The transactional importance of an employee;
(Hi)
The fact that an employee plays a critical role in dealing with restructuring
matters affecting the applicable member of the Pacific Group;
(iv)
The risk that a particular employee resigns prior to a Payment Event, and the
impact that such resignation would have on the applicable member of the Pacific
Group and its business, including its restructuring efforts; and
(v)
In the event of resignation of such employee, the difficulty for the applicable of
the Pacific Group to replace that employee, with a person of similar skills and
knowledge.
(f)
Powers of the Chief Restructuring Officer. Subject to the provisions hereof, and the
oversight of the Monitor: CO the Chief Restructuring Officer shall have complete control of
the administration of the Plan, with all powers necessary to enable it properly to carry out
its duties; (ii) the Chief Restructuring Officer shall be authorized to interpret the Plan and
shall have the discretion to determine all questions arising in the administration,
construction and application of the Plan; and (Hi) the decisions of the Chief Restructuring
Officer upon all matters within the scope of its authority shall be conclusive and binding
on all parties.
(g)
Rules and Regulations. Subject to the limitations of this Section 5 and Section 9 below,
the Chief Restructuring Officer, from time to time, shall recommend such supplemental
rules and regulations for the administration of the Plan and the transaction of its business
as it believes are necessary, after consultation with the Monitor.
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(15
(h)
Reports. The Chief Restructuring Officer shall be responsible for the preparation and
delivery of all reports, notices, plan summaries and plan descriptions required to be filed
with any governmental office or to be given to any Participant or Beneficiary.
6. KERP Reserve. The Company shall reserve an amount of U.S.$1,000,000 for the purpose of funding
additional Retention Bonus Amounts to Participants who may be identified by the Chief Restructuring
Officer, in consultation with the Monitor, pursuant to this Plan after the Effective Date; it being
understood that the Chief Restructuring Officer shall be under no obligation to identify any such
additional Participants and that any payment of additional Retention Bonus Amounts shall first be
approved by the Monitor. To the extent that additional Participants are identified, Schedule "A" to
this Plan shall be amended to add any such additional Participants.
7. KERP Charge. At the same time as its application for an initial order under the CCAA (or such similar
application pursuant to other Proceedings if applicable), the Company shall bring a motion to the
CCAA Court (or such other applicable Court), seeking an order (the "KERP Charge") (i) approving
this Plan and the entitlements provided hereunder and (ii) granting a court-ordered charge in favour of
the Participants, which charge shall rank pad passu with the $500 million debtor in possession senior
secured note charge, and behind the administrative charge, each to be granted in connection with the
Proceedings of the Company and certain of its subsidiaries, securing the obligations of the Pacific
Group to pay the Retention Bonus Amounts contemplated hereunder.
8. Reinstatement of Benefit Plans, As part of this Plan, each Participant shall have their entitlement to
the Benefits Plans re-instated and be in full force and effect.
9. Amendment of Plan. The Chief Restructuring Officer, in consultation with the Monitor, may amend the
Plan in any manner not materially adverse to the rights of Participants; provided that subject to
Paragraph 5(d) above, a Participant's Notice of Participation shall not be amended after it has been
issued to the Participant except with the prior written consent of the Participant.
10. General Provisions
(a)
Nonalienation of Benefits. None of the payments, benefits or rights of a Participant shall
be subject to any claim of any creditor, and, to the fullest extent permitted by law, all such
payments, benefits and rights shall be free from attachment, garnishment, levy,
execution, trustee's process, or any other legal or equitable process available to any
creditor of such Participant. Except as provided in paragraph 10(d) below, any attempt by
a Participant to alienate, anticipate, sell, transfer, commute, pledge, encumber, assign or
charge any payments, benefits or rights, contingent or otherwise, under this Plan, shall
be null and void. Payments hereunder shall not be considered assets of a Participant in
the event of the Participant's insolvency or bankruptcy.
(b)
No Contract of Employment. Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund, trust or account, nor the payment of any benefits
shall be construed as giving any Participant or any other person the right to be retained in
the service of the Pacific Group, and each Participant shall remain subject to discharge,
with or without cause (but subject to the terms of this Plan and any written employment
contract between the Participant and the applicable member of the Pacific Group) to the
same extent as if the Plan had never been adopted.
(c)
Severability of Provisions. The invalidity or unenforceability of any provision of this Plan
shall not affect the validity or enforceability of any other provision of this Plan. If any
provision of this Plan shall be held invalid or unenforceable in part, the remaining portion
of such provision, together with all other provisions of this Plan, shall remain valid and
enforceable and continue in full force and effect to the fullest extent consistent with law.
CAN_DMS: \ 102296559 \ 1
7
(d)
Successors.
(i)
No rights or obligations of any Participant under this Plan may be assigned or
transferred by the Participant other than rights to payments or benefits
hereunder, which may be transferred only by will or the laws of descent and
distribution. Each Participant shall have the right to designate a Beneficiary to
receive such Participant's unpaid benefits under Section 4 in the event of the
Participant's death. If no designated Beneficiary survives the Participant or if the
Participant fails to designate a Beneficiary, payment of such benefits shall be
made pursuant to will or the laws of descent and distribution. In the event of a
Participant's death or a judicial determination of his incompetence, reference in
this Plan to the Participant shall be deemed, where appropriate, to refer to the
Participant's Beneficiary or Beneficiaries, estate or other legal representative(s).
The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Pacific Group expressly to assume and agree to
perform this Plan in the same manner and to the same extent that the Pacific
Group would have been required to perform it if no such succession had taken
place. As used in this Plan, the "Company" or "member of the Pacific Group" or
"Pacific Group" shall mean the Company, member of the Pacific Group or Pacific
Group and any successor to its or their business and/or assets (by merger,
purchase or otherwise) or which otherwise becomes bound by all the terms and
provisions of this Plan by operation of law or otherwise.
(e)
Headings and Captions. The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan and shall not be employed
in the construction of the Plan.
(f)
Unfunded Plan. The Plan is intended to constitute an "unfunded" plan for the payment of
retention amounts. Except as may otherwise be provided pursuant to the KERP Charge,
with respect to any payments not yet made to a Participant by the Company, nothing
contained herein shall give any Participant any rights that are greater than those of a
secured creditor of the Pacific Group.
(g)
Notices. Any notice or other communication required or permitted pursuant to the terms
of this Plan shall be in writing and shall be deemed to have been duly given when
delivered personally, or sent by certified or registered mail, postage prepaid, return
receipt requested, or sent by telegram, telex, telecopy, facsimile or similar form of
telecommunication, and shall be deemed to have been given when received. Any such
notice shall be addressed as follows:
If to the Pacific Group:
Pacific Exploration & Production Corporation
333 Bay Street, Suite 1100
Toronto, ON
M5H 2R2
Attn:
General Counsel and Chief Restructuring Officer
If to a Participant:
At the most recent address set forth in the applicable member of the Pacific Group's records.
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8
(h)
Governing Law. This Plan shall be construed and enforced according to the internal laws
of the Province of Ontario, without reference to any conflicts of laws provisions, to the
extent not preempted by other Federal law, which shall otherwise control.
Withholding. The members of the Pacific Group may withhold from amounts payable
under this Plan all federal, provincial and local tax deductions that are required to be
withheld by Applicable Laws.
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SCHEDULE "A"
RETENTION BONUS AMOUNTS
REDACTED
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A-1
SCHEDULE B
FORM OF NOTICE OF PARTICIPATION
[Pacific Exploration & Production Corporation Letterhead]
STRICTLY PRIVATE AND CONFIDENTIAL
April 22, 2016
Dear •:
Re: Key Employee Retention Plan — Notice of Participation
Pacific Exploration & Production Corporation (the "Company") intends to undertake a comprehensive
financial restructuring, which will be implemented by way of a plan of arrangement pursuant to a courtsupervised process in Canada, together with appropriate proceedings in Colombia under Law 1116 and
in the United States. As the Company enters this challenging period of its operations, the Company
would like to assure you that your contribution continues to be extremely valued.
Unfortunately, the Company's current circumstances require it to make significant changes to its
compensation practices, which are more fully set out below. However, to retain your continued loyal
service, and in consideration of you agreeing to the conditions set out herein, the Company is prepared to
provide you with a retention bonus in accordance with the Company's Key Employee Retention Plan
("KERP"). Any capitalized terms used herein but not otherwise defined have the meaning ascribed to
them in the KERP.
The KERP, and the retention bonuses contemplated by it, were approved by the Independent Committee
of Board of Directors of the Company. The KERP, as well as the retention bonuses payable pursuant to it,
shall become effective once it is approved by the Court at the hearing currently scheduled to take place
on April 27, 2016. The Company will also seek an order securing the payment of the retention bonuses
pursuant to a charge over the property of the Company and certain of its subsidiaries. The KERP charge
will rank behind the administration charge, equally with the U.S.$500 million debtor in possession senior
secured note charge, and ahead of all unsecured claims.
As contemplated by the KERP, and assuming the KERP is approved by the Court on April 27, 2016, the
Company is pleased to offer you a conditional, non-salaried retention bonus in the amount •% (•
percent) of your base salary, which is equivalent to $• (the "Retention Bonus Amount"). Should you
agree to the terms set out herein, you will be eligible for the Retention Bonus Amount, which is payable in
two tranches, as follows:
1
25% of the Retention Bonus Amount; which is equivalent to a $• cash payment, payable within
two (2) payroll dates of the Company receiving both a countersigned copy of your Notice of
Participation and a countersigned copy of your new employment agreement (as further discussed
below); and
2
the remaining 75% of the Retention Bonus Amount, which is a $• cash payment, payable upon
the occurrence of an Emergence Event as defined in the KERP.
If, during the Term of the Plan, your employment ends prior to an Emergence Event as a result of a
Qualifying Termination of Employment and other than because your employment was terminated by the
Company for cause, you shall be entitled to an Applicable Pro Rata Fraction of your Retention Bonus
Amount upon the occurrence of an Emergence Event.
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I 2, 0
The Retention Bonus Amount is an extraordinary, single occurrence, non-salaried bonus, and will not be
included for the purposes of determining regular earnings or severance. It is also inclusive of vacation
pay, and will be subject to applicable taxes and statutory deductions.
As noted above, the Retention Bonus Amount is a conditional payment; in order to be eligible to receive
the Retention Bonus Amount, you must comply with, and agree to, the following:
1
If you currently have an existing Employment Agreement that provides for change of control
arrangements and/or provides for severance arrangements that exceed 1.5 times your base
salary (a "COC Employment Agreement"), your existing employment agreement will terminate
effective as of the Court's approval of the KERP, and you waive any and all entitlements triggered
as a result thereof.
2
If you have a COC Employment Agreement, you are required to execute the attached revised
employment agreement dated April 22, 2016 (the "New Employment Agreement"), which will be
effective as of the Court's approval of the KERP, and which (i) eliminates any reference to the
entitlement to participate in the SOP and DSU Plan (as both terms are defined below), (ii)
eliminates your change of control clause, OD limits your severance entitlements to the lesser of
your current severance entitlements or a maximum of 1.5 times your base salary, and (iv)
releases the Company (and its related entities) of all claims in respect of the change in your terms
and conditions of employment.
3
You waive all rights and entitlements you may have pursuant to the Pacific Rubiales Energy
Corp. ("PCE") Deferred Share Unit Plan approved by the Board of Directors on May 30, 2014
("DSU Plan"). In particular, any deferred share units you may have pursuant to the DSU Plan are
forfeited and/or cancelled, and any right of participation you may have had in the DSU Plan is
terminated.
4
You waive all rights and entitlements you may have pursuant to the PCE Stock Option Plan
approved by the Board of Directors on April 23, 2014 and by the Shareholders on May 29, 2014
(the "SOP"). In particular, all outstanding options you may have pursuant to the SOP are forfeited
and/or cancelled, and any right of participation you may have had in the SOP is terminated.
5
You acknowledge and agree that any annual bonuses contemplated in your New Employment
Agreement or otherwise will not be payable unless approved by the new board of directors of the
reorganized company following an Emergence Event.
6
You acknowledge and agree that you are bound to the terms contained in the attached KERP,
and that if there is a conflict between this Notice of Participation and the KERP, the KERP
supersedes the terms of this Notice of Participation, and the Chief Restructuring Officer has the
exclusive right to determine the appropriate interpretation and application of both the KERP and
this Notice of Participation.
7
You must not have disclosed these arrangements to any person other than your personal
representatives and legal advisors (other than any disclosure required by law).
8
Prior to the time that the payments become payable, you cannot have:
(a)
resigned;
(b)
been terminated with cause; or
(c)
failed to perform your duties and responsibilities diligently, faithfully and honestly in the
opinion of your direct supervisor and the Chief Restructuring Officer.
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To acknowledge and agree that you accept the terms and conditions set out herein this Notice of
Participation, including those terms set out in your New Employment Agreement (if applicable) and the
KERP, please countersign this Notice of Participation and your New Employment Agreement (if
applicable) and return it or both to the General Counsel of the Company by April 26, 2016. If you do not
countersign this Notice of Participation and your New Employment Agreement (if applicable), and return it
or both to the General Counsel by April 26, 2016, you will not be entitled to participate in the KERP.
You have the option of obtaining independent legal advice in respect of the KERP, this Notice of
Participation and your New Employment Agreement (if applicable). Should you choose to obtain
independent legal advice, the Company will reimburse you up to [$500.00], inclusive of HST, upon
providing proof of payment of legal fees incurred.
We truly appreciate your continued hard work and loyalty to the Company as [position/legal entity
employer], particularly at this time.
Sincerely,
PACIFIC EXPLORATION & PRODUCTION
CORPORATION
Per:
Name:
Title:
Enclosures:
(1) Employment Agreement dated April 22, 2016.
(2) Pacific Exploration & Production Corporation Key Employee Retention Plan (April 2016)
By my signature below, I confirm that I have read, I understand and I agree to be bound by the foregoing
terms and conditions, that I have been afforded a reasonable opportunity to consult with independent
legal counsel with respect to those terms and conditions, and that I sign this document freely, voluntarily
and without any pressure, duress or undue influence.
[Employee's Name]
CAN_DMS: \ 102296559 VI
Date
D-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 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
REDACTED VOLUME OF CONFIDENTIAL
EXHIBITS TO THE VOLK AFFIDAVIT AND
SUPPLEMENTARY VOLK AFFIDAVIT
(Returnable April 27, 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.reyesanortonrosefulbright.com
Orestes Pasparakis LSUC #36851T
Tel: 416.216.4815
orestes.pasparakisnnortonrosefulbright.com
Virginie Gauthier LSUC #41097D
Tel: 416.216.4853
viminie.ciauthiernortonrosefulbright.com
Lawyers for the Applicants
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