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NOTICES OF SPECIAL MEETINGS
- and -
NOTICE OF ORIGINATING APPLICATION TO THE COURT OF
QUEEN’S BENCH OF ALBERTA
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MANAGEMENT INFORMATION CIRCULAR
FOR SPECIAL MEETINGS OF THE COMMON SHAREHOLDERS AND
THE PREFERRED SHAREHOLDERS OF VERESEN INC.
EACH MEETING TO BE HELD JULY 11, 2017
with respect to a proposed
PLAN OF ARRANGEMENT
involving
VERESEN INC.
and
PEMBINA PIPELINE CORPORATION
June 5, 2017
These materials are important and require your immediate attention. Please carefully read this management
information circular, including its appendices and the documents incorporated by reference herein, as they contain
detailed information related to, among other things, the proposed plan of arrangement that will be voted upon at
the special meetings. If you are in doubt as to how to deal with these materials or the matters they describe, please
consult your professional advisor. If you have any questions or require more information with regards to voting
your shares, please contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected] .
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TABLE OF CONTENTS
NOTICE OF SPECIAL MEETING OF
COMMON SHAREHOLDERS ............................ ii
NOTICE OF SPECIAL MEETING OF
PREFERRED SHAREHOLDERS ........................iv
GENERAL QUESTIONS AND ANSWERS ......... 1
GLOSSARY OF TERMS........................................ 9
CONVENTIONS ................................................... 20
MANAGEMENT INFORMATION CIRCULAR
................................................................................. 21 Introduction ........................................................ 21 Supplemental Disclosure – Non-U.S. GAAP and
Non-IFRS Measures ........................................... 21 Information for United States Shareholders ........ 22 Currency ............................................................. 23
FORWARD-LOOKING STATEMENTS ........... 23
INFORMATION FOR BENEFICIAL HOLDERS
................................................................................. 26
SUMMARY ............................................................ 28
THE ARRANGEMENT ........................................ 43 General................................................................ 43 Details of the Arrangement ................................. 44 Background to the Arrangement ......................... 47 Reasons for the Arrangement ............................. 50 Attributes of the Combined Company ................ 51 Fairness Opinions ............................................... 53 Recommendation of the Board of Directors ....... 58 The Arrangement Agreement ............................. 59 Support Agreements ........................................... 66
PROCEDURE FOR THE ARRANGEMENT TO
BECOME EFFECTIVE ........................................ 67 Procedural Steps ................................................. 67 Shareholder Approvals ....................................... 67 Court Approval ................................................... 68 Regulatory Approvals ......................................... 69 Securities Law Matters ....................................... 72 Making an Election Regarding the Consideration
to be Received..................................................... 74 Pro-rationing Provisions ..................................... 74 Procedure for Exchange of Veresen Share
Certificates or DRS Advices ............................... 76
INTERESTS OF CERTAIN PERSONS OR
COMPANIES IN THE ARRANGEMENT ......... 78 Veresen Shares.................................................... 78 Veresen Incentive Awards .................................. 78 Severance ............................................................ 78 Continuing Insurance Coverage for Directors and
Officers of Veresen ............................................. 79 Combined Company Appointments .................... 80 Summary of Interests of Directors and Executive
Officers in the Arrangement ............................... 80
DISSENT RIGHTS................................................ 82
CERTAIN CANADIAN FEDERAL INCOME
TAX CONSIDERATIONS ................................... 84 Holders Resident in Canada ................................ 85 Holders Not Resident in Canada ......................... 88 Dissenting Non-Resident Holders....................... 89
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS .................. 91 Scope of This Disclosure .................................... 91 Certain U.S. Federal Income Tax Consequences of
the Arrangement ................................................. 93 U.S. Federal Income Tax Consequences of the
Ownership and Disposition of Pembina Common
Shares.................................................................. 96 Additional Considerations .................................. 97
TIMING.................................................................. 99
PRO FORMA INFORMATION OF PEMBINA
AFTER GIVING EFFECT TO THE
ARRANGEMENT ................................................. 99 General................................................................ 99 Officers and Directors of Pembina ..................... 99 Selected Unaudited Pro Forma Financial
Information ....................................................... 100 Pro Forma Consolidated Capitalization of
Pembina ............................................................ 100 Description of Share Capital ............................. 103 Principal Holders of Pembina Common Shares
Following the Arrangement .............................. 103 Auditors, Registrar and Transfer Agent ............ 103
RISK FACTORS ................................................. 103
INTERESTS OF EXPERTS ............................... 106
INFORMATION CONCERNING VERESEN
INC. ....................................................................... 106
INFORMATION CONCERNING PEMBINA
PIPELINE CORPORATION ............................. 106
MATTERS TO BE CONSIDERED AT THE
MEETINGS .......................................................... 107 Common Shareholders’ Meeting ...................... 107 Preferred Shareholders’ Meeting ...................... 107
GENERAL PROXY MATTERS ........................ 107 Solicitation of Proxies ....................................... 107 Appointment and Revocation of Proxies .......... 108 Proxy Voting ..................................................... 108 General.............................................................. 109 Voting Securities of Veresen and Principal
Holders thereof ................................................. 109 Procedure and Votes Required ......................... 110
QUESTIONS AND OTHER ASSISTANCE ..... 110
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APPENDICES
APPENDIX A – Common Shareholder Arrangement
Resolution
APPENDIX B – Preferred Shareholder Arrangement
Resolution
APPENDIX C – Arrangement Agreement
APPENDIX D – Plan of Arrangement
APPENDIX E – Interim Order
APPENDIX F – Section 191 of the Business
Corporation Act (Alberta)
APPENDIX G – Common Shareholder Fairness
Opinion
APPENDIX H – Preferred Shareholder Fairness
Opinion
APPENDIX I – Pro Forma Consolidated Financial
Statements of Pembina Pipeline Corporation
APPENDIX J – Information Concerning Veresen
Inc.
APPENDIX K – Information Concerning Pembina
Pipeline Corporation
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June 5, 2017
Dear Shareholders:
On May 1, 2017, Veresen entered into an agreement with Pembina Pipeline Corporation to create a premier Canadian energy
infrastructure company, supporting some of North America’s most prolific resource plays. Our board of directors and senior
management determined that the agreement with Pembina offers both a compelling valuation and that the combined company
will be greater than the sum of its parts.
Included with this letter is a package of information with respect to the transaction, that is referred to as the “Arrangement”,
which includes details of the Arrangement and directions on how to vote on the Arrangement, as well as what to do with your
shares if the Arrangement is approved. The management information circular included with this letter is a lengthy document
that includes very detailed information prescribed by law. That said, I would encourage you to review it for complete details
of the proposed transaction, as well as its impact on you.
Summarizing what the agreement means for you as a common shareholder, each of your common shares of Veresen would
be exchanged for common shares of Pembina, on the basis of 0.4287 common shares of Pembina, or for $18.65 in cash. You
will be able to specify if you’d prefer to receive all cash or all shares, however, the total consideration offered by Pembina
for Veresen common shares is approximately three quarters Pembina common shares and one quarter cash. Depending on
the choices made by all of the common shareholders, you may receive a combination of shares and cash. Complete details
are provided in the attached materials.
I draw your attention to the section of the enclosed circular entitled “Attributes of the Combined Company” which provides
details on why our management expects the combined company will:
be better positioned to successfully deliver an aggregated growth program of approximately $6.0 billion, optimize
the integrated asset base, and compete for future investment opportunities in order to drive significant growth over
the long term;
pay a meaningful cash dividend that is expected to grow, while offering a lower payout ratio and cash flows
supported primarily with fee-for-service contracts and high-quality counterparties; and
offer a stronger balance sheet and superior access to the capital markets, resulting in a greater ability to grow on a
per share basis and to execute a broad suite of potential projects.
I invite you to attend the shareholder meeting on July 11, 2017 to vote on approval of the Arrangement. If you cannot attend
the meeting in person, please complete and deliver the enclosed proxy form as soon as possible.
As part of the Arrangement, holders of Veresen preferred shares are being asked to approve an exchange for Pembina
preferred shares with the same terms and conditions as the existing Veresen preferred shares.
If you have any questions, please consult your financial or other advisors, or Kingsdale Advisors, who we’ve hired for this
purpose, at 1-888-518-6554 toll-free, or 416-867-2272 (collect), or email [email protected] .
I should note that our board of directors unanimously recommends that you vote in favour of the Arrangement.
I would like to express my gratitude for the support of our shareholders over the past years. I would also like to thank all
Veresen employees for their hard work and their support. I look forward to seeing you at the meeting.
Yours very truly,
Don Althoff
President and Chief Executive Officer
Veresen Inc.
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NOTICE OF SPECIAL MEETING OF COMMON SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting (the “Common Shareholders’ Meeting”) of the holders
(“Common Shareholders”) of common shares (“Common Shares”) of Veresen Inc. (“Veresen”) will be held at
10:00 a.m. (Calgary time) on July 11, 2017 at Livingston Place (South Tower) in the Livingston Club Conference
Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary, Alberta, Canada for the following purposes:
1. to consider, pursuant to an interim order (the “Interim Order”) of the Court of Queen’s Bench of Alberta
dated June 5, 2017, and, if deemed advisable, to approve, with or without variation, a special resolution of
the Common Shareholders (the “Common Shareholder Arrangement Resolution”), the full text of which
is set forth in Appendix A to the accompanying management information circular dated June 5, 2017 (the
“Information Circular”), to approve a plan of arrangement (the “Arrangement”) under Section 193 of the
Business Corporations Act (Alberta) (the “ABCA”) involving Veresen, Common Shareholders, holders of
cumulative redeemable preferred shares, series A, B, C, D, E and F, of Veresen and Pembina Pipeline
Corporation (“Pembina”), whereby, among other things, Pembina will acquire all of the issued and
outstanding Common Shares, all as more particularly described in the Information Circular; and
2. to transact such further and other business as may properly be brought before the Common Shareholders’
Meeting or any adjournment(s) or postponement(s) thereof.
Specific details of the matters to be put before the Common Shareholders’ Meeting are set forth in the Information
Circular.
The board of directors of Veresen unanimously recommends that Common Shareholders vote in favour of the
Common Shareholder Arrangement Resolution. It is a condition to the completion of the Arrangement that the
Common Shareholder Arrangement Resolution be approved at the Common Shareholders’ Meeting.
The full text of the plan of arrangement (the “Plan of Arrangement”) implementing the Arrangement is attached as
Appendix D to the Information Circular. The Interim Order is attached as Appendix E to the Information Circular.
Each Common Share entitled to be voted in respect of the Common Shareholder Arrangement Resolution will entitle
the holder to one vote at the Common Shareholders’ Meeting. The Common Shareholder Arrangement Resolution
must be approved by at least 66⅔% of the votes cast by Common Shareholders present in person or by proxy at the
Common Shareholders’ Meeting.
The record date (the “Record Date”) for determination of Common Shareholders entitled to receive notice of and to
vote at the Common Shareholders’ Meeting is the close of business on May 23, 2017. Common Shareholders whose
names have been entered in the register of holders of Common Shares on the close of business on the Record Date
will be entitled to receive notice of and to vote at the Common Shareholders’ Meeting, provided that, to the extent
that a Common Shareholder transfers the ownership of any Common Shares after the Record Date and the transferee
of those Common Shares establishes ownership of such Common Shares and demands, not later than ten (10) days
before the Common Shareholders’ Meeting, to be included in the list of Common Shareholders eligible to vote at the
Common Shareholders’ Meeting, such transferee will be entitled to vote those Common Shares at the Common
Shareholders’ Meeting.
Registered Common Shareholders may attend the Common Shareholders’ Meeting in person or may be represented
by proxy. Common Shareholders who are unable to attend the Common Shareholders’ Meeting or any adjournments
thereof in person are requested to date, sign and return the accompanying form of proxy for use at the Common
Shareholders’ Meeting or any adjournment thereof. To be effective, the enclosed form of proxy must be dated, signed
and deposited with Veresen’s registrar and transfer agent, Computershare Trust Company of Canada: (i) by mail using
the enclosed return envelope or one addressed to Computershare Trust Company of Canada, 8th Floor North Tower,
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100 University Avenue, Toronto, Ontario, M5J 2Y1; (ii) by facsimile 1-866-249-7775; or (iii) through the internet at
www.investorvote.com, no later than: (a) 10:00 a.m. (Calgary time) on July 7, 2017 or, if the Common Shareholders’
Meeting is adjourned or postponed, no later than forty-eight (48) hours (excluding Saturdays, Sundays and statutory
holidays in Alberta) before the beginning of any adjourned or postponed Common Shareholders’ Meeting. The time
limit for the deposit of proxies may be waived or extended by the Chairman of the applicable Meeting at his discretion
without notice. To vote through the internet you will require your 15-digit control number found on your proxy form.
If a Common Shareholder receives more than one form of proxy because such holder owns Common Shares
registered in different names or addresses, each form of proxy should be completed and returned.
A proxyholder has discretion under the accompanying form of proxy in respect of amendments or variations to matters
identified in this Notice and with respect to other matters which may properly come before the Common Shareholders’
Meeting, or any adjournment thereof. As of the date hereof, management of Veresen knows of no amendments,
variations or other matters to come before the Common Shareholders’ Meeting other than the matters set forth in this
Notice. Common Shareholders who are planning to return the form of proxy are encouraged to review the Information
Circular carefully before submitting the proxy form.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote in favour of the Common Shareholder Arrangement Resolution.
Pursuant to the Interim Order, registered holders of Common Shares have been granted the right to dissent with respect
to the Common Shareholder Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair
value of their Common Shares in accordance with the provisions of Section 191 of the ABCA, as modified by the
Interim Order and the Plan of Arrangement. The right of a Common Shareholder to dissent is more particularly
described in the Information Circular and in the Interim Order and the text of Section 191 of the ABCA, which are set
forth in Appendices E and F, respectively, to the accompanying Information Circular. To exercise such right to dissent,
a dissenting Common Shareholder must send to Veresen, c/o Osler, Hoskin & Harcourt LLP, Suite 2500, TransCanada
Tower, 450 – 1st Street S.W., Calgary, Alberta, T2P 5H1, Attention: Colin Feasby, a written objection to the Common
Shareholder Arrangement Resolution, which written objection must be received by 4:00 p.m. (Calgary time) on July
4, 2017 or the fifth business day immediately preceding the date of any adjournment of the Common Shareholders’
Meeting.
Failure to strictly comply with the requirements set forth in Section 191 of the ABCA, as modified by the
Interim Order and the Plan of Arrangement, may result in the loss of any right of dissent. Persons who are
beneficial owners of Common Shares registered in the name of a broker, dealer, bank, trust company or other
nominee who wish to dissent should be aware that only the registered holders of such Common Shares are
entitled to dissent. Accordingly, a beneficial owner of Common Shares desiring to exercise the right of dissent
must make arrangements for the Common Shares beneficially owned by such holder to be registered in the
holder’s name prior to the time the written objection to the Common Shareholder Arrangement Resolution is
required to be received by Veresen or, alternatively, make arrangements for the registered holder of such
Common Shares to dissent on behalf of the beneficial holder. It is strongly recommended that any Common
Shareholders wishing to dissent seek independent legal advice.
Dated at Calgary, Alberta, this 5th day of June, 2017.
BY ORDER OF THE BOARD OF DIRECTORS OF
VERESEN INC.
Don Althoff
President and Chief Executive Officer
Veresen Inc.
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NOTICE OF SPECIAL MEETING OF PREFERRED SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting (the “Preferred Shareholders’ Meeting”) of the holders
(“Preferred Shareholders”) of cumulative redeemable preferred shares, series A, B, C, D, E and F (collectively, the
“Preferred Shares”) of Veresen Inc. (“Veresen”) will be held at 11:00 a.m. (Calgary time) on July 11, 2017 at
Livingston Place (South Tower) in the Livingston Club Conference Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary,
Alberta, Canada for the following purposes:
1. to consider, pursuant to an interim order (the “Interim Order”) of the Court of Queen’s Bench of Alberta
dated June 5, 2017, and, if deemed advisable, to approve, voting as a single class, with or without variation,
a special resolution of the Preferred Shareholders (the “Preferred Shareholder Arrangement Resolution”),
the full text of which is set forth in Appendix B to the accompanying management information circular dated
June 5, 2017 (the “Information Circular”), to approve a plan of arrangement (the “Arrangement”) under
Section 193 of the Business Corporations Act (Alberta) (the “ABCA”) involving Veresen, holders of
common shares of Veresen, Preferred Shareholders and Pembina Pipeline Corporation (“Pembina”),
whereby, among other things, Pembina will, in addition to acquiring all of the common shares of Veresen,
exchange all of the issued and outstanding Preferred Shares for preferred shares of Pembina, all as more
particularly described in the Information Circular; and
2. to transact such further and other business as may properly be brought before the Preferred Shareholders’
Meeting or any adjournment(s) or postponement(s) thereof.
Specific details of the matters to be put before the Preferred Shareholders’ Meeting are set forth in the Information
Circular.
The board of directors of Veresen unanimously recommends that Preferred Shareholders vote in favour of the
Preferred Shareholder Arrangement Resolution. Completion of the Arrangement is not conditional upon
receiving the approval of Preferred Shareholders for the Preferred Shareholder Arrangement Resolution. If
the Preferred Shareholders do not approve the Preferred Shareholder Arrangement Resolution, the Preferred
Shares will remain outstanding following completion of the Arrangement and will not be exchanged for
preferred shares of Pembina.
The full text of the plan of arrangement (the “Plan of Arrangement”) implementing the Arrangement is attached as
Appendix D to the Information Circular. The Interim Order is attached as Appendix E to the Information Circular.
Each Preferred Share entitled to be voted in respect of the Preferred Shareholder Arrangement Resolution will entitle
the holder to one vote at the Preferred Shareholders’ Meeting. The Preferred Shareholder Arrangement Resolution
must be approved by at least 66⅔% of the votes cast by Preferred Shareholders present in person or by proxy at the
Preferred Shareholders’ Meeting, voting as a single class.
The record date (the “Record Date”) for determination of Preferred Shareholders entitled to receive notice of and to
vote at the Preferred Shareholders’ Meeting is the close of business on May 23, 2017. Only Preferred Shareholders
whose names have been entered in the register of holders of Preferred Shares on the close of business on the Record
Date will be entitled to receive notice of and to vote at the Preferred Shareholders’ Meeting, provided that, to the
extent that a Preferred Shareholder transfers the ownership of any Preferred Shares after the Record Date and the
transferee of those Preferred Shares establishes ownership of such Preferred Shares and demands, not later than ten
(10) days before the Preferred Shareholders’ Meeting, to be included in the list of Preferred Shareholders eligible to
vote at the Preferred Shareholders’ Meeting, such transferee will be entitled to vote those Preferred Shares at the
Preferred Shareholders’ Meeting.
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Registered Preferred Shareholders may attend the Preferred Shareholders’ Meeting in person or may be represented
by proxy. Preferred Shareholders who are unable to attend the Preferred Shareholders’ Meeting or any adjournment
or postponement thereof in person are requested to date, sign and return the accompanying form of proxy for use at
the Preferred Shareholders’ Meeting or any adjournment thereof. To be effective, the enclosed form of proxy must be
dated, signed and deposited with Veresen’s registrar and transfer agent, Computershare Trust Company of Canada:
(i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, 8th
Floor North Tower, 100 University Avenue, Toronto, Ontario, M5J 2Y1; (ii) by facsimile 1-866-249-7775; or (iii)
through the internet at www.investorvote.com, no later than: (a) 11:00 a.m. (Calgary time) on July 7, 2017 or, if the
Preferred Shareholders’ Meeting is adjourned, no later than forty-eight (48) hours (excluding Saturdays, Sundays and
statutory holidays in Alberta) before the beginning of any adjourned or postponed Preferred Shareholders’ Meeting.
To vote through the internet you will require your 15-digit control number found on your proxy form.
If a Preferred Shareholder receives more than one form of proxy because such holder owns Preferred Shares
registered in different names or addresses, each form of proxy should be completed and returned.
A proxyholder has discretion under the accompanying form of proxy in respect of amendments or variations to matters
identified in this Notice and with respect to other matters which may properly come before the Preferred Shareholders’
Meeting, or any adjournment thereof. As of the date hereof, management of Veresen knows of no amendments,
variations or other matters to come before the Preferred Shareholders’ Meeting other than the matters set forth in this
Notice. Preferred Shareholders who are planning to return the form of proxy are encouraged to review the Information
Circular carefully before submitting the proxy form.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote in favour of the Preferred Shareholder Arrangement Resolution.
Pursuant to the Interim Order, registered holders of Preferred Shares have been granted the right to dissent with respect
to the Preferred Shareholder Arrangement Resolution and, if the Arrangement becomes effective (and the Preferred
Shareholders participate therein), to be paid the fair value of their Preferred Shares in accordance with the provisions
of Section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement. The right of a Preferred
Shareholder to dissent is more particularly described in the Information Circular and in the Interim Order and the text
of Section 191 of the ABCA, which are set forth in Appendices E and F, respectively, to the accompanying Information
Circular. To exercise such right to dissent, a dissenting Preferred Shareholder must send to Veresen, c/o Osler, Hoskin
& Harcourt LLP, Suite 2500, TransCanada Tower, 450 – 1st Street S.W., Calgary, Alberta, T2P 5H1, Attention: Colin
Feasby, a written objection to the Preferred Shareholder Arrangement Resolution, which written objection must be
received by 4:00 p.m. (Calgary time) on July 4, 2017 or the fifth business day immediately preceding the date of any
adjournment of the Preferred Shareholders’ Meeting. Notwithstanding the foregoing, registered Preferred
Shareholders who have validly exercised their right to dissent shall not be entitled to be paid the fair value of their
Preferred Shares in the event that the approval of the Preferred Shareholders is not obtained at the Preferred
Shareholders’ Meeting or if the Preferred Shares are not acquired by Pembina pursuant to the Plan of Arrangement.
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Failure to strictly comply with the requirements set forth in Section 191 of the ABCA, as modified by the
Interim Order and the Plan of Arrangement may result in the loss of any right of dissent. Persons who are
beneficial owners of Preferred Shares registered in the name of a broker, dealer, bank, trust company or other
nominee who wish to dissent should be aware that only the registered holders of such Preferred Shares are
entitled to dissent. Accordingly, a beneficial owner of Preferred Shares desiring to exercise the right of dissent
must make arrangements for the Preferred Shares beneficially owned by such holder to be registered in the
holder’s name prior to the time the written objection to the Preferred Shareholder Arrangement Resolution is
required to be received by Veresen or, alternatively, make arrangements for the registered holder of such
Preferred Shares to dissent on behalf of the beneficial holder. It is strongly recommended that any Preferred
Shareholders wishing to dissent seek independent legal advice.
Dated at Calgary, Alberta, this 5th day of June, 2017.
BY ORDER OF THE BOARD OF DIRECTORS OF
VERESEN INC.
Don Althoff
President and Chief Executive Officer
Veresen Inc.
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Court File No. 1701-07563
IN THE COURT OF QUEEN’S BENCH OF ALBERTA
JUDICIAL CENTRE OF CALGARY
IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT,
R.S.A. 2000, c. B-9, AS AMENDED
AND IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVING VERESEN INC., THE
HOLDERS OF COMMON SHARES OF VERESEN INC., THE HOLDERS OF CUMULATIVE
REDEEMABLE PREFERRED SHARES, SERIES A, B, C, D, E AND F, OF VERESEN INC. AND
PEMBINA PIPELINE CORPORATION
NOTICE OF ORIGINATING APPLICATION
NOTICE IS HEREBY GIVEN that an originating application (the “Application”) has been filed with the Court of
Queen’s Bench of Alberta, Judicial Centre of Calgary (the “Court”) on behalf of Veresen Inc. (“Veresen”) with
respect to a proposed arrangement (the “Arrangement”) under Section 193 of the Business Corporations Act, R.S.A.
2000, c. B-9, as amended (the “ABCA”), involving Veresen, the holders of common shares of Veresen (the “Common
Shareholders”), the holders of cumulative redeemable preferred shares, series A, B, C, D, E and F of Veresen (the
“Preferred Shareholders”) and Pembina Pipeline Corporation (“Pembina”), which Arrangement is described in
greater detail in the management information circular dated June 5, 2017 accompanying this Notice of Originating
Application. At the hearing of the Application, Veresen intends to seek:
1. a declaration that the terms and conditions of the Arrangement, and the procedures relating thereto, are fair
to the Common Shareholders, the Preferred Shareholders and other affected persons, both from a substantive
and procedural perspective;
2. an order approving the Arrangement pursuant to the provisions of Section 193 of the ABCA;
3. an order declaring that registered Common Shareholders shall have the right to dissent in respect of the
Arrangement pursuant to the provisions of Section 191 of the ABCA, as modified by the interim order (the
“Interim Order”) of the Court dated June 5, 2017;
4. an order declaring that registered Preferred Shareholders shall have the right to dissent in respect of the
Arrangement (provided the Preferred Shareholders participate therein) pursuant to the provisions of Section
191 of the ABCA, as modified by the Interim Order;
5. a declaration that the Arrangement will, upon the filing of Articles of Arrangement pursuant to the provisions
of Section 193 of the ABCA, be effective in accordance with its terms and shall be binding on and after the
Effective Time, as defined in the Arrangement; and
6. such other and further orders, declarations or directions as the Court may deem just,
(collectively, the “Final Order”).
AND NOTICE IS FURTHER GIVEN that the said Application is directed to be heard before a Justice of the Court,
at the Calgary Courts Centre, 601 - 5th Street, S.W., Calgary, Alberta, Canada, on July 12, 2017 at 10:00 a.m. (Calgary
time) or as soon thereafter as counsel may be heard. Any Common Shareholder, Preferred Shareholder (if
applicable) or other interested party desiring to support or oppose the Application may appear at the time of
the hearing in person or by counsel for that purpose provided such Common Shareholder, Preferred
Shareholder or other interested party files with the Court and serves upon Veresen on or before 5:00 p.m.
(Calgary time) on July 4, 2017, a notice of intention to appear (the “Notice of Intention to Appear”) setting out
such Common Shareholder’s, Preferred Shareholder’s or interested party’s address for service and indicating
whether such Common Shareholder, Preferred Shareholder or interested party intends to support or oppose
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the Application or make submissions, together with any evidence or materials which are to be presented to the
Court. Service on Veresen is to be effected by delivery to its solicitors at the address set forth below.
AND NOTICE IS FURTHER GIVEN that, at the hearing and subject to the foregoing, Common Shareholders,
Preferred Shareholders and any other interested persons will be entitled to make representations as to, and the Court
will be requested to consider, the fairness of the Arrangement. If you do not attend, either in person or by counsel, at
that time, the Court may approve or refuse to approve the Arrangement as presented, or may approve it subject to such
terms and conditions as the Court may deem fit, without any further notice.
AND NOTICE IS FURTHER GIVEN that the Court, by the Interim Order, has given directions as to the calling
and holding of special meetings of the Common Shareholders and Preferred Shareholders for the purposes of such
Common Shareholders and Preferred Shareholders voting upon applicable special resolutions to approve the
Arrangement and, in particular, has directed that registered Common Shareholders and registered Preferred
Shareholders have the right to dissent under the provisions of Section 191 of the ABCA, as modified by the terms of
the Interim Order in respect of the Arrangement.
AND NOTICE IS FURTHER GIVEN that the Final Order approving the Arrangement will, if granted, serve as the
basis for an exemption from the registration requirements of the United States Securities Act of 1933, as amended,
pursuant to Section 3(a)(10) thereof with respect to (i) the issuance of common shares in the capital of Pembina
issuable to Common Shareholders, and (ii) the issuance of preferred shares in the capital of Pembina issuable to
Preferred Shareholders, all pursuant to the Arrangement.
AND NOTICE IS FURTHER GIVEN that further notice in respect of these proceedings will only be given to those
persons who have filed a Notice of Intention to Appear.
AND NOTICE IS FURTHER GIVEN that a copy of the said Application and other documents in the proceedings
will be furnished to any Common Shareholder, Preferred Shareholder or other interested party requesting the same by
the under-mentioned solicitors for Veresen upon written request delivered to such solicitors as follows:
Solicitors for Veresen:
Osler, Hoskin & Harcourt LLP
Suite 2500, TransCanada Tower
450 – 1st Street S.W.
Calgary, Alberta T2P 5H1
Facsimile Number: (403) 260-7024
Attention: Colin Feasby
DATED at the City of Calgary, in the Province of Alberta, this 5th day of June, 2017.
BY ORDER OF THE BOARD OF DIRECTORS OF
VERESEN INC.
Don Althoff
President and Chief Executive Officer
Veresen Inc.
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GENERAL QUESTIONS AND ANSWERS
All capitalized terms used herein but not otherwise defined have the meanings set forth under “Glossary of Terms” in
this Information Circular
Q: Where and when will the Meetings be held?
A: The Common Shareholders’ Meeting will be held at Livingston Place (South Tower) in the Livingston Club
Conference Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary, Alberta, Canada at 10:00 a.m. (Calgary time)
on July 11, 2017.
The Preferred Shareholders’ Meeting will be held at Livingston Place (South Tower) in the Livingston Club
Conference Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary, Alberta, Canada at 11:00 a.m. (Calgary time)
on July 11, 2017.
Q: What are Shareholders being asked to vote on?
A: At the Common Shareholders’ Meeting, Common Shareholders will be asked to vote on the Common
Shareholder Arrangement Resolution approving the Arrangement under Section 193 of the ABCA involving
Veresen, Common Shareholders, Preferred Shareholders and Pembina, whereby, among other things,
Pembina will acquire all of the issued and outstanding Common Shares, all as more particularly described in
this Information Circular.
At the Preferred Shareholders’ Meeting, Preferred Shareholders will be asked to vote on the Preferred
Shareholder Arrangement Resolution approving the Arrangement under Section 193 of the ABCA involving
Veresen, Common Shareholders, Preferred Shareholders and Pembina, whereby, among other things,
Pembina will exchange all of the issued and outstanding Preferred Shares for preferred shares of Pembina,
all as more particularly described in the Information Circular.
Q: What is the consideration offered to Shareholders?
A: The Arrangement Agreement provides for, among other things, the acquisition of all of the issued and
outstanding Common Shares. Pursuant to the Arrangement, Common Shareholders may elect, subject to
certain pro-rationing provisions, to receive for each Common Share held, either:
(a) 0.4287 of a Pembina Common Share; or
(b) $18.65 in cash,
provided that the cash payments paid by Pembina in connection with such elections shall not exceed
$1,522,500,000 (Maximum Cash Consideration) nor shall the aggregate number of Pembina Common Shares
to be issued by Pembina in connection with such elections exceed 99,500,000 Pembina Common Shares
(Maximum Share Consideration). For clarity, Common Shareholders will have the right to elect to receive
Pembina Common Shares or cash in respect of their aggregate holdings of Common Shares, subject to the
above-mentioned limits.
If the Arrangement is approved by Preferred Shareholders then, pursuant to the Arrangement, Preferred
Shareholders will receive, for each Preferred Share held, one Pembina Exchange Share with the same terms
and conditions as the Preferred Share so exchanged.
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Q: What is the expected ownership structure of the combined company on completion of the
Arrangement?
A: As of June 5, 2017, there were issued and outstanding 313,652,781 Common Shares and 401,129,872
Pembina Common Shares. Upon completion of the Arrangement, assuming the issuance of the Maximum
Share Consideration, current holders of Pembina Common Shares are expected to own approximately 80%
of the combined company, and Common Shareholders are expected to own approximately 20% of the
combined company.
Q: Does the Board support the Arrangement?
A: Yes. The Board UNANIMOUSLY: (a) determined that the Arrangement and the entry into the Arrangement
Agreement are in the best interests of Veresen and the Arrangement is fair to the Common Shareholders and
the Preferred Shareholders; and (b) recommends that the Common Shareholders and the Preferred
Shareholders vote in favour of the Arrangement.
In determining that the Arrangement is in the best interests of Veresen and is fair to the Shareholders, and in
recommending to Shareholders that they approve the Arrangement, the Board considered and relied upon a
number of factors, including, among others, the following:
the consideration offered for the Common Shares, based on the Cash Consideration of $18.65, represents
a 21.8% premium to the 20-day weighted average price of the Common Shares on the TSX of $15.31 as
of April 28, 2017 (the last trading day prior to announcement of the Arrangement), and a 22.5% premium
to the closing price of the Common Shares on the TSX of $15.23 on April 28, 2017;
the Board’s view, based on both external and internal analysis, that the consideration to be paid pursuant
to the Arrangement offers a compelling value for assets currently in service and generating cash flows,
as well as for future opportunities on a risked and present valued basis, including placing the Sunrise,
Tower and Saturn Phase II processing facilities into service, the potential to sanction additional
midstream projects through Veresen Midstream, the potential extension of long-term transportation
agreements on Alliance Pipeline and subsequent ability to explore optimizing the capital structure of
Alliance Pipeline, the potential expansion of Alliance Pipeline through additional compression, the
potential for increased revenue and potential to advance Jordan Cove LNG and Pacific Connector Gas
Pipeline on a regulatory and commercial basis;
Common Shareholders will have the opportunity to continue to participate in the growth opportunities
associated with Veresen’s business as well as of the combined business. As described under the heading
“The Arrangement – Attributes of the Combined Company” the combined company is expected to be
better positioned than a stand-alone Veresen to deliver on Veresen’s existing strategy;
the Arrangement offers an opportunity for Common Shareholders to participate in Pembina’s low-risk,
highly-contracted asset base which is well integrated across the hydrocarbon value chain;
the Board’s view, after negotiations with Pembina, that the consideration offered by Pembina represented
the highest per share consideration reasonably attainable within a reasonable forecast period; and
Pembina’s reputation as a leading transportation and midstream service provider in North America with
a focus on enhancing shareholder value in a safe, environmentally responsible manner positioned it as
an ideal partner for a business combination with Veresen.
Q: What will be the attributes of the combined company?
A: Management of Veresen expects the combined company, after completion of the Arrangement, will be one
of Canada’s premier energy infrastructure companies, supporting some of North America’s most prolific
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resource plays and securing increased market access for its customers. The combined company will feature
a largely integrated asset base that is supported by long-life, economic hydrocarbon reserves and comprises
crude oil, liquids and natural gas pipelines, terminal, storage and midstream operations, gas gathering and
processing facilities, as well as fractionation facilities. Veresen’s management believes the combined
company will be greater than the sum of its parts and better positioned than a stand-alone Veresen entity to
deliver on its growth strategy.
The combined company will be better positioned to successfully deliver an aggregated growth program of
approximately $6.0 billion, optimize the integrated asset base, and compete for future investment
opportunities in order to drive meaningful growth over the long term.
the combined company will have approximately $6.0 billion in growth projects under construction, and
will enjoy the benefit of Pembina’s proven track record of safe, on-time and on-budget project delivery,
and decades of operating experience, which will provide a strong foundation to support attractive long-
term adjusted cash flow per share growth;
in addition to the projects currently under construction by each of Pembina and Veresen, the combined
company is expected to have a growth portfolio of unsecured development opportunities of
approximately $20 billion to potentially sanction in the future, including Jordan Cove LNG and Pacific
Connector Gas Pipeline in Oregon, a Propane Dehydrogenation and Propylene Production facility in
Alberta, as well as various midstream opportunities in western Canada;
the majority of the combined asset base is already physically connected or presents the opportunity to
be connected in the future, which will enable operational integration, creating the opportunity to realize
significant operational synergies, as well as overall enhancements to customer service within existing
commercial arrangements;
increasing integration across the value chain will allow the combined company to offer a superior range
of services and flexibility in how these services are provided to customers, which is expected to improve
the combined company’s competitiveness in securing new business opportunities, and offer the potential
to develop other ancillary business lines in the future in response to customer needs;
the combined company will have an established footprint in some of the most prolific resource plays in
North America, including the BC Montney, the Alberta Montney and the Duvernay, strategically
positioning the combined company in the principal areas for future midstream infrastructure investment
in western Canada; and
potential for significant financial synergies, including reduction in administrative overhead, operating
costs, optimization of capital structure and integrated tax planning, estimated by Pembina at $75 million
to $100 million on a run-rate basis.
The combined company will pay a meaningful cash dividend that is expected to grow, while offering a
lower payout ratio and cash flows supported primarily with fee-for-service contracts and high-quality
counterparties.
upon completion of the Arrangement, and after taking into the account the proposed increase in the
dividend on Pembina Common Shares announced by Pembina, the combined company will pay an
attractive cash dividend of approximately $2.16 per Pembina Common Share on an annualized basis;
the combined company will have a significantly lower payout ratio, which, when combined with line-
of-sight to significant growth in cash flows, will advantageously position the combined company to
continue Pembina’s long-term track record of dividend growth and reinvestment in the business;
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the dividend is expected to be underpinned by over 85% of cash flows from low-risk, stable take-or-pay
and fee-for-service contract structures with a diverse set of counterparties, over 80% of which hold
investment grade ratings, split ratings or provide security in the form of letters of credit;
significant horizontal diversification across the hydrocarbon value chains in terms of crude oil, natural
gas liquids and natural gas focused segments each constituting approximately one-third of pro forma
cash flows, as well as vertical diversification within value chains, including long-haul pipelines,
terminals, storage, midstream operations, gathering and processing facilities as well as fractionation
facilities; and
the combined company will have significant geographic diversification across the western Canada – U.
S. Midwest – Pacific Northwest triangle.
The combined company is expected to have a stronger balance sheet and superior access to the capital
markets, resulting in a greater ability to grow on a per share basis and to execute a broad suite of potential
projects.
with a pro forma enterprise value of approximately $35 billion and as one of the top 25 public companies
in Canada, the combined company will have greater access to both debt and equity capital markets,
providing a lower aggregate cost of capital to maximize investment returns to enable higher growth on
a per share basis;
Pembina and its management team have built a very strong track record in the capital markets, further
enhancing access to capital markets, the ability to finance large-scale, long-term projects, and to pursue
a broader range of potential business development opportunities to drive future growth; and
the combined company is expected to maintain a strong BBB investment grade credit rating, with a focus
on continued prudent financial management. The stronger and larger balance sheet of the combined
company will provide a better financial position to pursue large-scale projects such as Jordan Cove LNG
and Pacific Connector Gas Pipeline as well as a Propane Dehydrogenation and Propylene Production
facility.
Q: What approvals are required for the Arrangement?
A: The Arrangement requires a number of approvals to become effective, including the approval of the Common
Shareholder Arrangement Resolution by at least 66⅔% of the votes cast by Common Shareholders at the
Common Shareholders’ Meeting.
In addition, completion of the Arrangement is subject to a number of conditions including, among other
things, the receipt of all Required Regulatory Approvals and the granting of the Final Order.
Completion of the Arrangement is not contingent on approval of the Preferred Shareholder Arrangement
Resolution at the Preferred Shareholders’ Meeting. Should such approval not be obtained, the Preferred
Shares will be excluded from the Arrangement and will remain outstanding following completion of the
Arrangement. The Preferred Shareholder Arrangement Resolution requires approval by at least 66⅔% of the
votes cast by the Preferred Shareholders at the Preferred Shareholders’ Meeting, voting as a single class.
Q: When will the Arrangement become effective?
A: Subject to the satisfaction of all conditions precedent, Veresen and Pembina expect the Effective Date to
occur in the second half of 2017.
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Q: Who is entitled to vote at the Meetings?
A: Common Shareholders of record at the close of business on May 23, 2017 are entitled to vote at the Common
Shareholders’ Meeting and Preferred Shareholders of record at the close of business on May 23, 2017 are
entitled to vote at the Preferred Shareholders’ Meeting.
Q: What is the voting deadline?
A: Shareholders are encouraged to submit their proxies as soon as possible to ensure that their votes are counted.
Proxies must be received by Computershare Trust Company of Canada (“Computershare”), the transfer
agent of Veresen, no later than: (a) 10:00 a.m. (Calgary time) on July 7, 2017 (in the case of proxies for
Common Shareholders), (b) 11:00 a.m. (Calgary time) on July 7, 2017 (in the case of proxies for Preferred
Shareholders), or (c) if the Common Shareholders’ Meeting or Preferred Shareholders’ Meeting is adjourned,
forty-eight (48) hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the beginning
of any adjournment of such meeting. The time limit for the deposit of proxies may be waived or extended by
the Chairman of the applicable Meeting at his discretion without notice.
A non-registered Shareholder exercising voting rights through a nominee should consult the voting
instruction form from such Shareholder’s nominee as the nominee may have different and earlier deadlines.
Q: How can a registered Shareholder vote?
A: A registered Shareholder is a person whose Common Shares or Preferred Shares are registered in the
Shareholder’s own name and may vote in any of the ways set out below.
On the Internet: A Shareholder can go to the website at www.investorvote.com and follow the instructions
on the screen. The Shareholder’s voting instructions are then conveyed electronically over the Internet. The
Shareholder will need the 15-digit control number found on his or her proxy.
By Telephone: A Shareholder can call the number located on such Shareholder’s proxy. The Shareholder
will need the 15-digit control number found on his or her proxy.
By Mail: A Shareholder can complete the proxy as directed and return it in the business reply envelope
provided to Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box
300, Richmond Hill, Ontario, L4B 4R5.
By Hand Delivery: A Shareholder can complete the proxy as directed and return it in the business reply
envelope provided by hand delivery to Computershare Trust Company of Canada, Proxy Department, 100
University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1.
In Person: A Common Shareholder who plans to vote in person does not need to do anything except attend
the Common Shareholders’ Meeting. A Preferred Shareholder who plans to vote in person does not need to
do anything except attend the Preferred Shareholders’ Meeting. Shareholders should register with the
representatives of Computershare upon arrival at the applicable Meeting.
By Proxy: A registered Shareholder can vote by proxy by using the enclosed instrument of proxy, or any
other appropriate proxy form, to appoint the Shareholder’s proxyholder and to indicate how such Shareholder
wants his or her Common Shares or Preferred Shares voted. The persons named in the enclosed instrument
of proxy are directors or officers of Veresen and intend to vote in favour of the Common Shareholder
Arrangement Resolution and the Preferred Shareholder Arrangement Resolution, as applicable.
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1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Q: How can a non-registered Shareholder vote?
A: A non-registered Shareholder is a person whose Common Shares or Preferred Shares are held in an account
in the name of a nominee, including a bank, trust company or securities broker and may vote in any of the
ways set out below.
On the Internet: A Shareholder can go to the website at www.proxyvote.com and follow the instructions on
the screen. The Shareholder’s voting instructions are then conveyed electronically over the Internet. The
Shareholder will need the 16-digit control number found on his or her voting instruction form.
By Telephone: A Shareholder can call the number located on such Shareholder’s voting instruction form.
The Shareholder will need the 16-digit control number found on his or her voting instruction form.
By Mail: A Shareholder can complete the voting instruction form as directed and return it in the business
reply envelope provided to the Shareholder by the nominee’s cut-off date and time.
By Broadridge QuickVote: Veresen may utilize the Broadridge QuickVote service to assist non-registered
Shareholders with voting their Common Shares or Preferred Shares over the telephone. Alternatively,
Kingsdale Advisors may contact such non-registered Shareholders to assist them with conveniently voting
their Common Shares or Preferred Shares directly over the phone.
By Proxy: A non-registered Shareholder should have received a notice from such Shareholder’s nominee
providing instructions on how to access an electronic copy of this Information Circular, together with a voting
instruction form. A Shareholder should contact his or her nominee if such Shareholder did not receive a
request for voting instructions. Each nominee has its own signing and return instructions, which should be
followed carefully to ensure that all votes are tabulated. A Shareholder’s nominee is required to seek
instructions as to the manner in which to vote such Shareholder’s Common Shares or Preferred Shares. If a
Shareholder does not complete a voting instruction form, such Shareholder’s nominee cannot vote the
Shareholder’s Common Shares or Preferred Shares at the applicable Meeting.
Q: How can a non-registered Shareholder vote in person at the Meetings?
A: If a non-registered Common Shareholder wishes to vote in person at the Common Shareholders’ Meeting or
a non-registered Preferred Shareholder wishes to vote in person at the Preferred Shareholders’ Meeting, such
Shareholder should fill in his or her name in the space provided for designating a proxy on the voting
instruction form sent by such Shareholder’s nominee. In so doing, the Shareholder is instructing the nominee
to appoint such Shareholder as proxyholder. The Shareholder should then follow the execution and return
instructions provided by his or her nominee. It is not necessary to otherwise complete the form, as the
Shareholder will be voting in person at the applicable Meeting. For further details, a Shareholder should
contact his or her nominee directly.
Q: What if my Veresen Shares are registered in more than one name or in the name of a company?
A: If your Common Shares or Preferred Shares are registered in more than one name, all registered persons must
sign the instrument of proxy. If your Common Shares or Preferred Shares are registered in a company’s name
or any name other than your own, you may be required to provide documents proving your authorization to
sign the instrument of proxy for that company or name. For any questions about the proper supporting
documents, contact Computershare before submitting your instrument of proxy.
Q: Who is soliciting my proxy?
A: The management of Veresen is soliciting your proxy and has engaged Kingsdale to act as strategic
shareholder advisor and proxy solicitation agent with respect to the matters to be considered at the Meetings.
Solicitation of proxies will be primarily by mail, but proxies may also be solicited personally, by
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advertisement, by telephone, by directors, officers or employees of Veresen and/or Kingsdale or by any other
means management may deem necessary.
Management will receive no additional compensation for these services, but will be reimbursed by Veresen
for any expenses incurred by them in connection with these services. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material
to the non-registered owners of Common Shares or Preferred Shares registered in the names of these persons,
and Veresen may reimburse them for their reasonable transaction and clerical expenses. Costs of solicitation
of proxies will be borne by Veresen. Veresen will pay the cost of Kingsdale’s services and any related
expenses, which is estimated to be approximately $400,000 plus disbursements.
Q: How do I complete the voting instructions on my instrument of proxy?
A: On the instrument of proxy, a Shareholder has two choices: (1) the Shareholder can indicate how such
shareholder wants his or her proxyholder to vote such holder’s Common Shares or Preferred Shares; or (2)
the Shareholder can let his or her proxyholder decide how to vote the holder’s Common Shares or Preferred
Shares.
If a Shareholder has specified on the instrument of proxy how such holder wants his or her Common Shares
or Preferred Shares to be voted on a particular matter, then such holder’s proxyholder must vote the holder’s
Common Shares or Preferred Shares accordingly in the case of either a vote by show of hands or a vote by
ballot. If a Shareholder has chosen to let such holder’s proxyholder decide how to vote on behalf of the
Shareholder, such holder’s proxyholder can then vote in accordance with his or her judgment.
Unless contrary instructions are provided, Common Shares or Preferred Shares represented by proxies
received by Veresen will be voted FOR each matter to be presented at the Meetings.
Q: Can I appoint someone other than the person(s) designated by management of Veresen to vote my
Common Shares or Preferred Shares?
A: Yes. A Shareholder can appoint a person (who need not be a Shareholder) to attend and act for him, her or it
and on his, her or its behalf at the Meetings other than the persons designated in the instrument of proxy or
voting instruction form. The Shareholder may exercise such right by inserting the name in full of the desired
person in the blank space provided in the instrument of proxy or the voting instruction form and striking out
the names now designated and date and submit the form. If you appoint a non-management proxyholder
please make sure they are aware and ensure they will attend the applicable Meeting in order for your vote to
count.
Q: Can I change my vote after I have voted by proxy?
A: Yes. If a registered Shareholder has submitted a proxy, such holder may revoke it (a) by instrument in writing
executed by the Shareholder or such Shareholder’s attorney authorized in writing or if the Shareholder is a
corporation, under its corporate seal or by an officer or attorney thereof, duly authorized, indicating the
capacity under which such officer or attorney is signing and deposit with Computershare, the transfer agent
of Veresen, at the office designated in the Notice of Common Shareholders’ Meeting or Notice of Preferred
Shareholders’ Meeting not later than 5:00 p.m. (Calgary time), on the Business Day preceding the day of the
applicable Meeting, (or any adjournment or postponement thereof) or with the Chair on the day of the
applicable Meeting (or any adjournment or postponement thereof); (b) by a duly executed and deposited
proxy as provided herein bearing a later date or time than the date or time of the proxy being revoked; or (c)
as permitted by law.
Only registered Shareholders have the right to revoke a proxy. If a non-registered Shareholder wishes to
change his or her vote, the Shareholder should contact his or her nominee to obtain information on the
procedure to follow and if necessary revoke their proxy in accordance with the revocation procedures.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Q: How many Veresen Shares are outstanding?
A: As at June 5, 2017, there were 313,652,781 Common Shares issued and outstanding. Each Common Share
entitles the holder thereof to one vote per share at the Common Shareholders’ Meeting.
As at June 5, 2017, there were 8,000,000 Veresen Series A Shares, 6,000,000 Veresen Series C Shares,
8,000,000 Veresen Series E Shares and no Veresen Series B Shares, Veresen Series D Shares or Veresen
Series F Shares issued and outstanding. Each Preferred Share entitles the holder thereof to one vote per share
at the Preferred Shareholders’ Meeting.
To the knowledge of the directors and officers of Veresen, as of the date hereof, no person or company
beneficially owns, or exercises control or direction over, directly or indirectly, more than 10% of the voting
rights attached to all of the outstanding Common Shares or Preferred Shares.
Q: Who will count the votes?
A: Proxies and votes of Shareholders attending the Meetings will be counted by Computershare, who will act as
the scrutineer of the Meetings.
Q: What are the quorums for the Meetings?
A: The quorum required at the Common Shareholders’ Meeting will be two Common Shareholders present in
person, or represented by proxy, at the opening of the Common Shareholders’ Meeting, and holding or
representing at least 25% of the Common Shares entitled to be voted at the Common Shareholders’ Meeting.
The quorum required at the Preferred Shareholders’ Meeting will be two Preferred Shareholders present in
person, or represented by proxy, at the opening of the Preferred Shareholders’ Meeting, and holding or
representing at least 25% of the Preferred Shares entitled to be voted at the Preferred Shareholders’ Meeting.
Q: What if I have other questions?
A: Shareholders who have questions regarding the Meetings, the Arrangement or who have additional questions
about the procedures for voting their Common Shares or Preferred Shares should contact their broker or
Kingsdale at the telephone numbers or e-mail below:
Toll-Free Number: 1-888-518-6554
Collect Calls: 416-867-2272
By E-mail: [email protected]
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1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
GLOSSARY OF TERMS
The following is a glossary of certain terms used in this Information Circular including the Summary and Appendices
J and K. Terms and abbreviations used in the Appendices to this Information Circular other than Appendices J and K
are defined separately and the terms and abbreviations defined below are not used therein, except where otherwise
indicated.
“1933 Act” means the United States Securities Act of 1933, including the rules and regulations promulgated
thereunder, as amended from time to time;
“1934 Act” means the United States Securities and Exchange Act of 1934, including the rules and regulations
promulgated thereunder, as amended from time to time;
“ABCA” means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, including the regulations promulgated
thereunder, as amended from time to time;
“Acquisition Proposal” means any inquiry or the making of any proposal to Veresen or Common Shareholders from
any Person or group of Persons “acting jointly or in concert” (within the meaning of NI 62-104) which constitutes, or
may reasonably be expected to lead to (in either case whether in one transaction or a series of transactions): (a) an
acquisition or purchase from Veresen or Common Shareholders of 20% or more of the voting securities of Veresen or
its Subsidiaries; (b) any acquisition of a substantial amount of assets (or any lease, long-term supply agreement or
other arrangement having the same economic effect as a purchase or sale of a substantial amount of assets) of Veresen
and its Subsidiaries taken as a whole; (c) an amalgamation, arrangement, merger, business combination, or
consolidation involving Veresen or its Subsidiaries; (d) any take-over bid, issuer bid, exchange offer, recapitalization,
liquidation, dissolution, reorganization or similar transaction involving Veresen or its Subsidiaries; or (e) any other
transaction, the consummation of which would or could reasonably be expected to impede, interfere with, prevent or
delay the transactions contemplated by the Arrangement Agreement or the Arrangement or which would or could
reasonably be expected to materially reduce the benefits to Pembina under the Arrangement Agreement or the
Arrangement, provided, however, that the transactions relating to the Veresen Power Business Sale, in all material
respects on the terms and conditions as disclosed to Pembina in writing by Veresen prior to the date of the Arrangement
Agreement, shall not constitute an “Acquisition Proposal”;
“Affiliate” means any Person that is affiliated with another Person in accordance with meaning of the Securities Act
(Alberta);
“Alliance Pipeline” means a natural gas transmission pipeline that runs from northwestern Alberta and northeastern
British Columbia to Channahon, Illinois;
“Amalco” means, in the event the Preferred Shareholder Arrangement Resolution receives the requisite approval of
Preferred Shareholders at the Preferred Shareholders’ Meeting, or the Preferred Shareholders have approved a special
resolution with similar effect to the Preferred Shareholder Arrangement Resolution prior to the Effective Time such
that Pembina is the sole holder of the Preferred Shares prior to the amalgamation contemplated in the Plan of
Arrangement and the Plan of Arrangement is not otherwise amended pursuant to its terms to exclude the Preferred
Shares, the corporation resulting from the amalgamation of Pembina and Veresen pursuant to the Plan of Arrangement;
“Arrangement” means the arrangement involving Veresen, the Common Shareholders, the Preferred Shareholders
and Pembina pursuant to Section 193 of the ABCA set forth in the Plan of Arrangement, as supplemented, modified
or amended in accordance with the Plan of Arrangement or made at the direction of the Court in the Final Order;
“Arrangement Agreement” means the arrangement agreement between Veresen and Pembina dated May 1, 2017,
providing for, among other things, the Plan of Arrangement and the Arrangement and all amendments thereto, a copy
of which is attached as Appendix C to this Information Circular;
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“Articles of Arrangement” means the articles of arrangement in respect of the Arrangement required under
Subsection 193(10) of the ABCA to be filed with the Registrar after the Final Order has been granted, giving effect to
the Arrangement;
“Beneficial Holders” means Shareholders who do not hold their Common Shares or Preferred Shares, as applicable,
in their own name;
“Board” or “Board of Directors” means the board of directors of Veresen;
“Broadridge” means Broadridge Financial Solutions, Inc.;
“Business Day” means, with respect to any action to be taken, any day, other than a Saturday, Sunday or a statutory
holiday in the place where such action is to be taken;
“Canada Transportation Act” means the Canada Transportation Act, R.S.C. 1996, C. 10, as amended;
“Cash Consideration” means $18.65 per Common Share;
“CDS” means CDS Clearing and Depository Services Inc.;
“Certificate” means the certificate or proof of filing to be issued by the Registrar pursuant to subsection 193(11) or
193(12) of the ABCA in respect of the Articles of Arrangement giving effect to the Arrangement;
“Code” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations”;
“Commissioner” means the Commissioner of Competition appointed under subsection 7(1) of the Competition Act,
or his designee;
“Common Shareholder Arrangement Resolution” means a special resolution of the Common Shareholders in
respect of the Arrangement to be considered at the Common Shareholders’ Meeting, the full text of which is set forth
in Appendix A to this Information Circular;
“Common Shareholder Fairness Opinion” means the written opinion of Scotia Capital dated April 30, 2017, a copy
of which is attached as Appendix G to this Information Circular.
“Common Shareholder Letter of Transmittal and Election Form” means the shareholder letter of transmittal and
election form forwarded to Common Shareholders pursuant to which Common Shareholders are required to deliver
certificates or DRS Advices representing Common Shares to the Depositary and may elect to receive, on completion
of the Arrangement, in exchange for each Common Share, the Share Consideration or the Cash Consideration, subject
in each case to pro-rationing;
“Common Shareholders” means the holders from time to time of Common Shares;
“Common Shareholders’ Meeting” means the special meeting of Common Shareholders (including any
adjournment(s) or postponement(s) thereof permitted under the Arrangement Agreement) that is to be convened to
consider and, if deemed advisable, to approve the Common Shareholder Arrangement Resolution;
“Common Shares” means common shares in the capital of Veresen;
“Competition Act” means the Competition Act, R.S.C. 1985, c. C-34, including the rules and regulations promulgated
thereunder, as amended from time to time;
“Competition Act Approval” means, in respect of the Arrangement, the occurrence of one of the following: (a) the
receipt of an advance ruling certificate under subsection 102(1) of the Competition Act in respect of the Arrangement;
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or (b) (i) the applicable waiting period under subsection 123(1) of the Competition Act, and any extension thereof,
shall have expired or shall have been terminated under subsection 123(2) of the Competition Act, or the obligation to
submit a notification under Part IX of the Competition Act shall have been waived by the Commissioner pursuant to
paragraph 113(c) of the Competition Act and (i) unless such requirement is waived in writing by Pembina in its sole
discretion, the Commissioner shall have advised the Parties in writing that the Commissioner does not, at that time,
intend to make an application under Section 92 of the Competition Act and such advice shall remain in full force and
effect;
“Confidentiality Agreement” means the confidentiality, exclusivity and standstill agreement dated April 14, 2017
between Pembina and Veresen;
“Convention” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“Court” means the Court of Queen’s Bench of Alberta;
“CTA Approval” means the occurrence of one of the following: (a) Pembina shall have received a notice from the
Minister of Transport pursuant to subsection 53.1(4) of the Canada Transportation Act that the Minister of Transport
is of the opinion that the Arrangement contemplated by the Arrangement Agreement does not raise issues with respect
to the public interest as it relates to national transportation, in accordance with subsection 53.1(4) of the Canada
Transportation Act; or (b) the Arrangement contemplated by the Arrangement Agreement shall have been approved
by the Governor in Council in accordance with subsections 53.2(7) of the Canada Transportation Act, and in either
case the completion of the Arrangement contemplated by the Arrangement Agreement shall not be prohibited under
subsection 53.2(1) of the Canada Transportation Act;
“CRA” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“Depositary” means Computershare Investor Services Inc., or such other Person that may be appointed by the Parties
in connection with the Arrangement for the purpose of receiving deposits of certificates or DRS Advices formerly
representing Common Shares and Preferred Shares;
“Dissent Rights” means, collectively, the rights of registered Common Shareholders and registered Preferred
Shareholders to dissent in respect of the Common Shareholder Arrangement Resolution and the Preferred Shareholder
Arrangement Resolution, respectively, and to be paid the fair value of the Common Shares or Preferred Shares in
respect of which the holder dissents, all in accordance with the provisions of Section 191 of the ABCA, as modified
by the Plan of Arrangement and the Interim Order;
“Dissenting Shareholders” means registered Common Shareholders and, in the event the Preferred Shareholder
Arrangement Resolution receives the requisite approval of Preferred Shareholders at the Preferred Shareholders’
Meeting, registered Preferred Shareholders who validly exercise the Dissent Rights with respect to the Common
Shareholder Arrangement Resolution or the Preferred Shareholder Arrangement Resolution, as applicable, provided
to them under the Interim Order, which exercise of Dissent Rights has not been withdrawn, or is not deemed to have
been withdrawn, before the Effective Time;
“DRS Advice” means a Direct Registration System (DRS) advice;
“Effective Date” means the effective date of the Arrangement, being the date shown on the Certificate;
“Effective Time” means 12:01 a.m. (Calgary time) on the Effective Date or such other time on the Effective Date as
may be agreed to in writing by Pembina and Veresen;
“Election Deadline” means 5:00 p.m. (Calgary time) on the date announced by Veresen by means of a news release
disseminated on a national newswire in Canada and the U.S. as the deadline for Common Shareholders to make an
election to receive Pembina Common Shares or cash pursuant to the Arrangement, which announcement shall be made
at least ten (10) Business Days in advance of the Election Deadline;
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1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“Encumbrance” includes any mortgage, pledge, assignment, charge, lien, security interest, adverse interest in
property, other third party interest or encumbrance of any kind whether contingent or absolute, and any agreement,
option, right or privilege (whether by Law, contract or otherwise) capable of becoming any of the foregoing;
“Environmental Laws” means, with respect to any Person or its business, activities, property, assets or undertaking,
all Laws, including the common law, relating to environmental or health and safety matters in the jurisdictions
applicable to such Person or its business, activities, property, assets or undertaking, including, without limitation,
legislation governing the reduction of greenhouse gas emissions and the use, transportation, storage and release of any
waste or other substance that is prohibited, listed, defined, designated or classified as dangerous, hazardous,
radioactive, explosive or toxic or a pollutant or a contaminant under or pursuant to any applicable environmental
Laws, and specifically including hydraulic fracturing fluids, chemicals and proppants, as well as petroleum and all
derivatives thereof or synthetic substitutes therefor;
“Fairness Opinions” means collectively, the Common Shareholder Fairness Opinion and the Preferred Shareholder
Fairness Opinion;
“Final Order” means the order of the Court approving the Arrangement pursuant to Subsection 193(9)(a) of the
ABCA, as such order may be amended at any time prior to the Effective Date or, if appealed, then unless such appeal
is withdrawn or denied, as affirmed;
“Governmental Entity” means any: (a) multinational, federal, provincial, territory, state, regional, municipal, local
or other government or any governmental or public department, court, tribunal, arbitral body, commission, board,
bureau or agency; (b) subdivision, agent, commission, board or authority of any of the foregoing; (c) quasi-
governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of
any of the foregoing; or (d) the TSX or NYSE, as applicable;
“Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
“HSR Approval” means the applicable waiting period (and any extension thereof) in respect of the Arrangement
under the HSR Act shall have expired or been earlier terminated;
“IFRS” means International Financial Reporting Standards as incorporated in the Chartered Professional Accountants
of Canada Handbook, at the relevant time applied on a consistent basis;
“Information Circular” means this management information circular dated June 5, 2017, together with all
Appendices hereto, distributed to the Common Shareholders and Preferred Shareholders in connection with the
Common Shareholders’ Meeting or the Preferred Shareholders’ Meeting, as the case may be;
“Interim Order” means the interim order of the Court dated June 5, 2017 under Subsection 193(4) of the ABCA,
containing declarations and directions with respect to the Arrangement and the holding of the Meetings, as such order
may be affirmed, amended or modified by any court of competent jurisdiction, a copy of which order is attached as
Appendix E to this Information Circular;
“IRS” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations”;
“Kingsdale” refers to Kingsdale Advisors, Veresen’s strategic shareholder advisor and proxy solicitation agent;
“Laws” means all laws, by-laws, statutes, rules, regulations, principles of law, orders, ordinances, protocols, codes,
guidelines, policies, notices, directions and judgments or other requirements and the terms and conditions of any grant
of approval, permission, authority or license of any Governmental Entity (including the TSX and the NYSE) or self-
regulatory authority and the term “applicable” with respect to such Laws and in a context that refers to one or more
Persons, means such Laws as are applicable to such Persons or its business, undertaking, property or securities and
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
emanate from a Person having jurisdiction over the Person or Persons or its or their business, undertaking, property
or securities; and “Laws” includes Environmental Laws;
“Letters of Transmittal” means collectively, the Common Shareholder Letter of Transmittal and Election Form and
the Preferred Shareholder Letter of Transmittal and “Letter of Transmittal” means either one of them;
“Listed Preferred Shares” has the meaning given to it under the heading “Procedure for the Arrangement to Become
Effective – Regulatory Approvals – Stock Exchange Listings”;
“LNG” means liquefied natural gas;
“Material Adverse Change” or “Material Adverse Effect” means, with respect to any Person, any fact or state of
facts, circumstance, change, effect, occurrence or event which:
(a) either individually is or in the aggregate are, or individually or in the aggregate would reasonably be expected
to be, material and adverse to the business, operations, results of operations, properties, assets, liabilities,
obligations (whether absolute, accrued, conditional or otherwise) or condition (financial or otherwise) of such
Person and its Subsidiaries, taken as a whole, except to the extent of any fact or state of facts, circumstance,
change, effect, occurrence or event resulting from or arising in connection with: (i) any matter or prospective
matter which has, at or prior to the date of the Arrangement Agreement, been publicly disclosed by such
Person or has been disclosed in writing to the other Party as at or prior to the date of the Arrangement
Agreement or the failure of such Party to meet any internal or published projections, forecasts, estimates or
predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date
of the Arrangement Agreement; (ii) any change in IFRS or U.S. GAAP or changes in regulatory accounting
requirements applicable to the oil, natural gas (including liquefied natural gas) and natural gas liquids
transportation, storage, processing, terminalling and fractionation or other midstream business (the “Relevant
Business”) as a whole; (iii) conditions affecting the Relevant Business as a whole, including changes in Laws
(including tax Laws); (iv) any change in global, national or regional political conditions (including the
outbreak of war or acts of terrorism) or in general economic, business, regulatory, or market conditions or in
national or global financial or capital markets or commodity markets; (v) any natural disaster; (vi) any
changes in the trading price or trading volumes of the Pembina Common Shares or Common Shares, as
applicable, or any credit rating downgrade, negative outlook, watch or similar event relating to Pembina or
Veresen, as applicable (provided, however, that the causes underlying such changes may be considered to
determine whether such causes constitute a Material Adverse Change or Material Adverse Effect); (vii) any
actions taken (or omitted to be taken) at the written request or with the prior written consent of the other Party
hereto; (viii) the announcement of the Arrangement Agreement or any action taken by the Person or any of
its Subsidiaries that is required pursuant to the Arrangement Agreement (including any steps taken pursuant
to Section 5.3 of the Arrangement Agreement to obtain any required regulatory approvals but excluding any
obligation to act in the ordinary course of business); or (ix) the failure by Veresen to complete the Veresen
Power Business Sale; provided, however, that with respect to paragraphs (ii), (iii), (iv) and (v) such matter
does not have a materially disproportionate effect on the Person and its Subsidiaries, taken as a whole, relative
to comparable entities operating in the Relevant Business, in which case, the relevant exclusion from this
definition of “Material Adverse Change” or “Material Adverse Effect” referred to in paragraphs (ii), (iii), (iv)
and (v) above would not apply, and references in certain sections of the Arrangement Agreement to dollar
amounts are not intended to be, and shall not be deemed to be, illustrative or interpretative for purposes of
determining whether a “Material Adverse Change” or a “Material Adverse Effect” has occurred; or
(b) either individually or in the aggregate prevents or materially delays, or individually or in the aggregate would
reasonably be expected to prevent or materially delay, the Person from performing its material obligations
under the Arrangement Agreement in any material respect;
“Maximum Cash Consideration” means $1,522,500,000;
“Maximum Share Consideration” means 99,500,000 Pembina Common Shares;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“Meetings” means, collectively, the Common Shareholders’ Meeting and the Preferred Shareholders’ Meeting and
“Meeting” means either one of them;
“MI 61-101” means Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions;
“Minister” means the Minister of Transport under the Canada Transportation Act;
“NGL” means natural gas liquids;
“NI 62-104” means National Instrument 62-104 – Take-Over Bids and Issuer Bids;
“Non-Resident Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax
Considerations”;
“NYSE” means the New York Stock Exchange;
“Outside Date” means October 31, 2017, subject to the right of Pembina to postpone the Outside Date for up to an
additional two (2) months if a Required Regulatory Approval has not been obtained, by giving written notice to
Veresen to such effect no later than 5:00 p.m. (Calgary Time) on the date that is not less than five (5) days prior to the
original Outside Date (and any subsequent Outside Date), or such later date as may be agreed to in writing by the
Parties, provided that, notwithstanding the foregoing, Pembina shall not be permitted to postpone the Outside Date if
the failure to obtain a Required Regulatory Approval is primarily the result of Pembina’s failure to comply with its
covenants in the Arrangement Agreement;
“Parties” means, collectively, Pembina and Veresen; and “Party” means any one of them;
“Pembina” means Pembina Pipeline Corporation, a corporation existing under the ABCA, and, following completion
of the Arrangement (provided that the Plan shall not have been amended to exclude the amalgamation of Veresen and
Pembina), means the corporation resulting from the amalgamation of Veresen and Pembina;
“Pembina AIF” means the annual information form of Pembina dated February 23, 2017 for the year ended December
31, 2016;
“Pembina Annual Financial Statements” means the audited consolidated financial statements of Pembina, together
with the notes thereto and the auditors’ reports thereon as at and for the years ended December 31, 2016 and 2015;
“Pembina Annual MD&A” means management’s discussion and analysis of the financial and operating results of
Pembina for the year ended December 31, 2016;
“Pembina Board” means the board of directors of Pembina;
“Pembina Class A Preferred Shares” means the class A preferred shares of Pembina, issuable in series, and where
the context requires includes the Pembina Series 1 Shares, the Pembina Series 2 Shares, the Pembina Series 3 Shares,
the Pembina Series 4 Shares, the Pembina Series 5 Shares, the Pembina Series 6 Shares, the Pembina Series 7 Shares,
the Pembina Series 8 Shares, the Pembina Series 9 Shares, the Pembina Series 10 Shares, the Pembina Series 11
Shares, the Pembina Series 12 Shares, the Pembina Series 13 Shares and the Pembina Series 14 Shares;
“Pembina Class B Preferred Shares” means class B preferred shares of Pembina;
“Pembina Common Shares” means the common shares in the capital of Pembina;
“Pembina Damages Event” has the meaning given to it under the heading “The Arrangement – The Arrangement
Agreement – Non-Completion Fees Payable by Veresen”;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“Pembina Exchange Shares” means the Pembina Series A Exchange Shares, the Pembina Series B Exchange Shares,
the Pembina Series C Exchange Shares, the Pembina Series D Exchange Shares, the Pembina Series E Exchange
Shares and the Pembina Series F Exchange Shares, as constituted on the Effective Date;
“Pembina Interim Financial Statements” means the unaudited condensed consolidated interim financial statements
of Pembina, together with the notes thereto, as at and for the three months ended March 31, 2017 and 2016;
“Pembina Interim MD&A” means management’s discussion and analysis of the financial and operating results of
Pembina for the three months ended March 31, 2017 and 2016;
“Pembina Option Plan” means the stock option plan of Pembina approved by Pembina shareholders on May 26,
2011, as amended effective November 30, 2016;
“Pembina Options” means the options granted by Pembina under the Pembina Option Plan;
“Pembina Series 1 Shares” means the cumulative redeemable rate reset Pembina Class A Preferred Shares, series 1
of Pembina, issued July 26, 2013;
“Pembina Series 2 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
2 of Pembina, issuable on conversion of the Pembina Series 1 Shares;
“Pembina Series 3 Shares” means the cumulative redeemable rate reset Pembina Class A Preferred Shares, series 3
of Pembina, issued October 2, 2013;
“Pembina Series 4 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
4 of Pembina, issuable on conversion of the Pembina Series 3 Shares;
“Pembina Series 5 Shares” means the cumulative redeemable rate reset Pembina Class A Preferred Shares, series 5
of Pembina, issued January 16, 2014;
“Pembina Series 6 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
6 of Pembina, issuable on conversion of the Pembina Series 5 Shares;
“Pembina Series 7 Shares” means the cumulative redeemable rate reset Pembina Class A Preferred Shares, series 7
of Pembina, issued September 11, 2014;
“Pembina Series 8 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
8 of Pembina, issuable on conversion of the Pembina Series 7 Shares;
“Pembina Series 9 Shares” means the cumulative redeemable rate reset Pembina Class A Preferred Shares, series 9
of Pembina, issued April 10, 2015;
“Pembina Series 10 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
10 of Pembina, issuable on conversion of the Pembina Series 9 Shares;
“Pembina Series 11 Shares” means the cumulative redeemable minimum rate reset Pembina Class A Preferred
Shares, series 11 of Pembina, issued January 15, 2016;
“Pembina Series 12 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
12 of Pembina, issuable on conversion of the Pembina Series 11 Shares;
“Pembina Series 13 Shares” means the cumulative redeemable minimum rate reset Pembina Class A Preferred
Shares, series 13 of Pembina, issued April 27, 2016;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“Pembina Series 14 Shares” means the cumulative redeemable floating rate Pembina Class A Preferred Shares, series
14 of Pembina, issuable on conversion of the Pembina Series 13 Shares;
“Pembina Series A Exchange Shares” means a series of cumulative redeemable rate reset Pembina Class A Preferred
Shares, such shares having identical terms to the Veresen Series A Shares except that the issuer thereof shall be
Pembina and they will be convertible into Pembina Series B Exchange Shares instead of Veresen Series B Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 15);
“Pembina Series B Exchange Shares” means a series of cumulative redeemable floating rate Pembina Class A
Preferred Shares, such shares having identical terms to the Veresen Series B Shares except that the issuer thereof shall
be Pembina and they will be convertible into Pembina Series A Exchange Shares instead of Veresen Series A Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 16);
“Pembina Series C Exchange Shares” means a series of cumulative redeemable rate reset Pembina Class A Preferred
Shares, such shares having identical terms to the Veresen Series C Shares except that the issuer thereof shall be
Pembina and they will be convertible into Pembina Series D Exchange Shares instead of Veresen Series D Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 17);
“Pembina Series D Exchange Shares” means a series of cumulative redeemable floating rate Pembina Class A
Preferred Shares, such shares having identical terms to the Veresen Series D Shares except that the issuer thereof shall
be Pembina and they will be convertible into Pembina Series C Exchange Shares instead of Veresen Series C Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 18);
“Pembina Series E Exchange Shares” means a series of cumulative redeemable rate reset Pembina Class A Preferred
Shares, such shares having identical terms to the Veresen Series E Shares except that the issuer thereof shall be
Pembina and they will be convertible into Pembina Series F Exchange Shares instead of Veresen Series F Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 19);
“Pembina Series F Exchange Shares” means a series of cumulative redeemable floating rate Pembina Class A
Preferred Shares, such shares having identical terms to the Veresen Series F Shares except that the issuer thereof shall
be Pembina and they will be convertible into Pembina Series E Exchange Shares instead of Veresen Series E Shares,
which series when issued, will be designated as the next available number in Pembina’s Class A Preferred Share
sequence (which, if created on the date hereof, would be designated as series 20);
“Pembina Shares” means collectively, the Pembina Common Shares and Pembina Exchange Shares;
“Person” includes an individual, firm, trust, partnership, association, corporation, joint venture, trustee, executor,
administrator, legal representative or government (including any Governmental Entity);
“PFIC” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations”;
“Plan” or “Plan of Arrangement” means the plan of arrangement in the form attached as Appendix D to this
Information Circular, and any amendments or variations thereto made in accordance with Section 6.1 of the Plan of
Arrangement or made at the discretion of the Court in the Final Order;
“Preferred Share Consideration” means one Pembina Series A Exchange Share per Veresen Series A Share, without
interest, one Pembina Series B Exchange Share per Veresen Series B Share, without interest, one Pembina Series C
Exchange Share per Veresen Series C Share, without interest, one Pembina Series D Exchange Share per Veresen
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Series D Share, without interest, one Pembina Series E Exchange Share per Veresen Series E Share, without interest,
and one Pembina Series F Exchange Share per Veresen Series F Share, without interest, as applicable;
“Preferred Shareholder Arrangement Resolution” means a special resolution of the Preferred Shareholders in
respect of the Arrangement to be considered at the Preferred Shareholders’ Meeting, the full text of which is set forth
in Appendix B to this Information Circular;
“Preferred Shareholder Fairness Opinion” means the written opinion of Scotia Capital dated April 30, 2017, a copy
of which is attached as Appendix H to this Information Circular;
“Preferred Shareholder Letter of Transmittal” means the Letter of Transmittal forwarded to Preferred
Shareholders pursuant to which Preferred Shareholders are required to deliver certificates representing Preferred
Shares to the Depositary;
“Preferred Shareholders” means, collectively, the holders of Veresen Series A Shares, Veresen Series B Shares,
Veresen Series C Shares, Veresen Series D Shares, Veresen Series E Shares and Veresen Series F Shares;
“Preferred Shareholders’ Meeting” means the special meeting of Preferred Shareholders (including any
adjournment(s) or postponement(s) thereof permitted under the Arrangement Agreement) that is to be convened to
consider and, if deemed advisable, to approve the Preferred Shareholder Arrangement Resolution;
“Preferred Shares” means collectively, the Veresen Series A Shares, the Veresen Series B Shares, the Veresen Series
C Shares, the Veresen Series D Shares, the Veresen Series E Shares and the Veresen Series F Shares;
“Proposed Amendments” has the meaning given to it under the heading “Certain Canadian Federal Income Tax
Considerations”;
“QEF” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations”;
“RDSP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“Record Date” means May 23, 2017;
“Registrar” means the Registrar of Corporations for the Province of Alberta appointed under Section 263 of the
ABCA;
“Regulatory Approvals” means any consent, waiver, permit, permission, exemption, review, order, decision or
approval of, or any registration and filing with or withdrawal of any objection or successful conclusion of any litigation
brought by, any Governmental Entity, or the expiry, waiver or termination of any waiting period imposed by Law or
a Governmental Entity or pursuant to a written agreement between the Parties and a Governmental Entity to refrain
from consummating the Arrangement, in each case required or advisable under Laws in connection with the
Arrangement, including the Required Regulatory Approvals;
“Reorganization” has the meaning given to it under the heading “Certain United States Federal Income Tax
Considerations”;
“Required Regulatory Approvals” means the Competition Act Approval, the CTA Approval and the HSR Approval;
“Resident Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax
Considerations”;
“RESP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“RRIF” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
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“RRSP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“Scotia Capital” means Scotia Capital Inc., financial advisor to Veresen;
“SEC” means the United States Securities and Exchange Commission;
“SEDAR” means the System for Electronic Document Analysis and Retrieval;
“Share Consideration” means 0.4287 of a Pembina Common Share;
“Shareholders” means collectively, the Common Shareholders and the Preferred Shareholders;
“Subsidiary” has the meaning set forth in the Securities Act (Alberta) and, in the case of Veresen, includes the Veresen
Significant Entities;
“Superior Proposal” means a written bona fide Acquisition Proposal to acquire not less than all of the outstanding
Common Shares, or all or substantially all of the assets (on a consolidated basis) of Veresen, which: (a) complies with
securities Laws and did not result from or involve a breach of the covenants regarding non-solicitation in the
Arrangement Agreement; (b) is not subject to any financing condition and that the funds or other consideration
necessary to complete the Acquisition Proposal are or are reasonably likely to be available, as demonstrated to the
satisfaction of the Board, acting in good faith, to fund completion of the Acquisition Proposal at the time and on the
basis set out therein; (c) is not subject to any due diligence condition; (d) the Board determines, in good faith, after
consultation with its financial advisor(s) and outside counsel, would or would be reasonably likely to, if consummated
in accordance with its terms and without assuming away the risk of non-completion, result in a transaction more
favourable, from a financial point of view, for Common Shareholders to the transaction contemplated by the
Arrangement Agreement (including after considering the proposal to adjust the terms and conditions of the
Arrangement as contemplated in the Arrangement Agreement); (e) the Board determines, in good faith, after
consultation with its financial advisor(s) and outside counsel, is reasonably likely to be consummated at the time and
on the terms proposed, without undue delay and taking into account all legal, financial, regulatory (including with
respect to the Competition Act, Canada Transportation Act and HSR Act, to the extent applicable) and other aspects
of such Acquisition Proposal and the Person or group of Persons making such proposal; and (f) after receiving the
advice of outside counsel, that the failure by the Board to accept, recommend, approve or enter into a definitive
agreement to implement, as applicable, such Acquisition Proposal would be inconsistent with its fiduciary duties;
“Support Agreements” means the lock-up agreements between Pembina and each of the Supporting Shareholders
pursuant to which the Supporting Shareholders agreed, among other things, to vote the Common Shares held by them
in favour of the Common Shareholder Arrangement Resolution and to otherwise support the Arrangement;
“Supporting Shareholders” means each of the directors and certain of the officers of Veresen;
“Tax Act” means the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.) and the regulations promulgated
thereunder, each as amended from time to time;
“taxable capital gain” has the meaning given to it under the heading “Certain Canadian Federal Income Tax
Considerations”;
“TFSA” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;
“Total Elected Cash Consideration” has the meaning given to it under the heading “Procedure for the Arrangement
to become Effective – Pro Ration Provisions – Elections for Cash”;
“Total Elected Share Consideration” has the meaning given to it under the heading “Procedure for the Arrangement
to become Effective – Pro Ration Provisions – Elections for Pembina Common Shares”;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“TSX” means the Toronto Stock Exchange;
“U.S. GAAP” means generally accepted accounting principles in the United States, at the relevant time applied on a
consistent basis;
“U.S. Holder” has the meaning given to it under the heading “Certain United States Federal Income Tax
Considerations”;
“United States” or “U.S.” means the United States of America, its territories and possessions, any State of the United
States, and the District of Columbia;
“Veresen” means Veresen Inc., a corporation existing under the ABCA;
“Veresen AIF” means the annual information form of Veresen dated March 14, 2017 for the year ended December
31, 2016;
“Veresen Annual 2016 Information Circular” means the proxy statement and information circular of Veresen dated
March 14, 2016 relating to the annual meeting of Common Shareholders held on May 4, 2016;
“Veresen Annual 2017 Information Circular” means the proxy statement and information circular of Veresen dated
March 14, 2017 relating to the annual meeting of Common Shareholders held on May 3, 2017;
“Veresen Annual Financial Statements” means the audited consolidated financial statements of Veresen, together
with the notes thereto and the auditors’ reports thereon as at and for the years ended December 31, 2016 and 2015;
“Veresen Annual MD&A” means management’s discussion and analysis of the financial and operating results of
Veresen for the year ended December 31, 2016;
“Veresen DSU Plans” means the Veresen Directors Deferred Share Unit Plan dated December 8, 2016 and the
Veresen Senior Executive Deferred Share Unit Plan dated January 1, 2012;
“Veresen DSUs” means deferred share units awarded pursuant to the Veresen DSU Plans, including any related
dividend equivalent units;
“Veresen Incentive Awards” means, collectively, the Veresen RSUs, Veresen DSUs and Veresen PSUs;
“Veresen Interim Financial Statements” means the unaudited consolidated financial statements of Veresen, together
with the notes thereto, as at and for the three months ended March 31, 2017 and 2016;
“Veresen Interim MD&A” means management’s discussion and analysis of the financial and operating results of
Veresen for the for the three months ended March 31, 2017 and 2016;
“Veresen February 2017 MCR” means the material change report of Veresen dated February 27, 2017;
“Veresen LTIP” means the amended and restated Veresen Long-Term Incentive Plan dated January 1, 2016;
“Veresen May 2017 MCR” means the material change report of Veresen dated May 2, 2017;
“Veresen Midstream” means Veresen Midstream Limited Partnership, a limited partnership owned by a wholly-
owned subsidiary of Veresen and affiliates of Kohlberg Kravis Roberts & Co. L.P.;
“Veresen Power Business Sale” means the sale of Veresen’s power generation business, as announced by Veresen
on February 21, 2017 including all updates, amendments and changes disclosed to Pembina in writing by Veresen
prior to the date of the Arrangement Agreement;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
“Veresen PSUs” means performance share units awarded pursuant to the Veresen LTIP, including any related
dividend equivalent units;
“Veresen RSUs” means restricted share units awarded pursuant to the Veresen LTIP, including any related dividend
equivalent units;
“Veresen Series A Shares” means the cumulative redeemable preferred shares, series A of Veresen;
“Veresen Series B Shares” means the cumulative redeemable preferred shares, series B of Veresen;
“Veresen Series C Shares” means the cumulative redeemable preferred shares, series C of Veresen;
“Veresen Series D Shares” means the cumulative redeemable preferred shares, series D of Veresen;
“Veresen Series E Shares” means the cumulative redeemable preferred shares, series E of Veresen;
“Veresen Series F Shares” means the cumulative redeemable preferred shares, series F of Veresen;
“Veresen Shares” means collectively, the Common Shares and the Preferred Shares;
“Veresen Significant Entities” means, collectively, Aux Sable Canada LP, Aux Sable Canada Ltd., Alliance Canada
Marketing L.P., Alliance Canada Marketing Ltd., Alliance Pipeline Limited Partnership, Alliance Pipeline Ltd.,
Veresen Midstream Limited Partnership, Veresen Midstream General Partner Inc., NRGreen Power L.P., NRGreen
Power Ltd., Alliance Pipeline L.P., Alliance Pipeline Inc., Aux Sable Liquid Products LP, Aux Sable Liquid Products
Inc., Aux Sable Midstream LLC, Ruby Pipeline Holding Company, L.L.C. and Ruby Pipeline, LLC; and
“Voting Instruction Form” means the voting instruction form provided by Broadridge to Beneficial Holders.
Words importing the singular include the plural and vice versa and words importing any gender include all genders.
CONVENTIONS
Certain terms used herein are defined in the “Glossary of Terms”. Unless otherwise indicated, references herein to “$”
or “dollars” are to Canadian dollars and references herein to “US$” or “U.S. dollars” are to United States dollars. All
financial information under the heading “Pro Forma Information of Pembina after Giving Effect to the Arrangement”
and in Appendices I and K to this Information Circular has been presented in Canadian dollars in accordance with
IFRS. All financial information in Appendix J to this Information Circular has been presented in Canadian dollars in
accordance with U.S. GAAP.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
MANAGEMENT INFORMATION CIRCULAR
Introduction
This Information Circular is furnished in connection with the solicitation of proxies by the management of
Veresen for use at the Meetings, and at any adjournment(s) thereof. No person has been authorized to give any
information or make any representation in connection with the Arrangement or any other matters to be
considered at the Meetings other than those contained in this Information Circular and if given or made, any
such information or representation must not be relied upon as having been authorized.
The information concerning Pembina contained and incorporated by reference in this Information Circular,
including but not limited to the information in Appendix K to this Information Circular, has been provided by
Pembina. Although Veresen has no knowledge that would indicate that any of such information is untrue or
incomplete, Veresen does not assume any responsibility for the accuracy or completeness of such information
or the failure by Pembina to disclose events which may have occurred or may affect the completeness or
accuracy of such information but which are unknown to Veresen.
This Information Circular does not constitute an offer to sell or a solicitation of an offer to purchase any securities or
the solicitation of a proxy by any person in any jurisdiction in which such an offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful
to make such an offer or solicitation of an offer or a proxy solicitation. Neither the delivery of this Information Circular
nor any distribution of the securities referred to in this Information Circular will, under any circumstances, create an
implication that there has been no change in the information set forth herein since the date as of which such information
is given in this Information Circular.
Information contained in or otherwise accessed through Veresen’s website or Pembina’s website, or any website, other
than those documents incorporated by reference herein and filed on SEDAR, does not constitute part of this
Information Circular.
All summaries of, and references to, the Arrangement Agreement and the Arrangement or Plan of Arrangement in this
Information Circular are qualified in their entirety by reference to the complete text of the Arrangement Agreement
and the Plan of Arrangement, copies of which are attached as Appendices C and D, respectively, to this Information
Circular. You are urged to carefully read the full text of the Arrangement Agreement and the Plan of
Arrangement.
All capitalized terms used in this Information Circular (including Appendices J and K hereto) but not otherwise defined
herein have the meanings set forth herein under “Glossary of Terms”. The terms and abbreviations used in the
Appendices to this Information Circular, other than in Appendices J and K, are defined separately therein. Information
contained in this Information Circular is given as of June 5, 2017, unless otherwise specifically stated. Details of the
Arrangement are set forth under the heading “The Arrangement”. For details of the matters to be considered by the
Common Shareholders and Preferred Shareholders, see “Matters to be Considered at the Meetings – Common
Shareholders’ Meeting” and “Matters to be Considered at the Meetings – Preferred Shareholders’ Meeting”,
respectively.
Supplemental Disclosure – Non-U.S. GAAP and Non-IFRS Measures
This Information Circular and certain documents incorporated by reference herein make reference to certain non-U.S.
GAAP and non-IFRS financial measures to assist in assessing Veresen’s and Pembina’s respective financial
performance, including references in this Information Circular to adjusted EBITDA. Non-U.S. GAAP and non-IFRS
financial measures do not have standard meanings prescribed by U.S. GAAP or IFRS, as applicable, and are therefore
unlikely to be comparable to similar measures presented by other issuers. Such non-U.S. GAAP and non-IFRS
financial measures should not be considered as an alternative to, or more meaningful than measures of financial
performance as determined in accordance with U.S. GAAP or IFRS, as applicable, as an indicator of performance.
For additional information regarding these non-U.S. GAAP and non-IFRS measures, see the advisories in the Veresen
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Annual MD&A, the Veresen Interim MD&A, the Pembina Annual MD&A and the Pembina Interim MD&A, as
applicable, all of which are incorporated by reference herein.
Information for United States Shareholders
The Pembina Shares issuable to Shareholders in exchange for their Veresen Shares, as applicable, pursuant to the
Arrangement have not been and will not be registered under the 1933 Act, and will be issued in reliance upon the
exemption from the registration requirements of the 1933 Act set forth in Section 3(a)(10) thereof. Section 3(a)(10)
of the 1933 Act exempts the issuance of any security issued in exchange for one or more bona fide outstanding
securities from the general requirement of registration where the terms and conditions of such issuance and exchange
have been approved by a court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions
of such issuance and exchange at which all persons to whom it is proposed to issue the securities have the right to
appear and receive timely notice thereof. The solicitation of proxies for the Meetings by means of this Information
Circular is not subject to the requirements of Section 14(a) of the 1934 Act. Accordingly, the solicitations and
transactions contemplated in this Information Circular are being made in the United States for securities of a Canadian
issuer in accordance with Canadian corporate and securities laws, and this Information Circular has been prepared
solely in accordance with disclosure requirements applicable in Canada. Shareholders in the United States should be
aware that such requirements are different from those of the United States applicable to registration statements under
the 1933 Act and proxy statements under the 1934 Act.
The Pembina Shares issuable to Shareholders, as applicable, pursuant to the Arrangement will be, following
completion of the Arrangement, freely tradable under the 1933 Act, except by persons who will be “affiliates” of
Pembina after the Effective Date or were affiliates of Pembina within 90 days before the Effective Date. Persons who
may be deemed to be “affiliates” of an issuer include individuals or entities that control, are controlled by, or are under
common control with, the issuer, whether through the ownership of voting securities, by contract, or otherwise, and
generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Any
resale of such Pembina Shares by such an affiliate (or former affiliate) may be subject to the registration requirements
of the 1933 Act, absent an exemption or exclusion therefrom. See “Procedure for the Arrangement to Become Effective
– Securities Law Matters – United States”.
The financial statements of Pembina included or incorporated by reference, as applicable, in this Information Circular
have been prepared in accordance with IFRS and, except as described below, are subject to Canadian auditing
standards which differ from U.S. GAAP and auditing standards in certain material respects and thus are not directly
comparable to financial statements of United States companies.
The Pembina Common Shares are listed on the NYSE and registered pursuant to Section 12 of the 1934 Act. Therefore
Pembina is required to file reports with the SEC, including annual reports on Form 40-F. Pembina has filed with the
SEC an annual report on Form 40-F for the fiscal year ended December 31, 2016. Pembina’s Form 40-F for the fiscal
year ended December 31, 2016 does not include a reconciliation of Pembina’s financial statements to U.S. GAAP.
Pembina’s filings with the SEC may be viewed for free at the SEC’s website at www.sec.gov.
Shareholders subject to United States federal income taxation should be aware that the description of tax consequences
to them of the Arrangement under certain United States federal income tax laws provided in this Information Circular
is a summary only. They are advised to consult their tax advisors to determine the particular tax consequences to them
of participating in the Arrangement and the ownership and disposition of Pembina Shares acquired pursuant to the
Arrangement.
The enforcement by Shareholders of civil liabilities under United States federal securities laws may be affected
adversely by the fact that both Pembina and Veresen are organized under the laws of Alberta, Canada, that some or
all of their officers and directors are residents of countries other than the United States, that the experts named in this
Information Circular are residents of countries other than the United States, and that all or a substantial portion of the
assets of Pembina, Veresen and such persons are located outside the United States. As a result, it may be difficult or
impossible for Shareholders in the United States to effect service of process within the United States upon Pembina
and Veresen and their directors or officers, or to realize against them upon judgments of courts of the United States
predicated upon civil liabilities under the federal securities laws of the United States or the securities laws of any state
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
within the United States. In addition, Shareholders in the United States should not assume that the courts of Canada:
(a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil
liabilities under the federal securities laws of the United States or the securities laws of any state within the United
States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under
the federal securities laws of the United States or the securities laws of any state within the United States.
No broker, dealer, salesperson or other person has been authorized to give any information or make any representation
other than those contained in this Information Circular and, if given or made, such information or representation must
not be relied upon as having been authorized by Pembina or Veresen.
THE PEMBINA SHARES ISSUABLE TO SHAREHOLDERS PURSUANT TO THE ARRANGEMENT
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY
AUTHORITY OF ANY STATE, NOR HAS THE SEC OR THE SECURITIES REGULATORY
AUTHORITY OF ANY STATE PASSED ON THE ADEQUACY OR ACCURACY OF THIS
INFORMATION CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENCE.
Currency
Except as otherwise indicated, all dollar amounts in this Information Circular are expressed in Canadian dollars. The
following table sets forth: (i) the rates of exchange for Canadian dollars, expressed in United States dollars, in effect
at the end of each of the periods indicated; and (ii) the high, low and average exchange rates during each such period,
in the case of rates for 2014, 2015 and 2016, based on the rate, published on the Bank of Canada’s website as being
in effect at approximately noon on each trading day and, in the case of rates for 2017, based on the daily average
exchange rate, published on the Bank of Canada’s website as being in effect at approximately 4:30 p.m. (Eastern time)
on each trading day.
Three Months Ended
March 31, 2017
Year Ended December 31
2016 2015 2014
Rate at end of Period US$0.7513 US$0.7448 US$0.7225 US$0.8620
Average rate during Period US$0.7555 US$0.7548 US$0.7820 US$0.9054
High US$0.7683 US$0.7972 US$0.8527 US$0.9422
Low US$0.7400 US$0.6854 US$0.7148 US$0.8589
On June 5, 2017, the Bank of Canada rate for $1.00 Canadian dollar was $0.7417 United States dollars.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Information Circular and in the documents incorporated by reference herein
constitute forward-looking information and forward-looking statements (collectively referred to as “forward-looking
statements”) within the meaning of applicable securities laws. These statements relate to future events or future
performance. All statements other than statements of historical fact may be forward-looking statements. Forward-
looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”,
“continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”,
“might”, “should”, “believe” and similar expressions or the negative thereof.
In particular, this Information Circular (including Appendices I, J and K, respectively, to this Information Circular)
contains forward-looking statements pertaining to the following:
the perceived benefits of the Arrangement and expected attributes of the combined company resulting from
the Arrangement, including the combined company’s potential for financial and operational synergies and
the combined company’s strategic positioning, balance sheet strength and superior access to capital markets;
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
the timing of the Meetings and the Final Order;
the anticipated Effective Date;
the satisfaction of conditions for listing of the Pembina Common Shares issuable pursuant to the Arrangement
on the TSX and the NYSE and the timing thereof, and the satisfaction of conditions for listing of the Pembina
Exchange Shares issuable pursuant to the Arrangement on the TSX;
the composition of the Pembina Board upon the Arrangement becoming effective;
future dividends, including the increase in the amount thereof, which may be declared on the Pembina
Common Shares, and the anticipated payout ratio of the combined company;
the delisting of the Veresen Shares from the TSX and the anticipated timing thereof;
the treatment of Shareholders under securities and tax Laws;
the anticipated receipt of all required regulatory and third party approvals for the Arrangement, including
under the Competition Act;
the exercise of Dissent Rights by Shareholders with regards to the Arrangement;
the anticipated credit rating of the combined company; and
timing for completion of the sale of Veresen’s remaining power assets pursuant to the Veresen Power
Business Sale.
These forward-looking statements are based on certain expectations and assumptions, including expectations and
assumptions respecting:
the perceived benefits of the Arrangement and expected attributes of the combined company resulting from
the Arrangement are based upon a number of facts, including the terms and conditions of the Arrangement
Agreement and current industry, economic and market conditions (see “The Arrangement – Reasons for the
Arrangement”, “The Arrangement – Attributes of the Combined Company” and “The Arrangement –
Recommendation of the Board of Directors”);
certain steps in, and timing of, the Arrangement and the Effective Date of the Arrangement are based upon
the terms of the Arrangement Agreement and advice received from counsel to Veresen relating to timing
expectations (see “The Arrangement”);
the listing of the Pembina Common Shares and the Pembina Exchange Shares issuable pursuant to the
Arrangement on the TSX and the NYSE, as applicable, and the delisting of the Veresen Shares, as applicable,
from the TSX is based on receiving approval from, and fulfilling all of the requirements of the TSX and the
NYSE, as applicable;
the treatment of Shareholders under tax Laws is subject to the statements under “Certain Canadian Federal
Income Tax Considerations” and “Certain United States Federal Income Tax Considerations”;
the effects of the Arrangement on Veresen and Pembina are based on Veresen management’s current
expectations regarding the intentions of Pembina; and
the timing for completion of the sale of Veresen’s remaining power assets pursuant to the Veresen Power
Business Sale is based on the terms of the agreements governing the transactions comprising the Veresen
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Power Business Sale and Veresen management’s current expectations regarding satisfaction of all conditions
precedent to completion of such transactions, including the receipt of all necessary approvals.
By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.
Veresen believes the expectations reflected in those forward-looking statements are reasonable but no assurance can
be given that these expectations will prove to be correct and such forward-looking statements included in this
Information Circular and in the documents incorporated by reference herein should not be unduly relied upon. These
statements speak only as of the date of this Information Circular.
Some of the risks that could cause results to differ materially from those expressed in the forward-looking statements
include:
Pembina and Veresen may fail to realize the anticipated benefits of the Arrangement;
there may be unforeseen difficulties in integrating the respective businesses of Pembina and Veresen;
the conditions to completion of the Arrangement, including receiving all Required Regulatory
Approvals, Court approval, TSX and NYSE approval, as applicable, for the listing of the Pembina
Common Shares and subject to the Preferred Shareholder Arrangement Resolution receiving the
requisite approval, the Pembina Exchange Shares issuable pursuant to the Arrangement, may not be
satisfied or waived which may result in the Arrangement not being completed;
the timing of the Meetings and Final Order and the anticipated Effective Date may be changed or
delayed;
Pembina and Veresen will incur significant costs relating to the Arrangement, regardless of whether the
Arrangement is completed or not completed;
the Arrangement Agreement could be terminated by either Party under certain circumstances, including
as a result of the occurrence of a Material Adverse Change respecting the other Party;
if the Arrangement is not completed, Shareholders will not realize the benefits of the Arrangement and
Veresen’s future business and operations could be adversely affected;
changes in income tax Laws or actions taken by taxing authorities could have adverse implications on
Pembina, Veresen or their respective securityholders;
completion of the sale of Veresen’s remaining power assets pursuant to the Veresen Power Business
Sale may not occur when anticipated; or
all future dividends, including in respect of any expected future increases to current dividend levels, are
subject to the approval of the board of directors of the applicable corporation.
With regard to the forward-looking statements in Veresen’s and Pembina’s documents incorporated by reference
herein, please refer to the forward-looking statements advisories in such documents in respect of the forward-looking
statements contained therein, the assumptions upon which they are based and the risk factors in respect of such
forward-looking statements.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained
in this Information Circular are expressly qualified by this cautionary statement. Except as required by Law, Veresen
does not undertake any obligation to publicly update or revise any forward-looking statements.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Readers should also carefully consider the matters discussed under the headings “Risk Factors”, “Certain Canadian
Federal Income Tax Considerations”, “Certain United States Federal Income Tax Considerations” and other risks
described elsewhere in this Information Circular and in the documents incorporated by reference herein, including
Appendices J and K, the Veresen AIF, the Veresen Annual MD&A, the Pembina AIF and the Pembina Annual
MD&A, which are incorporated by reference herein. Additional information on these and other factors that could
affect the operations or financial results of Veresen or Pembina are included in documents on file with applicable
Canadian Securities Administrators and may be accessed on Veresen’s and Pembina’s respective issuer profiles
through the SEDAR website (www.sedar.com). Such documents, unless expressly incorporated by reference herein,
do not form part of this Information Circular.
INFORMATION FOR BENEFICIAL HOLDERS
The information set forth in this section is of significant importance to many Shareholders, as a substantial number of
such Shareholders do not hold Veresen Shares in their own name. Beneficial Holders should note that only proxies
deposited by Shareholders whose names appear on the records of the registrar and transfer agent for Veresen as the
registered holders of Veresen Shares can be recognized and acted upon at the Meetings, as applicable. If Veresen
Shares are listed in an account statement provided to a Shareholder by a broker, then, in almost all cases, those Veresen
Shares will not be registered in a holder’s name on the records of Veresen. Such Veresen Shares will most likely be
registered in the name of the holder’s broker or an agent of the broker. In Canada, the vast majority of such Veresen
Shares are registered under the name of CDS & Co. (the registration name for CDS, which acts as nominee for many
Canadian brokerage firms). Veresen Shares held by brokers or their nominees can only be voted (for or against
resolutions) upon instructions of the Beneficial Holder. Without specific instructions, brokers/nominees are prohibited
from voting Veresen Shares for their clients. Beneficial Holders should therefore ensure that instructions
regarding the voting of their Veresen Shares are properly communicated to the appropriate Person or that the
Veresen Shares are duly registered in their name well in advance of the applicable Meeting.
Applicable regulatory policies require intermediaries/brokers to seek voting instructions from Beneficial Holders in
advance of shareholder meetings. Every intermediary/broker has its own mailing procedures and provides its own
return instructions which should be carefully followed by Beneficial Holders in order to ensure that their Veresen
Shares are voted at the applicable Meeting. Often, the form of proxy supplied to a Beneficial Holder by its broker is
identical to that provided to a registered shareholder. However, its purpose is limited to instructing the registered
shareholder on how to vote on behalf of the Beneficial Holder. The majority of brokers now delegate responsibility
for obtaining instructions from clients to Broadridge. Broadridge typically mails a scannable Voting Instruction Form
in lieu of the applicable form of proxy. The Beneficial Holder is requested to complete and return the Voting
Instruction Form by mail or facsimile. Alternatively, the Beneficial Holder can call a toll-free telephone number or
access the internet to vote the Veresen Shares held by the Beneficial Holder. Broadridge then tabulates the results of
all instructions received and provides appropriate instructions respecting the voting of Veresen Shares to be
represented at the applicable Meeting. A Beneficial Holder receiving a form of proxy or Voting Instruction Form from
its broker or other intermediary (or an agent or nominee of such broker or other intermediary) cannot use that form to
vote Veresen Shares directly at the applicable Meeting. Voting instructions must be communicated to the broker,
intermediary, agent or nominee (in accordance with the instructions provided by it or on its behalf) well in advance of
the applicable Meeting in order to have the Veresen Shares to which such instructions relate voted at the applicable
Meeting.
If you are a Beneficial Holder and wish to vote in person at the applicable Meeting, please contact your broker or
agent well in advance of the applicable Meeting to determine how you can do so.
Although a Beneficial Holder may not be recognized directly at the applicable Meeting for the purpose of voting
Veresen Shares registered in the name of its broker or other intermediary, a Beneficial Holder may vote those Veresen
Shares as a proxyholder for the registered shareholder. To do so, a Beneficial Holder should enter such Beneficial
Holder’s own name in the blank space on the applicable form of proxy provided to the Beneficial Holder and return
the document to such Beneficial Holder’s broker or other intermediary (or the agent of such broker or other
intermediary) in accordance with the instructions provided by such broker, intermediary or agent well in advance of
the applicable Meeting.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Shareholders who do not hold their Veresen Shares in their own name should also instruct their broker or other
intermediary to complete the Common Shareholder Letter of Transmittal and Election Form or Preferred Shareholder
Letter of Transmittal, as applicable, regarding the Arrangement with respect to such holder’s Veresen Shares, once
such has been provided, in order to receive the consideration issuable pursuant to the Arrangement in exchange for
such holder’s Veresen Shares.
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SUMMARY
This Summary is qualified in its entirety by the more detailed information appearing elsewhere in this Information
Circular, including the Appendices hereto. Terms with initial capital letters in this Summary are defined in the
Glossary of Terms set out elsewhere in this Information Circular.
Veresen Inc.
Veresen is an ABCA corporation that owns and operates energy infrastructure assets across North America. Veresen
is engaged in two principal businesses: a pipeline transportation business comprised of interests in the Alliance
Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; and a midstream business which includes a
partnership interest in Veresen Midstream Limited Partnership, which owns assets in western Canada, and an
ownership interest in Aux Sable, which owns a world-class NGL extraction facility near Chicago, and other natural
gas and NGL processing energy infrastructure. Veresen is also developing Jordan Cove LNG, a 7.8 million tonne per
annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the associated Pacific
Connector Gas Pipeline. Veresen expects to complete the remainder of the Veresen Power Business Sale during the
second quarter of 2017.
Veresen is a reporting issuer or the equivalent under the securities laws of each of the provinces of Canada. The
Common Shares and the Veresen Series A Shares, Veresen Series C Shares and Veresen Series E Shares are each
listed and posted for trading on the TSX under the symbols VSN, VSN.PR.A, VSN.PR.C and VSN.PR.E, respectively.
Pursuant to the Arrangement, all of the Common Shares will be acquired by Pembina and, in the event that Preferred
Shareholders approve the Preferred Shareholder Arrangement Resolution and the Preferred Shares are not otherwise
excluded from the Arrangement pursuant to the terms of the Arrangement Agreement, all of the Preferred Shares will
be exchanged by Pembina for the Pembina Exchange Shares. Following completion of the Arrangement, it is
anticipated that the Common Shares and, in the event that the Preferred Shares are exchanged by Pembina, the Listed
Preferred Shares, will be delisted from the TSX.
The head, principal and registered office of Veresen is located at Suite 900, Livingston Place, 222 - 3rd Avenue S.W.,
Calgary, Alberta T2P 0B4.
See Appendix J – “Information Concerning Veresen Inc.”.
Pembina Pipeline Corporation
Pembina is an ABCA corporation that owns and operates an integrated system of pipelines that transport various
products derived from natural gas and hydrocarbon liquids produced primarily in western Canada. Pembina also owns
and operates gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics
business. Pembina’s integrated assets and commercial operations along the majority of the hydrocarbon value chain
allow it to offer a full spectrum of midstream and marketing services to the energy sector.
Pembina is a reporting issuer or the equivalent under the securities laws of each of the provinces of Canada. The
Pembina Common Shares are listed and posted for trading on the TSX under the symbol “PPL” and the NYSE under
the symbol “PBA”. Pembina’s Class A Preferred Shares, Series 1, 3, 5, 7, 9, 11 and 13, are also listed and posted for
trading on the TSX.
The head, principal and registered office of Pembina is located at Suite 4000, 585 - 8th Avenue S.W., Calgary, Alberta,
T2P 1G1.
See Appendix K – “Information Concerning Pembina Pipeline Corporation”.
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The Common Shareholders’ Meeting
The Common Shareholders’ Meeting will be held at Livingston Place (South Tower) in the Livingston Club
Conference Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary, Alberta, Canada at 10:00 a.m. (Calgary time) on July
11, 2017, for the purposes set forth in the accompanying notice of meeting. The business of the Common Shareholders’
Meeting will be to consider and vote upon the Common Shareholder Arrangement Resolution. See “Matters to be
Considered at the Meetings – Common Shareholders’ Meeting.”
The Record Date for determining Common Shareholders entitled to receive notice of, and to vote at, the Common
Shareholders’ Meeting is May 23, 2017. Only Common Shareholders of record as at the Record Date are entitled to
receive notice of the Common Shareholders’ Meeting. Common Shareholders of record will be entitled to vote those
Common Shares included in the list of Common Shareholders prepared as at the Record Date. If a Common
Shareholder transfers Common Shares after the Record Date and the transferee of those Common Shares, having
produced properly endorsed certificates evidencing such Common Shares or having otherwise established that the
transferee owns such Common Shares, demands, at least 10 days before the Common Shareholders’ Meeting, that the
transferee’s name be included in the list of Common Shareholders entitled to vote at the Common Shareholders’
Meeting, such transferee shall be entitled to vote such Common Shares at the Common Shareholders’ Meeting. See
“General Proxy Matters”.
The Preferred Shareholders’ Meeting
The Preferred Shareholders’ Meeting will be held at Livingston Place (South Tower) in the Livingston Club
Conference Centre, Plus 15, 222 – 3rd Avenue S.W., Calgary, Alberta, Canada at 11:00 a.m. (Calgary time) on July
11, 2017, for the purposes set forth in the accompanying notice of meeting. The business of the Preferred Shareholders’
Meeting will be to consider and vote upon the Preferred Shareholder Arrangement Resolution. See “Matters to be
Considered at the Meetings – Preferred Shareholders’ Meeting.”
The Record Date for determining Preferred Shareholders entitled to receive notice of, and to vote at, the Preferred
Shareholders’ Meeting is May 23, 2017. Only Preferred Shareholders of record as at the Record Date are entitled to
receive notice of the Preferred Shareholders’ Meeting. Preferred Shareholders of record will be entitled to vote those
Preferred Shares included in the list of Preferred Shareholders prepared as at the Record Date. If a Preferred
Shareholder transfers Preferred Shares after the Record Date and the transferee of those Preferred Shares, having
produced properly endorsed certificates evidencing such Preferred Shares or having otherwise established that the
transferee owns such Preferred Shares, demands, at least 10 days before the Preferred Shareholders’ Meeting, that the
transferee’s name be included in the list of Preferred Shareholders entitled to vote at the Preferred Shareholders’
Meeting, such transferee shall be entitled to vote such Preferred Shares at the Preferred Shareholders’ Meeting. See
“General Proxy Matters”.
The Arrangement
Veresen entered into the Arrangement Agreement with Pembina on May 1, 2017. A copy of the Arrangement
Agreement is attached as Appendix C to this Information Circular. The Arrangement Agreement provides for the
implementation of the Plan of Arrangement (a copy of which is attached as Appendix D to this Information Circular)
pursuant to which, among other things, the following transactions will occur:
Common Shareholders (other than Dissenting Shareholders) will, for each Common Share held, have the
option to receive:
(a) 0.4287 of a Pembina Common Share; or
(b) $18.65 in cash,
subject to pro-rationing under the Plan of Arrangement. Assuming full pro-rationing, each Common Shareholder
would receive (i) cash in an amount equal to $4.8494 multiplied by the number of Common Shares held by such
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Common Shareholder, and (ii) 0.3172 of a Pembina Common Share multiplied by the number of Common Shares
held by such Common Shareholder.
Provided that the Preferred Shareholder Arrangement Resolution receives the requisite approval by the
Preferred Shareholders at the Preferred Shareholders’ Meeting and the Preferred Shares are not otherwise
excluded from the Arrangement pursuant to the terms of the Arrangement Agreement:
(a) Veresen shall declare and pay a cash dividend on each Preferred Share in an amount equal to all
accrued and unpaid dividends thereon, and for which a record date for the payment of such dividends
has not occurred prior to the Effective Date, up to, but excluding, the Effective Date; and
(b) each Preferred Shareholder (other than Dissenting Shareholders) shall receive, for each Preferred
Share held, the Preferred Share Consideration.
Provided that the Preferred Shareholder Arrangement Resolution has received the requisite approval of
Preferred Shareholders at the Preferred Shareholders’ Meeting (or the Preferred Shareholders have approved
a special resolution with similar effect to the Preferred Shareholder Arrangement Resolution prior to the
Effective Time such that Pembina has become the sole holder of the Preferred Shares), and the Plan of
Arrangement is not otherwise amended to exclude the Preferred Shares, Pembina and Veresen shall be
amalgamated to form one corporation under the ABCA, being Amalco. If the Preferred Shareholders do not
approve the Preferred Shareholder Arrangement Resolution, or if the Preferred Shares are otherwise excluded
from the Plan of Arrangement pursuant to the terms of the Arrangement Agreement, the Preferred Shares
will remain outstanding following completion of the Arrangement and will not be exchanged for the Pembina
Exchange Shares.
Upon completion of the Arrangement, assuming the issuance of the Maximum Share Consideration, current holders
of Pembina Common Shares are expected to own approximately 80% of the combined company, and Common
Shareholders are expected to own approximately 20% of the combined company.
As the completion of the Arrangement will be considered a “Change of Control” pursuant to the Veresen LTIP and
the Veresen DSU Plans and the provisions of the Arrangement Agreement, all outstanding Veresen RSUs, Veresen
PSUs and Veresen DSUs will vest and be settled in cash immediately prior to the Effective Time.
Subject to the completion of the Arrangement, Pembina has announced that it intends to increase the monthly dividend
on the Pembina Common Shares by 5.9% (from $0.17 to $0.18 per Pembina Common Share per month). Further,
Pembina has agreed to use commercially reasonable efforts to appoint three of the current directors of Veresen to the
Pembina Board as soon as reasonably practicable following completion of the Arrangement to serve until the next
annual meeting of Pembina shareholders or until their successors are duly appointed.
See “The Arrangement – Details of the Arrangement”.
Arrangement Agreement
The obligations of Veresen and Pembina to complete the Arrangement are subject to the satisfaction or waiver of
certain conditions set out in the Arrangement Agreement. These conditions include, among others, approval of the
Common Shareholder Arrangement Resolution by the Common Shareholders, conditional approval or equivalent
approval, as the case may be, of the TSX and the NYSE, as applicable, for the listing of the Pembina Common Shares
and subject to the Preferred Shareholder Arrangement Resolution being approved, the Pembina Exchange Shares
issuable pursuant to the Arrangement, Court approval, receipt of all Required Regulatory Approvals and holders of
not more than 5% of the Common Shares having validly exercised Dissent Rights that have not been withdrawn as of
the Effective Date. Upon all the conditions being fulfilled or waived, Veresen is required to file the Articles of
Arrangement with the Registrar in order to give effect to the Arrangement. Closing of the Arrangement is not
conditional on the approval of the Preferred Shareholder Arrangement Resolution. If the Preferred Shareholders do
not approve the Arrangement, the Preferred Shares will remain outstanding following completion of the Arrangement
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and will not be exchanged for Pembina Exchange Shares. In addition, in the circumstances where the Preferred
Shareholder Arrangement Resolution receives the requisite approval of the Preferred Shareholders, and Dissent Rights
have been validly exercised in respect of more than 5% of the outstanding Preferred Shares, Veresen shall amend the
Plan of Arrangement if requested by Pembina to exclude the Preferred Shares under the Plan of Arrangement and
matters ancillary thereto, including the amalgamation of Pembina and Veresen as contemplated in the Plan of
Arrangement.
In addition to certain covenants, representations and warranties made by each of Veresen and Pembina in the
Arrangement Agreement, Veresen has provided certain non-solicitation covenants, subject to the right of the Board
to, prior to the approval of the Common Shareholder Arrangement Resolution, respond to an Acquisition Proposal
that constitutes or could reasonably be excepted to lead to a Superior Proposal, and the right of Pembina to match any
such Superior Proposal within five Business Days.
In the event of the termination of the Arrangement Agreement as a result of a Pembina Damages Event, including
where: (a) the Board has withdrawn, modified, qualified or changed any of its recommendations or determinations
with respect to the Arrangement in a manner adverse to Pembina; or (b) the Board has accepted, recommended,
approved or entered into an agreement to implement a Superior Proposal, Veresen has agreed to pay to Pembina a
termination fee in the amount of $200 million. The Arrangement Agreement also provides for the payment by Pembina
of a reverse termination fee of $100 million if the Arrangement Agreement is terminated in specified circumstances
where all Required Regulatory Approvals have not been received and Pembina has not complied in all material
respects with certain of its covenants relating to seeking and obtaining such Required Regulatory Approvals. The
Arrangement Agreement may be terminated by mutual written consent of Pembina and Veresen and by either Party
in certain circumstances as more particularly set forth in the Arrangement Agreement. Subject to certain limitations,
each party may also terminate the Arrangement Agreement if the Arrangement is not consummated by October 31,
2017, which date can be unilaterally extended by Pembina, upon the payment of an extension fee of $23.5 million, for
up to an additional two months if a Required Regulatory Approval has not been obtained.
The above is a summary of certain terms of the Arrangement Agreement and is qualified in its entirety by the full text
of the Arrangement Agreement, which is attached as Appendix C to this Information Circular, and to the more detailed
summary contained elsewhere in this Information Circular.
See “The Arrangement – The Arrangement Agreement” and Appendix C for a copy of the Arrangement Agreement.
Attributes of the Combined Company
Management of Veresen expects the combined company, after completion of the Arrangement, will be one of
Canada’s premier energy infrastructure companies, supporting some of North America’s most prolific resource plays
and securing increased market access for its customers. The combined company will feature a largely integrated asset
base that is supported by long-life, economic hydrocarbon reserves and comprises crude oil, liquids and natural gas
pipelines, terminal, storage and midstream operations, gas gathering and processing facilities, as well as fractionation
facilities. Veresen’s management believes the combined company will be greater than the sum of its parts and better
positioned than a stand-alone Veresen entity to deliver on its growth strategy.
The combined company will be better positioned to successfully deliver an aggregated growth program of
approximately $6.0 billion, optimize the integrated asset base, and compete for future investment opportunities in
order to drive meaningful growth over the long term.
the combined company will have approximately $6.0 billion in growth projects under construction, and
will enjoy the benefit of Pembina’s proven track record of safe, on-time and on-budget project delivery,
and decades of operating experience, which will provide a strong foundation to support attractive long-
term adjusted cash flow per share growth;
in addition to the projects currently under construction by each of Pembina and Veresen, the combined
company is expected to have a growth portfolio of unsecured development opportunities of
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approximately $20 billion to potentially sanction in the future, including Jordan Cove LNG and Pacific
Connector Gas Pipeline in Oregon, a Propane Dehydrogenation and Propylene Production facility in
Alberta, as well as various midstream opportunities in western Canada;
the majority of the combined asset base is already physically connected or presents the opportunity to
be connected in the future, which will enable operational integration, creating the opportunity to realize
significant operational synergies, as well as overall enhancements to customer service within existing
commercial arrangements;
increasing integration across the value chain will allow the combined company to offer a superior range
of services and flexibility in how these services are provided to customers, which is expected to improve
the combined company’s competitiveness in securing new business opportunities, and offer the potential
to develop other ancillary business lines in the future in response to customer needs;
the combined company will have an established footprint in some of the most prolific resource plays in
North America, including the BC Montney, the Alberta Montney and the Duvernay, strategically
positioning the combined company in the principal areas for future midstream infrastructure investment
in western Canada; and
potential for significant financial synergies, including reduction in administrative overhead, operating
costs, optimization of capital structure and integrated tax planning, estimated by Pembina at $75 million
to $100 million on a run-rate basis.
The combined company will pay a meaningful cash dividend that is expected to grow, while offering a lower payout
ratio and cash flows supported primarily with fee-for-service contracts and high-quality counterparties.
upon completion of the Arrangement, and after taking into the account the proposed increase in the
dividend on Pembina Common Shares announced by Pembina, the combined company will pay an
attractive cash dividend of approximately $2.16 per Pembina Common Share on an annualized basis;
the combined company will have a significantly lower payout ratio, which, when combined with line-
of-sight to significant growth in cash flows, will advantageously position the combined company to
continue Pembina’s long-term track record of dividend growth and reinvestment in the business;
the dividend is expected to be underpinned by over 85% of cash flows from low-risk, stable take-or-pay
and fee-for-service contract structures with a diverse set of counterparties, over 80% of which hold
investment grade ratings, split ratings or provide security in the form of letters of credit;
significant horizontal diversification across the hydrocarbon value chains in terms of crude oil, natural
gas liquids and natural gas focused segments each constituting approximately one-third of pro forma
cash flows, as well as vertical diversification within value chains, including long-haul pipelines,
terminals, storage, midstream operations, gathering and processing facilities as well as fractionation
facilities; and
the combined company will have significant geographic diversification across the western Canada – U.
S. Midwest – Pacific Northwest triangle.
The combined company is expected to have a stronger balance sheet and superior access to the capital markets,
resulting in a greater ability to grow on a per share basis and to execute a broad suite of potential projects.
with a pro forma enterprise value of approximately $35 billion and as one of the top 25 public companies
in Canada, the combined company will have greater access to both debt and equity capital markets,
providing a lower aggregate cost of capital to maximize investment returns to enable higher growth on
a per share basis;
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Pembina and its management team have built a very strong track record in the capital markets, further
enhancing access to capital markets, the ability to finance large-scale, long-term projects, and to pursue
a broader range of potential business development opportunities to drive future growth; and
the combined company is expected to maintain a strong BBB investment grade credit rating, with a focus
on continued prudent financial management. The stronger and larger balance sheet of the combined
company will provide a better financial position to pursue large-scale projects such as Jordan Cove LNG
and Pacific Connector Gas Pipeline as well as a Propane Dehydrogenation and Propylene Production
facility.
See “The Arrangement – Attributes of the Combined Company”.
Reasons for the Arrangement
In determining that the Arrangement is in the best interests of Veresen and is fair to the Shareholders, and in
recommending to Shareholders that they approve the Arrangement, the Board considered and relied upon a number
of factors, including, among others, the following:
the consideration offered for the Common Shares, based on the Cash Consideration of $18.65, represents
a 21.8% premium to the 20-day weighted average price of the Common Shares on the TSX of $15.31 as
of April 28, 2017 (the last trading day prior to announcement of the Arrangement), and a 22.5% premium
to the closing price of the Common Shares on the TSX of $15.23 on April 28, 2017;
the Board’s view, based on both external and internal analysis, that the consideration to be paid pursuant
to the Arrangement offers a compelling value for assets currently in service and generating cash flows,
as well as for future opportunities on a risked and present valued basis, including placing the Sunrise,
Tower and Saturn Phase II processing facilities into service, the potential to sanction additional
midstream projects through Veresen Midstream, the potential extension of long-term transportation
agreements on Alliance Pipeline and subsequent ability to explore optimizing the capital structure of
Alliance Pipeline, the potential expansion of Alliance Pipeline through additional compression, the
potential for increased revenue and potential to advance Jordan Cove LNG and Pacific Connector Gas
Pipeline on a regulatory and commercial basis;
Common Shareholders will have the opportunity to continue to participate in the growth opportunities
associated with Veresen’s business as well as of the combined business. As described under the heading
“The Arrangement – Attributes of the Combined Company” the combined company is expected to be
better positioned than a stand-alone Veresen to deliver on Veresen’s existing strategy;
the Arrangement offers an opportunity for Common Shareholders to participate in Pembina’s low-risk,
highly-contracted asset base which is well integrated across the hydrocarbon value chain;
the Board’s view, after negotiations with Pembina, that the consideration offered by Pembina represented
the highest per share consideration reasonably attainable within a reasonable forecast period;
Pembina’s reputation as a leading transportation and midstream service provider in North America with
a focus on enhancing shareholder value in a safe, environmentally responsible manner positioned it as
an ideal partner for a business combination with Veresen;
the Board’s judgment, after discussions with Veresen’s financial advisor and management, that there
were few, if any, potentially interested and capable alternative counterparties to Veresen that would
likely be willing and able to compete with the financial terms proposed by Pembina (including the
potential upside with the combined company), and the potential negative impacts of such discussions on
the negotiations with Pembina;
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the Arrangement provides Common Shareholders with flexibility through the opportunity to receive their
consideration in the form of cash or Pembina Common Shares, subject to the Maximum Cash
Consideration or the Maximum Share Consideration, as applicable, and the potential resultant pro-
rationing. This flexibility of consideration allows the Common Shareholders, to the extent they receive
cash, to lock in the premium represented by the Arrangement, and to the extent they receive Pembina
Common Shares, to benefit from exposure to the upside potential of Pembina’s and Veresen’s combined
business and participate in a value enhancing growing company with increased size, scale and liquidity;
Scotia Capital provided the Fairness Opinions, the full text of which can be found in Appendices G and
H to this Information Circular, that, as of April 30, 2017, and, subject to certain assumptions,
qualifications and limitations, the consideration to be paid to the Common Shareholders and Preferred
Shareholders, as applicable, pursuant to the Arrangement is fair, from a financial point of view, to
Common Shareholders and Preferred Shareholders, respectively;
while the Arrangement contains a covenant prohibiting Veresen from soliciting third-party acquisition
proposals, the Arrangement permits Veresen, prior to the time that Common Shareholders pass the
Common Shareholder Arrangement Resolution, to discuss and negotiate, under specified circumstances,
an unsolicited acquisition proposal should one be received and, if the Board determines in good faith,
after consultation with its legal and financial advisors, that the unsolicited acquisition proposal
constitutes a Superior Proposal within the meaning of the Arrangement Agreement and that the failure
to pursue such Superior Proposal would be inconsistent with the Board’s fiduciary duties under
applicable law, the Board is permitted, after taking certain steps, to terminate the Arrangement in order
to enter into a definitive agreement for that Superior Proposal, subject to payment of a termination fee
to Pembina;
Pembina’s obligation to complete the Arrangement being subject to a limited number of conditions
which the Board believes are reasonable under the circumstances, with the completion of the
Arrangement not being subject to a financing condition, due diligence condition or the approval of
Pembina’s shareholders, the fact that the conditions to completion of the Arrangement are specific and
limited in scope, the business reputation and capabilities of Pembina, and the Board’s assessment that
Pembina is willing to devote the resources necessary to complete the Arrangement in an expeditious
manner;
at least 66⅔% of the votes cast by Common Shareholders at the Common Shareholders’ Meeting are
required to approve the Common Shareholder Arrangement Resolution;
the Arrangement Agreement is a result of arm’s length negotiations with Pembina, and the Board
supervised the negotiation of the key economic and other material terms of the Arrangement Agreement;
all of the directors and certain officers were willing to enter into Support Agreements in connection with
the Arrangement;
the Arrangement is subject to a determination of the Court that the terms and conditions of the
Arrangement, and the procedures relating thereto are fair, substantively and procedurally, to the
Shareholders and the other persons affected;
the Board’s belief that the Arrangement is likely to be completed in accordance with its terms and within
a reasonable time, with closing currently expected to occur in the second half of 2017; and
registered Shareholders may, upon compliance with certain conditions and in certain circumstances,
exercise Dissent Rights.
The information and factors described above and considered by the Board in reaching its determinations and making
its approvals are not intended to be exhaustive but include material factors considered by the Board. In view of the
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wide variety of factors considered in connection with its evaluation of the Arrangement and the complexity of these
matters, the Board did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights
to these factors. In addition, individual members of the Board may have given different weight to different factors.
See “The Arrangement – Recommendation of the Board”.
Fairness Opinions
Scotia Capital was formally retained by Veresen on January 4, 2017 to perform such financial advisory and investment
banking services for Veresen as are customary in transactions similar to the Arrangement including assisting Veresen
in analyzing strategic alternatives and, if requested, structuring, negotiating and effecting a possible transaction
between Veresen and Pembina. In connection with this mandate, Scotia Capital has provided the Board with the
Fairness Opinions, that, as of April 30, 2017, and, subject to certain assumptions, qualifications and limitations, the
consideration to be paid to the Common Shareholders and the Preferred Shareholders, as applicable, pursuant to the
Arrangement is fair, from a financial point of view, to the Common Shareholders and the Preferred Shareholders,
respectively.
The full texts of the Common Shareholder Fairness Opinion and the Preferred Shareholder Fairness Opinion
which set forth, among other things, assumptions made, information reviewed, matters considered and
limitations on the scope of the review undertaken in rendering such Fairness Opinions, are attached as
Appendices G and H, respectively. The Fairness Opinions address only the fairness, from a financial point of
view, as of April 30, 2017, of the consideration to be received by the Shareholders pursuant to the Arrangement
and do not address any other aspect of the Arrangement or any related transaction, including any legal, tax or
regulatory aspects of the Arrangement to Veresen or the Shareholders. Scotia Capital provided the Fairness
Opinions to the Board for its exclusive use only in considering the Arrangement. The Fairness Opinions may
not be relied upon by any other Person. The Fairness Opinions do not address the relative merits of the
Arrangement as compared to other business strategies or transactions that might be available to Veresen or
Veresen’s underlying business decision to effect the Arrangement. The Fairness Opinions do not constitute a
recommendation to any Shareholder as to how such Shareholder should act or vote with respect to the
Arrangement.
Shareholders are urged to read the Fairness Opinions carefully and in their entirety. This summary of the
Fairness Opinions is qualified in its entirety by the full text of such opinions.
See “The Arrangement – Fairness Opinions”. For the full texts of the Fairness Opinions, see Appendix G – “Common
Shareholder Fairness Opinion” and Appendix H – “Preferred Shareholder Fairness Opinion”
Recommendation of the Board of Directors
After considering, among other things, the Fairness Opinions, the Board unanimously: (a) determined that the
Arrangement and the entry into the Arrangement Agreement are in the best interests of Veresen and that the
Arrangement is fair to the Common Shareholders and the Preferred Shareholders; and (b) recommends that
the Common Shareholders and the Preferred Shareholders vote in favour of the Common Shareholder
Arrangement Resolution and the Preferred Shareholder Arrangement Resolution, respectively.
See “The Arrangement – Recommendation of the Board”.
Support Agreements
On May 1, 2017, the Supporting Shareholders, which include all of the directors and certain officers of Veresen,
entered into the Support Agreements with Pembina pursuant to which they agreed, among other things, to do all such
things and take all such steps as may reasonably be required to be done or taken by the Supporting Shareholder to
vote, or cause to be voted, all of such Supporting Shareholder’s Common Shares entitled to vote on the Common
Share Arrangement Resolution in favour of the Common Share Arrangement Resolution, and to vote, or cause to be
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voted, all of the Supporting Shareholder’s Common Shares entitled to vote against any proposed action by any Person
whatsoever which could prevent or delay the completion of the Arrangement and the transactions contemplated by
the Arrangement Agreement.
See “The Arrangement – Support Agreements”.
Procedure for the Arrangement to become Effective
Procedural Steps
The Arrangement is proposed to be carried out pursuant to Section 193 of the ABCA. The following procedural steps
must be taken in order for the Arrangement to become effective:
(a) the Common Shareholder Arrangement Resolution must be approved by the Common Shareholders
at the Common Shareholders’ Meeting in the manner set forth in the Interim Order;
(b) the Preferred Shareholder Arrangement Resolution must be approved by the Preferred Shareholders
at the Preferred Shareholders’ Meeting in the manner set forth in the Interim Order (provided,
however, that should such approval not be obtained, the Preferred Shares will be excluded from the
Arrangement and will remain outstanding following completion of the Arrangement and the Plan of
Arrangement will be amended prior to its filing to reflect the same);
(c) the Court must grant the Final Order approving the Arrangement;
(d) all conditions precedent to the Arrangement, as set forth in the Arrangement Agreement, including
receipt of the Required Regulatory Approvals, must be satisfied or waived by the appropriate Party;
and
(e) the Final Order, the Articles of Arrangement and related documents, in the form prescribed by the
ABCA, must be filed with the Registrar.
There is no assurance that the conditions set out in the Arrangement Agreement will be satisfied or waived on
a timely basis or at all.
Upon the conditions precedent set forth in the Arrangement Agreement being fulfilled or waived, Veresen intends to
file a copy of the Final Order and the Articles of Arrangement with the Registrar under the ABCA, together with such
other materials as may be required by the Registrar, in order to give effect to the Arrangement.
See “Procedure for the Arrangement to become Effective – Procedural Steps”.
Shareholder Approvals
Common Shareholder Approval
Pursuant to the terms of the Interim Order, the Common Shareholder Arrangement Resolution must, subject to further
order of the Court, be approved by at least 66⅔% of the votes cast by Common Shareholders present in person or
represented by proxy at the Common Shareholders’ Meeting. If the Common Shareholder Arrangement Resolution is
not approved by Common Shareholders, the Arrangement cannot be completed.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote such proxy in favour of the Common Shareholder Arrangement Resolution set
forth in Appendix A to this Information Circular.
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Notwithstanding the foregoing, the Common Shareholder Arrangement Resolution proposed for consideration by the
Common Shareholders authorizes the Board, without further notice to or approval of Common Shareholders, subject
to the terms of the Arrangement Agreement and the Interim Order, to modify, amend or terminate the Arrangement
Agreement or the Plan of Arrangement, to decide not to proceed with the Arrangement and to revoke the Common
Shareholder Arrangement Resolution at any time prior to the Effective Time. See Appendix A to this Information
Circular for the full text of the Common Shareholder Arrangement Resolution.
Preferred Shareholder Approval
Pursuant to the terms of the Interim Order, the Preferred Shareholder Arrangement Resolution must be approved by
at least 66⅔% of the votes cast by the Preferred Shareholders present in person or represented by proxy at the Preferred
Shareholders’ Meeting, voting as a single class. It is not a condition to completion of the Arrangement that the
Preferred Shareholder Arrangement Resolution shall have been approved and, if the Preferred Shareholder
Arrangement Resolution is not approved by Preferred Shareholders, the Preferred Shares will be excluded from the
Arrangement and will remain outstanding following completion of the Arrangement. In addition, in the circumstances
where the Preferred Shareholder Arrangement Resolution receives the requisite approval of the Preferred
Shareholders, and Dissent Rights have been validly exercised in respect of more than 5% of the outstanding Preferred
Shares, Veresen shall amend the Plan of Arrangement if requested by Pembina to exclude the Preferred Shares under
the Plan of Arrangement and matters ancillary thereto, including the amalgamation of Pembina and Veresen as
contemplated in the Plan of Arrangement.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote such proxy in favour of the Preferred Shareholder Arrangement Resolution set
forth in Appendix B to this Information Circular.
Notwithstanding the foregoing, the Preferred Shareholder Arrangement Resolution proposed for consideration by the
Preferred Shareholders authorizes the Board, without further notice to or approval of such Preferred Shareholders,
subject to the terms of the Arrangement Agreement and the Interim Order, to modify, amend or terminate the
Arrangement Agreement or the Plan of Arrangement, to decide not to proceed with the Arrangement and to revoke
the Preferred Shareholder Arrangement Resolution at any time prior to the Effective Time. See Appendix B to this
Information Circular for the full text of the Preferred Shareholder Arrangement Resolution.
See “Procedure for the Arrangement to become Effective – Regulatory Approvals”.
Court Approval
On June 5, 2017, Veresen obtained the Interim Order providing for the calling and holding of the Meetings and other
procedural matters. The Interim Order is attached as Appendix E to this Information Circular. The ABCA provides
that the Arrangement requires final Court approval. Subject to the terms of the Arrangement Agreement, if the
Common Shareholder Arrangement Resolution is approved at the Common Shareholders’ Meeting, Veresen will make
an application to the Court for the Final Order at the Calgary Courts Centre, 601 - 5th Street, S.W., Calgary, Alberta,
Canada, on July 12, 2017 at 10:00 a.m. (Calgary time) or as soon thereafter as counsel may be heard. The Notice of
Originating Application for the Final Order accompanies this Information Circular. At the application the Court will
be requested to consider the fairness of the Arrangement.
Any Shareholder, or other interested party desiring to support or oppose the Application with respect to the
Arrangement, may appear at the hearing in person or by counsel for that purpose, subject to filing with the Court and
serving on Veresen on or before 5:00 p.m. (Calgary time) on July 4, 2017, a notice of intention to appear setting out
their address for service and indicating whether they intend to support or oppose the Application or make submissions,
together with any evidence or materials which are to be presented to the Court. Service of such notice on Veresen is
required to be effected by service upon the solicitors for Veresen: Osler, Hoskin & Harcourt LLP, Suite 2500, 450 -
1st Street S.W., Calgary, Alberta, T2P 5H1, Attention: Colin Feasby.
See “Procedure for the Arrangement to become Effective – Court Approval”.
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Regulatory Approvals
The Arrangement Agreement provides that receipt of all Required Regulatory Approvals, including Competition Act
Approval, HSR Approval and CTA Approval, is a condition precedent to the Arrangement becoming effective.
It is also a condition to the completion of the Arrangement that the TSX and the NYSE shall have conditionally
approved the listing of the Pembina Common Shares to be issued to Common Shareholders pursuant to the
Arrangement and, if the Preferred Shareholder Arrangement Resolution receives the requisite approval of the
Preferred Shareholders at the Preferred Shareholders’ Meeting, that the TSX shall have conditionally approved the
listing of the Pembina Exchange Shares to be issued to Preferred Shareholders pursuant to the Arrangement. The TSX
has conditionally approved the listing of the Pembina Common Shares to be issued to Common Shareholders pursuant
to the Arrangement and the listing of the Pembina Exchange Shares following the Effective Date on the TSX. Listing
is subject to Pembina fulfilling all of the listing requirements of the TSX. The NYSE has conditionally approved the
listing of the Pembina Common Shares to be issued to Common Shareholders pursuant to the Arrangement. Listing
will be subject to Pembina fulfilling all of the listing requirements of the NYSE.
See “Procedure for the Arrangement to become Effective – Regulatory Approvals”.
Dissent Rights
Pursuant to the Interim Order, Dissenting Shareholders are entitled, in addition to any other right such Dissenting
Shareholder may have, to dissent and to be paid by Pembina the fair value of the Common Shares or Preferred Shares,
as the case may be, held by such Dissenting Shareholder in respect of which such Dissenting Shareholder dissents,
determined as of the close of business on the last Business Day before the day on which the Common Shareholder
Arrangement Resolution or Preferred Shareholder Arrangement Resolution, as the case may be, from which such
Dissenting Shareholder’s dissent was adopted and provided the Arrangement is completed in respect of such
Shareholders. A Dissenting Shareholder may dissent only with respect to all of the Common Shares or Preferred
Shares, respectively, held by such Dissenting Shareholder, or on behalf of any one beneficial owner and
registered in the Dissenting Shareholder’s name. Only registered Shareholders may dissent. Persons who are
beneficial owners of Veresen Shares registered in the name of a broker, dealer, bank, trust company or other
nominee who wish to dissent should be aware that they may only do so through the registered owner of such
Veresen Shares. A registered Shareholder, such as a broker or CDS who holds Veresen Shares as nominee for
beneficial holders, some of whom wish to dissent, must exercise the Dissent Right on behalf of such beneficial
owners with respect to all of the Common Shares or Preferred Shares held for such beneficial owners. In such
case, the written objection to the Common Shareholder Arrangement Resolution or Preferred Shareholder
Arrangement Resolution, as the case may be, should set forth the number of Common Shares and/or Preferred
Shares covered by it.
Unless otherwise waived, it is a condition to the completion of the Arrangement that holders of not more than
5% of the issued and outstanding Common Shares shall have validly exercised Dissent Rights in respect of the
Arrangement that have not been withdrawn as of the Effective Date. Should Dissent Rights have been validly
exercised in respect of more than 5% of the outstanding Preferred Shares and the Preferred Shareholder Arrangement
Resolution receives the requisite approval of the Preferred Shareholders, Veresen will, if requested by Pembina, amend
the Plan of Arrangement to exclude the Preferred Shares under the Plan of Arrangement and matters ancillary thereto,
including, in each case, the amalgamation of Veresen and Pembina contemplated by the Plan of Arrangement.
Notwithstanding the foregoing, registered Preferred Shareholders who have validly exercised Dissent Rights shall not
be entitled to dissent and to be paid the fair value of their Preferred Shares in the event that the Preferred Shares are
not exchanged by Pembina pursuant to the Arrangement.
See “Dissent Rights”.
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Making an Election Regarding the Consideration to be Received
How to Make an Election
Enclosed with this Information Circular is the Common Shareholder Letter of Transmittal and Election Form which,
when properly completed and returned together with the certificate(s) or DRS Advice(s) representing Common Shares
and all other documents that may be required by the Depositary, will enable each Common Shareholder to obtain the
consideration that the Common Shareholder is entitled to receive under the Arrangement. The Common Shareholder
Letter of Transmittal and Election Form must be submitted by the Election Deadline. Veresen will provide at least 10
Business Days’ notice of the Election Deadline to Common Shareholders by means of a news release disseminated
on a national newswire in Canada and the U.S. See “Procedure for the Arrangement to become Effective – Procedure
for Exchange of Veresen Share Certificates or DRS Advices”.
The Common Shareholder Letter of Transmittal and Election Form contains complete instructions on how to make
your election and exchange your Common Shares.
Each Common Shareholder’s election may be subject to the pro-rationing provisions described below.
What Happens if a Shareholder Fails to Make a Valid Election
Common Shareholders who do not deposit with the Depositary a duly completed Common Shareholder Letter of
Transmittal and Election Form together with the applicable certificate(s) or DRS Advice(s) representing Common
Shares prior to the Election Deadline, or otherwise fail to comply with the requirements of the Plan of Arrangement
and the Common Shareholder Letter of Transmittal and Election Form with respect to the election to receive the Share
Consideration or the Cash Consideration shall be deemed to have elected to receive the Share Consideration in
exchange for all of such holder’s Common Shares, subject to the terms of the Plan of Arrangement.
See “Procedure for the Arrangement to become Effective – Making an Election Regarding the Consideration to be
Received”.
Pro-Rationing Provisions
Elections for Pembina Common Shares
In the event the Total Elected Share Consideration exceeds the Maximum Share Consideration, then the aggregate
number of Pembina Common Shares to be paid to any Common Shareholder shall be determined by multiplying the
aggregate number of Pembina Common Shares that would be issued to such Common Shareholder by a fraction,
rounded to six decimal places, the numerator of which is the Maximum Share Consideration and the denominator of
which is the Total Elected Share Consideration; and such holder shall be deemed to have elected to receive the Share
Consideration for such number of its Common Shares, rounded down to the nearest whole, as is equal to the aggregate
number of Pembina Common Shares received by such holder, as adjusted pursuant to the Plan of Arrangement, divided
by the Share Consideration, and the Cash Consideration for the remainder of its Common Shares for which such holder
would otherwise have received the Share Consideration.
See “Procedure for the Arrangement to become Effective – Pro Ration Provisions – Elections for Pembina Common
Shares”.
Elections for Cash
In the event that the Total Elected Cash Consideration exceeds the Maximum Cash Consideration, then the aggregate
amount of cash to be paid to any Common Shareholder shall be determined by multiplying the aggregate amount of
cash that would be paid to such Common Shareholder by a fraction, rounded to six decimal places, the numerator of
which is the Maximum Cash Consideration and the denominator of which is the Total Elected Cash Consideration;
and such holder shall be deemed to have elected to receive the Cash Consideration for such number of its Common
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Shares, rounded down to the nearest whole, as is equal to the aggregate amount of cash received by such holder, as
adjusted in accordance with the Plan of Arrangement, divided by the Cash Consideration, and the Share Consideration
for the remainder of its Common Shares for which such holder would otherwise have received the Cash Consideration.
See “Procedure for the Arrangement to become Effective – Pro Ration Provisions – Elections for Cash”.
Fractional Shares
No fractional Pembina Common Shares will be issued pursuant to the Arrangement and, in lieu thereof, each former
Common Shareholder otherwise entitled to a fractional interest in a Pembina Common Share will receive the nearest
whole number of Pembina Common Shares (with fractions equal to exactly 0.5 or greater being rounded up and
fractions less than 0.5 being rounded down), unless such rounding causes the aggregate number of Pembina Common
Shares to be paid to the Common Shareholders pursuant to the Plan of Arrangement to be greater than the Maximum
Share Consideration, in which case all such fractional interests will be paid in cash based on the Cash Consideration
notwithstanding that such cash payments may cause the aggregate cash consideration to be paid by Pembina pursuant
to the Plan of Arrangement to exceed the Maximum Cash Consideration. In calculating such fractional interests, all
Common Shares registered in the name of or beneficially held by a Common Shareholder or his/her/its nominee shall
be aggregated.
See “Procedure for the Arrangement to become Effective – Pro Ration Provisions – Fractional Shares”.
It is highly likely that elections made by Common Shareholders will be subject to pro-rationing under the Plan
of Arrangement.
Summary of Canadian Federal Income Tax Considerations
This Information Circular contains a summary of certain Canadian federal income tax considerations generally
applicable to certain Shareholders who, under the Arrangement, dispose of one or more Veresen Shares. See the
discussion under the section entitled “Certain Canadian Federal Income Tax Considerations”.
Shareholders should consult their own tax advisors for advice with respect to the Canadian income tax consequences
to them in respect of the Arrangement.
Summary of Certain United States Federal Income Tax Considerations
This Information Circular contains a summary of certain U.S. federal income tax considerations generally applicable
to certain U.S. Holders that transfer one or more Common Shares pursuant to the Arrangement. Any comments herein
regarding such considerations are qualified in their entirety by reference to that summary. See the discussion under
the section entitled “Certain United States Federal Income Tax Considerations”. U.S. Holders are urged to consult
their tax advisors regarding the specific tax consequences of the Arrangement to them.
Other Tax Considerations
This Information Circular discusses certain Canadian and United States federal income tax considerations applicable
to certain Shareholders. Tax consequences to Shareholders who are resident in jurisdictions other than Canada or the
United States are not discussed and such Shareholders should consult their tax advisors with respect to the tax
implications of the Arrangement, including any associated filing requirements, in such jurisdictions and with respect
to the tax implications in such jurisdictions of owning Pembina Shares after the Arrangement. All Shareholders should
consult their tax advisors regarding the provincial, state, local and territorial tax consequences of the Arrangement and
of holding Pembina Shares.
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Timing
If the Meetings are held as scheduled and are not adjourned and the necessary conditions for completion of the
Arrangement are satisfied or waived, Veresen will apply for the Final Order approving the Arrangement. If the Final
Order is obtained on July 12, 2017 in form and substance satisfactory to Veresen and Pembina, the Effective Date will
occur once all other conditions set forth in the Arrangement Agreement are satisfied or waived. Veresen and Pembina
expect the Effective Date will occur in the second half of 2017. It is not possible, however, to state with certainty
when the Effective Date will occur.
The Arrangement will become effective upon the filing with the Registrar of the Articles of Arrangement and a copy
of the Final Order, together with such other materials as may be required by the Registrar.
The Effective Date could be delayed for a number of reasons, including an objection before the Court at the hearing
of the application for the Final Order or delays in receiving all Required Regulatory Approvals.
See “Timing”.
Selected Unaudited Pro Forma Financial Information for Pembina
This Information Circular contains certain unaudited pro forma financial information for Pembina after giving effect
to the Arrangement for the year ended December 31, 2016 and for the three month period ended March 31, 2017.
These tables should be read in conjunction with the unaudited pro forma consolidated financial statements of Pembina
for the year ended December 31, 2016 and the three month period ended March 31, 2017, including the notes thereto,
attached as Appendix I to this Information Circular. Reference should also be made to: (a) the Veresen Annual
Financial Statements; (b) the Veresen Interim Financial Statements; (c) the Pembina Annual Financial Statements;
and (d) the Pembina Interim Financial Statements, each of which is incorporated by reference herein. See “Pro Forma
Information of Pembina After Giving Effect to the Arrangement”.
Risk Factors
Shareholders voting in favour of the Common Shareholder Arrangement Resolution and the Preferred Shareholder
Arrangement Resolution, as the case may be, will be choosing to combine the businesses of Veresen and Pembina and
to invest in Pembina Shares, as applicable. The completion of the Arrangement and investment in Pembina Shares
involves risks.
An investment in Pembina Shares is subject to certain risks, which are generally associated with an investment in
shares of a pipeline, midstream and marketing corporation. The following is a list of certain additional risk factors
associated with the Arrangement and the investment in Pembina Shares which Shareholders should carefully
consider before approving the Common Shareholder Arrangement Resolution and Preferred Shareholder
Arrangement Resolution, as applicable:
Pembina and Veresen may fail to realize the anticipated benefits of the Arrangement;
the conditions to completion of the Arrangement, including receiving all Required Regulatory Approvals,
Court approval, TSX and NYSE approval, as applicable, for the listing of the Pembina Common Shares and
subject to the Preferred Shareholder Arrangement Resolution receiving the requisite approval, the Pembina
Exchange Shares issuable pursuant to the Arrangement, may not be satisfied or waived by the Outside Date
which may result in the Arrangement not being completed;
risks related to the integration of Veresen’s and Pembina’s existing businesses, including that Shareholders
may be exposed to additional business risks not previously applicable to such investment;
the Arrangement Agreement could be terminated by either Party under certain circumstances;
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Veresen will incur significant costs relating to the Arrangement, regardless of whether the Arrangement is
completed or not completed;
the timing of the Meetings and the Final Order and the anticipated Effective Date may be changed or delayed;
if the Arrangement is not completed, Shareholders will not realize the benefits of the Arrangement and
Veresen’s future business and operations could be adversely affected;
changes in income tax laws or actions taken by taxing authorities could have adverse implications on
Pembina, Veresen or their respective securityholders; and
future dividends on Pembina’s Common Shares may not be increased as expected, or declared at all.
The risk factors listed above are an abbreviated list of risk facts summarized elsewhere in this Information Circular,
the Veresen AIF, the Veresen Annual MD&A, the Veresen Interim MD&A, the Pembina AIF, the Pembina
Annual MD&A and the Pembina Interim MD&A, each of which are incorporated herein by reference. See
“Risk Factors”. Shareholders should carefully consider all such risk factors.
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THE ARRANGEMENT
General
Veresen entered into the Arrangement Agreement with Pembina on May 1, 2017. A copy of the Arrangement
Agreement is attached as Appendix C to this Information Circular. The Arrangement Agreement provides for the
implementation of the Plan of Arrangement (a copy of which is attached as Appendix D to this Information Circular)
pursuant to which, among other things, the following transactions will occur:
Common Shareholders (other than Dissenting Shareholders) will, for each Common Share held, have the
option to receive:
(a) 0.4287 of a Pembina Common Share; or
(b) $18.65 in cash,
subject to pro-rationing under the Plan of Arrangement. Assuming full pro-rationing, each Common
Shareholder would receive (i) cash in an amount equal to $4.8494 multiplied by the number of Common
Shares held by such Common Shareholder, and (ii) 0.3172 of a Pembina Common Share multiplied by the
number of Common Shares held by such Common Shareholder.
Provided that the Preferred Shareholder Arrangement Resolution receives the requisite approval by the
Preferred Shareholders at the Preferred Shareholders’ Meeting and the Preferred Shares are not otherwise
excluded from the Arrangement pursuant to the terms of the Arrangement Agreement:
(a) Veresen shall declare and pay a cash dividend on each Preferred Share in an amount equal to all
accrued and unpaid dividends thereon, and for which a record date for the payment of such dividends
has not occurred prior to the Effective Date, up to, but excluding, the Effective Date; and
(b) each Preferred Shareholder (other than Dissenting Shareholders) shall receive, for each Preferred
Share held, the Preferred Share Consideration.
Provided that the Preferred Shareholder Arrangement Resolution has received the requisite approval of
Preferred Shareholders at the Preferred Shareholders’ Meeting (or the Preferred Shareholders have approved
a special resolution with similar effect to the Preferred Shareholder Arrangement Resolution prior to the
Effective Time such that Pembina has become the sole holder of the Preferred Shares), and the Plan of
Arrangement is not otherwise amended to exclude the Preferred Shares, Pembina and Veresen shall be
amalgamated to form one corporation under the ABCA, being Amalco. If the Preferred Shareholders do not
approve the Preferred Shareholder Arrangement Resolution, or if the Preferred Shares are otherwise excluded
from the Plan of Arrangement pursuant to the terms of the Arrangement Agreement, the Preferred Shares
will remain outstanding following completion of the Arrangement and will not be exchanged for the Pembina
Exchange Shares.
Pursuant to the Arrangement Agreement: (a) in the circumstances where the Preferred Shareholder Arrangement
Resolution does not receive the requisite approval of the Preferred Shareholders at the Preferred Shareholders’
Meeting (or any adjournment thereof) and the Preferred Shareholders do not otherwise approve a special resolution
with similar effect to the Preferred Shareholder Arrangement Resolution prior to the Effective Time such that Pembina
is the sole holder of the Preferred Shares prior to the amalgamation contemplated in the Plan of Arrangement, Veresen
shall amend the Plan of Arrangement to exclude the Preferred Shares under the Plan of Arrangement and matters
ancillary thereto; and (b) in the circumstances where the Preferred Shareholder Arrangement Resolution receives the
requisite approval of the Preferred Shareholders, and Dissent Rights have been validly exercised in respect of more
than 5% of the outstanding Preferred Shares, Veresen shall amend the Plan of Arrangement if requested by Pembina
to exclude the Preferred Shares under the Plan of Arrangement and matters ancillary thereto, including, in each case,
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the amalgamation contemplated in the Plan of Arrangement. In such circumstances, the Preferred Shares will remain
outstanding following completion of the Arrangement and will not be exchanged for the Pembina Exchange Shares.
As of June 5, 2017, there were issued and outstanding 313,652,781 Common Shares and 401,129,872 Pembina
Common Shares. Upon completion of the Arrangement, assuming the issuance of the Maximum Share Consideration,
current holders of Pembina Common Shares are expected to own approximately 80% of the combined company, and
Common Shareholders are expected to own approximately 20% of the combined company. The Plan of Arrangement
provides that any certificate formerly representing Common Shares (and, in the event the Preferred Shareholder
Arrangement Resolution receives the requisite approval at the Preferred Shareholders’ Meeting, any certificate
formerly representing Preferred Shares) not deposited together with all other documents as required by the Plan of
Arrangement and the applicable Letter of Transmittal on or before the last Business Day prior to the third anniversary
of the Effective Date, shall cease to represent a right or claim by or interest of any kind or nature against Veresen or
Pembina. On such date, all consideration and other property to which such former holder was entitled shall be deemed
to have been surrendered to Veresen or Pembina, as applicable.
As the completion of the Arrangement will be considered a “Change of Control” pursuant to the Veresen LTIP and
the Veresen DSU Plans and the provisions of the Arrangement Agreement, all outstanding Veresen RSUs, Veresen
PSUs and Veresen DSUs will vest and be settled in cash immediately prior to the Effective Time such that no Veresen
RSUs, Veresen PSUs or Veresen DSUs will remain outstanding at the Effective Time. See “Interests of Certain
Persons and Companies in the Arrangement”.
Subject to the completion of the Arrangement, Pembina has announced that it intends to increase the monthly dividend
on the Pembina Common Shares by 5.9% (from $0.17 to $0.18 per Pembina Common Share per month). Commencing
with the July 2017 dividend record date, Veresen will amend its record dates for dividends on the Common Shares to
match the record dates set by Pembina for dividends on the Pembina Common Shares.
Pembina has agreed to use commercially reasonable efforts to appoint Doug Arnell, Maureen E. Howe and Henry W.
Sykes, each a current director of Veresen, to the Pembina Board as soon as reasonably practicable following
completion of the Arrangement to serve until the next annual meeting of Pembina shareholders or until their successors
are duly appointed.
Details of the Arrangement
The following is a summary only of the Plan of Arrangement and reference should be made to the full text of the
Arrangement Agreement and the Plan of Arrangement set forth in Appendices C and D to this Information Circular,
respectively.
Pursuant to the Plan of Arrangement, commencing at the Effective Time, each of the following are deemed to occur
in the following order without any further authorization, act or formality:
Termination of Shareholder Rights Plan: Veresen’s shareholder rights plan dated May 3, 2017, as such may
be amended, amended and restated or replaced from time to time shall terminate and cease to have any further
force or effect and the rights issued pursuant thereto shall be cancelled without any payment in respect
thereof;
Dissenting Shareholders: Common Shares and, in the event the Preferred Shareholder Arrangement
Resolution receives the requisite approval of Preferred Shareholders at the Preferred Shareholders’ Meeting,
Preferred Shares held by Dissenting Shareholders who have validly exercised Dissent Rights shall be deemed
to have been transferred to Veresen (free and clear of any and all Encumbrances), and cancelled and such
Dissenting Shareholders shall cease to have any rights as Common Shareholders or Preferred Shareholders,
as applicable, other than the right to be paid the fair value of their Common Shares or Preferred Shares, as
the case may be, in accordance with the Plan of Arrangement, and the names of such holders shall be removed
from the register of Common Shareholders and Preferred Shareholders, as applicable;
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Acquisition of Common Shares by Pembina: Each issued and outstanding Common Share (other than those
held by Dissenting Shareholders) shall be transferred by the holder thereof without any further action on its
part (free and clear of any Encumbrances) to Pembina in accordance with the election or deemed election of
such holder pursuant to the Plan of Arrangement, as adjusted by the pro-rationing provisions of the Plan of
Arrangement, if applicable, in exchange for the Cash Consideration or the Share Consideration, as applicable,
and Pembina shall be deemed to be the legal and beneficial owner of such transferred Common Shares (free
and clear of Encumbrances), and upon such exchange: (a) the holders of such Common Shares shall cease to
be the holders of Common Shares and the names of such holders shall be removed from the register of
Common Shareholders; and (b) Pembina shall become the holder of the Common Shares so exchanged and
shall be added to the register of Common Shareholders as the registered holder of such shares;
Acquisition and Exchange of Preferred Shares by Pembina: Provided that the Preferred Shareholder
Arrangement Resolution has received the requisite approval of Preferred Shareholders at the Preferred
Shareholders’ Meeting and the Preferred Shares are not otherwise excluded from the Plan of Arrangement:
o Veresen shall declare and pay in cash a dividend on each Preferred Share in an amount equal to all
accrued and unpaid dividends thereon, and for which a record date for the payment of such dividends
has not occurred prior to the Effective Date, up to, but excluding, the Effective Date; and
o each issued and outstanding Preferred Share (other than those held by Dissenting Shareholders) shall
be transferred by the holder thereof without any further action on its part (free and clear of any
Encumbrances) to Pembina in exchange for the Preferred Share Consideration and Pembina shall
be deemed to be the legal and beneficial owner of such transferred Preferred Shares (free and clear
of Encumbrances), and upon such exchange: (a) the holders of such Preferred Shares shall cease to
be the holders of Preferred Shares and the names of such holders shall be removed from the register
of Preferred Shareholders; and (b) Pembina shall become the holder of the Preferred Shares so
exchanged and shall be added to the register of Preferred Shareholders as the registered holder of
such shares;
Reduction of Stated Capital: Provided that the Preferred Shareholder Arrangement Resolution has received
the requisite approval of Preferred Shareholders at the Preferred Shareholders’ Meeting or the Preferred
Shareholders have approved a special resolution with similar effect to the Preferred Shareholder Arrangement
Resolution prior to the Effective Time such that Pembina is the sole holder of the Preferred Shares, and the
Plan of Arrangement is not otherwise amended pursuant to the terms thereof to exclude the Preferred Shares,
the aggregate stated capital of Veresen, in respect of the Common Shares and the Preferred Shares, shall be
reduced to nil; and
Amalgamation: Provided that the Preferred Shareholder Arrangement Resolution has received the requisite
approval of Preferred Shareholders at the Preferred Shareholders’ Meeting or the Preferred Shareholders
have approved a special resolution with similar effect to the Preferred Shareholder Arrangement Resolution
prior to the Effective Time such that Pembina is the sole holder of the Preferred Shares, and the Plan of
Arrangement is not otherwise amended pursuant to the terms thereof to exclude the Preferred Shares,
Pembina and Veresen shall be amalgamated to form one corporation under the ABCA, being Amalco, in
accordance with the following terms of the Plan of Arrangement:
(i) Name. The name of Amalco shall be Pembina Pipeline Corporation;
(ii) Share Provisions. The share provisions and authorized share capital of Amalco shall be the
same as the share provisions and authorized share capital of Pembina;
(iii) Directors and Officers.
(A) Initial Directors. The directors of Amalco shall be the same as the directors of
Pembina; and
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(B) Initial Officers. The officers of Amalco shall be the same as the officers of
Pembina;
(iv) Business and Powers. There shall be no restrictions on the business that Amalco may carry
on or on the powers it may exercise;
(v) Other Provisions. The other provisions forming part of the Articles of Amalco shall be the
same as the respective provision of the articles of Pembina as such existed immediately
prior to the amalgamation;
(vi) Stated Capital. The aggregate stated capital of Amalco will be an amount equal to the
aggregate of the paid-up capital for the purposes of the Tax Act of the Pembina Common
Shares and the Pembina Class A Preferred Shares outstanding immediately before the
amalgamation;
(vii) By-laws. The by-laws of Amalco shall be the by-laws of Pembina;
(viii) Registered Office. The registered office of Amalco shall be the registered office of
Pembina;
(ix) Effect of Amalgamation. The following shall be the effect of the amalgamation:
(A) all of the property of each of Pembina and Veresen shall continue to be the
property of Amalco;
(B) Amalco shall continue to be liable for the obligations of each of Pembina and
Veresen;
(C) any existing cause of action, claim or liability to prosecution of Pembina or
Veresen shall be unaffected;
(D) any civil, criminal or administrative action or proceeding pending by or against
either of Pembina or Veresen may be continued to be prosecuted by or against
Amalco; and
(E) a conviction against, or ruling, order or judgment in favour of or against, either of
Pembina or Veresen may be enforced by or against Amalco;
(x) Articles. The articles of amalgamation of Amalco filed shall be deemed to be the articles
of incorporation of Amalco, and the certificate of amalgamation of Amalco shall be
deemed to be the certificate of incorporation of Amalco;
(xi) Inconsistency with Laws. To the extent any of the provisions of the Plan of Arrangement
is deemed to be inconsistent with applicable Laws, the Plan of Arrangement shall be
automatically adjusted to remove such inconsistency; and
(xii) Cancellation of Shares. On the amalgamation each issued and outstanding Common Share
and Preferred Share shall be cancelled and each issued and outstanding Pembina Common
Share and Pembina Class A Preferred Share shall remain unaffected.
The respective obligations of Pembina and Veresen to complete the transactions contemplated by the Arrangement
are subject to a number of conditions which must be satisfied or waived in order for the Arrangement to become
effective. Upon all of the conditions being fulfilled or waived, Veresen is required to file a copy of the Final Order
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and the Articles of Arrangement and any such other documents as may be required with the Registrar in order to give
effect to the Arrangement.
Background to the Arrangement
The terms of the Arrangement are the result of arm’s length negotiations between Veresen and Pembina and their
respective advisors. The following is a summary of the events leading up to the negotiation of the Arrangement
Agreement and the key meetings, negotiations, discussions and actions by and between the Parties that preceded the
execution and public announcement of the Arrangement Agreement.
Pembina, through its President and Chief Executive Officer, Mick Dilger, first approached Don Althoff, President and
Chief Executive Officer of Veresen, in early December 2016. Mr. Althoff and Mr. Dilger subsequently met on
December 8, 2016, at which meeting Mr. Dilger raised the possibility of a business combination involving Veresen
and Pembina. The discussions were preliminary in nature and specific details of any proposed transaction, such as the
consideration to be offered by Pembina in respect of any such transaction, were not addressed. Several days following
the meeting between Mr. Althoff and Mr. Dilger, Steve Mulherin, the Chair of the Board, met with Randall Findlay,
the Chair of the Pembina Board, to discuss the possibility of a business combination involving Veresen and Pembina.
These discussions were also preliminary in nature and no details of a potential transaction were proposed or discussed.
On December 19, 2016, Mr. Althoff and Mr. Dilger discussed by telephone the possibility of a business combination.
These discussions continued to be of a preliminary nature and no details of a potential transaction were proposed or
discussed.
Following these meetings, the Board met on December 26, 2016 and received an update from Mr. Althoff and Mr.
Mulherin regarding their respective discussions with Mr. Dilger and Mr. Findlay. While Veresen regularly reviews its
overall corporate strategy and, from time to time, considers various strategic options that might accelerate the
achievement of its business plan or otherwise be in the best interests of Veresen, at the time of Pembina’s approach in
December 2016, Veresen was focused on the execution of its then existing business plan and was not pursuing any
strategic options. Accordingly, in light of Pembina’s approach, the Board determined that it was appropriate to seek
financial and legal advice in order to clearly understand Veresen’s strategic alternatives and its legal obligations.
Veresen subsequently engaged Scotia Capital as financial advisor and Osler, Hoskin & Harcourt LLP (“Osler”) as
legal counsel.
Effective January 4, 2017, Veresen entered into an engagement agreement with Scotia Capital assigning Scotia Capital
the mandate of preparing an analysis of Veresen’s business plan under different scenarios, to conduct a financial
review of Pembina, provide capital markets perspective on Veresen, Pembina and other market participants and to act
as financial advisor in the event of any potential approach by a third party proposing a transaction involving Veresen,
including Pembina.
In January and early February 2017, representatives from Veresen and Scotia Capital met to discuss Veresen’s current
business prospects, financial outlook and growth prospects. Scotia Capital prepared an analysis of Veresen’s then
existing business plan under various scenarios.
In mid-February 2017, Mr. Dilger requested a meeting with Mr. Althoff, which was held on February 22, 2017. At
this meeting, Mr. Dilger further outlined Pembina’s desire to enter into a combination with Veresen and discussed the
financial and strategic merits of a potential combination. The discussions continued to be preliminary in nature without
specific details, such as transaction consideration, being addressed. On February 28, 2017, the Board met and Mr.
Althoff updated the Board on the conversations with Mr. Dilger. At the meeting, the analysis by Scotia Capital of
Veresen’s business plan under various scenarios was also reviewed.
In mid-March 2017, Mr. Dilger requested a further meeting with Mr. Althoff, which occurred on March 26, 2017.
During this meeting, Mr. Dilger presented Mr. Althoff with a written non-binding proposal relating to a potential
business combination for consideration comprised of a combination of cash and Pembina Common Shares, subject to
certain customary conditions including satisfactory completion of confirmatory diligence review by Pembina,
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approval of the respective boards of directors and agreement between the Parties with respect to the terms of a
definitive transaction agreement. The non-binding proposal also summarized several reasons why Pembina believed
that a potential business combination between the Parties had merit. Pembina requested a response to its non-binding
proposal by no later than April 7, 2017.
On March 31, 2017, the Board met, with representatives of Scotia Capital and Osler in attendance, to consider
Pembina’s non-binding proposal and Veresen’s response thereto. At the meeting, Osler briefed the directors of
Veresen on their legal duties and responsibilities in considering Pembina’s proposal and in considering alternative
strategic courses of action. The Board also considered the process for reviewing the developments with respect to
Pembina and determined that a special committee of the Board would not be appointed to consider other proposals
from Pembina or related matters as the full Board was prepared to make itself available to make all decisions and
determinations in regard to a potential transaction with Pembina, although a working group of Messrs. Mulherin,
Sykes and Charron was identified as being available to support management in any developments between Board
meetings and that each Board meeting would include in camera sessions. The Board, having considered legal advice
from Osler and financial advice from Scotia Capital, determined that the consideration proposed in Pembina’s non-
binding proposal was not compelling enough to move forward with discussions with Pembina and approved a form
of response letter, which was sent to Pembina on March 31, 2017. In the response, Mr. Althoff indicated that, while
there appeared to be potential strategic merit of a business combination as proposed, Veresen did not believe that the
financial terms of Pembina’s non-binding proposal properly reflected the value of Veresen’s business in order to be
compelling from the perspective of Veresen’s shareholders such that the Board would be prepared to enter into further
discussions with Pembina.
Between March 31 and April 7, 2017, conversations occurred between Mr. Althoff and Mr. Dilger and between
representatives of Scotia Capital and Pembina’s financial advisor, CIBC World Markets Inc. (“CIBC”). During the
course of these conversations, Pembina indicated that the level of consideration in the non-binding proposal could be
increased pending further review of a variety of factors. To assist Pembina in forming a new non-binding proposal,
Pembina requested an information session with senior members of management of Veresen to ask a number of
questions regarding Veresen’s business and its outlook. On April 10, 2017, representatives of management of Veresen
and Pembina, along with representatives from Scotia and CIBC, met and the parties discussed non-confidential
information related to the business of Veresen.
On April 13, 2017, Mr. Althoff and Mr. Mulherin met with Mr. Dilger and Mr. Findlay to discuss the potential for
reaching the terms of a business combination. Later on April 13, 2017, Mr. Dilger sent to Mr. Althoff a revised written
non-binding proposal relating to a potential business combination for increased consideration comprised of a
combination of cash and Pembina Common Shares. A draft of the Confidentiality Agreement contemplating, among
other things, a covenant by Veresen to negotiate exclusively with Pembina for a period of time, accompanied the non-
binding proposal. Pembina requested a response to its non-binding proposal by no later than April 17, 2017.
On April 14, 2017, the Board met, with representatives of Scotia Capital and Osler in attendance, to consider
Pembina’s updated non-binding proposal. At the meeting, the Board approved the execution by Veresen of the
Confidentiality Agreement with Pembina, subject to any changes recommended by Osler, and authorized Veresen’s
management to provide various due diligence items to Pembina and undertake due diligence on the business of
Pembina. The meeting included an in camera meeting of the Board with Mr. Althoff and other members of
management not in attendance.
On April 14, 2017, the Parties entered into the Confidentiality Agreement to enable mutual due diligence on each
other’s businesses and operations. The Confidentiality Agreement also contained Veresen’s covenant to negotiate
exclusively with Pembina until 5:00 p.m. (Calgary time) on May 3, 2017.
Between April 15 and April 29, 2017, management of Veresen and Pembina and their respective financial and legal
advisors met and exchanged information on the respective businesses and operations. Negotiations of the terms of the
Arrangement Agreement also commenced the week of April 17, 2017.
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Between April 26 and April 29, 2017, discussions were held by management of the Parties, with the support of their
respective financial advisors and legal counsel, in connection with the possible financial parameters, terms and
structure of a business combination.
On April 27, 2017, the Board met, with representatives of Scotia Capital and Osler in attendance, to receive Scotia
Capital’s preliminary financial analyses on Veresen, Pembina and the combined pro forma company, as well as an
update on the negotiations of the Arrangement Agreement. Scotia Capital also provided the Board with its view on
the potential market and shareholder reaction to the combination. Further, Osler provided a comprehensive summary
of the terms of the Arrangement Agreement, regulatory approvals, timeline and other related matters. Management
and advisors provided the Board with the results of the due diligence process to date. The Board provided guidance
on several of the outstanding items for negotiation in the Arrangement Agreement. The meeting included an in camera
meeting of the Board with Mr. Althoff and other members of management not in attendance.
As a result of negotiations, on April 28, 2017, Pembina provided a further revised non-binding proposal. The Board
met on April 29, 2017, with representatives of Scotia Capital and Osler in attendance, to receive a further update on
negotiations of the Arrangement Agreement and the financial parameters of the proposed transaction. The meeting
included an in camera meeting of the Board with Mr. Althoff and other members of management not in attendance.
The Board instructed that a proposal outlining updated financial terms and certain other transaction terms be provided
to Pembina.
On the afternoon of April 29, 2017, Mr. Althoff and Mr. Mulherin met with Mr. Dilger to discuss a revised transaction
proposal. At this meeting, the parties agreed to take forward new transaction terms to their respective boards of
directors to approve a final form of agreement including a total value of $18.65 per Common Share comprised of a
combination of cash and Pembina Common Shares. Additional transaction details were also finalized. Mr. Mulherin
and Mr. Findlay met separately that same day to finalize other details of the transaction.
The Board subsequently met on April 30, 2017 to review and consider the specific transaction terms that had been
negotiated by the Parties, the anticipated benefits to Veresen and the Shareholders of entering into the proposed
transaction and the proposed Arrangement Agreement and Plan of Arrangement that resulted from the negotiations
with Pembina. Scotia Capital provided its verbal fairness opinions to the Board that, as of the date of such opinions
and subject to and based on customary assumptions, qualifications and limitations: (a) the consideration to be paid to
the Common Shareholders pursuant to the Arrangement was fair, from a financial point of view, to the Common
Shareholders; and (b) the consideration to be paid to the Preferred Shareholders pursuant to the Arrangement was fair,
from a financial point of view, to the Preferred Shareholders. The Fairness Opinions dated April 30, 2017 and
addressed to the Board are contained in Appendices G and H to this Information Circular. Osler summarized for the
Board the material terms of the proposed Arrangement Agreement and Plan of Arrangement, advised the Board as to
the status of resolving the final matters under negotiation and responded to inquiries on fiduciary duties and
responsibilities with respect to the proposed transaction. Osler also noted that the due diligence review had been
completed. The Board reviewed the negotiation process with management, discussed the proposed final terms of the
Arrangement Agreement and the verbal fairness opinions of Scotia Capital. After considering, among other things,
the review of alternative courses of action that had been considered, the terms of the Arrangement Agreement, the
fairness opinions of Scotia Capital and the impact of the proposed transaction on the various stakeholders of Veresen,
the Board unanimously determined that the Arrangement and the entry into the Arrangement Agreement was in the
best interests of Veresen, the Arrangement was fair to the Common Shareholders and the Preferred Shareholders and
that it would recommend that the Common Shareholders and Preferred Shareholders vote in favour of the Arrangement
and authorized Veresen to enter into the Arrangement Agreement. This meeting included an in camera session of the
Board at the beginning and end of the meeting with Mr. Althoff and other members of management not in attendance.
Following the meeting of the Board, the Arrangement Agreement and Support Agreements were executed and
delivered. Thereafter, a joint news release of Veresen and Pembina announcing the proposed Arrangement was
disseminated in the morning of May 1, 2017.
On May 30, 2017, the Board approved the contents and mailing of this Information Circular to Common Shareholders
and Preferred Shareholders, subject to any amendments that may be approved by Veresen’s senior management team,
and ratified the recommendations to Shareholders with respect to the Arrangement.
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On June 5, 2017, the Court granted the Interim Order which is attached as Appendix E to this Information Circular.
Reasons for the Arrangement
In determining that the Arrangement is in the best interests of Veresen and is fair to the Shareholders, and in
recommending to Shareholders that they approve the Arrangement, the Board considered and relied upon a number
of factors, including, among others, the following:
the consideration offered for the Common Shares, based on the Cash Consideration of $18.65, represents
a 21.8% premium to the 20-day weighted average price of the Common Shares on the TSX of $15.31 as
of April 28, 2017 (the last trading day prior to announcement of the Arrangement), and a 22.5% premium
to the closing price of the Common Shares on the TSX of $15.23 on April 28, 2017;
the Board’s view, based on both external and internal analysis, that the consideration to be paid pursuant
to the Arrangement offers a compelling value for assets currently in service and generating cash flows,
as well as for future opportunities on a risked and present valued basis, including placing the Sunrise,
Tower and Saturn Phase II processing facilities into service, the potential to sanction additional
midstream projects through Veresen Midstream, the potential extension of long-term transportation
agreements on Alliance Pipeline and subsequent ability to explore optimizing the capital structure of
Alliance Pipeline, the potential expansion of Alliance Pipeline through additional compression, the
potential for increased revenue and potential to advance Jordan Cove LNG and Pacific Connector Gas
Pipeline on a regulatory and commercial basis;
Common Shareholders will have the opportunity to continue to participate in the growth opportunities
associated with Veresen’s business as well as of the combined business. As described under the heading
“Attributes of the Combined Company” the combined company is expected to be better positioned than
a stand-alone Veresen to deliver on Veresen’s existing strategy;
the Arrangement offers an opportunity for Common Shareholders to participate in Pembina’s low-risk,
highly-contracted asset base which is well integrated across the hydrocarbon value chain;
the Board’s view, after negotiations with Pembina, that the consideration offered by Pembina represented
the highest per share consideration reasonably attainable within a reasonable forecast period;
Pembina’s reputation as a leading transportation and midstream service provider in North America with
a focus on enhancing shareholder value in a safe, environmentally responsible manner positioned it as
an ideal partner for a business combination with Veresen;
the Board’s judgment, after discussions with Veresen’s financial advisor and management, that there
were few, if any, potentially interested and capable alternative counterparties to Veresen that would
likely be willing and able to compete with the financial terms proposed by Pembina (including the
potential upside with the combined company), and the potential negative impacts of such discussions on
the negotiations with Pembina;
the Arrangement provides Common Shareholders with flexibility through the opportunity to receive their
consideration in the form of cash or Pembina Common Shares, subject to the Maximum Cash
Consideration or the Maximum Share Consideration, as applicable, and the potential resultant pro-
rationing. This flexibility of consideration allows the Common Shareholders, to the extent they receive
cash, to lock in the premium represented by the Arrangement, and to the extent they receive Pembina
Common Shares, to benefit from exposure to the upside potential of Pembina’s and Veresen’s combined
business and participate in a value enhancing growing company with increased size, scale and liquidity;
Scotia Capital provided the Fairness Opinions, the full text of which can be found in Appendices G and
H to this Information Circular, that, as of April 30, 2017, and, subject to certain assumptions,
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qualifications and limitations, the consideration to be paid to the Common Shareholders and Preferred
Shareholders, as applicable, pursuant to the Arrangement is fair, from a financial point of view, to
Common Shareholders and Preferred Shareholders, respectively;
while the Arrangement contains a covenant prohibiting Veresen from soliciting third-party acquisition
proposals, the Arrangement permits Veresen, prior to the time that Common Shareholders pass the
Common Shareholder Arrangement Resolution, to discuss and negotiate, under specified circumstances,
an unsolicited acquisition proposal should one be received and, if the Board determines in good faith,
after consultation with its legal and financial advisors, that the unsolicited acquisition proposal
constitutes a Superior Proposal within the meaning of the Arrangement Agreement and that the failure
to pursue such Superior Proposal would be inconsistent with the Board’s fiduciary duties under
applicable law, the Board is permitted, after taking certain steps, to terminate the Arrangement in order
to enter into a definitive agreement for that Superior Proposal, subject to payment of a termination fee
to Pembina;
Pembina’s obligation to complete the Arrangement being subject to a limited number of conditions
which the Board believes are reasonable under the circumstances, with the completion of the
Arrangement not being subject to a financing condition, due diligence condition or the approval of
Pembina’s shareholders, the fact that the conditions to completion of the Arrangement are specific and
limited in scope, the business reputation and capabilities of Pembina, and the Board’s assessment that
Pembina is willing to devote the resources necessary to complete the Arrangement in an expeditious
manner;
at least 66⅔% of the votes cast by Common Shareholders at the Common Shareholders’ Meeting are
required to approve the Common Shareholder Arrangement Resolution;
the Arrangement Agreement is a result of arm’s length negotiations with Pembina, and the Board
supervised the negotiation of the key economic and other material terms of the Arrangement Agreement;
all of the directors and certain officers were willing to enter into Support Agreements in connection with
the Arrangement;
the Arrangement is subject to a determination of the Court that the terms and conditions of the
Arrangement, and the procedures relating thereto are fair, substantively and procedurally, to the
Shareholders and the other persons affected;
the Board’s belief that the Arrangement is likely to be completed in accordance with its terms and within
a reasonable time, with closing currently expected to occur in the second half of 2017; and
registered Shareholders may, upon compliance with certain conditions and in certain circumstances,
exercise Dissent Rights.
The information and factors described above and considered by the Board in reaching its determinations and making
its approvals are not intended to be exhaustive but include material factors considered by the Board. In view of the
wide variety of factors considered in connection with its evaluation of the Arrangement and the complexity of these
matters, the Board did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights
to these factors. In addition, individual members of the Board may have given different weight to different factors.
See “The Arrangement – Recommendation of the Board”.
Attributes of the Combined Company
Management of Veresen expects the combined company, after completion of the Arrangement, will be one of
Canada’s premier energy infrastructure companies, supporting some of North America’s most prolific resource plays
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and securing increased market access for its customers. The combined company will feature a largely integrated asset
base that is supported by long-life, economic hydrocarbon reserves and comprises crude oil, liquids and natural gas
pipelines, terminal, storage and midstream operations, gas gathering and processing facilities, as well as fractionation
facilities. Veresen’s management believes the combined company will be greater than the sum of its parts and better
positioned than a stand-alone Veresen entity to deliver on its growth strategy.
The combined company will be better positioned to successfully deliver an aggregated growth program of
approximately $6.0 billion, optimize the integrated asset base, and compete for future investment opportunities in
order to drive meaningful growth over the long term.
the combined company will have approximately $6.0 billion in growth projects under construction, and
will enjoy the benefit of Pembina’s proven track record of safe, on-time and on-budget project delivery,
and decades of operating experience, which will provide a strong foundation to support attractive long-
term adjusted cash flow per share growth;
in addition to the projects currently under construction by each of Pembina and Veresen, the combined
company is expected to have a growth portfolio of unsecured development opportunities of
approximately $20 billion to potentially sanction in the future, including Jordan Cove LNG and Pacific
Connector Gas Pipeline in Oregon, a Propane Dehydrogenation and Propylene Production facility in
Alberta, as well as various midstream opportunities in western Canada;
the majority of the combined asset base is already physically connected or presents the opportunity to
be connected in the future, which will enable operational integration, creating the opportunity to realize
significant operational synergies, as well as overall enhancements to customer service within existing
commercial arrangements;
increasing integration across the value chain will allow the combined company to offer a superior range
of services and flexibility in how these services are provided to customers, which is expected to improve
the combined company’s competitiveness in securing new business opportunities, and offer the potential
to develop other ancillary business lines in the future in response to customer needs;
the combined company will have an established footprint in some of the most prolific resource plays in
North America, including the BC Montney, the Alberta Montney and the Duvernay, strategically
positioning the combined company in the principal areas for future midstream infrastructure investment
in western Canada; and
potential for significant financial synergies, including reduction in administrative overhead, operating
costs, optimization of capital structure and integrated tax planning, estimated by Pembina at $75 million
to $100 million on a run-rate basis.
The combined company will pay a meaningful cash dividend that is expected to grow, while offering a lower payout
ratio and cash flows supported primarily with fee-for-service contracts and high-quality counterparties.
upon completion of the Arrangement, and after taking into the account the proposed increase in the
dividend on Pembina Common Shares announced by Pembina, the combined company will pay an
attractive cash dividend of approximately $2.16 per Pembina Common Share on an annualized basis;
the combined company will have a significantly lower payout ratio, which, when combined with line-
of-sight to significant growth in cash flows, will advantageously position the combined company to
continue Pembina’s long-term track record of dividend growth and reinvestment in the business;
the dividend is expected to be underpinned by over 85% of cash flows from low-risk, stable take-or-pay
and fee-for-service contract structures with a diverse set of counterparties, over 80% of which hold
investment grade ratings, split ratings or provide security in the form of letters of credit;
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significant horizontal diversification across the hydrocarbon value chains in terms of crude oil, natural
gas liquids and natural gas focused segments each constituting approximately one-third of pro forma
cash flows, as well as vertical diversification within value chains, including long-haul pipelines,
terminals, storage, midstream operations, gathering and processing facilities as well as fractionation
facilities; and
the combined company will have significant geographic diversification across the western Canada – U.
S. Midwest – Pacific Northwest triangle.
The combined company is expected to have a stronger balance sheet and superior access to the capital markets,
resulting in a greater ability to grow on a per share basis and to execute a broad suite of potential projects.
with a pro forma enterprise value of approximately $35 billion and as one of the top 25 public companies
in Canada, the combined company will have greater access to both debt and equity capital markets,
providing a lower aggregate cost of capital to maximize investment returns to enable higher growth on
a per share basis;
Pembina and its management team have built a very strong track record in the capital markets, further
enhancing access to capital markets, the ability to finance large-scale, long-term projects, and to pursue
a broader range of potential business development opportunities to drive future growth; and
the combined company is expected to maintain a strong BBB investment grade credit rating, with a focus
on continued prudent financial management. The stronger and larger balance sheet of the combined
company will provide a better financial position to pursue large-scale projects such as Jordan Cove LNG
and Pacific Connector Gas Pipeline as well as a Propane Dehydrogenation and Propylene Production
facility.
Fairness Opinions
In determining to approve the Arrangement Agreement, the Board considered, among other things, the verbal opinions
from Scotia Capital that, as of April 30, 2017, and, subject to the assumptions, qualifications and limitations contained
in the Fairness Opinions, the consideration to be paid to Common Shareholders and Preferred Shareholders, as
applicable, pursuant to the Arrangement is fair, from a financial point of view, to such Shareholders.
The full texts of the Common Shareholder Fairness Opinion and the Preferred Shareholder Fairness Opinion
which set forth, among other things, assumptions made, information reviewed, matters considered and
limitations on the scope of the review undertaken in rendering such Fairness Opinions, are attached as
Appendices G and H, respectively. The Fairness Opinions address only the fairness, from a financial point of
view, as of April 30, 2017, of the consideration to be received by the Shareholders pursuant to the Arrangement
and do not address any other aspect of the Arrangement or any related transaction, including any legal, tax or
regulatory aspects of the Arrangement to Veresen or the Shareholders. Scotia Capital provided the Fairness
Opinions to the Board for its exclusive use only in considering the Arrangement. The Fairness Opinions may
not be relied upon by any other Person. The Fairness Opinions do not address the relative merits of the
Arrangement as compared to other business strategies or transactions that might be available to Veresen or
Veresen’s underlying business decision to effect the Arrangement. The Fairness Opinions do not constitute a
recommendation to any Shareholder as to how such Shareholder should act or vote with respect to the
Arrangement.
Shareholders are urged to read the Fairness Opinions carefully and in their entirety. This summary of the
Fairness Opinions is qualified in its entirety by the full text of such opinions.
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Engagement of Scotia Capital
Scotia Capital was first contacted by Veresen in December 2016 with regard to a potential strategic review of Veresen.
Scotia Capital was formally retained by Veresen on January 4, 2017 pursuant to an engagement letter (the
“Engagement Agreement”) to perform such financial advisory and investment banking services for Veresen as are
customary in transactions similar to the Arrangement including assisting Veresen in analyzing strategic alternatives
and, if requested, structuring, negotiating and effecting a possible transaction between Veresen and Pembina. Pursuant
to the Engagement Agreement, the Board requested that Scotia Capital provide opinions as to the fairness, from a
financial point of view, of the consideration to be received by the Common Shareholders and the Preferred
Shareholders pursuant to the Arrangement. The terms of the Engagement Agreement provided that Scotia Capital is
to be paid a fee for its services as financial advisor, including fees that are contingent on the completion of the
Arrangement and fees payable upon delivery of the Fairness Opinions. The fees payable for delivery of the Fairness
Opinions are not contingent on the completion of the Arrangement. In addition, Scotia Capital is to be reimbursed for
its reasonable out-of-pocket expenses and to be indemnified by Veresen in certain circumstances.
In connection with this mandate, Scotia Capital has provided the Board with the Fairness Opinions, that, as of April
30, 2017, the consideration to be paid to the Common Shareholders and the Preferred Shareholders, as applicable,
pursuant to the Arrangement is fair, from a financial point of view, to the Common Shareholders and the Preferred
Shareholders, respectively.
The Board has not instructed Scotia Capital to prepare, and Scotia Capital has not prepared, a formal valuation of
Veresen or any of its securities or assets, and the Fairness Opinions should not be construed as such. Scotia Capital
has, however, conducted such analyses as it considered necessary in the circumstances to prepare and deliver the
Fairness Opinions.
Subject to the terms of the Engagement Agreement, Scotia Capital has consented to the inclusion of the Fairness
Opinions in their entirety and a summary thereof in this Information Circular and to the filing of the Fairness Opinions,
as necessary, with the securities commissions, stock exchanges and other similar regulatory authorities in Canada.
Scotia Capital Credentials
Scotia Capital represents the global corporate and investment banking and capital markets business of Scotiabank
Group (“Scotiabank”), one of North America’s premier financial institutions. In Canada, Scotia Capital is one of the
country’s largest investment banking firms with operations in all facets of corporate and government finance, mergers
and acquisitions, equity and fixed income sales and trading and investment research. Scotia Capital has participated
in a significant number of transactions involving private and public companies and has extensive experience in
preparing fairness opinions.
The Fairness Opinions represent the opinions of Scotia Capital as a firm. The form and content of the Fairness
Opinions have been approved for release by a committee of directors and other professionals of Scotia Capital, all of
whom are experienced in merger, acquisition, divestiture, fairness opinion and valuation matters.
Relationship of Scotia Capital and Veresen
Neither Scotia Capital nor any of its affiliates is an insider, associate or affiliate (as those terms are defined in the
Securities Act (Ontario)) of Veresen, Pembina or any of their respective associates or affiliates. Subject to the
following, there are no understandings, agreements or commitments between or among Scotia Capital and Veresen,
Pembina or any of their respective associates or affiliates with respect to any future business dealings. An affiliate of
Scotiabank is currently a lender to both Veresen and Pembina and Scotia Capital and certain of its affiliates have in
the past provided, and may in the future provide, traditional banking, financial advisory or investment banking services
to Veresen or any of its affiliates and may in the future provide similar services to Pembina or its affiliates.
Scotia Capital acts as a trader and dealer, both as principal and agent, in the financial markets in Canada, the United
States and elsewhere and, as such, it and Scotiabank, may have had and may have positions in the securities of Veresen
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or its affiliates from time to time and may have executed or may execute transactions on behalf of such companies or
clients for which it receives compensation. As an investment dealer, Scotia Capital conducts research on securities
and may, in the ordinary course of business, provide research reports and investment advice to its clients on investment
matters, including with respect to Veresen or any of its affiliates or Pembina or any of its affiliates or with respect to
the Arrangement.
Scope of Review
In preparing the Fairness Opinions, Scotia Capital has reviewed, considered and relied upon, without attempting to
verify independently the completeness or accuracy thereof, among other things:
(a) the draft Arrangement Agreement dated April 29, 2017, including the Plan of Arrangement
appended thereto;
(b) a draft form of Support Agreement dated April 29, 2017 to be entered into between Veresen and
each of Veresen’s directors and members of executive management;
(c) annual reports of Veresen and Pembina for the fiscal years ended 2014 to 2016;
(d) the Notice of Annual Meeting of Shareholders and the Management Information Circular of Veresen
for the fiscal years ended 2014 to 2016;
(e) the audited financial statements and management discussion and analysis of Veresen and Pembina
for the fiscal years ended 2014 to 2016;
(f) annual information forms of Veresen and Pembina for the fiscal years ended 2014 to 2016;
(g) with respect to the Preferred Shareholder Fairness Opinion, the prospectuses for each class of
Preferred Shares issued by Veresen;
(h) the budget for each of Veresen and Pembina for the fiscal year ending 2017;
(i) financial projections for each of Veresen and Pembina for the fiscal years ending 2017 to 2021
prepared by the management of Veresen and Pembina respectively;
(j) various detailed internal Veresen management reports;
(k) discussions with senior management of Veresen and Pembina;
(l) discussions with Veresen’s legal counsel;
(m) various research publications prepared by industry and equity research analysts regarding Veresen,
Pembina and other selected entities considered relevant;
(n) public information relating to the business, operations, financial performance and stock trading
history of Veresen, Pembina and other selected public companies considered by Scotia Capital to
be relevant;
(o) public information with respect to other transactions of a comparable nature considered by Scotia
Capital to be relevant;
(p) representations contained in a certificate addressed to Scotia Capital, as of April 30, 2017, from
senior officers of Veresen as to the completeness, accuracy and fair presentation of the information
upon which the Fairness Opinions are based; and
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(q) such other corporate, industry and financial market information, investigations and analyses as
Scotia Capital considered necessary or appropriate in the circumstances.
Scotia Capital has not, to the best of its knowledge, been denied access by Veresen to any information requested by
Scotia Capital.
Approach to Fairness
For the purposes of the Common Shareholder Fairness Opinion, in considering the fairness, from a financial point of
view, of the consideration to be received by the Common Shareholders pursuant to the Arrangement, Scotia Capital
reviewed, considered and relied upon, among other things, the following: (a) a comparison of the consideration under
the Arrangement to the results of the financial analysis of Veresen on a sum-of-the-parts basis; (b) a comparison of
selected financial multiples implied by the consideration under the Arrangement to multiples paid, to the extent
publicly available, in selected precedent transactions; (c) a comparison of selected financial multiples of comparable
companies whose securities are publicly traded to the multiples implied by the consideration under the Arrangement;
(d) a comparison of the consideration under the Arrangement to the recent market trading prices of the Common
Shares; (e) a review of the form of consideration under the Arrangement and perspectives on the pro forma company
including the potential synergies associated with the Arrangement; and (f) such other factors, studies and analyses, as
Scotia Capital deemed appropriate.
For the purposes of the Preferred Shareholder Fairness Opinion, in considering the fairness, from a financial point of
view, of the consideration to be received by the Preferred Shareholders pursuant to the Arrangement, Scotia Capital
reviewed, considered and relied upon, among other things, a comparison of the financial and non-financial terms of
the consideration to be received (Pembina Exchange Shares) to the financial and non-financial terms of the Preferred
Shares. The compared terms included coupons and rate reset spreads, reset dates, redemption and conversion rights
and governance rights. Scotia Capital also examined the differences in capital structure and balance sheet, credit
ratings and forecasted revenue and earnings before interest, tax, depreciation and amortization of the two issuers,
Pembina and Veresen. Finally, Scotia Capital compared the liquidity of the existing Pembina preferred shares to that
of the Preferred Shares.
In arriving at its fairness determinations in the Fairness Opinions, Scotia Capital considered the results of all of its
analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Scotia Capital
made its determination as to fairness on the basis of its experience and professional judgment after considering the
results of all of its analyses.
Prior Valuations
Veresen has represented to Scotia Capital that, to the best of its knowledge, there have been no valuations or appraisals
of Veresen or any material property of Veresen or any of its subsidiaries or affiliates prepared within the past twenty-
four (24) months and in the possession or control or knowledge of Veresen.
Assumptions and Limitations
The Fairness Opinions are subject to the assumptions, explanations and limitations set forth below.
Scotia Capital has, subject to the exercise of its professional judgment, relied, without independent verification, upon
the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions
and representations obtained by it from public sources, or that was provided to Scotia Capital, by Veresen, and its
associates and affiliates and advisors (collectively, the “Information”), and has assumed that this Information did not
omit to state any material fact or any fact necessary to be stated to make that information not misleading. The Fairness
Opinions are conditional upon the completeness, accuracy and fair presentation of such Information. With respect to
Veresen’s financial projections provided to Scotia Capital by management of Veresen and used in the analysis
supporting the Fairness Opinions, Scotia Capital has assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of Veresen as to the matters covered
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thereby, and in rendering the Fairness Opinions Scotia Capital expresses no view as to the reasonableness of such
forecasts or budgets or the assumptions on which they are based.
Senior management of Veresen has represented to Scotia Capital in certificates delivered as at April 30, 2017, among
other things, that to the best of their knowledge (a) Veresen has no information or knowledge of any facts public or
otherwise not specifically provided to Scotia Capital relating to Veresen or any of its subsidiaries or affiliates which
would reasonably be expected to affect materially the Fairness Opinions; (b) with the exception of forecasts,
projections or estimates referred to in (d) below, the written Information provided to Scotia Capital by or on behalf of
Veresen in respect of Veresen and its subsidiaries or affiliates, in connection with the Arrangement is or, in the case
of historical information or data, was, at the date of preparation, true and accurate in all material respects, and no
additional material, data or information would be required to make the data provided to Scotia Capital by Veresen not
misleading in light of circumstances in which it was prepared; (c) to the extent that any of the Information identified
in (b) above is historical, there have been no changes in material facts or new material facts since the respective dates
thereof which have not been disclosed to Scotia Capital or updated by more current Information that has been
disclosed; and (d) any portions of the Information provided to Scotia Capital which constitute forecasts, projections
or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of Veresen, are
(or were at the time of preparation) reasonable in the circumstances.
The Fairness Opinions are rendered on the basis of the securities markets, economic, financial and general business
conditions prevailing as at April 30, 2017 and the conditions and prospects, financial and otherwise, of Veresen and
its subsidiaries and affiliates, as they were reflected in the Information. In its analyses and in preparing the Fairness
Opinions, Scotia Capital made numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, which Scotia Capital believes to be reasonable and appropriate in the exercise
of its professional judgment, many of which are beyond the control of Scotia Capital or any party involved in the
Arrangement.
For the purposes of rendering the Fairness Opinions, Scotia Capital also made several assumptions, including that the
final version of the Arrangement Agreement and Support Agreements would conform in all material respects to the
drafts provided to Scotia Capital, the representations and warranties of each party contained in the Arrangement
Agreement and the Support Agreements are true and correct in all material respects, each party to the Arrangement
Agreement and the Support Agreements will perform all of the covenants and agreements required to be performed
by it under the Arrangement, Veresen will be entitled to fully enforce its rights under the Arrangement Agreement
and receive the benefits therefrom in accordance with the terms thereof, and all of the conditions required to implement
the Arrangement will be satisfied.
The Fairness Opinions have been provided for the sole use of the Board in connection with its consideration of the
Arrangement and may not be used or relied upon by any other person. The Fairness Opinions do not constitute a
recommendation to the Board or to any Shareholder as to how such Shareholder should vote or act with respect to the
Arrangement. The Fairness Opinions are given as of April 30, 2017, and Scotia Capital disclaims any undertaking or
obligation to advise any person of any change in any fact or matter affecting the Fairness Opinions which may come
or be brought to the attention of Scotia Capital after April 30, 2017. Without limiting the foregoing, in the event that
there is any material change in any fact or matter affecting the Fairness Opinions after April 30, 2017, Scotia Capital
reserves the right to change, modify or withdraw the Fairness Opinions.
The Fairness Opinions do not address the relative merits of the Arrangement as compared to other business strategies
or transactions that might be available with respect to Veresen or Veresen’s underlying business decision to effect the
Arrangement. At Veresen’s direction, Scotia Capital was not requested to solicit, and did not solicit, interest from
other parties with respect to an acquisition of, or other business combination with, Veresen or any other alternative
transaction. The Fairness Opinions address only the fairness, from a financial point of view, as of April 30, 2017, of
the consideration to be received by the Common Shareholders or the Preferred Shareholders, respectively, pursuant
to the Arrangement. Without limiting the foregoing, Scotia Capital does not express any view on, and the Fairness
Opinions do not address, any other term or aspect of the Arrangement Agreement or any term or aspect of any other
agreement or instrument contemplated by the Arrangement or entered into or amended in connection with the
Arrangement. Scotia Capital is not an expert on, and did not render advice to the Board regarding legal, tax, accounting
and regulatory matters.
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The preparation of a fairness opinion is a complex process and it is not amenable to partial analysis or summary
description. Scotia Capital believes that its analyses must be considered as a whole and that selecting portions of its
analyses or the factors considered by it, without considering all facts and analyses together, could create an incomplete
view of the process and analyses underlying the Fairness Opinions.
Shareholders are urged to read the Fairness Opinions carefully and in their entirety. This summary of the
Fairness Opinions is qualified in its entirety by the full text of such opinions. The full texts of the Common
Shareholder Fairness Opinion and the Preferred Shareholder Fairness Opinion are attached as Appendices G
and H, respectively. The Fairness Opinions are subject to the assumptions, qualifications and limitations
contained therein.
Recommendation of the Board of Directors
At a meeting of the Board held on April 30, 2017 prior to Veresen entering into the Arrangement Agreement, the
Board considered the Arrangement on the terms and conditions as provided in the Arrangement Agreement, and the
verbal fairness opinions of Scotia Capital that the consideration to be received by the Common Shareholders and the
Preferred Shareholders pursuant to the Arrangement is fair, from a financial point of view to the Common
Shareholders and the Preferred Shareholders, respectively. After considering the terms of the proposed
arrangement, the Fairness Opinions, the advice from its financial advisor and legal counsel and such other
factors as were deemed appropriate, the members of the Board unanimously: (a) determined that the
Arrangement and the entry into the Arrangement Agreement are in the best interests of Veresen; and (b) the
Arrangement is fair to the Common Shareholders and Preferred Shareholders. The Board determined that the
Arrangement shall be presented to the Shareholders at the Meetings and unanimously recommends that the
Common Shareholders and the Preferred Shareholders vote in favour of the Common Shareholder
Arrangement Resolution and Preferred Shareholder Arrangement Resolution, respectively. In coming to its
conclusion and recommendations the Board considered, among others, the following factors:
(a) the purpose and anticipated benefits of the Arrangement as outlined elsewhere in this Information
Circular including under “Reasons for the Arrangement” and “Attributes of the Combined
Company” above;
(b) information concerning the financial condition, results of operations, business plans and prospects
of Veresen, and the resulting potential for the enhancement of the business efficiency, management
effectiveness and financial results of the combined company;
(c) the alternatives available to Veresen; and
(d) the advice and assistance of Scotia Capital in evaluating the Arrangement. See “Common
Shareholder Fairness Opinion” at Appendix G to this Information Circular and “Preferred
Shareholder Fairness Opinion” at Appendix H to this Information Circular.
The foregoing discussion of the information and factors considered and given weight by the Board is not intended to
be exhaustive. In addition, in reaching the determination to approve and recommend the Arrangement, the Board did
not assign any relative or specific weights to the foregoing factors which were considered, and individual directors
may have given differing weights to different factors.
The Board realized that there are risks associated with the Arrangement, including that some of the potential benefits
set forth above may not be realized or that there may be significant costs associated with realizing such benefits. The
Board believes that the factors in favour of the Arrangement outweigh the risks and potential disadvantages, although
there can be no assurance in this regard. See “Risk Factors”.
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The Arrangement Agreement
General
The Arrangement will be effected pursuant to the Arrangement Agreement which provides for the implementation of
the Plan of Arrangement. The Arrangement Agreement contains covenants, representations and warranties of and
from each of Veresen and Pembina and various conditions precedent, both mutual and with respect to Veresen and
Pembina.
Unless all of such conditions are satisfied or waived by the Party for whose benefit such conditions exist, to the extent
they may be capable of waiver, the Arrangement will not proceed. There is no assurance that the conditions will be
satisfied or waived on a timely basis, or at all.
The following is a summary of certain provisions of the Arrangement Agreement and is qualified in its entirety by the
full text of the Arrangement Agreement, set forth in Appendix C to this Information Circular. Shareholders are urged
to read the Arrangement Agreement in its entirety.
Representations and Warranties and Covenants Relating to the Conduct of Business of the Parties
The Arrangement Agreement contains certain customary representations and warranties of each of Veresen and
Pembina relating to, among other things, their respective organization, capitalization, operations, compliance with
laws and regulations and other matters, including their authority to enter into the Arrangement Agreement and to
consummate the Arrangement. For the complete text of the applicable provisions, see Section 3.1, Schedule C, Section
4.1 and Schedule D of the Arrangement Agreement.
In addition, pursuant to the Arrangement Agreement, each of the Parties has covenanted, among other things, until the
earlier of the completion of the Arrangement or the termination of the Arrangement Agreement, to maintain and
preserve their respective businesses and refrain from taking certain actions outside the ordinary course. For the
complete text of the applicable provisions, see Sections 5.1 and 5.2 of the Arrangement Agreement.
Mutual Conditions
The respective obligations of Pembina and Veresen to complete the Arrangement are subject to the satisfaction of the
following conditions, any of which may be waived by the mutual consent of Pembina and Veresen, without prejudice
to their right to rely on any other of such conditions:
(a) the Interim Order shall have been obtained on terms consistent with the Arrangement and in form
and substance satisfactory to each of the Parties, acting reasonably, and such order shall not have
been set aside or modified in a manner unacceptable to either of the Parties, acting reasonably, on
appeal or otherwise;
(b) the Common Shareholder Arrangement Resolution shall have been passed by the Common
Shareholders at the Common Shareholders’ Meeting in accordance with the Interim Order;
(c) the Final Order shall have been obtained on terms consistent with the Arrangement and in form and
substance satisfactory to each of the Parties, acting reasonably, and such order shall not have been
set aside or modified in a manner unacceptable to either of the Parties, acting reasonably, on appeal
or otherwise;
(d) each of the Required Regulatory Approvals shall have been made, given, obtained or occurred, as
the case may be, and any such approval shall be in full force and effect and any such occurrence
shall not have been invalidated in any manner;
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(e) all Regulatory Approvals (other than the Required Regulatory Approvals) required to be obtained,
or that the Parties mutually agree in writing to obtain in respect of the completion of the
Arrangement, and the expiry of applicable waiting periods necessary to complete the Arrangement,
shall have occurred or been obtained on terms and conditions acceptable to the Parties, each acting
reasonably, and all applicable domestic and foreign statutory and regulatory waiting periods shall
have expired or have been terminated and no unresolved material objection or opposition shall have
been filed, initiated or made, except where the failure or failures to obtain such Regulatory
Approvals, or for the applicable waiting periods to have expired or terminated, would not be
reasonably expected to have a Material Adverse Effect on either of Pembina (before or after
completion of the Arrangement) or Veresen;
(f) the conditional approval to the listing of the Pembina Common Shares issuable pursuant to the
Arrangement on the TSX, and approval, subject to official notice of issuance, of the listing of
Pembina Common Shares issuable pursuant to the Arrangement on the NYSE, and, if the Preferred
Shareholder Arrangement Resolution received the requisite approval of the Preferred Shareholders
at the Preferred Shareholders’ Meeting, the conditional approval to the listing of the Pembina
Exchange Shares issuable pursuant to the Arrangement on the TSX, shall have been obtained;
(g) no Law, regulation, policy, judgment, decision, order, agreement between the Parties and a
Governmental Entity to refrain from consummating the Arrangement, ruling or directive (whether
or not having the force of Law) shall have been enacted, promulgated, amended or applied, which
prevents, prohibits or makes the consummation of the Arrangement illegal or otherwise prohibits or
enjoins Pembina or Veresen from consummating the Arrangement, or that would be reasonably
expected to have a Material Adverse Effect on either of Pembina (before or after completion of the
Arrangement) or Veresen; and
(h) no act, action, suit, proceeding, objection, opposition, order or injunction shall have been taken,
entered or promulgated by any Governmental Entity or by any elected or appointed public official
in Canada or elsewhere, whether or not having the force of Law, which prevents, prohibits or makes
the consummation of the Arrangement illegal or otherwise prohibits or enjoins Pembina or Veresen
from consummating the Arrangement, or that would be reasonably expected to have a Material
Adverse Effect on either of Pembina (before or after completion of the Arrangement) or Veresen.
Conditions to the Obligations of Pembina
The obligation of Pembina to complete the Arrangement and take the other actions required to be taken by Pembina
on or before the Effective Date is subject to the satisfaction or waiver of the following conditions:
(a) the representations and warranties made by Veresen in the Arrangement Agreement shall be true
and correct (or, in certain cases, materially true and correct) as of the Effective Date as if made on
and as of such date (except to the extent such representations and warranties speak as of an earlier
date or except as affected by transactions contemplated or permitted by the Arrangement
Agreement), except, in certain cases only, where the failure of such representations and warranties
to be true and correct, individually or in the aggregate, would not result or would not reasonably be
expected to result in a Material Adverse Change in respect of Veresen and its Subsidiaries, taken as
a whole, and Veresen will have provided to Pembina a certificate of two senior officers of Veresen
(on behalf of Veresen and without personal liability) certifying the foregoing on the Effective Date;
(b) Veresen shall have complied in all material respects with its covenants in the Arrangement
Agreement to be complied with by it on or prior to the Effective Time; and Veresen shall have
provided to Pembina a certificate of two executive officers of Veresen (on behalf of Veresen and
without personal liability) certifying compliance with such covenants on the Effective Date;
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(c) no Material Adverse Change in respect of Veresen and its Subsidiaries, taken as a whole, shall have
occurred after the date of the Arrangement Agreement and prior to the Effective Date; and
(d) holders of less than 5% of the outstanding Common Shares shall have validly exercised Dissent
Rights in respect of the Arrangement that have not been withdrawn as of the Effective Date.
The foregoing conditions are for the exclusive benefit of Pembina and may be asserted by Pembina regardless of the
circumstances or may be waived in writing by Pembina in its sole discretion, in whole or in part, at any time and from
time to time without prejudice to any other rights which Pembina may have.
Conditions to the Obligations of Veresen
The obligation of Veresen to complete the Arrangement and to take the other actions required to be taken by Veresen
on or before the Effective Date is subject to the satisfaction or waiver of the following conditions:
(a) the representations and warranties made by Pembina in the Arrangement Agreement shall be true
and correct (or, in certain cases, materially true and correct) as of the Effective Date as if made on
and as of such date (except to the extent such representations and warranties speak as of an earlier
date or except as affected by transactions contemplated or permitted by the Arrangement
Agreement), except, in certain cases only, where the failure of such representations and warranties
to be true and complete, individually or in the aggregate, would not result or would not reasonably
be expected to result in a Material Adverse Change in respect of Pembina and its Subsidiaries, taken
as a whole, and Pembina will have provided to Veresen a certificate of two senior officers of
Pembina (on behalf of Pembina and without personal liability) certifying the foregoing on the
Effective Date;
(b) Pembina shall have complied in all material respects with its covenants in the Arrangement
Agreement to be complied with by it on or prior to the Effective Time; and Pembina shall have
provided to Veresen a certificate of two executive officers of Pembina (on behalf of Pembina and
without personal liability) certifying compliance with such covenants on the Effective Date; and
(c) no Material Adverse Change in respect of Pembina and its Subsidiaries, taken as a whole, shall have
occurred after the date of the Arrangement Agreement and prior to the Effective Date.
The foregoing conditions are for the exclusive benefit of Veresen and may be asserted by Veresen regardless of the
circumstances or may be waived by Veresen in its sole discretion, in whole or in part, at any time and from time to
time without prejudice to any other rights which Veresen may have.
Covenants of Veresen Regarding Non-Solicitation; Right to Accept a Superior Proposal
Under the Arrangement Agreement, Veresen has agreed to certain non-solicitation covenants as follows:
(a) Veresen shall immediately cease and cause to be terminated all existing solicitation, discussion or
negotiation (including through its officers, directors, employees, financial advisors, legal counsel,
accountants and other agents and representatives (collectively, the “Representatives”) on its
behalf), if any, with any parties conducted before the date of the Arrangement Agreement with
respect to any Acquisition Proposal or any inquiry, proposal or offer that constitutes, or could
reasonably be expected to lead to an Acquisition Proposal, and, in connection therewith, Veresen
shall discontinue access of any of its confidential information; Veresen shall also promptly request
the return or destruction of all information respecting Veresen provided to any third parties who
have entered into a confidentiality agreement with Veresen relating to an Acquisition Proposal in
the 12 months prior to the date of the Arrangement Agreement and will use all commercial efforts
to ensure that such requests are honoured. Veresen also undertakes to enforce all standstill, non-
disclosure, non-disturbance, non-solicitation and similar agreements or covenants that Veresen has
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entered into prior to the date of the Arrangement Agreement and that Veresen enters into after the
date of the Arrangement Agreement.
(b) Veresen shall not, directly or indirectly, do or authorize or permit any of its representatives to do
any of the following:
(i) solicit, initiate or knowingly encourage or facilitate (including by way of furnishing
information) any Acquisition Proposal or any inquiries, proposals or offers relating to any
Acquisition Proposal or that could reasonably be expected to lead to an Acquisition
Proposal;
(ii) enter into or participate in any discussions or negotiations regarding any Acquisition
Proposal or any proposal that constitutes, or could reasonably be expected to lead to an
Acquisition Proposal, or furnish to any other Person any information with respect to its
businesses, properties, operations, prospects or conditions (financial or otherwise) in
connection with any Acquisition Proposal or any proposal that constitutes, or could
reasonably be expected to lead to an Acquisition Proposal or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or attempt of any
other Person to do or seek to do any of the foregoing;
(iii) waive, terminate, amend, modify or release any third party or otherwise forbear in the
enforcement of, or enter into or participate in any discussions, negotiations or agreements
to waive, terminate, amend, modify or release any third party from or otherwise forbear in
respect of, any rights or other benefits under confidential information and/or standstill
agreements (which, for greater certainty, does not prohibit the automatic release of a party
in accordance with the pre-existing terms of any standstill provision);
(iv) accept, approve, endorse or recommend, or publicly propose to accept, approve, endorse
or recommend any Acquisition Proposal or any inquiry, proposal or offer that could
reasonably be expected to lead to an Acquisition Proposal; or
(v) accept or enter into, or publicly propose to accept or enter into, any letter of intent,
agreement in principle, agreement, arrangement or undertaking related to any Acquisition
Proposal (other than a confidentiality and standstill agreement contemplated under the
Arrangement Agreement);
provided, however, that notwithstanding any other provision of the Arrangement Agreement, Veresen and its
Representatives may, prior to the approval of the Common Shareholder Arrangement Resolution at the Common
Shareholders’ Meeting:
(vi) enter into or participate in any discussions or negotiations with a third party that is not in
breach of any confidentiality or standstill agreement and who, without any solicitation,
initiation or deliberate encouragement, directly or indirectly, after that date of the
Arrangement Agreement, by Veresen or any of its Representatives, seeks to initiate such
discussions or negotiations and, subject to execution of a confidentiality and standstill
agreement in favour of Veresen that contains a standstill provision that Veresen determines
in good faith is no less onerous or more beneficial to such third party than that in the
Confidentiality Agreement and is otherwise on terms that Veresen determines in good faith
are no less favourable to Veresen than those found in the Confidentiality Agreement
(provided that such confidentiality and standstill agreement shall (A) allow for disclosure
thereof, along with all information provided thereunder, to Pembina as set out below, (B)
allow disclosure to Pembina of the making and terms of any Acquisition Proposal made by
the third party as contemplated in the Arrangement Agreement, and (C) not contain any
provision restricting Veresen from complying with the Arrangement Agreement) may
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furnish to such third party any information concerning Veresen and its Subsidiaries and
their businesses, properties and assets, in each case if, and only to the extent that:
(A) the third party has first made a written bona fide Acquisition Proposal, which did
not result from a breach of the Arrangement Agreement, and in respect of which
the Board determines in good faith, after consultation with its outside legal and
financial advisors, constitutes, or could reasonably be expected to lead to a
Superior Proposal; and
(B) prior to furnishing such information to or entering into or participating in any such
discussions or negotiations with such third party regarding the Acquisition
Proposal, Veresen shall (1) provide prompt notice to Pembina to the effect that it
is furnishing information to or entering into or participating in discussions or
negotiations with such third party, together with a copy of the confidentiality and
standstill agreement referenced above and, if not previously provided to Pembina,
copies of all information provided to such third party concurrently with the
provision of such information to such third party, (2) notify Pembina orally and
in writing of any inquiries, offers or proposals with respect to an actual or
contemplated Superior Proposal (which written notice shall include a summary of
the material terms of such proposal (and any amendments or supplements thereto)
and, if the proposal includes equity consideration, the identity of the Person
making it, and, if not previously provided to the other Party, copies of all
information provided to the third party), within 24 hours of the receipt thereof,
and (3) keep Pembina promptly informed of the status and reasonable details of
any such inquiry, offer or proposal and answer Pembina’s reasonable questions
with respect thereto;
(vii) comply with Part 2 – Division 3 of NI 62-104 and similar provisions in respect of U.S.
securities Laws relating to the provision of directors’ circulars and making appropriate
disclosure with respect thereto to its securityholders; and
(viii) accept, recommend, approve or enter into an agreement to implement a Superior Proposal
from a third party, but only if prior to such acceptance, recommendation, approval or
implementation, the Board concludes in good faith, after considering all proposals to adjust
the terms and conditions of the Arrangement Agreement as contemplated by the
Arrangement Agreement and after receiving the advice of outside counsel, that the failure
by the board of directors to take such action would be inconsistent with its fiduciary duties
under applicable Laws, and Veresen (A) complies with its obligations set forth in the
Arrangement Agreement, (B) terminates the Arrangement Agreement in accordance with
its terms, and (C) concurrently therewith pays the amount required by the Arrangement
Agreement to Pembina.
(c) Following determination by the Board that an Acquisition Proposal constitutes a Superior Proposal,
Veresen shall give Pembina, orally and in writing, at least five complete Business Days advance
notice of any decision by the Board to accept, recommend, approve or enter into an agreement to
implement a Superior Proposal, which notice shall confirm that the Board has determined that such
Acquisition Proposal constitutes a Superior Proposal and shall identify the third party making the
Superior Proposal and Veresen shall provide Pembina with a true and complete copy thereof and of
the agreement to implement the Superior Proposal and any amendments thereto. During such five
Business Day period, Veresen agrees not to accept, recommend, approve or enter into any agreement
to implement such Superior Proposal and not to release the party making the Superior Proposal from
any standstill provisions and shall not withdraw, redefine, modify or change its recommendation in
respect of the Arrangement as outlined in the Arrangement Agreement. In addition, during such five
Business Day period Veresen shall, and shall cause its financial and legal advisors to, negotiate in
good faith with Pembina and its financial and legal advisors to make such adjustments in the terms
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and conditions of Arrangement Agreement and the Arrangement as would enable Veresen to
proceed with the Arrangement as amended rather than the Superior Proposal. In the event Pembina
proposes to amend the Arrangement Agreement and the Arrangement on a basis such that the Board
determines that the alternative proposed transaction is no longer a Superior Proposal and so advises
the Pembina Board prior to the expiry of such five Business Day period, the Board shall not accept,
recommend, approve or enter into any agreement to implement such Acquisition Proposal and shall
not release the party making the Acquisition Proposal from any standstill provisions and shall not
withdraw, redefine, modify or change its recommendation in respect of the Arrangement. In the
event that Veresen provides the notice contemplated by the Arrangement Agreement on a date which
is less than five Business Days prior to the Meetings, Pembina shall be entitled to require Veresen
to adjourn or postpone the Meetings to a date that is not more than ten (10) Business Days after the
date of such notice.
(d) Each successive amendment to any Acquisition Proposal that results in an increase in, or
modification of, the consideration (or value of such consideration) to be received by the shareholders
of the Party subject to such Acquisition Proposal or other material terms or condition thereof, shall
constitute a new Acquisition Proposal for the purposes of the Arrangement Agreement, and the other
Party shall be afforded a new five day period from the date on which such Party received all of the
materials set forth in the Arrangement Agreement with respect to the new Superior Proposal from
the Party subject thereto.
(e) The Board shall promptly reaffirm the recommendation and determination in respect of the
Arrangement, as outlined in the Arrangement Agreement, by press release after (i) any Acquisition
Proposal which is publicly announced is determined not to be a Superior Proposal, or (ii) the Parties
have entered into an amended agreement pursuant to the Arrangement Agreement which results in
any Acquisition Proposal not being a Superior Proposal.
(f) Veresen shall ensure that its Representatives are aware of the foregoing provisions. Veresen shall
be responsible for any breach of such provisions by Veresen’s Representatives.
Non-Completion Fees Payable by Veresen
Pursuant to the Arrangement Agreement, if at any time after the execution of the Arrangement Agreement:
(a) the Board has withdrawn, modified, qualified or changed any of its recommendations or
determinations with respect to the Arrangement, as outlined in the Arrangement Agreement, in a
manner adverse to Pembina or shall have resolved to do so prior to the Effective Date, or has failed
to publicly reconfirm any such recommendation upon the reasonable request of Pembina prior to
the earlier of 72 hours following such request or 72 hours prior to the Meetings, other than in
circumstances described in paragraph (c) above under the heading “Covenants of Veresen Regarding
Non-Solicitation; Right to Accept a Superior Proposal”, in which case the obligation to reaffirm is
governed by paragraph (e) under such heading (unless Pembina is then in material breach of its
obligations thereunder and such withdrawal, change or failure relates to such breach);
(b) (i) an Acquisition Proposal is publicly announced, proposed, disclosed, offered or made in respect
of Veresen or any Person shall have publicly announced an intention to make an Acquisition
Proposal prior to the termination of the Arrangement Agreement; (ii) after such Acquisition Proposal
shall have been publicly announced, proposed, disclosed, offered or made, the Arrangement
Agreement is terminated pursuant to the termination provisions of the Arrangement Agreement, and
(iii) such Acquisition Proposal, or an amended version thereof, or any other Acquisition Proposal is
consummated, agreed to or entered into, as applicable, within 12 months of the date the first
Acquisition Proposal is publicly announced, proposed, disclosed, offered or made, provided that for
purposes of the foregoing, the term “Acquisition Proposal” shall have the meaning assigned to such
term in the Arrangement Agreement except that references to “20% or more” shall be deemed to be
references to “50% or more”;
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(c) the Board accepts, recommends, approves or enters into an agreement to implement a Superior
Proposal; or
(d) Veresen is in breach, in a material respect, of any of its covenants made in the Arrangement
Agreement, which breach individually or in the aggregate causes or would reasonably be expected
to cause a Material Adverse Change with respect to Veresen and its Subsidiaries, taken as a whole,
and the Arrangement Agreement is terminated by Pembina pursuant to its terms;
(each of the above being a “Pembina Damages Event”) then in the event of the termination of the Arrangement
Agreement pursuant to its terms, Veresen shall pay to Pembina, within two Business Days of the termination of the
Arrangement Agreement, a fee in the amount of $200 million in immediately available funds to an account designated
by Pembina, and after such event but prior to payment of such amount, Veresen shall be deemed to hold such funds
in trust for Pembina; provided that: (i) in the case of a Pembina Damages Event in connection with the acceptance by
the Board of a Superior Proposal such payment shall be made by Veresen to Pembina concurrently with the acceptance,
recommending, approving or entering into of the Superior Proposal by Veresen as provided for in the Arrangement
Agreement; and (ii) the case of a Pembina Damages Event pursuant to the acceptance of an Acquisition Proposal to
purchase 50% or more of the voting securities of Veresen or its Subsidiaries within 12 months of the date such
Acquisition Proposal was first announced, subject to the terms of the Arrangement Agreement, such payment shall be
made by Veresen to Pembina upon the consummation of the Acquisition Proposal referred to therein. Veresen shall
only be obligated to pay a maximum of $200 million pursuant to the Arrangement Agreement.
Extension and Termination Fees Payable by Pembina
If the Outside Date of October 31, 2017 is postponed by Pembina pursuant to its right to postpone the Outside Date
for up to an additional two months to December 31, 2017 if a Required Regulatory Approval has not been obtained,
Pembina shall concurrently pay to Veresen an amount equal to $23.5 million as reimbursement to Veresen for its out-
of-pocket expenses incurred in connection with the postponement, provided that if Veresen is in material breach of its
obligations or covenants under the Arrangement Agreement at the time of the postponement, such amount will not be
payable.
If the Arrangement Agreement is terminated by Veresen or Pembina as a result of the Effective Time not having
occurred on or prior to the Outside Date (as may be extended) and at the time of such termination all of the mutual
conditions and the conditions to the obligations of Pembina have been satisfied or waived by Pembina other than those
conditions that by their terms are to be satisfied at the Effective Date but each of the Required Regulatory Approvals
has not been received, Pembina shall pay to Veresen an amount equal to $100 million, less any fee previously paid by
Pembina to Veresen in connection with postponement of the Outside Date, provided that such amount will not be
payable if (a) Veresen is in material breach of its obligations under the Arrangement Agreement at the time of the
termination of the Arrangement Agreement, or (b) Pembina has complied, in all material respects, with certain of its
covenants relating to seeking and obtaining such Required Regulatory Approvals.
See “Procedure for the Arrangement to Become Effective – Regulatory Approvals” for additional information with
respect to the Required Regulatory Approvals.
Termination
Pembina and Veresen have agreed that the Arrangement Agreement may be terminated at any time prior to the
Effective Date:
(a) by mutual written consent of Pembina and Veresen;
(b) by either Pembina or Veresen if the Common Shareholder Arrangement Resolution shall have failed
to receive the requisite vote of the Common Shareholders for approval at the Common Shareholders’
Meeting (including any adjournment or postponement thereof) in accordance with the Interim
Order;
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(c) by either Pembina or Veresen if the Effective Time shall not have occurred on or prior to the Outside
Date, except that this right to terminate shall not be available to any Party whose failure to fulfill
any of its obligations has been the cause of, or resulted in, the failure of the Effective Time to occur
by such date;
(d) as provided for in the Arrangement Agreement, in the event of a breach of representation, warranty,
covenant or condition by a Party after notice of such breach has been provided and the expiration of
a fifteen-Business Day cure period as set forth in the Arrangement Agreement; provided that the
Party seeking termination is not then in breach of the Arrangement Agreement so as to cause any of
the conditions to consummate the transactions contemplated by the Arrangement Agreement, not to
be satisfied;
(e) by Pembina upon the occurrence of a Pembina Damages Event; or
(f) by Veresen’s acceptance, recommendation, approval or entry into an agreement to implement a
Superior Proposal in accordance with the Arrangement Agreement, provided that Veresen (i) has
complied with its obligations described under the heading “Covenants of Veresen Regarding Non-
Solicitation; Right to Accept a Superior Proposal” above and (ii) concurrently pays the amounts
required under the heading “Non- Completion Fees Payable by Veresen” above.
Under the provisions of the Arrangement Agreement, in the event of the termination of the Arrangement Agreement
in the circumstances set out above, the Arrangement Agreement will become void and neither Party will have any
liability or further obligation to the other Party thereunder, except with respect to: (a) certain indemnification
obligations set forth in the Arrangement Agreement; and (b) the payment of certain fees pursuant to the Arrangement
Agreement, including those outlined above under the heading “Non-Completion Fees Payable by Veresen” above and
the termination fees outlined under the heading “Extension and Termination Fees Payable by Pembina”, where
applicable. For greater certainty, unless liquidated damages are payable on account of a Party being entitled to a
payment pursuant to the Arrangement Agreement, nothing contained in the Arrangement Agreement shall relieve
either Party from liability for any breach of any provision of the Arrangement Agreement. No termination of the
Arrangement Agreement will affect the obligations of the Parties pursuant to the Confidentiality Agreement or any
other subsequent written agreement that addresses confidentiality between the Parties, except to the extent specified
therein. The Arrangement Agreement provides that, upon the occurrence of certain termination events, either of
Pembina or Veresen, as the case may be, may be required to pay to the other $25 million for the payment of certain
expenses and fees. For the complete text of the applicable provisions, see Sections 7.2 and 7.3 of the Arrangement
Agreement.
Liquidated Damages
Pembina and Veresen acknowledge that all of the payment amounts set out in the Arrangement Agreement are
payments of liquidated damages which are a genuine pre-estimate of the damages which Pembina or Veresen will
suffer or incur as a result of the event giving rise to such damages and resultant termination of the Arrangement
Agreement and are not penalties. Each Party irrevocably waives any right it may have to raise as a defence that any
such liquidated damages are excessive or punitive. For greater certainty, Pembina and Veresen agree that if the
payment of any amount pursuant to the Arrangement Agreement is made, such payment is the sole monetary remedy
of Pembina and Veresen; provided, however, that this limitation shall not apply in the event of fraud or deliberate
breach of the Arrangement Agreement by either Party.
Support Agreements
On May 1, 2017, the Supporting Shareholders, which includes all of the directors and certain officers of Veresen,
holding an aggregate of 291,182 Common Shares (representing less than 1% of the outstanding Common Shares),
entered into the Support Agreements with Pembina pursuant to which they agreed, among other things, to vote the
Common Shares beneficially owned or controlled or directed by them, directly or indirectly, at the Common
Shareholders’ Meeting, in favour of the Arrangement and all matters related thereto.
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Pursuant to the Support Agreements, each of the Supporting Shareholders agrees to do all such things and take all
such steps as may reasonably be required to be done or taken by the Supporting Shareholder to vote, or cause to be
voted, all of such Supporting Shareholder’s Common Shares entitled to vote on the Common Share Arrangement
Resolution in favour of the Common Share Arrangement Resolution, and to vote, or cause to be voted, all of the
Supporting Shareholder’s Common Shares entitled to vote against any proposed action by any Person whatsoever
which could prevent or delay the completion of the Arrangement and the transactions contemplated by the
Arrangement Agreement. In addition, each Supporting Shareholder has agreed not to solicit, initiate or encourage
inquiries, submissions, proposals or offers from any other Person relating to, or participate in any negotiations
regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way with or
assist or participate in or facilitate or encourage any effort or attempt with respect to any Acquisition Proposal and to
otherwise comply with the terms of the Arrangement Agreement having regard to the Supporting Shareholder’s
position as a director and/or officer of Veresen. The Support Agreements may be terminated on the earliest of: (a) the
Effective Time; (b) the date on which a Support Agreement is terminated by the mutual written agreement of the
parties thereto; and (c) the date that the Arrangement Agreement is terminated in accordance with the terms thereof.
PROCEDURE FOR THE ARRANGEMENT TO BECOME EFFECTIVE
Procedural Steps
The Arrangement is proposed to be carried out pursuant to Section 193 of the ABCA. The following procedural steps
must be taken in order for the Arrangement to become effective:
(a) the Common Shareholder Arrangement Resolution must be approved by the Common Shareholders
at the Common Shareholders’ Meeting in the manner set forth in the Interim Order;
(b) the Preferred Shareholder Arrangement Resolution must be approved by the Preferred Shareholders
at the Preferred Shareholders’ Meeting in the manner set forth in the Interim Order (provided,
however, that should such approval not be obtained, the Preferred Shares will be excluded from the
Arrangement and will remain outstanding following completion of the Arrangement and the Plan of
Arrangement will be amended prior to its filing to reflect the same);
(c) the Court must grant the Final Order approving the Arrangement;
(d) all conditions precedent to the Arrangement, as set forth in the Arrangement Agreement, including
receipt of the Required Regulatory Approvals, must be satisfied or waived by the appropriate Party;
and
(e) the Final Order, the Articles of Arrangement and related documents, in the form prescribed by the
ABCA, must be filed with the Registrar.
There is no assurance that the conditions set out in the Arrangement Agreement will be satisfied or waived on
a timely basis or at all.
Upon the conditions precedent set forth in the Arrangement Agreement being fulfilled or waived, Veresen intends to
file a copy of the Final Order and the Articles of Arrangement with the Registrar under the ABCA, together with such
other materials as may be required by the Registrar, in order to give effect to the Arrangement.
Shareholder Approvals
Common Shareholder Approval
Pursuant to the terms of the Interim Order, the Common Shareholder Arrangement Resolution must, subject to further
order of the Court, be approved by at least 66⅔% of the votes cast by Common Shareholders present in person or
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represented by proxy at the Common Shareholders’ Meeting. If the Common Shareholder Arrangement Resolution is
not approved by Common Shareholders, the Arrangement cannot be completed.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote such proxy in favour of the Common Shareholder Arrangement Resolution set
forth in Appendix A to this Information Circular.
Notwithstanding the foregoing, the Common Shareholder Arrangement Resolution proposed for consideration by the
Common Shareholders authorizes the Board, without further notice to or approval of Common Shareholders, subject
to the terms of the Arrangement Agreement and the Interim Order, to modify, amend or terminate the Arrangement
Agreement or the Plan of Arrangement, to decide not to proceed with the Arrangement and to revoke the Common
Shareholder Arrangement Resolution at any time prior to the Effective Time. See Appendix A to this Information
Circular for the full text of the Common Shareholder Arrangement Resolution.
Preferred Shareholder Approval
Pursuant to the terms of the Interim Order, the Preferred Shareholder Arrangement Resolution must be approved by
at least 66⅔% of the votes cast by the Preferred Shareholders present in person or represented by proxy at the Preferred
Shareholders’ Meeting, voting as a single class. It is not a condition to completion of the Arrangement that the
Preferred Shareholder Arrangement Resolution shall have been approved and, if the Preferred Shareholder
Arrangement Resolution is not approved by Preferred Shareholders, the Preferred Shares will be excluded from the
Arrangement and will remain outstanding following completion of the Arrangement. In addition, in the circumstances
where the Preferred Shareholder Arrangement Resolution receives the requisite approval of the Preferred
Shareholders, and Dissent Rights have been validly exercised in respect of more than 5% of the outstanding Preferred
Shares, Veresen shall amend the Plan of Arrangement if requested by Pembina to exclude the Preferred Shares under
the Plan of Arrangement and matters ancillary thereto, including the amalgamation of Pembina and Veresen as
contemplated in the Plan of Arrangement.
It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary
in such form of proxy, to vote such proxy in favour of the Preferred Shareholder Arrangement Resolution set
forth in Appendix B to this Information Circular.
Notwithstanding the foregoing, the Preferred Shareholder Arrangement Resolution proposed for consideration by the
Preferred Shareholders authorizes the Board, without further notice to or approval of such Preferred Shareholders,
subject to the terms of the Arrangement Agreement and the Interim Order, to modify, amend or terminate the
Arrangement Agreement or the Plan of Arrangement, to decide not to proceed with the Arrangement and to revoke
the Preferred Shareholder Arrangement Resolution at any time prior to the Effective Time. See Appendix B to this
Information Circular for the full text of the Preferred Shareholder Arrangement Resolution.
Court Approval
Interim Order
On June 5, 2017, Veresen obtained the Interim Order providing for the calling and holding of the Meetings and other
procedural matters. The Interim Order is attached as Appendix E to this Information Circular.
Final Order
The ABCA provides that the Arrangement requires final Court approval. Subject to the terms of the Arrangement
Agreement, if the Common Shareholder Arrangement Resolution is approved at the Common Shareholders’ Meeting,
Veresen will make an application to the Court for the Final Order at the Calgary Courts Centre, 601 - 5th Street, S.W.,
Calgary, Alberta, Canada, on July 12, 2017 at 10:00 a.m. (Calgary time) or as soon thereafter as counsel may be heard.
The Notice of Originating Application for the Final Order accompanies this Information Circular. At the application
the Court will be requested to consider the fairness of the Arrangement.
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Any Shareholder, or other interested party desiring to support or oppose the application with respect to the
Arrangement, may appear at the hearing in person or by counsel for that purpose, subject to filing with the Court and
serving on Veresen on or before 5:00 p.m. (Calgary time) on July 4, 2017, a notice of intention to appear setting out
their address for service and indicating whether they intend to support or oppose the application or make submissions,
together with any evidence or materials which are to be presented to the Court. Service of such notice on Veresen is
required to be effected by service upon the solicitors for Veresen: Osler, Hoskin & Harcourt LLP, Suite 2500, 450 -
1st Street S.W., Calgary, Alberta, T2P 5H1, Attention: Colin Feasby.
The Pembina Common Shares issuable to Common Shareholders in exchange for their Common Shares and the
Pembina Exchange Shares issuable to Preferred Shareholders pursuant to the Arrangement have not been and will not
be registered under the 1933 Act, in reliance upon the exemption from the registration requirements of the 1933 Act
provided by Section 3(a)(10) thereof. The Court has been advised that the Final Order, if granted, will constitute the
basis for an exemption from the registration requirements of the 1933 Act, pursuant to Section 3(a)(10) thereof, with
respect to the issuance of the Pembina Common Shares issuable to Common Shareholders and Pembina Exchange
Shares issuable to Preferred Shareholders pursuant to the Arrangement.
Veresen has been advised by its counsel that the Court has broad discretion under the ABCA when making orders
with respect to the Arrangement and that the Court, in hearing the application for the Final Order, will consider, among
other things, the fairness of the Arrangement to the Shareholders and any other interested party as the Court determines
appropriate. The Court may approve the Arrangement either as proposed or as amended in any manner the Court may
direct, subject to compliance with such terms and conditions, if any, as the Court may determine appropriate. Either
Pembina or Veresen may, subject to the terms of the Arrangement Agreement, determine not to proceed with the
Arrangement in the event that any amendment ordered by the Court is not satisfactory to such Party.
Regulatory Approvals
The Arrangement Agreement provides that receipt of all Required Regulatory Approvals including, without limitation,
Competition Act Approval, HSR Approval and CTA Approval and receipt of conditional approval of the TSX and
NYSE for listing of the Pembina Common Shares issuable pursuant to the Arrangement, is a condition precedent to
the Arrangement becoming effective. See “The Arrangement – The Arrangement Agreement – Mutual Conditions”.
Competition Act Approval
The Arrangement is a “notifiable transaction” for the purposes of Part IX of the Competition Act. When a transaction
is a notifiable transaction under the Competition Act, certain prescribed information must be provided to the
Commissioner under Part IX of the Competition Act and the transaction may not be completed until the expiry, waiver
or termination of the applicable waiting period. Where a notification is made, the waiting period is 30 calendar days
after the day on which the parties to the transaction submit the prescribed information, provided that, before the expiry
of this period, the Commissioner has not notified the parties that he requires additional information that is relevant to
the Commissioner’s assessment of the transaction (a “Supplementary Information Request”). If the Commissioner
provides the Parties with a Supplementary Information Request, the Parties cannot complete their transaction until 30
calendar days after compliance with such Supplementary Information Request, provided that there is no order in effect
prohibiting completion at the relevant time. Veresen and Pembina filed a pre-merger notification under subsection
114(1) of the Competition Act on May 18, 2017.
The Commissioner may, upon application by the Parties to a proposed transaction, issue an advance ruling certificate
(“ARC”) under Section 102 of the Competition Act where he is satisfied that he would not have sufficient grounds
on which to apply to the Competition Tribunal (the “Tribunal”) for an order under Section 92 of the Competition
Act. Further, if the transaction to which the ARC relates is substantially completed within one year after the ARC is
issued, the Commissioner cannot seek an order of the Tribunal under Section 92 of the Competition Act in respect of
the transaction solely on the basis of information that is the same or substantially the same as the information on the
basis of which the ARC was issued.
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The Commissioner may decide to challenge the transaction under Section 92 of the Competition Act if he is of the
view that the transaction is likely to prevent or lessen competition substantially, and may also apply to the Tribunal
for an injunction to prevent its closing pending the Tribunal’s determination of his challenge to the transaction.
Completion of the Arrangement is subject to the condition that: (a) an ARC shall have been issued by the
Commissioner pursuant to subsection 102(1) of the Competition Act with respect to the transactions contemplated by
the Arrangement Agreement; or (b) (i) the applicable waiting period under subsection 123(1) of the Competition Act,
and any extension thereof, shall have expired or shall have been terminated under subsection 123(2) of the Competition
Act, or the obligation to submit a notification under Part IX of the Competition Act shall have been waived by the
Commissioner pursuant to paragraph 113(c) of the Competition Act; and (ii) unless such requirement is waived in
writing by Pembina in its sole discretion, the Commissioner shall have advised the Parties in writing that the
Commissioner does not, at that time, intend to make an application under Section 92 of the Competition Act and such
advice shall remain in full force and effect (a “no-action letter”).
Veresen and Pembina have jointly requested that the Commissioner issue an ARC under Section 102 of the
Competition Act or, alternatively, a no-action letter in respect of the Arrangement.
HSR Approval
Under the HSR Act, certain transactions may not be completed until each Party has filed a Notification and Report
Form with the Antitrust Division of the U.S. Department of Justice (the “DOJ”) and with the U.S. Federal Trade
Commission (the “FTC”). The HSR Act requires the parties to observe a 30 calendar-day waiting period after the
submission of their HSR Act filings before consummating their transaction, unless the waiting period is terminated
early or, alternatively, is extended if the FTC or DOJ issues a Request for Additional Information and Documentary
Material. The transactions contemplated by the Arrangement Agreement are subject to the HSR Act.
Veresen and Pembina filed the requisite Notification and Report Forms on May 18, 2017, and the FTC granted early
termination of the 30 calendar-day waiting period on May 30, 2017. The expiration or termination of the waiting
period does not bar the FTC or the DOJ from subsequently challenging the Arrangement. Private parties and state
attorneys general may also bring an action under the antitrust laws under certain circumstances.
In addition, prior to acquiring their Pembina Common Shares, Common Shareholders who as a result of the
Arrangement will hold Pembina Common Shares with a value in excess of US$80.8 million may, unless exempt, be
subject to the filing and waiting period requirements of the HSR Act. This would require each such Common
Shareholder, as well as Pembina, to file a Notification and Report Form with the FTC and the DOJ and to observe an
initial 30 calendar-day waiting period. The initial waiting period may be terminated before its expiration or extended
by a Request for Additional Information and Documentary Material. Therefore, compliance with the HSR procedures
could delay the acquisition of Pembina Common Shares by affected Common Shareholders and/or the Effective Date
of the Arrangement. Any Common Shareholder that believes that it may have a filing and waiting obligation under
the HSR Act in connection with this transaction should contact Pembina at its head office at Suite 4000, 585 – 8th
Avenue S.W., Calgary, Alberta, T2P 1G1 and consult its own legal counsel.
Canada Transportation Act Approval
Subsection 53.1(1) of the Canada Transportation Act provides that every person who is required to notify the
Commissioner under subsection 114(1) of the Competition Act of a proposed transaction that involves a transportation
undertaking shall, at the same time as the Commissioner is notified and, in any event, not later than the date by which
the person is required to notify the Commissioner, give notice of the proposed transaction to the Minister. Transactions
that are subject to notification under the Canada Transportation Act cannot be completed until the requirements noted
below have been satisfied. The transactions contemplated by the Arrangement Agreement also may be subject to
notification under subsection 53.1(1) of the Canada Transportation Act.
While the Canada Transportation Act may not apply to the transactions contemplated by the Arrangement Agreement,
as a precaution Veresen and Pembina have filed a notice under subsection 53.1(1) of the Canada Transportation Act
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with the Minister. Under the Canada Transportation Act, the Minister is required to inform the Parties within 42 days
of the receipt of the Parties’ notification whether, in the Minister’s opinion, the transactions contemplated by the
Arrangement Agreement raise issues with respect to the public interest as it relates to national transportation. At any
time during or at the end of the 42 day period, the Minister may notify the Parties that the transactions contemplated
by the Arrangement Agreement do not raise issues with respect to the public interest as it relates to national
transportation, in which case the consummation of the transactions would no longer be prohibited under the Canada
Transportation Act. Alternatively, if the Minister determines that the transactions contemplated by the Arrangement
Agreement raise issues with respect to the public interest as it relates to national transportation, the Parties cannot
complete the transactions until they are approved by the Governor in Council. If this approval is required, the Minister
may direct the Canada Transportation Agency or another person to examine the public interest issues and to report to
the Minister of Transport within 150 days (or within any longer period that the Minister allows); within this same
period, the Commissioner of Competition must report to the Minister and the Parties on any concerns regarding
potential prevention or lessening of competition that may occur as a result of the transaction. The Minister will then
make a recommendation to the Governor in Council as to whether to approve the proposed transaction. The Governor
in Council has the authority to approve the transaction either conditionally or unconditionally.
Commercially Reasonable Efforts
Under the Arrangement Agreement, the Parties agreed to use their commercially reasonable efforts to obtain the
Required Regulatory Approvals, including defending all lawsuits or other legal, regulatory or other proceedings
challenging or affecting the Arrangement, and opposing, lifting or rescinding any injunction or restraining order or
action seeking to stop, or otherwise affecting the ability of the Parties to consummate the Arrangement, except that
Pembina is not required to offer, agree or consent to sell, assign, license, hold separate, or take any other action
(individually, and collectively, a “Regulatory Action”) before or after the Effective Date, with respect to any assets
or businesses, or interests in any assets or businesses, of Pembina or Veresen, or any of their respective Subsidiaries.
However, in connection with obtaining Required Regulatory Approvals by no later than the Outside Date, Pembina is
required to take a Regulatory Action with respect to any assets or businesses, or interests in any assets or businesses,
of Pembina or Veresen, or any of their respective Subsidiaries, to the extent that (A) the aggregate forecasted earnings
before interest, taxes, depreciation and amortization from such assets, businesses or interests, as applicable, for 2017
does not exceed 10% of the forecasted earnings before interest, taxes, depreciation and amortization of Veresen for
2017, as disclosed in writing by Veresen to Pembina, and (B) any such Regulatory Action is conditional on
consummation of the Arrangement.
Stock Exchange Listings
Veresen is a reporting issuer under the securities laws of each province of Canada. The Common Shares and the
Veresen Series A Shares, Veresen Series C Shares and Veresen Series E Shares (collectively, the “Listed Preferred
Shares”) are each listed and posted for trading on the TSX under the symbols VSN, VSN.PR.A, VSN.PR.C and
VSN.PR.E, respectively.
On April 28, 2017, the last trading day on which the Common Shares traded prior to the announcement of the
Arrangement, the closing price of the Common Shares on the TSX was $15.23. On June 5, 2017, the last trading day
on which the Common Shares traded prior to the printing of this Information Circular, the closing price of the Common
Shares on the TSX was $18.64.
Pembina is a reporting issuer under the securities laws of each province of Canada. The Pembina Common Shares are
listed and posted for trading on the TSX under the symbol “PPL” and on the NYSE under the symbol “PBA”.
On April 28, 2017, the last trading day on which the Pembina Common Shares traded prior to announcement of the
Arrangement, the closing price of the Pembina Common Shares on the TSX and the NYSE was $43.50 and US$31.88,
respectively. On June 5, 2017, the closing price of the Pembina Common Shares on the TSX and NYSE was $44.08
and US$32.70, respectively.
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Following completion of the Arrangement, it is anticipated that the Common Shares will be delisted from the TSX. In
the event the Preferred Shares are exchanged for Pembina Exchange Shares, it is anticipated that the Listed Preferred
Shares will be delisted from the TSX. In the event the Preferred Shares are otherwise excluded from the Plan of
Arrangement, the Preferred Shares will remain outstanding and the Listed Preferred Shares will remain listed on the
TSX.
For information with respect to the trading history of the Pembina Common Shares, the Common Shares and the
Listed Preferred Shares, see “Information Concerning Pembina Pipeline Corporation – Price Range and Trading
Volumes” and “Information Concerning Veresen Inc. – Price Range and Trading Volumes”, in Appendix J and
Appendix K to this Information Circular, respectively.
It is a condition to the completion of the Arrangement that the TSX and the NYSE shall have conditionally approved
the listing of the Pembina Common Shares to be issued to Common Shareholders pursuant to the Arrangement and,
if the Preferred Shareholder Arrangement Resolution receives the requisite approval of the Preferred Shareholders at
the Preferred Shareholders’ Meeting, that the TSX shall have conditionally approved the listing of the Pembina
Exchange Shares to be issued to Preferred Shareholders pursuant to the Arrangement. The TSX has conditionally
approved the listing of the Pembina Common Shares to be issued to Common Shareholders pursuant to the
Arrangement and the listing of the Pembina Exchange Shares following the Effective Date on the TSX. Listing is
subject to Pembina fulfilling all of the listing requirements of the TSX. The NYSE has conditionally approved the
listing of the Pembina Common Shares to be issued to Common Shareholders pursuant to the Arrangement. Listing
will be subject to Pembina fulfilling all of the listing requirements of the NYSE.
Securities Law Matters
Canada
General
The Pembina Common Shares to be issued to Common Shareholders and in the event the Preferred Shareholder
Arrangement Resolution is approved at the Preferred Shareholders’ Meeting, the Pembina Exchange Shares to be
issued to Preferred Shareholders pursuant to the Arrangement will be issued in reliance on exemptions from the
prospectus requirements of applicable Canadian securities Laws, will generally be “freely tradable” and the resale of
such Pembina Common Shares will be exempt from the prospectus requirements (and not subject to any “restricted
period” or “hold period”) under applicable Canadian securities Laws if the following conditions are met: (a) the trade
is not a control distribution (as defined in applicable securities legislation); (b) no unusual effort is made to prepare
the market or to create a demand for the securities that are the subject of the trade; (c) no extraordinary commission
or consideration is paid to a person or company in respect of the trade; and (d) if the selling shareholder is an insider
or an officer of Pembina, the selling shareholder has no reasonable grounds to believe that Pembina is in default of
securities legislation. Shareholders are urged to consult their legal advisors to determine the applicability to
them of the resale restrictions prescribed by applicable Canadian securities Laws.
MI 61-101
Each of Veresen and Pembina is subject to the provisions of MI 61-101. MI 61-101 is intended to regulate insider
bids, issuer bids, business combinations and related party transactions to ensure equality of treatment among
securityholders, generally by requiring enhanced disclosure, minority securityholder approval, and, in certain
instances, independent valuations and approval and oversight of certain transactions by a special committee of
independent directors.
As previously described in this Information Circular, all Common Shares and Preferred Shares (if the Preferred
Shareholders approve the Preferred Shareholder Arrangement Resolution) will be exchanged for Pembina Common
Shares and Pembina Exchange Shares, respectively, under the terms of the Plan of Arrangement. Unless certain
exceptions apply, the Arrangement will be considered a “business combination” in respect of Veresen pursuant to MI
61-101 since the interest of a holder of a Common Share or Preferred Share may be terminated without the holder’s
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consent. Accordingly, unless no related party of Veresen is entitled to receive a “collateral benefit” (as defined in MI
61-101) in connection with the Arrangement, the transaction would be considered a “business combination” and
subject to minority approval requirements.
If “minority approval” is required, MI 61-101 would require that, in addition to the approval of the Common
Shareholder Arrangement Resolution by not less than 66⅔% of the votes cast by the Common Shareholders and the
approval of the Preferred Shareholder Arrangement Resolution by not less than 66⅔% of the votes cast by the
Preferred Shareholders present in person or represented by proxy at the applicable Meeting, the Arrangement would
also require the approval of a simple majority of the votes cast by Common Shareholders and Preferred Shareholders,
as applicable, excluding votes cast in respect of Common Shares or Preferred Shares held by “related parties” who
receive a “collateral benefit” (as such terms are defined in MI 61-101) as a consequence of the transaction.
However, the minority approval requirements of MI 61-101 do not apply to certain transactions in which a related
party beneficially owns, or exercises control or direction over, less than 1% of the issuer’s outstanding equity securities
or to certain transactions in which an independent committee of directors has determined, acting in good faith, that
the value of the benefits received by a related party, net of any offsetting costs to the related party, is less than 5% of
the value the related party expects to receive pursuant to the transaction, provided the independent committee’s
determination is disclosed in the disclosure document for the transaction.
As disclosed in this Information Circular, certain current officers of Veresen will receive compensation in the form of
severance payments and payments resulting from accelerated vesting of the Veresen Incentive Awards upon
completion of the Arrangement. Veresen has considered whether any of these payments or other benefits to be received
by the officers of Veresen would constitute a “collateral benefit” for purposes of MI 61-101 such that the Arrangement
would therefore constitute a “business combination” under MI 61-101. See “Interests of Certain Persons or
Companies in the Arrangement”.
Veresen has determined that none of these payments or other benefits is a “collateral benefit” for the purposes of MI
61-101 since: (i) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the
consideration paid to the related party for their Veresen Shares; (ii) the benefit is not, by its terms, conditional on the
related party supporting the Arrangement in any manner; (iii) full particulars of the benefit have been disclosed in this
Information Circular; and (iv) each of the related parties receiving the benefit exercised control or direction over, or
beneficially owned, less than 1% of the outstanding Common Shares or Preferred Shares, at the date on which the
proposed Arrangement was agreed to.
Accordingly, the Arrangement is not considered to be a “business combination” in respect of Veresen, and as a result,
no “minority approval” is required for the Common Shareholder Arrangement Resolution and the Preferred
Shareholder Arrangement Resolution. In addition, since the Arrangement does not constitute a business combination,
no formal valuation is required for the Arrangement under MI 61-101.
United States
The Pembina Common Shares issuable to Common Shareholders in exchange for their Common Shares and, in the
event the Preferred Shareholder Arrangement Resolution is approved at the Preferred Shareholders’ Meeting, the
Pembina Exchange Shares to be issued to Preferred Shareholders in exchange for their Preferred Shares pursuant to
the Arrangement, have not been and will not be registered under the 1933 Act or any state securities laws, and will be
issued in reliance upon the exemption from the registration requirements of the 1933 Act provided by Section 3(a)(10)
thereof and exemptions under applicable state securities laws. Section 3(a)(10) of the 1933 Act exempts the issuance
of any security issued in exchange for one or more bona fide outstanding securities from the general requirement of
registration where the terms and conditions of such issuance and exchange have been approved by a court of competent
jurisdiction that is expressly authorized by law to grant such approval, after a hearing upon the fairness of the terms
and conditions of such issuance and exchange at which all persons to whom it is proposed to issue the securities have
the right to appear and receive timely notice thereof. The Court is authorized to conduct a hearing at which the fairness
of the terms and conditions of the Arrangement will be considered. The Court granted the Interim Order on June 5,
2017 and, subject to the approval of the Arrangement by Common Shareholders and satisfaction of certain other
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conditions, a hearing on the Arrangement will be held on July 12, 2017 by the Court. See “Procedure for the
Arrangement to Become Effective – Court Approval”.
The Pembina Common Shares issuable to Common Shareholders and the Pembina Exchange Shares issuable to
Preferred Shareholders pursuant to the Arrangement will be, following completion of the Arrangement, freely
tradeable under the 1933 Act, except by persons who will be “affiliates” of Pembina after the Effective Date or were
affiliates of Pembina within 90 days before the Effective Date. Persons who may be deemed to be “affiliates” of an
issuer include individuals or entities that control, are controlled by, or are under common control with, the issuer,
whether through the ownership of voting securities, by contract or otherwise, and generally include executive officers
and directors of the issuer as well as principal shareholders of the issuer.
Any resale of such Pembina Common Shares or Pembina Exchange Shares by such an affiliate (or former affiliate)
may be subject to the registration requirements of the 1933 Act, absent an exemption or exclusion therefrom. Subject
to certain limitations, such affiliates (and former affiliates) may immediately resell Pembina Common Shares or the
Pembina Exchange Shares outside the United States without registration under the 1933 Act pursuant to Regulation S
under the 1933 Act. If available, such affiliates (and former affiliates) may also resell such Pembina Common Shares
or Pembina Exchange Shares pursuant to Rule 144 under the 1933 Act.
The foregoing discussion is only a general overview of certain provisions of United States federal securities laws
applicable to the resale of Pembina Common Shares or Pembina Exchange Shares received upon completion
of the Arrangement. All holders of such securities are urged to consult with counsel to ensure that the resale of
their securities complies with applicable securities legislation.
Making an Election Regarding the Consideration to be Received
How to Make an Election
Enclosed with this Information Circular is the Common Shareholder Letter of Transmittal and Election Form which,
when properly completed and returned together with the certificate(s) or DRS Advice(s) representing Common Shares
and all other documents that may be required by the Depositary, will enable each Common Shareholder to obtain the
consideration that the Common Shareholder is entitled to receive under the Arrangement. The Common Shareholder
Letter of Transmittal and Election Form must be submitted by the Election Deadline. Veresen will provide at least 10
Business Days’ notice of the Election Deadline to Common Shareholders by means of a news release disseminated
on a national newswire in Canada and the U.S. See “Procedure for Exchange of Veresen Share Certificates or DRS
Advices”.
The Common Shareholder Letter of Transmittal and Election Form contains complete instructions on how to make
your election and exchange your Common Shares.
Each Common Shareholder’s election may be subject to the pro-rationing provisions described below.
What Happens if a Shareholder Fails to Make a Valid Election
Common Shareholders who do not deposit with the Depositary a duly completed Common Shareholder Letter of
Transmittal and Election Form together with the applicable certificate(s) or DRS Advice(s) representing Common
Shares prior to the Election Deadline, or otherwise fail to comply with the requirements of the Plan of Arrangement
and the Common Shareholder Letter of Transmittal and Election Form with respect to the election to receive the Share
Consideration or the Cash Consideration shall be deemed to have elected to receive the Share Consideration in
exchange for all of such holder’s Common Shares, subject to the terms of the Plan of Arrangement.
Pro-rationing Provisions
The Plan of Arrangement provides that the aggregate Cash Consideration shall not exceed the Maximum Cash
Consideration and the aggregate Share Consideration shall not exceed the Maximum Share Consideration. If Common
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Shareholders elect to receive either Cash Consideration in an aggregate amount exceeding the Maximum Cash
Consideration or the Share Consideration in an aggregate number exceeding the Maximum Share Consideration, the
actual amount of cash paid and the actual number of Pembina Common Shares issued to Common Shareholders
pursuant to the Arrangement will be subject to pro-rationing as described below. It is highly likely that elections
made by Common Shareholders will be subject to pro-rationing under the Plan of Arrangement.
Elections for Pembina Common Shares
In the event that the aggregate number of Pembina Common Shares that would be paid to Common Shareholders in
accordance with the elections or deemed elections of such Common Shareholders pursuant to the Plan of Arrangement
(the “Total Elected Share Consideration”) exceeds the Maximum Share Consideration, then the aggregate number
of Pembina Common Shares to be paid to any Common Shareholder shall be determined by multiplying the aggregate
number of Pembina Common Shares that would be issued to such Common Shareholder by a fraction, rounded to six
decimal places, the numerator of which is the Maximum Share Consideration and the denominator of which is the
Total Elected Share Consideration; and such holder shall be deemed to have elected to receive the Share Consideration
for such number of its Common Shares, rounded down to the nearest whole, as is equal to the aggregate number of
Pembina Common Shares received by such holder, as adjusted pursuant to the Plan of Arrangement, divided by the
Share Consideration, and the Cash Consideration for the remainder of its Common Shares for which such holder
would otherwise have received the Share Consideration.
Elections for Cash
In the event that the aggregate amount of cash that would be paid to Common Shareholders in accordance with the
elections or deemed elections of such Common Shareholders pursuant to Plan of Arrangement (the “Total Elected
Cash Consideration”) exceeds the Maximum Cash Consideration, then the aggregate amount of cash to be paid to
any Common Shareholder shall be determined by multiplying the aggregate amount of cash that would be paid to such
Common Shareholder by a fraction, rounded to six decimal places, the numerator of which is the Maximum Cash
Consideration and the denominator of which is the Total Elected Cash Consideration; and such holder shall be deemed
to have elected to receive the Cash Consideration for such number of its Common Shares, rounded down to the nearest
whole, as is equal to the aggregate amount of cash received by such holder, as adjusted in accordance with the Plan
of Arrangement, divided by the Cash Consideration, and the Share Consideration for the remainder of its Common
Shares for which such holder would otherwise have received the Cash Consideration.
Fractional Shares
No fractional Pembina Common Shares will be issued pursuant to the Arrangement and, in lieu thereof, each former
Common Shareholder otherwise entitled to a fractional interest in a Pembina Common Share will receive the nearest
whole number of Pembina Common Shares (with fractions equal to exactly 0.5 or greater being rounded up and
fractions less than 0.5 being rounded down), unless such rounding causes the aggregate number of Pembina Common
Shares to be paid to the Common Shareholders pursuant to the Plan of Arrangement to be greater than the Maximum
Share Consideration, in which case all such fractional interests will be paid in cash based on the Cash Consideration
notwithstanding that such cash payments may cause the aggregate cash consideration to be paid by Pembina pursuant
to the Plan of Arrangement to exceed the Maximum Cash Consideration. In calculating such fractional interests, all
Common Shares registered in the name of or beneficially held by a Common Shareholder or his/her/its nominee shall
be aggregated.
Effect on Preferred Shares if Preferred Shareholder Approval is Obtained
If the requisite approval of the Preferred Shareholders is obtained at the Preferred Shareholders’ Meeting and the
Arrangement is completed, the Preferred Shares will be acquired by Pembina as part of the Arrangement in exchange
for the Preferred Share Consideration.
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Effect on Preferred Shares if Preferred Shareholder Approval is Not Obtained
If the requisite approval of the Preferred Shareholders is not obtained at the Preferred Shareholders’ Meeting (or any
adjournment thereof) and the Preferred Shareholders do not otherwise approve a special resolution with similar effect
to the Preferred Shareholder Arrangement Resolution prior to the Effective Time such that Pembina is the sole holder
of the Preferred Shares prior to the amalgamation contemplated in the Plan of Arrangement, Veresen will amend the
Plan of Arrangement to exclude the Preferred Shares under the Plan of Arrangement and matters ancillary thereto, the
Preferred Shares will not be acquired by Pembina and will remain outstanding following completion of the
Arrangement.
Procedure for Exchange of Veresen Share Certificates or DRS Advices
Common Shareholders and Preferred Shareholders (other than Dissenting Shareholders) must duly complete and
return a Common Shareholder Letter of Transmittal and Election Form or Preferred Shareholder Letter of Transmittal,
respectively, together with the certificate(s) or DRS Advice(s), as applicable, representing their Common Shares
and/or Preferred Shares, as the case may be, and all other required documents to the Depositary at one of the offices
specified in the Letters of Transmittal. In the event that the Arrangement is not completed, such certificates or DRS
Advices will be promptly returned to Shareholders who provided such certificates or DRS Advices to the Depositary.
Enclosed with this Information Circular is a Common Shareholder Letter of Transmittal and Election Form
and/or Preferred Shareholder Letter of Transmittal which, when properly completed and returned together
with the certificate(s) or DRS Advice(s) representing Common Shares and/or Preferred Shares, as the case may
be, and all other required documents, will enable each Shareholder to obtain the consideration that the
Shareholder is entitled to receive under the Arrangement.
Common Shareholders who do not deposit with the Depositary a duly completed Common Shareholder Letter of
Transmittal and Election Form together with certificate(s) or DRS Advice(s) representing the applicable Common
Shares prior to the Election Deadline, or otherwise fail to comply with the Plan of Arrangement or the Common
Shareholder Letter of Transmittal and Election Form, will be deemed to have elected to receive the Share
Consideration in respect of all of such holders’ Common Shares, subject to pro-rationing. Veresen will provide at least
ten (10) Business Days’ notice of the Election Deadline to Common Shareholders by means of a news release
disseminated on a national newswire in Canada and the U.S.
The Common Shareholder Letter of Transmittal and Election Form contains complete instructions on how to make
your election and exchange your Common Shares. The Preferred Shareholder Letter of Transmittal contains complete
instructions on how to exchange your Preferred Shares.
From and after the Effective Time, certificates or DRS Advices formerly representing Veresen Shares shall
represent only the right to receive the consideration to which the former Shareholders are entitled under the
Arrangement, or as to those held by Dissenting Shareholders, other than those Dissenting Shareholders deemed to
have participated in the Arrangement pursuant to the Plan of Arrangement, to receive the fair value of the Veresen
Shares represented by such certificates or DRS Advices. As soon as practicable following the later of the Effective
Date and the date of deposit by a former holder of Veresen Shares acquired by Pembina under the Arrangement of a
duly completed Common Shareholder Letter of Transmittal and Election Form or Preferred Shareholder Letter of
Transmittal, as applicable, and the certificates or DRS Advices representing such Veresen Shares and all other required
documents, the Depositary shall either: (a) forward by first class mail to such former holder at the address specified
in the Common Shareholder Letter of Transmittal and Election Form or Preferred Shareholder Letter of Transmittal;
or (b) if requested by such Shareholder in the Common Shareholder Letter of Transmittal and Election Form or
Preferred Shareholder Letter of Transmittal, as applicable, make available or cause to be made available at the
Depositary for pickup by such Shareholder, the cash and/or DRS Advices representing the number of Pembina
Common Shares or Pembina Exchange Shares issued to such Shareholder under the Arrangement.
Subject to any applicable Laws relating to unclaimed personal property, any certificate formerly representing
Common Shares or Preferred Shares that is not deposited with all other documents as required by the Plan of
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Arrangement on or before the last Business Day before the third anniversary of the Effective Date shall cease
to represent a claim or interest of any kind or nature including the right of the former holders of Common
Shares or Preferred Shares, as applicable, to receive the consideration for such Common Shares or Preferred
Shares, as applicable, pursuant to the Plan of Arrangement (and any dividends or other distributions thereon).
In such case, such Pembina Common Shares or Pembina Exchange Shares shall be returned to Pembina for
cancellation and any cash (including any dividends or other distributions in respect of Pembina Common
Shares or Pembina Exchange Shares) shall be returned to Pembina.
If any certificate which immediately prior to the Effective Time represented an interest in outstanding Veresen Shares
that were exchanged pursuant to the Plan of Arrangement has been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to have been lost, stolen or destroyed, the Depositary will
issue and deliver in exchange for such lost, stolen or destroyed certificate the consideration to which the holder is
entitled pursuant to the Arrangement, as determined in accordance with the Arrangement. The person who is entitled
to receive such consideration shall, as a condition precedent to the receipt thereof, give a bond satisfactory to Pembina
and its transfer agent in such form as is satisfactory to Pembina and such transfer agent, or otherwise indemnify
Veresen, Pembina and the transfer agent, to the reasonable satisfaction of such parties, against any claim that may be
made against any of them with respect to the certificate alleged to have been lost, stolen or destroyed.
Shareholders whose Veresen Shares are registered in the name of a broker, dealer, bank, trust company or
other nominee must contact their nominee to deposit their Veresen Shares.
The use of mail to transmit certificates representing Veresen Shares or the Letters of Transmittal is at each
registered holder’s risk. Veresen recommends that such certificates and documents be delivered by hand to the
Depositary and a receipt therefor be obtained or that registered mail be used and appropriate insurance be
obtained.
If a Common Shareholder Letter of Transmittal and Election Form or a Preferred Shareholder Letter of Transmittal is
executed by a person other than the registered holder of the Common Shares or Preferred Shares, as applicable, being
exchanged or if the certificate(s), DRS Advice(s) or cheque(s) to be issued in exchange therefor are to be issued to a
person other than the registered owner(s) or sent to an address other than the address of the registered holder(s) as
shown on the register of Common Shareholders or Preferred Shareholders, as the case may be, maintained by the
applicable registrar and transfer agent, the signature on the Common Shareholder Letter of Transmittal and Election
Form or Preferred Shareholder Letter of Transmittal, as the case may be, must be medallion guaranteed by an Eligible
Institution (as defined in the applicable Letter of Transmittal). If the Common Shareholder Letter of Transmittal and
Election Form or the Preferred Shareholder Letter of Transmittal is executed by a person other than the registered
owner(s) of the Common Shares or Preferred Shares, as the case may be, and in certain other circumstances as set
forth in the applicable Letter of Transmittal, then the certificate(s) representing the Common Shares or Preferred
Shares, as the case may be, must be endorsed or be accompanied by an appropriate transfer power of attorney duly
and properly completed by the registered owner(s). The signature(s) on the endorsement panel or the transfer power
of attorney must correspond exactly to the name(s) of the registered owner(s) as registered or as appearing on the
certificate(s) must be medallion guaranteed by an Eligible Institution.
All questions as to validity, form, eligibility (including timely receipt), and acceptance of any Common Shares or
Preferred Shares exchanged pursuant to the Arrangement will be determined by Pembina in its sole discretion.
Depositing Common Shareholders or Preferred Shareholders, as the case may be, agree that such determination shall
be final and binding. Pembina reserves the absolute right to reject any and all deposits which it determines not to be
in proper form or which may be unlawful for it to accept under the laws of any jurisdiction. Pembina reserves the
absolute right to waive any defect or irregularity in the exchange of Common Shares or Preferred Shares. There shall
be no duty or obligation on Pembina, the Depositary or any other person to give notice of any defect or irregularity in
any deposit of Common Shares or Preferred Shares and no liability shall be incurred by any of them for failure to give
such notice.
Under no circumstances will interest accrue or be paid by Pembina, Veresen or the Depositary on the Cash
Consideration per Common Share, regardless of any delay in making any payment for the Common Shares.
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Notwithstanding the provisions of this Information Circular, the Letters of Transmittal, DRS Advices representing
Pembina Common Shares, Pembina Exchange Shares and/or cheques representing the consideration to be received
pursuant to the Arrangement will not be mailed if Pembina determines that delivery thereof by mail may be delayed.
Persons entitled to DRS Advices and/or cheques which are not mailed for the following reason may take delivery
thereof at the office of the Depositary in which the deposited certificates or DRS Advices representing Common
Shares or Preferred Shares, as the case may be, were originally deposited until such time that it is determined that the
delivery by mail will no longer be delayed.
Shareholders are encouraged to deliver a validly completed and duly executed Letter of Transmittal, as applicable,
together with the relevant security certificate(s) or DRS Advice(s), as applicable, to the Depositary as soon as possible.
None of Veresen, Pembina or the Depositary are liable for failure to notify Shareholders, nor do they have any
obligation to notify Shareholders, who make a deficient deposit with the Depositary.
INTERESTS OF CERTAIN PERSONS OR COMPANIES IN THE ARRANGEMENT
Except as described below, management of Veresen is not aware of any material interest direct or indirect, by way of
beneficial ownership or otherwise of any director or executive officer of Veresen or anyone who has held office as
such since the beginning of Veresen’s last financial year or of any associate or affiliate of any of the foregoing in the
Arrangement.
Veresen Shares
As at May 31, 2017, the directors and executive officers of Veresen and their associates beneficially owned, controlled
or directed, directly or indirectly, an aggregate of 302,092 Common Shares, representing approximately 0.1% of the
outstanding Common Shares and 1,000 Preferred Shares, representing less than 0.01% of the outstanding Preferred
Shares. All of the Common Shares held by such directors and executive officers of Veresen and their associates will
be treated in the same fashion under the Arrangement as Common Shares held by any other Common Shareholder. If
the Arrangement is completed, assuming all such individuals elect to receive the Share Consideration, without any
pro-rationing, the directors and executive officers of Veresen and their associates will receive in exchange for such
Common Shares an aggregate of approximately 129,506 Pembina Common Shares. The Common Shares held by each
director and executive officer of Veresen are set out in the table below under “Summary of Interests of Directors and
Executive Officers in the Arrangement”.
As at June 5, 2017, to the knowledge of Veresen, Pembina did not beneficially own, control or direct, directly or
indirectly, any Veresen Shares. As at June 5, 2017, to the knowledge of Veresen, the directors and executive officers
of Pembina, as a group, beneficially owned, controlled or directed, directly or indirectly, an aggregate of less than 1%
of the Common Shares and 1% of the Preferred Shares.
Veresen Incentive Awards
As at May 31, 2017 the directors and executive officers of Veresen held an aggregate of 326,012 Veresen RSUs,
809,953 Veresen PSUs and 405,711 Veresen DSUs. As the completion of the Arrangement will be considered a
“Change of Control” pursuant to the Veresen LTIP and the Veresen DSU Plans, all outstanding Veresen RSUs,
Veresen PSUs and Veresen DSUs will vest and be settled in cash immediately prior to the Effective Time. The Veresen
Incentive Awards held by each individual director and executive officer are set out in the table below under “Summary
of Interests of Directors and Executive Officers in the Arrangement”.
Severance
Veresen has entered into employment agreements with each of Don Althoff, Kevan King, Darren Marine and Theresa
Jang (collectively, the “Employment Agreements”).
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Pursuant to the Employment Agreements, in the event that a “Change of Control”, as defined in the Employment
Agreements, occurs and within one year of the Change of Control occurring the executive officer’s employment
relationship with Veresen is terminated by Veresen without “Just Cause” or by the executive officer for “Good
Reason”, provided that in order to resign for Good Reason: (a) the executive officer must give notice to terminate his
or her employment within a period of 30 days from the date of the event constituting Good Reason; and (b) Veresen
shall have 30 days from the date of receipt of such notice to remedy the Good Reason relied upon by the executive
officer, and only if Veresen failed to remedy the Good Reason during the 30 day period, then the executive officer
may resign for Good Reason, then, Veresen must pay such executive officer, other than Mr. Althoff, one and one-half
times, and for Mr. Althoff, two times the aggregate of:
(a) their annual base salary;
(b) the average annual payout to the executive officer under Veresen’s short-term incentive plan for the
past three years (or such lesser period as the executive officer has received such short-term incentive
plan payouts); and
(c) 15% of their annual base salary, which amount is to cover the cost of life, disability, medical, dental,
accident benefits and the employer matching contributions to the their savings plan.
Veresen has also adopted an executive termination policy (the “Executive Termination Policy”) applicable to
executive officers of Veresen who have not entered into Employment Agreements. The Executive Termination Policy
provides for payments to such executive officers in the event that a “Change of Control”, as defined in the Executive
Termination Policy, occurs and the executive officer’s employment relationship with Veresen is terminated by
Veresen without “Just Cause” or by the executive officer for “Good Reason”, provided that in order to resign for Good
Reason: (a) the executive officer must give notice to terminate his or her employment within a period of 30 days from
the date of the event constituting Good Reason; and (b) Veresen shall have 30 days from the date of receipt of such
notice to remedy the Good Reason relied upon by the executive officer, and only if Veresen failed to remedy the Good
Reason during the 30 day period, then the executive officer may resign for Good Reason.
For purposes of the Employment Agreements and the Executive Termination Policy, “Good Reason” means the
occurrence of any event without the executive officer’s consent that would be considered constructive dismissal or
constructive discharge by a court of competent jurisdiction under the common law and “Just Cause” means (a) any
improper conduct of the executive officer which is materially detrimental to Veresen or any willful and material failure
by the executive officer to properly carry out his or her employment duties or (b) any other act or omission that would
constitute “just cause” as determined by a court of competent jurisdiction under common law.
The estimated severance which would be received by each individual executive officer pursuant to the Employment
Agreements or the Executive Termination Policy, as applicable, assuming that all such executive officers of Veresen
are terminated by Veresen without “Just Cause”, or for “Good Reason” by the executive officer, upon the completion
of the Arrangement, is set out in the table below under “Summary of Interests of Directors and Executive Officers in
the Arrangement”.
Continuing Insurance Coverage for Directors and Officers of Veresen
Pursuant to the Arrangement Agreement, Pembina has agreed that it will maintain in effect, or will cause Veresen or
its successors to maintain in effect, without any reduction in scope or coverage for six years from the Effective Time
customary policies of directors’ and officers’ liability insurance providing protection comparable to the current
protection provided by the policies maintained by Veresen and their respective Subsidiaries as are in effect
immediately prior to the Effective Time and providing coverage on a “trailing” or “run-off” basis for all present and
former directors and officers of Veresen with respect to claims arising from facts or events which occurred prior to
the Effective Time. Prior to the Effective Time, Veresen is allowed to, in the alternative, with the consent of Pembina,
not to be unreasonably withheld, purchase run-off directors’ and officers’ liability insurance for a period of up to six
years from the Effective Time, and in such event none of Pembina, Veresen or any successor of Veresen will have
any further obligation under the Arrangement Agreement.
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Pembina has also agreed, pursuant to the Arrangement Agreement, that all rights to indemnification or exculpation
that are existing in favour of present and former officers and directors of Veresen shall survive completion of the
Arrangement and shall continue in full force and effect for a period of not less than six years from the Effective Date.
Combined Company Appointments
Veresen and Pembina have agreed pursuant to the Arrangement Agreement that Pembina shall use commercially
reasonable efforts to appoint Doug Arnell, Maureen E. Howe and Henry W. Sykes to the Pembina Board as soon as
reasonably practicable following completion of the Arrangement to serve until the next annual meeting of Pembina
shareholders or until their successors are duly appointed. Don Althoff, Veresen’s President and Chief Executive
Officer, will also continue to be involved in the combined company.
Summary of Interests of Directors and Executive Officers in the Arrangement
Each of the directors and executive officers of Veresen indicated in the table below intends to vote in favour of the
Common Shareholder Arrangement Resolution.
Name and Position
Number of
Common
Shares
Owned or
Controlled(1)
Number of
Pembina
Common
Shares Issuable
Pursuant to the
Arrangement
in Exchange for
Common
Shares Owned
or Controlled(2)
Number of
Veresen
Incentive
Awards held(3)
Estimated Payment for
Outstanding Veresen
Incentive Awards
($)(4)
Estimated
Severance
Payments(5)
($)
Don Althoff
President, Chief
Executive Officer and
Director
87,136(6)
(0.03%)
37,355 19,771 Veresen
DSUs
154,305 Veresen
RSUs
296,385 Veresen
PSUs
368,531 for Veresen DSUs
2,876,245 for Veresen
RSUs
5,524,616 for Veresen
PSUs
2,993,415
Theresa Jang
Senior Vice President,
Finance and Chief
Financial Officer
47,829(6), (7)
(0.01%)
20,504 45,913 Veresen
RSUs
119,486 Veresen
PSUs
855,818 for Veresen RSUs
2,227,219 for Veresen
PSUs
1,097,187
Kevan King
Senior Vice President,
General Counsel
28,883(6)
(0.01%)
12,382 7,718 Veresen
DSUs
34,096 Veresen
RSUs
72,209 Veresen
PSUs
143,864 for Veresen DSUs
635,549 for Veresen RSUs
1,345,976 for Veresen
PSUs
906,009
Darren Marine
Senior Vice President,
Business Joint
Ventures
716
(less than
0.01%)
307 28,075 Veresen
RSUs
69,899 Veresen
PSUs
523,318 for Veresen RSUs
1,302,917 for Veresen
PSUs
1,080,168
Elizabeth Spomer
Executive Vice
President of Veresen
and President and
CEO of Jordan Cove
LNG LLC
14,162
(less than
0.01%)
6,071 62,994 Veresen
RSUs
251,974 Veresen
PSUs
1,174,208 for Veresen
RSUs
4,696,795 for Veresen
PSUs
US$927,398
Page 92
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Name and Position
Number of
Common
Shares
Owned or
Controlled(1)
Number of
Pembina
Common
Shares Issuable
Pursuant to the
Arrangement
in Exchange for
Common
Shares Owned
or Controlled(2)
Number of
Veresen
Incentive
Awards held(3)
Estimated Payment for
Outstanding Veresen
Incentive Awards
($)(4)
Estimated
Severance
Payments(5)
($)
Doug Arnell
Director
500
(less than
0.01%)
214 12,001 Veresen
DSUs 223,699 for Veresen DSUs Nil
J. Paul Charron
Director
35,000
(0.01%)
15,005 54,367 Veresen
DSUs
1,013,401 for Veresen
DSUs
Nil
Maureen E. Howe
Director
8,500
(less than
0.01%)
3,644 63,338 Veresen
DSUs
1,180,620 for Veresen
DSUs
Nil
Rebecca A. McDonald
Director
500
(less than
0.01%)
214 41,840 Veresen
DSUs
779,898 for Veresen DSUs Nil
Stephen W.C.
Mulherin
Director
50,000
(0.02%)
21,435 92,687 Veresen
DSUs
1,727,686 for Veresen
DSUs
Nil
Henry W. Sykes
Director
18,000
(0.01%)
7,717 51,645 Veresen
DSUs
962,663 for Veresen DSUs Nil
Bertrand A. Valdman
Director
7,241
(less than
0.01%)
3,104 41,840 Veresen
DSUs
779,898 for Veresen DSUs Nil
Thierry Vandal
Director
3,625
(less than
0.01%)
1,554 20,804 Veresen
DSUs
387,787 for Veresen DSUs Nil
Notes:
(1) Assumes 313,652,781 Common Shares are issued and outstanding based on the number of Common Shares issued and outstanding on May 31, 2017.
(2) Assuming all such individuals elect to receive the Share Consideration, without any pro-rationing.
(3) Veresen DSUs, Veresen RSUs and Veresen PSUs held by executive officers and directors, as applicable, will continue
to accrue dividend equivalent units until the Effective Time. As part of their regular annual long-term incentive award,
Veresen DSUs will also continue to be credited to the account of each non-executive director in quarterly installments
on the last Business Day of each fiscal quarter until the Effective Time or any earlier date when such individuals cease
to be a director of Veresen.
(4) Value of Veresen DSUs, Veresen RSUs and Veresen PSUs has been determined by multiplying the aggregate number of
Veresen DSUs, Veresen RSUs and Veresen PSUs by the closing trading price of Common Shares on June 5, 2017 of
$18.64. The actual value of any Veresen PSUs upon vesting will be subject to adjustment in accordance with the terms
of the Veresen LTIP. Pursuant to the Veresen LTIP and the Veresen DSU Plans and the provisions of the Arrangement
Agreement, the fair market value used to determine actual cash payments in settlement of vested Veresen RSUs, Veresen
PSUs and Veresen DSUs as a result of the Arrangement will equal the twenty (20) day volume weighted average trading
price of the Common Shares prior to the Effective Date. In the case of Veresen PSUs, the value has been determined
assuming a payout multiplier, defined as the “TR Performance Factor”, of 1.0 and excludes any adjustment for dividend
equivalent units awarded after the date hereof. The actual TR Performance Factor used to determine actual cash payments
in settlement of vested Veresen PSUs will be determined in accordance with the terms of the Veresen LTIP prior to the Effective Date.
Page 93
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(5) Assumes that all executive officers of Veresen are terminated by Veresen without “Just Cause”, or for “Good Reason”
by the executive officer, upon the completion of the Arrangement, triggering payments under the Employment
Agreements or the Executive Termination Policy, as applicable, described under the heading “Interests of Directors and
Executive Officers in the Arrangement – Severance”.
(6) Number of Common Shares shown is as of May 31, 2017.
(7) Ms. Jang also holds 1,000 Preferred Shares.
DISSENT RIGHTS
The following description of the right to dissent to which registered Shareholders are entitled is not a
comprehensive statement of the procedures to be followed by a Dissenting Shareholder who seeks payment of
the fair value of such Dissenting Shareholder’s Common Shares or Preferred Shares, as applicable, and is
qualified in its entirety by reference to the full text of the Plan of Arrangement, Interim Order and the text of
Section 191 of the ABCA, which are attached to this Information Circular as Appendices D, E and F,
respectively. A Dissenting Shareholder who intends to exercise the right to dissent should carefully consider
and comply with the provisions of the ABCA, as modified by the Plan of Arrangement and by the Interim
Order. Failure to adhere to the procedures established therein may result in the loss of all rights thereunder.
Accordingly, each Dissenting Shareholder who might desire to exercise Dissent Rights should consult his or her own
legal advisor.
A Court hearing the application for the Final Order has the discretion to alter the Dissent Rights described herein
based on the evidence presented at such hearing. Subject to certain tests as described below, pursuant to the Interim
Order, Dissenting Shareholders are entitled, in addition to any other right such Dissenting Shareholder may have, to
dissent and to be paid by Veresen the fair value of the Common Shares or Preferred Shares, as the case may be, held
by such Dissenting Shareholder in respect of which such Dissenting Shareholder dissents, determined as of the close
of business on the last Business Day before the day on which the Common Shareholder Arrangement Resolution or
Preferred Shareholder Arrangement Resolution, as the case may be, from which such Dissenting Shareholder’s dissent
was adopted and provided the Arrangement is completed in respect of such Shareholders. A Dissenting Shareholder
may dissent only with respect to all of the Common Shares or Preferred Shares, as the case may be, held by
such Dissenting Shareholder, or on behalf of any one beneficial owner and registered in the Dissenting
Shareholder’s name. Only registered Shareholders may dissent. Persons who are beneficial owners of Veresen
Shares registered in the name of a broker, dealer, bank, trust company or other nominee (including CDS) who
wish to dissent, should be aware that they may only do so through the registered owner of such Veresen Shares.
A registered Shareholder, such as a broker or CDS, who holds Veresen Shares as nominee for beneficial
holders, some of whom wish to dissent, must exercise the Dissent Right on behalf of such beneficial owners with
respect to all of the Common Shares or Preferred Shares held for such beneficial owners. In such case, the
written objection to the Common Shareholder Arrangement Resolution or Preferred Shareholder
Arrangement Resolution, as the case may be, should set forth the number of Common Shares and/or Preferred
Shares covered by it.
Dissenting Shareholders must provide a written objection to the Common Shareholder Arrangement Resolution or
Preferred Shareholder Arrangement Resolution, as the case may be, so that it is received by Veresen c/o Osler, Hoskin
& Harcourt LLP, Suite 2500, TransCanada Tower, 450 – 1st Street SW, Calgary, Alberta T2P 5H1, Attention: Colin
Feasby, by 4:00 p.m. (Calgary time) on July 4, 2017 being the fifth Business Day immediately preceding the date of
the Meetings, or the Business Day immediately preceding the date of any adjournment of the Common Shareholders’
Meeting or Preferred Shareholders’ Meeting, as applicable. No Common Shareholder or Preferred Shareholder
who has voted in favour of the Common Shareholder Arrangement Resolution or Preferred Shareholder
Arrangement Resolution, respectively, shall be entitled to dissent with respect to the Arrangement.
Either Veresen (which for purposes hereof shall include any successor to Veresen) or a Dissenting Shareholder, as the
case may be, may apply to the Court, after the approval of the Common Shareholder Arrangement Resolution or the
Preferred Shareholder Arrangement Resolution, as the case may be, to fix the fair value of such Dissenting
Shareholder’s Common Shares or Preferred Shares. If such an application is made to the Court by either Veresen or a
Page 94
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Dissenting Shareholder, as the case may be, Veresen must, unless the Court orders otherwise, send to each Dissenting
Shareholder, a written offer to pay such Dissenting Shareholder an amount considered by the Pembina Board to be
the fair value of the Common Shares or Preferred Shares held by such Dissenting Shareholder. The offer, unless the
Court orders otherwise, must be sent to each Dissenting Shareholder, as the case may be, at least 10 days before the
date on which the application is returnable, if Veresen is the applicant, or within 10 days after Veresen is served a
copy of the application, if a Dissenting Shareholder is the applicant. Every offer will be made on the same terms to
each Dissenting Shareholder and contain or be accompanied with a statement showing how the fair value was
determined.
A Dissenting Shareholder may make an agreement with Pembina for the purchase of such holder’s Common Shares
or Preferred Shares, as the case may be, in the amount of the offer made by Pembina, or otherwise, at any time before
the Court pronounces an order fixing the fair value of the Common Shares or Preferred Shares, as the case may be.
A Dissenting Shareholder will not be required to give security for costs in respect of an application and, except in
special circumstances, will not be required to pay the costs of the application or appraisal. On the application, the
Court will make an order fixing the fair value of the Common Shares or Preferred Shares of all Dissenting
Shareholders, as the case may be, who are parties to the application, giving judgment in that amount against Pembina
and in favour of each of those Dissenting Shareholders, and fixing the time within which Pembina must pay the amount
payable to each Dissenting Shareholder calculated from the date on which such Dissenting Shareholder ceases to have
any rights as a Common Shareholder or Preferred Shareholder, as the case may be, until the date of payment.
On the Arrangement becoming effective in respect of the Common Shares or Preferred Shares, as the case may be,
held by the Dissenting Shareholder, or upon the making of an agreement between Veresen and the Dissenting
Shareholder as to the payment to be made by Veresen to the Dissenting Shareholder, or upon the pronouncement of a
Court order, whichever first occurs, such Dissenting Shareholder will cease to have any rights as a Common
Shareholder or Preferred Shareholder, as the case may be, other than the right to be paid the fair value of such holder’s
Common Shares or Preferred Shares, as the case may be, in the amount or in the amount of the judgment, as the case
may be. Until one of these events occurs, the Dissenting Shareholder may withdraw his or her dissent or, if the
Arrangement has not yet become effective, Veresen may rescind the Common Shareholder Arrangement Resolution
or Preferred Shareholder Arrangement Resolution, as the case may be, and in either event, the dissent and appraisal
proceedings in respect of that Dissenting Shareholder will be discontinued.
Veresen shall not make a payment to a Dissenting Shareholder under Section 191 of the ABCA, as modified by the
Interim Order and the Plan of Arrangement, if there are reasonable grounds for believing that Veresen is or would
after the payment be unable to pay its liabilities as they become due, or that the realizable value of its assets of Pembina
would thereby be less than the aggregate of its liabilities. In such event, Veresen shall notify each Dissenting
Shareholder that it is unable lawfully to pay such Dissenting Shareholder for his or her Veresen Shares, in which case
the Dissenting Shareholder may, by written notice to Veresen within 30 days after receipt of such notice, withdraw
such holder’s written objection, in which case the holder shall be deemed to have participated in the Arrangement as
a Common Shareholder or Preferred Shareholder, as the case may be. If the Dissenting Shareholder does not withdraw
such holder’s written objection, such Dissenting Shareholder retains status as a claimant against Veresen to be paid as
soon as Pembina is lawfully entitled to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of
Pembina but in priority to its shareholders.
All Common Shares or Preferred Shares, as the case may be, held by Dissenting Shareholders, who exercise their
Dissent Rights will, if the holders thereof do not otherwise withdraw such written objections, be deemed to be
transferred to Veresen under the Arrangement (if applicable), and cancelled in exchange for the fair value thereof or
will, if such Dissenting Shareholders ultimately are not so entitled to be paid the fair value thereof, be treated as if the
holders had participated in the Arrangement on the same basis as a non-dissenting holder of Common Shares or
Preferred Shares, as the case may be.
The above summary does not purport to provide a comprehensive statement of the procedures to be followed by a
Dissenting Shareholders who seek payment of the fair value of their Common Shares or Preferred Shares, as the case
may be. Section 191 of the ABCA, other than as amended by the Arrangement and the Interim Order, requires
adherence to the procedures established therein and failure to do so may result in the loss of all rights thereunder.
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Accordingly, Dissenting Shareholders who might desire to exercise the right to dissent and appraisal should
carefully consider and comply with the provisions of Section 191 of the ABCA, the full text of which is set out
in Appendix F to this Information Circular and consult their own legal advisor.
Unless otherwise waived, it is a condition to the completion of the Arrangement that holders of not more than
5% of the issued and outstanding Common Shares shall have validly exercised Dissent Rights in respect of the
Arrangement that have not been withdrawn as of the Effective Date. Should Dissent Rights have been validly
exercised in respect of more than 5% of the outstanding Preferred Shares and the Preferred Shareholder Arrangement
Resolution receives the requisite approval of the Preferred Shareholders, Veresen will amend the Plan of Arrangement
if requested by Pembina to exclude the Preferred Shares under the Plan of Arrangement and matters ancillary thereto,
including the amalgamation of Veresen and Pembina contemplated by the Plan of Arrangement.
Notwithstanding the foregoing, registered Preferred Shareholders who have validly exercised Dissent Rights shall not
be entitled to dissent and to be paid the fair value of their Preferred Shares in the event that the Preferred Shares are
not exchanged by Pembina pursuant to the Arrangement.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Osler, the following summary describes the principal Canadian federal income tax considerations in
respect of the sale of Veresen Shares pursuant to the Arrangement and the holding of Pembina Shares received
pursuant to the Arrangement. This summary is generally applicable to a beneficial owner of Veresen Shares who, at
all relevant times, for purposes of the Tax Act, (1) deals at arm’s length with Veresen and Pembina; (2) is not affiliated
with Veresen or Pembina; and (3) holds the Veresen Shares, and will hold any Pembina Shares received under the
Arrangement, as capital property (a “Holder”). Generally, the Veresen Shares and the Pembina Shares will be capital
property to a Holder provided the Holder does not hold such shares in the course of carrying on a business of buying
and selling securities or as part of an adventure or concern in the nature of trade. This summary does not address all
issues relevant to Holders who acquired their Common Shares on the exercise of options or pursuant to other employee
equity compensation plans. Such Holders should consult their own tax advisors.
This summary is based on the current provisions of the Tax Act, and on Osler’s understanding of the current
administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) published in writing prior to
the date hereof. This summary takes into account all specific proposals to amend the Tax Act publicly announced by
or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes
that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the
Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or
anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulation,
administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory
or foreign jurisdiction, which may differ from those discussed herein.
This summary is not applicable to (i) a Holder that is a “specified financial institution”, (ii) a Holder an interest in
which is a “tax shelter investment”, (iii) a Holder that is, for purposes of certain rules (referred to as the mark-to-
market rules) applicable to securities held by financial institutions, a “financial institution”, (iv) a Holder that reports
its “Canadian tax results” in a currency other than Canadian currency, (iv) a Holder who acquired its Common Shares
on the exercise of an employment stock option that was granted while Veresen qualified as a “Canadian controlled
private corporation”, or (v) a Holder that has entered into, or will enter into, with respect to its Veresen Shares or
Pembina Shares, as the case may be, a “derivative forward agreement”, each as defined in the Tax Act. Such Holders
should consult their own tax advisors.
Additional considerations, not discussed herein, may be applicable to a Holder that is a corporation resident in Canada
and is, or becomes, controlled by a non-resident corporation for the purposes of the “foreign affiliate dumping” rules
in section 212.3 of the Tax Act. Such Holders should consult their own tax advisors.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any
particular shareholder. This summary is not exhaustive of all Canadian federal income tax considerations.
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Accordingly, Shareholders should consult their own tax advisors having regard to their own particular
circumstances.
Holders Resident in Canada
This portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax Act
and any applicable income tax convention, is, or is deemed to be, resident in Canada (a “Resident Holder”). Certain
Resident Holders may be entitled to make or may have already made the irrevocable election permitted by subsection
39(4) of the Tax Act, the effect of which may be to deem to be capital property any Veresen Shares and Pembina
Shares (and all other “Canadian securities”, as defined in the Tax Act) owned by such Resident Holder in the taxation
year in which the election is made and in all subsequent taxation years. Resident Holders whose Veresen Shares or
Pembina Shares might not otherwise be considered to be capital property should consult their own tax advisors
concerning this election.
Exchange of Veresen Shares under the Arrangement
Pursuant to the Arrangement, a Resident Holder may elect, subject to certain pro-rationing and rounding provisions,
to receive for each one of their Common Shares, either (a) the Cash Consideration or (b) the Share Consideration, and
for each one of their Preferred Shares, the Preferred Share Consideration. (See “Procedure for the Arrangement to
become Effective” for further details.)
Common Shares Exchanged for Veresen Cash Consideration
For each Common Share that is exchanged for Cash Consideration pursuant to a Resident Holder’s election, as
adjusted under the Arrangement, the Resident Holder will realize a capital gain (or capital loss) to the extent that the
aggregate amount of cash received for those Common Shares, net of any reasonable costs of disposition, exceeds (or
is less than) the adjusted cost base of such shares to the Resident Holder. See “Taxation of Capital Gains and Losses”
below for a general discussion of the treatment of capital gains and capital losses under the Tax Act.
Common Shares Exchanged for Share Consideration
For each Common Share that is exchanged for Share Consideration pursuant to a Resident Holder’s election, as
adjusted under the Arrangement, the Resident Holder will be deemed to have disposed of such Common Share under
a tax-deferred share-for-share exchange pursuant to section 85.1 of the Tax Act, unless the Resident Holder chooses
to recognize a capital gain (or capital loss) as described in paragraph (b) below.
(a) Where a Resident Holder does not choose to recognize a capital gain (or capital loss) on the
exchange, the Resident Holder will be deemed to have disposed of such Common Shares for
proceeds of disposition equal to the aggregate adjusted cost base of those Common Shares to the
Resident Holder, determined immediately before the exchange, and the Resident Holder will be
deemed to have acquired the Pembina Common Shares at an aggregate cost equal to such adjusted
cost base of the Common Shares. This cost will be averaged with the adjusted cost base of all other
Pembina Common Shares held by the Resident Holder as capital property for the purposes of
determining the adjusted cost base of each Pembina Common Share held by the Resident Holder as
capital property.
(b) A Resident Holder may choose to recognize a capital gain (or capital loss) in respect of the exchange
of Common Shares for Pembina Common Shares by including the capital gain (or capital loss) in
computing the Resident Holder’s income for the taxation year in which the Arrangement takes place.
In such circumstances, the Resident Holder will recognize a capital gain (or capital loss) equal to
the amount, if any, by which the fair market value of the Pembina Common Shares received, net of
any reasonable costs associated with the exchange, exceeds (or is less than) the aggregate of the
adjusted cost base of such Common Shares to the Resident Holder, determined immediately before
the exchange. For a description of the tax treatment of capital gains and capital losses, see “Taxation
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of Capital Gains and Losses” below. The cost of the Pembina Common Shares acquired on the
exchange will be equal to the fair market value thereof at the time of the exchange. This cost will
be averaged with the adjusted cost of all other Pembina Common Shares held by the Resident Holder
as capital property for the purpose of determining the adjusted cost base of each Pembina Common
Share held by the Resident Holder as capital property.
Preferred Shares Exchanged for Preferred Share Consideration
For each Preferred Share that is exchanged for Preferred Share Consideration, the Resident Holder will be deemed to
have disposed of such Preferred Share under a tax-deferred share-for-share exchange pursuant to section 85.1 of the
Tax Act, unless the Resident Holder chooses to recognize a capital gain (or capital loss) as described in paragraph (b)
below.
(a) Where a Resident Holder does not choose to recognize a capital gain (or capital loss) on the
exchange, the Resident Holder will be deemed to have disposed of such Preferred Shares for
proceeds of disposition equal to the aggregate adjusted cost base of those Preferred Shares to the
Resident Holder, determined immediately before the exchange, and the Resident Holder will be
deemed to have acquired the Pembina Exchange Shares at an aggregate cost equal to such adjusted
cost base of the Preferred Shares. This cost will be averaged with the adjusted cost base of all other
Pembina Exchange Shares of the applicable series held by the Resident Holder as capital property
for the purposes of determining the adjusted cost base of each Pembina Exchange Share of that
series held by the Resident Holder as capital property.
(b) A Resident Holder may choose to recognize a capital gain (or capital loss) in respect of the exchange
of Preferred Shares for Pembina Exchange Shares by including the capital gain (or capital loss) in
computing the Resident Holder’s income for the taxation year in which the Arrangement takes place.
In such circumstances, the Resident Holder will recognize a capital gain (or capital loss) equal to
the amount, if any, by which the fair market value of the Pembina Exchange Shares received, net of
any reasonable costs associated with the exchange, exceeds (or is less than) the aggregate of the
adjusted cost base of such Preferred Shares to the Resident Holder, determined immediately before
the exchange. For a description of the tax treatment of capital gains and capital losses, see “Taxation
of Capital Gains and Losses” below. The cost of the Pembina Exchange Shares acquired on the
exchange will be equal to the fair market value thereof at the time of the exchange. This cost will
be averaged with the adjusted cost of all other Pembina Exchange Shares of the applicable series
held by the Resident Holder as capital property for the purpose of determining the adjusted cost base
of each Pembina Exchange Share of that series held by the Resident Holder as capital property.
Dissenting Resident Holders of Veresen Shares
A Resident Holder that validly exercises Dissent Rights will be deemed under the Arrangement to have transferred
such Resident Holder’s Common Shares or Preferred Shares to Veresen, and will be entitled to be paid the fair value
of the Resident Holder’s Common Shares or Preferred Shares, as the case may be. The Resident Holder will be deemed
to have received a taxable dividend equal to the amount by which the amount received for the Common Shares or
Preferred Shares, as the case may be, (less an amount in respect of interest, if any, awarded by the Court) exceeds the
paid-up capital for purposes of the Tax Act of such shares (as determined under the Tax Act).
Where a Dissenting Shareholder is an individual, any deemed dividend will be included in computing that Resident
Holder’s income and will be subject to the gross-up and dividend tax credit rules normally applicable to dividends
received from taxable Canadian corporations. In the case of a Dissenting Shareholder that is a corporation, any deemed
dividend will be included in income and generally will be deductible in computing taxable income. However, in some
circumstances, the amount of any such deemed dividend realized by a corporation may be treated as proceeds of
disposition and not as a dividend under subsection 55(2) of the Tax Act. Resident Holders that are corporations should
consult their own tax advisors in this regard.
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“Private corporations” and “subject corporations” (as defined in the Tax Act) may be liable for an additional
refundable Part IV tax on any dividends received to the extent such dividends are deductible in computing the Resident
Holder’s taxable income for the year.
A Resident Holder will also be considered to have disposed of Common Shares or Preferred Shares, as the case may
be, for proceeds of disposition equal to the amount paid to such Resident Holder less an amount in respect of interest,
if any, awarded by the Court and the amount of any deemed dividend. Resident Holders may realize a capital gain (or
sustain a capital loss) to the extent that such proceeds exceed (or are less than) the aggregate of the adjusted cost base
of the Common Shares or Preferred Shares, as the case may be, to the dissenting Resident Holder and reasonable costs
of the disposition. The taxation of capital gains and capital losses is discussed below under the heading “Taxation of
Capital Gains and Capital Losses”.
Any interest awarded by the Court to a Dissenting Shareholder will be included in such Resident Holder’s income for
the purposes of the Tax Act.
Holding and Disposing of Pembina Shares
Dividends Received on Pembina Shares
A Resident Holder will be required to include in computing its income for a taxation year any dividends received (or
deemed to be received) on the Pembina Common Shares or Pembina Exchange Shares, as the case may be. In the case
of a Resident Holder that is an individual (other than certain trusts), such dividends will be subject to the gross-up and
dividend tax credit rules applicable to taxable dividends received from taxable Canadian corporations, including the
enhanced gross-up and dividend tax credit applicable to any dividends designated by Pembina as an eligible dividend
in accordance with the provisions of the Tax Act. A dividend received (or deemed to be received) by a Resident Holder
that is a corporation will generally be deductible in computing the corporation’s taxable income. In certain
circumstances, however, a taxable dividend received (or deemed to be received) by a Resident Holder that is a
corporation may be deemed to be proceeds of a disposition potentially giving rise to a capital gain. Resident Holders
that are corporations should consult their own tax advisors having regard to their own particular circumstances.
A Resident Holder that is a “private corporation”, as defined in the Tax Act, or any other corporation controlled,
whether because of a beneficial interest in one or more trusts or otherwise, by or for the benefit of an individual (other
than a trust) or a related group of individuals (other than trusts), will generally be liable to pay a refundable tax under
Part IV of the Tax Act on dividends received (or deemed to be received) on the Pembina Common Shares or Pembina
Exchange Shares, as the case may be, to the extent such dividends are deductible in computing the Resident Holder’s
taxable income for the taxation year.
The Pembina Exchange Shares will be “taxable preferred shares” as defined in the Tax Act. The terms of the Pembina
Exchange Shares require Pembina to make the necessary election under Part VI.1 of the Tax Act so that Resident
Holders that are corporations will not be subject to tax under Part IV.1 of the Tax Act on dividends received (or
deemed to be received) on the Pembina Exchange Shares.
Disposition of Pembina Shares
Generally, on a disposition or deemed disposition of a Pembina Common Share or Pembina Exchange Share, a
Resident Holder will realize a capital gain (or capital loss) equal to the amount, if any, by which the proceeds of
disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Resident
Holder of the Pembina Common Share or the Pembina Exchange Share, as the case may be, held immediately before
the disposition or deemed disposition. The adjusted cost base to the Resident Holder of a Pembina Common Share or
Pembina Exchange Share will be determined by averaging the cost of such Pembina Common Share or Pembina
Exchange Share with the adjusted cost base of all other Pembina Common Shares or Pembina Exchange Shares of the
same series, as the case may be, held by the Resident Holder as capital property at that time. See “Taxation of Capital
Gains and Losses” below for a general discussion of the treatment of capital gains and capital losses under the Tax
Act.
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Taxation of Capital Gains and Losses
Generally, a Resident Holder is required to include in computing its income for a taxation year one-half of the amount
of any capital gain (a “taxable capital gain”) realized in the year. Subject to and in accordance with the provisions of
the Tax Act, a Resident Holder is required to deduct one-half of the amount of any capital loss (an “allowable capital
loss”) realized in a taxation year from taxable capital gains realized by the Resident Holder in the year and allowable
capital losses in excess of taxable capital gains for the year may be carried back and deducted in any of the three
preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital
gains realized in such years.
The amount of any capital loss realized by a Resident Holder that is a corporation on the disposition of a Pembina
Common Share or Pembina Exchange Share may be reduced by the amount of any dividends received (or deemed to
be received) by the Resident Holder on such share to the extent and under the circumstances prescribed by the Tax
Act. Similar rules may apply where a Pembina Common Share or Pembina Exchange Share is owned by a partnership
or trust of which a corporation, trust or partnership is a member or beneficiary. Such Resident Holders should consult
their own advisors.
Additional Refundable Tax
A Resident Holder that is throughout the taxation year a “Canadian-controlled private corporation”, as defined in the
Tax Act, is liable for tax, a portion of which may be refundable, on investment income, including taxable capital gains
realized and dividends received or deemed to be received (but not dividends or deemed dividends that are deductible
in computing taxable income).
Eligibility for Investment
Provided that the Pembina Common Shares and Pembina Exchange Shares are listed on a designated stock exchange
(which currently includes the TSX) on the Effective Date, the Pembina Common Shares and Pembina Exchange
Shares received by Common Shareholders and Preferred Shareholders, as the case may be, pursuant to the
Arrangement will be qualified investments under the Tax Act for trusts governed by registered retirement savings
plans (“RRSP”), registered retirement income funds (“RRIF”), registered education savings plans (“RESP”),
deferred profit sharing plans, registered disability savings plans (“RDSP”) and tax-free savings accounts (“TFSA”).
In the case of an RRSP, an RRIF or a TFSA, provided the annuitant of the RRSP or RRIF or the holder of the TFSA,
as the case may be, deals at arm’s length with Pembina and does not have a “significant interest” (within the meaning
of the Tax Act) in Pembina, the Pembina Common Shares and Pembina Exchange Shares will generally not be a
prohibited investment under the Tax Act for such RRSP, RRIF or TFSA. In addition, the Pembina Common Shares
and Pembina Exchange Shares will generally not be a prohibited investment if such shares are “excluded property” as
defined in the Tax Act for purposes of the prohibited investment rules. Under proposals to amend the Tax Act
contained in the Federal Budget released on March 22, 2017, the prohibited investment rules will also apply to trusts
governed by RESPs and the subscribers thereof and RDSPs and the holders thereof, effective after March 22, 2017.
Holders Not Resident in Canada
This portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax
Act, is not, and is not deemed to be, resident in Canada and does not use or hold, and is not deemed to use or hold, the
Veresen Shares or Pembina Shares in a business carried on in Canada (a “Non-Resident Holder”). Special rules,
which are not discussed in this summary, may apply to certain holders that are insurers carrying on an insurance
business in Canada and elsewhere.
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Exchange of Veresen Shares under the Arrangement
Exchange of Common Shares under the Arrangement
A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on a disposition of
Common Shares pursuant to the Arrangement unless, at the Effective Time, the Common Shares are “taxable Canadian
property” (as defined in the Tax Act) to the Non-Resident Holder and are not “treaty-protected property” (as defined
in the Tax Act) of the Non-Resident Holder. See discussion below under “Veresen Shares – Taxable Canadian
Property”.
A Non-Resident Holder whose Common Shares are “taxable Canadian property” and are not “treaty-protected
property” will generally have the same tax considerations as those described above under “Holders Resident in Canada
– Exchange of Veresen Shares under the Arrangement”.
Exchange of Preferred Shares under the Arrangement
A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on a disposition of
Preferred Shares pursuant to the Arrangement unless, at the Effective Time, the Preferred Shares are “taxable Canadian
property” (as defined in the Tax Act) to the Non-Resident Holder and are not “treaty-protected property” (as defined
in the Tax Act) of the Non-Resident Holder. See discussion below under “Veresen Shares – Taxable Canadian
Property”.
A Non-Resident Holder whose Preferred Shares are “taxable Canadian property” and are not “treaty-protected
property” will generally have the same tax considerations as those described above under “Holders Resident in Canada
– Exchange of Veresen Shares under the Arrangement”.
Dissenting Non-Resident Holders
A Non-Resident Holder that validly exercises Dissent Rights will be deemed to have transferred such Non-Resident
Holder’s Common Shares or Preferred Shares, as the case may be, to Veresen, and will be entitled to receive an amount
equal to the fair value of the Non-Resident Holder’s Common Shares or Preferred Shares, respectively. The Non-
Resident Holder will be deemed to have received a taxable dividend equal to the amount by which the amount paid to
the Non-Resident Holder for the Common Shares or Preferred Shares, as the case may be, (less an amount in respect
of interest, if any, awarded by the Court) exceeds the paid-up capital of such shares (as determined under the Tax Act).
The amount of the dividend will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the
dividend unless the rate is reduced under the provisions of an applicable income tax treaty or convention between
Canada and the Non-Resident Holder’s country of residence.
A Non-Resident Holder of Common Shares or Preferred Shares will also be considered to have disposed of the
Common Shares or Preferred Shares, as the case may be, for proceeds of disposition equal to the amount paid to such
Non-Resident Holder less an amount in respect of interest, if any, awarded by the Court and the amount of any deemed
dividend, and will be subject to tax under the Tax Act on any gain realized if such shares constitute “taxable Canadian
property” as described under the above heading “Exchange of Veresen Shares Under the Arrangement”, unless relief
is provided under an income tax treaty or convention between Canada and the Non-Resident Holder’s country of
residence.
Veresen Shares – Taxable Canadian Property
Generally, the Common Shares or Preferred Shares will not constitute “taxable Canadian property” to a Non-Resident
Holder at a particular time provided that the Common Shares or Preferred Shares, as the case may be, are listed at that
time on a designated stock exchange (which includes the TSX), unless at any particular time during the 60-month
period that ends at that time:
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(a) one or any combination of (a) the Non-Resident Holder, (b) persons with whom the Non-Resident
Holder does not deal with at arm’s length, and (c) partnerships in which the Non-Resident Holder
or a person described in (b) holds a membership interest directly or indirectly through one or more
partnerships, has owned 25% or more of the issued shares of any class or series of the capital stock
of Veresen; and
(b) more than 50% of the fair market value of the Common Shares or Preferred Shares, as the case may
be, was derived directly or indirectly from one or any combination of: (a) real or immovable
properties situated in Canada, (b) “Canadian resource properties” (as defined in the Tax Act), (c)
“timber resource properties” (as defined in the Tax Act), and (d) options in respect of, or interests
in, or for civil law rights in, property in any of the foregoing whether or not the property exists.
Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, Common Shares or Preferred Shares
could be deemed to be taxable Canadian property. Non-Resident Holders whose Common Shares or Preferred Shares,
as the case may be, may constitute taxable Canadian property should consult their own tax advisors.
Even if the Common Shares or Preferred Shares are taxable Canadian property to a Non-Resident Holder, a taxable
capital gain resulting from the disposition of such shares will not be included in computing the Non-Resident Holder’s
income for the purposes of the Tax Act if the Common Shares or Preferred Shares, as the case may be, constitute
“treaty-protected property”. Common Shares or Preferred Shares owned by a Non-Resident Holder will generally be
treaty-protected property if the gain from the disposition of such shares would, because of an applicable income tax
treaty, be exempt from tax under the Tax Act.
A Non-Resident Holder who disposes of taxable Canadian property that is not treaty-protected property must file a
Canadian income tax return for the year in which the disposition occurs, regardless of whether the Non-Resident
Holder is liable for Canadian tax on any gain realized as a result.
Holding and Disposing of Pembina Shares
Dividends Received on Pembina Shares
Dividends paid or credited (or deemed to be paid or credited) on the Pembina Common Shares and the Pembina
Exchange Shares to a Non-Resident Holder will be subject to Canadian withholding tax at the rate of 25%, subject to
any reduction in the rate of withholding to which the Non-Resident Holder is entitled under any applicable income
tax convention. For example, under the Canada-U.S. Income Tax Convention (1980) (the “Convention”), where
dividends on the Pembina Common Shares and the Pembina Exchange Shares are considered to be paid to or derived
by a Non-Resident Holder that is the beneficial owner of the dividends and is a U.S. resident for the purposes of, and
is entitled to benefits in accordance with, the provisions of the Convention, the applicable rate of Canadian withholding
tax is generally reduced to 15%.
Disposition of Pembina Shares
A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on a disposition or
deemed disposition of Pembina Common Shares or Pembina Exchange Shares, unless the Pembina Common Shares
or Pembina Exchange Shares, as the case may be, constitute “taxable Canadian property” to the Non-Resident Holder
and do not constitute “treaty-protected property”. For a description of “taxable Canadian property” see “Veresen
Shares – Taxable Canadian Property” above, as the same tests will apply in respect of the Pembina Common Shares
and the Pembina Exchange Shares.
Pursuant to the provisions of the Tax Act, where a Veresen Share constitutes “taxable Canadian property” to a Non-
Resident Holder, any Pembina Shares received by the Non-Resident Holder on the exchange of such Veresen Share
for Pembina Shares utilizing the rollover available under section 85.1 of the Tax Act will be deemed to constitute
“taxable Canadian property” to the Non-Resident Holder for a period of 60 months. The result is that such Non-
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Resident Holder may be subject to tax under the Tax Act on future gains realized on a disposition of those Pembina
Shares so long as the Pembina Shares constitute “taxable Canadian property” to the Non-Resident Holder.
Non-Resident Holders whose Pembina Shares may constitute taxable Canadian property should consult their own tax
advisors.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain U.S. federal income tax considerations applicable to a U.S. Holder (as
defined below) arising from the disposition of Common Shares pursuant to the Arrangement and the ownership and
disposition of Pembina Common Shares received pursuant to the Arrangement. This summary is for general
information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income
tax considerations that may apply to a U.S. Holder. In addition, this summary does not take into account the individual
facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to
such U.S. Holder (as discussed below), including specific tax consequences to a U.S. Holder under an applicable tax
treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income
tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S.
federal estate and gift, U.S. state and local, or non-U.S. tax consequences to U.S. Holders of the receipt of Pembina
Common Shares and/or cash pursuant to the Arrangement and the ownership and disposition of such Pembina
Common Shares. Except as specifically set forth below, this summary does not discuss applicable income tax reporting
requirements. Each U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local, and
non-U.S. tax consequences of the Arrangement and the ownership and disposition of Pembina Common Shares
received pursuant to the Arrangement.
No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or
will be obtained, regarding the U.S. federal income tax consequences of the Arrangement or the ownership and
disposition of Pembina Common Shares received pursuant to the Arrangement. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in
this summary. In addition, because the authorities on which this summary is based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
This summary does not address the U.S. federal income tax consequences to any person of the disposition of Preferred
Shares in exchange for Pembina Exchange Shares pursuant to the Arrangement, or the ownership and disposition of
such Pembina Exchange Shares. Each holder of Preferred Shares should consult its own tax advisor regarding all U.S.
federal, U.S. state and local, and non-U.S. tax consequences of the disposition of Preferred Shares pursuant to the
Arrangement and the ownership and disposition of Pembina Exchange Shares received pursuant to the Arrangement.
Further, this summary does not address the U.S. federal income tax consequences of transactions effected prior or
subsequent to, or concurrently with, the Arrangement that, in each case, are not part of the Plan of Arrangement.
Scope of This Disclosure
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), final and temporary U.S.
Treasury Regulations, published rulings of the IRS, published administrative positions of the IRS, the Convention,
and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this
Information Circular. Any of the authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a prospective or retroactive basis which could
affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a
retroactive or prospective basis.
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U.S. Holders
For purposes of this summary, the term “U.S. Holder” means a beneficial owner of Common Shares (or, after the
Arrangement, Pembina Common Shares) participating in the Arrangement or exercising Dissent Rights (with respect
only to Common Shares) pursuant to the Arrangement, that is for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust that (a) is subject to the primary supervision of a court within the United States and the control of one
or more U.S. persons for all substantial decisions or (b) has a valid election in effect under applicable U.S.
Treasury Regulations to be treated as a U.S. person.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax consequences of the Arrangement or the ownership and
disposition of Pembina Common Shares received pursuant to the Arrangement to U.S. Holders that are subject to
special provisions under the Code, including U.S. Holders that: (a) are tax-exempt organizations, qualified retirement
plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters,
insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers,
or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a “functional
currency” other than the U.S. dollar; (e) own Common Shares (or after the Arrangement, Pembina Common Shares)
as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving
more than one position; (f) acquired Common Shares in connection with the exercise of employee stock options or
otherwise as compensation for services; (g) hold Common Shares (or after the Arrangement, Pembina Common
Shares) other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for
investment purposes); (h) own, directly, indirectly, or by attribution, 5% or more, by voting power or value, of the
outstanding Veresen Shares (or after the Arrangement, Pembina Shares); and (i) acquired Common Shares by gift or
inheritance. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders
who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a
resident or deemed to be a resident in Canada for purposes of the Tax Act; (c) persons that use or hold, will use or
hold, or that are or will be deemed to use or hold Common Shares (or after the Arrangement, Pembina Common
Shares) in connection with carrying on a business in Canada; (d) persons whose Common Shares (or after the
Arrangement, Pembina Common Shares) constitute “taxable Canadian property” under the Tax Act; or (e) persons
that have a permanent establishment in Canada for the purposes of the Convention. U.S. Holders that are subject to
special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax
advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences relating to the Arrangement
and the ownership and disposition of Pembina Common Shares received pursuant to the Arrangement.
If an entity or arrangement that is classified as a partnership (including any other “pass-through” entity) for U.S.
federal income tax purposes holds Common Shares (or after the Arrangement, Pembina Common Shares), the U.S.
federal income tax consequences to such partnership and the partners (or owners) of such partnership of participating
in the Arrangement and the ownership and disposition of Pembina Common Shares received pursuant to the
Arrangement generally will depend on the activities of the partnership and the status of such partners (or owners).
This summary does not address the tax consequences to any such partnership or partner (or owner). Partners (or
owners) of entities and arrangements that are classified as partnerships for U.S. federal , U.S. state and local, and non-
U.S. tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences of the
Arrangement and the ownership and disposition of Pembina Common Shares received pursuant to the Arrangement.
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Certain U.S. Federal Income Tax Consequences of the Arrangement
Characterization of the Arrangement for U.S. Federal Income Tax Purposes
If the Preferred Shareholder Arrangement Resolution receives the requisite approval by the Preferred Shareholders at
the Preferred Shareholders’ Meeting, and, as a result, the amalgamation of Pembina and Veresen pursuant to the
Arrangement (the “Amalgamation”) occurs, Veresen and Pembina intend that, (i) the exchange of Common Shares
for Pembina Common Shares or cash, and (ii) the Amalgamation, both pursuant to the Arrangement, be treated as an
integrated transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Code (a
“Reorganization”).
Since the Arrangement will be effected pursuant to applicable provisions of Canadian corporate law that are not
identical to analogous provisions of U.S. corporate law, and there are no direct authorities that consider whether the
transactions described in items (i) and (ii) in the preceding sentence will be treated as a single integrated transaction
that qualifies as a Reorganization within the meaning of Section 368(a) of the Code, there can be no assurance that
the IRS or a U.S. court would not take a contrary view of the Arrangement in such circumstances. Neither Veresen
nor Pembina has sought or obtained either a ruling from the IRS or an opinion of counsel regarding any of the tax
consequences of the Arrangement. Accordingly, there can be no assurance that the IRS will not challenge the status
of the Arrangement as a Reorganization or that the U.S. courts would uphold the status of the Arrangement as a
Reorganization in the event of an IRS challenge.
Alternatively, if the Preferred Shareholder Arrangement Resolution does not receive the requisite approval, and, as a
result, the Amalgamation does not occur, the Arrangement is expected to be treated as a taxable transaction for U.S.
federal income tax purposes.
The alternative tax consequences of the Arrangement qualifying as a Reorganization or as a taxable transaction are
discussed below. U.S. Holders should consult their own tax advisors regarding the proper tax reporting of the
Arrangement.
Tax Consequences if the Arrangement Qualifies as a Reorganization
If the Arrangement qualifies as a Reorganization, then subject to the PFIC rules discussed below, the following U.S.
federal income tax consequences should apply to U.S. Holders:
no gain or loss will be recognized by a U.S. Holder to the extent such U.S. Holder receives solely Share
Consideration in exchange for its Common Shares;
a U.S. Holder that elects to receive Cash Consideration or Share Consideration, but pursuant to pro-ration
receives a combination of Cash Consideration and Share Consideration in exchange for its Common Shares
generally will recognize gain (but not loss), in an amount equal to the lesser of (1) the amount of gain, if any,
realized (i.e., the excess of the sum of the U.S. dollar value of the Cash Consideration and the fair market
value of the Share Consideration received pursuant to the Arrangement over the U.S. Holder’s adjusted tax
basis in the Common Shares surrendered), and (2) the U.S. dollar value of the Cash Consideration received
by such holder of Common Shares.
a U.S. Holder that receives solely Cash Consideration in exchange for all of its Common Shares pursuant to
the Arrangement generally will recognize gain or loss on the difference between (1) the U.S. dollar value of
the Cash Consideration received by such holder pursuant to the Arrangement, and (2) the adjusted tax basis
of such holder in its surrendered Common Shares;
the aggregate tax basis of the Pembina Common Shares received by a U.S. Holder pursuant to the
Arrangement will equal the aggregate tax basis of the Common Shares surrendered, decreased by the U.S.
dollar value of the Cash Consideration received in the Arrangement, and increased by the amount of gain, if
any, recognized on the exchange;
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the holding period for the Pembina Common Shares received in the Arrangement will include such U.S.
Holder’s holding period for the Common Shares surrendered in exchange therefor; and
U.S. Holders generally will be required to report certain information to the IRS on their U.S. federal income
tax returns for the tax year in which the Arrangement occurs, and to retain certain records related to the
Arrangement.
Subject to the PFIC rules discussed below and the discussion in the following paragraph, any gain or loss recognized
as described above should generally be capital gain or loss, and should generally be long-term capital gain or loss if
the Common Shares exchanged pursuant to the Arrangement have been held for more than one year on the Effective
Date of the Arrangement. Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual,
estate, or trust. There are no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation.
If, after the Arrangement, a U.S. Holder owns, or is treated as owning under the constructive ownership rules of
Section 318 of the Code, Pembina Common Shares, it is possible that such holder’s gain recognized, if any, in the
Arrangement will be treated as a dividend rather than as capital gain. The characterization of any gain recognized on
the receipt of cash pursuant to the Arrangement as a capital gain or as ordinary dividend income will depend on
whether or not the receipt of such cash has the effect of a distribution of a dividend under Sections 302 and 356(a)(2)
of the Code, as well as certain other factors. For this purpose, a U.S. Holder will be treated as if the portion of its
Common Shares exchanged for cash in the Arrangement had instead been exchanged for Pembina Common Shares
and then was redeemed for the cash it actually received. Gain recognized in the deemed redemption generally will be
treated as capital gain if the deemed redemption is (1) “substantially disproportionate” with respect to the U.S. Holder
(that is, in general, if its deemed percentage share ownership in Pembina, including the Pembina Common Shares
actually or constructively owned, as well as those the U.S. Holder is deemed to own for purposes of the deemed
redemption analysis, was reduced in the deemed redemption by more than 20%) or (2) “not essentially equivalent to
a dividend,” which requires a “meaningful reduction” in the U.S. Holder’s deemed share ownership of Pembina. In
applying the above tests, a U.S. Holder will, under the constructive ownership rules, be deemed to own not only shares
that it actually owns, but also shares that are owned by certain related persons and entities or that such U.S. Holder or
such related persons or entities have the right to acquire pursuant to an option. The IRS has ruled that a shareholder in
a publicly held corporation whose relative common stock interest is minimal and who exercises no control with respect
to corporate affairs may generally be considered to have a “meaningful reduction” if that shareholder has even a small
reduction in its percentage stock ownership under the above analysis. These rules are complex and dependent upon
the specific factual circumstances particular to each U.S. Holder. Accordingly, U.S. Holders are urged to consult with
their own tax advisors regarding the potential characterization of any Cash Consideration received pursuant to the
Arrangement as the distribution of a dividend, having regard to such holder’s particular circumstances. For further
discussion of the treatment of dividends generally, see “Distributions on Pembina Common Shares”.
The IRS could challenge a U.S. Holder’s treatment of the Arrangement as a Reorganization. If the Arrangement fails
to qualify as a Reorganization, then the Arrangement would be treated as a taxable transaction, and the consequences
to U.S. Holders discussed below under “Tax Consequences if the Arrangement is a Taxable Transaction” would apply
instead.
Tax Consequences if the Arrangement is a Taxable Transaction
If the Arrangement does not qualify as a Reorganization, then subject to the PFIC rules discussed below, the following
U.S. federal income tax consequences would apply to U.S. Holders:
gain or loss would be recognized in an amount equal to the excess of the sum of the U.S. dollar value of the
Cash Consideration and the fair market value of the Share Consideration received pursuant to the
Arrangement over the U.S. Holder’s adjusted tax basis in the Common Shares surrendered;
the aggregate tax basis of the Pembina Common Shares received in the Arrangement would be equal to the
fair market value of such shares on the date of receipt; and
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the holding period for the Pembina Common Shares received in the Arrangement would begin on the day
after such shares are received.
Subject to the PFIC rules discussed below, any gain or loss described in the first bullet point immediately above would
be capital gain or loss, which would be long-term capital gain or loss if the holding period with respect to such
Common Shares is more than one year as of the date of the Arrangement. Preferential tax rates apply to long-term
capital gains of a non-corporate U.S. Holder. There are currently no preferential tax rates for long-term capital gains
of a U.S. Holder that is a corporation. Deductions for capital losses are subject to complex limitations under the Code.
Tax Consequences of the Arrangement if Veresen Is Classified as a PFIC
A U.S. Holder of Common Shares could be subject to special, adverse tax rules in respect of the Arrangement if
Veresen was classified as a “passive foreign investment company” within the meaning of Section 1297 of the Code (a
“PFIC”) for any tax year during which such U.S. Holder has held Common Shares.
In general, a non-U.S. corporation is a PFIC for each tax year in which (i) 75% or more of its gross income is passive
income (as defined for U.S. federal income tax purposes) or (ii) 50% or more of the value of its assets either produce
passive income or are held for the production of passive income, based on the quarterly average of the fair market
value, of such assets. For purposes of the PFIC provisions, “gross income” generally includes all sales revenues less
cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive
income” generally includes dividends, interest, certain royalties and rents, certain gains from the sale of stock and
securities, and certain gains from commodities transactions. In determining whether or not it is a PFIC, a non-U.S.
corporation will be treated as owning its proportionate share of the assets and earning its proportionate share of the
income of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value).
Veresen believes that it was not a PFIC during its taxable year ended December 2016 and, based on its current
operations and financial expectations, Veresen expects it would not be a PFIC for its current taxable year if such
taxable year were to end on the Effective Date. The determination of whether Veresen was a PFIC during any tax year
depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing
interpretations. Accordingly, there can be no assurance that the IRS will not challenge any determination made by
Veresen concerning its PFIC status or that Veresen was not, or will not be, a PFIC for any tax year. U.S. Holders
should consult their own tax advisors regarding the PFIC status of Veresen.
If Veresen has been a PFIC at any time during a U.S. Holder’s holding period for Common Shares, then under the
default PFIC rules the U.S. federal income tax consequences to a U.S. Holder of the Arrangement are expected to be
as follows:
the exchange of Common Shares for Pembina Common Shares pursuant to the Arrangement may be treated
as a taxable transaction even if the Arrangement qualifies as a Reorganization as discussed above (subject to
an exception that may be available if Pembina is also a PFIC in the taxable year that includes the
Arrangement);
any gain on the exchange of Common Shares pursuant to the Arrangement and any “excess distribution”
(defined as the excess of distributions with respect to the Common Shares in any tax year over 125% of the
average annual distributions such U.S. Holder has received from Veresen during the shorter of the three
preceding tax years, or such U.S. Holder’s holding period for the Common Shares), will be allocated ratably
over such U.S. Holder’s holding period for the Common Shares;
the amounts allocated to the current tax year in which the Arrangement occurs and to any tax year prior to
the first year in which Veresen was a PFIC will be taxed as ordinary income in the current year;
the amounts allocated to each of the other tax years in such U.S. Holder’s holding period for the Common
Shares (“prior PFIC years”) will be subject to tax as ordinary income at the highest rate of tax in effect for
the applicable class of taxpayer for that year;
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an interest charge for a deemed deferral benefit will be imposed with respect to the resulting tax attributable
to each of the prior PFIC years, which interest charge is not deductible by non-corporate U.S. Holders; and
if the Arrangement otherwise qualifies as a Reorganization as discussed above, any loss realized by the U.S.
Holder in connection with the Arrangement would generally not be recognized.
Each U.S. Holder should consult its own tax advisor regarding the status of Veresen as a PFIC, the possible
effect of the PFIC rules to such holder, as well as the availability of any election or exception that may be
available to such holder to mitigate adverse U.S. federal income tax consequences of holding shares in a PFIC.
The remainder of this discussion assumes that Veresen has not been a PFIC at any time during a U.S. Holder’s
holding period for Common Shares and is not be a PFIC during its current taxable year.
U.S. Holders Exercising Dissent Rights
A U.S. Holder that exercises Dissent Rights with respect to their Common Shares and is paid cash in exchange for all
of such U.S. Holder’s Common Shares generally will recognize gain or loss in an amount equal to the difference, if
any, between (a) the U.S. dollar value of the Canadian currency received by such U.S. Holder in exchange for such
U.S. Holder’s Common Shares (other than amounts, if any, that are or are deemed to be interest for U.S. federal
income tax purposes, which amounts will be taxed as ordinary income) and (b) the adjusted tax basis of such U.S.
Holder in such Common Shares surrendered. Subject to the PFIC rules discussed in this summary, such gain or loss
will generally be capital gain or loss, which will be long-term capital gain or loss if the holding period with respect to
such Common Shares is more than one year as of the date of the exchange. Preferential tax rates apply to long-term
capital gains of a non-corporate U.S. Holder. There are currently no preferential tax rates for long-term capital gains
of a U.S. Holder that is a corporation. Deductions for capital losses are subject to complex limitations under the Code.
U.S. Federal Income Tax Consequences of the Ownership and Disposition of Pembina Common Shares
The following discussion is subject, in its entirety, to the rules described below under “PFIC Rules Relating to the
Ownership of Pembina Common Shares”.
Distributions on Pembina Common Shares
For U.S. federal income tax purposes, a U.S. Holder that receives a distribution, including a constructive distribution,
with respect to a Pembina Common Share generally will be required to include the amount of such distribution in
gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated “earnings and profits” of Pembina, as computed for U.S. federal income tax
purposes. Any portion of the distribution in excess of Pembina’s earnings and profits will first be treated as a tax-free
return of capital to the extent of the U.S. Holder’s tax basis in its Pembina Common Share and will be applied against
and reduce that basis, but not below zero, on a dollar-for-dollar basis (thereby increasing the amount of gain or
decreasing the amount of loss recognized on a subsequent disposition of the Pembina Common Share). To the extent
that the distribution exceeds the U.S. Holder’s tax basis, the excess will constitute gain from a sale or exchange of the
Pembina Common Share. Dividends received on the Pembina Common Shares by corporate U.S. Holders generally
will not be eligible for the “dividends received deduction”. Subject to applicable limitations, dividends paid by
Pembina to non-corporate U.S. Holders, including individuals, generally would be eligible for qualified dividend
treatment and the preferential tax rates applicable to long-term capital gains, provided certain holding period and other
conditions are satisfied, including that Pembina not be classified as a PFIC in the tax year of distribution or in the
preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding
the application of such rules.
Sale, Exchange or Other Disposition of the Pembina Common Shares
Upon a sale, exchange or other taxable disposition of the Pembina Common Shares acquired pursuant to the
Arrangement, a U.S. Holder will recognize a capital gain or loss for U.S. federal income tax purposes in an amount
equal to the difference between the U.S. dollar value of the cash received plus the fair market value of any property
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received, and the U.S. Holder’s adjusted tax basis in such Pembina Common Shares. Any such gain or loss generally
will be long-term capital gain or loss if the U.S. Holder’s holding period in the Pembina Common Shares exceeds one
year. Non-corporate U.S. Holders (including individuals) generally will be subject to U.S. federal income tax on long-
term capital gain at preferential rates. The deductibility of capital losses is subject to complex limitations.
PFIC Rules Relating to the Ownership of Pembina Common Shares
Special, generally unfavorable, U.S. federal income tax rules apply to U.S. Holders owning stock of a PFIC. Based
on current business plans and financial expectations, Pembina expects that it should not be a PFIC for its current tax
year and does not anticipate becoming a PFIC in the future. No opinion of legal counsel or ruling from the IRS
concerning the status of Pembina as a PFIC has been obtained or is currently planned to be requested. PFIC
classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in
question, and is determined annually. Additionally, the analysis depends, in part, on the application of complex U.S.
federal income tax rules, which are subject to differing interpretations. Consequently, there can be no assurance that
Pembina is not or will not become, a PFIC for any tax year during which a U.S. Holder holds Pembina Common
Shares.
If Pembina were to be treated as a PFIC, gain realized on the sale or other disposition of Pembina Common Shares
would in general not be treated as capital gain. Instead, unless a U.S. Holder elects to be taxed annually on a mark-to-
market basis with respect to its Pembina Common Shares, the holder would be treated as if it had realized such gain
and certain “excess distributions” ratably over its holding period for the Pembina Common Shares and would generally
be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest
charge in respect of the tax attributable to certain of such years. With certain exceptions, a U.S. Holder’s Pembina
Common Shares will be treated as stock in a PFIC if Pembina were a PFIC at any time during such holder’s holding
period in its Pembina Common Shares. Dividends received from Pembina would not be eligible for the preferential
tax rates applicable to qualified dividend income if Pembina is treated as a PFIC either in the taxable year of the
distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income.
U.S. Holders should consult their own tax advisors regarding the potential application of the PFIC rules to the
ownership and disposition of Pembina Common Shares and the availability of certain U.S. tax elections under the
PFIC rules.
Additional Considerations
Foreign Tax Credit
Any payment (whether directly or through withholding) of non-U.S. income tax in connection with a U.S. Holder’s
ownership or disposition of Pembina Common Shares may, subject to a number of complex limitations, be claimed
as a foreign tax credit against a U.S. Holder’s U.S. federal income tax liability in respect of such holder’s foreign
source income or may be claimed as a deduction for U.S. federal income tax purposes. The limitation on foreign taxes
eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that
are distributed with respect to Pembina Common Shares will generally be foreign source income for purposes of
computing the foreign tax credit allowable to a U.S. Holder. Gains recognized on the sale of Pembina Common Shares
by a U.S. Holder should generally be treated as U.S. source for this purpose, except as otherwise provided in an
applicable income tax treaty and if an election is properly made under the Code. Because of the complexity of those
limitations, each U.S. Holder should consult its own tax advisor with respect to the amount of foreign taxes that may
be claimed as a credit or deduction, having regard to such holder’s particular circumstances.
Foreign Currency Gains
The amount of any distribution or proceeds paid in Canadian dollars to a U.S. Holder in connection with the ownership
of Pembina Common Shares, or on the sale, exchange or other taxable disposition of Pembina Common Shares, or
any Canadian dollars received in connection with the Arrangement, will generally be included in the gross income of
a U.S. Holder as translated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of
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actual or constructive receipt of such amount, regardless of whether the Canadian dollars or other non-U.S. currency
is converted into U.S. dollars at that time. If the Canadian dollars or other non-U.S. currency received is not converted
into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars or other non-U.S.
currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in Canadian
dollars or other non-U.S. currency and engages in a subsequent conversion or other disposition of the Canadian dollars
or other non-U.S. currency may have a foreign currency exchange gain or loss that would be treated as ordinary income
or loss, and generally would be U.S. source income or loss for foreign tax credit purposes. Different rules may apply
to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own tax advisor regarding the U.S.
federal income tax consequences of receiving, owning, and disposing of Canadian dollars or other non-U.S. currency.
Additional Tax on Passive Income
Certain U.S. Holders that are individuals, estates and trusts whose income exceeds certain thresholds generally will
be required to pay a 3.8% Medicare surtax on “net investment income” including, among other things, dividends and
net gain from the sale or other taxable disposition of their Common Shares pursuant to the Arrangement. U.S. Holders
should consult their own tax advisors regarding the effect, if any, of this tax on their taxable disposition of Common
Shares pursuant to the Arrangement and their ownership and disposition of Pembina Common Shares.
U.S. Information Reporting and Backup Withholding Tax
Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to
their investment in, or involvement in, Veresen or Pembina. For example, U.S. return disclosure obligations (and
related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets
in excess of certain thresholds. The definition of “specified foreign financial assets” includes not only financial
accounts maintained in non-U.S. financial institutions, but also, if held for investment and not in an account maintained
by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract
that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may be
subject to these reporting requirements unless their Common Shares or Pembina Common Shares are held in an
account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial.
U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns under
these rules, including the requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of (a) distributions on the Pembina Common
Shares, (b) proceeds arising from the sale or other taxable disposition of Pembina Common Shares, or (c) payments
received in connection with the Arrangement (including, but not limited to, U.S. Holders exercising Dissent Rights
with respect to their Common Shares) generally may be subject to information reporting. In addition, backup
withholding, currently at a rate of 28%, may apply to such payments if a U.S. Holder (a) fails to furnish such U.S.
Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S.
taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report
items subject to backup withholding, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has
furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is
subject to backup withholding. Certain exempt persons generally are excluded from these information reporting and
backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup
withholding rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will
be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. Each U.S. Holder
should consult its own tax advisor regarding the information reporting and backup withholding rules in their particular
circumstances and the availability of and procedures for obtaining an exemption from backup withholding.
The discussion of reporting requirements set forth above is not intended to constitute an exhaustive description of all
reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result
in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an
extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder
should consult its own tax advisor regarding applicable reporting requirements and the information reporting and
backup withholding rules.
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TIMING
If the Meetings are held as scheduled and are not adjourned and the necessary conditions for completion of the
Arrangement are satisfied or waived, Veresen will apply for the Final Order approving the Arrangement. If the Final
Order is obtained on July 12, 2017 in form and substance satisfactory to Veresen and Pembina, the Effective Date will
occur once all other conditions set forth in the Arrangement Agreement are satisfied or waived. Veresen and Pembina
expect the Effective Date will occur in the second half of 2017. It is not possible, however, to state with certainty
when the Effective Date will occur.
The Arrangement will become effective upon the filing with the Registrar of the Articles of Arrangement and a copy
of the Final Order, together with such other materials as may be required by the Registrar.
The Effective Date could be delayed for a number of reasons, including an objection before the Court at the hearing
of the application for the Final Order or delays in receiving all Required Regulatory Approvals.
PRO FORMA INFORMATION OF PEMBINA AFTER GIVING EFFECT TO THE ARRANGEMENT
General
The Arrangement will result in the acquisition of all of the Common Shares (and the acquisition of all of the Preferred
Shares, provided the Preferred Shareholder Arrangement Resolution is approved at the Preferred Shareholders’
Meeting) by Pembina and the amalgamation of Veresen and Pembina to form Amalco. Shareholders (excluding
Dissenting Shareholders) will receive the Share Consideration or the Cash Consideration, subject to pro-rationing, for
each Common Share held and the Preferred Share Consideration for each Preferred Share held, as the case may be.
Following the completion of the Arrangement, the name of the Amalco will be “Pembina Pipeline Corporation” and
Amalco will continue the operations of Pembina and Veresen on a combined basis.
The following sets forth certain information relating to Pembina and Veresen, together with pro forma information of
Pembina after giving effect to the Arrangement and certain other adjustments. Additional information concerning each
of Pembina and Veresen is set forth elsewhere in this Information Circular. See Appendix K – “Information
Concerning Pembina Pipeline Corporation” and Appendix J – “Information Concerning Veresen Inc.”.
Officers and Directors of Pembina
Officers
Upon completion of the Arrangement, Pembina will continue to be led by its current executive team of Mick Dilger,
President and Chief Executive Officer; Scott Burrows, Vice President, Finance and Chief Financial Officer; Stuart
Taylor, Senior Vice President, NGL and Natural Gas Facilities; Paul Murphy, Senior Vice President, Crude Oil
Facilities; Harry Andersen, Vice President, Legal and General Counsel; Robert Jones, Vice President, Midstream,
Crude and Condensate; Claudia D’Orazio, Vice President, Compliance and Risk; Allan Charlesworth, Vice President,
Technical Services; Robert Lock, Vice President, Midstream; Jason Wiun, Vice President, Conventional Pipelines;
Brad Smith, Vice President, Operating Services and Jaret Sprott, Vice President, Gas Services. In addition, certain
executive officers of Veresen may join the management team of Pembina following completion of the Arrangement.
Directors
The post-Arrangement Pembina Board will consist of 13 members, being all 10 of the current Pembina directors
(Randall Findlay, Anne-Marie Ainsworth, Lorne Gordon, David LeGresley, Robert Michaleski, Leslie O’Donoghue,
Jeffrey Smith, Gordon Kerr, Bruce Rubin and Mick Dilger) and three new Veresen nominee directors (Doug Arnell,
Maureen E. Howe and Henry W. Sykes). Randall Findlay will continue in his capacity as Chairman of the Pembina
Board.
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Selected Unaudited Pro Forma Financial Information
The following tables set out certain unaudited pro forma financial information for Pembina after giving effect to the
Arrangement for the year ended December 31, 2016 and the three month period ended March 31, 2017.
The following tables should be read in conjunction with the unaudited pro forma consolidated financial statements of
Pembina for the year ended December 31, 2016 and the three month period ended March 31, 2017, including the notes
thereto, attached as Appendix I to this Information Circular. Reference should also be made to: (a) the Pembina Annual
Financial Statements; (b) the Pembina Interim Financial Statements; (c) the Veresen Annual Financial Statements;
and (d) the Veresen Interim Financial Statements, each of which is incorporated by reference herein and which can be
found under Pembina’s and Veresen’s respective profiles on SEDAR at www.sedar.com.
($millions, unless otherwise noted)
As at March 31,
2017
Total assets 23,953
Total liabilities(1) 10,776
Net assets 13,177
Share capital
Preferred shares 2,019
Common shares 13,263
($millions, unless otherwise noted)
Three month period
March 31, 2017
Year ended
December 31, 2017
Revenue 1,497 4,318
Results from operating activities 301 646
Earnings for the period 262 487
Basic and diluted earnings per share (dollars) 0.49 0.85
Note:
(1) Includes loans and borrowings of $7,318 million.
The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not
necessarily indicative of (i) the financial results that would have occurred had the Arrangement actually occurred at
the times contemplated by the notes to the unaudited pro forma consolidated financial statements; or (ii) the results
expected in future periods.
Pro Forma Consolidated Capitalization of Pembina
The following table sets forth Pembina’s consolidated capitalization as at March 31, 2017, both before and after giving
effect to the Arrangement. See also Appendix I – “Pro Forma Financial Statements of Pembina”.
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Designation
($millions, unless otherwise noted)
Authorized(2)(3)
Outstanding as at
March 31, 2017
Outstanding as at
March 31, 2017
after giving effect
to the
Arrangement(12)
Common Shares(1) Unlimited 8,935 13,263
(399,988,551
common shares)
(499,479,213
common shares)
Class A Preferred Shares(3)
Series 1 250 250 250
Series 3 150 150 150
Series 5 250 250 250
Series 7 250 250 250
Series 9 225 225 225
Series 11 170 170 170
Series 13 250 250 250
Series A Exchange(4) - 200
Series C Exchange(4) - 150
Series E Exchange (4) - 200
Convertible Debentures(11)
Series F Convertible Debentures(5) 173 147 147
Notes(11)
Series C Senior Unsecured Notes(6) 200 200 200
Series D Senior Unsecured Notes(7) 267 267 267
Medium Term Notes, Series 1(8) 250 250 250
Medium Term Notes, Series 2(8) 450 450 450
Medium Term Notes, Series 3(8) 450 450 450
Medium Term Notes, Series 4(8) 600 600 600
Medium Term Notes, Series 5(8) 450 450 450
Medium Term Notes, Series 6(8) 500 500 500
Medium Term Notes, Series 7(8) 500 500 500
Medium Term Notes, Series 8(8) 300 300 300
Medium Term Notes, Series 9(8) 300 300 300
Veresen Medium Term Notes, Series 1(8) - 150
Veresen Medium Term Notes, Series 3(8) - 50
Veresen Medium Term Notes, Series 4(8) - 200
Veresen Medium Term Notes, Series 5(8) - 350
Bank Debt(11)
Revolving Credit Facility(9) 2,500 87 1,610
Operating Credit Facility(9) 30 - -
Veresen Revolving Credit Facility(10) 750 - 606 Notes:
(1) At March 31, 2017, 15,514,056 Pembina Options were outstanding and held by employees of Pembina, of which
7,319,284 were exercisable. The Pembina Options have exercise prices ranging from $19.17 to $52.01 and expire at various dates to March 2024.
(2) Pembina is authorized to issue an unlimited number of Pembina Class B Preferred Shares, which may only be issued to
a wholly-owned subsidiary of Pembina, and such shares are eliminated on consolidation. No Pembina Class B Preferred Shares are outstanding.
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(3) The terms of the Pembina Class A Preferred Shares provide that the number of Pembina Class A Preferred Shares which
may be issued and outstanding at any time shall be limited to a number equal to no more than 20% of the number of issued and outstanding Pembina Common Shares at the time of issuance of any Pembina Class A Preferred Shares.
(4) Assumes that the Preferred Shareholder Arrangement Resolution receives the requisite approval by the Preferred
Shareholders at the Preferred Shareholders’ Meeting and the Preferred Shares are not otherwise excluded from the
Arrangement pursuant to the terms of the Arrangement Agreement. The actual designation of Pembina Exchange Shares will be numerical based on the next available number in the sequence of Pembina Class A Preferred Shares.
(5) The Series F Convertible Debentures of Pembina bear interest at the rate of 5.75% per annum payable semi-annually and mature on December 31, 2018.
(6) The Series C Senior Notes of Pembina bear interest at the rate of 5.58% per annum and mature on September 30, 2021.
(7) The Series D Senior Notes of Pembina bear interest at the rate of 5.91% per annum and mature on November 18, 2019.
(8) The Medium Term Notes, Series 1 were issued by Pembina on March 29, 2011 in the aggregate principal amount of $250
million of senior unsecured medium term notes, have a fixed interest rate of 4.89% per annum that is paid semi-annually,
and will mature on March 29, 2021. The Medium Term Notes, Series 2 were issued by Pembina on October 22, 2012 in
the aggregate principal amount of $450 million of senior unsecured medium term notes, have fixed interest rate of 3.77%
per annum that is paid semi-annually, and will mature on October 24, 2022. The Medium Term Notes, Series 3 were
issued by Pembina on April 30, 2013, February 2, 2015 and June 16, 2015 in the aggregate principal amount of $200
million, $150 million and $100 million, respectively, of senior unsecured medium term notes, have a fixed interest rate
of 4.75% per annum that is paid semi-annually, and will mature on April 30, 2043. The Medium Term Notes, Series 4
were issued by Pembina on April 4, 2014 in the aggregate principal amount of $600 million senior unsecured medium
term notes, have a fixed interest rate of 4.81% per annum that is paid semi-annually, and will mature on March 25, 2044.
The Medium Term Notes, Series 5 were issued by Pembina on February 2, 2015 in the aggregate principal amount of
$450 million of senior unsecured medium term notes, have a fixed interest rate of 3.54% per annum that is paid semi-
annually, and will mature on February 3, 2025. The Medium Term Notes, Series 6 were issued by Pembina on June 16,
2015 in the aggregate principal amount of $500 million of senior unsecured medium term notes, have a fixed interest rate
of 4.24% per annum that is paid semi-annually, and will mature on June 15, 2027. The Medium Term Notes, Series 7
were issued by Pembina on August 11, 2016 in the aggregate principal amount of $500 million of senior unsecured
medium term notes, have a fixed interest rate of 3.71% per annum that is paid semi-annually, and will mature on August
11, 2026. The Medium Term Notes, Series 8 were issued by Pembina on January 20, 2017 in the aggregate principal
amount of $300 million of senior unsecured medium term notes, have a fixed interest rate of 2.99% per annum that is
paid semi-annually, and will mature on January 22, 2024. The Medium Term Notes, Series 9 were issued by Pembina on
January 20, 2017 in the aggregate principal amount of $300 million of senior unsecured medium term notes, have a fixed
interest rate of 4.74% per annum that is paid semi-annually, and will mature on January 21, 2047. The Veresen Medium
Term Notes, Series 1 were issued by Veresen on November 22, 2011 in the aggregate amount of $150 million of senior
unsecured medium term notes, have a fixed interest rate of 4.00% per annum that is paid semi-annually and are due
November 22, 2018. The Veresen Medium Term Notes, Series 3 were issued by Veresen on March 14, 2012 in the
aggregate amount of $50 million of unsecured medium term notes, have a fixed interest rate of 5.05% per annum that is
payable semi-annually and are due March 14, 2022. The Veresen Medium Term Notes, Series 4 were issued by Veresen
on June 13, 2014 in the aggregate amount of $200 million as senior unsecured medium term notes, have a fixed interest
rate of 3.06% per annum that is payable semi-annually and are due June 13, 2019. The Veresen Medium Term Notes,
Series 5 were issued by Veresen on November 10, 2016 in the aggregate amount of $350 million as senior unsecured
medium term notes, have a fixed interest rate of 3.43% per annum payable semi-annually and are due November 10,
2021.
(9) Pembina’s credit facilities as at March 31, 2017 consisted of an unsecured $2,500 million revolving credit facility due
May 2020 (the “Revolving Credit Facility”) and an unsecured operating facility of $30 million due May 2017 (the
“Operating Credit Facility”, and together with the Revolving Credit Facility, the “Pembina Facilities”). Borrowings
on the Revolving Credit Facility and the Operating Credit Facility bear interest at prime lending rates plus nil to 1.25
percent or Bankers’ Acceptances rates plus 1.00 percent to 2.25 percent. Margins on the Pembina Facilities are based on
the credit rating of Pembina’s senior unsecured debt. There are no repayments due over the term of the Pembina Facilities.
As at March 31, 2017, Pembina had $2,479 million of cash and unutilized debt available under the Pembina Facilities.
In May 2017, Pembina reduced the amount of its Operating Credit Facility to $20 million and renewed the Operating
Credit Facility to May 2018. Pembina also had an additional $30 million in letters of credit issued pursuant to a separate
credit facility as at March 31, 2017.
(10) Veresen has an existing $750 million revolving credit facility that will mature on May 31, 2020. Subsequent to March
31, 2017, net proceeds from the closing of the sale of gas-fired facilities pursuant to the Veresen Power Business Sale in
the amount of $235 million were applied against such facility. It is anticipated that all amounts outstanding under such
facility at closing of the Arrangement will be repaid using funds drawn from Pembina’s Revolving Credit Facility and
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the facility will be cancelled. Veresen also has an existing $45 million club revolving credit facility that will mature on
May 31, 2020 pursuant to which $17 million in letters of credit were issued as at March 31, 2017.
(11) All debt amounts in the table as at March 31, 2017 represent the outstanding principal balances of such debt obligations.
(12) Excludes senior debt of Veresen’s Subsidiaries.
Description of Share Capital
The authorized share capital of Pembina will not be altered by the Arrangement. The authorized capital of Pembina
consists of an unlimited number of Pembina Common Shares, a number of Pembina Class A Preferred shares, issuable
in series, not to exceed 20% of the number of issued and outstanding Pembina Common Shares at the time of issuance
of any Pembina Class A Preferred Shares, and an unlimited number of Pembina Class B Preferred Shares which are
deemed to be automatically redeemed if a holder ceases to be a wholly-owned subsidiary of Pembina.
See “Description of the Capital Structure of Pembina” in the Pembina AIF, which is incorporated by reference herein.
Following completion of the Arrangement, it is anticipated that the issued and outstanding share capital of Pembina
will include 500,629,872 Pembina Common Shares (based on the Common Shares outstanding as of June 5, 2017 and
assuming: (a) the issuance of the Maximum Share Consideration, and (b) no additional Pembina Common Shares are
issued by Pembina prior to the Effective Date), and, if Preferred Shareholders vote in favour of the Preferred
Shareholder Arrangement Resolution at the Preferred Shareholders’ Meeting, 8,000,000 Pembina Series A Exchange
Shares, 6,000,000 Pembina Series C Exchange Shares 8,000,000 Pembina Series E Exchange Shares, as well as
10,000,000 Pembina Series 1 Shares, 6,000,000 Series 3 Shares, 10,000,000 Pembina Series 5 Shares, 10,000,000
Pembina Series 7 Shares, 9,000,000 Pembina Series 9 Shares, 6,800,000 Pembina Series 11 Shares and 10,000,000
Pembina Series 13 Shares. The Pembina Series A Exchange Shares, Pembina Series C Exchange Shares and Pembina
Series E Exchange Shares will trade on the TSX under the next available symbols in Pembina’s preferred share ticker.
Principal Holders of Pembina Common Shares Following the Arrangement
To the knowledge of the respective directors and executive officers of Pembina, as at the date hereof, both before and
after giving effect to the Arrangement, no persons will beneficially own, or control or direct, directly or indirectly,
10% or more of the Pembina Common Shares.
Auditors, Registrar and Transfer Agent
Following the completion of the Arrangement, the auditors for Pembina will continue to be KPMG LLP, Chartered
Accountants located at Suite 2700, 205 – 5th Avenue SW, Calgary, Alberta, T2P 4B9.
Following the completion of the Arrangement, the transfer agent and registrar of Pembina will continue to be
Computershare Trust Company of Canada, at its principal offices in Calgary, Alberta and Toronto, Ontario. The co-
transfer agent and registrar for the Pembina Common Shares in the United States will be Computershare Investor
Services U.S. at its principal office in Golden, Colorado.
RISK FACTORS
Shareholders voting in favour of the Common Shareholder Arrangement Resolution or the Preferred Shareholder
Arrangement Resolution, as the case may be, will be choosing to combine the businesses of Veresen and Pembina and
to invest in Pembina Common Shares (provided that such Shareholder receives Share Consideration pursuant to the
Arrangement) or Pembina Exchange Shares, as applicable. The completion of the Arrangement and investment in
Pembina Shares involves risks. In addition to the risk factors present in each of Veresen’s and Pembina’s businesses,
described under the heading “Risk Factors” in the Veresen AIF and the Pembina AIF, which are incorporated by
reference herein, Shareholders should carefully consider the following risk factors in evaluating whether to approve
the Common Shareholder Arrangement Resolution or the Preferred Shareholder Arrangement Resolution, as
applicable. Readers are cautioned that such risk factors are not exhaustive. These risk factors should be considered in
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conjunction with the other information included in this Information Circular, including the documents incorporated
by reference herein and documents filed by Pembina and Veresen pursuant to applicable Laws from time to time.
Possible Failure to Realize Anticipated Benefits of the Arrangement
The Arrangement is subject to normal commercial risks that such transaction may not be completed on the terms
negotiated or at all. Pembina and Veresen are proposing to complete the Arrangement to strengthen the position of
Pembina in the pipeline industry and to create the opportunity to realize certain benefits including, among other things,
potential cost savings. Achieving the benefits of the Arrangement depends in part on successfully consolidating
functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as the ability
of Pembina, after giving effect to the Arrangement, to realize the anticipated growth opportunities and synergies from
combining the acquired businesses and operations of Veresen with those of Pembina.
The integration of the Veresen assets requires the dedication of substantial management effort, time and resources
which may divert management’s focus and resources from other strategic opportunities and from operational matters
during this process. The integration process may result in the loss of key employees and the disruption of ongoing
business, customer and employee relationships that may adversely affect Pembina’s ability to achieve the anticipated
benefits of the Arrangement.
Satisfaction of Conditions Precedent
The completion of the Arrangement is subject to a number of condition precedents, certain of which are outside the
control of Veresen and Pembina, including obtaining the requisite approvals from Common Shareholders and
Required Regulatory Approvals, including Competition Act Approval. A substantial delay in obtaining satisfactory
approvals or the imposition of unfavourable terms or conditions to the Required Regulatory Approvals could delay
the Effective Date and may adversely affect the business, financial condition or results of Veresen, Pembina or the
combined company. There is no certainty, nor can Veresen and/or Pembina provide any assurance, that these
conditions will be satisfied or, if satisfied, when they will be satisfied. If for any reason the Arrangement is not
completed, or is materially delayed, the market price of the Common Shares may be adversely affected.
Entry into New Business Activities
Completion of the Arrangement will result in a combination of the current business activities currently carried on by
each of Veresen and Pembina as separate entities. The combination of these activities into the combined company
may expose Shareholders to different business risks than those to which they were exposed prior to the Arrangement.
As a result of the changing risk profile of the companies, the combined company may be subject to review of its credit
ratings, which may result in a downgrade or negative outlook being assigned to the combined company.
After the completion of the Arrangement, Pembina will face the same risks currently facing each of Veresen and
Pembina, in addition to other risks.
The Arrangement Agreement May Be Terminated
Each of Veresen and Pembina has the right to terminate the Arrangement Agreement in certain circumstances.
Accordingly, there is no certainty, nor can either of Veresen or Pembina provide any assurance, that the Arrangement
will not be terminated by either Veresen or Pembina before the completion of the Arrangement. For instance, Veresen
and Pembina have the right, in certain circumstances, to terminate the Arrangement Agreement if changes occur that
have a Material Adverse Effect on the other Party. There is no assurance that a Material Adverse Effect will not occur
before the Effective Date, in which case Veresen and Pembina could elect to terminate the Arrangement Agreement
and the Arrangement would not proceed.
In addition, certain costs related to the Arrangement, such as legal, accounting and certain financial advisor fees, must
be paid by Veresen even if the Arrangement is not completed.
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Under the Arrangement Agreement, Veresen is required to pay Pembina a non-completion fee in certain
circumstances. This non-completion fee may discourage other parties from attempting to enter into a business
transaction with Veresen, even if those parties would otherwise be willing to enter into an agreement with Veresen
with a business combination. See “The Arrangement – The Arrangement Agreement – Non-Completion Fees Payable
by Veresen”.
While the Arrangement is Pending, Veresen is Restricted from Taking Certain Actions
The Arrangement Agreement restricts Veresen from taking specified actions until the Arrangement is completed,
without the consent of Pembina. These restrictions may prevent Veresen from pursuing attractive business
opportunities that may arise prior to completion of the Arrangement.
The Exchange Ratio underlying the Share Consideration is fixed and will not be Adjusted in the Event of any
Change in either Veresen’s or Pembina’s Respective Share Prices
Upon closing of the Arrangement, each Common Shareholder who has elected to receive Share Consideration (or who
receives Share Consideration as a result of pro-rationing in accordance with the Plan of Arrangement) will receive
0.4287 Pembina Common Shares for each Common Share held by such Common Shareholder. This exchange ratio is
fixed in the Plan of Arrangement and will not be adjusted for changes in the market price of either the Common Shares
or the Pembina Common Shares. Changes in the price of the Pembina Common Shares prior to the consummation of
the Arrangement will affect the market value that Common Shareholders will be entitled to receive upon closing.
Neither Veresen nor Pembina is permitted to terminate the Arrangement Agreement or, in the case of Veresen, resolicit
the vote of the Common Shareholders, solely because of changes in the market price of either Party’s common shares.
Share price changes may result from a variety of factors (many of which are beyond Pembina’s or Veresen’s control),
including the risk factors identified in the Veresen AIF and the Pembina AIF.
Veresen Dissent Rights
Shareholders have the right to exercise certain dissent and appraisal rights and demand payment of the fair value of
their Common Shares or Preferred Shares, as the case may be, in cash in connection with the Arrangement in
accordance with the ABCA. If there are a significant number of Dissenting Shareholders, a substantial cash payment
may be required to be made to such Shareholders that could have an adverse effect on Pembina’s financial condition
and cash resources if the Arrangement is completed. It is a condition to completion of the Arrangement that holders
of less than 5% of the outstanding Common Shares have exercised Dissent Rights in respect of the Arrangement,
which condition may be waived by Pembina, in its sole discretion. If holders of more than 5% of the Preferred Shares
exercise Dissent Rights, Veresen will amend the Plan of Arrangement if requested by Pembina to exclude the Preferred
Shares under the Plan of Arrangement.
Trading Access
The Veresen Shares are currently listed on the TSX and it is anticipated the Common Shares will be delisted from the
TSX following completion of the Arrangement and in the event the Preferred Shares are exchanged for Pembina
Exchange Shares, the Listed Preferred Shares will be delisted from the TSX. Although Pembina has applied to list the
Pembina Common Shares on the TSX and NYSE and the Pembina Exchange Shares on the TSX following completion
of the Arrangement, there can be no assurance that such listing will occur in a timely manner or at all.
Income Tax Laws
There can be no assurance that the CRA, the United States Internal Revenue Service or other applicable taxing
authorities will agree with the Canadian and U.S. federal income tax consequences of the Arrangement, as applicable,
as set forth in this Information Circular. Furthermore, there can be no assurance that applicable Canadian and U.S.
income tax Laws, regulations or tax treaties will not be changed or interpreted in a manner, or that applicable taxing
authorities will not take administrative positions, that are adverse to Pembina and its securityholders following
completion of the Arrangement. Such taxation authorities may also disagree with how Pembina or its predecessors,
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including Veresen, calculate or have in the past calculated their income for income tax purposes. Any such events
could adversely affect the combined company, its share price or the dividends or other payments to be paid to
Pembina’s securityholders following completion of the Arrangement.
Future Dividends on Pembina Common Shares
There can be no assurance as to future dividend payments by Pembina on the Pembina Common Shares and the level
thereof, including the anticipated increase following completion of the Arrangement, as Pembina’s dividend policy
and the funds available for the payment of dividends from time to time will be dependent upon, among other things,
operating cash flow generated by Pembina and its subsidiaries, financial requirements for Pembina’s operations, the
execution of its growth strategy and the satisfaction of solvency tests imposed by the ABCA for the declaration and
payment of dividends.
Credit Ratings related to the Preferred Shares
There can be no assurance that the credit ratings on the Preferred Shares will be maintained if the Preferred Shareholder
Arrangement Resolution is not approved at the Preferred Shareholder Meeting (or any adjournment thereof) and the
Preferred Shareholders do not otherwise approve a special resolution with similar effect to the Preferred Shareholder
Arrangement Resolution prior to the Effective Time such that Pembina is the sole holder of the Preferred Shares prior
to the amalgamation contemplated in the Plan of Arrangement. In such circumstances, the Preferred Shares will not
be acquired and will remain outstanding following completion of the Arrangement.
INTERESTS OF EXPERTS
Certain legal matters relating to the Arrangement are to be passed upon by Osler, Hoskin & Harcourt LLP on behalf
of Veresen. As at the date hereof, the partners and associates of Osler, Hoskin & Harcourt LLP beneficially own,
directly or indirectly, less than 1% of the outstanding Common Shares and Preferred Shares.
The Veresen Annual Financial Statements have been incorporated by reference in this Information Circular.
PricewaterhouseCoopers LLP, the auditors of Veresen, has confirmed that it is independent with respect to Veresen
in accordance with the relevant rules and related interpretation prescribed by the Code of Professional Conduct of the
Chartered Professional Accountants of Alberta.
The Pembina Annual Financial Statements have been incorporated by reference in this Information Circular. KPMG
LLP are the auditors of Pembina and have confirmed that they are independent with respect to Pembina within the
meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and
any applicable legislation or regulations and also that they are independent accountants with respect to Pembina under
all relevant U.S. professional and regulatory standards.
Scotia Capital was retained by Veresen to provide the Fairness Opinions. As at the date hereof, Scotia Capital and the
“designated professionals” (as such term is defined in Form 51-102F2) of Scotia Capital owned, directly and
indirectly, in the aggregate, less than 1% of the outstanding Common Shares and Preferred Shares and less than 1%
of the outstanding Pembina Common Shares and Pembina Exchange Shares.
INFORMATION CONCERNING VERESEN INC.
See Appendix J attached to this Information Circular for detailed information concerning Veresen.
INFORMATION CONCERNING PEMBINA PIPELINE CORPORATION
See Appendix K attached to this Information Circular for detailed information concerning Pembina.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
MATTERS TO BE CONSIDERED AT THE MEETINGS
Common Shareholders’ Meeting
At the Common Shareholders’ Meeting, Common Shareholders will be asked to consider the Common Shareholder
Arrangement Resolution in the form set forth in Appendix A of this Information Circular. Common Shareholders are
urged to review this Information Circular when considering the Common Shareholder Arrangement Resolution. In
particular, see, “The Arrangement” and Appendix K – “Information Concerning Pembina Pipeline Corporation”. For
information relating to the impact of the Arrangement on Veresen and Pembina, see “Pro Forma Information of
Pembina after Giving Effect to the Arrangement” and Appendix I – “Pro Forma Consolidated Financial Statements
of Pembina Pipeline Corporation”.
The Common Shareholder Arrangement Resolution must be approved by at least 66⅔% of the votes cast by Common
Shareholders, present in person or by proxy at the Common Shareholders’ Meeting.
Unless otherwise directed, the persons named in the accompanying form of proxy for the Common
Shareholders’ Meeting intend to vote in favour of the Common Shareholder Arrangement Resolution.
It is a condition to the completion of the Arrangement that the Common Shareholder Arrangement Resolution be
approved at the Common Shareholders’ Meeting.
Preferred Shareholders’ Meeting
At the Preferred Shareholders’ Meeting, Preferred Shareholders will be asked to consider the Preferred Shareholder
Arrangement Resolution in the form set forth in Appendix B of this Information Circular. Preferred Shareholders are
urged to review this Information Circular when considering the Preferred Shareholder Arrangement Resolution. In
particular, see “The Arrangement” and Appendix K – “Information Concerning Pembina Pipeline Corporation”. For
information relating to the impact of the Arrangement on Veresen and Pembina, see “Pro Forma Information of
Pembina after Giving Effect to the Arrangement” and Appendix I – “Pro Forma Consolidated Financial Statements
of Pembina Pipeline Corporation”.
The Preferred Shareholder Arrangement Resolution must be approved by at least 66⅔% of the votes cast by Preferred
Shareholders, present in person or by proxy at the Preferred Shareholders’ Meeting, voting as a single class.
Unless otherwise directed, the persons named in the accompanying form of proxy for the Preferred
Shareholders’ Meeting intend to vote in favour of the Preferred Shareholder Arrangement Resolution.
It is not a condition to the completion of the Arrangement that the Preferred Shareholder Arrangement Resolution be
approved at the Preferred Shareholders’ Meeting. However, if the requisite approval of the Preferred Shareholders is
not obtained at the Preferred Shareholders’ Meeting (or any adjournment thereof) and the Preferred Shareholders do
not otherwise approve a special resolution with similar effect to the Preferred Shareholder Arrangement Resolution
prior to the Effective Time such that Pembina is the sole holder of the Preferred Shares prior to the amalgamation
contemplated in the Plan of Arrangement, Veresen will amend the Plan of Arrangement to exclude the Preferred
Shares under the Plan of Arrangement and matters ancillary thereto, the Preferred Shares will not be acquired by
Pembina and will remain outstanding following completion of the Arrangement.
GENERAL PROXY MATTERS
Solicitation of Proxies
This Information Circular is provided in connection with the solicitation of proxies by the management of
Veresen for use at the Meetings and the associated costs thereof will be borne by Veresen. In addition to
solicitation by mail, proxies may be solicited by personal interviews, telephone or other means of communication and
by directors, officers and employees of Veresen (who will not be specifically remunerated therefore). In addition, the
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Arrangement Agreement provides that, if requested by Pembina, acting reasonably, Veresen shall engage a proxy
solicitation agent to solicit proxies in favour of the Common Shareholder Arrangement Resolution and the Preferred
Shareholder Arrangement Resolution, in which case the costs of such agent shall be paid by Pembina.
The Meetings are being called pursuant to the Interim Order of the Court to seek the requisite approval of Common
Shareholders and Preferred Shareholders to the Arrangement in accordance with Section 193 of the ABCA. See “The
Arrangement” and “Matters to be Considered at the Veresen Meetings”.
The information set forth below generally applies to registered holders of Veresen Shares. If you are a beneficial
holder of Veresen Shares (i.e. your Veresen Shares are held through a broker, financial institution or other nominee),
please see “Information for Beneficial Holders” at the front of this Information Circular.
Appointment and Revocation of Proxies
Accompanying this Information Circular is a form of proxy for Common Shareholders and/or a form of proxy for
Preferred Shareholders. The persons named in the enclosed form(s) of proxy are directors and/or officers of Veresen.
A Shareholder has the right to appoint a person (who need not be a Shareholder) other than the persons
designated in the form of proxy provided by Veresen to represent the Shareholder at the Common
Shareholders’ Meeting or the Preferred Shareholders’ Meeting, as the case may be. To exercise this right, the
Shareholder should strike out the names of management designees in the enclosed form of proxy and insert the name
of the desired representative in the blank space provided in the form of proxy or submit another appropriate form of
proxy. In order to be effective, a proxy must be forwarded so as to reach, or be deposited with Computershare Trust
Company of Canada at: (i) by mail using the enclosed return envelope or one addressed to Computershare Trust
Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5;
(ii) by hand delivery to Computershare Trust Company of Canada, 9th Floor, 100 University Avenue, Toronto,
Ontario, M5J 2Y1; or (iii) by facsimile to (416) 263-9524 or 1-866-249-7775, no later than: (a) 10:00 a.m. (Calgary
time) on July 7, 2017 (in the case of proxies for Common Shareholders), (b) 11:00 a.m. (Calgary time) on July 7, 2017
(in the case of proxies for Preferred Shareholders) or, (c) if the Common Shareholders’ Meeting or Preferred
Shareholders’ Meeting is adjourned, forty-eight (48) hours (excluding Saturdays, Sundays and statutory holidays in
Alberta) before the beginning of any adjournment of such meeting. The time limit for the deposit of proxies may be
waived or extended by the Chairman of the applicable Meeting at his discretion without notice. The proxy shall be in
writing and executed by the Shareholder or such Shareholder’s attorney authorized in writing, or if such Shareholder
is a corporation, under its corporate seal or by a duly authorized officer or attorney.
In addition to revocation in any other manner permitted by law, a Shareholder may revoke a proxy: (a) by instrument
in writing executed by the Shareholder or such Shareholder’s attorney authorized in writing or if the Shareholder is a
corporation, under its corporate seal or by an officer or attorney thereof, duly authorized, indicating the capacity under
while such officer or attorney is signing and deposited with Computershare Trust Company of Canada, the transfer
agent of Veresen, at the office designated in the Notice of Common Shareholders’ Meeting or Notice of Preferred
Shareholders’ Meeting not later than 5:00 p.m. (Calgary time), on the Business Day preceding the day of the Meetings,
(or any adjournment or postponement thereof) or with the Chair on the day of the Meetings, as applicable, (or any
adjournment or postponement thereof); (b) by a duly executed and deposited proxy as provided herein bearing a later
date or time than the date or time of the proxy being revoked; or (c) as permitted by law.
Proxy Voting
The Common Shares represented by an effective proxy will be voted in accordance with the instructions specified
therein. Where no choice is specified, the Common Shares will be voted FOR the approval of the Common
Shareholder Arrangement Resolution. In respect of any other matters other than the Common Shareholder
Arrangement Resolution to be considered at the Common Shareholders’ Meeting, where no choice is specified,
the Common Shares will be voted for in favour of each matter identified in the accompanying Notice of Meeting
to Common Shareholders. The enclosed applicable form of proxy confers discretionary authority in respect of
amendments or variations to matters identified in the Notice of Meeting to Common Shareholders and with respect to
other matters which may properly come before the Meetings or any adjournment thereof. As of the date hereof,
management of Veresen knows of no amendments, variations or other matters to come before the Common
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
Shareholders’ Meeting; however, if any other matter properly comes before the Common Shareholders’ Meeting, the
accompanying applicable form of proxy will be voted on such matter in accordance with the best judgment of the
person(s) voting the proxies.
The Preferred Shares represented by an effective proxy will be voted in accordance with the instructions specified
therein. Where no choice is specified, the Preferred Shares will be voted FOR the approval of the Preferred
Shareholder Arrangement Resolution. In respect of any other matters other than the Preferred Shareholder
Arrangement Resolution to be considered at the Preferred Shareholders’ Meeting, where no choice is specified,
the Preferred Shares will be voted for in favour of each matter identified in the accompanying Notice of Meeting
to Preferred Shareholders. The enclosed applicable form of proxy confers discretionary authority in respect of
amendments or variations to matters identified in the Notice of Meeting to Preferred Shareholders and with respect to
other matters which may properly come before the Preferred Shareholders’ Meeting or any adjournment thereof. As
of the date hereof, management of Veresen knows of no amendments, variations or other matters to come before the
Preferred Shareholders’ Meeting; however, if any other matter properly comes before the Preferred Shareholders’
Meeting, the accompanying applicable form of proxy will be voted on such matter in accordance with the best
judgment of the person(s) voting the proxies.
General
Veresen is not using “notice-and-access” to send its proxy-related materials to the Shareholders, and paper copies of
such materials will be sent to all Shareholders. Veresen will be delivering proxy-related materials directly to non-
objecting Beneficial Holders with the assistance of Broadridge and intends to pay for intermediaries to deliver proxy-
related materials to objecting Beneficial Holders.
Voting Securities of Veresen and Principal Holders thereof
As at June 5, 2017, there were 313,652,781 Common Shares issued and outstanding. Each Common Share entitles the
holder thereof to one vote per share at the Common Shareholders’ Meeting.
As at June 5, 2017, there were 8,000,000 Veresen Series A Shares, 6,000,000 Veresen Series C Shares, 8,000,000
Veresen Series E Shares and no Veresen Series B Shares, Veresen Series D Shares or Veresen Series F Shares issued
and outstanding. Each Preferred Share entitles the holder thereof to one vote per share at the Preferred Shareholders’
Meeting.
The record date for determination of Common Shareholders and Preferred Shareholders entitled to receive notice of
and to vote at the Common Shareholders’ Meeting and the Preferred Shareholders’ Meeting, respectively, is the close
of business on May 23, 2017. Veresen will prepare, as of the Record Date, a list of Common Shareholders entitled to
receive the Notice of the Common Shareholders’ Meeting, showing the number of Common Shares held by each such
Common Shareholder, and a list of Preferred Shareholders entitled to receive the Notice of the Preferred Shareholders’
Meeting, showing the number of Preferred Shares held by each such Preferred Shareholder. Common Shareholders
and Preferred Shareholders whose names have been entered in the register of holders of Common Shares or the register
of holders of Preferred Shares, respectively, on the close of business on the Record Date will be entitled to receive
notice of and to vote the Common Shares or Preferred Shares shown opposite such Common Shareholder’s or
Preferred Shareholder’s name at the Common Shareholders’ Meeting or the Preferred Shareholders’ Meeting,
respectively; provided that, to the extent that a Common Shareholder or a Preferred Shareholder transfers ownership
of any Common Shares or Preferred Shares after the Record Date and the transferee of those Common Shares or
Preferred Shares, as the case may be, establishes ownership of such Common Shares or Preferred Shares and demands,
not later than ten (10) days before the Meetings, to be included in the list of Common Shareholders eligible to vote at
the Common Shareholders’ Meeting or the list of Preferred Shareholders eligible to vote at the Preferred Shareholders’
Meeting, as the case may be, such transferee will be entitled to vote such Common Shares or Preferred Shares at the
Common Shareholders’ Meeting or the Preferred Shareholders’ Meeting, respectively.
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If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact Kingsdale Advisors at
1-888-518-6554 toll-free, or 416-867-2272 (collect), or email at [email protected]
To the knowledge of the directors and officers of Veresen, as of the date hereof, no person or company beneficially
owns, or exercises control or direction over, directly or indirectly, more than 10% of the voting rights attached to all
of the outstanding Common Shares or Preferred Shares.
Procedure and Votes Required
Pursuant to the Interim Order:
(a) each Common Share entitled to vote at the Common Shareholders’ Meeting will entitle the holder
to one vote at the Common Shareholders’ Meeting in respect of the Common Shareholder
Arrangement Resolution;
(b) each Preferred Share entitled to vote at the Preferred Shareholders’ Meeting will entitle the holder
to one vote at the Preferred Shareholders’ Meeting in respect of the Preferred Shareholder
Arrangement Resolution;
(c) the number of votes required to pass the Common Shareholder Arrangement Resolution shall be not
less than 66⅔% of the votes cast by Common Shareholders, present in person or by proxy, voting
at the Common Shareholders’ Meeting;
(d) the number of votes required to pass the Preferred Shareholder Arrangement Resolution shall be not
less than 66⅔% of the votes cast by Preferred Shareholders, present in person or by proxy, voting
as a single class at the Preferred Shareholders’ Meeting;
(e) the quorum required at the Common Shareholders’ Meeting will be two Common Shareholders
present in person, or represented by proxy, at the opening of the Common Shareholders’ Meeting,
and holding or representing at least 25% of the Common Shares entitled to be voted at the Common
Shareholders’ Meeting; and
(f) the quorum required at the Preferred Shareholders’ Meeting will be two Preferred Shareholders
present in person, or represented by proxy, at the opening of the Preferred Shareholders’ Meeting,
and holding or representing at least 25% of the Preferred Shares entitled to be voted at the Preferred
Shareholders’ Meeting.
Notwithstanding the foregoing, the Common Shareholder Arrangement Resolution and the Preferred Shareholder
Arrangement Resolution each authorizes the Board, without further notice to or approval of the Common Shareholders
or Preferred Shareholders, subject to the terms of the Plan of Arrangement, the Arrangement Agreement and the
Interim Order, to amend the Plan of Arrangement or the Arrangement Agreement or to decide not to proceed with the
Arrangement at any time prior to the Arrangement becoming effective pursuant to the provisions of the ABCA. See
Appendix A to this Information Circular for the full text of the Common Shareholder Arrangement Resolution and
Appendix B to this Information Circular for the full text of the Preferred Shareholder Arrangement Resolution.
QUESTIONS AND OTHER ASSISTANCE
If you are a Shareholder and you have any questions about the information contained in this Information Circular or
require assistance in completing your form of proxy, Common Shareholder Letter of Transmittal and Election Form
or Preferred Shareholder Letter of Transmittal, please contact your financial, legal, tax or other professional advisors
or Kingsdale.
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APPENDIX A
VERESEN INC.
COMMON SHAREHOLDER ARRANGEMENT RESOLUTION
“BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. The arrangement (the “Arrangement”) under section 193 of the Business Corporations Act (Alberta) (the
“ABCA”) involving Veresen Inc. (the “Company”), as more particularly described and set forth in the
management proxy circular (the “Circular”) of the Company accompanying the notice of this meeting, as
the Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved
and adopted.
2. The plan of arrangement (the “Plan of Arrangement”) involving the Company, the full text of which is set
out as Appendix D to the Circular, as the Plan of Arrangement may be modified or amended in accordance
with its terms, is hereby authorized, approved and adopted.
3. The Arrangement Agreement made as of May 1, 2017 between Pembina Pipeline Corporation and the
Company (the “Arrangement Agreement”), the actions of the directors of the Company in approving the
Arrangement Agreement and the actions of the directors and officers of the Company in executing and
delivering the Arrangement Agreement and any amendments thereto in accordance with its terms are hereby
ratified and approved.
4. Notwithstanding that this resolution has been passed (and the Plan of Arrangement adopted) by the Common
Shareholders (as defined in the Arrangement Agreement) or that the Arrangement has been approved by the
Court of Queen’s Bench of Alberta, the directors of the Company are hereby authorized and empowered,
without further notice to or approval of the Common Shareholders (i) to amend the Arrangement Agreement
or the Plan of Arrangement, to the extent permitted by the Arrangement Agreement or the Plan of
Arrangement, and (ii) subject to the terms of the Arrangement Agreement, to disregard the Common
Shareholders’ approval and not proceed with the Arrangement.
5. Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the
Company to execute, under the corporate seal of the Company or otherwise, and to deliver to the Registrar
under the ABCA for filing articles of arrangement and such other documents as are necessary or desirable to
give effect to the Arrangement and the Plan of Arrangement in accordance with the Arrangement Agreement.
6. Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the
Company to execute or cause to be executed, under the corporate seal of the Company or otherwise, and to
deliver or cause to be delivered, all such other documents and instruments and to perform or cause to be
performed all such other acts and things as in such person’s opinion may be necessary or desirable to give
full effect to the foregoing resolutions and the matters authorized thereby, such determination to be
conclusively evidenced by the execution and delivery of such document, agreement or instrument or the
doing of any such act or thing.”
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APPENDIX B
VERESEN INC.
PREFERRED SHAREHOLDER ARRANGEMENT RESOLUTION
“BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. The arrangement (the “Arrangement”) under section 193 of the Business Corporations Act (Alberta) (the
“ABCA”) involving Veresen Inc. (the “Company”), as more particularly described and set forth in the
management proxy circular (the “Circular”) of the Company accompanying the notice of this meeting, as
the Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved
and adopted.
2. The plan of arrangement (the “Plan of Arrangement”) involving the Company, the full text of which is set
out as Appendix D to the Circular, as the Plan of Arrangement may be modified or amended in accordance
with its terms, is hereby authorized, approved and adopted.
3. The Arrangement Agreement made as of May 1, 2017 between Pembina Pipeline Corporation and the
Company (the “Arrangement Agreement”), the actions of the directors of the Company in approving the
Arrangement Agreement and the actions of the directors and officers of the Company in executing and
delivering the Arrangement Agreement and any amendments thereto in accordance with its terms are hereby
ratified and approved.
4. Notwithstanding that this resolution has been passed (and the Plan of Arrangement adopted) by the Preferred
Shareholders (as defined in the Arrangement Agreement) or that the Arrangement has been approved by the
Court of Queen’s Bench of Alberta, the directors of the Company are hereby authorized and empowered,
without further notice to or approval of the Preferred Shareholders (i) to amend the Arrangement Agreement
or the Plan of Arrangement, to the extent permitted by the Arrangement Agreement or the Plan of
Arrangement, and (ii) subject to the terms of the Arrangement Agreement, to disregard the Preferred
Shareholders’ approval and not proceed with the Arrangement.
5. Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the
Company to execute, under the corporate seal of the Company or otherwise, and to deliver to the Registrar
under the ABCA for filing articles of arrangement and such other documents as are necessary or desirable to
give effect to the Arrangement and the Plan of Arrangement in accordance with the Arrangement Agreement.
6. Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the
Company to execute or cause to be executed, under the corporate seal of the Company or otherwise, and to
deliver or cause to be delivered, all such other documents and instruments and to perform or cause to be
performed all such other acts and things as in such person’s opinion may be necessary or desirable to give
full effect to the foregoing resolutions and the matters authorized thereby, such determination to be
conclusively evidenced by the execution and delivery of such document, agreement or instrument or the
doing of any such act or thing.”
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APPENDIX C
ARRANGEMENT AGREEMENT
Page 125
ARRANGEMENT AGREEMENT
Between
PEMBINA PIPELINE CORPORATION
and
VERESEN INC.
May 1, 2017
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Page 126
Table of Contents
Page
i
ARTICLE I INTERPRETATION ................................................................................................................ 1
1.1 Definitions .......................................................................................................................... 1
1.2 Interpretation Not Affected by Headings .......................................................................... 13
1.3 Article References ............................................................................................................. 13
1.4 Number and Gender .......................................................................................................... 13
1.5 Date for Any Action ......................................................................................................... 14
1.6 Currency............................................................................................................................ 14
1.7 Schedules .......................................................................................................................... 14
1.8 Accounting Matters ........................................................................................................... 14
1.9 Knowledge ........................................................................................................................ 14
1.10 Veresen Significant Entities .............................................................................................. 14
1.11 Other Definitional and Interpretive Provisions ................................................................. 15
ARTICLE II THE ARRANGEMENT ........................................................................................................ 15
2.1 The Arrangement .............................................................................................................. 15
2.2 Veresen Approval ............................................................................................................. 16
2.3 Obligations of Pembina .................................................................................................... 16
2.4 Obligations of Veresen ..................................................................................................... 17
2.5 Interim Order .................................................................................................................... 18
2.6 Conduct of Meeting .......................................................................................................... 19
2.7 Court Proceedings ............................................................................................................. 20
2.8 Board of Directors of Pembina ......................................................................................... 20
2.9 Veresen LTI Plans and Veresen Employment Agreements .............................................. 20
2.10 Effective Date ................................................................................................................... 21
2.11 Veresen Dividend ............................................................................................................. 21
2.12 Tax Matters ....................................................................................................................... 21
2.13 Shareholder Communications ........................................................................................... 22
2.14 U.S. Securities Laws ......................................................................................................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PEMBINA ........................................... 22
3.1 Representations and Warranties ........................................................................................ 22
3.2 Investigation...................................................................................................................... 22
3.3 Survival of Representations and Warranties ..................................................................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF VERESEN ........................................... 23
4.1 Representations and Warranties ........................................................................................ 23
4.2 Investigation...................................................................................................................... 23
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Table of Contents (continued)
Page
ii
4.3 Survival of Representations and Warranties ..................................................................... 23
ARTICLE V COVENANTS ....................................................................................................................... 23
5.1 Covenants of Pembina ...................................................................................................... 23
5.2 Covenants of Veresen ....................................................................................................... 25
5.3 Mutual Covenants ............................................................................................................. 30
5.4 Pre-Arrangement Reorganizations .................................................................................... 32
5.5 Financing Assistance ........................................................................................................ 33
5.6 Payment on Postponement of Outside Date ...................................................................... 34
ARTICLE VI CONDITIONS ..................................................................................................................... 34
6.1 Mutual Conditions ............................................................................................................ 34
6.2 Pembina Conditions .......................................................................................................... 36
6.3 Veresen Conditions ........................................................................................................... 36
6.4 Notice and Cure Provisions .............................................................................................. 37
6.5 Merger of Conditions ........................................................................................................ 38
ARTICLE VII ADDITIONAL AGREEMENTS........................................................................................ 38
7.1 Veresen Covenant Regarding Non-Solicitation ................................................................ 38
7.2 Agreement as to Pembina Damages ................................................................................. 41
7.3 Fees and Expenses and Other Agreements as to Damages ............................................... 42
7.4 Liquidated Damages ......................................................................................................... 43
7.5 Access to Information; Confidentiality ............................................................................. 43
7.6 Insurance and Indemnification .......................................................................................... 44
7.7 Privacy Issues ................................................................................................................... 44
ARTICLE VIII TERM, TERMINATION, AMENDMENT AND WAIVER ............................................ 46
8.1 Termination ....................................................................................................................... 46
8.2 Effect of Termination ........................................................................................................ 47
8.3 Amendment ....................................................................................................................... 47
8.4 Waiver ............................................................................................................................... 47
ARTICLE IX GENERAL PROVISIONS .................................................................................................. 47
9.1 Notices .............................................................................................................................. 47
9.2 Entire Agreement; Binding Effect .................................................................................... 49
9.3 Assignment ....................................................................................................................... 49
9.4 Time of Essence ................................................................................................................ 49
9.5 Further Assurances ........................................................................................................... 49
9.6 Specific Performance ........................................................................................................ 49
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Table of Contents (continued)
Page
iii
9.7 Third Party Beneficiaries .................................................................................................. 49
9.8 Governing Law ................................................................................................................. 50
9.9 Severability ....................................................................................................................... 50
9.10 Counterparts ...................................................................................................................... 50
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Page 129
ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT is dated May 1, 2017 between:
PEMBINA PIPELINE CORPORATION, a corporation existing under
the laws of Alberta with its head office in the City of Calgary, in the
Province of Alberta ("Pembina")
- and -
VERESEN INC., a corporation existing under the laws of Alberta with
its head office in the City of Calgary, in the Province of Alberta
("Veresen")
WHEREAS the board of directors of each of Pembina and Veresen has determined that it would
be in the best interests of its corporation to complete a transaction involving a business combination of
Pembina and Veresen through an acquisition by Pembina of all the issued and outstanding common
shares and preferred shares of Veresen;
AND WHEREAS Pembina and Veresen wish to carry out the transactions contemplated hereby
by way of a plan of arrangement of Veresen under the provisions of the Business Corporations Act
(Alberta);
AND WHEREAS upon the effectiveness of the Arrangement, holders of common shares of
Veresen will receive, at their election, common shares of Pembina or a cash payment, and holders of
preferred shares of Veresen, if such holders approve the Arrangement, will receive preferred shares of
Pembina all on the terms set out herein;
AND WHEREAS the Parties have entered into this Agreement to provide for the matters
referred to in the foregoing recitals and for other matters related to the transactions herein provided for;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT IN CONSIDERATION of
the covenants and agreements herein contained and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the Parties covenant and agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires:
"ABCA" means the Business Corporations Act, R.S.A. 1985, c. B-9, as amended, including the
regulations promulgated therefore;
"Acquisition Proposal" means any inquiry or the making of any proposal to Veresen or the
Veresen Common Shareholders from any Person or group of Persons "acting jointly or in concert" (within
the meaning of NI 62-104) which constitutes, or may reasonably be expected to lead to (in either case
whether in one transaction or a series of transactions): (a) an acquisition or purchase from Veresen or the
Veresen Common Shareholders of 20% or more of the voting securities of Veresen or its Subsidiaries; (b)
any acquisition of a substantial amount of assets (or any lease, long term supply agreement or other
arrangement having the same economic effect as a purchase or sale of a substantial amount of assets) of
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Veresen and its Subsidiaries taken as a whole; (c) an amalgamation, arrangement, merger, business
combination, or consolidation involving Veresen or its Subsidiaries; (d) any take-over bid, issuer bid,
exchange offer, recapitalization, liquidation, dissolution, reorganization or similar transaction involving
Veresen or its Subsidiaries; or (e) any other transaction, the consummation of which would or could
reasonably be expected to impede, interfere with, prevent or delay the transactions contemplated by this
Agreement or the Arrangement or which would or could reasonably be expected to materially reduce the
benefits to Pembina under this Agreement or the Arrangement, provided, however, that the transactions
relating to the Veresen Power Business Sale, in all material respects on the terms and conditions as
disclosed to Pembina in writing by Veresen prior to the date hereof, shall not constitute an "Acquisition
Proposal";
"affiliate" has the meaning set forth in the Securities Act (Alberta);
"Agreement", "herein", "hereof", "hereto", "hereunder" and similar expressions mean and
refer to this Arrangement Agreement (including the schedules hereto) as supplemented, modified or
amended, and not to any particular article, section, schedule or other portion hereof;
"Arrangement" means the arrangement pursuant to Section 193 of the ABCA, all on the terms
and conditions set forth in the Plan of Arrangement, subject to any amendments or variations thereto
made in accordance with the provisions of the Plan of Arrangement or made at the direction of the Court;
"Arrangement Resolution" means a special resolution of the Veresen Common Shareholders in
respect of the Arrangement to be considered at the Veresen Shareholders' Meeting, substantially in the
form of Schedule B-1 hereto;
"Articles of Arrangement" means the articles of arrangement of Veresen in respect of the
Arrangement required under subsection 193(10) of the ABCA to be filed with the Registrar after the Final
Order has been granted, giving effect to the Arrangement;
"associate" has the meaning set forth in the Securities Act (Alberta);
"business day" means any day, other than a Saturday, a Sunday or a statutory holiday, in the
Province of Alberta;
"Canadian Securities Administrators" means the securities commission or other securities
regulatory authority of each province and territory of Canada;
"Canadian Securities Laws" means the securities legislation or ordinance and regulations
thereunder of each province and territory of Canada and the rules, instruments, policies and orders of each
Canadian Securities Administrator made thereunder;
"Certificate" means the certificate or proof of filing to be issued by the Registrar pursuant to
subsection 193(11) or 193(12) of the ABCA in respect of the Articles of Arrangement giving effect to the
Arrangement;
"Commissioner" means the Commissioner of Competition appointed under subsection 7(1) of
the Competition Act, or his designee;
"Competition Act" means the Competition Act, R.S.C. 1985, c. C-34, as amended;
"Competition Act Approval" means, in respect of the Arrangement, the occurrence of one of the
following: (i) the receipt of an advance ruling certificate under subsection 102(1) of the Competition Act
in respect of the Arrangement; or (ii) (a) the applicable waiting period under subsection 123(1) of the
Competition Act, and any extension thereof, shall have expired or shall have been terminated under
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subsection 123(2) of the Competition Act, or the obligation to submit a notification under Part IX of the
Competition Act shall have been waived by the Commissioner pursuant to paragraph 113(c) of the
Competition Act and (b) unless such requirement is waived in writing by Pembina in its sole discretion,
the Commissioner shall have advised the Parties in writing that the Commissioner does not, at that time,
intend to make an application under section 92 of the Competition Act and such advice shall remain in
full force and effect;
"Confidentiality Agreement" means the Confidentiality Agreement dated April 14, 2017
between Pembina and Veresen;
"Court" means the Court of Queen's Bench of Alberta;
"CT Act" means the Canada Transportation Act, R.S.C. 1996, C. 10, as amended;
"CTA Approval" means the occurrence of one of the following: (i) Pembina shall have received
a notice from the Minister of Transport pursuant to subsection 53.1(4) of the CT Act that the Minister of
Transport is of the opinion that the Arrangement contemplated by this Agreement does not raise issues
with respect to the public interest as it relates to national transportation, in accordance with subsection
53.1(4) of the CT Act; or (ii) the Arrangement contemplated by this Agreement shall have been approved
by the Governor in Council in accordance with subsections 53.2(7) of the CT Act, and in either case the
completion of the Arrangement contemplated by this Agreement shall not be prohibited under subsection
53.2(1) of the CT Act;
"deliberate" breach of any representation, warranty or covenant by Pembina or Veresen means
that, as applicable, an executive officer of Pembina or Veresen (a) had actual knowledge that a
representation or warranty of the Party to which he served as an executive officer was false when made,
or (b) as to a covenant herein, directed or allowed Pembina or Veresen, each as applicable, to take an
action, fail to take an action or permit an action to be taken or occur that he knew at such time constituted
a breach of a covenant herein by such Party;
"Dissent Rights" means the rights of dissent provided for in Article 4 of the Plan of
Arrangement;
"Effective Date" means the effective date of the Arrangement, being the date shown on the
Certificate;
"Effective Time" means 12:01 a.m. (Calgary time) on the Effective Date or such other time on
the Effective Date as may be agreed to in writing by Pembina and Veresen;
"Encumbrance" includes any mortgage, pledge, assignment, charge, lien, security interest,
adverse interest in property, other third party interest or encumbrance of any kind whether contingent or
absolute, and any agreement, option, right or privilege (whether by Law, contract or otherwise) capable of
becoming any of the foregoing;
"Environmental Laws" means, with respect to any Person or its business, activities, property,
assets or undertaking, all Laws, including the common law, relating to environmental or health and safety
matters in the jurisdictions applicable to such Person or its business, activities, property, assets or
undertaking, including, without limitation, legislation governing the reduction of greenhouse gas
emissions and the use, transportation, storage and release of Hazardous Substances;
"ERISA" means the United States Employee Retirement Income Security Act of 1974, as
amended, or any successor thereto;
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"ERISA Affiliate" means, with respect to Veresen or any of its Subsidiaries (other than the
Veresen Significant Entities), any other entity, trade or business that together with Veresen or any of its
Subsidiaries (other than the Veresen Significant Entities) is, was at the relevant time or would be treated
as a single employer under Section 414 of the U.S. Tax Code or Section 4001 of ERISA;
"Exchanges" means the TSX and, with respect to Pembina, also includes the NYSE;
"Final Order" means the final order of the Court approving the Arrangement pursuant to
subsection 193(9)(a) of the ABCA, as such order may be amended at any time prior to the Effective Date
or, if appealed, then unless such appeal is withdrawn or denied, as affirmed;
"Governmental Entity" means any: (a) multinational, federal, provincial, territory, state,
regional, municipal, local or other government or any governmental or public department, court, tribunal,
arbitral body, commission, board, bureau or agency; (b) subdivision, agent, commission, board or
authority of any of the foregoing; (c) quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of the foregoing; or (d) the Exchanges,
as applicable;
"Hazardous Substances" means any waste or other substance that is prohibited, listed, defined,
designated or classified as dangerous, hazardous, radioactive, explosive or toxic or a pollutant or a
contaminant under or pursuant to any applicable Environmental Laws, and specifically including
hydraulic fracturing fluids, chemicals and proppants, as well as petroleum and all derivatives thereof or
synthetic substitutes therefor;
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;
"HSR Approval" means the applicable waiting period (and any extension thereof) in respect of
the Arrangement under the HSR Act shall have expired or been earlier terminated;
"IFRS" means International Financial Reporting Standards as incorporated in the Handbook of
the Canadian Institute of Chartered Accountants, at the relevant time applied on a consistent basis;
"Interim Order" means the interim order of the Court under subsection 193(4) of the ABCA, as
the same may be amended, containing declarations and directions in respect of the notice to be given and
the conduct of the Veresen Shareholders' Meeting with respect to the Arrangement as more fully set out
herein;
"Investment Canada Act" means the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), as
amended;
"IRS" means the United States Internal Revenue Service;
"Laws" means all laws, by-laws, statutes, rules, regulations, principles of law, orders, ordinances,
protocols, codes, guidelines, policies, notices, directions and judgments or other requirements and the
terms and conditions of any grant of approval, permission, authority or license of any Governmental
Entity (including any of the Exchanges) or self-regulatory authority and the term "applicable" with
respect to such Laws and in a context that refers to one or more Persons, means such Laws as are
applicable to such Persons or its business, undertaking, property or securities and emanate from a Person
having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;
and "Laws" includes Environmental Laws;
"Material Adverse Change" or "Material Adverse Effect" means, with respect to any Person,
any fact or state of facts, circumstance, change, effect, occurrence or event which:
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(a) either individually is or in the aggregate are, or individually or in the aggregate would
reasonably be expected to be, material and adverse to the business, operations, results of
operations, properties, assets, liabilities, obligations (whether absolute, accrued,
conditional or otherwise) or condition (financial or otherwise) of such Person and its
Subsidiaries, taken as a whole, except to the extent of any fact or state of facts,
circumstance, change, effect, occurrence or event resulting from or arising in connection
with: (i) any matter or prospective matter which has, at or prior to the date hereof, been
publicly disclosed by such Person or has been disclosed in writing to the other Party as at
or prior to the date hereof or the failure of such Party to meet any internal or published
projections, forecasts, estimates or predictions in respect of revenues, earnings or other
financial or operating metrics before, on or after the date of this Agreement; (ii) any
change in IFRS or U.S. GAAP or changes in regulatory accounting requirements
applicable to the oil, natural gas (including liquefied natural gas) and natural gas liquids
transportation, storage, processing, terminalling and fractionation or other midstream
business (the "Relevant Business") as a whole; (iii) conditions affecting the Relevant
Business as a whole, including changes in Laws (including Tax Laws); (iv) any change in
global, national or regional political conditions (including the outbreak of war or acts of
terrorism) or in general economic, business, regulatory, or market conditions or in
national or global financial or capital markets or commodity markets; (v) any natural
disaster; (vi) any changes in the trading price or trading volumes of the Pembina Shares
or Veresen Common Shares, as applicable, or any credit rating downgrade, negative
outlook, watch or similar event relating to Pembina or Veresen, as applicable (provided,
however, that the causes underlying such changes may be considered to determine
whether such causes constitute a Material Adverse Change or Material Adverse Effect);
(vii) any actions taken (or omitted to be taken) at the written request or with the prior
written consent of the other Party hereto; (viii) the announcement of this Agreement or
any action taken by the Person or any of its Subsidiaries that is required pursuant to this
Agreement (including any steps taken pursuant to Section 5.3 to obtain any required
regulatory approvals but excluding any obligation to act in the ordinary course of
business); or (ix) the failure by Veresen to complete the Veresen Power Business Sale;
provided, however, that with respect to paragraphs (ii), (iii), (iv) and (v) such matter does
not have a materially disproportionate effect on the Person and its Subsidiaries, taken as a
whole, relative to comparable entities operating in the Relevant Business, in which case,
the relevant exclusion from this definition of "Material Adverse Change" or "Material
Adverse Effect" referred to in paragraphs (ii), (iii), (iv) and (v) above would not apply,
and references in certain sections of this Agreement to dollar amounts are not intended to
be, and shall not be deemed to be, illustrative or interpretative for purposes of
determining whether a "Material Adverse Change" or a "Material Adverse Effect" has
occurred; or
(b) either individually or in the aggregate prevents or materially delays, or individually or in
the aggregate would reasonably be expected to prevent or materially delay, the Person
from performing its material obligations under this Agreement in any material respect;
"Maximum Cash Consideration" means $1,522,500,000;
"Maximum Share Consideration" means 99,500,000 Pembina Shares;
"MI 61-101" means Multilateral Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions;
"Money Laundering Laws" has the meaning ascribed thereto in paragraph (bb) of Schedule C;
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"NI 62-104" means National Instrument 62-104 – Take-Over Bids and Issuer Bids;
"NYSE" means the New York Stock Exchange;
"OFAC" has the meaning ascribed thereto in paragraph (bb) of Schedule C;
"Outside Date" means October 31, 2017, subject to the right of Pembina to postpone the Outside
Date for up to an additional two months if a Required Regulatory Approval has not been obtained, by
giving written notice to Veresen to such effect no later than 5:00 p.m. (Calgary Time) on the date that is
not less than five days prior to the original Outside Date (and any subsequent Outside Date), or such later
date as may be agreed to in writing by the Parties, provided that, notwithstanding the foregoing, Pembina
shall not be permitted to postpone the Outside Date if the failure to obtain a Required Regulatory
Approval is primarily the result of Pembina's failure to comply with its covenants herein;
"Parties" means Pembina and Veresen, and "Party" means either one of them;
"Pembina Class A Preferred Shares" means the class A preferred shares of Pembina;
"Pembina Class B Preferred Shares" means class B preferred shares of Pembina, issuable in
series;
"Pembina Convertible Debentures" means the 5.75% convertible unsecured subordinated
debentures of Pembina maturing December 31, 2018 issued by Provident Energy Ltd. on April 29, 2011
and assumed by Pembina in April 2012;
"Pembina Damages Event" has the meaning ascribed thereto in Section 7.2;
"Pembina Exchange Preferred Shares" means the Pembina Series A Exchange Shares, the
Pembina Series B Exchange Shares, the Pembina Series C Exchange Shares, the Pembina Series D
Exchange Shares, the Pembina Series E Exchange Shares and the Pembina Series F Exchange Shares, as
constituted on the Effective Date;
"Pembina Information" has the meaning ascribed thereto in Section 2.3;
"Pembina Options" means options to purchase Pembina Shares granted pursuant to Pembina's
stock option plan dated May 26, 2011, as amended;
"Pembina Preferred Shares" means, collectively, the Pembina Class A Preferred Shares and the
Pembina Class B Preferred Shares;
"Pembina Series 1 Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, Series 1 in the capital of Pembina;
"Pembina Series 2 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 2 in the capital of Pembina;
"Pembina Series 3 Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, Series 3 in the capital of Pembina;
"Pembina Series 4 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 4 in the capital of Pembina;
"Pembina Series 5 Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, Series 5 in the capital of Pembina;
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"Pembina Series 6 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 6 in the capital of Pembina;
"Pembina Series 7 Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, Series 7 in the capital of Pembina;
"Pembina Series 8 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 8 in the capital of Pembina;
"Pembina Series 9 Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, Series 9 in the capital of Pembina;
"Pembina Series 10 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 10 in the capital of Pembina;
"Pembina Series 11 Shares" means the cumulative redeemable minimum rate reset Class A
Preferred Shares, Series 11 in the capital of Pembina;
"Pembina Series 12 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 12 in the capital of Pembina;
"Pembina Series 13 Shares" means the cumulative redeemable minimum rate reset Class A
Preferred Shares, Series 13 in the capital of Pembina;
"Pembina Series 14 Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, Series 14 in the capital of Pembina;
"Pembina Series A Exchange Shares" means a series of cumulative redeemable rate reset Class
A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen Series A
Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina Series B
Exchange Shares instead of Veresen Series B Shares;
"Pembina Series B Exchange Shares" means a series of cumulative redeemable floating rate
Class A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen
Series B Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina
Series A Exchange Shares instead of Veresen Series A Shares;
"Pembina Series C Exchange Shares" means a series of cumulative redeemable rate reset Class
A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen Series C
Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina Series D
Exchange Shares instead of Veresen Series D Shares;
"Pembina Series D Exchange Shares" means a series of cumulative redeemable floating rate
Class A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen
Series D Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina
Series C Exchange Shares instead of Veresen Series C Shares;
"Pembina Series E Exchange Shares" means a series of cumulative redeemable rate reset Class
A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen Series E
Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina Series F
Exchange Shares instead of Veresen Series F Shares;
"Pembina Series F Exchange Shares" means a series of cumulative redeemable floating rate
Class A Preferred Shares in the capital of Pembina, such shares having identical terms to the Veresen
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Series F Shares except that the issuer thereof shall be Pembina and they will be convertible into Pembina
Series E Exchange Shares instead of Veresen Series E Shares;
"Pembina Shareholder Rights Plan" means Pembina's shareholder rights plan dated May 13,
2016;
"Pembina Shareholders" means the holders of Pembina Shares;
"Pembina Shares" means the common shares in the capital of Pembina;
"Permitted Encumbrances" means (a) Encumbrances specifically disclosed in writing to the
other Party prior to the date hereof; (b) easements, rights of way, servitudes or other similar rights,
including, without limitation, rights of way for highways, railways, sewers, drains, gas or oil pipelines,
gas or water mains, electric light, power, telephone or cable television towers, poles, wires and similar
rights in real property or any interest therein, provided the same are registered on title and not of such
nature as to materially adversely affect the use of the property subject thereto; (c) the regulations and any
rights reserved to or vested in any municipality or governmental, statutory or public authority to levy
taxes or to control or regulate any Party's or any of its Subsidiaries' interests in any manner;
(d) undetermined or inchoate liens incurred or created in the ordinary course of business as security for a
Party's or any of its Subsidiaries' share of the costs and expenses of the development or operation of any
of its assets, which costs and expenses are not delinquent as of the Effective Time; (e) undetermined or
inchoate mechanics' liens and similar liens for which payment for services rendered or goods supplied is
not delinquent as of the Effective Time; (f) liens granted in the ordinary course of business to a
Governmental Entity respecting operations pertaining to petroleum and natural gas rights; (g) liens for
taxes, assessments and governmental charges that are not due and payable or delinquent; and (h) any
encumbrances under a Party's or any of its Subsidiaries' existing credit facilities or other borrowing
arrangements disclosed in writing to the other Party;
"Person" includes an individual, firm, trust, partnership, association, corporation, joint venture,
trustee, executor, administrator, legal representative or government (including any Governmental Entity);
"Plan of Arrangement" means the plan of arrangement substantially in the form set forth in
Schedule A hereto and any amendments or variations thereto made in accordance with Section 8.3 hereof
or Article 6 of the Plan of Arrangement or made at the direction of the Court in the Final Order with the
consent of Pembina and Veresen, each acting reasonably;
"Pre-Arrangement Reorganization" has the meaning ascribed thereto in Section 5.4;
"Pre-Emptive Right" means a right of first refusal, pre-emptive right of purchase or similar right
whereby any third party has a right to acquire or purchase all or any portion of any asset (including any
securities) owned in whole or in part by Veresen or any of its Subsidiaries;
"Preferred Shareholder Resolution" means the special resolution of the Veresen Preferred
Shareholders, voting as a class, in respect of the Arrangement to be considered at the Veresen
Shareholders' Meeting, substantially in the form attached as Schedule B-2 to the Arrangement
Agreement;
"Registrar" means the Registrar of Corporations duly appointed pursuant to section 263 of the
ABCA;
"Regulatory Action" has the meaning ascribed thereto in Section 5.3(d);
"Regulatory Approvals" means any consent, waiver, permit, permission, exemption, review,
order, decision or approval of, or any registration and filing with or withdrawal of any objection or
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successful conclusion of any litigation brought by, any Governmental Entity, or the expiry, waiver or
termination of any waiting period imposed by Law or a Governmental Entity or pursuant to a written
agreement between the Parties and a Governmental Entity to refrain from consummating the
Arrangement, in each case required or advisable under Laws in connection with the Arrangement,
including the Required Regulatory Approvals;
"Relevant Business" has the meaning set forth in the definition of "Material Adverse Change"
and "Material Adverse Effect" in this Agreement;
"Representatives" means the officers, directors, employees, financial advisors, legal counsel,
accountants and other agents and representatives of a Party;
"Required Regulatory Approvals" means the Competition Act Approval, the CTA Approval
and the HSR Approval;
"SEC" means the United States Securities and Exchange Commission;
"Securities Regulators" means collectively the Canadian Securities Administrators and the SEC;
"Subsidiary" has the meaning set forth in the Securities Act (Alberta) and, in the case of Veresen,
includes the Veresen Significant Entities;
"Superior Proposal" means a written bona fide Acquisition Proposal to acquire not less than all
of the outstanding Veresen Common Shares, or all or substantially all of the assets (on a consolidated
basis) of Veresen, which: (i) complies with Securities Laws and did not result from or involve a breach of
Section 7.1; (ii) is not subject to any financing condition and that the funds or other consideration
necessary to complete the Acquisition Proposal are or are reasonably likely to be available, as
demonstrated to the satisfaction of the board of directors of Veresen, acting in good faith, to fund
completion of the Acquisition Proposal at the time and on the basis set out therein; (iii) is not subject to
any due diligence condition; (iv) the board of directors of Veresen determines, in good faith, after
consultation with its financial advisor(s) and outside counsel, would or would be reasonably likely to, if
consummated in accordance with its terms and without assuming away the risk of non-completion, result
in a transaction more favourable, from a financial point of view, for Veresen Common Shareholders to the
transaction contemplated by this Agreement (including after considering the proposal to adjust the terms
and conditions of the Arrangement as contemplated in Section 7.1(c)); (v) the board of directors of
Veresen determines, in good faith, after consultation with its financial advisor(s) and outside counsel, is
reasonably likely to be consummated at the time and on the terms proposed, without undue delay and
taking into account all legal, financial, regulatory (including with respect to the Competition Act, CT Act
and HSR Act, to the extent applicable) and other aspects of such Acquisition Proposal and the Person or
group of Persons making such proposal; and (vi) after receiving the advice of outside counsel, that the
failure by the board of directors of Veresen to accept, recommend, approve or enter into a definitive
agreement to implement, as applicable, such Acquisition Proposal would be inconsistent with its fiduciary
duties;
"Tax" or "Taxes" means all taxes, however denominated, including any interest, penalties or
other additions that may become payable in respect thereof, imposed by any Governmental Entity, which
taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including,
but not limited to, federal, provincial and state income taxes), capital taxes, payroll and employee
withholding taxes, gasoline and fuel taxes, employment insurance, social insurance taxes (including
Canada Pension Plan payments), sales and use taxes (including goods and services, harmonized sales and
provincial or territorial sales tax), ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, carbon taxes, transfer taxes, workers' compensation premiums or charges, pension assessment and
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other governmental charges, and other obligations of the same or of a similar nature to any of the
foregoing, which one of the Parties or any of its Subsidiaries is required to pay, withhold or collect;
"Tax Act" means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended, including the
regulations promulgated thereunder, as amended from time to time;
"Tax Returns" means all reports, estimates, elections, designations, forms, declarations of
estimated Tax, information statements and returns relating to, or required to be filed in connection with
any Taxes and whether in tangible or electronic form;
"Tax Sharing Agreement" has the meaning ascribed thereto in subparagraph (g)(xiv) of
Schedule D;
"Third Party Beneficiaries" has the meaning ascribed thereto in Section 9.7;
"TSX" means The Toronto Stock Exchange;
"U.S. Economic Sanctions" has the meaning ascribed thereto in paragraph (bb) of Schedule C;
"U.S. Exchange Act" means the United States Securities Exchange Act of 1934, as amended;
"U.S. GAAP" means generally accepted accounting principles in the United States, at the
relevant time applied on a consistent basis;
"U.S. Securities Act" means the United States Securities Act of 1933, as amended;
"U.S. Securities Laws" means federal and state securities legislation of the United States and all
rules, regulations and orders promulgated thereunder;
"U.S. Tax Code" means the United States Internal Revenue Code of 1986, as amended, or any
successor thereto;
"U.S. Treasury Regulations" means the Treasury regulations promulgated under the U.S. Tax
Code;
"Veresen AEGS Notes" means the $110 million aggregate principal amount of 5.565% senior
notes, Series A due May 4, 2020 of Alberta Ethane Gathering System L.P. issued pursuant to the note
purchase agreement dated May 4, 2005;
"Veresen Bank Facility" means the $750 million revolving credit facility of Veresen and the $45
million club revolving credit facility of Veresen, as amended, with a syndicate of financial institutions
maturing on May 31, 2020;
"Veresen Common Shareholders" means the holders of Veresen Common Shares;
"Veresen Common Share Consideration" means a deemed price per Veresen Common Share of
$18.65;
"Veresen Common Shares" means the common shares in the capital of Veresen;
"Veresen Debt" means total consolidated indebtedness, including long-term debt (including, for
greater certainty, the Veresen MTNs and the Veresen AEGS Notes) and bank debt, but excluding working
capital deficiency, of Veresen;
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"Veresen DSU Plans" means the Veresen Directors Deferred Share Unit Plan dated December
8, 2016 and the Veresen Senior Executive Deferred Share Unit Plan dated January 1, 2012;
"Veresen DSUs" means deferred share units awarded pursuant to the Veresen DSU Plans,
including any related dividend equivalent units;
"Veresen DRIP" means Veresen's Premium Dividend, Dividend Reinvestment Share Purchase
Plan;
"Veresen Employee Plans" has the meaning ascribed thereto in paragraph (bb) of Schedule D;
"Veresen Employee Obligations" means any obligations or liabilities of Veresen to pay any
amount to or on behalf of its directors, officers, consultants or Veresen Employees (other than for salary,
vacation pay and directors' fees in the ordinary course and in amounts consistent with historic practices
and not including payments made in respect of Veresen Incentive Awards) and, without limiting the
generality of the foregoing, Veresen Employee Obligations shall include the obligations of Veresen to
officers or other Veresen Employees for severance, or other termination payments pursuant to the
Veresen Employment Agreements and arising under applicable Laws as a result of the change of control
of Veresen;
"Veresen Employees" means the officers and other employees of Veresen or of any of its
Subsidiaries (excluding the Veresen Significant Entities);
"Veresen Employment Agreements" means the executive employment agreements between
Veresen and each of Don Althoff, Kevan King, Darren Marine, Paul Eastman, David Fitzpatrick and
Theresa Jang;
"Veresen Exchange Ratio" means 0.4287 of a Pembina Share for each Veresen Common Share;
"Veresen Fairness Opinions" has the meaning ascribed thereto in Section 2.2(b);
"Veresen Financial Statements" has the meaning ascribed thereto in paragraph (q) of
Schedule D;
"Veresen Incentive Awards" means, collectively, the Veresen RSUs, Veresen DSUs and
Veresen PSUs;
"Veresen LTI Plans" means, collectively, the Veresen LTIP and the Veresen DSU Plans,
including any award agreements related to awards granted thereunder;
"Veresen LTIP" means the amended and restated Veresen Long-Term Incentive Plan dated
January 1, 2016;
"Veresen Midstream Facility" means the $1.925 billion credit facility of Veresen Midstream
Limited Partnership pursuant to the credit agreement dated as March 31, 2015, as amended, among
Veresen Midstream Limited Partnership, Veresen Midstream US LLC and the administrative and
collateral agents and lenders party thereto from time to time;
"Veresen MTN Indenture" means the trust indenture dated as of November 22, 2011, as
amended by a First Supplemental Indenture dated March 14, 2012, a second supplemental indenture dated
June 13, 2014 and a third supplemental indenture dated November 10, 2016, between Veresen and
Computershare Trust Company of Canada, establishing and setting forth, among other things, the terms of
the Veresen MTNs;
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"Veresen MTNholders" means, collectively, the holders of the Veresen MTNs;
"Veresen MTNs" means, collectively, (i) the $150 million principal amount of 4.00% series 1
medium term notes of Veresen due November 22, 2018, (ii) the $50 million principal amount of 5.05%
series 3 medium term notes of Veresen due March 14, 2022, (iii) the $200 million principal amount of
3.06% series 4 medium term notes of Veresen due June 13, 2019, and (iv) the $350 million principal
amount of 3.43% series 5 medium term notes of Veresen due November 10, 2021;
"Veresen Power Business Sale" means the sale of Veresen's power generation business, as
announced by Veresen on February 21, 2017 including all updates, amendments and changes disclosed to
Pembina in writing by Veresen prior to the date hereof;
"Veresen Preferred Share Consideration" one Pembina Series A Exchange Share per Veresen
Series A Share, without interest, one Pembina Series B Exchange Share per Veresen Series B Share,
without interest, one Pembina Series C Exchange Share per Veresen Series C Share, without interest, one
Pembina Series D Exchange Share per Veresen Series D Share, without interest, one Pembina Series E
Exchange Share per Veresen Series E Share, without interest, and one Pembina Series F Exchange Share
per Veresen Series F Share, without interest (together, in the case of each Veresen Preferred Share, with
an amount equal to all accrued and unpaid dividends thereon up to, but excluding, the Effective Date) as
applicable;
"Veresen Preferred Shareholders" means, collectively, the holders of Veresen Series A Shares,
Veresen Series B Shares, Veresen Series C Shares, Veresen Series D Shares, Veresen Series E Shares and
Veresen Series F Shares;
"Veresen Preferred Shares" means, collectively, the Veresen Series A Shares, the Veresen
Series B Shares, the Veresen Series C Shares, the Veresen Series D Shares, the Veresen Series E Shares
and the Veresen Series F Shares, as constituted on the date hereof;
"Veresen Proxy Circular" means the notice of the Veresen Shareholders' Meeting to be sent to
Veresen Shareholders and the management proxy circular to be prepared in connection with the Veresen
Shareholders' Meeting together with any amendments thereto or supplements thereof, and any other
registration statement, information circular or proxy statement which may be prepared in connection with
the Veresen Shareholders' Meeting;
"Veresen PSUs" means performance share units awarded pursuant to the Veresen LTIP,
including any related dividend equivalent units;
"Veresen RSUs" means the restricted share units awarded pursuant to the Veresen LTIP,
including any related dividend equivalent units;
"Veresen Ruby Notes" means up to US$250 million aggregate principal amount of subordinated
notes of Ruby Pipeline, L.L.C. and Veresen U.S. Infrastructure Inc.;
"Veresen Series A Shares" means the cumulative redeemable preferred shares, series A of
Veresen;
"Veresen Series B Shares" means the cumulative redeemable preferred shares, series B of
Veresen;
"Veresen Series C Shares" means the cumulative redeemable preferred shares, series C of
Veresen;
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"Veresen Series D Shares" means the cumulative redeemable preferred shares, series D of
Veresen;
"Veresen Series E Shares" means the cumulative redeemable preferred shares, series E of
Veresen;
"Veresen Series F Shares" means the cumulative redeemable preferred shares, series F of
Veresen;
"Veresen Shareholder Rights Plan" means Veresen's shareholder rights plan dated May 6,
2014, as such may be amended, amended and restated or replaced from time to time;
"Veresen Shareholders" means the holders of Veresen Common Shares and Veresen Preferred
Shares;
"Veresen Shareholders' Meeting" means such meeting or meetings of the Veresen
Shareholders, including any adjournment thereof, that is or are to be convened as provided by the Interim
Order to consider, and if deemed advisable approve, the Arrangement Resolution and the Preferred
Shareholder Resolution;
"Veresen Shares" means, collectively, Veresen Common Shares and Veresen Preferred Shares;
"Veresen Significant Entities" means, collectively, Aux Sable Canada LP, Aux Sable Canada
Ltd., Alliance Canada Marketing L.P., Alliance Canada Marketing Ltd., Alliance Pipeline Limited
Partnership, Alliance Pipeline Ltd., Veresen Midstream Limited Partnership, Veresen Midstream General
Partner Inc., NRGreen Power L.P., NRGreen Power Ltd., Alliance Pipeline L.P., Alliance Pipeline Inc.,
Aux Sable Liquid Products LP, Aux Sable Liquid Products Inc., Aux Sable Midstream LLC, Ruby
Pipeline Holding Company, L.L.C. and Ruby Pipeline, LLC; and
"WARN Act" means the United States Worker Adjustment and Retraining Notification Act of
1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and
employment losses.
1.2 Interpretation Not Affected by Headings
The division of this Agreement into Articles, Sections, subsections, paragraphs and other portions
and the insertion of headings are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
1.3 Article References
Unless the contrary intention appears, references in this Agreement to an Article, Section,
subsection, paragraph or Schedule by number or letter or both refer to the Article, Section, subsection,
paragraph or Schedule, respectively, bearing that designation in this Agreement.
1.4 Number and Gender
In this Agreement, unless the contrary intention appears, words importing the singular include the
plural and vice versa; and words importing gender shall include all genders.
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1.5 Date for Any Action
If the date on which any action is required to be taken hereunder by a Party is not a business day
in the place where the action is required to be taken, such action shall be required to be taken on the next
succeeding day which is a business day in such place.
1.6 Currency
Unless otherwise stated, all references in this Agreement to sums of money are expressed in
lawful money of Canada.
1.7 Schedules
The following Schedules annexed to this Agreement, being:
Schedule A Plan of Arrangement
Schedule B-1 Form of Arrangement Resolution
Schedule B-2 Form of Preferred Shareholder Resolution
Schedule C Representations and Warranties of Pembina
Schedule D Representations and Warranties of Veresen
are incorporated by reference into this Agreement and form a part hereof.
1.8 Accounting Matters
Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings
attributable thereto under, and all determinations of an accounting nature required to be made shall be
made in a manner consistent with IFRS, in the case of Pembina, and U.S. GAAP, in the case of Veresen.
1.9 Knowledge
In this Agreement, references to "to the knowledge of" means the actual knowledge of the
Executive Officers of Pembina or Veresen, as the case may be, after reasonable inquiry (which, for
greater certainty, shall not require inquiries of any Person other than the Executive Officers of Veresen
and the executive officers of Subsidiaries of Veresen (other than the Veresen Significant Entities)), and
such officers shall make such inquiry as is reasonable in the circumstances. For purposes of this Section
1.9 and Section 1.10, "Executive Officers" (a) in the case of Pembina, means Pembina's President and
Chief Executive Officer, Vice President, Finance and Chief Financial Officer, Vice President, Legal and
General Counsel, Senior Vice President, Pipeline and Crude Oil Facilities and Senior Vice President,
NGL and Natural Gas Facilities, and (b) in the case of Veresen means Veresen's President and Chief
Executive Officer, Senior Vice President, Finance and Chief Financial Officer, Senior Vice
President, General Counsel, Senior Vice President, Business Joint Ventures, Executive Vice President,
President and CEO, Jordan Cove LNG, Vice President, Human Resources and Administration and Vice
President, Corporate Planning and Investor Relations.
1.10 Veresen Significant Entities
Notwithstanding any other provision of this Agreement, the representations and warranties
contained in this Agreement with respect to the Veresen Significant Entities are given by Veresen only to
the knowledge of the Executive Officers of Veresen referred to in Section 1.9, except for the
representations and warranties given respecting Veresen's direct or indirect ownership and Veresen's
rights and obligations in respect of such Veresen Significant Entities.
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Covenants of Veresen contained in this Agreement shall not extend to the Veresen Significant
Entities in which Veresen does not directly or indirectly own a controlling interest; provided however,
except as expressly stated in this Agreement, that if an issue, event or circumstance relating to any of the
Veresen Significant Entities arises, which issue would be the subject matter of any of the covenants
contained in this Agreement but for the fact that the covenants do not extend to the Veresen Significant
Entities, subject to any applicable Laws, applicable fiduciary duties or contractual obligations (other than
under this Agreement), Veresen shall use commercially reasonable efforts to comply with such covenant
and shall vote its voting interests in the relevant Veresen Significant Entity in respect of such issue, event
or circumstance consistent with complying with the relevant covenant as though such covenant did extend
to the relevant Veresen Significant Entity. Veresen shall also exercise any other proper influence in the
relevant Veresen Significant Entity in a manner consistent with complying with the relevant covenant as
though such covenant did extend to the relevant Veresen Significant Entity, subject to any applicable
Laws, applicable fiduciary duties or contractual obligations (other than under this Agreement).
1.11 Other Definitional and Interpretive Provisions
(a) References in this Agreement to the words "include", "includes" or "including" shall be
deemed to be followed by the words "without limitation" whether or not they are in fact
followed by those words or words of like import.
(b) Any capitalized terms used in any exhibit or Schedule but not otherwise defined therein,
shall have the meaning as defined in this Agreement.
(c) References to any agreement or contract are to that agreement or contract as amended,
modified or supplemented from time to time in accordance with the terms hereof and
thereof. Any reference in this Agreement to a Person includes the heirs, administrators,
executors, legal personal representatives, predecessors, successors and permitted assigns
of that Person.
(d) References to a particular statute or Law shall be to such statute or Law and the rules,
regulations and published policies made thereunder, as now in effect and as they may be
promulgated thereunder or amended from time to time.
(e) The term "made available" means that (i) copies of the subject materials were included in,
and were not removed from, the data room of the applicable Party no later than 9 a.m.
(Calgary time) on April 30, 2017; or (ii) copies of the subject materials were provided to
the other Party.
ARTICLE II
THE ARRANGEMENT
2.1 The Arrangement
Pembina and Veresen shall proceed to effect a plan of arrangement under section 193 of the
ABCA pursuant to which, on the Effective Date, on the terms and subject to the conditions contained in
the Plan of Arrangement:
(a) each Veresen Common Shareholder (other than those Veresen Common Shareholders
who have validly exercised Dissent Rights) shall receive, for each Veresen Common
Share, the Veresen Common Share Consideration which shall be payable, at its election
with:
(i) such number of Pembina Shares equal to the Veresen Exchange Ratio; or
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(ii) a cash amount equal to the Veresen Common Share Consideration;
provided that, under no circumstance shall: (A) the aggregate cash
payments paid by Pembina in connection with such elections exceed the
Maximum Cash Consideration (for greater certainty, excluding any validly
exercised Dissent Rights); or (B) the aggregate number of Pembina Shares
issued by Pembina in connection with such elections exceed the Maximum
Share Consideration. In the event the Maximum Cash Consideration or the
Maximum Share Consideration would otherwise be exceeded, the Veresen
Common Shareholders who have elected to receive a portion of their
aggregate Veresen Common Share Consideration in cash or Pembina
Shares, as applicable, will receive that amount of cash and Pembina Shares
as has been prorated in accordance with the terms of the Plan of
Arrangement; and
(b) if the Preferred Shareholder Resolution receives the requisite approval by the Veresen
Preferred Shareholders at the Veresen Shareholders' Meeting, each Veresen Preferred
Shareholder (other than those Veresen Preferred Shareholders who have validly exercised
Dissent Rights) shall receive, for each Veresen Preferred Share, the Veresen Preferred
Share Consideration, as applicable.
Pembina may acquire the Veresen Shares through a direct or indirectly wholly-owned Subsidiary,
currently existing or to be organized under the laws of any jurisdiction in Canada ("AcquisitionCo").
Pembina will cause AcquisitionCo to perform all of its obligations under the Plan of Arrangement.
2.2 Veresen Approval
Veresen represents and warrants to Pembina:
(a) that its board of directors has unanimously determined that:
(i) the Arrangement is fair to the Veresen Common Shareholders and the
Veresen Preferred Shareholders;
(ii) it will recommend that the Veresen Common Shareholders and the Veresen
Preferred Shareholders vote in favour of the Arrangement; and
(iii) the Arrangement and entry into this Agreement are in the best interests of
Veresen; and
(b) (i) that its board of directors has received verbal opinions from Scotia Capital Inc., the
financial advisor to Veresen, that the consideration to be paid to the Veresen Common
Shareholders and the Veresen Preferred Shareholders is fair, from a financial point of
view, to the Veresen Common Shareholders and the Veresen Preferred Shareholders,
respectively (the "Veresen Fairness Opinions"); and (ii) that the fees to be paid to Scotia
Capital Inc. in connection with the delivery of the Veresen Fairness Opinions are not
contingent on the completion of the Arrangement.
2.3 Obligations of Pembina
Subject to the terms and conditions of this Agreement, in order to facilitate the Arrangement,
Pembina shall take all action necessary in accordance with all applicable Laws, including Canadian
Securities Laws and U.S. Securities Laws, to do all things necessary or desirable to give effect to the
Arrangement, including using commercially reasonable efforts to make and actively prosecute
applications for all applicable required Regulatory Approvals.
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Pembina shall use its commercially reasonable efforts to obtain and furnish to Veresen the
information required on its behalf to be included in the Veresen Proxy Circular (the "Pembina
Information"). As of the date the Veresen Proxy Circular is first mailed to the Veresen Shareholders and
the date of any Veresen Shareholders' Meeting, the Pembina Information shall be complete and correct in
all material respects, shall not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
in which they are made, not misleading (a "Misrepresentation") and shall comply in all material respects
with all applicable Laws. Pembina agrees to promptly correct any Pembina Information which shall have
become false or misleading at any time prior to the Veresen Shareholders' Meeting.
Pembina agrees to indemnify and save harmless Veresen and its officers, directors, employees,
agents, advisors and representatives from and against any and all liabilities, losses, damages, claims,
costs, reasonable expenses, interest awards, judgments and penalties suffered or incurred by any of them
in connection with or as a result of any Misrepresentation in any of the Pembina Information.
2.4 Obligations of Veresen
Subject to the terms and conditions of this Agreement, in order to facilitate the Arrangement,
Veresen shall take all action necessary in accordance with all applicable Laws, including Canadian
Securities Laws and U.S. Securities Laws, to:
(a) make and diligently prosecute an application to the Court for the Interim Order in respect
of the Arrangement;
(b) in accordance with the terms of and the procedures contained in the Interim Order, duly
call, give notice of, convene and hold the Veresen Shareholders' Meeting as promptly as
practicable, and in any event not later than July 11, 2017 and with a record date not later
than May 23, 2017, to vote upon the Arrangement Resolution and the Preferred
Shareholder Resolution and any other matters as may be properly brought before such
meeting;
(c) subject to compliance by the Veresen directors and officers with their fiduciary duties,
solicit proxies of Veresen Common Shareholders and Veresen Preferred Shareholders in
favour of the Arrangement Resolution and the Preferred Shareholder Resolution,
respectively, including, if so requested by Pembina, acting reasonably, by using a proxy
solicitation agent for such purpose;
(d) subject to obtaining the approvals as contemplated in the Interim Order and as may be
directed by the Court in the Interim Order, take all steps necessary or desirable to submit
the Arrangement to the Court and apply for the Final Order as soon as reasonably
practicable, and use all commercially reasonable efforts to do so not later than the third
business day after the date on which the Arrangement Resolution is passed at the Veresen
Shareholders' Meeting;
(e) deliver the Articles of Arrangement to the Registrar upon satisfaction or waiver of the
conditions set forth in Article VI as provided for in Section 2.10; and
(f) do all things necessary or desirable to give effect to the Arrangement, including using
commercially reasonable efforts to make and actively prosecute applications for all
applicable required Regulatory Approvals.
Veresen shall use its commercially reasonable efforts to prepare, print and mail, directly and
indirectly, the Veresen Proxy Circular and related material to the Veresen Shareholders as soon as
practicable following the date of this Agreement. Veresen shall give Pembina and its legal counsel a
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reasonable opportunity to review and comment on the drafts of the Veresen Proxy Circular and other
related documents, and shall give reasonable consideration to any comments made by Pembina and its
counsel relating to the disclosure contained therein, and agrees that all Pembina Information and
information regarding the Arrangement included in the Veresen Proxy Circular must be in content
satisfactory to Pembina, acting reasonably. As of the date the Veresen Proxy Circular is first mailed to
the Veresen Shareholders and the date of any Veresen Shareholders' Meeting, the Veresen Proxy Circular
shall be complete and correct in all material respects, shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading and shall comply in all
material respects with all applicable Laws. Veresen agrees to promptly correct any information (other
than the Pembina Information) in the Veresen Proxy Circular which shall have become false or
misleading at any time prior to the Veresen Shareholders' Meeting. Without limiting the generality of the
foregoing, Veresen shall ensure that the Veresen Proxy Circular provides holders of Veresen Shares with
information in sufficient detail to permit them to form a reasoned judgment concerning the matters to be
placed before them at the Veresen Shareholders' Meeting, including identifying the approaches to fairness
determination taken by Scotia Capital Inc. in respect of the Veresen Fairness Opinions and presented to
the board of directors of Veresen, and contains the unanimous recommendation of the board of directors
of Veresen that the Veresen Common Shareholders and the Veresen Preferred Shareholders vote in favour
of the Arrangement Resolution and the Preferred Shareholder Resolution, respectively.
2.5 Interim Order
The application referred to in Section 2.4(a) shall request that the Interim Order provide, among
other things:
(a) for the class of Persons to whom notice is to be provided in respect of the Arrangement
and the Veresen Shareholders' Meeting and for the manner in which such notice is to be
provided;
(b) that the requisite approval for the Arrangement Resolution to be placed before the
Veresen Common Shareholders shall be 66 2/3% of the votes cast on the Arrangement
Resolution by Veresen Common Shareholders present in person or by proxy at the
Veresen Shareholders' Meeting (such that each Veresen Common Shareholder is entitled
to one vote for each Veresen Common Share held) and, if required under Canadian
Securities Laws, by a majority of the votes cast on the Arrangement Resolution by
Veresen Common Shareholders present in person or by proxy at the Veresen Meeting
after excluding the votes of those Persons whose votes are required to be excluded under
MI 61-101;
(c) that the requisite approval for the Preferred Shareholder Resolution to be placed before
the Veresen Preferred Shareholders shall be 66 2/3% of the votes cast on the Preferred
Shareholder Resolution by Veresen Preferred Shareholders present in person or by proxy
at the Veresen Shareholders' Meeting (such that each Veresen Preferred Shareholder is
entitled to one vote for each Veresen Preferred Share held) and, if required under
Canadian Securities Laws, by a majority of the votes cast on the Preferred Shareholder
Resolution by Veresen Preferred Shareholders present in person or by proxy at the
Veresen Shareholders' Meeting after excluding the votes of those Persons whose votes
are required to be excluded under MI 61-101;
(d) that, in all other respects, the terms, restrictions and conditions of the constating
documents of Veresen, including quorum requirements and all other matters, shall apply
in respect of the Veresen Shareholders' Meeting;
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(e) for the grant of the Dissent Rights as set forth in the Plan of Arrangement;
(f) that the Veresen Shareholders' Meeting may be adjourned or postponed from time to time
by Veresen in accordance with the terms of this Agreement without the need for
additional approval of the Court;
(g) that the record date for Veresen Shareholders entitled to notice of and to vote at the
Veresen Shareholders' Meeting will not change in respect of any adjournment(s) or
postponement(s) of the Veresen Shareholders' Meeting;
(h) for the notice requirements with respect to the presentation of the application to the Court
for the Final Order; and
(i) for such other matters as the Parties may agree in writing, each acting reasonably.
In the application referred to in Section 2.4(a), Veresen shall inform the Court that the Parties
intend to rely on the exemption provided by Section 3(a)(10) of the U.S. Securities Act for the issuance of
the Pembina Shares and, if applicable, the Pembina Exchange Preferred Shares, pursuant to the
Arrangement and that, in connection therewith, the Court will be required to approve the substantive and
procedural fairness of the terms and conditions of the Arrangement to each Person to whom Pembina
Shares and, if applicable, the Pembina Exchange Preferred Shares will be issued. Each Person to whom
Pembina Shares and, if applicable, the Pembina Exchange Preferred Shares will be issued on completion
of the Arrangement will be given adequate notice advising them of their right to attend and appear before
the Court at the hearing of the Court for the Final Order and providing them with adequate information to
enable such Person to exercise such right.
2.6 Conduct of Meeting
(a) Subject to the terms of this Agreement and the Interim Order, Veresen agrees to convene
and conduct the Veresen Shareholders' Meeting, in accordance with its constating
documents and applicable Laws and the Interim Order, and agrees not to propose to
adjourn or postpone the meeting without the prior consent of Pembina, acting reasonably:
(i) except as required for quorum purposes (in which case the meeting shall be
adjourned and not cancelled) or by applicable Law or by a Governmental
Entity;
(ii) except as required under Section 6.4 or Section 7.1(c); or
(iii) except for an adjournment at the request of Pembina for the purpose of
attempting to obtain the requisite approval for the Arrangement Resolution
or the Preferred Shareholder Resolution.
(b) Notwithstanding the receipt by Veresen of a Superior Proposal in accordance with
Section 7.1, unless otherwise agreed to in writing by Pembina or this Agreement is
terminated in accordance with its terms or except as required by applicable Law or by a
Governmental Entity, Veresen shall continue to take all steps reasonably necessary to
hold the Veresen Shareholders' Meeting and to cause the Arrangement Resolution and the
Preferred Shareholder Resolution to be voted on at the Veresen Shareholders' Meeting
and shall not propose to adjourn or postpone the Veresen Shareholders' Meeting other
than as contemplated by Section 2.6(a).
(c) Veresen shall advise Pembina as reasonably requested, and on a daily basis on each of the
last seven business days prior to the date of the Veresen Shareholders' Meeting, as to the
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aggregate tally of the proxies and votes received in respect of such meeting and all
matters to be considered at such meeting.
(d) Veresen shall advise Pembina of any written communication received after the date of
this Agreement from any shareholder or other Person in opposition to the Arrangement
Resolution or the Preferred Shareholder Resolution or any written notice of dissent,
purported dissent exercise or withdrawal of Dissent Rights by a Veresen Shareholder, and
written communications sent by or on behalf of Veresen to any Veresen Shareholder
exercising or purporting to exercise Dissent Rights.
(e) Veresen shall not make any payment or settlement offer, or agree to any payment or
settlement prior to the Effective Time with respect to the Dissent Rights without the prior
written consent of Pembina, acting reasonably.
2.7 Court Proceedings
Veresen will provide Pembina and its legal counsel with reasonable opportunity to review and
comment upon drafts of all material to be filed with the Court in connection with the Arrangement,
including by providing on a timely basis a description of any information required to be supplied by
Pembina for inclusion in such material, prior to the service and filing of that material, and will accept the
reasonable comments of Pembina and its legal counsel with respect to any such information required to be
supplied by Pembina and included in such material and any other matters contained therein. Veresen will
ensure that all material filed with the Court in connection with the Arrangement is consistent in all
material respects with the terms of this Agreement and the Plan of Arrangement. In addition, Veresen
will not object to legal counsel to Pembina making submissions on the application for the Interim Order
and the application for the Final Order as such counsel considers appropriate, provided such submissions
are consistent with this Agreement and the Plan of Arrangement. Veresen will also provide legal counsel
to Pembina on a timely basis with copies of any notice and evidence served on Veresen or its legal
counsel in respect of the application for the Final Order or any appeal therefrom. Subject to applicable
Laws, Veresen will not file any material with, or make any submissions to, the Court in connection with
the Arrangement or serve any such material, and will not agree to modify or amend materials so filed or
served, except as contemplated hereby or with Pembina's prior written consent, such consent not to be
unreasonably withheld or delayed; provided that nothing herein shall require Pembina to agree or consent
to any increased purchase price or other consideration or other modification or amendment to such filed
or served materials that expands or increases Pembina's obligations set forth in any such filed or served
materials or under this Agreement. Veresen shall oppose any proposal from any Person that would result
in the Final Order containing any provision that is inconsistent with this Agreement.
2.8 Board of Directors of Pembina
The Parties agree that Pembina shall use commercially reasonable efforts to appoint Doug Arnell,
Maureen E. Howe and Henry W. Sykes to the board of directors of Pembina as soon as reasonably
practicable following completion of the Arrangement to serve until the next annual meeting of Pembina
Shareholders or until their successors are duly appointed.
2.9 Veresen LTI Plans and Veresen Employment Agreements
The Parties acknowledge that the Arrangement will result in a "change of control" under the
Veresen LTI Plans and the Veresen Employment Agreements, and other than in respect of Veresen
Incentive Awards, there is no accelerated vesting or payout of any awards nor is there any change of
control, severance, separation or similar payments triggered under any executive employment or change
of control agreements applicable to any officers, employees or directors of Veresen or any of its
Subsidiaries (excluding the Veresen Significant Entities), or, to the knowledge of Veresen, of any of the
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Veresen Significant Entities, including the Veresen Employment Agreements, solely as a result of the
completion of the Arrangement. Notwithstanding any provision of the Veresen LTI Plans to the contrary,
all Veresen Incentive Awards shall be settled in cash prior to the Effective Time in the manner disclosed
in writing to Pembina by Veresen on or prior to the date hereof.
Veresen has disclosed in writing to Pembina the estimated amount of any change of control,
severance, separation or similar payments which would be payable to named executive officers of
Veresen (determined as at December 31, 2016), as a group, pursuant to the Veresen Employment
Agreements and any other Veresen Employee Obligations assuming the relevant conditions to the
payment of such amounts pursuant to such agreements or obligations are triggered at or prior to the
Effective Time (whether or not such conditions are actually met).
Veresen shall be exclusively responsible for any withholding obligations of Taxes pursuant to the
Tax Act or other applicable Laws from any amounts paid for the Veresen Employee Obligations at or
prior to the Effective Time and in connection with the exercise or settlement of any Veresen Incentive
Awards (whether pursuant to this Section 2.9 or otherwise), and Veresen shall deliver the consideration
for the foregoing net of such amounts to Veresen Employees and holders of Veresen Incentive Awards, as
applicable. Any such amounts deducted, withheld and remitted by Veresen will be treated for all
purposes under this Agreement as having been paid to the Veresen Employees and holders of Veresen
Incentive Awards, as applicable, in respect of which such deduction, withholding and remittance was
made; provided that such deducted and withheld amounts are actually remitted to the appropriate Tax
authority.
2.10 Effective Date
The Arrangement shall become effective at the Effective Time. Upon issuance of the Final Order
and subject to the satisfaction or waiver of the conditions precedent in Article VI, each of Pembina and
Veresen shall, as soon as practicable, execute and deliver such closing documents and instruments and
Veresen shall proceed to file the Articles of Arrangement, the Final Order and such other documents as
may be required to give effect to the Arrangement with the Registrar pursuant to section 193 of the
ABCA no later than the fifth business day following the satisfaction or waiver of such conditions
precedent (other than the conditions precedent that by their terms are to be satisfied as of the Effective
Date) or such other date as agreed to in writing by the Parties, whereupon the transactions comprising the
Arrangement shall occur and shall be deemed to have occurred in the order set out therein without any
further act or formality.
2.11 Veresen Dividend
Commencing with the July 2017 dividend record date, Veresen shall amend its record dates for
dividends on the Veresen Common Shares to match the record dates set by Pembina for dividends on the
Pembina Shares.
2.12 Tax Matters
Pembina and Veresen shall be entitled to deduct and withhold from any amount otherwise
payable to any Veresen Shareholder and, for greater certainty, from any amount payable to a Veresen
Shareholder who has validly exercised, and not withdrawn, Dissent Rights, as the case may be, under the
Plan of Arrangement such amounts as Pembina or Veresen, as the case may be, is required or reasonably
believes is required to deduct and withhold from such consideration in accordance with applicable Laws.
Any such amounts will be deducted, withheld and remitted from the consideration payable pursuant to the
Plan of Arrangement and shall be treated for all purposes as having been paid to the Veresen Shareholder
in respect of which such deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate Governmental Entity.
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Provided that the Preferred Shareholder Resolution receives the required approval of the Veresen
Preferred Shareholders, the Parties intend (i) that the Arrangement shall qualify as a reorganization within
the meaning of Section 368(a) of the U.S. Tax Code, and (ii) that this Agreement shall constitute a plan of
reorganization for such purposes.
2.13 Shareholder Communications
Veresen agrees to co-operate with Pembina and, if requested by Pembina, participate in
presentations to investors regarding the Arrangement. Veresen shall seek prior consent of Pembina, such
consent not to be unreasonably withheld, prior to the making of any presentations regarding the
Arrangement and shall promptly advise, consult and co-operate with Pembina in issuing any press
releases or otherwise making public statements with respect to this Agreement or the Arrangement and in
making any filing with any Governmental Entity or with any stock exchange, including the Exchanges,
with respect thereto. Veresen shall use all commercially reasonable efforts to enable Pembina to review
and comment on all such press releases prior to the release thereof and shall enable Pembina to review
and comment on such filings prior to the filing thereof; provided, however, that the foregoing shall be
subject to Veresen's overriding obligation to make disclosure in accordance with applicable Laws, and if
such disclosure is required and Pembina has not reviewed or commented on the disclosure, Veresen shall
use commercially reasonable efforts to give prior oral or written notice to Pembina, and if such prior
notice is not possible, to give such notice immediately following the making of such disclosure or filing.
The Parties agree to issue jointly a press release with respect to this Agreement, which shall include
reference to an increase in Pembina's monthly dividend and the appointment of certain of Veresen's
current directors to the Pembina board of directors following completion of the Arrangement as provided
in Section 2.8, as soon as practicable after its due execution. For the avoidance of doubt, the foregoing
shall not prevent Veresen from making internal announcements to employees and having discussions with
Veresen Shareholders, financial analysts or other stakeholders so long as such statements and
announcements are consistent with the press releases, public disclosures or public statements made by the
Parties.
2.14 U.S. Securities Laws
The Arrangement shall be structured and executed such that, assuming the Court considers the
fairness of the terms and conditions of the Arrangement and grants the Final Order, the issuance of the
Pembina Shares issuable to Veresen Common Shareholders and, if applicable, the issuance of Pembina
Exchange Preferred Shares to Veresen Preferred Shareholders under the Arrangement will not require
registration under the U.S. Securities Act, in reliance upon Section 3(a)(10) thereof. Each Party agrees to
act in good faith, consistent with the intent of the Parties and the intended treatment of the Arrangement
as set forth in this Section 2.14.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PEMBINA
3.1 Representations and Warranties
Pembina hereby makes to Veresen the representations and warranties set forth in Schedule C
hereto and acknowledges that Veresen is relying upon such representations and warranties in connection
with the entering into of this Agreement and the carrying out of the Arrangement.
3.2 Investigation
Any investigation by Veresen and its advisors shall not mitigate, diminish or affect the
representations and warranties of Pembina pursuant to this Agreement.
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3.3 Survival of Representations and Warranties
The representations and warranties of Pembina contained in this Agreement shall expire and be
terminated on the earlier of the Effective Date and the date on which this Agreement is terminated,
provided that such termination shall not affect any claim arising from a deliberate prior breach of any
such representations or warranties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VERESEN
4.1 Representations and Warranties
Veresen hereby makes to Pembina the representations and warranties set forth in Schedule D
hereto, and acknowledges that Pembina is relying upon such representations and warranties in connection
with the entering into of this Agreement and the carrying out of the Arrangement.
4.2 Investigation
Any investigation by Pembina and its advisors shall not mitigate, diminish or affect the
representations and warranties of Veresen pursuant to this Agreement.
4.3 Survival of Representations and Warranties
The representations and warranties of Veresen contained in this Agreement shall expire and be
terminated on the earlier of the Effective Date and the date on which this Agreement is terminated,
provided that such termination shall not affect any claim arising from a deliberate prior breach of any
such representations or warranties.
ARTICLE V
COVENANTS
5.1 Covenants of Pembina
Pembina covenants and agrees that during the period from the date of this Agreement until the
earlier of the Effective Date and the time that this Agreement is terminated in accordance with its terms,
unless otherwise (i) agreed to in writing by Veresen (such agreement to be subject to applicable Law and
not be unreasonably withheld, conditioned or delayed); (ii) required or expressly permitted or specifically
contemplated by this Agreement or the Arrangement; or (iii) disclosed to Veresen in writing on or prior to
the date hereof:
(a) the business of Pembina and its Subsidiaries shall be conducted only in, and Pembina and
its Subsidiaries shall not take any action except in, the ordinary course of business and
consistent with past practice, and Pembina shall use all commercially reasonable efforts
to maintain and preserve its and their business organization, assets, employees and
advantageous business relationships, provided, however, that this Section 5.1(a) shall not
restrict Pembina or any Subsidiary of Pembina from resolving to, or entering into or
performing any contract, agreement, commitment or arrangement with respect to, the
acquisition (subject to Section 5.1(c)(ii)), disposition (subject to Section 5.1(c)(i)),
building or construction of any assets or properties relating to the Relevant Business or of
the ownership interests in any Person engaged in the Relevant Business in any manner
(other than a disposition of a material Subsidiary of Pembina), including other than in the
usual and ordinary course consistent with past practices, and provided that the doing of
any such thing does not have a Material Adverse Effect on Pembina;
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(b) Pembina shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i)
except in connection with the issuance of any Pembina Preferred Shares, amend
Pembina's constating documents or amend in any material respects the constating
documents of any of its Subsidiaries; (ii) except in relation to internal transactions solely
involving Pembina and its wholly-owned Subsidiaries or solely among such Subsidiaries,
declare, set aside or pay any dividend or other distribution or payment in cash, shares or
property in respect of its shares owned by any Person, except monthly dividends to
holders of Pembina Shares and dividends to holders of Pembina Preferred Shares in the
amounts set forth in the articles of Pembina; (iii) issue, grant, sell or pledge or agree to
issue, grant, sell or pledge any shares of Pembina or any of its Subsidiaries, or securities
convertible into or exchangeable or exercisable for, or otherwise evidencing a right to
acquire, shares of Pembina or any of its Subsidiaries, other than as required pursuant to
the terms attaching to any Pembina Preferred Shares, Pembina Shares issuable upon
conversion, redemption or maturity of the Pembina Convertible Debentures, Pembina
Shares issuable upon exercise of the Pembina Options and new grants of Pembina
Options; (iv) except as allowed pursuant to the terms attaching to any Pembina Preferred
Shares, split, consolidate, redeem, purchase or otherwise acquire any of its outstanding
shares or other securities; (v) amend the terms of any of its securities; (vi) adopt a plan of
liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation
or reorganization of Pembina or any of its Subsidiaries; (vii) reduce the capital of any
shares of Pembina or any of its Subsidiaries; or (viii) authorize, agree, resolve, commit or
propose any of the foregoing, or enter into, modify or terminate any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(c) Pembina shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i)
sell, pledge, dispose of or encumber any assets of Pembina or any of its Subsidiaries with
a value individually or in the aggregate exceeding $1.0 billion (other than any security
interests required to be provided in connection with Pembina's credit facilities or the
assumption by Pembina of Veresen's credit facilities or in connection with any
transactions solely involving Pembina and its Subsidiaries); (ii) acquire (by merger,
amalgamation, consolidation or acquisition of shares or assets) any corporation,
partnership or other business organization or division thereof or make any investment
either by purchase of shares or securities, contributions of capital (other than to wholly
owned Subsidiaries) or purchase of any property or assets of any other individual or
entity with a value individually or in the aggregate exceeding $1.0 billion; (iii) waive,
release or relinquish, or authorize or propose to do so, any contractual right which is
material to the business of Pembina and its Subsidiaries, taken as a whole, other than in
the ordinary course of business consistent with past practice; (iv) waive, release, grant or
transfer any rights of value or modify or change any existing license, lease, contract or
other document which is material to the business of Pembina and its Subsidiaries, taken
as a whole, other than in the ordinary course of business consistent with past practice; or
(v) authorize, agree, resolve, commit or propose any of the foregoing, or enter into or
modify any contract, agreement, commitment or arrangement to do any of the foregoing;
(d) Pembina shall use its commercially reasonable efforts (taking into account insurance
market conditions and offerings and industry practices) to cause its current insurance (or
re-insurance) policies, including directors' and officers' insurance, not to be cancelled or
terminated or any of the coverage thereunder to lapse, except where such cancellation,
termination or lapse would not individually or in the aggregate be material to Pembina,
unless simultaneously with such termination, cancellation or lapse, replacement policies
underwritten by insurance or re-insurance companies of nationally recognized standing
having comparable deductibles and providing coverage equal to or greater than the
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coverage under the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
(e) other than would not be reasonably expected to result in a material increase in Taxes,
Pembina shall not, and shall not permit any of its Subsidiaries to, (i) file any amended
Tax Returns; (ii) change in any material respect any of its methods of reporting income or
deductions for accounting or income tax purposes from those employed in the preparation
of its income tax return for the taxation year ending December 31, 2015 except as may be
required by applicable Law; (iii) make or revoke any material election relating to Taxes;
(iv) settle, compromise or agree to the entry of judgment with respect to any proceeding
relating to Taxes except for any settlement, compromise or agreement that is not material
to Pembina; (v) file any Tax Return other than in accordance with past practice; (vi) enter
into any Tax Sharing Agreement; or (vii) make a request for a Tax ruling to any
Governmental Entity;
(f) Pembina shall continue to withhold from each payment to be made to any of its present or
former employees (which includes officers) and directors and to all other Persons
including, without limitation, all Persons who are non-residents of Canada for the
purposes of the Tax Act, all amounts that are required to be so withheld by any applicable
Laws and Pembina shall remit such withheld amounts to the proper Governmental Entity
within the times prescribed by such applicable Laws;
(g) Pembina will make all necessary filings and applications under applicable Laws,
including Canadian Securities Laws and U.S. Securities Laws, required to be made on the
part of Pembina in connection with the transactions contemplated herein and shall take all
reasonable action necessary to be in compliance with such applicable Laws;
(h) Pembina shall apply to list the Pembina Shares issuable or to be made issuable pursuant
to the Arrangement on the Exchanges and the Pembina Exchange Preferred Shares on the
TSX, and shall use its commercially reasonable efforts to obtain approval, subject to
customary conditions, for the listing of such Pembina Shares on the Exchanges and, if the
Preferred Shareholder Resolution receives the requisite approval of Veresen Preferred
Shareholders, of such Pembina Exchange Preferred Shares on the TSX;
(i) Pembina shall ensure that it has available funds to permit the payment of any amount that
may become payable under Section 7.3, having regard to its other liabilities and
obligations, and shall take all such actions as may be necessary to ensure that it maintains
such availability to ensure that it is able to pay such amount if and when required; and
(j) Pembina shall not agree, resolve, commit or undertake to do any of the matters prohibited
in this Section 5.1.
Nothing in this Agreement is intended to or shall result in Veresen exercising material influence
over the operations of Pembina, particularly in relation to operations in which the Parties compete or
would compete, but for this Agreement, with each other, prior to the Effective Date.
5.2 Covenants of Veresen
Veresen covenants and agrees that during the period from the date of this Agreement until the
earlier of the Effective Date and the time that this Agreement is terminated in accordance with its terms,
except pursuant to the Veresen Power Business Sale in all material respects on the terms and conditions
as disclosed to Pembina in writing by Veresen prior to the date hereof, or unless otherwise (i) agreed to in
writing by Pembina (such agreement to be subject to applicable Law and not be unreasonably withheld,
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conditioned or delayed); (ii) required or expressly permitted or specifically contemplated by this
Agreement or the Arrangement; or (iii) disclosed to Pembina in writing on or prior to the date hereof:
(a) the business of Veresen and its Subsidiaries shall be conducted only in, and Veresen and
its Subsidiaries shall not take any action except in, the ordinary course of business and
consistent with past practice (which, for greater certainty includes resolving to, or
entering into or performing any contract, agreement, commitment or arrangement with
respect to, the acquisition (subject to Section 5.2(c)(ii)), disposition (subject to Section
5.2(c)(i)), building or construction of any assets or properties relating to the Relevant
Business (subject to Section 5.2(d)) in the ordinary course of business and consistent with
past practice), Veresen shall use all commercially reasonable efforts to maintain and
preserve its and their business organization, assets, employees and advantageous business
relationships and Veresen shall undertake any actions agreed to in writing between the
Parties;
(b) Veresen shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i)
amend Veresen's constating documents or amend in any material respects the constating
documents of any of its Subsidiaries (including, for greater certainty, any joint venture or
similar agreement in respect thereof); (ii) except in relation to internal transactions solely
involving Veresen and its wholly-owned Subsidiaries or among such Subsidiaries or, in
the case of the Veresen Significant Entities, consistent with past practice, declare, set
aside or pay any dividend or other distribution or payment in cash, shares or property in
respect of its shares owned by any Person, except regular monthly dividends to holders of
Veresen Common Shares in an amount not to exceed $0.0833 per Veresen Common
Share per month, dividends to holders of Veresen Preferred Shares in the amounts set
forth in the articles of Veresen and any dividend or other distribution or payment in cash
by any of the Veresen Significant Entities made in the ordinary course of business and
consistent with past practice; (iii) issue, grant, sell or pledge or agree to issue, grant, sell
or pledge any shares of Veresen or any of its Subsidiaries, or securities convertible into or
exchangeable or exercisable for, or otherwise evidencing a right to acquire, shares of
Veresen or any of its Subsidiaries, other than as required pursuant to the terms attaching
to any Veresen Preferred Shares and Veresen Common Shares issuable pursuant to the
terms of outstanding Veresen Incentive Awards on the terms disclosed in writing to
Pembina on or prior to the date hereof (and, for greater certainty, Veresen shall not
reinstate the Veresen DRIP following execution of this Agreement); (iv) split,
consolidate, redeem, purchase or otherwise acquire any of the outstanding shares or other
securities of Veresen or any of its Subsidiaries; (v) amend the terms of any of the
securities of Veresen or any of its Subsidiaries; (vi) adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger, consolidation or
reorganization of Veresen or any of its Subsidiaries; or (vii) authorize, agree, resolve,
commit or propose any of the foregoing, or enter into, modify or terminate any contract,
agreement, commitment or arrangement with respect to any of the foregoing, except as
permitted above;
(c) Veresen shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i)
sell, pledge, dispose of or encumber any assets of Veresen or any of its Subsidiaries with
a value in the aggregate exceeding $200 million; (ii) acquire (by merger, amalgamation,
consolidation or acquisition of shares or assets) any corporation, partnership or other
business organization or division thereof or make any investment either by purchase of
shares or securities, contributions of capital (other than to wholly owned Subsidiaries) or
purchase of any property or assets of any other individual or entity with a value in the
aggregate exceeding $200 million; (iii) incur any indebtedness for borrowed money or
any other liability or obligation, except those which are not material and which arise in
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the ordinary course of business consistent with past practice, or issue any debt securities
or assume, guarantee, endorse or otherwise as an accommodation become responsible for,
the obligations of any other individual or entity, or make any loans or advances; (iv)
extend the maturity of any indebtedness for borrowed money or any other liability or
obligation, including bankers' acceptances; (v) pay, discharge or satisfy any claims,
liabilities or obligations (including any regulatory investigation) which are material to the
business of Veresen, other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice, of liabilities reflected or reserved against
in Veresen's most recently publicly available financial statements as of the date hereof or
incurred in the ordinary course of business consistent with past practice; (vi) waive,
release or relinquish, or authorize or propose to do so, any contractual right which is
material to the business of Veresen; (vii) waive, release, grant or transfer any rights of
value or modify, amend or change any existing license, agreement, lease, contract or
other document which is material to the business of Veresen or any of its Subsidiaries
(including, for greater certainty, any joint venture or similar agreement in respect
thereof), other than in connection with contract renewals and annual supply agreements
in the ordinary course of business consistent with past practice; (viii) enter into or
terminate any hedges, swaps or other financial instruments or like transaction; or (ix)
authorize, agree, resolve, commit or propose to do any of the foregoing, or enter into or
modify any contract, agreement, commitment or arrangement to do any of the foregoing;
(d) except for the aggregate amount and for the specified purposes set forth in Veresen's
previously approved 2017 capital budget (a true and complete copy of which has been
disclosed in writing to Pembina), and except for capital expenditures necessary to address
emergencies or other urgent matters involving actual or potential loss or damage to
property, or threats to human safety or the environment, Veresen and its Subsidiaries
shall not incur or commit to capital expenditures prior to the Effective Date with a value
in the aggregate exceeding $200 million;
(e) Veresen shall use its commercially reasonable efforts to complete each of the transactions
comprising the Veresen Power Business Sale pursuant to, and in all material respects on,
the terms and conditions, and within the time frame as disclosed to Pembina in writing by
Veresen prior to the date hereof;
(f) Veresen shall not, and shall cause each of its Subsidiaries (excluding the Veresen
Significant Entities) not to: (i) issue, award or grant any Veresen Incentive Awards or any
securities or other instruments or equity-based compensation providing similar benefits;
(ii) except as may be required pursuant to existing employment, collective bargaining,
pension, supplemental pension or termination policies or agreements (each of which are
in writing and copies of which have been provided to Pembina prior to the date hereof),
grant to any officer, director, consultant or employee an increase in compensation or
benefits in any form, make any loan to any officer, director or employee or grant or
increase the amount or value of any change of control, severance, separation, retention or
termination pay to, or enter into any employment, change of control, severance, retention
or termination agreement with any officer, director, consultant or employee of Veresen or
any of its Subsidiaries; (iii) grant any general salary increases; (iv) make any payment to
any director, officer, consultant or employee outside of their ordinary and usual
compensation for services provided; or (v) enter into or modify any employment
agreement with any officer, director or other employees of Veresen or of any of its
Subsidiaries (excluding the Veresen Significant Entities) or enter into any agreements
with any consultants that are not terminable with 30 days or less notice, provided that
Veresen and its Subsidiaries shall be permitted to enter into or modify employment
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agreements with non-officer employees which do not result in an increase to the total
employee expense of Veresen or such Subsidiary, as applicable, as of the date hereof;
(g) Veresen shall not, and the board of directors of Veresen and its committees shall not use
any discretion which may be available to them under the terms of the Veresen LTI Plans,
or any awards granted thereunder, to accelerate the vesting of any awards granted
pursuant to the Veresen LTI Plans and all payouts of awards granted pursuant to the
Veresen LTI Plans shall be determined in accordance with Section 2.9 hereof;
(h) except as is necessary to comply with applicable Law or any non-discretionary
requirements of the Veresen Employee Plans, neither Veresen nor any of its Subsidiaries
(excluding the Veresen Significant Entities) shall (i) adopt any additional benefit or
similar plans which would be considered to be a Veresen Employee Plan once created,
(ii) amend, terminate, or make any contribution to any Veresen Employee Plan, or (iii)
enter into any collective bargaining or other union agreement;
(i) Veresen shall use its commercially reasonable efforts (taking into account insurance
market conditions and offerings and industry practices) to cause its current insurance (or
re-insurance) policies, including directors' and officers' insurance, not to be cancelled or
terminated or any of the coverage thereunder to lapse, except where such cancellation,
termination or lapse would not individually or in the aggregate be material to Veresen,
unless simultaneously with such termination, cancellation or lapse, replacement policies
underwritten by insurance or re-insurance companies of nationally recognized standing
having comparable deductibles and providing coverage equal to or greater than the
coverage under the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
(j) Veresen will deliver to Pembina, as soon as they become available, true and complete
copies of any material reports or statements which relate to Veresen and its Subsidiaries
and are required to be filed by Veresen with any Governmental Entity subsequent to the
date hereof. As of their respective dates, such reports and statements (excluding any
information therein provided by Pembina, as to which Veresen makes no representation)
will not contain any untrue statement of a material fact, or omit to state a material fact,
required to be stated therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading and will comply in all material
respects with all applicable Laws;
(k) Veresen shall not, and shall not permit any of its Subsidiaries (excluding the Veresen
Significant Entities, but only to the extent that any of the following is not authorized,
agreed to, resolved, committed to or proposed by the board of directors of such Veresen
Significant Entity) to, (i) file any amended Tax Returns; (ii) change in any material
respect any of its methods of reporting income or deductions for accounting or income
tax purposes from those employed in the preparation of its income tax return for the
taxation year ending December 31, 2015 except as may be required by applicable Law;
(iii) make or revoke any material election relating to Taxes; (iv) settle, compromise or
agree to the entry of judgment with respect to any proceeding relating to Taxes except for
any settlement, compromise or agreement that is not material to Veresen; (v) file any Tax
Return other than in accordance with past practice; (vi) enter into any Tax Sharing
Agreement; or (vii) make a request for a Tax ruling to any Governmental Entity;
(l) Veresen shall continue to withhold from each payment to be made to any of its present or
former employees (which includes officers) and directors and to all other Persons
including, without limitation, all Persons who are non-residents of Canada for the
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purposes of the Tax Act, all amounts that are required to be so withheld by any applicable
Laws and Veresen shall remit such withheld amounts to the proper Governmental Entity
within the times prescribed by such applicable Laws;
(m) Veresen shall not knowingly take any action or knowingly permit inaction or knowingly
enter into any transaction that could reasonably be expected to have the effect of
materially reducing or eliminating the amount of the tax cost "bump" pursuant to
paragraphs 88(1)(c) and 88(1)(d) of the Tax Act in respect of the securities of any
affiliates or subsidiaries and other non-depreciable capital property owned by Veresen or
any affiliate or subsidiary on the date hereof, upon an amalgamation or winding-up of
Veresen or any of its subsidiaries (or any of their respective successors);
(n) Veresen will conduct itself so as to keep Pembina fully informed as to the material
decisions or actions required or required to be made with respect to the operation of its
business; provided that such disclosure is not otherwise prohibited by reason of a
confidentiality obligation owed to a third party or otherwise prevented by applicable Law
or is in respect to customer specific or competitively sensitive information;
(o) Veresen shall not settle or compromise any claim (i) material to its business, or (ii)
brought by any present, former or purported holder of its securities (in such Person's
capacity as such) in connection with the transactions contemplated by this Agreement or
the Arrangement prior to the Effective Date;
(p) Veresen will make all necessary filings and applications under applicable Laws,
including applicable Canadian Securities Laws and U.S. Securities Laws, required to be
made on the part of Veresen in connection with the transactions contemplated herein and
shall take all commercially reasonable action necessary to be in compliance with such
applicable Laws;
(q) Veresen shall provide Pembina with such assistance as may be reasonably required in
connection with the application for conditional approval of the listing of the Pembina
Shares issuable under the Arrangement on the Exchanges and, if applicable, the Pembina
Exchange Preferred Shares issuable under the Arrangement on the TSX;
(r) Veresen shall ensure that it has available funds to permit the payment of any amount that
may become payable under Section 7.2 or 7.3, having regard to its other liabilities and
obligations, and shall take all such actions as may be necessary to ensure that it maintains
such availability to ensure that it is able to pay such amount if and when required;
(s) Veresen shall use commercially reasonable efforts to obtain resignations and mutual
releases (in a form satisfactory to Pembina and such resigning person, each acting
reasonably) from each of the directors of Veresen and the directors of its Subsidiaries
who were nominated by Veresen to be effective at the Effective Time; and
(t) Veresen shall not agree, resolve, commit or undertake to do any of the matters prohibited
in this Section 5.2.
Nothing in this Agreement is intended to or shall result in Pembina exercising material influence
over the operations of Veresen, particularly in relation to operations in which the Parties compete or
would compete, but for this Agreement, with each other, prior to the Effective Date.
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5.3 Mutual Covenants
Each of the Parties covenants and agrees that during the period from the date of this Agreement
until the earlier of the Effective Date and the time that this Agreement is terminated in accordance with its
terms:
(a) subject to Section 5.3(d), it shall use its commercially reasonable efforts to, and shall
cause its Subsidiaries to use their commercially reasonable efforts to, satisfy (or cause the
satisfaction of) the conditions precedent to its obligations hereunder as set forth in Article
VI and to take, or cause to be taken, all other action and to do, or cause to be done, all
other things necessary, proper or advisable under all applicable Laws to complete the
Arrangement, including using its commercially reasonable efforts to promptly: (i) obtain
all necessary waivers, consents and approvals required to be obtained by it from parties to
loan agreements, leases and other contracts; (ii) obtain all necessary exemptions,
consents, approvals and authorizations as are required to be obtained by it under all
applicable Laws; (iii) defend all lawsuits or other legal, regulatory or other proceedings
against it challenging or affecting the Arrangement or this Agreement, and oppose, lift or
rescind any injunction or restraining order or other order or action seeking to stop, or
otherwise adversely affecting the ability of the Parties to consummate, the Arrangement;
(iv) fulfill all conditions and satisfy all provisions of this Agreement and the
Arrangement, including delivery of the certificates of their respective officers
contemplated by Section 6.2 and Section 6.3; and (v) carry out the terms of the Interim
Order and the Final Order applicable to it and comply with all requirements imposed by
applicable Laws on it or its Subsidiaries with respect to this Agreement or the
Arrangement;
(b) it shall cooperate with the other Party in connection with the performance by it and its
Subsidiaries of their obligations under this Section 5.3, including providing regular status
updates on its progress in obtaining any Regulatory Approval to the other Party as and
when requested by the other Party, and permitting the other Party a reasonable
opportunity to review in advance, and to provide comments on, any proposed
communications of any nature with a Governmental Entity, which comments shall be
considered and given due regard;
(c) it shall use commercially reasonable efforts to, and shall cause its Subsidiaries to use
commercially reasonable efforts to, satisfy (or cause the satisfaction of) the conditions
precedent set forth in Section 6.1(d) and Section 6.1(e) including, subject to Section
5.3(d), using commercially reasonable efforts to: (i) obtain all Regulatory Approvals, (ii)
cooperate fully with the other Party and such other Party's counsel, recognizing that
certain competitively sensitive information shall be exchanged only on an external
counsel-only basis and in accordance with the Confidentiality Agreement and any other
subsequent written agreement that addresses confidentiality between the Parties, (iii) as
promptly as possible, but in any event on or before May 26, 2017, unless otherwise
mutually agreed to in writing, make all necessary notifications or applications in respect
of Regulatory Approvals, including the notification required under subsection 114(1) of
the Competition Act (and Pembina shall also file with the Commissioner a request for an
advance ruling certificate or, in lieu thereof, a no-action letter either prior to or
simultaneously with the submission of its notification), the notification under subsection
53.1(1) and 53.1(2) of the CT Act, and the notification required under the HSR Act, and
the Parties shall supply as promptly as practicable any additional information or
documentary materials that may be required or as the parties or their counsel agree may
be advisable pursuant to the Competition Act, the CT Act, the HSR Act or any similar
Laws, (iv) certify completeness of its response to any supplementary information request
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received under subsection 114(2) of the Competition Act, and comply with any second
request issued under the HSR Act, in respect of the Arrangement as promptly as
practicable after the date of issuance of any such supplementary information request or
second request, as applicable, but in no event later than sixty days after such issuance,
unless otherwise mutually agreed to in writing, and to take all actions necessary to assert,
defend and support its certification of the completeness of its response to such
supplementary information request or second request, (v) respond promptly to all
requests for information made by a Governmental Entity in respect of obtaining a
Regulatory Approval, and (vi) prepare and file, as promptly as practicable, all
documentation to effect all necessary notices, reports and other filings and to obtain as
promptly as practicable all consents, registrations, approvals, and authorizations in
respect of the Regulatory Approvals;
(d) nothing in this Section 5.3 shall require Pembina to offer, agree or consent to sell, assign,
license, hold separate, or take any other action (individually, and collectively, a
"Regulatory Action"), before or after the Effective Date, with respect to any assets or
businesses, or interests in any assets or businesses, of Pembina or Veresen, or any of their
respective Subsidiaries, as applicable and as the case may be, including agreeing and
consenting to (i) restrictions on, or impairment of, its ability to own, manage, operate, or
otherwise exercise full ownership rights of, any assets or businesses, or interest in any
assets or businesses, or (ii) the creation of, termination or amendment of relationships,
contractual rights, obligations, licenses, ventures or other arrangements, with respect to,
before or after the Effective Date, any assets or businesses, or interests in any assets or
businesses, of either Party or any of its respective Subsidiaries; provided that,
notwithstanding the foregoing in this Section 5.3(d), in connection with obtaining
Required Regulatory Approvals by no later than the Outside Date, Section 5.3(a), Section
5.3(c) and this Section 5.3(d) shall require Pembina to take a Regulatory Action with
respect to any assets or businesses, or interests in any assets or businesses, of Pembina or
Veresen, or any of their respective Subsidiaries, as applicable and as the case may be, to
the extent that (A) the aggregate forecasted earnings before interest, taxes, depreciation
and amortization from such assets, businesses or interests, as applicable, for 2017 does
not exceed 10% of the forecasted earnings before interest, taxes, depreciation and
amortization of Veresen for 2017, as disclosed in writing by Veresen to Pembina on or
prior to the date hereof, and (B) any such Regulatory Action is conditional on
consummation of the Arrangement;
(e) except as required by Law, it shall not engage in any meetings or material
communications with any Governmental Entity in relation to the Regulatory Approvals
or the Arrangement, without counsel for the other Party being advised of same, having
been given the opportunity to participate in such meetings or communications, and in any
event shall immediately notify and provide copies to the other Party's counsel of any
communications to or from a Governmental Entity in relation to the Arrangement;
(f) it shall not deliberately take any action, refrain from taking any action or permit any
action to be taken or not taken, which is inconsistent with this Agreement or which would
reasonably be expected to significantly impede the consummation of the Arrangement, or
that will have, or would reasonably be expected to have, the effect of materially delaying,
impairing or impeding the granting of the Regulatory Approvals;
(g) except for non-substantive communications with securityholders, and subject to its
obligations under Section 2.13, it shall furnish promptly to the other Party or its counsel,
a copy of each notice, report, schedule or other document delivered, filed or received by
it in connection with: (i) the Arrangement; (ii) any filings under applicable Laws in
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connection with the transactions contemplated hereby; and (iii) any dealings with
Governmental Entities in connection with the transactions contemplated hereby; and
(h) it shall promptly notify the other Party in writing of any material change (actual,
anticipated, contemplated or, to the knowledge of such Party, threatened, financial or
otherwise) in its business, operations, results of operations, properties, assets, liabilities
(whether absolute, accrued, contingent or otherwise) or financial condition, or of any
material complaints, investigations or hearings (or communications indicating that the
same may be contemplated) by any Governmental Entity or third party relating to the
transactions contemplated hereby.
5.4 Pre-Arrangement Reorganizations
(a) Subject to Section 5.4(b), Veresen agrees that, upon request of Pembina, Veresen shall
use its commercially reasonable efforts to (i) perform such reorganizations of its
corporate structure, capital structure, business, operations and assets or such other
transactions as Pembina may request, acting reasonably (each a "Pre-Arrangement
Reorganization"), (ii) cooperate with Pembina and its advisors to determine the nature of
the Pre-Arrangement Reorganizations that might be undertaken and the manner in which
they would most effectively be undertaken, and (iii) cooperate with Pembina and its
advisors to seek to obtain consents or waivers which might be required from Veresen's
lenders under its existing credit facilities in connection with the Pre-Arrangement
Reorganizations, if any, provided that any costs, fees or expenses associated therewith
shall be at Pembina's sole expense, whether such Pre-Arrangement Reorganizations are
completed or not.
(b) Notwithstanding the foregoing, Veresen will not be obligated to participate in any Pre-
Arrangement Reorganization under Section 5.5(a) unless it has received an appropriate
indemnity from Pembina indemnifying it for all liabilities, damages, claims, judgments,
costs, expenses, and losses which it may suffer or incur as a result of such structuring and
it determines to its satisfaction, acting reasonably that such Pre-Arrangement
Reorganization:
(i) does not impair, impede, delay or prevent the satisfaction of any conditions
set forth in Article VI, or the ability of Veresen or Pembina to
consummate, and will not materially delay the consummation of, the
Arrangement;
(ii) does not require Veresen to obtain the approval of any Veresen
Shareholders;
(iii) does not reduce the consideration to be received under the Arrangement by
any of the Veresen Shareholders;
(iv) does not impose any incremental tax obligations on the Veresen
Shareholders;
(v) will not have an adverse effect on Veresen or its Subsidiaries or their
respective businesses or assets, and
(vi) is effected as close as reasonably practicable prior to the Effective Time.
(c) Pembina must provide written notice to Veresen of any proposed Pre-Arrangement
Reorganization at least ten business days prior to the Effective Date. Upon receipt of
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such notice, Veresen and Pembina shall work cooperatively and use their commercially
reasonable efforts to prepare prior to the Effective Time all documentation necessary and
do such other acts and things as are necessary to give effect to such Pre-Arrangement
Reorganization, including any amendment to this Agreement or the Plan of Arrangement
(provided that such amendments do not require Veresen to obtain approval of Veresen
Common Shareholders).
(d) Pembina waives any breach of a representation, warranty or covenant by Veresen, where
such breach is a result of an action taken by Veresen or a Subsidiary in good faith
pursuant to a request by Pembina in accordance with this Section 5.4.
5.5 Financing Assistance
(a) Veresen shall, and shall cause its Subsidiaries to, and shall use its commercially
reasonable efforts to have its and their Representatives, provide such cooperation to
Pembina as Pembina may reasonably request in connection with the arrangements by
Pembina to obtain new or amend any existing credit facilities or issue equity or debt
securities publicly or privately, subject to the terms hereof (provided that (A) to the
extent reasonably practicable, such request is made on reasonable notice, (B) such
cooperation does not unreasonably interfere with the ongoing operations of Veresen and
its Subsidiaries or unreasonably interfere with or hinder or delay the performance by
Veresen or its Subsidiaries of their obligations hereunder, (C) Veresen shall not be
required to provide, or cause any of its Subsidiaries to provide, cooperation that involves
any binding commitment by Veresen or its Subsidiaries, which commitment is not
conditional on the completion of the Arrangement and does not terminate without
liability to Veresen or its Subsidiaries upon the termination of this Agreement; and (D)
any actions taken hereunder are in compliance with Sections 5.2 and 5.3), including one
or more of the following cooperative actions as so requested:
(i) participating in meetings (including meetings with rating agencies),
drafting sessions and due diligence sessions;
(ii) furnishing Pembina and its proposed lenders or underwriters with such
financial and other pertinent information regarding Veresen as may be
reasonably requested by Pembina;
(iii) cooperating with Pembina in connection with applications to obtain such
consents, approvals or authorizations which may be reasonably necessary
or desirable in connection with such financing;
(iv) using its commercially reasonable efforts to obtain customary accountants'
consent and comfort letters and other documentation and items relating to
such securities issue as reasonably requested by Pembina and, if requested
by Pembina, to cooperate with and assist it in obtaining such
documentation and items;
(v) executing and delivering, or where applicable, obtaining, any certificates,
legal opinions or documents, as may be reasonably requested by Pembina
(including a certificate of the Chief Financial Officer of Veresen or any of
its Subsidiaries with respect to consents of accountants for use of their
reports in any materials relating to such securities issue); and
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(vi) taking all corporate actions, to be effective at the Effective Time, requested
by Pembina that are necessary or customary to permit the consummation of
such financing.
(b) Notwithstanding Section 5.5(a), neither Veresen, nor any of its Subsidiaries shall be
required by Pembina to: (i) take any action or do anything that would (A) contravene any
applicable Law, or (B) be capable of impairing or preventing the satisfaction of any
condition set forth in Article VI; (ii) commit to take any action that is not contingent on
the consummation of the transactions contemplated by this Agreement at the Effective
Time; (iii) pay any commitment, consent or other fee or incur any other liability in
connection with such financing prior to the Effective Date; or (iv) except as required to
comply with applicable Laws, disclose any information that in the reasonable judgment
of such Party would violate any obligations of such Party or any other Person with
respect to confidentiality.
(c) Pembina agrees to indemnify and save harmless Veresen and its Subsidiaries and their
respective officers, directors, employees, agents, advisors and representatives from and
against any and all liabilities, losses, damages, claims, costs, expenses, interest awards,
judgments and penalties suffered or incurred by any of them in connection with any
actions or omissions by any of them in connection with any request by Pembina made
pursuant to this Section 5.5 and for any alleged misstatement or omission in any
information provided by Veresen at the request of Pembina (other than historical factual
information to the extent prepared by Veresen and relating to Veresen and its
Subsidiaries) except that Pembina shall not be liable in any such case to the extent that
any such liabilities, losses, damages, claims, costs, expenses, interest awards, judgments
and penalties arise out of the negligence or willful misconduct of Veresen. Pembina shall
promptly upon request by Veresen and from time to time reimburse Veresen and its
Subsidiaries for all reasonable out-of-pocket costs (including legal fees) incurred by
Veresen or its Subsidiaries and their Representatives in connection with any of the
actions contemplated by this Section 5.5, including, if this Agreement is terminated by
Veresen in accordance with its terms, in connection with any unwinding or similar
transactions by Veresen or its Subsidiaries required as a result of actions taken pursuant
to this Section 5.5.
5.6 Payment on Postponement of Outside Date
If the Outside Date is postponed by Pembina pursuant to its right provided in the definition of
"Outside Date" in Section 1.1, Pembina shall concurrently pay to Veresen an amount equal to $23.5
million as reimbursement to Veresen for its out-of-pocket expenses incurred in connection with the
postponement, provided that if Veresen is in material breach of its obligations or covenants hereunder at
the time of the postponement, such amount will not be payable.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions
The respective obligations of the Parties to consummate the transactions contemplated hereby,
and in particular the Arrangement, are subject to the satisfaction, on or before the Effective Date or such
other time specified, of the following conditions, any of which may be waived by the mutual consent of
such Parties without prejudice to their right to rely on any other of such conditions:
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(a) the Interim Order shall have been obtained on terms consistent with the Arrangement and
in form and substance satisfactory to each of the Parties, acting reasonably, and such
order shall not have been set aside or modified in a manner unacceptable to either of the
Parties, acting reasonably, on appeal or otherwise;
(b) the Arrangement Resolution shall have been passed by the Veresen Common
Shareholders at the Veresen Shareholders' Meeting in accordance with the Interim Order;
(c) the Final Order shall have been obtained on terms consistent with the Arrangement and in
form and substance satisfactory to each of the Parties, acting reasonably, and such order
shall not have been set aside or modified in a manner unacceptable to either of the
Parties, acting reasonably, on appeal or otherwise;
(d) each of the Required Regulatory Approvals has been made, given, obtained or occurred,
as the case may be, and any such approval shall be in full force and effect and any such
occurrence shall not have been invalidated in any manner;
(e) all Regulatory Approvals (other than the Required Regulatory Approvals) required to be
obtained, or that the Parties mutually agree in writing to obtain in respect of the
completion of the Arrangement, and the expiry of applicable waiting periods necessary to
complete the Arrangement, shall have occurred or been obtained on terms and conditions
acceptable to the Parties, each acting reasonably, and all applicable domestic and foreign
statutory and regulatory waiting periods shall have expired or have been terminated and
no unresolved material objection or opposition shall have been filed, initiated or made,
except where the failure or failures to obtain such Regulatory Approvals, or for the
applicable waiting periods to have expired or terminated, would not be reasonably
expected to have a Material Adverse Effect on either of Pembina (before or after
completion of the Arrangement) or Veresen;
(f) the conditional approval to the listing of the Pembina Shares issuable pursuant to the
Arrangement on the TSX, and approval, subject to official notice of issuance, of the
listing of Pembina Shares issuable pursuant to the Arrangement on the NYSE, and, if the
Preferred Shareholder Resolution received the requisite approval of the Veresen Preferred
Shareholders at the Veresen Shareholders' Meeting, the conditional approval to the listing
of the Pembina Exchange Preferred Shares issuable pursuant to the Arrangement on the
TSX, shall have been obtained;
(g) no Law, regulation, policy, judgment, decision, order, agreement between the Parties and
a Governmental Entity to refrain from consummating the Arrangement, ruling or
directive (whether or not having the force of Law) shall have been enacted, promulgated,
amended or applied, which prevents, prohibits or makes the consummation of the
Arrangement illegal or otherwise prohibits or enjoins Pembina or Veresen from
consummating the Arrangement, or that would be reasonably expected to have a Material
Adverse Effect on either of Pembina (before or after completion of the Arrangement) or
Veresen; and
(h) no act, action, suit, proceeding, objection, opposition, order or injunction shall have been
taken, entered or promulgated by any Governmental Entity or by any elected or appointed
public official in Canada or elsewhere, whether or not having the force of Law, which
prevents, prohibits or makes the consummation of the Arrangement illegal or otherwise
prohibits or enjoins Pembina or Veresen from consummating the Arrangement, or that
would be reasonably expected to have a Material Adverse Effect on either of Pembina
(before or after completion of the Arrangement) or Veresen.
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6.2 Pembina Conditions
The obligation of Pembina to consummate the transactions contemplated hereby, and in particular
the Arrangement, is subject to the satisfaction, on or before the Effective Date or such other time
specified, of the following conditions:
(a) the representations and warranties made by Veresen in this Agreement shall be true and
correct as of the Effective Date as if made on and as of such date (except to the extent
such representations and warranties speak as of an earlier date or except as affected by
transactions contemplated or permitted by this Agreement), except where the failure of
such representations and warranties to be true and correct, individually or in the
aggregate, would not result or would not reasonably be expected to result in a Material
Adverse Change in respect of Veresen and its Subsidiaries, taken as a whole (and for this
purpose, any reference to "material", "Material Adverse Effect" or other concepts of
materiality in such representations and warranties shall be ignored), except that the
representations and warranties in: (i) paragraphs (a), (b), (c), (d), (g) and (h) of Schedule
D shall be true and correct in all material respects as of the Effective Date as if made on
such date; and (ii) paragraphs (k), (l), (t)(iii), (nn), (oo), (tt) and (uu) of Schedule D shall
be true and correct as of the Effective Date as if made on such date (except, it being
understood that the number of Veresen Common Shares outstanding may increase from
the number outstanding on the date of this Agreement solely as a result of the conversion
of securities of Veresen convertible into Veresen Common Shares, but only to the extent
that such convertible securities are specifically described in paragraph (k) of Schedule D,
that the number of outstanding Veresen Preferred Shares of a series may change as a
result of the conversion of Veresen Preferred Shares, and that the number of Veresen
RSUs and Veresen PSUs may change due to their vesting, expiry or termination in
accordance with their terms), and Veresen shall have provided to Pembina a certificate of
two senior officers of Veresen (on Veresen's behalf and without personal liability)
certifying the foregoing on the Effective Date;
(b) Veresen shall have complied in all material respects with its covenants herein to be
complied with by it on or prior to the Effective Time; and Veresen shall have provided to
Pembina a certificate of two executive officers of Veresen (on behalf of Veresen and
without personal liability) certifying compliance with such covenants on the Effective
Date;
(c) no Material Adverse Change in respect of Veresen and its Subsidiaries, taken as a whole,
shall have occurred after the date hereof and prior to the Effective Date; and
(d) holders of less than 5% of the outstanding Veresen Common Shares shall have validly
exercised Dissent Rights in respect of the Arrangement that have not been withdrawn as
of the Effective Date.
The conditions set forth in this Section 6.2 are for the exclusive benefit of Pembina and may be
asserted by Pembina regardless of the circumstances or may be waived in writing by Pembina in its sole
discretion, in whole or in part, at any time and from time to time without prejudice to any other rights
which Pembina may have.
6.3 Veresen Conditions
The obligation of Veresen to consummate the transactions contemplated hereby, and in particular
the Arrangement, is subject to the satisfaction, on or before the Effective Date or such other time
specified, of the following conditions:
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(a) (i) the representations and warranties made by Pembina in paragraphs (a), (b) and (c) of
Schedule C shall be true and correct in all material respects as of the Effective Date as if
made on such date; (ii) the representations and warranties made by Pembina in paragraph
(z) and (q)(iii) of Schedule C shall be true and correct as of the Effective Date as if made
on such date; (iii) the representations and warranties made by Pembina in paragraph (h)
of Schedule C shall be true and correct as at the date of this Agreement; and (iv) the
remaining representations and warranties made by Pembina in this Agreement shall be
true and correct as of the Effective Date as if made on and as of such date (except to the
extent such remaining representations and warranties speak as of an earlier date or except
as affected by transactions contemplated or permitted by this Agreement), except where
the failure of such remaining representations and warranties to be true and complete,
individually or in the aggregate, would not result or would not reasonably be expected to
result in a Material Adverse Change in respect of Pembina and its Subsidiaries, taken as a
whole (and for this purpose, any reference to "material", "Material Adverse Effect" or
other concepts of materiality in such representations and warranties shall be ignored), and
Pembina shall have provided to Veresen a certificate of two senior officers of Pembina
(on Pembina's behalf and without personal liability) certifying the foregoing on the
Effective Date;
(b) Pembina shall have complied in all material respects with its covenants herein to be
complied with by it on or prior to the Effective Time; and Pembina shall have provided to
Veresen a certificate of two executive officers of Pembina (on behalf of Pembina and
without personal liability) certifying compliance with such covenants on the Effective
Date; and
(c) no Material Adverse Change in respect of Pembina and its Subsidiaries, taken as a whole,
shall have occurred after the date hereof and prior to the Effective Date.
The conditions set forth in this Section 6.3 are for the exclusive benefit of Veresen and may be
asserted by Veresen regardless of the circumstances or may be waived by Veresen in its sole discretion, in
whole or in part, at any time and from time to time without prejudice to any other rights which Veresen
may have.
6.4 Notice and Cure Provisions
Each Party will give prompt notice to the other of the occurrence, at any time from the date
hereof until the Effective Date, of any circumstance or change in circumstances (actual, anticipated,
contemplated, or to the knowledge of such Party, threatened) which would, or would reasonably be
expected to: (a) cause any of the representations or warranties of such Party contained herein to be untrue
or inaccurate in any material respect (or, in the case of any representations or warranties that are not
subject to materiality qualifications in respect of the conditions contained in Section 6.2(a) or Section
6.3(a), as applicable, cause any of such representations or warranties of such Party to be untrue or
inaccurate in any respect); or (b) result in the failure to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such Party, and it shall in good faith discuss with the other
Party any circumstance or change in circumstances (actual, anticipated, contemplated, or to the
knowledge of such Party, threatened) which is of such a nature that there may be a reasonable question as
to whether notice need to be given to the other Party pursuant to this provision.
Neither Party may elect to terminate this Agreement pursuant to Section 8.1(d) or Section 8.1(e),
as applicable, unless promptly, and in any event prior to the issuance of the Certificate by the Registrar,
the Party intending to rely thereon has delivered a written notice to the other Party specifying in
reasonable detail all breaches of covenants, inaccuracies of representations and warranties or other
matters which the Party delivering such notice is asserting as the basis for the non-fulfillment of the
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applicable condition or the availability of a termination right, as the case may be. If any such notice is
delivered, provided that the receiving Party is proceeding diligently to cure any such matter capable of
cure prior to the Outside Date to the satisfaction of the Party delivering such notice, acting reasonably, no
Party may terminate this Agreement until the earlier of (i) the expiration of a period of 15 business days
from the date of receipt of such notice, and (ii) the Outside Date, if such matter has not been cured by
such date; except that, in each case and for greater certainty, (A) no cure period shall be provided for a
breach which by its nature cannot be cured, and (B) a failure to cure a breach or another matter within the
15 business day period referenced in (i) above shall, for the purposes of any condition referenced in
Section 8.1(d) and Section 8.1(e), deem such condition to be incapable of being satisfied by the Outside
Date. More than one notice may be delivered by a Party. If such notice has been delivered within 15
business days prior to the date of the Veresen Shareholders' Meeting, Veresen may elect to postpone the
meeting of its shareholders until the expiry of such period.
6.5 Merger of Conditions
Subject to applicable Law, the conditions set out in Sections 6.1, 6.2 and 6.3 shall be conclusively
deemed to have been satisfied, waived or released upon the issuance of a Certificate in respect of the
Arrangement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Veresen Covenant Regarding Non-Solicitation
(a) Veresen shall immediately cease and cause to be terminated all existing solicitation,
discussion or negotiation (including through any Representatives on its behalf), if any,
with any parties conducted before the date of this Agreement with respect to any
Acquisition Proposal or any inquiry, proposal or offer that constitutes or could reasonably
be expected to lead to an Acquisition Proposal, and, in connection therewith, Veresen
shall discontinue access of any of its confidential information; Veresen shall also
promptly request the return or destruction of all information respecting Veresen provided
to any third parties who have entered into a confidentiality agreement with Veresen
relating to an Acquisition Proposal in the last 12 months and shall use all commercial
efforts to ensure that such requests are honoured. Veresen undertakes to enforce all
standstill, non-disclosure, non-disturbance, non-solicitation and similar agreements or
covenants that Veresen has entered into prior to the date of this Agreement and that
Veresen enters into after the date of this Agreement.
(b) Veresen shall not, directly or indirectly, do or authorize or permit any of its
Representatives to do, any of the following:
(i) solicit, initiate or knowingly encourage or facilitate (including by way of
furnishing information) any Acquisition Proposal or any inquiries,
proposals or offers relating to any Acquisition Proposal or that could
reasonably be expected to lead to an Acquisition Proposal;
(ii) enter into or participate in any discussions or negotiations regarding any
Acquisition Proposal or any proposal that constitutes or could reasonably
be expected to lead to an Acquisition Proposal, or furnish to any other
Person any information with respect to its businesses, properties,
operations, prospects or conditions (financial or otherwise) in connection
with any Acquisition Proposal or any proposal that constitutes or could
reasonably be expected to lead to an Acquisition Proposal or otherwise
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cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt of any other Person to do or seek to do any
of the foregoing;
(iii) waive, terminate, amend, modify or release any third party or otherwise
forbear in the enforcement of, or enter into or participate in any
discussions, negotiations or agreements to waive, terminate, amend,
modify or release any third party from or otherwise forbear in respect of,
any rights or other benefits under confidential information and/or standstill
agreements (which, for greater certainty, does not prohibit the automatic
release of a party in accordance with the pre-existing terms of any standstill
provision);
(iv) accept, approve, endorse or recommend, or publicly propose to accept,
approve, endorse or recommend any Acquisition Proposal or any inquiry,
proposal or offer that could reasonably be expected to lead to an
Acquisition Proposal; or
(v) accept or enter into, or publicly propose to accept or enter into, any letter of
intent, agreement in principle, agreement, arrangement or undertaking
related to any Acquisition Proposal (other than a confidentiality and
standstill agreement contemplated under Section 7.1(b)(vi);
provided, however, that notwithstanding any other provision hereof, Veresen and its
Representatives may, prior to the approval of the Arrangement Resolution at the Veresen
Shareholders' Meeting:
(vi) enter into or participate in any discussions or negotiations with a third party
that is not in breach of any confidentiality or standstill agreement and who,
without any solicitation, initiation or deliberate encouragement, directly or
indirectly, after that date of this Agreement, by Veresen or any of its
Representatives, seeks to initiate such discussions or negotiations and,
subject to execution of a confidentiality and standstill agreement in favour
of Veresen that contains a standstill provision that Veresen determines in
good faith is no less onerous or more beneficial to such third party than that
in the Confidentiality Agreement and is otherwise on terms that Veresen
determines in good faith are no less favourable to Veresen than those found
in the Confidentiality Agreement (provided that such confidentiality and
standstill agreement shall (A) allow for disclosure thereof, along with all
information provided thereunder, to Pembina as set out below, (B) allow
disclosure to Pembina of the making and terms of any Acquisition Proposal
made by the third party as contemplated herein, and (C) not contain any
provision restricting Veresen from complying with this Section 7.1) may
furnish to such third party any information concerning Veresen and its
Subsidiaries and their businesses, properties and assets, in each case if, and
only to the extent that:
(A) the third party has first made a written bona fide Acquisition
Proposal, which did not result from a breach of this Section
7.1, and in respect of which the board of directors of Veresen
determines in good faith, after consultation with its outside
legal and financial advisors, constitutes or could reasonably be
expected to lead to a Superior Proposal; and
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(B) prior to furnishing such information to or entering into or
participating in any such discussions or negotiations with such
third party regarding the Acquisition Proposal, Veresen shall
(1) provide prompt notice to Pembina to the effect that it is
furnishing information to or entering into or participating in
discussions or negotiations with such third party, together with
a copy of the confidentiality and standstill agreement
referenced above and, if not previously provided to Pembina,
copies of all information provided to such third party
concurrently with the provision of such information to such
third party, (2) notify Pembina orally and in writing of any
inquiries, offers or proposals with respect to an actual or
contemplated Superior Proposal (which written notice shall
include a summary of the material terms of such proposal (and
any amendments or supplements thereto) and, if the proposal
includes equity consideration, the identity of the Person making
it, and, if not previously provided to the other Party, copies of
all information provided to the third party), within 24 hours of
the receipt thereof, and (3) keep Pembina promptly informed of
the status and reasonable details of any such inquiry, offer or
proposal and answer Pembina's reasonable questions with
respect thereto;
(vii) comply with Part 2 - Division 3 of NI 62-104 and similar provisions in
respect of U.S. Securities Laws relating to the provision of directors'
circulars and making appropriate disclosure with respect thereto to its
securityholders; and
(viii) accept, recommend, approve or enter into an agreement to implement a
Superior Proposal from a third party, but only if prior to such acceptance,
recommendation, approval or implementation, the board of directors of
Veresen concludes in good faith, after considering all proposals to adjust
the terms and conditions of this Agreement as contemplated by Section
7.1(c) and after receiving the advice of outside counsel, that the failure by
the board of directors to take such action would be inconsistent with its
fiduciary duties under applicable Laws, and Veresen (A) complies with its
obligations set forth in Section 7.1, (B) terminates this Agreement in
accordance with Section 8.1(g), and (C) concurrently therewith pays the
amount required by Section 7.2 to Pembina.
(c) Following determination by the board of directors of Veresen that an Acquisition
Proposal constitutes a Superior Proposal, Veresen shall give Pembina, orally and in
writing, at least five complete business days advance notice of any decision by the board
of directors of Veresen to accept, recommend, approve or enter into an agreement to
implement a Superior Proposal, which notice shall confirm that the board of directors of
Veresen has determined that such Acquisition Proposal constitutes a Superior Proposal
and shall identify the third party making the Superior Proposal and Veresen shall provide
Pembina with a true and complete copy thereof and the agreement to implement the
Superior Proposal and any amendments thereto. During such five business day period,
Veresen agrees not to accept, recommend, approve or enter into any agreement to
implement such Superior Proposal and not to release the party making the Superior
Proposal from any standstill provisions and shall not withdraw, redefine, modify or
change its recommendation in respect of the Arrangement as outlined in Section 2.2(a).
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In addition, during such five business day period Veresen shall, and shall cause its
financial and legal advisors to, negotiate in good faith with Pembina and its financial and
legal advisors to make such adjustments in the terms and conditions of this Agreement
and the Arrangement as would enable Veresen to proceed with the Arrangement as
amended rather than the Superior Proposal. In the event Pembina proposes to amend this
Agreement and the Arrangement on a basis such that the board of directors of Veresen
determines that the alternative proposed transaction is no longer a Superior Proposal and
so advises the board of directors of Pembina prior to the expiry of such five business day
period, the board of directors of Veresen shall not accept, recommend, approve or enter
into any agreement to implement such Acquisition Proposal and shall not release the
party making the Acquisition Proposal from any standstill provisions and shall not
withdraw, redefine, modify or change its recommendation in respect of the Arrangement.
In the event that Veresen provides the notice contemplated by this Section 7.1(b)(vi) on a
date which is less than five business days prior to the Veresen Shareholders' Meeting,
Pembina shall be entitled to require Veresen to adjourn or postpone the Veresen
Shareholders' Meeting to a date that is not more than ten business days after the date of
such notice.
(d) Each successive amendment to any Acquisition Proposal that results in an increase in, or
modification of, the consideration (or value of such consideration) to be received by the
shareholders of the Party subject to such Acquisition Proposal or other material terms or
condition thereof, shall constitute a new Acquisition Proposal for the purposes of Section
7.1(c), and the other Party shall be afforded a new five day period from the date on which
such Party received all of the materials set forth in Section 7.1(c) with respect to the new
Superior Proposal from the Party subject thereto.
(e) The board of directors of Veresen shall promptly reaffirm the recommendation and
determination in Section 2.2(a) by press release after (i) any Acquisition Proposal which
is publicly announced is determined not to be a Superior Proposal, or (ii) the Parties have
entered into an amended agreement pursuant to Section 7.1(c) which results in any
Acquisition Proposal not being a Superior Proposal.
(f) Veresen shall ensure that its Representatives are aware of the provisions of this
Section 7.1. Veresen shall be responsible for any breach of this Section 7.1 by Veresen's
Representatives.
7.2 Agreement as to Pembina Damages
If at any time after the execution of this Agreement:
(a) the board of directors of Veresen has withdrawn, modified, qualified or changed any of
its recommendations or determinations referred to in Section 2.2(a) in a manner adverse
to Pembina or shall have resolved to do so prior to the Effective Date, or has failed to
publicly reconfirm any such recommendation upon the reasonable request of Pembina
prior to the earlier of 72 hours following such request or 72 hours prior to the Veresen
Shareholders' Meeting other than, in each case, circumstances where Section 7.1(c) is in
effect, in which case the obligation to reaffirm is governed by Section 7.1(e)(ii) (unless
Pembina is then in material breach of its obligations hereunder and such withdrawal,
change or failure relates to such breach);
(b) (i) an Acquisition Proposal is publicly announced, proposed, disclosed, offered or made
in respect of Veresen or any Person shall have publicly announced an intention to make
an Acquisition Proposal prior to the termination of this Agreement; (ii) after such
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Acquisition Proposal shall have been publicly announced, proposed, disclosed, offered or
made, this Agreement is terminated (A) by either Party pursuant to Section 8.1(b) [No
Veresen Common Shareholder Approval] or Section 8.1(c) [Outside Date], or (B) by
Pembina pursuant to Section 8.1(d) [Failure to Satisfy Conditions] as a result of the
failure to satisfy the condition in Section 6.2(b) [Compliance by Veresen with
Covenants], and (iii) such Acquisition Proposal, or an amended version thereof, or any
other Acquisition Proposal is consummated, agreed to or entered into, as applicable,
within 12 months of the date the first Acquisition Proposal is publicly announced,
proposed, disclosed, offered or made, provided that for purposes of this Section 7.2(b) the
term "Acquisition Proposal" shall have the meaning assigned to such term in Section 1.1
except that references to "20% or more" shall be deemed to be references to "50% or
more";
(c) the board of directors of Veresen accepts, recommends, approves or enters into an
agreement to implement a Superior Proposal; or
(d) Veresen is in breach, in a material respect, of any of its covenants made in this
Agreement, which breach individually or in the aggregate causes or would reasonably be
expected to cause a Material Adverse Change with respect to Veresen and its
Subsidiaries, taken as a whole, and this Agreement is terminated by Pembina pursuant to
Section 8.1(d) [Failure to Satisfy Conditions] as a result of the failure to satisfy the
condition in Section 6.2(b) [Failure to Comply with Covenants] or Section 6.2(c) [No
Material Adverse Change];
(each of the above being a "Pembina Damages Event") then in the event of the termination of this
Agreement pursuant to Section 8.1, Veresen shall pay to Pembina, within two business days of the
termination of this Agreement, a fee in the amount of $200 million in immediately available funds to an
account designated by Pembina, and after such event but prior to payment of such amount, Veresen shall
be deemed to hold such funds in trust for Pembina; provided that: (i) in the case of a Pembina Damages
Event pursuant to Section 7.2(c) such payment shall be made by Veresen to Pembina concurrently with
the acceptance, recommending, approving or entering into of the Superior Proposal by Veresen as
provided for in Section 7.1(b)(viii)(C); and (ii) the case of a Pembina Damages Event pursuant to Section
7.2(b) such payment shall be made by Veresen to Pembina upon the consummation of the Acquisition
Proposal referred to therein. Veresen shall only be obligated to pay a maximum of $200 million pursuant
to this Section 7.2.
7.3 Fees and Expenses and Other Agreements as to Damages
(a) Subject to Section 7.3(b), each Party shall pay all fees, costs and expenses incurred by
such Party in connection with this Agreement and the Arrangement. Pembina shall pay
any filing fees and applicable Taxes payable for or in respect of any application,
notification or other filing made in respect of any regulatory process in respect of the
transactions contemplated by the Arrangement, including under the Competition Act and
the HSR Act.
(b) If this Agreement is terminated (i) by Pembina pursuant to Section 8.1(d) [Failure to
Satisfy Conditions] because of the failure of the condition in Section 6.2(a) [Accuracy of
Veresen Reps and Warranties], or (ii) by Pembina or Veresen pursuant to Section 8.1(c)
[Outside Date] and at the time of such termination there exists a state of facts or
circumstances that would cause the conditions set forth in Section 6.2(a) [Accuracy of
Veresen Reps and Warranties] not to be satisfied, notwithstanding the availability of any
cure period, Veresen shall pay to Pembina an amount equal to $25 million as
reimbursement to Pembina for its out-of-pocket expenses incurred in connection with the
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Arrangement, provided that if Pembina is in material breach of its obligations hereunder
at the time of the termination of the Agreement such amount will not be payable.
(c) If this Agreement is terminated (i) by Veresen pursuant to Section 8.1(e) [Failure to
Satisfy Conditions] because of the failure of the condition in Section 6.3(a) [Accuracy of
Pembina Reps and Warranties], or (ii) by Veresen or Pembina pursuant to Section 8.1(c)
[Outside Date] and at the time of such termination there exists a state of facts or
circumstances that would cause the conditions set forth in Section 6.3(a) [Accuracy of
Pembina Reps and Warranties] not to be satisfied, notwithstanding the availability of any
cure period, Pembina shall pay to Veresen an amount equal to $25 million as
reimbursement to Veresen for its out-of-pocket expenses incurred in connection with the
Arrangement, provided that if Veresen is in material breach of its obligations hereunder
at the time of the termination of the Agreement such amount will not be payable.
(d) If this Agreement is terminated by Veresen or Pembina pursuant to Section 8.1(c)
[Outside Date] and at the time of such termination all of the conditions set forth in
Section 6.1 and Section 6.2 have been satisfied or waived by Pembina other than those
conditions that by their terms are to be satisfied at the Effective Date and there exists a
state of facts or circumstances that would cause the conditions set forth in Section 6.1(d)
[Required Regulatory Approvals] not to be satisfied, Pembina shall pay to Veresen an
amount equal to $100 million, less any amount previously paid by Pembina to Veresen
pursuant to Section 5.6, provided that such amount will not be payable if (A) Veresen is
in material breach of its obligations hereunder at the time of the termination of the
Agreement, or (B) Pembina has complied, in all material respects, with its obligations in
Section 5.3(a) and Section 5.3(d).
(e) No fees or amounts shall be payable by Veresen under Section 7.3(b) if Veresen has paid
a fee under Section 7.2 and no fees or amounts shall be payable by Pembina under
Section 7.3(c) if Pembina has paid a fee under Section 7.3(d).
7.4 Liquidated Damages
Each Party acknowledges that all of the payment amounts set out in this Article VII are payments
of liquidated damages which are a genuine pre-estimate of the damages which Pembina or Veresen will
suffer or incur as a result of the event giving rise to such damages and resultant termination of this
Agreement and are not penalties. Each Party irrevocably waives any right it may have to raise as a
defence that any such liquidated damages are excessive or punitive. For greater certainty, the Parties
agree that if the payment of any amounts pursuant to this Article VII is made, such payment is the sole
monetary remedy of Pembina and Veresen; provided, however, that this limitation shall not apply in the
event of fraud or deliberate breach of this Agreement by a Party.
7.5 Access to Information; Confidentiality
From the date hereof until the earlier of the Effective Date and the termination of this Agreement,
Veresen shall, and shall cause its Subsidiaries and Representatives to, subject to all applicable Laws and
any confidentiality obligations owed by Veresen to a third party or in respect to customer specific or
competitively sensitive information and in accordance with the Confidentiality Agreement and any other
subsequent written agreement that addresses confidentiality between the Parties, afford to Pembina and
the Representatives of Pembina reasonable access at all reasonable times to their officers, employees,
agents, properties, books, records and contracts (but which shall not include any right of Pembina's
Representatives to attend Veresen's regular operations meetings), and shall furnish Pembina with all data
and information as Pembina may reasonably request, subject to any confidentiality obligations owed by
Veresen to a third party, in respect to customer specific or competitively sensitive information, the
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conditions contained in the Confidentiality Agreement and any other subsequent written agreement that
addresses confidentiality between the Parties, in order to permit Pembina to be in a position to
expeditiously and efficiently integrate the businesses and operations of Pembina and Veresen immediately
upon but not prior to the Effective Date.
7.6 Insurance and Indemnification
(a) Pembina agrees that it will maintain in effect, or will cause Veresen or its successors to
maintain in effect, without any reduction in scope or coverage for six years from the
Effective Time customary policies of directors' and officers' liability insurance providing
protection comparable to the current protection provided by the policies maintained by
Veresen and their respective Subsidiaries as are in effect immediately prior to the
Effective Time and providing coverage on a "trailing" or "run-off" basis for all present
and former directors and officers of Veresen with respect to claims arising from facts or
events which occurred prior to the Effective Time. Furthermore, prior to the Effective
Time, Veresen may, in the alternative, with the consent of Pembina, not to be
unreasonably withheld, purchase run-off directors' and officers' liability insurance for a
period of up to six years from the Effective Time, and in such event none of Pembina,
Veresen or any successor of Veresen will have any further obligation under this Section
7.6(a).
(b) Pembina agrees that all rights to indemnification or exculpation now existing in favour of
present and former officers and directors of Veresen shall survive completion of the
Arrangement and shall continue in full force and effect for a period of not less than six
years from the Effective Date.
7.7 Privacy Issues
(a) For the purposes of this Section 7.7, the following definitions shall apply:
(i) "applicable law" means, in relation to any Person, transaction or event, all
applicable provisions of Laws by which such Person is bound or having
application to the transaction or event in question, including applicable
privacy laws;
(ii) "applicable privacy laws" means any and all applicable laws relating to
privacy and the collection, use and disclosure of Personal Information in all
applicable jurisdictions, including the Personal Information Protection and
Electronic Documents Act (Canada) and/or any comparable provincial law
including the Personal Information Protection Act (Alberta);
(iii) "authorized authority" means, in relation to any Person, transaction or
event, any (A) federal, provincial, municipal or local governmental body
(whether administrative, legislative, executive or otherwise), both domestic
and foreign, (B) agency, authority, commission, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government, (C) court, arbitrator, commission or body
exercising judicial, quasi-judicial, administrative or similar functions, and
(D) other body or entity created under the authority of or otherwise subject
to the jurisdiction of any of the foregoing, including any stock or other
securities exchange, in each case having jurisdiction over such Person,
transaction or event; and
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(iv) "Personal Information" means information (other than business contact
information when used or disclosed for the purpose of contacting such
individual in that individual's capacity as an employee or an official of an
organization and for no other purpose) about an identifiable individual
disclosed or transferred to Pembina by Veresen in accordance with this
Agreement and/or as a condition of the Arrangement.
(b) The Parties hereto acknowledge that they are responsible for compliance at all times with
applicable privacy laws and with respect to any individual who is a resident of the United
States, any applicable Party policy or agreement which govern the collection, use or
disclosure of Personal Information disclosed to either Party pursuant to or in connection
with this Agreement (the "Disclosed Personal Information").
(c) Prior to the completion of the Arrangement, neither Party shall use or disclose the
Disclosed Personal Information for any purposes other than those related to the
performance of this Agreement and the completion of the Arrangement. After the
completion of the transactions contemplated herein, a Party may only collect, use and
disclose the Disclosed Personal Information for the purposes for which the Disclosed
Personal Information was initially collected from or in respect of the individual to which
such Disclosed Personal Information relates or for the completion of the transactions
contemplated herein, unless (i) either Party shall have first notified such individual of
such additional purpose, and where required by applicable law and with respect to any
individual who is a resident of the United States, any applicable Party policy or
agreement, obtained the consent of such individual to such additional purpose, or (ii)
such use or disclosure is permitted or authorized by applicable law and with respect to
any individual who is a resident of the United States, any applicable Party policy or
agreement, without notice to, or consent from, such individual.
(d) Each Party acknowledges and confirms that the disclosure of the Disclosed Personal
Information is necessary for the purposes of determining if the Parties shall proceed with
the Arrangement, and that the Disclosed Personal Information relates solely to the
carrying on of the business or the completion of the Arrangement.
(e) Each Party acknowledges and confirms that it has taken and shall continue to take
reasonable steps to, in accordance with applicable law and with respect to any individual
who is resident of the United States, any applicable Party policy or agreement, prevent
accidental loss or corruption of the Disclosed Personal Information, unauthorized input or
access to the Disclosed Personal Information, or unauthorized or unlawful collection,
storage, disclosure, recording, copying, alteration, removal, deletion, use or other
processing of such Disclosed Personal Information.
(f) Subject to the following provisions, each Party shall at all times keep strictly confidential
all Disclosed Personal Information provided to it, and shall instruct those employees or
advisors responsible for processing such Disclosed Personal Information to protect the
confidentiality of such information in a manner consistent with the Parties' obligations
hereunder. Prior to the completion of the Arrangement, each Party shall take reasonable
steps to ensure that access to the Disclosed Personal Information shall be restricted to
those employees or advisors of the respective Party who have a bona fide need to access
to such information in order to complete the Arrangement.
(g) Where authorized by applicable law, each Party shall promptly notify the other Party to
this Agreement of all inquiries, complaints, requests for access, variations or withdrawals
of consent and claims of which the Party is made aware in connection with the Disclosed
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Personal Information. To the extent permitted by applicable law, the Parties shall fully
co-operate with one another, with the persons to whom the Personal Information relates,
and any authorized authority charged with enforcement of applicable privacy laws, in
responding to such inquiries, complaints, requests for access, variations or withdrawals of
consent and claims.
(h) Upon the expiry or termination of this Agreement, or otherwise upon the reasonable
request of either Party, the other Party shall forthwith cease all use of the Disclosed
Personal Information acquired by it in connection with this Agreement and will return to
the requesting Party or, at the requesting Party's request, destroy in a secure manner and
with respect to any individual who is resident of the United States, in accordance with
applicable law and any applicable Party policy or agreement, the Disclosed Personal
Information (and any copies thereof) in its possession.
ARTICLE VIII
TERM, TERMINATION, AMENDMENT AND WAIVER
8.1 Termination
This Agreement may be terminated at any time prior to the Effective Date:
(a) by mutual written consent of Pembina and Veresen;
(b) by either Pembina or Veresen if the Arrangement Resolution shall have failed to receive
the requisite vote of the Veresen Common Shareholders for approval at the Veresen
Shareholders' Meeting (including any adjournment or postponement thereof) in
accordance with the Interim Order;
(c) by either Pembina or Veresen if the Effective Time shall not have occurred on or prior to
the Outside Date, except that the right to terminate this Agreement under this
Section 8.1(c) shall not be available to any Party whose failure to fulfill any of its
obligations has been the cause of, or resulted in, the failure of the Effective Time to occur
by such date;
(d) by Pembina if any of the conditions set forth in Section 6.1 or Section 6.2 has not been
satisfied or waived by the Outside Date or such condition is incapable of being satisfied
by the Outside Date, provided that Pembina is in compliance with its obligations under
Section 6.4 (including in respect of providing any required cure period prior to such
termination), if applicable, and not then in breach of this Agreement so as to cause any of
the conditions set forth in Section 6.1 or Section 6.3 not to be satisfied;
(e) by Veresen if any of the conditions set forth in Section 6.1 or Section 6.3 has not been
satisfied or waived by the Outside Date or such condition is incapable of being satisfied
by the Outside Date, provided that Veresen is in compliance with its obligations under
Section 6.4 (including in respect of providing any required cure period prior to such
termination), if applicable, and not then in breach of this Agreement so as to cause any of
the conditions set forth in Section 6.1 or Section 6.2, as applicable, not to be satisfied;
(f) by Pembina upon the occurrence of a Pembina Damages Event as provided in
Section 7.2; or
(g) by Veresen to accept, recommend, approve or enter into an agreement to implement a
Superior Proposal in accordance with Section 7.1(b)(viii), provided that Veresen (i) has
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complied with its obligations set forth in Section 7.1; and (ii) concurrently pays the
amount required pursuant to Section 7.2.
8.2 Effect of Termination
In the event of the termination of this Agreement in the circumstances set out in Section 8.1, this
Agreement shall forthwith become void and neither Party shall have any liability or further obligation to
the other Party hereunder, except with respect to the obligations set forth in Sections 7.2, 7.3, and 7.4
where applicable. For greater certainty, unless Section 7.4 applies due to a Party being entitled to a
payment pursuant to Sections 7.2 or 7.3, nothing contained in this Section 8.2 shall relieve either Party
from liability for any breach of any provision of this Agreement. No termination of this Agreement shall
affect the obligations of the Parties pursuant to the Confidentiality Agreement or any other subsequent
written agreement that addresses confidentiality between the Parties, except to the extent specified
therein.
8.3 Amendment
This Agreement and the Plan of Arrangement may, at any time and from time to time before or
after the holding of the Veresen Shareholders' Meeting but not later than the Effective Time, be amended
by mutual written agreement of the Parties, subject to the Interim Order and Final Order and applicable
Laws.
Notwithstanding anything else contained herein: (a) in the circumstances where the Preferred
Shareholder Resolution does not receive the requisite approval of the Veresen Preferred Shareholders at
the Veresen Shareholders' Meeting (or any adjournment thereof) and the Veresen Preferred Shareholders
do not otherwise approve a special resolution with similar effect to the Preferred Shareholder Resolution
prior to the Effective Time such that Pembina is the sole holder of the Veresen Preferred Shares prior to
the amalgamation contemplated in Section 3.1(f) of the Plan of Arrangement, Veresen shall amend the
Plan of Arrangement to exclude the Veresen Preferred Shares under the Plan of Arrangement and matters
ancillary thereto; and (b) in the circumstances where the Preferred Shareholder Resolution receives the
requisite approval of the Veresen Preferred Shareholders, and Dissent Rights have been validly exercised
in respect of more than 5% of the outstanding Veresen Preferred Shares, Veresen shall amend the Plan of
Arrangement if requested by Pembina to exclude the Veresen Preferred Shares under the Plan of
Arrangement and matters ancillary thereto, including, in each case, the amalgamation contemplated in
Section 3.1(f) of the Plan of Arrangement.
8.4 Waiver
Either Party may: (a) extend the time for the performance of any of the obligations or other acts
of the other Party; (b) waive compliance with any of the other Party's agreements or the fulfillment of any
conditions to its own obligations contained herein; and (c) waive inaccuracies in any of the other Party's
representations or warranties contained herein or in any document delivered by the other Party; provided,
however, that any such extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such Party and such waiver shall apply only to the specific matters identified in such
instrument.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices
All notices and other communications given or made pursuant hereto shall be in writing and shall
be deemed to have been duly given or made as of the date delivered or sent if delivered personally or sent
by facsimile transmission or email, or as of the following business day if sent by prepaid overnight
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courier, to the Parties at the following addresses (or at such other addresses as shall be specified by either
Party by notice to the other given in accordance with these provisions):
(a) if to Pembina:
Pembina Pipeline Corporation
4000, 585 – 8th Avenue S.W.
Calgary, Alberta T2P 1G1
Attention: Scott Burrows, Vice President, Finance and Chief Financial Officer
Harry Andersen, Vice President, Legal and General Counsel
Telephone: 403-231-7559
403-231-7476
Facsimile: 403-691-7356
403-237-0254
Email: [email protected]
[email protected]
with a copy to:
Blake, Cassels & Graydon LLP
3500, 855-2nd Street S.W.
Calgary, Alberta T2P 4J8
Attention: Chad Schneider
Jeff Bakker
Telephone: 403-260-9660
403-260-9682
Facsimile: 403-260-9700
Email: [email protected]
[email protected]
(b) if to Veresen:
Veresen Inc.
Suite 900, Livingston Place
222 – 3rd
Avenue S.W.
Calgary, Alberta T2P 0B4
Attention: Kevan King, Senior Vice President, General Counsel
Telephone: 403-213-3643
Facsimile: 403-213-3648
Email: [email protected]
with a copy to:
Osler, Hoskin & Harcourt LLP
Suite 2500, 450 - 1st Street S.W.
Calgary, Alberta T2P 5H1
Attention: Noralee Bradley
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Telephone: 403-260-7002
Facsimile: 403-260-7024
Email: [email protected]
9.2 Entire Agreement; Binding Effect
This Agreement: (a) together with the Confidentiality Agreement and any other subsequent
written agreement that addresses confidentiality between the Parties, constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral, between the Parties with
respect to the subject matter hereof; and (b) shall be binding upon and enure to the benefit of the Parties
and their respective successors and permitted assigns.
9.3 Assignment
Except as expressly permitted by the terms hereof, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the Parties hereto without the prior written
consent of the other Party.
9.4 Time of Essence
Time shall be of the essence in this Agreement.
9.5 Further Assurances
Each Party hereto shall, from time to time and at all times hereafter, at the request of the other
Party hereto, but without further consideration, do all such further acts, and execute and deliver all such
further documents and instruments as may be reasonably required in order to fully perform and carry out
the terms and intent hereof.
9.6 Specific Performance
Pembina and Veresen agree that irreparable harm would occur for which money damages would
not be an adequate remedy at law in the event that any of the provisions of this Agreement or the
Confidentiality Agreement or any other subsequent written agreement that addresses confidentiality
between the Parties were not performed by the other Party in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each Party shall be entitled to an injunction or
injunctions and other equitable relief to prevent breaches or threatened breaches of the provisions of this
Agreement or the Confidentiality Agreement or any other subsequent written agreement that addresses
confidentiality between the Parties or to otherwise obtain specific performance of any such provisions,
any requirement for the securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief hereby being waived.
9.7 Third Party Beneficiaries
The provisions of Section 7.6 are intended for the benefit of all present and former directors and
officers of Veresen and its Subsidiaries, as and to the extent applicable in accordance with their terms,
and shall be enforceable by each of such Persons and his or her heirs, executors administrators and other
legal representatives (collectively, the "Third Party Beneficiaries") and Pembina shall hold the rights
and benefits of Section 7.6 in trust for and on behalf of the Third Party Beneficiaries and Pembina hereby
accepts such trust and agrees to hold the benefit of and enforce performance of such covenants on behalf
of the Third Party Beneficiaries; and (b) are in addition to, and not in substitution for, any other rights that
the Third Party Beneficiaries may have by contract or otherwise. Except as provided in this Section 9.7,
this Agreement shall not: (i) confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns; (ii) constitute or create an employment agreement with
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any employee, create any right to employment or continued employment or service, or to a particular term
or condition of employment, or (iii) other than as may be provided for in Section 2.9 and Section 5.2(g)
hereof, be construed to establish, amend, or modify any Veresen Employee Plan or any other benefit or
compensation plan, program, agreement or arrangement.
9.8 Governing Law
This Agreement shall be governed by and construed in accordance with the Laws of the Province
of Alberta and the Laws of Canada applicable therein, and the Parties hereto irrevocably attorn to the
jurisdiction of the courts of the Province of Alberta.
9.9 Severability
If any one or more of the provisions or parts thereof contained in this Agreement should be or
become invalid, illegal or unenforceable in any respect in any jurisdiction, the remaining provisions or
parts thereof contained herein shall be and shall be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
(a) the validity, legality or enforceability of such remaining provisions or parts thereof shall
not in any way be affected or impaired by the severance of the provisions or parts thereof
severed; and
(b) the invalidity, illegality or unenforceability of any provision or part thereof contained in
this Agreement in any jurisdiction shall not affect or impair such provision or part thereof
or any other provisions of this Agreement in any other jurisdiction.
Upon such determination that any term or other provision is invalid, illegal or unenforceable, the
Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby
are fulfilled to the fullest extent possible.
9.10 Counterparts
This Agreement may be executed by facsimile or other electronic signature and in counterparts,
each of which shall be deemed an original, and all of which together constitute one and the same
instrument.
[The remainder of this page is left blank intentionally]
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IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be executed as of
the date first written above by their respective officers thereunto duly authorized.
PEMBINA PIPELINE CORPORATION
by: (signed) "Michael H. Dilger"
Name: Michael H. Dilger
Title: President and Chief Executive Officer
by: (signed) "Harold K.B. Andersen"
Name: Harold K.B. Andersen
Title: Vice President, Legal and General Counsel
VERESEN INC.
by: (signed) "Don Althoff"
Name: Don Althoff
Title: President and Chief Executive Officer
by: (signed) "Kevan King"
Name: Kevan King
Title: Senior Vice President, General Counsel
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SCHEDULE A
PLAN OF ARRANGEMENT
respecting
VERESEN INC.
made pursuant to
Section 193 of the Business Corporations Act (Alberta)
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PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT UNDER SECTION 193
OF THE
BUSINESS CORPORATIONS ACT (ALBERTA)
ARTICLE 1
INTERPRETATION
1.1 In this Plan of Arrangement, the following terms have the following meanings:
(a) "ABCA" means the Business Corporations Act, R.S.A. 2000, c. B-9, as amended,
including the regulations promulgated thereunder;
(b) "Amalco" means, in the event the Preferred Shareholder Resolution receives the requisite
approval of Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting, or the
Veresen Preferred Shareholders have approved a special resolution with similar effect to
the Preferred Shareholder Resolution prior to the Effective Time such that Pembina is the
sole holder of the Veresen Preferred Shares prior to the amalgamation contemplated in
Section 3.1(f), and this Plan of Arrangement is not otherwise amended pursuant to
Section 6.5 hereof to exclude the Veresen Preferred Shares, the corporation resulting
from the amalgamation of Pembina and Veresen pursuant to this Plan of Arrangement;
(c) "Arrangement", "herein", "hereof", "hereto", "hereunder" and similar expressions
mean and refer to the arrangement pursuant to section 193 of the ABCA on the terms and
subject to the conditions set forth in this Plan of Arrangement as supplemented, modified
or amended in accordance with this plan, and not to any particular article, section or other
portion hereof;
(d) "Arrangement Agreement" means the agreement dated May 1, 2017, between Pembina
and Veresen with respect to the Arrangement and all amendments thereto;
(e) "Arrangement Resolution" means the special resolution of Veresen Shareholders in
respect of the Arrangement to be considered at the Veresen Shareholders’ Meeting
substantially in the form attached as Schedule "B-1" to the Arrangement Agreement;
(f) "Articles of Arrangement" means the articles of arrangement of Veresen in respect of
the Arrangement required under subsection 193(10) of the ABCA to be sent to the
Registrar for filing after the Final Order has been granted, giving effect to the
Arrangement;
(g) "Business Day" means a day other than a Saturday, Sunday or statutory holiday or other
day when banks in the City of Calgary, Alberta are not generally open for business;
(h) "Certificate" means the certificate or proof of filing to be issued by the Registrar
pursuant to subsection 193(11) or 193(12) of the ABCA in respect of the Articles of
Arrangement giving effect to the Arrangement;
(i) "Court" means the Court of Queen's Bench of Alberta;
(j) "Depositary" means Computershare Trust Company of Canada, a trust company licensed
to carry on business in the Province of Alberta at its principal office in Calgary, Alberta
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2
or such other person that may be appointed by Pembina for the purpose of receiving
deposits of certificates formerly representing Veresen Shares;
(k) "Dissenting Veresen Shareholders" means registered Veresen Shareholders and, in the
event the Preferred Shareholder Resolution receives the requisite approval of Veresen
Preferred Shareholders at the Veresen Shareholders’ Meeting, Veresen Preferred
Shareholders who validly exercise the Dissent Rights with respect to the Arrangement
Resolution or the Preferred Shareholder Resolution, as applicable, provided to them
under the Interim Order, which exercise of Dissent Rights has not been withdrawn, or is
not deemed to have been withdrawn, before the Effective Time;
(l) "Dissent Rights" means the right dissent in respect of the Arrangement described in
Article 4 hereof;
(m) "Effective Date" means the date the Arrangement is effective under the ABCA;
(n) "Effective Time" means the time at which the Articles of Arrangement are filed with the
Registrar on the Effective Date and the Arrangement becomes effective;
(o) "Election Deadline" means 5:00 p.m. (Calgary time) on the date indicated as the election
deadline in the Letter of Transmittal and Election Form, which shall be not more than
three business days before the Effective Date;
(p) "Encumbrance" includes any mortgage, pledge, assignment, charge, lien, security
interest, adverse interest in property, other third party interest or encumbrance of any
kind whether contingent or absolute, and any agreement, option, right or privilege
(whether by law, contract or otherwise) capable of becoming any of the foregoing
(q) "Final Order" means the final order of the Court approving the Arrangement pursuant to
subsection 193(9)(a) of the ABCA, as such order may be amended at any time prior to
the Effective Date or, if appealed, then unless such appeal is withdrawn or denied, as
affirmed;
(r) "Interim Order" means an interim order of the Court concerning the Arrangement under
subsection 193(4) of the ABCA, containing declarations and directions with respect to
the Arrangement and the holding of the Veresen Shareholders’ Meeting, as such order
may be affirmed, amended or modified by any court of competent jurisdiction;
(s) "Tax Act" means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended,
including the regulations promulgated thereunder, as amended from time to time;
(t) "Total Elected Cash Consideration" has the meaning ascribed thereto in Section 3.3;
(u) "Total Elected Share Consideration" has the meaning ascribed thereto in Section 3.3;
(v) "Letter of Transmittal" means, as applicable: (i) in respect of the Veresen Shares, the
letter of transmittal and election form accompanying the Veresen Proxy Circular sent to
Veresen Shareholders and Veresen Preferred Shareholders pursuant to which holders of
Veresen Shares are required to deliver certificates representing the Veresen Shares to the
Depository and may elect to receive, on completion of the Arrangement, in exchange for
each Veresen Share, the Cash Consideration or the Share Consideration, subject to
proration set forth in Section 3.3 hereof; or (ii) in respect of the Veresen Preferred Shares,
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the letter of transmittal accompanying the Veresen Proxy Circular sent to Veresen
Shareholders and Veresen Preferred Shareholders pursuant to which holders of Veresen
Preferred Shares are required to deliver certificates representing the Veresen Preferred
Shares to the Depository;
(w) "Maximum Cash Consideration" means $1,522,500,000;
(x) "Maximum Share Consideration" means 99,500,000 Pembina Shares;
(y) "Pembina" means Pembina Pipeline Corporation, a corporation existing under the
ABCA;
(z) "Pembina Exchange Preferred Shares" means the Pembina Series [X] Shares, the
Pembina Series [X+1] Shares, the Pembina Series [X+2] Shares, the Pembina Series
[X+3] Shares, the Pembina Series [X+4] Shares and the Pembina Series [X+5] Shares, as
constituted on the Effective Date;
(aa) "Pembina Series [X] Shares" means the cumulative redeemable rate reset Class A
Preferred Shares, series [X] in the capital of Pembina, such shares having identical terms
to the Veresen Series A Shares except that the issuer thereof shall be the Pembina and
they will be convertible into Pembina Series [X+1] Shares instead of Veresen Series B
Shares;
(bb) "Pembina Series [X+1] Shares" means the cumulative redeemable floating rate Class A
Preferred Shares, series [X+1] in the capital of Pembina, such shares having identical
terms to the Veresen Series B Shares except that the issuer thereof shall be the Pembina
and they will be convertible into Pembina Series [X] Shares instead of Veresen Series A
Shares;
(cc) "Pembina Series [X+2] Shares" means the cumulative redeemable rate reset Class A
Preferred Shares, series [X+2] in the capital of Pembina, such shares having identical
terms to the Veresen Series C Shares except that the issuer thereof shall be the Pembina
and they will be convertible into Pembina Series [X+3] Shares instead of Veresen Series
D Shares;
(dd) "Pembina Series [X+3] Shares" means the cumulative redeemable floating rate Class A
Preferred Shares, series [X+3] in the capital of Pembina, such shares having identical
terms to the Veresen Series D Shares except that the issuer thereof shall be the Pembina
and they will be convertible into Pembina Series [X+2] Shares instead of Veresen Series
C Shares;
(ee) "Pembina Series [X+4] Shares" means the cumulative redeemable rate reset Class A
Preferred Shares, series [X+4] in the capital of Pembina, such shares having identical
terms to the Veresen Series E Shares except that the issuer thereof shall be the Pembina
and they will be convertible into Pembina Series [X+5] Shares instead of Veresen Series
F Shares;
(ff) "Pembina Series [X+5] Shares" means the cumulative redeemable floating rate Class A
Preferred Shares, series [X+5] in the capital of Pembina, such shares having identical
terms to the Veresen Series F Shares except that the issuer thereof shall be the Pembina
and they will be convertible into Pembina Series [X+4] Shares instead of Veresen Series
E Shares;
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(gg) "Pembina Shares" means the common shares in the capital of Pembina;
(hh) "Plan" or "Plan of Arrangement" means this plan of arrangement as amended or
supplemented from time to time in accordance with the terms hereof, and "hereby",
"hereof", "herein", "hereunder", "herewith" and similar terms refer to this plan of
arrangement and not to any particular provision of this plan of arrangement;
(ii) "Preferred Shareholder Resolution" means the special resolution of the Veresen
Preferred Shareholders, voting as a class, in respect of the Arrangement to be considered
at the Veresen Shareholders’ Meeting substantially in the form attached as Schedule B-2
to the Arrangement Agreement;
(jj) "Registrar" means the Registrar of Corporations or the Deputy Registrar of Corporations
appointed pursuant to section 263 of the ABCA;
(kk) "Veresen" means Veresen Inc., a corporation incorporated under the ABCA;
(ll) "Veresen Cash Consideration" means $18.65 per Veresen Share;
(mm) "Veresen Preferred Share Consideration" means one Pembina Series [X] Share per
Veresen Series A Share, without interest, one Pembina Series [X+1] Share per Veresen
Series B Share, without interest, one Pembina Series [X+2] Share per Veresen Series C
Share, without interest, one Pembina Series [X+3] Share per Veresen Series D Share,
without interest, one Pembina Series [X+4] Share per Veresen Series E Share, without
interest, and one Pembina Series [X+5] Share per Veresen Series F Share, without
interest (together, in the case of each Veresen Preferred Share, with an amount equal to
all accrued and unpaid dividends thereon up to, but excluding, the Effective Date) as
applicable;
(nn) "Veresen Preferred Shareholders" means, collectively, the holders of Veresen Series A
Shares, Veresen Series B Shares, Veresen Series C Shares, Veresen Series D Shares,
Veresen Series E Shares and Veresen Series F Shares;
(oo) "Veresen Proxy Circular" means the notice of the Veresen Shareholders' Meeting to be
sent to Veresen Shareholders and Veresen Preferred Shareholders and the management
proxy circular to be prepared in connection with the Veresen Shareholders' Meeting
together with any amendments thereto or supplements thereof, and any other registration
statement, information circular or proxy statement which may be prepared in connection
with the Veresen Shareholders' Meeting;
(pp) "Veresen Series A Shares" means the cumulative redeemable preferred shares, series A
of Veresen;
(qq) "Veresen Series B Shares" means the cumulative redeemable preferred shares, series B
of Veresen;
(rr) "Veresen Series C Shares" means the cumulative redeemable preferred shares, series C
of Veresen;
(ss) "Veresen Series D Shares" means the cumulative redeemable preferred shares, series D
of Veresen;
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(tt) "Veresen Series E Shares" means the cumulative redeemable preferred shares, series E
of Veresen;
(uu) "Veresen Series F Shares" means the cumulative redeemable preferred shares, series F
of Veresen;
(vv) "Veresen Shareholders" means the holders of Veresen Shares;
(ww) "Veresen Share Consideration" means 0.4287 of a Pembina Share;
(xx) "Veresen Shareholders' Meeting" means such meeting or meetings of the Veresen
Shareholders and the Veresen Preferred Shareholders, including any adjournment thereof,
that is to be convened as provided by the Interim Order to consider, and if deemed
advisable approve, the Arrangement;
(yy) "Veresen Shareholder Rights Plan" means Veresen's shareholder rights plan dated May
6, 2014, as such may be amended, amended and restated or replaced from time to time;
(zz) "Veresen Shares" means the common shares in the capital of Veresen; and
(aaa) "Veresen SRPs" means the rights issued pursuant to the Veresen Shareholder Rights
Plan.
1.2 The division of this Plan of Arrangement into articles, sections and subsections and the insertion
of headings are for convenience of reference only and shall not affect the construction or
interpretation of this Plan of Arrangement.
1.3 Unless reference is specifically made to some other document or instrument, all references herein
to articles, sections and subsections are to articles, sections and subsections of this Plan of
Arrangement.
1.4 Unless the context otherwise requires, words importing the singular number shall include the
plural and vice versa; words importing any gender shall include all genders; and words importing
persons shall include individuals, partnerships, associations, corporations, funds, unincorporated
organizations, governments, regulatory authorities, and other entities.
1.5 Unless otherwise specified, all references to "dollars" or "$" shall mean Canadian dollars.
1.6 In the event that the date on which any action is required to be taken hereunder by any of the
parties is not a Business Day in the place where the action is required to be taken, such action
shall be required to be taken on the next succeeding day which is a Business Day in such place.
1.7 References in this Plan of Arrangement to any statute or sections thereof shall include such
statute as amended or substituted and any regulations promulgated thereunder from time to time
in effect.
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ARTICLE 2
ARRANGEMENT AGREEMENT
2.1 This Plan of Arrangement is made pursuant and subject to the provisions of and forms part of the
Arrangement Agreement.
2.2 This Plan of Arrangement, upon the filing of the Articles of Arrangement and the issue of the
Certificate, will become effective on, and be binding on and after, the Effective Time on: (i) all
registered and beneficial Veresen Shareholders and, in the event the Preferred Shareholder
Resolution receives the requisite approval of Veresen Preferred Shareholders at the Veresen
Shareholders’ Meeting, the Veresen Preferred Shareholders; (ii) Veresen; and (iii) Pembina.
2.3 The Articles of Arrangement and Certificate shall be filed and issued, respectively, with respect
to this Arrangement in its entirety. The Certificate shall be conclusive evidence that the
Arrangement has become effective and that each of the provisions of Article 3 have become
effective in the sequence set out therein. If no Certificate is required to be issued by the Registrar
pursuant to subsection 193(11) of the ABCA, the Arrangement shall become effective at the
Effective Time on the date the Articles of Arrangement are filed with the Registrar pursuant to
subsection 193(10) of the ABCA.
ARTICLE 3
ARRANGEMENT
3.1 Commencing at the Effective Time, each of the events set out below shall occur and shall be
deemed to occur in the following order without any further act or formality except as otherwise
provided herein.
Veresen Shareholder Rights Plan
(a) The Veresen Shareholder Rights Plan shall terminate and cease to have any further force
or effect and the Veresen SRP Rights shall be cancelled without any payment in respect
thereof.
Dissenting Veresen Shareholders
(b) Subject to Article 4, the Veresen Shares and, in the event the Preferred Shareholder
Resolution receives the requisite approval of Veresen Preferred Shareholders at the
Veresen Shareholders’ Meeting, the Veresen Preferred Shares held by Dissenting
Veresen Shareholders who have validly exercised Dissent Rights shall be deemed to have
been transferred to Veresen (free and clear of all any Encumbrances), and cancelled and
such Dissenting Veresen Shareholders shall cease to have any rights as Veresen
Shareholders or Veresen Preferred Shareholders, as applicable, other than the right to be
paid the fair value of their Veresen Shares or Veresen Preferred Shares, as the case may
be, in accordance with Article 4, and the names of such holders shall be removed from
the register of Veresen Shareholders and Veresen Preferred Shareholders, as applicable.
Acquisition of Veresen Shares by Pembina
(c) Each issued and outstanding Veresen Share (other than those held by Dissenting Veresen
Shareholders) shall be transferred by the holder thereof without any further action on its
part (free and clear of any Encumbrances) to Pembina in accordance with the election or
deemed election of such holder pursuant to Section 3.2, as adjusted by Section 3.3, if
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applicable, in exchange for the Veresen Cash Consideration or the Veresen Share
Consideration, and Pembina shall be deemed to be the legal and beneficial owner of such
transferred Veresen Share (free and clear of Encumbrances,), and upon such exchange:
(i) the holders of such Veresen Shares shall cease to be the holders of Veresen
Shares and the names of such holders shall be removed from the register of
Veresen Shareholders; and
(ii) Pembina shall become the holder of the Veresen Shares so exchanged and shall
be added to the register of Veresen Shareholders as the registered holder of such
shares.
Acquisition and Exchange of Veresen Preferred Shares by Pembina
(d) Provided that the Preferred Shareholder Resolution has received the requisite approval of
Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting, each issued and
outstanding Veresen Preferred Share (other than those held by Dissenting Veresen
Shareholders) shall be transferred by the holder thereof without any further action on its
part (free and clear of any Encumbrances) to Pembina in exchange for the Veresen
Preferred Share Consideration, as applicable, and Pembina shall be deemed to be the
legal and beneficial owner of such transferred Veresen Preferred Share (free and clear of
Encumbrances), and upon such exchange:
(i) the holders of such Veresen Preferred Shares shall cease to be the holders of
Veresen Preferred Shares and the names of such holders shall be removed from
the register of Veresen Preferred Shareholders; and
(ii) Pembina shall become the holder of the Veresen Preferred Shares so exchanged
and shall be added to the register of Veresen Preferred Shareholders as the
registered holder of such shares.
Amalgamation
(e) Provided that the Preferred Shareholder Resolution has received the requisite approval of
Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting or Pembina has
otherwise acquired all of the Veresen Preferred Shares, and this Plan of Arrangement is
not otherwise amended pursuant to Section 6.5 hereof to exclude the Veresen Preferred
Shares, the aggregate stated capital of Veresen, in respect of the Veresen Shares and the
Veresen Preferred Shares, shall be reduced to nil.
(f) Provided that the Preferred Shareholder Resolution has received the requisite approval of
Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting or the Veresen
Preferred Shareholders have approved a special resolution with similar effect to the
Preferred Shareholder Resolution prior to the Effective Time such that Pembina is the
sole holder of the Veresen Preferred Shares, and this Plan of Arrangement is not
otherwise amended pursuant to Section 6.5 hereof to exclude the Veresen Preferred
Shares, Pembina and Veresen shall be amalgamated and continued as one corporation
under the ABCA to form Amalco in accordance with the following:
(i) Name. The name of Amalco shall be Pembina Pipeline Corporation;
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(ii) Share Provisions. The share provisions and authorized share capital of Amalco
shall be the same as the share provisions and authorized share capital of
Pembina;
(iii) Directors and Officers.
(A) Initial Directors. The directors of Amalco shall be the same as the
directors of Pembina; and
(B) Initial Officers. The officers of Amalco shall be the same as the officers
of Phiilip;
(iv) Business and Powers. There shall be no restrictions on the business that Amalco
may carry on or on the powers it may exercise;
(v) Other Provisions. The other provisions forming part of the Articles of Amalco
shall be the same as the respective provision of the articles of Pembina as such
existed immediately prior to the amalgamation;
(vi) Stated Capital. The aggregate stated capital of Amalco will be an amount equal
to the aggregate of the paid-up capital for the purposes of the Tax Act of the
Pembina Shares and the Class A Preferred Shares of Pembina outstanding
immediately before the amalgamation;
(vii) By-laws. The by-laws of Amalco shall be the by-laws of Pembina;
(viii) Registered Office. The registered office of Amalco shall be the registered office
of Pembina;
(ix) Effect of Amalgamation. The following shall be the effect of the amalgamation:
(A) all of the property of each of Pembina and Veresen shall continue to be
the property of Amalco;
(B) Amalco shall continue to be liable for the obligations of each of Pembina
and Veresen;
(C) any existing cause of action, claim or liability to prosecution of Pembina
or Veresen shall be unaffected;
(D) any civil, criminal or administrative action or proceeding pending by or
against either of Pembina or Veresen may be continued to be prosecuted
by or against Amalco; and
(E) a conviction against, or ruling, order or judgment in favour of or against,
either of Pembina or Veresen may be enforced by or against Amalco;
(x) Articles. The articles of amalgamation of Amalco filed shall be deemed to be the
articles of incorporation of Amalco, and the certificate of amalgamation of
Amalco shall be deemed to be the certificate of incorporation of Amalco;
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(xi) Inconsistency with Laws. To the extent any of the provisions of this Plan of
Arrangement is deemed to be inconsistent with applicable Laws, this Plan of
Arrangement shall be automatically adjusted to remove such inconsistency;
(xii) Cancellation of Shares. On the amalgamation each issued and outstanding
Veresen Share and Veresen Preferred Share shall be cancelled and each issued
and outstanding Pembina Share and Class A Preferred Share of Pembina shall
remain unaffected.
Election
3.2 With respect to the exchange of Veresen Shares effected pursuant to Section 3.1(c):
(a) each Veresen Shareholder (other than Dissenting Shareholders) may elect to receive, in
respect of each Veresen Share held, the Veresen Cash Consideration or the Veresen Share
Consideration, subject to Sections 3.3, 3.4 and 5.6;
(b) the election provided for in Section 3.2(a) shall be made by each Veresen Shareholder by
depositing with the Depositary, prior to the Election Deadline, a duly completed Letter of
Transmittal indicating such holder's election, together with any certificates representing
the holder's Veresen Shares;
(c) any Letter of Transmittal, once deposited with the Depositary, shall be irrevocable and
may not be withdrawn by a Veresen Shareholder; and
(d) any Veresen Shareholder who does not deposit with the Depositary a duly completed
Letter of Transmittal prior to the Election Deadline, or otherwise fails to comply with the
requirements of this Section 3.2 and the Letter of Transmittal, shall be deemed to have
elected to receive the Share Consideration in respect of all of such holder's Veresen
Shares, subject to Sections 3.3, 3.4 and 5.6.
3.3 Adjustments to Share and Cash Consideration
(a) Notwithstanding Section 3.2 or any contrary provision herein (other than Section 5.6), the
maximum amount of cash that may, in the aggregate, be paid to the Veresen Shareholders
pursuant to Section 3.1(c) shall be equal to the Maximum Cash Consideration. In the
event that the aggregate amount of cash that would, but for this Section 3.3(a), be paid to
Veresen Shareholders in accordance with the elections or deemed elections of such
Veresen Shareholders pursuant to Section 3.2 (the "Total Elected Cash Consideration")
exceeds the Maximum Cash Consideration, then the aggregate amount of cash to be paid
to any Veresen Shareholder shall be determined by multiplying the aggregate amount of
cash that would, but for this Section 3.3(a), be paid to such Veresen Shareholder by a
fraction, rounded to six decimal places, the numerator of which is the Maximum Cash
Consideration and the denominator of which is the Total Elected Cash Consideration; and
such holder shall be deemed to have elected to receive the Veresen Cash Consideration
for such number of its Veresen Shares, rounded down to the nearest whole, as is equal to
the aggregate amount of cash received by such holder, as adjusted in accordance with this
Section 3.3(a), divided by the Veresen Cash Consideration, and the Veresen Share
Consideration for the remainder of its Veresen Shares for which, but for this
Section 3.3(a), such holder would otherwise have received the Veresen Cash
Consideration.
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(b) Notwithstanding Section 3.2 or any contrary provision herein, the maximum number of
Pembina Shares that may, in the aggregate, be paid to the Veresen Shareholders pursuant
to Section 3.1(c) shall be equal to the Maximum Share Consideration. In the event that
the aggregate number of Pembina Shares that would, but for this Section 3.3(b), be paid
to Veresen Shareholders in accordance with the elections or deemed elections of such
Veresen Shareholders pursuant to Section 3.2 (the "Total Elected Share
Consideration") exceeds the Maximum Share Consideration, then the aggregate number
of Pembina Shares to be paid to any Veresen Shareholder shall be determined by
multiplying the aggregate number of Pembina Shares that would, but for this
Section 3.3(b), be issued to such Veresen Shareholder by a fraction, rounded to six
decimal places, the numerator of which is the Maximum Share Consideration and the
denominator of which is the Total Elected Share Consideration; and such holder shall be
deemed to have elected to receive the Veresen Share Consideration for such number of its
Veresen Shares, rounded down to the nearest whole, as is equal to the aggregate number
of Pembina Shares received by such holder, as adjusted pursuant to this Section 3.3(b),
divided by the Veresen Share Consideration, and the Veresen Cash Consideration for the
remainder of its Veresen Shares for which, but for this Section 3.3(b), such holder would
otherwise have received the Veresen Share Consideration.
Withholding
3.4 Veresen, Pembina and the Depositary shall be entitled to deduct and withhold from any
consideration or amount otherwise payable to any former Veresen Shareholder or Veresen
Preferred Shareholder, if applicable, such amounts as Veresen, Pembina, or the Depositary, as the
case may be, may determine is required or permitted to deduct and withhold with respect to such
payment under the Tax Act, the United States Internal Revenue Code of 1986 or any provision of
federal, provincial, territorial, state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to
the former Veresen Shareholder or Veresen Preferred Shareholder, as the case may be, in respect
of which such deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the amount so required to
be deducted or withheld from any payment to a former Veresen Shareholder or Veresen Preferred
Shareholder, as the case may be, exceeds the cash consideration otherwise payable to the holder,
Veresen, Pembina and the Depositary are hereby authorized to sell or otherwise dispose of any
property or amount otherwise payable to such former Veresen Shareholder or Veresen Preferred
Shareholder pursuant to this Plan of Arrangement to the extent necessary to provide sufficient
funds to Veresen, Pembina or the Depositary, as the case may be, to enable it to comply with such
deduction or withholding requirement and Veresen, Pembina or the Depositary, as the case may
be, shall remit to such former Veresen Shareholder or Veresen Preferred Shareholder, as the case
may be, any unapplied balance of the net proceeds of such sale.
ARTICLE 4
DISSENTING VICTOR SHAREHOLDERS
4.1 Each registered holder of Veresen Shares or, subject to Section 4.7, Veresen Preferred Shares
shall have the right to dissent with respect to the Arrangement in accordance with the Interim
Order and this Article 4, provided that notwithstanding section 191(5) of the ABCA, the written
objection to the Arrangement referred to in section 191(5) of the ABCA must be sent to by
Veresen by the Dissenting Shareholder not later than 4:00 p.m. (Calgary time) on the date that is
five Business Days prior to the date of the Veresen Shareholders’ Meeting.
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4.2 A Dissenting Veresen Shareholder shall, at the Effective Time, cease to have any rights as a
holder of Veresen Shares or Veresen Preferred Shares, as the case may be, (other than as set forth
herein) and shall only be entitled to be paid by Veresen the fair value of the holder's Veresen
Shares or Veresen Preferred Shares, as the case may be. A Dissenting Veresen Shareholder who
is entitled to be paid by Veresen the fair value of the holder's Veresen Shares or Veresen
Preferred Shares, as the case may be, shall, pursuant to Section 3.1(b) hereof, be deemed to have
transferred the holder's Veresen Shares or Veresen Preferred Shares, as the case may be, (free and
clear of any Encumbrances) to Veresen for cancellation without any further act or formality
notwithstanding the provisions of section 191 of the ABCA.
4.3 A Dissenting Veresen Shareholder who for any reason is not ultimately entitled to be paid the fair
value of the holder's Veresen Shares or Veresen Preferred Shares, as the case may be, shall be
deemed to have participated in the Arrangement on the same basis as a non-dissenting holder of
Veresen Shares (who elected to exclusively receive Veresen Cash Consideration) or Veresen
Preferred Shares (provided, in the case of Veresen Preferred Shares, that the requisite approval of
Veresen Preferred Shareholders is received at the Veresen Shareholders’ Meeting)
notwithstanding the provisions of section 191 of the ABCA.
4.4 The fair value of the Veresen Shares shall be determined as of the close of business on the last
Business Day before the day on which the Arrangement Resolution is approved by the holders of
Veresen Shares. The fair value of the Veresen Preferred Shares shall be determined as of the
close of business on the last Business Day before the day on which the Preferred Shareholders
Resolution is approved by the holders of Veresen Preferred Shares.
4.5 In no event shall Veresen or Pembina be required to recognize any Dissenting Veresen
Shareholder as a Veresen Shareholder or a Veresen Preferred Shareholder, as the case may be,
after the Effective Time and the names of such holders shall be removed from the register of
Veresen Shareholders and Veresen Preferred Shareholders, as applicable, as at the Effective
Time.
4.6 For greater certainty, in addition to any other restrictions in section 191 of the ABCA: (a) any
person who has voted in favour of the Arrangement Resolution shall not be entitled to dissent
with respect to such person’s Veresen Shares for the Arrangement; and (b) any person who has
voted in favour of the Preferred Shareholder Resolution shall not be entitled to dissent with
respect to such person’s Veresen Preferred Shares for the Arrangement. In addition, a Dissenting
Veresen Shareholder may only exercise Dissent Rights in respect of all, and not less than all, of
its Veresen Shares or Veresen Preferred Shares, as the case may be.
4.7 Notwithstanding any provision to the contrary in this Plan of Arrangement, in the event that the
requisite approval of Veresen Preferred Shareholders is not received at the Veresen Shareholders’
Meeting, the right of dissent provided for in this Article 4 shall cease to apply to holders of
Veresen Preferred Shares and any written objection to the Arrangement sent by a Veresen
Preferred Shareholder shall be null and void.
ARTICLE 5
OUTSTANDING CERTIFICATES AND FRACTIONAL SHARES
5.1 Forthwith following the Effective Time, Pembina and Veresen shall, subject to Section 5.2, cause
to be paid (a) to the Veresen Shareholders the amounts payable, or cause to be issued the number
of Pembina Shares issuable, in respect of the Veresen Shares required by Section 3.1(c), as
adjusted, if applicable, pursuant to Section 3.3 and (b) in the event the Preferred Shareholder
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Resolution receives the requisite approval at the Veresen Shareholders’ Meeting, cause to be
issued the number of Pembina Exchange Preferred Shares issuable, in respect of the Veresen
Preferred Shares required by Section 3.1(d).
5.2 Upon surrender to the Depositary for cancellation of a certificate or certificates (as applicable)
which, immediately prior to the Effective Time, represented outstanding Veresen Shares or
outstanding Veresen Preferred Shares that were transferred pursuant to Section 3.1(c) or 3.1(d),
together with a duly completed and executed Letter of Transmittal and such additional documents
and instruments as the Depositary may reasonably require, each Veresen Shareholder and
Veresen Preferred Shareholder represented by such surrendered certificate(s) shall be entitled to
receive in exchange therefor, and the Depositary shall deliver to such holder, the consideration
which such holder has the right to receive under this Plan of Arrangement for such Veresen
Shares and Veresen Preferred Shares, as applicable, less any amounts withheld pursuant to
Section 3.4, and any certificate(s) so surrendered shall forthwith be cancelled.
5.3 Until deposited as contemplated by Section 5.2, each certificate that immediately prior to the
Effective Time represented Veresen Shares and, in the event the Preferred Shareholder
Resolution receives the requisite approval at the Veresen Shareholders’ Meeting, Veresen
Preferred Shares shall be deemed after the Effective Time to represent only the right to receive
upon such deposit the consideration and other property to which the holders of such Veresen
Shares and Veresen Preferred Shares, as applicable, are entitled under the Arrangement, or as to
those held by Dissenting Veresen Shareholders, other than those Dissenting Veresen Shareholders
deemed to have participated in the Arrangement pursuant to Section 4.3, to receive the fair value
of the Veresen Shares or Veresen Preferred Shares, as applicable, represented by such certificates.
Any such certificate formerly representing Veresen Shares and, in the event the Preferred
Shareholder Resolution receives the requisite approval at the Veresen Shareholders’ Meeting,
Veresen Preferred Shares not duly surrendered on or before the last Business Day prior to the
third anniversary of the Effective Date shall cease to represent a claim by or interest of any
former Veresen Shareholder or Veresen Preferred Shareholder, as applicable, of any kind or
nature against Veresen or Pembina. On such date, all consideration and other property to which
such former holder was entitled shall be deemed to have been surrendered to Veresen or Pembina,
as applicable.
5.4 No Veresen Shareholder or, in the event the Preferred Shareholder Resolution receives the
requisite approval at the Veresen Shareholders’ Meeting, Veresen Preferred Shareholder shall be
entitled to receive any consideration with respect to such Veresen Shares or Veresen Preferred
Shares, as applicable, other than the consideration and other property to which such holder is
entitled to receive under the Arrangement and, for greater certainty, no such holder will be
entitled to receive any interest, dividend, premium or other payment in connection therewith.
5.5 If any certificate which immediately prior to the Effective Time represented an interest in
outstanding Veresen Shares or Veresen Preferred Shares that were exchanged pursuant to
Section 3.1 has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to have been lost, stolen or destroyed, the Depositary will issue
and deliver in exchange for such lost, stolen or destroyed certificate the consideration and other
property to which the holder is entitled pursuant to the Arrangement as determined in accordance
with the Arrangement. The person who is entitled to receive such consideration and other
property shall, as a condition precedent to the receipt thereof, give a bond satisfactory to Pembina
and its transfer agent in such form as is satisfactory to Pembina and such transfer agent, or
otherwise indemnify Veresen, Pembina and the transfer agent, to the reasonable satisfaction of
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such parties, against any claim that may be made against any of them with respect to the
certificate alleged to have been lost, stolen or destroyed.
5.6 No certificates representing fractional Pembina Shares shall be issued under the Arrangement. In
lieu of any fractional Pembina Shares, each registered Veresen Shareholder otherwise entitled to a
fractional interest in Pembina Shares will receive the nearest whole number of Pembina Shares,
provided that in no circumstances shall the aggregate number of Pembina Shares to be paid to the
Veresen Shareholders pursuant to this Plan of Arrangement be greater than the Maximum Share
Consideration. For greater certainty, where such fractional interest is greater than or equal to 0.5,
the number of Pembina Shares to be issued will be rounded up to the nearest whole number and
where such fractional interest is less than 0.5, the number of Pembina Shares to be issued will be
rounded down to the nearest whole number, unless such rounding causes the aggregate number of
Pembina Shares to be paid to the Veresen Shareholders pursuant to this Plan of Arrangement to
be greater than the Maximum Share Consideration, in which case all such fractional interests will
be paid in cash based on the Veresen Cash Consideration notwithstanding that such cash
payments may cause the aggregate cash consideration to be paid by Pembina pursuant to this Plan
of Arrangement to exceed the Maximum Cash Consideration. In calculating such fractional
interests, all Veresen Shares registered in the name of or beneficially held by such Veresen
Shareholder or their nominee shall be aggregated.
ARTICLE 6
AMENDMENTS
6.1 Veresen and Pembina may amend, modify and/or supplement this Plan of Arrangement at any
time and from time to time prior to the Effective Time, provided that each such amendment,
modification and/or supplement must be: (i) set out in writing; (ii) approved by both parties;
(iii) filed with the Court and, if made following the Veresen Shareholders’ Meeting, approved by
the Court; and (iv) communicated to Veresen Shareholders and/or Veresen Preferred
Shareholders, if and as required by the Court.
6.2 Any amendment, modification or supplement to this Plan of Arrangement may be proposed by
Veresen or Pembina at any time prior to or at the Veresen Shareholders’ Meeting (provided that
the other party shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted, in the manner contemplated and to the extent
required by the Arrangement Agreement by the persons voting at the Veresen Shareholders’
Meeting (other than as may be required under the Interim Order or other order of the Court), shall
become part of this Plan of Arrangement for all purposes.
6.3 Any amendment, modification or supplement to this Plan of Arrangement that is approved or
directed by the Court following the Veresen Shareholders’ Meeting shall be effective only (i) if it
is consented to in writing by each of Veresen and Pembina (each acting reasonably), and (ii) if
required by the Court or applicable law, it is consented to by the Veresen Shareholders and/or
Veresen Preferred Shareholders.
6.4 Any amendment, modification or supplement to this Plan of Arrangement may be made following
the Effective Time effective only if it is consented to in writing by each of Pembina and Veresen,
provided that it concerns a matter which, in the reasonable opinion of each of Pembina and
Veresen, is of an administrative nature required to better give effect to the implementation of this
Plan of Arrangement and is not adverse to the financial or economic interests of any former
holder of Veresen Shares and, in the event the Preferred Shareholder Resolution receives the
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requisite approval at the Veresen Shareholders’ Meeting, any former holder of Veresen Preferred
Shares.
6.5 Notwithstanding anything else contained herein: (a) in the circumstances where the Preferred
Shareholder Resolution does not receive the requisite approval of the Veresen Preferred
Shareholders at the Veresen Shareholders' Meeting (or any adjournment thereof) and the Veresen
Preferred Shareholders do not otherwise approve a special resolution with similar effect to the
Preferred Shareholder Resolution prior to the Effective Time such that Pembina is the sole holder
of the Veresen Preferred Shares prior to the amalgamation contemplated in Section 3.1(f),
Veresen shall amend this Plan of Arrangement to exclude the Veresen Preferred Shares under this
Plan of Arrangement and matters ancillary thereto; and (b) in the circumstances where the
Preferred Shareholder Resolution receives the requisite approval of the Veresen Preferred
Shareholders, and Dissent Rights have been validly exercised in respect of more than 5% of the
outstanding Veresen Preferred Shares, Veresen shall amend this Plan of Arrangement if requested
by Pembina to exclude the Veresen Preferred Shares under this Plan of Arrangement and matters
ancillary thereto, including, in each case, the amalgamation contemplated in Section 3.1(f).
ARTICLE 7
FURTHER ASSURANCES
7.1 Notwithstanding that the transactions and events set out herein shall occur and shall be deemed to
occur in the order set out in this Plan without any further act or formality, each of the Parties to
the Arrangement Agreement shall make, do and execute, or cause to be made, done and executed,
all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may
reasonably be required in order further to document or evidence any of the transactions or events
set out herein.
7.2 From and after the Effective Time (a) this Plan shall take precedence and priority over any and all
rights related to Veresen Shares and, in the event the Preferred Shareholder Resolution receives
the requisite approval at the Veresen Shareholders’ Meeting, Veresen Preferred Shares issued
prior to the Effective Time; (b) the rights and obligations of the holders of Veresen Shares and, in
the event the Preferred Shareholder Resolution receives the requisite approval at the Veresen
Shareholders’ Meeting, holders of Veresen Preferred Shares and, in each case, any respective
trustee and transfer agent therefor, shall be solely as provided for in this Plan; and (c) all actions,
causes of actions, claims or proceedings (actual or contingent, and whether or not previously
asserted) based on or in any way relating to Veresen Shares and, in the event the Preferred
Shareholder Resolution receives the requisite approval at the Veresen Shareholders’ Meeting,
Veresen Preferred Shares shall be deemed to have been settled, compromised, released and
determined without liability except as set forth herein.
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SCHEDULE B-1
FORM OF ARRANGEMENT RESOLUTION
BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:
(1) The arrangement (the "Arrangement") under section 193 of the Business Corporations
Act (Alberta) (the "ABCA") involving Veresen Inc. (the "Company"), as more particularly described
and set forth in the management proxy circular (the "Circular") of the Company accompanying the
notice of this meeting, as the Arrangement may be modified or amended in accordance with its terms, is
hereby authorized, approved and adopted.
(2) The plan of arrangement (the "Plan of Arrangement") involving the Company, the full
text of which is set out as Schedule A to the Arrangement Agreement made as of May 1, 2017 between
Pembina Pipeline Corporation and the Company (the "Arrangement Agreement"), as the Plan of
Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved
and adopted.
(3) The Arrangement Agreement, the actions of the directors of the Company in approving
the Arrangement Agreement and the actions of the directors and officers of the Company in executing and
delivering the Arrangement Agreement and any amendments thereto in accordance with its terms are
hereby ratified and approved.
(4) Notwithstanding that this resolution has been passed (and the Plan of Arrangement
adopted) by the Veresen Common Shareholders (as defined in the Arrangement Agreement) or that the
Arrangement has been approved by the Court of Queen's Bench of Alberta, the directors of the Company
are hereby authorized and empowered, without further notice to or approval of the Veresen Common
Shareholders (i) to amend the Arrangement Agreement or the Plan of Arrangement, to the extent
permitted by the Arrangement Agreement or the Plan of Arrangement, and (ii) subject to the terms of the
Arrangement Agreement, to disregard the Veresen Common Shareholders' approval and not proceed with
the Arrangement.
(5) Any one director or officer of the Company be and is hereby authorized and directed for
and on behalf of the Company to execute, under the corporate seal of the Company or otherwise, and to
deliver to the Registrar under the ABCA for filing articles of arrangement and such other documents as
are necessary or desirable to give effect to the Arrangement and the Plan of Arrangement in accordance
with the Arrangement Agreement.
(6) Any one director or officer of the Company be and is hereby authorized and directed for
and on behalf of the Company to execute or cause to be executed, under the corporate seal of the
Company or otherwise, and to deliver or cause to be delivered, all such other documents and instruments
and to perform or cause to be performed all such other acts and things as in such person's opinion may be
necessary or desirable to give full effect to the foregoing resolutions and the matters authorized thereby,
such determination to be conclusively evidenced by the execution and delivery of such document,
agreement or instrument or the doing of any such act or thing.
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SCHEDULE B-2
FORM OF PREFERRED SHAREHOLDER RESOLUTION
BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:
(1) The arrangement (the "Arrangement") under section 193 of the Business Corporations
Act (Alberta) (the "ABCA") involving Veresen Inc. (the "Company"), as more particularly described
and set forth in the management proxy circular (the "Circular") of the Company accompanying the
notice of this meeting, as the Arrangement may be modified or amended in accordance with its terms, is
hereby authorized, approved and adopted.
(2) The plan of arrangement (the "Plan of Arrangement") involving the Company, the full
text of which is set out as Schedule A to the Arrangement Agreement made as of May 1, 2017 between
Pembina Pipeline Corporation and the Company (the "Arrangement Agreement"), as the Plan of
Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved
and adopted.
(3) The Arrangement Agreement, the actions of the directors of the Company in approving
the Arrangement Agreement and the actions of the directors and officers of the Company in executing and
delivering the Arrangement Agreement and any amendments thereto in accordance with its terms are
hereby ratified and approved.
(4) Notwithstanding that this resolution has been passed (and the Plan of Arrangement
adopted) by the Veresen Preferred Shareholders (as defined in the Arrangement Agreement) or that the
Arrangement has been approved by the Court of Queen's Bench of Alberta, the directors of the Company
are hereby authorized and empowered, without further notice to or approval of the Veresen Preferred
Shareholders (i) to amend the Arrangement Agreement or the Plan of Arrangement, to the extent
permitted by the Arrangement Agreement or the Plan of Arrangement, and (ii) subject to the terms of the
Arrangement Agreement, to disregard the Veresen Preferred Shareholders' approval and not proceed with
the Arrangement.
(5) Any one director or officer of the Company be and is hereby authorized and directed for
and on behalf of the Company to execute, under the corporate seal of the Company or otherwise, and to
deliver to the Registrar under the ABCA for filing articles of arrangement and such other documents as
are necessary or desirable to give effect to the Arrangement and the Plan of Arrangement in accordance
with the Arrangement Agreement.
(6) Any one director or officer of the Company be and is hereby authorized and directed for
and on behalf of the Company to execute or cause to be executed, under the corporate seal of the
Company or otherwise, and to deliver or cause to be delivered, all such other documents and instruments
and to perform or cause to be performed all such other acts and things as in such person's opinion may be
necessary or desirable to give full effect to the foregoing resolutions and the matters authorized thereby,
such determination to be conclusively evidenced by the execution and delivery of such document,
agreement or instrument or the doing of any such act or thing.
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SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF PEMBINA
(a) Organization and Qualification. Each of Pembina and its Subsidiaries is a corporation or
partnership duly incorporated or formed, as applicable, validly existing and in good standing under the
Laws of its jurisdiction of incorporation or formation and has the requisite corporate or partnership power
and authority to own its properties as now owned and to carry on its business as it is now being
conducted. Pembina is, and its Subsidiaries are, duly registered to do business and each is in good
standing in each jurisdiction in which the nature of its properties, owned or leased, or its activities makes
such registration necessary, except where the failure to be so registered or in good standing would not
materially adversely affect Pembina and its Subsidiaries taken as a whole. Copies of the constating
documents of Pembina and its material Subsidiaries, together with all amendments to date, have been
provided to Veresen and are accurate and complete as of the date hereof and have not been amended or
superseded
(b) Authority Relative this Agreement. Pembina has the requisite corporate authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and
the participation by Pembina in the Arrangement contemplated hereby have been duly authorized by
Pembina's board of directors and no other corporate proceedings on the part of Pembina are necessary to
authorize this Agreement or the Arrangement. This Agreement has been duly executed and delivered by
Pembina and constitutes a legal, valid and binding obligation of Pembina enforceable against it in
accordance with its terms, subject to the qualification that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting rights
of creditors and that equitable remedies, including specific performance, are discretionary and may not be
ordered.
(c) Subsidiaries. Pembina has no Subsidiaries, nor does it own, directly or indirectly, any interests in
any other joint ventures, corporations, partnerships or other entities (whether or not incorporated), other
than as disclosed in writing to Veresen by Pembina on or prior to the date hereof.
(d) Ownership of Subsidiaries. Except as disclosed in writing to Veresen by Pembina on or prior to
the date hereof, Pembina is the beneficial direct or indirect owner of all of the outstanding shares and
partnership interests and other ownership interests of Pembina's Subsidiaries with good title thereto free
and clear of any and all Encumbrances. There are no options, warrants or other rights, plans, agreements
or commitments of any character whatsoever requiring the issuance, sale or transfer by any of Pembina's
Subsidiaries of any securities or other ownership interests of Pembina's Subsidiaries or any securities or
other ownership interests convertible into, or exchangeable or exercisable for, or otherwise evidencing a
right to acquire, any securities of any of Pembina's Subsidiaries. All outstanding securities or other
ownership interests of Pembina's Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and are not subject to, nor were they issued in violation of, any Pre-Emptive Right.
(e) No Violations; Absence of Defaults and Conflicts.
(i) Neither Pembina nor any of its Subsidiaries is in violation of its constating documents or
by-laws or in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any note, bond, mortgage, indenture, loan agreement,
deed of trust, agreement, lien, contract or other instrument or obligation to which
Pembina or any of its Subsidiaries is a party or to which any of them, or any of their
respective properties or assets, may be subject or by which Pembina or any of its
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Subsidiaries is bound, except for such defaults which would not materially adversely
affect Pembina and its Subsidiaries taken as a whole;
(ii) neither the execution and delivery of this Agreement by Pembina nor the consummation
of the Arrangement contemplated hereby nor compliance by Pembina with any of the
provisions hereof will: (A) violate, conflict with, or result in a breach of any provision of,
require any consent, approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or result in a right of
termination or acceleration under, or result in the creation of any Encumbrance (other
than Permitted Encumbrances) upon any of the properties or assets of Pembina or any of
its Subsidiaries or cause any indebtedness to come due before its stated maturity or cause
any credit to cease to be available, under any of the terms, conditions or provisions of (1)
their respective charter, by-laws or other constating documents (including any applicable
partnership, shareholder or operating agreements), or (2) any note, bond, mortgage,
indenture, loan agreement, deed of trust, agreement, lien, contract or other instrument or
obligation to which Pembina or any of its Subsidiaries is a party or to which any of them,
or any of their respective properties or assets, may be subject or by which Pembina or any
of its Subsidiaries is bound; or (B) subject to compliance with the statutes and regulations
referred to below, violate any Laws, judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation applicable to Pembina
or any of its Subsidiaries or any of their respective properties or assets; or (C) cause the
suspension or revocation of any authorization, consent, approval or license currently in
effect, except, in the case of each of clauses (A)(2), (B) or (C) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations, creations of Encumbrances,
suspensions or revocations which, or any consents, approvals or notices which if not
given or received, would not materially adversely affect Pembina and its Subsidiaries
taken as a whole; and
(iii) other than in connection with or in compliance with the provisions of applicable
Canadian Securities Laws, U.S. Securities Laws, the ABCA, the Competition Act, the
HSR Act, the CT Act or other similar applicable Laws (including any Laws that regulate
competition, antitrust, foreign investment or transportation), the terms of the Interim
Order and the Final Order in respect of the Arrangement and the filing of the Articles of
Arrangement, (A) there is no legal impediment to Pembina's consummation of the
Arrangement, and (B) no filing or registration with, or authorization, consent or approval
of, any domestic or foreign public body or authority is required of Pembina in connection
with the consummation of the Arrangement, except for such filings or registration which,
if not made, or for such authorizations, consents or approvals which, if not received,
would not materially adversely affect Pembina and its Subsidiaries taken as a whole.
(f) Litigation. Except as disclosed in writing to Veresen by Pembina on or prior to the date hereof,
there are no actions, suits, proceedings, or investigations by Governmental Entities pending or, to the
knowledge of Pembina, threatened, affecting or that would reasonably be expected to materially adversely
affect Pembina or any of its Subsidiaries or affecting or that would reasonably be expected to materially
adversely affect any of their property or assets at Law or equity or before or by any court or
Governmental Entity which action, suit, proceeding or investigation involves a possibility of any
judgment against or liability of Pembina or any of its Subsidiaries which, if successful, would materially
adversely affect Pembina and its Subsidiaries taken as a whole or would significantly impede the ability
of Pembina to consummate the Arrangement. Neither Pembina nor its Subsidiaries is subject to any
outstanding order, writ, injunction or decree that has or would materially adversely affect Pembina and its
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Subsidiaries taken as a whole or would significantly impede the ability of Pembina to consummate the
Arrangement.
(g) Reporting Issuer Status. Pembina is a reporting issuer (where such concept exists) in all provinces
of Canada and is in material compliance with all applicable Canadian Securities Laws therein. The
currently issued and outstanding Pembina Shares are listed and posted for trading on the Exchanges and
the Pembina Preferred Shares are also listed and posted for trading on the TSX and Pembina is in material
compliance with the rules of the Exchanges.
(h) Capitalization. The authorized share capital of Pembina consists of (i) an unlimited number of
Pembina Shares, (ii) Pembina Class A Preferred Shares issuable in series and limited in number to not
more than 20% of the number of issued and outstanding Pembina Shares at the time of issuance of any
such Pembina Class A Preferred Shares; and (iii) an unlimited number of Pembina Class B Preferred
Shares. There are issued and outstanding no more than 405,000,000 Pembina Shares, 10,000,000 Pembina
Series 1 Shares, 6,000,000 Pembina Series 3 Shares, 10,000,000 Pembina Series 5 Shares, 10,000,000
Pembina Series 7 Shares, 9,000,000 Pembina Series 9 Shares, 6,800,000 Pembina Series 11 Shares,
10,000,000 Pembina Series 13 Shares and there are no other shares of any class or series outstanding.
There are no more than 5,500,000 Pembina Shares issuable upon the conversion of Pembina Convertible
Debentures and no more than 17,000,000 Pembina Shares issuable upon the exercise of outstanding
Pembina Options as of the date hereof. Other than (i) Pembina Series 2 Shares issuable on conversion of
the Pembina Series 1 Shares, Pembina Series 4 Shares issuable on conversion of the Pembina Series 3
Shares, Pembina Series 6 Shares issuable on conversion of the Pembina Series 5 Shares, Pembina Series 8
Shares issuable on conversion of the Pembina Series 7 Shares, Pembina Series 10 Shares issuable on
conversion of the Pembina Series 9 Shares, Pembina Series 12 Shares issuable on conversion of the
Pembina Series 11 Shares and Pembina Series 14 Shares issuable on conversion of the Pembina Series 13
Shares, (ii) as set forth above, (iii) Pembina Shares issuable pursuant to the Pembina's Premium Dividend
and Dividend Reinvestment Plan, (iv) Pembina Shares issuable upon conversion, redemption or maturity
of the Pembina Convertible Debentures, (v) Pembina Shares issuable upon exercise of the Pembina
Options, and (vi) Pembina Shares issuable pursuant to rights issued under Pembina Shareholder Rights
Plan, each on the terms as publicly disclosed on or prior to the date hereof, there are no options, warrants
or other rights, shareholder rights plans, agreements or commitments of any character whatsoever
requiring the issuance, sale or transfer by Pembina of any shares of Pembina or any securities convertible
into, or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any shares of
Pembina. All outstanding Pembina Shares, Pembina Class A Preferred Shares and Pembina Convertible
Debentures have, as applicable, been duly authorized and validly issued, are fully paid and non-assessable
and are not subject to, nor were they issued in violation of, any pre-emptive rights, and all Pembina
Shares issuable upon conversion, redemption or maturity of outstanding Pembina Convertible Debentures
and upon the exercise of the Pembina Options, and all Pembina Class A Preferred Shares issuable upon
conversion of any Pembina Class A Preferred Shares, in accordance with their respective terms will be
duly authorized and validly issued as fully paid and non-assessable and will not be subject to any pre-
emptive rights.
(i) No Orders. No order, ruling or determination having the effect of suspending the sale of, or
ceasing the trading of, the Pembina Shares or any other securities of Pembina has been issued by any
regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted,
are pending or, to the knowledge of Pembina, are contemplated or threatened under any applicable Laws
or by any other Governmental Entity.
(j) Books and Records. The records and minute books of Pembina and its material Subsidiaries and
their respective predecessors have been maintained substantially in accordance with all applicable Laws
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and are complete and accurate in all material respects, and have been made available in their entirety to
Veresen.
(k) Reports. As of their respective dates, (i) Pembina's audited consolidated financial statements as at
and for the fiscal year ended December 31, 2016 (the "Pembina Financial Statements") and the related
management's discussion and analysis, (ii) Pembina's Annual Information Form dated February 23, 2017,
(iii) Pembina's information circular dated March 16, 2017 for its annual meeting of shareholders to be
held on May 5, 2017, (iv) all Pembina press releases and material change reports or similar documents
filed with any Securities Regulators since December 31, 2016, and (v) all prospectuses or other offering
documents used by Pembina in the offering of its securities or filed with Securities Regulators since
December 31, 2016 are all the financial statements, forms, reports, prospectuses or other documents
required to be filed by virtue of applicable Canadian Securities Laws and U.S. Securities Laws since
December 31, 2016, did not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading and complied in all material respects with applicable Canadian
Securities Laws and U.S. Securities Laws. Since December 31, 2016, Pembina has not filed any material
change reports which continue to be confidential.
(l) Financial Statements. The Pembina Financial Statements were prepared in accordance with IFRS
(except as otherwise indicated in such financial statements and the notes thereto or in the related report of
Pembina's independent auditors), and fairly present the consolidated financial position, results of
operations and cash flows of Pembina on a consolidated basis as of the dates thereof and for the periods
indicated therein and reflect appropriate and adequate reserves in respect of contingent liabilities, if any,
of Pembina on a consolidated basis. There has been no change in Pembina's accounting policies, except as
described in the notes to the Pembina Financial Statements, since December 31, 2016.
(m) Absence of Undisclosed Liabilities. Except as disclosed in writing to Veresen by Pembina on or
prior to the date hereof, Pembina has no material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent), other than:
(i) those set forth or adequately provided for in the balance sheet included in the Pembina
Financial Statements;
(ii) those incurred in the ordinary course of business and not required to be set forth in the
Pembina Financial Statements;
(iii) those incurred in the ordinary course of business since the date of the Pembina Financial
Statements and consistent with past practice; and
(iv) those incurred in connection with the execution of this Agreement.
(n) Tax Returns Filed and Taxes Paid. All material Tax Returns required to be filed by or on behalf
of Pembina or any of its Subsidiaries have been duly filed on a timely basis and such Tax Returns are
true, complete and correct in all material respects. All Taxes shown to be payable on such Tax Returns or
on subsequent assessments with respect thereto have been paid in full on a timely basis, and, other than
Taxes being contested in good faith and for which adequate reserves in accordance with IFRS have been
established, no amount of Taxes are payable by Pembina or any of its Subsidiaries with respect to items
or periods covered by such Tax Returns.
(o) Tax Reserves. Pembina has paid or provided adequate accruals in the Pembina Financial
Statements for Taxes, including income taxes and related future income taxes, in accordance with IFRS.
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(p) Tax Deficiencies; Audits. Except as disclosed in writing to Veresen by Pembina on or prior to the
date hereof, no deficiencies exist or have been asserted with respect to Taxes of Pembina or any of its
Subsidiaries that would materially adversely affect Pembina and its Subsidiaries taken as a whole.
Neither Pembina nor any of its Subsidiaries is a party to any action or proceeding for assessment or
collection of Taxes, nor, to the knowledge of Pembina, has such an event been asserted or threatened
against Pembina or any of its Subsidiaries or any of their respective assets that would materially adversely
affect Pembina and its Subsidiaries taken as a whole.
(q) No Material Adverse Change. Since December 31, 2016: (i) Pembina and its Subsidiaries have
conducted their businesses only in the ordinary and normal course, (ii) no liability or obligation of any
nature (whether absolute, accrued, contingent or otherwise) material to Pembina and its Subsidiaries,
taken as a whole, has been incurred other than in the ordinary course of business, and (iii) there has not
been any Material Adverse Change in respect of Pembina and its Subsidiaries, taken as a whole.
(r) Environmental.
(i) There have not occurred any material spills, emissions or pollution on any property of
Pembina or its Subsidiaries as a result of their operations, nor has Pembina or any of its
Subsidiaries been subject to any stop orders, control orders, clean-up orders or
reclamation orders under applicable Environmental Laws. All operations of Pembina and
its Subsidiaries have been and are now being conducted in material compliance with all
applicable Environmental Laws. Neither Pembina nor any of its Subsidiaries is aware of,
or is subject to:
(A) any proceeding, application, order or directive which relates to
environmental, health or safety matters, and which may require any
material work, repairs, construction, or expenditures; or
(B) any demand or notice with respect to the breach of any Environmental
Laws applicable to Pembina or any of its Subsidiaries, including any
regulations respecting the use, storage, treatment, transportation, or
disposition of any Hazardous Substances and which may require any
material work, repairs, construction or expenditures.
(ii) Pembina has reasonably concluded that there are no costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit, license or approval,
any related constraints on operating activities and any potential liabilities to third parties)
associated with the effect of Environmental Laws on various business, operations and
properties of Pembina and its Subsidiaries that would be material to Pembina and its
Subsidiaries, taken as a whole.
(s) Title. Pembina and its Subsidiaries have good and sufficient title to their material real property
interests, including fee simple estate of and in real property, leases, easements, rights of way, permits or
licenses from landowners or authorities permitting the use of land by Pembina and its Subsidiaries
necessary to permit the operation of their respective businesses as presently owned and conducted. To the
knowledge of Pembina, there are no material defects, failures or impairments in the title of Pembina or its
Subsidiaries to their assets, whether or not an action, suit, proceeding or inquiry is pending or threatened
or whether or not discovered by any third party.
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(t) Facilities. To the knowledge of Pembina, the material equipment, facilities, buildings, structures,
improvements and other appurtenances on or under real property owned or used by Pembina or its
Subsidiaries are in good operating condition and in a good state of maintenance and repair, each has been
constructed and is operated in accordance with good industry practice; each is adequate and suitable for
the purpose for which it is currently being used and in the ordinary course of business, and none thereof,
nor the operation or maintenance thereof, violates any restrictive covenant or any applicable Law or
encroaches any property owned by others.
(u) No Encumbrances. Neither Pembina nor any of its Subsidiaries has encumbered or alienated their
interest in any of their assets or agreed to do so and such assets are free and clear of all Encumbrances
except for Permitted Encumbrances and other Encumbrances which are not material.
(v) Licenses. Each of Pembina and its Subsidiaries has obtained and is in compliance in all material
respects with all licenses, permits, certificates, consents, orders, grants and other authorizations of or from
any Governmental Entity or other Person necessary to conduct its businesses as they are now being or are
proposed to be conducted.
(w) Compliance with Laws. Pembina and its Subsidiaries have complied with and are not in violation
of any applicable Laws in all material respects.
(x) Insurance. Policies of insurance are in force naming Pembina or its applicable Subsidiary as an
insured that adequately cover all risks as are customarily covered by participants in the industry in which
Pembina operates. All such policies shall remain in force and effect (subject to taking into account
insurance market conditions and offerings and industry practices) and shall not be cancelled or otherwise
terminated as a result of the transactions contemplated by this Agreement, other than such cancellations as
would not, individually or in the aggregate, materially adversely affect Pembina or its Subsidiaries taken
as a whole.
(y) Possession of Intellectual Property. Except for such of the following as would not reasonably be
expected to materially adversely affect Pembina or its Subsidiaries taken as a whole, Pembina and its
Subsidiaries own or possess adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other intellectual property necessary to
carry on the business now operated by them, and neither Pembina nor any Subsidiary has received any
written notice or claim challenging Pembina or its Subsidiaries respecting the validity of, use of or
ownership of the processes and technology, and to the knowledge of Pembina, there are no facts upon
which such a challenge could be made.
(z) Funds Available. Pembina has sufficient funds available to pay the amounts that may be payable
pursuant to Section 7.3 of this Agreement.
(aa) Investment Canada Act. Pembina is not a non-Canadian within the meaning of the Investment
Canada Act.
(bb) Corrupt Practices Legislation.
(i) To the knowledge of Pembina, neither it nor any of its Subsidiaries has, directly or
indirectly, (A) made or authorized any contribution, payment or gift of funds or property
to any official, employee or agent of any governmental agency, authority or
instrumentality of any jurisdiction or any official of any public international organization,
or (B) made any contribution to any candidate for public office, in either case, where
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either the payment or the purpose of such contribution, payment or gift was, is, or would
be prohibited under the U.S. Foreign Corrupt Practices Act of 1977, as amended, the
Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada) or the rules and regulations
promulgated thereunder;
(ii) during the periods of the Pembina Financial Statements, the operations of Pembina and
its Subsidiaries are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements and the money laundering statutes
and the rules and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency (collectively,
the "Money Laundering Laws"). To the knowledge of Pembina, no action, suit or
proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving Pembina or any of its Subsidiaries with respect to the Money
Laundering Laws is pending or threatened; and
(iii) neither Pembina nor any of its Subsidiaries nor, to the knowledge of Pembina, any
director, officer, agent, employee or affiliate of Pembina or any of its Subsidiaries has
had any sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department ("OFAC") imposed upon such Person; and neither Pembina nor
any of its Subsidiaries is in violation of any of the economic sanctions of the United
States administered by OFAC or any Law or executive order relating thereto (the "U.S.
Economic Sanctions").
(cc) Place of Principal Offices. The principal offices of Pembina are not located within the United
States.
(dd) Internal Control Over Financial Reporting. Pembina maintains a system of internal control over
financial reporting that complies in all material respects with the requirements of applicable Laws and a
system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with IFRS and to
maintain asset accountability; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with respect to any differences,
except where the failure to maintain such a system would not reasonably be expected to materially
adversely affect Pembina and its Subsidiaries, taken as a whole; management of Pembina has assessed the
effectiveness of the Pembina's internal control over financial reporting, as at December 31, 2016, and has
concluded that such internal control over financial reporting was effective as of such date;
(ee) Foreign Private Issuer. As of the date hereof, Pembina is a "foreign private issuer" within the
meaning of Rule 405 of Regulation C adopted by the SEC under the U.S. Securities Act.
(ff) Investment Company. To the knowledge of Pembina, neither Pembina nor any of its Subsidiaries
is registered or is required to be registered as an "investment company" within the meaning of the United
States Investment Company Act of 1940, as amended.
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SCHEDULE D
REPRESENTATIONS AND WARRANTIES OF VERESEN
(a) Organization and Qualification. Each of Veresen and its Subsidiaries is a corporation or
partnership duly incorporated or formed, as applicable, validly existing and in good standing under the
Laws of its jurisdiction of incorporation or formation and has the requisite corporate or partnership power
and authority to own its properties as now owned and to carry on its business as it is now being
conducted. Veresen is, and its Subsidiaries are, duly registered to do business and each is in good
standing in each jurisdiction in which the nature of its properties, owned or leased, or its activities makes
such registration necessary, except where the failure to be so registered or in good standing would not
materially adversely affect Veresen and its Subsidiaries taken as a whole. Except as disclosed in writing
to Pembina on or prior to the date hereof, copies of the constating documents of Veresen and its material
Subsidiaries, together with all amendments to date, have been provided to Pembina and are accurate and
complete as of the date hereof and have not been amended or superseded.
(b) Authority Relative this Agreement. Veresen has the requisite corporate authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and
the participation by Veresen in the Arrangement contemplated hereby have been duly authorized by
Veresen's board of directors and, subject to such approval of Veresen Common Shareholders as is
stipulated by the Court in the Interim Order, no other corporate proceedings on the part of Veresen are
necessary to authorize this Agreement or the Arrangement. This Agreement has been duly executed and
delivered by Veresen and constitutes a legal, valid and binding obligation of Veresen enforceable against
it in accordance with its terms, subject to the qualification that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting rights
of creditors and that equitable remedies, including specific performance, are discretionary and may not be
ordered.
(c) Subsidiaries. Veresen has no Subsidiaries, nor does it own, directly or indirectly, any interests in
any other joint ventures, corporations, partnerships or other entities (whether or not incorporated), other
than as disclosed in writing to Pembina by Veresen on or prior to the date hereof. Except as disclosed in
writing to Pembina by Veresen on or prior to the date hereof, none of Veresen's Subsidiaries is currently
prohibited, directly or indirectly, from paying any dividends to Veresen or any of its Subsidiaries, from
making any other distribution on such Subsidiary's securities or other ownership interests, or from
repaying to Veresen or any of its Subsidiaries any loans or advances to such Subsidiary from Veresen or
any of its Subsidiaries.
(d) Ownership of Subsidiaries. Except as disclosed in writing to Pembina by Veresen on or prior to
the date hereof, Veresen is the beneficial direct or indirect owner of all of the outstanding shares and other
ownership interests of Veresen's Subsidiaries with good title thereto free and clear of any and all
Encumbrances (other than Permitted Encumbrances). Except as disclosed in writing to Pembina by
Veresen on or prior to the date hereof, there are no options, warrants or other rights, plans, agreements or
commitments of any character whatsoever requiring the issuance, sale or transfer by any of Veresen's
Subsidiaries of any securities or other ownership interests of Veresen's Subsidiaries or any securities or
other ownership interests convertible into, or exchangeable or exercisable for, or otherwise evidencing a
right to acquire, any securities or other ownership interests of any of Veresen's Subsidiaries. All
outstanding securities or other ownership interests of Veresen's Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and are not subject to, nor were they issued in
violation of, any Pre-Emptive Right.
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(e) No Violations; Absence of Defaults and Conflicts.
Except as disclosed in writing to Pembina by Veresen on or prior to the date hereof:
(i) neither Veresen nor any of its Subsidiaries is in violation of its constating documents or
by-laws or in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any note, bond, mortgage, indenture, loan agreement,
deed of trust, agreement, lien, contract or other instrument or obligation to which Veresen
or any of its Subsidiaries is a party or to which any of them, or any of their respective
properties or assets, may be subject or by which Veresen or any of its Subsidiaries is
bound, except for such defaults which would not materially adversely affect Veresen and
its Subsidiaries taken as a whole;
(ii) neither the execution and delivery of this Agreement by Veresen nor the consummation
of the Arrangement contemplated hereby nor compliance by Veresen with any of the
provisions hereof will: (A) violate, conflict with, or result in a breach of any provision of,
require any consent, approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or result in a right of
termination or acceleration under, or result in the creation of any Encumbrance (other
than Permitted Encumbrances) upon any of the properties or assets of Veresen or any of
its Subsidiaries or cause any indebtedness to come due before its stated maturity or cause
any credit to cease to be available, under any of the terms, conditions or provisions of (1)
their respective charter, by-laws or other constating documents (including any applicable
partnership, shareholder or operating agreements), or (2) any note, bond, mortgage,
indenture, loan agreement, deed of trust, agreement, lien, contract or other instrument or
obligation to which Veresen or any of its Subsidiaries is a party or to which any of them,
or any of their respective properties or assets, may be subject or by which Veresen or any
of its Subsidiaries is bound; or (B) subject to compliance with the statutes and regulations
referred to below, violate any Laws, judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation applicable to Veresen
or any of its Subsidiaries or any of their respective properties or assets; or (C) cause the
suspension or revocation of any authorization, consent, approval or license currently in
effect, except, in the case of each of clauses (A)(2), (B) or (C) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations, creations of Encumbrances,
suspensions or revocations which, or any consents, approvals or notices which if not
given or received, would not materially adversely affect Veresen and its Subsidiaries
taken as a whole; and
(iii) other than in connection with or in compliance with the provisions of applicable
Canadian Securities Laws, U.S. Securities Laws, the ABCA, the Competition Act, the
HSR Act, the CT Act or other similar applicable Laws (including any Laws that regulate
competition, antitrust, foreign investment or transportation), the terms of the Interim
Order and the Final Order in respect of the Arrangement and the filing of the Articles of
Arrangement, (A) there is no legal impediment to Veresen's consummation of the
Arrangement, and (B) no filing or registration with, or authorization, consent or approval
of, any domestic or foreign public body or authority is required of Veresen in connection
with the consummation of the Arrangement, except for such filings or registration which,
if not made, or for such authorizations, consents or approvals which, if not received,
would not materially adversely affect Veresen and its Subsidiaries taken as a whole.
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(f) Litigation. Except as disclosed in writing to Pembina by Veresen on or prior to the date hereof,
there are no actions, suits, proceedings, or investigations by Governmental Entities pending or, to the
knowledge of Veresen, threatened, affecting or that would reasonably be expected to materially adversely
affect Veresen or any of its Subsidiaries or affecting or that would reasonably be expected to materially
adversely affect any of their property or assets at Law or equity or before or by any court or
Governmental Entity which action, suit, proceeding or investigation involves a possibility of any
judgment against or liability of Veresen or any of its Subsidiaries which, if successful, would materially
adversely affect Veresen and its Subsidiaries taken as a whole or would significantly impede the ability of
Veresen to consummate the Arrangement. Neither Veresen nor its Subsidiaries is subject to any
outstanding order, writ, injunction or decree that has or would materially adversely affect Veresen and its
Subsidiaries taken as a whole or would significantly impede the ability of Veresen to consummate the
Arrangement.
(g) Tax Returns Filed and Taxes Paid.
(i) All Tax Returns required to be filed by or on behalf of Veresen or any of its Subsidiaries
have been duly filed on a timely basis and such Tax Returns are true, complete and
correct. All Taxes shown to be payable on such Tax Returns or on subsequent
assessments or reassessments with respect thereto have been paid in full on a timely basis
other than Taxes being contested in good faith and for which adequate reserves in
accordance with U.S. GAAP have been established, and no other Taxes are payable by
Veresen or any of its Subsidiaries with respect to items or periods covered by such Tax
Returns;
(ii) Veresen and its Subsidiaries have duly and timely paid all Taxes, including all
installments on account of Taxes for the current year, that are due and payable by them
whether or not assessed by the appropriate Governmental Entity;
(iii) Veresen has made available to Pembina for review originals or true and complete copies
of: (A) material portions of income tax audit reports, statements of deficiencies, closing
or other agreements or correspondence concerning assessments, reassessments or audits
pursuant to which a Governmental Entity has proposed amendments to previously filed
Tax Returns received by or on behalf of Veresen of any of its Subsidiaries relating to
Taxes; (B) any material federal, provincial, state, local or foreign income or franchise
Tax Returns for Veresen and its Subsidiaries for all Tax years beginning after January 1,
2013; and (C) all material written communications to or from any Governmental Entity
relating to the Taxes of Veresen and its Subsidiaries over such period have been made
available to Pembina;
(iv) except as disclosed in writing by Veresen to Pembina on or prior to the date hereof, (A)
neither Veresen nor any of its Subsidiaries is a party to any action or proceeding for
assessment or collection of Taxes, nor, to the knowledge of Veresen, has such an event
been asserted or threatened against Veresen and its Subsidiaries, or any of them, or any of
their respective assets; (B) no waiver or extension of any statute of limitations is in effect
with respect to Taxes or Tax Returns of Veresen or any of its Subsidiaries and no request
for any such waiver or extension is currently pending; (C) no audit by any Governmental
Entity of Veresen or any of its Subsidiaries is in process, to the knowledge of Veresen,
threatened; and (D) no written claim has been made to Veresen or any of its Subsidiaries
by any Governmental Entity in a jurisdiction where Veresen and its Subsidiaries do not
file Tax Returns that they are or may be subject to taxation by that jurisdiction;
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(v) Veresen has or will furnish Pembina with originals or copies of all material elections,
designations or similar filings relating to Taxes of Veresen and its Subsidiaries and any
agreement or other arrangement in respect of Taxes or Tax Returns of Veresen and its
Subsidiaries that has effect for any period ending after the Effective Date;
(vi) Veresen has made available to Pembina originals or true and complete copies of all
notices of assessments that have been received in respect of income, sales (including
goods and services, harmonized sales and provincial or territorial sales) and capital tax
liabilities of Veresen and its Subsidiaries for all taxation years or periods ending prior to
and including the taxation year or period ended December 31, 2016;
(vii) each of Veresen and its Subsidiaries has duly and timely withheld all material amounts in
respect of Taxes and other amounts required by Law to be withheld by it (including
Taxes and other amounts required to be withheld by it in respect of any amount paid or
credited or deemed to be paid or credited by it to or for the account or benefit of any
Person, including any employee, officer or director and any non-resident Person), and has
duly and timely remitted to the appropriate Governmental Entity such amounts required
by Law to be remitted by it. Each of Veresen and its Subsidiaries has complied in all
material respects with all Tax information reporting provisions of all applicable Laws;
(viii) each of Veresen and its Subsidiaries has duly and timely collected or self-assessed all
amounts on account of any sales or transfer taxes, including goods and services,
harmonized sales and provincial or territorial sales taxes, required by Law to be collected
by it and have duly and timely remitted to the appropriate Governmental Entity any such
amounts required by Law to be remitted by it;
(ix) none of sections 17 or 78 or 80, 80.01, 80.02, 80.03 or 80.04 of the Tax Act, or any
equivalent provision of the Tax legislation of any province or any other jurisdiction, have
applied or will apply to any of Veresen or its Subsidiaries at any time up to and including
the Effective Time;
(x) none of Veresen and its Subsidiaries has acquired property from, or transferred property
to, a non-arm's length Person, within the meaning of the Tax Act, for consideration the
value of which is less than the fair market value of the property acquired or transferred
or, in the case where such consideration included debt payable by the acquiror, for debt
with a principal amount which is less than the fair market value of the property acquired
or transferred in consideration of such debt;
(xi) there are no reserves under the Tax Act or any equivalent provincial or territorial statute
to be claimed by any of Veresen or its Subsidiaries;
(xii) there are no Tax liens or security interests on any of the assets of Veresen or any of its
Subsidiaries other than Permitted Liens;
(xiii) neither Veresen nor any of its Subsidiaries (A) has any liability for the Taxes of any other
Person, (B) has ever filed, or has ever been required to file, a consolidated, combined or
unitary Tax Return (other than Tax Returns which include only Veresen or any of its
Subsidiaries), (C) has any liability under any agreement or arrangement relating to the
sharing, allocation or indemnification of Taxes, or any similar agreement, contract or
arrangement (other than an indemnification for Taxes provided in purchase and sale
agreements that would not have a material effect on Veresen) (collectively, "Tax
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Sharing Agreements"), or (D) has any liability for the Taxes of any Person as a
transferee, successor or agent, by contract or otherwise;
(xiv) the aggregate tax attributes of Veresen and its Subsidiaries as of December 31, 2016 are
not materially lower than as disclosed in writing to Pembina by Veresen on or prior to the
date hereof and Veresen has not undertaken any transactions out of the ordinary course of
its business in the period beginning on January 1, 2017 and ending on the date hereof
which would result in a material reduction in such aggregate tax attributes;
(xv) within the past three years, neither Veresen nor any of its Subsidiaries has constituted a
"distributing corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the U.S. Tax Code) in a distribution of shares qualifying for tax-free
treatment under Section 355 of the U.S. Tax Code;
(xvi) except as disclosed in writing by Veresen to Pembina on or prior to the date hereof,
neither Veresen nor any of its Subsidiaries has entered into a closing agreement pursuant
to Section 7121 of the U.S. Tax Code or any similar provision of state, local or foreign
law, and neither Veresen nor any of its Subsidiaries is subject to any private letter ruling
of the IRS or comparable ruling of any other Governmental Entity which may apply after
the Effective Date;
(xvii) Subsidiaries of Veresen that are U.S. persons had not entered into any contract,
agreement, plan or arrangement covering any person that gives rise to the payment of
any amount that would not be deductible pursuant to Section 162(m) of the U.S. Tax
Code;
(xviii) None of the Veresen Subsidiaries that are US persons is or has been a party to any "listed
transaction" as defined in U.S. Tax Code §6707A(c)(2) and U.S. Treasury Regulations
§1.6011-4(b)(2).
(h) Tax Reserves. Veresen has paid or provided adequate accruals in the Veresen Financial
Statements (as defined herein) for Taxes, including income taxes and related future income taxes, in
conformity with U.S. GAAP.
(i) Tax Deficiencies; Audits. No deficiencies exist or have been asserted with respect to Taxes of
Veresen or any of its Subsidiaries that would materially adversely affect Veresen and its Subsidiaries
taken as a whole. Neither Veresen nor any of its Subsidiaries is a party to any action or proceeding for
assessment or collection of Taxes, nor, to the knowledge of Veresen, has such an event been asserted or
threatened against Veresen or any of its Subsidiaries or any of their respective assets that would
materially adversely affect Veresen and its Subsidiaries taken as a whole.
(j) Reporting Issuer Status. Veresen is a reporting issuer (where such concept exists) in all provinces
of Canada and is in material compliance with all applicable Canadian Securities Laws therein. The
Veresen Common Shares and the Veresen Preferred Shares are listed and posted for trading on the TSX
and Veresen is in material compliance with the rules of the TSX.
(k) Capitalization. The authorized share capital of Veresen consists of an unlimited number of
Veresen Common Shares and a number of preferred shares of Veresen, issuable in series, to be limited to
an amount equal to not more than one-half of the number of Veresen Common Shares issued and
outstanding at the time of issuance of such Veresen Preferred Shares. There are issued and outstanding
313,652,781 Veresen Common Shares, 8,000,000 Veresen Series A Shares, 6,000,000 Veresen Series C
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Shares and 8,000,000 Veresen Series E Shares; and there are no other shares of Veresen of any class or
series outstanding. No Veresen Common Shares will be issued upon the vesting of Veresen RSUs and
Veresen PSUs outstanding as of the date hereof. Other than (i) Veresen Series B Shares issuable on
conversion of the Veresen Series A Shares, Veresen Series D Shares issuable on conversion of the
Veresen Series C Shares and Veresen Series F Shares issuable on conversion of the Veresen Series E
Shares, (ii) Veresen Common Shares issuable pursuant to the Veresen DRIP (it being understood that
Veresen shall keep suspended the Veresen DRIP following execution of this Agreement), (iii) Veresen
Common Shares issuable upon vesting of Veresen RSUs and Veresen PSUs, and (iv) pursuant to rights
issued under the Veresen Shareholder Rights Plan, each on the terms as publicly disclosed on or prior to
the date hereof, there are no options, warrants or other rights, shareholder rights plans, agreements or
commitments of any character whatsoever requiring the issuance, sale or transfer by Veresen of any
shares of Veresen or any securities convertible into, or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, any shares of Veresen. All outstanding Veresen Common Shares, Veresen
Preferred Shares and Veresen MTNs have, as applicable, been duly authorized and validly issued, are
fully paid and non-assessable and are not subject to, nor were they issued in violation of, any pre-emptive
rights, and all Veresen Common Shares issuable upon the vesting of the Veresen RSUs and Veresen
PSUs, and all Veresen Preferred Shares issuable upon conversion of any Veresen Preferred Shares, in
accordance with their respective terms, will be duly authorized and validly issued as fully paid and non-
assessable and will not be subject to any pre-emptive rights.
(l) Equity Monetization Plans. Other than the Veresen Incentive Awards as disclosed in writing to
Pembina by Veresen on or prior to the date hereof and except as disclosed in writing by Veresen to
Pembina on or prior to the date hereof, there are no outstanding stock appreciation rights, phantom equity,
profit sharing plan or similar rights, agreements, arrangements or commitments payable to any director,
officer or employee of Veresen or its Subsidiaries (excluding the Veresen Significant Entities) and which
are based upon the share price, revenue, value, income or any other attribute of Veresen or its Subsidiaries
(excluding the Veresen Significant Entities) and all such Veresen Incentive Awards outstanding are
subject only to the terms and conditions of the Veresen LTI Plans (true and complete copies of which
have been provided to Pembina prior to the date hereof) and the applicable grant agreements pursuant to
which such awards were granted (a true and complete copy of the form of which has been provided to
Pembina prior to the date hereof and none of the grant agreements entered into in respect of outstanding
Veresen Incentive Awards contain any material departures from such form of agreement).
(m) No Orders. No order, ruling or determination having the effect of suspending the sale of, or
ceasing the trading of, the Veresen Common Shares, the Veresen Preferred Shares or any other securities
of Veresen has been issued by any regulatory authority and is continuing in effect and no proceedings for
that purpose have been instituted, are pending or, to the knowledge of Veresen, are contemplated or
threatened under any applicable Laws or by any other Governmental Entity.
(n) Material Agreements. Except as disclosed in writing to Pembina by Veresen prior to the date
hereof, Veresen has provided Pembina with originals or true and complete copies of all contracts,
agreements and commitments entered into by Veresen or its Subsidiaries, or by which any of them are
bound, which are material to Veresen and its Subsidiaries (taken as a whole), and all agreements material
to Veresen and its Subsidiaries taken as a whole, whether or not provided to Pembina, are valid and
subsisting and none of Veresen or its Subsidiaries, or to the knowledge of Veresen, any counterparty to
such material agreements, is in material default under any such agreements, and, to the knowledge of
Veresen, no event or circumstance exists which with the passage of time could reasonably be expected to
result in a material default by any counterparty to such agreements.
(o) Non-Competition Agreements. Except as disclosed in writing to Pembina by Veresen prior to the
date hereof, neither Veresen nor any of its Subsidiaries is a party to or bound by any non-competition
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agreement, exclusivity agreement or any other agreement, commitment, understanding or obligation
which purports to limit the manner or the localities or regions in which all or any portion of the business
of Veresen or its Subsidiaries is or is reasonably expected to be conducted, and the execution, delivery
and performance of this Agreement and the completion of the Arrangement does not and will not result in
the restriction of Veresen or any of its Subsidiaries from engaging in their business or from competing
with any Person as described above.
(p) Books and Records. The records and minute books of Veresen and its material Subsidiaries
(excluding the Veresen Significant Entities) and their respective predecessors have been maintained
substantially in accordance with all applicable Laws and are complete and accurate in all material
respects, and have been made available in their entirety to Pembina.
(q) Reports. As of their respective dates, (i) Veresen's audited consolidated financial statements as at
and for the fiscal years ended December 31, 2016 and December 31, 2015 (the "Veresen Financial
Statements") and the related management's discussion and analysis, (ii) Veresen's Annual Information
Form dated March 14, 2017, (iii) Veresen's information circular dated March 17, 2017 for its annual
meeting of shareholders to be held on May 3, 2017, (iv) all Veresen press releases and material change
reports or similar documents filed with any Securities Regulators since December 31, 2016, and (v) all
prospectuses or other offering documents used by Veresen in the offering of its securities or filed with
Securities Regulators since December 31, 2016 are all the financial statements, forms, reports,
prospectuses or other documents required to be filed by virtue of applicable Canadian Securities Laws
since December 31, 2016, did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and complied in all material respects with
applicable Canadian Securities Laws. Since December 31, 2016, Veresen has not filed any material
change reports which continue to be confidential.
(r) Financial Statements. The Veresen Financial Statements were prepared in accordance with U.S.
GAAP (except (i) as otherwise indicated in such financial statements and the notes thereto or, in the case
of audited statements, in the related report of Veresen's independent auditors or (ii) in the case of
unaudited interim statements, to the extent they are subject to normal year-end adjustments), and fairly
present the consolidated financial position, results of operations and cash flows of Veresen on a
consolidated basis as of the dates thereof and for the periods indicated therein (subject, in the case of any
unaudited interim financial statements, to normal year-end audit adjustments) and reflect appropriate and
adequate reserves in respect of contingent liabilities, if any, of Veresen on a consolidated basis. There has
been no change in Veresen accounting policies, except as described in the notes to the Veresen Financial
Statements, since December 31, 2016.
(s) Absence of Undisclosed Liabilities. Veresen has no material obligations or liabilities of any
nature (matured or unmatured, fixed or contingent), other than:
(i) those set forth or adequately provided for in the balance sheet included in the Veresen
Financial Statements;
(ii) those incurred in the ordinary course of business and not required to be set forth in the
Veresen Financial Statements;
(iii) those incurred in the ordinary course of business since the date of the Veresen Financial
Statements and consistent with past practice; and
(iv) those incurred in connection with the execution of this Agreement.
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(t) No Material Adverse Change. Since December 31, 2016: (i) except in connection with the
Veresen Power Business Sale, Veresen and its Subsidiaries have conducted their businesses only in the
ordinary and normal course, (ii) no liability or obligation of any nature (whether absolute, accrued,
contingent or otherwise) material to Veresen and its Subsidiaries, taken as a whole, has been incurred
other than in the ordinary course of business, and (iii) there has not been any Material Adverse Change in
respect of Veresen and its Subsidiaries, taken as a whole.
(u) Environmental.
(i) There have not occurred any material spills, emissions or pollution on any property of
Veresen or its Subsidiaries as a result of their operations, nor has Veresen or any of its
Subsidiaries been subject to any stop orders, control orders, clean-up orders or
reclamation orders under applicable Environmental Laws. All operations of Veresen and
its Subsidiaries have been and are now being conducted in material compliance with all
applicable Environmental Laws. Neither Veresen nor any of its Subsidiaries is aware of,
or is subject to:
(A) any proceeding, application, order or directive which relates to
environmental, health or safety matters, and which may require any
material work, repairs, construction, or expenditures; or
(B) any demand or notice with respect to the breach of any Environmental
Laws applicable to Veresen or any of its Subsidiaries, including any
regulations respecting the use, storage, treatment, transportation, or
disposition of any Hazardous Substances and which may require any
material work, repairs, construction or expenditures.
(ii) Veresen has reasonably concluded that there are no costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit, license or approval,
any related constraints on operating activities and any potential liabilities to third parties)
associated with the effect of Environmental Laws on various business, operations and
properties of Veresen and its Subsidiaries that would be material to Veresen and its
Subsidiaries, taken as a whole.
(v) Title. Veresen and its Subsidiaries have good and sufficient title to their material real property
interests including fee simple estate of and in real property, leases, easements, rights of way, permits or
licenses from landowners or authorities permitting the use of land by Veresen and its Subsidiaries
necessary to permit the operation of their respective businesses as presently owned and conducted. To the
knowledge of Veresen, there are no material defects, failures or impairments in the title of Veresen or its
Subsidiaries to their assets, whether or not an action, suit, proceeding or inquiry is pending or threatened
or whether or not discovered by any third party.
(w) Facilities. To the knowledge of Veresen, the material equipment, facilities, buildings, structures,
improvements and other appurtenances on or under real property owned or used by Veresen or its
Subsidiaries, are in good operating condition and in a good state of maintenance and repair, each has been
constructed and is operated in accordance with good industry practice; each is adequate and suitable for
the purpose for which it is currently being used and in the ordinary course of business, and none thereof,
nor the operation or maintenance thereof, violates any restrictive covenant or any applicable Law or
encroaches any property owned by others.
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(x) No Encumbrances. Neither Veresen nor any of its Subsidiaries has encumbered or alienated their
interest in any of their assets or agreed to do so and such assets are free and clear of all Encumbrances
except for Permitted Encumbrances and other Encumbrances which are not material.
(y) Licenses. Each of Veresen and its Subsidiaries has obtained and is in compliance in all material
respects with all licenses, permits, certificates, consents, orders, grants and other authorizations of or from
any Governmental Entity or other Person necessary to conduct its businesses as they are now being or are
proposed to be conducted.
(z) Compliance with Laws. Veresen and its Subsidiaries have complied with and are not in violation
of any applicable Laws in all material respects.
(aa) Long-Term and Derivative Transactions. Except as disclosed in the Veresen Financial Statements
or in writing to Pembina by Veresen prior to the date hereof, Veresen has no material obligations or
liabilities, direct or indirect, vested or contingent in respect of any rate swap transactions, basis swaps,
forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or
equity index options, bond options, interest rate options, foreign exchange transactions, cap transactions,
floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, production sales transactions having terms greater than 90 days or any other similar
transactions (including any option with respect to any of such transactions) or any combination of such
transactions.
(bb) Employee Benefit Plans. Veresen has provided to Pembina true, complete and correct copies of
each material health, medical, dental, welfare, supplemental unemployment benefit, bonus, profit sharing,
option, insurance, incentive, incentive compensation, deferred compensation, share purchase, share-based
compensation, disability, pension, retirement or supplemental retirement plan and each other employee or
director compensation or benefit plan, agreement or arrangement whether written or unwritten, tax-
qualified or non-qualified, funded or unfunded, for the benefit of directors or former directors of Veresen
and/or its Subsidiaries (excluding the Veresen Significant Entities) consultants or former consultants of
Veresen and/ or its Subsidiaries (excluding the Veresen Significant Entities) employees or former
employees of Veresen and/or its Subsidiaries (excluding the Veresen Significant Entities) which are
maintained by, contributed to, or in respect of which Veresen or any Subsidiary thereof (excluding the
Veresen Significant Entities) has any actual or potential liability, excluding any statutory benefit plans
which Veresen or any Subsidiary (excluding the Veresen Significant Entities) is required to participate in
or comply with (the "Veresen Employee Plans"), and:
(i) each Veresen Employee Plan has been maintained and administered in material
compliance with its terms and in accordance with applicable Laws;
(ii) all required employer contributions or premiums under any such plans have been made in
material compliance with the terms thereof;
(iii) to the knowledge of Veresen, each Veresen Employee Plan that is required or intended to
be qualified under applicable Law or registered or approved by a governmental agency or
authority has been so qualified, registered or approved by the appropriate governmental
agency or authority, and, to the knowledge of Veresen, nothing has occurred since the
date of the last qualification, registration or approval which could reasonably be expected
to materially adversely affect, or cause, the appropriate governmental agency or authority
to revoke such qualification, registration or approval;
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(iv) to the knowledge of Veresen, there are no pending or anticipated claims against or
otherwise involving any of the Veresen Employee Plans (excluding claims for benefits
incurred in the ordinary course of Veresen Employee Plan activities) and no suit, action
or other litigation (excluding claims for benefits incurred in the ordinary course of
Veresen Employee Plan activities) has been brought against or with respect to any
Veresen Employee Plan;
(v) no Veresen Employee Plan is a "registered pension plan" as that term is defined in
subsection 248(1) of the Tax Act;
(vi) Veresen has no liability for or obligation to provide any retiree or other post-employment
health or life benefits under any Veresen Employee Plan except as may be required by
Law;
(vii) except as disclosed in writing to Pembina by Veresen on or prior to the date hereof, the
execution and delivery of this Agreement or the consummation of the transactions
contemplated herein will not (either alone or in combination with any other event) (i)
result in, cause the accelerated vesting of, funding or delivery of, or increase the amount
or value of, any payment or benefit to any current or former employee, officer, or director
of Veresen or any of its Subsidiaries under any Veresen Employee Plans or (ii) in respect
of any individuals who are subject to taxation in the United States, result in any right,
benefit or the payment of any amount that, individually or in combination with any other
such payment, right, or benefit constitutes an "excess parachute payment", as defined in
Section 280G(b)(1) of the U.S. Tax Code. No Veresen Employee Plan provides for the
gross-up or reimbursement of Taxes under Section 409A or Section 4999 of the U.S. Tax
Code or any similar provision of applicable Law; and
(viii) except as disclosed in writing to Pembina by Veresen on or prior to the date hereof,
neither Veresen nor any of its ERISA Affiliates maintain, sponsor, contribute to or have
any obligation to contribute to, or have any liability in respect of (and have not, within
the last six years, maintained, sponsored, contributed to or had any obligation to
contribute to) any employee benefit plan, contract or arrangement that is subject to
ERISA.
(cc) Employment Agreements and Collective Agreements.
(i) Except as disclosed in writing to Pembina by Veresen on or prior to the date hereof,
neither Veresen nor any Subsidiary of Veresen is a party to, nor is engaged in any
negotiations with respect to, any employment agreement with any officer or employee or
any written agreement or policy providing for severance, termination or change of control
payments to any Veresen Employee; provided that, severance or termination payments
made to non-officer employees in the ordinary course of business shall not be subject to
the foregoing;
(ii) except as disclosed in writing to Pembina by Veresen on or prior to the date hereof: (A)
neither Veresen nor any Subsidiary of Veresen is a party to, nor is engaged in any
negotiations with respect to, nor is bound by, any collective bargaining or union
agreement, any actual or, to the knowledge of Veresen, threatened application for
certification or bargaining rights or letter of understanding, with respect to any current or
former employee of Veresen or any of its Subsidiaries; (B) no trade union, council of
trade unions, labor union, employee bargaining agency or affiliated bargaining agent
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holds bargaining rights with respect to any of Veresen or any of its Subsidiaries
employees by way of certification, interim certification, voluntary recognition, or
succession rights; and (C) during the last two years, no Person has petitioned and no
Person is now petitioning, for union representation of any of the employees of Veresen or
any of its Subsidiaries.
(iii) to the knowledge of Veresen, no individual who has performed services for Veresen or
any of its Subsidiaries has been improperly included or excluded from participation in
any Veresen Employee Plan;
(iv) to the knowledge of Veresen, there is no labour strike, dispute, lock-out work slowdown
or stoppage pending or involving or, to the knowledge of Veresen, threatened against
Veresen or any Subsidiary of Veresen. Except as disclosed in writing to Pembina by
Veresen on or prior to the date hereof, no trade union has applied to have Veresen or a
Subsidiary of Veresen declared a related successor, or common employer pursuant to the
Labour Relations Code (Alberta) or any similar legislation in any jurisdiction in which
Veresen or any Subsidiary of Veresen carries on business;
(v) since January 1, 2015, neither Veresen nor any of its Subsidiaries has engaged in any
unfair labour practice and no unfair labour practice complaint, grievance or arbitration
proceeding is pending or, to the knowledge of Veresen, threatened against Veresen or any
of its Subsidiaries;
(vi) all amounts due or accrued for all salary, wages, bonuses, commissions, vacation with
pay, and other employee benefits or contractor payments in respect of current or former
directors, officers, employees or consultants of Veresen or any of its Subsidiaries which
are attributable to the period before the Effective Date have been paid or are accurately
reflected in the books and records of Veresen or its Subsidiary, as applicable;
(vii) there are no material outstanding assessments, penalties, fines liens, charges, surcharges,
or other amounts due or owing by Veresen or any of its Subsidiaries pursuant to any
workers' compensation legislation and none of Veresen or any of its Subsidiaries has
been reassessed under such legislation and, to the knowledge of Veresen, no audit of any
of Veresen or any of its Subsidiaries is currently being performed pursuant to any
applicable worker's compensation legislation;
(viii) except as disclosed in writing to Pembina by Veresen on or prior to the date hereof, there
are no retirees or terminated employees of Veresen or any of its Subsidiaries (excluding
the Veresen Significant Entities) to whom Veresen or any of its Subsidiaries (excluding
the Veresen Significant Entities) has any material benefits responsibility or other
continuing or contingent material obligation;
(ix) except as disclosed in writing to Pembina by Veresen on or prior to the date hereof, no
employees or consultant of Veresen or any of its Subsidiaries (excluding the Veresen
Significant Entities) has any written agreement as to length of notice or severance
payment required to terminate his or her employment or services;
(x) no employee or consultant of Veresen or any of its Subsidiaries (excluding the Veresen
Significant Entities) in the year immediately prior to the date hereof has indicated to
Veresen that he, she or it intends to resign, retire or terminate his, her or its engagement
with Veresen as a result of the transactions contemplated by this Agreement or otherwise;
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(xi) Veresen has made available to Pembina originals or copies of all agreements, policies or
practices used by Veresen or any of its Subsidiaries (excluding the Veresen Significant
Entities) in connection with employment with Veresen or any of its Subsidiaries
(excluding the Veresen Significant Entities), including any arrangement or practice of
Veresen regarding redundancy or severance payments, whether contractual, customary or
discretionary;
(xii) to the knowledge of Veresen, no employee or consultant of Veresen or any of its
Subsidiaries is in violation of any non-competition, non-solicitation, non-disclosure or
any similar agreement with any third party; and
(xiii) Veresen and its Subsidiaries have complied in all material respects with the WARN Act.
Veresen and its Subsidiaries have not taken any action within the immediately preceding
ninety days that requires any notice pursuant to the WARN Act.
(dd) Insurance. Policies of insurance are in force naming Veresen or its applicable Subsidiary as an
insured that adequately cover all risks as are customarily covered by participants in the industry in which
Veresen operates. All such policies shall remain in force and effect (subject to taking into account
insurance market conditions and offerings and industry practices) and shall not be cancelled or otherwise
terminated as a result of the transactions contemplated by this Agreement, other than such cancellations as
would not, individually or in the aggregate, materially adversely affect Veresen or its Subsidiaries taken
as a whole.
(ee) Indebtedness To and By Officers, Directors and Others. Except as disclosed in writing to
Pembina by Veresen on or prior to the date hereof, none of Veresen or any of its Subsidiaries is indebted
to any of the directors, officers, employees or consultants of Veresen or any of its Subsidiaries or any of
their respective associates or affiliates or other parties not at arm's length to Veresen or any of its
Subsidiaries, except for amounts due as normal compensation or reimbursement of ordinary business
expenses, nor is there any indebtedness owing by any such parties to Veresen.
(ff) Customers and Suppliers. Except as disclosed in writing to Pembina by Veresen on or prior to the
date hereof:
(i) none of Veresen or any of its Subsidiaries has received notice of, and there is not, to the
knowledge of Veresen, any intention on the part of any principal customer to cease doing
business with Veresen or any of its Subsidiaries or to modify or change in any material
manner any existing arrangement with Veresen or any of its Subsidiaries for the purchase
or supply of any products or services;
(ii) the relationships of Veresen and its Subsidiaries with their principal suppliers and
customers are satisfactory, and there are no material unresolved disputes with any such
supplier or customer;
(iii) no contract with any principal supplier or customer contains terms under which the
execution or performance of this Agreement would give the supplier or customer the
right to terminate or adversely change the terms of that contract;
(iv) since December 31, 2016, there has been no termination or cancellation of, and no
modification or change in, the business relationship of Veresen or any of its Subsidiaries
with any principal customer; and
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(v) Veresen has no reason to believe that the benefits of any relationship with any of the
principal customers or suppliers of Veresen or any of its Subsidiaries will not continue
after the consummation of the transactions hereunder in substantially the same manner as
prior to the date of this Agreement.
(gg) Possession of Intellectual Property. Except for such of the following as would not reasonably be
expected to materially adversely affect Veresen or its Subsidiaries, taken as a whole, Veresen and its
Subsidiaries own or possess adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other intellectual property necessary to
carry on the business now operated by them, and neither Veresen nor any Subsidiary has received any
written notice or claim challenging Veresen or its Subsidiaries respecting the validity of, use of or
ownership of the processes and technology, and to the knowledge of Veresen, there are no facts upon
which such a challenge could be made.
(hh) Guarantees and Indemnification. Except for guarantees, indemnification or any like commitment
in respect of the obligations, liabilities (contingent or otherwise) or indebtedness of any of the
Subsidiaries of Veresen with respect to credit obligations of Veresen or as disclosed in writing to
Pembina by Veresen on or prior to the date hereof, none of Veresen or any of its Subsidiaries is a party to
or bound by any agreement of guarantee, indemnification (other than an indemnification of directors and
officers in accordance with the by-laws of the respective corporation or applicable Laws, and other than
standard indemnity agreements in underwriting and agency agreements and in the ordinary course
provided to service providers) or any like commitment in respect of the obligations, liabilities (contingent
or otherwise) or indebtedness of any other Person, other than guarantees of obligations of any other
Subsidiary of Veresen or industry typical indemnifications.
(ii) No Insider Rights. No director, officer, insider or other party not at arm's length to Veresen or any
of its Subsidiaries has any right, title or interest in (or the right to acquire any right, title or interest in) any
royalty interest, participation interest or any other interest whatsoever, in any assets or properties of
Veresen or any of its Subsidiaries.
(jj) Funds Available. Veresen has sufficient funds available to pay the amounts that may be payable
pursuant to Section 7.2 or Section 7.3 of this Agreement.
(kk) Corrupt Practices Legislation.
(i) To the knowledge of Veresen, neither it nor any of its Subsidiaries has, directly or
indirectly, (A) made or authorized any contribution, payment or gift of funds or property
to any official, employee or agent of any governmental agency, authority or
instrumentality of any jurisdiction or any official of any public international organization
or (B) made any contribution to any candidate for public office, in either case, where
either the payment or the purpose of such contribution, payment or gift was, is, or would
be prohibited under the U.S. Foreign Corrupt Practices Act of 1977, as amended, the
Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada) or the rules and regulations
promulgated thereunder;
(ii) during the periods of the Veresen Financial Statements, the operations of Veresen and its
Subsidiaries are and have been conducted at all times in compliance with Money
Laundering Laws. To the knowledge of Veresen, no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator involving
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Veresen or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or threatened; and
(iii) neither Veresen nor any of its Subsidiaries nor, to the knowledge of Veresen, any
director, officer, agent, employee or affiliate of Veresen or any of its Subsidiaries has had
any sanctions administered by OFAC imposed upon such Person; and neither Veresen
nor any of its Subsidiaries is in violation of any U.S. Economic Sanctions.
(ll) Place of Principal Offices. The principal offices of Veresen are not located within the United
States.
(mm) Off-Balance Sheet Arrangements. Veresen does not have any off-balance sheet arrangements.
(nn) Internal Control Over Financial Reporting. Veresen maintains internal control over financial
reporting and is in compliance with all applicable Laws and required certification and disclosure
requirements with respect to internal control over financial reporting. Such internal control over financial
reporting is effective in providing sufficient assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes
policies and procedures that: (i) pertain to the maintenance of records that in sufficient detail accurately
and fairly reflect the transactions and dispositions of the assets of Veresen; (ii) provide sufficient
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that receipts and expenditures of Veresen are being made only in
accordance with authorizations of management and directors of Veresen; and (iii) provide sufficient
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
assets of Veresen that could have a material effect on its financial statements. To the knowledge of
Veresen, there are no significant deficiencies in the design or operation of, or material weaknesses in, the
internal controls over financial reporting of Veresen that are reasonably likely to materially and adversely
affect the ability of Veresen to record, process, summarize and report financial information; and, to the
knowledge of Veresen, there is no fraud, whether or not material, that involves management or other
employees who have a significant role in the internal control over financial reporting of Veresen. There
have been no controls deficiencies comments made by Veresen's auditors to Veresen.
(oo) Financial Advisors. Except for Scotia Capital Inc., no financial advisor, broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or commission, or to the
reimbursement of any of its expenses, in connection with the Arrangement. The fees payable to Scotia
Capital Inc. for the delivery of the Veresen Fairness Opinions in respect of the Arrangement are not
contingent on the completion of the Arrangement. Veresen has provided to Pembina a correct and
complete copy of all agreements relating to the arrangements between it and its financial advisors as are
in existence at the date hereof (whether in connection with the Arrangement other otherwise) and agrees
not to enter into any new agreements with financial advisors or amend the terms of any such existing
agreements relating to the payment of fees and expenses or indemnification without the prior written
approval of Pembina, such approval not to be unreasonably withheld.
(pp) Confidentiality Agreements. All agreements that have not by their terms expired that have been
entered into by Veresen with Persons other than Pembina regarding the confidentiality of information
provided to such Persons or reviewed by such Persons with respect to any transaction in the nature
described in the definition of Acquisition Proposal are in industry typical form and Veresen has not
waived any standstill or other provisions of any of such agreements.
(qq) Disclosure. The data and information in respect of Veresen and its Subsidiaries and their
respective assets, liabilities, businesses, affairs and operations provided by or on behalf of Veresen to or
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on behalf of Pembina was and is accurate and correct in all material respects as at the respective dates
thereof and does not omit any data or information necessary to make any data or information provided not
materially misleading as at the respective dates thereof.
(rr) Terms of Material Agreements. None of the (i) decision by Veresen to enter into the negotiations
that gave rise to the transaction contemplated hereby and pursuant to the Plan of Arrangement, (ii)
execution and delivery of this Agreement or, (iii) the consummation of the transactions contemplated
hereby or pursuant to the Plan of Arrangement, will or has caused:
(i) any material breach of any material agreement (which, for certainty, includes the Veresen
MTN Indenture and the agreements governing the Veresen Bank Facility, the Veresen
Midstream Facility, the Veresen AEGS Notes, the Veresen Ruby Notes and the Veresen
Power Business Debt (as defined herein)) to which Veresen or any of its Subsidiaries is
or are party or by which any of them are bound;
(ii) the triggering of any Pre-Emptive Right under any material agreement to which Veresen
or any of its Subsidiaries or affiliates is or are party or by which any of them are bound;
(iii) the triggering of any change of control provision under any material agreement to which
Veresen or any of its Subsidiaries or affiliates is or are party or by which any of them are
bound;
(iv) the termination of or shortening of:
(A) the term of any material agreement to which Veresen or any of its
Subsidiaries or affiliates is or are party or by which any of them are bound;
or
(B) any term contained within any such agreement granting any manner of
contractual right to Veresen or its Subsidiaries or affiliates;
(v) any requirement to replace, post or otherwise provide any form of credit assurance under
or pursuant to any material agreement to which Veresen or any of its Subsidiaries or
affiliates is or are party or by which any of them are bound; or
(vi) the loss of any right of Veresen or its Subsidiaries or affiliates (whether presently vested
or vesting or arising in future) to acquire any interest in any property, facility or
undertaking (including an incremental interest in any property, facility or undertaking in
which Veresen or any of its Subsidiaries or affiliates currently has or have an interest).
(ss) No Area of Mutual Interest, Exclusion or Non-Compete Provision. Except as disclosed in writing
to Pembina by Veresen on or prior to the date hereof, none of Veresen or its Subsidiaries or affiliates are
party to or bound by any agreement containing any area of mutual interest or area of exclusion provisions
or provisions precluding, preventing or otherwise constraining Veresen or its Subsidiaries or affiliates
from conducting business operations (whether directly or indirectly) within any particular geographical
area, any particular industry or in competition with any third party.
(tt) Veresen Power Business Sale. No event has occurred, or state of facts or circumstances arisen,
which will prevent, or give a counterparty thereto the right to terminate, in whole or in part, the agreed
upon transactions comprising the Veresen Power Business Sale from being completed pursuant to, and in
all material respects on, the terms and conditions as disclosed to Pembina in writing by Veresen prior to
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the date hereof, and Veresen has no reason to believe that such transactions will not be completed in
accordance, in all material respects, with such terms and conditions except as disclosed to Pembina in
writing by Veresen prior to the date hereof. The amount of cash taxes payable by Veresen and arising
from the Veresen Power Business Sale will not be greater than the amount disclosed to Pembina in
writing by Veresen prior to the date hereof. As of the date of this Agreement, the amount of debt
associated with Veresen's interest in the assets subject to the Veresen Power Business Sale does not
exceed $150 million (the "Veresen Power Business Debt"), all of which will, upon completion of the
Veresen Power Business Sale, be transferred to the purchasers thereunder and will cease to be a liability
of Veresen or its applicable Subsidiaries. For greater certainty, the Veresen Power Business Debt does
not include the amount of debt associated with Veresen's interest in the transactions that were completed
prior to the date hereof.
(uu) Credit Facilities and Other Long-Term Debt. Except as disclosed in writing to Pembina by
Veresen on or prior to the date hereof, other than the Veresen Bank Facility, the Veresen Midstream
Facility, the Veresen AEGS Notes, the Veresen MTNs and the Veresen Ruby Notes and other than the
Veresen Power Business Debt, neither Veresen nor any of its Subsidiaries has any long term indebtedness
or bank indebtedness. As of the date of this Agreement, the Veresen Debt does not exceed $1,204.2
million and, as at March 31, 2017: (i) the amounts drawn under the Veresen Midstream Facility did not
exceed $868.9 million for the expansion facility, $40.0 million for the revolving facility and US$713.8
million for the term B loan, and (ii) no amounts were drawn in respect of the Veresen Ruby Notes.
Veresen is not in material default under the Veresen Bank Facility or the Veresen MTN Indenture, and the
applicable Subsidiaries of Veresen are not in default under the Veresen AEGS Notes, the Veresen Ruby
Notes or the Veresen Midstream Facility which default would be material to Veresen and its Subsidiaries,
taken as a whole, nor has any event occurred, or state of facts or circumstances arisen, that would cause
such a default to occur in the future and, to the best of Veresen's knowledge, its banker is not
contemplating any reduction under the Veresen Bank Facility or the Veresen Midstream Facility
borrowing base, prior to giving effect to the Arrangement.
(vv) Foreign Private Issuer. As of the date hereof, Veresen is a "foreign private issuer" within the
meaning of Rule 405 of Regulation C adopted by the SEC under the U.S. Securities Act.
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APPENDIX D
PLAN OF ARRANGEMENT
Page 221
PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT UNDER SECTION 193
OF THE
BUSINESS CORPORATIONS ACT (ALBERTA)
ARTICLE 1
INTERPRETATION
1.1 In this Plan of Arrangement, the following terms have the following meanings:
(a) "ABCA" means the Business Corporations Act, R.S.A. 2000, c. B-9, as amended, including the
regulations promulgated thereunder;
(b) "Amalco" means, in the event the Preferred Shareholder Resolution receives the requisite
approval of Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting, or the Veresen
Preferred Shareholders have approved a special resolution with similar effect to the Preferred
Shareholder Resolution prior to the Effective Time such that Pembina is the sole holder of the
Veresen Preferred Shares prior to the amalgamation contemplated in Section 3.1(f), and this Plan
of Arrangement is not otherwise amended pursuant to Section 6.5 hereof to exclude the Veresen
Preferred Shares, the corporation resulting from the amalgamation of Pembina and Veresen
pursuant to this Plan of Arrangement;
(c) "Arrangement", "herein", "hereof", "hereto", "hereunder" and similar expressions mean and
refer to the arrangement pursuant to section 193 of the ABCA on the terms and subject to the
conditions set forth in this Plan of Arrangement as supplemented, modified or amended in
accordance with this plan, and not to any particular article, section or other portion hereof;
(d) "Arrangement Agreement" means the agreement dated May 1, 2017, between Pembina and
Veresen with respect to the Arrangement and all amendments thereto;
(e) "Arrangement Resolution" means the special resolution of Veresen Shareholders in respect of
the Arrangement to be considered at the Veresen Shareholders’ Meeting substantially in the form
attached as Schedule "B-1" to the Arrangement Agreement;
(f) "Articles of Arrangement" means the articles of arrangement of Veresen in respect of the
Arrangement required under subsection 193(10) of the ABCA to be sent to the Registrar for filing
after the Final Order has been granted, giving effect to the Arrangement;
(g) "Business Day" means a day other than a Saturday, Sunday or statutory holiday or other day when
banks in the City of Calgary, Alberta are not generally open for business;
(h) "Certificate" means the certificate or proof of filing to be issued by the Registrar pursuant to
subsection 193(11) or 193(12) of the ABCA in respect of the Articles of Arrangement giving
effect to the Arrangement;
(i) "Court" means the Court of Queen's Bench of Alberta;
(j) "Depositary" means Computershare Trust Company of Canada, a trust company licensed to carry
on business in the Province of Alberta at its principal office in Calgary, Alberta or such other
person that may be appointed by Pembina for the purpose of receiving deposits of certificates
formerly representing Veresen Shares;
(k) "Dissenting Veresen Shareholders" means registered Veresen Shareholders and, in the event the
Preferred Shareholder Resolution receives the requisite approval of Veresen Preferred
Shareholders at the Veresen Shareholders’ Meeting, Veresen Preferred Shareholders who validly
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exercise the Dissent Rights with respect to the Arrangement Resolution or the Preferred
Shareholder Resolution, as applicable, provided to them under the Interim Order, which exercise
of Dissent Rights has not been withdrawn, or is not deemed to have been withdrawn, before the
Effective Time;
(l) "Dissent Rights" means the right dissent in respect of the Arrangement described in Article 4
hereof;
(m) "Effective Date" means the date the Arrangement is effective under the ABCA;
(n) "Effective Time" means the time at which the Articles of Arrangement are filed with the Registrar
on the Effective Date and the Arrangement becomes effective;
(o) "Election Deadline" means 5:00 p.m. (Calgary time) on the date announced by Veresen by means
of a news release disseminated on a national newswire in Canada and the U.S. as the deadline for
Veresen Shareholders to make an election to receive the Cash Consideration or the Share
Consideration in respect of their Veresen Shares, which announcement shall be made at least ten
(10) Business Days in advance of the Election Deadline;
(p) "Encumbrance" includes any mortgage, pledge, assignment, charge, lien, security interest,
adverse interest in property, other third party interest or encumbrance of any kind whether
contingent or absolute, and any agreement, option, right or privilege (whether by law, contract or
otherwise) capable of becoming any of the foregoing
(q) "Final Order" means the final order of the Court approving the Arrangement pursuant to
subsection 193(9)(a) of the ABCA, as such order may be amended at any time prior to the
Effective Date or, if appealed, then unless such appeal is withdrawn or denied, as affirmed;
(r) "Interim Order" means an interim order of the Court concerning the Arrangement under
subsection 193(4) of the ABCA, containing declarations and directions with respect to the
Arrangement and the holding of the Veresen Shareholders’ Meeting, as such order may be
affirmed, amended or modified by any court of competent jurisdiction;
(s) "Tax Act" means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended, including the
regulations promulgated thereunder, as amended from time to time;
(t) "Total Elected Cash Consideration" has the meaning ascribed thereto in Section 3.3;
(u) "Total Elected Share Consideration" has the meaning ascribed thereto in Section 3.3;
(v) "Letter of Transmittal" means, as applicable: (i) in respect of the Veresen Shares, the letter of
transmittal and election form accompanying the Veresen Proxy Circular sent to Veresen
Shareholders and Veresen Preferred Shareholders pursuant to which holders of Veresen Shares are
required to deliver certificates representing the Veresen Shares to the Depository and may elect to
receive, on completion of the Arrangement, in exchange for each Veresen Share, the Cash
Consideration or the Share Consideration, subject to proration set forth in Section 3.3 hereof; or
(ii) in respect of the Veresen Preferred Shares, the letter of transmittal accompanying the Veresen
Proxy Circular sent to Veresen Shareholders and Veresen Preferred Shareholders pursuant to
which holders of Veresen Preferred Shares are required to deliver certificates representing the
Veresen Preferred Shares to the Depository;
(w) "Maximum Cash Consideration" means $1,522,500,000;
(x) "Maximum Share Consideration" means 99,500,000 Pembina Shares;
(y) "Pembina" means Pembina Pipeline Corporation, a corporation existing under the ABCA;
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(z) "Pembina Exchange Preferred Shares" means the Pembina Series [X] Shares, the Pembina
Series [X+1] Shares, the Pembina Series [X+2] Shares, the Pembina Series [X+3] Shares, the
Pembina Series [X+4] Shares and the Pembina Series [X+5] Shares, as constituted on the
Effective Date;
(aa) "Pembina Series [X] Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, series [X] in the capital of Pembina, such shares having identical terms to the Veresen
Series A Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X+1] Shares instead of Veresen Series B Shares;
(bb) "Pembina Series [X+1] Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, series [X+1] in the capital of Pembina, such shares having identical terms to the Veresen
Series B Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X] Shares instead of Veresen Series A Shares;
(cc) "Pembina Series [X+2] Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, series [X+2] in the capital of Pembina, such shares having identical terms to the Veresen
Series C Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X+3] Shares instead of Veresen Series D Shares;
(dd) "Pembina Series [X+3] Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, series [X+3] in the capital of Pembina, such shares having identical terms to the Veresen
Series D Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X+2] Shares instead of Veresen Series C Shares;
(ee) "Pembina Series [X+4] Shares" means the cumulative redeemable rate reset Class A Preferred
Shares, series [X+4] in the capital of Pembina, such shares having identical terms to the Veresen
Series E Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X+5] Shares instead of Veresen Series F Shares;
(ff) "Pembina Series [X+5] Shares" means the cumulative redeemable floating rate Class A Preferred
Shares, series [X+5] in the capital of Pembina, such shares having identical terms to the Veresen
Series F Shares except that the issuer thereof shall be the Pembina and they will be convertible
into Pembina Series [X+4] Shares instead of Veresen Series E Shares;
(gg) "Pembina Shares" means the common shares in the capital of Pembina;
(hh) "Plan" or "Plan of Arrangement" means this plan of arrangement as amended or supplemented
from time to time in accordance with the terms hereof, and "hereby", "hereof", "herein",
"hereunder", "herewith" and similar terms refer to this plan of arrangement and not to any
particular provision of this plan of arrangement;
(ii) "Preferred Shareholder Resolution" means the special resolution of the Veresen Preferred
Shareholders, voting as a class, in respect of the Arrangement to be considered at the Veresen
Shareholders’ Meeting substantially in the form attached as Schedule B-2 to the Arrangement
Agreement;
(jj) "Registrar" means the Registrar of Corporations or the Deputy Registrar of Corporations
appointed pursuant to section 263 of the ABCA;
(kk) "Veresen" means Veresen Inc., a corporation incorporated under the ABCA;
(ll) "Veresen Cash Consideration" means $18.65 per Veresen Share;
(mm) "Veresen Preferred Share Consideration" means one Pembina Series [X] Share per Veresen
Series A Share, without interest, one Pembina Series [X+1] Share per Veresen Series B Share,
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without interest, one Pembina Series [X+2] Share per Veresen Series C Share, without interest,
one Pembina Series [X+3] Share per Veresen Series D Share, without interest, one Pembina Series
[X+4] Share per Veresen Series E Share, without interest, and one Pembina Series [X+5] Share
per Veresen Series F Share, without interest, as applicable;
(nn) "Veresen Preferred Shareholders" means, collectively, the holders of Veresen Series A Shares,
Veresen Series B Shares, Veresen Series C Shares, Veresen Series D Shares, Veresen Series E
Shares and Veresen Series F Shares;
(oo) "Veresen Proxy Circular" means the notice of the Veresen Shareholders' Meeting to be sent to
Veresen Shareholders and Veresen Preferred Shareholders and the management proxy circular to
be prepared in connection with the Veresen Shareholders' Meeting together with any amendments
thereto or supplements thereof, and any other registration statement, information circular or proxy
statement which may be prepared in connection with the Veresen Shareholders' Meeting;
(pp) "Veresen Series A Shares" means the cumulative redeemable preferred shares, series A of
Veresen;
(qq) "Veresen Series B Shares" means the cumulative redeemable preferred shares, series B of
Veresen;
(rr) "Veresen Series C Shares" means the cumulative redeemable preferred shares, series C of
Veresen;
(ss) "Veresen Series D Shares" means the cumulative redeemable preferred shares, series D of
Veresen;
(tt) "Veresen Series E Shares" means the cumulative redeemable preferred shares, series E of
Veresen;
(uu) "Veresen Series F Shares" means the cumulative redeemable preferred shares, series F of
Veresen;
(vv) "Veresen Shareholders" means the holders of Veresen Shares;
(ww) "Veresen Share Consideration" means 0.4287 of a Pembina Share;
(xx) "Veresen Shareholders' Meeting" means such meeting or meetings of the Veresen Shareholders
and the Veresen Preferred Shareholders, including any adjournment thereof, that is to be convened
as provided by the Interim Order to consider, and if deemed advisable approve, the Arrangement;
(yy) "Veresen Shareholder Rights Plan" means Veresen's shareholder rights plan dated May 6, 2014,
as such may be amended, amended and restated or replaced from time to time;
(zz) "Veresen Shares" means the common shares in the capital of Veresen; and
(aaa) "Veresen SRPs" means the rights issued pursuant to the Veresen Shareholder Rights Plan.
1.2 The division of this Plan of Arrangement into articles, sections and subsections and the insertion of
headings are for convenience of reference only and shall not affect the construction or interpretation of this
Plan of Arrangement.
1.3 Unless reference is specifically made to some other document or instrument, all references herein to
articles, sections and subsections are to articles, sections and subsections of this Plan of Arrangement.
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1.4 Unless the context otherwise requires, words importing the singular number shall include the plural and
vice versa; words importing any gender shall include all genders; and words importing persons shall
include individuals, partnerships, associations, corporations, funds, unincorporated organizations,
governments, regulatory authorities, and other entities.
1.5 Unless otherwise specified, all references to "dollars" or "$" shall mean Canadian dollars.
1.6 In the event that the date on which any action is required to be taken hereunder by any of the parties is not a
Business Day in the place where the action is required to be taken, such action shall be required to be taken
on the next succeeding day which is a Business Day in such place.
1.7 References in this Plan of Arrangement to any statute or sections thereof shall include such statute as
amended or substituted and any regulations promulgated thereunder from time to time in effect.
ARTICLE 2
ARRANGEMENT AGREEMENT
2.1 This Plan of Arrangement is made pursuant and subject to the provisions of and forms part of the
Arrangement Agreement.
2.2 This Plan of Arrangement, upon the filing of the Articles of Arrangement and the issue of the Certificate,
will become effective on, and be binding on and after, the Effective Time on: (i) all registered and
beneficial Veresen Shareholders and, in the event the Preferred Shareholder Resolution receives the
requisite approval of Veresen Preferred Shareholders at the Veresen Shareholders’ Meeting, the Veresen
Preferred Shareholders; (ii) Veresen; and (iii) Pembina.
2.3 The Articles of Arrangement and Certificate shall be filed and issued, respectively, with respect to this
Arrangement in its entirety. The Certificate shall be conclusive evidence that the Arrangement has become
effective and that each of the provisions of Article 3 have become effective in the sequence set out therein.
If no Certificate is required to be issued by the Registrar pursuant to subsection 193(11) of the ABCA, the
Arrangement shall become effective at the Effective Time on the date the Articles of Arrangement are filed
with the Registrar pursuant to subsection 193(10) of the ABCA.
ARTICLE 3
ARRANGEMENT
3.1 Commencing at the Effective Time, each of the events set out below shall occur and shall be deemed to
occur in the following order without any further act or formality except as otherwise provided herein.
Veresen Shareholder Rights Plan
(a) The Veresen Shareholder Rights Plan shall terminate and cease to have any further force or effect
and the Veresen SRP Rights shall be cancelled without any payment in respect thereof.
Dissenting Veresen Shareholders
(b) Subject to Article 4, the Veresen Shares and, in the event the Preferred Shareholder Resolution
receives the requisite approval of Veresen Preferred Shareholders at the Veresen Shareholders’
Meeting, the Veresen Preferred Shares held by Dissenting Veresen Shareholders who have validly
exercised Dissent Rights shall be deemed to have been transferred to Veresen (free and clear of all
any Encumbrances), and cancelled and such Dissenting Veresen Shareholders shall cease to have
any rights as Veresen Shareholders or Veresen Preferred Shareholders, as applicable, other than
the right to be paid the fair value of their Veresen Shares or Veresen Preferred Shares, as the case
may be, in accordance with Article 4, and the names of such holders shall be removed from the
register of Veresen Shareholders and Veresen Preferred Shareholders, as applicable.
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Acquisition of Veresen Shares by Pembina
(c) Each issued and outstanding Veresen Share (other than those held by Dissenting Veresen
Shareholders) shall be transferred by the holder thereof without any further action on its part (free
and clear of any Encumbrances) to Pembina in accordance with the election or deemed election of
such holder pursuant to Section 3.2, as adjusted by Section 3.3, if applicable, in exchange for the
Veresen Cash Consideration or the Veresen Share Consideration, and Pembina shall be deemed to
be the legal and beneficial owner of such transferred Veresen Share (free and clear of
Encumbrances,), and upon such exchange:
(i) the holders of such Veresen Shares shall cease to be the holders of Veresen Shares and
the names of such holders shall be removed from the register of Veresen Shareholders;
and
(ii) Pembina shall become the holder of the Veresen Shares so exchanged and shall be added
to the register of Veresen Shareholders as the registered holder of such shares.
Acquisition and Exchange of Veresen Preferred Shares by Pembina
(d) Provided that the Preferred Shareholder Resolution has received the requisite approval of Veresen
Preferred Shareholders at the Veresen Shareholders’ Meeting:
(i) Veresen shall declare and pay in cash a dividend on each Veresen Preferred Share in an
amount equal to all accrued and unpaid dividends thereon, and for which a record date for
the payment of such dividends has not occurred prior to the Effective Date, up to, but
excluding, the Effective Date; and
(ii) each issued and outstanding Veresen Preferred Share (other than those held by Dissenting
Veresen Shareholders) shall be transferred by the holder thereof without any further
action on its part (free and clear of any Encumbrances) to Pembina in exchange for the
Veresen Preferred Share Consideration, as applicable, and Pembina shall be deemed to be
the legal and beneficial owner of such transferred Veresen Preferred Share (free and clear
of Encumbrances), and upon such exchange:
(A) the holders of such Veresen Preferred Shares shall cease to be the holders of
Veresen Preferred Shares and the names of such holders shall be removed from
the register of Veresen Preferred Shareholders; and
(B) Pembina shall become the holder of the Veresen Preferred Shares so exchanged
and shall be added to the register of Veresen Preferred Shareholders as the
registered holder of such shares.
Amalgamation
(e) Provided that the Preferred Shareholder Resolution has received the requisite approval of Veresen
Preferred Shareholders at the Veresen Shareholders’ Meeting or the Veresen Preferred
Shareholders have approved a special resolution with similar effect to the Preferred Shareholder
Resolution prior to the Effective Time such that Pembina is the sole holder of the Veresen
Preferred Shares, and this Plan of Arrangement is not otherwise amended pursuant to Section 6.5
hereof to exclude the Veresen Preferred Shares, the aggregate stated capital of Veresen, in respect
of the Veresen Shares and the Veresen Preferred Shares, shall be reduced to nil.
(f) Provided that the Preferred Shareholder Resolution has received the requisite approval of Veresen
Preferred Shareholders at the Veresen Shareholders’ Meeting or the Veresen Preferred
Shareholders have approved a special resolution with similar effect to the Preferred Shareholder
Resolution prior to the Effective Time such that Pembina is the sole holder of the Veresen
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Preferred Shares, and this Plan of Arrangement is not otherwise amended pursuant to Section 6.5
hereof to exclude the Veresen Preferred Shares, Pembina and Veresen shall be amalgamated and
continued as one corporation under the ABCA to form Amalco in accordance with the following:
(i) Name. The name of Amalco shall be Pembina Pipeline Corporation;
(ii) Share Provisions. The share provisions and authorized share capital of Amalco shall be
the same as the share provisions and authorized share capital of Pembina;
(iii) Directors and Officers.
(A) Initial Directors. The directors of Amalco shall be the same as the directors of
Pembina; and
(B) Initial Officers. The officers of Amalco shall be the same as the officers of
Pembina;
(iv) Business and Powers. There shall be no restrictions on the business that Amalco may
carry on or on the powers it may exercise;
(v) Other Provisions. The other provisions forming part of the Articles of Amalco shall be
the same as the respective provision of the articles of Pembina as such existed
immediately prior to the amalgamation;
(vi) Stated Capital. The aggregate stated capital of Amalco will be an amount equal to the
aggregate of the paid-up capital for the purposes of the Tax Act of the Pembina Shares
and the Class A Preferred Shares of Pembina outstanding immediately before the
amalgamation;
(vii) By-laws. The by-laws of Amalco shall be the by-laws of Pembina;
(viii) Registered Office. The registered office of Amalco shall be the registered office of
Pembina;
(ix) Effect of Amalgamation. The following shall be the effect of the amalgamation:
(A) all of the property of each of Pembina and Veresen shall continue to be the
property of Amalco;
(B) Amalco shall continue to be liable for the obligations of each of Pembina and
Veresen;
(C) any existing cause of action, claim or liability to prosecution of Pembina or
Veresen shall be unaffected;
(D) any civil, criminal or administrative action or proceeding pending by or against
either of Pembina or Veresen may be continued to be prosecuted by or against
Amalco; and
(E) a conviction against, or ruling, order or judgment in favour of or against, either
of Pembina or Veresen may be enforced by or against Amalco;
(x) Articles. The articles of amalgamation of Amalco filed shall be deemed to be the articles
of incorporation of Amalco, and the certificate of amalgamation of Amalco shall be
deemed to be the certificate of incorporation of Amalco;
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(xi) Inconsistency with Laws. To the extent any of the provisions of this Plan of
Arrangement is deemed to be inconsistent with applicable Laws, this Plan of
Arrangement shall be automatically adjusted to remove such inconsistency;
(xii) Cancellation of Shares. On the amalgamation each issued and outstanding Veresen
Share and Veresen Preferred Share shall be cancelled and each issued and outstanding
Pembina Share and Class A Preferred Share of Pembina shall remain unaffected.
Election
3.2 With respect to the exchange of Veresen Shares effected pursuant to Section 3.1(c):
(a) each Veresen Shareholder (other than Dissenting Shareholders) may elect to receive, in respect of
each Veresen Share held, the Veresen Cash Consideration or the Veresen Share Consideration,
subject to Sections 3.3, 3.4 and 5.6;
(b) the election provided for in Section 3.2(a) shall be made by each Veresen Shareholder by
depositing with the Depositary, prior to the Election Deadline, a duly completed Letter of
Transmittal indicating such holder's election, together with any certificates representing the
holder's Veresen Shares;
(c) any Letter of Transmittal, once deposited with the Depositary, shall be irrevocable and may not be
withdrawn by a Veresen Shareholder; and
(d) any Veresen Shareholder who does not deposit with the Depositary a duly completed Letter of
Transmittal prior to the Election Deadline, or otherwise fails to comply with the requirements of
this Section 3.2 and the Letter of Transmittal, shall be deemed to have elected to receive the Share
Consideration in respect of all of such holder's Veresen Shares, subject to Sections 3.3, 3.4
and 5.6.
3.3 Adjustments to Share and Cash Consideration
(a) Notwithstanding Section 3.2 or any contrary provision herein (other than Section 5.6), the
maximum amount of cash that may, in the aggregate, be paid to the Veresen Shareholders
pursuant to Section 3.1(c) shall be equal to the Maximum Cash Consideration. In the event that
the aggregate amount of cash that would, but for this Section 3.3(a), be paid to Veresen
Shareholders in accordance with the elections or deemed elections of such Veresen Shareholders
pursuant to Section 3.2 (the "Total Elected Cash Consideration") exceeds the Maximum Cash
Consideration, then the aggregate amount of cash to be paid to any Veresen Shareholder shall be
determined by multiplying the aggregate amount of cash that would, but for this Section 3.3(a), be
paid to such Veresen Shareholder by a fraction, rounded to six decimal places, the numerator of
which is the Maximum Cash Consideration and the denominator of which is the Total Elected
Cash Consideration; and such holder shall be deemed to have elected to receive the Veresen Cash
Consideration for such number of its Veresen Shares, rounded down to the nearest whole, as is
equal to the aggregate amount of cash received by such holder, as adjusted in accordance with this
Section 3.3(a), divided by the Veresen Cash Consideration, and the Veresen Share Consideration
for the remainder of its Veresen Shares for which, but for this Section 3.3(a), such holder would
otherwise have received the Veresen Cash Consideration.
(b) Notwithstanding Section 3.2 or any contrary provision herein, the maximum number of Pembina
Shares that may, in the aggregate, be paid to the Veresen Shareholders pursuant to Section 3.1(c)
shall be equal to the Maximum Share Consideration. In the event that the aggregate number of
Pembina Shares that would, but for this Section 3.3(b), be paid to Veresen Shareholders in
accordance with the elections or deemed elections of such Veresen Shareholders pursuant to
Section 3.2 (the "Total Elected Share Consideration") exceeds the Maximum Share
Consideration, then the aggregate number of Pembina Shares to be paid to any Veresen
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Shareholder shall be determined by multiplying the aggregate number of Pembina Shares that
would, but for this Section 3.3(b), be issued to such Veresen Shareholder by a fraction, rounded to
six decimal places, the numerator of which is the Maximum Share Consideration and the
denominator of which is the Total Elected Share Consideration; and such holder shall be deemed
to have elected to receive the Veresen Share Consideration for such number of its Veresen Shares,
rounded down to the nearest whole, as is equal to the aggregate number of Pembina Shares
received by such holder, as adjusted pursuant to this Section 3.3(b), divided by the Veresen Share
Consideration, and the Veresen Cash Consideration for the remainder of its Veresen Shares for
which, but for this Section 3.3(b), such holder would otherwise have received the Veresen Share
Consideration.
Withholding
3.4 Veresen, Pembina and the Depositary shall be entitled to deduct and withhold from any consideration or
amount otherwise payable to any former Veresen Shareholder or Veresen Preferred Shareholder, if
applicable, such amounts as Veresen, Pembina, or the Depositary, as the case may be, may determine is
required or permitted to deduct and withhold with respect to such payment under the Tax Act, the United
States Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all
purposes hereof as having been paid to the former Veresen Shareholder or Veresen Preferred Shareholder,
as the case may be, in respect of which such deduction and withholding was made, provided that such
withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so
required to be deducted or withheld from any payment to a former Veresen Shareholder or Veresen
Preferred Shareholder, as the case may be, exceeds the cash consideration otherwise payable to the holder,
Veresen, Pembina and the Depositary are hereby authorized to sell or otherwise dispose of any property or
amount otherwise payable to such former Veresen Shareholder or Veresen Preferred Shareholder pursuant
to this Plan of Arrangement to the extent necessary to provide sufficient funds to Veresen, Pembina or the
Depositary, as the case may be, to enable it to comply with such deduction or withholding requirement and
Veresen, Pembina or the Depositary, as the case may be, shall remit to such former Veresen Shareholder or
Veresen Preferred Shareholder, as the case may be, any unapplied balance of the net proceeds of such sale.
ARTICLE 4
DISSENTING VERESEN SHAREHOLDERS
4.1 Each registered holder of Veresen Shares or, subject to Section 4.7, Veresen Preferred Shares shall have the
right to dissent with respect to the Arrangement in accordance with the Interim Order and this Article 4,
provided that notwithstanding section 191(5) of the ABCA, the written objection to the Arrangement
referred to in section 191(5) of the ABCA must be received by Veresen from the Dissenting Shareholder
not later than 4:00 p.m. (Calgary time) on the date that is five Business Days prior to the date of the
Veresen Shareholders’ Meeting.
4.2 A Dissenting Veresen Shareholder shall, at the Effective Time, cease to have any rights as a holder of
Veresen Shares or Veresen Preferred Shares, as the case may be, (other than as set forth herein) and shall
only be entitled to be paid by Veresen the fair value of the holder's Veresen Shares or Veresen Preferred
Shares, as the case may be. A Dissenting Veresen Shareholder who is entitled to be paid by Veresen the
fair value of the holder's Veresen Shares or Veresen Preferred Shares, as the case may be, shall, pursuant to
Section 3.1(b) hereof, be deemed to have transferred the holder's Veresen Shares or Veresen Preferred
Shares, as the case may be, (free and clear of any Encumbrances) to Veresen for cancellation without any
further act or formality notwithstanding the provisions of section 191 of the ABCA.
4.3 A Dissenting Veresen Shareholder who for any reason is not ultimately entitled to be paid the fair value of
the holder's Veresen Shares or Veresen Preferred Shares, as the case may be, shall be deemed to have
participated in the Arrangement on the same basis as a non-dissenting holder of Veresen Shares (who
elected to exclusively receive Veresen Cash Consideration) or Veresen Preferred Shares (provided, in the
case of Veresen Preferred Shares, that the requisite approval of Veresen Preferred Shareholders is received
at the Veresen Shareholders’ Meeting) notwithstanding the provisions of section 191 of the ABCA.
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4.4 The fair value of the Veresen Shares shall be determined as of the close of business on the last Business
Day before the day on which the Arrangement Resolution is approved by the holders of Veresen Shares.
The fair value of the Veresen Preferred Shares shall be determined as of the close of business on the last
Business Day before the day on which the Preferred Shareholders Resolution is approved by the holders of
Veresen Preferred Shares.
4.5 In no event shall Veresen or Pembina be required to recognize any Dissenting Veresen Shareholder as a
Veresen Shareholder or a Veresen Preferred Shareholder, as the case may be, after the Effective Time and
the names of such holders shall be removed from the register of Veresen Shareholders and Veresen
Preferred Shareholders, as applicable, as at the Effective Time.
4.6 For greater certainty, in addition to any other restrictions in section 191 of the ABCA: (a) any person who
has voted in favour of the Arrangement Resolution shall not be entitled to dissent with respect to such
person’s Veresen Shares for the Arrangement; and (b) any person who has voted in favour of the Preferred
Shareholder Resolution shall not be entitled to dissent with respect to such person’s Veresen Preferred
Shares for the Arrangement. In addition, a Dissenting Veresen Shareholder may only exercise Dissent
Rights in respect of all, and not less than all, of its Veresen Shares or Veresen Preferred Shares, as the case
may be.
4.7 Notwithstanding any provision to the contrary in this Plan of Arrangement, in the event that the requisite
approval of Veresen Preferred Shareholders is not received at the Veresen Shareholders’ Meeting, the right
of dissent provided for in this Article 4 shall cease to apply to holders of Veresen Preferred Shares and any
written objection to the Arrangement sent by a Veresen Preferred Shareholder shall be null and void.
ARTICLE 5
OUTSTANDING CERTIFICATES AND FRACTIONAL SHARES
5.1 Forthwith following the Effective Time, Pembina and Veresen shall, subject to Section 5.2, cause to be
paid (a) to the Veresen Shareholders the amounts payable, or cause to be issued the number of Pembina
Shares issuable, in respect of the Veresen Shares required by Section 3.1(c), as adjusted, if applicable,
pursuant to Section 3.3 and (b) in the event the Preferred Shareholder Resolution receives the requisite
approval at the Veresen Shareholders’ Meeting, cause to be issued the number of Pembina Exchange
Preferred Shares issuable, in respect of the Veresen Preferred Shares required by Section 3.1(d).
5.2 Upon surrender to the Depositary for cancellation of a certificate or certificates (as applicable) which,
immediately prior to the Effective Time, represented outstanding Veresen Shares or outstanding Veresen
Preferred Shares that were transferred pursuant to Section 3.1(c) or 3.1(d), together with a duly completed
and executed Letter of Transmittal and such additional documents and instruments as the Depositary may
reasonably require, each Veresen Shareholder and Veresen Preferred Shareholder represented by such
surrendered certificate(s) shall be entitled to receive in exchange therefor, and the Depositary shall deliver
to such holder, the consideration which such holder has the right to receive under this Plan of Arrangement
for such Veresen Shares and Veresen Preferred Shares, as applicable, less any amounts withheld pursuant
to Section 3.4, and any certificate(s) so surrendered shall forthwith be cancelled.
5.3 Until deposited as contemplated by Section 5.2, each certificate that immediately prior to the Effective
Time represented Veresen Shares and, in the event the Preferred Shareholder Resolution receives the
requisite approval at the Veresen Shareholders’ Meeting, Veresen Preferred Shares shall be deemed after
the Effective Time to represent only the right to receive upon such deposit the consideration and other
property to which the holders of such Veresen Shares and Veresen Preferred Shares, as applicable, are
entitled under the Arrangement, or as to those held by Dissenting Veresen Shareholders, other than those
Dissenting Veresen Shareholders deemed to have participated in the Arrangement pursuant to Section 4.3,
to receive the fair value of the Veresen Shares or Veresen Preferred Shares, as applicable, represented by
such certificates. Any such certificate formerly representing Veresen Shares and, in the event the Preferred
Shareholder Resolution receives the requisite approval at the Veresen Shareholders’ Meeting, Veresen
Preferred Shares not duly surrendered on or before the last Business Day prior to the third anniversary of
the Effective Date shall cease to represent a claim by or interest of any former Veresen Shareholder or
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Veresen Preferred Shareholder, as applicable, of any kind or nature against Veresen or Pembina. On such
date, all consideration and other property to which such former holder was entitled shall be deemed to have
been surrendered to Veresen or Pembina, as applicable.
5.4 No Veresen Shareholder or, in the event the Preferred Shareholder Resolution receives the requisite
approval at the Veresen Shareholders’ Meeting, Veresen Preferred Shareholder shall be entitled to receive
any consideration with respect to such Veresen Shares or Veresen Preferred Shares, as applicable, other
than the consideration and other property to which such holder is entitled to receive under the Arrangement
and, for greater certainty, no such holder will be entitled to receive any interest, dividend, premium or other
payment in connection therewith.
5.5 If any certificate which immediately prior to the Effective Time represented an interest in outstanding
Veresen Shares or Veresen Preferred Shares that were exchanged pursuant to Section 3.1 has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to
have been lost, stolen or destroyed, the Depositary will issue and deliver in exchange for such lost, stolen or
destroyed certificate the consideration and other property to which the holder is entitled pursuant to the
Arrangement as determined in accordance with the Arrangement. The person who is entitled to receive
such consideration and other property shall, as a condition precedent to the receipt thereof, give a bond
satisfactory to Pembina and its transfer agent in such form as is satisfactory to Pembina and such transfer
agent, or otherwise indemnify Veresen, Pembina and the transfer agent, to the reasonable satisfaction of
such parties, against any claim that may be made against any of them with respect to the certificate alleged
to have been lost, stolen or destroyed.
5.6 No certificates representing fractional Pembina Shares shall be issued under the Arrangement. In lieu of
any fractional Pembina Shares, each registered Veresen Shareholder otherwise entitled to a fractional
interest in Pembina Shares will receive the nearest whole number of Pembina Shares, provided that in no
circumstances shall the aggregate number of Pembina Shares to be paid to the Veresen Shareholders
pursuant to this Plan of Arrangement be greater than the Maximum Share Consideration. For greater
certainty, where such fractional interest is greater than or equal to 0.5, the number of Pembina Shares to be
issued will be rounded up to the nearest whole number and where such fractional interest is less than 0.5,
the number of Pembina Shares to be issued will be rounded down to the nearest whole number, unless such
rounding causes the aggregate number of Pembina Shares to be paid to the Veresen Shareholders pursuant
to this Plan of Arrangement to be greater than the Maximum Share Consideration, in which case all such
fractional interests will be paid in cash based on the Veresen Cash Consideration notwithstanding that such
cash payments may cause the aggregate cash consideration to be paid by Pembina pursuant to this Plan of
Arrangement to exceed the Maximum Cash Consideration. In calculating such fractional interests, all
Veresen Shares registered in the name of or beneficially held by such Veresen Shareholder or their
nominee shall be aggregated.
ARTICLE 6
AMENDMENTS
6.1 Veresen and Pembina may amend, modify and/or supplement this Plan of Arrangement at any time and
from time to time prior to the Effective Time, provided that each such amendment, modification and/or
supplement must be: (i) set out in writing; (ii) approved by both parties; (iii) filed with the Court and, if
made following the Veresen Shareholders’ Meeting, approved by the Court; and (iv) communicated to
Veresen Shareholders and/or Veresen Preferred Shareholders, if and as required by the Court.
6.2 Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Veresen or
Pembina at any time prior to or at the Veresen Shareholders’ Meeting (provided that the other party shall
have consented thereto) with or without any other prior notice or communication, and if so proposed and
accepted, in the manner contemplated and to the extent required by the Arrangement Agreement by the
persons voting at the Veresen Shareholders’ Meeting (other than as may be required under the Interim
Order or other order of the Court), shall become part of this Plan of Arrangement for all purposes.
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6.3 Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by
the Court following the Veresen Shareholders’ Meeting shall be effective only (i) if it is consented to in
writing by each of Veresen and Pembina (each acting reasonably), and (ii) if required by the Court or
applicable law, it is consented to by the Veresen Shareholders and/or Veresen Preferred Shareholders.
6.4 Any amendment, modification or supplement to this Plan of Arrangement may be made following the
Effective Time effective only if it is consented to in writing by each of Pembina and Veresen, provided that
it concerns a matter which, in the reasonable opinion of each of Pembina and Veresen, is of an
administrative nature required to better give effect to the implementation of this Plan of Arrangement and is
not adverse to the financial or economic interests of any former holder of Veresen Shares and, in the event
the Preferred Shareholder Resolution receives the requisite approval at the Veresen Shareholders’ Meeting,
any former holder of Veresen Preferred Shares.
6.5 Notwithstanding anything else contained herein: (a) in the circumstances where the Preferred Shareholder
Resolution does not receive the requisite approval of the Veresen Preferred Shareholders at the Veresen
Shareholders' Meeting (or any adjournment thereof) and the Veresen Preferred Shareholders do not
otherwise approve a special resolution with similar effect to the Preferred Shareholder Resolution prior to
the Effective Time such that Pembina is the sole holder of the Veresen Preferred Shares prior to the
amalgamation contemplated in Section 3.1(f), Veresen shall amend this Plan of Arrangement to exclude the
Veresen Preferred Shares under this Plan of Arrangement and matters ancillary thereto; and (b) in the
circumstances where the Preferred Shareholder Resolution receives the requisite approval of the Veresen
Preferred Shareholders, and Dissent Rights have been validly exercised in respect of more than 5% of the
outstanding Veresen Preferred Shares, Veresen shall amend this Plan of Arrangement if requested by
Pembina to exclude the Veresen Preferred Shares under this Plan of Arrangement and matters ancillary
thereto, including, in each case, the amalgamation contemplated in Section 3.1(f).
ARTICLE 7
FURTHER ASSURANCES
7.1 Notwithstanding that the transactions and events set out herein shall occur and shall be deemed to occur in
the order set out in this Plan without any further act or formality, each of the Parties to the Arrangement
Agreement shall make, do and execute, or cause to be made, done and executed, all such further acts,
deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required in order
further to document or evidence any of the transactions or events set out herein.
7.2 From and after the Effective Time (a) this Plan shall take precedence and priority over any and all rights
related to Veresen Shares and, in the event the Preferred Shareholder Resolution receives the requisite
approval at the Veresen Shareholders’ Meeting, Veresen Preferred Shares issued prior to the Effective
Time; (b) the rights and obligations of the holders of Veresen Shares and, in the event the Preferred
Shareholder Resolution receives the requisite approval at the Veresen Shareholders’ Meeting, holders of
Veresen Preferred Shares and, in each case, any respective trustee and transfer agent therefor, shall be
solely as provided for in this Plan; and (c) all actions, causes of actions, claims or proceedings (actual or
contingent, and whether or not previously asserted) based on or in any way relating to Veresen Shares and,
in the event the Preferred Shareholder Resolution receives the requisite approval at the Veresen
Shareholders’ Meeting, Veresen Preferred Shares shall be deemed to have been settled, compromised,
released and determined without liability except as set forth herein.
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APPENDIX E
INTERIM ORDER
Page 234
Clerk’s stamp
Filed on June 5,
2017
Court File Number 1701 – 07563
Court COURT OF QUEEN’S BENCH OF ALBERTA
Judicial Centre CALGARY
Applicant VERESEN INC.
Respondent NOT APPLICABLE
Matter IN THE MATTER OF SECTION 193 OF THE BUSINESS
CORPORATIONS ACT, RSA 2000, c B-9, AS AMENDED
AND IN THE MATTER OF A PROPOSED ARRANGEMENT
INVOLVING VERESEN INC., PEMBINA PIPELINE CORPORTION,
AND THE SHAREHOLDERS OF VERESEN INC.
Document INTERIM ORDER
Address for Service
and Contact
Information of
Party Filing this
Document
Osler, Hoskin & Harcourt LLP
2500 TransCanada Tower
450 – 1st Street SW
Calgary, AB T2P 5H1
Attention: Tristram J. Mallett Telephone: (403) 260-7041
Facsimile: (403) 260-7024
Email: [email protected]
UPON the Originating Application (the “Originating Application”) of Veresen Inc. (the
“Applicant”);
AND UPON reading the Originating Application, the affidavit of Don Althoff, sworn
June 1, 2017 (the “Affidavit”) and the documents referred to therein;
DATE ON WHICH ORDER WAS PRONOUNCED: June 5, 2017
NAME OF JUDGE WHO MADE THIS ORDER: Madam Justice G. A. Campbell
LOCATION OF HEARING: Calgary Courts Centre, 601 – 5th
Street SW, Calgary
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AND UPON HEARING counsel for the Applicant;
FOR THE PURPOSES OF THIS ORDER:
(a) the capitalized terms not defined in this Order (the “Order”) shall have the
meanings attributed to them in the draft information circular of the Applicant
which is attached as Exhibit “A” to the Affidavit; and
(b) all references to “Arrangement” used herein mean the arrangement as set forth in
the plan of arrangement attached as Appendix D of the management information
circular of the Applicant ( the “Information Circular”), and the arrangement
agreement (“Arrangement Agreement”) attached as Appendix C to the
Information Circular.
IT IS HEREBY ORDERED THAT:
General
1. The Applicant shall seek approval of the Arrangement as described in the Information
Circular by holders (“Common Shareholders”) of common shares (“Common Shares”)
in the capital of the Applicant and holders (“Preferred Shareholders” and together with
Common Shareholders, “Shareholders”) of cumulative redeemable preferred shares,
series A, C, and E (collectively, the “Preferred Shares”) in the capital of the Applicant
in the manner set forth below.
The Meetings
2. The Applicant shall call and conduct a special meeting (the “Common Shareholders’
Meeting”) of the Common Shareholders and a special meeting (the “Preferred
Shareholders’ Meeting” and together with the Common Shareholders’ Meeting, the
“Meetings” and each a “Meeting”) of the Preferred Shareholders on or about July 11,
2017.
The Common Shareholders’ Meeting
3. At the Common Shareholders’ Meeting, the Common Shareholders will consider and
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vote on a resolution to approve the Arrangement in substantially the form attached as
Appendix A to the Information Circular (the “Common Shareholder Arrangement
Resolution”) and such other business as may properly be brought before the Common
Shareholders’ Meeting or any adjournment or postponement thereof, all as more
particularly described in the Information Circular.
4. A quorum at the Common Shareholders’ Meeting shall be two Common Shareholders
present in person, or represented by proxy, at the opening of the Common Shareholders’
Meeting, and holding or representing at least 25% of the Common Shares entitled to be
voted at the Common Shareholders’ Meeting.
5. If within 30 minutes from the time appointed for the Common Shareholders’ Meeting, a
quorum is not present, the Common Shareholders’ Meeting shall stand adjourned to a
date not less than two (2) and not more than 30 days later, as may be determined by the
Chair of the Common Shareholders’ Meeting. No notice of the adjourned meeting shall
be required and, if at such adjourned meeting a quorum is not present, the Common
Shareholders present at the adjourned meeting in person or represented by proxy shall
constitute a quorum for all purposes.
6. Each Common Share entitled to be voted at the Common Shareholders’ Meeting will
entitle the holder to one vote at the Common Shareholders’ Meeting in respect of the
Common Shareholder Arrangement Resolution and any other matters to be considered at
the Common Shareholders’ Meeting.
7. The record date for Common Shareholders entitled to receive notice of and vote at the
Common Shareholders’ Meeting is May 23, 2017 (the “Record Date”). Only Common
Shareholders whose names have been entered on the registers of holders of Common
Shares as at the close of business on the Record Date will be entitled to receive notice of
and to vote at the Common Shareholders’ Meeting provided that, to the extent that a
Common Shareholder transfers the ownership of any Common Shares after the Record
Date and the transferee of those Common Shares establishes ownership of such Common
Shares and demands, not later than ten (10) days before the Common Shareholders’
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31298920.1
Meeting, to be included in the list of Common Shareholders eligible to vote at the
Common Shareholders’ Meeting, such transferee will be entitled to vote those Common
Shares at the Common Shareholders’ Meeting.
Preferred Shareholders’ Meeting
8. At the Preferred Shareholders’ Meeting, the Preferred Shareholders will consider and
vote, as a single class, on a resolution to approve the Arrangement substantially in the
form attached as Appendix B to the Information Circular (the “Preferred Shareholder
Arrangement Resolution”) and such other business as may properly be brought before
the Preferred Shareholders’ Meeting or any adjournment or postponement thereof, all as
more particularly described in the Information Circular.
9. A quorum at the Preferred Shareholders’ Meeting shall be two Preferred Shareholders
present in person, or represented by proxy, at the opening of the Preferred Shareholders’
Meeting, and holding or representing at least 25% of the Preferred Shares entitled to be
voted, as a single class, at the Preferred Shareholders’ Meeting.
10. If within 30 minutes from the time appointed for the Preferred Shareholders’ Meeting, a
quorum is not present, the Preferred Shareholders’ Meeting shall stand adjourned to a
date not less than two (2) and not more than 30 days later, as may be determined by the
Chair of the Preferred Shareholders’ Meeting. No notice of the adjourned meeting shall
be required and, if at such adjourned meeting a quorum is not present, the Preferred
Shareholders present at the adjourned meeting in person or represented by proxy shall
constitute a quorum for all purposes.
11. Each Preferred Share entitled to be voted at the Preferred Shareholders’ Meeting will
entitle the holder to one vote at the Preferred Shareholders’ Meeting in respect of the
Preferred Shareholder Arrangement Resolution and any other matters to be considered at
the Preferred Shareholders’ Meeting.
12. The record date for Preferred Shareholders entitled to receive notice of and vote at the
Preferred Shareholders’ Meeting is May 23, 2017. Only Preferred Shareholders whose
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31298920.1
names have been entered on the registers of holders of Preferred Shares as at the close of
business on the Record Date will be entitled to receive notice of and to vote at the
Preferred Shareholders’ Meeting provided that, to the extent that a Preferred Shareholder
transfers the ownership of any Preferred Shares after the Record Date and the transferee
of those Preferred Shares establishes ownership of such Preferred Shares and demands,
not later than ten (10) days before the Preferred Shareholders’ Meeting, to be included in
the list of Preferred Shareholders eligible to vote at the Preferred Shareholders’ Meeting,
such transferee will be entitled to vote those Preferred Shares at the Preferred
Shareholders’ Meeting.
Conduct of the Meetings
13. The Meetings shall be called, held and conducted in accordance with the applicable
provisions of the ABCA, the articles and by-laws of the Applicant in effect at the relevant
time, the Information Circular, the rulings and directions of the Chair of the Meetings,
this Order and any further Order of this Court. To the extent that there is any
inconsistency or discrepancy between this Order and the ABCA or the articles or by-laws
of the Applicant, the terms of this Order shall govern.
14. The only persons entitled to attend the Common Shareholders’ Meeting shall be Common
Shareholders or their authorized proxy holders, the Applicant’s directors and officers and
its auditors, the scrutineer (and its representatives for that purpose), the Applicant’s legal
counsel and financial advisors, representatives and legal counsel of other parties to the
Arrangement, and such other persons who may be permitted to attend by the Chair of the
Common Shareholders’ Meeting.
15. The only persons entitled to attend the Preferred Shareholders’ Meeting shall be Preferred
Shareholders or their authorized proxy holders, the Applicant’s directors and officers and
its auditors, the scrutineer (and its representatives for that purpose), the Applicant’s legal
counsel and financial advisors, representatives and legal counsel of other parties to the
Arrangement, and such other persons who may be permitted to attend by the Chair of the
Preferred Shareholders’ Meeting.
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16. The number of votes required to pass the Common Shareholder Arrangement Resolution
shall be not less than 66⅔% of the votes cast by Common Shareholders present in person
or represented by proxy at the Common Shareholders’ Meeting.
17. The number of votes required to pass the Preferred Shareholder Arrangement Resolution
shall be not less than 66⅔% of the votes cast by Preferred Shareholders present in person
or represented by proxy at the Preferred Shareholders’ Meeting, voting as a single class.
18. To be valid, proxies must be deposited with Computershare Trust Company of Canada in
the manner described in the Information Circular.
19. The accidental omission to give notice of the Meetings or the non-receipt of the notice
shall not invalidate any resolution passed or proceedings taken at the Meetings.
20. The Applicant is authorized to adjourn or postpone each of the Meetings on one or more
occasions (whether or not a quorum is present, if applicable) and for such period or
periods of time as the Applicant deems advisable, without the necessity of first convening
the Meetings, or either of them, or first obtaining any vote of the Common Shareholders
or the Preferred Shareholders in respect of the adjournment or postponement. Notice of
such adjournment or postponement may be given by such method as the Applicant
determines is appropriate in the circumstances. If one or both of the Meetings are
adjourned or postponed in accordance with this Order (including paragraphs 5 and 10
hereof), the references to such Meeting or Meetings in this Order shall be deemed to be
the Meeting or Meetings as adjourned or postposed, as the context allows.
Amendments to the Arrangement
21. The Applicant and the acquirer, Pembina Pipeline Corporation (“Pembina”), are
authorized to make such amendments, revisions or supplements to the Arrangement as
they may together determine necessary or desirable, provided that such amendments,
revisions or supplements are made in accordance with and in the manner contemplated by
the Arrangement and the Arrangement Agreement. The Arrangement so amended,
revised or supplemented shall be deemed to be the Arrangement submitted to the
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Meetings and the subject of the Common Shareholder Arrangement Resolution and the
Preferred Shareholder Arrangement Resolution, without need to return to this Court to
amend this Order.
Amendments to Meeting Materials
22. The Applicant is authorized to make such amendments, revisions or supplements
(“Additional Information”) to the Information Circular, form of proxy for use by
Common Shareholders at the Common Shareholders’ Meeting (“Common Shareholder
Proxy”), form of proxy for use by Preferred Shareholders at the Preferred Shareholders’
Meeting (“Preferred Shareholder Proxy”), notice of the Common Shareholders’
Meeting (“Notice of the Common Shareholders’ Meeting”), notice of the Preferred
Shareholders’ Meeting (“Notice of the Preferred Shareholders’ Meeting”), form of
letter of transmittal and election form for Common Shareholders (“Common
Shareholder Letter of Transmittal and Election Form”), form of letter of transmittal
for Preferred Shareholders (“Preferred Shareholder Letter of Transmittal”) and notice
of Originating Application (“Notice of Originating Application”) as it may determine.
The Applicant may disclose such Additional Information, including material changes, by
the method and in the time most reasonably practicable in the circumstances as
determined by the Applicant. Without limiting the generality of the foregoing, if any
material change or material fact arises between the date of this Order and the date(s) of
the Meetings, which change or fact, if known prior to mailing of the Information
Circular, would have been required to be disclosed in the Information Circular, then:
(a) the Applicant shall advise Shareholders of the material change or material fact by
disseminating a news release (a “News Release”) in accordance with applicable
securities laws and the policies of the Toronto Stock Exchange; and
(b) provided that the News Release describes the applicable material change or
material fact in reasonable detail, the Applicant shall not be required to deliver an
amendment to the Information Circular to the Shareholders or otherwise give
notice to the Shareholders of the material change or material fact other than
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dissemination and filing of the News Release as aforesaid.
23. The Applicant is authorized to fix or amend a deadline (the “Election Deadline”) for
Common Shareholders to deposit with the depositary for the Arrangement a duly
completed Common Shareholder Letter of Transmittal and Election Form by
disseminating a news release (an “Election Deadline News Release”) on a national
newswire in Canada and the U.S. announcing the date of the Election Deadline at least 10
business days prior to the date of the Election Deadline. The Applicant shall not be
required to deliver any notice to the Common Shareholders of the Election Deadline
other than the dissemination and filing of the Election Deadline News Release as
aforesaid.
Dissent Rights
24. Registered Common Shareholders and registered Preferred Shareholders are, subject to
the provisions of this Order and the Arrangement, accorded the right to dissent under
section 191 of the ABCA with respect to the Common Shareholder Arrangement
Resolution and the Preferred Shareholder Arrangement Resolution, respectively, and the
right to be paid the fair value of their Shares by Pembina in respect of which such right to
dissent was validly exercised.
25. In order for a registered Shareholder (a “Dissenting Shareholder”) to exercise such right
to dissent under section 191 of the ABCA:
(a) the Dissenting Shareholder’s written objection to the Common Shareholder
Arrangement Resolution or the Preferred Shareholder Arrangement Resolution, as
applicable, must be received by the Applicant’s counsel, Osler, Hoskin &
Harcourt LLP, no later than 4:00 p.m. (Calgary time) on July 4, 2017 or the fifth
business day immediately preceding the date that any adjournment or
postponement of the Common Shareholders’ Meeting or the Preferred
Shareholders’ Meeting is reconvened or held, as the case may be;
(b) a vote against the Common Shareholder Arrangement Resolution, whether in
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person or by proxy, shall not constitute a written objection to the Common
Shareholder Arrangement Resolution as required under clause 25(a) herein and a
vote against the Preferred Shareholder Arrangement Resolution, whether in
person or by proxy, shall not constitute a written objection to the Preferred
Shareholder Arrangement Resolution as required under clause 25(a) herein;
(c) a Dissenting Shareholder shall not have voted his or her Common Shares or
Preferred Shares, as applicable, at the Common Shareholders’ Meeting or the
Preferred Shareholders’ Meeting, as applicable, either by proxy or in person, in
favour of the Common Shareholder Arrangement Resolution or the Preferred
Shareholder Arrangement Resolution, as applicable;
(d) a Dissenting Shareholder may dissent only with respect to all of the Common
Shares or Preferred Shares, as applicable, held by such Dissenting Shareholder, or
on behalf of any one beneficial owner and registered in the Dissenting
Shareholder’s name and, except in respect of a dissent of all of the Common
Shares or Preferred Shares held in respect of a beneficial owner, a Dissenting
Shareholder shall not exercise the right of dissent in respect of only a portion of
the Dissenting Shareholder’s Common Shares or Preferred Shares; and
(e) the exercise of such right to dissent must otherwise comply with the requirements
of section 191 of the ABCA, as modified and supplemented by this Order and the
Arrangement.
26. The fair value of the consideration to which a Dissenting Shareholder is entitled pursuant
to the Arrangement shall be determined as of the close of business on the last business
day before the day on which the Common Shareholder Arrangement Resolution or
Preferred Shareholder Arrangement Resolution, as the case may be, was adopted and
provided that the Arrangement is completed in respect of the applicable Shareholders.
27. Dissenting Shareholders who validly exercise their right to dissent, as set out in
paragraphs 24 and 25 above, and who:
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(i) are determined to be entitled to be paid the fair value of their Common Shares or
Preferred Shares, shall be deemed to have transferred such Shares as of the
effective time of the Arrangement (the “Effective Time”), without any further act
or formality and free and clear of all liens, claims and encumbrances to Pembina
in exchange for the fair value of the Common Shares or Preferred Shares, as the
case may be; or
(ii) are, for any reason (including, for clarity, any withdrawal by any Dissenting
Shareholder of their dissent) determined not to be entitled to be paid the fair value
for their Common Shares or Preferred Shares shall be deemed to have participated
in the Arrangement on the same basis as a non-dissenting Shareholder and such
Common Shares or Preferred Shares will be deemed to be exchanged for the
consideration under the Arrangement;
but in no event shall the Applicant, Pembina or any other person be required to recognize
such Shareholders as holders of Common Shares or Preferred Shares after the Effective
Time, and the names of such Shareholders shall be removed from the register of
Common Shares or Preferred Shares, as the case may be.
28. Subject to further order of this Court, the rights available to Shareholders under the
ABCA and the Arrangement to dissent from the Common Shareholder Arrangement
Resolution or the Preferred Shareholder Arrangement Resolution, as the case may be,
shall constitute full and sufficient dissent rights for the Shareholders with respect to the
Common Shareholder Arrangement Resolution or the Preferred Shareholder
Arrangement Resolution.
29. Notice to the Common Shareholders and the Preferred Shareholders of their rights to
dissent with respect to the Common Shareholder Arrangement Resolution or the
Preferred Shareholder Arrangement Resolution, respectively, and to receive, subject to
the provisions of the ABCA, this Order and the Arrangement, the fair value of the
consideration to which a Dissenting Shareholder is entitled pursuant to the Arrangement
shall be sufficiently given by including information with respect to these rights as set
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forth in the Information Circular which is to be sent to Shareholders in accordance with
paragraph 31 of this Order.
30. Notwithstanding paragraphs 24 through 27 of this Order, registered Preferred
Shareholders who have validly exercised rights of dissent shall not be entitled to dissent
and to be paid the fair value of their Preferred Shares if the Preferred Shares are not
exchanged, for any reason, by Pembina pursuant to the Arrangement.
Notice
31. The Information Circular, substantially in the form attached as Exhibit “A” to the
Affidavit, with such amendments thereto as counsel to the Applicant may determine
necessary or desirable (provided such amendments are not inconsistent with the terms of
this Order), and including the Notice of the Common Shareholders’ Meeting (in the case
of Common Shareholders only), the Notice of the Preferred Shareholders’ Meeting (in
the case of Preferred Shareholders only), the Common Shareholder Proxy (in the case of
Common Shareholders only), the Preferred Shareholder Proxy (in the case of Preferred
Shareholders only), the Notice of Originating Application and this Order, together with
any other communications or documents determined by the Applicant to be necessary or
advisable including the Common Shareholder Letter of Transmittal and Election Form (in
the case of Common Shareholders only) and the Preferred Shareholder Letter of
Transmittal (in the case of Preferred Shareholders only) (collectively, the “Meeting
Materials”), shall be sent to those Shareholders whose names have been entered in the
registers of holders of Common Shares or Preferred Shares, as the case may be, on the
close of business on the Record Date, the directors of the Applicant, and the auditors of
the Applicant, by one or more of the following methods:
(a) in the case of registered Shareholders, by pre-paid first class or ordinary mail, by
courier or by delivery in person, addressed to each such holder at his, her or its
address, as shown on the books and records of the Applicant as of the Record
Date not later than 21 days prior to the Common Shareholders’ Meeting or the
Preferred Shareholders’ Meeting, as applicable;
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(b) in the case of beneficial Shareholders, by providing sufficient copies of the
applicable Meeting Materials to intermediaries, in accordance with National
Instrument 54 -101 – Communication With Beneficial Owners of Securities of a
Reporting Issuer; and
(c) in the case of the directors and auditors of the Applicant, by email, pre-paid first
class or ordinary mail, by courier or by delivery in person, addressed to the
individual directors or firm of auditors, as applicable, not later than 21 days prior
to the date of the Common Shareholders’ Meeting or the Preferred Shareholders’
Meeting, as applicable.
32. Delivery of the Meeting Materials in the manner directed by this Order shall be deemed
to be good and sufficient service upon the Shareholders, the directors and auditors of the
Applicant of:
(a) the Originating Application;
(b) this Order;
(c) the Notice of the Common Shareholders’ Meeting or the Notice of the Preferred
Shareholders’ Meeting, as applicable; and
(d) the Notice of Originating Application.
Final Application
33. Subject to further order of this Court, and provided that the Shareholders have approved
the Arrangement in the manner directed by this Court and the directors of the Applicant
have not revoked their approval, the Applicant may proceed with an application for a
final Order of the Court approving the Arrangement (the “Final Order”) on July 12,
2017 at 10:00 a.m. (Calgary time) or so soon thereafter as counsel may be heard. Subject
to the Final Order and to the issuance of the proof of filing of the articles of arrangement,
the Applicant, all Shareholders and all other persons affected will be bound by the
Arrangement in accordance with its terms.
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34. Any Shareholder or other interested party (each an “Interested Party”) desiring to
appear and make submissions at the application for the Final Order is required to file with
this Court and serve upon the Applicant, by service on the Applicant’s counsel so that it
is received before 5:00 pm (Calgary time) on July 4, 2017, a notice of intention to appear
(“Notice of Intention to Appear”) including the Interested Party’s address for service
(or alternatively, a facsimile number for service by facsimile or an email address for
service by electronic mail), indicating whether such Interested Party intends to support or
oppose the application or make submissions at the application, together with a summary
of the position such Interested Party intends to advocate before the Court, and any
evidence or materials which are to be presented to the Court. Service of this Notice of
Intention to Appear to the Applicant’s counsel shall be effected by delivery to the address
set forth below:
Osler, Hoskin & Harcourt LLP
Suite 2500, TransCanada Tower
450 – 1st Street SW
Calgary, Alberta T2P 5H1
Attention: Colin Feasby
35. If the application for the Final Order is adjourned, only those parties appearing before
this Court for the Final Order, and those Interested Parties serving a Notice of Intention to
Appear in accordance with paragraph 34 of this Order, shall have notice of the adjourned
date.
Leave to Vary Interim Order
36. The Applicant is entitled at any time to seek leave to vary this Order upon such terms and
the giving of such notice as this Court may direct.
(signed) “Madam Justice G.A. Campbell”
Justice of the Court of Queen’s
Bench of Alberta
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APPENDIX F
SECTION 191 OF THE ABCA
191(1) Subject to sections 192 and 242, a holder of shares of any class of a corporation may dissent if the corporation
resolves to
(a) amend its articles under section 173 or 174 to add, change or remove any provisions restricting or
constraining the issue or transfer of shares of that class,
(b) amend its articles under section 173 to add, change or remove any restrictions on the business or
businesses that the corporation may carry on,
(b.1) amend its articles under section 173 to add or remove an express statement establishing the unlimited
liability of shareholders as set out in section 15.2(1),
(c) amalgamate with another corporation, otherwise than under section 184 or 187,
(d) be continued under the laws of another jurisdiction under section 189, or
(e) sell, lease or exchange all or substantially all its property under section 190.
(2) A holder of shares of any class or series of shares entitled to vote under section 176, other than section
176(1)(a), may dissent if the corporation resolves to amend its articles in a manner described in that section.
(3) In addition to any other right the shareholder may have, but subject to subsection (20), a shareholder entitled
to dissent under this section and who complies with this section is entitled to be paid by the corporation the
fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of
the close of business on the last business day before the day on which the resolution from which the
shareholder dissents was adopted.
(4) A dissenting shareholder may only claim under this section with respect to all the shares of a class held by
the shareholder or on behalf of any one beneficial owner and registered in the name of the dissenting
shareholder.
(5) A dissenting shareholder shall send to the corporation a written objection to a resolution referred to in
subsection (1) or (2)
(a) at or before any meeting of shareholders at which the resolution is to be voted on, or
(b) if the corporation did not send notice to the shareholder of the purpose of the meeting or of the
shareholder’s right to dissent, within a reasonable time after the shareholder learns that the resolution
was adopted and of the shareholder’s right to dissent.
(6) An application may be made to the Court by originating notice after the adoption of a resolution referred to
in subsection (1) or (2),
(a) by the corporation, or
(b) by a shareholder if the shareholder has sent an objection to the corporation under subsection (5),
to fix the fair value in accordance with subsection (3) of the shares of a shareholder who dissents under this
section, or to fix the time at which a shareholder of an unlimited liability corporation who dissents under this
section ceases to become liable for any new liability, act or default of the unlimited liability corporation.
(7) If an application is made under subsection (6), the corporation shall, unless the Court otherwise orders, send
to each dissenting shareholder a written offer to pay the shareholder an amount considered by the directors
to be the fair value of the shares.
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(8) Unless the Court otherwise orders, an offer referred to in subsection (7) shall be sent to each dissenting
shareholder
(a) at least 10 days before the date on which the application is returnable, if the corporation is the
applicant, or
(b) within 10 days after the corporation is served with a copy of the application, if a shareholder is the
applicant.
(9) Every offer made under subsection (7) shall
(a) be made on the same terms, and
(b) contain or be accompanied with a statement showing how the fair value was determined.
(10) A dissenting shareholder may make an agreement with the corporation for the purchase of the shareholder’s
shares by the corporation, in the amount of the corporation’s offer under subsection (7) or otherwise, at any
time before the Court pronounces an order fixing the fair value of the shares.
(11) A dissenting shareholder
(a) is not required to give security for costs in respect of an application under subsection (6), and
(b) except in special circumstances must not be required to pay the costs of the application or appraisal.
(12) In connection with an application under subsection (6), the Court may give directions for
(a) joining as parties all dissenting shareholders whose shares have not been purchased by the
corporation and for the representation of dissenting shareholders who, in the opinion of the Court,
are in need of representation,
(b) the trial of issues and interlocutory matters, including pleadings and questioning under Part 5 of the
Alberta Rules of Court,
(c) the payment to the shareholder of all or part of the sum offered by the corporation for the shares,
(d) the deposit of the share certificates with the Court or with the corporation or its transfer agent,
(e) the appointment and payment of independent appraisers, and the procedures to be followed by them,
(f) the service of documents, and
(g) the burden of proof on the parties.
(13) On an application under subsection (6), the Court shall make an order
(a) fixing the fair value of the shares in accordance with subsection (3) of all dissenting shareholders
who are parties to the application,
(b) giving judgment in that amount against the corporation and in favour of each of those dissenting
shareholders,
(c) fixing the time within which the corporation must pay that amount to a shareholder, and
(d) fixing the time at which a dissenting shareholder of an unlimited liability corporation ceases to
become liable for any new liability, act or default of the unlimited liability corporation.
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(14) On
(a) the action approved by the resolution from which the shareholder dissents becoming effective,
(b) the making of an agreement under subsection (10) between the corporation and the dissenting
shareholder as to the payment to be made by the corporation for the shareholder’s shares, whether
by the acceptance of the corporation’s offer under subsection (7) or otherwise, or
(c) the pronouncement of an order under subsection (13),
whichever first occurs, the shareholder ceases to have any rights as a shareholder other than the right to be
paid the fair value of the shareholder’s shares in the amount agreed to between the corporation and the
shareholder or in the amount of the judgement, as the case may be.
(15) Subsection (14)(a) does not apply to a shareholder referred to in subsection (5)(b).
(16) Until one of the events mentioned in subsection (14) occurs,
(a) the shareholder may withdraw the shareholder’s dissent, or
(b) the corporation may rescind the resolution,
and in either event proceedings under this section shall be discontinued.
(17) The Court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting
shareholder, from the date on which the shareholder ceases to have any rights as a shareholder by reason of
subsection (14) until the date of payment.
(18) If subsection (20) applies, the corporation shall, within 10 days after
(a) the pronouncement of an order under subsection (13), or
(b) the making of an agreement between the shareholder and the corporation as to the payment to be
made for the shareholder’s shares,
notify each dissenting shareholder that it is unable lawfully to pay dissenting shareholders for their shares.
(19) Notwithstanding that a judgment has been given in favour of a dissenting shareholder under subsection
(13)(b), if subsection (20) applies, the dissenting shareholder, by written notice delivered to the corporation
within 30 days after receiving the notice under subsection (18), may withdraw the shareholder’s notice of
objection, in which case the corporation is deemed to consent to the withdrawal and the shareholder is
reinstated to the shareholder’s full rights as a shareholder, failing which the shareholder retains a status as a
claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a
liquidation, to be ranked subordinate to the rights of creditors of the corporation but in priority to its
shareholders.
(20) A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable
grounds for believing that
(a) the corporation is or would after the payment be unable to pay its liabilities as they become due, or
(b) the realizable value of the corporation’s assets would by reason of the payment be less than the
aggregate of its liabilities.
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APPENDIX G
COMMON SHAREHOLDER FAIRNESS OPINION
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April 30, 2017
The Board of Directors Veresen Inc. Suite 900, Livingston Place, South Tower 222 – 3rd Avenue S.W. Calgary, Alberta T2P 0B4
To the Members of the Board:
Scotia Capital Inc. (“Scotia Capital”, “we” or “us”) understands that Veresen Inc. (“Veresen” or the “Company”) and Pembina Pipeline Corporation (“Pembina” or the “Acquirer”) propose to enter into an agreement (the “Arrangement Agreement”) whereby, among other things, Pembina will acquire all of the outstanding common shares in the capital of the Company (the “Common Shares”) by way of a court-approved plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (Alberta) (the “Transaction”).
Pursuant to the terms of the Arrangement Agreement and the Plan of Arrangement, holders of the Common Shares will receive, for each Common Share held (i) 0.4287 of a common share of Pembina (a “Pembina Common Share”) or (ii) $18.65 in cash, subject to pro-ration based on maximum share consideration of 99,500,000 Pembina Common Shares and maximum cash consideration of $1,522,500,000 (the “Consideration”). We further understand that pursuant to the Arrangement Agreement, in the event that the Plan of Arrangement receives the requisite approval of the holders of Preferred Shares (as defined below), all of the outstanding cumulative redeemable preferred shares, series A, B, C, D, E, and F, in the capital of Veresen (collectively, the “Preferred Shares”) will be exchanged for preferred shares in the capital of Pembina having terms identical to the terms of the Preferred Shares except that the issuer will be Pembina and such shares will be convertible into shares of Pembina. The terms of the Arrangement Agreement relating to the Transaction are to be more fully described in a management information circular which will be mailed to the shareholders of the Company (the “Disclosure Document”).
Background and Engagement of Scotia Capital
Scotia Capital was first contacted by the Company in December 2016 with regard to a potential strategic review of the Company. Scotia Capital was formally retained by the Company on January 4, 2017 pursuant to an engagement letter (the “Engagement Agreement”) to perform such financial advisory and investment banking services for the Company as are customary in transactions of this type including assisting the Company in analyzing strategic alternatives and, if requested, structuring, negotiating and effecting a Transaction (as defined in the Engagement Agreement). Pursuant to the Engagement Agreement, the Board of Directors of the Company has requested that Scotia Capital provide an opinion (the “Opinion”) as to the fairness, from a financial point of view, of the Consideration to be received by the holders of the Common Shares (the “Common Shareholders”) pursuant to the Transaction. The terms of the Engagement Agreement provide that Scotia Capital is to be paid a fee for its services as financial advisor, including fees that are contingent on the completion of the Transaction and fees payable upon delivery of the Opinion. The fees payable for delivery of the Opinion are not contingent on the completion of the Transaction. In addition, Scotia Capital is to be reimbursed for its reasonable out-of-pocket expenses and to be indemnified by the Company in certain circumstances.
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The Board of Directors has not instructed Scotia Capital to prepare, and Scotia Capital has not prepared, a formal valuation of the Company or any of its securities or assets, and the Opinion should not be construed as such. Scotia Capital has, however, conducted such analyses as it considered necessary in the circumstances to prepare and deliver the Opinion.
Subject to the terms of the Engagement Agreement, Scotia Capital consents to the inclusion of the Opinion in its entirety and a summary thereof in the Disclosure Document and to the filing of the Opinion, as necessary, with the securities commissions, stock exchanges and other similar regulatory authorities in Canada.
Overview of Veresen Inc.
Veresen owns and operates energy infrastructure assets across North America. Veresen is engaged in two principal businesses: a pipeline transportation business comprised of interests in the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System and a midstream business which includes a partnership interest in Veresen Midstream Limited Partnership, which owns assets in western Canada, and an ownership interest in Aux Sable, which owns a world-class natural gas liquids (NGL) extraction facility near Chicago, and other natural gas and NGL processing energy infrastructure; Veresen is also developing Jordan Cove LNG, a 7.8 million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the associated Pacific Connector Gas Pipeline.
Credentials of Scotia Capital
Scotia Capital represents the global corporate and investment banking and capital markets business of Scotiabank Group (“Scotiabank”), one of North America’s premier financial institutions. In Canada, Scotia Capital is one of the country’s largest investment banking firms with operations in all facets of corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading and investment research. Scotia Capital has participated in a significant number of transactions involving private and public companies and has extensive experience in preparing fairness opinions.
The Opinion expressed herein represents the opinion of Scotia Capital as a firm. The form and content of the Opinion have been approved for release by a committee of directors and other professionals of Scotia Capital, all of whom are experienced in merger, acquisition, divestiture, fairness opinion and valuation matters.
Relationships of Scotia Capital
Neither Scotia Capital nor any of its affiliates, is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of the Company, Acquirer or any of their respective associates or affiliates. Subject to the following, there are no understandings, agreements or commitments between or among Scotia Capital and the Company, Acquirer or any of their respective associates or affiliates with respect to any future business dealings. An affiliate of Scotiabank is currently a lender to both the Company and the Acquirer and Scotia Capital and certain of its affiliates have in the past provided, and may in the future provide, traditional banking, financial advisory or investment banking services to the Company or any of its affiliates and may in the future provide similar services to the Acquirer or its affiliates.
Scotia Capital acts as a trader and dealer, both as principal and agent, in the financial markets in Canada, the United States and elsewhere and, as such, it and Scotiabank, may have had and may have positions in the securities of the Company, or its affiliates from time to time and may have executed or may execute transactions on behalf of such companies or clients for which it receives compensation. As an investment dealer, Scotia Capital conducts research on securities and may, in the ordinary course of business, provide research reports and investment advice to its clients on investment matters, including with respect to the Company or any of its affiliates or the Acquirer or any of its affiliates or with respect to the Transaction.
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Scope of Review
In preparing the Opinion, Scotia Capital has reviewed, considered and relied upon, without attempting to verify independently the completeness or accuracy thereof, among other things:
(a) a draft Arrangement Agreement dated April 29, 2017, including the Plan of Arrangement appendedthereto (the “Arrangement Agreement”);
(b) a draft form of lock-up agreement (the “Support Agreement”) dated April 29, 2017 to be entered intobetween the Acquirer and each of Veresen’s directors and members of executive management;
(c) annual reports of the Company and Pembina for the fiscal years ended 2014 to 2016;
(d) the Notice of Annual Meeting of Shareholders and the Management Information Circular of theCompany for the fiscal years ended 2014 to 2016;
(e) audited financial statements and management discussion and analysis of the Company andPembina for the fiscal years ended 2014 to 2016;
(f) annual information forms of the Company and Pembina for the fiscal years ended 2014 to 2016;
(g) the budget for each of the Company and Pembina for the fiscal year ending 2017;
(h) financial projections for each of the Company and Pembina for the fiscal years ending 2017 to 2021prepared by the management of the Company and Pembina respectively;
(i) various detailed internal Company management reports;
(j) discussions with senior management of the Company and Pembina;
(k) discussions with the Company’s legal counsel;
(l) various research publications prepared by industry and equity research analysts regarding theCompany, Pembina and other selected entities considered relevant;
(m) public information relating to the business, operations, financial performance and stock tradinghistory of the Company, Pembina and other selected public companies considered by us to berelevant;
(n) public information with respect to other transactions of a comparable nature considered by us to berelevant;
(o) representations contained in a certificate addressed to Scotia Capital, as of the date hereof, fromsenior officers of the Company as to the completeness, accuracy and fair presentation of theinformation upon which the Opinion is based; and
(p) such other corporate, industry and financial market information, investigations and analyses asScotia Capital considered necessary or appropriate in the circumstances.
Scotia Capital has not, to the best of its knowledge, been denied access by the Company to anyinformation requested by Scotia Capital.
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Prior Valuations
The Company has represented to Scotia Capital that, to the best of its knowledge, there have been no valuations or appraisals of the Company or any material property of the Company or any of its subsidiaries or affiliates, made in the preceding twenty-four (24) months and in the possession or control or knowledge of the Company.
Assumptions and Limitations
The Opinion is subject to the assumptions, explanations and limitations set forth below.
Scotia Capital has, subject to the exercise of its professional judgment, relied, without independent verification, upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions and representations obtained by it from public sources, or that was provided to us, by the Company, and its associates and affiliates and advisors (collectively, the “Information”), and we have assumed that this Information did not omit to state any material fact or any fact necessary to be stated to make that information not misleading. The Opinion is conditional upon the completeness, accuracy and fair presentation of such Information. With respect to the Company’s financial projections provided to Scotia Capital by management of the Company and used in the analysis supporting the Opinion, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the matters covered thereby, and in rendering the Opinion we express no view as to the reasonableness of such forecasts or budgets or the assumptions on which they are based.
Senior management of the Company has represented to Scotia Capital in certificates delivered as at the date hereof, among other things, that to the best of their knowledge (a) the Company has no information or knowledge of any facts public or otherwise not specifically provided to Scotia Capital relating to the Company or any of its subsidiaries or affiliates which would reasonably be expected to affect materially the Opinion; (b) with the exception of forecasts, projections or estimates referred to in (d) below, the written Information provided to Scotia Capital by or on behalf of the Company in respect of the Company and its subsidiaries or affiliates, in connection with the Transaction is or, in the case of historical information or data, was, at the date of preparation, true and accurate in all material respects, and no additional material, data or information would be required to make the data provided to Scotia Capital by the Company not misleading in light of circumstances in which it was prepared; (c) to the extent that any of the Information identified in (b) above is historical, there have been no changes in material facts or new material facts since the respective dates thereof which have not been disclosed to Scotia Capital or updated by more current Information that has been disclosed; and (d) any portions of the Information provided to Scotia Capital which constitute forecasts, projections or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of the Company, are (or were at the time of preparation) reasonable in the circumstances.
The Opinion is rendered on the basis of the securities markets, economic, financial and general business conditions prevailing as at the date hereof and the conditions and prospects, financial and otherwise, of the Company and its subsidiaries and affiliates, as they were reflected in the Information. In its analyses and in preparing the Opinion, Scotia Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, which Scotia Capital believes to be reasonable and appropriate in the exercise of its professional judgment, many of which are beyond the control of Scotia Capital or any party involved in the Transaction.
For the purposes of rendering the Opinion, Scotia Capital has also made several assumptions, including that the final version of the Arrangement Agreement and Support Arrangement will conform in all material respects to the drafts provided to Scotia Capital, the representations and warranties of each party contained in the Arrangement Agreement and the Support Agreement are true and correct in all material respects, each party to the Arrangement Agreement and the Support Agreement will perform all of the covenants and agreements required to be performed by it under the Transaction, the Company will be
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entitled to fully enforce its rights under the Arrangement Agreement and receive the benefits therefrom in accordance with the terms thereof, and all of the conditions required to implement the Transaction will be satisfied.
The Opinion has been provided for the sole use of the Board of Directors of the Company in connection with its consideration of the Transaction and may not be used or relied upon by any other person. Our opinion does not constitute a recommendation to the Board of Directors or to any shareholder of the Company as to how such shareholder should vote or act with respect to the Transaction. The Opinion is given as of the date hereof, and Scotia Capital disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to the attention of Scotia Capital after the date hereof. Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting the Opinion after the date hereof, Scotia Capital reserves the right to change, modify or withdraw the Opinion.
Our Opinion does not address the relative merits of the Transaction as compared to other business strategies or transactions that might be available with respect to the Company or the Company’s underlying business decision to effect the Transaction. At your direction, we were not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, the Company or any other alternative transaction. This Opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the Consideration to be received by the Common Shareholders pursuant to the Transaction. Without limiting the foregoing, we do not express any view on, and our Opinion does not address, any other term or aspect of the Arrangement Agreement or any term or aspect of any other agreement or instrument contemplated by the Transaction or entered into or amended in connection with the Transaction. Scotia Capital is not an expert on, and did not render advice to the Board of Directors regarding legal, tax, accounting and regulatory matters.
The preparation of a fairness opinion is a complex process and it is not amenable to partial analysis or summary description. Scotia Capital believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors considered by it, without considering all facts and analyses together, could create an incomplete view of the process and analyses underlying the Opinion.
Approach to Fairness
In considering the fairness, from a financial point of view, of the Consideration to be received by the Common Shareholders pursuant to the Transaction , Scotia Capital reviewed, considered and relied upon, among other things, the following: (i) a comparison of the Consideration under the Transaction to the results of the financial analysis of Veresen on a sum-of-the-parts basis; (ii) a comparison of selected financial multiples implied by the Consideration under the Transaction to multiples paid, to the extent publicly available, in selected precedent transactions; (iii) a comparison of selected financial multiples of comparable companies whose securities are publicly traded to the multiples implied by the Consideration under the Transaction; (iv) a comparison of the Consideration under the Transaction to the recent market trading prices of the Veresen Common Shares; (v) a review of the form of Consideration under the Transaction and perspectives on the pro forma company including the potential synergies associated with the Transaction; and (vi) such other factors, studies and analyses, as we deemed appropriate. In arriving at its fairness determination, Scotia Capital considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Scotia Capital made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses.
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Conclusion
Based upon and subject to the foregoing and such other matters as we considered relevant, Scotia Capital is of the opinion that, as of the date hereof, the Consideration to be received by the Common Shareholders pursuant to the Transaction is fair, from a financial point of view, to such Common Shareholders.
Yours very truly,
SCOTIA CAPITAL INC.
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APPENDIX H
PREFERRED SHAREHOLDER FAIRNESS OPINION
Page 258
April 30, 2017
The Board of Directors Veresen Inc. Suite 900, Livingston Place, South Tower 222 – 3rd Avenue S.W. Calgary, Alberta T2P 0B4
To the Members of the Board:
Scotia Capital Inc. (“Scotia Capital”, “we” or “us”) understands that Veresen Inc. (“Veresen” or the “Company”) and Pembina Pipeline Corporation (“Pembina” or the “Acquirer”) propose to enter into an agreement (the “Arrangement Agreement”) whereby, among other things, subject to receipt of the requisite approval of the holders of Preferred Shares (as defined below), all of the outstanding cumulative redeemable preferred shares, series A, cumulative redeemable preferred shares, series B, cumulative redeemable preferred shares, series C, cumulative redeemable preferred shares, series D, cumulative redeemable preferred shares, series E, cumulative redeemable preferred shares, series F in the capital of the Company (collectively, the "Preferred Shares") will be exchanged for newly issued preferred shares in the capital of Pembina (the “Consideration”) with identical terms to the Preferred Shares except that the issuer will be Pembina and such shares will be convertible into shares of Pembina (the “Preferred Shares Transaction”). Pursuant to the Arrangement Agreement, Pembina will also acquire all of the outstanding common shares in the capital of Veresen (the “Common Shares”) for consideration of (i) 0.4287 of a common share of Pembina (a “Pembina Common Share”) or (ii) $18.65 in cash, for each Common Share subject to pro-ration based on maximum share consideration of 99,500,000 Pembina Common Shares and maximum cash consideration of $1,522,500,000 (the “Common Shares Transaction”). The Preferred Shares Transaction and the Common Shares Transaction (collectively, the “Transaction”) are to be effected by way of a court-approved plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (Alberta). The terms of the Arrangement Agreement relating to the Transaction are to be more fully described in a management information circular which will be mailed to the shareholders of the Company (the “Disclosure Document”).
Background and Engagement of Scotia Capital
Scotia Capital was first contacted by the Company in December 2016 with regard to a potential strategic review of the Company. Scotia Capital was formally retained by the Company on January 4, 2017 pursuant to an engagement letter (the “Engagement Agreement”) to perform such financial advisory and investment banking services for the Company as are customary in transactions of this type including assisting the Company in analyzing strategic alternatives and, if requested, structuring, negotiating and effecting a Transaction (as defined in the Engagement Agreement). Pursuant to the Engagement Agreement, the Board of Directors of the Company has requested that Scotia Capital provide an opinion (the “Opinion”) as to the fairness, from a financial point of view, of the Consideration to be received by the holders of the Preferred Shares (the “Preferred Shareholders”) pursuant to the Preferred Shares Transaction. The terms of the Engagement Agreement provide that Scotia Capital is to be paid a fee for its services as financial advisor, including fees that are contingent on the completion of the Transaction and fees payable upon delivery of the Opinion. The fees payable for delivery of the Opinion are not contingent on the completion of the Transaction. In addition, Scotia Capital is to be reimbursed for its reasonable out-of-pocket expenses and to be indemnified by the Company in certain circumstances.
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The Board of Directors has not instructed Scotia Capital to prepare, and Scotia Capital has not prepared, a formal valuation of the Company or any of its securities or assets, and the Opinion should not be construed as such. Scotia Capital has, however, conducted such analyses as it considered necessary in the circumstances to prepare and deliver the Opinion.
Subject to the terms of the Engagement Agreement, Scotia Capital consents to the inclusion of the Opinion in its entirety and a summary thereof in the Disclosure Document and to the filing of the Opinion, as necessary, with the securities commissions, stock exchanges and other similar regulatory authorities in Canada.
Overview of Veresen Inc.
Veresen owns and operates energy infrastructure assets across North America. Veresen is engaged in two principal businesses: a pipeline transportation business comprised of interests in the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System and a midstream business which includes a partnership interest in Veresen Midstream Limited Partnership, which owns assets in western Canada, and an ownership interest in Aux Sable, which owns a world-class natural gas liquids (NGL) extraction facility near Chicago, and other natural gas and NGL processing energy infrastructure; Veresen is also developing Jordan Cove LNG, a 7.8 million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the associated Pacific Connector Gas Pipeline.
Credentials of Scotia Capital
Scotia Capital represents the global corporate and investment banking and capital markets business of Scotiabank Group (“Scotiabank”), one of North America’s premier financial institutions. In Canada, Scotia Capital is one of the country’s largest investment banking firms with operations in all facets of corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading and investment research. Scotia Capital has participated in a significant number of transactions involving private and public companies and has extensive experience in preparing fairness opinions.
The Opinion expressed herein represents the opinion of Scotia Capital as a firm. The form and content of the Opinion have been approved for release by a committee of directors and other professionals of Scotia Capital, all of whom are experienced in merger, acquisition, divestiture, fairness opinion and valuation matters.
Relationships of Scotia Capital
Neither Scotia Capital nor any of its affiliates, is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of the Company, Acquirer or any of their respective associates or affiliates. Subject to the following, there are no understandings, agreements or commitments between or among Scotia Capital and the Company, Acquirer or any of their respective associates or affiliates with respect to any future business dealings. An affiliate of Scotiabank is currently a lender to both the Company and the Acquirer and Scotia Capital and certain of its affiliates have in the past provided, and may in the future provide, traditional banking, financial advisory or investment banking services to the Company or any of its affiliates and may in the future provide similar services to the Acquirer or its affiliates.
Scotia Capital acts as a trader and dealer, both as principal and agent, in the financial markets in Canada, the United States and elsewhere and, as such, it and Scotiabank, may have had and may have positions in the securities of the Company, or its affiliates from time to time and may have executed or may execute transactions on behalf of such companies or clients for which it receives compensation. As an investment dealer, Scotia Capital conducts research on securities and may, in the ordinary course of business, provide research reports and investment advice to its clients on investment matters, including with respect to the Company or any of its affiliates or the Acquirer or any of its affiliates or with respect to the Transaction.
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Scope of Review
In preparing the Opinion, Scotia Capital has reviewed, considered and relied upon, without attempting to verify independently the completeness or accuracy thereof, among other things:
(a) a draft Arrangement Agreement dated April 29, 2017, including the Plan of Arrangement appendedthereto (the “Arrangement Agreement”);
(b) a draft form of lock-up agreement (the “Support Agreement”) dated April 29, 2017 to be entered intobetween the Acquirer and each of Veresen’s directors and members of executive management;
(c) annual reports of the Company and Pembina for the fiscal years ended 2014 to 2016;
(d) the Notice of Annual Meeting of Shareholders and the Management Information Circular of theCompany for the fiscal years ended 2014 to 2016;
(e) audited financial statements and management discussion and analysis of the Company andPembina for the fiscal years ended 2014 to 2016;
(f) annual information forms of the Company and Pembina for the fiscal years ended 2014 to 2016;
(g) the prospectuses for each class of Preferred Shares issued by the Company;
(h) the budget for each of the Company and Pembina for the fiscal year ending 2017;
(i) financial projections for each of the Company and Pembina for the fiscal years ending 2017 to 2021prepared by the management of the Company and Pembina respectively;
(j) various detailed internal Company management reports;
(k) discussions with senior management of the Company and Pembina;
(l) discussions with the Company’s legal counsel;
(m) various research publications prepared by industry and equity research analysts regarding theCompany, Pembina and other selected entities considered relevant;
(n) public information relating to the business, operations, financial performance and stock tradinghistory of the Company, Pembina and other selected public companies considered by us to berelevant;
(o) public information with respect to other transactions of a comparable nature considered by us to berelevant;
(p) representations contained in a certificate addressed to Scotia Capital, as of the date hereof, fromsenior officers of the Company as to the completeness, accuracy and fair presentation of theinformation upon which the Opinion is based; and
(q) such other corporate, industry and financial market information, investigations and analyses asScotia Capital considered necessary or appropriate in the circumstances.
Scotia Capital has not, to the best of its knowledge, been denied access by the Company to anyinformation requested by Scotia Capital.
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Prior Valuations
The Company has represented to Scotia Capital that, to the best of its knowledge, there have been no valuations or appraisals of the Company or any material property of the Company or any of its subsidiaries or affiliates, made in the preceding twenty-four (24) months and in the possession or control or knowledge of the Company.
Assumptions and Limitations
The Opinion is subject to the assumptions, explanations and limitations set forth below.
Scotia Capital has, subject to the exercise of its professional judgment, relied, without independent verification, upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions and representations obtained by it from public sources, or that was provided to us, by the Company, and its associates and affiliates and advisors (collectively, the “Information”), and we have assumed that this Information did not omit to state any material fact or any fact necessary to be stated to make that information not misleading. The Opinion is conditional upon the completeness, accuracy and fair presentation of such Information. With respect to the Company’s financial projections provided to Scotia Capital by management of the Company and used in the analysis supporting the Opinion, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the matters covered thereby, and in rendering the Opinion we express no view as to the reasonableness of such forecasts or budgets or the assumptions on which they are based.
Senior management of the Company has represented to Scotia Capital in certificates delivered as at the date hereof, among other things, that to the best of their knowledge (a) the Company has no information or knowledge of any facts public or otherwise not specifically provided to Scotia Capital relating to the Company or any of its subsidiaries or affiliates which would reasonably be expected to affect materially the Opinion; (b) with the exception of forecasts, projections or estimates referred to in (d), below, the written Information provided to Scotia Capital by or on behalf of the Company in respect of the Company and its subsidiaries or affiliates, in connection with the Transaction is or, in the case of historical information or data, was, at the date of preparation, true and accurate in all material respects, and no additional material, data or information would be required to make the data provided to Scotia Capital by the Company not misleading in light of circumstances in which it was prepared; (c) to the extent that any of the Information identified in (b), above, is historical, there have been no changes in material facts or new material facts since the respective dates thereof which have not been disclosed to Scotia Capital or updated by more current Information that has been disclosed; and (d) any portions of the Information provided to Scotia Capital which constitute forecasts, projections or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of the Company, are (or were at the time of preparation) reasonable in the circumstances.
The Opinion is rendered on the basis of the securities markets, economic, financial and general business conditions prevailing as at the date hereof and the conditions and prospects, financial and otherwise, of the Company and its subsidiaries and affiliates, as they were reflected in the Information. In its analyses and in preparing the Opinion, Scotia Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, which Scotia Capital believes to be reasonable and appropriate in the exercise of its professional judgment, many of which are beyond the control of Scotia Capital or any party involved in the Preferred Shares Transaction.
For the purposes of rendering the Opinion, Scotia Capital has also made several assumptions, including that the final version of the Arrangement Agreement and Support Arrangement will conform in all material respects to the drafts provided to Scotia Capital, the representations and warranties of each party contained in the Arrangement Agreement and the Support Agreement are true and correct in all material respects, each party to the Arrangement Agreement and the Support Agreement will perform all of the covenants and agreements required to be performed by it under the Transaction, the Company will be
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entitled to fully enforce its rights under the Arrangement Agreement and receive the benefits therefrom in accordance with the terms thereof, and all of the conditions required to implement the Transaction will be satisfied.
The Opinion has been provided for the sole use of the Board of Directors of the Company in connection with its consideration of the Preferred Shares Transaction and may not be used or relied upon by any other person. Our opinion does not constitute a recommendation to the Board of Directors or to any shareholder of the Company as to how such shareholder should vote or act with respect to the Preferred Shares Transaction. The Opinion is given as of the date hereof, and Scotia Capital disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to the attention of Scotia Capital after the date hereof. Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting the Opinion after the date hereof, Scotia Capital reserves the right to change, modify or withdraw the Opinion.
Our Opinion does not address the relative merits of the Preferred Shares Transaction as compared to other business strategies or transactions that might be available with respect to the Company or the Company’s underlying business decision to effect the Preferred Shares Transaction. At your direction, we were not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, the Company or any other alternative transaction. This Opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the Consideration to be received by the Preferred Shareholders pursuant to the Preferred Shares Transaction. Without limiting the foregoing, we do not express any view on, and our Opinion does not address, any other term or aspect of the Arrangement Agreement or any term or aspect of any other agreement or instrument contemplated by the Preferred Shares Transaction or entered into or amended in connection with the Preferred Shares Transaction. Scotia Capital is not an expert on, and did not render advice to the Board of Directors regarding legal, tax, accounting and regulatory matters.
The preparation of a fairness opinion is a complex process and it is not amenable to partial analysis or summary description. Scotia Capital believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors considered by it, without considering all facts and analyses together, could create an incomplete view of the process and analyses underlying the Opinion.
Approach to Fairness
In considering the fairness, from a financial point of view, of the Consideration to be received by the Preferred Shareholders pursuant to the Preferred Shares Transaction, Scotia Capital reviewed, considered and relied upon, among other things, a comparison of the financial and non-financial terms of the Consideration to the financial and non-financial terms of the Preferred Shares. The compared terms included coupons and rate reset spreads, reset dates, redemption and conversion rights, and governance rights. Scotia Capital also examined the differences in capital structure and balance sheet, credit ratings, and forecasted revenue and EBITDA of the two issuers, Pembina and Veresen. Finally, Scotia Capital compared the liquidity of the existing Pembina preferred shares to that of the Preferred Shares. In arriving at its fairness determination, Scotia Capital considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Scotia Capital made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses.
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Conclusion
Based upon and subject to the foregoing and such other matters as we considered relevant, Scotia Capital is of the opinion that, as of the date hereof, the Consideration to be received by the Preferred Shareholders pursuant to the Preferred Shares Transaction is fair, from a financial point of view, to such Preferred Shareholders.
Yours very truly,
SCOTIA CAPITAL INC.
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APPENDIX I
PEMBINA UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
In connection with a proposed plan of arrangement (the "Arrangement") under the Business Corporations
Act (Alberta) (the "ABCA") involving, among others, Veresen Inc. ("Veresen"), the holders ("Veresen Common
Shareholders") of common shares in the capital of Veresen (the "Veresen Common Shares"), and the holders
("Veresen Preferred Shareholders" and together with the Common Shareholders, the "Veresen Shareholders") of
the cumulative redeemable preferred shares, series A, B, C, D, E and F, of Veresen (collectively, "Veresen Preferred
Shares") and Pembina Pipeline Corporation ("Pembina"), the following unaudited pro forma condensed combined
financial information, referred to herein as the pro forma financial information, presents the effect of the Arrangement
on the combined historical financial statements of Veresen and Pembina.
Veresen and Pembina entered into an arrangement agreement dated May 1, 2017 (the "Arrangement
Agreement"). Pursuant to the Arrangement Agreement and the accompanying Arrangement, Pembina will acquire all
of the issued and outstanding Veresen Common Shares. Pursuant to the Arrangement, Veresen Common Shareholders
will receive (i) 0.4287 common shares in the capital of Pembina (each one share, a "Pembina Common Share") or
(ii) $18.65 in cash, for each Veresen Common Share held, subject to pro-rationing based on maximum share consideration of 99,500,000 Pembina Common Shares and maximum cash consideration of $1,522,500,000. Immediately following completion of the Arrangement, assuming full pro-rationing and the issuance of the maximum number of Pembina Common Shares and maximum cash consideration, former Veresen Common Shareholders are anticipated to own approximately 20% of the combined entity and current holders of Pembina Common Shares are anticipated to own approximately 80% of the combined entity. The Arrangement is currently anticipated to be completed in the second half of 2017, subject to the satisfaction of customary closing conditions, including receipt of the Required Regulatory Approvals (as defined below), approval by the Court of Queen's Bench of Alberta and approval by the Veresen Common Shareholders of a resolution approving the Arrangement (the "Common Shareholder Resolution") by at least 662/3% of the votes cast by Veresen Common Shareholders, present in person or represented by proxy at a special meeting of the Common Shareholders to be held on July 11, 2017 (the "Common Shareholder Meeting"). The pro forma information has been prepared using the assumption that full pro-rationing will occur and the maximum number of Pembina Common Shares will be issued and the maximum amount of cash consideration paid pursuant to the Arrangement.
In addition, Veresen will be seeking approval of the Veresen Preferred Shareholders to effect the exchange
of the Veresen Preferred Shares for preferred shares of Pembina with the same terms and conditions as the outstanding
Veresen Preferred Shares. For such exchange to occur at closing of the Arrangement, a resolution of the Veresen
Preferred Shareholders approving the Arrangement (the "Preferred Shareholder Resolution") must be approved by
at least 662/3% of the votes cast by Veresen Preferred Shareholders, voting as one class, present in person or represented
by proxy at a special meeting of Veresen Preferred Shareholders to be held on July 11, 2017 (the "Preferred
Shareholder Meeting"). Closing of the Arrangement is not conditional on the approval of the Veresen Preferred
Shareholder Resolution; however the exchange of Veresen Preferred Shares has been assumed in the pro forma
information. Completion of the Arrangement is subject to approval of the Toronto Stock Exchange ("TSX") and the
New York Stock Exchange, as applicable, for the listing of the Pembina Common Shares and (subject to the Preferred
Shareholder Resolution receiving the requisite approvals) the preferred shares of Pembina issuable pursuant to the
Arrangement, approval under the Competition Act and the Canada Transportation Act and will be subject to the
expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "Required Regulatory Approvals").
The pro forma financial information described below gives pro forma effect to the Arrangement in
accordance with Section 8.4(7) of National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian
Securities Administrators ("NI 51-102") by applying pro forma adjustments to Veresen's and Pembina's historical
consolidated financial statements, which are incorporated by reference into the management information circular of
Veresen in relation to the Common Shareholder Meeting and the Preferred Shareholder Meeting, dated June 5, 2017
(the "Circular"). The pro forma financial information has been derived from the respective historical consolidated
financial statements of Veresen and Pembina, along with certain adjustments and assumptions made to give effect to
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the Arrangement. Adjustments in accordance with NI 51-102 include only adjustments to conform Veresen's financial
statement amounts to Pembina's accounting policies and adjustments for those pro forma events that are (a) directly
attributable to the Arrangement for which there are firm commitments and (b) for which the complete financial effects
are objectively determinable. No adjustments have been made to eliminate non-recurring effects of the Arrangement
that are not expected to continue in future periods, to eliminate discontinued operations or to adjust the related assets
or liabilities associated with assets held for sale. The pro forma adjustments are based upon available information and
certain assumptions that management of Veresen and Pembina each believe are reasonable under the circumstances.
The Arrangement is more particularly described and set forth in the Circular accompanying the pro forma
financial information.
The pro forma financial information presents the combined effect on the historical statements and provides
the following resulting information:
Historical Information of
Veresen and Pembina
Historical Dates and Giving
Effect Resulting Information
Consolidated statements of
financial position
As at March 31, 2017 Unaudited pro forma condensed combined statement of
financial position, referred to as the pro forma statement of
financial position
Consolidated statements of
earnings
For the year ended December 31,
2016; and for the three months
ended March 31, 2017
Unaudited pro forma condensed combined statements of
earnings, referred to as the pro forma statements of earnings.
Fair value adjustments to net assets acquired at March 31,
2017 have been applied to an assumed acquisition date of
January 1, 2016 for purposes of the pro forma statements of
earnings
The pro forma financial information is presented for illustrative purposes only and does not include, among
other things, estimated cost synergies, adjustments related to restructuring or integration activities, further acquisitions
or disposals not yet known or probable, or impacts of Arrangement-related change in control provisions that are
currently not factually supportable and/or probable of occurring. Therefore, the pro forma condensed combined
financial information is presented for informational purposes only and is not necessarily indicative of what Pembina's
actual financial condition or results of operations would have been had the Arrangement been completed on the date
indicated, nor does it purport to project Pembina's future financial position or results of operations for any future
period or as of any future date. Accordingly, the combined business, assets, results of operations and financial
condition may differ significantly from those indicated.
The Arrangement shall constitute a "change in control" for purposes of the applicable Veresen long term
incentive and executive employment plans and, as a result, units outstanding under these plans will vest and, together
with payments due under the executive employment agreements, be settled in cash immediately prior to the effective
time of the Arrangement. The pro forma financial information recognizes these payments.
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All pro forma adjustments and their underlying assumptions are described more fully in the notes to this pro
forma financial information. The pro forma financial information should be read in conjunction with the following:
(a) The accompanying notes to the unaudited pro forma condensed combined financial information;
(b) The audited consolidated financial statements of Veresen as at and for the year ended December 31,
2016 and the related notes;
(c) The unaudited interim consolidated financial statements of Veresen as at and for the three months
ended March 31, 2017 and the related notes (collectively with item (b), "Veresen's historical
financial statements");
(d) The audited consolidated financial statements of Pembina as at and for the year ended December
31, 2016 and the related notes; and,
(e) The unaudited interim condensed consolidated financial statements of Pembina as at and for the
three months ended March, 2017 and the related notes (collectively with item (d), "Pembina's
historical financial statements").
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PEMBINA PIPELINE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Financial Position
As at March 31, 2017
Historical Pro Forma Note 4 Combined
Pembina Veresen(1) Adjustments Reference(s) Pro Forma
(in millions of Cdn dollars)
Assets
Current Assets
Cash and cash equivalents 36 163 (41) b(iv) 158
Trade receivable and other 463 29 492
Distributions receivable 65 65
Derivative financial instruments 6 6
Inventory 123 123
Assets held for sale 779 779
Total current assets 628 1,036 (41) 1,623
Non-current assets
Property, plant and equipment 12,002 315 12 b(iii) 12,329
Intangible assets and goodwill 2,826 45 3,617 b(i) 6,488
Investments in jointly-controlled businesses 131 1,535 1,804 b(ii) 3,470
Investments held at cost 1,804 (1,804) b(ii)
Deferred tax assets 27 27
Other receivables 11 5 16
Total Assets 15,625 4,740 3,588 23,953
Liabilities
Current liabilities
Trade payables and accrued liabilities 774 51 79 b(iv) 904
Taxes payable 4 10 14
Dividends payable 64 26 90
Loans and borrowings 6 4 10
Derivative financial instruments 10 10
Liabilities associated with assets held for sale 173 173
Total current liabilities 858 264 79 1,201
Non-current liabilities
Loans and borrowings 4,333 1,425 1,560 b(i) 7,318
Convertible debentures 144 144
Derivative financial instruments 57 57
Employee benefits 39 39
Deferred revenue 88 88
Decommissioning provision 504 12 b(iii) 516
Deferred tax liabilities 1,175 223 (32) b(v) 1,366
Other liabilities 47 47
Total Liabilities 7,198 1,959 1,619 10,776
Equity
Common share capital 8,935 3,482 846 b(i) 13,263
Preferred share capital 1,509 536 (26) b(i) 2,019
Deficit (2,005) (1,527) 1,439 b(i), b(iv),b(vi) (2,093)
Additional paid in capital 28 (28) b(i)
Accumulated other comprehensive income (12) 262 (262) b(i) (12)
Total Equity 8,427 2,781 1,969 13,177
Total Liabilities and Equity 15,625 4,740 3,588 23,953 (1) The financial information in this column has been derived from Veresen's historical financial statements as at March 31, 2017 with certain reclassifications as
described in further detail in Note 6.
See the accompanying notes to this Unaudited Pro Forma Condensed Combined Financial Information, which are an integral part of this pro forma financial
information.
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PEMBINA PIPELINE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the year ended December 31, 2016
Historical Pro Forma Note 4 Combined
Pembina(1) Veresen(1) Adjustments Reference(s)
Pro
Forma
(in millions of Cdn dollars)
Revenue 4,265 53 4,318
Cost of sales 3,193 29 3,222
Loss on commodity related financial
derivative instruments (71) (71)
Gross Profit 1,001 24 1,025
General and administrative 195 52 247
Other income (1) (1)
Project development 133 133
Results from operating activities 807 (161) 646
Asset impairment loss 103 (103) c(iii)
Net finance costs 153 37 27 c(i), c(ii) 217
Earnings (loss) before equity income
and income tax 654 (301) (76) 429
Equity income 1 149 71 c(ii), c(iv), c(v), c(vi) 221
Dividend income 121 (121) c(iv)
Earnings (loss) before income tax 655 (31) 26 650
Current tax expense (recovery) 50 11 (10) c(vii) 51
Deferred tax expense (recovery) 139 (51) 21 c(vii) 109
Income tax expense 189 (40) 11 160
Earnings for the year 466 9 15 490
Discontinued operations income (loss) (3) (3)
Earnings for the year 466 6 15 487 (1) The financial information in this column has been derived from Pembina and Veresen's historical financial statements for the year ended December 31, 2016 with
certain reclassifications as described in further detail in Note 6.
See the accompanying notes to this Unaudited Pro Forma Condensed Combined Financial Information, which are an integral part of this pro forma financial
information.
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PEMBINA PIPELINE CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the three months ended March 31, 2017
Historical Pro Forma Note 4 Combined
Pembina Veresen(1) Adjustments Reference(s) Pro Forma
(in millions of Cdn dollars)
Revenue 1,485 12 1,497
Cost of sales 1,117 6 1,123
Gain on commodity related financial
derivative instruments 13 13
Gross Profit 381 6 387
General and administrative 60 13 73
Other income (3) (3)
Project development 16 16
Results from operating activities 324 (23) 301
Net finance costs 30 12 8 c(i), c(ii) 50
Earnings (loss) before equity income
and income tax 294 (35) (8) 251
Equity income 59 30 c(ii), c(iv), c(v), c(vi) 89
Dividend income 30 (30) c(iv)
Earnings before income tax 294 54 (8) 340
Current tax expense (recovery) 12 3 (2) c(vii) 13
Deferred tax expense 67 10 c(vii) 77
Income tax expense 79 13 (2) 90
Earnings for the period 215 41 (6) 250
Discontinued operations income 12 12
Earnings for the period 215 53 (6) 262 (1) The financial information in this column has been derived from Veresen's historical financial statements for the three months ended March 31, 2017 with certain
reclassifications as described in further detail in Note 6.
See the accompanying notes to this Unaudited Pro Forma Condensed Combined Financial Information, which are an integral part of this pro forma financial
information.
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PEMBINA
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL INFORMATION
(millions of Cdn dollars, except as otherwise noted)
Note 1 Description of the Arrangement
Veresen and Pembina entered into the Arrangement Agreement on May 1, 2017. Pursuant to the Arrangement
Agreement and the accompanying Arrangement, Pembina will acquire all of the issued and outstanding Veresen
Common Shares. Pursuant to the Arrangement, Veresen Shareholders will receive (i) 0.4287 Pembina Common
Shares or (ii) $18.65 in cash, for each Veresen Share held, subject to pro-rationing based on maximum share
consideration of 99,500,000 Pembina common shares and maximum cash consideration of $1,522,500,000.
Immediately following completion of the Arrangement, assuming full pro-rationing and the issuance of the maximum
number of Pembina Common Shares and maximum cash consideration, former Veresen Common Shareholders are
anticipated to own approximately 20% of the combined entity and current holders of Pembina Common Shares are
anticipated to own approximately 80% of the combined entity. The Arrangement is currently anticipated to be
completed in the second half of 2017, subject to the satisfaction of customary closing conditions, including receipt of
the Required Regulatory Approvals, approval by the Court of Queen's Bench of Alberta and approval by the Veresen
Common Shareholders of the Common Shareholder Resolution by at least 662/3% of the votes cast by Veresen
Common Shareholders, present in person or represented by proxy at the Common Shareholder Meeting. The pro forma
information has been prepared using the assumption that full pro-rationing will occur and the maximum number of
Pembina Common Shares will be issued and the maximum amount of cash consideration paid pursuant to the
Arrangement.
In addition, Veresen will be seeking approval of the Veresen Preferred Shareholders to effect the exchange
of the Veresen Preferred Shares for the Pembina Exchange Shares. For such exchange to occur at closing of the
Arrangement, the Preferred Shareholder Resolution must be approved by at least 662/3% of the votes cast by Veresen
Preferred Shareholders, voting as one class, present in person or represented by proxy at the Preferred Shareholder
Meeting. Closing of the Arrangement is not conditional on the approval of the Veresen Preferred Shareholder
Resolution; however the exchange of Veresen Preferred Shares has been assumed in the pro forma information.
The pro forma financial information described below gives pro forma effect to the Arrangement in
accordance with Section 8.4(7) of NI 51-102 by applying pro forma adjustments to Veresen's and Pembina's historical
consolidated financial statements, which are incorporated by reference into the management information circular in
relation to the Common Shareholder Meeting and the Preferred Shareholder Meeting, dated June 5, 2017. The pro
forma financial information has been derived from the respective historical consolidated financial statements of
Veresen and Pembina, along with certain adjustments and assumptions made to give effect to the Arrangement.
Adjustments in accordance with NI 51-102 include only adjustments to conform Veresen's financial statement
amounts to Pembina's accounting policies and adjustments for those pro forma events that are (a) directly attributable
to the Arrangement for which there are firm commitments and (b) for which the complete financial effects are
objectively determinable. No adjustments have been made to eliminate non-recurring effects of the Arrangement that
are not expected to continue in future periods, or to eliminate discontinued operations or adjust the related assets or
liabilities associated with assets held for sale. The pro forma adjustments are based upon available information and
certain assumptions that management of Veresen and Pembina each believe are reasonable under the circumstances.
The Arrangement is more particularly described and set forth in the Circular accompanying the pro forma
financial information.
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Note 2 Basis of Presentation
The pro forma financial information gives pro forma effect to the Arrangement in accordance with Section
8.4(7) of NI 51-102 by applying pro forma adjustments to Veresen's and Pembina's historical consolidated financial
statements, which are incorporated by reference into the Circular. The pro forma financial information has been
derived from the respective historical consolidated financial statements of Veresen and Pembina, along with certain
adjustments and assumptions made to give effect to the Arrangement. Adjustments in accordance with NI 51-102
include only adjustments to conform Veresen's financial statement amounts to Pembina's accounting policies and
adjustments for those pro forma events that are (a) directly attributable to the Arrangement for which there are firm
commitments and (b) for which the complete financial effects are objectively determinable. No adjustments have been
made to eliminate non-recurring effects of the Arrangement that are not expected to continue in the statement of
earnings in future periods, to eliminate discontinued operations and the related assets or liabilities associated with
assets held for sale or to recognize adjustments to either parties' interests in their recognized assets or liabilities due to
the outcome of the finalization of their processes to closing. The pro forma adjustments are based upon available
information and certain assumptions that management of Veresen and Pembina each believes are reasonable under
the circumstances.
The pro forma financial information combines and provides the following:
Historical Information of
Veresen and Pembina
Historical Dates and Giving
Effect Resulting Information
Consolidated statements of
financial position
As of March 31, 2017 Unaudited pro forma condensed combined statement of
financial position, referred to as the pro forma statement of
financial position
Consolidated statements of
earnings
For the year ended December 31,
2016; and for the three months
ended March 31, 2017
Unaudited pro forma condensed combined statements of
earnings, referred to as the pro forma statements of earnings.
Fair value adjustments to net assets acquired at March 31,
2017 have been applied to an assumed acquisition date of
January 1, 2016 for purposes of the pro forma statements of
earnings
The pro forma financial information is presented for illustrative purposes only and does not include, among
other things, estimated cost synergies, adjustments related to restructuring or integration activities, former acquisitions
or disposals, or impacts of Arrangement-related change in control provisions that are currently not factually
supportable and/or probable of occurring. Therefore, the pro forma condensed combined financial information is
presented for informational purpose only and is not necessarily indicative of what Pembina's actual financial condition
or results of operations would have been had the Arrangement been completed on the date indicated, nor does it
purport to project Pembina's future financial position or results of operations for any future period or as of any future
date. Accordingly, the combined business, assets, results of operations and financial condition may differ significantly
from those indicated.
The pro forma financial information should be read in conjunction with Veresen's historical financial
statements and Pembina's historical financial statements. Veresen's historical financial statements have been adjusted
to reclassify line items to conform to Pembina's presentation. Additional reclassifications may be necessary on
completion of the Arrangement.
The Arrangement has been accounted for in the pro forma financial information using the acquisition method
under International Financial Reporting Standard 3 - Business Combinations ("IFRS 3") of the International
Accounting Standards Board ("IASB"). Pembina is the acquiring entity for accounting purposes.
At the date of preparation of this pro forma financial information, certain pro forma adjustments have been
made as identified herein. See Note 4 for further details.
The Arrangement consideration in the pro forma financial information is based on the closing price of
Pembina shares on the TSX on April 28, 2017 the last trading day on which Pembina Shares traded prior to Veresen
and Pembina announcing the Arrangement. However, the actual purchase price will be based on the closing price of
Pembina shares on the TSX on the date of closing of the Arrangement. Accordingly, the purchase price and the value
of identifiable assets acquired, liabilities assumed and goodwill ultimately recorded at the date of closing of the
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Arrangement could differ materially.
Note 3 Significant Accounting Policies
The accounting policies used in the preparation of the pro forma financial information are those set out in
Pembina's audited consolidated financial statements as at and for the year ended December 31, 2016, which were
prepared in accordance with International Financial Reporting Standards as issued by the IASB ("IFRS"). Veresen's
audited consolidated financial statements as at and for the year ended December 31, 2016 were prepared in accordance
with United States Generally Accepted Accounting Principles ("US GAAP"). The pro forma financial information
has been prepared based on the historical financial statements of Veresen and Pembina. For the purposes of this pro
forma financial information, Veresen and Pembina completed a review of potential adjustments needed to conform
Veresen's historical financial statements to Pembina's and concluded that there were adjustments required to conform
Veresen's financial statements from US GAAP to IFRS ("IFRS adjustments"). Upon completion of the Arrangement,
Pembina will perform a further review and comparison of the accounting policies of Veresen and Pembina. From that
review, Pembina may identify differences between the accounting policies of the two companies that, when
conformed, could have a material impact on the financial statements of Pembina.
Certain reclassifications were made to align the presentation of Veresen's historical financial statements with
Pembina's current presentation, as set out in Note 6. The reclassifications have no impact on the historical statements
of income of Veresen and accordingly no impact on the pro forma statements of earnings of Pembina.
Note 4 Pro Forma Adjustments
(a) Pro Forma Purchase Price and Purchase Price Allocation
At the date of preparation of this pro forma financial information, certain pro forma adjustments have been
made as identified herein; however, the fair values of Veresen's identifiable assets and liabilities to be assumed and
the full impact of applying acquisition accounting have not been fully determined. After reflecting the pro forma
adjustments made herein, the excess of the purchase consideration over the adjusted book values of Veresen's net
assets has been presented as goodwill. It is expected that following closing of the Arrangement and once detailed
valuations and related calculations are completed, a material portion of the amount allocated to goodwill will be
attributable to property, plant and equipment, investments in jointly-controlled businesses, intangible assets, other
assets and liabilities and related deferred income tax balances. Some property, plant and equipment and intangible
assets are expected to be finite-lived and accordingly subject to amortization. The actual amount assigned to the fair
values of the identifiable assets and liabilities acquired will result in changes to earnings in periods subsequent to the
Arrangement, and those changes could be material.
Details of the Arrangement are as follows:
Maximum Pembina shares to be issued in the Arrangement (millions of shares) 99.5
Pembina closing share price as at April 28, 2017 (dollars) 43.5
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Arrangement consideration, pro forma net assets acquired and goodwill:
($millions)
Pembina share consideration 4,328
Pembina cash consideration 1,523
Pembina preferred shares issued to replace Veresen preferred shares 510
Total pro forma Arrangement consideration 6,361
Veresen net assets as at March 31, 2017, per Veresen's historical financial statements 2,781
Fair value adjustments
Increase long-term debt to fair value as at March 31, 2017 37
Fair value of Veresen net assets acquired 2,744
Calculated pro forma Arrangement goodwill 3,617
6,361
(b) Pro Forma Statement of Financial Position
The pro forma statement of financial position as at March 31, 2017 has been adjusted to give effect to the
consummation of the Arrangement and exchange of Veresen preferred shares to Pembina preferred shares with the
same terms and conditions, as if it had occurred on March 31, 2017. The following pro forma adjustments and IFRS
adjustments were made:
(i) Certain liabilities have been adjusted to fair values as described in Note 4(a). The pro forma excess
of the estimated Arrangement consideration over the fair value of Veresen's assets and liabilities
has been recorded as goodwill.
(ii) Veresen’s Investments held at cost of $1,804 million as of March 31, 2017 related to the Ruby
Pipeline preferred interest have been recorded as Investments in jointly-controlled businesses.
(iii) Asset retirement obligations ("ARO") under IFRS have been estimated for Veresen's property,
plant and equipment resulting in an increase of $12 million to both decommissioning provision
and property, plant and equipment. An ARO adjustment of $257 million relating to property, plant
and equipment owned by entities accounted for as Investments in jointly controlled businesses has
resulted in an increase and corresponding decrease to Investments in jointly controlled businesses.
(iv) Change in control payments of $79 million related to compensation were accrued in Trade payables
and accrued liabilities based on estimates by Pembina management. Cash was adjusted for
estimated transaction costs of $41 million.
(v) Adjustment to deferred income tax liabilities consists of the income tax effects related to change
in control payments related to executive compensation ($21 million) and transaction costs expected
to be incurred by Veresen and Pembina ($11 million).
(vi) In addition to (i), adjustment to deficit consists of the after income tax effects for compensation
and transaction expenses ($88 million).
(c) Pro Forma Statements of Earnings
The pro forma statements of earnings for the year ended December 31, 2016 and the three months ended
March 31, 2017 have been adjusted to give effect to the consummation of the Arrangement as if it had occurred on
January 1, 2016. The following pro forma adjustments were made:
(i) The interest expense on cash drawn on Pembina's line of credit for payments to Veresen
shareholders and change in control payments has been recorded. Net finance costs have been
increased by $36 million for the year ended December 31, 2016 and $9 million for the three months
ending March 31, 2017.
(ii) The excess of the fair values of Veresen's long-term debt over their carrying values were amortized
using the effective interest method over the remaining terms of the long-term debt. Decreased
finance costs of $9 million and $1 million were recorded for the year ended December 31, 2016
and for the three months ended March 31, 2017, respectively.
The excess of the fair values of the long-term debt held by Veresen's jointly controlled businesses
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over the carrying values was amortized using the effective interest method over the remaining
terms of the long-term debt. Decreased finance costs of $12 million and $3 million were recorded
for the year ended December 31, 2016 and for the three months ended March 31, 2017, respectively
as adjustments to equity income.
(iii) The Ruby pipeline impairment of $103 million for the year ended December 31, 2016 has been
reversed as the fair value of the asset at March 31, 2017 has been pushed back to January 1, 2016
for purposes of the pro forma statements.
(iv) The Ruby pipeline has been accounted for as an equity investment for the purposes of the pro
forma statements. The Ruby equity interest consists of 50% voting unit ownership in the Ruby
pipeline with preferential rights to dividends and distributions. Equity income of $70 million and
$30 million has been recognized for the year ended December 31, 2016 and for the three months
ended March 31, 2017, net of depreciation expense incurred of $70 million and $18 million and
other expenses in those respective periods. The preferential dividend income of $121 million and
$30 million for the year ended December 31, 2016 and three months ended March 31, 2017,
respectively has been derecognized.
(v) Equity income has been adjusted for accretion expense relating to ARO adjustments of $5 million
and $1 million recorded for the year ended December 31, 2016 and for the three months ended
March 31, 2017, respectively.
(vi) Equity income has been adjusted for depreciation of property, plant and equipment of $6 million
and $2 million recognized for the year ended December 31, 2016 and for the three months ended
March 31, 2017, respectively.
(vii) Enacted or substantively enacted Canadian tax rate of 27% and US rate of 40% was used to
determine the income tax effect of the above pro forma adjustments. The enacted or substantively
enacted tax rate could be different than the tax rates assumed for the purpose of preparing this pro
forma financial information.
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Note 5 Earnings per Share Information
Pro forma net earnings per share
Year Ended
December 31, 2016
Three Months Ended
March 31, 2017
Basic and diluted net earnings per share (1)
Net earnings attributable to shareholders (millions) $414 $243
Weighted average shares (millions) 487 497
Net earnings per share (dollars) $.85 $.49 (1) Net earnings per share calculations are based on dollar amounts rounded to the nearest million and share amounts rounded to the nearest ten thousand.
Note 6 Reclassification
The following reclassifications were made to Pembina's historical financial statements:
(a) Pembina's Consolidated Statement of Financial Position: Equity accounted investment has been recast
on the balance sheet as Investments in jointly-controlled businesses.
(b) Pembina's Statements of Earnings: Share of profit from equity accounted investees has been recast as
equity income.
The following reclassifications were made to align the presentation of Veresen's historical financial
statements with Pembina's current presentation. The reclassifications have no impact on the historical net earnings
of Veresen.
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PEMBINA PIPELINE CORPORATION PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS RECLASSIFICATIONS
For the year ended December 31, 2016
UNAUDITED
Veresen
Reclassification
Amounts
Amount after
Reclassification Reference
(in millions of Cdn dollars)
2016 2016
Revenue 53 53 1
Equity income 149 (149) 2
Dividend income 121 (121) 3
Operating revenues 53 (53) 1
Operations and maintenance 24 (24) 4
Cost of sales 24 29 4
5 8
General and administrative 38 (38) 5
Impairment loss 103 (103) 6
Project development 133 (133) 7
Depreciation and amortization 19 (19) 8
Interest and other finance 39 (39) 9
Foreign exchange and other 2 (2) 10
Gross profit (loss) (31) 55 24
General and administrative 38 52 5
14 8
Project development 133 133 7
Results from operating activities (31) (130) (161)
Impairment loss 103 103 6
Finance costs 39 37 9
(2) 10
Earnings (loss) before equity income, dividend
income and income tax
(31) (270) (301)
Equity income 149 149 2
Dividend income 121 121 3
Earnings (loss) before income tax (31) (31)
Current taxes 11 11
Deferred taxes (recovery) (51) (51)
Income taxes (40) (40)
Earnings for the year ended before discontinued
operations
9 9
Discontinued operations loss (3) (3)
Earnings for the year 6 6
1 Operating revenues of $53 million to revenue 2 Equity income $149 from gross profit to earnings before income tax
3 Dividend income $121 million from gross profit to earnings before income tax
4 Operation and maintenance $24 million to cost of sales 5 General and administrative $38 million from gross profit to results from operating activities
6 Impairment loss $103 million from gross profit to earnings before finance costs and income tax
7 Project development $133 million from gross profit to results from operating activities 8 Depreciation and amortization of $19 million to general and administrative ($14 million) and cost of sales ($5 million)
9 Interest and other finance $39 million to finance costs 10 Foreign exchange and other income of $2 million to finance costs
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PEMBINA PIPELINE CORPORATION PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS RECLASSIFICATIONS
For the three month period ended March 31, 2017
UNAUDITED
Veresen
Reclassification
Amounts
Amount after
Reclassification Reference
(in millions of Cdn dollars) 2017 2017
Revenue 12 12 1
Equity income 59 (59) 2
Dividend income 30 (30) 3
Operating revenues 12 (12) 1
Operations and maintenance 5 (5) 4
Cost of sales 5 6 4
1 7
General and administrative 9 (9) 5
Impairment loss
Project development 16 (16) 6
Depreciation and amortization 5 (5) 7
Interest and other finance 12 (12) 8
Gross profit 54 (48) 6
General and administrative 4 13 7
9 5
Project development 16 16 6
Results from operating activities 54 (77) (23)
Finance costs 12 12 8
Earnings before equity income, dividend income
and income tax
54 (89) (35)
Equity income 59 59 2
Dividend income 30 30 3
Earnings before income tax 54 54
Current taxes 3 3
Deferred taxes 10 10
Income taxes 13 13
Earnings for the period ended before discontinued
operations
41 41
Discontinued operations income 12 12
Earnings for the period 53 53
1 Operating revenues of $12 million to revenue
2 Equity income $59 from gross profit to earnings before income tax
3 Dividend income $30 million from gross profit to earnings before income tax 4 Operation and maintenance $5 million to cost of sales
5 General and administrative $9 million from gross profit to results from operating activities
6 Project development $16 million from gross profit to results from operating activities 7 Depreciation and amortization of $5 million to general and administrative ($4 million) and cost of sales ($1 million)
8 Interest and other finance $12 million to finance costs
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PEMBINA PIPELINE CORPORATION PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION RECLASSIFICATIONS
As at March 31, 2017
UNAUDITED
Veresen
Reclassification
Amounts
Amount after
Reclassification Reference
(in millions of Cdn dollars) 31-Mar 31-Mar
2017 2017
ASSETS
Current Assets
Cash and cash equivalents 163 163
Accounts receivable and other 29 (29) 1
Trade receivable and other 29 29 1
Distributions receivable 65 65
Assets held for sale 779 779
Total current assets 1,036 1,036
Non-current assets
Property, plant & equipment 315 315
Intangible assets and goodwill 45 45 2
Investments in jointly-controlled businesses 1,535 1,535
Investments held at cost 1,804 1,804
Intangible assets 45 (45) 2
Due from jointly-controlled businesses 3 (3) 3
Other assets 2 (2) 3
Other receivables 5 5 3
TOTAL ASSETS 4,740 4,740
LIABILITIES
Current liabilities
Accounts payable and other 57 (57) 4
Deferred revenue 4 (4) 5
Trade payables and accrued liabilities 57 51 4
4 5
(10) 6
Taxes payable 10 10 6
Dividends payable 26 26
Loans and borrowings 4 4 7
Current portion of long-term senior debt 4 (4) 7
Liabilities associated with assets held for sale 173 173
Total current liabilities 264 264
Non-current liabilities
Loans and borrowings 1,425 1,425 8
Long-term senior debt 1,425 (1,425) 8
Deferred tax liabilities 223 223
Other long term liabilities 47 (47) 9
Other liabilities 47 47 9
Total Liabilities 1,959 1,959
EQUITY
Common share capital 3,482 3,482
Preferred share capital 536 536
Deficit (1,527) (1,527)
Additional paid-in capital 28 28
Accumulated other comprehensive income 262 262
Total Equity 2,781 2,781
TOTAL LIABILITIES & EQUITY 4,740 4,740
1 Accounts receivable of $29 million to trade receivable and other
2 Intangible assets of $45 million to intangible assets and goodwill
3 Due from jointly-controlled businesses ($3 million) and other assets ($2 million) to other receivables 4. Accounts payable and other of $57 million to trade payable and other
5 Deferred revenue of $4 million to trade payable and other6 Taxes payable of $10 million from accounts payable and other
7 Current portion of long term senior debt of $4 million to loans and borrowings (current portion)
8 Long term senior debt of $1,425 million to loans and borrowings9 Other long term liabilities of $47 million to other liabilities
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APPENDIX J
INFORMATION CONCERNING VERESEN INC.
TABLE OF CONTENTS
NOTICE TO READER .............................................................................................................................................J-2 FORWARD-LOOKING STATEMENTS .................................................................................................................J-2 NON-U.S. GAAP MEASURES ................................................................................................................................J-2 DOCUMENTS INCORPORATED BY REFERENCE ............................................................................................J-2 VERESEN INC. ........................................................................................................................................................J-3 RECENT DEVELOPMENTS ...................................................................................................................................J-3 DESCRIPTION OF SECURITIES ............................................................................................................................J-4 CONSOLIDATED CAPITALIZATION OF VERESEN ..........................................................................................J-5 PRIOR SALES ..........................................................................................................................................................J-6 PRICE RANGE AND TRADING VOLUME OF SECURITIES .............................................................................J-6 INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS ........................................................J-7 AUDITORS, REGISTRAR AND TRANSFER AGENT ..........................................................................................J-7 RISK FACTORS .......................................................................................................................................................J-8 ADDITIONAL INFORMATION..............................................................................................................................J-8
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NOTICE TO READER
Unless the context indicates otherwise, capitalized terms which are used in this Appendix J and not otherwise defined
in this Appendix J have the meanings given to such terms under the heading “Glossary of Terms” in the Information
Circular.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Appendix J, and in the documents incorporated by reference into this Appendix
J, constitute forward-looking statements and forward-looking information (collectively referred to as “forward-
looking statements”) within the meaning of applicable securities laws. Such forward-looking statements relate to
future events or Veresen’s future performance. See “Forward-Looking Statements” in the Information Circular.
Readers should also carefully consider the matters and cautionary statements discussed under the heading “Risk
Factors” in the Information Circular, and under the heading “Risk Factors” in this Appendix J and the Veresen AIF.
NON-U.S. GAAP MEASURES
In certain documents incorporated by reference into this Appendix J, there are references to the terms EBIDTA,
distributable cash, distributable cash per Common Share and adjusted net income attributable to Common Shares.
These non-U.S. GAAP financial measures do not have standardized meanings prescribed by U.S. GAAP and are
therefore unlikely to be comparable to similar measures presented by other issuers. Veresen cautions Shareholders not
to consider these non-U.S. GAAP financial measures as an alternative to, or more meaningful than measures of
financial performance as determined in accordance with U.S. GAAP. Veresen further cautions Shareholders not to
place undue reliance on any one financial measure.
For more information, see the Veresen AIF, the Veresen Annual MD&A and the Veresen Interim MD&A, each of
which is incorporated herein by reference.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference in this Information Circular, including this Appendix “J”,
from documents filed with securities commissions or similar authorities in Canada. Copies of the documents
incorporated herein by reference may be obtained on request without charge from Autumn Howell, Corporate
Secretary of Veresen, at Suite 900, Livingston Place, 222 - 3rd Avenue S.W., Calgary, Alberta T2P 0B4, Phone: (403)
296-0140 or (403) 213-3633 (Investor Relations). In addition, copies of the documents incorporated herein by
reference may be obtained by accessing the disclosure documents available on the SEDAR website at www.sedar.com.
The following documents of Veresen are filed with the various securities commissions or similar authorities in the
provinces of Canada and are specifically incorporated by reference into and form an integral part of the Information
Circular:
(a) the Veresen AIF;
(b) the Veresen Annual Financial Statements;
(c) the Veresen Interim Financial Statements;
(d) the Veresen Annual MD&A;
(e) the Veresen Interim MD&A;
(f) the information circular of Veresen dated March 14, 2017 relating to the annual meeting of
shareholders held on May 3, 2017;
(g) the material change report of Veresen dated February 27, 2017; and
(h) the material change report of Veresen dated May 1, 2017.
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Any documents of the type required by National Instrument 44-101 – Short Form Prospectus Distributions to be
incorporated by reference in a short form prospectus, including any material change reports (excluding confidential
reports), comparative interim financial statements, comparative annual financial statements and the auditor’s report
thereon, management’s discussion and analysis of financial condition and results of operations, information circulars,
annual information forms, marketing materials and business acquisition reports filed by Veresen with the securities
commissions or similar authorities in Canada subsequent to the date of the Information Circular and before the
Effective Date, are deemed to be incorporated by reference in this Information Circular including Appendix J.
Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for the purposes of the Information Circular to the extent that a
statement contained herein or in any other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or include any other information
set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement
shall not be deemed an admission for any purposes that the modified or superseded statement, when made,
constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact
that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances
in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Information Circular.
VERESEN INC.
Veresen is a publicly traded corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets
across North America. Veresen is engaged in two principal businesses:
(a) a pipeline transportation business comprised of interests in three pipeline systems, the Alliance
Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; and
(b) a midstream business comprised of a partnership interest in Veresen Midstream, which owns assets
in western Canada, and an ownership interest in Aux Sable, which owns a world-class NGL
extraction facility near Chicago and other natural gas and NGL processing facilities.
Veresen is also actively developing a number of projects including the Jordan Cove LNG export terminal proposed to
be constructed in Coos Bay, Oregon, and the Pacific Connector Gas Pipeline proposed to originate in Malin, Oregon
and terminate at the related Jordan Cove LNG export terminal, and the ethane storage facility currently under
construction near Burstall, Saskatchewan.
Veresen Inc. was incorporated as 1560941 Alberta Ltd. on October 1, 2010 pursuant to the provisions of the ABCA.
On October 15, 2010, 1560941 Alberta Ltd. filed articles of amendment to change its name to Veresen Inc. 1560941
Alberta Ltd. was incorporated for the sole purpose of participating in a plan of arrangement whereby Fort Chicago
Energy Partners L.P. was converted to a corporate structure, as Veresen Inc., effective January 1, 2011.
For a complete description of Veresen’s organizational structure and material subsidiaries, see “Subsidiaries and
Operating Entities” in the Veresen AIF, incorporated by reference into this Information Circular. In addition, further
details concerning Veresen, including information with respect to Veresen’s assets, operations and history, are
provided in the Veresen AIF. Readers are encouraged to thoroughly review this document as it contains important
information about Veresen.
Veresen’s head, principal and registered office is located at Suite 900, Livingston Place, 222 - 3rd Avenue S.W.,
Calgary, Alberta T2P 0B4.
RECENT DEVELOPMENTS
The Arrangement
On May 1, 2017, Veresen entered into the Arrangement Agreement with Pembina, pursuant to which Pembina
proposes to acquire all of the issued and outstanding Veresen Shares by way of a plan of arrangement under the ABCA.
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For a full description of the Arrangement and the Arrangement Agreement, see “The Arrangement” and “Pro Forma
Information of Pembina after Giving Effect to the Arrangement” in the Information Circular. Also see Appendix I –
“Pro Forma Consolidated Financial Statements of Pembina Pipeline Corporation” and Appendix K – “Information
Concerning Pembina Pipeline Corporation”.
Veresen Power Business Sale
On April 13, 2017, Veresen announced that it closed the previously announced sale of its gas-fired power assets
pursuant to the Veresen Power Business Sale. Veresen continues to expect the sale of its remaining power assets
pursuant to the Veresen Power Business Sale to be completed during the second quarter of 2017, subject to the receipt
of all necessary approvals. See “Our Power Business” in the Veresen AIF.
DESCRIPTION OF SECURITIES
Veresen is entitled to issue an unlimited number of Common Shares and a number of Preferred Shares, issuable in
series, to be limited to an amount equal to not more than one-half of the number of Common Shares issued and
outstanding at the time of issuance of such Preferred Shares. Veresen currently has outstanding Common Shares,
Veresen Series A Shares, Veresen Series C Shares and Veresen Series E Shares.
The following is a summary of the rights, privileges, restrictions and conditions attaching to the securities that
comprise Veresen’s existing share capital.
Common Shares
Each Common Share entitles the holder to one vote at all meetings of Common Shareholders, except meetings at
which only holders of a specified class of shares are entitled to vote. Subject to the prior rights and privileges attaching
to any other class of shares of Veresen, holders of Common Shares have the right to receive any dividend declared by
the Board of Directors on the Common Shares and the right to receive the remaining property and assets of Veresen
upon dissolution.
On January 1, 2011, Veresen implemented a shareholder rights plan (the “Existing Rights Plan”), the terms and
conditions of which are set out in the Shareholder Rights Plan Agreement dated as of January 1, 2011 (“2011 Rights
Plan Agreement”) between Veresen and Computershare Trust Company of Canada, as rights agent (the “Rights
Agent”). At the annual meeting of Common Shareholders held on May 6, 2014, the Common Shareholders approved
the continuation of the Existing Rights Plan until the termination of the annual meeting of Common Shareholders in
the year 2017 and the Amended and Restated Shareholder Rights Plan Agreement dated as of May 6, 2014 (the “2014
Rights Plan Agreement”) between Veresen and the Rights Agent, which amended and restated the 2011 Rights Plan
Agreement, and continued the rights issued thereunder. At the annual meeting of Common Shareholders held on May
3, 2017, the Common Shareholders approved the continuation of the Existing Rights Plan until the termination of the
annual meeting of shareholders in the year 2020 and the Amended and Restated Shareholder Rights Plan Agreement
dated as of May 3, 2017 (the “2017 Rights Plan Agreement”) between Veresen and the Rights Agent, which amended
and restated the 2014 Rights Plan Agreement, and continued the rights issued thereunder. The 2017 Rights Plan
Agreement provides that it will terminate following the termination of the annual meeting of Common Shareholders
in the year 2020 unless the continued existence of the Existing Rights Plan is ratified at such annual meeting.
Preferred Shares
The Preferred Shares may at any time and from time to time be issued in one or more series, each series to consist of
such number of shares as may, before the issue thereof, be determined by the Board of Directors, provided that the
number of Preferred Shares of all series shall be limited in number to an amount equal to not more than one-half of
the Common Shares issued and outstanding at the time of issuance of such Preferred Shares. Subject to the provisions
of the ABCA, the Board of Directors may fix from time to time, before the issue thereof, the designation, rights,
privileges, restrictions and conditions attaching to each series of the Preferred Shares.
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Series A Preferred Shares
In February 2012, Veresen issued 8,000,000 Veresen Series A Shares. The holders of Veresen Series A Shares are
entitled to receive fixed cumulative dividends at an annual rate of 4.40%, payable quarterly, commencing June 30,
2012, for an initial period up to but excluding September 30, 2017, as and when declared by the Board of Directors.
The dividend rate will reset on September 30, 2017 and every five years thereafter at a rate equal to the sum of the
then five-year Government of Canada bond yield plus 2.92%. The Veresen Series A Shares are redeemable by
Veresen, at its option, on September 30, 2017 and on September 30 of every fifth year thereafter.
Holders of Veresen Series A Shares will have the right to convert all or any part of their shares into the Veresen Series
B Shares subject to certain conditions, on September 30, 2017, and on September 30 of every fifth year thereafter.
The holders of Veresen Series B Shares will be entitled to receive quarterly floating rate cumulative dividends, as and
when declared by the Board of Directors, at a rate equal to the sum of the then 90-day Government of Canada treasury
bill rate plus 2.92%.
Series C Preferred Shares
In October 2013, Veresen issued 6,000,000 Veresen Series C Shares. The holders of Veresen Series C Shares are
entitled to receive fixed cumulative dividends at an annual rate of 5.00%, payable quarterly, commencing December
31, 2013, for an initial period up to but excluding March 31, 2019, as and when declared by the Board of Directors.
The dividend rate will reset on March 31, 2019 and every five years thereafter at a rate equal to the sum of the then
five-year Government of Canada bond yield plus 3.01%. The Veresen Series C Shares are redeemable by Veresen, at
its option, on March 31, 2019 and on March 31 of every fifth year thereafter.
Veresen Series C Shares will have the right to convert all or any part of their shares into the Veresen Series D Shares
subject to certain conditions, on March 31, 2019, and on March 31 of every fifth year thereafter. The holders of
Veresen Series D Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared
by the Board of Directors, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus
3.01%.
Series E Preferred Shares
In April 2015, Veresen issued 8,000,000 Veresen Series E Shares. The holders of Veresen Series E Shares are entitled
to receive fixed cumulative dividends at an annual rate of 5.00%, payable quarterly, commencing June 30, 2015, for
an initial period up to but excluding June 30, 2020, as and when declared by the Board of Directors. The dividend rate
will reset on June 30, 2020 and every five years thereafter at a rate equal to the sum of the then five-year Government
of Canada bond yield plus 4.27%. The Veresen Series E Shares are redeemable by Veresen, at its option, on June 30,
2020 and on June 30 of every fifth year thereafter.
Holders of Veresen Series E Shares will have the right to convert all or any part of their shares into Veresen Series F
Shares subject to certain conditions, on June 30, 2020, and on June 30 of every fifth year thereafter. The holders of
Veresen Series F Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared
by the Board of Directors, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus
4.27%.
CONSOLIDATED CAPITALIZATION OF VERESEN
There have been no material changes in the share capital or indebtedness of Veresen on a consolidated basis since
March 31, 2017, other than Veresen’s outstanding indebtedness under its revolving credit facility was reduced by
approximately $235 million on April 17, 2017 utilizing net proceeds received from the sale of Veresen’s gas-fired
power assets pursuant to the Veresen Power Business Sale.
See the Veresen Interim Financial Statements and Veresen Interim MD&A incorporated by reference into this
Information Circular for more information about Veresen’s consolidated capitalization.
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PRIOR SALES
Veresen has not sold or issued any Common Shares or Preferred Shares or securities convertible into Common Shares
or Preferred Shares during the 12 month period prior to the date of the Information Circular other than as follows:
an aggregate of 4,746,202 Common Shares were issued during this period pursuant to Veresen’s Premium
DividendTM and Dividend Reinvestment Plan at a weighted average issue price of $10.6834 per Common
Share for aggregate consideration of approximately $50.7 million; and
an aggregate of 23,926 Common Shares were issued in settlement of Veresen RSUs pursuant to the terms of
the Veresen LTIP.
PRICE RANGE AND TRADING VOLUME OF SECURITIES
Common Shares
The Common Shares are listed and trade on the TSX under the symbol “VSN”. The following table sets forth the price
range and trading volume of the Common Shares on the TSX as reported by the TSX for the periods indicated.
Price Range
Date High ($) Low ($) Trading Volume
2016 June 11.16 9.97 23,785,387
July 11.56 10.51 14,664,679 August 13.19 10.76 24,916,904
September 13.525 12.35 22,820,257
October 13.78 11.81 17,281,172 November 12.95 11.62 22,302,033
December 13.27 11.40 24,039,171
2017 January 14.13 12.74 18,730,376
February 14.41 13.02 21,131,317
March 14.73 13.23 21,178,304 April 16.16 14.56 16,607,690
May 18.76 17.92 70,858,700
June (1-5) 18.66 18.32 3,266,760
Veresen Series A Shares
The Veresen Series A Shares are listed and trade on the TSX under the symbol “VSN.PR.A”. The following table sets
forth the prices range and the trading volume of the Veresen Series A Shares on the TSX as reported by the TSX for
the periods indicated.
Price Range
Date High ($) Low ($) Trading Volume
2016
June 14.60 13.39 294,836
July 14.95 13.77 190,359 August 15.28 14.15 136,543
September 15.04 14.37 120,389
October 15.75 14.30 180,666 November 16.28 15.56 358,892
December 18.02 16.02 297,881
2017 January 19.97 17.83 892,509
February 20.98 19.60 130,791
March 21.40 20.11 125,370 April 21.99 20.90 184,093
May 23.11 20.25 192,065
June (1-5) 20.38 19.94 7,606
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Veresen Series C Shares
The Veresen Series C Shares are listed and trade on the TSX under the symbol “VSN.PR.C”. The following table sets
forth the prices range and the trading volume of the Veresen Series C Shares on the TSX as reported by the TSX for
the periods indicated.
Price Range
Date High ($) Low ($) Trading Volume
2016
June 16.61 14.74 94,094 July 16.84 15.68 136,444
August 18.01 16.12 177,723
September 17.35 16.72 153,133 October 18.46 16.98 116,117
November 19.15 18.30 215,935
December 21.00 19.03 182,888
2017
January 22.80 21.08 132,273
February 23.00 22.25 95,111 March 23.58 22.21 120,838
April 23.70 22.37 57,734
May 24.14 22.32 99,311 June (1-5) 22.51 22.18 1,411
Veresen Series E Shares
The Veresen Series E Shares are listed and trade on the TSX under the symbol “VSN.PR.E”. The following table sets
forth the prices range and the trading volume of the Veresen Series E Shares on the TSX as reported by the TSX for
the periods indicated.
Price Range
Date High ($) Low ($) Trading Volume
2016 June 21.04 20.05 185,877
July 20.92 20.25 78,846
August 21.99 18.05 144,267 September 21.69 18.76 202,586
October 22.83 20.05 133,218
November 23.22 20.35 165,213 December 24.12 20.65 165,139
2017
January 24.79 23.06 118,141 February 24.75 24.02 249,769
March 24.82 24.09 332,038
April 25.10 24.06 185,996 May 25.45 24.60 637,123
June (1-5) 24.97 24.75 25,825
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Other than as set forth under “Interests of Certain Persons of Companies in the Arrangement” in the Information
Circular, there were no material interests, direct or indirect, of Veresen’s directors or executive officers, or any director
or executive officer of a subsidiary of Veresen or any person who beneficially owns, or controls or directs, directly or
indirectly, more than 10% of the outstanding Common Shares, or any associate or affiliate of such persons, in any
transaction since the commencement of Veresen’s last completed financial year or in any proposed transaction which
has materially affected, or would materially affect, Veresen or any of its subsidiaries.
AUDITORS, REGISTRAR AND TRANSFER AGENT
The auditors of Veresen are PricewaterhouseCoopers LLP, Chartered Accountants, Suite 3100, 111 – 5th Avenue
S.W., Calgary, Alberta T2P 5L3.
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Computershare Trust Company of Canada, at its principal offices in Calgary, Alberta and Toronto, Ontario is the
registrar and transfer agent of the Common Shares and Preferred Shares.
RISK FACTORS
An investment in the securities of Veresen is subject to certain risks. Shareholders should carefully consider the risk
factors described under the heading “Risk Factors” in the Veresen AIF, which incorporated by reference herein, the
risk factors described under the heading “Risk Factors” in the Pembina AIF, which is incorporated by reference in
Appendix K to this Information Circular, as well as the risk factors set forth elsewhere in this Information Circular. If
any of the identified risks were to materialize, Veresen’s business, financial position, results and/or future operations
may be materially affected.
ADDITIONAL INFORMATION
Additional information relating to Veresen is available on SEDAR at www.sedar.com. Financial information
concerning Veresen is provided in the Veresen Annual Financial Statements and the Veresen Annual MD&A, which
can be accessed on SEDAR at www.sedar.com.
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APPENDIX K
INFORMATION CONCERNING PEMBINA PIPELINE CORPORATION
TABLE OF CONTENTS
NOTICE TO READER ........................................................................................................................................... K-2 FORWARD-LOOKING STATEMENTS ............................................................................................................... K-2 NON-GAAP MEASURES ...................................................................................................................................... K-2 DOCUMENTS INCORPORATED BY REFERENCE .......................................................................................... K-2 PEMBINA PIPELINE CORPORATION ................................................................................................................ K-3 RECENT DEVELOPMENTS ................................................................................................................................. K-3 DESCRIPTION OF SECURITIES .......................................................................................................................... K-4 CONSOLIDATED CAPITALIZATION OF PEMBINA ........................................................................................ K-6 PRIOR SALES ........................................................................................................................................................ K-6 PRICE RANGE AND TRADING VOLUME OF SECURITIES ........................................................................... K-7 INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS ...................................................... K-8 AUDITORS, REGISTRAR AND TRANSFER AGENT ........................................................................................ K-9 RISK FACTORS ..................................................................................................................................................... K-9 ADDITIONAL INFORMATION............................................................................................................................ K-9
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NOTICE TO READER
Unless the context indicates otherwise, capitalized terms which are used in this Appendix K and not otherwise
defined in this Appendix K have the meanings given to such terms under the heading "Glossary of Terms" in this
Information Circular.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Appendix K, and in the documents incorporated by reference into this Appendix
K, constitute forward-looking statements and forward-looking information (collectively referred to as "forward-
looking statements") within the meaning of applicable securities laws. Such forward-looking statements relate to
future events or Pembina's future performance. See "Forward-Looking Statements" in this Information Circular.
Readers should also carefully consider the matters and cautionary statements discussed under the heading "Risk
Factors" in this Information Circular, and under the heading "Risk Factors" in this Appendix K and the Pembina
AIF.
NON-GAAP MEASURES
In certain documents incorporated by reference into this Appendix K, there are references to the terms "net
revenue", "adjusted EBITDA" (adjusted earnings before interest, taxes, depreciation and amortization), "adjusted
cash flow from operating activities", "cash flow from operating activities per common share", "adjusted cash flow
from operating activities per common share" (also referred to as "cash flow per share" and "adjusted cash flow per
share", respectively), "operating margin", and "total enterprise value". These terms are considered Non-GAAP
Financial Measures and do not have any standardized meaning as prescribed by Canadian generally accepted
accounting principles ("GAAP") and, therefore, they may not be comparable with the calculation of similar
measures presented by other issuers and should not be construed as an alternative to revenue, earnings, cash flow
from operating activities, gross profit or other measures of financial performance calculated in accordance with
GAAP.
These terms have the meanings as set out in the Pembina Annual MD&A which is incorporated by reference herein.
The specific rationale for , and incremental information associated with each Non-GAAP Financial Measure,
including a reconciliation of the most directly comparable measure calculated in accordance with GAAP, are also
discussed therein. Pembina further cautions Pembina shareholders not to place undue reliance on any one financial
measure.
For more information, see the Pembina AIF, the Pembina Annual MD&A and the Pembina Interim MD&A, each of
which is incorporated herein by reference.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference in this Information Circular, including this Appendix "K",
from documents filed with securities commissions or similar authorities in Canada. Copies of the documents
incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of
Pembina at #4000, 585 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1G1, Phone: (403) 231-7500. In addition,
copies of the documents incorporated herein by reference may be obtained by accessing the disclosure documents
available under Pembina's profile on the SEDAR website at www.sedar.com.
The following documents of Pembina are filed with the various securities commissions or similar authorities in the
provinces of Canada and are specifically incorporated by reference into and form an integral part of this Information
Circular:
(a) the Pembina AIF;
(b) the Pembina Annual Financial Statements;
(c) the Pembina Interim Financial Statements;
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(d) the Pembina Annual MD&A;
(e) the Pembina Interim MD&A;
(f) the information circular of Pembina dated March 16, 2017 relating to the annual meeting of
shareholders held on May 5, 2017; and
(g) the material change report of Pembina dated May 3, 2017.
Any documents of the type required by National Instrument 44-101 – Short Form Prospectus Distributions to be
incorporated by reference in a short form prospectus, including any material change reports (excluding confidential
reports), comparative interim financial statements, comparative annual financial statements and the auditor's report
thereon, management's discussion and analysis of financial condition and results of operations, information
circulars, annual information forms, marketing materials and business acquisition reports filed by Pembina with the
securities commissions or similar authorities in Canada subsequent to the date of this Information Circular and
before the Effective Date, are deemed to be incorporated by reference in this Information Circular including
Appendix K.
Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for the purposes of this Information Circular to the extent that a
statement contained herein or in any other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or include any other
information set forth in the document that it modifies or supersedes. The making of a modifying or
superseding statement shall not be deemed an admission for any purposes that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission
to state a material fact that is required to be stated or that is necessary to make a statement not misleading in
light of the circumstances in which it was made. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Information Circular.
PEMBINA PIPELINE CORPORATION
Pembina Pipeline Corporation is a leading transportation and midstream service provider that has been serving
North America's energy industry for over 60 years. Pembina owns and operates an integrated system of pipelines
that transport various products derived from natural gas and hydrocarbon liquids produced primarily in western
Canada. Pembina also owns and operates gas gathering and processing facilities and an oil and natural gas liquids
infrastructure and logistics business. Pembina's integrated assets and commercial operations along the majority of
the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy
sector. Pembina is committed to working with its community and aboriginal neighbours, while providing value for
investors in a safe, environmentally responsible manner. This balanced approach to operating ensures the trust
Pembina builds among all of its stakeholders is sustainable over the long term. See "Description of Pembina's
Business and Operations" in the Pembina AIF and "Conventional Pipelines – Business Overview", "Oil Sands &
Heavy Oil – Business Overview", "Gas Services – Business Overview" and "Midstream – Business Overview" in the
Pembina Annual MD&A, which documents are incorporated by reference herein, for a description of the business
and operations of Pembina and the operating subsidiaries of Pembina.
The registered office and principal place of business of Pembina is at #4000, 585 - 8th Avenue S.W., Calgary,
Alberta, Canada, T2P 1G1.
RECENT DEVELOPMENTS
The Arrangement
On May 1, 2017, Pembina entered into the Arrangement Agreement with Veresen, pursuant to which Pembina
proposes to acquire all of the issued and outstanding Veresen Shares by way of a plan of arrangement under the
ABCA. For a full description of the Arrangement and the Arrangement Agreement, see "The Arrangement" and
"Pro Forma Information of Pembina after Giving Effect to the Arrangement" in this Information Circular. Also see
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Appendix I – "Pro Forma Consolidated Financial Statements of Pembina Pipeline Corporation" and Appendix J –
"Information Concerning Veresen Inc."
On May 15, 2017, Pembina announced that it and Petrochemical Industries Company K.S.C. of Kuwait had
executed 50/50 joint venture agreements for the previously announced proposed integrated propylene and
polypropylene production facility in Sturgeon County, Alberta (the "Project"), which include binding terms in
support of the Project and have formed a new entity, Canada Kuwait Petrochemical Corporation ("CKPC").
Additionally, Pembina announced that CKPC will proceed with activities for front end engineering design for the
Project.
DESCRIPTION OF SECURITIES
The authorized capital of Pembina consists of an unlimited number of Pembina Common Shares, a number of
Pembina Class A Preferred Shares, issuable in series, not to exceed twenty percent of the number of issued and
outstanding Pembina Common Shares at the time of issuance of any Pembina Class A Preferred Shares, and an
unlimited number of Pembina Class B Preferred Shares (together with the Pembina Class A Shares, the "Pembina
Preferred Shares") which are deemed to be automatically redeemed if a holder ceases to be a wholly-owned
subsidiary of Pembina.
The following is a summary of the rights, privileges, restrictions and conditions attaching to the Pembina Common
Shares, the Pembina Class A Preferred Shares and the Pembina Class B Preferred Shares.
Pembina Common Shares
Holders of Pembina Common Shares ("Pembina Common Shareholders") are entitled to receive notice of and to
attend all meetings of Pembina Common Shareholders and to one vote at such meetings for each Pembina Common
Share held. Pembina Common Shareholders are, at the discretion of the Pembina Board and subject to applicable
legal restrictions, entitled to receive any dividends declared by the Pembina Board on the Pembina Common Shares,
and are entitled to share in the remaining property of Pembina upon liquidation, dissolution or winding-up, subject
to the rights of the Pembina Class A Preferred Shares and Pembina Class B Preferred Shares.
Pembina has a shareholder rights plan (the "Plan") that was adopted to ensure, to the extent possible, that all
Pembina Common Shareholders are treated fairly in connection with any take-over bid for Pembina and to ensure
that the Pembina Board is provided with sufficient time to evaluate unsolicited take-over bids and to explore and
develop alternatives to maximize Pembina Common Shareholder value. The Plan creates a right that attaches to each
present and subsequently issued Pembina Common Share. Until the Separation Time (as defined in the Plan), which
typically occurs at the time of an unsolicited take-over bid, whereby a person acquires or attempts to acquire 20
percent or more of the Pembina Common Shares, the rights are not separable from the Pembina Common Shares,
are not exercisable and no separate rights certificates are issued. Each right entitles the holder, other than the 20
percent acquirer, from and after the separation time and before certain expiration times, to acquire one Pembina
Common Share at a substantial discount to the market price at the time of exercise. The Pembina Board may waive
the application of the Plan in certain circumstances. The Plan was reconfirmed by Pembina Common Shareholders
at Pembina's 2016 annual meeting and must be reconfirmed at every third annual meeting thereafter. A copy of the
agreement relating to the current Plan has been filed on Pembina's SEDAR and EDGAR profiles on May 13, 2016
and May 31, 2016, respectively.
Pembina Class A Preferred Shares
Pembina Class A Preferred Shares were not intended to and will not be used by Pembina for anti-takeover purposes
without Pembina Common Shareholder approval. Subject to certain limitations, the Pembina Board may, from time
to time, issue Pembina Class A Preferred Shares in one or more series and determine for any such series, its
designation, number of shares and respective rights, privileges, restrictions and conditions. The Pembina Class A
Preferred Shares as a class have, among others, the provisions described below.
Each series of Pembina Class A Preferred Shares shall rank on parity with every other series of Pembina Class A
Preferred Shares, and shall have priority over the Pembina Common Shares, the Pembina Class B Preferred Shares
and any other class of shares ranking junior to the Pembina Class A Preferred Shares with respect to redemption, the
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payment of dividends, the return of capital and the distribution of assets in the event of the liquidation, dissolution or
winding-up of Pembina. The Pembina Class A Preferred Shares of any series may also be given such preferences,
not inconsistent with the provisions thereof, over the Pembina Common Shares, the Pembina Class B Preferred
Shares and over any other class of shares ranking junior to the Pembina Class A Preferred Shares, as may be
determined by the Pembina Board.
In the event of the liquidation, dissolution or winding-up of Pembina, if any cumulative dividends or amounts
payable on a return of capital in respect of a series of Pembina Class A Preferred Shares are not paid in full, the
Pembina Class A Preferred Shares of all series shall participate rateably in: (a) the amounts that would be payable on
such shares if all such dividends were declared at or prior to such time and paid in full; and (b) the amounts that
would be payable in respect of the return of capital as if all such amounts were paid in full; provided that if there are
insufficient assets to satisfy all such claims, the claims of the holders of the Pembina Class A Preferred Shares with
respect to repayment of capital shall first be paid and satisfied and any assets remaining shall be applied towards the
payment and satisfaction of claims in respect of dividends. After payment to the holders of any series of Pembina
Class A Preferred Shares of the amount so payable, the holders of such series of Pembina Class A Preferred Shares
shall not be entitled to share in any further distribution of the property or assets of Pembina in the event of the
liquidation, dissolution or winding-up of Pembina.
Holders of any series of Pembina Class A Preferred Shares will not be entitled (except as otherwise provided by law
and except for meetings of the holders of Pembina Class A Preferred Shares or a series thereof) to receive notice of,
attend at, or vote at any meeting of shareholders of Pembina, unless the Pembina Board shall determine otherwise in
the terms of a particular series of Pembina Class A Preferred Shares, in which case voting rights shall only be
provided in circumstances where Pembina shall have failed to pay a certain number of dividends on such series of
Pembina Class A Preferred Shares, which determination and number of dividends and any other terms in respect of
such voting rights, shall be determined by the Pembina Board and set out in the designations, rights, privileges,
restrictions and conditions of such series of Pembina Class A Preferred Shares. Other than as set out below, the
material characteristics of each series of Pembina Class A Preferred Shares are substantially the same.
The table below outlines the number of outstanding, and the material provisions of, each of the issued series of
Pembina Class A Preferred Shares.
Series Issue Date
Issued and
Outstanding Amount (C$)
Annual
Dividend
Rate(1)
Redemption
and
Conversion
Option
Date(2)(3)
Reset
Spread(3)
Per Share
Base
Redemption/
Liquidation
Value
Right to
Convert
on a one
for one
basis(4)
1 July 26, 2013 10,000,000 $250,000,000 $1.0625 Dec. 1, 2018 2.47% $25.00 Series 2
3 Oct. 2, 2013 6,000,000 $150,000,000 $1.1750 Mar. 1, 2019 2.60% $25.00 Series 4
5 Jan. 16, 2014 10,000,000 $250,000,000 $1.2500 June 1, 2019 3.00% $25.00 Series 6
7 Sept. 11, 2014 10,000,000 $250,000,000 $1.1250 Dec. 1, 2019 2.94% $25.00 Series 8
9 Apr. 10, 2015 9,000,000 $225,000,000 $1.1875 Dec. 1, 2020 3.91% $25.00 Series 10
11 Jan. 15, 2016 6,800,000 $170,000,000 $1.4375 Mar. 1, 2021 5.00%(5) $25.00 Series 12
13 Apr. 27, 2016 10,000,000 $250,000,000 $1.4375 June 1, 2021 4.96%(5) $25.00 Series 14
Notes:
(1) The holder is entitled to receive a fixed, cumulative preferential dividend per year payable quarterly on the 1st day of March, June,
September and December, as declared by the Pembina Board.
(2) Pembina may, at its option, redeem all or a portion of an outstanding series of Pembina Class A Preferred Shares on the Redemption Option Date and every fifth year thereafter for the Base Redemption Value per share plus all accrued and unpaid dividends.
(3) The dividend rate will reset on the Redemption and Conversion Option Date and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus the applicable Reset Spread noted above.
(4) A holder has the right, subject to certain conditions, to convert their Pembina Class A Preferred Shares into cumulative redeemable
Pembina Class A Preferred Shares of a specified series on the Conversion Option date and every fifth anniversary thereafter. The even numbered series of Pembina Class A Preferred Shares carry the right to receive floating, cumulative preferential dividends at a
rate, reset quarterly, equal to the sum of the then 90 day Government of Canada treasury bill rate plus the applicable reset spread.
(5) The dividend rate will reset on the Redemption and Conversion Option Date and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus the applicable Reset Spread noted above, provided that in any event, the
rate for the Pembina Series 11 Shares and Pembina Series 13 Shares shall not be less than 5.75 percent.
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K-6
Pembina Class B Preferred Shares
Pembina Class B Preferred Shares were not intended to and will not be used by Pembina for anti-takeover purposes
without Pembina Common Shareholder approval. If at any time a holder of Pembina Class B Preferred Shares
ceases to be, or is not, a direct or indirect wholly owned subsidiary of Pembina, Pembina, with or without
knowledge of such event, shall be deemed, without further action or notice, to have automatically redeemed all of
the Pembina Class B Preferred Shares held by such holder in exchange for the redemption amount as set out in
Pembina's articles per share together with all declared but unpaid dividends thereon (the "Redemption Amount").
All of the issued Pembina Class B Preferred Shares were cancelled pursuant to the amalgamation between Pembina
and its wholly-owned subsidiary Alberta Oil Sands Pipeline Ltd. on October 1, 2015. There are currently no
Pembina Class B Preferred Shares outstanding.
Holders of Pembina Class B Preferred Shares are not entitled to receive notice of, to attend or to vote at any meeting
of the Pembina shareholders, except as required by law. The Pembina Class B Preferred Shares are retractable and
redeemable at the option of the holder thereof and Pembina, respectively.
The holders of Pembina Class B Preferred Shares shall be entitled to receive, if and when declared by the Pembina
Board, preferential non-cumulative dividends and upon the liquidation, dissolution or winding-up of Pembina, the
holders of Pembina Class B Preferred Shares shall be entitled to receive for each such share, in priority to the
holders of Pembina Common Shares, the Redemption Amount.
CONSOLIDATED CAPITALIZATION OF PEMBINA
There have been no material changes in the share capital or indebtedness of Pembina on a consolidated basis since
March 31, 2017. See the Pembina Interim Financial Statements and Pembina Interim MD&A incorporated by
reference into this Information Circular for more information about Pembina's consolidated capitalization and the
table under the heading "Pro Forma Consolidated Capitalization of Pembina" in this Information Circular for more
information about Pembina's consolidated capitalization both before and after giving effect to the Arrangement.
PRIOR SALES
Pembina has not sold or issued any Pembina Common Shares, Pembina Preferred Shares or securities convertible
into Pembina Common Shares or Pembina Preferred Shares during the 12 month period prior to the date of this
Information Circular other than as follows:
an aggregate of 10,508,374 Pembina Common Shares were issued pursuant to Pembina's Premium
DividendTM and Dividend Reinvestment Plan during June 5, 2016 until Pembina's Premium DividendTM
and Dividend Reinvestment Plan was suspended effective April 25, 2017 at a weighted average issue price
of $39.29 per Pembina Common Share for approximately $412,161,760; and
options to purchase an aggregate of 4,417,828 Pembina Common Shares were issued during this period
pursuant to the Pembina Option Plan.
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K-7
PRICE RANGE AND TRADING VOLUME OF SECURITIES
The Pembina Common Shares are listed and traded on the TSX under the symbol "PPL". The Pembina Common
Shares are also listed on the NYSE under the trading symbol "PBA". The following table sets forth the price ranges
for and trading volumes of the Pembina Common Shares on the TSX for June 2016 through June 5, 2017, as
reported by the TSX, and on the NYSE for June 2016 through June 5, 2017, as reported by NYSE.
TSX (PPL) NYSE (PBA)
Month High ($) Low ($) Close ($) Volume High (US$) Low (US$) Close (US$) Volume
2016
June 41.00 37.31 39.26 22,164,093 32.31 28.66 30.34 6,031,071
July 40.25 37.21 38.08 14,892,316 31.18 28.16 29.13 5,048,124 August 39.98 37.35 39.46 12,923,414 31.14 28.20 30.16 4,077,993
September 40.56 38.01 39.98 15,529,438 31.46 28.79 30.46 3,647,586
October 41.98 39.33 41.21 14,793,957 31.75 29.66 30.76 2,794,815 November 41.34 37.25 39.47 20,735,405 30.94 27.44 29.41 3,878,095
December 42.73 39.03 41.96 17,200,999 31.92 29.36 31.32 3,869,202
2017
January 42.70 40.17 40.37 12,946,131 32.72 30.64 31.01 3,944,447
February 43.49 39.90 42.92 17,777,923 33.24 30.49 32.31 6,364,676
March 43.90 41.89 42.14 21,344,682 32.61 31.28 31.71 6,405,672 April 44.65 41.71 43.50 22,392,728 33.52 31.12 31.88 5,804,260
May 44.43 41.42 43.17 34,686,299 32.93 30.32 31.96 8,238,070
June (1-5) 44.20 43.06 44.08 2,636,410 32.81 31.89 32.70 819,947
In April 2012, Pembina assumed 5.75 percent Series F convertible unsecured subordinated debentures maturing
December 31, 2018 issued by Provident Energy Ltd. on April 29, 2011 (the "Series F Convertible Debentures")
which are listed and traded on the TSX under the symbol "PPL.DB.F". The following table sets forth the price range
for and trading volume of the Pembina Series F Convertible Debentures on the TSX for June 2016 through June 5,
2017, as reported by the TSX.
Month High ($) Low ($) Close ($) Volume
2016
June 139.00 129.72 133.00 9,140
July 135.59 127.15 129.40 3,715
August 135.28 127.59 132.85 4,870
September 137.00 129.61 136.53 6,290
October 142.00 136.00 140.00 27,500 November 135.50 127.24 135.50 5,340
December 145.00 134.13 142.40 3,900
2017 January 143.00 136.79 137.50 33,550
February 146.50 136.65 146.50 6,310
March 146.96 143.00 143.00 6,940 April 150.00 145.64 148.25 1,310
May 150.00 143.48 147.49 2,530
June (1-5) 148.50 147.20 147.81 1,650
The Pembina Series 1 Shares, Pembina Series 3 Shares, Pembina Series 5 Shares, Pembina Series 7 Shares, Pembina
Series 9 Shares, Pembina Series 11 Shares and Pembina Series 13 Shares are listed and traded on the TSX under the
symbols "PPL.PR.A", "PPL.PR.C", "PPL.PR.E", "PPL.PR.G", "PPL.PR.I", "PPL.PR.K" and "PPL.PR.M",
respectively. The following tables set forth the price range for and trading volume of the Pembina Series 1 Shares,
Pembina Series 3 Shares, Pembina Series 5 Shares, Pembina Series 7 Shares, Pembina Series 9 Shares, Pembina
Series 11 Shares and Pembina Series 13 Shares on the TSX for June 2016 through June 5, 2017, all as reported by
the TSX.
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K-8
Series 1 (PPL.PR.A) Series 3 (PPL.PR.C) Series 5 (PPL.PR.E)
Month
High
($)
Low
($)
Close
($) Volume
High
($)
Low
($)
Close
($) Volume
High
($)
Low
($)
Close
($) Volume
2016 June 15.81 14.00 14.95 191,060 17.12 15.19 16.87 170,436 19.15 16.75 18.30 146,748
July 15.98 14.42 15.86 167,588 17.55 16.33 17.33 186,925 19.23 17.75 19.22 183,822
August 17.15 15.85 16.91 161,194 18.76 16.97 18.25 163,112 20.50 19.05 20.19 153,665 September 17.00 16.33 16.69 172,236 18.25 17.75 18.13 70,434 20.20 19.78 20.09 262,980
October 17.93 16.13 17.90 305,163 19.00 17.68 19.00 99,281 21.01 19.43 21.01 262,297
November 18.50 17.51 17.73 268,772 19.43 18.22 18.79 133,854 21.37 19.72 20.82 354,837 December 19.00 17.37 18.75 284,997 20.00 18.34 19.75 196,736 21.89 20.31 21.84 287,772
2017
January 20.34 18.65 20.21 266,137 21.09 19.70 20.99 94,310 23.20 21.71 22.88 269,216 February 20.92 19.90 20.50 207,523 21.60 20.53 21.36 99,378 23.30 22.40 23.14 154,545
March 21.37 20.31 20.93 349,290 22.30 21.23 21.91 134,302 24.00 22.98 24.00 191,818
April 21.55 20.75 20.80 131,277 22.54 21.71 21.80 110,818 24.33 23.46 23.50 186,274 May 21.20 20.07 20.21 76,760 22.22 21.17 21.25 106,830 23.89 23.00 23.09 106,753
June (1-5) 20.20 19.72 19.79 13,865 21.24 20.93 20.93 7,187 23.11 22.57 22.63 12,544
Series 7 (PPL.PR.G) Series 9 (PPL.PR.I) Series 11 (PPL.PR.K)
Month
High
($)
Low
($)
Close
($) Volume
High
($)
Low
($)
Close
($) Volume
High
($)
Low
($)
Close
($) Volume
2016
June 18.28 15.33 17.24 183,982 21.19 19.12 20.07 180,806 25.80 25.25 25.79 180,380 July 18.29 16.60 18.29 157,923 21.92 19.93 21.65 103,194 26.88 25.71 26.16 86,575
August 19.57 18.19 19.11 132,555 23.47 21.65 23.20 171,068 26.59 25.83 25.89 107,440
September 19.06 18.65 18.89 181,339 23.37 22.50 22.90 138,995 26.27 25.75 26.00 64,304 October 19.96 18.27 19.88 296,622 23.52 22.08 23.50 106,776 26.53 25.93 26.25 156,371
November 20.17 19.19 19.54 165,695 24.12 22.89 23.25 152,688 26.33 25.51 25.89 163,270
December 20.76 19.22 20.70 244,907 24.85 23.09 24.58 142,580 26.53 25.67 26.48 98,500
2017
January 21.90 20.65 21.60 353,809 25.01 24.43 24.90 457,160 26.75 25.84 25.84 190,228
February 22.26 21.05 22.04 187,894 24.99 24.67 24.87 143,030 26.54 25.80 26.39 159,661 March 23.28 21.98 23.15 121,652 25.18 24.50 24.98 122,842 26.58 26.09 26.35 258,940
April 23.71 22.72 22.79 111,888 25.18 24.48 24.72 127,374 26.85 26.35 26.36 127,146
May 23.09 22.12 22.25 102,517 24.94 24.33 24.51 174,172 26.48 26.13 26.28 165,000
June (1-5) 22.32 21.89 21.89 11,016 24.50 24.25 24.28 8,675 26.44 26.31 26.37 45,588
Series 13 (PPL.PR.M)
Month
High
($)
Low
($)
Close
($) Volume
2016 June 25.87 25.20 25.86 467,289
July 26.65 25.67 26.21 386,494
August 26.43 25.82 25.90 338,087
September 26.28 25.81 26.06 254,437 October 26.39 25.90 26.26 229,188
November 26.33 25.41 25.89 321,245
December 26.45 25.71 26.39 141,533
2017
January 26.64 25.93 25.95 195,341
February 26.55 25.79 26.49 344,331 March 26.50 26.10 26.45 1,119,833
April 26.83 26.43 26.48 98,192
May 26.48 26.14 26.43 378,469 June (1-5) 26.45 26.29 26.29 8,326
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
There were no material interests, direct or indirect, of Pembina's directors or executive officers, or any director or
executive officer of a subsidiary of Pembina or any person who beneficially owns, or controls or directs, directly or
indirectly, more than 10% of the outstanding Common Shares or Pembina Common Shares, or any associate or
affiliate of such persons, in any transaction since the commencement of Pembina's last completed financial year or
in any proposed transaction which has materially affected, or would materially affect, Pembina or any of its
subsidiaries.
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K-9
AUDITORS, REGISTRAR AND TRANSFER AGENT
The auditors of Pembina are KPMG LLP, Chartered Accountants, Calgary, Alberta, Canada.
The transfer agent and registrar for the Pembina Common Shares, Pembina Series F Convertible Debentures,
Pembina Series 1 Shares, Pembina Series 3 Shares, Pembina Series 5 Shares, Pembina Series 7 Shares, Pembina
Series 9 Shares, Pembina Series 11 Shares and Pembina Series 13 Shares is Computershare Trust Company of
Canada at its principal offices in Calgary, Alberta and Toronto, Ontario.
RISK FACTORS
An investment in the securities of Pembina is subject to certain risks. Pembina shareholders should carefully
consider the risk factors described under the heading "Risk Factors" in the Pembina AIF, which is incorporated by
reference herein, the risk factors described under the heading "Risk Factors" in the Veresen AIF, which is
incorporated by reference in Appendix J to this Information Circular, as well as the risk factors set forth elsewhere
in this Information Circular. If any of the identified risks were to materialize, Pembina's business, financial position,
results and/or future operations may be materially affected.
ADDITIONAL INFORMATION
Additional information relating to Pembina is available under its profile on SEDAR at www.sedar.com. Financial
information concerning Pembina is provided in the Pembina Annual Financial Statements and the Pembina Annual
MD&A, which can be accessed on SEDAR at www.sedar.com.
Page 296
Questions? Need Help Voting?
Please contact our Strategic Shareholder Advisor and Proxy
Solicitation Agent, Kingsdale Advisors
1-888-518-6554