EXHIBIT 3.01
-------------
AGREEMENT OF PURCHASE AND SALE
DATED MARCH 19, 1999
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AGREEMENT OF PURCHASE AND SALE
TABLE OF CONTENTS
1.00 INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Schedules . . . . . . . . . . . . . . . . . . . . . . . . .6
1.03 References. . . . . . . . . . . . . . . . . . . . . . . . .6
1.04 Headings. . . . . . . . . . . . . . . . . . . . . . . . . .6
1.05 Singular/Plural . . . . . . . . . . . . . . . . . . . . . .7
1.06 Use of Canadian Funds . . . . . . . . . . . . . . . . . . .7
1.07 Derivatives . . . . . . . . . . . . . . . . . . . . . . . .7
1.08 Interpretation If Closing Does Not occur. . . . . . . . . .7
1.09 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . .7
1.10 Responsibility Extends To Legal Costs . . . . . . . . . . .7
1.11 Knowledge or Awareness. . . . . . . . . . . . . . . . . . .7
2.00 PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . .8
2.01 Agreement Of Purchase And Sale. . . . . . . . . . . . . . .8
2.02 Allocation Of Purchase Price. . . . . . . . . . . . . . . .8
2.03 Calculation Of The Initial Interest Purchase Price . . . .8
2.04 Payment Of Initial Interest Purchase Price. . . . . . . . .8
2.05 Options . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.06 Purchaser's Default In Exercising Options . . . . . . . . .9
2.07 Purchaser's Post-Closing Entitlements/obligations . . . . 10
3.00 THIRD PARTY RIGHTS AND CONSENTS . . . . . . . . . . . . . . . . . 11
3.01 Preferential Rights of Purchase and Consents. . . . . . . 11
3.02 Operatorship And Third Parties. . . . . . . . . . . . . . 13
4.00 PURCHASER'S REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 13
4.01 Vendor To Provide Access. . . . . . . . . . . . . . . . . 13
4.02 Title Defects . . . . . . . . . . . . . . . . . . . . . . 13
5.00 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.01 No Adjustment . . . . . . . . . . . . . . . . . . . . . . 14
6.00 INTERIM PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 14
6.01 Assets To Be Maintained In Proper Manner. . . . . . . . . 14
6.02 Vendor as Agent . . . . . . . . . . . . . . . . . . . . . 14
6.03 Restrictions on Conduct of Business . . . . . . . . . . . 15
7.00 REPRESENTATIONS AND WARRANTIES OF PARTIES . . . . . . . . . . . . 15
7.01 Vendor's Representations And Warranties . . . . . . . . . 15
7.02 Purchaser's Representations And Warranties. . . . . . . . 18
7.03 Survival of Representations And Warranties. . . . . . . . 19
7.04 Limit on Vendor's Responsibility. . . . . . . . . . . . . 19
7.05 No Additional Representations or Warranties By Vendor . . 20
8.00 LIABILITY AND INDEMNIFICATON. . . . . . . . . . . . . . . . . . . 20
8.01 Responsibility of Purchaser . . . . . . . . . . . . . . . 20
8.02 Environmental Indemnity . . . . . . . . . . . . . . . . . 21
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9.00 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.01 Place of Closing. . . . . . . . . . . . . . . . . . . . . 22
9.02 Required Approvals. . . . . . . . . . . . . . . . . . . . 22
9.03 Conditions For Benefit of Purchaser . . . . . . . . . . . 22
9.04 Conditions For Benefit of Vendor. . . . . . . . . . . . . 23
9.05 Waiver of Conditions. . . . . . . . . . . . . . . . . . . 24
9.06 Failure To Satisfy Conditions . . . . . . . . . . . . . . 24
10.00 POST CLOSING ADMINISTRATION . . . . . . . . . . . . . . . . . . . 24
10.01 Registration of Documents . . . . . . . . . . . . . . . . 24
10.02 Coordination of Administrative Matters. . . . . . . . . . 24
11.00 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.01 Purchaser's ob1igation To Maintain Information
Confidential. . . . . . . . . . . . . . . . . . . . . . . 25
11.02 Consultants And Advisors Bound. . . . . . . . . . . . . . 25
12.00 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.01 Reference To Arbitration. . . . . . . . . . . . . . . . . 25
12.02 Proceedings . . . . . . . . . . . . . . . . . . . . . . . 26
13.00 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.01 Assignments Before Closing. . . . . . . . . . . . . . . . 26
13.02 Assignments By Purchaser After Closing. . . . . . . . . . 26
14.00 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.01 Service of Notice . . . . . . . . . . . . . . . . . . . . 26
14.02 Addresses For Notices . . . . . . . . . . . . . . . . . . 27
14.03 Right To Change Address . . . . . . . . . . . . . . . . . 27
15.00 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . 27
15.01 Approval Required for Press Releases. . . . . . . . . . . 27
15.02 Signs And Notification To Governmental Agencies . . . . . 28
16.00 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . 28
16.01 Further Assurances. . . . . . . . . . . . . . . . . . . . 28
16.02 Governing Law . . . . . . . . . . . . . . . . . . . . . . 28
16.03 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16.04 No Amendment Except In Writing. . . . . . . . . . . . . . 28
16.05 Waiver Must Be In Writing . . . . . . . . . . . . . . . . 29
16.06 Consequences Of Termination . . . . . . . . . . . . . . . 29
16.07 Supersedes Earlier Agreements . . . . . . . . . . . . . . 29
16.08 No Merger . . . . . . . . . . . . . . . . . . . . . . . . 29
16.09 Substitution And Subrogation. . . . . . . . . . . . . . . 29
16.10 Enurement . . . . . . . . . . . . . . . . . . . . . . . . 30
SCHEDULES
Schedule" A " - Lands, Leases and Encumbrances; Production Sales
Contracts; Unit Agreements; Facility Agreements; Wells;
Authorizations for Expenditure For Which Purchaser is
Responsible; Preferential Purchase Rights; Processing,
Treating, Transportation and Contract Operating
Agreements; Penalties
Schedule "B" - General Conveyance
Schedule "C" - (Vendor's/Purchaser's) Officer's Certificate -
Representations are True
Schedule "D" - Vendor's officer's Certificate - No Substantial
Damage
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AGREEMENT OF PURCHASE AND SALE
CESSFORD AREA, ALBERTA
THIS AGREEMENT made this 19th day of March, 1999.
BETWEEN:
STARROCK RESOURCES L TD., a body corporate having an office
in the City of Calgary, in the Province of Alberta
(hereinafter called the "Vendor")
- and-
PROMAX ENERGY INC., a body corporate having an office in the
City of Calgary , in the Province of Alberta (hereinafter
called the "Purchaser")
WHEREAS the Vendor has agreed to sell the Assets to the Purchaser and the
Purchaser has agreed to purchase the Assets from the vendor on the terms
and conditions set forth herein;
NOW THEREFORE in consideration of the premises and the mutual covenants and
warranties herein contained, the Parties agree as follows:
1.00 INTERPRETATION
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1.01 Definitions
-----------
In this Agreement, including the recitals and the Schedules, the
following terms shall have the respective meanings hereby assigned to
them, subject to Subclause 3.01E:
"Agreement" means this document, together with the Schedules attached
hereto and made a part hereof.
"Annual Option Interest" means an undivided 14% interest in the
Petroleum and Natural Gas Rights (comprising one-fifth (1/5) of the
Option Interest) which the Purchaser may acquire in each of the first
5 years following the Closing Date by exercise of an option pursuant
to Clause 2.05.
"Assets" means the Petroleum and Natural Gas Rights, the Tangibles and
the Miscellaneous Interests.
"Closing" means the exchange of Conveyance Documents on the Closing
Date, the delivery by the Purchaser to the vendor of the Purchase
Price, and the transfer of the Assets by the vendor to the Purchaser.
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"Closing Date" means 2:00 p.m. on March 19, 1999, or such other time
and date as may be agreed to by the Parties.
"Conveyance Documents" means the documents described in Subparagraphs
9.03 (e) (i) and (ii), which provide for the assignment, transfer or
other disposition of the Assets to the Purchaser.
"Effective Date" means 10.00 a.m. on March 19, 1999.
"Environmental Liabilities" means any and all environmental damage,
contamination or other environmental problem arising out of, resulting
from, attributable to or connected with operations relating to the
Assets, whether or not caused by a breach of applicable Regulations,
including, without limitation, any matters related to surface,
underground, air, groundwater or surface water contamination, the
abandonment or plugging of any of the Wells, the restoration or
reclamation of any part of the Assets, or the removal of or failure to
remove any materials, substances, foundations, structures or equipment
from the surface lands pertaining to the Assets.
"Event of Default" means anyone of the following:
(a) the Purchaser fails to exercise an option granted pursuant to
clause 2.05.
(b) the Purchaser commits any act of bankruptcy or insolvency; or
files a Proposal or Notice of Intention to Make a Proposal under
the Bankruptcy and Insolvency Act (Canada); or the Purchaser
assigns or is petitioned into bankruptcy; or an application
is made concerning the Companies Creditors Arrangements Act, or
the Purchaser takes advantage of or is otherwise involved as a
debtor in any similar legislation governing the relationship of
debtors and their creditors;
(c) the Purchaser resolves or is ordered by a court to wind-up,
dissolve or liquidate;
(d) any of the Purchaser's assets or undertaking are seized or
otherwise encumbered by virtue of any writ, judgment or order
filed, entered or made against the Purchaser; or
(e) the Purchaser breaches the Purchaser's covenant contained in
Clause 2.07B.
"Exercise Bonus Amount" means the amount payable to the vendor
pursuant to clause 2.05 in addition to the Annual Option Interest
Purchase Price as additional purchase price consideration which amount
shall be equal to the amount arrived at by calculating interest on the
Annual Option Insurance at a rate equal to the prime commercial
lending rate of the Main Branch in Calgary of the Canadian Imperial
Bank of Commerce, from the Closing Date until the Annual option
Interest Purchase Price is paid by the Purchaser to the vendor.
"GST" means tax payable pursuant to the Excise Tax Act (Canada). The
Vendor's GST registration Number is 893059683RT.
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"Intia1 Interest" means all of the Tangibles, miscellaneous Interests
and an undivided 30% interest in the Petroleum and Natural Gas Rights.
"Initial Interest Purchase Price" means the amount payable by the
Purchaser to the vendor for the Initial Interest pursuant to Clause
2.03, as modified by the reductions herein.
"Lands" means the lands set forth and described in Schedule '' A",
insofar as rights to the Petroleum Substances underlying those lands
are granted by the Leases.
"Leases" means the leases, licences, permits and other documents of
title set forth and described in Schedule" A", by virtue of which the
holder thereof is entitled to drill for, win, take, own or remove the
Petroleum Substances within, upon or under the Lands or by virtue of
which the holder thereof is deemed to be entitled to a share of
Petroleum Substances removed from the Lands and includes, if
applicable, all renewals and extensions of such documents and all
documents issued in substitution therefor.
"Miscellaneous Interests" means the Vendor's Interest in and to all
property, assets and rights, other than the Petroleum and Natural Gas
Rights and the Tangibles, to the extent such property, assets and
rights pertain to the Petroleum and Natural Gas Rights or the
Tangibles, or any rights relating thereto, including, without
restricting the generality of the foregoing, the vendor's Interest in:
(a) all contracts, agreements and documents, to the extent that they
relate directly to the Petroleum Substances, the Petroleum and Natural
Gas Rights or the Tangibles, including agreements for the
construction, ownership and operation of any facilities and agreements
for the sale, processing or transportation of Petroleum Substances;
(b) all subsisting rights to enter upon, use and occupy the surface of
any of the Lands,or any lands upon which any Tangibles are located or
of any lands to be crossed in order to gain access to any of the Lands
or the Tangibles;
(c) the wellbores and casing of all Wells; and
(d) copies of engineering records, files, reports and data that, in
the Vendor's reasonable judgement, relate directly to the Petroleum
Substances, the Petroleum and Natural Gas Rights, the Wells or the
Tangibles, excluding the Vendor's tax and financial records, economic
evaluations and geophysical data.
Unless otherwise agreed in writing by the Parties, however, the
Miscellaneous Interests shall not include agreements, documents or
data to the extent that:
they pertain to the Vendor's proprietary technology or
interpretations;
(b) they are owned or licensed by third parties with restrictions on
their deliverability or disclosure by the Vendor to any assignee which
is not an affiliate of the Vendor; or
(c) they consist of seismic records or data, whether or not owned by
the Vendor.
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"Option Interest" means the undivided 70% interest in the Petroleum
and Natural Gas Rights, being the remaining interest in the Petroleum
and Natural Gas Rights included in the Assets but not forming part of
the Initial Interest.
"Party" means a person, partnership or corporation which is bound by
this Agreement.
"Permitted Encumbrances" means:
(a) any encumbrances, overriding royalties, net profits interests and
other burdens identified in Schedule "A";
(b) any preferential rights of purchase or any similar restriction
applicable to any of the Assets, as identified in Schedule" A";
(c) the terms and conditions of the Leases, including, without
limitation, the requirement to pay any rentals or royalties to
the grantor thereof to maintain the Leases in good standing and
any gross royalty trusts applicable to the grantor's interest in
any of the Leases;
(d) the right reserved to or vested in any grantor, government or
other public authority by the term of any Lease or by the
Regulations to terminate any Lease;
(e) easements, rights of way, servitudes or other similar rights in
land, including, without in any way limiting the generality of
the foregoing, rights of way and servitudes for highways,
railways, sewers, drains, gas and oil pipelines, gas and water
mains, electric light, power, telephone or cable television
conduits, poles, wires or cables;
(f) rights of general application reserved to or vested in any
governmental authority to levy taxes on Petroleum Substances or
the income or revenue therefrom and governmental restrictions on
production rates from wells or on operations being conducted on
the Lands or otherwise affecting the value of any of the Assets;
(g) agreements for the sale of Petroleum Substances, which are
terminable on thirty (30) days' notice or less (without an early
termination penalty or other cost) or are identified in
Schedule" A";
(h) the Regulations and any rights reserved to or vested in any
municipality or governmental, statutory or public authority - to
control or regulate any of the Assets in any manner;
(i) undetermined or inchoate liens incurred or created as security in
favour of any person with respect to the development or operation
of any of the Assets, as regards the Vendor's share of the costs
and expenses thereof;
(j) the reservations, limitations, provisos and conditions in any
grants or transfers from the Crown of any of the Lands or
interests therein, and statutory exceptions to title;
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(k) agreements and plans relating to pooling or unitization, provided
that any unit agreement applicable to the Lands shall be
identified in Schedule ''A";
(l) the agreements, including any identified in Schedule "A"
respecting the processing, treating or transmission of Petroleum
Substances or the operation of wells by contract field operators;
(m) penalties which are disclosed in Schedule ''A", and Which have
arisen under operating procedures or similar agreements as a
consequence of elections by the Vendor not to participate in
operations on the Lands to which the penalty applies;
(n) liens granted in the ordinary course of business to a public
utility, municipality or governmental authority with respect to
operations pertaining to any of the Assets; and
(o) mechanics', builders' or materialman's liens in respect of
services rendered or goods supplied, but only insofar as such
liens relate to goods or services for which payment is not due or
the validity of which is being diligently contested by or on
behalf of the Vendor;
Petroleum and Natural Gas Rights" means the Vendor's Interest in
and to the Lands, and the Leases pertaining thereto.
"Petroleum Substances" means petroleum, natural gas, sulphur and
every other mineral or substance, or any of them, the right to
explore for which, or an interest in which, is granted pursuant
to the Leases, insofar only as they pertain to the Lands.
"Purchase Price" means the amount payable by the Purchaser to the
Vendor for the Assets pursuant to Clause 2.02, as modified by the
reductions provided for herein.
"Regulation" means all statutes, laws, rules, orders and regulations
in effect from time to time and made by governments or governmental
boards or agencies having jurisdiction over the Assets.
"Secured Assets" means all of the Unexercised Option Interest and an
undivided percentage interest portion (equal to the Unexercised Option
Interest) of the Purchaser's interest now owned or after the Closing
Date acquired in petroleum and natural gas rights within, upon or
underlying those lands located in Townships 23, 24, 25, 26 and Ranges
7, 8, 9, 10, all West of the Fourth Meridian and any equipment,
improvements, facilities, intangible rights or other assets associated
therewith.
"Tangibles" means the Vendor's Interest, whether leased or owned, in
and to all tangible depreciable property, and assets that are:
(a) located in or on the Lands and used, or intended for use, in
connection with production, processing, gathering, storage,
treatment or transportation operations relating to the Petroleum
Substances and the Petroleum and Natural Gas Rights, including,
without limitation, the well equipment, if any, relating to the
Wells; and
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(b) any additional items, whether located on or off the Lands, that
are indicated in Schedule " A '' to be specifically included as
Tangibles.
"Title Defect" means a defect, deficiency or discrepancy in or
affecting the title of the Vendor in and to any of the Assets, other
than as specifically disclosed herein or in Schedule "A", which is
sufficiently material and adverse to the enforcement of title that it
would not be acceptable to a knowledgeable, prudent purchaser buying
similar oil and gas properties, acting reasonably.
"Unexercised Option Interest" means the undivided percentage interest
portion of the Option Interest which has not been acquired by the
Purchaser through its exercise of the options pursuant to Clause 2.05.
"Vendor's Interest" means, in respect of a particular property, right
or asset, the undivided interest of the Vendor in the Petroleum and
Natural Gas Rights described as "Vendor's Interest" in Schedule " A "
and a corresponding interest in the Tangibles and Miscellaneous
Interests.
"Wells" means all producing, shut-in, water source, disposal,
injection, suspended, abandoned and similar wells located on the Lands
including the wells described in Schedule "A".
1.02 Schedules
---------
The following Schedules are attached hereto and made part of this
Agreement:
(a) Schedule "A", which includes: Part I - Lands, Leases and
Encumbrances, Part II - Production Sales Contracts, Part III -
Unit Agreements, Part IV Facility Agreements, Part V- Wells
and Gathering System, Part VI - Authorizations for Expenditure,
Part VII-Preferential Purchase Rights, Part VIII - Processing,
Treating, Transportation and Contract Operating Agreements, Part
IX- Penalties;
(b) Schedule "B", which is the form of General Conveyance;
(c) Schedule "C", which is the form of the certificate to be provided
pursuant to Article 9.00 with respect to the truth of a Party's
representations and warranties; and
(d) Schedule "D", which is the form of the certificate to be provided
pursuant to Article 9.00 with respect to the belief of the Vendor
that there has been no substantial damage or alteration to the
Assets.
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1.03 References
----------
The references "hereunder", "herein" and "hereof' refer to the
provisions of this Agreement, and references to Articles, Clauses,
Subclauses, Paragraphs or Subparagraphs herein refer to Articles,
Clauses, Subclauses, Paragraphs or Subparagraphs of this Agreement.
Any reference to time shall refer to Mountain Standard Time or
Mountain Daylight Savings Time during the respective intervals in
which each is in force.
1.04 Headings
--------
The headings of the Articles, Clauses, Schedules and any other
headings, captions or indices herein are inserted. for convenience of
reference only and shall not be used in any way in construing or
interpreting any provision hereof
1.05 Singular/Plural
---------------
Whenever the singular or masculine or neuter is used in this Agreement
or in the Schedules, it shall be interpreted as meaning the plural or
feminine or body politic or corporate, and vice versa, as the context
requires.
1.06 Use of Canadian Funds
---------------------
All references to "dollars" or "$" herein shall refer to lawful
currency of Canada.
1.07 Derivatives
-----------
Where a term is defined herein, a capitalized derivative of such term
shall have corresponding meaning unless the context otherwise
requires.
1.08 Interpretation If Closing Does Not Occur
----------------------------------------
In the event that Closing does not occur, each provision of this
Agreement which presumes that the Purchaser has acquired the Assets
hereunder shall be construed as having been contingent upon Closing
having occurred.
1.09 Conflict
--------
If there is any conflict or inconsistency between a provision of the
body of this Agreement and that of a Schedule or a Conveyance
Document, the provision of the body of this Agreement shall prevail.
If any term or condition of this Agreement conflicts with a term or
condition of a Lease or the Regulations, the term or condition of such
Lease or the Regulations shall prevail, and this Agreement shall be
deemed to be amended to the extent required to eliminate any such
conflict.
1.10 Responsibility Extends To Legal Costs
-------------------------------------
References to costs in the liability and indemnification obligations
prescribed in this Agreement shall be deemed to include reasonable
legal costs on a solicitor-client basis.
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1.11 Knowledge of Awareness
----------------------
Where a representation or warranty in this Agreement is made on the
basis of the knowledge or awareness of the Vendor, such knowledge or
awareness consists only of the actual knowledge or awareness of the
current officers and senior supervisory personnel of the Vendor and
does not include knowledge or awareness of any other person or
persons.
2.00 PURCHASE AND SALE
-----------------
2.01 Agreement of Purchase and Sale
------------------------------
The Purchaser agrees to purchase all of the Initial Interest from the
vendor and the Vendor agrees to sell all of the Initial Interest to
the Purchaser on the terms and conditions set forth herein. The
Purchaser will have the right to acquire from the Vendor additional
interests in the Petroleum and Natural Gas Rights on the exercise of
options granted herein.
2.02 Allocation of Purchase Price
----------------------------
The Purchase Price payable by the Purchaser to the Vendor for the
Assets is $8,000,000.00, as adjusted in clause 2.05, and shall be
allocated among the Assets as follows:
(a) To Petroleum and Natural Gas Rights $7,604,259.00
(b) To Tangibles $395,740.00
(c) To Miscellaneous Interests $1.00
TOTAL $8,000,000.00
In determining the Purchase Price, the Parties have taken into account
the Purchaser's assumption of responsibility for the future
abandonment and reclamation costs associated with the Assets, as set
forth in this Agreement, and the Vendor's release of responsibility
therefor.
2.03 Calculation of the Initial Interest Purchase Price.
---------------------------------------------------
The Purchase Price payable by the Purchaser to the Vendor for the
Initial Interest will be $2,677,018.70, being all of the Purchase
Price allocated to the Tangibles and Miscellaneous Interests and 30%
of the Purchase Price allocable to the Petroleum and Natural Gas
Rights.
2.04 Payment of Initia1 Interest Purchase Price
-------------------------------------------
The amount of$1,858,767.79 shall be paid by the Purchaser to the
Vendor at Closing toward the Initial Interest Purchase Price, which is
the Initial Interest Purchase Price less the amount of$618,250.91
already paid by the Purchaser to the Vendor as a deposit and the
amount of $200,000.00 which amount shall be paid by the Purchaser to
the Vendor on or before June 30,1999, subject to any reductions as may
be made pursuant to Article 3.00 or as otherwise provided in this
Agreement. The Purchaser shall also remit to the Vendor at Closing the
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GST applicable to that portion of the Initial Purchase Price allocated
to the Tangibles and on the amount attributable to any other Assets or
expenses to which GST may apply. All amounts payable pursuant to this
Clause and the following Clause 2.05 shall be paid by cheque payable
in immediately avai1able funds to the Vendor.
2.05 Options
-------
The Vendor hereby grants to the Purchaser five (5) successive annual
options to acquire the Option Interest, which options will be for
undivided 14% interests under and exercisable by the Purchaser
delivering to the Vendor, on or before the anniversary of the Closing
Date, the Annual Option Interest Purchase Price of$1,064,596.26, plus
interest thereon at the prime rate per annum of the Main Branch in
Calgary of the Exercise Bonus Amount and the Purchaser agrees to
exercise all of the options granted herein. Upon the occurrence of an
Event of Default all options granted herein which are unexercised
shall immediately terminate and be of no further force and effect.
2.06 Purchaser's Default In Exercising Options
-----------------------------------------
Upon the occurrence of an Event of default, in addition to the rights
specified in Clause 2.07 hereof:
A. all unexercised options granted in Clause 2.05 shall immediately
terminate and be of no further force and effect;
B. the Vendor will be entitled to a re-conveyance of the Secured
Assets, and for this purpose the Purchaser hereby irrevocably
appoints the Vendor as the Purchaser's lawful attorney with full
power of substitution to endorse and transfer the Secured Assets
from the Purchaser to the Vendor, with the power to make, execute
and deliver all such documents, and perform all such acts, and do
all matters or things, and with the right to use the name of the
Purchaser whenever and wherever it may by deemed necessary or
expedient, and which power and right shall include, but not be
limited to, the following:
(a) the power to make, execute and deliver on behalf of the
Purchaser a General Conveyance in the form attached as
Schedule "B" re-conveying the Unexercised Option Interest
from the Purchaser to the Vendor;
(b) the power to make, execute and deliver on behalf of the
Purchaser all specific assignments, registrable transfers,
novation agreements, trust agreements and other instruments
required to convey the unexercised Option Interest to the
Purchaser, provided that such documents shall not require
the Vendor to assume or incur any obligation, or to provide
any representation or warranty, beyond that contained in
this Agreement; and
(c) correspond and deal with governmental agencies having
jurisdiction over the Unexercised Option Interest and make,
execute and deliver on behalf of the Purchaser any and all
specific assignments. registerable transfers or applications
required to vest in the vendor all rights conferred on the
Purchaser by such governmental authorities in respect of the
Unexercised Option Interest.
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2.07 Purchaser's Post-Closing Entitlements/Obligations:
--------------------------------------------------
A. After Closing, while not in default of exercising an option
granted pursuant to Clause 2.05, whether or not the Purchaser
becomes the recognized holder in the place of the vendors of all
or a portion of the Assets (including both the Initial Interest
and the Option Interest):
(a) the Purchaser shall be entitled to receive and hold all
proceeds, benefits and advantages accruing from the Assets
for the benefit, use and ownership of the Purchaser, with
entitlement to commingle any of them with its own or any
other assets;
(b) the Vendor shall in a timely manner deliver to the Purchaser
all revenues, proceeds and other benefits received by the
vendor for the Assets after deduction of any amounts owing
by the Purchaser to the vendor relating to the Assets;
(c) the vendor shall in a timely manner deliver to the Purchaser
all third party notices and communications received by the
vendor for the Assets;
(d) the vendor shall in a timely manner deliver to third parties
all notices and communications as the Purchaser may
reasonably request and all monies and other items the
Purchaser reasonably provides for the Assets;
(e) the Vendor shall as agent of the Purchaser, do and perform
all acts and things, and execute and deliver all agreements,
notices and other documents and instruments, that the
Purchaser reasonably requests for the purpose of
facilitating the exercise of rights incidental to the
ownership of the Assets; and
(f) the Purchaser shall be responsible for all obligations,
expenses, costs, ingoings and outgoings of every kind and
nature, accruing or payable with respect to the Assets,
including, but not limited to, maintenance, development,
capital and operating costs, advances, payments with respect
to the Permitted Encumbrances, and authorizations for
expenditures;
Provided that, upon the occurrence of an Event of Default, the
Vendor's obligations and the Purchaser's rights herein shall
immediately terminate with respect to the Unexercised Option
Interest and the Vendor will be entitled from that date for
all intents and purposes to be recognized and hold itself out
as holder of the Unexercised Option Interest.
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B. The Purchaser covenants and agrees that, while any of the options
granted pursuant to Clause 2.05 remain unexercised, the Purchaser
shall:
(a) not grant any security interest in or otherwise under the
Assets or any pol1ion thereof;
(b) not transfer, convey, assign or grant participation or
options rights in the Assets or any portion thereof to any
third party;
(c) not permit or suffer any builder's lien to be registered or
filed against the Assets or any portion thereof;
(d) from time to time when requested by the Vendor, grant to
the Vendor such security interests in the Secured Assets or
any portion thereof that the vendor requires as security for
the Purchaser's performance of its obligations contained in
Clause 2.05, and to immediately execute and deliver to the
vendor such security evidencing the said security interests
in the form or forms approved by the vendor;
C. The Vendor shall not be liable to the Purchaser for any loss or
damage suffered by the Purchaser in connection with the
arrangements established by the Purchaser in connection with the
arrangement established by Subclause 2.07 A, except to the extent
that the loss or damage is caused by the Vendor' s gross
negligence or its wilful misconduct. The Purchaser shall:
(a) be liable to the Vendor for all losses, costs, damages and
expenses whatsoever which the vendor may suffer, sustain,
pay or incur; and
(b) indemnify and save harmless the vendor and its directors,
officers, servants, agents, consultants and employees from
and against any claims, liabilities, actions, proceedings,
demands, losses, costs, damages and expenses whatsoever
which may be brought against or suffered by any of them or
which they may sustain, pay or incur;
arising out of the performance by the Vendor of its obligations under
Subclause 2.07A. An action omission of the vendor or its directors,
officers, servants, agents or employees shall not be regarded as gross
negligence or wilful misconduct, however, to the extent it was done or
omitted to be done in accordance with the instructions of or with the
concurrence of the Purchaser. Nothing in this Clause 2.07 shall be
construed as extending or restricting or limiting in any manner any of
the other covenants, warranties, representations or other obligations
of the Parties under this Agreement.
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D. After Closing, where the Purchaser is assuming operatorship of
any of the Assets, the Purchaser shall be responsible for
submission of any reports required by the Regulations, including
but not limited to monthly production reports pertaining to the
Assets. If requested by the Purchaser, the Vendor shall assist
the purchaser in compiling pre-Closing production data.
3.00 THIRD PARTY RIGHTS AND CONSENTS
-------------------------------
3.01 Preferential Rights of Purchase and Consents
--------------------------------------------
A. If any of the Assets are subject to a preferential right of
purchase or similar restriction, or if the disposition herein
requires the consent of any third party, the Vendor shall
promptly serve all notices as are required under such
preferential purchase or consent provision. Each such notice
shall include a request for a waiver of any preferential or
similar right to purchase any of the Assets and for the
granting of any consent that may be required. Notwithstanding
the foregoing, the Parties acknowledge that the consent of
buyers under production sale agreements may not be sought until
after Closing.
B. The Purchaser, acting reasonably and in good faith, shall
provide to the Vendor the value placed by the Purchaser on
any of the Assets with respect to which the Vendor is required
to specify a value in a notice served pursuant to this Clause.
The Vendor shall not be obligated to use such a value where, in
the Vendor's opinion, the value is unreasonable.
C. If the holder of any preferential right to purchase any of the
Assets exercises such right, or a third party required to give
a necessary consent refuses to give such consent, Closing shall
then proceed with respect to those of the Assets which are not
subject to such preferential right to purchase or consent. In
such case, the Purchase Price shall be reduced by the portion
of the Purchase Price allocated pursuant to Subclause 3.01B to
the Assets directly affected by such preferential right to
purchase or consent, or falling such allocation, by agreement
of the Parties or by Article 12.00.
D. If the portion of the Purchase Price applicable to the Assets
directly affected by the preferential right to purchase or
consent provided for in Subclause 3.01C is to be determined
pursuant to Article 12.00:
(a) then prior to Closing, the Purchaser shall deduct from the
Purchase Price an amount equal to the Purchaser's good
faith estimate of the portion of the Purchase Price
applicable to such directly affected Assets and deposit
such amount in trust with a Canadian chartered bank in
an interest bearing account; and
(b) the funds retained in trust pursuant to Paragraph (a) of
this Subclause and the accrued interest thereon shall be
released from trust following determination pursuant to
Article 12.00. To the extent that the amount held in trust
varies from such determination, any excess or deficiency
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and the interest which accrued thereon shall either be
paid by the Purchaser to the Vendor within fifteen (15)
days of such determination or be retained by the
Purchaser, as applicable.
E. If a portion of the Assets is excluded from the Closing pursuant
to this Clause:
(a) the terms ''Assets" , "Lands" , "Leases" , "Miscellaneous
Interests" , "Petroleum and Natural Gas Rights" and
"Tangibles" shall be construed as meaning only that portion
of the subject matter of those terms with respect to which
Closing occurs; and
(b) The term "Purchase Price" shall be construed to be the
amount of the Purchase Price remaining after the reduction
provided for in Subclause 3.01C, and the allocation of the
Purchase Price pursuant to Clause 2.02 shall be determined
by agreement of the Parties or by Article 12.00 and adjusted
accordingly.
3.02 Operatorship And Third Parties
------------------------------
Nothing in this Agreement shall be interpreted as any assurance by
the Vendor that the Purchaser will be able to serve as operator with
respect to any of the Assets in which interests are held by third
parties, whether or not such Assets are presently operated by the
Vendor.
4.00 PURCHASER'S REVIEW
------------------
4.01 Vendor To Provide Access
------------------------
The Vendor shall, subject to the Regulations and all contractual and
fiduciary obligations and limits:
(a) at the Vendor's office during normal business hours, provide
the Purchaser and its nominees reasonable access to the
Vendor's records, files and documents directly relating to
the Assets, for the purpose of the Purchaser's review of the
Assets and the Vendor's title thereto, including, without
limitation, the Leases and applicable operating agreements,
unit agreements, overriding royalty agreements and production
sale contracts; and
(b) provide the Purchaser and its nominees with a reasonable
opportunity to inspect the Assets at the Purchaser's sole cost,
risk and expense, insofar as the Vendor can reasonably provide
access to the Assets.
4.02 Title Defects
-------------
A. Any review of the Vendor's title to the Assets shall be
undertaken by the Purchaser with reasonable diligence. Not later
than ten (10) days prior to the Closing Date, the Purchaser shall
give the Vendor written notice of the Title Defects which the
Purchaser does not waive. Such notice shall specify such Title
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Defects in reasonable detail, the Assets directly affected
thereby (the II Affected Assets") and the Purchaser's
requirements for the rectification or curing thereof. The
Vendor shall there upon diligently make reasonable efforts to
cure such Title Defects on or before the Closing Date.
B. Insofar as the Title Defects described in the Purchaser's
notice have not been cured to the Purchaser's reasonable
satisfaction, the Purchaser may elect, on or before the Closing
Date by written notice to the vendor, to do one of the following:
(a) delay the Closing Date to such later date as is agreed by
the Parties, so as to provide the Vendor with additional
time to cure the remaining Title Defects;
(b) waive such uncured Title Defects and proceed with Closing;
or
(c) terminate this Agreement, if the portion of the Purchase
Price applicable to the Assets directly affected by such
uncured Title Defects is twenty-five percent (25%) or more
of the Purchase Price, as determined by agreement of the
Parties or by Article 12.00, as the case may be.
However, failure of the Purchaser to make such election at or before
the Closing Date shall be deemed to be an election pursuant to
Paragraph (b) of this Subclause.
5.00 ADJUSTMENTS
-----------
5.01 No Adjustment
-------------
The Parties acknowledge that, in agreeing to the amount of the
Purchase Price, the Parties determined that there shall be no
adjustments to the Purchase Price for the vendor' s prepaid expenses
accruing after the Effective Date or for any other item ordinarily
adjusted between a vendor and Purchaser on a sale of assets of a
similar nature to the sale contemplated by this Agreement.
6.00 INTERIM PROVISIONS
------------------
6.01 Assets To Be Maintained In Proper Manner
----------------------------------------
Possession of the Assets shall not pass to the Purchaser until after
Closing on the Closing Date. The vendor shall continue to maintain
the Assets on behalf of the Purchaser in a proper and prudent
manner in accordance with good oil field practice and the
Regulations until Closing. The Vendor shall maintain insurance
respecting the Assets until the Closing Date.
6.02 Vendor as Agent
---------------
A. Insofar as the Vendor maintains the Assets and takes actions
with respect thereto on behalf of the Purchaser pursuant to
this Article, the Vendor shall be deemed to have been the agent
of the Purchaser hereunder. The Purchaser ratifies all actions
which the vendor takes or refrains from taking pursuant to the
terms of this Article, with the intention that all such actions
shall be deemed to be those of the Purchaser.
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B. The Purchaser shall indemnify the vendor and its directors,
officers, servants, agents, consultants or employees against
all liabilities, losses, costs, claims or damages which the
vendor or its directors, officers, servants, agents,
consultants or employees may suffer or incur as a result of
maintaining the Assets as the agent of the Purchaser pursuant
to this Article, insofar as such liabilities, losses, costs,
claims or damages are not a direct result of the gross
negligence or wilful misconduct of the vendor or its directors,
officers, servants, agents, consultants or employees. An action
or omission of the vendor or its directors, officers, servants,
agents, consultants or employees shall not be regarded as gross
negligence or wilful misconduct, however, to the extent it was
done or omitted to be done in accordance with the instructions
of or with the concurrence of the Purchaser.
6.03 Restrictions on Conduct of Business
-----------------------------------
While acting as agent for the Purchaser pursuant to this Article,
the vendor shall not, without the prior written consent of the
Purchaser:
(a) voluntarily assume any obligation or commitment with respect to
the Assets, where the Vendor's share of the expenditure
associated with such obligation or commitment is estimated to
exceed $25,000.00;
(b) surrender or abandon any of the Assets;
(c) mend any agreement or enter into any new agreement respecting
the Assets;
(d) propose any operation with respect to the Assets or initiate
the exercise of any right arising as a result of the ownership
of the Assets;
(e) sell, transfer or otherwise dispose of the Assets, or any of
them, except as may be required by the Vendor to comply with its
obligations respecting any preferential rights, as provided in
Article 3.00; or
(f) grant a security interest or any encumbrance with respect to any
of the Assets.
However, the Vendor may assume such obligations or commitments and
propose or initiate such operations or exercise any such right or
option without the prior consent of the Purchaser, if the Vendor
reasonably determines that such expenditures or actions are necessary
for the protection of life or property, in which case the Vendor shall
promptly notify the Purchaser of such intention or actions and the
Vendor's estimate of the costs and expenses associated therewith.
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7.00 REPRESENTATIONS AND WARRANTIES OF PARTIES
-----------------------------------------
7.01 Vendor's Representations and Warranties
---------------------------------------
The Vendor represents and warrants to the Purchaser that:
(a) Standing: The Vendor is a corporation, duly organized, valid and
subsisting and registered under the laws of the Province of
Alberta, and authorized to carry on business in the jurisdiction
where the Lands are located;
(b) Requisite Authority The Vendor has the requisite capacity, power
and authority to execute this Agreement and the Conveyance
Documents and to perform the obligations to which it thereby
becomes subject;
(c) No Conflict: The execution and delivery of this Agreement and the
completion of the sale of the Assets in accordance with the terms
of this Agreement are not and will not be in violation or breach
of, or be in conflict with:
(i) any term or provision of the constating or other governing
documents of the Vendor;
(ii) any agreement, instrument, permit or authority to which the
Vendor is a party or by which the Vendor is bound; or
(iii)the Regulations or any judicial order, award, judgement or
decree applicable to the Vendor or the Assets;
(d) Execution And Enforceability: The Vendor has taken all actions
necessary to authorize the execution and delivery of this
Agreement, and, as of the Closing Date, the Vendor shall have
taken all actions necessary to authorize and complete the sale of
the Assets in accordance with the provisions of this Agreement.
This Agreement has been validly executed and delivered by the
Vendor, and this Agreement and all other documents executed and
delivered on behalf of the Vendor hereunder shall constitute
valid and binding obligations of the Vendor enforceable in
accordance with their respective terms and conditions;
(e) Residency: Far Tax Purposes: The Vendor is not a non-resident of
Canada within the meaning of the Income Tax Act (Canada);
(f) No Finders' Fees: The Purchaser shall not have any
responsibility for any obligation or liability, contingent or
otherwise, for brokers' or finders' fees, if any, incurred by the
Vendor with respect to the transactions herein;
(g) Lawsuits And claims: To the best of the knowledge of the Vendor,
there are no unsatisfied judgements, claims, proceedings,
actions, governmental investigations or lawsuits in existence,
contemplated or threatened against or with respect to the Assets
or the interest of the Vendor therein, and there exists no
particular circumstance which the vendor reasonably believes will
give rise to such a claim, proceeding, action, governmental
investigation or lawsuit;
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(h) Compliance With Leases and Agreements: To the best of the
knowledge of the vendor , no act or omission has occurred whereby
the vendor is, or would be, in default under the terms of the
Regulations, any Lease or any agreement pertaining to the Assets,
where such a default would impact materially and adversely upon
the Assets, or any of them;
(i) No Default Notices: Except as has been specifically identified in
Schedule '' A", the Vendor has not received any notice of default
under the Leases or any notice alleging its default under any
agreement pertaining to any of the Assets, which default has not
been rectified as of the date of this Agreement;
(j) Payment of Royalties and Taxes: To the best of the knowledge of
the Vendor, all royalties and all ad valorem, property,
production, severance and similar taxes and assessments based on,
or measured by, the Vendor's ownership of the Assets, the
production of Petroleum Substances from the Lands or the receipt
of proceeds therefrom that are payable by the Vendor and which
accrued prior to the Effective Date have been or will be properly
and fully paid and discharged in the manner and at the time
prescribed by the Leases and the Regulations;
(k) Encumbrances: The Vendor does not warrant its title to the
Assets, but does warrant that the Vendor's Interest in the Assets
is free and clear of any and all liens, mortgages, pledges,
claims, options, encumbrances, overriding royalties, net profits
interests or other burdens created by, through or under the
Vendor, other than the Permitted Encumbrances;
(l) No Reduction: The vendor's Interest in the Assets is not subject
to reduction by payout of a Well or otherwise, or subject to
modification in size or nature by virtue of any right or interest
granted by, through or under the Vendor except for the Permitted
Encumbrances and any such rights and interests identified in
Schedule " A " ;
(m) Sale Agreements: Except as identified in Schedule "A", the
Petroleum Substances are not subject to any gas balancing
agreements nor any agreements for the sale of Petroleum
Substances which are not terminable on thirty (30) days' notice
or less (without an early termination penalty or other cost);
(n) Environmental Matters. The Vendor is not aware of and has not
received:
(i) any orders or directives pursuant to the Regulations which
relate to environmental matters and which require any work,
repairs, construction or capital expenditures with respect
to the Assets, where such orders or directives have not been
complied with in all material respects; or
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</Page>
(ii) any demand or notice issued pursuant to the Regulations
with respect to the breach of any environmental, health or
safety law applicable to the Assets, including, without
limitation, any Regulations respecting the use, storage,
treatment, transportation or disposition o environmental
contaminants, which demand or notice remains outstanding as
of the date hereof;
except as have been specifically disclosed by the Vendor. by
notice to the Purchaser prior to the Vendor's submission of this
Agreement to the Purchaser for the Purchaser's execution;
(o) Condition of Wells: To the best of the knowledge of the Vendor,
each Well has been drilled and, if completed, completed and
operated in accordance with good oil and gas field practices and
the material requirements of the Regulations;
(p) Abandonment Of Wells: To the best of the knowledge of the
Vendor, each Well which has been abandoned has been plugged and
abandoned, and the wellsite therefor properly restored, in
accordance with good oil and gas field practices and the material
requirements of the Regulations;
(q) Condition Of Tangibles: To the best of the knowledge of the
Vendor, the Tangibles have been constructed, installed,
maintained and operated in accordance with generally accepted
engineering practices, good oil and gas field practices and the
material requirements of the Regulations;
(r) Authorized Expenditures: There are no outstanding authorizations
for expenditure or outstanding financial commitments respecting
the Assets, pursuant to which expenditures are or may be required
by the Purchaser or in respect of which any amount is
outstanding, other than as set forth in Schedule "A" or as may be
authorized on behalf of the Purchaser in accordance herewith;
(s) Area Of Mutual Interest: No agreement affecting the lands
provides for an area of mutual interest, except as specifically
identified in Schedule "A";
(t) Quiet Enjoyment: Subject at all times to the Vendor's other
representations and warranties made pursuant to this Clause, the
Permitted Encumbrances and the satisfaction of the obligations
required to maintain the Leases in good standing by the
applicable lessees, the Purchaser may, for the remainder of the
term of the Leases, hold and utilize the Assets for the
Purchaser's own use and benefit without any interruption by the
Vendor or any other person claiming by through or under the
Vendor.
7.02 Purchaser's Representations And Warranties
------------------------------------------
The Purchaser represents and warrants to the Vendor that:
(a) Standing The Purchaser is a corporation, duly organized, valid
and subsisting under the laws of its jurisdiction of
incorporation, and duly registered and authorized to carry on
business in the jurisdiction in which the Lands are located;
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(b) Requisite Authority: The Purchaser has the requisite capacity,
power and authority to execute this Agreement and the Conveyance
Documents and to perform the obligations to which it thereby
becomes subject;
(c) G.S.T.: The Purchaser is registered for GST purposes and will
provide the Vendor with its registration number on the Closing
Date;
(d) No Conflict: The execution and delivery of this Agreement and the
completion of the purchase of the Assets in accordance with the
terms of this Agreement are not and will not be in violation or
breach of, or be in conflict with:
(i) any term or provision of the constating or other governing
documents of the Purchaser; or
(ii) the Regulations or any judicial order, award, judgement or
decree applicable to the Purchaser;
(d) Execution And Enforceability: The Purchaser has taken all actions
necessary to authorize the execution and delivery of this
Agreement and, as of the Closing Date, the Purchaser shall have
taken all actions necessary to authorize and complete the
purchase of the Assets in accordance with the provisions of this
Agreement. This Agreement has been validly executed and delivered
by the Purchaser, and this Agreement and all other documents
executed and delivered on behalf of the Purchaser hereunder shall
constitute valid and binding obligations of the Purchaser
enforceable in accordance with their respective terms
and conditions;
(e) Residence For Tax Purposes: The Purchaser is not a non-resident
of Canada within the meaning of the Income Tax Act (Canada);
(f) No Sales Commission: The Purchaser has not incurred any
obligation or liability, contingent or otherwise, for brokers' or
finders' fees with respect to the transactions herein for which
the vendor shall have any responsibility;
(g) Investment Canada Act The Purchaser shall comply with the
Investment Canada Act to the extent, if any, that it is
applicable to the transactions herein;
(h) Purchaser As Principal: The Purchaser is acquiring the Assets in
its capacity as a principal, and is not purchasing the Assets for
the purpose of resale or distribution to a third party; and
(i) Transfers of Licences, Permits and Authorizations: The Purchaser
is not aware of anything that would prohibit the Purchaser from
obtaining or holding any well licences, authorizations or other
permits or licenses related to the Assets with the relevant
governmental authorities.
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7.03 Survival of Representations and Warranties
------------------------------------------
Each Party acknowledges that the other may rely on the representations
and warranties made by such Party pursuant to Clause 7.01 or7.02, as
the case may be. The representations and warranties in Clauses 7.01
and 7.02 shall be true on the Closing Date, and such representations
and warranties shall continue in full force and effect and shall
survive the Closing Date for a period of one (1) year, for the benefit
of the Party for which such representations and warranties were made.
In the absence of fraud, however, no claim or action shall be
commenced with respect to a breach of any such representation or
warranty, unless, within such period, written notice specifying such
breach in reasonable detail has been provided to the Party which made
such representation or warranty.
7.04 Limit on Vendor's Responsibility
--------------------------------
In no event, except in the event of fraud, shall the total of the
liabilities of the vendor under this Agreement exceed the Purchase
Price.
7.05 No Additional Representations Or Warranties By Vendor
-----------------------------------------------------
A. The Vendor makes no representations or warranties to the
Purchaser in addition to those expressly enumerated in Clause
7.01. Except and to the extent provided in Clause 7.01, the
Vendor does not warrant title to the Assets or make
representations or warranties with respect to:
(i) the quantity , quality or recoverability of Petroleum
Substances respecting the Lands;
(ii) any estimates of the value of the Assets or the revenues
applicable to future production from the Lands;
(iii)any engineering, geological or other interpretations or
economic evaluations respecting the Assets;
(iv) the rates of production of Petroleum Substances from the
Lands;
(v) the quality, condition or serviceability of the Assets; or
(vi) the suitability of the use of the Assets for any purpose.
The Purchaser acknowledges that it has made its own independent
investigation, analysis, evaluation, verification and inspection
of the Vendor's interests in the Assets and the state and
condition thereof and that it has relied solely on such
investigation, analysis, evaluation, verification and inspection
as to its assessment of the condition (environmental or
otherwise), quantum and value of the Assets.
B. Except with respect to the representations and warranties in
Clause 7 01 or in the event of fraud, the Purchaser forever
releases and discharges the Vendor and its directors, officers,
servants, agents and employees from any claims and all liability
to the Purchaser or the Purchaser's assigns and successors, as a
result of the use or reliance upon advice, information or
materials pertaining to the Assets which was delivered or made
available to the Purchaser by the Vendor or its directors,
officers, servants, agents or employees prior to or pursuant to
this Agreement, including, without limitation, any evaluations,
projections, reports and interpretive or non- factual materials
prepared by or for the vendor , or otherwise in the vendor's
possession.
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8.00 LIABILITY AND INDEMNIFICATION
-----------------------------
8.01 Responsibility of Purchaser
---------------------------
Provided that Closing has occurred, the Purchaser shall:
(a) be liable to the vendor for all losses, costs, damages and
expenses whatsoever which the vendor may suffer, sustain, pay or
incur; and
(b) indemnify and save the Vendor and its directors, officers,
servants, agents, consultants and employees harmless from and
against all claims, liabilities, actions, proceedings, demands,
losses, costs, damages and expenses whatsoever which maybe
brought against or suffered by the Vendor , its directors,
officers, servants, agents, consultants or employees or which
they may sustain, pay or incur;
as a direct result of any matter or thing arising out of, resulting
from, attributable to or connected with the Assets and occurring or
accruing subsequent to the Effective Date, except any losses, costs,
damages, expense, claims, liabilities, actions, proceedings and
demands to the extent that the same either are reimbursed (or
reimbursable) by insurance maintained by the Vendor or are caused by
the gross negligence or wilful misconduct of the Vendor, its
directors, officers, servants, agents, consultants, employees or
assigns. The responsibility prescribed by this Clause, however, does
not provide either an extension of any representation or warranty
contained in Clause 7.02 or an additional remedy for the Purchaser's
breach of such a representation or warranty.
8.02 Environmental Indemnity
-----------------------
The Purchaser acknowledges that with respect to the environmental
condition of the Assets, it is acquiring the Assets on an ''as is"
basis. The Purchaser acknowledges that it is familiar with the
condition of the Assets, including the past and present use of the
Lands and the Tangibles, that the Vendor has provided the Purchaser
with a reasonable opportunity to inspect the Assets at the sole cost,
risk and expense of the Purchaser (insofar as the Vendor could
reasonably provide access) and that the Purchaser is not relying upon
any representation or warranty of the Vendor as to the condition,
environmental or otherwise, of the Assets, except as is specifically
made pursuant to Clause 7.01. Provided that Closing has occurred, the
Purchaser further agrees that it shall:
(a) be solely liable and responsible for any and all losses, costs,
damages and expenses which the Vendor may suffer, sustain, pay or
incur; and
(b) indemnify and save the Vendor and its directors, officers,
servants, agents, consultants and employees harmless from any and
all claims, liabilities, actions, proceedings, demands, losses,
costs, damages and expenses whatsoever which may be brought
against or suffered by the vendor, its directors, officers,
servants, agents, consultants or employees or which they may
sustain, pay or incur;
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as a direct result of any Environmental Liabilities, regardless of the
date from which they may have accrued. This liability and indemnity
shall apply without limit and without regard to cause or causes,
including without limitation, the negligence or wilful misconduct of
the parties or any other person. Once Closing has occurred, the
Purchaser shall be solely responsible for all Environmental
Liabilities, including, without limitation, the abandol1n1ent of all
wells and the reclamation of the surface lands pertaining to the
Lands, and the Purchaser hereby releases the vendor from any claims
the Purchaser may have against the vendor with respect to all such
liabilities and responsibilities. Nothing in this Clause, however,
shall operate either to limit any representation or warranty made by
the Vendor pursuant to Clause 7.01 or to affect the Purchaser's right
to make a claim against the Vendor for the breach of such a
representation or warranty.
9.00 CLOSING
-------
9.01 Place Of Closing
----------------
Unless otherwise agreed in writing by the Parties, Closing shall take
place at the offices of the Vendor's solicitor at #900, 521 3rd Avenue
S.W., Calgary , Alberta on the Closing Date.
9.02 Required Approvals
-------------------
It is a condition precedent to Closing that any and all approvals
required under the Regulations shall have been obtained or that such
approval shall have been waived, otherwise lapsed or is a foffi1 of
approval which is customarily obtained subsequent to Closing.
9.03 Conditions For Benefit Of Purchaser
-----------------------------------
The obligation of the Purchaser to complete the purchase hereunder is
subject to the following conditions precedent:
(a) No Substantial Damage: There shall have been no damage to or
alteration of any of the Assets between the Effective Date and
the Closing Date which, in the Purchaser's reasonable opinion,
would materially and adversely affect the value of the Assets,
except and to the extent approved in writing by the Purchaser,
provided that a change in the prices at which Petroleum
Substances may be sold in no event shall be regarded as material
damage to or an alteration of the Assets. In addition, the Vendor
shall have delivered to the Purchaser a certificate of a senior
officer of the Vendor in the form of Schedule "D";
(b) Availability of Documents: The Vendor shall have provided the
nominees of the Purchaser with reasonable access to the Vendor's
records and documents pertaining to the Assets pursuant to
Article 4.00, in order to confirm the Vendor's title to the
Assets;
160
</Page>
(c) Material Compliance By Vendor: The Vendor shall have performed or
complied in all material respects with each of the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Vendor at or prior to the Closing Date;
(d) Certificate That Representation Are Correct: The vendor shall
have delivered to the Purchaser a certificate of a senior officer
of the Vendor, in the form of Schedule "C"; and
(e) Delivery of Conveyance Documents: The Vendor shall have
delivered the following to the Purchaser.
(i) a General Conveyance for the Assets, in the form attached as
Schedule "B", which has been executed by the Vendor;
(ii) all specific assignments, registerable transfers, novation
agreements, trust agreements and other instruments required
to convey the Assets to the Purchaser, unless and to the
extent that the Purchaser allows the Vendor to
deliver such documents to the Purchaser at a later date,
provided that such documents shall not require the Vendor to
assume or incur any obligation, or to provide any
representation or warranty, beyond that contained in this
Agreement;
(iv) copies of all consents to disposition and waivers of
preferential rights of purchase or any similar restriction
obtained by the Vendor with respect to the sale of the
Assets to the Purchaser;
(v) originals of the Vendor's records, files, reports and data
pertaining to the Assets, insofar as such delivery is
permitted and required hereunder, unless and to the extent
that the Purchaser agrees to allow the Vendor to deliver
such records, files, reports and data at a later date;
(vi) such other documents as may be specifically required
hereunder or as may be reasonably requested by the Purchaser
upon reasonable notice to the vendor;
(vii)a written notice of the Vendor's intention to sell the
Assets to the Purchaser, resign as Operator of the Lands and
appoint the Purchaser as Operator in the Vendor's place,
served on all working interest owners of the Lands; and
(v) a copy of the corporate proceedings of the Vendor
authorizing the Vendor to enter into this Agreement and
consummate the transactions contemplated herein.
161
</Page>
9.04 Conditional for Benefit Of Vendor
---------------------------------
The obligation of the vendor to complete the sale hereunder is subject
to the following conditions precedent:
(a) Material Compliance by Purchaser: The Purchaser shall have
performed or complied in all material respects with each of the
terms, covenants and conditions of this Agreement to be performed
or complied with by the Purchaser at or prior to the Closing
Date;
(b) Payment of Purchase Price: The Purchaser shall have tendered to
the vendor the Purchase Price and the applicable goods and
services tax in the manner provided for in Clause 2.03, subject
to any adjustments provided for in Article 5.00 and any
alteration expressly provided for herein;
(c) Certification That Representations Are Correct: The Purchaser
shall have delivered to the Vendor a certificate of a senior
officer of the Purchaser, in the form of Schedule "C";
(d) Delivery Of Documents: The Purchaser shall have executed and
delivered to the Vendor one copy of the General Conveyance in the
form attached as Schedule "B" and such other documents as may be
specifically required hereunder; and
(e) Transfer of Wel1 Licenses: The Vendor shall have received
evidence satisfactory to the Vendor, acting reasonably, that the
relevant regulatory board or agency will approve the transfer to
the Purchaser of well licenses and other licenses and permits
pertaining to the Assets that are currently registered in the
name of the Vendor.
9.05 Waiver Of Conditions
--------------------
The conditions in Clauses 9.03 and 9.04 are for the sole benefit of
the Purchaser and the Vendor respectively. The Party for the benefit
of which such conditions have been included may waive any of them, in
whole or in part, by written notice to the other Party, without
prejudice to any of the rights of the Party waiving such condition,
including, without limitation, reliance on or enforcement of the
representations, warranties or covenants which are preserved and
pertain to conditions-similar to the condition so waived. However, the
Purchaser may not waive the existence and operation of any
preferential right of a third party to purchase any of the Assets or,
without the concurrence of the Vendor, any required consent of a third
party to the Vendor's disposition of any of the Assets.
9.06 Failure To Satisfy Conditions
-----------------------------
In the event any of the conditions in Clauses 9.03 or 9.04 has not
been satisfied at or before the Closing Date and such condition has
not been waived by the Party for the benefit of which such condition
has been included, such Party may terminate this Agreement by written
notice to the other Party. However, a Party may not terminate this
Agreement in such manner after Closing, and its remedies thereafter,
if any, with respect to the failure to satisfy such condition shall be
limited to damages.
162
</Page>
10.00 POST CLOSING ADMINISTRATION
---------------------------
10.01 Registration of Documents
-------------------------
The vendor shall register promptly after Closing all documents
described in Paragraph 9.03 (e) which require registration. The
Purchaser shall reimburse the vendor for all costs incurred in
registering such documents and shall bear all costs of preparing and
registering any further assurances required to convey the Initial
Interest to the Purchaser.
10.02 Vendor's Access to Documents
----------------------------
The Vendor may retain or subsequently obtain from the Purchaser
copies or photocopies of any of the documents comprised in
Miscellaneous Interests that it considers necessary to enable it to
comply with any Regulations or the requirements of any authority or
to conduct audits relating to the period prior to the Effective
Date.
11.00 CONFIDENTIALITY
---------------
11.01 Purchaser's Obligation To Maintain Information Confidential
-----------------------------------------------------------
Information respecting the Assets shall be retained in confidence
and used only for the purposes of this acquisition, provided that
upon Closing, the Purchaser's rights to use or disclose such
information shall be subject only to any operating, unit or other
agreements that may apply thereto. Any additional information
obtained as a result of such access which does not relate to the
Assets shall continue to be treated as confidential and shall not be
used by the Purchaser without the prior written consent of the
vendor. However, the restrictions on disclosure and use of
information in this Agreement shall not apply to information to the
extent it:
(a) is or becomes publicly available through no act or omission of
the Purchaser or its consultants or advisors;
(b) is subsequently obtained lawfully from a third party, where the
Purchaser has made reasonable efforts to ensure that such third
party is not a party to or bound by any confidentiality agreement
with the Vendor; or
(c) is already in the Purchaser's possession at the time of
disclosure, without restriction on disclosure.
However, specific items of information shall not be considered to be
in the public domain merely because more general information
respecting the Assets is in the public domain.
11.02 Consultants And Advisors Bound
------------------------------
If the Purchaser employs consultants, advisors or agents to assist
in its review of the Assets pursuant to Article 4.00, the Purchaser
shall be responsible to the vendor for ensuring that such
consultants, advisors and agents comply with the restrictions on the
use and disclosure of information set forth in Clause 11.01 .
163
</Page>
12.00 ARBITRATION
-----------
12.01 Reference To Arbitration
------------------------
Insofar as the Parties are unable to agree on any matter which
expressly may be referred to arbitration hereunder, either Party may
serve the other Party written notice that it wishes such matter
referred to arbitration.
The Parties shall meet within seven (7) days of the receipt of a
notice issued pursuant to Subclause 12.01A, to attempt to agree on a
single arbitrator qualified by experience, education and training,
to determine such matter. If the Parties are unable to agree on the
selection of the arbitrator, the Party which issued such notice
shall forthwith make application to a judge of the Court of Queen's
Bench of the Province of Alberta pursuant to the Arbitration Act of
the Province of Alberta (S.A. 1991, c. A-43.1, as amended from time
to time, hereinafter referred to as the "Arbitration Act") for the
appointment of a single arbitrator, and failing such action on the
part of the Party which issued such notice, the other Party may make
such application.
12.02 Proceedings
-----------
A. The arbitrator selected pursuant to Clause 12.01 shall proceed as
soon as is practicable to hear and deteI1l1ine the matter in
dispute, and shall be directed to provide a written decision
respecting such matter within forty-five (45) days of
appointment. The Parties shall provide such assistance and
information as may be reasonably necessary to enable the
arbitrator to determine such matter.
B. Except to the extent modified in this Article, the arbitrator
shall conduct any arbitration hereunder pursuant to the
provisions of the Arbitration Act.
13.00 ASSIGNMENT
----------
13.01 Assignment Before Closing
-------------------------
Prior to Closing, neither Party may assign its interest in or under
this Agreement or to the Assets without the prior written consent of
the other Party, except as may be required by the vendor to comply
with its obligations respecting any preferential rights, as provided
in Article 3.00.
164
</Page>
13.02 Assignments By Purchase After Closing
-------------------------------------
No assignment, transfer or other disposition of this Agreement or
all or any portion of the assets by the Purchaser after Closing
shall relieve the Purchaser from its obligations to the Vendor
herein. The Vendor shall have the option to claim payment or
performance of such obligations from the Purchaser or the assignee
or transferee, and to bring proceedings in the event of default
against either or all of them, provided that nothing herein shall
entitle the vendor to receive duplicate payment or performance of
the same obligation.
14.00 NOTICE
------
14.01 Service Of Notice
-----------------
Notwithstanding anything to the contrary contained herein, all
notices required or permitted hereunder shall be in writing. Any
notice to be given hereunder shall be deemed to be served properly
if served in any of the following modes:
(a) personally, by delivering the notice to the Party on which it is
to be served at that Party's address for service. Personally
served notices shall be deemed to be received by the addressee
when actually delivered as aforesaid, provided that such delivery
shall be during normal business hours on any day other than a
Saturday, Sunday or statutory holiday in Alberta. If a notice is
not delivered on such a day or is delivered after the addressee's
normal business hours, such notice shall be deemed to have been
received by such party at the commencement of the addressee's
first business day next following the time of the delivery;
(b) by telecopier or telex ( or by any other like method by which a
written message may be sent) directed to the party on which it is
to be served at that Party's address for service. A notice so
served shall be deemed to be received by the addressee when
actually received by it, if received within normal business hours
on any day other than a Saturday, Sunday or statutory holiday in
Alberta or at the commencement of the next ensuing business day
following transmission if such notice is not received during such
normal business hours; or
(c) bv" mailing it first class ( air mail if to or from a location
outside of Canada) registered post, postage prepaid, directed to
the party on which it is to be served at that Party's address for
service. Notices so served shall be deemed to be received by the
addressee at noon, local time, on the earlier of the actual date
of receipt or the fourth (4th) day ( excluding Saturdays, Sundays
and statutory holidays in Alberta) following the mailing thereof.
However, if postal service is (or is reasonably anticipated to
be) interrupted or operating with unusual delay, notice shall not
be served by such means during such interruption or period of
delay.
165
</Page>
14.02 Addresses For Notices
---------------------
The address for service of notices hereunder of each of the
Parties shall be as follows:
VENDOR: STARROCK RESOURCES LTD.
#900, 521- 3rd Avenue S.W.
Calgarv Alberta T2P 3T3
Telecopier: (403) 264-6654
PURCHASER: PROMAX ENERGY INC.
#810, 1122 - 4th Street S.W
Calgary, Alberta T2M lMl
14.03 Right To Change Address
-----------------------
A Party may change its address for service by notice to the other
Party, and such changed address for service thereafter shall be
effective for all purposes of this Agreement.
15.00 PUBLIC ANNOUNCEMENTS
--------------------
15.01 Approval Required For Press Release
-----------------------------------
A. Subject to Clause 11.01, the Parties shall cooperate with each
other in relaying to third parties information concerning this
Agreement and shall receive written approval from the other Party
of all press releases and other releases of information prior to
publication which approval may not be unreasonably withheld.
However, nothing in this Clause shall prevent a Party from
furnishing any information to any governmental agency or
regulatory authority or to the public, insofar only as is
required by the Regulations or securities laws applicable to such
Party, provided that a Party which proposes to make such a public
disclosure shall, to the extent reasonably possible, provide the
other Party with a draft of such statement a sufficient time
prior to its release to enable such other party to review such
draft and advise that Party of any comments it may have with
respect thereto.
B. Notwithstanding Subclause 15.01A, the Vendor shall be permitted
to disclose information pertaining to this Agreement and the
identity of the Purchaser, to the extent required to enable the
Vendor to fulfil its obligations pertaining to preferential
rights of purchase and other third party rights, in accordance
with Article 3.00.
15.02 Signs And Notification To Governmental Agencies
-----------------------------------------------
Following Closing, the Vendor may remove any signs which indicate
the Vendor's ownership or operation of the Assets. If the Purchaser
will be the operator of the Assets, it shall be the responsibility
of the Purchaser to erect or install any signs required by
governmental agencies which pertain to the Assets. In addition, the
Purchaser shall be responsible for advising governmental agencies,
contractors, suppliers and other affected third parties of the
Purchaser's interest in the Assets, subject to Article 3.00.
166
</Page>
16.00 MISCELLANEOUS PROVISIONS
------------------------
16.01 Further Assurance
-----------------
At the Closing Date and thereafter as may be necessary , the Parties
shall execute, acknowledge and deliver such instruments and take
such other actions as may be reasonably necessary to fulfil their
respective obligations under this Agreement. The Vendor shall
cooperate with the Purchaser as reasonably required to secure
execution by third parties of the documents referred to in
Subparagraph 9.03 (e) (ii).
16.02 Governing Law
-------------
This Agreement shall be subject to and be interpreted, construed and
enforced in accordance with the laws in effect in the Province of
Alberta. Each Party accepts the jurisdiction of the courts of the
Province of Alberta and all courts of appeal therefrom.
16.03 Time
----
Time shall be of the essence in this Agreement.
16.04 No Amendment Except In Writing
------------------------------
Subject to Clause 14.03, this Agreement may be amended only by
written instrument executed by the Vendor and the Purchaser.
16.05 Waiver Must Be In Writing
-------------------------
No waiver by any Party of any breach (whether actual or anticipated)
of any of the terms, conditions, representations or warranties
contained herein shall take effect or be binding upon that Party
unless the waiver is expressed in writing under the authority of
that party. Any waiver so given shall extend only to the particular
breach so waived and shall not limit or affect any rights with
respect to any other or future breach.
16.06 Consequence Of Termination
--------------------------
If this Agreement is terminated in accordance with its terms prior
to Closing, then except for the provisions of Article 11.00 and the
covenants, warranties, representations or other obligations breached
prior to the time at which such termination occurs, the Parties
shall be released from all of their obligations under this
Agreement. If this Agreement is so terminated, the Purchaser shall
promptly return to the Vendor all materials delivered to the
Purchaser by the Vendor hereunder, together with all copies of them
that may have been made by or for the Purchaser.
167
</Page>
16.07 Supersedes Earlier Agreements
-----------------------------
This Agreement supersedes all other agreements between the Parties
with respect to the Assets and expresses the entire agreement of the
Parties with respect to the transactions contained herein.
16.08 No Merger
---------
The representations, warranties, liabilities and indemnities created
in this Agreement shall be deemed to apply to, and shall not merge
in, all assignments, transfers, conveyances, novations, trust
agreements and other documents conveying any of the Assets from the
vendor to the Purchaser, notwithstanding the terms of such
assignments, transfers, conveyances, novations and other documents,
the Regulations or any rule of law or equity to the contrary , and
all such rules are hereby waived.
16.09 Substitution and Subrogation
----------------------------
Insofar as is possible, each party shall have full rights of
substitution and subrogation in and to all covenants,
representations and warranties by others previously given or made in
respect of the Assets or any of them.
16.10 Enurement
---------
Subject to the provisions of Article 13.00, this Agreement shall be
binding upon and enure to the benefit of the Parties and their
respective successors and permitted assigns.
IN WITNESS WHEREOF the Parties have duly executed this Agreement.
STARROCK RESOURCES LTD. PROMAX ENERGY INC.
Per: /S/ Al Langard Per: /S/ Robert Card
Per: /S/ J.R. MacMillan
168
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March
19, 1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX
ENERGY INC. as Purchaser.
Part I Lands, Leases and Encumbrances
-----------------------------------------
Lease Vendor's
Legal P&NG Zones Expiry Working Operator
Description Lease Included Date Interest of
(W4M) Number in Lease M/D/Y (%) Lease Encumbrances
- ------------- ----------- ---------- ---------- --------- --------- -------------
6-6-25-7 0492020031 Base MH Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
19-24-8 0497100596 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
6-24-9 0495010052 All 1-5-00 37.28 Calahoo Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
17-24-9** 0490040297 Base Indefinite 74.56 Vendor Crown Lessor
Viking Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
18-24-9 0494110451 All 11-24-99 37.28 Calahoo Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
23-24-9 0497100597 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
24-24-9 049700598 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
30-24-9 12286 Base MH Indefinite 74.56 Vendor Crown Lessor
Royalty
12286 Viking 4-24-99 74.56 Vendor Crown Lessor
Royalty
0495010054 Below 1-5-00 37.28 Calahoo Crown Lessor
Viking Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
32-24-9 37514 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
34-24-9 0495090051 All 9-14-00 29.82 Seaton Crown Lessor
Jordon Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
35-24-9 0497100600 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
36-24-9 0497100601 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
2-24-10 0493040043 Base Indefinite 74.56 Vendor Crown Lessor
Mann Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
11-24-10 39535 Base Indefinite 74.56 Vendor Crown Lessor
Viking Royalty
0498040317 Below 4-30-03 74.56 Vendor Crown Lessor
Viking Royalty
- ------------- ----------- ---------- ---------- --------- --------- -------------
169
</Page>
This is Schedule "A" to an Agreement of Purchase and Sale dated March 19, 1999
between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as purchaser
Page 2
Lease Vendor's
P&NG Zones Expiry Working Operator
Location Lease Included Date Interest of
(W4M) Number in Lease M/D/Y (%) Lease Encumbrances
- ---------------------------------------------------------------------------------
13-24-10 0493040044 Base Mann 4-1-99 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
14-24-10 12286 Base Mann 10-30-02 74.56 Vendor Crown Lessor
Royalty
12286 Viking 4-29-99 74.56 Vendor Crown Lessor
Royalty
0495010055 Below 1-5-00 37.28 Calahoo Crown Lessor
Viking Royalty
- ---------------------------------------------------------------------------------
25-24-10 0496070046 All 7-11-00 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
7-25-8 0499020043 All 2-3-04 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
9-25-8 0498040318 All 4-30-03 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
15-25-8 0492010234 Base Mann Indefinite 45.31 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
16-25-8 0498040322 All 4-30-03 45.31 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
17-25-8 0498040323 All 4-30-03 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
18-25-8 0499020044 All 2-3-04 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
20-25-8 0492010235 Base Mann Indefinite 50.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
21-25-8 0492010236 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
28-25-8 0492010237 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
1-25-9 0497100603 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
4-25-9 8435 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
5-25-9 12276 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
170
</Page>
- ---------------------------------------------------------------------------------
9-25-9 38435 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ---------------------------------------------------------------------------------
11-25-9** 0491070294 Base Indefinite 74.56 Vendor Crown Lessor
Viking Royalty
0498040324 Below 4-30-03 74056 Vendor Crown Lessor
Viking Royalty
- ---------------------------------------------------------------------------------
12-25-9 0491030315 Base Indefinite 74.56 Vendor Crown Lessor
Viking Royalty
0498040325 Below 4-30-03 74.56 Vendor Crown Lessor
Viking Royalty
- ---------------------------------------------------------------------------------
171
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
Page 3
All the above leases are subject to a 5% GORR.
The leases marked with an ** are subject to an additional 6% GORR.
Part II - Production Sales Contracts
-------------------------------------
[None]
Part III - Unit Agreements
---------------------------
[None]
Part IV - Facility Agreements
-------------------------------
[None]
172
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
Page 4
Part V- Wells and Gathering Systems
--------------------------------------
Cessford Equipment
--------------------
Location (W4M) License Number Vendor Interest %
- ------------------------ --------------------- --------------------
- ------------------------ --------------------- --------------------
15-27-24-8 0205307 74.56
- ------------------------ --------------------- --------------------
10-17-24-9 0146609 74.56
- ------------------------ --------------------- --------------------
10-17-24-9 0176525 74.56
- ------------------------ --------------------- --------------------
7-30-24-9 163072 74.56
- ------------------------ --------------------- --------------------
7-30-24-9 0090208 74.56
- ------------------------ --------------------- --------------------
9-32-24-9 0096821 74.56
- ------------------------ --------------------- --------------------
12-2-24-10 161668 74.56
- ------------------------ --------------------- --------------------
12a-2-24-10 163073 74.56
- ------------------------ --------------------- --------------------
13-2-24-10 0076860 74.56
- ------------------------ --------------------- --------------------
12-11-24-10 0075362 74.56
- ------------------------ --------------------- --------------------
14-11-24-10 0145307 74.56
- ------------------------ --------------------- --------------------
6-14-24-10* 0051035 74.56
- ------------------------ --------------------- --------------------
6-6-25-7 0204986 74.56
- ------------------------ --------------------- --------------------
6-15-25-8 0217157 45.31
- ------------------------ --------------------- --------------------
8-16-25-8 0217156 45.31
- ------------------------ --------------------- --------------------
6-20-25-8 0217843 74.56
- ------------------------ --------------------- --------------------
6-21-25-8 0206367 74.56
- ------------------------ --------------------- --------------------
10-28-25-8 0209012 74.56
- ------------------------ --------------------- --------------------
6-4-25-9 0050887 74.56
- ------------------------ --------------------- --------------------
173
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
Page 5
- ------------------------ --------------------- --------------------
Location (W4M) License Number Vendor Interest
(%)
- ------------------------ --------------------- --------------------
7-5-25-9 0051972 74.56
- ------------------------ --------------------- --------------------
6-9-25-9 0052198 74.56
- ------------------------ --------------------- --------------------
7-9-25-9 0412019 74.56
- ------------------------ --------------------- --------------------
9-11-25-9 0189572 74.56
- ------------------------ --------------------- --------------------
15-12-25-9 0151802 74.56
- ------------------------ --------------------- --------------------
- ------------------------ --------------------- --------------------
TOTALS
- ------------------------ --------------------- --------------------
*Dehydrator Located at 6-14-24-10
174
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
Page 6
Cessford Pipeline
------------------
From To Outside Wall
Line Location Location Diameter Thickness Length
Number (W4M) (W4M) (inches) (inches) (Miles)
- ----------- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- ----------- -----------
2 6-4-25-9 6-24-24-10 4.50 .125 4.25
- ----------- ----------- ----------- ----------- ----------- -----------
18 6-24-24-10 6-14-24-10 4.50 .125 1.34
- ----------- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- ----------- -----------
7 6-14-24-10 3-6-24-10 3.50 .125 4.48
- ----------- ----------- ----------- ----------- ----------- -----------
17 3-6-24-10 16-36-23-11 3.50 .125 .65
- ----------- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- ----------- -----------
14 7-30-24-9 6-30-24-9 2.50 .125 .15
- ----------- ----------- ----------- ----------- ----------- -----------
15 13-2-24-10 12-11-24-10 2.50 .125 .80
- ----------- ----------- ----------- ----------- ----------- -----------
16 12-11-24-10 6-14-24-10 2.50 .125 .80
- ----------- ----------- ----------- ----------- ----------- -----------
Total 4.50 inch line = 5.59
Total 3.50 inch line = 5.13
Total 2.50 inch line = 1.75
Replacement Value for Pipeline is projected at $15,000 per inch mile
Calculated As: 4.50*5.59)(15,000) = 377,325
3.50(5.13)(15,000) = 269,325
2.50(1.75)15,000) = 65,625
Total Replacement Value $712,275
Establish Present Day Value at 75% of replacement value
to allow for repairs if necessary $534,206
Vendor's Value at 74.56% Interest = $398,300
175
</Page>
This is SCHEDULE "A" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
Page 7
Part VI Authorizations for Expenditure For Which
Purchaser is Responsible
----------------------------------------------------
[None]
Part VII Preferential Purchase Rights
---------------------------------------
[None]
Part VII Processing, Treating, Transportation and Contract
Operating Agreements
--------------------------------------------------------------
[None]
Part IX Penalties
---------------------
[None]
176
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This is SCHEDULE "B" to an Agreement of Purchase and Sale dated March 19,
1999 between STARROCK RESOURCES LTD.as Vendor and PROMAX ENERGY INC.
As Purchaser
GENERAL CONVEYANCE
Cessford Area, Alberta
This Conveyance made this 19th day of March,1999.
BETWEEN.
STARROCK RESOURCES LTD. having an office in the City of Calgary, in the
Province of Alberta (hereinafter called the "Vendor")
- and -
PROMAX ENERGY INC., a body corporate, having an office in
the City of Calgary,in the Province of Alberta
(hereinafter called the "Purchaser")
WHEREAS the Vendor has agreed to sell and convey the Vendor's entire
right, title, estate and interest in the Assets to the Purchaser and the
Purchaser has agreed to purchase and accept all of the Vendor's right,
title, estate and interest in and to the Assets;
THE PARTIES AGREE AS FOLLOWS:
1. Definitions
-----------
In this Conveyance, including the recitals, "Agreement" means the
Agreement of Purchase and Sale dated the 19th day of March, 1999,
between the Vendor and the Purchaser. In addition, the definitions
provided for in the Agreement are adopted in this Conveyance.
2. Conveyance
----------
The Vendor , for the consideration provided for in the Agreement, the
receipt and sufficiency of which is acknowledged by the Vendor, sells,
assigns, transfers and conveys the Initial Interest to the Purchaser,
and the Purchaser purchases and accepts such interest from the Vendor,
TO HAVE AND TO HOLD the same absolutely, subject to the terms of the
Agreement, the Permitted Encumbrances and compliance with the terms of
the Leases.
3. Effective Time
--------------
This Conveyance is effective as of the Closing Date.
177
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4. Subordinate Document
--------------------
This Conveyance is executed and delivered by the Parties pursuant to
the Agreement for the purposes of the provisions of the Agreement, and
the terms hereof shall be read in conjunction with the terms of the
Agreement. The Agreement shall prevail if there is a conflict between
the provisions of the Agreement and this Conveyance.
5. Enurement
---------
This Conveyance ensures to the benefit of and is binding upon the
Parties and their respective successors and permitted assigns.
6. Further Assurances
------------------
Each Party shall, after the date of this Conveyance, at the request of
the other Party and without further consideration, do all further acts
and execute and deliver all further documents which are reasonably
required to perform and carry out the terms of this Conveyance.
IN WITNESS WHEREOF the Parties have duly executed this Conveyance.
STARROCK RESOURCES LTD.
PER: /S/ Al Langard
----------------------------------
PER:
----------------------------------
PROMAX ENERGY INC.
PER: /S/ Robert Card
----------------------------------
PER: /S/ J.R. MacMillan
----------------------------------
178
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This is SCHEDULE "C" to an Agreement of Purchase and Sale dated March 19,
1999, between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
VENDOR'S/PURCHASER'S OFFICER'S CERTIFICATE
--------------------------------------------
(REPRESENTATIONS ARE TRUE)
RE: Article 7.00 of the Agreement of Purchase and Sale ("Agreement") dated
March 19, 1999, between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY
INC. as Purchaser.
Unless otherwise stated, the definitions provided for in the Agreement are
adopted in this Certificate.
I, (name), (position) of (name of party) ("the Vendor" or "the
Purchaser") hereby certify that:
1. Each of the covenants, representations and warranties of the
(Vendor/Purchaser) contained in Article 7.00 of the Agreement is
true and correct in all material respects as of the Closing Date.
2. This Certificate is made for and on behalf of the Vendor and is
binding upon it, and I am not incurring and will not incur any
personal liability whatsoever with respect to it.
3. This Certificate is made with full knowledge that the Vendor is
relying on the same for the Closing of the transactions
contemplated by the Agreement.
IN WITNESS WHEREOF I have executed this Certificate the 19th day of March,
1999.
____________________________ ____________________________
WITNESS (OFFICER'S NAME)
179
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This is SCHEDULE "D" to an Agreement of Purchase and Sale dated March 19,
1999, between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY INC. as
Purchaser
VENDOR'S OFFICER'S CERTIFICATE
------------------------------
(NO SUBSTANTIAL DAMAGE)
RE: Article 9.00 of the Agreement of Purchase and Sale ("Agreement") dated
March 19, 1999, between STARROCK RESOURCES LTD, as Vendor and PROMAX ENERGY
INC. as Purchaser.
Unless otherwise stated, the definitions provided for in the Agreement
are adopted in this Certificate.
I, AL LANGARD, President of STARROCK RESOURCES LTD. ("the Vendor")
hereby certify that:
1. To the best of the information, knowledge and belief of the
Vendor, there has been no damage to or alteration of the Assets
between the Effective Date and the Closing Date that would
materially and adversely affect the value of the Assets.
2. This Certificate is made for and on behalf of the Vendor and is
binding upon it, and I am not incurring and will not incur any
personal liability whatsoever with respect to it.
3. This Certificate is made with full knowledge that the Purchaser
is relying on the same for the Closing of the transactions
contemplated by the Agreement.
IN WITNESS WHEREOF I have executed this Certificate the 19th day of March,
1999.
/S/ Al Langard" AL LANGARD, PRESIDENT
--------------------- ----------------------------
180
</Page>
RECEIPT
(G.S.T.)
Starrock Resources Ltd. Hereby acknowledges receipt of the amount of
Twenty-Seven Thousand, Seven Hundred One Dollar and Eighty Cents
($27,701.80) from Promax Energy Inc. this day of March, 1999.
Starrock Resources Ltd.
Per: /S/ Al Langard
-----------------------------
181
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RECEIPT
(G.S.T.)
Starrock Resources Ltd. Hereby acknowledges receipt of the amount of One
Million Eight Hundred Fifty Eight Thousand, Seven Hundred Sixty-Seven
Dollars and Seventy-Nine Cents ($1,858,767.79) from Promax Energy Inc. this
day of March, 1999.
Starrock Resources Ltd.
Per: /S/ Al Langard
----------------------------
182
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NEGATIVE PLEDGE AND UNDERTAKING
---------------------------------
March 19, 1999
STARROCK RESOURCES l TD.
#900, 521- 3 Avenue S.W.
Calgary, Alberta
T2P 3T3
Dear Sirs:
In consideration of Starrock Resources Ltd. {the "Starrock") offering
options as set forth in the Agreement of Purchase and Sale dated March 19,
1999 between Promax Energy Inc. and Starrock Resources Ltd., the
undersigned undertakes and agrees that it will from time to time, when
requested in writing by Starrock, and for so long as the said options
remain unexercised by PROMAX ENERGY INC., immediately execute and deliver
to, and in favour of Starrock, such further security, in the form Starrock
requests on its assets and undertaking, whether now owned or hereafter
acquired, including, without limitation, security in the form of fixed
charges, floating charges, specific assignments of proceeds and contracts
and general assignments of debts.
The undersigned further undertakes and agrees that so long as the said
options remain available to PROMAX ENERGY INC., and until the undersigned
is released from its obligations under this letter of undertaking, it will
maintain its assets and undertaking free from any and all mortgages, liens,
charges, or security interests other than those granted to and in favour of
Starrock.
Given at the City of Calgary, in the Province of Alberta
PROMAX ENERGY INC.
Per: /S/ Robert Card
----------------------------
Per: /S/ J.R. McMillan
----------------------------
183
</Page>
PURCHASER'S OFFICER'S CERTIFICATE
-----------------------------------
(REPRESENTATIONS ARE TRUE)
RE: Article 7.00 of the Agreement of Purchase and Sale (" Agreement") dated
March 19, 1999, between STARROCK RESOURCES LTD. As Vendor and PROMAX ENERGY
INC. as Purchaser.
Unless otherwise stated, the definitions provided for in the Agreement
are adopted in this Certificate.
I, Robert L. Card, Chairman of the Board of Directors of Promax Energy
Inc. ("the Purchaser") hereby certify that:
1. Each of the covenants, representations and warranties of the
Purchaser contained in Article 7.00 of the Agreement is true and
correct in all material respects as of the Closing Date.
2. This Certificate is made for and on behalf of the Purchaser and
is binding upon it, and I am not incurring and will not incur any
personal liability whatsoever with respect to it.
3. This Certificate is made with full knowledge that the Purchaser
is relying on the same for the Closing of the transactions
contemplated by the Agreement.
IN WITNESS WHEREOF I have executed this Certificate the 19th day of March,
1999.
/S/ J.R. MacMillan /S/ Robert Card
-------------------- --------------------
WITNESS ROBERT L.CARD
184
</Page>
VENDOR'S OFFICER'S CERTIFICATE
---------------------------------
(NO SUBSTANTIAL DAMAGE)
RE: Article 9.00 of the Agreement of Purchase and Sale ("Agreement") dated
March 19, 1999, between STARROCK RESOURCES LTD, as Vendor and PROMAX ENERGY
INC. as Purchaser.
Unless otherwise stated, the definitions provided for in the Agreement
are adopted in this Certificate.
I, AL LANGARD, President of STARROCK RESOURCES LTD. ("the Vendor")
hereby certify that:
1. To the best of the information, knowledge and belief of the
Vendor, there has been no damage to or alteration of the Assets
between the Effective Date and the Closing Date that would
materially and adversely affect the value of the Assets.
2. This Certificate is made for and on behalf of the Vendor and is
binding upon it, and I am not incurring and will not incur any
personal liability whatsoever with respect to it.
3. This Certificate is made with full knowledge that the Purchaser
is relying on the same for the Closing of the transactions
contemplated by the Agreement.
IN WITNESS WHEREOF I have executed this Certificate the 19th day of March,
1999.
/S/ Al Langard
--------------------------
AL LANGARD, PRESIDENT
185
</Page>
VENDOR'S OFFICER'S CERTIFICATE
-------------------------------
(REPRESENTATIONS ARE TRUE)
RE: Article 7.00 of the Agreement of Purchase and Sale ("Agreement") dated
March 19, 1999, between STARROCK RESOURCES LTD. as Vendor and PROMAX ENERGY
INC. as Purchaser.
Unless otherwise stated, the definitions provided for in the Agreement
are adopted in this Certificate.
I, Al Langard, President, of Starrock Resources Ltd.. ("the Vendor")
hereby certify that:
1. Each of the covenants, representations and warranties of the
Vendor contained in Article 7.00 of the Agreement is true and
correct in all material respects as of the Closing Date.
2. This Certificate is made for and on behalf of the Vendor and is
binding upon it, and I am not incurring and will not incur any
personal liability whatsoever with respect to it.
3. This Certificate is made with full knowledge that the Vendor is
relying on the same for the Closing of the transactions
contemplated by the Agreement.
IN WITNESS WHEREOF I have executed this Certificate the 19th day of March,
1999.
/S/ Al Langard
------------------------
AL LANGARD, PRESIDENT
186
</Page>
May 1, 1999
PROMAX ENERGY INC.
#810, 1122- 4th Street S.W.
Calgary , Alberta
T2M 1M1
Attention: Mr. Barclay Hambrook, President
Dear Mr. Hambrook
Re: Fixed and Floating Charge Debenture Granted by Promax Energy Inc.
("Promax") to Starrock Resources Ltd. ("Starrock")
In conjunction with the closing of the transactions contemplated in the
Agreement of Purchase and Sale dated March 19,. 1999 (" Agreement") between
Starrock and Promax, Promax granted Starrock a Fixed and Floating Charge
Debenture ("Debenture"), charging all property conveyed to Promax pursuant
to the Agreement. As per instructions from Starrock, we did not register
the Debenture with the Personal Property Registry of Alberta or by way of
caveat or security notice against any leases conveyed to Promax. We have
been instructed by Starrock to inform Promax that it is terminating the
Debenture. The cancellation of the Debenture does not, however, abrogate,
extinguish or diminish the obligations of Promax pursuant to the Agreement.
Sincerely,
/S/ Al Langard
- ------------------
AL LANGARD
187
</Page>
/Letterhead/
DRUMMOND PHILLIPS & SEVALRUD
Barristers & Solicitors
Allan L. Holme
Direct Line: 221-8705
Assistant: Linda Wilson
Direct Line: 221-8719
Our File No: 12771/06/MJL
April 5, 1999
Mr. Al Langard
Starrock Resources Ltd.
Box 19, Site 10, RR 4
Calgary , Alberta
T2M 4L4
Dear Mr. Langard:
Re: Sale by Starrock Resources Ltd. ("Starrock") to Promax Energy Inc.
("Promax")of Assets in Cessford Area of Alberta
We confirm completion of the above noted matter and accordingly enclose
herewith the following:
1. fully executed copy of the Fixed and Floating Charge Debenture
granted by Promax to Starrock, charging all property in
Schedule" A" and after acquired property in the "Secured Property
Area It as defined in item (k) on page 3;
2. our statement of account for services rendered herein.
We confirm your previous instructions during our meeting of March 8, 1999,
that we are not to register the enclosed debenture at the Personal Property
Registry of Alberta or by way of caveat or security notice against the
leases. However, we have recommended that such registrations be effected
to protect Starrock's security and maintain its priority over other
creditors of Promax or third party purchasers of the assets. We will
await your further instructions in this regard.
We understand that you have complete copies of all other closing
documentation. Should you require another copy of any of the closing
documents, please do not hesitate to contact our office directly.
We trust you will find the foregoing and enclosed satisfactory and thank
you for allowing us to be of service to you in this matter.
Yours very truly,
DRUMMOND, PHILLIPS & SEVALRUD
/S/ Allan Holme
ALLAN L. HOLME
900, 521 3rd Avenue S.W. Calgary, Alberta T2P 3T3
E-mail: dpslaw@telusplanet.net Facsimile: 403.264.6654
Telephone: 403.221.8700
188
</Page>
FIXED AND FLOATING CHARGE-DEBENTURE
------------------------------------
1. PROMAX ENERGY INC., a corporation incorporated having an office in the
City of Calgary, in the Province of Alberta (hereinafter called the
"Corporation"), for value received as security for the Corporation's
obligations under an Agreement of Purchase and Sale dated March 19,
1999 between the Corporation and Starrock Resources Ltd. ('' Agreement
of Purchase and Sale"), hereby acknowledges itself indebted and
promises to pay to STARROCK RESOURCES LTD. (who and whose successors
and assigns as holders of this Debenture are hereinafter collectively
called the "Holder"), the sum of FOUR MILLION NINE HUNDRED AND FORTY
TWO THOUSAND SEVEN HUNDRED AND SIXTY-EIGHT DOLLARS AND THIRTY FIVE
CENTS ($4,942,768.35) being the Option Interest Purchase Price and
also to pay to the Holder the Exercise Bonus Amount(s) payable under
the Agreement of Purchase and Sale, in lawful money of Canada
(hereinafter called the "principal sum") at #900, 521- 3 A venue S.
W. , the City of Calgary, in the Province of Alberta, Canada.
2. In this Debenture, including this clause and any schedules hereto,
unless there is something in the subject matter or context
inconsistent therewith :
(a) "Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, licence, authorization or other
direction or requirement (including, without limitation, any of
the foregoing which relates to environmental standards or
controls, energy regulations and occupational safety and health
standards or controls) of any federal, provincial, county,
municipal or other government, department, commission, board,
court, agency or any other instrumentality or any of them, that
exercises jurisdiction over the Corporation or any part of the
Mortgaged Premises;
(b) "hydrocarbons" means solid, liquid and gaseous hydrocarbons and
any natural gas whether consisting of a single element or of two
or more elements in chemical combination or uncombined and any
other substances, whether a hydrocarbon or not, produced in
association therewith and, without restricting the generality of
the foregoing, includes oil-bearing shale, tar sands, crude oil,
petroleum, helium and hydrogen sulphide;
(c) "lien hereto" or "lien hereof" or "lien of this Debenture" means
the security created or expressed to be created or required to be
created by the Corporation by any provision of this Debenture;
(d) "Mortgaged Premises" and "Mortgaged Property" mean all of the
undertaking, property and assets, both present and future, of the
Corporation, of whatsoever nature and kind and wheresoever
situated, that are from time to time subject to any security
interests, mortgages, liens, assignments, transfers,
hypothecations, pledges or charges created under or secured by
this Debenture" or by any indenture supplementary hereto and
includes the Specifically Mortgaged Property and the Specifically
Assigned Property.
(e) "Operating equipment" means all surface and subsurface machinery,
apparatus, equipment, facilities and other property and assets of
whatsoever nature and kind (excluding drilling rigs, service
189
</Page>
rigs, trucks, automotive equipment or other property or assets
taken on the said lands or any part thereof to drill, service,
stimulate or rework any well or wells or to conduct any other
temporary operations on the said lands relative to exploring for
or producing hydrocarbons) now or hereafter located on any of the
said lands that are used or useful for the production, treatment,
storage or transportation of any of the hydrocarbons including,
without limiting the generality of the foregoing, oil wells, gas
wells, water wells, injection wells, disposal wells, casing,
tubing, rods, pumps and pumping equipment, christmas trees and
other wellhead equipment, separators, flow lines, tanks,
treaters, heaters, plants and systems to gather, treat and/or
compress hydrocarbons, plants and systems to treat, dispose of or
inject water or other substances, power plants, poles, lines,
transformers, starters, controllers, machine shops, tools, spare
parts and spare equipment, telegraph, telephone, radio and other
communication equipment, racks, storage facilities, land records,
contracts and seismic and geological data;
(f) "permitted encumbrances" means:
(i) liens for taxes not yet due or the validity of which is
being contested in good faith by the Corporation and liens
for the excess of the amount of any past due taxes for which
a final assessment has not been received over the amount of
such taxes as estimated by a responsible representative of
the Corporation and in respect of which the Corporation has
set aside cash reserves sufficient to fully pay and satisfy
the same;
(ii) undetermined or inchoate liens or charges incidental to
current operations which have not at the time been duly
registered in accordance with applicable law against the
Corporation or its property and of which no notice has been
served upon the Corporation in accordance with such law and
in respect of which the Corporation has set aside cash
reserves sufficient to fully pay and satisfy the same;
(iii)liens incurred or created in the ordinary course of business
on the Specifically Mortgaged Premises in favour of any
other person who is conducting the development or operation
of the Specifically Mortgaged Premises the cost of which
would otherwise have been paid by the Corporation and in
respect of which the Corporation has set aside cash reserves
sufficient to fully pay and satisfy the same;
(iv) pooling or unitization agreements hereinafter entered into
by the Corporation in the ordinary course of business
covering any part of the Specifically Mortgaged Premises;
(v) assignments now or at any time hereinafter made by the
Corporation to the Holder covering all or any part of the
petroleum and natural gas rights owned from time to time by
the Corporation whether or not the same form part of the
Specifically Mortgaged Premises or otherwise, such
assignments being made as collateral security for any
present or future debts, liabilities or obligations of the
Corporation to the Holder'
190
</Page>
(vi) easements or rights in land granted to public utilities,
pipe line owners, common carriers or similar bodies or to
any municipality or governmental or other public authority
which are not of such nature as to prevent or materially
affect the use, for the purposes of the Corporation, of the
Specifically Mortgaged Premises that is subject thereto;
(vii) any interest of a third party under any pooling, unit,
development, farmout, royalty or operating agreement
affecting the petroleum and natural gas rights forming part
of the Specifically Mortgaged Premises in effect at the date
hereof,
(viii) any lease or sublease of substances other than
hydrocarbons granted by the Corporation; provided that any
such lease or sublease does not interfere with the enjoyment
by the Corporation of the Specifically Mortgaged Premises;
(ix) any right of first refusal contained in any instrument
affecting petroleum and natural gas rights comprising part
of the Specifically Mortgaged Premises that is customary in
the oil and gas industry in Canada; and
(x) any general and specific assignment now or at any time
hereafter made by the Corporation to the Holder of the book
debts and accounts receivable of the Corporation to secure
any of the present or future debts, liabilities or
obligations of the Corporation to the Holder;
(g) "Person" means any individual, corporation, partnership,
joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or
political subdivision thereof, or any other form of entity
recognized by law;
(h) "petroleum and natural gas right" means any leasehold, permit,
working royalty, overriding royalty, net profits, fee, mineral or
other interest, estate or right in or in respect of any
hydrocarbons including, without restricting the foregoing, any
interest of the Corporation described in Schedule "A" hereto, .
(i) "Receiver" means any receiver of all or any part of the Mortgaged
Premises appointed pursuant to clause 17 hereof either by the
Holder or by a court having jurisdiction and includes a receiver-
manager;
(j) "said lands" means all of those lands in or in respect of which
the Corporation now holds or hereafter acquires a petroleum and
natural gas right and includes those lands that are described in
Schedule "A" hereto;
(k) "Secured Property Area " means the geographic area described as
Townships 23, 24, 25, 26 and Ranges 7, 8, 9, 10, all West of the
Fourth Meridian;
(l) "Specifically Assigned Property" means the hydrocarbons, together
with the proceeds therefrom and receivables and all other monies
accruing from time to time to the Corporation in respect of the
Specifically Mortgaged Premises or any of them and referred to in
subclause 4(b) hereof,
191
</Page>
(m) "Specifically Mortgaged Premises" or "Specifically Mortgaged
Property" means the properties, interests, rights and privileges
of the Corporation set forth in subclause 4(a) hereof; and
(n) "this Debenture", "hereby", "hereof" and "hereunder" means this
instrument and every instrument entered into supplementary hereto
or in implementation hereof;
(o) all initially capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to those terms in the
Agreement of Purchase and Sale.
3. This Debenture is not one of a series of debentures but is a
single debenture, and no other debenture or other security (save and
except for permitted encumbrances) shall rank in priority over or pari
passu with this Debenture as a charge upon the interest of the
Corporation in the Mortgaged Premises except any security granted by
the Corporation to Holder.
4. As security for the payment of the principal sum, interest and all
other monies from time to time secured hereby and as security for the
performance and observance of the covenants, obligations and
agreements on the part of the Corporation contained in this Debenture:
(a ) the Corporation hereby grants, conveys, assigns, transfers, sets
over, pledges, mortgages and charges as and by way of a first,
fixed and specific mortgage, assignment and charge to and in
favour of the Holder (subject only to the exception as to
leaseholds hereinafter contained), the right, title and interest
of the Corporation equal to the Unexercised Option Interest in
and to:
(i) the lands described in Schedule "A" hereto;
(ii) the petroleum and natural gas rights held by the Corporation
in the lands including the petroleum and natural gas rights
of the Corporation described in Schedule "A" hereto;
(iii)all lands that are or may be pooled or unitized with the
lands described in Schedule "A" hereto;
(iv) all operating equipment located on the lands described in
Schedule "A"'
(v) all leases, licences, permits, reservations, agreements,
authorizations and other instruments under which the
Corporation derives, holds, operates or maintains the
petroleum and natural gas rights in the lands described in
Schedule "A" and all rights, benefits, privileges and
advantages of the Corporation to be derived therefrom;
(vi) all contracts for the purchase or utilization of
hydrocarbons from or allocated to the lands described in
Schedule "A"; and
(vii) all servitudes, leases, licences, privileges, easements,
rights-of-way, rights of ingress or egress and other surface
rights under which the Corporation derives or holds the
right to drill for, produce, store, gather, treat or
process hydrocarbons upon or in respect of the lands
described in Schedule "A"'
192
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(b) the Corporation hereby grants, bargains, sells, pledges, assigns,
transfers, sets over and delivers unto the Holder, the right,
title and interest equal to the Unexercised Option Interest now
held and hereafter acquired by the Corporation in and to the:
(i) all hydrocarbons produced from or allocated to the interest
of the Corporation in the lands described in Schedule "A",
(ii) all monies and proceeds derived from the sale or utilization
of the hydrocarbons referred to in paragraph (i) of
subclause 4(b) hereof;
(iii) all monies receivable under contracts for the purchase,
operation or utilization of hydrocarbons from or allocated
to the interest of the Corporation in the lands described in
Schedule "A"; and
(iv) all proceeds accruing to the credit of the Corporation from
time to time as a result of its ownership or operation of
its interest in the petroleum and natural gas rights in the
lands described in Schedule "A"; and
(c) the Corporation hereby mortgages, pledges and charges as and by
way of a floating charge to and in favour of the Holder (subject
to the exception as to leaseholds hereinafter contained) and
grants a security interest to the Holder in
(i) the Corporation's estate and interest (equal to the
Unexercised Option Interest) in any real property, both
present and future located within or forming part of the
Secured Property Area; and
(ii) an interest (equal to the Unexercised Option Interest) in
the Corporation's undertaking and all of the property and
assets of the Corporation for the time being, both present
and future, of whatsoever nature and kind and wheresoever
situated
(other than such property, assets, hydrocarbons and revenues of
the Corporation as are validly and effectively subject to the
fixed and specific mortgage, assignment and/or charge under
subclauses (a) and (b) of this clause 4 or under any supplemental
indenture hereto), including, without in any way limiting or
restricting the generality of the foregoing, its uncalled
capital and all present and future incomes, monies, sources of
money, revenues, rents, creditors, accounts receivable, book
debts, negotiable and non-negotiable instruments, shares, stocks,
bonds, debentures, securities, choses in action, goodwill, trade
marks, patents and patent rights, processes, inventions,
franchises, powers, privileges, licences and all other property
and things of value, real or personal, tangible or intangible,
legal or equitable, that the Corporation may be possessed of or
entitled to or that may at any time hereafter be acquired by the
Corporation.
TO HAVE AND TO HOLD the Mortgaged Premises and rights hereby conferred
on the Holder for the use and purposes and with the power and
authority and subject to the terms, conditions, provisos, covenants
and stipulations herein expressed.
193
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The mortgages and charges created and secured hereby shall not extend
or apply to the last day of the term of any lease, whether oral or
written, now held or hereafter acquired by the Corporation but should
such mortgages or charges become enforceable and the Holder shall have
determined to enforce the same, the Corporation shall thereafter stand
possessed of such last day and shall hold it in trust to assign the
same to any person who may acquire such term or the part thereof
hereby mortgaged and charged in the course of any enforcement of the
said mortgages and charges or any realization of the subject matter
thereof.
Notwithstanding the provisions contained in this clause 4, the
Corporation shall remain liable to perform and observe all of its
duties and obligations in respect of the Mortgaged Property to the
same extent as if this Debenture had not been executed and the
exercise by the Holder of any of its rights under this clause 4 shall
not release the Corporation from performing and observing such duties
and obligations and the Holder shall have no liability for the
performance or observance of such duties or obligations by reason only
of the execution and delivery of this Debenture.
5. (a) All parties producing, purchasing, taking, processing or
receiving any hydrocarbons produced from or allocable to the
interest of the Corporation in the said lands, or having in their
possession any such hydrocarbons or proceeds therefrom, for which
they or others are accountable to the Holder by virtue of the
provisions of this Debenture, are authorized and directed to
treat and regard the Holder as the assignee and transferee of the
Corporation and entitled in the place and stead of the
Corporation to receive the said hydrocarbons and the proceeds
therefrom and are authorized and directed to remit all such
proceeds directly to the Holder. and such parties and each of
them shall be fully protected in so treating and regarding the
Holder as such assignee and transferee and shall be under no
obligation to see to the application by the Holder of any such
proceeds received by it. The Corporation will, at the request of
the Holder, furnish the Holder with the names of all parties
purchasing or receiving such hydrocarbons and the names of all
parties having in their possession such hydrocarbons or proceeds
therefrom for which they or others are accountable to the Holder
by virtue of this Debenture.
(b) If the Corporation shall receive all or any portion of the
proceeds of any sale or utilization of hydrocarbons or other
monies that under subclause 4(b) hereof have been assigned to the
Holder, the Corporation will hold such proceeds in trust for the
Holder and will forthwith cause such proceeds to be remitted to
the Holder.
(c) The Corporation will execute, if and whenever requested by the
Holder, transfers and division orders and all other appropriate
instruments for the purpose of effecting the assignment made by
the Corporation by subclause 4(b) hereof and the payment to the
Holder of the production, proceeds and monies so assigned. The
Corporation covenants to warrant and forever defend the title of
the Holder to all proceeds of hydrocarbons and to all other
monies received in accordance with the provisions hereof by the
Holder and to hold the Holder and the purchaser or purchasers of
194
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such hydrocarbons harmless against all liability and expense on
account of any adverse claim asserted to any of such proceeds or
monies. The covenants and indemnity in this subclause 5(c)
contained and the lien hereof to secure the same shall survive
and continue in full force and effect notwithstanding the payment
of the principal sum, interest and other monies secured hereby
and the release of the security of this Debenture.
(d) All monies received by the Holder pursuant to the assignment
contained in subclause 4(b) hereof shall be applied towards
payment of the principal sum, interest and other monies secured
hereby.
(e) Any monies received by the Holder pursuant to this Debenture and
remaining after payment in full of the principal sum, interest
and of all other monies secured hereby shall, subject to the
rights of other creditors of the Corporation, be paid to the
Corporation, free of the assignment contained in subclause 4(b)
hereof and without further obligation hereunder with respect
thereto.
(f) The Holder shall not be liable to ascertain the purchasers and
the other persons liable for the payment of the proceeds and
other monies assigned under subclause 4(b) hereof, or for its
failure to collect or exercise diligence in collecting funds
assigned hereunder and shall be accountable only for sums
actually received by the Holder.
(g) Nothing contained in this clause 5 shall, or shall be deemed, to
limit the scope or effect of clause 4 hereof, or to detract from
or limit the rights or remedies of the Holder under the
provisions hereof including, without limitation, the right of the
Holder, through a Receiver or otherwise, to collect and receive
as part of the income from the Specifically Mortgaged Property
all of the Corporation's income from the said lands, contracts,
interests and rights described or referred to in clause 4 hereof.
(h) Nothing contained herein shall detract from or limit the absolute
obligation of the Corporation to make payment of all monies owing
hereunder at the time and in the manner provided herein and to
perform or observe hereunder, regardless of whether the proceeds
or production assigned by subclause 4(b) hereof are sufficient to
pay the same, or whether the assignment herein is operative or
whether the proceeds or production assigned by subclause 4(b)
hereof have been applied in accordance with the foregoing
provisions of this clause 5, and the rights under this clause 5
shall be in addition to all other security of any and every
character now or hereafter held by the Holder for the obligations
of the Corporation secured hereby.
(i) Whenever the principal sum, interest and other monies hereby
secured shall have been paid in full and all covenants contained
in this Debenture shall have been fulfilled, all to the
satisfaction of the Holder, then the assignment contained in
subclause 4(b) hereof shall become void and of no effect and the
Holder, upon request of the Corporation, shall execute and
deliver to, and at the expense of, the Corporation an
instrument of release and satisfaction of the assignment
contained in subclause 4(b) hereof. Until the purchaser of any
hydrocarbons that are the subject of the lien hereof or other
195
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person liable for the payment of monies assigned by the terms of
subclause 4(b) hereof shall have received a certified copy of
such an instrument of release and satisfaction or other contrary
instructions from the Holder, such purchaser or other person
shall make payment in accordance with the authorization and
direction of this clause. The assignment evidenced by subclause
4(b) hereof shall also become void and of no effect with respect
to any of the Specifically Mortgaged Property that is sold on
enforcement of this Debenture, whether pursuant to the powers
herein provided for or pursuant to an order of a court having
jurisdiction.
6. Unless and until an Event of Default shall have occurred and be
continuing and the Holder shall have determined to enforce the
security hereof, the Corporation shall be permitted, in the same
manner and to the same extent as if this Debenture had not been
executed, but subject to the express terms hereof, to possess,
operate, manage, use and enjoy the Mortgaged Premises (except for the
Specifically Assigned Property that has been assigned to the Holder
pursuant to subclause 4(b) hereof), to exercise discretion with
respect to the drilling of or participation in wells relating to the
petroleum and natural gas rights, to produce and sa'/e the
hydrocarbons comprised therein and freely to control its business.
7. The Corporation represents and warrants to the Holder as follows:
(a) The Corporation is a corporation duly organized, legally
existing and in good standing under the laws of the Province of
Alberta and is duly authorized to do business in each other
jurisdiction where a failure so to qualify would have a
materially adverse effect on the business or operations of the
Corporation.
(b) The Corporation is duly authorized and empowered to execute,
deliver and perform its obligations under this Debenture and all
corporate action on the part , of the Corporation for the due
execution, delivery and performance by the Corporation of this
Debenture has been duly and effectively taken.
(c) The Corporation has all rights purported to be vested in it or
any of its predecessors in title under each and every one of the
documents and instruments under which it derives and holds its
petroleum and natural gas rights in the said lands and its rights
to the production and revenues in respect thereof and that are
subject to the security hereof and all of such documents and
instruments are in full force and effect in accordance with their
terms.
(d) This Debenture constitutes the valid and binding obligation of
the Corporation, enforceable in accordance with its terms (except
that such enforcement may be subject to any applicable
bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditors' rights and that specific performance of
equitable remedies is subject to the discretion of the courts
before which such remedies are sought).
(e) This Debenture does not and will not violate any provisions of
the articles or certificate of incorporation or continuance, as
the case may be, or the by-laws of the Corporation, or any
contract, agreement, instrument or Governmental Requirement to
which the Corporation is subject or result in the creation or
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imposition of any lien upon the Mortgaged Premises, other than
the lien of this Debenture and any lien created by the permitted
encumbrances.
(f) No registration or filing with, or approval by, or consent of,
any Person is required to be made or obtained by the Corporation
in connection with the execution, delivery or performance of this
Debenture, except as may be necessary to perfect the lien hereof.
(g) The Corporation has good and marketable title to the Mortgaged
Property that is subject to the lien hereof, free from any lien,
charge, encumbrance, claim, or notice, except for permitted
encumbrances and the lien of this Debenture.
(h) The Corporation :
(i) is not in violation of any Governmental Requirement; and
(ii) has not failed to obtain any licence, permit, franchise or
other governmental authorization necessary to its ownership
of the Mortgaged Premises or the conduct of its business,
which violation or failure would have (in the event such
violation or failure were asserted by any Person through
appropriate action) a material adverse effect upon the
business or operations of the Corporation.
8. The Corporation covenants and agrees with the Holder:
(a ) to warrant and forever defend all and singular the Mortgaged
Premises unto the Holder against every person whosoever lawfully
claiming or attempting to claim the same or any part thereof, .
(b) to pay the principal sum, interest and other monies hereby
secured, together with other appurtenant charges thereon, in
accordance with the terms of this Debenture;
(c) to carry on and continuously conduct its business in respect of
the Mortgaged Premises in a lawful, efficient, diligent and
businesslike manner and in accordance with good oilfield
practice;
(d) to keep and maintain proper books of account and records
accurately covering all aspects of the business and affairs of
the Corporation relating to the Mortgaged Premises and to permit
authorized officers, employees or agents of the Holder to inspect
the same during regular business hours;
(e) to advise the Holder in writing of the particulars of any
acquisition by the Corporation of an interest in land located
within the Secured Property Area, such particulars to be
sufficiently detailed to the Holder's satisfaction;
(f) to fully pay and discharge as and when the same become due and
payable all taxes (including local improvement rates), rates,
duties and assessments that may be levied, rated, charged or
assessed against the Corporation, or the Mortgaged Premises, or
any part thereof, and if the Corporation fails to pay any of such
taxes, rates, duties or assessments and if it is not in good
faith contesting the same, the Holder may pay, but shall not be
obligated to pay, the same and any amounts so paid by the Holder
shall become and form part of the principal sum secured hereby
and shall bear interest at the rate aforesaid until paid; and
197 </Page>
(g) to give notice to the Holder promptly of any Event of Default or
of any event which with notice or lapse of time, or both, would
constitute an Event of Default hereunder.
9. The Corporation further covenants and agrees with the Holder as
follows:
(a) The Corporation will keep and maintain in good standing all
petroleum and natural gas rights that are subject to the lien
hereof and will observe and perform all of its covenants and
obligations under the instruments evidencing the same to the
extent necessary to preserve the value of the Mortgaged Premises
and in particular will to the extent necessary as aforesaid, in
timely fashion pay all rentals, delay rentals, royalties and
other charges accruing and payable from time to time thereunder.
(b) The Corporation will conduct all drilling and production
operations on the said lands in such a manner as to comply with
the respective covenants and obligations contained in the various
instruments under which it derives and holds its interest .in the
said lands.
(c) The Corporation will not, without the prior written consent of
the Holder, surrender, quit claim or permit to lapse any document
or instrument assigned and pledged under subclause 4(a) hereof
if, as a result thereof, the value of the Specifically Mortgaged
Property would be diminished.
(d) The Corporation will maintain in good standing and will observe
and perform all of its covenants and obligations under any
agreement or instrument forming part of the Specifically
Mortgaged Property now in existence or hereafter entered into by
the Corporation and that is subject to the lien hereof.
(e) The Corporation will keep in good standing all rights-of-way,
rights-of-access, surface leases and other surface rights upon
and across the said lands that are necessary or required in
connection with the operations being carried on by or for the
account of the Corporation thereon for the production, treating,
storing or transporting of hydrocarbons and the Corporation will
not abandon or dispose of the same, if they are necessary or
desirable for the proper and efficient operation of the
Specifically Mortgaged Property.
(f) The Corporation will keep and maintain in good repair and
condition all of the operating equipment reasonably necessary for
the production, treating, transporting and storage of
hydrocarbons produced from or allocated to the said lands and
will not abandon or dispose of the same if they are necessary or
useful in the proper and efficient operation of the Specifically
Mortgaged Property, except upon substitution therefore other
equipment adequate for those purposes.
(g) The Corporation will maintain and protect from diminution the
productive capacity of each producing well on the said lands, but
shall not be prevented from shutting in or abandoning a well that
is not economic to produce.
(h) The Corporation will cause to be afforded to one or more
authorized representatives of the Holder, the opportunity at any
reasonable time during business hours to make such inspection as
such representative or representatives shall deem proper of any
198
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of the Mortgaged Premises to the extent that the Corporation
itself is entitled to inspect the Mortgaged Premises.
(i) The Corporation will not, without the prior written consent of
the Holder, make or permit to be made any material amendment to
or modification of any document or instrument that would have the
effect of diminishing the value of the Specifically Mortgaged
Property or of impairing the security of this Debenture.
(j) The Corporation will duly perform and observe all duties,
covenants, agreements and obligations on its part to be performed
or observed under all documents and instruments affecting,
relating to or comprising a part of the Mortgaged Premises and,
unless otherwise approved of in writing by the Holder, the
Corporation will maintain or cause to be maintained all such
documents and instruments, insofar as and to the extent that they
relate to the Mortgaged Premises, in full force and effect in
accordance with their terms.
(k) The Corporation will punctually take all measures reasonably
necessary in the circumstances to enforce promptly the
performance and observance of the obligations of all other
Persons under each of the leases, agreements, contracts,
documents and other instruments constituting part of the
Specifically Mortgaged Premises or pertaining or relating to the
Specifically Mortgaged Premises.
(l) The Corporation will from time to time and at any time, at the
request of the Holder, furnish the Holder with any detailed
information requested concerning the Mortgaged Premises as may be
available to the Corporation.
(m) In the event of any damage or loss, from any cause whatsoever, to
any property, any interest in which is now or hereafter included
in the Specifically Mortgaged Property, the Corporation will
forthwith repair such damage and replace such loss unless the
repair of such damage or the replacement of loss is unnecessary
or uneconomic for the production of hydrocarbons from within,
upon or under the said lands.
(n) The Corporation will proceed with due diligence to correct any
defect in title to the Specifically Mortgaged Property should any
such defect exist or be found to exist after the execution and
delivery of this Debenture and will give immediate written notice
of any such defect to the Holder upon becoming aware of such
defect.
(o) The Corporation will ensure that all the duties, agreements and
obligations performable by it under each contract constituting a
part of, or applicable to, the Specifically Mortgaged Property
are duly performed and will maintain each such contract in full
force and effect, except with the prior written approval of the
Holder.
(p) The Corporation will punctually take all measures reasonably
necessary or desirable in the circumstances to enforce or cause
to be enforced promptly the performance by the purchaser and
other contracting parties under each contract constituting a part
of, or applicable to, the Specifically rvlortgaged Property, of
all of the obligations of the purchaser and other contracting
parties under such contract.
199
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(q) Where, under the provision of any contract included or applicable
to the Specifically Mortgaged Property, the contracting party,
other than the Corporation, may perform some act only with the
permission of the Corporation, the Corporation will ensure that
such approval or consent is not given unless the consent of the
Holder is first obtained, if the doing of such act by that
contracting party may have a material adverse effect on the
security of this Debenture.
10. (a) The Corporation covenants that at all times during the
continuation of this security, it will keep such of the Mortgaged
Premises that are of an insurable nature and are of a character
usually insured by companies owning or operating similar
premises insured with responsible insurers, against loss or
damage by fire and other causes customarily insured against by
similar companies owning or operating the same or similar
premises in Canada and within limits of coverage acceptable to
the Holder. Unless otherwise agreed to in writing by the Holder,
the losses under all such insurance shall be payable firstly to
the Holder as its interest may appear.
(b) The Corporation agrees that so long as it remains indebted to the
Holder, it will, unless otherwise requested in writing by the
Holder, maintain with reputable insurers third party public
liability and property damage insurance covering all operations
of the Corporation within limits of coverage usually carried by
owners owning or operating the same or a similar type and size of
business as that being conducted by the Corporation.
(c) The Corporation will, upon the request of the Holder, deliver to
the Holder certified copies of all policies or contracts of
insurance being carried by the Corporation pursuant to the terms
hereof, together with such certificates of insurance as the
Holder may reasonably require and evidence that the premiums on
all such insurance have been paid.
(d) If the Corporation should fail to take out or maintain all or any
of the insurance required to be carried by the Corporation
pursuant to the terms of this Debenture, the Holder may, but
shall not be obliged to, take out some or all of such insurance
and all sums expended by the Holder in effecting such insurance
shall forthwith become due and be payable by the Corporation to
the Holder and until paid shall form part of the principal sum
secured hereby and shall bear interest at the aforesaid rate to
the fixed and specific lien and charge hereof or as the Holder or
its legal counsel deems necessary or advisable for the perfection
and protection of the mortgages, liens, charges, assignments and
all other security interests created or intended to be created
hereby and the rights conferred or intended to be conferred upon
the Holder under this Debenture. The Corporation, at its cost and
expense, will cause this Debenture and all such supplementary and
corrective instruments and other documents and assurances to be
promptly filed and refiled, registered and reregistered and
deposited and redeposited, in such manner, in such offices and
places and at such times and as often as may be required by law
or as may be necessary or desirable to perfect and preserve the
mortgages, liens, charges, assignments and all other security
interests created or intended to be created hereby and the rights
conferred or intended to be conferred upon the Holder under this
Debenture, and will cause to be furnished promptly to the Holder
evidence satisfactory to the Holder of such filing, registering
and depositing, all at the cost and expense of the Corporation.
200
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14. If the Corporation shall fail to perform any act that it is required
to perform hereunder, or to pay any money that the Corporation is
required to pay under the terms of this Debenture, including any
expenses, payments and outlays incurred by the Holder hereunder, the
Holder may perform or cause to be performed such act at the
Corporation's expense, and may pay such money at the Corporation's
expense, and thereupon, without prejudice to the rights of the Holder
to damages and other remedies available at law or in equity hereunder
or otherwise, the Corporation will immediately repay to the Holder all
expenses so incurred and all amounts so paid by the Holder together
with interest thereon, at a rate per annum set forth in clause 1
hereof, from and after the date of incurring such expenses or the
making of such payments. The amount of all such expenses and payments
together with interest thereon shall be added to the principal sum
hereby secured and shall form a part of the same and shall be secured
by this Debenture and, to the extent the Holder may be entitled to the
same by way of subrogation, the rights against the Corporation of the
Person who has received payment thereof from the Holder.
15. If any one or more of the following Events of Default occurs, the
Holder may, at its sole option, exercise and on all of the remedies
available to it in this Debenture and the Agreement of Purchase and
Sale and any other remedies available to it at law or in equity.
16. The Holder may waive any breach by the Corporation of any of the
provisions contained in this Debenture or any default by the
Corporation in the observance or performance of any covenant,
agreement or condition required to be kept, observed or performed by
the Corporation under the terms of this Debenture; provided always
that no act or omission of the Holder in the premises shall extend to
or be taken in any manner whatsoever to affect any subsequent breach
or default or to affect the rights of the Holder resulting therefrom.
17. Nothing done by the Holder in possession of the Mortgaged Premises
shall render the Holder a mortgagee in possession or responsible as
such, or in any way limit or curtail the remedies of the Holder as a
mortgagee or creditor under any applicable law or statute.
18. If the security hereby constituted shall become enforceable, the
Holder may, either before or after any entry, sell and dispose of all
or any part of the Mortgaged Premises either as a whole or in several
portions thereof, at public auction or by public tender or by private
sale at such time or times and on or subject to such terms and
conditions as the Holder may determine, and it shall be lawful for the
Holder to make such sale, either for cash or upon credit or partly for
cash and partly upon credit, and with or without advertisement, and
upon such reasonable conditions as to upset, reserve bid or price and
as to terms of payment as the Holder may deem proper, and the Holder
may also rescind or vary any contract of sale that may have been
entered into and resell with or under any of the powers conferred
hereunder and adjourn any such sale from time to time and may execute
and deliver to the purchaser or purchasers of the Mortgaged Premises
or any part thereof good and sufficient title to the same, the Holder
being hereby constituted irrevocably the attorney of the Corporation
for the purpose of making such sale and for executing all deeds and
documents appertaining thereto and any such sale made as aforesaid
shall be a perpetual bar both at law and in equity against the
Corporation and all other persons claiming the said property or any
part thereof, by, from, through or under the Corporation.
201
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19. Upon payment by the Corporation to the Holder of the principal sum,
interest and all other monies secured by this Debenture and provided
the security hereby constituted shall not have become enforceable, the
Holder shall, upon written request of the Corporation, deliver up this
Debenture to the Corporation and shall, at the expense of the
Corporation, release and discharge the security hereby constituted and
execute and deliver to the Corporation such deeds or other documents
as shall be requisite to release and discharge this Debenture and the
security afforded hereby, . provided, however, that this Debenture may
be assigned, pledged, hypothecated or deposited by the Corporation as
security for advances or loans to or for indebtedness or other
obligations or liabilities (contingent or otherwise) of the
Corporation and in such event this Debenture shall not be deemed to
have been discharged or redeemed by reason of the account of the
Corporation having ceased to be in debit balance while this Debenture
remains so assigned, pledged, hypothecated or deposited.
20. No postponement or partial release or discharge of the mortgage, lien
and charge created under and secured by this Debenture in respect of
all or any part of the Mortgaged Premises shall in any way operate or
be construed so as to release and discharge the security hereby
constituted in respect of the Mortgaged Premises except as therein
specifically provided, or so as to release or discharge the
Corporation from its liability to the Holder to fully pay and satisfy
the principal sum, interest and all other monies due or remaining
unpaid by the Corporation to the Holder.
21. This Debenture is to be treated as a negotiable instrument and all
persons are invited by the Corporation to act accordingly.
22. The principal sum, interest and other monies hereby secured will be
paid and shall be assignable free from any right of set-off or
counterclaim or equity between the Corporation and the Holder.
23. The security hereby constituted is in addition to, and not in
substitution for, any other security now or hereafter held by the
Holder and no payment to the Holder shall constitute payment on
account of the principal sum, interest or other monies from time to
time owing hereunder unless specifically so appropriated in writing by
the Holder. The taking of any action or proceedings or refraining from
so doing, or any other dealing with any other security for the monies
secured hereby shall not release or affect the charge of this
Debenture and the taking of the security hereby granted or any
proceedings hereunder for the realization of the security hereby
granted shall not release or affect any other security held by the
Holder for the monies hereby secured.
24. Any notice that may be given by the Holder in accordance with this
Debenture shall be in writing and may be given at any time either by
delivering or by mailing the same addressed to the Corporation at
#810, 1122- 4 Street S.vV. , Calgary, Alberta T2M 1 M1. Any notice
delivered to the Corporation shall be deemed to have been given on the
business day during which the same was so delivered to the Corporation
and any notice mailed to the Corporation shall be conclusively deemed
to have been received by the Corporation on the third business day
following that on which it was so mailed.
25. This Debenture and all its provisions shall enure to the benefit of
the Holder, its successors and assigns and shall be binding upon the
Corporation, its successors and assigns.
202
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26. Wherever the singular or masculine or neuter is used in this
Debenture, the same shall be construed as meaning the plural or
feminine or body corporate and vice versa, where the context or the
parties so require.
IN WITNESS WHEREOF the Corporation caused its corporate sea! to be
hereunto affixed and these presents to be signed by its proper officers
duly authorized in that behalf as of the 19th day of
March, 1999.
PROMAX
Per: /S/ Robert Card
----------------------------
Per: /S/ J.R. MacMillan
----------------------------
203
</Page>
- ------------------------------------------------------------------------------------
Zones Vendor's
P&NG Included Lease Working Operator
Location Lease in Exiry Interest of
(W4M) Number Lease Date (%) Lease Encumbrances
- ------------------------------------------------------------------------------------
13-24-10 0493040044 Base Mann 4-1-99 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
14-24-10 12286 Base Crown Lessor
Viking Indefinite 74.56 Royalty
12286 Viking 4-29-99 74.56 Crown Lessor
0495010055 Below Royalty
Viking 1-5-00 37.28 Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
25-24-10 0496070046 All 7-11-01 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
7-25-8 0499020043 All 2-3-04 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
9-25-8 0498040318 All 4-30-03 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
15-25-8 0492010234 Base Mann Indefinite 45.31 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
16-25-8 0498040322 All 4-30-03 45.31 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
17-25-8 0498040323 All 4-30-03 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
18-25-8 0499020044 All 2-3-04 50.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
20-25-8 0492010235 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
21-25-8 0492010236 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
28-25-8 0492010237 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
1-25-9 0497100603 All 10-30-02 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
4-25-9 38435 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
5-25-9 12276 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
9-25-9 38435 Base Mann Indefinite 74.56 Vendor Crown Lessor
Royalty
- ------------------------------------------------------------------------------------
</Page>
- ------------------------------------------------------------------------------------
11-25-9** 0491070294 Base Vendor Crown Lessor
Viking Indefinite 74.56 Royalty
0498040324 Below Vendor Crown Lessor
Viking 04-30-03 74.56 Royalty
- ------------------------------------------------------------------------------------
12-25-9** 0491030315 Base Vendor Crown Lessor
Viking Indefinite 74.56 Royalty
0498040325 Below Crown Lessor
Viking 04-30-03 74.56 Royalty
- ------------------------------------------------------------------------------------
All the above leases are subject to a 5% GORR
The leases marked with an ** are subject to an additional 6% GORR
204
</Page>