Exhibit 10.31
PURCHASE AND SALE AGREEMENT AMONG
SLATTERY TRUST, STARBUCKS TRUST, TODD GRABOIS,
ROBERT NOVAK, PRENTIS B. TOMLINSON, JR.,
CALIBRE OIL & GAS, INC., CALIBRE ENERGY, L.L.C.
AND
BENZ ENERGY LTD.
April 22, 1998
INDEX
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SECTION TITLE PAGE
- ------- ----- ----
RECITALS.........................................................2
1. INTERPRETATION...................................................3
2. SALE AND PURCHASE BETWEEN CALIBRE LLC AND THE PURCHASE...........7
5. REPRESENTATIONS AND WARRANTIES..................................10
6. COVENANTS.......................................................22
7. CLOSING.........................................................28
8. TERMINATION.....................................................31
9. GENERAL PROVISIONS..............................................32
10. COUNTERPARTS....................................................34
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT dated for reference this 22nd day of
April, 1998.
AMONG:
SLATTERY TRUST, of P.O. Box 61268, Houston, Texas 77208-1268
("Slattery")
OF THE FIRST PART
AND: STARBUCKS TRUST, of P.O. Box 61268, Houston, Texas 77208-1268
("Starbucks")
OF THE SECOND PART
AND: TODD GRAB01S, of 8919 Ashridge Park, Spring, Texas 77379
("Grabois")
OF THE THIRD PART
AND: ROBERT NOVAK, of 6326 Willgus Trail, Lane, Texas 77066
("Novak")
OF THE FOURTH PART
AND: PRENTIS B. TOMLINSON. JR, of 1000 Louisiana, Suite 1500,
Houston, Texas 77002
("Tomlinson")
OF THE FIFTH PART
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AND: CALIBRE OIL & GAS, INC. of 1000 Louisiana, Suite 1500,
Houston, Texas 77002
("Calibre Inc.")
OF THE SIXTH PART
AND: CALIBRE ENERGY L.L.C. of 1000 Louisiana, Suite 1500,
Houston, Texas 77002
("Calibre LLC")
OF THE SEVENTH PART
AND: BENZ ENERGY LTD. of 1305 - 1090 West Georgia Street,
Vancouver, British Columbia, V6E 3V7
(the "Purchaser")
OF THE EIGHTH PART
WHEREAS:
A. Calibre LLC owns 1000 common shares in the capital of Calibre Inc.
(the "CI Shares"), being 100% of the issued and outstanding shares in the
capital of Calibre Inc.
B. Calibre Inc. owns the oil and gas interests and properties described
in the attached Schedule "A" (the "Calibre Properties") and has the
liabilities described in the attached Schedule "D" (the "Calibre
Liabilities");
C . Slattery, Starbucks, Grabois and Novak (the "Members") own, among
other assets, the oil and gas interests and properties described in Schedule
"B" hereof (the "Member Properties");
D. Tomlinson owns, among other assets, the oil and gas interests and
properties described in Schedule "C" hereof (the "Tomlinson Properties");
E. Calibre LLC, the Members, Tomlinson and the Purchaser entered into a
letter of understanding dated November 17, 1997 (the "Letter of
Understanding") which set forth the terms and conditions under which:
(1) the Purchaser agreed to purchase from Calibre LLC and Calibre
LLC agreed to sell to the Purchaser all of the CI Shares;
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(2) the Purchaser agreed to purchase from the Members and the
Members agreed to sell to the Purchaser the Member Properties;
and
(3) the Purchaser agreed to purchase from Tomlinson and Tomlinson
agreed to sell to the Purchaser the Tomlinson Properties.
E. In accordance with the terms of the Letter of Understanding, Calibre
LLC, the Members, Tomlinson and the Purchaser have prepared this Agreement as
the definitive agreement to supersede and replace the Letter of Understanding
concerning the transactions contemplated by the Letter of Understanding.
NOW THEREFORE THIS AGREEMENT WITNESSES that for and in consideration of the
sum of TEN ($10.00) DOLLARS now paid by the Purchaser to each of Calibre LLC,
the Members and Tomlinson and of the premises, covenants and agreements
herein set forth, the parties hereto covenant and agree each with the other
as follows:
1. INTERPRETATION
1.1 DEFINITIONS. For the purposes of this Agreement and the recitals and
any schedules hereto, unless the context otherwise requires, the following
words and phrases will have the meanings hereinafter ascribed to them:
(a) "AGREEMENT" means this Agreement including the recitals and
schedules hereto, as amended and supplemented;
(b) "APPROVALS" means any and all approvals, orders, consents,
filings, licences and permits required by any applicable law,
rule, regulation, order, decree or statute of any Governmental
Authority including all court, securities, regulatory,
shareholder and stock exchange approvals;
(c) "BUSINESS DAY" means any day on which commercial banking
institutions in Vancouver, British Columbia are open for the
transaction of business other than Saturday, Sunday or any day
which is a legal holiday in Vancouver, British Columbia;
(d) "CALIBRE INC." means Calibre Oil & Gas, Inc., a body corporate
subsisting under the laws of Texas;
(e) "CALIBRE FINANCIAL STATEMENTS" means the unaudited financial
statements of Calibre Inc. for the period ended March 31, 1998
attached hereto as Schedule "G";
(f) "CALIBRE LIABILITIES" means all of the liabilities of Calibre
Inc. which are described in Schedule "D" hereto;
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(g) "CALIBRE LLC" means Calibre Energy L.L.C., a limited liability
company subsisting under the laws of Texas;
(h) "CALIBRE PERMITTED ENCUMBRANCES" means any liens, encumbrances,
charges, claims or rights of third parties summarized in Schedule
"F" hereto;
(i) "CALIBRE PROPERTIES" means the oil and gas interests and
properties described in Schedule "A";
(j) "CI SHARES" means 1000 common shares in the capital of Calibre
Inc., being all of the issued and outstanding shares in the
capital of Calibre Inc.;
(k) "CLOSING" has the meaning set out in Section 7.1 hereof, and
"time of Closing" means the time that Closing occurs;
(l) "CLOSING DATE" means the date which is five days following the
date of receipt of all required Approvals, or such other date as
the parties may agree but no later than May 15,1998;
(m) "COMPANY ACT" means COMPANY ACT, R.S.B.C. 1979, c.59, as amended;
(n) "CONSTATING DOCUMENTS" means the Memorandum, the Articles, the
Articles of Incorporation, the Articles of Arrangement, the
Articles of Continuance or the Articles of Amalgamation pursuant
to which a corporation is incorporated, arranged, continued or
amalgamated, as the case may be, together with any amendments
thereto, the by-laws of such corporation, any special rights and
restrictions associated with any class of shares and any
shareholders' agreement which has been executed by such
corporation and which governs in whole or in part such
corporation's affairs;
(o) "EFFECTIVE TIME" means 7:00 a.m., local time of the location of
the Member Properties and the Tomlinson Properties on November
14, 1997 (the "Effective Time");
(p) "EXCHANGE" means the Vancouver Stock Exchange;
(q) "GOVERNMENTAL AUTHORITY" means any federal, provincial, state,
municipal, county parish, local or regional governmental or
quasi-governmental authority, domestic or foreign, and bureau,
board, administrative or other agency or regulatory body or
instrumentality thereof;
(r) "KNOWLEDGE" means the actual, conscious awareness of a party and
not any form of constructive, vicarious or imputed knowledge.
When used with reference to a corporation, "knowledge" means the
character of knowledge defined in the preceding
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sentence of any of such corporation's directors and executive
officers, and when used with respect to a trust means the same
character of knowledge of the trustees of the trust;
(s) "MEMBER PERMITTED ENCUMBRANCES" means any liens, encumbrances,
charges, claims or rights of third parties summarized in Schedule
"J" hereto;
(t) "MEMBER PROPERTIES" means the oil and gas interests and
properties described in Schedule "B" hereof;
(u) "NOTICE" means any citation, directive, order, claim, judgment,
letter or other communication, written or oral, actual or
threatened, from any Person;
(v) "PERSON" means and includes an individual, a partnership, a
corporation, a joint venture, a trust, an unincorporated
association or other entity or government or any agency or
political subdivision thereof;
(w) "PROPERTIES" means the Calibre LLC Properties, the Members
Properties and the Tomlinson Properties;
(x) "PURCHASER" means Benz Energy Ltd., a body corporate subsisting
under the laws of the Yukon;
(y) "PURCHASER FINANCIAL STATEMENTS" means the annual audited
financial statements of the Purchaser for the period ending
August 31, 1997 together with the unaudited financial statements
of the Purchaser for the period ending December 31, 1997 attached
hereto as Schedule "H";
(z) "PURCHASER'S LIABILITIES" means all of the liabilities of Benz
which are described in Schedule "H" hereto;
(aa) "PURCHASER'S SHARES" means 1,927,426 common shares without par
value in the capital of the Purchaser at a deemed price of $2.80
per share;
(bb) "SELLER" means individually or collectively as called for in the
context of the usage of the term Calibre LLC, the Members or
Tomlinson.
(cc) "TAXES" means all income, franchise, business, property, sales,
use, value added, withholding, excise, alternate minimum capital
and other taxes required to be reported upon or paid to any
domestic or foreign jurisdiction and all interest and penalties
thereon;
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(dd) "TEXSTAR" means Texstar Petroleum, Inc., a wholly owned
subsidiary corporation of the Purchaser, subsisting under the
laws of Texas;
(ee) "TEXSTAR PROMISSORY NOTES" means the promissory notes to be
issued by Texstar pursuant to subsections 3.2(a)(ii), (b)(ii),
(c)(ii) and 4.2(11) hereof;
(ff) "TOMLINSON PERMITTED ENCUMBRANCES" means any liens, encumbrances,
charges, claims or rights of third parties summarized in Schedule
"K" hereto;
(gg) "TOMLINSON PROPERTIES" means the oil and gas interests and
properties described in Schedule "C" hereof;
(hh) "U.S. GOVERNMENTAL AUTHORITY" means any federal, state, county,
parish, or local governmental or quasi-governmental authority of
or within the United States of America, and any bureau, board,
administrative or other agency or regulatory body or
instrumentality thereof; and
(ii) "U.S. LAWS" means laws and regulations of any U.S. Governmental
Authority.
1.2 SCHEDULES. The following Schedules are attached hereto and form a part
hereof:
SCHEDULE SUBJECT
"A" Calibre Properties
"B" Member Properties
"C" Tomlinson Properties
"D" Calibre Liabilities
"F" Calibre Permitted Encumbrances
"G" Calibre Financial Statements
"H" Purchaser Financial Statements
"J" Member Permitted Encumbrances
"K" Tomlinson Permitted Encumbrances
"N" Options, Warrants and Other Convertible Securities
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2. SALE AND PURCHASE BETWEEN CALIBRE LLC AND THE PURCHASER
2.1 SALE AND PURCHASE OF CI SHARES. Upon and subject to the terms and
conditions set forth in this Agreement, Calibre LLC hereby agrees to sell,
assign and transfer to the Purchaser, and the Purchaser hereby agrees to
purchase from Calibre LLC, on the Closing Date, the CI Shares free and clear
of all liens, charges and encumbrances of any kind whatsoever. The sale and
purchase of the CI Shares shall occur on the Closing Date but shall be
effective as of the Effective Date.
2.2 PURCHASE PRICE FOR THE CI SHARES. The purchase price for the CI Shares
shall be CDN$5,396,793 (US$3,820,713) (the "CI Purchase Price"), payable by
the issuance by the Purchaser to Calibre LLC of the Purchaser's Shares. The
sale and purchase of the CI Shares shall occur on the Closing Date but shall
be effective as of the Effective Date.
2.3 RESALE RESTRICTIONS. Calibre LLC hereby acknowledges and accepts that
the Purchaser's Shares to be issued under the terms of this Agreement may be
subject to certain resale restrictions imposed under such applicable
securities; laws and the rules of regulatory bodies having jurisdiction and
Calibre LLC agrees to comply with such requirements and restrictions.
3. SALE AND PURCHASE BETWEEN THE MEMBERS AND THE PURCHASER
3.1 SALE AND PURCHASE OF THE MEMBER PROPERTIES. Upon and subject to the
terms and conditions set forth in this Agreement, the Members hereby agree to
sell, assign and transfer to the Purchaser, and the Purchaser hereby agrees
to purchase from the Members, the Member Properties. The sale and purchase of
the Member Properties shall occur on the Closing Date but shall be effective
as of the Effective Date.
3.2 PURCHASE PRICE FOR THE MEMBER PROPERTIES. The purchase price for the
Member Properties shall be US$339,150 (CDN$478,201), subject to the
adjustments provided for herein (the "MP Purchase Price") payable by the
issuance and delivery to:
(a) Starbucks of (1) a certified check, bank draft or wire transfer
in the amount of US$26,100 (CDN$36,866); and (ii) a promissory
note issued by Texstar Petroleum, Inc. ("Texstar") to Starbucks
in the original principal amount of US$200,000 (CDN$282,501);
(b) Grabois of: (i) a certified check, bank draft or wire transfer
in the amount of US$9,135 (CDN$12,903); and (ii) a promissory
note issued by Texstar to Grabois in the original principal
amount of US$70,000 (CDN$98,875); and
(c) Novak of: (i) a certified check, bank draft or wire transfer in
the amount of US$3,915 (CDN$5,529); and (ii) a promissory note
issued by Texstar to Grabois in the original principal amount of
US$30,000 (CDN$42,375).
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All amounts to be delivered under subsections 3.2(a)(i), (b)(i) and (c)(ii) are
to be delivered in cash in escrow pursuant to section 7.6 hereof, on the date of
execution of this Agreement. The Texstar Promissory Note to be delivered under
subsections 3.2(a)(ii), (b)(ii) and (c)(ii) are to be delivered at Closing. Each
of the Texstar Promissory Notes issued under subsections 3.2(a)(ii), (b)(ii) and
(c)(ii) shall: (i) bear interest at the per annum rate of 10%, (ii) be payable
in two installments, with 50% of the original principal amount being due on
April 1, 1998, and the remaining principal balance being due September 1, 1998,
and (iii) be guaranteed by the Purchaser.
3.3 ALLOCATION. The MP Purchase Price shall be allocated to the Member
Properties in accordance with the schedule set forth in Exhibit C of Schedule
"B". Each of the Members and the Purchaser covenant and agree that the values
allocated to various portions of the Member Properties which are set forth on
Exhibit C to Schedule "B", shall be binding on the Members.
3.4 OWNERSHIP PRIOR TO EFFECTIVE TIME. Except as set forth in section 3.6, the
Members shall be entitled to all of the rights and incidents of ownership
generated from or attributable to the Member Properties prior to the Effective
Time, including the right to all Oil and Gas (as defined in Schedule "B")
produced from or attributable to the Member Properties prior to the Effective
Time. The Members shall bear and be responsible for the duties, liabilities,
costs, expenses and obligations of ownership attributable to the Member
Properties prior to the Effective Time, except as may be otherwise provided
herein.
3.5 OWNERSHIP AFTER EFFECTIVE TIME. Except as set forth in section 3.6, the
Purchaser shall be entitled to all of the rights and incidents of ownership
generated from or attributable to the Member Properties after the Effective
Time, including the right to all Oil and Gas thereafter produced from or
attributable to the Member Properties after the Effective Time. The Purchaser
shall assume, bear and be responsible for the duties, liabilities, costs,
expenses and obligations of ownership attributable to the Member Properties from
and after the Effective Time, including but not limited to compliance with
applicable environmental laws and plugging and abandonment of all MP Wells (as
defined in Schedule "B") in accordance with applicable laws and regulations,
except as may be otherwise provided herein.
3.6 For purposes of calculating the adjustments to the Purchase Price, the
Members shall be credited with proceeds of production attributable to the Member
Properties through January 3 1, 1998 and shall be debited with costs and
expenses (except for capital costs) of operating the Member Properties through
January 31, 1998.
4. SALE AND PURCHASE BETWEEN TOMLINSON AND THE PURCHASER
4.1 SALE AND PURCHASE OF THE TOMLINSON PROPERTIES. Upon and subject to the
terms and conditions set forth in this Agreement, Tomlinson hereby agrees to
sell, assign and transfer to the Purchaser, and the Purchaser hereby agrees to
purchase from Tomlinson, on the Closing Date, the Tomlinson Properties.
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4.2 PURCHASE PRICE FOR THE TOMLINSON PROPERTIES. The purchase price for the
Tomlinson Properties shall be US$1,921,850 (CDN$2,714,630), subject to the
adjustments provided for herein (the "TP Purchase Price"), payable by the
issuance and delivery to Tomlinson of: (i) a certified check, bank draft or wire
transfer in the amount of US$221,850 (CDN$313,365); and (ii) a promissory note
issued by Texstar to Tomlinson in the original principal amount of US$1,700,000
(CDN$2,401,265). The amount to be delivered under this sections 4.2(i) is to be
delivered in escrow pursuant to section 7.6 hereof, on the date of execution of
this Agreement. The Texstar Promissory Notes to be delivered under this section
4.2(ii) is to be delivered at Closing. The promissory notes issued under section
4.2(ii), shall: (i) bear interest at the per annum rate of 10%, (ii) be payable
in two installments, with 50% of the original principal amount being due on
April 1, 1998, and the remaining principal balance being due September 1, 1998,
and (iii) be guaranteed by the Purchaser.
4.3 ALLOCATION. The TP Purchase Price shall be allocated to the Tomlinson
Properties in accordance with the schedule set forth in Exhibit C of Schedule
"C". Each of Tomlinson and the Purchaser covenant and agree that the values
allocated to various portions of the Tomlinson Properties which are set forth on
Exhibit C to Schedule "C" shall be binding on Tomlinson.
4.4 OWNERSHIP PRIOR TO EFFECTIVE TIME. Except as set forth in section 4.6,
Tomlinson shall be entitled to all of the rights and incidents of ownership
generated from or attributable to the Tomlinson Properties prior to the Closing
Date, including the right to all Oil and Gas (as defined in Schedule "C")
produced from or attributable to the Tomlinson Properties prior to the Closing
Date. Tomlinson shall bear and be responsible for the duties, liabilities,
costs, expenses and obligations of ownership attributable to the Tomlinson
Properties prior to the Effective Time, except as may be otherwise provided
herein.
4.5 OWNERSHIP AFTER EFFECTIVE TIME. Except as set forth in section 4.6, the
Purchaser shall be entitled to all of the rights and incidents of ownership
generated from or attributable to the Tomlinson Properties after the Closing
Date, including the right to all Oil and Gas thereafter produced from or
attributable to the Tomlinson Properties after the Closing Date. The Purchaser
shall assume, bear and be responsible for the duties, liabilities, costs,
expenses and obligations of ownership attributable to the Tomlinson Properties
from and after the Closing Date, including but not limited to compliance with
applicable environmental laws and plugging and abandonment of all Wells in
accordance with applicable laws and regulations, except as may be otherwise
provided herein.
4.6 For purposes of calculating the Purchase Price, Tomlinson shall be
credited with proceeds of production attributable to the Tomlinson Properties
through January 31, 1998 and shall be debited with costs and expenses (except
for capital costs) of operating the Tomlinson Properties through January 31,
1998.
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5. REPRESENTATIONS AND WARRANTIES
5.1 GENERAL REPRESENTATIONS AND WARRANTIES OF CALIBRE LLC, THE MEMBERS
AND TOMLINSON. Each of Calibre LLC, the Members and Tomlinson severally (and
not jointly and severally) represents and warrants to the Purchaser, as
representations and warranties that are true at the date hereof or as of
Closing, and acknowledges that the Purchaser is relying on each of the
following representations and warranties in entering into this Agreement that:
(a) CAPACITY - it has all requisite power and capacity to execute and
deliver this Agreement, to carry out the transactions to which it
is a party and to duly observe and perform all of its covenants
set out herein;
(b) AUTHORITY - the execution and delivery of this Agreement has been
duly and validly authorized by all necessary action on its part
and this Agreement constitutes a legal, valid and binding
obligation of it enforceable against it in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting creditors' rights and to the
availability of equitable remedies;
(c) ARPROVALS AND FILINGS - to its Knowledge, no exemption or
Approval of any court or Governmental Authority or any third
party is required to be obtained by it with respect to the
execution and delivery of this Agreement by it or the
consummation by it of the transactions contemplated hereby,
except applicable securities legislation, Exchange approval and
shareholder approval of Calibre LLC;
(d) NO DEFAULT/APPROVALS - provided that it has completed all the
necessary filings in subsection 5.1(c), neither the execution
and delivery of this Agreement nor the due observance and
performance by it of its obligations contemplated herein shall:
(i) result in a breach or violation by the it of any of the
terms, conditions or provisions of any law, judgment,
order, injunction, decree or ruling to which it is subject;
or
(ii) except for rights held by EnCap Energy Capital Fund III,
L.P. ("EnCap") and Bank One, Texas N.A. ("Bank One")
pursuant to existing credit facilities, give any other
Person any right of termination, cancellation, acceleration
in respect of, or constitute a material breach of or
material default under, any material agreement, instrument
or commitment to which it is a party or by which the
Calibre Properties, the Member Properties or the Tomlinson
Properties, as the case may be, are bound or affected which
termination, cancellation, acceleration or breach, if any,
would likely materially and adversely affect Calibre Inc.
or any portion of the
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Calibre Properties, the Member Properties or the Tomlinson
Properties, as the case may be.
5.2 SPECIFIC REPRESENTATIONS AND WARRANTIES OF CALIBRE LLC. Calibre LLC
represents and warrants to the Purchaser, as representations and warranties that
are true at the date hereof or as of Closing, and acknowledges that the
Purchaser is relying on each of the following representations and warranties in
entering into this Agreement that:
(a) CALIBRE PROPERTIES--
(i) the Calibre Properties are fully and accurately described
in Schedule "A" hereto except for Bank One and EnCap
liens and encumbrances described in Exhibit A to Schedule
"D";
(ii) to the best of Calibre LLC's Knowledge, Calibre Inc. is
the owner (both beneficially and of record insofar as
such Calibre Properties are required to be recorded in
public real property records) of the Calibre Properties
described in Schedule "A", free of any liens, charges,
claims, encumbrances, with the exception of Calibre
Permitted Encumbrances which in the aggregate would not
materially and adversely affect the value or future
operation of the Calibre Properties;
(iii) to the best of Calibre LLC's Knowledge, no third party
has any options to purchase, or any preferential rights
to acquire or develop any of the Calibre Properties and
except as may constitute a Calibre Permitted Encumbrance;
(iv) except for Bank One and EnCap liens and encumbrances, the
Calibre Properties have been validly transferred by
Calibre LLC to Calibre Inc. and are free and clear of all
liens, charges and encumbrances except the Calibre
Permitted Encumbrances and no interest in all or any of
the Calibre Properties have been transferred or otherwise
disposed of by Calibre Inc.;
(v) all applicable requirements and procedures established by
applicable U.S. Laws with regard to the grant or
acquisition of the Calibre Properties have been fulfilled
except for such matters of non-compliance, if any, as
would not affect materially and adversely Calibre Inc. or
any portion of the Calibre Properties;
(vi) neither Calibre LLC nor Calibre Inc. is in breach or
default of any laws or agreement under which Calibre Inc.
has acquired the Calibre Properties except for such
breaches or defaults, if any, as would not affect
materially and adversely Calibre Inc. or any portion of
the Calibre Properties;
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(vii) Calibre LLC and Calibre Inc. are in material compliance
with all permits, licenses, contracts and agreements
relating to the Calibre Properties. Calibre LLC and
Calibre Inc. are in material compliance with all laws,
rules, regulations and orders of federal, state or local
entities which have jurisdiction over Calibre LLC,
Calibre Inc. or the Calibre Properties, except for
noncompliance with such laws, rules and regulations
which, individually or in the aggregate, do not and will
not affect materially and adversely Calibre Inc. or any
portion of the Calibre Properties; and
(viii) to the best of Calibre LLC's Knowledge, there is no suit,
action, claim, investigation or inquiry pending or
threatened arising out of or with respect to the
ownership, operation or environmental condition of the
Calibre Properties.
(b) STATUS AND CAPACITY OF CALIBRE INC,-- Calibre Inc. is a
corporation duly incorporated and validly in existence in
accordance with the laws of the State of Texas, and Calibre Inc.:
(i) is in good standing and up-to-date with all its corporate
filings required under the laws of its incorporating
jurisdiction;
(ii) has the corporate power and capacity to carry on the
business now carried on by it and to own, lease or
acquire the assets or interests in assets now owned or
leased by it including the Calibre Properties;
(iii) is duly qualified to carry on business in each
jurisdiction in which the conduct of its business or the
ownership or leasing of its properties and assets makes
such qualification necessary except in jurisdictions
where the failure to be so qualified would not likely
affect materially and adversely Calibre Inc. or any
portion of the Calibre Properties;
(iv) is not in default of any requirement under any applicable
U.S. Laws or other laws to which it is subject except for
such defaults, if any, as would not likely affect
materially and adversely Calibre Inc. or any portion of
the Calibre Properties; and
(v) has no subsidiaries and has no participation in any
company, limited partnership or sole proprietorship;
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(c) ORGANIZATION OF CALIBRE INC.--
(i) Calibre Inc. has an authorized capital of 1000 shares
with a par value of US$.01 per share of which 1000 shares
are issued and outstanding;
(ii) all of the CI Shares are legally and beneficially owned by
Calibre LLC;
(iii) the CI Shares are all validly issued and outstanding as
fully paid and nonassessable shares and are free and
clear of all liens, charges and encumbrances and are
shares with a right to vote;
(iv) no Person has any right, present or future, contingent or
absolute, to require Calibre Inc. to issue any share in
its capital and, in particular, there are no outstanding
securities of Calibre Inc. which are convertible into
shares in the capital of Calibre Inc. and there are no
outstanding options on or rights to subscribe for any of
the unissued shares in the capital of Calibre Inc., or
any agreements, options or understandings capable of
becoming options or agreements to purchase the CI Shares;
(v) effective upon the Closing Date no Person other than
Calibre LLC or its nominee will have any right of any
Kind or nature to vote the CI Shares or to appoint the
officers or directors of Calibre Inc.; and
(vi) on the Closing Date, the CI Shares shall be validly
issued and fully paid, and shall be shares with the right
to vote. On the Closing Date, Calibre LLC shall have the
complete and absolute right to sell, to transfer and to
cede legal and beneficial title to the Cl Shares, without
the existence of preferential rights or acquisition
options created by the Constating Documents or other
agreements of Calibre Inc. and Calibre Inc. has no debt
other than as described in Schedule "D" and will not
have any indebtedness for borrowed money, whether
principal or interest other than as described in Exhibit
A to Schedule "D";
(d) FINANCIAL STATUS OF CALIBRE INC.--
(i) the Calibre Financial Statements and all the financial
records of Calibre Inc. are true, correct and complete in
all material respects, have been prepared in accordance
with generally accepted accounting principles in the
United States applied on a consistent basis throughout
the periods involved, fairly represent the financial
condition of Calibre Inc. as of the dates set forth in
the balance sheets included therein and the results of
operation of Calibre Inc. for the respective periods
covered thereby;
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(ii) there are no outstanding debts between Calibre Inc. and
Calibre LLC or between Calibre Inc. and the officers or
directors of Calibre Inc. or the officers and directors
of Calibre LLC or the relatives or associates of the
aforementioned persons and no direct or indirect
contractual connection is in existence between them,
including absolute or contingent liabilities, save and
except as may arise in the ordinary course of business
out of employment relationships between Calibre Inc. and
such persons and except as described in Schedule "D";
(iii) there are no material liabilities of Calibre Inc. that
are not disclosed in the most recent balance sheet
included in the Calibre Financial Statements except those
incurred in the ordinary course of business since the
date of the Calibre Financial Statements and except as
described in Schedule "D";
(iv) since the date of the Calibre Financial Statements, there
has been no:
A. material change in the financial condition of Calibre
Inc. or its assets, liabilities or business;
B. indebtedness for borrowed money incurred by Calibre
Inc. that is not reflected in the Calibre Financial
Statements or on Schedule "D" hereto;
C. termination, revision or significant renegotiation of
any material contract with third parties; or
D. event or condition that may have influenced in an
adverse and significant manner the financial
condition or business of Calibre Inc., individually
or collectively, with the exception of all the events
derived from the execution of this Agreement;
(e) ACQUISITION OF THE PURCHASER'S SHARES--
(i) it has such Knowledge and experience in financial and
business matters as to be capable of evaluating the
merits and risks of an investment in the Purchaser's
Shares and it is able to bear the economic risk of loss
of its entire investment;
(ii) it has had access to such additional information, if any,
concerning the Purchaser as it has considered
necessary in connection with an investment in the
Purchaser's Shares;
14
(iii) it is acquiring the Purchaser's Shares for its own account,
for investment purposes only and not with a view to any
resale, distribution or other disposition of the
Purchaser's Shares in violation of the United States or
other applicable securities laws;
(iv) it understands that the Purchaser's Shares have not been
and will not be registered under the United States
Securities Act of 1933, as amended (the "Securities Act")
or the securities laws of any state of the United States
and that the sale contemplated hereby is being made in
reliance of an exemption from such registration
requirements;
(v) it acknowledges that it has dealt directly with the
Purchaser rather than through the facilities of a security
exchange, investment bankers, or by any other means of
public distribution; and
(vi) it acknowledges that it has a significant amount of prior
business experience in the oil and gas industry in which
the Purchaser will operate.
(f) RESALE OF THE PURCHASER'S SHARES -
(i) it agrees that if it decides to offer, sell or otherwise
transfer any of the Purchaser's Shares, it will not offer,
sell or otherwise transfer any of such Shares directly or
indirectly, unless:
A. the sale is to the Purchaser;
B. the sale is made outside the United States in a
transaction meeting the requirements of Rule 904 of
Regulation S under the Securities Act and in compliance
with applicable local laws and regulations;
C. the sale is made pursuant to an exemption from the
registration requirements under applicable securities
laws including, without limiting the generality of the
forgoing, the Securities Act provided by Rules 144 and
145 thereunder and in accordance with any applicable
state securities or "Blue Sky" laws; or
D. the Purchaser's Shares are sold in a transaction that
does not require an exemption from applicable
securities laws or registration under the Securities
Act or any applicable state or laws and regulations
governing the offer and sale of securities, and it has
prior to such sale furnished to the Purchaser an
opinion of counsel reasonably satisfactory to the
Purchaser;
15
(g) LEGENDING OF CERTIFICATES - it acknowledges that the certificates
representing the Purchaser's Shares will bear a legend in
accordance with applicable securities laws, including a legend
stating that such shares have not been registered under the
Securities Act or the securities laws of any state of the United
States and may not be offered for sale or sold unless registered
under the Securities Act and the securities laws of all
applicable states of the United States or an exemption from such
registration requirements is available; and
(h) CONSENT TO NOTATION - it consents to the Purchaser making a
notation on its records of giving instructions to any transfer
agent of the Purchaser in order to implement the restrictions on
transfer set forth and described herein.
5.3 SPECIFIC REPRESENTATIONS AND WARRANTIES OF CALIBRE LLC AND THE MEMBERS
CONCERNING MEMBERS PROPERTIES. Each of Calibre LLC and each of the Members
represents and warrants to the Purchaser, as representations and warranties
that are true at the date hereof or as of Closing, and acknowledges that the
Purchaser is relying on each of the following representations and warranties
in entering into this Agreement that:
(a) MEMBER PROPERTIES -
(i) the Member Properties are fully and accurately described in
Schedule "B" hereto;
(ii) to the best of Calibre LLC's and the Members Knowledge, the
Members are the owners (both beneficially and of record
insofar as such Member Properties are required to be
recorded in public real property records) of the Member
Properties described in Schedule "B" free of any liens,
charges, claims, encumbrances, with the exception of the
Member Permitted Encumbrances, which in the aggregate
would materially and adversely affect the value or future
operation of the Member Properties;
(iii) no third party has any options to purchase, or any
preferential rights to acquire or develop any of the Member
Properties for which notices have not been sent to such
third parties, and except as may constitute a Member
Permitted Encumbrance;
(iv) the Member Properties have been validly transferred by
Calibre LLC to the Members and are free and clear of all
liens, charges and encumbrances except the Member Permitted
Encumbrances and no interest in all or any of the Member
Properties have been transferred or otherwise disposed of
by the Members;
16
(v) all applicable requirements and procedures established by
applicable U.S. Laws with regard to the grant or
acquisition of the Member Properties have been fulfilled
except for such matters of non-compliance, if any, as would
not likely affect materially and adversely any portion of
the Member Properties;
(vi) none of the Members nor Calibre LLC is in breach or default
of any laws or agreement under which it has acquired the
Member Properties except for such breaches or defaults, if
any, as would not likely affect materially and adversely
any portion of the Member Properties;
(vii) the Members and Calibre LLC are in material compliance with
all permits, licenses, contracts and agreements relating to
Member Properties. The Members and Calibre LLC are in
material compliance with all laws, rules, regulations and
orders of federal, state or local entities which have
jurisdiction over the Members, Calibre LLC or the Member
Properties, except for noncompliance with such laws, rules
and regulations which, individually or in the aggregate, do
not and will not affect materially and adversely any
portion of the Member Properties; and
(viii) to the best of Calibre LLC's and the Members Knowledge,
there is no suit, action, claim, investigation or inquiry
pending or threatened arising out of or with respect to the
ownership, operation or environmental condition of any of
the Member Properties.
5.4 SPECIFIC REPRESENTATIONS AND WARRANTIES OF CALIBRE LLC AND TOMLINSON
CONCERNING TOMLINSON PROPERTIES. Each of Calibre LLC and Tomlinson represents
and warrants to the Purchaser, as representations and warranties that are true
at the date hereof or as of Closing, and acknowledges that the Purchaser is
relying on each of the following representations and warranties in entering into
this Agreement that:
(a) TOMLINSON PROPERTIES - each of Calibre LLC and Tomlinson
represents and warrants, in respect of the Tomlinson Properties
that:
(i) the Tomlinson Properties are fully and accurately described
in Schedule "C" hereto;
(ii) to the best of Calibre LLC's and Tomlinson's Knowledge,
Tomlinson is the owner (both beneficially and of record
insofar as such Tomlinson Properties are required to be
recorded in public real property records) of the Tomlinson
Properties described in Schedule "C" free of any liens,
charges, claims, encumbrances, with the exception of the
Tomlinson Permitted Encumbrances which in the aggregate
would materially and adversely affect the value or future
operations of the Tomlinson Properties;
17
(iii) no third party has any options to purchase, or any
preferential rights to acquire or develop any of the
Tomlinson Properties for which notices have not been sent
to such third parties, and except as may constitute a
Tomlinson Permitted Encumbrance;
(iv) the Tomlinson Properties have been validly transferred by
Calibre LLC to Tomlinson and are free and clear of all
liens, charges and encumbrances except the Tomlinson
Permitted Encumbrances and no interest in all or any of the
Tomlinson Properties have been transferred or otherwise
disposed of by Tomlinson;
(v) all applicable requirements and procedures established by
applicable U.S. Laws with regard to the grant or
acquisition of the Tomlinson Properties have been fulfilled
except for such matters of non-compliance, if any, as would
not likely affect materially and adversely any portion of
the Tomlinson Properties;
(vi) neither Tomlinson nor Calibre LLC is in breach or default
of any laws or agreement under which it has acquired the
Tomlinson Properties except for such breaches or defaults,
if any, as would not likely affect materially and adversely
any portion of the Tomlinson Properties;
(vii) Tomlinson and Calibre LLC are in material compliance with
all permits, licenses, contracts and agreements relating to
the Tomlinson Properties. Tomlinson and Calibre LLC are in
material compliance with all laws, rules, regulations and
orders of federal, state or local entities which have
jurisdiction over Tomlinson, Calibre LLC or the Tomlinson
Properties, except for noncompliance with such laws, rules
and regulations which, individually or in the aggregate, do
not and will not affect materially and adversely any
portion of any of the Tomlinson Properties; and
(viii) to the best of Calibre LLC's and Tomlinson's Knowledge,
there is no suit, action, claim, investigation or inquiry
pending or threatened against Calibre LLC or Calibre Inc.
or arising out of or with respect to the ownership,
operation or environmental condition of the Tomlinson
Properties.
5.5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents
and warrants to Calibre LLC, the Members and Tomlinson, as representations and
warranties that are true at the date hereof, and acknowledges that Calibre LLC,
the Members and Tomlinson are relying on each of the following representations
and warranties in entering this Agreement that:
18
(a) CAPACITY - the Purchaser has all requisite corporate power and
capacity to execute and deliver this Agreement, to carry out the
transactions to which it is a party and to duly observe and
perform all its covenants set out herein;
(b) AUTHORITY - the execution and delivery of this Agreement have
been duly and validly authorized by all necessary action on the
part of the Purchaser and this Agreement constitutes a legal,
valid and binding obligation of the Purchaser enforceable
against it in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting
creditors' rights and to the availability of equitable remedies;
(c) APPROVALS AND FILINGS - no exemption or Approval of any court or
Governmental Authority or any third party is required to be
obtained by the Purchaser with respect to the execution and
delivery of this Agreement by the Purchaser or the consummation
by the Purchaser of the transactions contemplated hereby,
except, to the Purchaser's Knowledge, as follows:
(i) acceptance for filing by the Exchange of final
documentation with respect to the transactions
contemplated hereby;
(ii) the Purchaser filing a report on Form 20 with the British
Columbia Securities Commission pursuant to the
provisions of applicable securities legislation; and
(iii) the Purchaser filing a press release and a report on
Form 27 with the British Columbia Securities Commission
pursuant to the provisions of applicable securities
legislation;
(d) NO DEFAULT/APPROVALS - provided that the Purchaser has obtained
the Approvals in subsection 5.5(c), neither the execution and
delivery of this Agreement nor the due observance and
performance by the Purchaser of its obligations contemplated
herein shall:
(i) result in a breach or violation by the Purchaser of any
of the terms, conditions or provisions of any law,
Judgment, order, injunction, decree, ruling to which the
Purchaser is subject; or
(ii) give any other Person any right of termination,
cancellation, acceleration in respect of, or constitute
a material breach of or material default under, any
material agreement, instrument or commitment to which
the Purchaser is a party or by which its properties or
assets are bound or affected which termination,
cancellation, acceleration or breach, if any, would
likely affect materially and adversely the Purchaser or
its properties or assets;
19
(e) STATUS AND CAPACITY - the Purchaser is a corporation duly
organized, validly existing and is in good standing in the
jurisdiction of its incorporation,
(i) is in good standing and up-to-date with all its corporate
filings required under the laws of its incorporating
jurisdiction;
(ii) has the corporate power and capacity to carry on the
business now carried on by it and to own, lease or
acquire the assets or interests in assets now owned or
leased by it;
(iii) is duly qualified to carry on business in each
jurisdiction in which the conduct of its business or the
ownership or leasing of its properties and assets makes
such qualification necessary except in jurisdictions
where the failure to be so qualified would not likely
affect materially and adversely the Purchaser or its
properties or assets;
(iv) is not in default of any requirement under any
applicable laws to which it is subject except for such
defaults, if any, as would not likely affect materially
and adversely the Purchaser or its properties or assets;
(v) is in material compliance with all permits, licenses,
contracts and agreements relating to its properties. The
Purchaser is in material compliance with all laws,
rules, regulations and orders of federal, state or local
entities which have jurisdiction over the Purchaser or
its properties, including but not limited to all
environmental regulations and laws, except for
noncompliance with such laws, rules and regulations
which, individually or in the aggregate, do not and will
not affect materially and adversely any portion of its
properties;
(f) ORGANIZATION OF THE PURCHASER -
(i) the authorized capital of the Purchaser consist of an
unlimited number of common shares, of which 32,508,357
are validly issued and outstanding as fully paid and
non-assessable shares as at the date of this Agreement;
(ii) on the Closing Date, the Purchaser's Shares, after
issuance, will be validly issued as fully paid and
non-assessable shares free and clear of all liens
charges and encumbrances, and shall be shares with the
right to vote;
(iii) no Person has any right, present or future, contingent
or absolute, to require the Purchaser to issue any share
in its capital and, in particular, there are no
outstanding securities of the Purchaser which are
convertible into shares in the capital of the Purchaser
and there are no outstanding options on or rights
20
to subscribe for any of the unissued shares in the
capital of the Purchaser except as otherwise described
in Schedule "N" hereto (which shall be as of March 31,
1998); and
(iv) effective upon the Closing Date no Person other than
Calibre LLC or its nominees will have any right of any
kind or nature to vote the Purchaser's Shares;
(g) FINANCIAL STATUS OF THE PURCHASER -
(i) the Purchaser's Financial Statements and all the
financial records of the Purchaser are true, correct and
complete in all material respects, have been prepared in
accordance with generally accepted accounting principles
in Canada applied on a consistent basis throughout the
periods involved, fairly represent the financial
condition of the Purchaser as of the dates set forth in
the balance sheets included therein and the results of
operation of the Purchaser for the respective periods
covered thereby;
(ii) there are no outstanding debts between the Purchaser and
the officers or directors of the Purchaser or the
relatives or associates of the aforementioned persons
and no direct or indirect contractual connection is in
existence between them, including absolute or contingent
liabilities, save and except as may arise in the ordinary
course of business out of employment relationships
between the Purchaser and such persons or except as
described in Schedule "N";
(iii) since the date of the Purchaser's Financial Statements,
there has been no:
A. material change in the financial condition of the
Purchaser or its assets, liabilities or business;
B. indebtedness for borrowed money incurred by the
Purchaser that is not reflected in the Purchaser's
Financial Statements or on Schedule "H" hereto;
C. termination, revision or significant renegotiation
of any material contract with third parties; or
D. event or condition that may have influenced in an
adverse and significant manner the financial
condition or business of the Purchaser,
individually or collectively, with the exception
of all the events derived from the execution of
this Agreement; and
21
(h) LITIGATION. To the best of the Purchaser's knowledge, there is
no suit, action, claim, investigation or inquiry pending or
threatened against the Purchaser or arising out of or with
respect to the ownership, operation or environmental condition
of its properties.
5.6 RELIANCE. Prior to executing this Agreement, Purchaser has been
afforded an opportunity to examine the Properties and such materials as it
has requested to be provided to it by Calibre LLC, the Members and Tomlinson,
to discuss with representatives of Calibre LLC, the Members and Tomlinson
such materials and the nature and operation of the Properties and to
investigate the condition, including the subsurface condition, of the
Properties and the condition of the personal property. In entering into this
Agreement, Purchaser has relied solely on the express representations and
covenants of Calibre LLC, the Members and Tomlinson in this Agreement, its
independent investigation of, and judgment with respect to, the personal
property and the Properties and the advice of its own legal, tax, economic,
environmental, engineering, geological and geophysical advisors and not on
any written or oral comments or statements of any representatives of, or
consultants or advisors engaged directly or indirectly by, Calibre LLC, the
Members and Tomlinson or any advisor to Calibre LLC, the Members and
Tomlinson.
5.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants made by any party to this Agreement
herein or pursuant hereto, including any statements contained in any
certificate or other instrument delivered by or on behalf of any party
pursuant to this Agreement, and shall not survive the completion of the
transactions contemplated hereunder.
6. COVENANTS
6.1 GENERAL COVENANTS OF CALIBRE LLC, THE MEMBERS AND TOMLINSON. Each of
Calibre LLC, each Member and Tomlinson severally covenants and agrees with
the Purchaser as follows:
(a) to provide all necessary information regarding itself, Calibre
Inc., the Calibre Properties, the Member Properties or the
Tomlinson Properties, as the case may be, to the Exchange as may
be required to obtain the approval of the Exchange for the
transactions contemplated herein;
(b) until the Closing Date, none of Calibre LLC, Calibre Inc., the
Members or Tomlinson, will perform any act or enter into any
transaction or negotiation which interferes or is inconsistent
with the completion of the transactions contemplated herein or
would render inaccurate in any material way any of the
representations and warranties set forth in sections 5.1
through 5.4, as the case may be, as if such representations and
warranties were made at a date subsequent to such act,
transaction or negotiation unless such transaction or
negotiation is entered into with the consent of the Purchaser;
22
(c) until the Closing Date, to promptly discuss with the Purchaser
any significant developments in or with respect to Calibre LLC,
Calibre Inc., the Calibre Properties the Member Properties or
the Tomlinson Properties, and to provide to the Purchaser all
such information about Calibre LLC, Calibre Inc., the Calibre
Properties, the Member Properties and the Tomlinson Properties,
as the case may be, as the Purchaser may reasonably request on a
timely and regular basis, and to afford, or cause to be
afforded, to the Purchaser and to their accountants, counsel,
financial advisors and other representatives, full access during
normal business hours to Calibre LLC's and Calibre Inc.'s
management, properties, books, contracts, commitments and
records in its possession or to which it has access and to allow
the Purchaser and such representatives to perform a diligent and
complete examination of Calibre LLC, Calibre Inc., the Calibre
Properties, the Member Properties and the Tomlinson Properties
during such period, to furnish at the request of the Purchaser
a copy of all filings with any regulatory - authority, and all
other information concerning Calibre LLC, Calibre Inc., the
Calibre Properties, the Member Properties and the Tomlinson
Properties as the Purchaser may reasonably request;
(d) forthwith after execution and delivery of this Agreement, to
take such steps and proceedings in good faith as may be
reasonably required to obtain all consents, Approvals, waivers
(including preferential rights) and agreements of all other
parties and Governmental Authorities which are required for the
Purchaser to complete the transactions contemplated herein;
(e) each of Calibre LLC, the Members and Tomlinson, as the case may
be, will in good faith make reasonable efforts to cause all the
conditions precedent on its part to be performed, as set out in
sections 7.3 and 7.4, to be complied with on or before the
Closing Date;
(f) as soon as reasonably possible after any of Calibre LLC, the
Members or Tomlinson, as the case may be, has determined that a
state of facts exists which results in or will result in the
non-fulfilment of any of the material conditions precedent set
forth in sections 7.3 or 7.4, Calibre LLC, the Members and/or
Tomlinson, as the case may be, will notify the Purchaser of such
state of facts; and
(g) provided the conditions set forth in sections 7.3 and 7.4 have
been satisfied or waived by the Closing Date, Calibre LLC, the
Members and Tomlinson will execute and deliver all such
documents and certificates required to carry out the
transactions contemplated herein to which it is a party.
23
6.2 ADDITIONAL COVENANTS OF CALIBRE LLC CONCERNING MAINTENANCE OF THE
CALIBRE PROPERTIES. From the date of this Agreement until Closing, Calibre
LLC agrees and covenants to cause Calibre Inc. to:
(a) administer and operate the Calibre Properties in good and
workmanlike manner, and conduct its business and operations in a
prudent manner, and in substantially the same manner as prior to
the date of this Agreement;
(b) not introduce any new methods of management, operation or
accounting with respect to any of the Calibre Properties;
(c) maintain and keep the Calibre Properties in good condition and
working order; preserve the Calibre Properties in full force and
effect; and fulfil all contractual or other covenants,
obligations and conditions imposed upon Calibre Inc. with
respect to the Calibre Properties, including, but not limited,
to payment of royalties, delay rentals, shut-in gas royalties
and any and all other required payments;
(d) operate or cause to be operated the CI Wells (as defined in
Schedule "A") in accordance with generally accepted oil field
practices and standards;
(e) not enter into agreements to drill new wells or to rework, plug
back, deepen, plug or abandon any existing well or wells on the
CI Leases (as defined in Schedule "A"), nor commence any
drilling, reworking or completing or other operations or make or
authorize any expenditures (except for emergency operations and
operations required under presently existing contractual
obligations) without giving notice to and consulting with the
Purchaser; provided that such notice to and consultation with
the Purchaser shall not be required with respect to any single
expenditure that does not exceed Fifty Thousand Dollars
($50,000.00) or aggregate expenditures that do not exceed One
Hundred Thousand Dollars ($100,000.00) (in either case, net to
Calibre Inc.'s working interest);
(f) not voluntarily relinquish its position as operator to anyone
other than the Purchaser with respect to any of the Calibre
Properties or abandon any of the Calibre Properties;
(g) not, without the prior written consent of the Purchaser, (i)
enter into any agreement or arrangement transferring, selling or
encumbering any of the Calibre Properties; (ii) grant any
preferential or other right to purchase or agree to require the
consent of any party to the transfer and assignment of the
Calibre Properties to the Purchaser; (iii) enter into any new
sales contracts or supply contracts; or (iv) incur or agree to
incur any material contractual obligation or liability (absolute
or contingent) with respect to the Calibre Properties except as
otherwise provided herein; and
24
(h) promptly provide the Purchaser with written notice of (i) any
claims, demands, suits or actions made against Calibre Inc.
which materially affect the Calibre Properties; or (ii) any
proposal from a third party to engage in any material
transaction (e.g. a farmout) with respect to the Calibre
Properties.
6.3 ADDITIONAL COVENANTS OF THE MEMBERS CONCERNING MAINTENANCE OF THE
MEMBER PROPERTIES. From the date of this Agreement until Closing, each of the
Members covenants and agrees to:
(a) administer and operate the Member Properties in good and
workmanlike manner, and conduct its business and operations in a
prudent manner, and in substantially the same manner as prior to
the date of this Agreement;
(b) not introduce any new methods of management, operation or
accounting with respect to any or all of the Member Properties;
(c) maintain and keep the Member Properties in good condition and
working order; preserve the Member Properties in full force and
effect; and fulfil all contractual or other covenants, obligations
and conditions imposed upon the Members with respect to the
Member Properties, including, but not limited, to payment of
royalties, delay rentals, shut-in gas royalties and any and
all other required payments;
(d) operate or cause to be operated the MP Wells (as defined in
Schedule "B") in accordance with generally accepted oil field
practices and standards;
(e) not enter into agreements to drill new wells or to rework, plug
back, deepen, plug or abandon any existing well or wells on the
MP Leases (as defined in Schedule "B"), nor commence any
drilling, reworking or completing or other operations or make or
authorize any expenditures (except for emergency operations and
operations required under presently existing contractual
obligations) without giving notice to and consulting with the
Purchaser; provided that such notice to and consultation with
prior written consent of the Purchaser shall not be required
with respect to any single expenditure that does not exceed
Fifty Thousand Dollars ($50,000.00) or aggregate expenditures
that do not exceed One Hundred Thousand Dollars ($100,000.00)
(in either case, net to the Members' working interest), and
provided further that the terms of this paragraph shall not
apply to any expenditures of the Members which will not be
charged to the Purchaser.
(f) not voluntarily relinquish its position as operator to anyone
other than the Purchaser with respect to any of the Member
Properties or abandon any of the Member Properties;
25
(g) not, without the prior written consent of the Purchaser, (i)
enter into any agreement or arrangement transferring, selling or
encumbering any of the Member Properties; (ii) grant any
preferential or other right to purchase or agree to require the
consent of any party to the transfer and assignment of the
Member Properties to the Purchaser; (iii) enter into any new
sales contracts or supply contracts; or (iv) incur or agree to
incur any material contractual obligation or liability (absolute
or contingent) with respect to the Member Properties except as
otherwise provided herein; and
(h) promptly provide the Purchaser with written notice of (i) any
claims, demands, suits or actions made against the Members which
materially affect the Member Properties; or (ii) any proposal
from a third party to engage in any material transaction (e.g. a
farmout) with respect to the Member Properties.
6.4 ADDITIONAL COVENANTS OF TOMLINSON CONCERNING MAINTENANCE OF THE
TOMLINSON PROPERTIES. From the date of this Agreement until Closing,
Tomlinson covenants and agrees to:
(a) administer and operate the Tomlinson Properties in good and
workmanlike manner, and conduct its business and operations in a
prudent manner, and in substantially the same mariner as prior
to the date of this Agreement;
(b) not introduce any new methods of management, operation or
accounting with respect to any or all of the Tomlinson
Properties;
(c) maintain and keep the Tomlinson Properties in good condition and
working order; preserve the Tomlinson Properties in full force
and effect; and fulfil all contractual or other covenants,
obligations and conditions imposed upon Tomlinson with respect
to the Tomlinson Properties, including, but not limited, to
payment of royalties, delay rentals, shut-in gas royalties and
any and all other required payments;
(d) operate or cause to be operated the TP Wells (as defined in
Schedule "C") in accordance with generally accepted oil field
practices and standards;
(e) not enter into agreements to drill new wells or to rework, plug
back, deepen, plug or abandon any existing well or wells on the
TP Leases (as defined in Schedule "C"), nor commence any
drilling, reworking or completing or other operations or make or
authorize any expenditures (except for emergency operations and
operations required under presently existing contractual
obligations) without giving notice to and consulting with the
Purchaser; provided that such notice to and consultation with of
the Purchaser shall not be required with respect to any single
expenditure that does not exceed Fifty Thousand Dollars
($50,000.00) or aggregate expenditures that do not exceed One
Hundred Thousand Dollars ($100,000.00) (in either case, net to
Tomlinson's working interest), and provided further that the
terms of this paragraph
26
shall not apply to any expenditures of the Tomlinson which will
not be charged to the Purchaser.
(f) not voluntarily relinquish its position as operator to anyone
other than the Purchaser with respect to any of the Tomlinson
Properties or abandon any of the Tomlinson Properties;
(g) not, without the prior written consent of the Purchaser, (i)
enter into any agreement or arrangement transferring, selling or
encumbering any of the Tomlinson Properties; (ii) grant any
preferential or other right to purchase or agree to require the
consent of any party to the transfer and assignment of the
Tomlinson Properties to the Purchaser; (iii) enter into any new
sales contracts or supply contracts; or (iv) incur or agree to
incur any material contractual obligation or liability (absolute
or contingent) with respect to the Tomlinson Properties except as
otherwise provided herein; and
(h) promptly provide the Purchaser with written notice of (i) any
claims, demands, suits or actions made against the Members which
materially affect the Tomlinson Properties; or (ii) any proposal
from a third party to engage in any material transaction (e.g. a
farmout) with respect to the Tomlinson Properties.
6.5 COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
Vendor as follows:
(a) until the Closing Date, the Purchaser will not perform any act or
enter into any transaction or negotiation which interferes or is
inconsistent with the completion of the transactions contemplated
herein or would render inaccurate in any material way any of the
representations and warranties set forth in section 5.5 as if
such representations and warranties were made at a date
subsequent to such act, transaction or negotiation unless such
transactions or negotiations are entered into with the consent of
Calibre LLC, the Members and Tomlinson;
(b) forthwith after execution and delivery of this Agreement, the
Purchaser will take such steps and proceedings in good faith as
may be reasonably required to obtain all consents, approvals,
waivers (including preferential rights) and agreements of all
other parties and Governmental Authorities which are required
for the Purchaser to complete the transactions contemplated
herein;
(c) the Purchaser will promptly apply for and diligently seek
approval of the Exchange for the transactions contemplated herein;
(d) the Purchaser will, subject to the terms of this Agreement, pay
the MP Purchase Price to the Members, the TP Purchase Price to
Tomlinson and issue the Purchaser's
27
Shares to Calibre LLC as fully paid and non-assessable shares in
accordance with the terms of this Agreement;
(e) the Purchaser will in good faith make reasonable efforts to cause
all the conditions precedent on its part to be performed, as set
out in sections 7.3 and 7.5, to be complied with on or before the
Closing Date;
(f) as soon as reasonably possible after the Purchaser has determined
that a state of facts exists which results in or will result in
the non-fulfilment of any of the material conditions precedent
set forth in sections 7.3 or 7.5, the Purchaser will notify
Calibre LLC, the Members and Tomlinson of such state of facts; and
(g) provided the conditions set forth in sections 7.3 and 7.5 have
been satisfied or waived by the Closing Date, the Purchaser will
execute and deliver all such documents and certificates required
to carry out the transactions contemplated herein to which the
Purchaser is a party.
7. CLOSING
7.1 TIME AND PLACE OF CLOSING. The Closing shall take place at 10:00 a.m.
(PST time) on the Closing Date at the offices of Porter & Hedges, L.L.P., in
Suite 3500,700 Louisiana, Houston, Texas 77002 or such other place as the
parties may agree.
7.2 CLOSING DOCUMENTS. On the Closing Date the parties will table the
following documents and instruments and take the following steps:
(a) Calibre LLC will table any Approvals required for the transfer of
the C1 Shares to the Purchaser;
(b) Calibre LLC will table for delivery to the Purchaser written
opinions of one or more counsel to Calibre LLC dated the Closing
Date in a form reasonably satisfactory to the Purchaser that:
(i) Calibre has all requisite power and capacity to execute and
deliver all documents set out in this Agreement and to duly
observe and perform all its covenants set out herein;
(ii) the execution, delivery and performance by Calibre of the
agreements to effect the transactions contemplated
herewith to which it is a party has been duly authorized
by all necessary legal action on the part of Calibre;
(iii) which confirms Calibre Inc.'s corporate status and power;
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(c) Calibre will table for delivery to the Purchaser share
certificates evidencing ownership of the CI Shares duly endorsed
(or accompanied by duly executed stock powers) for transfer into
the name of the Purchaser;
(d) the Purchaser will table for delivery to Calibre LLC a share
certificate or certificates evidencing ownership of the
Purchaser's Shares duly registered in the name of Calibre LLC;
(e) the Members shall deliver to the Purchaser, in form satisfactory
to the Members and the Purchaser and the appropriate government
agencies, an Assignment and Bill of Sale effecting the sale,
transfer, conveyance and assignment of the Member Properties in
the forms set forth as Exhibit D to Schedule "B";
(f) the Purchaser will table for delivery to the Members, the Texstar
Promissory Notes, as set out in section 3.2 hereof;
(g) Tomlinson shall deliver to the Purchaser, in form satisfactory to
Tomlinson and the Purchaser and the appropriate government
agencies, an Assignment and Bill of Sale effecting the sale,
transfer, conveyance and assignment of the Tomlinson Properties
in the forms set forth as Exhibit D to Schedule "C";
(h) the Purchaser will table for delivery to Tomlinson, the Texstar
Promissory Note, as set out in section 4.2 hereof;
(i) each of the parties hereto will execute and table for delivery,
or cause to be executed and tabled for delivery, to the
appropriate parties all such other documents and instruments
reasonably required by the parties to effectively consummate the
transactions hereunder.
7.3 JOINT CONDITIONS PRECEDENT TO CLOSING. The respective obligations of
each of the parties hereto to complete the Closing shall be subject to
satisfaction, on or before the Closing Date, of the following, conditions, any
of which may be waived by both the Purchaser and Calibre LLC, the Members and
Tomlinson acting together:
(a) there shall not be in force any order or decree of a court of
competent jurisdiction or any Governmental Authority restraining,
interfering with or enjoining the consummation of the
transactions contemplated herein;
(b) all Approvals required for the completion of the transactions
contemplated herein shall have been obtained or received from the
Persons having jurisdiction in the circumstances; and
(c) this Agreement shall not have been terminated under Article 8.
29
7.4 CONDITIONS TO OBLIGATIONS OF CALIBRE LLC, THE MEMBERS AND TOMLINSON. The
obligation of Calibre LLC, the Members and Tomlinson to complete the Closing is
subject to the satisfaction, on or before the Closing Date, of the following
conditions, any of which may be waived by it without prejudice to its rights to
rely on any other or others of them:
(a) each of the covenants, agreements, acts and undertakings of the
Purchaser to be performed on or before the Closing Date pursuant
to the terms of this Agreement shall have been duly performed by
it, including the delivery of the documents specified in
subsections 7.2(d), (f) and (h);
(b) the warranties and representations of the Purchaser contained in
section 5.5 shall be true in all material respects on the Closing
with the same effect as though made at and as of such time;
(c) the results of Calibre LLC's due diligence examination of the
Purchaser shall be satisfactory to Calibre LLC, the Members and
Tomlinson;
(d) there shall have been no material adverse change in the financial
condition or assets of the Purchaser.
(e) no Governmental Authority shall have enacted any statute,
regulation or bylaws or announced any policy that will materially
and adversely affect the value of the Purchaser's Shares except
as otherwise contemplated by the terms of this Agreement.
7.5 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to complete the Closing is subject to the satisfaction, on or before
the Closing Date, of the following conditions, any of which may be waived by it
without prejudice to its right to rely on any other or others of them:
(a) each of the covenants, agreements, acts and undertakings of
Calibre LLC, the Members and Tomlinson, as the case may be, to be
performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed by them, including
the execution and delivery of the documents specified in
subsections 7.2(a), (b), (c), (e) and (g);
(b) the warranties and representations of each of Calibre LLC, the
Members and Tomlinson contained in Sections 5.1 through 5.4 shall
be true in all material respects on the Closing with the same
effect as though made at and as of such time;
(c) the results of the Purchaser's due diligence examination of
Calibre LLC, Calibre Inc., the Calibre Properties, the Member
Properties and the Tomlinson Properties shall be satisfactory to
the Purchaser;
30
(d) there shall have been no material adverse change in the
financial condition or assets of Calibre Inc.;
(e) there shall have been no options, warrants or other rights to
acquire shares of Calibre Inc. or agreements or options to
acquire the CI Shares other than this Agreement;
(f) there shall be no increase in the number of shares of Calibre
Inc. issued and outstanding above the numbers of such shares
issued and outstanding as at the date hereof; and
(g) no Governmental Authority shall have enacted any statute,
regulation or bylaws or announced any policy that will
materially and adversely affect the value of the CI Shares, the
Calibre Properties, the Member Properties or the Tomlinson
Properties.
7.6 ESCROW OF CLOSING DOCUMENTS. The parties recognize that certain
formalities for the completion of the transactions contemplated by this
Agreement and Approvals may not be completed as at the Closing Date. In such
circumstance, the parties will place all closing documents in escrow with
solicitors for the Purchaser until such time as confirmations regarding
completion of these formalities and Approvals are received by the Purchaser
or as otherwise required on terms agreeable by each of the parties, acting
reasonably. Upon receipt of such confirmations, the escrow will be terminated
and all closing documents will be released to the parties entitled thereto.
The parties will take all actions as may be necessary to formalize the
transactions contemplated hereby.
8. TERMINATION
8.1 MUTUAL TERMINATION. This Agreement may, prior to the Closing Date, be
terminated by the Purchaser, Calibre LLC, the Members and Tomlinson by
written agreement notwithstanding anything contained herein.
8.2 UNILATERAL TERMINATION.
(a) If any of the conditions contained in section 7.3 shall not be
fulfilled or performed on or before the Closing Date and such
condition has not been waived by the parties in accordance with
the provisions of section 7.3, either of the parties may
terminate this Agreement by notice to the other party and in
such event both parties shall be released from all obligations
under this Agreement and all rights of specific performance by
either party shall terminate. Calibre LLC's, the Members' and
Tomlinson's right to so terminate shall be exercised by Calibre
LLC.
(b) If any of the conditions contained in section 7.4 shall not be
fulfilled or performed on or before the Closing Date, Calibre
LLC, the Members and Tomlinson may terminate this Agreement by
written notice to the Purchaser signed by Calibre LLC
31
and in such event Calibre LLC, the Members and Tomlinson shall
be released from all obligations hereunder and all rights of
specific performance by any of the parties hereto shall
terminate.
(c) If any of the conditions contained in section 7.5 shall not be
fulfilled or performed on or before the Closing Date, the
Purchaser may terminate this Agreement by written notice to
Calibre LLC as representative of Calibre LLC, the Members, and
Tomlinson, and in such event the Purchaser shall be released
from all obligations hereunder and all rights of specific
performance by any of the parties hereto shall terminate.
8.3 NOTICE OF UNFULFILLED CONDITIONS. If any party hereto shall determine
at any time prior to the Closing Date that it intends to terminate this
Agreement because of any unfulfilled and/or unperformed condition precedent
contained in this Agreement on the part of the other party to be fulfilled
and/or performed, it shall so notify the other party forthwith upon making
such determination to the end that such other party shall have the right and
opportunity to take such steps, at its own expense, as may be necessary for
the purpose of fulfilling and/or performing such condition precedent within a
reasonable period of time, but in no event later than 30 days after the
receipt of such Written notice by such other party of its intention to
terminate this Agreement.
9. GENERAL PROVISIONS
9.1 Time is and will be of the essence of each and every provision of this
Agreement.
9.2 Each of the parties will, at their respective expense, execute and
deliver all such further documents and instruments, give all such further
assurances, and do all such acts and things as the other or its solicitors
may, either before or after the Closing Date, reasonably require to carry out
the full intent and meaning of this Agreement.
9.3 This Agreement contains the whole agreement among Calibre LLC, the
Members, Tomlinson and the Purchaser in respect of the subject matter hereof
and supersedes and replaces the Letter of Understanding and all prior
negotiations, communications and correspondence. There are no warranties,
representations, terms, conditions or collateral agreements, express or
implied, statutory or otherwise, other than as expressly set forth in this
Agreement.
9.4 This Agreement will entire to the benefit of and be binding upon the
parties and each of them and their respective heirs, successors, liquidators,
executors and assigns. No party may assign any of its right, title or
interest in, to or under this Agreement, nor will any such purported
assignment be valid amongst the parties hereto, except with the prior written
consent of all parties hereto, such consent not to be unreasonably withheld.
9.5 This Agreement is being delivered in and is intended to be performed
in British Columbia, and shall be construed and interpreted in accordance
with the laws of British Columbia and the laws
32
of Canada applicable therein. The parties irrevocably attorn to the
jurisdiction of the arbitrators and courts of British Columbia and the venue
for any actions or arbitrations arising out of this Agreement will be
Vancouver, British Columbia.
9.6 Any notices required or permitted to be given under this Agreement
will be in writing and will be duly and properly given and received if
delivered, telecopied or mailed by prepaid post, in each case addressed to
the intended recipient at its respective address appearing on the first page
of this Agreement (or at such other address as a party may from time to time
designate by notice in writing to the other parties in accordance with this
section), and any such notice will be deemed to have been given and received,
if delivered, when delivered to such address, and if telecopied, on the next
business day after the telecopying of the same or, if mailed, on the tenth
business day after depositing the same in any post office in Canada unless
postal service is disrupted after the mailing of such notice, in which case
the party giving notice will forthwith give such notice in another permitted
manner.
9.7 No amendment, waiver, termination or variation of the terms,
conditions, warranties, covenants, agreements and undertakings set out herein
will be of any force or effect unless the same is reduced to writing duly
executed by all parties hereto in the same manner and with the same formality
as this Agreement is executed.
9.8 In the event that any date on which any action is required to be taken
or by which notice is to be received hereunder is not a Business Day, such
action shall be required to be taken on and such notice shall be required to
be received by the next succeeding day which is a Business Day.
9.9 No waiver of any of the provisions of this Agreement will constitute a
waiver of any other provision (whether or not similar) and no waiver will
constitute a continuing waiver unless otherwise expressly provided.
9.10 The representations, warranties, covenants and agreements contained in
this Agreement shall not merge in the Closing and shall have no further force
or effect from and after the Closing Date.
9.11 WAIVER OF REPRESENTATION TO THE EXTENT REQUIRED BY APPLICABLE LAW TO
BE OPERATIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES IN
THIS SECTION 9.11 ARE "CONSPICUOUS DISCLAIMERS" FOR PURPOSES OF ANY
APPLICABLE LAW, RULE OR ORDER. THE EXPRESS REPRESENTATIONS OF CALIBRE LLC,
THE MEMBERS AND TOMLINSON CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE
IN LIEU OF, AND CALIBRE LLC, THE MEMBERS AND TOMLINSON EXPRESSLY DISCLAIM AND
NEGATE AND PURCHASER HEREBY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE
QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF OIL, GAS OR OTHER
HYDROCARBONS IN OR UNDER THE PROPERTIES, THE ENVIRONMENTAL CONDITION, BOTH
SURFACE AND
33
SUBSURFACE, OR OTHER CONDITIONS OF THE PROPERTIES, OR THE OWNERSHIP OR
OPERATION OF THE PROPERTIES OR ANY PART THEREOF OR FOR CLAIMS BY PURCHASER
FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN. EXCEPT AS OTHERWISE
PROVIDED HEREIN AND EXCEPT FOR THE TITLE WARRANTY CONTAINED IN THE ASSIGNMENT
AND BILL OF SALE, PURCHASER AGREES THAT CALIBRE LLC, THE MEMBERS AND
TOMLINSON ARE CONVEYING THE ASSETS WITHOUT REPRESENTATION OR WARRANTY AND
CALIBRE LLC, THE MEMBERS AND TOMLINSON DO NOT MAKE OR PROVIDE, AND PURCHASER
HEREBY WAIVES, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE AND SPECIFICALLY IN THE CASE OF THE PERSONAL
PROPERTY WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING
TO THE QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY
TO SAMPLES, OR CONDITIONS OF ANY OF THE PROPERTIES. CALIBRE LLC, THE MEMBERS
AND TOMLINSON DISCLAIM AND NEGATE, AND PURCHASER HEREBY WAIVES ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE
OR FOR CLAIMS BY PURCHASER FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR
UNKNOWN. THE ITEMS OF PERSONAL PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES
AND APPURTENANCES CONVEYED AS PART OF THE PROPERTIES ARE SOLD, AND PURCHASER
ACCEPTS SUCH ITEMS "AS IS, WITH ALL FAULTS." THERE ARE NO WARRANTIES THAT
EXTEND BEYOND THE FACE OF THIS AGREEMENT. PURCHASER ACKNOWLEDGES THAT THIS
WAIVER IS CONSPICUOUS.
10. COUNTERPARTS
10.1 This Agreement, and any certificates or other writing delivered in
connection herewith, may be executed in any number of counterparts with the
same effect as if all parties had all signed the same documents, and all such
counterparts and adopting instruments will be construed together and will
constitute one and the same instrument. The execution of this Agreement and
any other writing by any party hereto or thereto will not become effective
until counterparts hereof or thereof, as the case may be, have been executed
by all the parties hereto or thereto, and executed copies delivered to each
party who is a party hereto or thereto. Such delivery may be made by
facsimile transmission of the execution page or pages, hereof or thereof, to
each of the other parties by the party signing the
34
particular counterpart, provided that forthwith after such facsimile
transmission, an originally executed execution page or pages is forwarded by
prepaid express courier to each of the other parties by the party signing
the particular counterpart.
IN WITNESS WHEREOF the parties have executed and delivered this Agreement as
of the day and year first above written.
BENZ ENERGY LTD. )
)
By: /s/ [illegible] )
--------------------------------- )
Authorized Signatory )
CALIBRE ENERGY, L.L.C. )
)
)
)
By: /s/ Heather J. Tomlinson )
--------------------------------- )
Authorized Signatory Manager )
CALIBRE OIL & GAS, INC. )
)
)
)
)
By: /s/ Heather J. Tomlinson )
--------------------------------- )
Authorized Signatory Director )
35
THE SLATTERY TRUST )
)
)
)
By: /s/ Prentis Tomlinson )
---------------------------------
Name: Prentis Tomlinson, Trustee
THE STARBUCKS TRUST )
)
)
)
By: /s/ Heather J. Tomlinson )
--------------------------------- )
Name: Heather Tomlinson, Trustee )
)
)
)
/s/ Todd Grabois )
- ------------------------------------ )
TODD GRABOIS )
)
)
)
/s/ Robert Novak )
- ------------------------------------ )
ROBERT NOVAK )
)
)
)
/s/ Prentis B. Tomlinson, Jr. )
- ------------------------------------ )
PRENTIS B. TOMLINSON, JR. )
36