UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1997 (June 16, 1997)
WAINOCO OIL CORPORATION
(Exact name of registrant as specified in its charter)
Wyoming 1-7627 74-895085
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 688-9600
Not Applicable
- -------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 16, 1997, Wainoco Oil Corporation and subsidiaries (Wainoco or the
Company) completed the sale of all its Canadian oil and gas properties to Numac
Energy Inc. (the Disposition). The transaction was initiated by the Company
through a negotiated bid process in order to maximize shareholder value. The
oil and gas assets were located in British Columbia and Alberta and included
approximately 94 billion cubic feet of natural gas, 1.7 million barrels of oil,
condensate and natural gas liquids, 121,500 net undeveloped acres and a
significant amount of seismic data. Additionally, value was received for
certain Canadian income tax pools of the Company.
The contract purchase price of C$133.6 million was adjusted from the January 1,
1997 effective date of the sale to June 16, 1997. Net proceeds after these
adjustments, transaction expenses and severance costs are approximately C$126.7
million (US$91.4 million) as of June 16, 1997.
Wainoco intends to use the net proceeds from the Disposition to repay $57.5
million principal amount of debt obligations of the Company. The remaining net
proceeds will be used to fund future growth activities or repay additional debt
obligations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Item Page
---------------------------------------------------- ----
(b) Pro Forma Financial Information 3
Pro Forma Condensed Consolidated Balance
Sheet as of March 31, 1997 4
Pro Forma Condensed Consolidated Statement
of Operations for the Year Ended December 31, 1996 5
Pro Forma Condensed Consolidated Statement
of Operations for the Three Months Ended March 31, 1997 6
Notes to Pro Forma Condensed Consolidated
Financial Statements 7
(c) Exhibit
2.1 Purchase and Sale Agreement, dated May 5, 1997, between
Wainoco Oil Corporation and the buyer, Numac Energy Inc.
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ITEM 7(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
of Wainoco is based on the historical financial statements of Wainoco, adjusted
to give effect to the Disposition and the intended repayment of $57.5 million
principal amount of debt obligations. The pro forma condensed consolidated
financial information is not necessarily indicative of the results that actually
would have occurred if the Disposition and debt repayment had been in effect on
the dates indicated or which may be obtained in the future. The pro forma
condensed financial information should be read in conjunction with the Wainoco's
annual report on Form 10-K for the year ended December 31, 1996 and Wainoco's
quarterly report on Form 10-Q for the three months ended March 31, 1997. The
pro forma balance sheet as of March 31, 1997 assumes the Disposition and debt
repayment occurred as of March 31, 1997. The pro forma statements of operations
for the year ended December 31, 1996 and the three months ended March 31, 1997
assume the Disposition and debt repayment occurred as of January 1, 1996.
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<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited, in thousands)
Canadian
Historical Oil and Gas Pro Forma Pro Forma
Wainoco Divested Adjustments Wainoco
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,154 $ - $ 90,300 (a) $ 34,836
(60,618) (b)
Receivables 20,394 (2,391) - 18,003
Inventory and other current assets 31,807 (158) - 31,649
----------- ----------- ----------- -----------
Total current assets 57,355 (2,549) 29,682 84,488
----------- ----------- ----------- -----------
Property and Equipment, at cost:
Oil and gas properties, on a full cost basis 170,561 (170,561) - -
Refinery and pipeline 143,595 - - 143,595
Furniture, fixtures and other equipment 3,666 (902) - 2,764
----------- ----------- ----------- -----------
317,822 (171,463) - 146,359
----------- ----------- ----------- -----------
Less - Accumulated depreciation, depletion
and amortization 142,738 (104,000) - 38,738
----------- ----------- ----------- -----------
175,084 (67,463) - 107,621
Other Assets 4,783 - (1,039) (c) 3,744
----------- ----------- ----------- -----------
$ 237,222 $ (70,012) $ 28,643 $ 195,853
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Payables $ 35,586 $ (2,430) $ - $ 33,156
Accrued interest 3,564 - (1,403) (b) 2,161
Other accrued liabilities 7,491 - - 7,491
Current maturities of long-term debt 2,500 - (2,500) (b) -
----------- ----------- ----------- -----------
Total current liabilities 49,141 (2,430) (3,903) 42,808
----------- ----------- ----------- -----------
Long-Term Debt, net of current maturities:
Revolving credit facilities 14,600 - - 14,600
12% Senior Notes 97,000 - (50,000) (b) 47,000
7 % Convertible Subordinated Debentures 46,000 - - 46,000
10 % Subordinated Debentures 4,941 - (4,941) (b) -
----------- ----------- ----------- -----------
162,541 - (54,941) 107,600
----------- ----------- ----------- -----------
Other Liabilities 9,453 (120) - 9,333
Commitments and Contingencies
Shareholders' Equity:
Preferred stock
Common stock 57,172 - - 57,172
Paid-in capital 81,767 - - 81,767
Retained earnings (deficit) (113,400) (76,666) 90,300 (a) (102,579)
(1,774) (b)
(1,039) (c)
Cumulative translation adjustment (9,204) 9,204 - -
Treasury stock (248) - - (248)
----------- ----------- ----------- -----------
Total Shareholders' Equity 16,087 (67,462) 87,487 36,112
----------- ----------- ----------- -----------
$ 237,222 $ (70,012) $ 28,643 $ 195,853
=========== =========== =========== ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
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<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited, in thousands except per share)
Canadian
Historical Oil and Gas Pro Forma Pro Forma
Wainoco Divested Adjustments Wainoco
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Refined products $ 382,098 $ - $ - $ 382,098
Oil and gas sales 18,738 (18,738) - -
Other 3,116 (854) - 2,262
----------- ----------- ----------- -----------
403,952 (19,592) - 384,360
----------- ----------- ----------- -----------
Costs and expenses:
Refining operating costs 362,485 - - 362,485
Oil and gas operating costs 4,986 (4,986) - -
Selling and general expenses 8,639 (2,056) - 6,583
Depreciation, depletion and amortization 17,141 (8,123) - 9,018
----------- ----------- ----------- -----------
393,251 (15,165) - 378,086
----------- ----------- ----------- -----------
Operating Income (Loss) 10,701 (4,427) - 6,274
Interest Expense, net 17,406 (177) (7,068) (d) 10,161
----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes (6,705) (4,250) 7,068 (3,887)
Provision for Income Taxes 187 (187) - -
----------- ----------- ----------- -----------
Income (Loss) From Continuing Operations $ (6,892) $ (4,063) $ 7,068 $ (3,887)
=========== =========== =========== ===========
Average Number of Common
Shares Outstanding 27,257
===========
Income (Loss) From Continuing
Operations Per Share $ (.14)
===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
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<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997
(Unaudited, in thousands except per share)
Canadian
Historical Oil and Gas Pro Forma Pro Forma
Wainoco Divested Adjustments Wainoco
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Refined products $ 89,212 $ - $ - $ 89,212
Oil and gas sales 5,544 (5,544) - -
Other 672 (314) - 358
----------- ----------- --------------- -----------
95,428 (5,858) - 89,570
----------- ----------- --------------- -----------
Costs and expenses:
Refining operating costs 91,149 - - 91,149
Oil and gas operating costs 1,104 (1,104) - -
Selling and general expenses 2,344 (552) - 1,792
Depreciation, depletion and amortization 4,746 (2,473) - 2,273
----------- ----------- --------------- -----------
99,343 (4,129) - 95,214
----------- ----------- --------------- -----------
Operating Income (Loss) (3,915) (1,729) - (5,644)
Interest Expense, net 4,525 (66) (1,767) (d) 2,692
----------- ----------- --------------- -----------
Income (Loss) Before Income Taxes (8,440) (1,663) 1,767 (8,336)
Provision for Income Taxes 39 (39) - -
----------- ----------- --------------- -----------
Income (Loss) From Continuing Operations $ (8,479) $ (1,624) $ 1,767 $ (8,336)
=========== =========== =========== ===========
Average Number of Common
Shares Outstanding 27,259
===========
Income (Loss) From Continuing
Operations Per Share $ (.31)
===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
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Wainoco Oil Corporation
Notes to Pro Forma Condensed Consolidated Financial Statements
Pro Forma Adjustments:
(a) To reflect Disposition net proceeds as of March 31, 1997. Actual
proceeds will vary slightly for purchase price adjustments and changes in
the Canadian dollar conversion rate to U.S. dollars after March 31, 1997.
Wainoco estimates Disposition net proceeds and the gain on Disposition as
of June 16, 1997, using the June 16, 1997 currency conversion rate, will
be approximately $91.4 million and $23.2 million, respectively. No
Canadian taxes are estimated to be payable due to available oil and gas
deductions and net operating loss carryforwards. For U.S. federal income
taxes, available net operating loss carryforwards will be utilized to
offset the gain; however, alternative minimum taxes of approximately
$800,000 are estimated to be payable. The estimated gain on the
Disposition has not been presented in the accompanying pro forma
statements of operations.
(b) To reflect the intended repayment of long-term debt, principal amount of
$57.5 million, accrued interest and redemption premium with proceeds from
the Disposition. It is anticipated the actual retirement of 10-3/4%
Subordinated Debentures will occur in October 1997 and repayment of 12%
Senior Notes will occur in August 1997 at a redemption price of 103.43%.
The ultimate amount of debt repayment with Disposition proceeds will
depend upon investment opportunities available to Wainoco during 1997 and
could vary significantly.
(c) To reflect the reduction in debt issuance costs based on the intended
debt repayment of $57.5 million from Disposition proceeds.
(d) To reflect the reduction of interest expense for the intended principal
repayment of $57.5 million of long term debt. Based on the principal
repayment of $57.5 million, the Company will recognize an extraordinary
loss on debt extinguishment of approximately $2.7 million due to the
redemption premium of 103.43% on the 12% Senior Notes and reduction in
debt issuance costs. The extraordinary loss has not been presented in
the accompanying pro forma statements of operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WAINOCO OIL CORPORATION
By: /s/ Julie H. Edwards
-------------------------------
Julie H. Edwards
Senior Vice President - Finance
and Chief Financial Officer
Date: June 30, 1997
AGREEMENT OF PURCHASE AND SALE
DATED MAY 5, 1997
BETWEEN
WAINOCO OIL CORPORATION
AND
NUMAC ENERGY INC.
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .1
2. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . .8
3. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . .9
4. ALLOCATION OF PRICE. . . . . . . . . . . . . . . . . . . .9
5. PAYMENT OF PURCHASE PRICE. . . . . . . . . . . . . . . . 10
6. CLOSING AND DELIVERIES AT CLOSING. . . . . . . . . . . . 11
7. THE PURCHASER'S REVIEW AND TITLE DEFECTS . . . . . . . . 12
8. CONVEYANCES. . . . . . . . . . . . . . . . . . . . . . . 14
9. ADJUSTMENTS TO THE PURCHASE PRICE. . . . . . . . . . . . 15
10. THE VENDOR'S REPRESENTATIONS AND WARRANTIES . . . . . 17
11. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. . . . 22
12. MAINTENANCE OF BUSINESS . . . . . . . . . . . . . . . 23
13. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . 24
14. CONSENTS AND PREFERENTIAL RIGHTS. . . . . . . . . . . 27
15. TERMINATION . . . . . . . . . . . . . . . . . . . . . 28
16. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . 29
17. INFORMATION AND MATERIALS . . . . . . . . . . . . . . 29
18. LIABILITIES AND INDEMNITIES . . . . . . . . . . . . . 30
19. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 31
20. ENVIRONMENTAL REVIEW. . . . . . . . . . . . . . . . . 32
21. WESTCOAST ADJUSTMENT. . . . . . . . . . . . . . . . . 35
22. COVENANTS OF THE VENDOR AND THE PURCHASER . . . . . . 36
23. SUBROGATION . . . . . . . . . . . . . . . . . . . . . 37
24. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 37
25. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . 38
26. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 38
27. SIGNS AND NOTIFICATIONS. . . . . . . . . . . . . . . . 38
28. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . 38
29. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . 39
30. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 39
31. ENUREMENT. . . . . . . . . . . . . . . . . . . . . . . 39
32. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 39
33. TIME . . . . . . . . . . . . . . . . . . . . . . . . . 39
34. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . 39
35. COUNTERPART. . . . . . . . . . . . . . . . . . . . . . 41
<PAGE>
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AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made the 5th day of May, 1997
BETWEEN:
WAINOCO OIL CORPORATION, a corporation having an office in the
City of Calgary, in the Province of Alberta (hereinafter called
the "Vendor")
AND
NUMAC ENERGY INC., a corporation having an office in the City of
Calgary, in the Province of Alberta (hereinafter called the
"Purchaser")
WHEREAS the Purchaser wishes to acquire from the Vendor and the
Vendor wishes to sell to the Purchaser the Assets on the terms and conditions
herein;
NOW THEREFORE this Agreement witnesses that, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Purchaser and the Vendor, the parties covenant and agree with each other as
follows:
1. DEFINITIONS
In this Agreement (including the recitals hereto, this clause and
each schedule) the words and phrases set forth below shall have the meanings
ascribed thereto below, namely:
a. "ACRI" means "Attributed Crown Royalty Income" as defined in subsection
20(1) of the Alberta Corporate Tax Act;
b. "Adjustment Date" means the 1st day of January, 1997;
c. "Adjusted Purchase Price" means the Purchase Price, as increased or
decreased pursuant to the provisions of clauses 7, 9, 14, 19, 20 and 21;
d. "Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" (including with correlative meanings,
"controlling", "controlled by" and "under common control with") means the
power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise and, it being understood and
agreed that with respect to a corporation or partnership, control shall
mean direct or indirect ownership of more than fifty percent (50%) of the
voting stock in any such corporation or general partnership interest or
voting interest in any such partnership;
e. "Agreement" means this Agreement of Purchase and Sale together with the
Schedules attached hereto and made a part hereof;
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f. "Assets" means the Petroleum and Natural Gas Rights, the Tangibles and
the Miscellaneous Interests;
g. "Assumed Obligations" means all liabilities, duties and obligations that
arise under the contracts listed in Schedule "F" attached hereto and for
greater certainty expressly excludes any obligations or liabilities in
respect of the Prepaid Hydrocarbon Sale Agreement;
h. "Business Day" means any day exclusive of Saturdays, Sundays or statutory
holidays observed by the post office in Calgary, Alberta;
i. "Closing" means the exchange of Conveyance Documents and the payment of
the Adjusted Purchase Price as set forth in clause 5 hereof on the
Closing Date;
j. "Closing Date" means 10:00 a.m. (Calgary time) on or prior to June 16,
1997, unless amended by agreement in writing by both parties, except in
the circumstances described in subclause 5(e);
k. "Confidentiality Agreement" means the Confidentiality Agreement dated
March 25, 1997 between the Vendor and the Purchaser;
l. "Conveyance Documents" means the documents described in clause 8 hereof
providing for the assignment, transfer or other disposition of the Assets
to the Purchaser;
m. "Deposit" has the meaning ascribed thereto in subclause 5(a);
n. "Dollar" or "$" means a Canadian dollar;
o. "Earned Depletion Base" has the meaning ascribed thereto in the Income
Tax Act (Canada);
p. "Engineering Report" means the summary engineering report respecting the
Assets prepared by Paddock Lindstrom & Associates Ltd. dated January 1,
1997 provided to the Purchaser on or about March 27, 1997;
q. "Environment" means navigable waters, ocean waters, natural resources,
surface waters, ground water, drinking water supply, soil, land surface,
subsurface strata, ambient air, both inside and outside of buildings and
structures, and wildlife, aquatic species and vegetation;
r. "Environmental Law" means any and all Laws now in effect, and in each
case as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree
or judgment, relating to protection of human health, safety or the
Environment, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Substances or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances;
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s. "Environmental Liabilities" means, but shall not be limited to, all
losses, costs, damages, expenses or claims, direct or indirect,
pertaining to the Assets or arising in connection with ownership or
operations pertaining to the Assets (including liabilities to compensate
third parties and the effects of and costs of complying with any order,
direction or claim of any government or agency, department, official or
tribunal thereof):
i. pollution or contamination of or damage to air, the surface and
subsurface of the earth, bodies of water (including rivers,
streams, lakes and aquifers) and plant and animal life (including
human beings) or otherwise to the environment;
ii. corrosion or deterioration of structures, equipment, fences and
other property;
iii. transportation, storage, use or disposal of toxic or hazardous
substances;
iv. release, spill, escape or emission of toxic or hazardous
substances;
v. accrued abandonment and reclamation obligation; or
vi. any violation of Environmental Law;
t. "Facilities" means all right, title, interest and estate of the Vendor in
the facilities described in Schedule "C";
u. "Government Entity" means a government organization, subdivision, agency,
commission, board, official or other authority thereof, whether federal,
provincial or local or any quasi-governmental or private body exercising
any regulatory or taxing authority thereunder;
v. "Hazardous Substance" means any substance which is or is deemed to be,
alone or in combination, hazardous, hazardous waste, toxic, radioactive,
a pollutant, a deleterious substance, a contaminant or a source of
pollution of contamination under any Environmental Law, whether or not
such substance is defined as hazardous under Environmental Law;
w. "Lands" means all right, title, interest and estate of the Vendor of and
in all lands in Canada (including, without limitation, the lands set
forth and described in Schedule "A");
x. "Laws" means all applicable statutes, laws, rules, orders and regulations
in effect from time to time and made by any Government Entity having
jurisdiction over the Parties or the Assets;
y. "Leases" means collectively the leases, licenses, permits and similar
instruments, by virtue of which the holder is entitled to drill for, win,
take, own or remove the Petroleum Substances within, upon or under all or
any part of the Lands (or any replacement thereof, renewals thereof or
leases derived therefrom), but only insofar as the same relate to the
Lands;
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z. "Losses" means any and all losses, liabilities, claims, demands,
penalties, fines, settlements, damages, actions, or suits of whatsoever
kind and nature (but expressly excluding consequential damages and lost
profits), whether or not subject to litigation, including without
limitation:
i. claims or penalties arising from products liability, negligence,
statutory liability or violation of any Law or in tort (strict,
absolute or otherwise); and
ii. loss of or damage to any property;
and all reasonable out-of-pocket costs, disbursements and expenses
(including, without limitation, legal, accounting, consulting and
investigation expenses and litigation costs) imposed on, incurred by or
asserted against an Indemnified Party in connection therewith;
aa. "Miscellaneous Interests" means all right, title, interest and estate of
the Vendor in and to all property, assets and rights, other than
Petroleum and Natural Gas Rights, or Tangibles, to the extent pertaining
to the Petroleum and Natural Gas Rights, the Lands, or the Tangibles and
to which the Vendor is entitled at the Adjustment Date or thereafter
until the Closing Date including, without limitation:
i. all contracts, agreements, and documents to the extent that they
relate to the Petroleum and Natural Gas Rights or the Tangibles,
including, without limitation, the Title and Operating Documents
and Vendor's interest as "master operator" pursuant to the Master
Operating Agreement dated May 2, 1984 between Wainoco Oil & Gas
Limited and Wainoco 70 Company limited partnership, as amended,
for certain joint venture owners who were formerly partners in the
Wainoco 70, 71 and 72 limited partnerships and any rights of the
Vendor in relation thereto but specifically excluding the rights
and obligations of the Vendor under the lawsuits disclosed on the
first page of Schedule "E";
ii. all Surface Interests;
iii. all Wells and casing contained therein;
iv. all Technical Information;
v. all well licences, authorizations, permits or other rights
relating to the Petroleum and Natural Gas Rights or the Tangibles;
and
vi. Petroleum Substances produced from Lands or from any lands pooled
or unitized therewith which are not beyond the wellhead as of the
Adjustment Date;
bb. "Permitted Encumbrances" means any of the following:
i. easements, rights of way, servitudes or other similar rights in
land including, without limiting the generality of the foregoing,
rights of way and servitudes for railways, sewers, drains, gas and
oil pipelines, gas and water mains, electric light, power,
telephone, telegraph or cable television conduits, poles, wires
and cables;
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ii. the right reserved to or vested in any government or other public
authority by the terms of any or by any statutory provision, to
terminate the Leases or to require annual or other periodic
payments as a condition of the continuance thereof;
iii. the right reserved to or vested in any government or public
authority to levy taxes on Petroleum Substances or the income or
revenue therefrom and governmental requirements as to production
rates on the operations of any property or otherwise affecting the
value of any property;
iv. the terms and conditions of the Leases and plans relating to
pooling or unitization;
v. all royalty burdens (including lessor's royalties), net profits
interests, liens, adverse claims and encumbrances listed in
Schedule "A";
vi. 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 and all applicable laws, rules and order of
any governmental authority;
vii. undetermined or inchoate liens incurred or created as a security
in favour of the person conducting the operation of the Assets for
the Vendor's proportion of the costs and expenses of such
operations provided such costs and expenses are not due and
delinquent;
viii. mechanics', builders' and materialmen's liens in respect of
services rendered or goods supplied for which payment is not due;
ix. the reservations, limitations, provisos and conditions in any
original grants from the Crown of any of the Lands or interest
therein and statutory exceptions to title;
x. provisions for penalties and forfeitures under agreements as a
consequence of non-participation in operations provided that any
penalties or forfeitures which apply to the Assets as a result of
the Vendor's failure to participate in a particular operation
prior to the Adjustment Date are listed on Schedule "A";
xi. liens granted in the ordinary course of business to a public
utility, municipality or governmental authority in connection with
operations conducted with respect to the Assets, but only to the
extent those liens relate to costs and expenses for which payment
is not due;
xii. agreements for the sale of Petroleum Substances which either are
terminable on not greater than sixty (60) days' notice (without an
early termination penalty or other cost) or are identified in
Schedule "D";
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xiii. the agreements respecting the processing, treating or transmission
of Petroleum Substances or the operation of Wells by contract
field operators; and
xiv. any Rights of First Refusal and required third party consents to
assignments and similar agreements with respect to which (A)
waivers or consents are obtained from the appropriate parties or
(B) required notices have been given to the holders of such rights
and the appropriate time period for asserting such rights has
expired without an exercise of such rights;
cc. "Person" means any individual, partnership, firm, trust, association,
corporation, joint venture, unincorporated organization, other business
entity or Government Entity;
dd. "Petroleum and Natural Gas Rights" means all right, title, interest and
estate of the Vendor in and to the Lands, including without limitation
the interests set forth in Schedule "A" hereto in and to the Leases to
the extent applicable to the Lands;
ee. "Petroleum Substances" means petroleum, natural gas and all related
hydrocarbons including, without limitation, all liquid hydrocarbons and
all other mineral substances, whether liquid, solid or gaseous and
whether hydrocarbons or not (except coal but including sulphur and
hydrogen sulfide), produced in association with such petroleum, natural
gas or related hydrocarbons or found in any water produced from the
Lands, insofar only as the rights to the same are granted by the Leases;
ff. "Prepaid Hydrocarbon Sale Agreement" means the Prepaid Crude Petroleum
and/or Natural Gas Purchase Agreement made as of December 1, 1995 between
the Vendor and WPP;
gg. "Prime Rate" means the annual rate of interest designated by the main
branch in Calgary by the Canadian Imperial Bank of Commerce as its
reference rate for Canadian dollar commercial loans made in Canada and
which is announced by such bank as its prime rate;
hh. "Right of First Refusal" means any pre-emptive right of purchase or
similar right whereby any party, other than the Vendor or the Purchaser,
has the right to acquire or purchase all or a portion of the Assets as a
consequence of the Vendor having agreed to sell the Assets to the
Purchaser in accordance herewith;
ii. "Sites" means all lands subject to the Surface Interests whether or not
the Surface Interests are presently in the name of the Vendor;
jj. "Surface Interests" means all rights of the Vendor to enter upon, use,
occupy and enjoy the surface of the Lands, any lands with which the same
have been pooled or unitized and any lands upon which the Tangibles are
located, for purposes related to the use, ownership and operation of the
Petroleum and Natural Gas Rights, Facilities or Tangibles, whether the
same are held in fee simple, by lease, by right-of-way, or otherwise;
<PAGE>
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kk. "Take or Pay Obligations" means, as of a particular time, all obligations
(including, without limitation, the future obligations of the Vendor
under "take or pay" or similar provisions in respect of contracts for the
sale of Petroleum Substances allowable to the Petroleum and Natural Gas
Rights) of the Vendor at such time arising under, in respect of or
related to such contracts whereby the Vendor is obligated to:
i. sell or deliver Petroleum Substances allocated to any of the
Petroleum and Natural Gas Rights without in due course receiving
or being entitled to retain full payment therefor at the full
price which would otherwise be applicable thereunder; or
ii. pay any person an amount on account of payments previously made in
respect of quantities of Petroleum Substances allocated to the
Petroleum and Natural Gas Rights which were not previously
delivered;
ll. "Tangibles" means the right, title, interest and estate of the Vendor in
and to all tangible depreciable property and assets that are situated in,
on or about the Lands or lands pooled or unitized therewith and used or
intended for use in connection with production, gathering, processing,
transmission, compression or treatment operations relating to the
Petroleum and Natural Gas Rights including, without limitation, the
Facilities, the Well equipment, if any, and casing relating to the Wells;
mm. "Taxes" means all domestic federal, provincial, municipal or other taxes,
imposts, rates, levies, assessments and governmental charges including,
without limitation, all income taxes, capital gains, sales, excise, use,
property, capital, payroll, GST, business, transfer and value added taxes
and all customs and import duties, together with all interest, fines and
penalties with respect thereto;
nn. "Tax Pools" means, with respect to the Assets, cumulative Canadian
Exploration Expense ("CEE"), and Earned Depletion Base as each is defined
in the Income Tax Act (Canada) and ACRI;
oo. "Tax Returns" includes all returns, reports, declarations, elections,
filings, information returns and statements filed in respect of Taxes;
pp. "Technical Information" means all production and well file information
relating to the Petroleum and Natural Gas Rights, the Lands and the
Tangibles owned by the Vendor or to which the Vendor is entitled
including, without limitation, all interpretative and uninterpretive
proprietary seismic, geological and geophysical data, including, without
limitation:
i. any geological data, and any contracts, agreements or documents to
the extent they relate to the proprietary technology of the
Vendor;
ii. any archive samples including, without limitation, core and liquid
samples and cuttings; and
iii. any engineering reports or documents;
<PAGE>
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qq. "Third Party" means a Person other than the Vendor or the Purchaser;
rr. "Title Defect" means:
i. in relation to an Asset, a defect, imperfection or deficiency in
the title of the Vendor which is such that a reasonable, prudent
and otherwise willing buyer of such Asset for the fair market
value thereof (computed as if such defect, imperfection or
deficiency did not exist) would refuse to purchase such Asset
solely because of such defect, imperfection or deficiency; or
ii. with respect to an interest attributed to the Vendor in the Land
Schedule, the Vendor's actual interest being less than that
attributed to it in the Land Schedule or being subject to a lien,
mortgage, royalty, production payment, charge, adverse claim or
other encumbrance, other than Permitted Encumbrances, which is not
disclosed in this Agreement;
ss. "Title and Operating Documents" means, in respect of any of the Petroleum
and Natural Gas Rights, the Tangibles or the Surface Interests, all
documents of title (including, without limitation, the Leases, permits,
operating agreements, unit agreements, pooling agreements, trust
declarations, gas and liquid sales agreements, agreements for the
construction, ownership and operation of the Tangibles, gathering,
transportation and processing agreements) by virtue of which such
Petroleum and Natural Gas Rights, Tangibles and Surface Interests are
held or were acquired by the Vendor;
tt. "Wells" means all producing, suspended, shut-in, abandoned, water source,
disposal or injection wells located on the Lands or lands pooled or
unitized therewith, including without limitation the wells described in
Schedule "A"; and
uu. "WPP" means Wainoco Production Partnership, a general partnership formed
under the laws of the Province of Alberta by its two (2) partners, the
Vendor and the Vendor's wholly-owned subsidiary, 662712 Alberta Ltd., by
a partnership agreement entered into as of December 1, 1995.
2. INTERPRETATION
a. The headings of the clauses of this Agreement and of the schedules are
inserted for convenience of reference only and shall not affect the
meaning or construction hereof.
b. Whenever the singular or masculine or neuter is used in this Agreement or
in the schedules, each shall be interpreted as meaning the plural or
feminine or body politic or corporate, and vice versa, as the context
requires.
c. If there is any conflict or inconsistency between the provisions of this
Agreement and those of a schedule attached hereto, the provisions of this
Agreement shall prevail. If any term or condition of this Agreement
conflicts with a term or condition of a Lease or Law, the term or
condition of such Lease or Law shall prevail, and this Agreement shall be
deemed to be amended to the extent required to eliminate any such
conflict.
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d. The following schedules are attached to, form part of and are
incorporated in this Agreement:
A Petroleum and Natural Gas Rights and Wells
B Conveyance
C Facilities
D Production Sales Contracts
E Disclosure
F Assumed Obligations
G Summary Example Determination of Adjusted Purchase Price
H Tax Pools
I AFEs and Proceeds on Sale
J Payout Accounts
e. Where a term is defined herein, a capitalized derivative of such term
shall have a corresponding meaning unless the context otherwise requires;
f. 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.
g. Accounting terms which are not specifically defined shall be construed in
accordance with generally accepted accounting principles in Canada.
h. Where in this Agreement a representation 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, as the case may be,
of any of the current officers or senior supervisory personnel of the
Vendor, and does not include knowledge and awareness of any other Person
or Persons.
3. PURCHASE AND SALE
Subject to and in accordance with this Agreement, the Purchaser
hereby agrees to purchase the Assets from the Vendor and the Vendor hereby
agrees to sell and convey the Assets to the Purchaser on the Closing Date at and
for a Purchase Price, subject to adjustment, of One Hundred Thirty Three Million
Six Hundred Thousand ($133,600,000) Dollars Canadian (the "Purchase Price"), to
have and hold absolutely, subject to the Permitted Encumbrances, the Title and
Operating Documents and the Assumed Obligations.
4. ALLOCATION OF PRICE
a. The Purchase Price shall be allocated among the Assets as follows:
To Petroleum and Natural Gas Rights $113,560,000
To Tangibles (exclusive of Goods and
Services Tax and Provincial Sales Tax) $ 20,039,999
To Miscellaneous Interests $1
TOTAL $133,600,000
<PAGE>
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b. The Purchase Price shall be increased or decreased, as the case may be,
in accordance with the provisions of clauses 7, 9, 14, 19, 20 and 21
(the "Adjusted Purchase Price").
c. Adjustments to the Purchase Price made in accordance with clauses 7, 9,
14, 19, 20 and 21 shall be allocated to the Petroleum and Natural Gas
Rights and the Tangibles (according to the proper UCC class) in
accordance with the nature of the adjustment.
5. PAYMENT OF PURCHASE PRICE
The Adjusted Purchase Price shall be payable by the Purchaser as
follows:
a. by delivery to Vendor's counsel, Burnet, Duckworth & Palmer of Five
Million Dollars ($5,000,000) representing a good faith deposit to be
applied against the Purchase Price on Closing, payable within three (3)
Business Days of the Purchaser's receipt of a copy of this Agreement
which has been executed by the Vendor (the "Deposit"), which shall be
held in trust and invested in an interest bearing account or instrument
and to be applied in accordance with the Agreement. If Closing does not
occur, the Deposit and any interest accrued thereon shall be dealt with
in accordance with clause 15;
b. by advancing as a loan to the Vendor, the amount required to settle the
Vendor's obligations under the Prepaid Hydrocarbon Sale Agreement,
estimated to be approximately $61,000,000 on June 15, 1997 (the "Loan
Amount"), who will immediately pay such Loan Amount to WPP as
consideration for confirmation that the Prepaid Hydrocarbon Sale
Agreement has been terminated and no further obligations or liabilities
exist in relation thereto;
c. upon the termination of the Prepaid Hydrocarbon Sale Agreement described
in subclause 5(b) above, the Adjusted Purchase Price shall be satisfied
by cancellation and offset of the Loan Amount and the balance (being the
Adjusted Purchase Price minus the Loan Amount) shall, subject to
subclause 5(d), be paid by certified cheque or bank draft or other
immediately available funds delivered to the Vendor at Closing;
d. if the purchase and sale contemplated herein is closed, then the Deposit
and interest thereon calculated daily and not compounded at the Prime
Rate from and including the date of payment of such Deposit to the
Vendor's solicitors to but not including the Closing Date shall be
credited to the Purchaser at Closing as partial payment of the Adjusted
Purchase Price;
e. the Vendor shall deliver or cause to be delivered to the Purchaser a tax
certificate in respect of a proposed disposition by a non-resident as
contemplated by Section 116 of the Income Tax Act (Canada) with a
certificate limit of not less than the Purchase Price payable to the
Vendor. If the Vendor does not provide the Purchaser with such
certificate on or before three (3) Business Days prior to the Closing
Date then the Vendor may extend the Closing Date to a date not more than
thirty (30) days later. In the event the said certificate is received
within the thirty day extension, the Vendor will provide the Purchaser
with such Certificate and Closing will occur two (2) Business Days later.
In the event the Vendor does not provide the Purchaser with such
certificate within the time aforesaid, then Closing shall occur and the
Purchaser may, at the Closing, deliver to the Purchaser's Solicitors,
Osler Hoskin & Harcourt, in trust, 50% of the Purchase Price payable to
<PAGE>
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the Vendor and shall pay to the Vendor in accordance with subclause 5(c)
hereof the balance of the Adjusted Purchase Price payable to the Vendor.
If the Vendor provides the Purchaser with such certificate on or prior to
the second business day preceding the date on which remittance to Revenue
Canada is required, Osler Hoskin & Harcourt shall remit the trust funds
and accrued interest, if any, to the Vendor where the certificate limit
is equal to the Purchase Price and, where the certificate limit is less
than the Purchase Price, fifty (50%) percent of the balance in excess of
the certificate limit shall be remitted to the lawful authorities when so
required in accordance with the Income Tax Act (Canada) and the remainder
shall be remitted to the Vendor. If the Vendor does not provide the
Purchaser with such certificate on or prior to the second business day
preceding the date on which remittance to Revenue Canada is required,
Osler Hoskin & Harcourt shall remit the trust funds and accrued interest,
to the lawful authorities when so required in accordance with the Income
Tax Act (Canada). The provisions of this subclause 5(e) shall survive the
closing of the transactions contemplated herein. In the event a
certificate is provided on Closing and the certificate limit is less than
the Purchase Price, the withheld amount shall be fifty (50%) percent of
the excess.
6. CLOSING AND DELIVERIES AT CLOSING
a. The Closing shall, unless otherwise agreed by the parties, take place on
the Closing Date at the offices of the Purchaser.
b. At Closing, the Vendor shall deliver the following to the Purchaser:
i. the executed certificate and legal opinion contemplated by
subclauses 13(a)(v) and 13(a)(vii), respectively;
ii. Conveyance Documents which have been prepared and executed by the
Vendor;
iii. copies of all consents to disposition and waivers of all Rights of
First Refusal obtained by the Vendor with respect to the sale of
the Assets to the Purchaser;
iv. original copies 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; and
v. such other documents as may be specifically required hereunder or
as may be reasonably requested by the Purchaser upon reasonable
notice to the Vendor, but no such documents shall require the
Vendor to assume or incur any obligations or to provide any
representation or warranty beyond that contained in this
Agreement.
The Vendor shall not be required to have the Conveyance Documents signed
by Third Parties at or before the Closing Date but shall cooperate with
the Purchaser as reasonably required to secure execution of such
documents by such third parties thereafter.
<PAGE>
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c. At Closing, the Purchaser shall deliver the following to the Vendor:
i. payment of the Adjusted Purchase Price, less the Deposit;
ii. the Conveyance Documents as require execution by the Purchaser,
executed by the Purchaser;
iii. the executed certificate and legal opinion contemplated by
subclauses 13(b)(iv) and 13(b)(vi), respectively; and
iv. such other documents as may be specifically required hereunder or
may be reasonably requested by the Vendor upon reasonable notice
to the Purchaser.
d. At Closing, the Vendor and Purchaser shall execute and deliver, and
thereafter, the appropriate party shall file as required:
i. a joint election under Section 66.7 of the Income Tax Act (Canada)
and corresponding provincial income tax legislation relating to
the transfer of CEE, Earned Depletion Base and ACRI; and
ii. an election under Section 167 of the Excise Tax Act (Canada).
7. THE PURCHASER'S REVIEW AND TITLE DEFECTS
a. The Vendor shall provide reasonable access for the Purchaser and its
advisors provided for in subclause 7(b) hereof to the Vendor's records
and documents regarding the Assets and the records and documents
regarding the Assets to which the Vendor has access for the purpose of
the Purchaser's review of the Assets and title thereto. The Purchaser
shall restrict its review to information directly related to the Assets.
b. The Purchaser may employ advisors to assist in its review of the Assets
and the Purchaser shall be responsible to the Vendor for ensuring that
such advisors comply with the restrictions on use and disclosure of
information set forth in clause 16 of this Agreement.
c. The Vendor shall provide, to the extent that its interest permits, the
right and the opportunity for the Purchaser to conduct its own due
diligence investigations of the Vendor's title to the Assets and with
respect to Environmental Liabilities, if any, the Vendors agents' and
Vendor's compliance with Environmental Laws.
d. From time to time as determined by the Purchaser, and in any event no
later than ten Business Days prior to Closing, the Purchaser shall give
the Vendor written notice of all Title Defects of which the Purchaser is
aware (other than Permitted Encumbrances and any matters specified in
Schedule "A") which the Purchaser does not waive. To the extent
<PAGE>
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reasonably possible, the Purchaser's notice shall state the Purchaser's
requirements for the rectification or curing thereof. A Title Defect
shall be deemed for the purposes of this subclause 7(d) to not exist
unless the aggregate diminished fair market value of the Assets subject
to such title defects and irregularities is more than $1,000,000.
Subject to the foregoing, if all Title Defects are not cured or removed
on or before the third Business Day prior to the Closing Date, the Vendor
and the Purchaser shall attempt to negotiate a resolution of the Title
Defect issues. If the Vendor and the Purchaser are unable to resolve the
issue then the Purchaser may elect in writing:
i. with the agreement of the Vendor, to grant a further period of
time within which the Vendor may cure or remove Title Defects;
ii. waive the uncured Title Defects;
iii. with the agreement of the Vendor, reduce the Purchase Price by an
amount which the Vendor and the Purchaser agree is equal to the
value of the Title Defects, in which event the Purchaser shall
purchase the Assets and shall assume the risk of the Title
Defects; or
iv. to put, immediately following the Closing, the Assets subject to
the uncured Title Defects to the Vendor or at Vendor's election,
to an Affiliate free and clear of all royalties, production
payments, penalties, obligations, liens, charges or encumbrances
created by, through or under the Purchaser in consideration for
the immediate payment by the Vendor to the Purchaser of an amount
equal to the value of such Assets determined in the manner set
forth below;
which election must be received by the Vendor on or before 4:00 p.m.,
Calgary time, on the Business Day prior to Closing. In the event that the
value of the Assets to be so put pursuant to paragraph iv. of this
subclause is more than $10,000,000, then the Purchaser or the Vendor may
terminate this Agreement in its entirety by giving written notice of same
to the other on or before the Closing Time.
If the Purchaser makes an election pursuant to subclause iv. of this
clause, it shall specify in the notice in which it exercises such
election the amount of the reduction of the Purchase Price resulting from
each property subject to an uncured Title Defect which it does not waive.
The value shall be the present value (as at the Adjustment Date)
discounted at 10% per annum of the cash flow from such Assets on an
established reserves basis as set out in the Engineering Report utilizing
100% of the proved reserves and 100% of the probable reserves. If such
value can not be determined directly or indirectly from the Engineering
Report, the Purchaser shall set out in its notice a proposed value and
the value set out by the Purchaser shall be used to determine the put
purchase price for the purposes of closing the put transaction. Prior to
Closing, the Vendor may elect to submit the determination of the disputed
value(s) to arbitration. Notwithstanding such election by the Vendor, the
Purchaser and the Vendor or its Affiliate shall close the put transaction
immediately following the Closing using the value determined by the
Purchaser. If the Vendor so elects, each of the Vendor and the Purchaser
shall within 10 days of such election select an arbitrator and the two
arbitrators so selected shall select within a further 10 days a third
arbitrator. If a party or the two arbitrators fail to select an
arbitrator as provided above, such arbitrator shall be appointed by a
<PAGE>
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judge of the Court of Queen's Bench of Alberta sitting in Calgary. The
Purchaser's value as set out in the election and a value determined by
the Vendor shall each be submitted to the arbitrators and the arbitrators
shall select either the Purchaser's or the Vendor's value of the Assets
affected by each Title Defect. The arbitrators shall select the value
which most closely represents the present value (as at the Adjustment
Date) discounted at 10% per annum of the cash flow from such Assets on an
established reserves basis as set out in the Engineering Report utilizing
100% of the proved reserves and 100% of the probable reserves) and shall
not select a value other than that of the Purchaser or the Vendor. The
arbitrators shall make their determination including a determination on
the responsibility for their costs within 45 days of the appointment of
the third arbitrator and such determination shall be final and binding on
the Vendor and the Purchaser. The Purchaser shall forthwith pay the
Vendor the difference between the value selected by the Vendor and the
value selected by the Purchaser in the event the arbitrators select the
value selected by the Vendor as the value which most closely represents
the present value (as at the Adjustment Date) discounted at 10% per annum
of the cash flow from such Assets on an established reserves basis as set
out in the Engineering Report, utilizing 100% of the proved reserves and
100% of the probable reserves.
Upon Closing, the Purchaser shall be irrefutably and conclusively deemed to have
waived all Title Defects in respect of which it gave notice to the Vendor
pursuant to this subclause 7(d) or in respect of which it was actually aware but
failed to give the Vendor such notice. Such waiver shall eliminate the
Purchaser's right to rely on the representations and warranties in clause 10 for
all matters so identified.
8. CONVEYANCES
a. The Vendor shall execute and deliver to the Purchaser at the Closing Date
a conveyance, substantially in the form attached as Schedule "B" to this
Agreement.
b. Prior to the Closing Date the Vendor shall at its sole cost and expense
prepare, and on the Closing Date deliver, in a form satisfactory to the
Purchaser acting reasonably, all notices of assignment, assignments,
novations, transfers, directions to pay or further assurances as are
necessary, or as may be reasonably requested by the Purchaser, to
transfer, assign and convey the Assets to the Purchaser and the Purchaser
shall execute such documents at such time as the Vendor shall request. In
no event shall such documents require the Vendor or the Purchaser to
assume or incur any obligations, or to provide any representation or
warranty, beyond that contained in this Agreement. The Vendor shall
cooperate with the Purchaser as reasonably required to secure execution
of such documents and other substitutions, amendments or replacements
thereof by such third parties after the Closing Date.
After the Closing Date, the Purchaser shall prepare, at its sole cost and
expense, any outstanding or further specific conveyances which specific
conveyances shall be forthwith executed by the Vendor upon delivery to
the Vendor by the Purchaser.
c. The Purchaser shall, unless otherwise agreed by the Vendor, promptly
register in the applicable registry all registrable transfers and
conveyances of the Assets. All costs incurred in registering any
<PAGE>
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transfer and conveyance, and all costs of registering any further
assurances required to convey the Assets, shall be borne by the
Purchaser.
d. The Purchaser acknowledges and agrees that nothing in this Agreement
shall be interpreted as any assurance by the Vendor that the Purchaser
will be able to serve as operator of any of the Assets.
e. All documents executed and delivered pursuant to the provisions of this
clause 8 or otherwise pursuant to this Agreement are subordinate to the
provisions hereof and the provisions hereof shall govern and prevail in
the event of a conflict.
9. ADJUSTMENTS TO THE PURCHASE PRICE
For the purpose of calculating the upward or downward adjustments to the
Purchase Price and therefore the Adjusted Purchase Price, the Vendor and
Purchaser agree as follows:
a. all benefits of every kind and nature received or receivable in respect
of the Assets, including without limitation, proceeds from the sale of
production and management fees paid to the Vendor and derived from the
Assets shall, subject to the provisions of this agreement, from and after
the Adjustment Date, be downwards adjustments to the Purchase Price and
the amount of all royalties and similar burdens to the extent that they
are Permitted Encumbrances, payable on or in respect of Petroleum
Substances produced after the Adjustment Date shall be upwards
adjustments to the Purchase Price;
b. all obligations of every kind and nature payable or paid, including
without limitation, maintenance, development, capital (except as further
specified herein) and operating costs, rentals and all similar payments
to required to preserve any of the Leases, any cash advances (other than
prepaid rentals) and all other taxes (other than income taxes) levied
with respect to the Assets, shall from and after the Adjustment Date, be
calculated on a per diem basis and be upwards adjustments to the Purchase
Price. Notwithstanding the above, Schedule "F" outlines the Assumed
Obligations and Schedule "I" outlines certain authorities for expenditure
costs, all of which will constitute upward adjustments to the Purchase
Price and proceeds from the sale of minor properties as outlined in
Schedule "I" will be allocated to the Purchaser and be downward
adjustments to the Purchase Price;
c. The Purchase Price shall be further adjusted as follows:
i. Upwards by the amount of all cash call advances, operating funds
and similar advances made by Vendor in respect of the Assets on
behalf of joint operating partners, the entitlement to which funds
are transferred to the Purchaser on the Closing Date;
ii. Upwards by the amount of all Petroleum Substances in the course of
production from the Lands or Lands pooled or unitized therewith
but not at the Adjustment Date beyond the point of delivery to the
purchaser of production from the Lands or Lands pooled or unitized
therewith, which production is deemed to be sold for the account
of the Vendor on a "first-in, first-out" basis;
<PAGE>
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iii. Upwards by the amount of $365,000.00 (Cdn.) for each calendar
month, beginning January 1, 1997 until the earlier of the Closing
Date or June 16, 1997 in respect of administrative costs that
would typically be incurred by the owner of such Assets, such
payment to be net of any overhead costs reimbursed to the Vendor
from other working interest owners and where Closing does not
occur at the end of a Month, this upward adjustment for the
portion of the last month will be determined on a per diem basis;
and
iv. Upwards by an amount equal to:
the Adjusted Purchase Price x A x B
Where:
A = the Prime Rate
B = a fraction the numerator of which is the number of days from
and including January 1 to but not including the earlier of June
16, 1997 or the Closing Date and the denominator of which is 365;
d. The Purchaser will indemnify the Vendor in respect of the payment of PST
(as defined below) and any goods and services tax ("GST"), if any, that
is payable in respect of the transaction contemplated by this Agreement,
in accordance with the provisions of the Excise Tax Act (Canada);
e. The Purchaser shall also be responsible for payment of any and all taxes
(including provincial sales taxes), fees, charges or other costs required
to be paid by the Purchaser by applicable legislation upon the purchase
of the Assets ("PST"). The Vendor will collect from the Purchaser such
PST and remit in a timely manner the PST to the appropriate governmental
agency. Any such PST or additional taxes, fees, charges or costs shall
be paid by the Purchaser in addition to the Purchase Price. If the
amount of GST or PST or any other such tax, fee, charge or cost paid by
the Purchaser is adjusted as a result of any re-assessment by any
governmental agency or authority, as the case may be, then any increase
or decrease in GST or PST exigible or in any other such tax, fee, charge
or costs and any interest and penalties resulting from the re-assessment
are for the Purchaser's account. The Purchaser shall calculate and remit
taxes levied pursuant to applicable provincial legislation directly to
the taxation authorities entitled to receive such payments under such
legislation and the Purchaser agrees to make such payments on or before
the respective dates for such payments;
f. An interim accounting and adjustment shall be carried out on the Closing
Date, for the purposes of determining the Adjusted Purchase Price to be
paid on Closing, based on the Vendor's good faith estimate of all
adjustments to be made for the transaction herein, which adjustments are,
without limitation, summarized and in a form similar to Schedule "G".
The Vendor shall prepare and deliver to the Purchaser a statement of such
interim accounting and adjustment at least two Business Days before the
Closing. A final accounting and adjustment shall be carried out twelve
months following the Closing Date by the Purchaser and presented to the
<PAGE>
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Vendor for approval. In the event and to the extent the parties are
unable to resolve such final accounting and adjustment within twelve
months following the Closing Date, then all disagreements shall be
submitted to arbitration pursuant to subclause 9(h) below. No further
accounting or adjustment shall be made between the parties after such
twelve month period, except for adjustments arising from:
i. a joint venture audit under the Title and Operating Documents, if
the adjustment is requested in writing within 180 days of the
Closing Date if the audit has been completed prior to the Closing
Date and in all other cases within the earlier of December 31,
1999 or 180 days of the completion of the audit and initial
identification of audit queries; and
ii. a Crown royalty audit initiated by the Crown, if the adjustment is
requested in writing within the earlier of four (4) years from the
Closing Date or 180 days after the final results are received by
the party requesting the adjustment;
g. Any amount owing to a party by the other party pursuant to any provision
of this Agreement after Closing and remaining unpaid shall bear interest
at the Prime Rate; and
h. The parties agree to arbitrate any disputes concerning adjustment figures
pursuant to the Arbitration Act (Alberta).
10. THE VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as of the date
hereof and as of the Closing Date that:
a. the Vendor is, and at the Closing Date shall continue to be, a body
corporate, duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation and in each jurisdiction in
which any of the Assets are located;
b. all necessary corporate action has been taken by the Vendor to authorize
the execution, delivery and performance of this Agreement and all
documents executed and delivered pursuant hereto;
c. except for regulatory approvals to be obtained prior to Closing and
waivers of rights of first refusal, the execution and delivery of this
Agreement, the execution of the transactions contemplated hereby, and the
fulfilment of and compliance with the terms and provisions hereof, do not
and will not:
i. violate any provisions of law or administrative regulation or any
judicial or administrative order, award, judgment or decree
applicable to the Vendor of which it is aware; or
ii. violate or conflict with any provision of the charter, bylaws or
equivalent governing documents relating to the Vendor; or
iii. violate or conflict with any provision of any agreement or
instrument to which the Vendor is a party or by which it is bound;
<PAGE>
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d. this Agreement has been duly executed and delivered by the Vendor and all
Conveyance Documents to be executed and delivered by it to the Purchaser
on the Closing Date or thereafter shall be duly executed and delivered by
the Vendor;
e. this Agreement and all documents executed and delivered pursuant to this
Agreement are and will be legal, valid and binding obligations of the
Vendor enforceable against the Vendor in accordance with their terms;
f. the Vendor has not incurred any obligation or liability, contingent or
otherwise, for brokerage fees, finder's fees, agents commission or other
similar forms of compensation with respect to this transaction for which
the Purchaser shall have any obligation or liability whatsoever;
g. subject to clause 19 herein, to the Vendor's knowledge, the Tax Pools of
the Vendor respecting the Assets, as at the Adjustment Date, are as set
forth and described in Exhibit "H" attached hereto;
h. the Vendor does not warrant its title to the Assets but represents and
warrants that, other than as set forth in Schedules "A" and "F" and
except for Permitted Encumbrances, the Assets are free and clear of any
liens, mortgages, royalties, production payments, charges, adverse
claims, demands or encumbrances created by, through or under the Vendor
or of which the Vendor has knowledge;
i. other than as set forth in Schedule "A" and except for Permitted
Encumbrances, the Vendor's interest in the Assets is not subject to
reduction by virtue of the conversion or other alteration of the interest
of, any third party claiming by, through or under the Vendor or of which
the Vendor has knowledge;
j. other than as disclosed in Schedule "E", the Vendor has not received any
written notices of:
i. violation, default or alleged violation or default of any material
provisions of any material agreement in respect of the Assets; or
ii. any third party claiming an interest in and to the Assets adverse
to the interests of the Vendor;
k. subject to the Title and Operating Documents, the Purchaser may enter
into and upon, hold and enjoy the Assets for the residue of their
respective terms and all renewals or extensions thereof for its own use
and benefit, without any lawful interruption by the Vendor or any person
claiming or to claim by, through or under the Vendor;
l. other than as disclosed in Schedule "E", to the Vendor's knowledge, there
are no actions, suits or proceedings commenced, or threatened, affecting
the Vendor at law or in equity or before or by any federal, provincial or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign and which might involve or affect
the Assets;
<PAGE>
- 19 -
m. to the Vendor's knowledge, except for the Prepaid Hydrocarbon Sale
Agreement which will be terminated immediately prior to the Closing, the
Vendor is not, in respect of the Assets, subject to and the Assets are
not affected by any Take or Pay Obligations or any other obligation to
deliver Petroleum Substances to any party without receiving (and being
entitled to retain without deduction) full payment for such Petroleum
Substances at current prices at the time of delivery;
n. other than as disclosed in Schedule "D", to the Vendor's knowledge there
are no production sales contracts to which the Vendor is a party or by
which it is bound applicable to the production of Petroleum Substances
from the Lands, nor has the Vendor dedicated the Lands to any other
production sale contract or similar arrangement, except for agreements
terminable by the seller without bonus, penalty or other costs on not
more than 60 days notice;
o. the Vendor is a non-resident of Canada within the meaning of the Income
Tax Act (Canada);
p. all necessary regulatory approvals required to be obtained by a vendor of
the Assets will have been obtained by the Vendor with respect to the
Vendor's obligations under this Agreement as of the Closing Date;
q. all Technical Information and Title and Operating Documents in the
Vendor's possession or to which the Vendor has access will have been made
available promptly after the date hereof and through the Closing Date to
the Purchaser or its solicitors;
r. to the Vendor's knowledge:
i. all taxes, charges and assessments that are due and that pertain
to the Assets have been fully paid, including, without limitation,
any and all ad valorem and property taxes, and any and all
production, severance and similar taxes, charges and assessments
based upon or measured by the ownership or production of Petroleum
Substances or any of them or the receipt of proceeds therefor;
ii. any and all operations conducted by the Vendor in, on or in
respect of the Assets have been conducted in accordance with
generally accepted oilfield and engineering practices and in
material compliance with all applicable laws, rules, regulations,
orders and directions of governmental and other competent
authorities;
iii. except as may be set out in Schedules "A" and "C", none of the
interests of the Vendor in and to the Assets are subject to any
Right of First Refusal;
iv. none of the Assets are subject to any penalties or forfeiture
under agreements as a consequence of non-participation in
operations except as set forth in Schedule "A"; and
v. the Vendor has not knowingly failed to comply with, perform,
observe or satisfy any material term, obligation or liability
which heretofore was required to be complied with, performed,
observed or satisfied to maintain in good standing any material
Title and Operating Document;
<PAGE>
- 20 -
s. to the knowledge of the Vendor, all of the Wells have been drilled and,
if completed, completed, operated, produced, shut-in, abandoned and
suspended, as the case may be, in accordance with good oilfield practices
and in compliance with all applicable laws, rules and regulations and all
costs associated with each such Well and all associated equipment have
been paid;
t. except as disclosed in Schedule "E", with respect to those of the Assets
operated by the Vendor, it has not received, and in respect of those of
the Assets operated by Third Parties, to the best of its knowledge, such
Third Party has not received, written notice of non-compliance, and does
not know, or does not have reasonable grounds to know, of any facts which
could give rise to a notice of non-compliance, with Environmental
Regulations;
u. with respect to those of the Assets operated by the Vendor, and in
respect of those of the Assets operated by Third Parties, to its
knowledge, all approvals, permits, certificates, licences,
orders-in-counsel or other actions required under Environmental
Regulations to own and operate the Assets have been obtained;
v. to the Vendor's knowledge, none of the interests of the Vendor in any of
the Wells on the Lands is subject to a production penalty of any material
nature;
w. there are no AFEs pursuant to which expenditures are or may be required,
nor are there any other financial commitments in excess of $25,000.00
that are now outstanding or due in respect of the Assets, other than as
disclosed in Schedule "I";
x. the Vendor has not received notice of and is not otherwise aware of any
change or proposed change in the production allowables for any of the
Wells producing Petroleum Substances from the Lands or from which
production of Petroleum Substances is allocated to the Lands;
y. to the Vendor's knowledge, the payout accounts set forth in Schedule "J"
are correct, as of March 31, 1997;
z. none of the Leases operated by the Vendor, and to its knowledge, none of
the Leases operated by Third Parties has been or is now subject to any
offset obligation for which notice has been received by it or of which it
is aware which has not been satisfied;
aa. except as disclosed in Schedule "I", the Vendor is not subject to any
outstanding obligation to drill or participate in the drilling of any
Wells upon the Lands; and
bb. to Vendor's knowledge, it has made available to the Purchaser all
material documents and agreements within its possession and has not
knowingly withheld any such documents or agreements from the Purchaser
affecting the title to the Assets or processing, transportation,
production or revenue from the Assets including, without limitation, all
gas purchase contracts that relate to or affect the Assets.
<PAGE>
- 21 -
Except as specifically provided in subclauses 10 (h), (i) and (k), the Vendor
does not warrant title to the Assets, nor does the Vendor agree to give any
greater interest or title to the Purchaser than that which the Vendor has.
Except as expressly provided in clause 10, the Assets are sold on an "as is"
basis, and on the occurrence of Closing the Purchaser shall be deemed to have
acknowledged that it has had an opportunity to review all records and
information of the Vendor which are made available to the Purchaser pertaining
to the Assets and is relying solely upon its own counsel and due diligence of
the Assets. For greater certainty, the Vendor makes no warranty, express or
implied in fact or by law, with respect to:
A. the quality, condition, merchantability or serviceability of all
or any of the Assets or their suitability for any particular
purpose; or
B. the quality, quantity or recoverability of the Petroleum
Substances within or under the Lands;
C. the value of the Assets or the future revenues applicable thereto;
D. any engineering, geological information or interpretations
thereof, or any economic evaluations respecting the Assets; or
E. any data or information supplied by the Vendor or its
representatives to the Purchaser or its representatives.
Subject only to the express representations, warranties and covenants of the
Vendor pertaining to the Assets contained in clauses 10 and 12 hereof, the
Purchaser acknowledges and agrees that by and upon Closing, the Purchaser shall
have purchased and acquired the Assets as to their physical condition and
location, as is, where is and in such state as they shall be on the Closing
Date. The Purchaser acknowledges that it is relying solely on its own counsel
(including all tax and legal consequences) and the Vendor's counsel in respect
of certain title opinions to be issued and its own due diligence of the Assets
and that it has made, or has had others make, such evaluation and inspection of
the Assets as it deems appropriate, and is not relying upon any representation
or warranty not contained in this Agreement, statement or collateral discussions
made by or with the Vendor, its representatives, agents, servants and employees.
The Purchaser shall, after Closing, have no claim or action against the Vendor
in respect of the location, state, condition, suitability or fitness of the
Assets, or any of them, for the Purchaser's intended use or purpose of their
merchantability, other than in the case of a breach of or untruth of any express
representation, warranty or covenant made herein by the Vendor.
The Vendor expressly negates and disclaims, and shall not be liable for, any
representation or warranty which may have been made or alleged to be made in any
other document or instrument in connection herewith or in any statement or
information (including without limitation the Engineering Report and any
opinion, information or advice which may have been provided by the Vendor, or
any officer, employee, agent, consultant or representative of the Vendor) made
or communicated to the Purchaser or its representatives in any manner.
The representations and warranties of the Vendor in this clause 10 shall survive
the Closing and not be merged in any conveyances or other documents provided
pursuant to this Agreement, provided that, except in the case of fraud, no claim
may be made against the Vendor, its successors or assigns, pursuant to or based
in any way upon any of these representations and warranties unless written
<PAGE>
- 22 -
notice thereof with reasonable particulars shall have been provided by the
Purchaser to the Vendor within twelve months of the Closing Date with the
exception of claims in respect of the representation and warranty contained in
subclause 10(g) which shall be governed by clause 19.
11. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to and with the Vendor as of
the date hereof and as of the Closing Date that:
a. the Purchaser is, and at the Closing Date shall continue to be a body
corporate duly organized, validly existing and in good standing under the
laws of its jurisdiction of formation and at Closing shall be duly
registered and authorized to carry on business in all jurisdictions in
which the Lands are located;
b. all necessary corporate action has been taken by the Purchaser to
authorize the execution, delivery and performance of this Agreement and
all documents executed and delivered pursuant hereto and this Agreement
has been and such documents when delivered will have been duly executed
and delivered by the Purchaser;
c. this Agreement and all documents executed and delivered pursuant to this
Agreement are legal, valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms;
d. the Purchaser has not incurred any obligation or liability, contingent or
otherwise, for brokerage fees, finder's fees, agents commission or other
similar forms of compensation with respect to this transaction for which
to the Vendor shall have any obligation or liability whatsoever;
e. the Purchaser will comply with the Investment Canada Act to the extent,
if any, applicable to the transaction herein;
f. all necessary regulatory approvals required to be obtained by a purchaser
of the Assets will have been obtained by the Purchaser with respect to
the Purchaser's obligations under this Agreement as of the Closing Date;
g. completion of the purchase of the Assets in accordance with the term of
this Agreement will not be in conflict with, constitute a default under,
or be in violation or breach of any agreement or instrument to which the
Purchaser is a party or by which it is bound or any judgment, decree,
order, statute, rule or regulation applicable to the Purchaser; and
h. the Purchaser has taken into account the Purchaser's assumption of
responsibility for the abandonment, reclamation and environmental
responsibilities and costs associated with the Assets and the release of
the Vendor from responsibility therefor when the Purchaser evaluated the
Assets and determined the Purchase Price.
The representations and warranties of the Purchaser in this clause 11 shall
survive the Closing and not be merged in any conveyances or other documents
provided pursuant to this Agreement, provided that no claim may be made against
the Purchaser, its successors or assigns, pursuant to or based in any way upon
<PAGE>
- 23 -
any of these representations and warranties unless written notice thereof with
reasonable particulars shall have been provided by the Vendor to the Purchaser
within twelve months of the Closing Date.
12. MAINTENANCE OF BUSINESS
a. Until the Closing Date, the Vendor to the extent its interest allows,
shall operate and maintain the Assets in a proper and prudent manner in
accordance with generally accepted oil and gas industry practices.
b. From the date of execution of this Agreement, the Vendor shall not:
i. without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld or delayed, surrender or abandon any
of the Assets;
ii. without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld or delayed, amend or terminate any
agreement or instrument relating to the Assets if the amendment or
termination would have a material adverse effect on the value of
any one or more of the Assets;
iii. mortgage, pledge, assign, sell, transfer, or otherwise dispose of
or encumber, or allow the mortgaging, pledging, assigning, sale,
transfer or other disposition or encumbrance, of any of the Assets
other than chattel property or other personal property that is
replaced by equivalent property or consumed in the operation of
the Assets, and other than liens arising in the ordinary course of
business as a result of the operations under agreements affecting
the Assets;
iv. without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld or delayed, remove or cause to be
removed any Tangibles out of the ordinary course of business; or
v. without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld or delayed, commit to do any of the
foregoing.
c. From the date hereof until the Closing Date, the Vendor shall not enter
into any obligations or commitments out of the ordinary course of
business with respect to the Assets, the Vendor's share of which is in
excess of twenty five thousand ($25,000.00) dollars for any single item
or related series of items without the prior consultation of the
Purchaser, which consent shall not be unreasonably withheld or delayed,
except as may be reasonably necessary to protect, ensure life and safety
or to preserve the Assets or title to the Assets. Until the Closing
Date, the Vendor shall not, without the prior written consent of the
Purchaser, propose or initiate the exercise of any right (including
bidding rights at Crown sales) or option relative to or arising as a
result of the ownership of the Assets, or propose or initiate any
operations on the Lands which have not been commenced or committed to by
the Vendor on the date hereof except that the Vendor may propose or
initiate any operations on the Lands for, and may propose or initiate the
exercise of any right or option relative to, the preservation of any of
the Leases or Assets. Without the written consent of the Vendor, the
Purchaser shall not, and shall not be entitled to, propose to the Vendor,
<PAGE>
- 24 -
or to cause the Vendor to propose to others, the conduct of any
operations on the said lands or the exercise of any right or option
relative to the Assets except pursuant to this paragraph.
13. CONDITIONS TO THE CLOSING
a. The following are conditions to the Closing of the purchase herein, for
the benefit of the Purchaser, which may be waived at the discretion of
the Purchaser:
i. any and all necessary regulatory or governmental approvals
required to permit the transaction to be completed shall have been
obtained (including, without limitation, any approval required
under the Investment Canada Act and the Competition Act);
ii. between the date hereof and the Closing Date, there shall not have
occurred any substantial damage to or material alteration of the
Assets (save as approved in writing by the Purchaser) which in the
Purchaser's opinion, acting reasonably, would materially and
adversely affect the value of the Assets, provided however that
neither a decrease in the market price of any Petroleum Substances
nor production of Petroleum Substances in the ordinary course of
business shall be considered as substantial damage or material
alteration for the purposes of this clause;
iii. the Vendor shall have performed or complied in all material
respects with all 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;
iv. the representations and warranties of the Vendor contained in this
Agreement shall be true in all material respects as of the Closing
Date and the Vendor shall have delivered to the Purchaser a
Certificate of a Vice-President or the Secretary or other senior
officer of the Vendor dated the Closing Date, to the effect that
the representations and warranties contained in clause 10 hereof
are true and correct in all material respects;
v. the Vendor shall have delivered to the Purchaser the Conveyance
Documents executed by the Vendor;
vi. on or before the Closing Date, the Vendor shall have delivered to
the Purchaser a certificate of a senior officer (with such
supporting documentation as the Purchaser may reasonably request)
certifying that the Wainoco 77 Canada and Wainoco 80 Canada
limited partnerships have been dissolved;
vii. on or before June 1, 1997, the Purchaser shall have had the
opportunity to conduct a field inspection of the Assets and upon
completion of same, shall be satisfied by June 1, 1997 that they
are in a condition consistent with good oilfield practice; and
viii. the Vendor shall have delivered to the Purchaser an opinion of
Burnet, Duckworth & Palmer dated the Closing Date to the effect
that:
<PAGE>
- 25 -
A. the Vendor is a corporation duly organized, validly
existing and in good standing under the laws of Wyoming and
is extra-provincially registered in the Provinces of
Alberta and British Columbia;
B. the Vendor has fully corporate power and authority to enter
into and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by all requisite corporate action;
C. this Agreement has been duly executed and delivered by the
Vendor and is the valid and binding obligation of the
Vendor, enforceable against the Vendor in accordance with
its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally or by principles governing the
availability of equitable remedies (whether considered in
an action at law or equity);
D. neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby
will result in violation or breach of or be in conflict
with
(a) any term of the constating documents of the Vendor;
or
(b) the Laws or any judicial order, award, judgment or
decree applicable to the Vendor of any Government
Entity of the State of Wyoming, the United States of
America, the Provinces of British Columbia or
Alberta or Canada; and
E. no consent, approval or action of or filing with any
Government Entity of the State of Wyoming, the United
States of America, the Provinces of British Columbia or
Alberta or Canada or any other third party on the part of
the Vendor, respectively, is required in connection with
the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated
hereby, except such consents, approvals, actions or filings
which have been obtained or made.
In rendering the foregoing opinions, counsel may rely upon certificates
of officers of the Vendor as to factual matters.
The foregoing conditions shall be for the benefit of the Purchaser and
may waived by the Purchaser in writing, in whole or part, at any time,
provided the Purchaser may not waive the existence or operation of any
preferential right to purchase any of the Assets. In case any of the
said conditions (i) to (viii) inclusive shall not be complied with, or
waived by the Purchaser, at or before the Closing Date, the Purchaser may
rescind or terminate this Agreement by written notice to the Vendor.
<PAGE>
- 26 -
b. The following are conditions to the Closing of the sale herein, for the
benefit of the Vendor, which may be waived at the discretion of the
Vendor:
i. any and all necessary regulatory, governmental and shareholders'
approvals required to permit the transaction to be completed
shall have been obtained (including, without limitation, any
approval required under the Investment Canada Act and the
Competition Act );
ii. the Purchaser shall have performed or complied in all material
respects with all 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;
iii. the Purchaser shall have tendered to the Vendor the Adjusted
Purchase Price in the manner provided for in clause 5;
iv. the representations and warranties of the Purchaser outlined in
this Agreement shall be true in all material respects at and as of
the Closing Date and the Purchaser shall have delivered to the
Vendor a Certificate of a Vice-President or the Secretary or other
senior officer of the Purchaser, dated the Closing Date, to the
effect that the representations and warranties contained in clause
11 hereof are true and correct in all material respects;
v. the Purchaser shall have delivered to the Vendor at least one copy
of the Conveyance Documents executed by the Purchaser; and
vi. the Purchaser shall have delivered to the Vendor an opinion of
counsel designated by the Purchaser and as approved by the Vendor
dated the Closing Date to the effect that with respect to the
Purchaser:
A. the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Alberta and
is extra-provincially registered in the Province of British
Columbia;
B. the Purchaser has fully corporate power and authority to
enter into and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by all requisite corporate action;
C. this Agreement has been duly executed and delivered by the
Purchaser and is the valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance
with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by principles
governing the availability of equitable remedies (whether
considered in an action at law or in equity);
<PAGE>
- 27 -
D. neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby
will result in violation or breach of or be in conflict
with:
(a) any term of the constating documents of the
Purchaser; or
(b) the Laws or any judicial order, award, judgment or
decree applicable to the Purchaser of any Government
Entity of the Provinces of British Columbia or
Alberta or Canada; and
E. no consent, approval or action of or filing with any
Government Entity of the Provinces of British Columbia or
Alberta or Canada or any other third party on the part of
the Purchaser is required in connection with the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby,
except such consents, approvals, actions or filings which
have been obtained or made.
In rendering the foregoing opinions, counsel may rely upon certificates
of officers of the Purchaser as to factual matters.
The foregoing conditions shall be for the benefit of the Vendor and may
be waived by the Vendor in writing, in whole or part, at any time,
provided the Vendor may not waive the existence or operation of any
preferential right to purchase any of the Assets. In case any of the
said conditions (i) to (v) inclusive shall not be complied with, or
waived by the Vendor, at or before the Closing Date, the Vendor may
rescind or terminate this Agreement by written notice to the Purchaser.
14. CONSENTS AND PREFERENTIAL RIGHTS
a. If all or any portion of the Assets are subject to Rights of First
Refusal, then the Vendor shall promptly following the execution of this
Agreement serve all notices as are required under the applicable Right of
First Refusal provisions. Each such notice shall include full
particulars of this transaction and a request for a waiver of the
applicable Right of First Refusal. As soon as is practicable after
execution of this Agreement, the Purchaser, acting reasonably, shall
advise the Vendor in writing of the Purchaser's valuation of the Assets
which are subject to such Rights of First Refusal and such allocations
shall be used for the purposes of this clause except where such
allocations are unreasonable.
b. If subsequent to Closing any of such Right of First Refusal is exercised
then the Purchaser shall convey to the holder of such Right of First
Refusal that portion of the Assets which are subject to such Right of
First Refusal free and clear of all liens, encumbrances and claims by,
through or under the Purchaser or, alternatively at the request of either
the Vendor or the Purchaser reconvey to the Vendor or a sister
corporation that portion of the Assets which are subject to such Right of
First Refusal free and clear of all liens, encumbrances and claims by,
through or under the Purchaser; in either case upon receipt by the
Purchaser of that portion of the Purchase Price allocated to such Assets.
<PAGE>
- 28 -
c. Prior to Closing the parties hereto shall use all reasonable efforts to
obtain and deliver to the other party all necessary consents (other than
consents which may not be unreasonably withheld), permissions and
approvals by third parties and governmental and regulatory authorities in
connection with the transaction contemplated herein.
15. TERMINATION
a. If this Agreement is terminated in accordance with its terms prior to
Closing, then except for clauses 15 and 16 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, and, subject to the
provisions of subclause 15(b), the Vendor shall promptly return to the
Purchaser the Deposit and any interest earned thereon.
b. If a party (the "Defaulting Party") fails to comply with any of the terms
and conditions of this Agreement and Closing does not occur because of
such failure, the other party (the "Injured Party") may, by notice to the
Defaulting Party, elect to either:
i. Where the Defaulting Party is the Purchaser and the Closing does
not occur by reason that the Vendor's Closing conditions contained
in subclause 13(b) are not satisfied and the failure to satisfy
such conditions is a direct result of the Purchaser's failure or
refusal to satisfy its material obligations hereunder, treat the
Agreement as terminated by reason of the non-fulfilment of the
obligations of the Defaulting Party, in which case the Injured
Party's remedy for such default shall be limited to that
prescribed by this subclause 15(b) and the Injured Party shall be
deemed to have waived all other remedies which may otherwise have
been available to it at law or equity with respect to such
default. In such event, the Deposit and the interest accrued
thereon shall be paid to the Vendor as a genuine pre-estimate of
liquidated damages and not as a penalty; or
ii. Treat this Agreement as terminated by reason of the non-fulfilment
of the Defaulting Party's obligations and, if the Injured Party so
decides, pursue a claim for Losses resulting from such default; or
iii. Continue to treat the Agreement as binding and enforceable, in
which event the Vendor shall cause the Deposit to be retained in
trust by Burnet, Duckworth & Palmer pending resolution of the
default by agreement of the parties or in accordance with a final
order of a court of competent jurisdiction.
However, the Injured Party shall be deemed to be treating the Agreement
as in effect and enforceable, unless and until it specifically elects in writing
to pursue an alternative in subclause 15(b)(i) or 15(b)(ii).
<PAGE>
- 29 -
16. CONFIDENTIALITY
a. Subject to the Confidentiality Agreement and subclause 16(b) hereof,
information obtained by the Purchaser, its employees, directors,
consultants or advisors, under this Agreement concerning the Assets and
information contained in this Agreement shall be retained in confidence
and used only for the purposes of acquisition unless and until the
Closing of the purchase of such Assets, whereupon the Purchaser's rights
to use or disclose such information shall be subject to any operating,
unit or other agreements that may apply thereto. Any additional
information obtained by the Purchaser, its employees, directors,
consultants or advisors, under this Agreement which does not relate to
the Assets shall, subject to subclause 16(b) hereof, continue to be
treated as confidential and not used by the Purchaser without the prior
written consent of the Vendor.
b. The restrictions on disclosure and use of information in this Agreement
shall not apply to information which:
i. is or becomes publicly available, other than as a result of
disclosure by the Purchaser or its consultants or advisors, as
identified in subclause 16(a), in breach of this Agreement;
ii. is subsequently obtained lawfully from a third party, other than a
consultant or advisor of the Purchaser pursuant to subclause
16(a), which the Purchaser does not know after reasonable inquiry,
to be bound to the Vendor to restrict the use or disclosure of
such information;
iii. is already in the Purchaser's possession at the time of
disclosure, without restriction on disclosure; or
iv. disclosure of which is required by applicable law.
c. At the Closing, the Vendor shall assign to the Purchaser any all rights
and privileges respecting confidentiality that the Vendor may hold
regarding other potential purchasers of the Assets.
17. INFORMATION AND MATERIALS
a. The Vendor shall, subject to clause 16, make available to the Purchaser
and its authorized representatives for such inspection as the Purchaser
requires, all Technical Information and all records pertaining to the
Assets, including without limitation, the operating revenues and expenses
related to the Assets as are in the possession of the Vendor or to which
the Vendor has access.
b. The Vendor shall, subject to clause 16, deliver copies of such Technical
Information and records in organized form to the Purchaser promptly after
Closing and the Purchaser shall receive such Technical Information and
records.
c. After the Closing Date, the Vendor and its representatives may, upon
reasonable notice to the Purchaser, have access during business hours to
all accounting information, personnel records, other records of
whatsoever nature and Technical Information delivered hereunder (to the
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extent the same is retained by the Purchaser or to which it has access)
to obtain and copy information in respect of matters arising prior to the
Closing Date if the information derived from such access is required in
connection with audits or the Vendor's dealings with taxing or other
regulatory authorities or is required to comply with any applicable law,
regulation or ruling by a relevant government or regulatory authority or
in any court of law or other tribunal having jurisdiction.
18. LIABILITIES AND INDEMNITIES
a. The Vendor's Indemnity: Except as otherwise expressly provided for
herein, and subject to subclauses 18(c) and 18(d), the Vendor, after
Closing, shall be liable to the Purchaser for all Losses which the
Purchaser may suffer and, in addition, indemnify and save harmless the
Purchaser from and against all Losses which arise or are attributable to
any breach of any representation or warranty made by the Vendor herein
excepting any Losses to the extent the same are caused by gross
negligence or wilful default of the Purchaser, its successors or assigns,
provided however that written notice of a claim hereunder together with
reasonable particulars must have been provided to the Vendor within
twelve months of the Closing Date. The indemnity granted herein by the
Vendor is not a title warranty and does not provide either an extension
of any of the adjustment provisions of clause 9, any representation or
warranty contained in clause 10, or any additional remedy with regard to
the Vendor's breach of warranty or misrepresentation.
b. The Purchaser's Indemnity: Except as otherwise expressly provided for
herein, the Purchaser, after Closing, shall be liable to the Vendor for
all Losses which the Vendor may suffer and, in addition, indemnify and
save harmless the Vendor from and against any Losses pertaining to the
Assets and occurring or accruing on or after the Adjustment Date
excepting any Losses to the extent the same are caused by gross
negligence or wilful default of the Vendor and its successors or assigns.
c. Reclamation Obligations: The parties agree that all costs, expenses,
risks, liabilities and obligations respecting the abandonment of any
Wells which are part of the Assets (including without limitation
obligations relating to Wells which were abandoned prior to the
Adjustment Date); closure, decommissioning and dismantling the Tangibles;
and reclamation and restoration of all Sites and the lands to which the
Surface Rights relate; shall be borne and paid for solely by the
Purchaser and the Purchaser shall, in respect thereof, indemnify, defend
and save harmless the Vendor from and against any claims or demands by
any person for or resulting in expense, liability, loss, costs, claims or
damages, direct or indirect (including the effects of, and the costs of
complying with any order, direction, or claim of any government, or
agency, department, official or tribunal thereof having jurisdiction)
pertaining to the foregoing operations conducted or failed to be
conducted by the Purchaser.
d. The Purchaser's Indemnity - Environmental Liabilities: Except as
otherwise provided in clause 20:
i. the Purchaser shall, after Closing, be liable to the Vendor for
all Environmental Liabilities which the Vendor may suffer,
sustain, pay or incur and, in addition, shall indemnify, defend
and save harmless the Vendor and its directors, officers, servants
<PAGE>
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and agents from and against any claims or demands by any person
for Environmental Liabilities; and
ii. the Purchaser shall not be entitled to exercise and hereby waives
any rights or remedies which the Purchaser may now or in the
future have against the Vendor in respect of Environmental
Liabilities, whether pursuant to common law or statute or
otherwise, including without limitation, the right to name the
Vendor as a third party to any action by any third party against
the Purchaser.
The Purchaser, by its execution hereof, hereby further irrevocably
waives, in accordance with Section 4(13) (a) of the Contaminated Site
Regulation (B.C. Reg. 375/96) (the "Regulation"), passed with respect to
the Waste Management Act (British Columbia), the right to receive a site
profile (as defined in the Regulation), in connection with the
acquisition of Assets pursuant to this Agreement.
e. Limitation on Liability: The total of the liabilities and indemnities of
the Vendor, its successors and assigns under this Agreement or any
document delivered pursuant thereto, including, without limitation,
claims relating to its covenants, representations, warranties and
indemnities, shall not exceed the Purchase Price. Furthermore, the
Vendor shall have no liability of any kind whatsoever under this
Agreement or any document delivered pursuant thereto, unless (and only to
the extent that) the aggregate liability exceeds $1,000,000. The
liability of the Purchaser under the subclauses b., c. and d. shall not
apply where the loss or harm suffered is a direct result of a breach of
the Vendor's representations or warranties. In no event may a claim be
made pursuant to clauses 10 or 18 with respect to any Title Defect in
respect of which a notice of Title Defect was given pursuant to subclause
7(d) or in respect of which Purchaser was actually aware or in respect of
adjustments which shall be governed by clause 9 hereof.
f. Assets Acquired on "As Is" Basis: Notwithstanding the foregoing
provisions of clause 18, the Purchaser acknowledges that it is acquiring
the Assets on an "as is" basis, as of the Adjustment Date. 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 such 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 10.
19. TAX MATTERS
a. Tax Indemnity: Notwithstanding the provisions of clauses 10 and 18
herein, the Vendor has made certain representations to the Purchaser
concerning the accuracy of the Tax Pools (as set forth in Schedule "H").
The parties agree to adjust the Purchase Price upwards or downwards as
follows, upwards for any surplus in the Tax Pools, or downwards for any
deficiency in the Tax Pools or any loss the Purchaser may suffer as a
result of an assessment or reassessment under the Income Tax Act (Canada)
or any provincial tax legislation of the Provinces of British Columbia or
Alberta (collectively, the "Tax Acts") on the basis that the Purchaser
may not make use of all or any part of certain of those Tax Pools, in
accordance with Section 66.7 of the Income Tax Act (Canada), or similar
<PAGE>
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provision of the Tax Acts, unless the inability to make use of such Tax
Pools arises, directly or indirectly, from actions of the Purchaser
unrelated to the transactions contemplated by this Agreement:
i. in the event the CEE available for deduction under Section 66.7 of
the Income Tax Act (Canada) is not equal to $32,198,000, the
Purchase Price shall be adjusted based on a value of 30 cents per
dollar surplus or deficiency;
ii. in the event the Earned Depletion Base available in accordance
with subsection 1202(2) of the Income Tax Regulations is not equal
to $11,769,000, the Purchase Price shall be adjusted based on a
value of 10 cents per dollar surplus or deficiency; and
iii. in the event the ACRI in accordance with subsection 20(5) of the
Income Tax Act (Canada) is not equal to $14,140,000, the Purchase
Price shall not be adjusted.
b. Limitation of Indemnification: Neither party shall be obliged to make
any payment to the other pursuant to subclause 19(a) unless all claims
for adjustment made by the claiming party to the other under this
subclause 19(a) exceed $200,000, at which time the party against whom the
claim is made shall be liable in full and pay the amount of the claim
(exclusive of costs and expenses related to the enforcement of such
claim). Notwithstanding the provisions of clauses 10 and 18 herein, all
such claims hereunder may be brought prior to the date which is one day
after the rights of assessment or reassessment under the Tax Acts in
respect of the taxation year in which such Tax Pools were utilized by the
Purchaser has expired.
c. Accounting: The parties shall account for and file all tax returns on
the basis that Vendor will book all revenue and expenses relating to the
Assets prior to the Closing Date and the Purchaser will book such revenue
and expenses relating to the Assets after the Closing Date.
20. ENVIRONMENTAL REVIEW
a. Conduct of Review: An environmental review may be conducted by the
Purchaser in respect of the Assets (subject to the consent of the
applicable operators). The costs of the environmental review shall be
paid solely by the Purchaser. The environmental review shall be
completed no later than June 1, 1997 and shall be undertaken in a manner
that does not unduly interfere with operations conducted in respect of
the Assets. The Vendor shall provide assistance to the Purchaser in
gaining access to those of the Assets which the Purchaser wishes to
review. If the Purchaser, or its representatives, visits any of the
sites of the Assets, the Purchaser shall indemnify and save harmless each
of the Vendor and its directors, officers, employees, agents and advisors
from any actions, proceedings, claims, demands, losses, costs, damages,
expenses and liabilities resulting from or arising out of any such visit.
b. Notice of Defects: the Parties shall meet and consult prior to initiation
of the environmental review and during the course of its conduct. During
the course of the environmental review but no later than 5:00 p.m.,
Calgary time, on June 1, 1997, the Purchaser may give notices to the
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Vendor of Environmental Defects (as herein defined) which in the
reasonable opinion of the Purchaser would cost, in the aggregate, at
least $1,500,000 to cure. Such notices shall: (i) identify in reasonable
detail the nature and a description of the Environment Defect and the
portion of the Assets to which it relates; (ii) identify the applicable
Environmental Law, which at June 1, 1997 requires remediation of the
Environmental Defect; (iii) identify in reasonable detail all necessary
environmental remediation including an estimate by the Purchaser, acting
reasonably, of the date on which the Purchaser will be obligated to
perform such environmental remediation under applicable Environmental
Law; and (iv) estimate the expected cost of such environmental
remediation on an itemized and site by site basis. Any notices given by
the Purchaser later than June 1, 1997 shall, for greater certainty, not
be valid or effective notices for the purposes of this Article 20 and
Environmental Defects disclosed in such notices shall not be adjusted in
accordance with the terms of this Article 20.
For the purposes of this Article 20, "Environmental Defects" shall mean
any Environmental Liabilities in respect of the Assets which the Vendor,
but for Closing of the transactions contemplated herein, would be
obligated to remediate under applicable Environmental Law, excluding all
abandonment and reclamation obligations which are usual in respect of oil
and gas assets of the type to be acquired by the Purchaser pursuant to
the terms of this Agreement net of salvage value. The Purchaser
acknowledges that it has taken into account the assumption of
responsibility for such abandonment and reclamation obligations and the
costs associated therewith when the Purchaser evaluated the Assets and
determined the Purchase Price.
c. Adjustments: if notices of Environmental Defects are given in accordance
with subclause 20(b)(i), the Vendor shall use reasonable efforts to
remedy such Environmental Defects as soon as possible after being
notified of such defect provided that the Vendor shall not be required to
make any payment to cure an Environmental Defect. If the Vendor does not
remedy an Environmental Defect (herein an "Uncured Environmental
Defect"), on or before the day prior to the Closing Date, then:
i. where the cumulative amount of the estimated costs to cure such
Uncured Environmental Defects is $1,500,000 or less, the Purchaser
shall waive the Uncured Environmental Defects and complete the
purchase of the Assets without adjustments to the Purchase Price
on account of such Uncured Environmental Defects; or
ii. where the cumulative amount of the estimated costs to cure such
Uncured Environmental Defects is greater than $1,500,000 but less
than or equal to $10,000,000, the Vendor shall elect prior to the
Closing Date to:
A. retain the liability with respect to some or all of the
Uncured Environmental Defects and perform, or cause to be
performed, the remediation of such Uncured Environmental
Defects before or after Closing and the Parties shall
proceed with Closing as otherwise contemplated herein in
which circumstances the Vendor shall credit the Purchaser
by way of a reduction to the Purchase Price for the
<PAGE>
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aggregate estimated costs to cure such Uncured
Environmental Defects not retained by the Vendor; or
B. credit the Purchaser by way of a reduction to the Purchase
Price of the aggregate estimated costs to cure such Uncured
Environmental Defects and the Parties shall proceed with
Closing; or
iii. where the cumulative amount of the estimated costs to cure such
Uncured Environmental Defects is greater than $10,000,000, unless
the Purchaser shall have agreed pursuant to subclause 20(c)(iv)(A)
to grant to the Vendor a further period of time within which the
Vendor may cure or remove the Uncured Environmental Defects, the
Vendor shall elect prior to the Closing Date to:
A. terminate this Agreement in its entirety; or
B. subject to the right of the Purchaser to terminate pursuant
to subclause 20(c)(iv), proceed with Closing and credit the
Purchaser by way of a reduction to the Purchase Price of
the aggregate estimated costs to cure such Uncured
Environmental Defects; or
C. retain the liability with respect to some or all of the
Uncured Environmental Defects and perform, or cause to be
performed, the remediation of such Uncured Environmental
Defects before or after Closing and, subject to the right
of the Purchaser to terminate pursuant to subclause
20(c)(iv), proceed with Closing as otherwise contemplated
herein, in which circumstances the Vendor shall credit the
Purchaser by way of a reduction to the Purchase Price of
the aggregate estimated costs to cure such Uncured
Environmental Defects not retained by the Vendor;
iv. where the cumulative amount of the estimated costs to cure such
Uncured Environmental Defects is greater than $10,000,000 and the
Vendor has not exercised its right to terminate this Agreement
pursuant to subclause 20(c)(iii)(A) above, the Purchaser shall
elect prior to the Closing Date to:
A. with the agreement of the Vendor, grant a further period of
time within which the Vendor may cure or remove the Uncured
Environmental defects; or
B. terminate this Agreement in its entirety; or
C. proceed with Closing on the basis of the election of the
Vendor under subclause 20(c)(iii)(B) or (C) above.
<PAGE>
- 35 -
Failure by the Purchaser to elect or to elect in a timely manner
shall be conclusively deemed to be an election to proceed with
Closing on the basis of the election of the Vendor under subclause
20(c)(iii)(B) or (C) above.
d. Valuation of Environmental Defects: The Parties agree that for the
purposes of determining the value of any Environmental Defects, the
estimated costs to cure such Environmental Defects shall be limited to
those costs which a Party would be obligated to incur under Environmental
Law applicable to the Assets in order to remediate the particular
Environmental Defect to the standards required by such applicable
Environmental Law as at June 1, 1997 having regard to the practices of a
reasonably prudent operator of oil and gas assets of the type to be
acquired by the Purchaser pursuant to the terms of this Agreement. The
net present value of such costs shall be determined by discounting the
same at a rate of 10% from the time a Party is obligated to incur such
costs to June 1, 1997.
e. Confidentiality: The Parties agree that the results of the Environmental
Review shall be and shall remain absolutely confidential, and the Parties
covenant and agree with each other not to disclose the Environmental
Review or the contents of the same to any other Persons whomsoever
without the prior written consent of the other Party, except:
i. to the extent that such Party must disclose the same in any court
proceedings brought by it to enforce its rights hereunder, or to
the extent it is otherwise required to do so by law, but in either
case only to the extent that it is specifically so required; and
ii. to an operator of a property for the purpose of advising such
operator of any environmental remediation, provided only the
relevant portion of the Environmental Review is disclosed.
Notwithstanding the foregoing, the Parties may disclose the Environmental Review
to those of their respective employees, agents or representatives who have a
need to know the same for purposes of advising such Party, provided such
employees, agents or representatives agree to be bound by the confidentiality
provisions of this Agreement.
21. WESTCOAST ADJUSTMENT
The Vendor and the Purchaser acknowledge that the Westcoast Energy
Inc. ("Westcoast") eight inch Monias Main Lateral Pipeline (the "Line") through
which the Vendor ships certain of its natural gas, ruptured on April 30, 1997.
The parties have agreed on the following methodology to calculate the required
downwards adjustment to the Purchase Price at Closing, if the line is repaired
by that time, or, after closing until such time as the Line is repaired.
a. The Vendor's proved producing wells effected by the rupture of the Line
will be identified (the "Affected Wells").
b. The Engineering Report will be rerun for the Affected Wells to reflect
the delayed production values (the "Revised Engineering Report").
<PAGE>
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c. The present value discounted at 10% per annum of the cash flow from such
Affected Wells on an established reserves basis (which, in this case,
means utilizing 100% of the proved reserves and 100% of the probable
reserves) will be determined.
d. The revised net present value of the Affected Wells as determined in the
Revised Engineering Report will then be subtracted from the original net
present value of the Affected Wells as determined in the Engineering
Report and the difference will be a downwards adjustment to the Purchase
Price.
e. If the Line is not repaired by the Closing Date, both parties agree to
obtain from Westcoast an estimate of the date the Line is expected to be
repaired. The Purchase Price adjustment prepared by the Vendor and used
at Closing will then be calculated based on the Westcoast estimated date
of repair. This adjustment will be subsequently reconciled by the
Purchaser (and agreed to by the Vendor) to the actual at the time the
Line is repaired. Such adjustment will be settled within 4 Business Days
of that time.
f. The Vendor agrees to use its reasonable commercial efforts to mitigate
the loss to the Vendor due to the rupture of the Line.
g. All unutilized Westcoast cost of service charges attributable to the
Vendor's Assets due to the Line rupture shall be for the Vendor's account
to and including the date the Line is repaired.
h. To the extent the Vendor purchases brokerage gas from Third Parties in
order to maintain deliveries under production sales contracts or to
otherwise mitigate losses, the net benefit or loss (ie. the difference
between the cost of purchasing such gas and the proceeds of sale of such
gas) shall be for the Vendor's account.
i. To the extent that any costs relating to the repair or replacement of the
Line are charged back by Westcoast, such costs shall be for the Vendor's
account.
22. COVENANTS OF THE VENDOR AND THE PURCHASER
a. The Vendor and the Purchaser will each use its best efforts to cause the
conditions precedent set forth in clause 13, which are for the benefit of
the other, to be fulfilled and satisfied as soon as practicable.
b. Until Closing has occurred, no party shall release any information
concerning this Agreement and the transactions herein provided for
without the prior written consent of the other party, which consent shall
not be unreasonably withheld and each party shall furnish to and discuss
with the other party, drafts of all press and other releases prior to
publication. Nothing contained herein shall prevent a party at any time
from furnishing information (i) to any governmental agency or regulatory
authority or to the public if required by applicable law, provided that
the parties shall advise each other in advance of any public statement
which they propose to make, (ii) in connection with obtaining consents or
complying with preferential, preemptive or first purchase rights
contained in Title and Operating Documents and any other agreements and
documents to which the Assets are subject, or (iii) to procure the
consent of the lenders of the Vendor or the Purchaser or any of their
respective Affiliates.
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c. If the purchase and sale contemplated by this Agreement is closed, then,
from the Closing Date until the Purchaser or its nominee becomes the
recognized holder of the Assets in the place of the Vendor, the Vendor
shall, as soon as practicable:
i. deliver to the Purchaser all revenues, proceeds and other benefits
received by the Vendor attributable to production after the
Adjustment Date respect of the Assets together with the relevant
statements of operations and related documents;
ii. deliver to the Purchaser all third party notices and
communications received by the Vendor in respect of the Assets in
order to permit the Purchaser to exercise its rights in accordance
with the terms of the relevant operating agreement;
iii. deliver to the Purchaser all third party invoices, cash calls and
other billings in respect of such Assets in order to permit the
Purchaser to make all payments required thereunder in a timely
fashion;
iv. deliver to third parties all notices and communications as the
Purchaser may reasonably request and all monies and other items
the Purchaser provides in respect of such Assets; and
v. as agent for the Purchaser, do and perform all acts and things,
and execute and deliver all agreements, notices and other
documents and instruments as the Purchaser reasonably requests for
the purpose of facilitating the exercise of rights incidental to
the ownership of such Assets.
Nothing in this paragraph shall be construed as extending or restricting or
limiting in any manner any of the other covenants, warranties, representations
and other obligations of the parties under this Agreement. The Vendor shall not
be liable to the Purchaser for any loss suffered by the Purchaser in connection
with the arrangement established by this subclause, except to the extent that
the loss is caused by Vendor's gross negligence or its wilful misconduct. The
Purchaser indemnifies Vendor, its directors, officers, contractors, agents and
employees from and against any liability, loss, costs, claims or damages
arising out of the performance by the Vendor or its successors or assigns of
their obligations under this subclause.
23. SUBROGATION
Insofar as is reasonably practicable, the Purchaser shall have
full rights of substitution and subrogation in and to all covenants,
representations and warranties previously given by third parties with respect to
the Assets or any of them.
24. WAIVER
No waiver by any party of any breach of any of the terms,
conditions, representations or warranties in this Agreement shall take effect or
be binding upon that party unless the waiver is expressed in writing under the
authority of that party and 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.
<PAGE>
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25. FURTHER ASSURANCES
At the Closing Date and thereafter as may be necessary, the
parties shall execute, acknowledge and deliver such other instruments and take
such other action as may be reasonably necessary to carry out their obligations
under this Agreement.
26. ASSIGNMENT
a. Prior to the 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 Rights of First Refusal, as provided in clause
14.
b. 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.
27. SIGNS AND NOTIFICATIONS
After Closing, the Vendor may remove any signs which indicate the
Vendor's ownership or operation of the Assets. It shall be the responsibility
of the Purchaser, where necessary, to erect or install any signs that may be
required by governmental agencies indicating the Purchaser to be the operator of
the Assets and to notify other working interest owners, gas purchasers,
suppliers, contractors, governmental agencies and any other third party of the
Purchaser's interests in the Assets.
28. NOTICE
All notices required or permitted hereunder or with respect to
this Agreement shall be in writing and shall be deemed to have been properly
given and delivered when delivered personally, or when sent from a point within
Canada by registered mail or confirmed facsimile (or by any other like method by
which a written and recorded message may be sent), with all postage or charges
fully prepaid, and addressed to the parties hereto, respectively, as follows:
The Purchaser: Numac Energy Inc.
Energy Plaza
321 - 6th Avenue S.W.
Calgary, Alberta T2P 3N3
Attention: Mr. Dale Hohm
Fax: (403) 260-9416
The Vendor: Wainoco Oil Corporation
600, 10000 Memorial Drive
Houston, Texas
77024
Attention: Julie Edwards
Fax: (713) 688-0616
<PAGE>
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Any notice or communication so mailed shall be deemed to have been
given to and received by the addressee four (4) Business Days after the mailing
thereof, provided that neither party shall use the mails for the giving of
notice during the term of any strike or disruption or threatened strike or
disruption of postal service in Canada. Any notice or communication sent by
personal service, facsimile or other means shall be deemed received when
delivery or reception of the transmission is complete except that, if such
delivery or transmission is sent on a Saturday, Sunday or day when the receiving
party's office is not open for the regular conduct of business, on or after 4:00
p.m., such notice or communication shall be deemed to be received on the next
day that such office is open for the regular conduct of business. Either party
may change its address for the purposes hereof by directing a notice in writing
of such change to the other party at its above address.
29. GOVERNING LAW
This Agreement shall in all respects 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.
30. ENTIRE AGREEMENT
a. This Agreement supersedes all previous agreements and states the entire
agreement between the parties concerning the Assets.
b. This Agreement may be amended only by written instrument signed by the
Vendor and the Purchaser.
31. ENUREMENT
This Agreement shall be binding upon and enure to the benefit of
the parties hereto and their respective successors and permitted assigns.
32. SEVERABILITY
If any provisions of this Agreement is held to be invalid, illegal
or unenforceable, the invalidity, illegality or unenforceability will not affect
any other provision of this Agreement and this Agreement will be construed as if
the invalid, illegal or unenforceable provision had never been contained herein
unless the deletion of the provision would result in such material change to
cause the completion of the transactions contemplated herein to be unreasonable.
33. TIME
Time shall be of the essence in this Agreement.
34. EMPLOYEE MATTERS
a. Offers of Employment: Not later than three Business Days before the
Closing Date, the Purchaser hereby agrees to make offers of employment to
thirteen of the Vendor's Calgary office and sixteen of the Vendor's field
staff, subject to the Purchaser's prior interview of such persons and
satisfaction of the Purchaser as to such person's acceptability and,
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relative to the Purchaser's compensation and benefit programs, the
appropriateness of the terms of employment of such persons. The
Purchaser will use its best efforts to ensure that such offers are in
writing and on substantially the same terms and conditions currently in
place for each such Employee. The Purchaser will provide copies of all
offers made by the Purchaser to the Vendor with evidence as to whether or
not such offer was accepted or rejected. Upon acceptance of the offers
of employment made to such persons, such persons shall constitute
"Retained Employees" for the purposes of this clause 34.
b. Liability of Vendor: The Vendor shall continue to be responsible for and
discharge all liabilities and obligations accruing due and payable to
those Employees not retained (the "Vendor's Employees") by the Purchaser,
without limitation, wages and benefits. The Vendor is responsible for
terminating the employment of the Vendor's Employees, and the payment of
all severance obligations and liabilities associated therewith.
c. Liability of Purchaser: The Purchaser shall be responsible for and
discharge all liabilities and obligations accruing due or payable to the
Retained Employees from and after the Closing Date including, without
limitation, wages and benefits and the Purchaser shall indemnify the
Vendor from and against any liabilities, losses, costs, claims, damages,
expenses or liabilities suffered, sustained, paid or incurred by the
Vendor in respect of claims by any Retained Employees in respect of same.
<PAGE>
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35. COUNTERPART
This Agreement may be executed in counterpart, each of which shall
be considered an original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF the parties have duly executed this Agreement
in accordance with their respective requirements therefor, as of the date first
above written.
WAINOCO OIL CORPORATION
Per: /s/ James R. Gibbs
-----------------------
James R. Gibbs
NUMAC ENERGY INC.
Per: /s/ Stewart D. McGregor
-----------------------
Stewart D. McGregor
