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EXHIBIT 3.07
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PIPELINE CONSTRUCTION AND LIMITED
RECOURSE FINANCING AGREEMENT
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PIPELINE CONSTRUCTION AND LIMITED RECOURSE FINANCING AGREEMENT
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This Agreement is made this 27th day of March, 2000.
BETWEEN:
PROMAX ENERGY INC., an Alberta corporation having an
office in the city of Calgary, Alberta (hereinafter called Promax)
-and-
BIGSTONE PROJECTS LTD., an Alberta corporation having an
office in the city of Calgary, Alberta (hereinafter called Bigstone)
WHEREAS Promax is the owner of the lands attached hereto as Exhibit "A".
WHEREAS Promax and Bigstone entered into Pipeline Construction and Limited
Recourse Financing Agreement dated February 14, 2000 (the "February 14
Agreement") attached hereto as Exhibit "B".
WHEREAS Promax wishes Bigstone to construct, and will purchase from
Bigstone as per the terms of this Agreement, a high pressure natural gas
pipeline from 6-4-25-9-W4M to 6-21-25-8-W4M, hereinafter referred to as the
"Phase 1 Pipeline".
WHEREAS Promax wishes Bigstone to construct, and will purchase from
Bigstone as per the terms of this Agreement, a high pressure natural gas
pipeline from 10-17-24-9-W4M to 9-18-24-8-W4M, and from 9-18-24-8-W4M to 9-
19-23-8-W4M, hereinafter referred to as the "Phase 2 Pipeline".
WHEREAS Promax wishes Bigstone to construct, and will purchase from
Bigstone as per the terms of this Agreement, a high pressure natural gas
pipeline from 9-18-24-8-W4M to 9-13-24-8-W4M, hereinafter referred to as
the "Phase 3 Pipeline".
NOW THEREFORE THE PARTIES HERETO AGREE AS FOLLOWS:
FEBRUARY 14 AGREEMENT
The February 14 Agreement is hereby cancelled and replaced with the terms
of this Agreement. Bigstone upon return the One Hundred Thousand Dollar
($100,000) advance made by Promax, as per the terms of the February 14
Agreement, on or before March 31, 2000.
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DEFINITIONS
1. AMI Area of Mutual Interest is all the lands included on townships
23,24 25 and 26 and ranges 7,8,9,10 and 11 all W4M comprising of 20
townships or 460,800 acres.
2. Bigstone Pipelines All pipelines constructed and owned by Bigstone
as per the terms of this Agreement including those portions of the
Phase 1 Pipeline, Phase 2 Pipeline, and Phase 3 Pipeline constructed.
3. Gas Price The average gas price received by Promax for its gas and
the gas of others at the plant gate outlet during any particular month
in Dollars per Mscf.
4. Monthly Gas Volume The number of Mscf that is delivered at the Plant
Gate Outlet from the Pipeline System, by Promax and others
transporting natural gas through the Pipeline System, during any
particular month.
5. Mscf One thousand standard cubic feet of natural gas measured at 60
degrees F and 14.65 Psia.
6. Payout When Promax has paid for the Bigstone Pipelines as per the
terms of this Agreement.
7. Pipeline System The Bigstone Pipelines and all other pipelines
operated or used by Promax in the AMI.
Plant Gate Outlet That location, or locations, that Promax or others
transporting natural gas through the Pipeline System delivers natural
gas for sale after processing.
8. Promax Monthly Installments Thirty Percent (30%) of the Gas Price
multiplied by the Monthly Gas Volume.
PHASE 1 PIPELINE
Bigstone will construct the Phase 1 Pipeline as follows:
1. A 6 5/8 inch OD, .156 inch wall, yellow jacketed X-42 steel pipeline
from 6-4-25-9-W4M to 6-20-25-8-W4M, a distance of approximately 7
miles, subject to minor modifications that may be required as a result
of the survey and right of way acquisition. The actual length of this
section of the Phase 1 Pipeline will be determined by final survey and
be hereinafter referred to as the "Phase 1-6 length" in miles.
2. A 4 1/2 inch OD, .125 inch wall, yellow jacketed X-42 steel pipeline
from 6-20-25-8-W5M to 6-21-25-8-W4M, a distance of approximately 1
mile, subject to minor modifications that may be required as a result
of the survey and right of way acquisition. The actual length of this
section of the Phase 1 Pipeline will be determined by final survey and
be hereinafter referred to as the "Phase 1-4 length" in miles.
3. The Phase 1 Pipeline will be constructed as per the general
specifications attached hereto as Exhibit "C", with the exception of
certain items that may conflict with general industry practices for
the construction of natural gas pipelines in the area and item (3)
under General.
4. Bigstone will use its best efforts to have the Phase 1 Pipeline
completed by June 30, 2000.
PHASE 2 PIPELINE
Bigstone will construct the Phase 2 Pipeline as follows:
1. A 6 5/8 inch OD, .156 wall, yellow jacketed X-42 steel pipeline from
10-17-24-9-W4M to 9-18-24-8-W4M, a distance of approximately 6 miles,
subject to minor modifications that may be required as a result of the
survey and right of way acquisition. The actual length of this section
of the Phase 2 Pipeline will be determined by final survey and be
hereinafter referred to as the "Phase 2-6 length" in miles.
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2. A 4 1/2 inch OD, .125 inch wall, yellow jacketed X-42 steel pipeline
from 9-18-24-8-W4M to 9-19-23-8-W4M, a distance of approximately 5 1/2
miles, subject to minor modifications that may be required as a result
of the survey and right of way acquisition. The actual length of this
section of the Phase 2 Pipeline will be determined by final survey and
be hereinafter referred to as the "Phase 2-4 length" in miles.
3. The Phase 2 Pipeline will be constructed as per the general
specifications attached hereto as Exhibit "C", with the exception of
certain items that may conflict with general industry practices for
the construction of natural gas pipelines in the area and item (3)
under General.
4. Bigstone will use its best efforts to have the Phase 2 Pipeline
completed by July 31, 2000.
PHASE 3 PIPELINE
Bigstone will construct the Phase 3 Pipeline, subject to cancellation by
Bigstone or Promax described herein, as follows:
1. A 6 5/8 inch OD, .156 inch wall, yellow jacketed X-42 steel pipeline
from 9-18-24-8 to 9-13-24-8-W4M, a distance of approximately 5 1/2
miles, subject to minor modifications that may be required as a result
of the survey and right of way acquisition. The actual length of the
Phase 3 Pipeline will be determined by final survey and be hereinafter
referred to as the "Phase 3-6 length" in miles.
2. The Phase 3 Pipeline will be constructed as per the general
specifications attached hereto as Exhibit "C", with the exception of
certain items that may conflict with general industry practices for
the construction of natural gas pipelines in the area and item(3)
under General.
3. Bigstone will use its best efforts to have the Phase 3 Pipeline
completed by October 31, 2000, subject to item (1) under the heading
Options.
OWNERSHIP AND CONTROL
1. Title to the Bigstone Pipelines will be held by Bigstone before
Payout. However once construction is completed on the different phases
of the pipelines, and those phases have been successfully tested and
accepted by Promax in writing, all future costs pertaining to the
completed and tested phase will be for the account of Promax. Cleanup
and restoration costs on the Pipeline Right of Way will remain the
responsibility of Bigstone.
2. Once a Phase of the Bigstone Pipelines has been successfully tested
and accepted by Promax in writing, Promax will have control of that
phase of the Bigstone Pipelines and may use it to transport its
natural gas and natural gas of others. This use will continue as long
as the Promax Monthly Installments are current.
PIPELINE SYSTEM PURCHASE
1. Promax will purchase the Pipeline System from Bigstone for a total
price, the "Total Price", to be calculated as per the following
formula:
Total Price = $ 128,000("Phase 1-6 length" + "Phase 2-6 length" +
"Phase 3-6 length")+ $ 104,000("Phase 1-4 length" + "Phase 2-4
length") + GST
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By inserting the approximate lengths given above and assuming that all
Phases of the Pipeline are constructed the Total Price would be Three
million, Forty Four Thousand Dollars ($ 3,044,000) plus GST. It is
acknowledged that actual survey values will be used for the
calculation of the Total Price.
2. Promax agrees to pay the Total Price to Bigstone by way of the Promax
Monthly Installments and Bigstone agrees to accept payment of the
Total Price from Promax by way of the Promax Monthly Installments.
3. The Promax Monthly Installments will commence upon Phase 1 of the
Bigstone Pipelines being completed, tested, accepted by Promax, and
put into service.
4. Upon the sum of the Promax Monthly Installments, equaling the Total
Price, title to the Bigstone Pipelines would be transferred to Promax.
5. The Promax Monthly Installments, are due within three (3) days of
Promax receiving its monthly payment for sale of its portion of the
Monthly Gas Volume.
6. If the Total Price is not paid in full within five (5) years of this
Agreement the balance owed, being the Total Price less the sum of the
Promax Monthly Installments made, becomes due and payable in full.
WELL TIE-INS AND WELLHEAD EQUIPMENT
1. The Pipeline System consists of pipelines only without connections or
tie-ins thereto. Promax is responsible for all tie-ins to the Pipeline
System and all wellhead equipment required for production. Bigstone
will make all the required tie-ins to the Pipeline System and install
all the wellhead equipment required, as directed and designed by
Promax, at the rate of cost plus 15%. Equipment rates will be mutually
agreed upon and will be equivalent to acceptable industry standards.
Bigstone will also do the work required, if requested and directed by
Promax , to reinstate the existing pipeline at the rate of cost plus
15%.
2. Promax agrees to pay Bigstone for the work described in #1 above, and
any additional work requested and performed, within 30 days of
invoice.
BIGSTONE ROYALTY, CONSTRUCTION, AND PARTICIPATION
1. Subsequent to Promax obtaining title to the Pipeline System, as per
the terms of this Agreement, Bigstone will be paid a transportation
royalty, the "Royalty". The Royalty will be paid by multiplying two
(2) cents per Mscf by the Monthly Gas Volume and will be due and
payable within three (3) days of Promax receiving its monthly payment
for sale of its portion of the Monthly Gas Volume.
2. Bigstone is hereby granted the right to construct any additional
pipelines for Promax, that Promax wishes to construct in the future,
in the "AMI", at the rate of cost plus 15%. For this right to continue
Bigstone must be competitive with other pipeline contractors in the
area.
3. In consideration of these arrangements, the risk associated with
financing, and upon completion of the Phase 1 Pipeline Bigstone is
hereby granted a four decimal eight (4.8%) working interest in the
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lands attached hereto as Exhibit "A", including the other associated
assets that are part of the Amex Joint Venture, and the right to
participate with Promax to the extent of four decimal eight
percent(4.8%) in all other lands and deals acquired by Promax in the
AMI that are not listed on Exhibit "A". The terms of this
participation will be identical to that of the Amex Joint Venture
Agreement and associated agreements that Promax had with Albreda
Resources Ltd. These Amex Joint Venture and associated documents will
be prepared and executed by Promax and Bigstone forthwith.
OPTIONS
1. Both Promax and Bigstone have the right to cancel the Phase 3 Pipeline
prior to August 31, 2000 by notice in writing to the other party.
2. Promax has the right to purchase the Bigstone Pipelines within one
year of this Agreement by paying Bigstone an amount calculated by the
following formula: = 0.85(Total Price Sum of Promax Monthly
Installments paid).
3. Promax has the right to purchase the Bigstone Pipelines within two
years of this Agreement by paying Bigstone an amount calculated by the
following formula: =0.90(Total Price Sum of Promax Monthly
Installments paid).
Promax has the right to purchase the Royalty from Bigstone at any time
for the greater of a mutually agreed projection of three (3) years of
royalty cash flow or Four Hundred Thousand Dollars ($400,000).
GENERAL
1. This agreement enures to the benefit of and is binding upon the
Parties and their respective successors and permitted assigns.
2. This agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta.
3. The general specifications attached in Exhibit "C" were not
specifically written for the construction of the Bigstone Pipelines
and are attached hereto as a guide to the construction thereof. The
general specifications do not override any portion of this Agreement.
4. Bigstone shall obtain and continuously carry during the work the
following insurance:
a) Workman's Compensation Insurance covering all employees engaged
in the work within the statutory requirements of the Province
having jurisdiction over such employees;
b) Employees Liability Insurance with limits of not less than
$1,000,000 for each accidental injury, to or death of Bigstone's
employees engaged in the work, if Workman's Compensation does not
exist.
c) Automobile and Aircraft liability Insurance covering all motor
vehicles and aircraft owned, operated or leased by Bigstone.
Limits of liability if not less than $1,000,000 favour accidental
injury to or death of one or more persons or damage to or
destruction of property as result of the accident.
d) General and Comprehensive Liability Insurance providing for a
combined single limit of $2,000,000 for each occurrence or
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accident coverage for damage due to bodily injury including death
sustained by any person or persons caused by occurrence or
accident arising out of contractual liability, products completed
liability, coverage for non-owned motor vehicles or aircraft and
coverage for sub-contractors.
e) Builder's Risk Course of Construction Insurance to the full value
of the worth of the work to include loss on damage to the
machinery, materials, and supplies at the site, or in transit
thereto.
5. Operations shall be conducted by Bigstone in full compliance with:
a) Applicable Workmen's Compensation & Occupation Heath and Safety
Legislation.
b) Indemnification of Promax from any and all claims,
liabilities, actions or causes of action including damages to
livestock, fences, gates, irrigation canals, ditches, wrongful
acts or omissions of Bigstone employees or sub-contractors,
bridges, roads, highways, negligent or defective work.
c) Applicable Federal, Provincial, and Local safety laws.
d) Permits and licenses require to be issued in Bigstone's name
including qualifying for and performing the work to all
applicable Federal, Provincial and Local Governments.
e) Performance of the work in a safe, efficient, workmanlike, and
careful manner by qualified, skilled competent, careful, and
efficient workmen.
f) Adequate and competent supervisors including a competent
Construction Superintendent.
g) Inspected by Promax at all reasonable times and notified in time
for specific tests.
h) Acceptance by Promax in writing, written certification by
Provincial Authorities with jurisdiction and evidence of proper
payment of all labour and sub-contractors.
6. Arbitration - when and if a dispute arises, the parties shall seek
equitable settlements between them, failing this, each party will
elect an arbitrator who will together elect a third. The discussions
of this group, by majority will settle all outstanding disputes.
7. All notices, requests, demands, or other communications shall be
delivered by registered mail as follows:
PROMAX ENERGY INC.
Suite 200, 707 - 7th Avenue SW
Calgary, Alberta
T2P OZ2
Telephone - 261 8880
Fax - 261 8818
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BIGSTONE PROJECTS LTD.
Box 19, Site 10, RR4
Calgary, Alberta
T2M 4L4
Telephone - 547-4377
Fax - 547-3453
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Signed at the City of Calgary, in the Province of Alberta on the 27th day
of March, 2000.
_____________________________
_____________________________ __________________________
PROMAX ENERGY INC. BIGSTONE PROJECTS LTD.
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