EXHIBIT 10.1
ASSET PURCHASE AGREEMENT DATED MARCH 8, 2007
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated effective March 8, 2007.
BETWEEN:
GREAT NORTHERN OILSANDS INC., of 600-595 Hornby Street,
Vancouver, BC V6C
2E8
(the "BUYER")
AND:
PATCH ENERGY INC., of Suite # 300, 441 - 5th Avenue S.W.,
Calgary, AB T2P
2V1
(the "SELLER")
WHEREAS:
(A) The
Seller is the
owner, directly and indirectly,
of the Purchased
Assets; and
(B) The
Seller wishes to
sell and Buyer wishes to purchase the
Purchased
Assets.
NOW, THEREFORE THIS
AGREEMENT WITNESSES
THAT in consideration of the mutual
warranties, covenants
and agreements contained in this Agreement and other good
and valuable
consideration by each of the Seller and the Buyer, the receipt
and
sufficiency of which is hereby acknowledged by each of them, the parties
agree
as follows:
PART 1
INTERPRETATION
DEFINITIONS
1.1 In this
Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(a)
"AGREEMENT" means this asset purchase agreement as amended from
time to time together with all schedules attached hereto;
(b)
"ASSETS" means
the Petroleum and Natural Gas Rights, the
Tangibles and the Miscellaneous Interests;
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(c)
"BUSINESS DAY" means any day, other than a Saturday, Sunday or
a
Canadian federal, Alberta or British Columbia statutory
holiday;
(d)
"CLOSING DATE" means
March 8, 2007,
or such other date as
the
parties may agree;
(e)
"CLOSING TIME" means 1:00 pm (Calgary time) on the Closing
Date;
(f)
"CONSENTS" means the
consents and approvals that are reasonably
required in
accordance
with
normal oil and gas industry
practices for the
assignment
to the Buyer of any contracts,
licences, leases or permits which are material to the use of
the
Purchased Assets as presently used or operated and all
consents,
authorizations
and approvals
required by any Governmental
Authority for the consummation of the transactions contemplated
by this Agreement;
(g) "DATA"
means all records,
data and information
owned by Seller
including Seismic Data
directly relating to the Petroleum and
Natural Gas Rights or the Tangibles, including well files,
lease
files, agreement
files and production
records (including the
Title and Operating Documents);
(h)
"EFFECTIVE TIME" means
1:00 p.m., Calgary
time, on the 8th day
of March, 2007;
(i)
"ENCUMBRANCE" means any mortgage, charge, pledge,
hypothecation,
lien, security interest, right of possession, lease, licence,
assignment, option, claim, encumbrance or charge, whether or
not
registered or
registrable
and whether or not consensual or
arising by law, statute or otherwise;
(j)
"ENVIRONMENTAL LAW" includes any statute, regulation or rule of
any Governmental Authority relating to protection of the
environment that relates to the Purchased Assets;
(k)
"EXCLUDED ASSETS"
means the Excluded
Petroleum and Natural Gas
Rights, the Excluded
Tangibles and the
Excluded
Miscellaneous
Interests;
(l)
"EXCLUDED DATA" means all records, data and information owned
by
the Limited Partnership including Excluded Seismic Data
directly
relating to the Excluded Petroleum and Natural Gas Rights or
the
Excluded Tangibles, including well files, lease files,
agreement
files and production
records (including the
Excluded Title and
Operating Documents);
(m)
"EXCLUDED LANDS" means the Petroleum Substances within, under
or
upon the lands described in the Excluded Land Schedule,
subject
to the restrictions
and exclusions set forth therein as to
Petroleum
Substances and
geological formations,
and any other
interests in oil and
gas properties
legally or beneficially
owned by the Limited Partnership;
(n)
"EXCLUDED LAND SCHEDULE" means Schedule "C";
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(o)
"EXCLUDED LEASES"
means the leases, licenses, permits and
similar documents
of title described in the Excluded Land
Schedule by virtue of
which the holder
thereof is entitled
to
drill for, win, take, own or remove Petroleum Substances
within,
upon or under the Excluded Lands and includes, if applicable,
all renewals and
extensions of such documents and all documents
issued in substitution therefore;
(p)
"EXCLUDED
MISCELLANEOUS
INTERESTS" means Limited Partnership's
interests in all property, assets, interests and rights (other
than
the Excluded
Petroleum and Natural Gas Rights and the
Excluded Tangibles)
directly related to
the Excluded Petroleum
and Natural Gas Rights or the Excluded Tangibles but only to
the
extent such property,
assets, interests and rights are directly
related to Excluded
Petroleum and Natural Gas Rights or the
Excluded Tangibles,
including without limitation any and all of
the following:
(i)
contracts and
agreements
directly
related
to the
Excluded
Petroleum and
Natural Gas Rights or the
Excluded Tangibles
including, without
limitation, the
Excluded Title and Operating Documents;
(ii) the
Excluded Surface Rights;
(iii) the
Excluded Data; and
(iv) the
Excluded Wells, including well bores and casing,
but specifically
excludes (a)
Petroleum Substances produced
prior to the Effective Time and (b) accounts receivable
accruing
prior to the Effective Time;
(q)
"EXCLUDED PETROLEUM AND NATURAL GAS RIGHTS" means (i) all of
the
interest of Limited
Partnership in the Excluded Leases (to the
extent they pertain to the Excluded Lands) including, without
limitation, the
interests that are attributed to the Limited
Partnership in the Excluded Land Schedule, (ii) the fee simple
interests (if any) in
mines and minerals in the Excluded Lands
attributed to the
Limited Partnership in the Excluded Land
Schedule, and
(iii) all of the interest of the Limited
Partnership (if any)
in royalties,
net profits
interests and
similar interests including, without limitation, the interests
attributed to the
Limited Partnership in the Excluded Land
Schedule;
(r)
"EXCLUDED SEISMIC
DATA" means seismic data owned by the Limited
Partnership, including surveyors' ground elevation records,
shot
point maps,
drillers' logs, shooters' records, seismograph
records, seismograph
magnetic tapes,
monitor records, field
records and record sections, excluding maps and
interpretations
made therefrom;
(s)
"EXCLUDED ASSETS
SPECIFIC CONVEYANCES"
means all
conveyances,
assignments,
transfers,
novations and
other documents or
instruments that
are reasonably required or desirable, in
accordance
with normal oil and gas industry practices, to
convey, assign and
transfer the Excluded
Assets to the Seller,
or its nominee,
and
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to novate the Seller,
or its nominee, into
the Excluded
Title
and Operating
Documents in the place and stead of the
Limited
Partnership with respect to the Excluded Assets;
(t)
"EXCLUDED SURFACE
RIGHTS" means all rights to use or occupy the
surface of lands
(including, but not
limited to, the
Excluded
Lands) which
are used or held for
use in connection
with the
Excluded Petroleum
and Natural Gas Rights or the Excluded
Tangibles, including rights to enter upon and occupy the
surface
of Excluded
Lands on which the Excluded Tangibles and the
Excluded Wells are
located and rights to use the surface of
lands to gain access thereto;
(u)
"EXCLUDED
TANGIBLES" means
the interests of the Limited
Partnership that are directly related to the Excluded Petroleum
and Natural
Gas Rights in all other tangible depreciable
property and assets
used or intended to be
used in producing,
processing, gathering, treating, storing, measuring or
injecting
Petroleum Substances
or any of them from the Excluded Lands or
lands pooled or unitized therewith or in connection
with water
injection or removal
operations
that pertain to the Excluded
Petroleum and Natural Gas Rights, including, without
limitation,
all Excluded
Wells, gas plants, oil batteries, production
equipment, pipelines, pipeline connections, meters,
dehydrators,
motors,
compressors, treaters, dehydrators, scrubbers,
separators, pumps,
tanks, boilers, inventory, and communication
equipment;
(v)
"EXCLUDED TITLE AND
OPERATING DOCUMENTS"
means, to the
extent
directly related to
the Excluded
Petroleum and Natural Gas
Rights or the Excluded Tangibles, (i) the Excluded Leases, (ii)
assignments, trust
declarations,
operating agreements, royalty
agreements, overriding
royalty agreements, gross overriding
agreements,
participation agreements, farm-in agreements, sale
and purchase
agreements,
pooling agreements, common stream
agreements, easements,
surface leases and pipeline crossing
agreements, (iii) Sale, Processing and Transportation
Agreements; (iv)
agreements
for construction, ownership and
operation of
gas plants, gas gathering systems and other
facilities, (v)
permits, licenses and approvals, and (vi) other
agreements which
relate to the Excluded
Petroleum and
Natural
Gas Rights or the Excluded Tangibles or the ownership,
operation
or exploitation thereof;
(w)
"EXCLUDED WELLS" means all wells (including without limitation
producing, shut-in, suspended, capped, abandoned, injection and
disposal wells)
located on the Excluded Lands or Excluded Lands
pooled or unitized therewith;
(x)
"HAZARDOUS MATERIALS"
has the meaning given to it in the
relevant Environmental Law;
(y)
"GOVERNMENTAL
AUTHORITY" means, the
government of Canada,
the
government of an applicable Canadian province or territory and
each ministry,
department,
commission, board,
bureau or other
agency of, or
municipality, regional
district or other local
governing body
established by, any
such government,
or other
political
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subdivision
thereof, and
includes
any person exercising
executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government;
(z) "GST"
means the goods and services tax payable pursuant to the
GST Legislation;
(aa) "GST
LEGISLATION"
means the EXCISE TAX
ACT, 1980 RSC, C. E-15,
as amended and the regulations thereunder;
(bb) "LANDS"
means the Petroleum Substances within, under or upon the
lands described
in the Land Schedule, subject to the
restrictions and
exclusions
set forth therein as
to Petroleum
Substances and geological formations, and any other interests
in
oil and gas properties legally or beneficially owned by Seller;
(cc) "LAND
SCHEDULE" means Schedule "A";
(dd) "LEASES"
means the leases, licenses, permits and similar
documents of title
described in the Land
Schedule by virtue of
which the holder
thereof is entitled to drill for, win, take,
own or remove
Petroleum Substances
within, upon or under the
Lands and includes, if
applicable, all
renewals and extensions
of such documents
and all documents issued in substitution
therefore;
(ee) "LIMITED
PARTNERSHIP"
mean
the Patch Oilsands Limited
Partnership
established and governed by the Limited Partnership
Agreement;
(ff) "LIMITED
PARTNERSHIP
AGREEMENT" means the
Limited
Partnership
Agreement dated for reference May 31, 2006 among the Seller,
as
initial limited partner, Micron Enviro Systems Inc. and
Habanero
Resources
Inc. as limited
partners and Patch
Oilsands Ltd., as
general partner;
(gg)
"MISCELLANEOUS
INTERESTS" means
Seller's interests in all
property, assets, interests and rights (other than the
Petroleum
and Natural Gas Rights and the Tangibles) directly related to
the Petroleum
and Natural Gas Rights
or the Tangibles but only
to the extent such
property, assets,
interests and rights
are
directly related to
Petroleum and Natural Gas Rights or the
Tangibles, including
without limitation any and all of the
following:
(i)
contracts and
agreements
directly
related
to the
Petroleum and
Natural Gas Rights or the Tangibles
including, without
limitation, the Title
and Operating
Documents;
(ii) the
Surface Rights;
(iii) the Data;
and
(iv) the
Wells, including well bores and casing,
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but specifically
excludes (a)
Petroleum Substances produced
prior to the Effective Time and (b) accounts receivable
accruing
prior to the Effective Time;
(hh) "PARTIES"
means the parties to
this Agreement and "Party" means
any one of them;
(ii) "PERMITTED
ENCUMBRANCES" means:
(i)
liens for taxes,
assessments and
governmental
charges
for which payment is not due;
(ii) liens
incurred or created in the ordinary course of
business as
security in favour of the person who is
conducting the
development or operation of the property
to which such liens
relate for Seller's
proportionate
share of costs
and expenses of such development or
operation for which payment is not due;
(iii)
mechanics', builders' and materialmen's liens in respect
of services rendered or goods supplied for which payment
is not due;
(iv)
easements, rights of
way, servitudes and
other similar
rights in land (including, without limitation, rights of
way and servitudes for roads; railways; sewers; drains;
gas and oil pipelines;
gas and water mains and electric
light, power, telephone, telegraph and cable television
conduits, poles, wires and cables);
(v)
the right reserved to or vested in any municipality or
government or other public authority by the terms of any
lease, license,
franchise,
grant or permit or by any
statutory provision,
to terminate any such lease,
license, franchise, grant or permit or to require annual
or other periodic payments as a condition of the
continuance thereof;
(vi)
rights of general
application reserved
to or vested in
any governmental
authority to levy taxes on Petroleum
Substances or Excluded Petroleum Substances, as the case
may be, or any of them or the income therefrom, and
governmental
requirements and
limitations
of general
application;
(vii) royalty
burdens, liens, adverse claims, penalties,
reductions in interests and other encumbrances set out
(A) in the Land Schedule or the Excluded Land Schedule,
as the case may be, or (B) in the Title and Operating
Documents or the Excluded Title and Operating Documents,
as the case
may be, to the extent that they would
constitute
Permitted
Encumbrances
under
section
1.1(hh)(i) to (vi) and (viii); and
(viii) the
reservations, limitations, provisions and conditions
in any original
grants from the Crown or freehold
lessors of any of the Lands or Excluded Lands, as the
case may be, or interests therein and statutory
exceptions to title;
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(jj) "PETROLEUM
AND NATURAL GAS RIGHTS" means (i) all of the interest
of Seller in the
Leases (to the
extent they pertain to the
Lands) including,
without limitation, the interests that are
attributed to Seller in the Land Schedule, (ii) the fee simple
interests (if any) in mines and minerals in the Lands
attributed
to Seller in the Land Schedule, and (iii) all of the interest
of
Seller (if any) in royalties, net profits interests and
similar
interests
including,
without
limitation, the
interests
attributed to Seller in the Land Schedule;
(kk) "PETROLEUM
SUBSTANCES" means crude oil, petroleum, natural gas,
natural gas
liquids, coalbed methane and other related
hydrocarbons (except
coal) and any and all other substances
(including sulphur),
whether liquid, solid or gaseous and
whether hydrocarbons or not, produced in association therewith,
the rights to which are granted pursuant to the Leases or the
Excluded Leases, as the case may be;
(ll) "PURCHASE
PRICE" means the purchase price for the Purchased
Assets as set out in Section 2.3;
(mm) "PURCHASED
ASSETS" means the Purchased Securities and the
Assets;
(nn) "PURCHASED
SECURITIES"
means one (1) common share of Patch
Oilsands Ltd. and
1,470,000 Cash Units
and 403,279 Share Units
of the Limited
Partnership
(as such terms are
defined in the
Limited Partnership Agreement;
(oo) "SALE,
PROCESSING
AND TRANSPORTATION AGREEMENTS" means
agreements for the
sale of Petroleum
Substances produced
from
the Lands or Excluded Lands, as the case may be, or lands
pooled
or unitized
therewith
and agreements providing for the
gathering, transportation, compression, processing, treatment
or
storage of
Petroleum Substances produced from the Lands or
Excluded Lands, as the
case may be, or lands pooled or unitized
therewith;
(pp) "SEISMIC
DATA" means seismic data owned by the Seller, including
surveyors' ground elevation records, shot point maps, drillers'
logs, shooters'
records, seismograph records, seismograph
magnetic tapes,
monitor records, field records and record
sections, excluding maps and interpretations made therefrom;
(qq) "SPECIFIC
CONVEYANCES"
means all conveyances, assignments,
transfers, novations and other documents or instruments that
are
reasonably required or desirable, in accordance with normal oil
and gas industry practices, to convey, assign and transfer the
Assets to Buyer, or
its nominee, and to
novate Buyer,
or its
nominee, into the Title and Operating Documents in the place
and
stead of Seller with respect to the Assets;
(rr) "SURFACE
RIGHTS" means all rights to use or occupy
the surface
of lands (including,
but not limited to,
the Lands) which
are
used or held for
use in connection with the Petroleum and
Natural Gas Rights or the Tangibles, including rights to enter
upon and occupy the surface of lands on which the Tangibles and
the Wells are located
and rights to use the surface of lands to
gain access thereto;
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(ss) "TANGIBLES"
means the interests of Seller that are directly
related to the
Petroleum and
Natural Gas Rights in all other
tangible depreciable
property and assets used or intended to be
used in producing,
processing, gathering,
treating, storing,
measuring or injecting Petroleum Substances or any of them from
the Lands or lands pooled or unitized therewith or in
connection
with water injection
or removal operations
that pertain to the
Petroleum and Natural Gas Rights, including, without
limitation,
all Wells, gas plants,
oil batteries, production equipment,
pipelines, pipeline
connections, meters,
dehydrators,
motors,
compressors,
treaters, dehydrators,
scrubbers,
separators,
pumps, tanks, boilers, inventory, and communication equipment;
(tt) "TITLE AND
OPERATING DOCUMENTS"
means, to the extent directly
related to
the Petroleum and Natural Gas Rights or the
Tangibles, (i) the Leases, (ii) assignments, trust
declarations,
operating agreements,
royalty agreements, overriding royalty
agreements, gross overriding agreements, participation
agreements, farm-in
agreements, sale and
purchase
agreements,
pooling agreements, common stream agreements, easements,
surface
leases and pipeline crossing agreements, (iii) Sale, Processing
and Transportation Agreements; (iv) agreements for
construction,
ownership and operation of gas plants, gas gathering systems
and
other facilities, (v)
permits, licenses and approvals, and (vi)
other agreements
which relate to the
Petroleum and Natural Gas
Rights or the Tangibles or the ownership, operation or
exploitation thereof
(uu) "WELLS"
means all wells (including without limitation producing,
shut-in, suspended,
capped, abandoned,
injection and
disposal
wells) located
on the Lands or lands pooled or unitized
therewith.
PART 2
PURCHASE AND SALE
PURCHASE AND SALE
2.1 Upon
the terms and subject to the
conditions of this
Agreement, the
Seller agrees to sell and convey to the Buyer, and the Buyer agrees to
purchase
from the Seller, at
the Closing Time,
the Purchased Assets for the Purchase
Price.
2.2
Notwithstanding
anything in
this Agreement to the contrary, the
parties acknowledge and agree that this Agreement is not intended
to transfer to
the Buyer the Excluded
Assets and that the Purchase Price does not include any
consideration for the
Excluded Assets;
and in this regard the
Buyer agrees to
execute and deliver all required documents and instruments of
transfer or title
and do all things
necessary to transfer back to the Seller the Excluded Assets,
and further
acknowledges and
agrees that as of and from the Closing Time until
such time as the transfer of the Excluded Assets from the Buyer to
the Seller is
effective, the Buyer will hold the entire legal right, title and
interest in and
to the Excluded Assets for the sole use, benefit, enjoyment and
advantage of the
Seller.
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PURCHASE PRICE
2.3 The
purchase price (the "PURCHASE PRICE") for
the Purchased Assets is
payable as follows:
(a) by
payment of $100,000, by way of non-refundable deposit (which
the Parties
acknowledge
has been paid to the
Seller as of the
date of this Agreement);
(b) by the
issuance to the Seller
on the Closing Date of
1,000,000
restricted common
shares (the "SHARES")
of the Buyer which the
Parties agree have an aggregate value of $2,100,000; and
(c) by
payment of $800,000,
by solicitors
trust cheque or by
wire
transfer of immediately available funds to the trust
account of
the Seller's solicitors on the Closing Date.
SALES AND TRANSFER TAXES
2.4 The
Purchase Price does
not include GST. The Buyer shall pay all sales
and transfer taxes due or payable to any governmental authority incurred or to
be incurred in
connection with the sale and transfer of the Purchased Assets
by
the Seller to the Buyer hereunder.
ALLOCATION OF PURCHASE PRICE
2.5 The
Purchase Price shall be allocated among the Purchased
Assets as
follows:
(a) to
Petroleum and Natural Gas Rights
$ 2,160,000
(b) to
Tangibles
$ 539,999
(c) to
Miscellaneous Interests
$ 1.00
(d) to
Purchased Securities
$ 300,000
-----------
TOTAL
$ 3,000,000
COSTS AND REVENUES TO BE APPORTIONED
2.6 (a)
Except as
otherwise provided in this Section 2.6 and subject
to all other provisions of this Agreement, the Parties will
adjust and apportion expenditures and revenues of every kind
and
nature incurred, payable or paid in respect of the operation
of
the Assets including
operating,
maintenance,
development and
capital costs, proceeds from the sale of Petroleum Substances,
royalties, property
taxes, gas cost allowance (or similar
allowances),
prepayments
and deposits, duties, taxes and
assessments (other than income taxes), as at the Effective
Time.
(b) The
Seller is entitled to the revenues and benefits from the
ownership and
operation of the Assets accrued prior to the
Effective Time
and is responsible for
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and will pay for the expenditures pertaining to the ownership,
operation and
development
of the Assets incurred
prior to the
Effective Time.
(c) The
Buyer is entitled to
the revenues
and benefits from the
ownership and operation of the Assets accrued from and after
the
Effective Time
and is responsible for and will pay for the
expenditures
pertaining to
the ownership, operation and
development of the Assets incurred from and after the
Effective
Time.
(d) All
statements prepared
under this Section 2.6 will be prepared
as contemplated herein and in accordance with generally
accepted
accounting principles applying the accrual method.
(e)
Two
Business Days prior to
the Closing Date,
the Seller shall
deliver to the Buyer a written interim statement of adjustments
under this Agreement
and the Seller will make available to
representatives of the
Buyer all information
necessary for the
Buyer to confirm the calculations in the statement. The Parties
will cooperate
in settling the
adjustments
and payment to be
made on an interim
basis and the amount so agreed will be
employed for the purposes of the Closing and completion of the
transactions contemplated by this Agreement. For the purposes
of
the interim statement of adjustments, there shall be an accrual
of net operating revenue from the Assets.
(f) By
June 30, 2007, the Parties will have cooperated and prepared
a final statement
of all adjustments and payments to be made
pursuant to this Agreement. Upon agreement as to all
adjustments
and payments to be made, the net amount will be remitted by
the
Party who in the net result is obliged to make payment and in
the
event Buyer is entitled to an adjustment in its favour, such
amount shall be
set-off from any
amount paid to Seller
under
S
