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JOINT VENTURE AGREEMENT

Joint Venture JV Agreement

JOINT VENTURE AGREEMENT | Document Parties: CANWEST PETROLEUM CORP | TRIPLE 7 ENERGY INC., | WEST PEAK VENTURES OF CANADA LTD., | TOWNSHIP PETROLEUM CORPORATION | CANWEST PETROLEUM CORPORATION You are currently viewing:
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CANWEST PETROLEUM CORP | TRIPLE 7 ENERGY INC., | WEST PEAK VENTURES OF CANADA LTD., | TOWNSHIP PETROLEUM CORPORATION | CANWEST PETROLEUM CORPORATION

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Title: JOINT VENTURE AGREEMENT
Governing Law: Colorado     Date: 8/10/2005

50 of the Top 250 law firms use our Products every day

 

                             JOINT VENTURE AGREEMENT

 

                                     AMONG:

 

                              TRIPLE 7 ENERGY INC.,

 

                       WEST PEAK VENTURES OF CANADA LTD.,

 

                               DR. MICHAEL RANGER

 

                   (collectively the "TRIPLE 7 JOINT VENTURE")

 

                                     - and -

 

                   TOWNSHIP PETROLEUM CORPORATION ("Township")

 

                    CANWEST PETROLEUM CORPORATION ("CanWest")

 

                             Dated as of June 1, 2005

 

<PAGE>

 

                               TABLE OF CONTENTS

                                                                          Page

ARTICLE 1              INTERPRETATION........................................1

 

         1.1       Definitions...............................................1

 

         1.2       Schedules.................................................5

 

         1.3       Headings..................................................5

 

         1.4       Currency..................................................5

 

ARTICLE 2              FORMATION OF THE JOINT VENTURE........................5

 

         2.1       Formation.................................................5

 

         2.2       Maintenance of Documents of Title.........................6

 

         2.3       Representations and Warranties............................6

 

ARTICLE 3              PURPOSE OF THE JOINT VENTURE..........................7

 

         3.1       Purpose of Joint Venture..................................7

 

ARTICLE 4              BIDDING ON POSTED LANDS...............................8

 

         4.1       Inclusion in Alberta Crown Sale...........................8

 

         4.2       Bid Recommendation........................................8

 

         4.3       Bid Determination.........................................8

 

         4.4       Engagement of Pioneer.....................................8

 

         4.5       Payment of Crown Rental and Pioneer Fees..................8

 

         4.6        Return of Unused Initial Funding..........................8

 

         4.7       Land held in Trust........................................8

 

ARTICLE 5              OWNERSHIP OF ACQUIRED LANDS...........................9

 

         5.1       Ownership.................................................9

 

         5.2       Issuance of Shares........................................9

 

         5.3       Ongoing Fees..............................................9

 

         5.4       Registration and Piggy Back Rights........................9

 

         5.5       Anniversary Date Payments.................................9

 

         5.6       Allocation of Payments...................................10

 

         5.7       Annual Reports...........................................10

 

         5.8       Access to Data...........................................10

 

ARTICLE 6              GRANT OF ROYALTY.....................................10

 

         6.1       Grant of Royalty.........................................10

 

ARTICLE 7               COMMERCIAL PROJECT...................................11

 

         7.1       Independent Engineering Study............................11

 

         7.2       Commercial Projects......................................11

 

<PAGE>

 

                                TABLE OF CONTENTS

                                  (continued)

                                                                          Page

         7.3       Commercial Payments......................................11

 

         7.4       Equal Payments...........................................11

 

ARTICLE 8              AREA OF EXCLUSION....................................11

 

         8.1       Acquisition..............................................11

 

         8.2       Acquisition Notice.......................................12

 

         8.3       Surrender of Area of Exclusion Lands.....................12

 

ARTICLE 9              FORCE MAJEURE........................................12

 

         9.1       Effect of Force Majeure..................................12

 

ARTICLE 10             DISPUTE RESOLUTION...................................13

 

         10.1      Definitions..............................................13

 

         10.2      Disputes Initially Referred To Mediation.................13

 

          10.3      Arbitration Proceedings..................................13

 

         10.4      Rules....................................................13

 

         10.5      Location of and Representation at Mediation and

                  Arbitration..............................................14

 

         10.6      Interim Relief...........................................14

 

ARTICLE 11             DISPOSITION OF INTERESTS.............................14

 

         11.1      No Transfers.............................................14

 

         11.2      Recognition Upon Assignment..............................14

 

         11.3      Effect of Assignment.....................................14

 

ARTICLE 12             TERM.................................................15

 

         12.1      Term.....................................................15

 

ARTICLE 13             CONFIDENTIALITY......................................15

 

         13.1      Confidential Information.................................15

 

         13.2      Public Disclosure........................................16

 

         13.3      Press Releases...........................................16

 

         13.4      Other Agreements.........................................17

 

ARTICLE 14             DEFAULT AND REMEDIES.................................17

 

         14.1      Default..................................................17

 

         14.2      Remedies.................................................17

 

                                      -ii-

 

<PAGE>

                                TABLE OF CONTENTS

                                  (continued)

 

                                                                          Page

ARTICLE 15             GENERAL PROVISIONS...................................18

 

          15.1      Notices..................................................18

 

         15.2      Entire Agreement.........................................19

 

         15.3      Waiver...................................................19

 

         15.4      Severability.............................................19

 

         15.5      Governing Law............................................19

 

         15.6      No Partnership...........................................19

 

         15.7      Further Assurances.......................................20

 

         15.8      Successors and Assigns...................................20

 

Schedule "A" -        Royalty Procedure

 

 

                                     -iii-

<PAGE>

 

                             JOINT VENTURE AGREEMENT

 

      THIS JOINT VENTURE AGREEMENT entered into as of the 1st day of June, 2005.

 

AMONG:

 

            TRIPLE 7 ENERGY INC. ("Triple 7"), WEST PEAK VENTURES OF CANADA LTD.

            ("West Peak"), and DR. MICHAEL RANGER ("Ranger") (collectively the

            "Triple 7 Joint Venture")

 

                                                               OF THE FIRST PART

 

                                     - and -

 

            TOWNSHIP PETROLEUM CORPORATION, a corporation, organized under the

             laws of the Province of Alberta (hereinafter referred to as

            "Township"), and

 

            CANWEST PETROLEUM CORPORATION ("CanWest"), a corporation organized

            under the laws of the State of Colorado,

 

                                                               OF THE SECOND PART

 

      WHEREAS the Triple 7 Joint Venture, Township and CanWest wish to enter

into a joint venture to, among other things, acquire, develop and produce oil

sands deposits located in the Athabasca Oil Sands region of Alberta.

 

      NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT in consideration of the

premises and of the mutual covenants and agreements hereinafter set forth, the

Parties hereto covenant and agree as follows:

 

                                     ARTICLE 1

                                 INTERPRETATION

 

1.1 Definitions

 

In this Agreement, the expressions following shall have the following meanings:

 

      "Acceptance Period" has the meaning ascribed to that term in Article 10

      hereof.

 

       "Acquired Lands" means those parcels of Posted Lands purchased by Township

      at the Alberta Crown Sale, any Area of Exclusion Lands or any other Oil

      Sands Interests which Township acquires pursuant to the terms of this

      Agreement.

 

       "Agreement", "this Agreement", "herein", "hereof", "hereunder" mean or

      refer to this Agreement and any amendments thereto.

 

<PAGE>

 

      "Alberta Crown Sale" means the August 24, 2005 Alberta Crown sale of

      petroleum and natural gas rights at which the Posted Lands are to be

      included.

 

      "Anniversary Date" means August 31, 2006 and each August 31 thereafter

      until the termination or expiration of this Agreement.

 

      "Area of Exclusion Lands" has the meaning ascribed that term in Article 8

      hereof.

 

      "Business Day" means any day other than a Saturday, Sunday or statutory

      holiday in the Province of Alberta.

 

      "Commercial Payment" means a payment which Township shall pay to the

      Triple 7 Joint Venture at the time which it elects to commence

      construction of a commercial project on a parcel of the Acquired lands,

      which payment shall be $6,000,000 CDN.

 

      "Crude Bitumen" means a naturally occurring viscous mixture, mainly of

      hydrocarbons heavier than pentane, that may contain sulphur compounds and

      that, in its naturally occurring viscous state, will not flow to a well;

 

      "Day" means a period commencing at 8:00 a.m. on any calendar day and

      ending at 8:00 a.m. on the immediately next succeeding calendar day or

      such other time as may be set by the Management Committee.

 

      "Defaulting Party" has the meaning ascribed to that term in Article 14.

 

      "Documents of Title" means the documents by virtue of which Township is

      entitled to drill for, win, take or remove Oil Sands Products and all

      renewals or extensions thereof or further documents of title issued

      pursuant thereto.

 

      "Effective Date" means the date of execution of this Agreement.

 

       "Event of Default" has the meaning ascribed to that term in Article 14.

 

      "Event of Insolvency" means, with respect to a Party:

 

            (a)    a court having jurisdiction has entered a decree or order

                  adjudging that Party bankrupt or insolvent under applicable

                  bankruptcy or insolvency laws;

 

            (b)    bankruptcy, insolvency or receivership proceedings shall have

                  been instituted against that Party with its consent, or

                  without its consent and such proceedings have not been

                  discharged within thirty (30) Days;

 

            (c)    that Party shall apply for or consent to the appointment of a

                  receiver, a trustee in bankruptcy or a liquidator, of itself

                  or of all or a substantial part of its assets;

 

 

                                      -2-

<PAGE>

 

            (d)    proceedings under the Companies Creditors Arrangement Act

                  (Canada) or any equivalent legislation, or under any analogous

                  statute of any other jurisdiction to which that Party is

                  subject, are commenced in respect of that Party and not

                  discharged within ninety (90) Days; or

 

            (e)    that Party makes a proposal to its creditors under the

                  Bankruptcy and Insolvency Act (Canada) or any equivalent

                  legislation, or under any analogous statute of any other

                  jurisdiction to which that Party is subject.

 

      "Force Majeure" means any event or occurrence which is beyond the

      reasonable control of the Party affected thereby, provided such event or

      occurrence is not due to the affected Party's sole negligence, and may

      include but is not limited to:

 

            (a)    floods, earthquakes, storms, lightning, fires, epidemics,

                  wars, explosions, riots, acts of public enemy, acts of civil

                  or military authority, civil disturbances, disobedience,

                   blockades, strikes, lockouts, or other similar events;

 

            (b)    accidents, vandalism, sabotage, ruptures, and breakage of or

                  damage to any facilities, machinery or equipment; and

 

            (c)    inability to obtain or the curtailment of supplies of any

                  materials or equipment, shortage of labour and government

                  restraint, action, delay or inaction, material changes to or

                  application of the Regulations or other lawful requirements of

                  governmental bodies or agencies.

 

            provided that lack of finances will not be considered an event or

            occurrence outside of a Party's control.

 

      "Initial Funding" means an amount estimated to be $4,000,000 USD, which

      shall be used for the acquisition of the Acquired Lands, the payment of

      the first year's rentals for the Acquired Lands and the fees charged by

      Pioneer to acquire the Acquired Lands.

 

      "Lenders" means any Person or Persons providing debt financing or debt

      refinancing to a Party in connection with this joint venture.

 

      "Offer Notice" has the meaning ascribed to that term in Article 10 hereof.

 

      "Offer Purchase Notice" has the meaning ascribed to that term in Article

      10 hereof.

 

      "Offered Rights" has the meaning ascribed to that term in Article 10

      hereof.

 

      "Offeror" has the meaning ascribed to that term in Article 10 hereof.

 

      "Oil Sands" means

 

            (a)    sands and other rock materials containing Crude Bitumen,

 

 

                                      -3-

<PAGE>

 

            (b)    the Crude Bitumen contained in those sands and other rock

                  materials, and

 

            (c)    any other mineral substances, other than natural gas, in

                  association with that Crude Bitumen or those sands and other

                  rock materials;

 

      "Oil Sands Interests" means the rights, however derived, to explore for,

      drill for, win, take, remove or share in Crude Bitumen and includes a

      working interest, royalty interest or other arrangement of whatever kind.

 

      "Oil Sands Products" means any products obtained by (i) processing Oil

      Sands, or producing from Oils Sands; Crude Bitumen or derivatives of Crude

      Bitumen, or (ii) by reprocessing a product referred to in subsection (i),

      and includes any products obtained by any subsequent reprocessing of the

      products;

 

      "Parcel Maintenance Payment" means the payment to be made by Township to

      the Triple 7 Joint Venture on the 3rd, 4th and 5th Anniversary Dates as

      more particularly set forth in Section 5.5 hereof.

 

      "Parties" means all those Persons who become parties to this Agreement

      which initially are the Triple 7 Joint Venture, Township and CanWest, and

      "Party" means any one of them.

 

      "Person" means any individual, corporation, partnership, joint venture,

      trust, government or governmental body or other incorporated or

       unincorporated entity.

 

      "Pioneer" means Pioneer Land Services Ltd., carrying on business under the

      firm name and style of Pioneer Land & Environmental Services.

 

      "Pioneer Agreement" means the agreement between Pioneer and Township dated

      [Note to Draft: Insert date]

 

      "Positive Feasibility Study" means an independent engineering report which

      has been generated at the direction of Township and which determines that

      the construction of a commercial project for production of Crude Bitumen,

      whether in situ or mining, from one or more of the Acquired Lands is

      economic.

 

      "Posted Lands" means the parcels of oil sands rights which the Triple 7

      Joint Venture, and Township have agreed to post for sale.

 

      "Prime Rate" means the prime rate for Canadian dollar commercial loans

      made by the Royal Bank of Canada as that rate is in effect at the time of

      determination and as that rate may be adjusted from time to time

      thereafter.

 

      "Proposed Disposition" has the meaning ascribed to that term in Article 10

      hereof.

 

      "Regulations" means all statutes, laws, rules, orders, directions and

      regulations in effect from time to time and made by governments or

      governmental boards or agencies having jurisdiction over the operations

      conducted pursuant to this Agreement.

 

 

                                      -4-

<PAGE>

 

      "Royalty" means the non-convertible royalty granted by Township to the

      Royalty Owners pursuant to this Agreement and calculated on Oil Sands

      Products produced from the Royalty Lands, and paid in accordance with the

      provisions of the Royalty Procedure.

 

      "Royalty Lands" means the Acquired Lands, which become subject to this

       Agreement.

 

      "Royalty Owner(s)" means each of Triple 7, West Peak, and Ranger.

 

      "Royalty Procedure" means the procedure attached hereto as Schedule "A"

      which sets forth the terms and conditions of the Royalty.

 

1.2 Schedules

 

The following schedule is attached hereto and made a part hereof:

 

      Schedule "A" - Royalty Procedure

 

            Appendix "A" - Royalty Lands

 

            Appendix "B" - Assignment Procedure

 

1.3 Headings

 

The headings used throughout this Agreement are solely for the convenience of

the Parties and are not to be used as an aid in the interpretation of this

Agreement. "Section", "Article" or "Schedule" followed by a number or a letter

means or refers to the specified section, article or schedules to this

Agreement. This Agreement is to be read with all changes of gender or number

required by the context.

 

1.4 Currency

 

Unless other wise indicated, all references to dollar amounts contained in this

Agreement shall be in Canadian funds.

 

                                     ARTICLE 2

                         FORMATION OF THE JOINT VENTURE

 

2.1 Formation

 

Triple 7, West Peak, Ranger and Township hereby form the joint venture in

accordance with the laws of the Province of Alberta for the purposes set forth

in Section 3.1.

 

2.2 Maintenance of Documents of Title

 

Except as otherwise provided herein Township shall comply with, or cause to be

complied with, all terms and conditions of the Documents of Title including the

payment of rentals, and the performances of all things necessary to maintain the

Documents of Title in good standing and in full force and effect.

 

 

                                      -5-

<PAGE>

 

2.3 Representations and Warranties

 

Triple 7 Energy Inc. represents, warrants, covenants and agrees with Township

that it:

 

      (a)    is a corporation incorporated under the laws of the Province of

            Alberta and is validly subsisting under the laws of the Province of

            Alberta;

 

      (b)    is not a "non-resident" of Canada for the purposes of the Tax Act;

            [Note to Draft: Confirm with Brent Walter] and

 

      (c)    has the capacity and corporate authority to enter into this

            Agreement and to perform its obligations under this Agreement, and

            such obligations do not conflict with nor do they result in a breach

            of any of its constating documents, by-laws or any agreement by

            which it is bound.

 

West Peak Ventures represents, warrants, covenants and agrees with Township that

it:

 

      (a)    is a corporation incorporated under the laws of Canada and is

            validly subsisting under the laws of Canada, and is

            extra-provincially registered in Alberta;

 

      (b)    is not a "non-resident" of Canada for the purposes of the Tax Act;

            and

 

      (c)    has the capacity and corporate authority to enter into this

            Agreement and to perform its obligations under this Agreement, and

            such obligations do not conflict with nor do they result in a breach

             of any of its constating documents, by-laws or any agreement by

            which it is bound.

 

Dr. Ranger represents, warrants, covenants and agrees with Township that he is:

 

      (a)    acting in his personal capacity;

 

      (b)    has sought and obtained independent legal advice concerning this

            Agreement, and his obligations and rights hereunder; and

 

      (c)    is not prevented from entering into this Agreement by any previous

            or current agreements with any other third parties by which he is

            bound.

 

Township represents, warrants, covenants and agrees with the Triple 7 Joint

Venture that:

 

      (a)    it is a corporation incorporated under the laws of the Province of

            Alberta, and is subsisting under the laws of the Province of

            Alberta;

 

      (b)    is not a "non-resident" of Canada for the purposes of the Tax Act;

            and

 

      (c)    it has the capacity and authority to enter into this Agreement and

            to perform its obligations under this Agreement and such obligations

            do not conflict with its constating documents or any agreement by

            which it is bound.

 

CanWest represents, warrants, covenants and agrees with the Triple 7 Joint

Venture that:

 

 

                                      -6-

<PAGE>

 

      (a)    it is a corporation incorporated under the laws of the State of

            Colorado, and is subsisting under the laws of the State of Colorado;

            and

 

      (b)    it has the capacity and authority to enter into this Agreement and

            to perform its obligations under this Agreement and such obligations

            do not conflict with its constating documents or any agreement by

            which it is bound.

 

                                     ARTICLE 3

                          PURPOSE OF THE JOINT VENTURE

 

3.1 Purpose of Joint Venture

 

The joint venture is formed for the following business purposes:

 

      (a)    identify and post for sale at the Alberta Crown Sale the Posted

            Lands;

 

      (b)    agree on a bid for each parcel of the Posted Lands and to submit the

            agreed upon bids at the Alberta Crown Sale;

 

      (c)    to have Township acquire Oil Sands Interests located within the

            Joint Venture Area which may be agreed upon or which may be required

            by the terms of this Agreement;

 

      (d)    to have Township own and administer Oil Sands Interests acquired

            pursuant to this Agreement, including permits, licences, leases and

            all other types of rights and interests of every nature and

            character in connection therewith and incidental thereto;

 

      (e)    to have Township explore and evaluate, or cause to be explored and

            evaluated, the Acquired Lands to determine the quantity and quality

            of reserves of bitumen located on Acquired Lands;

 

      (f)    to have Township grant the Royalty to Triple 7, West Peak and Ranger

            with respect to the Acquired Lands; and

 

      (g)    to engage in any of the foregoing or related operations by itself or

            in association with others.

 

                                    ARTICLE 4

                             BIDDING ON POSTED LANDS

 

4.1 Inclusion in Alberta Crown Sale

 

The Parties acknowledge that the Posted Lands have been included for sale at the

Alberta Crown Sale.

 

 

                                      -7-

<PAGE>

 

4.2 Bid Recommendation

 

Triple 7, West Peak, Ranger and Township shall meet on or before July 15, 2005

to review and receive the recommendation from the Triple 7 Joint Venture and

Pioneer, with respect to the amount to be bid for each parcel of Posted Lands,

provided however that the total amount to be paid for the Posted Lands,

including the acquisition cost and first year's rental payment, shall not exceed

the Initial Funding.

 

4.3 Bid Determination

 

Township shall determine, after the meeting contemplated by Clause 4.2 is held,

in its sole discretion, the bid which is to be submitted for each parcel of

Posted Lands at the Alberta Crown Sale.

 

4.4 Engagement of Pioneer

 

Township shall engage Pioneer to provide land services and advice with respect

to the bidding on the Posted Lands and shall pay or cause to be paid, to

Pioneer, by wire transfer, the Initial Funding.

 

4.5 Payment of Crown Rental and Pioneer Fees

 

The fees for the services of Pioneer in bidding for the Acquired Lands and the

Crown rental for the first year of any oil sands licenses acquired with respect

to the Acquired Lands will be paid from the Initial Funding.

 

4.6 Return of Unused Initial Funding

 

Any portion of the Initial Funding which is not used for the acquisition of the

Posted Lands, including the amounts needed for the first year's rental and

payment to Pioneer for its services, will forthwith after the results of the

Alberta Crown Sale are finalized, be forwarded by Pioneer to Township's US

Attorney Trust Account by wire transfer, for distribution to its fundors as per

the terms of the Pioneer Agreement.

 

4.7 Land held in Trust

 

The bid for the Posted Lands shall be made in the name of Pioneer and Pioneer

shall initially hold the interest acquired in trust for Township.

 

                                    ARTICLE 5

                           OWNERSHIP OF ACQUIRED LANDS

 

5.1 Ownership

 

Any Acquired Lands shall be owned One Hundred Percent (100%) by Township subject

to the Royalty granted to the Triple 7 Joint Venture and the payments by

Township to the Triple 7 Joint Venture as herein set forth. Within thirty (30)

days after Township acquires Acquired Lands, or surrenders Acquired Lands, it

shall prepare a revised Appendix "A" for attachment to the Royalty Procedure

which shall list the permit, license or lease which it has acquired, the term of

the permit, license or lease and the lands and petroleum substances granted by

the document and it shall attach a copy of the revised Appendix "A" to its copy

of this Agreement and it shall forward a copy of the revised Appendix "A" to

each of the other Parties for attachment by them to their copies of this

Agreement.

 

 

                                      -8-

<PAGE>

 

5.2 Issuance of Shares

 

Should Township acquire one or more parcels of Acquired Lands, then CanWest

agrees that it shall pay to the Triple 7 Joint Venture $150,000 which shall be

paid by the issuance of common shares of CanWest to be priced at the closing bid

price on the day of the Alberta Crown Sale. In calculating the conversion from

US$ to CDN$ of the closing price, the cheque exchange rate posted by the Bank of

Montreal for the close of business on the day of the Alberta Crown Sale shall be

used. The common shares issued pursuant to this Section shall be issued equally

to each of Triple 7, West Peak and Ranger.

 

5.3 Ongoing Fees

 

Township shall pay to the Triple 7 Joint Venture $150,000, on the first and

second Anniversary Dates of this Agreement (provided that it still owns one or

more parcels of Acquired Lands acquired at the Alberta Crown Sale) such amount

to be paid, at Township's sole election, in cash or by the issuance of common

shares of CanWest, to be priced at the closing bid price on the applicable

Anniversary Date. In calculating the conversion from US$ to CDN$ of the closing

price, the cheque exchange rate posted by the Bank of Montreal for the close of

business on the applicable Anniversary Date shall be used. If common shares are

issued pursuant to this Section 5.3 they shall be issued equally to each of

Triple 7, West Peak and Ranger.

 

5.4 Registration and Piggy Back Rights

 

The CanWest shares to be issued pursuant to Section 5.2 or 5.3 (the "Shares")

shall have piggyback registration rights pursuant to which CanWest will register

the Shares for resale, as follows: if CanWest files a resale registration

statement on Form SB-2 after [Note to Draft: August 1, 2005 - confirm date] of

the Shares, then CanWest shall include the Shares in such registration

statement, subject to customary underwriter cutbacks and receipt by CanWest of

appropriate information and representations from holders of the Shares. This

piggyback registration right shall expire once holders of the Shares are

eligible to sell the Shares pursuant to Rule 144 under the Securities Act of

1933.

 

5.5 Anniversary Date Payments

 

On the 3rd Anniversary Date, and each subsequent Anniversary Date, Township

shall pay to the Triple 7 Joint Venture a payment equal to $450,000 CDN per

parcel of Acquired Lands which were acquired by Township at the Alberta Crown

Sale and which have not been surrendered at the applicable Anniversary Date, or

for which a Commercial Notice (as hereinafter defined) has not been issued.

 

5.6 Allocation of Payments

 

All payments which are payable to the Triple 7 Joint Venture pursuant to this

Article shall be paid equally to Triple 7, West Peak and Ranger.

 

 

                                      -9-

<PAGE>

 

5.7 Annual Reports

 

Within thirty (30) days of each Anniversary Date Township shall provide a report

to the Triple 7 Joint Venture which shall describe all of the operations which

have been conducted on the Acquired Lands during the preceding year, including

without limitation, a description of the seismic programs which were conducted

and evaluation wells which were drilled and details of the tests undertaken in

the evaluation and the results thereof. The report will also contain a forecast

with respect to the operations which Township envisions will take place on the

Acquired Lands during the ensuing year.

 

5.8 Access to Data

 

Triple 7, West Peak and Ranger will each have the right, at its sole discretion

and cost, with reasonable notice to Township to:

 

      (a)    review all raw data from the operations;

 

      (b)    obtain hard copies of all raw data from the operations; and

 

      (c)    re-process any proprietary seismic data owned or licensed by

            Township.

 

                                     ARTICLE 6

                                GRANT OF ROYALTY

 

6.1 Grant of Royalty

 

Township hereby grants to each Royalty Owner the Royalty on the Acquired Lands.

The Royalty will be CDN$0.03, payable to each Royalty Owner and calculated on

each barrel of Crude Bitumen produced, saved and sold from the Royalty Lands,

and governed by the Royalty Procedure, or $450,000 per parcel per year which

ever is greater.

 

For the purposes of this Agreement, a barrel of Crude Bitumen means an amount of

Crude Bitumen that would equal 0.159 cubic metres if such Crude Bitumen measured

in the state at which it exists in the geological formation prior to the

commencement of any recovery or conversion processes.

 

                                    ARTICLE 7

                                COMMERCIAL PROJECT

 

7.1 Independent Engineering Study

 

Prior to commencing the construction of a project for the production of Crude

Bitumen from a parcel of Acquired Lands, Township shall cause an independent

engineering study to be conducted and a report generated.

 

 

                                      -10-

<PAGE>

 

7.2 Commercial Projects

 

If at any time after a Positive Feasibility Study is received by Township with

respect to one or more parcels of Acquired Lands, Township wishes to construct a

commercial project for the production, treating and transportation of Crude

Bitumen from one or more parcels of Acquired Lands ("Commercial Parcel"),

Township shall deliver a written notice to the Triple 7 Joint Venture

("Commercial Notice") which notice will include:

 

      (a)    the description of the Commercial Parcel on which the project is to

            be constructed;

 

      (b)    a detailed description of the proposed commercial project and the

            production to be obtained;

 

      (c)    a copy of the Positive Feasibility Study; and

 

      (d)    an estimate of the costs and the time to construct the proposed

            commercial project.

 

7.3 Commercial Payments

 

Forthwith upon commencing construction of a commercial project on the Commercial

Parcel Township shall pay to the Triple 7 Joint Venture the Commercial Payment.

 

7.4 Equal Payments

 

Any payments to be made to the Triple 7 Joint Venture pursuant to this Article

shall be made equally to Triple 7, Township and Ranger.

 

                                    ARTICLE 8

                                AREA OF EXCLUSION

 

8.1 Acquisition

 

If at any time before August 31, 2016 the Triple 7 Joint Venture, or any

participant of the Triple 7 Joint Venture (the "Acquiring Party") acquires Oil

Sands Interests, fifty percent (50%) or more of the surface area of which are

located within two (2) miles of the boundary of any parcel of Acquired Lands

which were acquired at the Alberta Crown Sale (the "Area of Exclusion Lands"),

then the Acquiring Party shall offer Township the opportunity to purchase the

Area of Exclusion Lands at the price the Acquiring Party paid for such lands,

pursuant to Section 8.2 hereof.

 

8.2 Acquisition Notice

 

The Acquiring Party shall provide a notice to Township ("Acquisition Notice")

providing a description of the Area of Exclusion Lands acquired, the purchase

price and any salient terms and conditions relating to the acquisition. Township

shall have twenty (20) days from the receipt of the Acquisition Notice to elect

to purchase the Area of Exclusion Lands for the consideration paid by the

Acquiring Party. If Township does not respond to the Acquisition Notice within

twenty (20) days from the receipt of the Acquisition Notice Township shall be

deemed to have elected not to purchase the Area of Exclusion Lands. If Township

purchases the Area of Exclusion Lands then the Area of Exclusion Lands will

become Acquired Lands for the purposes of the Agreement and the Royalty will

automatically apply to the Area of Exclusion Lands, provided however that the

Area of Exclusion Lands shall not be included or considered with respect to the

payments to be made by Township pursuant to Article 5.

 

 

                                      -11-

<PAGE>

 

8.3 Surrender of Area of Exclusion Lands

 

In the event that any entire parcel of Area of Exclusion Lands is surrendered,

this Article 8 shall immediately cease to apply to such surrendered parcel.

 

                                    ARTICLE 9

                                  FORCE MAJEURE

 

9.1 Effect of Force Majeure

 

If by reason of Force Majeure a Party to this Agreement is unable, wholly or

partially, to perform or comply with its covenants and obligations hereunder,

then the Party so affected by Force Majeure shall be relieved of its obligations

or liability and shall suffer no prejudice for failing to perform or comply

during the continuance and to the extent of the inability so caused from and

after the happening of the event of Force Majeure, provided that the Party

invoking Force Majeure gives to each other Party prompt notice, written or oral

(but if oral, promptly confirmed in writing) of such inability and reasonably

full particulars of the cause thereof. If notice is not promptly given, then the

Party suffering the Force Majeure shall only be relieved from such performance

or compliance from and after the giving of such notice. The Party invoking Force

Majeure shall use all reasonable efforts to remedy the situation and remove, so

far as possible and with reasonable dispatch, the cause of its inability to

perform or comply, provided that settlement of strikes and other labour disputes

shall be wholly within the discretion of the Party involved and such Party shall

not be required to accede to demands of its opponents in any such strike or

labour dispute. The Party invoking Force Majeure shall give prompt notice of the

cessation of the event of Force Majeure. Notwithstanding anything contained in

this Article 9 an event of Force Majeure shall not suspend any obligation for

the payment of money under this Agreement unless the Force Majeure Event is one

which prevents the Party invoking Force Majeure from making the payment. If

payments are not made when due because an event of Force Majeure has directly

effected the power of a Party to make the payments, then the Party not making

the payments shall, at such time that the Force Majeure is corrected and the

Party recommences payment, pay interest on all of the unpaid amounts from the

date that payment was due until the date paid at the Prime Rate plus two percent

(2%) per annum.

 

                                   ARTICLE 10

                               DISPUTE RESOLUTION

 

10.1 Definitions

 

In this Article, in addition to all terms defined in the Agreement, the

following words and phrases shall have the following meaning namely:

 

 

                                      -12-

<PAGE>

 

"Dispute" means any dispute or controversy amongst any of the Parties concerning

any matter arising out of the Agreement.

 

10.2 Disputes Initially Referred To Mediation

 

The Parties will attempt to resolve any Dispute through consultation and

negotiation in good faith. If those attempts fail, a Party may, by notice to the

other Parties at any time during those negotiations, request the other Parties

to attempt to resolve that Dispute through mediation, including with that notice

sufficient detail to enable the other Parties to understand the issues that

remain in dispute. The Parties will attempt to agree on the selection of a

mediator within ten (10) days of receipt of that notice, unless a Party gives

notice to the other Parties within that period that it is not prepared to

proceed with mediation respecting that Dispute. If the Parties are proceeding

with a mediation and are unable to select a mediator within that period, any

Party may deliver a written request to the Canadian Foundation for Dispute

Resolution to select, within two (2) Business Days of the receipt of that

request, a mediator qualified by education and experience to resolve that

Dispute, and the Parties agree that the person so selected will be the mediator

for the Dispute. Unless otherwise unanimously agreed, the Parties will commence

a mediation within twenty (20) days of the selection of the mediator. The

mediation will continue until the Dispute is resolved, or a Party serves notice

to the other Parties that it wishes to terminate the mediation, or the mediator

makes a written determination that the Dispute cannot be resolved through

mediation, or sixty (60) days pass after the receipt of the original notice,

whichever occurs first. All Parties which participate in or are affected by the

mediation will each bear their own costs associated with a mediation, but will

share the common costs of a mediation equally, including, without limitation,

the cost of the mediator.

 

10.3 Arbitration Proceedings

 

In the event a Dispute has not otherwise been resolved, the Dispute shall be

submitted to binding arbitration in accordance with the provisions of this

Article.

 

10.4 Rules

 

Any such arbitration and any other arbitration the Parties agree to conduct

hereunder will be conducted under the Commercial Arbitration Rules of The

Canadian Foundation for Dispute Resolution.

 

10.5 Location of and Representation at Mediation and Arbitration

 

The place for mediation and arbitration shall be Calgary, Alberta. Any Party may

have another Party, provided that other Party agrees to same in writing,

represent its interests in the Dispute resolution.

 

10.6 Interim Relief

 

All limitation periods respecting the commencement of an action will be stayed

during the period that the Parties are attempting to resolve a Dispute. A Party

may, at any time it believes is necessary to protect its interest, seek interim

or provisional relief, in the form of a temporary restraining order, preliminary

injunction or other interim equitable relief concerning a Dispute under this

Agreement, notwithstanding anything to the contrary in the Article.

 

 

                                      -13-

<PAGE>

 

                                   ARTICLE 11

                            DISPOSITION OF INTERESTS

 

11.1 No Transfers

 

Except as otherwise expressly provided for herein and in the Royalty Procedure,

no Party shall sell, assign, transfer, mortgage, encumber, hypothecate, pledge

or alienate in any way all or any portion of the control or ownership of its

interest in this Agreement, the Acquired Lands or the Royalty.

 

11.2 Recognition Upon Assignment

 

Other than as required and allowed one Party to another elsewhere in this

Agreement, a Party which proposes that an assignment of its interest, or a

corresponding interest in this Agreement or the Royalty Procedure, shall be

effective against the party who is not party to the assignment (in this Section

called the "Other Party") shall serve a notice of the assignment to the Other

Party. The assignment shall not be effective until the assignor and the assignee

have entered into an agreement with the Other Party, to ensure the assumption of

and compliance with the obligations of the assignor by the assignee with respect

to the interest assigned to the assignee, provided that the Other Party shall be

deemed to have executed that agreement unless, within ninety (90) days of the

receipt of that agreement, the Other Party has advised the assignor and

assignee, by notice, that they are not prepared to execute that agreement and

the reasonable objections they have to that agreement.

 

The assignor shall forthwith give notice to the Parties respecting the status of

that agreement upon the earliest of execution of that agreement by the Other

Party, the receipt of notices of the Other Party that they are not prepared to

execute that agreement or the expiry of such ninety (90) day period, as the case

may be.

 

11.3 Effect of Assignment

 

      (a)    Subject to subsection (b), if an assignment is effected in the

            manner prescribed in this Article, the assignment shall be effective

            against the Other Party at the time specified in the agreement

            provided to the Other Party.

 

      (b)    Until the agreement provided to the Other Party has been executed,

            or deemed to have been executed by the Other Party, the assignor

            shall continue to remain liable to the Other Party for performance

            of the obligations applicable to the assigned interest un


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