March 26, 2010 Eternal Energy Corp.
▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Littleton,
CO 80120
Attention: ▇▇▇▇
▇▇▇▇▇
Dear ▇▇.
▇▇▇▇▇:
This letter sets out the agreement
between the undersigned concerning the matters described
below:
Background
A. Eternal
Energy Corp. ("Eternal")
holds the following overriding royalties on production from the Royalty
Lands:
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1.
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Earned Solo
Lands: A 4% overriding royalty on production in respect of the
Earned Solo Lands (the "Eternal Solo ▇▇▇")
pursuant to the Eternal Solo ▇▇▇
Agreement;
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2.
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Earned AMI
Lands: A 5% overriding royalty on production in respect of the
Earned AMI Lands (the "Eternal ▇▇▇ ▇▇▇")
pursuant to the Eternal ▇▇▇ ▇▇▇ Agreement;
and
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3.
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Residual Royalty
Lands: A 5% overriding royalty on production in respect of the
Residual Royalty Lands (the "General Eternal ▇▇▇")
pursuant to the General Eternal ▇▇▇
Agreement.
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B. Eternal
has agreed to sell and ▇▇▇▇▇▇ Oil Corporation ("▇▇▇▇▇▇") has agreed to
purchase 100% of the Eternal Royalties for cash, Ryland Shares and the Hardy
Assets as described below.
Agreement
Now therefore the parties agree as
follows:
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1.
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Definitions. In
addition to any other defined terms and phrases, the following definitions
shall apply:
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(a)
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“Border Acreage Sale” has
the meaning set forth in Clause 12(a)(ii)
hereof;
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(b)
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"Claims" means all
losses, damages, expenses (including reasonable legal and other
professional fees), liabilities (whether accrued, actual, contingent,
latent or otherwise), judgments, penalties, fines, claims, lawsuits,
causes of action, proceedings, investigations and demands or other
obligations of whatever nature or kind and all costs incurred in
investigating or pursuing any of the foregoing or any proceeding relating
to any of the foregoing;
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(c)
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"Closing" means the
completion of the transactions contemplated by this
Agreement;
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(d)
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“Closing Date” means the
later of the following:
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(i)
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April
7, 2010; and
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(ii)
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Three
(3) business days following TSXV approval as contemplated in Clause 7
herein;
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(e)
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"Crescent Point" means
Crescent Point Energy Corp., the successor in interest to ▇▇▇▇▇▇▇'s assets
pursuant to a court approved Plan of Arrangement effective December 15,
2009, such assets including, without limitation, ▇▇▇▇▇▇▇'s interests under
the 2009 Farmout and in and to the Earned AMI Lands, the Earned Solo Lands
and the Earned 2009 Lands;
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(f)
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"Earned AMI Lands" means
the Petroleum Substances within the ▇▇▇▇▇▇ Formation underlying the
following Royalty Lands:
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Sections
4, 9, 16,
17, 20 and 21-1-15 W2M;
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(g)
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"Earned Solo Lands" means
the Petroleum Substances within the ▇▇▇▇▇▇ Formation underlying the
following Royalty Lands:
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Sections
5, 6, 7, 17 to 20, 29, 30 and 32-1-14 W2M and Sections 1, 2, 3, 10 to 15, 22, 23
and 24-1-15 W4M;
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(h)
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“Effective Date” has the
meaning set forth in Clause 6
hereof;
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(i)
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"Environment" means the
components of the earth and includes ambient air, land, surface and
sub-surface strata, groundwater, surface water, all layers of the
atmosphere, all organic and inorganic matter and living organisms, and the
interacting natural systems that include such
components;
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(j)
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"Environmental
Liabilities" means:
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(i)
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any
and all Claims arising directly or indirectly from contamination or other
adverse situations pertaining to the Environment and relating to or caused
by the Hardy Assets or operations thereon or related thereto, however and
by whomsoever caused, and whether such Claim, contamination or other
adverse situation occurs or arises in whole or in part prior to, at or
subsequent to the Effective Date;
and
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(ii)
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all
past, present and future Claims arising directly or indirectly, whether
before or after the Effective Date, from (A) Environmental Matters;
(B) non-compliance with, violation of or liability under any Environmental
Regulations; or (C) the Abandonment and Reclamation
Obligations;
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(k)
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"Environmental Matters"
means, in relation to the Environment, any activity, event or circumstance
in respect of or relating to past, present or future activities regarding
the Hardy Assets including:
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(i)
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the
storage, use, holding, collection, accumulation, assessment, generation,
manufacture, construction, processing, treatment, stabilization,
disposition, handling, transportation or release of hydrocarbon, hazardous
substances and environmental
contaminants;
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- 3 -
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(ii)
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the
protection of the Environment;
or
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(iii)
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pollution,
reclamation or restoration of the
Environment;
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(l)
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"Environmental
Regulations" means all statutes, laws, rules, orders and
regulations in effect from time to time and made by governments or
governmental boards or agencies having jurisdiction pertaining to the
Environment in relation to the Hardy
Assets;
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(m)
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"Eternal ▇▇▇ ▇▇▇
Agreement" means that certain Overriding Royalty Agreement dated
May 21, 2009 between Pebble, TriAxon and Wild River Resources Ltd. (whose
interests were acquired by Crescent Point as to 75% and Shelter Bay Energy
Inc. as to 25%), as Royalty Payors and Eternal, as Royalty Owner, as
amended;
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(n)
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"Eternal Royalties" means
the entire right, title and interest of Eternal in and to any and all
overriding royalties which Eternal currently holds or has the right to
acquire in and to any and all production from any and all of the Royalty
Lands, including without limitation, the Eternal Solo ▇▇▇, the Eternal ▇▇▇
▇▇▇ and the General Eternal
▇▇▇;
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(o)
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"Eternal Royalty
Agreements" means the Eternal Solo ▇▇▇ Agreement, the Eternal ▇▇▇
▇▇▇ Agreement and the General Eternal ▇▇▇
Agreement;
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(p)
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"Eternal Solo ▇▇▇
Agreement" means that certain Overriding Royalty Agreement dated
May 21, 2009 between Pebble and TriAxon, as Royalty Payors and Eternal, as
Royalty Owner, as
amended;
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(q)
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"General Eternal ▇▇▇
Agreement" means that certain Overriding Royalty Agreement dated
September 4, 2008 between Pebble, as Royalty Payor and Eternal, as Royalty
Owner, as amended;
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(r)
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"GST" means the goods and
services tax exigible pursuant to the Excise Tax Act (Canada)
with respect to the subject
transactions;
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(s)
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"Hardy Abandonment and
Reclamation Obligations" means all obligations to (i) abandon the
Hardy Well and restore and reclaim the surface site thereof, (ii)
decommission and remove any facilities and equipment comprised in the
Tangibles and restore and reclaim the surface sites thereof, and (iii)
reclaim and restore the surface of any of the Hardy Lands, all in
accordance with the Environmental
Regulations;
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(t)
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"Hardy Assets" means the Hardy PNG
Rights, the Hardy Tangibles and the Hardy Miscellaneous
Interests;
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(u)
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"Hardy Lands" means the
specified stratigraphic zones or intervals within, upon or under the lands
set forth and described in Schedule "B", insofar as rights to the
Petroleum Substances within those zones or intervals are granted by the
Hardy Leases;
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(v)
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"Hardy Leases" means the
leases, licenses, permits and other documents of title by virtue of which
the holder thereof is (i) entitled to drill for, win, take, own or remove
the Petroleum Substances within, upon or under the Hardy Lands, (ii deemed
to be entitled to a share of Petroleum Substances removed from the Hardy
Lands or any lands with which the Hardy Lands are pooled or unitized or
(iii) entitled to share in the proceeds generated by, or to receive
payments calculated by reference to the quantity or value of, such
production including, without limitation, the documents of title as
described in Schedule "B" and, if applicable, all renewals and extensions
of such documents and all documents issued in substitution
therefor;
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(w)
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"Hardy Miscellaneous
Interests" means the entire interest of ▇▇▇▇▇▇/Pebble in and to all
property, assets, interests and rights on or with respect to the Hardy
Lands, other than the Hardy PNG Rights and the Hardy Tangibles per se, to
the extent such property, assets, interests and rights pertain to the
Hardy PNG Rights or the Hardy Tangibles, or any rights relating thereto
including, without limitation, the Hardy Well, the associated wellbore and
the casing contained therein;
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(x)
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"Hardy PNG Rights" means
the entire interest of ▇▇▇▇▇▇/▇▇▇▇▇▇ in and to the Hardy Lands and the
Hardy Leases;
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(y)
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"Hardy Tangibles" means
the entire interest of ▇▇▇▇▇▇/Pebble in and to the equipment described in
Schedule “B” and any facilities and any other tangible depreciable
property and assets located in or on the Hardy Lands and used or intended
to be used to produce, store, process, gather, treat, measure, make
marketable or inject the Petroleum Substances or in connection with water
injection or removal operations that pertain to the Hardy PNG Rights
including, without limitation, any and all gas plants, oil batteries,
buildings, production equipment, pipelines, pipeline connections, meters,
generators, motors, compressors, treaters, dehydrators, separators, pumps,
tanks and boilers;
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(z)
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“Hardy Well" means the
well described in Schedule
"B";
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(aa)
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"Pebble" means Pebble
Petroleum Inc.;
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(bb)
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"Petroleum
Substances" means
crude oil, crude bitumen and products derived therefrom, synthetic crude
oil, petroleum, natural gas, natural gas liquids, sulphur and every other
mineral or substance, whether liquid, solid or gaseous, or any of
them;
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(cc)
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“PST” means the 5% provincial sales
tax exigible pursuant to the Act for the Imposition and
Collection of Taxes on Consumers and Users of Tangible Personal Property
and Certain Services
(Saskatchewan);
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(dd)
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"Residual Royalty Lands"
means all of the Royalty Lands, excepting the Earned AMI Lands and the
Earned Solo Lands;
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(ee)
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"Royalty Lands" means the
hydrocarbon properties described in Schedule "A", the same being comprised
of the Earned AMI Lands, the Earned Solo Lands and the Residual Royalty
Lands and, for greater certainty, includes any and all lands within the
Pebble Beach Prospect (as likewise described in Schedule "A") in which
Pebble holds an interest as of the date of this
Agreement;
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(ff)
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"▇▇▇▇▇▇ Shares" means
voting common shares without par value in the capital stock of
▇▇▇▇▇▇;
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(gg)
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"TriAxon" means TriAxon Limited
Partnership;
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(hh)
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“TSXV” means the TSX Venture Exchange;
and
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(ii)
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"2009
Farmout" means that
certain Letter Farmin Agreement dated February 25, 2009 between Pebble, as
Farmor and TriAxon, as
Farmee.
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2.
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Schedules. The
following schedules are attached hereto and made a part of this
Agreement:
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Schedule
“A”
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Royalty
Lands
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Schedule
“B”
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Hardy
Assets
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Schedule
“C”
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Form of
Representation Letter of the Seller
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3.
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Sale
of Royalties. Eternal, for
the consideration set out in Clause 4, agrees to sell, convey, transfer
and assign to ▇▇▇▇▇▇ 100% of Eternal's right, title, estate and interest
in and to the Eternal Royalties (the "Sale Royalties") such
sale, conveyance, transfer and assignment to have effect as of the
Effective Date.
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4.
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Consideration. In
consideration of the sale, conveyance, transfer and assignment of the Sale
Royalties by Eternal to ▇▇▇▇▇▇, ▇▇▇▇▇▇ shall pay to Eternal the
following:
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(a)
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Share
Consideration: On Closing, issue 2,145,883 ▇▇▇▇▇▇ ▇▇▇▇▇▇
(the "Sale
Shares") to Eternal at a deemed price of CDN $0.36 per share for a
total deemed share consideration value of CDN $772,500 (the "Share
Consideration"). Eternal acknowledges that the Sale
Shares will be subject to a hold period expiring four (4) months and one
day after the date of issuance, after which the Sale Shares shall be
freely tradeable in Canada. Eternal further acknowledges that the Sale
Shares will not be registered in the United States and consequently there
will be resale restrictions in the United States. The certificate or
certificates in respect of the Sale Shares shall be endorsed with legends
reflecting the foregoing
restrictions:
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"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE
DISTRIBUTION DATE].
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR QUALIFIED
UNDER ANY U.S. STATE SECURITIES LAW, AND, UNLESS SO REGISTERED, SUCH SECURITIES
MAY ONLY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, (B) TO THE CORPORATION,
(C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER
THE U.S. SECURITIES ACT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE U.S. SECURITIES ACT AND THE SELLER FURNISHES TO THE
CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT AND, IN EACH CASE, IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE U.S. SECURITIES ACT. "UNITED STATES" AND "U.S.
PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES
ACT.";
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provided that, if at the time any or all of the Sale
Shares are sold (a) ▇▇▇▇▇▇ is then a “foreign issuer” as defined in Regulation S
under the United States Securities Act of 1933, as amended (the “U.S. Securities
Act”) and (b) the Sale Shares are sold in compliance with the requirements of
Rule 904 of Regulation S under the U.S. Securities Act and in compliance with
applicable Canadian securities laws and regulations, then ▇▇▇▇▇▇ shall, or shall
cause its transfer agent to, remove the legend on the certificate representing
such shares within two business days of the receipt of a duly executed
Representation Letter of the Seller in substantially the form annexed hereto as
Schedule C;
provided further, that, if any of the Sale
Shares are being sold pursuant to Rule 144 of the U.S. Securities Act, the
legend may be removed upon the delivery to ▇▇▇▇▇▇’▇ transfer agent of an opinion
of counsel of recognized standing in form and substance reasonably satisfactory
to ▇▇▇▇▇▇, to the effect that the legend is no longer required under applicable
requirements of the U.S. Securities Act or applicable state securities
laws.
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(b)
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Property
Consideration: On Closing, convey, transfer and assign
the Hardy Assets to Eternal, or its nominee, EERG Energy ULC, its wholly
owned Canadian subsidiary, for a deemed value of CDN $240,001 (the "Property
Consideration"), the same to be allocated as
follows:
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(i)
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Hardy PNG
Rights: CDN
$115,000;
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(ii)
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Hardy
Tangibles: CDN $125,000;
and
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(iii)
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Hardy Miscellaneous
Interests: CDN
$1.00.
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Eternal
acknowledges that the Hardy Assets are currently owned by Pebble and that
ownership will be transferred to ▇▇▇▇▇▇ prior to Closing; and
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(c)
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Cash
Consideration: On June 1, 2010, pay to Eternal USD
$3,000,000 (net of any required withholding taxes ▇▇▇▇▇▇ is obligated to
deduct from the aforesaid payment and remit to the Canada Revenue Agency
(the "CRA") as
provided in Section 116 of the ITA) by way of wire transfer or as
otherwise directed by Eternal in writing (the "Cash Consideration").
▇▇▇▇▇▇ acknowledges and agrees that a re-conveyance back to Eternal for
60% of the Sale Royalties will be escrowed at Closing with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
solicitors for ▇▇▇▇▇▇, who will be appointed as escrow agent, as security
for the payment of the Cash Consideration. The parties
further agree that such re-conveyance of 60% of the Sale Royalties shall
be released to Eternal immediately upon ▇▇▇▇▇▇’▇ failure to pay the Cash
Consideration by the close of business on June 1,
2010.
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5.
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Canadian
Tax
Matters.
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(a)
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Section 85
Rollover: It is the intention of the parties that the
sale of the Sale Royalties will be effected as a "rollover" pursuant to
section 85(1) of the Income Tax Act (Canada)
(the "ITA") with the intent that Eternal will not be liable for the
immediate payment of income tax in Canada on the Share Consideration, but
rather will obtain a tax deferral until such time as Eternal sells the
Sale Shares. The parties will file all necessary documents with
the CRA to evidence their election to effect the purchase and sale of the
Sale Royalties as a transaction under section 85(1) of the ITA concurrent
with the tax clearance application described in Clause 5(b)
below.
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(b)
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Withholding
Tax: Promptly following execution of this Agreement,
Eternal, with the assistance of ▇▇▇▇▇▇, will apply to the CRA for a tax
clearance certificate under section 116 of the ITA to limit the Canadian
withholding tax on the Property Consideration and the Cash Consideration
to no more than 28%. To that end, Eternal acknowledges that it
may be required to prepare and file a tax return with the CRA in support
of its application.
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(c)
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▇▇▇▇▇▇
Assistance: ▇▇▇▇▇▇ agrees to instruct its Canadian tax
advisors to provide all advice and assistance reasonably required by
Eternal and its tax advisors to complete the application described above
and all ancillary forms and to assist in filing same with the CRA and
responding to questions and comments, all with a view to having Eternal's
application granted within a reasonable
time.
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(d)
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Possible
Amendments: The parties agree to amend this Agreement or
execute such additional agreements as may be recommended by their tax
advisors to more properly reflect their intentions as set out in this
Section 5.
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(e)
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GST and PST:
Eternal acknowledges that it is liable for payment on Closing of federal
GST and PST on the sale price of the Hardy Tangibles and the Hardy
Miscellaneous Interests.
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6.
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Adjustments. The
effective date of the sale, conveyance, transfer and assignment of the
Sale Royalties to ▇▇▇▇▇▇ and the conveyance, transfer and assignment of
the Hardy Assets to Eternal will be April 1, 2010 (the "Effective Date"). The
parties acknowledge and agree that, upon Closing and except as may
hereafter be expressly provided to the contrary, ▇▇▇▇▇▇ (as to the Sale
Royalties) and Eternal (as to the Hardy Assets) will assume and be
responsible for 100% of all expenses and obligations associated with the
assets they acquire hereunder but there will be no adjustment or accrual
with respect to any expenses and obligations paid or incurred prior to the
Effective Date. For greater certainty, an adjustment will be
made to reflect the royalties payable to Eternal by Pebble to March 31,
2010 and payable in accordance with the Eternal Royalty Agreements. Final
adjustments will be made by May 31,
2010.
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7.
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TSXV
Acceptance. This Agreement is subject to TSXV
acceptance. ▇▇▇▇▇▇ agrees to make application to the TSXV for acceptance
promptly upon execution of this Agreement and use its reasonable best
efforts to obtain such acceptance within 30 days of execution. Eternal
agrees to assist ▇▇▇▇▇▇ by providing such information as the TSXV may
reasonably require and which is within Eternal's knowledge or
control.
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8.
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Closing. The Closing shall
take place at 2:00 pm on the Closing Date in the offices of ▇▇▇▇▇▇ in
Vancouver, BC or at such other date, time, place and manner as the parties
may mutually agree upon in writing. On Closing (a) Eternal shall execute
and deliver such general and specific conveyances, transfers and
assignments and other documents as ▇▇▇▇▇▇ may reasonably require to
complete the sale, conveyance, transfer and assignment of the Sale
Royalties, and (b) ▇▇▇▇▇▇ shall deliver the TSXV acceptance letter and a
certificate representing the Sale Shares and, further, ▇▇▇▇▇▇ shall
execute and deliver such general and specific conveyances, transfers and
assignments and other documents as Eternal may reasonably require to
complete the conveyance, transfer and assignment of the Hardy
Assets. Each party shall also deliver such further
documentation as the other party may reasonably request to complete the
transactions contemplated hereby including, without limitation, officer's
certificates in respect of each party's representations and warranties and
any required escrow documentation to secure the payment of the Cash
Consideration. All documentation delivered at Closing shall be
in form and substance satisfactory to the parties, acting
reasonably.
Eternal shall deliver to ▇▇▇▇▇▇ all of its files and other records
pertaining to the Sale Royalties as soon as commercially reasonable
following Closing and ▇▇▇▇▇▇, in turn, shall deliver to Eternal all of its
lease and agreement files and other records pertaining to the Hardy Assets
as soon as commercially reasonable following
Closing.
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9.
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Pre-Closing
Hardy Operations. Prior to Closing, ▇▇▇▇▇▇ shall cause
the Hardy Assets to be maintained in the ordinary course of business,
consistent with past practice and applicable law, and shall cause all
obligations under the relevant mineral leases and any other agreements
affecting the Hardy Assets to be performed and complied with and neither
▇▇▇▇▇▇ nor Pebble shall, without Eternal's prior written consent, commence
or consent to any operation in respect of the Hardy Assets, remove or
dispose of any of the Hardy Assets, amend any Hardy Lease or other
agreement affecting the Hardy Assets or grant any security interest in
respect of the Hardy Assets.
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10.
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Hardy
Review Period. ▇▇▇▇▇▇ agrees that Eternal shall have
until March 31, 2010 to undertake a title review and
environmental assessment in respect of the Hardy Assets ("Review
Period"). On or before the end of the Review Period,
Eternal shall advise ▇▇▇▇▇▇ in writing if in Eternal's sole opinion,
acting reasonably, ▇▇▇▇▇▇/▇▇▇▇▇▇'s title to such interests is sufficient
and it has obtained a satisfactory environmental assessment that it wishes
to proceed with the sale of the Sale Royalties. Failure to
provide ▇▇▇▇▇▇ with such a notice prior to the expiration of the Review
Period will be deemed to be an election by Eternal to
proceed.
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11.
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Liability.
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(a)
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Pre-Effective Date
Obligations: Eternal shall remain liable for all
liabilities and obligations in respect of the Sale Royalties existing or
that arise out of events occurring prior to the Effective Date and Eternal
shall discharge and satisfy such liabilities and obligations and indemnify
▇▇▇▇▇▇ from and against any and all Claims associated
therewith. Subject to Clause 11(c), ▇▇▇▇▇▇ shall likewise
remain liable for all liabilities and obligations in respect of the Hardy
Assets existing or that arise out of events occurring prior to the
Effective Date and ▇▇▇▇▇▇ shall discharge and satisfy such obligations and
indemnify Eternal from and against any and all Claims associated
therewith.
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(b)
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Post-Effective Date
Obligations: Upon Closing, ▇▇▇▇▇▇ shall assume 100% of
all liabilities and obligations in respect of the Sale Royalties arising
or that arise out of events occurring after the Effective Date and ▇▇▇▇▇▇
shall discharge and satisfy such liabilities and obligations and indemnify
Eternal from and against any and all Claims associated
therewith. Eternal, upon Closing, shall assume 100% of all
liabilities and obligations in respect of the Hardy Assets (including,
without limitation, those arising under the Hardy Leases or any other
relevant agreements), arising or that arise out of events occurring after
the Effective Date and Eternal shall discharge and satisfy such
obligations and indemnify ▇▇▇▇▇▇ from and against any and all Claims
associated therewith.
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(c)
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▇▇▇▇▇ Environmental
Liabilities: Notwithstanding anything else herein
contained, Eternal agrees that it shall, upon Closing (i) be solely liable
and responsible for any and all Claims relating to events or conditions
on, prior to, and after the Effective Date which ▇▇▇▇▇▇ or Pebble may
suffer, sustain, pay or incur, and (ii) indemnify and save ▇▇▇▇▇▇ and
Pebble harmless from any and all Claims whatsoever which may be brought
against or suffered by them or which they may sustain, pay or incur, in
either case as a result of any matter or thing arising out of, resulting
from, attributable to or connected with any Environmental Liabilities
pertaining to the Hardy Assets, or any of them, including, without
limitation, damage from or removal of hazardous or toxic substances,
clean-up and the Abandonment and Reclamation Obligations. Once
Closing has occurred, Eternal shall be solely responsible for all
Environmental Liabilities respecting the Hardy Assets and the performance
of the Abandonment and Reclamation Obligations (as between ▇▇▇▇▇▇/Pebble
and Eternal), and releases ▇▇▇▇▇▇ and Pebble from any Claims Eternal may
have against ▇▇▇▇▇▇ and Pebble with respect to all such liabilities and
responsibilities. The parties have taken into account Eternal's
assumption of responsibility for the future Abandonment and Reclamation
Obligations associated with the Hardy Assets, as set forth in this
Agreement, and ▇▇▇▇▇▇ and ▇▇▇▇▇▇'s release of responsibility therefor when
they determined the Property
Consideration.
|
|
(d)
|
Pre-Closing
Termination Options: Notwithstanding the foregoing,
should any liability or obligation arise after the Effective Date but
prior to Closing which would materially affect the value of the Sale
Royalties or the Hardy Assets, ▇▇▇▇▇▇ or Eternal, as applicable, shall
have the option prior to Closing to terminate the proposed transactions by
giving the other party written
notice.
|
|
12.
|
Representations
and Warranties.
|
|
(a)
|
Eternal: Eternal
makes the following representations and warranties to ▇▇▇▇▇▇,
all of which shall be true and accurate in all material respects as of the
Closing:
|
|
(i)
|
Organization and
Standing: Eternal is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada;
|
|
(ii)
|
Power and
Authority: Eternal has all requisite power and authority
to carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations hereunder and this Agreement has
been approved by all necessary corporate action on the part of
Eternal. The consummation of this Agreement will not violate,
nor be in conflict with, (A) any provision of the governing documents of
Eternal, (B) any agreements to which Eternal is a party, or (C) any
judgment, decree, ordinance, law, regulation or permit. In particular, the
within sale of the Sale Royalties and the proposed concurrent sale to
Rover Resources, Inc. ("Rover") of Eternal's
interest in certain North Dakota hydrocarbon properties (the "Border Acreage Sale")
does not constitute a sale of substantially all of Eternal's assets and,
consequently, Eternal does not require the approval of its shareholders to
enter into this Agreement or to perform its obligations
hereunder;
|
- 10 -
|
(iii)
|
Enforceability: This
Agreement and all other agreements and instruments executed in accordance
herewith shall constitute the valid and binding obligation of Eternal
enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization
or similar laws affecting the rights of creditors generally and subject to
the general principles of
equity;
|
|
(iv)
|
Litigation: To
the best of Eternal’s knowledge, there is no claim, lawsuit, accident
investigation, arbitration or administrative proceeding pending or
threatened in any venue involving Eternal or the Sale Royalties which
would or might have an adverse effect on the Sale Royalties or the ability
of Eternal to consummate the transactions contemplated by this
Agreement;
|
|
(v)
|
No Consents or Rights
of First Refusal: Except for the consent of the royalty
payors under the Eternal Royalty Agreements, there are no consents
required or rights of first refusal or similar rights triggered as a
result of the contemplated sale of the Sale
Royalties;
|
|
(vi)
|
Compliance with
Laws: To the best of Eternal's knowledge, all laws,
rules, regulations, ordinances and orders of all local, provincial and
federal governmental bodies having jurisdiction over the Sale Royalties
have been complied with;
|
|
(vii)
|
Contracts: Except
for the Eternal Royalty Agreements, there are no other contractual
arrangements with respect to the Sale Royalties;
and
|
|
(viii)
|
Full
Disclosure: To the best of Eternal's knowledge, none of
the above representations and warranties fails to state a material fact
necessary to make the statements contained therein not
misleading.
|
|
(b)
|
▇▇▇▇▇▇: ▇▇▇▇▇▇
makes the following representations and warranties to Eternal,
all of which shall be true and accurate in all material respects as of the
Closing:
|
|
(i)
|
Organization and
Standing: ▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of the Province of
Ontario and is authorized, operating through Pebble, to conduct business
in the Province of
Saskatchewan;
|
|
(ii)
|
Power and
Authority: ▇▇▇▇▇▇ has all requisite power and authority
to carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations hereunder and this Agreement has
been approved by all necessary corporate action on the part of
▇▇▇▇▇▇. The consummation of this Agreement will not violate,
nor be in conflict with, (A) any provision of the governing documents of
▇▇▇▇▇▇, (B) any agreements to which ▇▇▇▇▇▇ is a party, or (C) any
judgment, decree, ordinance, law, regulation or
permit;
|
- 11 -
|
(iii)
|
Enforceability: This
Agreement and all other agreements and instruments executed in accordance
herewith shall constitute the valid and binding obligation of ▇▇▇▇▇▇
enforceable in accordance with their respective terms subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization
or similar laws affecting the rights of creditors generally and subject to
the general principles of
equity;
|
|
(iv)
|
Litigation: To
the best of ▇▇▇▇▇▇’▇ knowledge, there is no claim, lawsuit, accident
investigation, arbitration or administrative proceeding pending or
threatened in any venue involving ▇▇▇▇▇▇ or the Hardy Assets which would
or might have an adverse effect on the Hardy Assets or the ability of
▇▇▇▇▇▇ to consummate the transactions contemplated by this
Agreement;
|
|
(v)
|
Material
Agreements: All of the material agreements which relate
to or otherwise affect the Hardy Assets are listed in Schedule
"B";
|
|
(vi)
|
Taxes
Paid: All taxes and assessments based upon or measured
by the ownership of the Hardy Assets which have become due and payable
prior to the Effective Date have been timely paid and any of the foregoing
which need to be paid prior to Closing will likewise be timely
paid;
|
|
(vii)
|
Lease Burdens
Paid: All rentals and other financial burdens arising in
respect of the Hardy Assets have been timely and properly paid and will
continue to be timely and properly paid up to
Closing;
|
|
(viii)
|
Validity of
Leases: ▇▇▇▇▇▇ has not received any notices of default
in respect of the Hardy Leases or any other agreements related to the
Hardy Assets and, to the best of ▇▇▇▇▇▇'▇ knowledge, the foregoing leases
and agreements are in full force and
effect;
|
|
(ix)
|
No Consents or Rights
of First Refusal: There are no consents required or
rights of first refusal or similar rights triggered as a result of the
contemplated sale and transfer of the Hardy
Assets;
|
|
(x)
|
Compliance with
Laws: To the best of ▇▇▇▇▇▇'▇ knowledge, all laws,
rules, regulations, ordinances and orders of all local, provincial and
federal governmental bodies having jurisdiction over the Hardy Assets have
been complied with;
|
|
(xi)
|
No Proposals or
Commitments: No proposals or commitments exist that
would obligate Eternal to make expenditures in respect of the Hardy Assets
after the Effective Date other than routine expenses incurred in the
normal operation of the Hardy Assets, other than any expenditures which
Eternal may choose to make in order to meet the offset obligations set out
in those two Notices of Offset Obligations issued May 15, 2009 by the
Saskatchewan Ministry of Energy and Resources in respect of Lease PN61692,
copies of which have been delivered to
Eternal;
|
- 12 -
|
(xii)
|
Hardy
Environmental: Pebble has not been charged with and, to
the best of ▇▇▇▇▇▇'▇ knowledge, there are no pending charges or
investigations against Pebble relating to any breach of Environmental
Regulations, nor has Pebble any knowledge of any breach of
Environmental Regulations, nor any knowledge of the basis for a claim by
any third party (including governmental authorities) of pollution or other
environmental damage arising from the Hardy Assets or the ownership
thereof, and Pebble has not received (i) any orders or directives under
the Environmental Regulations which relate to Environmental Liabilities
and which require any work, repairs, construction or capital expenditures
with respect to the Hardy Assets, where such orders or directives have not
been complied with in all material respects; or (ii) any demand or notice
issued under the Environmental Regulations with respect to the breach of
any environmental, health or safety law applicable to the Hardy Assets
including, without limitation, any Environmental Regulations relating to
the release, use, storage, treatment, transportation or disposition of
environmental contaminants, which demand or notice remains
outstanding;
|
|
(xiii)
|
Contracts: To
the best of ▇▇▇▇▇▇'▇ knowledge, there are no gas contracts, gas balancing
or similar arrangements, agreements for the transportation, processing or
disposal of hydrocarbons, joint operating agreements or contract operating
agreements affecting the Hardy
Assets;
|
|
(xiv)
|
No ▇▇▇▇▇ other than
the Hardy Well: To the best of ▇▇▇▇▇▇'▇ knowledge ,
except for the Hardy Well, there are no ▇▇▇▇▇ located on or directly
related to the operation of the Hardy
Assets;
|
|
(xv)
|
No Areas of Mutual
Interest: To the best of ▇▇▇▇▇▇'▇ knowledge, the Hardy
Assets are not subject to an agreement which provides for an area of
mutual interest;
|
|
(xvi)
|
Sale
Shares: The Sale Shares will on issuance be fully paid
and non-assessable and will be listed for trading on the
TSXV;
|
|
(xvii)
|
Securities
Filings: The Sale Shares will be issued to Eternal
pursuant to an exemption from the registration and prospectus requirements
of applicable securities laws and regulations. Forthwith after the
Closing, ▇▇▇▇▇▇ shall file such forms and documents as may be required
under the applicable securities laws and regulations in Canada relating to
the issuance of the Sale Shares, including a Form 45-106F1 as prescribed
by National Instrument
45-106;
|
|
(xviii)
|
Full
Disclosure: To the best of ▇▇▇▇▇▇'▇ knowledge, none of
the above representations and warranties fails to state a material fact
necessary to make the statements contained therein not misleading;
and
|
|
(xix)
|
SEDAR
Filings: All documents filed by ▇▇▇▇▇▇ on SEDAR (the
“▇▇▇▇▇▇ Disclosure
Documents”) as of their respective dates, were filed on a timely
basis and in compliance in all material respects with all applicable
legislation and did not, when filed, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading. As of their respective dates, the financial
statements of ▇▇▇▇▇▇ included in the ▇▇▇▇▇▇ Disclosure Documents complied
as to form in all material respects with applicable accounting
requirements and legislation. Such financial statements fairly
presented the financial position of ▇▇▇▇▇▇ at and as of the dates thereof
and the results of its operations, cash flows, and changes in
shareholders’ equity for the periods then
ended.
|
- 13 -
|
13.
|
Conditions
of Closing. The obligations of the parties to close the
subject transactions shall be subject to satisfaction of the following
conditions, which may be waived by notice in
writing:
|
|
a)
|
TSXV
Acceptance: The TSXV shall have accepted for filing this
Agreement on the terms set out
herein;
|
|
(b)
|
Compliance with
Agreement: Each party shall have delivered all documents
required to be delivered by it and otherwise complied with the terms of
this Agreement in all material
respects;
|
|
(c)
|
Representations and
Warranties: The representations and warranties of each
party shall be true and accurate in all material respects on and as of
Closing;
|
|
d)
|
No Material Adverse
Change: Prior to Closing, no material adverse change in
the Sale Royalties or the Hardy Assets or the business conducted in
relation thereto shall have occurred, whether by casualty or otherwise;
and
|
|
(e)
|
Concurrent Closing of
Border Acreage Sale: Rover and Eternal shall
concurrently close the Border Acreage
Sale.
|
|
14.
|
Casualty. The
risk of loss due to fire or other casualty or condemnation shall be with
Eternal (as to the Sale Royalties) and ▇▇▇▇▇▇ (as to the Hardy Assets) at
all times prior to Closing and shall be borne 100% by ▇▇▇▇▇▇ (as to the
Sale Royalties) and Eternal (as to the Hardy Assets)
thereafter. If any material portion of the assets generating
the Sale Royalties or the Hardy Assets shall be damaged, destroyed or
condemned prior to Closing (or if condemnation is threatened), Eternal and
▇▇▇▇▇▇ shall each have the right to terminate this Agreement at or prior
to Closing without further obligation to the non-terminating
party.
|
|
15.
|
Survival. The
representations and covenants of Eternal and ▇▇▇▇▇▇ shall survive Closing
for a period of 6 months and shall be deemed to apply to all agreements
and instruments executed in accordance herewith, it being the express
intention of the parties that there shall not be any merger of the
aforesaid representations and covenants notwithstanding any rule of law,
equity of statute to the contrary, all such rules being
waived. Each of Eternal and ▇▇▇▇▇▇ shall indemnify the other
from and against all Claims arising within the aforesaid survival period
which are occasioned by reason of a representation being untrue or
inaccurate.
|
|
16.
|
No
Consequential Damages. No party shall be liable to the
other hereunder for indirect, consequential, special or punitive damages
including, without limitation, loss of future revenue, income or profits,
diminution of value or loss of business reputation or
opportunity.
|
- 14 -
|
17.
|
Press
Releases. The parties each acknowledge that the other is
a publicly traded entity and that each shall be required to issue a press
release concerning this Agreement and the transactions contemplated
hereunder. Nothing herein shall prevent a party from furnishing
any information to any governmental agency or regulatory authority or to
the public insofar and to the extent such disclosure is required by
applicable law (including, without limitation, securities laws or the
rules or regulations of any stock exchange applicable to such party),
provided that a party which proposes to make such a public disclosure
shall, to the extent reasonably possible, provide the other party with a
draft of such statement in sufficient time prior to its release to enable
such other party to review such draft and advise the disclosing party of
any comments it may have with respect
thereto.
|
|
18.
|
Amendment. This
Agreement may only be amended by a formal written instrument executed by
proper signing officers for the
parties.
|
|
19.
|
Waiver. The
parties acknowledge and agree that any waiver of the provisions of this
Agreement shall only be binding upon the waiving party if evidenced in
writing and signed on behalf of the waiving party; any such waiver shall
apply only to the particular breach, default, obligation or provision
specifically identified and waived and not to any other breaches,
defaults, obligations or provisions, whether or not similar; any such
waiver shall not constitute a continuing waiver unless expressly stated;
and any delay or omission on the part of a party in exercising any right
or power under this Agreement shall not impair the ability of such party
to exercise such right or power or be considered to be a waiver of, or
acquiescence to, any breach or
default.
|
|
20.
|
Notices. Any
notices which may be required to be given under the terms of this
Agreement shall be in writing and shall be considered duly delivered if
personally delivered or sent by facsimile to the addresses of the parties
as set out below:
|
|
If to ▇▇▇▇▇▇:
|
If to Eternal:
|
|||
|
|
|
|||
|
▇▇▇▇▇▇
Oil Corporation
|
||||
|
Suite
302, ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
|
▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|||
|
Vancouver,
British Columbia
|
Littleton,
Colorado
|
|||
|
V6J
1V4
|
80120
|
|||
|
Facsimile:
|
604.639.4458
|
Facsimile:
|
303.798.5767
|
|
|
Attn:
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
Attn:
|
▇▇▇▇
▇▇▇▇▇
|
|
|
President
|
Chief
Executive Officer
|
|||
|
21.
|
Non-Assignable. This
Agreement is not assignable by either
party.
|
|
22.
|
Inurement. This
Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors, receivers, receiver-managers and
trustees.
|
|
23.
|
Headings. The
headings utilized in this Agreement are inserted for convenience of
reference only and shall not affect the construction of the provisions
hereof.
|
|
24.
|
Gender
and Number. This Agreement shall be read with all
changes in gender and number as may be required by the
context.
|
|
25.
|
Conflict. Wherever
any provision, whether express or implied, of any schedule conflicts or is
at variance with any provision of the main body of this Agreement, the
provision in the main body shall prevail. Wherever any provision, whether
express or implied, of this Agreement conflicts or is at variance with any
documentation issued in furtherance thereof, the provision of this
Agreement shall prevail.
|
- 15 -
|
26.
|
Weekend
or Holiday Dates. If any date for the payment of monies
or the fulfillment of an obligation or any other stipulated deadline falls
on a Saturday, Sunday or statutory holiday, such date will be postponed to
the next following business day unless the parties expressly agree to the
contrary.
|
|
27.
|
Governing
Law/Courts.
|
|
(a)
|
Governing
Laws: This Agreement shall, in all respects, be subject
to, interpreted, construed and enforced in accordance with and under the
laws of the Province of Alberta and the laws of Canada applicable therein
and shall, in every regard, be treated as a contract made in the Province
of Alberta. To the extent that the location of the Royalty
Lands or the Hardy Assets in the Province of Saskatchewan requires the
application of the laws in force in the Province of Saskatchewan, such
laws shall be adduced as evidence in the Alberta courts having
jurisdiction in respect of a dispute arising
hereunder.
|
|
(b)
|
Courts: The
parties irrevocably attorn and submit to the exclusive jurisdiction of the
courts of the Province of Alberta and courts of appeal therefrom in
respect of all matters arising out of this
Agreement.
|
|
28.
|
Invalidity
of Provisions. If any provision of this Agreement or the
application thereof to any party or circumstance shall to any extent be
held invalid, illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement, the application of such
provision to parties or circumstances other than those to which it is held
invalid, illegal or unenforceable or the validity, legality or
enforceability of such provision in any other jurisdiction shall not in
any way be affected or impaired thereby and such provision shall be
severable from this Agreement to the extent of such invalidity, illegality
or unenforceability.
|
|
29.
|
Negotiated
Transaction. The parties have participated jointly in
the negotiation and drafting of this Agreement and, in the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as jointly drafted by the parties and no presumption or
burden of proof shall arise favouring or disfavouring any party by virtue
of the authorship of any provision of this
Agreement.
|
|
30.
|
Further
Assurances, Intent. It is Eternal’s intent to convey to
▇▇▇▇▇▇ 100% of Eternal’s right, title, estate and interest in and to the
Sale Royalties, legal, beneficial or equitable, and it is likewise
▇▇▇▇▇▇’▇ intent to, among other things, convey to Eternal 100% of
▇▇▇▇▇▇/Pebble’s right, title, estate and interest in and to the Hardy
Assets, legal, beneficial or equitable. In this regard, both
parties agree to execute and deliver all such instruments, conveyances and
other documents and do such other acts not inconsistent with the terms of
this Agreement as may be necessary or advisable to carry out each party’s
intent as stated herein.
|
|
31.
|
Complete
Agreement. This Agreement constitutes the complete
agreement between the parties regarding the matters addressed herein and
shall supercede all prior agreements between the parties in relation
thereto, whether written or oral. In addition, each of ▇▇▇▇▇▇
and Eternal acknowledges and agrees that this Agreement and the agreement
providing for the Border Acreage Sale supercede and replace that certain
Letter Agreement dated November 25, 2009 between ▇▇▇▇▇▇ and Eternal, and
the Lock Up Agreements executed in conjunction therewith by the officers
and directors of Eternal, pursuant to which ▇▇▇▇▇▇ was going to acquire
all of the issued and outstanding shares of common stock of
Eternal.
|
- 16 -
|
32.
|
Counterpart
Execution/Delivery. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
but all of which together shall constitute one and the same instrument. In
addition, facsimile or scanned email copies of executed counterparts shall
be conclusively regarded for all purposes as originally executed
counterparts pending the delivery of the
originals.
|
Please confirm your agreement to the
foregoing by signing and returning a copy of this Agreement to the attention of
the undersigned prior to
4:30 p.m. MST on March 26, 2010.
Sincerely,
▇▇▇▇▇▇
OIL CORPORATION
Per: /s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
President
AGREED to
and ACCEPTED this 26th day of March, 2010.
Per: /s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer