EXHIBIT 10.11
CANWEST ROYALTY AGREEMENT
DATED effective as of the 4th day of March, 2005.
BETWEEN: EARTH ENERGY RESOURCES INC., a body corporate incorporated
under the laws of the Province of Alberta
("Earth Energy")
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WEST PEAK VENTURES OF CANADA LTD., a body corporate
incorporated under the laws of Canada
("West Peak")
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CANWEST PETROLEUM CORPORATION, a body corporate incorporated
under the laws of Colorado
("Canwest")
WHEREAS Earth Energy and West Peak have entered into the Licence
Agreement;
AND WHEREAS West Peak has advised Earth Energy that it has assigned all of
West Peak's right, title and interest in and to the License Agreement to
Canwest;
AND WHEREAS the parties wish to terminate the License Agreement, together
with all rights, liabilities and obligations thereunder and replace the License
Agreement with this Agreement.
NOW THEREFORE IN CONSIDERATION of the covenants, agreements,
representations, warranties and indemnities contained herein and other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
the parties hereby agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement the following words and terms shall have the indicated
meanings and grammatical variations of such words and terms shall have
responding meanings:
(a) "Agreement" means this Canwest Royalty Agreement, together with the
Schedules attached hereto and made part hereof, as the same may be
amended, supplemented or otherwise modified from time to time;
(b) "Affiliate" means, with respect to a party hereto, an entity that
has an "affiliation" (as defined in the Securities Act (Alberta), as
amended from time to time) with such party;
(c) "Business Day" means any day other than a day which is a Saturday, a
Sunday, a statutory holiday or day on which banks in Calgary,
Alberta are not generally open for business;
(d) "Canwest Lands" means lands while the same are beneficially owned to
a minimum of an undivided fifteen (15%) percent interest by Canwest
or a then Affiliate of Canwest, and includes the lands set forth in
Schedule "A" hereto, as amended from time to time;
(e) "Catalyst" means the chemical formulation utilized for applications
limited to the extraction of oil from surface mines tar sands and
oil shale and soil reclamation, covered by patent applications: PCT
CA04/001826 and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇/▇▇, both filed on or about October
16, 2004, together with any Improvements thereto that:
(i) Earth Energy commercially uses or makes available to other
persons for commercial use (provided such Improvements have
not been developed for such other persons on an exclusive
basis); and
(ii) are also appropriate for use in optimizing commercial
production of oil from specific surface mines of tar sands or
oil shale or soil reclamation that constitute part of the
Canwest Lands;
(f) "Catalyst Costs" means the actual cost to Earth Energy to acquire
the raw components and process the Catalyst in question, plus a
reasonable allocation of other costs and expenses associated with or
attributable to such Catalyst and including:
(i) research and development costs;
(ii) overhead and general and administrative costs and expenses;
(iii) advertising and marketing of the Catalyst;
(iv) transportation costs; and
(v) blending costs including labour;
(g) "Central and South America" means the geographic territory
encompassed by all countries and other jurisdictions in the Western
Hemisphere south of the southernmost border of Mexico and for
greater clarification not including any of the Caribbean Sea
countries or territories;
(h) "Dispute" has the meaning attributed to it in Section 8.1;
(i) "Effective Date" means the date first above written;
(j) "Equipment" means the equipment to be used as part of the Catalyst
process, together with any Improvements thereto that:
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(i) Earth Energy commercially uses or makes available to other
persons for commercial use (provided such equipment and/or
Improvements have not been developed for such persons on an
exclusive basis); and
(ii) are also appropriate for use in optimizing commercial
production of oil from specific surface mines of tar sands or
oil shale or soil reclamation that constitute part of the
Canwest Lands;
(k) "Equipment Cost" means the cost to Earth Energy of acquiring,
building and/or modifying, as the case may be, of any Equipment to
be supplied to Canwest hereunder, plus twenty five (25%) per cent;
(l) "Excluded Persons" means any four (4) entities and such entities
Affiliates; such four (4) entities to be designated by Earth Energy
at any time and from time to time during the Term;
(m) "Excluded Persons Field of Use" means those types of commercial or
business activities being carried out by each of the respective
Excluded Persons as at the date such entity is designated as an
Excluded Person hereunder;
(n) "GAAP" means generally accepted accounting principles as prescribed,
recommended or promulgated from time to time by the Canadian
Institute of Chartered Accountants as contained in the CCIA Handbook
which are applicable as at the date on which any calculation made
hereunder is to be effective and in the absence of a specific
recommendation contained in the CCIA Handbook, such accounting
principles as are generally accepted in practice;
(o) "Gross Revenue" means those revenues actually received by Earth
Energy from or through the use of the Technology for extraction of
oil from surface mines of tar sands or oil shale, as well as soil
reclamation (other than for revenues received from or through
Canwest or any of the Excluded Persons from the Excluded Persons
Field of Use), including:
(i) licensing fees from persons (other than Canwest and the
Excluded Persons from the Excluded Persons Field of Use) of
the use for the Technology;
(ii) the purchase price for sales of Equipment to persons (other
than Canwest and the Excluded Persons for use in the Excluded
Persons Field of Use);
(iii) lease and license fees for leases and licenses of Equipment to
persons (other than Canwest and the Excluded Persons for use
in the Excluded Persons Field of Use);
(iv) fees for services provided to persons (other than Canwest and
the Excluded Persons for use in the Excluded Persons Field of
Use) relating to the Technology; and
(v) the sale of any territory, field of use or Technology or any
part thereof (other than to Canwest or any Excluded Person in
connection with the Excluded Persons Field of Use),
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less any refunds provided for returns or defects, shipping
costs, insurance costs and other usual deductions directly
related to revenues;
(p) "Improvements" means any improvements, modifications, variations,
refinements or additions to the Technology that enhance the
production of oil from surface mines of tar sands or oil shale or
improves the results of soil reclamation, as the same may be
applicable to the Canwest Lands;
(q) "License Agreement" means that License Agreement (Draft No. 6)
between Earth Energy and West Peak, dated effective August 1, 2003;
(r) "Non-Disclosure and Non-Use Agreement" has the meaning attributed to
it in Section 6.1;
(s) "Patents" means all current and future patents and all pending
applications (and including patents which may issue as a result of
such pending applications) for patents of Earth Energy or any
Affiliate of Earth Energy in any country, including, without
limitation, those specified in the definition of "Catalyst", to the
extent that they cover inventions relating to the Technology,
including Improvements;
(t) "Process" means the processes described in the Catalyst patent
applications and other know-how associated with the use of the
Catalyst in conjunction with the Equipment to optimize commercial
production of oil, including all Improvements thereto;
(u) "Profits" means the net profits of Earth Energy in the applicable
jurisdiction derived from the sale of Catalyst for use in tar sands
separation by purchasers in the jurisdiction specified (other than
for sales to Canwest and any Excluded Person for use in the Excluded
Persons Field of Use), the calculation of which shall include the
deduction of all costs and expenses associated with or attributable
to such sales of Catalyst, including a reasonable allocation of:
(i) research and development costs;
(ii) direct costs and expenses, including costs of raw materials
and processing of the Catalyst;
(iii) overhead and general and administrative costs and expenses
incurred in the business relating to such sales of Catalyst;
(iv) advertising and marketing of the Catalyst,
and after deduction of any loss carry forward from previous
years that has not already been deducted from any prior years'
profits;
(v) "Royalties" means all royalties that may be payable by Earth Energy
to Canwest pursuant to Sections 3.2, 3.3 and 3.4;
(w) "Royalty Rate" means, as applicable, an amount calculated as two and
one-half (2.5%) percent of the Gross Revenue, or twelve and one-half
(12.5%) percent of any Profits, as the case may be;
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(x) "Services Cost" means the costs and expenses of Earth Energy
associated with its provisions of technical advisory and supervision
services personnel to Canwest, which costs and expenses shall be
payable at then current market rates for such services and also
include all travel and lodging expenses of such personnel while
travelling to and from and performing such services;
(y) "Technology" means the Catalyst, the Equipment and the Process
and/or any combination thereof; and
(z) "Term" means the term of this Agreement as set forth in Section 7.1.
1.2 Schedules
The following schedules are annexed to this Agreement and form a part hereof:
Schedule "A" List of Canwest Lands as at Effective Date
Schedule "B" Form of Non-Disclosure and Non-Use Agreement
1.3 Construction
In this Agreement, unless otherwise expressly stated:
(a) references to a "party" or "parties" are references to a party or
parties to this Agreement, and references to "herein", "hereby",
"hereunder", "hereof" and similar expressions are references to this
Agreement and not to any particular Article, Section, subsection,
clause or Schedule;
(b) references to an "Article", "Section", "subsection", "clause" or
"Schedule" are references to an Article, Section, subsection, clause
or Schedule of or to this Agreement;
(c) references to dollar amounts are references to Canadian dollars,
unless otherwise specified;
(d) words importing the singular shall include the plural and vice
versa, words importing gender shall include the masculine, feminine
and neuter genders, and references to a "person" or "persons" shall
include individuals, corporations, partnerships, associations,
bodies politic and other entities, all as may be applicable in the
context;
(e) the table of contents and the use of headings is for convenience of
reference only and shall not affect the construction or
interpretation hereof;
(f) the words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation";
(g) where a word or phrase is defined, its derivatives or other
grammatical forms have a corresponding meaning;
(h) references to a statute, regulation or other legal enactment include
all of its amendments and re-enactments; and
(i) time is of the essence.
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1.4 Choice of Law
This Agreement, and each of the documents contemplated by or delivered under or
in connection with this Agreement (to the extent no choice of law is specified
therein), shall be governed by and construed in accordance with the laws of the
Province of Alberta and the federal laws of Canada applicable therein (without
reference to conflicts of laws principles).
1.5 Interpretation Not Affected by Party Drafting
The parties hereto acknowledge that their respective legal counsel have reviewed
and participated in settling the terms of this Agreement, and the parties hereby
agree that any rule of construction to the effect that any ambiguity is to be
resolved against the drafting party shall not be applicable in the
interpretation of this Agreement.
ARTICLE 2
TERMINATION OF LICENSE AGREEMENT
2.1 Confirmation of Assignment
West Peak hereby represents and warrants (and acknowledges that Earth Energy and
Canwest are relying upon such representations and warranties in entering into
this Agreement) that:
(a) West Peak has assigned all of its right, title and interest in and
to the License Agreement to Canwest;
(b) West Peak retains no interest in or under the License Agreement;
(c) Earth Energy may deal solely with Canwest in connection with any and
all matters relating to the License Agreement; and
(d) West Peak is not aware of anyone other than Canwest having any claim
under nor has any person made any demand in connection with, the
License Agreement.
2.2 Canwest Representations and Warranties
Canwest hereby represents and warrants to Earth Energy (and acknowledges that
Earth Energy is relying upon such representations and warranties in entering
into this Agreement) that as of the Effective Date:
(a) Canwest is a corporation in good standing and has the requisite
capacity, power and authority to execute this Agreement and to
perform its obligations hereunder without seeking or obtaining the
consent of any other person;
(b) Canwest has not disposed, purported to dispose nor entered into any
discussions with any third person to dispose of any of Canwest's
rights or interests under or in connection with the License
Agreement and it has good title to the License Agreement and all
rights thereunder and every part thereof, free and clear of all
encumbrances, liens, charges, mortgages, pledges, security
interests, claims, preferential rights of purchase, options,
royalties, or other third person interests or rights of any kind
whatsoever;
(c) Canwest has not sub-licensed any rights under or in connection with
the License Agreement nor entered into any agreements or other
obligations with any third person with respect thereto;
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(d) there are no unsatisfied judgments, claims, proceedings, actions,
governmental investigations or lawsuits in existence, contemplated
or threatened against or with respect to the License Agreement or
the rights or obligations of Canwest thereunder or otherwise,
directly or indirectly, in connection therewith; and
(e) no consideration of any kind, actual or contingent, was paid or is
owing or may be owing to any person for the transfer of West Peak's
interest in the License Agreement to Canwest.
2.3 Earth Energy Representations and Warranties
Earth Energy hereby represents and warrants to Canwest (and acknowledges that
Canwest is relying upon such representations and warranties in entering into
this Agreement) that as of the Effective Date:
(a) Earth Energy is a corporation in good standing and has the requisite
capacity, power and authority to execute this Agreement and to
perform its obligations hereunder without seeking or obtaining the
consent of any other person;
(b) Earth Energy has not disposed, purported to dispose nor entered into
any discussions with any third person to dispose of any of Earth
Energy's rights or interests under or in connection with the License
Agreement or the Catalyst and it has good title to the License
Agreement and all rights thereunder and every part thereof, free and
clear of all encumbrances, liens, charges, mortgages, pledges,
security interests, claims, preferential rights of purchase,
options, royalties, or other third person interests or rights of any
kind whatsoever;
(c) there are no unsatisfied judgments, claims, proceedings, actions,
governmental investigations or lawsuits in existence, contemplated
or threatened against or with respect to the License Agreement or
the rights or obligations of Earth Energy thereunder or otherwise,
directly or indirectly, in connection therewith;
(d) since August 12, 2003, there have been no circumstances or events
which would, as of the date hereof, constitute a material adverse
change in the business, affairs or operations of Earth Energy; and
(e) that all material results from testing of the Catalyst prior to the
Effective Date have been provided to Canwest or West Peak.
2.4 Termination of License Agreement
Except as set forth herein, the License Agreement and all rights and obligations
thereunder or in connection therewith, including any obligations or liabilities
that have or may have accrued and remain outstanding before the Effective Date
and/or that accrue on or after the Effective Date, are all hereby terminated and
at an end. Subject to Section 2.5, to the extent any payments or other benefits
have been received by a party to the License Agreement prior to the Effective
Date, the receiving party shall be entitled to retain the benefit therefrom,
without further compensation to the party so paying or providing the payment or
benefit, as the case may be.
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2.5 Partial Survival of License Agreement
The parties acknowledge that notwithstanding the foregoing, Section 2.10 of the
Licensing Agreement shall continue in full force and effect in so far as any
payments are made or have been made, directly or indirectly, by Canwest to West
Peak for transfer by West Peak of its interests in the License Agreement,
provided that Earth Energy may seek compensation with respect to what is owed to
it under Section 2.10 of the Licensing Agreement only from Canwest and Canwest
agrees to make such payment to Earth Energy.
2.6 Mutual Release
Each party for themselves and their respective principals and agents, including
present and future directors, officers and employees (collectively, the
"Releasors" and individually a "Releasor") hereby remise, release and forever
discharge each of the other parties hereto and their respective principals and
agents, including present and future directors, officers and employees
(collectively, the "Releasees" and individually a "Releasee") from any and all
matters of action and actions, cause and causes of action, suits, dues, sums of
money, claims and demands whatsoever at law or in equity, by contract or by
statute, which each Releasor or any combination of Releasors ever had, now has,
or can, shall, or may hereafter have, for or by reason of any act, omission,
matter, cause or thing whatsoever relating to or arising out of in any way,
directly or indirectly, the License Agreement or termination thereof, other
than:
(a) for any payments by Canwest which are subject to Section 2.5; and
(b) any matters expressly set forth herein.
2.7 West Peak and Canwest Indemnity
West Peak and Canwest each agrees to indemnify and save harmless Earth Energy
from and against any claims, demands, actions, causes of action, damages,
losses, costs, liabilities and expenses which may be made or brought against
Earth Energy or which Earth Energy may suffer or incur as a result of, in
respect of or arising out of:
(a) third person claims, with the exception of those related to
intellectual property infringement in connection with the use of the
Technology, arising, directly or indirectly, under or in connection
with the License Agreement or by virtue of or through West Peak's
and/or Canwest's rights thereunder;
(b) any non-performance, non-fulfillment or breach of any covenant or
agreement on the part of West Peak or Canwest, respectively,
contained in this Agreement or in any document given in connection
herewith in order to carry out the transactions contemplated hereby;
(c) any misrepresentation, inaccuracy, incorrectness or breach of any
representation or warranty made by West Peak or Canwest,
respectively, contained in this Agreement or in any document given
in connection herewith in order to carry out the transactions
contemplated hereby; and
(d) all costs and expenses, including legal fees on a solicitor and his
own client basis, incidental to or in respect of the foregoing.
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2.8 Earth Energy Indemnity
Earth Energy agrees to indemnify and save harmless each of Canwest and West Peak
from and against any claims, demands, actions, causes of action, damages,
losses, costs, liabilities and expenses which may be made or brought against it
or which it may suffer or incur as a result of, in respect of or arising out of:
(a) any non-performance, non-fulfillment or breach of any covenant or
agreement on the part of Earth Energy contained in this Agreement or
in any document given in connection herewith in order to carry out
the transactions contemplated hereby;
(b) any misrepresentation, inaccuracy, incorrectness or breach of any
representation or warranty made by Earth Energy contained in this
Agreement or in any document given in connection herewith in order
to carry out the transactions contemplated hereby;
(c) third person claims of intellectual property infringement relating
to the use of the Technology and arising, directly or indirectly, in
connection with the exercise by Canwest and/or West Peak of their
respective rights hereunder or under the License Agreement, provided
that Earth Energy shall be given prompt notice of such claim and the
sole right to defend and settle same; and
(d) all costs and expenses, including legal fees on a solicitor and his
own client basis, incidental to or in respect of the foregoing.
2.9 Ownership of Improvements
Earth Energy shall own all Improvements. Canwest acknowledges and agrees that it
is not entitled to develop and shall not undertake development of any
Improvements without the prior written consent of Earth Energy. To the extent
any Improvements do become vested in Canwest, through operation of law or
otherwise, Canwest shall hold the same in trust for and on behalf of Earth
Energy and forthwith upon the request of Earth Energy, transfer and assign title
thereto to Earth Energy.
ARTICLE 3
GRANT OF LICENSE AND ROYALTIES
3.1 Grant of License
Earth Energy, warranting that it has the right to do so, hereby grants to
Canwest a limited license to:
(a) use and practice the Technology; and
(b) sell the oil removed from surface mined tar sands and/or oil shale
originating from the Canwest Lands,
as limited by the terms of this Agreement and to the extent necessary for
Canwest to exercise its rights hereunder.
3.2 Canadian Royalties
Subject to Section 3.4, Earth Energy shall pay Canwest a royalty at the Royalty
Rate on all Gross Revenues and Profits generated from use of the Technology in
Canada and sales of Catalyst for use in Canada during the Term.
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3.3 Central and South American Royalties
For consideration of Five Hundred Thousand United States Dollars ($500,000 USD)
which must be paid in full prior to the end of the Term, Canwest shall be
entitled to and Earth Energy shall pay to Canwest, subject to Section 3.4, a
royalty at the Royalty Rate on all Gross Revenue and Profits generated from use
of the Technology in Central and South America and sales of Catalyst for use in
Central and South America during the Term. In the event that Canwest elects to
exercise its right to receive Royalties under this Section 3.3, it may make
payment of the $500,000USD consideration through set-off and forfeiture of the
first $500,000USD in Royalties owing to it.
3.4 Excluded Persons and Excluded Persons Royalty
In order for a person to be considered an Excluded Person hereunder, Earth
Energy shall provide written notice in advance to Canwest of the identity of
such person and the fact that as and from the date of such notice, until
otherwise determined, they shall be considered an Excluded Person. In the event
any of the Excluded Persons carries on any commercial and business activities in
Canada using the Technology other than in the Excluded Person's Field of Use
(which, for greater certainty, is royalty free), then Earth Energy shall pay to
Canwest a royalty calculated at one-half (1/2) of the Royalty Rate on all Gross
Revenues related to such other activities and Profits related to such other
activities earned by Earth Energy during the Term.
3.5 Payment of Royalties
All Royalties earned by Canwest during any fiscal quarter of Earth Energy during
the Term shall be paid quarterly by Earth Energy to Canwest within thirty (30)
days of the end of such quarter or, if such day is not a Business Day, then the
next succeeding Business Day thereafter. Earth Energy shall be entitled to
set-off from any Royalty payments any amounts owing to it by Canwest. Within
thirty (30) days of completion of its annual financial statements, Earth Energy
shall make a final calculation of all Royalties paid by it during the year and
shall make whatever adjustments are necessary and shall provide a report of same
to Canwest. In the event of an adjustment, the owing party shall make the
necessary payment to the other party within fourteen (14) days from the date of
notification of the adjustment.
3.6 Royalty Reports
Contemporaneously with payment of Royalties or, if no Royalties are payable for
any quarter, then no later than the due date for Royalties had the same been
payable, Earth Energy shall provide a written report to Canwest detailing how
Royalties were calculated and including such information as Canwest may
reasonably request in connection therewith.
3.7 GAAP
All Catalyst Costs, Equipment Costs, Service Costs, Royalties, Gross Revenue,
Profits and other financial amounts set forth herein shall, wherever reasonable,
be calculated using GAAP, and Earth Energy shall keep all relevant books and
records relating thereto in sufficient detail to permit an accurate audit
thereof.
3.8 Audit Rights
No more than once per fiscal quarter of Earth Energy during the Term, Canwest
shall have the right on reasonable advance notice to Earth Energy, to attend at
Earth Energy's premises (if necessary) during regular business hours on Business
Days and to audit Earth Energy's relevant books and records solely for purposes
of confirming an accurate calculation of Royalties. The costs of any such audit
shall be bourne by and paid for by Canwest, unless it is determined that the
Royalties audited were underpaid by Earth Energy at least ten (10%) per cent
less than what was actually owing for such period, in which event Earth Energy
shall pay such audit costs, together with the full amount of the Royalty
shortfall.
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3.9 Taxes
All payments to be made hereunder are subject to all applicable taxes, including
sales, GST, VAT and any withholding taxes that may be applicable on any part of
the transactions contemplated hereby. Each party represents and warrants to the
other that as of the Effective Date it is a resident of Canada for purposes of
the Income Tax Act (Canada).
ARTICLE 4
CANWEST LANDS
4.1 Catalyst Supply
Canwest may, at its discretion, elect to pay Earth Energy Three Hundred and
Fifty Thousand Canadian Dollars ($350,000 CDN) for the right to purchase
Catalyst at Catalyst Cost. If Canwest so elects, during the Term, Canwest shall
be entitled to purchase from Earth Energy Catalyst at Catalyst Cost for use
solely and exclusively on Canwest Lands for extraction of oil from surface mines
tar sands and oil shale as well for soil reclamation of soil originating from
such Canwest Lands. For greater clarification, Canwest shall not be entitled to
process soil of, from or for third parties at Catalyst Cost and in order for
soil to be considered as originating from Canwest Lands, it shall have been
originally excavated from such Canwest Lands and not stored or moved there from
some other lands.
4.2 Supply of Equipment
Earth Energy shall supply all necessary Equipment to Canwest and Canwest shall
acquire from Earth Energy all Equipment needed for use on the Canwest Lands, all
at Equipment Cost. Earth Energy agrees to train Canwest personnel on the proper
and efficient use of the Equipment at Services Cost.
4.3 Earth Energy Services
Any use of the Catalyst at or on Canwest Lands shall only occur under the
technical supervision of Earth Energy, in part to ensure compliance with Section
4.1. All such supervision services shall be paid for by Canwest at Services
Cost.
4.4 Catalyst and Services Payments
Canwest shall pay Earth Energy in full within forty five (45) days of invoicing
for all Catalyst purchased by it and services provided to it. Where there is a
bona fide dispute on any amount invoiced, Canwest shall be entitled only to
withhold the amount in dispute and in such event the parties shall work
expeditiously and in good faith to resolve such dispute. Any late payment to
Earth Energy not in accordance with the foregoing shall:
(a) entitle Earth Energy, at its option, to suspend supply of Catalyst
and/or services to Canwest; and
(b) accrue interest at the rate of the prime commercial lending rate of
the CIBC bank plus 4% per annum, compounded annually,
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until such time as such late payments and all accrued interest thereon have been
paid in full.
ARTICLE 5
ASSIGNMENT & TRANSFER OF RIGHTS
5.1 Offer To Sell Royalty Rights
If Canwest desires to dispose, except to an Affiliate, (the "Proposed
Disposition") of any of its rights, obligations or interests under Sections 3.2
to 3.8 (the "Offered Rights") hereunder, it shall first offer the Offered Rights
for sale to Earth Energy in accordance with Sections 5.1 to 5.5, inclusive.
5.2 Transfer Notice
Canwest shall give a written notice (the "Offer Notice") to Earth Energy of its
intention to sell the Offered Rights. The Offer Notice shall set out:
(a) the specific interests and, if applicable, obligations of Canwest
that comprise the Offered Rights;
(b) reasons for the Proposed Disposition; and
(c) all the fundamental terms of the Proposed Disposition, including the
purchase price, the nature of consideration, the time within which
the Proposed Disposition shall close, and any other material terms
of the Proposed Disposition.
5.3 Purchase Notice
Earth Energy shall have fifteen (15) Business Days (the "Acceptance Period")
following receipt of the Offer Notice, to elect to purchase all (but not less
than all) of the Offered Rights upon the terms contained in the Offer Notice by
giving written notice (the "Offer Purchase Notice") to Canwest accepting
Canwest's offer as contained in the Offer Notice.
5.4 Failure To Purchase
If Earth Energy does not give the Offer Purchase Notice to Canwest within the
Acceptance Period or it fails to close as contemplated in Section 5.5, then
Canwest may negotiate with and sell to a bona fide third party purchaser the
Offered Rights on terms which shall not be more favourable to such purchaser in
any respect than those specified in the Offer Notice and Earth Energy shall be
deemed to have consented to such assignment of rights. If no such sale is
consummated with ninety (90) days following the end of the Acceptance Period, or
the date on which Earth Energy failed to close as contemplated in Section 5.5,
as applicable, the rights of Earth Energy provided for in this Article 5 shall
revive in all respects. If Canwest completes a sale of the Offered Rights to a
third party in accordance with the terms hereof, it shall provide to Earth
Energy, and shall obtain enduring covenants from such third party purchaser
prior to the completion of such sale to provide to Earth Energy, all
documentation and other information requested by Earth Energy for it to
determine, in its sole satisfaction, acting reasonably, all the terms and
conditions relating to such sale.
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5.5 Closing
It shall be a condition of the closing of the Proposed Disposition to Earth
Energy for the benefit of Earth Energy, that Canwest has good right and lawful
authority to sell the Offered Rights free and clear of all liens, encumbrances,
charges, security interests, rights, claims and of any kind whatsoever.
5.6 Offer to Purchase Royalty Rights
If Canwest receives an offer to purchase (the "Offer") all or a part of its
rights, obligations or interests under Sections 3.2 to 3.8 (the "Solicited
Rights") from a bona fide third party offeror (the "Offeror") and Canwest
desires to sell such Solicited Rights (the "Proposed Acceptance") it shall first
offer the Solicited Rights to Earth Energy in accordance with Sections 5.6 to
5.10, inclusive.
5.7 Solicitation Transfer Notice
Canwest shall give a written notice (the "Solicitation Transfer Notice") to
Earth Energy of its Proposed Acceptance, which Solicitation Transfer Notice
shall set out:
(a) the specific rights and, if applicable, obligations of Canwest that
comprise the Solicited Rights;
(b) all the fundamental terms of the Offer and Proposed Acceptance,
including the purchase price, nature of the consideration, the time
within which the purchase and sale shall take place, and any other
material terms of the Offer and Proposed Acceptance;
(c) the name and address of the Offeror together with an executed copy
of such Offer; (d) all documentation and other information requested
by Earth Energy necessary for it to determine, to its sole
satisfaction, acting reasonably, that the Offer is bona fide and
that the Offeror has the means to complete the purchase of the
Solicited Rights and make payment therefor; and
(e) confirmation from the Offeror that its Offer is subject to this
Agreement.
5.8 Solicitation Purchase Notice
Earth Energy shall have the right for fifteen (15) Business Days (the
"Solicitation Acceptance Period") following receipt of the Solicitation Transfer
Notice, to elect to purchase all (but not less than all) of the Solicited Rights
upon the terms contained in the Solicited Transfer Notice by giving written
notice (the "Solicitation Purchase Notice") to Canwest accepting the offer of
Canwest contained in the Solicitation Transfer Notice.
5.9 Failure To Purchase
If Earth Energy does not give to Canwest a Solicitation Purchase Notice within
the Solicitation Acceptance Period or if the sale of the Solicited Rights to
Earth Energy fails to close as contemplated in Section 5.10, then Canwest may
complete the sale of the Solicited Rights, but not more or less than the
Solicited Rights, to the Offeror on terms no more favourable in any respect than
those specified in the Solicitation Transfer Notice and Earth Energy shall be
deemed to have consented to such assignment of rights. If no such sale is
consummated with ninety (90) days following the end of the Solicitation
Acceptance Period, or the date on which Earth Energy failed to close as
contemplated in Section 5.10, as applicable, the rights of Earth Energy provided
for in this Article 5 shall revive in all respects. If Canwest completes a sale
of the Solicited Rights to a third party, it shall provide to Earth Energy, and
shall obtain enduring covenants from such third party purchaser prior to the
completion of such sale to provide to Earth Energy, all documentation and other
information requested by Earth Energy necessary for it to determine, to its sole
satisfaction, acting reasonably, all the terms and conditions relating to such
sale.
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5.10 Closing
It shall be a condition of the closing of the sale of the Solicited Rights to
Earth Energy for the benefit of Earth Energy, that Canwest has good right and
lawful authority to sell the Solicited Rights free and clear of all liens,
encumbrances, charges, security interests, rights, claims and of any kind
whatsoever.
5.11 Consent to Assignment
Sections 5.1 - 5.10 do not apply to any transfer or sale of Canwest's rights,
obligations or interests under this Agreement to an Affiliate where such a
transfer or sale is for nominal consideration or where the consideration paid is
substantially non-cash property or property that does not oblige the purchaser
to pay cash consideration at the time of the transfer or sale or subsequently
thereto.
5.12 Consent to Assignment
Canwest acknowledges that it may only assign any of its rights, obligations or
interests under this Agreement, with the exceptions of those rights under
Sections 3.2 to 3.8 (which are subject to Sections 5.1 through 5.11 with the
prior written consent of Earth Energy, such consent not to be unreasonably
withheld. Notwithstanding the foregoing, Earth Energy shall not withhold its
consent to any assignment of its rights, provided that: (i) there are no
reasonable grounds to conclude that such assignment will impair or reduce the
likelihood that Earth Energy will receive payment under Article 4 (ii) the
assignee provides reasonable representations, warranties and covenants to Earth
Energy relative to its corporate existence, capacity and powers, and its ability
to carry on business; and (iii) the assignee agrees to be bound by the terms
hereof.
5.13 Consent to Transfer of Royalty Rights
In the case of a transfer of rights, obligations or interests under Sections 3.2
to 3.8 to a party other than an Affiliate of Canwest, such assignment shall be
in accordance with Sections 5.1 to 5.11 of this Article 5.
5.14 Consent to Transfer Rights to Catalyst Purchases at Cost
In the case of a transfer of rights, obligations or interests under Article 4
and related license under Section 3.1, Canwest shall not be entitled to assign
any such rights, obligations or interests, except and to the extent that Canwest
Lands are transferred to an entity that is an Affiliate of Canwest, and in such
case the transferred rights, obligations or interests shall only apply to the
Canwest Lands so transferred or to lands subsequently acquired by such Affiliate
where such subsequently acquired lands would meet the definition of "Canwest
Lands" as if the Affiliate were Canwest. If at any time such entity is no longer
an Affiliate of Canwest, then at such time the rights under Article 4 and
related license under Section 3.1 shall terminate with respect to such entity.
5.15 Assignment Payment
In the event Earth Energy consents to an assignment by Canwest of some or all of
its rights hereunder and in addition to any other rights Earth Energy might
have, Canwest shall pay to Earth Energy:
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(a) in the case of an assignment of rights to receive Royalties derived
from Canada, an amount calculated by the formula a/3 + (b-c), where:
(i) a = the total consideration (whether cash or any other form of
consideration) paid by the assignee to Canwest,
(ii) b = all royalties paid by Earth Energy to Canwest under
section 3.2 hereof, and
(iii) c = the sum of $150,000 CDN plus any amount paid by Canwest to
Earth Energy under section 4.1 hereof,
provided that where the remainder of b minus c is a positive number,
the remainder shall be deemed to be zero.
(b) in the case of an assignment of rights to receive Royalties derived
from Central or South America, an amount calculated by the formula
d/3 + (e-f), where:
(i) d = the total consideration (whether cash or any other form of
consideration) paid by the assignee to Canwest,
(ii) e = all royalties paid by Earth Energy to Canwest under
sections 3.3 and 3.4 hereof, and
(iii) f = that amount paid or set-off by Canwest under section 3.3
hereof, to a maximum of $500,000 USD,
provided that where the remainder of e minus f is a positive number,
the remainder shall be deemed to be zero.
Canwest covenants that, to the extent practicable, it shall arrange for
Earth Energy's share of such assignment payment(s) to be made directly by
the assignee to Earth Energy. Any payments made by the assignee shall be
made first for the account of Earth Energy and second for the account of
Canwest. Further, any payments received by Canwest shall be received first
for the account of Earth Energy until Earth Energy is paid in full, and
only then for the account of Canwest, and any such payments shall be held
by Canwest in trust for Earth Energy.
This Section 5.15 does not apply to any assignment by Canwest to an Affiliate of
Canwest, provided that such assignment is bona fide and any payments made to
Canwest in connection with such assignment are for tax, accounting or similar
corporate purposes and not primarily with a view to profit Canwest.
5.16 Continuing Canwest Obligations
Notwithstanding any assignment by Canwest of any rights, obligations or
interests hereunder, Canwest shall remain liable for full performance of all of
its obligations hereunder and under the Non-Disclosure and Non-Use Agreement,
including relating to ownership of the Technology and confidentiality.
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ARTICLE 6
CONFIDENTIALITY
6.1 Non-Disclosure Agreement
Canwest agrees to execute and deliver, all on the Effective Date, Earth Energy's
form of non-disclosure and non-use agreement in the form attached hereto as
Schedule "B" (the "Non-Disclosure and Non-Use Agreement).
6.2 Affiliates and Assignees
It shall be a condition of any assignment of any rights, obligations and/or
interests hereunder that the assignee first execute and deliver to Earth Energy
a Non-Disclosure and Non-Use Agreement. Prior to any Affiliate of Canwest being
entitled to receive the benefit of any rights hereunder, such Affiliate shall
first execute and deliver to Earth Energy a Non-Disclosure and Non-Use
Agreement.
ARTICLE 7
TERM AND TERMINATION
7.1 Term
The term (the "Term") of this Agreement shall commence on the Effective Date and
continue until terminated on the earliest of:
(a) the expiry of the last of any and all Patents anywhere in Canada or
Central and South America (assuming rights to Royalties levied from
Central and South America are acquired by Canwest and if not, then
Canada only);
(b) the day being thirty (30) days following delivery of written notice
to Canwest that it is in material breach of this Agreement and
provided such breach has not been fully cured or corrected prior to
such day; and
(c) any action or inactions by Canwest that constitutes: (i) a material
breach of the Non-Disclosure and Non-Use Agreement; (ii) an attempt
to "reverse engineer" any Technology not in the public domain; or
(iii) any breach by Canwest of Section 4.3 or 5.1.
This Section 7.1 is subject to the arbitration provisions in Article 8.
7.2 Survival
The representation, warranties, covenants and other agreements contained in this
Agreement and/or in other documents delivered in connection herewith shall not
merge on and shall survive the closing of the transactions contemplated hereby.
In addition, Articles 1, 2, 6, 8 and 10, and the Non-Disclosure and Non-Use
Agreement shall survive any termination of this Agreement.
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ARTICLE 8
ARBITRATION
8.1 Reasonable Commercial Efforts to Settle Disputes
If any controversy, dispute, claim, question or difference ("Dispute") arises
with respect to this Agreement or its performance, enforcement, breach,
termination or validity, the parties shall use all reasonable commercial efforts
to settle the Dispute. To this end, they shall consult and negotiate with each
other in good faith and understanding of their mutual interests to reach a just
and equitable solution satisfactory to all parties. No express reference in this
Agreement to the application of Article 8 to a provision hereof shall affect the
general application of this Article 8 to all provisions hereof.
8.2 Arbitration
Except as is expressly provided in this Agreement, and subject to Section 10.12,
if Earth Energy and Canwest do not reach a solution pursuant to Section 8.1
within a period of fifteen (15) Business Days following the first notice of the
Dispute by any party to the others, then either party may, at its own election,
refer the Dispute to arbitration in accordance with this Section 8.2 to be
finally settled in accordance with the provisions of the Arbitration Act
(Alberta), based upon the following:
(a) the arbitration tribunal shall consist of three (3) arbitrators, one
(1) appointed by each of Earth Energy and Canwest and a third
appointed by mutual agreement of the first two arbitrators; or in
the event of failure to agree within ten (10) Business Days
following the appointment of the second arbitrator, any party may
apply to a judge of the Court of Queen's Bench of Alberta to appoint
an arbitrator. The arbitrators shall be qualified by education and
training to pass upon the particular matter to be decided;
(b) the arbitrators shall be instructed that time is of the essence in
the arbitration proceeding and, in any event, the arbitration award
must be made within thirty (30) days of the appointment of the third
arbitrator;
(c) after written notice is given to refer any Dispute to arbitration,
the parties will meet within fifteen (15) Business Days of delivery
of the notice to arbitrate and will negotiate in good faith to agree
upon the rules and procedures for the arbitration, in an effort to
expedite the process and otherwise ensure that the process is
appropriate given the nature of the Dispute and the values at risk,
failing which, the rules and procedures for the arbitration shall be
determined by the arbitrators or a majority of them;
(d) the arbitration shall take place in Calgary, Alberta;
(e) except as otherwise provided in this Agreement or otherwise decided
by a majority of the arbitrators, the fees and other costs
associated with the arbitrators shall be shared equally by the
parties and each party shall be responsible for its own costs;
(f) the arbitration award shall be given in writing, shall provide
reasons for the decision and shall be final and binding on the
parties, not subject to any appeal, and shall deal with the question
of costs of arbitration and all related matters;
(g) judgment upon any award may be entered in any Court having
jurisdiction or application may be made to the Court for a judicial
recognition of the award or an order of enforcement, as the case may
be;
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(h) all Disputes referred to arbitration (including the scope of the
agreement to arbitrate, any statute of limitations, conflict of laws
rules, tort claims and interest claims) shall be governed by the
substantive law of Alberta and the federal laws of Canada applicable
therein; and
(i) the parties agree that the arbitration shall be kept confidential
and that the existence of the proceeding and any element of it
(including any pleadings, briefs or other documents submitted or
exchanged, any testimony or other oral submissions and other awards)
shall not be disclosed beyond the arbitrators, the parties, their
counsel and any person necessary to the conduct of the proceeding,
except as may lawfully be required in judicial proceedings relating
to the arbitration or otherwise.
8.3 Continuing Relationship During a Dispute
In the event there is Dispute between the parties, the obligations and rights of
the parties hereunder shall remain in force until settlement of the Dispute is
reached, provided that the party against whom a grievance is alleged remains in
good standing under the Agreement in all other respects and provided that the
party alleging the grievance would not suffer irreparable harm due the
continuation of the Agreement.
ARTICLE 9
PRESERVATION OF INTERESTS OF CANWEST
9.1 Preservation and Maintenance of Patents
Earth Energy hereby provides to Canwest express authority and consent (but
without any obligation on the part of Canwest to do so) to take any and all
reasonable steps and actions, on its behalf or otherwise, necessary to preserve
any Patents in existence, including but not limited to making whatever filings
and payments are required to be made with any appropriate patent office,
provided that such action:
(a) is not contrary to law and will not cause an infringement or cannot
reasonably be expected to cause an infringement of any other
person's property rights;
(b) will not be, directly or indirectly, materially adverse to the
interests of Earth Energy unless such action of Canwest was made
necessary by the negligence or wilful misconduct of Earth Energy, in
which case this subsection shall be of no force and effect; and
(c) will be at the sole expense of Canwest, unless such action of
Canwest was made necessary by the negligence or wilful misconduct of
Earth Energy, in which case all reasonable out-of-pocket costs of
Canwest relating to such action shall be at the expense of Earth
Energy.
In connection with the foregoing, a determination by Earth Energy to abandon any
Patent shall not be deemed to be wilful misconduct or negligence.
9.2 Preservation of Right to Catalyst
Earth Energy covenants and agrees to use all reasonable commercial efforts to
supply Catalyst and provide related services to Canwest pursuant to and subject
to the provisions of Article 4, failing which Canwest shall have recourse to any
and all remedies available to it under law to enable the supply of Catalyst to
Canwest for uses and in amounts contemplated by Section 4 of this Agreement and
on the basis of then current needs for such uses; provided also that such
recourse shall be subject to all other terms of this Agreement.
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9.3 Disclosure
Canwest acknowledges and agrees that, other than as provided for in Section
2.4(e), Earth Energy is not under any ongoing obligation to provide Canwest with
any confidential information relating to the Technology, including research,
development and testing related thereto. Earth Energy shall, however:
(a) comply with its obligations under Section 4.2 to properly train
Canwest personnel in the use of the Equipment;
(b) in the event of Earth Energy's failure to supply Catalyst in
accordance with Section 9.2, provide sufficient information to
Canwest to permit the acquisition of alternative supplies of
Catalyst in accordance with the terms of this Agreement; and
(c) provide testing services to Canwest, at Services Cost, for samples
of tar sands, oil shale and/or soil originating from Canwest Lands,
to determine if there are any Improvements that might be applicable
thereto and if so, to advise Canwest of what Catalyst is appropriate
and what modifications, if any, should be made to the Equipment, the
Process and/or to the operation of the Equipment,
provided always that appropriate confidentiality obligations are in place and
complied with by Canwest and third persons having a need to know such
information.
9.4 Arbitration
This Article 9 shall be subject to the arbitration provisions in Article 8.
ARTICLE 10
GENERAL
10.1 Communications
All notices and other communications given in connection with this Agreement
shall be in writing, and the respective addresses of the parties for the service
of any such notices or other communications shall be as follows:
EARTH ENERGY Earth Energy Resources Inc.
#▇▇▇ - ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, CEO
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Gervais LLP
1000, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
WEST PEAK and/or CANWEST West Peak Ventures of Canada Ltd./Canwest
Petroleum Corporation
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▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
3700, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and communications given in connection with this Agreement
shall be sufficiently given if addressed as aforesaid and either delivered by
hand or by reputable courier service or mail to the intended recipient's address
for service as set forth above, or sent by direct facsimile telecommunication to
such party at its fax number as set forth above (with receipt confirmed). Any
notice so given shall be deemed to have been given and received on the last
Business Day on which it is presented during normal business hours at the
address for service of the addressee thereof, or, in the case of a direct
facsimile telecommunication, on the day on which it is transmitted if
transmitted prior to or during normal business hours on a Business Day, or on
the first Business Day following the day on which it is transmitted if
transmitted otherwise. A party may change its address for service by giving
written notice thereof to the other parties.
10.2 Entire Agreement
This Agreement expresses and constitutes the entire agreement between the
parties hereto with respect to the matters set forth herein and supersedes any
previous agreements or understandings with respect to the matters set forth
herein, including, without limitation, the letter from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
barrister and solicitor, on behalf of Earth Energy, dated June 10, 2004,
addressed to West Peak and acknowledged and accepted by Canwest.
10.3 Amendment
This Agreement may be amended only by written instrument executed by Canwest and
Earth Energy.
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10.4 Transaction Costs
Each party shall be responsible for their own legal, accounting, evaluations and
other transaction fess and costs incurred in connection with this Agreement.
10.5 Assignment
Canwest shall only be entitled to assign any rights or obligations under or in
respect of this Agreement with the prior written consent of Earth Energy and
subject to Article 5. Earth Energy shall be entitled to assign the whole or any
portion of its interest in and in respect of this Agreement at any time,
provided that it shall not thereby be relieved of its liability to Canwest for
the performance of its obligations hereunder, unless Canwest otherwise agrees.
10.6 Enurement
This Agreement shall enure to the benefit of and be binding upon the parties and
their respective trustees, legal representatives, receivers and permitted
assigns.
10.7 Further Assurances
Each of the parties shall from time to time and at all times following the
Effective Date, without further consideration, do and perform all such further
acts and things, and execute and deliver all such further agreements,
assurances, deeds, notices, releases and other documents and instruments, as may
reasonably be required to more fully assure the intent and provisions of this
Agreement.
10.8 Waiver
No failure by any party hereto to exercise, and no delay by any party hereto in
exercising, any right, power or remedy hereunder shall impair any right, power
or remedy which such party may have, nor shall such delay be construed to be a
waiver of any such rights, powers or remedies or an acquiescence in any breach
or default under this Agreement or in connection with the transactions
contemplated hereby. No waiver of any breach or default hereunder of any party
hereto shall be deemed a waiver of any default or breach subsequently occurring
hereunder. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party, and a waiver shall affect only the matter, and the occurrence
thereof, specifically identified in the writing granting such waiver and shall
not extend to any other matter or occurrence.
10.9 Severability
If any provision of this Agreement, or the application thereof, will for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and application of such provision to other persons or circumstances
will be interpreted so as reasonably to affect the intent of the parties hereto.
The parties further agree to replace such invalid or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of the invalid or
unenforceable provision.
10.10 Other Remedies
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby or by law or equity on such party, and the
exercise of any one remedy will not preclude the exercise of any other, provided
however that the results of arbitration pursuant to Section 8.2 shall be binding
on all parties.
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10.11 Absence of Third Party Beneficiary Rights
No provision of this Agreement is intended, nor will be interpreted, to provide
to create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, officer, director, employee or
partner of any party hereto or any other person or entity unless specifically
provided otherwise herein, and, except as so provided, all provisions hereof
will be solely between the parties to this Agreement.
10.12 Specific Performance
The parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement and/or the Non-Disclosure and Non-Use
Agreement were not performed in accordance with their specific terms or were
otherwise breached. The parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and/or the Non-Disclosure and
Non-Use Agreement and to enforce specifically the terms and provisions thereof
in court, in addition to any other remedy to which they are entitled at law or
in equity.
10.13 Counterpart Execution
This Agreement may be executed in separate counterparts, and the executed
counterparts shall together constitute one instrument and have the same force
and effect as if all of the parties had executed the same instrument.
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IN WITNESS WHEREOF the parties have executed and delivered this Agreement
effective the Effective Date.
WEST PEAK VENTURES OF CANADA LTD. EARTH ENERGY RESOURCES INC.
Per: Per:
-------------------------------- --------------------------------
Per: Per:
-------------------------------- --------------------------------
CANWEST PETROLEUM CORPORATION
Per:
--------------------------------
Per:
--------------------------------
SCHEDULE "A"
LIST OF CANWEST LANDS AS OF THE EFFECTIVE DATE
See attached.
SCHEDULE "B"
FORM OF NON-DISCLOSURE AND NON-USE AGREEMENT
EARTH ENERGY RESOURCES INC.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇▇▇ Petroleum Corporation
Suite 420 - ▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇ ▇▇▇▇▇
Dear Sirs:
Re: Non-Disclosure and Non-Use Agreement
Each party hereto (where the same is a discloser of Confidential
Information, the "Owner") is considering disclosing to the other party (where
the same is the recipient of Confidential Information, the "Receiving Party") in
connection with the use and commercial exploration of Earth Energy Resources
Inc.'s ("Earth Energy") catalyst, process and related equipment technology
(collectively "Technology") including certain test, business and other
information as may be determined by the Owner, for purposes associated with each
party's respective business operations and as may be agreed to under separate
agreement(s) (the "Permitted Use"). In the course of the Permitted Use it will
be necessary to disclose to the Receiving Party certain Confidential Information
and the parties wish to provide for the use of the Confidential Information by
the Receiving Party solely for and limited to the Permitted Use and to confirm
that the ownership of and all benefits to the Technology shall remain with Earth
Energy.
The term "Confidential Information" as used in this Agreement shall mean
all information whether in oral, written, visual or other tangible or intangible
form which has been or is in the future disclosed, directly or indirectly, to
the Receiving Party, relating in any way, directly or indirectly, to the
business of the Owner, including without limitation any business opportunities
that may be available to the Owner and all financial information. With respect
to Earth Energy as Owner, Confidential Information also includes information
directly or indirectly relating to the Technology, including without limitation,
any uses of or improvements to the Technology, as well as all Inventions (as
defined below) in connection therewith. Confidential Information shall not
include information which the Receiving Party establishes by clear and
convincing evidence:
(a) was already in the possession of the Receiving Party prior to August
1, 2003;
(b) was in the public domain at the time the Receiving Party received or
developed such information; or
(c) becomes part of the public domain after receipt or development by
the Receiving Party, through no act or omission on the part of the
Receiving Party.
Confidential Information which is specific is not deemed to be in the
public domain merely because it is embraced by general knowledge in the public
domain. Further, Confidential Information is not deemed to be within the public
domain merely because its individual features are within the public domain,
unless the combination of features or their nexus are in the public domain.
The term "Inventions" as used in this Agreement shall mean all works,
discoveries, concepts, work product and ideas, whether patentable or not,
including but not limited to products, processes, prototypes, software, designs,
methods, formulae and techniques, as well as improvements thereto or thereof and
all "know-how" in connection with all thereof, as well as all patents,
copyright, industrial design and other intellectual property rights therein and
thereto, all whether conceived or developed by the Owner and/or the Receiving
Party and which relate in anyway to any aspect, present or future, of the
Confidential Information; provided however, it is the intent of this Agreement
and the parties agree that any and all Inventions relating, directly or
indirectly, to the Technology shall be owned solely by Earth Energy.
The Owner is agreeable to making the Confidential Information available to
the Receiving Party, subject to the following terms and conditions:
1. The Receiving Party hereby acknowledges and agrees that the
Confidential Information and all Inventions are and shall be the
exclusive, valuable property of the Owner. The Receiving Party shall
acquire no right or interest in or to the Confidential Information
and no license or assignment is granted or to be implied herein,
unless otherwise agreed to by the parties in a separate agreement.
2. The Receiving Party agrees to keep secret and confidential any and
all Confidential Information received and/or developed by it,
together with all Inventions and not to divulge any such
Confidential Information or Inventions, in whole or in part,
directly or indirectly, to any third party, except as specifically
permitted hereby.
3. The Receiving Party agrees to refrain from using or drawing upon the
Confidential Information, directly or indirectly, for any purpose
other than the Permitted Use and with a view to assisting the Owner
in its business and the Receiving Party shall not make any
commercial or other use, directly or indirectly, of the Confidential
Information or any Invention.
4. Without limiting the Receiving Party's obligations hereunder, the
Receiving Party covenants and agrees to perform such obligations
using at least the same standard of care as it applies to its own
confidential information, which standard, in any event, shall not be
less than those professional standards used in the industry relating
to the Permitted Use. The Receiving Party shall limit the
availability of the Confidential Information within the Receiving
Party's organization to only those of its employees, consultants and
agents who have an absolute need to see and use it for the express
and limited purpose of the Permitted Use and should any such
disclosure be required, to inform each of the said employees,
consultants and agents of the provisions of this Agreement and
ensure through written agreement that they are also bound as a
Receiving Party by the provisions hereof, with the Owner being named
either as a party or as a third party beneficiary under such
agreement.
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5. In the event that the Receiving Party or any of its representatives
is requested or required by discoveries, interrogatories, requests
for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process, to disclose any of
the Confidential Information, the Receiving Party shall provide
Owner with prompt written notice of any such request or requirement
so that Owner may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy,
the Receiving Party is nonetheless, in the opinion of counsel,
legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt or suffer other censure
or penalty, the Receiving Party, without liability hereunder, may
disclose to such tribunal only that portion of the Confidential
Information which such counsel advises is legally required to be
disclosed, provided that the Receiving Party exercises all
commercially reasonable efforts to obtain assurance that
confidential treatment will be accorded that Confidential
Information by such tribunal.
6. In the event the Receiving Party decides not to proceed with further
discussions pertaining to the Permitted Use or upon the request of
the Owner, then the Receiving Party agrees to forthwith deliver to
the Owner or permanently destroy all copies of documents, electronic
records or other media containing or based upon or arising out of
Confidential Information without retaining any copies thereof. The
Receiving Party shall confirm in writing, certified by an officer of
the Receiving Party where the same is a corporation, that all such
documents, electronic records and other media have been delivered or
destroyed, as the case may be.
7. For greater clarification where Earth Energy is the Owner, all of
the forgoing provisions and the provisions of this paragraph 7
concerning Earth Energy's Confidential Information shall also apply
to and include, mutatis mutandis, the Technology, including without
limitation all Inventions relating thereto, such that Earth Energy
shall be the sole and exclusive owner of the Technology and all
Inventions pertaining thereto and to the extent the same constitute
Confidential Information, it shall be deemed to be Earth Energy
Confidential Information. Any Inventions conceived or developed by
the Receiving Party following disclosure of the Confidential
Information shall be owned solely by the Owner and be forthwith
disclosed by the Receiving Party to the Owner and the Receiving
Party agrees to hold the same in trust for and on behalf of the
Owner and forthwith upon request of the Owner, to execute and
deliver any documents to the Owner and at the request and cost of
the Owner, to take whatever other steps are so requested, in order
to fully transfer any and all right, title or interest thereto to
the Owner. The Receiving Party acknowledges and agrees that it shall
make no claim of ownership or other entitlement to any right, title
or interest in or to any Confidential Information or Invention or
part thereof.
8. Each party agrees that it shall not knowingly solicit or recruit the
employees of the other party who are or were associated with the
Permitted Use, without the prior written consent of such other
party. The foregoing provisions of this paragraph 8 shall not
restrict the right of either party to solicit or recruit generally
in the media and shall not prohibit either party from hiring,
without prior written consent, the other party's employee(s) who
answer any general advertisement or who otherwise voluntarily apply
for hire without having been personally solicited or recruited by
the hiring party.
9. The Receiving Party's obligations under this Agreement shall be in
force from the date of this Agreement and continue in effect
thereafter with respect to:
(a) Confidential Information, until the specific information is no
longer deemed to be Confidential Information in accordance
with the provisions hereof;
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(b) Inventions, until one (1) year following the delivery to the
Owner of the officer's certificate referred to in paragraph 6
hereof; and
(c) solicitation or recruitment of the other party's employees,
until the earlier of an employee leaving his or her employment
(with respect only to such employee) and one (1) year
following the delivery of the officer's certificate referred
to in paragraph 6 hereof.
10. The Receiving Party agrees that if it commits a breach, or threatens
to commit a breach, of any of the provisions of this Agreement, then
the Owner has the right to have the provisions of this Agreement
specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach
will cause irreparable injury to the Owner and that money damages
may not provide an adequate remedy to the Owner. If a breach occurs
and is not wholly remedied by specific enforcement of this
Agreement, the Receiving Party agrees to compensate the Owner for
any adverse consequences that result, directly or indirectly, from
the breach.
11. No representation or warranty of any kind is made with respect to
the accuracy, completeness or suitability for a particular purpose
of the Confidential Information or of any Inventions and the same is
provided hereunder on an "as is" basis.
12. This Agreement shall not be construed as creating an agency,
partnership, joint venture, teaming or other formal business
relationship between the parties.
13. This Agreement is governed by and construed in accordance with the
laws of the Province of Alberta applicable to agreements to be
performed entirely within the Province of Alberta. Each of the
parties hereby irrevocably attorns to the jurisdiction of the courts
of the Province of Alberta.
14. The Receiving Party shall not be entitled to assign any of its
obligations under this Agreement without the prior written consent
of the Owner, which consent the Owner may withhold in its
discretion. The Owner shall be entitled, without the prior consent
of the Receiving Party, to assign any or all of its rights, powers
or privileges under this Agreement.
15. This Agreement contains the entire agreement between the parties
concerning the confidentiality and Permitted Use of the Confidential
Information and ownership of the Inventions and no modification of
this Agreement or waiver of its terms and conditions is binding upon
us unless approved in writing and signed, in the case of
modification, by each of the Owner and the Receiving Party and in
the case of waiver, by the party so waiving.
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If you agree with the foregoing, please indicate your acceptance by signing the
enclosed duplicate copy of this letter agreement and returning it to us.
Yours truly,
EARTH ENERGY RESOURCES INC
Per:
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Name:
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Position:
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ACCEPTED AND AGREED to this 4th day of March, 2005
CANWEST PETROLEUM CORPORATION
Per:
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Name:
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Position:
--------------------------
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