Document:

Asset Transfer Agreement

Exhibit 10.1

ASSET TRANSFER AGREEMENT

BETWEEN:

TALISMAN ENERGY CANADA

AND

IVANHOE ENERGY INC.

JULY 11, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1 INTERPRETATION
	 	 	1	 
	1.1 Definitions
	 	 	 1	 
	1.2 Schedules and Exhibits
	 	 	12	 
	1.3 Interpretation Not Affected by Headings
	 	 	12	 
	1.4 Included Words
	 	 	12	 
	1.5 Headings
	 	 	12	 
	1.6 Statutory References
	 	 	12	 
	1.7 Invalidity of Provisions
	 	 	13	 
	1.8 References in Agreement
	 	 	13	 
	1.9 Knowledge or Awareness
	 	 	13	 
	1.10 Conflicts
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 2 PURCHASE AND SALE
	 	 	13	 
	2.1 Purchase and Sale
	 	 	13	 
	2.2 Purchase Price
	 	 	13	 
	2.3 Concurrent Agreements
	 	 	14	 
	2.4 Closing
	 	 	14	 
	2.5 Form of Payment
	 	 	14	 
	2.6 Tax Allocation
	 	 	14	 
	2.7 Taxes
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 3 TITLE AND ENVIRONMENTAL REVIEW
	 	 	15	 
	3.1 Acknowledgement
	 	 	15	 
	 
	 	 	 	 
	ARTICLE 4 ROFR’S AND CONSENTS
	 	 	15	 
	4.1 Rights of First Refusal
	 	 	15	 
	4.2 Consents
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 5 DOCUMENTS, RECORDS AND CONVEYANCES
	 	 	16	 
	5.1 Conveyances and Joint Obligations
	 	 	16	 
	5.2 Delivery of Data
	 	 	17	 
	5.3 ERCB License Transfers
	 	 	18	 
	 
	 	 	 	 
	ARTICLE 6 POST-CLOSING TRANSITION
	 	 	19	 
	6.1 Post-Closing Transition
	 	 	19	 
	6.2 Vendor as Agent of Purchaser
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 7 APPORTIONMENTS
	 	 	20	 
	7.1 Apportionments
	 	 	20	 
	7.2 Interim and Final Accounting
	 	 	21	 
	7.3 Audit Rights for Apportionments
	 	 	22	 
	7.4 General
	 	 	22	 
	 
	 	 	 	 
	ARTICLE 8 LEASE 10 ADJUSTMENT
	 	 	22	 
	8.1 Permits and Lease 10 Affected Area
	 	 	22	 
	8.2 Contingent Payment
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 9 REPRESENTATIONS AND WARRANTIES
	 	 	23	 
	9.1 Representations and Warranties of Vendor
	 	 	23	 

 

- ii -  

	 	 	 	 	 
	9.2 Limitation of Representations and Warranties
	 	 	27	 
	9.3 Representations and Warranties of Purchaser
	 	 	27	 
	 
	 	 	 	 
	ARTICLE 10 INDEMNITIES
	 	 	30	 
	10.1 General Indemnity
	 	 	30	 
	10.2 Environmental Indemnity
	 	 	31	 
	10.3 Limitation of Claims
	 	 	32	 
	10.4 Specific Post-Closing Reclamation Activities
	 	 	33	 
	10.5 Additional Indemnitees
	 	 	33	 
	10.6 Indemnification Procedure
	 	 	33	 
	 
	 	 	 	 
	ARTICLE 11 DISPUTE RESOLUTION
	 	 	35	 
	11.1 Arbitration
	 	 	35	 
	11.2 Proceedings
	 	 	35	 
	 
	 	 	 	 
	ARTICLE 12 RIGHT OF FIRST OFFER
	 	 	36	 
	12.1 ROFO Notice
	 	 	36	 
	12.2 Equivalent Consideration
	 	 	36	 
	12.3 Notice of Acceptance
	 	 	36	 
	12.4 Transfers to Subsidiaries
	 	 	37	 
	 
	 	 	 	 
	ARTICLE 13 GENERAL
	 	 	38	 
	13.1 Subordination Arrangements
	 	 	38	 
	13.2 Public Announcements
	 	 	39	 
	13.3 Further Assurances
	 	 	39	 
	13.4 No Merger
	 	 	39	 
	13.5 Signs and Notifications
	 	 	39	 
	13.6 Governing Law
	 	 	39	 
	13.7 Time
	 	 	39	 
	13.8 Notices
	 	 	40	 
	13.9 Entire Agreement
	 	 	40	 
	13.10 Assignment
	 	 	41	 
	13.11 Transfer of Assets to an Affiliate
	 	 	41	 
	13.12 Enurement
	 	 	42	 
	13.13 Waivers
	 	 	42	 
	13.14 Substitution and Subrogation
	 	 	42	 
	13.15 Counterpart Execution
	 	 	43	 

SCHEDULES

Schedule “A”  —  Lands and Leases

Schedule “B”  —  Wells

Schedule “C”  —  Proprietary Seismic Data

Schedule “D”  —  Disclosure Schedule

Schedule “E”  —  Data Room Materials

Schedule “F”  —  Proposed Recovery Area

Schedule “G”  —  ROFR Assets

Schedule “H”  —  Reclamation Wells

 

 

ASSET TRANSFER AGREEMENT

THIS AGREEMENT dated July 11, 2008

BETWEEN:

TALISMAN ENERGY CANADA, a general partnership having an office and
carrying on business in the City of Calgary, in the Province of
Alberta (“Vendor”)

- and -

IVANHOE ENERGY INC., a corporaton having an office and carrying on
business in the City of Vancouver, in the Province of British
Columbia (“Purchaser”)

     WHEREAS Vendor wishes to convey to Purchaser and Purchaser wishes to purchase from Vendor the
Assets, all subject to and in accordance with the terms and conditions set forth herein;

     NOW THEREFORE in consideration of the premises and the mutual covenants and agreements
hereinafter contained, the Parties agree as follows:

ARTICLE 1

INTERPRETATION

	1.1	 	Definitions
	 
	 	 	In this Agreement, including the recitals, this clause and the schedules attached hereto,
the following capitalized words and phrases shall have the following meanings:

	 	(a)	 	“2008 Note” means the interest bearing promissory note dated as of the date
hereof issued by Purchaser to Vendor in the principal amount of $12,500,000, with a
maturity date of December 31, 2008;
	 
	 	(b)	 	“Abandonment and Reclamation Obligations” means all obligations to abandon the
Wells and restore and reclaim the surface sites thereof, to decommission and remove
facilities and equipment and restore and reclaim the surface sites thereof and to
reclaim and restore the lands to which the surface rights relate (including the removal
of all tailings ponds and the remediation of all associated and affected sites), all in
accordance with good oil and gas field practices, and in compliance with the
Regulations;
	 
	 	(c)	 	“Additional Indemnitees” means, with respect to any Party to which an indemnity
is granted pursuant to this Agreement, its Affiliates, and the respective

 

 

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	 	 	 	directors, officers, servants, agents, advisors, employees and consultants of that
Party and its Affiliates;
	 
	 	(d)	 	“AFEs” means authorities for expenditure, cash calls and operations notices
issued under Title and Operating Documents authorizing expenditures and similar items;
	 
	 	(e)	 	“Affiliate” means any company, person, partnership or other legal entity which
controls or is controlled by a Party to this Agreement, or which controls or is
controlled by a company, person, partnership or other legal entity which controls such
Party, and “control” means the power to direct or cause the direction of the management
and policies of the Party or the other company, person, partnership or legal entity, as
the case may be, whether directly or indirectly, through one or more intermediaries or
otherwise, and whether by virtue of the ownership of shares or other equity interests,
the holding of voting rights or contractual rights, or partnership interests or
otherwise. For certainty, a partnership which is a Party and which is comprised of
corporations which are Affiliates, as described above, shall be deemed to be an
Affiliate of each such corporation and its other Affiliates;
	 
	 	(f)	 	“Applicable Securities Laws” means all applicable Canadian and U.S. securities
Regulations, including the rules, regulations, notices, instruments and policies of the
Securities Commissions;
	 
	 	(g)	 	“Approved Recovery Area” has the meaning ascribed to that term in clause 8.2;
	 
	 	(h)	 	“Assets” means the Oil Sands Rights and the Miscellaneous Interests;
	 
	 	(i)	 	“Back-In Agreement” means the back-in agreement dated as of the date hereof
between Vendor and Purchaser;
	 
	 	(j)	 	“Business Day” means any day other than a Saturday, a Sunday or a statutory
holiday in Calgary, Alberta, and each Business Day to be calculated under this
Agreement shall be a full and complete day encompassing the period from 8:00 a.m. to
4:30 p.m. of such day;
	 
	 	(k)	 	“Common Shares” means common shares in the capital of Purchaser;
	 
	 	(l)	 	“Consent Rights” has the meaning ascribed to that term in clause 4.2;
	 
	 	(m)	 	“Contingent Payment” means the sum of $15,000,000 (as same may be adjusted
pursuant to clause 8.2);
	 
	 	(n)	 	“Convertible Note” means the interest bearing convertible promissory note dated
as of the date hereof issued by Purchaser to Vendor in the principal amount of
$40,000,000, with a maturity date of July 11, 2011;

 

3

	 	(o)	 	“Crude Bitumen” means a viscous mixture, mainly of hydrocarbons heavier than
pentanes, that may contain sulphur compounds;
	 
	 	(p)	 	“Data Room Materials” means the documents, files, data and information which
were reviewed by Purchaser, or were available to be reviewed by Purchaser in Vendor’s
data room, or were otherwise provided to Purchaser by Vendor at any time prior to the
date hereof, including the materials described in Schedule “E” attached hereto;
	 
	 	(q)	 	“Disclosure Schedule” means Schedule “D” attached hereto;
	 
	 	(r)	 	“Disposition Notice” has the meaning ascribed to that term in clause 12.3;
	 
	 	(s)	 	“Environmental Liabilities” means any and all environmental damage,
contamination and other adverse environmental conditions pertaining to or caused by any
of the Assets or operations thereon or related thereto, however and by whomsoever
caused, and whether caused by a breach of the applicable Regulations or otherwise,
which occur or arise in whole or in part prior to, at or subsequent to the date hereof,
and regardless of whether or not a reclamation certificate has been issued. Without
limiting the generality of the foregoing, such environmental damage or contamination or
other environmental conditions shall include those arising from or related to (i)
surface, underground, air, ground water, surface water or marine environment
contamination; (ii) Abandonment and Reclamation Obligations; (iii) the restoration,
cleanup or reclamation of or failure to restore, cleanup or reclaim any part of the
Assets; (iv) the breach of applicable Regulations in effect at any time; (v) the
removal of or failure to remove foundations, structures or equipment; (vi) the release,
spill, escape or emissions of toxic, hazardous or oilfield waste substances; and (vii)
damages and losses suffered by Third Parties as a result of any of the occurrences in
subclauses (i) through (vi) of this clause;
	 
	 	(t)	 	“ERCB” means the Alberta Energy Resources Conservation Board;
	 
	 	(u)	 	“GST” means the goods and services tax administered pursuant to the Excise Tax
Act (Canada) or under any successor or parallel federal or provincial legislation that
imposes a tax on the recipient of goods and services;
	 
	 	(v)	 	“HTL Data Monitoring Agreement” means the HTL data monitoring agreement dated
as of the date hereof between Vendor and Purchaser;
	 
	 	(w)	 	“JOA” means the Joint Operating Agreement dated April 5, 2000 between Canadian
Natural Resources, Talisman Energy Inc. and Union Pacific Resources Inc.;
	 
	 	(x)	 	“Jurisdictions” means Yukon Territory and every province of Canada;
	 
	 	(y)	 	“Lands” means the lands set forth and described in Schedule “A” (insofar as
rights thereto are granted by the Leases) and includes the Oil Sands Substances

 

4

	 	 	 	within such lands, subject to such limitations as to geological formations and
petroleum substances as set forth in Schedule “A”;

	 	(z)	 	“Leases” means all leases, licences, permits and other documents of title set
forth and described in Schedule “A”, by virtue of which the holder thereof is entitled
to drill for, win, take, own or remove the Oil Sands Substances within, upon or under
the Lands or by virtue of which the holder thereof is deemed to be entitled to a share
of Oil Sands Substances removed from the Lands and includes, if applicable, all
amendments, renewals and extensions of such documents and all documents issued in
substitution therefor but only insofar as the same relate to the Lands;
	 
	 	(aa)	 	“Lease 10” means Alberta Crown Primary Oil Sands Lease No. 7401100010, as more
particularly described in Schedule “A”, and all amendments, renewals and extensions
thereof and all documents issued in substitution therefor;
	 
	 	(bb)	 	“Lease 10 Affected Area” means the surface of those Lands governed by Lease 10
which are subject to the Suncor Mineral Surface Lease, and for purposes of illustration
only include those lands described in Schedule “F” as the “Suncor MSL 044435 Lands
Affecting Lease 10” and as “Suncor MSL” in the map attached thereto;
	 
	 	(cc)	 	“Lease 50” means Alberta Crown Continued Oil Sands Lease No. 7281020T50, as
more particularly described in Schedule “G”, and all amendments, renewals and
extensions thereof and all documents issued in substitution therefor;
	 
	 	(dd)	 	“Lease 50 Lands” means the lands set forth and described in Schedule “G”
(insofar as rights thereto are granted by Lease 50) and includes the Oil Sands
Substances within such lands, subject to such limitations as to geological formations
and petroleum substances as set forth in Schedule “G”;
	 
	 	(ee)	 	“Lease 50 Miscellaneous Interests” means, subject to any and all limitations
and exclusions provided for in this definition, the entire interest of Vendor in and to
all property, assets, interests and rights pertaining to the Lease 50 Oil Sands Rights
and the Lease 50 Wells, or any of them, but only to the extent that such property,
assets, interests and rights pertain to the Lease 50 Oil Sands Rights and the Lease 50
Wells to which Vendor is entitled as at the date hereof, or any of them, or any rights
relating thereto, including, without limitation, any and all of the following:

	 	(i)	 	Lease 50, the Title and Operating Documents pertaining to the
Lease 50 Lands, and any other contracts and agreements to the extent that they
relate to the Lease 50 Oil Sands Rights and the Lease 50 Wells, or any of them;
	 
	 	(ii)	 	all subsisting leasehold rights (if any) to, and rights (if
any) to enter upon, use or occupy the surface of any lands which are or may be
used to gain access to or use or operate the Lease 50 Oil Sands Rights and the
Lease 50

 

5

	 	 	 	Wells, or any of them, excluding any such rights that pertain only to a well
or wells other than the Lease 50 Wells;

	 	(iii)	 	all records, books, documents, licenses, permits, approvals,
drawings (whether in electronic format or otherwise, including all ‘as-built’
drawings, and including a list of drawings), authorizations, files, or papers
which relate to the Lease 50 Oil Sands Rights and the Lease 50 Wells, or any of
them;
	 
	 	(iv)	 	the Proprietary Seismic Data; and
	 
	 	(v)	 	the right, title, estate and interest of Vendor described in
Schedule “G” in and to the Lease 50 Wells, including the wellbores and any and
all casing thereof,

	 	 	 	but specifically excluding any of the foregoing that: (i) may pertain to any seismic
other than the Proprietary Seismic Data, or to geophysical or geological data or
matters, engineering forecasts, evaluations or reserve estimates; (ii) may pertain
to Vendor’s proprietary information or technology or interpretations or Vendor’s tax
or financial records or economic evaluations; (iii) are owned or licensed by Third
Parties with restrictions on their delivery or disclosure by Vendor or which require
the payment of any fees to transfer or disclose same; (iv) are legal opinions, or
documents prepared by Vendor in contemplation of litigation; or (v) pertain to
records required to be maintained by Vendor under the Regulations;
	 
	 	(ff)	 	“Lease 50 Oil Sands Rights” means the right, title, estate and interest of
Vendor described in Schedule “G”, in and to the Lease 50 Lands and, insofar as they
pertain thereto, Lease 50;
	 
	 	(gg)	 	“Lease 50 Wells” means the wells identified in Schedule “G”, and all other
wells which are or may be or were used in connection with the Lease 50 Oil Sands
Rights, and including without limitation, evaluation, delineation, producing, shut-in,
suspended, abandoned, water source, injection and disposal wells unless any such other
wells are specifically excluded in Schedule “G”.
	 
	 	(hh)	 	“Letter Agreement” means the letter agreement dated May 29, 2008 between Vendor
and Purchaser;
	 
	 	(ii)	 	“Losses” means all actions, causes of action, losses, costs, claims, damages,
penalties, fines, assessments, charges, expenses or other liabilities whatsoever,
whether contractual or tortious, which are suffered, sustained, paid or incurred by a
Party and includes, without limitation, reasonable legal fees on a solicitor and client
basis and other professional fees and disbursements on a full indemnity basis, but
notwithstanding the foregoing shall not include any liability for indirect or
consequential damages including, without limitation, business loss, loss of profit,
economic loss, punitive damages, or income tax liabilities;

 

6

	 	(jj)	 	“Miscellaneous Interests” means, subject to any and all limitations and
exclusions provided for in this definition, the entire interest of Vendor in and to all
property, assets, interests and rights pertaining to the Oil Sands Rights and the
Wells, or any of them, but only to the extent that such property, assets, interests and
rights pertain to the Oil Sands Rights and the Wells to which Vendor is entitled as at
the date hereof, or any of them, or any rights relating thereto, including, without
limitation, any and all of the following:

	 	(i)	 	the Leases, the Title and Operating Documents, and any other
contracts and agreements to the extent that they relate to the Oil Sands Rights
and the Wells, or any of them;
	 
	 	(ii)	 	all subsisting leasehold rights (if any) to, and rights (if
any) to enter upon, use or occupy the surface of any lands which are or may be
used to gain access to or use or operate the Oil Sands Rights and the Wells, or
any of them, excluding any such rights that pertain only to a well or wells
other than the Wells;
	 
	 	(iii)	 	all records, books, documents, licenses, permits, approvals,
drawings (whether in electronic format or otherwise, including all ‘as-built’
drawings, and including a list of drawings), authorizations, files, or papers
which relate to the Oil Sands Rights and the Wells, or any of them; and
	 
	 	(iv)	 	the right, title, estate and interest of Vendor described in
Schedule “A” in and to the Wells, including the wellbores and any and all
casing thereof,

	 	 	 	but specifically excluding any of the foregoing that: (i) may pertain to any seismic
(including the Proprietary Seismic Data), or to geophysical or geological data or
matters, engineering forecasts, evaluations or reserve estimates; (ii) may pertain
to Vendor’s proprietary information or technology or interpretations or Vendor’s tax
or financial records or economic evaluations; (iii) are owned or licensed by Third
Parties with restrictions on their delivery or disclosure by Vendor or which require
the payment of any fees to transfer or disclose same; (iv) are legal opinions, or
documents prepared by Vendor in contemplation of litigation; or (v) pertain to
records required to be maintained by Vendor under the Regulations;
	 
	 	(kk)	 	“Notes” means the 2008 Note and Convertible Note;
	 
	 	(ll)	 	“Notice of Acceptance” has the meaning ascribed to that term in clause 12.3;
	 
	 	(mm)	 	“Oil Sands Rights” means the right, title, estate and interest of Vendor
described in Schedule “A”, in and to the Lands and, insofar as they pertain thereto,
the Leases, including without limitation any of the following which relate to the
Lands:

	 	(i)	 	rights to explore for, drill for, extract, win, produce, take,
save or market Oil Sands Substances therefrom;

 

7

	 	(ii)	 	rights to a share of the production of Oil Sands Substances
therefrom;
	 
	 	(iii)	 	rights to a share of the proceeds of sale of, or rights to
receive payment calculated by reference to, the quantity or value of the
production of Oil Sands Substances produced therefrom, other than the rights
under agreements for the sale of Oil Sands Substances;
	 
	 	(iv)	 	rights to acquire any of the rights described in subparagraphs
(i) to (iii) of this definition; and
	 
	 	(v)	 	to the extent that they are described in Schedule “A”, all
interests and rights known as working interests, royalty interests, overriding
royalty interests, gross overriding royalty interests, production payments,
profits interests, net profits interests, revenue interests, net revenue
interests and economic interests;

	 	(nn)	 	“Oil Sands Substances” means Crude Bitumen and every other mineral or
substance, the right to explore for which, or an interest in which, is granted under
the Leases, but only insofar as the Leases pertain to the Lands;
	 
	 	(oo)	 	“Party” means a party to this Agreement;
	 
	 	(pp)	 	“Permitted Encumbrances” means, with respect to the Assets:

	 	(i)	 	easements, rights of way, servitudes and other similar rights
in land (including, without limitation, rights of way and servitudes for
highways and other roads, railways, sewers, drains, gas and oil pipelines, gas
and water mains, electric light, power, telephone, telegraph or cable
television conduits, poles, towers, wires and cables);
	 
	 	(ii)	 	the right reserved to or vested in any government or other
public authority by the terms of any lease (including any Lease), license,
franchise, grant or permit or by any statutory provision, to terminate any such
lease (including any Lease), license, franchise, grant, permit or authorization
or to require annual or other periodic payments as a condition of the
continuance thereof;
	 
	 	(iii)	 	rights of general application reserved to or vested in any
governmental or other public authority to levy taxes on the Lands or on Oil
Sands Substances produced from the Lands or any of them or the revenue
therefrom;
	 
	 	(iv)	 	legally binding requirements imposed under the Regulations
concerning any of the Assets which are generally applicable to the oil and gas
industry including, without limitation, rates of production from operations in
respect of any of the Assets and any order or directive of the ERCB or other
governmental authority, whether before or after the date hereof, to limit or
shut-in production from the Assets;

 

8

	 	(v)	 	the terms and conditions of the Leases and the Title and
Operating Documents, including without limitation any penalty or forfeiture
that is disclosed in Schedule “A”;
	 
	 	(vi)	 	to the extent described in Schedule “A”:

	 	(A)	 	any royalties, overriding royalties, net
profits interests or other encumbrances applicable to the Oil Sands
Rights;
	 
	 	(B)	 	any existing potential alteration of Vendor’s
interest in the Assets because of payout conversion or farmin, farmout
or other such agreement; and
	 
	 	(C)	 	any Rights of First Refusal;

	 	(vii)	 	liens or security incurred, created or granted in the ordinary
course of business or imposed by Regulations, to a public utility or government
authority in connection with the Assets or operations thereon for the payment
of taxes, assessments and governmental charges which are not due as at the date
hereof, or the validity of which is being diligently contested in good faith by
or on behalf of Vendor;
	 
	 	(viii)	 	liens (including, without limitation, processors’, operators’ and similar
liens) incurred or created in the ordinary course of business as security in
favour of the person conducting the development or operation of the Assets for
Vendor’s proportionate share of the costs and expenses of such development or
operation which are not due as at the date hereof, or the validity of which is
being diligently contested in good faith by or on behalf of Vendor;
	 
	 	(ix)	 	mechanics’, builders’ or materialman’s liens in respect of
services rendered or goods supplied, but only insofar as such liens relate to
goods or services for which payment is not due as at the date hereof, or the
validity of which is being diligently contested in good faith by or on behalf
of Vendor;
	 
	 	(x)	 	statutory exceptions to title, and the reservations,
limitations, provisos and conditions in any original grants from the Crown of
any of the Assets or interests therein;
	 
	 	(xi)	 	any Security Interest held by any Third Party encumbering
Vendor’s interest in and to the Assets, or any part or portion thereof, in
respect of which Vendor delivers a registerable discharge or a ‘no interest’
letter to Purchaser on or prior to the date hereof;
	 
	 	(xii)	 	any security held by, or granted by, through or under a Third
Party in respect of or encumbering that Third Party’s interest in and to the
Assets or any part or portion thereof;

 

9

	 	(xiii)	 	any defect or deficiencies in title to the Assets of which Purchaser is aware
or which are disclosed in this Agreement; and
	 
	 	(xiv)	 	all other liens, adverse claims, and other claims or interests
of Third Parties set out in Schedule “A”;

	 	(qq)	 	“person” means an individual, a partnership, a corporation, a trust, an
unincorporated organization, a union, a governmental authority and the heirs,
executors, administrators or other legal representatives thereof;
	 
	 	(rr)	 	“Prime Rate” means the daily rate of interest expressed as a per annum rate
announced from time to time by the main branch of the Royal Bank of Canada in Calgary,
Alberta as a reference rate for the determination of interest rates on Canadian dollar
commercial loans to customers in Canada;
	 
	 	(ss)	 	“Proposed Recovery Area” means the portion of the Lease 10 Affected Area that
is within the 750 meter buffer zone of the outside perimeter thereof, as is illustrated
in Schedule “F”;
	 
	 	(tt)	 	“Proposed Recovery Area Permits” has the meaning ascribed to that term in
clause 8.1;
	 
	 	(uu)	 	“Proprietary Seismic Data” means Vendor’s interest in seismic data owned by
Vendor jointly with one or more Third Parties, to the extent such data is in respect of
the Lands or lands located on or within 1.6 kilometers of the Lease 50 Lands, and is
described in Schedule “C”, but specifically excludes all trade or licensed seismic
data, and any proprietary interpretations of such data or derivative products thereof;
	 
	 	(vv)	 	“Public Record” means all information filed by Purchaser with the Securities
Commissions including, without limitation, any information filed with any Securities
Commission in compliance, or intended compliance, with any Applicable Securities Laws;
	 
	 	(ww)	 	“Purchase Price” means the total consideration paid or delivered (as the case
may be) by Purchaser to Vendor as set forth in clause 2.2;
	 
	 	(xx)	 	“Purchaser Counsel Opinions” means the legal opinions dated as of the date
hereof delivered by Goodmans LLP and Bennett Jones LLP to Vendor;
	 
	 	(yy)	 	“Regulations” means all statutes, laws, rules, orders, regulations and
directions of governmental and other competent authorities in effect from time to time
and made by governments, governmental boards or agencies, tribunals, arbitrators, or
judicial authorities having jurisdiction over the Assets, the Parties or the
transaction contemplated herein;
	 
	 	(zz)	 	“Rights of First Refusal” means a right of first refusal, pre-emptive right of
purchase or similar right whereby any Third Party has the right to acquire or

 

10

	 	 	 	purchase all or a portion of the Assets as a consequence of the Parties entering
into this Agreement or the transaction to be effected by this Agreement;

	 	(aaa)	 	“ROFO Interests” has the meaning ascribed to that term in clause 12.1;
	 
	 	(bbb)	 	“ROFO Notice” has the meaning ascribed to that term in clause 12.1;
	 
	 	(ccc)	 	“ROFR Assets” means the Lease 50 Oil Sands Rights and the Lease 50
Miscellaneous Interests;
	 
	 	(ddd)	 	“ROFR Assets Value” has the meaning ascribed to that term in clause 4.1(b)(i);
	 
	 	(eee)	 	“SEC” means the United States Securities and Exchange Commission;
	 
	 	(fff)	 	“Securities Commissions” means the securities commissions or securities
regulatory authorities in each of the provinces of Canada and the Yukon Territory, and
the SEC;
	 
	 	(ggg)	 	“Security Documents” means the Fixed and Floating Charge Debenture and
associated Pledge Agreement of even date granted by Purchaser to Vendor;
	 
	 	(hhh)	 	“Security Interests” means security interests in the Assets or any portion
thereof granted by Vendor or its Affiliates to any Third Party, whether by way of
mortgage, deed of trust, assignment under the Bank Act (Canada), debenture, general
security agreement or land charge under personal property security legislation or
otherwise, including any amendments thereto;
	 
	 	(iii)	 	“Specific Conveyances” means all conveyances, assignments, registerable
transfers, novations, bills of sale, and other documents or instruments that are
reasonably required or desirable to convey, assign and transfer the interest of and the
obligations of Vendor in and to the Assets to Purchaser and to novate Purchaser in the
place and stead of Vendor with respect to the Assets and all of Vendor’s obligations
relating thereto;
	 
	 	(jjj)	 	“Specified Reclamation Activities” means the activities associated or required
in connection with the reclamation of the wells described in Schedule “H”, including
establishing native vegetation, reducing slash accumulation and spreading debris over
the lease area, addressing any stability and erosion issues, reducing mulched debris
and the depth thereof to promote natural vegetation, and addressing well site
subsidence at abandonment by mounting well centers, in each case as may be required by
the Regulations or generally accepted oil and gas practices;
	 
	 	(kkk)	 	“Subsidiary” means any company, person, partnership or other legal entity
which is controlled by Purchaser, and “control” means the power to direct or cause the
direction of the management and policies of such company, person, partnership or other
legal entity, as the case may be, whether directly or indirectly, through one or more
intermediaries or otherwise, and whether by virtue of the ownership of

 

11

	 	 	 	 shares or other equity interests, the holding of voting rights or contractual
rights, or partnership interests or otherwise;

	 	(lll)	 	“Suncor Mineral Surface Lease” means Mineral Surface Lease No. 044435 granted
by Alberta Sustainable Resource Development to Suncor Energy Inc., and all amendments,
renewals and extensions thereof and all documents issued in substitution therefor;
	 
	 	(mmm)	 	“Survival Period” shall have the meaning ascribed to that term in clause 9.4;
	 
	 	(nnn)	 	“Third Party” means any person (other than the Parties to the extent of their
roles in this Agreement as Vendor and Purchaser);
	 
	 	(ooo)	 	“this Agreement”, “herein”, “hereto”, “hereof” and similar expressions mean
and refer to this Asset Transfer Agreement together with all Schedules, in its
entirety;
	 
	 	(ppp)	 	“Title and Operating Documents” means, to the extent directly related to the
Oil Sands Rights and Wells, or any of them:

	 	(i)	 	agreements whereby Vendor derives any interest therein, or
affecting Vendor’s interests and obligations therein, including, without
limitation, operating agreements, royalty agreements, farmout or farmin
agreements, option agreements, participation agreements, pooling agreements, or
trust agreements (whether Vendor is trustee or beneficiary);
	 
	 	(ii)	 	any approvals, authorizations or licenses required under the
Regulations for the conduct of operations with respect to the Assets, including
without limitation Well licenses; and
	 
	 	(iii)	 	all other agreements other than the Leases that relate to the
ownership, operation or exploitation of the Oil Sands Rights or the Wells;

	 	(qqq)	 	“Transaction Documents” means this Agreement, the Back-In Agreement, the
Notes, the Security Documents and the HTL Data Monitoring Agreement and all ancillary
or supplemental documents relating thereto;
	 
	 	(rrr)	 	“U.S Person” means “U.S. person” as defined in Regulation S promulgated under
the U.S Securities Act;
	 
	 	(sss)	 	“U.S. Securities Act” means the United States Securities Act of 1933, as
amended; and
	 
	 	(ttt)	 	“Wells” means the wells identified in Schedule “B”, and all other wells which
are or may be or were used in connection with the Oil Sands Rights, and including
without limitation, evaluation, delineation, producing, shut-in, suspended, abandoned,
water source, injection and disposal wells unless any such other wells are specifically
excluded in Schedule “B”.

 

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	1.2	 	Schedules and Exhibits
	 
	 	 	The following schedules are attached to, form part of, and are incorporated in this
Agreement:

	 	 	Schedule “A”  —  Lands and
Leases

Schedule “B”  —  Wells

Schedule “C”  —  Proprietary Seismic Data

Schedule “D”  —  Disclosure Schedule

Schedule “E”  —  Data Room Materials

Schedule “F”  —  Proposed Recovery Area

Schedule “G”  —  ROFR Assets

Schedule “H”  —  Reclamation Wells
	 
	 	 	These schedules are incorporated herein by reference as though contained in the body of this
Agreement. Whenever any term or condition, whether express or implied, of any schedule
conflicts or is at variance with any term or condition of the body of this Agreement, the
latter shall prevail.
	 
	1.3	 	Interpretation Not Affected by Headings
	 
	 	 	The division of this Agreement into articles, clauses, subclauses and paragraphs and the
provision of headings for all or any part thereof are for convenience and reference only and
shall not affect the meaning, interpretation or construction of this Agreement.
	 
	1.4	 	Included Words
	 
	 	 	When the context reasonably permits, words suggesting the singular shall be construed as
suggesting the plural and vice versa, and words suggesting gender or gender neutrality shall
be construed as suggesting the masculine, feminine and neutral genders. In addition,
references to “including” shall mean including without limitation, and “includes” or other
derivatives thereof shall have corresponding meanings.
	 
	1.5	 	Headings
	 
	 	 	The expressions “Article”, “clause”, “subclause”, “paragraph” and “Schedule” followed by a
number or letter or combination thereof mean and refer to the specified article, clause,
subclause, paragraph and schedule of or to this Agreement.
	 
	1.6	 	Statutory References
	 
	 	 	Any reference herein to a statute shall include and shall be deemed to be a reference to
such statute and to the regulations made pursuant thereto, and all amendments made thereto
and in force from time to time, and to any statute or regulation that may be passed which
has the effect of supplementing or superseding the statute so referred to or the regulations
made pursuant thereto.

 

13

	1.7	 	Invalidity of Provisions
	 
	 	 	If any of the provisions of this Agreement should be determined to be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the remaining
provisions herein shall not in any way be affected or impaired thereby.
	 
	1.8	 	References in Agreement
	 
	 	 	Any reference to time refers to the time in Calgary, Alberta at the applicable time. All
references to “dollars” or “$” herein refer to lawful currency of Canada.
	 
	1.9	 	Knowledge or Awareness
	 
	 	 	In this Agreement, the stated knowledge, information, belief or awareness of a Party
consists only of the actual knowledge or awareness, as the case may be, of the current
officers of such Party whose normal responsibilities relate to the matter in question in the
course of their normal duties, and does not include knowledge, information or belief and
awareness of any other person or persons or any constructive or imputed knowledge. Vendor
does not have any obligation to make inquiry of Third Parties or the files and records of
any Third Party or public authority in connection with representations and warranties that
are made to its knowledge, information, belief or awareness.
	 
	1.10	 	Conflicts
	 
	 	 	If any term or condition of this Agreement conflicts with a term or condition of the Leases
or the Regulations, the term or condition of the relevant Lease or Regulation will prevail,
and this Agreement will be deemed to be amended to the extent required to eliminate any such
conflict.

ARTICLE 2

PURCHASE AND SALE

	2.1	 	Purchase and Sale
	 
	 	 	As consideration for the payment or delivery, as the case may be, of the Purchase Price, the
receipt and sufficiency of which is hereby acknowledged, Vendor hereby sells, assigns,
transfers, conveys and sets over to Purchaser, and Purchaser hereby purchases from Vendor,
all of the right, title, estate and interest of Vendor (whether absolute or contingent,
legal or beneficial) in and to the Assets, TO HAVE AND TO HOLD the same, together with all
benefit and advantage to be derived therefrom, absolutely, subject to the terms of this
Agreement.
	 
	2.2	 	Purchase Price
	 
	 	 	The Purchase Price for the Assets is as follows:

	 	(a)	 	$22,500,000 in cash;
	 
	 	(b)	 	delivery of the Notes duly executed by the Purchaser; and

 

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	 	(c)	 	the obligation of Purchaser respecting the Contingent Payment in accordance
with article 8,
	 
	 	(a)	 	and (b) of which has been paid or delivered, as the case may be, by Purchaser to Vendor
concurrently with the execution and delivery of this Agreement.

	2.3	 	Concurrent Agreements
	 
	 	 	Concurrently with the execution and delivery of this Agreement, the Parties or Purchaser (as
the case may be) have delivered the Back-In Agreement, the Security Documents and the HTL
Data Monitoring Agreement.
	 
	2.4	 	Closing
	 
	 	 	Possession, risk and beneficial ownership of Vendor’s interest in and to the Assets shall
pass from Vendor to Purchaser on the date hereof.
	 
	2.5	 	Form of Payment
	 
	 	 	All payments to be made pursuant to this Agreement shall be in Canadian funds and shall be
made by bank wire unless otherwise instructed by Vendor.
	 
	2.6	 	Tax Allocation
	 
	 	 	The Parties shall allocate the Purchase Price amongst the Assets as follows:

	 	 	 
	(a) Miscellaneous Interests
	 	 $1.00
	 	 	 
	(b) Oil Sands Rights
	 	The balance of the Purchase Price

	2.7	 	Taxes

	 	(a)	 	Purchaser shall be solely responsible for any provincial sales tax pertaining
to its acquisition of the Assets and shall remit any such taxes to the applicable
governmental authority according to the Regulations.
	 
	 	(b)	 	If Vendor is required to collect from Purchaser any tax, fee or charge under
the Regulations in connection with Purchaser acquiring the Assets, including but not
limited to GST, then Purchaser shall pay the amount of those taxes, fees or charges to
Vendor, and Vendor shall remit those amounts in the manner required by the Regulations.
Such amounts are in addition to the Purchase Price. If the amount of any tax, fee or
charge is adjusted as a result of any audit or determination by any government
authority then any increase or decrease and any related penalties and interest paid or
received shall be paid by or received by Purchaser.

 

15

ARTICLE 3

TITLE AND ENVIRONMENTAL REVIEW

	3.1	 	Acknowledgement
	 
	 	 	Purchaser acknowledges and confirms that it and its nominees have been provided with a
reasonable opportunity by Vendor to conduct a physical inspection, environmental assessment
and title review of the Assets, all at Purchaser’s sole cost, risk and expense, and that it
is satisfied with such inspection, assessment and review and the results thereof.

ARTICLE 4

ROFR’S AND CONSENTS

	4.1	 	Rights of First Refusal

	 	(a)	 	The Parties confirm that a notice respecting the applicable Right of First
Refusal was issued to the appropriate Third Party in respect of the ROFR Assets
pursuant to and in accordance with the Letter Agreement and the JOA, and that such
Third Party exercised its Right of First Refusal. In the event that a sale of the ROFR
Assets to such Third Party is not completed at any time prior to November 30, 2008 and
Vendor determines that it has no further obligation to sell the ROFR Assets to such
Third Party, Vendor shall provide written notice thereof to Purchaser. Within thirty
(30) days after receipt of such written notice:

	 	(i)	 	Vendor and Purchaser shall execute and deliver an amending
agreement pursuant to which:

	 	(A)	 	this Agreement is amended to reflect the
consideration to be paid by Purchaser to Vendor in accordance with
clause 4.1(a)(ii);
	 
	 	(B)	 	Vendor’s representations and warranties in
clause 9.1 shall be deemed repeated as at the date of the amending
agreement and shall survive, for purposes of the ROFR Assets only, for
a period of twelve (12) months thereafter; and
	 
	 	(C)	 	Schedule “A” hereto is amended to include a
description of the ROFR Assets;

	 	(ii)	 	concurrently with the execution and delivery of the amending
agreement Purchaser shall deliver to Vendor a certified cheque or bank draft
(or at Vendor’s request initiate a wire transfer) in the amount of $7,500,000
and an amended and restated 2008 Note in form and substance satisfactory to
Vendor, acting reasonably, pursuant to which the Principal Amount (as such term
is defined in the 2008 Note) of the 2008 Note is increased to $20,000,000, and
in addition Purchaser shall deliver to Vendor a supplemental debenture pursuant
to which the Fixed and Floating Charged Debenture of even date granted by
Purchaser to Vendor is amended,

 

16

	 	 	 	modified and supplemented to increase the Principal Sum (as that term is
defined therein) to $75,000,000.

	 	 	 	If Purchaser acquires the ROFR Assets pursuant to this Agreement, Vendor will as
soon as reasonably practicable thereafter instruct its data management service
provider to effect a transfer and delivery of the Proprietary Seismic Data to
Purchaser. Purchaser shall be solely responsible for all fees and costs charged
therefor by that service provider, and for any other fees and costs (including in
respect of reproduction, deletion and handling) charged by the service provider.

	4.2	 	Consents
	 
	 	 	To the extent all such consents were not obtained prior to the date hereof, if any Lease or
Title and Operating Document provides that Vendor shall obtain the written consent (the
“Consent Rights”) from a Third Party to the disposition of such Lease or Title and Operating
Document to Purchaser, Vendor shall, no later than ten (10) Business Days after the date
hereof, serve all notices and request all consents required to permit the conveyance of any
such Leases or Title and Operating Documents to Purchaser. Failure to obtain consents for
all Leases or Title and Operating Documents requiring written consent shall not constitute a
breach of this Agreement or any of Vendor’s representations and warranties. Vendor shall
give prompt written notice to Purchaser of all Consent Rights for which consents are either
granted or refused. If any Third Party notifies Vendor that it refuses to give the consent
required by the Consent Right, Vendor and Purchaser shall cooperate in attempting to obtain
such consent. Purchaser shall, however, continue to own the Assets affected by the relevant
Lease or Title and Operating Document and shall indemnify Vendor against Losses of Vendor in
connection therewith. Vendor shall after the date hereof hold Purchaser’s legal interest in
that Lease and Title and Operating Document as agent for Purchaser and shall continue to use
commerically reasonable efforts (but Vendor shall not be required to incur any costs or
expenses) to obtain such written consent from the Third Party.

ARTICLE 5

DOCUMENTS, RECORDS AND CONVEYANCES

	5.1	 	Conveyances and Joint Obligations

	 	(a)	 	Vendor has used commercially reasonable efforts to prepare the required
Specific Conveyances. To the extent any further Specific Conveyances are required
after the date hereof, Vendor shall use commercially reasonable efforts to provide such
Specific Conveyances for execution and delivery by the Parties as soon as reasonably
possible after such requirements are established. None of the Specific Conveyances
shall confer or impose upon a Party any greater right or obligation than contemplated
in this Agreement.
	 
	 	 	 	To the extent any Specific Conveyances are not prepared or delivered on the date
hereof, Vendor shall be entitled to retain the Leases, Title and Operating Documents
and correspondence, records, books, documents, licences, reports and data relating
thereto comprising the Miscellaneous Interests until such Specific

 

17

	 	 	 	Conveyances are executed and delivered, but Purchaser may access all of the
foregoing at Vendor’s offices during normal business hours for review purposes and
to make copies.

	 	(b)	 	Vendor shall (with the cooperation of Purchaser) circulate and register, as the
case may be, all Specific Conveyances that by their nature may be circulated or
registered. All costs of registration of the Specific Conveyances, including all Well
licence transfers, assignments of dispositions and any associated security deposits,
shall be for the sole account of Purchaser.
	 
	 	(c)	 	No Specific Conveyance shall require Vendor to provide any representation or
warranty beyond those contained in this Agreement, nor shall they entitle Purchaser to
impose any obligation upon or to rely on any representation or warranty, express or
implied, of Vendor beyond those contained in this Agreement.

	5.2	 	Delivery of Data

	 	(a)	 	Subject to completion of Specific Conveyances as provided in clause 5.1, Vendor
shall deliver to Purchaser on the date hereof or forthwith hereafter the original
copies of the Leases and the Title and Operating Documents and the original copies of
other agreements, correspondence, records, books, documents, licences, permits,
approvals, reports and data comprising the Miscellaneous Interests which are now in the
possession of Vendor. Notwithstanding the foregoing, if and to the extent such Leases,
Title and Operating Documents and other agreements, correspondence, records, books,
documents, licences, reports and data comprising the Miscellaneous Interests also
pertain to interests other than the Assets, photocopies or other copies may be provided
to Purchaser in lieu of original copies, at Purchaser’s sole cost and expense for
copying. Vendor may retain photocopies of all Leases, Title and Operating Documents,
other agreements, correspondence, records, books, documents, licences, reports and data
comprising the Miscellaneous Interests, at its sole cost and expense.
	 
	 	(b)	 	Notwithstanding anything contained herein, with respect to the Leases, Title
and Operating Documents, and all other files, records and other documents included in
the Miscellaneous Interests, for a period of seven (7) years after the date hereof
Purchaser shall provide Vendor with reasonable access to all such materials (including
permitting the copying thereof where appropriate) acquired from Vendor that are
required by Vendor in connection with audits, the preparation of tax returns, to comply
with Regulations (including Applicable Securities Laws) and in connection with any
action, suit or proceeding. Purchaser shall make its personnel reasonably available
for the purpose of providing Vendor, upon Vendor’s reasonable request, with assistance
in locating information from such records, providing appropriate verifications of
documents and information, developing information, reports, submissions and the like
relating to Vendor’s ownership or operation of the Assets prior to the date hereof, or
otherwise providing reasonable assistance.

 

18

	 	(c)	 	Notwithstanding subclause 5.2(a), Vendor shall either provide the documents
included in Miscellaneous Interests on the date hereof or undertake to deliver them
within three (3) weeks following the date hereof.

	5.3	 	ERCB License Transfers

	 	(a)	 	Purchaser acknowledges that Vendor had the right to, at least five (5) Business
Days prior to the date hereof, request that Purchaser communicate with the ERCB to
determine all conditions which the ERCB would require be complied with or satisfied in
order for the ERCB to approve the transfer by Vendor of licences for the Wells to
Purchaser, and that Purchaser was to advise Vendor in writing of such conditions.
Purchaser covenants to comply with all conditions imposed by the ERCB in respect of
such transfers.
	 
	 	(b)	 	Within five (5) Business Days following the date hereof, and subject to the
approval of Vendor’s working interest partners in the particular Asset (to the extent
such working interest partners have the contractual right to grant or deny consent),
Vendor shall prepare and electronically submit an application to the ERCB for the
transfer of the Wells, if any, held in the name of Vendor, and Purchaser shall
electronically ratify and sign such application. If Vendor’s working interest partners
for an Asset deny their consent to such transfer, the Parties shall cooperate in
re-transferring the pertinent licenses back to Vendor for Vendor’s assignment to an
approved operator. Purchaser’s LSAS Client ID No. is EN3601.
	 
	 	(c)	 	Should the ERCB deny any license transfer because of misdescription or other
minor deficiencies in the application, Vendor shall within two (2) Business Days
correct the application and amend and re-submit an application for the license
transfers, and Purchaser shall electronically ratify and sign such application.
	 
	 	(d)	 	After the date hereof, whether or not Purchaser requested prior determination
of ERCB transfer conditions under clause 5.3(a), if for any reason the ERCB requires
Purchaser to make a deposit in order to approve the license transfer, Purchaser shall
and covenants to immediately make such deposit.
	 
	 	(e)	 	If Purchaser fails to make a deposit which it is required to make under
clause 5.3(d) within ten (10) days of Purchaser’s receipt of notification from ERCB
that such deposit is required, Vendor shall have the right, but not the obligation, to
make such deposit. In such event, Purchaser shall reimburse Vendor for the amount of
such deposit plus interest thereon at the Prime Rate plus two (2) percent per annum,
calculated daily and not compounded, from the date Vendor paid the deposit until such
reimbursement is made. In addition to all other rights to enforce such reimbursement
otherwise available to Vendor, it shall have the right to set-off the amount of such
reimbursement (including interest) against other monies due to Purchaser pursuant to
this Agreement.

 

19

	 	(f)	 	Purchaser hereby appoints Vendor as its agent with regard to the payment
referred to in clause 5.3(e), it being agreed however that Vendor shall not have any
obligation to make such security deposits on behalf of Purchaser.

ARTICLE 6

POST-CLOSING TRANSITION

	6.1	 	Post-Closing Transition
	 
	 	 	After the date hereof and to the extent that Purchaser must be recognized by Third Parties
under the Title and Operating Documents or otherwise recognized as the owner of any of the
Assets, the following will apply to those Assets until that recognition has been effected:

	 	(a)	 	Vendor shall hold title to the Assets, or any portion thereof, as agent for
Purchaser, represent Purchaser and receive and hold all proceeds, benefits and
advantages accruing in respect of the Assets for the benefit, use and ownership of
Purchaser;
	 
	 	(b)	 	Vendor will forthwith provide to Purchaser all Third Party AFEs, notices, mail
ballots, invoices, cash calls, billings, and other similar documents Vendor receives
respecting the Assets, and will respond to such AFEs, notices, mail ballots, and other
similar documents pursuant to the written instruction of Purchaser, if received on a
timely basis, provided that Vendor may refuse to follow instructions that it reasonably
believes to be unlawful, unethical or in conflict with an applicable contract by
providing notice to that effect to Purchaser in a timely manner, and further provided
that Vendor may require Purchaser to advance or otherwise secure any costs to be
incurred in connection with Purchaser’s written instructions in such manner and by such
date as Vendor may reasonably request, and if Purchaser fails to do so Vendor shall not
be obligated to follow such instructions and shall not be responsible for any Losses
suffered by Purchaser or for any other claims, expenses or damages which may result;
	 
	 	(c)	 	Pursuant to article 7, Vendor will deliver to Purchaser, on a monthly basis, in
a manner consistent with Vendor’s internal accounting processes, all revenues, proceeds
and other benefits received by Vendor respecting the Assets and accruing after the date
hereof, together with all relevant statements of operating expenses, less the share of
the applicable lessor royalties, development and operating costs, treating, gathering,
processing and product transportation expenses and those other costs and expenses
directly relating to the Assets and the production of Oil Sands Substances. Vendor
shall be entitled to retain any portion of such funds to satisfy any amounts owing or
payable hereunder or to satisfy any amounts owing to Third Parties by Purchaser under
the Leases, Title and Operating Documents and other agreements or other documents
relating to the Assets. Any net amount owing to Vendor under this subclause (c) will
be paid by Purchaser within thirty (30) days of Vendor’s invoice therefore. All
overdue payments hereunder shall be payable with interest calculated at the Prime Rate
plus two per cent (2.0%) per annum, calculated daily and not compounded.; and

 

20

	 	(d)	 	Vendor will, as agent of Purchaser, deliver to Third Parties all such notices
and other documents as Purchaser may reasonably request, in connection with its
ownership of the Assets, and all money or other items provided in respect thereof,
provided that Vendor may refuse to deliver any such notice or document if it reasonably
believes same to be unlawful, unethical or in conflict with an applicable contract by
providing notice to that effect to Purchaser in a timely manner, and further provided
that Vendor may require Purchaser to advance or otherwise secure any costs to be
incurred in connection with the delivery of such notice or document in such manner and
by such date as Vendor may reasonably request, and if Purchaser fails to do so Vendor
shall not be obligated to deliver such notice or document and shall not be responsible
for any Losses suffered by Purchaser or for any other claims, expenses or damages which
may result.

	6.2	 	Vendor as Agent of Purchaser

	 	(a)	 	After the date hereof and insofar as Vendor takes actions on behalf of
Purchaser in compliance with the obligations under this article 6, Vendor will be
deemed to have been the agent of Purchaser hereunder. Purchaser hereby ratifies all
actions taken, or refrained from being taken, by Vendor under this article in that
capacity, with the intention that all of those actions will be deemed to be those of
Purchaser, except to the extent that Vendor’s actions constitute gross negligence or
wilful misconduct. An act or omission of Vendor will not be regarded as gross
negligence or wilful misconduct under this article, however, to the extent that it was
done or omitted to be done in accordance with Purchaser’s written instructions or
knowledge.
	 
	 	(b)	 	Purchaser will be liable to and, in addition, indemnify Vendor and its
additional Indemnitees against all of their Losses and liabilities as a result of
maintaining the Assets or exercising other rights as Purchaser’s agent under this
article, insofar as those Losses and liabilities are not a direct result of the gross
negligence or wilful misconduct of Vendor or any of its Additional Indemnitees. An act
or omission of Vendor or its Additional Indemnitees will not be regarded as gross
negligence or wilful misconduct, however, to the extent that it was done or omitted to
be done in accordance with Purchaser’s written instructions or knowledge.

ARTICLE 7

APPORTIONMENTS

	7.1	 	Apportionments

	 	(a)	 	Except as provided below in this article 7, all benefits and obligations of
every kind and nature relating to the ownership and operation of the Assets and
accruing in respect of the Assets including without limitation, rentals, property
taxes, maintenance, development, and capital and operating costs, shall be apportioned
between the Parties as of the date hereof on an accrual basis in accordance with
generally accepted accounting principles.

 

21

	 	(b)	 	All rentals and all similar payments required to preserve any of the Leases and
all taxes (other than income taxes) levied with respect to the Assets shall be
apportioned between Vendor and Purchaser on a per diem basis as of the date hereof.
	 
	 	(c)	 	Any adjustments resulting from Third Party joint venture audits relating to the
Assets:

	 	(i)	 	relating to the period prior to the date hereof and for which
audit queries are outstanding as at the date hereof; or
	 
	 	(ii)	 	that occur after the date hereof but not later than two (2)
years after the date hereof or within the applicable period in the governing
agreements included in the Miscellaneous Interests, whichever is later;

	 	 	 	shall be made as they are established and payment for them shall be made by the
Party required to make payment hereunder in accordance with clause 7.1(a) within
thirty (30) days of being notified in writing of the determination of the amount
owing. All overdue payments hereunder shall be payable with interest calculated at
the Prime Rate plus two per cent (2.0%) per annum, calculated daily and not
compounded.

	7.2	 	Interim and Final Accounting

	 	(a)	 	An interim accounting of all apportionments required under this article shall
be carried out by the Parties on the date hereof based upon Vendor’s good faith best
estimate of such apportionments (based upon information then available) and the net
apportionment pursuant to this article based upon such accounting shall be paid on the
date hereof. The Parties acknowledge that a statement setting out the above interim
accounting was delivered by Vendor to Purchaser prior to the date hereof and same was
in form and substance satisfactory to the Parties.
	 
	 	(b)	 	Subject to the audit rights in clause 7.3, a final accounting of all
apportionments pursuant to this article shall be carried out within ninety (90) days
following the date hereof. Purchaser shall pay to Vendor, or Vendor shall pay to
Purchaser, as the case may be, the net cash amount owing in respect of the
apportionments as specified in the final accounting within thirty (30) days of receipt
of such final accounting. Subject to clauses 7.1(c) and 7.3, the Parties shall not be
obligated to make any apportionments after such ninety (90) day period unless such
apportionment has been specifically requested, by notice, within such period. All
apportionments shall be settled by payment by the Party required to make payment
hereunder within thirty (30) days of being notified of each such apportionment being
agreed upon. All overdue payments hereunder shall be payable with interest calculated
at the Prime Rate plus two per cent (2.0%) per annum, calculated daily and not
compounded.

 

 22

	7.3	 	Audit Rights for Apportionments
	 
	 	 	During the ninety (90) day period following the date hereof, Purchaser may audit the books,
records and accounts of Vendor respecting the Assets for the purpose of ascertaining,
verifying or effecting apportionments pursuant to this article. Such audit shall be
conducted upon reasonable notice to Vendor at its offices during normal business hours, and
shall be conducted at the sole expense of Purchaser. Any claims or discrepancies disclosed
by such audit shall be made in writing to Vendor within thirty (30) days following the
completion of such audit, and Vendor shall respond in writing to any claims or discrepancies
within sixty (60) days of the receipt of such claims. To the extent that the Parties are
unable to resolve any outstanding claims or discrepancies disclosed by such audit within
thirty (30) days of the response of Vendor, such audit exceptions shall be resolved by
arbitration pursuant to article 11. Notwithstanding the foregoing audit period limitation,
Purchaser’s audit rights under this clause 7.3 shall be extended for the time period, and in
respect of those books, records and accounts, as may be reasonably necessary to permit
Purchaser to verify refunds or payments to be received or made by it pursuant to clause
7.1(c).
	 
	7.4	 	General

	 	(a)	 	Either Party may, at any time, refer to arbitration pursuant to article 11, a
dispute between the Parties respecting the requirement for, or the amount of, or the
allocation of, an apportionment pursuant to the provisions of this article.
	 
	 	(b)	 	GST shall be payable with respect to apportionments where required by law and
paid accordingly by the applicable Party.
	 
	 	(c)	 	The Parties confirm Vendor shall claim all revenue and expenses relating to the
Assets prior to the date hereof and shall be responsible for any income taxes relating
thereto. Nothing contained in this article shall impose any liability on any Party for
the income tax liability of the other Party.

ARTICLE 8

LEASE 10 ADJUSTMENT

	8.1	 	Permits and Lease 10 Affected Area
	 
	 	 	Purchaser acknowledges the existence of the Suncor Mineral Surface Lease and a Third Party
tailings pond on a portion of the surface of the Lands governed by Lease 10, and that as a
result certain permits, consents and approvals (the “Proposed Recovery Area Permits”),
including from (as applicable) the ERCB, Alberta Environment and other regulatory
authorities, will be required for the exploration or development of, or production from, the
Lease 10 Affected Area by directional drilling from pads located on the surface of the Lease
10 Lands (other than the Lease 10 Affected Area) into all or a part of the Proposed Recovery
Area. After the date hereof, Purchaser shall at all times use its commercially reasonable
efforts to obtain all Proposed Required Area Permits required to permit such directional
drilling in respect of the entire Proposed Recovery Area. Purchaser shall forthwith after
receipt notify Vendor of each Proposed Recovery

 

23

	 	 	Area Permit it obtains, and provide Vendor with a copy thereof. Purchaser shall from time
to time upon request provide Vendor with a report summarizing the status of each application
for a Proposed Recovery Area Permit it has made and the status thereof.
	 
	8.2	 	Contingent Payment
	 
	 	 	In the event that all Proposed Recovery Area Permits required for any directional drilling
operation referred to in clause 8.1 are granted, Purchaser shall pay to Vendor the
Contingent Payment within ninety (90) Business Days of the grant of the last of such
permits, provided that if such Proposed Recovery Area Permits restrict or limit access to
less than all of the Proposed Recovery Area (the “Approved Recovery Area”), the Contingent
Payment will be reduced to an amount equal to the product of: (A) $15,000,000; multiplied by
(B) the Approved Recovery Area (measured on an acreage basis) divided by the Proposed
Recovery Area (measured on an acreage basis).
	 
	 	 	In the event a payment is made pursuant to this article 8 and at any time within two (2)
years of such payment there is any amendment, renewal, extension or replacement, or a
further grant, of a Proposed Recovery Area Permit, or Purchaser otherwise becomes entitled
to explore, develop or produce from lands within the Proposed Recovery Area that are in
addition to lands previously included in an Approved Recovery Area, Purchaser shall pay an
additional amount in accordance with this clause 8.2 based on such additional available
acreage. In this regard the Contingent Payment amount shall be re-calculated (provided that
the aggregate amount of the Contingent Payment shall not in any event exceed $15,000,000)
and for such purpose the additional available acreage shall be deemed to form part of the
Approved Recovery Area.
	 
	 	 	Nothing in this article 8 shall oblige Purchaser to pay any amounts (other than nominal
amounts) to non-governmental Third Parties to acquire access rights to the Lease 10 Affected
Area.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

	9.1	 	Representations and Warranties of Vendor
	 
	 	 	Purchaser acknowledges that it is purchasing Vendor’s interest in and to the Assets on an
“as is, where is” basis, without representation and warranty, except that and subject in all
instances to the other provisions in this Agreement Vendor hereby represents and warrants
that, except as otherwise disclosed to Purchaser or its representatives prior to the date
hereof, and subject in all events to the Permitted Encumbrances and the matters set forth in
the Disclosure Schedule:

	 	(a)	 	Standing: Vendor was formed as a general partnership under the
Partnership Act (Alberta) and currently exists and is registered as a general
partnership under that Act. Vendor is duly organized and authorised to carry on
business in the jurisdictions in which the Assets are located;

 

24

	 	(b)	 	Authority: Vendor now has and shall have at all times material to the
transactions contemplated hereby, taken all necessary actions and has all requisite
capacity, power and authority to enter into this Agreement and the other agreements and
documents required to be delivered by it pursuant hereto, and to perform its
obligations as Vendor under this Agreement and the other agreements and documents
required to be delivered by it pursuant hereto;
	 
	 	(c)	 	Execution and Enforceability of Documents: This Agreement and the other
Transaction Documents have been duly executed and delivered by it and constitute legal,
valid, binding and enforceable obligations of Vendor subject to the qualification that
such enforceability may be subject to:

	 	(i)	 	bankruptcy, insolvency, fraudulent preference, reorganization
or other laws affecting creditor’s rights generally; and
	 
	 	(ii)	 	general principles of equity (regardless of whether such
enforceability is considered in a proceeding at equity or law);

	 	(d)	 	No Conflicts: The consummation by Vendor of the transactions
contemplated herein will not, in any material respect, violate, or be in beach of, or
conflict with any of the constating documents, partnership agreement, charter, by-laws
or other governing documents of Vendor or any provision of any material agreement or
instrument to which Vendor is party or by which Vendor or the Assets are bound, or any
Regulation applicable to Vendor or the Assets;
	 
	 	(e)	 	Canadian Resident: It is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada);
	 
	 	(f)	 	Title: Although it does not warrant title to the Assets, Vendor
confirms that except for the Permitted Encumbrances:

	 	(i)	 	it has not assigned, mortgaged or in any way alienated or
encumbered all or any portion of its interest in the Assets;
	 
	 	(ii)	 	the Assets are free and clear of all liens, encumbrances and
adverse claims created by through or under Vendor; and
	 
	 	(iii)	 	subject to the terms and provisions in this Agreement
(including Article 8 hereof) and each other Transaction Document, and to the
terms, rents, covenants, conditions and stipulations in the Title and Operating
Documents, Purchaser shall be entitled to hold and enjoy the Assets without any
lawful interruption by any person claiming by, through or under the Vendor;

	 	(g)	 	Finders’ Fees: It has not incurred any obligation or liability,
contingent or otherwise, for brokers’ or finders’ fees in respect of this transaction
for which Purchaser shall have any obligation or liability;

 

25

	 	(h)	 	No Lawsuits or Claims: There are no material unsatisfied claims,
proceedings, actions, lawsuits, administrative proceedings or governmental
investigations in existence or, to Vendor’s knowledge, threatened against or with
respect to the Assets;
	 
	 	(i)	 	Payment of Taxes: To Vendor’s knowledge, all ad valorem, property and
similar taxes and assessments based on or measured by the ownership of the Assets
payable by Vendor prior to the date hereof and for all prior years have been properly
paid and discharged or will be paid when due;
	 
	 	(j)	 	Compliance: Vendor has complied with, performed, observed and
satisfied all material terms, conditions, obligations and liabilities which have
heretofore arisen and were the obligations of Vendor under any of the provisions of the
Leases or the Title and Operating Documents affecting the Assets or any then-existing
Regulation relating to the Assets;
	 
	 	(k)	 	AFE’s: As of the date of execution of this Agreement there are no
outstanding AFE’s in respect of the Assets pursuant to which any expenditures in excess
of $50,000 are or may be required from Purchaser ;
	 
	 	(l)	 	Production Sales Contracts / Transportation Agreements / Processing
Obligations: There are no production sales contracts, transportation agreements or
obligations to process Oil Sands Substances (including any take or pay obligations)
which relate to the Assets;
	 
	 	(m)	 	Operations: All operations relating to the Assets in respect of which
Vendor was the operator have been conducted in accordance with generally accepted
oilfield practice and all material requirements of then existing Regulations and Vendor
has not received any notice of the occurrence of a material violation, and is not aware
that any material violation is occurring or has occurred, in respect of operations
conducted by it and relating to the Assets;
	 
	 	(n)	 	Environmental: To Vendor’s knowledge, except for Abandonment and
Reclamation Obligations arising in the ordinary course:

	 	(i)	 	Vendor has not received any order or directives under the
Regulations relating to environmental matters of a material nature which relate
to the Assets and remain outstanding in any material way as of the date hereof
and that require any further work, repairs, construction or capital
expenditures of a material nature; and
	 
	 	(ii)	 	no demand or notice under the Regulations has been made or
filed by any government or agency having to do with any material environmental
damage or injury or alleged damage or injury, which relates to the Assets and
remains outstanding as of the date hereof;

	 	(o)	 	Assets: Vendor is not disposing of all or substantially all of its
assets;

 

26

	 	(p)	 	Regulatory Transfer Requirements: Vendor or its managing partner meets
all qualification requirements of and under the Regulations to transfer the Assets;
	 
	 	(q)	 	No AMI: There are no active areas of mutual interest or similar
provisions contained in any Title and Operating Documents pertaining to the Assets
which remain in effect;
	 
	 	(r)	 	Right of First Refusal: There are no Rights of First Refusal other
than pursuant to a Joint Operating Agreement dated April 5, 2000 between Canadian
Natural Resources, Talisman Energy Inc. and Union Pacific Resources Inc.;
	 
	 	(s)	 	Notes:

	 	(i)	 	Vendor is acquiring the Notes as principal and not for the
benefit of any other person.
	 
	 	(ii)	 	Vendor acknowledges that:

	 	(A)	 	the Notes are being issued under an exemption
from prospectus requirements pursuant to Applicable Securities Laws in
Canada;
	 
	 	(B)	 	the Notes have not been registered under the
U.S. Securities Act, and may not be offered or sold in the United
States or to U.S. Persons unless the Notes are registered under the
U.S. Securities Act, or an exemption from the registration requirements
of the U.S Securities Act is available;
	 
	 	(C)	 	Vendor may not be able to resell the Notes or
any Common Shares issued upon the conversion of the Convertible Note
except in accordance with limited exemptions available under Applicable
Securities Laws and stock exchange rules for a period of four months
and one day from the date hereof; and
	 
	 	(D)	 	the Convertible Note contains, and the
certificate representing the Common Shares issued upon conversion of
the Convertible Note may contain (depending on the date of conversion),
a legend indicating that the resale of such securities is restricted in
accordance with Applicable Securities Laws;

	 	(t)	 	Net Book Value: The aggregate net book value of the Assets as set
forth in Vendor’s most recent audited financial statements, and the gross revenues from
sales in or from Canada generated from the Assets for Vendor’s most recently completed
fiscal year, are both less than $50,000,000; and
	 
	 	(u)	 	Proprietary Seismic: Vendor does not own (whether solely or jointly
with a Third Party) a proprietary interest in seismic data (for greater certainty
excluding trade or licensed seismic data) which relates to the Lands.

 

27

	9.2	 	Limitation of Representations and Warranties

	 	(a)	 	Purchaser acknowledges that it is purchasing Vendor’s interest in and to the
Assets on an “as is, where is” basis, without representation and warranty by Vendor or
any Third Party except as expressly set forth in clause 9.1. In particular, and
without limiting the generality of the foregoing, Vendor hereby negates any
representations or warranties, whether contained in any information memorandum, the
Data Room Materials, or otherwise with respect to:

	 	(i)	 	any data, information or materials supplied by Vendor in
connection therewith, whether provided in the Data Room Materials or otherwise,
and including without limitation any engineering, geological, or other
interpretations or economic evaluations respecting the Assets;
	 
	 	(ii)	 	the quality, quantity or recoverability of Oil Sands Substances
within or under the Lands;
	 
	 	(iii)	 	the value of the Assets or the future cash flow therefrom; and
	 
	 	(iv)	 	the quality, condition, serviceability, fitness or
marketability of the Wells and any tangible, depreciable equipment or property
or interests which comprise the Assets, including their suitability for use for
any purpose.

	 	(b)	 	Furthermore, Purchaser acknowledges and confirms that it has performed its own
due diligence, and that it has not relied on any representation, warranty or covenant
not contained in this Agreement or on any statement or information provided by, or
discussions with, Vendor or its Affiliates or any of their representatives. Purchaser
shall have no claim or action against Vendor or its Affiliates in respect of the
location, state, condition, suitability or fitness of the Assets, or any of them, for
Purchaser’s intended use or purpose or their merchantability, other than in the case of
a breach of or untruth of any express representation or warranty made by Vendor in this
Agreement (and in such case subject to the limitations in this Agreement). In
addition, Purchaser specifically acknowledges and confirms that in agreeing to enter
into and to consummate the transaction contemplated in this Agreement, it has relied,
and will continue to rely, upon its own engineering and other evaluations and
projections as the same relate to the Assets and on its own inspection of all other
physical property and assets which comprise the Assets.

	9.3	 	Representations and Warranties of Purchaser
	 
	 	Purchaser hereby represents and warrants to Vendor that:

	 	(a)	 	Corporate Standing: Purchaser is a corporation duly organized, validly
subsisting and in good standing under the laws of Yukon Territory and duly registered,
validly subsisting and authorized to carry on business in the jurisdictions in which
the Assets are located; Purchaser has all requisite corporate authority and power to
carry on its business and to own its properties and assets;

 

28

	 	(b)	 	Corporate Authority: Purchaser has taken all necessary corporate
actions and has all requisite capacity, power and authority to enter into this
Agreement and the other Transaction Documents, and to perform all other obligations of
Purchaser under this Agreement and the other Transaction Documents (including the
issuance of Common Shares upon the conversion of the Convertible Note);
	 
	 	(c)	 	Execution and Enforceability of Transaction Documents: This Agreement
and the other Transaction Documents have been duly executed and delivered by it and
constitute legal, valid, binding and enforceable obligations of Purchaser subject to
the qualification that such enforceability may be subject to:

	 	(i)	 	bankruptcy, insolvency, fraudulent preference, reorganization
or other laws affecting creditor’s rights generally; and
	 
	 	(ii)	 	general principles of equity (regardless of whether such
enforceability is considered in a proceeding at equity or law);

	 	(d)	 	No Conflicts: The consummation by Purchaser of the transactions
contemplated herein will not, in any material respect, violate, be in breach of, or
conflict with any of the constating documents, charter, by-laws or other governing
documents of Purchaser or any provision of any material agreement or instrument to
which Purchaser is party or by which Purchaser, its Common Shares or the Assets are
bound, or any Regulation applicable to Purchaser, its Common Shares or the Assets;
	 
	 	(e)	 	Canadian Resident: It is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada);
	 
	 	(f)	 	Finders’ Fees: It has not incurred any obligation or liability,
contingent or otherwise, for brokers’ or finders’ fees in respect of this transaction
for which Vendor shall have any obligation or liability;
	 
	 	(g)	 	Regulatory Transfer Requirements: Purchaser meets all qualification
requirements of all governmental agencies and under the Regulations to purchase, accept
and hold the Assets;
	 
	 	(h)	 	Investment Canada Act: Purchaser is not a non-Canadian person for the
purposes of the Investment Canada Act;
	 
	 	(i)	 	Authorized Capital: The authorized capital of Purchaser consists of an
unlimited number of Common Shares and an unlimited number of preferred shares, issuable
in series, of which 245,586,470 Common Shares and no preferred shares are currently
issued and outstanding;
	 
	 	(j)	 	Public Record: The information and statements set forth in the Public
Record were true, correct and complete and did not contain any misrepresentation, as of
the respective dates of such information or statements, and no material change has
occurred in relation to Purchaser which is not disclosed in the Public Record, and

 

29

	 	 	 	Purchaser has not filed any confidential material change reports which continue to
be confidential;
	 
	 	(k)	 	No Lawsuits or Claims: There are no material unsatisfied claims,
proceedings, actions, lawsuits, administrative proceedings or governmental
investigations in existence or threatened against or with respect to Purchaser or its
properties;
	 
	 	(l)	 	Financial Statements: The most recent audited financial statements of
Purchaser fairly represent the financial condition of Purchaser and its assets and
liabilities as at the date thereof, for the periods covered thereby, as applicable, in
accordance with generally accepted accounting principles consistently applied and the
accounting policies set out in the notes to such financial statements, and there has
been no material adverse change in the financial condition of Purchaser since the date
of those financial statements;
	 
	 	(m)	 	Securities Compliance: None of the Securities Commissions, the Toronto
Stock Exchange and NASDAQ has issued any order which is currently outstanding
preventing or suspending trading trading in any securities of Purchaser, and Purchaser
is not in default of any material requirement of Applicable Securities Laws;
	 
	 	(n)	 	Exchange Approvals: The Toronto Stock Exchange has conditionally
approved the issuance of the Convertible Note and the listing of the Common Shares
issuable upon conversion of the Convertible Note; and
	 
	 	(o)	 	Issuance of Common Shares: Upon conversion of the Convertible Note in
accordance with its terms into Common Shares, the Common Shares so issued will be
validly issued as fully paid and non-assessable shares of Purchaser.

	9.4	 	No Merger
	 
	 	 	The representations and warranties set forth in clauses 9.1 and 9.3 shall continue in full
force and effect and will survive after the date hereof for a period of:

	 	(a)	 	as regards the representations and warranties set forth in clause 9.1, twelve
(12) months;
	 
	 	(b)	 	as regards the representations and warranties set forth in clause 9.3(a), (b),
(c), (d), (i), (j), (l), (m), (n) and (o), thirty six (36) months; and
	 
	 	(c)	 	as regards the balance of the representations and warranties set forth in
clause 9.3, twelve (12) months,

(each, a “Survival Period”) for the benefit of the Party for which those representations and
warranties were made. These representations and warranties shall not be the subject of any
rights of subrogation in favour of any other persons, and the benefit thereof shall not be
transferred to any other person. Such representations and warranties and the indemnities
set forth in clause 10.1 and 10.2 shall be deemed to apply, as applicable, to

 

30

all assignments, conveyances, transfers and documents conveying the Assets from Vendor to
Purchaser and the issuance of the Notes by Purchaser to Vendor, and there shall not be any
merger of any representation, warranty or indemnity in such assignments, transfers or
documents notwithstanding any rule of law, equity or statute to the contrary and all such
rules are hereby waived.

ARTICLE 10

INDEMNITIES

	10.1	 	General Indemnity
	 
	      Subject to clauses 6.2, 9.2, 10.2 and 10.3:

	 	(a)	 	Vendor shall:

	 	(i)	 	be liable to Purchaser for all Losses suffered, sustained, paid
or incurred by Purchaser; and
	 
	 	(ii)	 	indemnify and save Purchaser and its Additional Indemnitees
harmless from and against all Losses that may be brought against or which they
or any one of them may suffer, sustain, pay or incur;

	 	 	 	as a direct result of any act, omission, circumstance or other matter arising out
of, resulting from, attributable to, or connected with any misrepresentation or
breach of a representation or warranty of Vendor contained herein, provided that
nothing in this clause 10.1(a) shall be construed so as to cause Vendor to be liable
to Purchaser or to indemnify Purchaser and its Additional Indemnitees in connection
with any such representation or warranty if and to the extent that Purchaser or its
Additional Indemnitees, as the case may be, did not rely upon such representation or
warranty.
	 
	 	(b)	 	Purchaser shall:

	 	(i)	 	be liable to Vendor for all Losses suffered, sustained, paid or
incurred by Vendor; and
	 
	 	(ii)	 	indemnify and save Vendor and its Additional Indemnitees
harmless from and against all Losses that may be brought against or which they
or any one of them may suffer, sustain, pay or incur;

	 	 	 	as a direct result of any act, omission, circumstance or other matter arising out
of, resulting from, attributable to, or connected with:

	 	(iii)	 	any misrepresentation or breach of a representation or
warranty of Purchaser contained herein, provided that nothing in this clause
10.1(b) shall be construed so as to cause Purchaser to be liable to Vendor or
to indemnify Vendor and its Additional Indemnitees in connection with any such
representation or warranty if and to the extent that Vendor or its

 

31

	 	 	 	Additional Indemnitees, as the case may be, did not rely upon such
representation or warranty; or
	 
	 	(iv)	 	the Assets, from and after the date hereof.

	10.2	 	Environmental Indemnity
	 
	     Purchaser acknowledges that it:

	 	(a)	 	is familiar with the condition of the Assets, including the past and present
use of the Assets;
	 
	 	(b)	 	has been provided with the right and the opportunity to conduct due diligence
investigations with respect to existing or potential Environmental Liabilities
pertaining to the Assets;
	 
	 	(c)	 	is not relying upon any representation or warranty of Vendor as to the
condition, environmental or otherwise, of the Assets, except as is specifically made
pursuant to clause 9.1(n). Notwithstanding the provisions of clause 10.1(a), but
subject to clause 10.4, Purchaser agrees that from and after the date hereof, Vendor
shall have no liability whatsoever for any Environmental Liabilities; and
	 
	 	(d)	 	shall be responsible for all Abandonment and Reclamation Obligations, subject
to clause 10.4.

	 	 	In this regard, after the date hereof Purchaser shall:

	 	(e)	 	be solely liable and responsible for all Losses suffered, sustained, paid or
incurred by Vendor; and
	 
	 	(f)	 	indemnify and save Vendor and its Additional Indemnitees harmless from and
against all Losses that may be brought against or which they or any one of them may
suffer, sustain, pay or incur;

	 	 	as a direct result of any act, omission, matter or thing related to any Environmental
Liabilities pertaining to or caused by the Assets, however and whenever arising or accruing
and Purchaser shall assume, perform, pay and discharge all Environmental Liabilities. This
liability and indemnity shall apply without limit and without regard to cause or causes,
including without limitation the negligence, whether sole, concurrent, gross, active,
passive, primary or secondary, or the wilful or wanton misconduct of either Vendor or
Purchaser or any other person or otherwise. Purchaser acknowledges and agrees that it shall
not be entitled to any rights or remedies as against Vendor under the common law or statute
pertaining to any Environmental Liabilities relating to or caused by the Assets including,
without limitation, the right to name Vendor as a third party to any action commenced by any
person against Purchaser. Nothing herein contained shall prejudice any claims or remedies
that Vendor may have against Purchaser in relation to such claim or remedy outside this
contract including rights and remedies under the common law or statute. Notwithstanding the
foregoing, the liability of and indemnity

 

32

	 	 	provided by Purchaser in this clause 10.2 shall be subject to clause 10.4, and shall not
apply to the extent of Vendor’s liability and indemnification provided pursuant to clause
10.1(a) as a result of a material breach of the environmental representation and warranty
made by Vendor contained in clause 9.1(n).
	 
	10.3 Limitation of Claims

	 	(a)	 	In the absence of fraud, no claim in respect of the representations and
warranties contained in this Agreement or in respect of the indemnities relating to
such representations and warranties as set out in clause 10.1(a) or clause 10.1(b)(iii)
may be made or enforceable unless written notice of such claim, including reasonably
detailed particulars thereof, is given by the claimant to the other Party within the
Survival Period applicable to such representations and warranties.
	 
	 	(b)	 	Subject to any specific limitations contained in this Agreement, including
those in clause 10.3(a) and to the timing restrictions contained in article 7, the
Parties agree that the period for seeking a remedial order under clause 3.1(a) of the
Limitations Act (Alberta) is extended from 2 years to 4 years for all claims that may
arise under article 7.
	 
	 	(c)	 	Nothing contained in this Agreement shall impose any liability on either Party
for indirect or consequential damages including, but not limited to, business loss,
loss of profit or economic loss suffered by either Party or their respective successors
and assigns.
	 
	 	(d)	 	Nothing contained in this Agreement shall impose any liability on any Party for
the income tax liabilities of any other Party.
	 
	 	(e)	 	The liabilities and indemnities prescribed by clause 10.1 are not a title
warranty by Vendor beyond those provided in clause 9.1, and do not provide an extension
of any representation or warranty of either Vendor or Purchaser contained in clauses
9.1 or 9.3 hereof.
	 
	 	(f)	 	The indemnities provided in clause 10.1 shall be reduced on a dollar for dollar
basis to the extent that claims for indemnified losses are actually reimbursed or
reimbursable to the Party to be indemnified by insurance carried by that Party.
	 
	 	(g)	 	Subject to clause 10.3(h), Vendor shall have no liability for, and Purchaser
shall not be entitled to any claim for liability or indemnity for Losses hereunder
unless each of the following conditions is satisfied:

	 	(i)	 	each particular claim in question, as agreed or as ultimately
determined by a court of competent jurisidiction, exceeds $100,000; and
	 
	 	(ii)	 	the aggregate amount of all such claims by Purchaser, as agreed
or as ultimately determined by a court of competent jurisdiction, exceeds
$500,000

 

33

	 	 	 	Upon the aggregate of such claims exceeding $500,000, the Vendor shall be required
to be liable to, or to indemnify for, only that amount of such Losses which are in
excess of $500,000, and then only as to those claims that exceed the threshold
amount in clause 10.3(g)(i) above.

	 	(h)	 	Notwithstanding anything contained herein, in no event shall the total
liabilities and indemnities of Vendor under or in connection with this Agreement
(including but not limited to any claims relating to its representations and warranties
in clause 9.1, any claims for liability and indemnity under clause 10.1, or any
interest accruing in connection with those or any other claims) exceed $75,000,000.
	 
	 	(i)	 	The provisions of this article 10 shall survive after the date hereof for the
benefit of Vendor and Purchaser.

	10.4	 	Specific Post-Closing Reclamation Activities
	 
	 	 	Purchaser shall provide access to the Lands to Vendor from time to time after the date
hereof so that Vendor can complete at its sole cost the Specified Reclamation Activities.
Purchaser shall otherwise remain liable for all Abandonment and Reclamation Obligations and
all Environmental Liabilities, provided that if the Environmental Liabilities are increased
as a direct result of Vendor’s negligent acts or omissions in conducting the Specified
Reclamation Activities, Vendor shall be solely liable for and shall indemnify Purchaser from
and against only such incremental Environmental Liabilities.
	 
	10.5	 	Additional Indemnitees
	 
	 	 	All indemnities, releases, assumptions and exclusions of and limitations on liability which
by the terms of this Agreement extend to the benefit of an Additional Indemnitee shall be
enforceable by such Additional Indemnitee in its own right as if it were party to this
Agreement. Notwithstanding the foregoing, it is agreed that the Parties may rescind,
terminate, amend or supplement this Agreement without the consent of any Additional
Indemnitee.
	 
	10.6	 	Indemnification Procedure

	 	 (a)	 	All claims for indemnification under this Agreement in connection with Third
Party claims shall be asserted and resolved as follows:

	 	(i)	 	A party claiming indemnification under this Agreement (an
“Indemnified Party”) shall promptly (A) notify the party from whom
indemnification is sought (the “Indemnifying Party”) of any third-party claim
(“Third Party Claim”) asserted against the Indemnified Party which could give
rise to a right of indemnification under this Agreement and (B) transmit to the
Indemnifying Party a written notice (“Claim Notice”) describing in reasonable
detail the nature of the Third Party Claim, a copy of all papers or documents
served, issued or otherwise provided with respect to the

 

34

	 	 	 	Third Party Claim (if any), an estimate of the amount of the damages
attributable to the Third Party Claim, if reasonably possible, and the basis
of the Indemnified Party’s request for indemnification under this Agreement.
	 
	 	(ii)	 	Within fifteen (15) Business Days after receipt of any Claim
Notice (the “Election Period”), the Indemnifying Party shall notify the
Indemnified Party (A) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Agreement with respect to such
Third Party Claim and (B) whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim. If the Indemnifying Party has disputed its
potential liability to the Indemnified Party with respect to any Third Party
Claim, such dispute shall be resolved by litigation in an appropriate court of
competent jurisdiction and the Indemnified Party shall have the right to defend
any such Third Party Claim in the manner set out in clause 10.6(a)(iv).
	 
	 	(iii)	 	If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Agreement and that the
Indemnifying Party elects to assume the defence of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this clause 10.6(a). The Indemnifying Party shall have full control of
such defence and proceedings including any compromise or settlement thereof;
provided, however, that any such compromise or settlement involving
non-monetary obligations of the Indemnified Party, or otherwise having a direct
effect upon its continuing operations, shall be subject to the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed.
The Indemnified Party is hereby authorized to, and at the sole cost and
expense of the Indemnifying Party shall be entitled to file, during the
Election Period, any motion, answer or other pleadings which the Indemnified
Party shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party and which are not unnecessarily prejudicial to the
Indemnifying Party. If requested by the Indemnifying Party, the Indemnified
Party shall, at the sole cost and expense of the Indemnifying Party, cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
which the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defence or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this clause 10.6(a) and,
except as permitted above or pursuant to this clause 10.6(a), shall bear its
own costs and expenses with respect to such participation.

 

35

	 	(iv)	 	If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to this clause 10.6(a), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to clause 10.6(a) but fails to
diligently and promptly prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party, the Third Party Claim. The Indemnified Party shall
have full control of such defence and proceedings; provided, however, that the
Indemnified Party may not enter into, without the Indemnifying Party’s consent,
which shall not be unreasonably withheld or delayed, any compromise or
settlement of such Third Party Claim. The Indemnifying Party may participate
in, but not control, any defence or settlement controlled by the Indemnified
Party pursuant to this clause 10.6(a), and the Indemnifying Party shall bear
its own costs and expenses with respect to such participation.
	 
	 	(v)	 	The failure to provide notice as provided in this clause
10.6(a) shall not excuse any Party from its continuing obligations hereunder.

	 	 (b)	 	Vendor and Purchaser shall each represent their respective Additional
Indemnitees for purposes of this clause 10.6.

ARTICLE 11

DISPUTE RESOLUTION

	11.1	 	Arbitration
	 
	 	 	In respect of any matter that must be or may be referred to arbitration under this
Agreement, the Parties shall select an arbitrator within five (5) Business Days of the date
the matter is referred to arbitration. The arbitrator shall meet the criteria for an
arbitrator under the Arbitration Act (Alberta). If the Parties cannot reasonably agree on
the appointment of an arbitrator, the Parties shall each appoint an umpire who shall appoint
an arbitrator. If the umpires are unable to agree on an arbitrator or if one of the Parties
fails to comply with the provisions of this clause 11.1, either Party may apply to a judge
of the Court of Queen’s Bench of Alberta for the appointment of an arbitrator.
	 
	11.2	 	Proceedings
	 
	 	 	The following proceedings shall apply in respect of any arbitration hereunder:

	 	 (a)	 	The Parties shall, within five (5) Business Days of the date of selection of
the arbitrator, each deliver to the arbitrator and the other Party a written statement
respecting the matter in dispute to the arbitrator, including such Party’s proposed
resolution. The arbitrator shall be required to accept one of such resolutions. If
only one of the Parties submits a written resolution, the arbitrator shall be required
to accept the resolution proposed by such Party;

 

36

	 	(b)	 	The arbitrator shall be instructed to render his or her decision not later than
ten (10) Business Days after his or her appointment and shall communicate such decision
to the Parties;
	 
	 	(c)	 	If the arbitrator accepts Vendor’s proposal, Purchaser shall pay the fees and
expenses of the arbitrator and if the arbitrator selects Purchaser’s proposal, Vendor
shall pay the fees and expenses of the arbitrator. The decision of the arbitrator
shall be final and binding on the Parties and not subject to review; and
	 
	 	(d)	 	Except to the extent modified in this article, the arbitrator shall conduct any
arbitration hereunder pursuant to the provisions of the Arbitration Act (Alberta).

ARTICLE 12

RIGHT OF FIRST OFFER

	12.1	 	ROFO Notice
	 
	 	 	If at any time during the period ending three (3) years after the date hereof Purchaser or
any Subsidiary wishes to solicit offers or receives an unsolicited offer which it is
favourably considering in respect of all or any interest it owns in any heavy oil property
(other than the Assets) located in the Province of Alberta (the “ROFO Interests”), Purchaser
shall by notice advise Vendor of the desire of Purchaser or such Subsidiary to make a
disposition, including in such notice a description of the ROFO Interests to be disposed of,
the minimum cash price or other consideration for which Purchaser or the Subsidiary is
prepared to make such disposition, the proposed effective date and closing date of the
disposition and any other information respecting the disposition which Purchaser reasonably
believes would be material to the exercise of Vendor’s rights hereunder (such notice called
the “ROFO Notice”).
	 
	12.2	 	Equivalent Consideration
	 
	 	 	If any consideration described in a ROFO Notice is not cash and cannot be matched in kind,
in whole or in part, by Vendor, the ROFO Notice shall include the bona fide estimate of
Purchaser of the value, in cash, of such consideration. If Vendor does not agree that the
estimate of the cash value of the non-cash consideration described in a ROFO Notice is
reasonable, it shall provide written notice thereof to Purchaser within fourteen (14) days
of receipt of the ROFO Notice. If such notice is not provided Vendor shall be deemed to
have agreed that the cash value estimate was reasonable. If such notice is provided, the
dispute shall be resolved pursuant to arbitration in accordance with article 11. The
equivalent cash consideration determined by such dispute resolution shall thereupon be used
to determine the sale price, in cash, for the ROFO Interest.
	 
	12.3	 	Notice of Acceptance
	 
	 	 	Within the later of thirty (30) days from the receipt of a ROFO Notice or of the value
determined pursuant to clause 12.2, Vendor may give notice (the “Notice of Acceptance”) to
Purchaser that it elects to purchase the ROFO Interest. A Notice of Acceptance shall create
a binding contractual obligation upon Purchaser (or the

 

 

 37

	 	 	Subsidiary) to sell and Vendor to purchase the ROFO Interest for the cash price referred
 to in clause 12.1 (as may be amended in accordance with clause 12.2) and on the terms and
 conditions set forth in the ROFO Notice. If Vendor fails to elect within the above thirty
(30) day period, Vendor shall be deemed to have elected to not acquire the ROFO Interest.
 If Vendor does not provide a Notice of Acceptance within the period set forth above, and
provided that Purchaser has complied with its obligations in this article 12, Purchaser (or
 the Subsidiary, as the case may be) may dispose of its ROFO Interest at any time within one
 hundred and eighty (180) days from the issuance of the ROFO Notice to a Third Party at
 a price and on terms no more advantageous to the Third Party than what was set forth in the
 ROFO Notice. If such dispostion does not occur within such one hundred and eighty (180) day
 period Purchaser shall
(or shall cause the Subsidiary) to comply with this article 12 before disposing of any
 of those ROFO Interests.
	 
	 	 	If Purchaser (or a Subsidiary) wishes to dispose of a ROFO Interest to a Third Party it
 shall first provide notice (the “Disposition Notice”) to Vendor of the material
 terms of such proposed disposition, including the sale price. If Vendor reasonably believes that
 the terms of the proposed Third Party disposition are more advantageous to the Third Party than
what was set forth in the ROFO Notice, it shall be entitled to provide a written notice thereof
 to Purchaser within fourteen (14) days of receipt of the Disposition Notice. If such notice is not provided Vendor shall be deemed to have agreed that the material terms set forth in the Disposition Notice are not more advantageous. If such notice is provided then the matter shall be resolved pursuant to arbitration in accordance with article 11, and no disposition of the ROFO Interests shall occur until the dispute is resolved. If it is determined that the terms made available to the Third Party are more advantageous to the Third
Party than what was set forth in the ROFO Notice, Vendor shall have the right, for a period of thirty (30) days from such determination, to elect to acquire the ROFO Interests on the terms made available to the Third Party by providing written notice to Purchaser. If Vendor provides such notice it shall create a binding contractual obligation upon Purchaser (or the Subsidiary) to sell and Vendor to purchase the ROFO Interest for the cash price referred to in clause 12.1 (as may be amended in accordance
 with clause 12.2) and on the terms and conditions set forth in the Disposition Notice. If Vendor fails to elect within the above thirty (30) day period, Vendor shall be deemed to have elected to not acquire the ROFO Interest and Purchaser (or the Subsidiary) shall complete the sale to the Third Party on the terms set forth in the Disposition Notice.
	 
	12.4	 	Transfers to Subsidiaries
	 
	 	 	The provisions set forth in this Article 12 shall apply mutatis mutandis to any transaction
or series of related transactions whereby a ROFO Interest is transferred to a Subsidiary and
the shares or other equity interests of Purchaser in the Subsidiary are thereafter sold, as
if and as though such transactions are a disposition of the ROFO Interests as contemplated
in this Article 12. Subject to the foregoing, the provisions in this Article 12 shall not
apply to a transfer of ROFO Interests from Purchaser to a Subsidiary, from a Subsidiary to
Purchaser, or from one Subsidiary to another Subsidiary.

 

38

ARTICLE 13

GENERAL

	13.1	 	Subordination Arrangements

	 	(a)	 	Vendor shall cooperate with Purchaser in good faith in connection with the
execution and delivery of a intercreditor or subordination agreement that is in form
and substance satisfactory to Vendor, acting reasonably (each a “Subordination
Agreement”) pursuant to which:

	 	(i)	 	Vendor consents to the grant of a security interest to third
party lenders (or their designee) (the “Third Party Lender”) of Purchaser in,
to and over the Mortgaged Property (as that term is defined in the Fixed and
Floating Charge Debenture (the “Debenture”) dated as of the date hereof),
subject always to Vendor’s first priority mortgage, charge and security
interest in and to all Specifically Mortgaged Property (which for greater
certainty shall include any personal property that may form part of, or
constitute proceeds from, such Specifically Mortgaged Property) and to the
pledge of shares and/or partnership interests as contemplated in clause
13.11(d) (the “Pledged Shares");
	 
	 	(ii)	 	Vendor consents to and acknowledges the subordination and
postponement of the Vendor’s rights under the Debenture as the same relate to
the Mortgaged Property other than the Specifically Mortgaged Property and the
Pledged Shares; and
	 
	 	(iii)	 	the Third Party Lender expressly:

	 	(A)	 	acknowledges the first priority mortgage,
charge and security interest of Vendor in and to the Specifically
Mortgaged Property and the Pledged Shares;
	 
	 	(B)	 	unconditionally subordinates its mortgages,
charges and security interests in and to the Specifically Mortgaged
Property and the Pledged Shares, and agrees that such subordination
shall apply in all events and circumstances; and
	 
	 	(C)	 	agrees not to contest or challenge Vendor’s
mortgages, charges and security interests.

	 	(b)	 	Upon any sale, assignment or other disposition of the Mortgaged Property
(excluding the Specifically Mortgaged Property and the Pledged Shares, and any and all
proceeds therefrom) to a Third Party that is not prohibited by the Debenture, the
Vendor agrees to provide any releases or no interest letters required in respect of the
security interests of the Vendor in such Mortgaged Property upon the request of the
Purchaser, acting reasonably, in connection with such sale, assignment or disposition.

 

39

	13.2	 	Public Announcements
	 
	 	 	If a Party intends to make any public announcement or press release (either, a “Press
Release”) relating to this Agreement, that Party shall use reasonable commercial efforts to
first give the other Party 48 hours to review and comment on such Press Release, unless it
is impracticable for that Party to do so having regard to its legal obligations relating to
timely disclosure. The Party desiring to make the Press Release shall give due
consideration to any comments it receives from the other Party, but it shall not be required
to incorporate such comments.
	 
	13.3	 	Further Assurances
	 
	 	 	Each Party will, from time to time and at all times after the date hereof, without further
consideration, do such further acts and deliver all such further assurances, deeds and
documents as shall be reasonably required in order to fully perform and carry out the terms
of this Agreement.
	 
	13.4	 	No Merger
	 
	 	 	There shall not be any merger of any covenant, representation, warranty or indemnity in any
other Transaction Document or in any assignments, conveyances, transfers and other documents
conveying the interests of Vendor in the Assets to Purchaser notwithstanding any rule of
law, equity or statute to the contrary, and all such rules are hereby waived.
	 
	13.5	 	Signs and Notifications
	 
	 	 	At any time after the date hereof, Vendor may remove any signs which indicate Vendor’s
ownership or operation of the Assets. It shall be the responsibility of Purchaser, where
necessary, to erect or install any signs that may be required by the Regulations indicating
Purchaser to be the operator of the Assets and, subject to Article 6, to notify other
working interest owners, gas purchasers, lessors, suppliers, contractors, governmental
agencies and any other Third Party of Purchaser’s interest in the Assets, and Purchaser
shall, as soon as is reasonably possible after the date hereof, erect or install such signs
and notify such persons.
	 
	13.6	 	Governing Law
	 
	 	 	This Agreement shall, in all respects, be subject to and be interpreted, construed and
enforced in accordance with and under the laws of the Province of Alberta and applicable
laws of Canada and shall, in all respects, be treated as a contract made in the Province of
Alberta. Each Party irrevocably attorns and submits to the exclusive jurisdiction of the
courts of the Province of Alberta and all courts of appeal therefrom in respect of all
matters arising out of or in connection with this Agreement, except for disputes governed by
clause 11.1.
	 
	13.7	 	Time
	 
	 	 	Time shall be of the essence in this Agreement.

 

40

	13.8	 	Notices
	 
	 	 	The addresses for service and the fax numbers of the Parties shall be as follows:

	 	 	 
	Vendor:	 	Purchaser:
	Talisman Energy Canada

	 	Ivanhoe Energy Inc.
	Suite 2000, 888 — 3rd Street S.W.

	 	654-999 Canada Place
	Calgary, Alberta T2P 5C5

	 	Vancouver, British Columbia
	Attention: Executive Vice-President,

	 	V6C 3E1
	Corporate and Legal

	 	Attention: Corporate Secretary
	Fax: (403) 231-3633

	 	Fax: (604) 682-2060
	 
	With a copy to:

	 	with a copy to:
	Macleod Dixon LLP

	 	Goodmans LLP
	3700, 400 Third Avenue S.W.

	 	355 Burrard Street, Suite 1900
	Calgary, Alberta T2P 4H2

	 	Vancouver, British Columbia V6C 2G8
	Attention: Kevin Johnson

	 	Attention: Bruce Wright
	Fax: (403) 264-5973

	 	Fax: (604) 682-7131

	 	 	All notices, communications and statements required, permitted or contemplated hereunder
shall be in writing, and shall be delivered and received if:

	 	(a)	 	personally served on the other Party by hand delivery or courier delivery
during the normal business hours of the recipient at the applicable address set forth
above (personally served notices shall be deemed received by the addressee when
actually delivered); or
	 
	 	(b)	 	by facsimile transmission directed to the Party on whom they are to be served
at that Party’s fax number set forth above and such notices so served shall be deemed
to have been received by the addressee thereof when actually received by it if received
within the normal working hours of a Business Day, or, if received outside the normal
working hours of a Business Day, at the commencement of the next ensuing Business Day
following transmission thereof.

	 	 	A Party may from time to time change its address for service or its fax number or both by
giving written notice of such change to the other Party.
	 
	13.9	 	Entire Agreement
	 
	 	 	The provisions contained in any and all documents and agreements collateral hereto shall at
all times be read subject to the provisions of this Agreement and, in the event of conflict,
the provisions of this Agreement shall prevail. This Agreement shall not be varied in its
terms or amended by oral agreement or by representations or otherwise other than by an
instrument in writing dated subsequent to the date hereof, executed by a duly authorized
representative of each Party. Except for the Confidentiality Agreement dated August 27,
2007 between Vendor and Purchaser, this Agreement and the other Transaction Documents
supersede all other agreements (including the Letter Agreement),

 

41

	 	 	documents, writings and verbal understandings between the Parties prior to the date hereof
relating to the subject matter hereof and express the entire agreement of the Parties with
respect to the subject matter hereof.
	 
	13.10	 	Assignment
	 
	 	 	This Agreement may not be assigned by a Party without the prior written consent of the other
Party, which consent may be unreasonably and arbitrarily withheld, provided that nothing
herein shall prevent or restrict Vendor from assigning in whole or in part this Agreement or
any benefits, obligations or liabilities hereunder to Talisman Energy Inc. or any of its
direct or indirect wholly owned subsidiaries, provided that any assignment to such a
subsidiary shall not result in Talisman Energy Inc. being released from any obligations or
liabilities it may have hereunder.
	 
	13.11	 	Transfer of Assets to an Affiliate
	 
	 	 	Subject to first obtaining the prior written consent of Vendor, which consent shall not be
unreasonably withheld, Purchaser shall have the right to assign the Assets or any portion
thereof to:

	 	(a)	 	a wholly owned Affiliate of Ivanhoe; or
	 
	 	(b)	 	a partnership with respect to which Ivanhoe and one or more direct or indirect
wholly owned subsidiaries of Ivanhoe are the only partners thereof,

	 	 	provided that:

	 	(c)	 	notwithstanding any such assignment Purchaser shall at all times remain
responsible for all, and shall not be released from any, obligations and liabilities
under this Agreement and each of the other Transaction Documents;
	 
	 	(d)	 	Purchaser first pledges in favour of Vendor the shares and partnership
interests in such Affiliate, subsidiary and partnership pursuant to a securities pledge
agreement in form and substance satisfactory to Vendor, acting reasonably; and
	 
	 	(e)	 	each such Affiliate, subsidiary and partnership:

	 	(i)	 	first agrees in writing with Vendor and Purchaser pursuant to
an agreement in form and substance satisfactory to Vendor, acting reasonably,
to be jointly and severally liable for all obligations and liabilities of
Purchaser under this Agreement and each other Transaction Document; and
	 
	 	(ii)	 	first executes and delivers to Vendor a debenture and deposit
agreement that is substantially in the form of the Security Documents, pursuant
to which it grants to Vendor a mortgage, charge and security interest in and to
all of its present and after-acquired real and personal property with the

 

42

	 	 	 	priority provided for in such Security Documents, including a first priority
fixed charge and security interest in and to the Assets.

	13.12	 	Enurement
	 
	 	 	This Agreement shall be binding upon and shall enure to the benefit of the Parties and their
respective administrators, trustees, receivers, receiver-managers, successors and permitted
assigns.
	 
	13.13	 	Waivers
	 
	 	 	Only a written waiver by a Party of any breach (whether actual or anticipated) of any of the
terms, conditions, representations or warranties contained herein will be effective or
binding upon that Party. Any waiver so given will extend only to the particular breach
waived, and will not limit or affect any rights for any other or future breach.
	 
	13.14	 	Substitution and Subrogation
	 
	 	 	The assignment and conveyance in respect of the Assets to be effected by this Agreement is
made with full right of substitution and subrogation of Purchaser in and to all covenants,
representations and warranties and indemnities previously given or made by others in respect
of the Assets or any part or portion thereof.

 

43

	13.15	 	Counterpart Execution
	 
	 	 	This Agreement may be executed by the Parties in counterpart and all such executed
counterparts together shall constitute one agreement.

     IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 	 	 
	 	 	TALISMAN ENERGY CANADA

by its Managing Partner

TALISMAN ENERGY INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ “M. Jacqueline Sheppard”	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	M. Jacqueline Sheppard	 	 
	 

	 	 	 	Executive Vice President, Corporate and Legal,
and Corporate Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ “Ian S. Barnett”	 	 

 

 

Schedule “A”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

LANDS AND LEASES

 

 

Schedule “B”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

WELLS

 

 

Schedule “C”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

PROPRIETARY SEISMIC DATA

 

 

Schedule “D”

attached to and made part of a Asset Transfer Agreement Agreement

dated July11, 2008 between Talisman Energy Canada and Ivanhoe Energy

Inc.

DISCLOSURE SCHEDULE

 

 

Schedule “E”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

DATA ROOM MATERIALS

 

 

Schedule “F”

attached to and made part of a Asset Transfer Agreement Agreement

dated July11, 2008 between Talisman Energy Canada and Ivanhoe Energy

Inc.

PROPOSED RECOVERY AREA

 

 

Schedule “G”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

ROFR ASSETS

 

 

Schedule “H”

attached to and made part of a Asset Transfer Agreement Agreement

dated July 11, 2008 between Talisman Energy Canada and Ivanhoe

Energy Inc.

RECLAMATION WELLS

	 	 	 
	Locations	 	 	 	 
	16-22-90-9 W4
	15-23-90-9 W4
	1-26-90-9 W4
	3-26-90-9 W4
	9-26-90-9 W4
	11-26-90-9 W4
	1-27-90-9 W4
	3-27-90-9 W4
	14-27-90-9 W4
	16-27-90-9 W4
	1-28-90-9 W4
	4-28-90-9 W4
	11-28-90-9 W4
	16-28-90-9 W4
	1-33-90-9 W4
	4-33-90-9 W4
	11-33-90-9 W4
	16-33-90-9 W4*
	1-34-90-9 W4*
	3-34-90.9 W4*
	4-34-90-9 W4
	10-34-90-9 W4*
	12-34-90-9 W4*
	1-35-90-9 W4*
	3-35-90-9 W4*
	12-35-90-9 W4*
	16-35-90-9 W4*
	3-36-90-9 W4*
	12-36-90-9 W4*
	14-36-90-9 W4*Back-In Agreement

Exhibit 10.2

BACK-IN AGREEMENT

BETWEEN:

TALISMAN ENERGY CANADA

AND

IVANHOE ENERGY INC.

JULY 11, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1 INTERPRETATION
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	1.2 Schedule
	 	 	3	 
	1.3 Interpretation Not Affected by Headings
	 	 	3	 
	1.4 Included Words
	 	 	3	 
	1.5 Headings
	 	 	3	 
	1.6 Statutory References
	 	 	3	 
	1.7 Invalidity of Provisions
	 	 	3	 
	1.8 References in Agreement
	 	 	4	 
	1.9 Conflicts
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 2 BACK-IN RIGHTS
	 	 	4	 
	2.1 Exercise of Back-In Rights
	 	 	4	 
	2.2 Pro Forma Conveyance Agreement
	 	 	5	 
	2.3 Payment of the Purchase Price
	 	 	6	 
	2.4 Lease 50
	 	 	6	 
	2.5 Covenants
	 	 	6	 
	2.6 Operating Agreement
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 3 DISPUTE RESOLUTION
	 	 	7	 
	3.1 Arbitration
	 	 	7	 
	3.2 Proceedings
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 4 GENERAL
	 	 	8	 
	4.1 Public Announcements
	 	 	8	 
	4.2 Further Assurances
	 	 	8	 
	4.3 No Merger
	 	 	8	 
	4.4 Governing Law
	 	 	9	 
	4.5 Time
	 	 	9	 
	4.6 Notices
	 	 	9	 
	4.7 Entire Agreement
	 	 	10	 
	4.8 Assignment
	 	 	10	 
	4.9 Enurement
	 	 	10	 
	4.10 Waivers
	 	 	10	 
	4.11 Counterpart Execution
	 	 	11	 

SCHEDULE

Schedule “A” — Pro Forma Conveyance Agreement

Schedule “B” — Accounting Procedure

 

 

BACK-IN AGREEMENT

THIS AGREEMENT dated July 11, 2008

BETWEEN:

TALISMAN ENERGY CANADA, a general partnership having an office and
carrying on business in the City of Calgary, in the Province of
Alberta (“Talisman”)

- and -

IVANHOE ENERGY INC., a corporaton having an office and carrying on
business in the City of Vancouver, in the Province of British
Columbia (“Ivanhoe”)

     WHEREAS pursuant to a Letter Agreement (the “Letter Agreement”) dated May 29, 2008 between
Talisman and Ivanhoe it was agreed that, subject to and in accordance with the terms and conditions
therein, Talisman would convey certain property and assets to Ivanhoe as provided for therein;

     WHEREAS the Letter Agreement included the condition that Talisman and Ivanhoe execute and
deliver the Definitive Transaction Documents (as that term is defined therein), including an Asset
Transfer Agreement (as hereinafter defined) pursuant to which Talisman was to convey said
properties and assets to Ivanhoe, and this Agreement;

     WHEREAS the parties have concurrently herewith executed and delivered the Asset Transfer
Agreement and the other Definitive Transaction Documents;

     NOW THEREFORE in connection with the execution and delivery of the other Definitive
Transaction Documents and in consideration of the premises and the mutual covenants and agreements
hereinafter contained, the Parties agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

In this Agreement, including the recitals and this clause, capitalized terms shall have the
meanings ascribed to them in the Asset Transfer Agreement; in addition, the following
capitalized words and phrases shall have the following meanings:

	 	(a)	 	“Agreement” means this Agreement and the schedule attached hereto;
	 
	 	(b)	 	“Accounting Procedure” means the modified 1996 Petroleum Accountants Society of
Canada accounting procedure attached hereto as Schedule “B”;

 

- 2 -

	 	(c)	 	“Assets” means the Lease 6 Assets, the Lease 10 Assets or the Lease 50 Assets,
or all of them, as the context may require;
	 
	 	(d)	 	“Asset Transfer Agreement” means the asset transfer agreement of even date
between Talisman, as vendor and Ivanhoe, as purchaser;
	 
	 	(e)	 	“Back-In Rights” has the meaning ascribed to that term in clause 2.1;
	 
	 	(f)	 	“Deemed Costs” means:

	 	(i)	 	the Purchase Price paid by Ivanhoe pursuant to the Asset
Transfer Agreement in respect of the Lease in question (with $2,000,000 thereof
being allocated to Lease 6, $15,000,000 thereof being allocated to Lease 50,
and the balance of the Purchase Price being allocated to Lease 10); plus
	 
	 	(ii)	 	all reasonable costs and expenses, including a pro rata share
of internal staff costs and overhead that are directly related to the
maintenance and development of the Lease in question, incurred by Ivanhoe from
and after the date hereof in respect of each such Lease, which shall not in any
event exceed what would be recoverable by an operator under articles II, III
and IV of the Accounting Procedure, including the overhead rates as provided
for in article III thereof;

For greater certainty “Deemed Costs” shall only include all or that portion of the
Contingent Payment that is actually received by Talisman pursuant to the Asset
Transfer Agreement;

	 	(g)	 	“Deemed Costs Statement” has the meaning ascribed to that term in clause
2.1(b)(i) hereof;
	 
	 	(h)	 	“JOA” means the Joint Operating Agreement dated April 5, 2000 between Canadian
Natural Resources, Talisman Energy Inc. and Union Pacific Resources Inc.;
	 
	 	(i)	 	“Lease 6 Assets” has the meaning ascribed to that term in the Pro Forma
Conveyance Agreement;
	 
	 	(j)	 	“Lease 10 Assets” has the meaning ascribed to that term in the Pro Forma
Conveyance Agreement;
	 
	 	(k)	 	“Lease 50 Assets” has the meaning ascribed to that term in the Pro Forma
Conveyance Agreement;
	 
	 	(l)	 	“Party” means a party to this Agreement; and
	 
	 	(m)	 	“Pro Forma Conveyance Agreement” means a conveyance agreement substantially in
the form of the agreement attached hereto as Schedule “A”.

 

- 3 -

1.2 Schedule

The following schedules are attached to, form part of, and are incorporated in this
Agreement:

Schedule “A”  —  Pro Forma Conveyance Agreement

Schedule “B”  —  Accounting Procedure

These schedules are incorporated herein by reference as though contained in the body of this
Agreement. Whenever any term or condition, whether express or implied, of any schedule
conflicts or is at variance with any term or condition of the body of this Agreement, the
latter shall prevail.

1.3 Interpretation Not Affected by Headings

The division of this Agreement into articles, clauses, subclauses and paragraphs and the
provision of headings for all or any part thereof are for convenience and reference only and
shall not affect the meaning, interpretation or construction of this Agreement.

1.4 Included Words

When the context reasonably permits, words suggesting the singular shall be construed as
suggesting the plural and vice versa, and words suggesting gender or gender neutrality shall
be construed as suggesting the masculine, feminine and neutral genders. In addition,
references to “including” shall mean including without limitation, and “includes” or other
derivatives thereof shall have corresponding meanings.

1.5 Headings

The expressions “Article”, “clause”, “subclause”, “paragraph” and “Schedule” followed by a
number or letter or combination thereof mean and refer to the specified article, clause,
subclause, paragraph and schedule of or to this Agreement.

1.6 Statutory References

Any reference herein to a statute shall include and shall be deemed to be a reference to
such statute and to the regulations made pursuant thereto, and all amendments made thereto
and in force from time to time, and to any statute or regulation that may be passed which
has the effect of supplementing or superseding the statute so referred to or the regulations
made pursuant thereto.

1.7 Invalidity of Provisions

If any of the provisions of this Agreement should be determined to be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the remaining
provisions herein shall not in any way be affected or impaired thereby.

 

- 4 -

1.8 References in Agreement

Any reference to time refers to the time in Calgary, Alberta at the applicable time. All
references to “dollars” or “$” herein refer to lawful currency of Canada.

1.9 Conflicts

If any term or condition of this Agreement conflicts with a term or condition of the Leases
or the Regulations, the term or condition of the relevant Lease or Regulation will prevail,
and this Agreement will be deemed to be amended to the extent required to eliminate any such
conflict.

ARTICLE 2

BACK-IN RIGHTS

2.1 Exercise of Back-In Rights

	 	(a)	 	Talisman will have the right (the “Back-In Rights”), exercisable once per each
Lease by notice in writing to Ivanhoe, to acquire up to a 20% undivided interest in
each of the Lease 6 Assets and the Lease 10 Assets, and up to a 15% undivided interest
in the Lease 50 Assets, until the date that is three (3) years following the date
hereof. In the written notice Talisman shall specify which of the Assets it wishes to
acquire, the percentage undivided interest(s) it wishes to acquire therein, and the
Deemed Costs applicable to each of the Lease 6 Assets, the Lease 10 Assets and/or the
Lease 50 Assets, as applicable. In this regard, the Deemed Costs for the applicable
Assets shall be as set forth in the Deemed Costs Statement provided pursuant to clause
2.1(b)(i), or if an arbitrator renders a decision in connection therewith, as set forth
in the arbitrator’s decision; there shall be no adjustments in connection with the
Deemed Costs pursuant to the Pro Forma Conveyance Agreement. The effective date of
each acquisition shall be the date of the applicable Deemed Cost Statement, provided
that the Deemed Cost Statement shall remain valid and binding for a period of ninety
(90) days from the date of issuance thereof or the date an arbitration decision is
rendered in connection therewith, whichever is later. In order for Talisman to
exercise its Back-In Rights there must be a valid and binding Deemed Cost Statement
then in effect.
	 
	 	(b)	 	In connection with the potential exercise of the Back-In Rights, Ivanhoe shall:

	 	(i)	 	from time to time within thirty (30) days of a request therefor
from Talisman (which request shall not be made by Talisman more than once per
calendar quarter), provide to Talisman a detailed written summary of the Deemed
Costs (the “Deemed Costs Statement”) incurred by Ivanhoe respecting the Lease 6
Assets, the Lease 10 Assets and/or the Lease 50 Assets between the date hereof
and the date of such statement. Talisman may audit Ivanhoe’s records and
supporting documentation relating to the Deemed Costs and the Deemed Costs
Statement and the Assets in question, upon request. Ivanhoe shall respond in
writing to any claim of

 

- 5 - 

	 	 	 	discrepancy within ten (10) days of receipt of such claim. If Ivanhoe
agrees with the claim, evidence of the adjustment shall accompany the
response. If Ivanhoe disagrees with the claim, a detailed response with the
relevant explanation shall be submitted to Talisman. If the Parties still
do not agree, the matter shall be immediately resolved pursuant to
arbitration in accordance with Article 3. For greater certaintly, Talisman
shall not be required or obligated to exercise its Back-In Rights as a
result of requesting a Deemed Cost Statement; and
	 
	 	(ii)	 	from time to time within thirty (30) days of a request therefor
from Talisman (which request shall not be made by Talisman more than once per
calendar quarter), and for such period thereafter as Talisman may reasonably
require, make the Assets available to Talisman so that Talisman can conduct a
due diligence review of them, including a review of title to the Assets, the
environmental condition of the Assets, the condition of any tangible property
comprising the Assets, and the terms and conditions of any documents, licenses
and agreements forming part of or relating to the Assets.

2.2 Pro Forma Conveyance Agreement

	 	(a)	 	The conveyance of the Lease 6 Assets, the Lease 10 Assets and the Lease 50
Assets shall occur in accordance with the Pro Forma Conveyance Agreement. In
connection with such conveyance, the representations and warranties set forth in the
Pro Forma Conveyance Agreement shall be updated to accurately reflect the current
status of the parties, the assets and operations in respect thereof, having regard to
the covenants in clause 2.5. The purchase price for the Lease 6 Assets, the Lease 10
Assets or the Lease 50 Assets, as the case may be, shall be the applicable Deemed Costs
as determined pursuant to clause 2.1, multiplied by the applicable percentage (if any)
set forth in clause 2.2(b), and further multiplied by the undivided percentage interest
being acquired by Talisman in the Assets in question. Talisman shall prepare a copy of
the Pro Forma Conveyance Agreement within thirty five (35) days of delivering the
exercise notice in accordance with clause 2.1(a), and closing shall occur thereunder
within five (5) days of such delivery, subject to clause 2.2(c). Any disputes
respecting the terms of the Pro Forma Conveyance Agreement shall be resolved pursuant
to arbitration in accordance with Article 3.
	 
	 	(b)	 	If the Back-In Right is exercised in respect of one or more of the Lease 6
Assets, the Lease 10 Assets or the Lease 50 Assets during:

	 	(i)	 	the first year following the date hereof, Ivanhoe’s Deemed Cost
shall not be multiplied by any further percentage;
	 
	 	(ii)	 	the second year following the date hereof, Ivanhoe’s Deemed
Cost respecting the Assets being acquired shall be multiplied by 150%; and

 

- 6 -

	 	(iii)	 	the third year following the date hereof, Ivanhoe’s Deemed
Cost respecting the Assets being acquired shall be multiplied by 200%.

	 	(c)	 	Within three (3) days of receiving a notice pursuant to clause 2.1(a) in
respect of the Lease 50 Assets, Ivanhoe shall issue a notice of right of first refusal
and request for consent to each counterparty under the JOA, with the ascribed value
thereunder being the purchase price as determined pursuant to clause 2.2(a).

2.3 Payment of the Purchase Price

The required payment from Talisman in connection with any exercise of the Back-In Rights
shall be effected by:

	 	(a)	 	first, reducing the amount (if any) outstanding under the 2008 Note; and
	 
	 	(b)	 	thereafter, at the election of Talisman, by way of cash payment or reduction of
the amount outstanding under the Convertible Note. Talisman shall make such election
concurrently with the exercise of the Back-In Right pursuant to clause 2.1.

2.4 Lease 50

The Parties acknowledge and confirm that:

	 	(a)	 	as at the date hereof the holder of the right of first refusal arising under
the JOA by virtue of the Asset Transfer Agreement has exercised that right of first
refusal; and
	 
	 	(b)	 	this Agreement shall apply to the Lease 50 Assets only if Lease 50 is not
conveyed to the right of first refusal holder and Ivanhoe thereafter acquires such
lease, as contemplated in clause 4.1(a) of the Asset Transfer Agreement.

2.5 Covenants

During the period Talisman has the right to exercise the Back-In Rights pursuant to this
Agreement (including until the last Pro Forma Conveyance Agreement is executed pursuant to
this Agreement) Ivanhoe shall:

	 	(a)	 	cause the Lease 6 Assets, the Lease 10 Assets and, to the extent applicable,
the Lease 50 Assets, to be operated and maintained, in accordance with and subject to
the applicable title and operating documents, applicable Regulations (as defined in the
Pro Forma Conveyance Agreement) and generally accepted oil and gas industry practices
in the province of Alberta, and shall not encumber the Assets with any additional
royalties, adverse claims or interests that may have a material adverse effect on the
value thereof;

 

- 7 -

	 	(b)	 	not do any act or thing, or omit to do any act or thing, whereby the
representations and warranties set forth in clauses 9.1(b), 9.1(c) and 9.1(d) in the
Pro Forma Conveyance Agreement would not be true and correct in all material respects;
	 
	 	(c)	 	not grant any Right of First Refusal (as such term is defined in the Pro Forma
Conveyance Agreement) in the Assets to the extent such Right of First Refusal would
prevent Talisman from acquiring up to a 20% undivided interest in each of the Lease 6
Assets and the Lease 10 Assets, and up to a 15% undivided interest in the Lease 50
Assets as contemplated herein;
	 
	 	(d)	 	not enter into any production sales contracts relating to the Assets that
cannot be terminated on 90 days notice or less without penalty; and
	 
	 	(e)	 	not grant any Security Interest (as such term is defined in the Pro Forma
Conveyance Agreement) in the Assets unless such Security Interests can be discharged
(or otherwise confirmed, to the satisfaction of Talisman, not to charge the interest of
Talisman) upon the request or at the direction of Talisman as regards the interests
Talisman may acquire in the Assets pursuant to this Agreement.

2.6 Operating Agreement

If there is no operating agreement (other than an agreement between Ivanhoe and any
Affiliates thereof) applicable to any of the Assets in respect of which Talisman is
exercising its Back-In Rights as at the date of such exercise, the Parties shall use their
commercially reasonable efforts to enter into an operating agreement (for those Assets) the
terms of which are acceptable to both Parties within ninety (90) days after the Pro Forma
Conveyance Agreement is executed and delivered in connection with such exercise, failing
which an operating agreement that is in the form of the JOA shall be deemed to govern those
Assets upon the expiry of the ninety (90) day period.

ARTICLE 3

DISPUTE RESOLUTION

3.1 Arbitration

In respect of any matter that must be or may be referred to arbitration under this
Agreement, the Parties shall select an arbitrator within five (5) Business Days of the date
the matter is referred to arbitration. The arbitrator shall meet the criteria for an
arbitrator under the Arbitration Act (Alberta). If the Parties cannot reasonably agree on
the appointment of an arbitrator, the Parties shall each appoint an umpire who shall appoint
an arbitrator. If the umpires are unable to agree on an arbitrator or if one of the Parties
fails to comply with the provisions of this clause 3.1, either Party may apply to a judge of
the Court of Queen’s Bench of Alberta for the appointment of an arbitrator.

3.2 Proceedings

The following proceedings shall apply in respect of any arbitration hereunder:

 

- 8 -

	 	(a)	 	The Parties shall, within five (5) Business Days of the date of selection of
the arbitrator, each deliver to the arbitrator and the other Party a written statement
respecting the matter in dispute to the arbitrator, including such Party’s proposed
resolution. The arbitrator shall be required to accept one of such resolutions. If
only one of the Parties submits a written resolution, the arbitrator shall be required
to accept the resolution proposed by such Party;
	 
	 	(b)	 	The arbitrator shall be instructed to render his or her decision not later than
ten (10) Business Days after his or her appointment and shall communicate such decision
to the Parties;
	 
	 	(c)	 	If the arbitrator accepts one Party’s proposal, the other Party shall pay the
fees and expenses of the arbitrator. The decision of the arbitrator shall be final and
binding on the Parties and not subject to review; and
	 
	 	(d)	 	Except to the extent modified in this article, the arbitrator shall conduct any
arbitration hereunder pursuant to the provisions of the Arbitration Act (Alberta).

ARTICLE 4

GENERAL

4.1 Public Announcements

If a Party intends to make any public announcement or press release (either, a “Press
Release”) relating to this Agreement or any exercise of the Back-In Right, that Party shall
use reasonable commercial efforts to first give the other Party 48 hours to review and
comment on such Press Release, unless it is impracticable for that Party to do so having
regard to its legal obligations relating to timely disclosure. The Party desiring to make
the Press Release shall give due consideration to any comments it receives from the other
Party, but it shall not be required to incorporate such comments.

4.2 Further Assurances

Each Party will, from time to time and at all times after the date hereof, without further
consideration, do such further acts and deliver all such further assurances, deeds and
documents as shall be reasonably required in order to fully perform and carry out the terms
of this Agreement.

4.3 No Merger

There shall not be any merger of any covenant, representation, warranty or indemnity in in
any assignments, conveyances, transfers and other documents conveying the interests of
Ivanhoe in the Lease 6 Assets, Lease 10 Assets or the Lease 50 Assets to Talisman
notwithstanding any rule of law, equity or statute to the contrary, and all such rules are
hereby waived.

 

- 9 -

4.4 Governing Law

This Agreement shall, in all respects, be subject to and be interpreted, construed and
enforced in accordance with and under the laws of the Province of Alberta and applicable
laws of Canada and shall, in all respects, be treated as a contract made in the Province of
Alberta. Each Party irrevocably attorns and submits to the exclusive jurisdiction of the
courts of the Province of Alberta and all courts of appeal therefrom in respect of all
matters arising out of or in connection with this Agreement, except for disputes governed by
clause 3.1.

4.5 Time

     Time shall be of the essence in this Agreement.

4.6 Notices

The addresses for service and the fax numbers of the Parties shall be as follows:

	 	 	 
	Talisman:	 	Ivanhoe:
	Talisman Energy Canada

	 	Ivanhoe Energy Inc.
	Suite 2000, 888 — 3rd Street S.W.

	 	654-999 Canada Place
	Calgary, Alberta T2P 5C5

	 	Vancouver, British Columbia
	Attention: Executive Vice-President,

	 	V6C 3E1
	Corporate and Legal

	 	Attention: Corporate Secretary
	Fax: (403) 231-3633

	 	Fax: (604) 682-2060
	 
	 	 
	With a copy to:

	 	with a copy to:
	Macleod Dixon LLP

	 	Goodmans LLP
	3700, 400 Third Avenue S.W.

	 	355 Burrard Street, Suite 1900
	Calgary, Alberta T2P 4H2

	 	Vancouver, British Columbia V6C 2G8
	Attention: Kevin Johnson

	 	Attention: Bruce Wright
	Fax: (403) 264-5973

	 	Fax: (604) 682-7131

All notices, communications and statements required, permitted or contemplated hereunder
shall be in writing, and shall be delivered and received if:

	 	(a)	 	personally served on the other Party by hand delivery or courier delivery
during the normal business hours of the recipient at the applicable address set forth
above (personally served notices shall be deemed received by the addressee when
actually delivered); or
	 
	 	(b)	 	by facsimile transmission directed to the Party on whom they are to be served
at that Party’s fax number set forth above and such notices so served shall be deemed
to have been received by the addressee thereof when actually received by it if received
within the normal working hours of a Business Day, or, if received outside the normal
working hours of a Business Day, at the commencement of the next ensuing Business Day
following transmission thereof.

 

- 10 -

A Party may from time to time change its address for service or its fax number or both by
giving written notice of such change to the other Party.

4.7 Entire Agreement

The provisions contained in any and all documents and agreements collateral hereto shall at
all times be read subject to the provisions of this Agreement and, in the event of conflict,
the provisions of this Agreement shall prevail. This Agreement shall not be varied in its
terms or amended by oral agreement or by representations or otherwise other than by an
instrument in writing dated subsequent to the date hereof, executed by a duly authorized
representative of each Party. Except for the Confidentiality Agreement dated August 27,
2007 between Talisman and Ivanhoe, this Agreement and the other Transaction Documents
supersede all other agreements (including the Letter Agreement), documents, writings and
verbal understandings between the Parties prior to the date hereof relating to the subject
matter hereof and express the entire agreement of the Parties with respect to the subject
matter hereof.

4.8 Assignment

	 	(a)	 	This Agreement may not be assigned by a Party without the prior written consent
of the other Party, which consent may be unreasonably and arbitrarily withheld,
provided that nothing herein shall prevent or restrict Talisman from assigning in whole
or in part this Agreement or any benefits, obligations or liabilities hereunder to
Talisman Energy Inc. or any of its direct or indirect wholly owned subsidiaries,
provided that any assignment to such a subsidiary shall not result in Talisman Energy
Inc. being released from any obligations or liabilities it may have hereunder..
	 
	 	(b)	 	In no event shall Ivanhoe assign in whole or in part any interest in the Lease
6 Assets, the Lease 10 Assets or the Lease 50 Assets without an assignment and novation
agreement (in form and substance satisfactory to Talisman) first being executed and
delivered pursuant to which the assignee agrees with Ivanhoe and Talisman to comply and
be bound by the terms of this Agreement as if and as though it was a party hereto.

4.9 Enurement

This Agreement shall be binding upon and shall enure to the benefit of the Parties and their
respective administrators, trustees, receivers, receiver-managers, successors and permitted
assigns.

4.10 Waivers

Only a written waiver by a Party of any breach (whether actual or anticipated) of any of the
terms, conditions, representations or warranties contained herein will be effective or
binding upon that Party. Any waiver so given will extend only to the particular breach
waived, and will not limit or affect any rights for any other or future breach.

 

- 11 -

4.11 Counterpart Execution

This Agreement may be executed by the Parties in counterpart and all such executed
counterparts together shall constitute one agreement.

     IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	 	TALISMAN ENERGY CANADA

by its Managing Partner

TALISMAN ENERGY INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ “M. Jacqueline Sheppard”
	 
	 

	 	 	 	 
	 

	 	 	 	M. Jacqueline Sheppard
	 

	 	 	 	Executive Vice President, Corporate and Legal,
	 

	 	 	 	and Corporate Secretary
	 
	 	 	 	 
	 	 	IVANHOE ENERGY INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ “Ian S. Barnett”

 

 

Schedule “A”

attached to and made part of a Back-In Agreement dated July 11, 2008

between Talisman Energy Canada and Ivanhoe Energy Inc.

PRO FORMA CONVEYANCE AGREEMENT

 

 

Schedule “B”

attached to and made part of a Back-In Agreement dated July 11, 2008

between Talisman Energy Canada and Ivanhoe Energy Inc.

ACCOUNTING PROCEDURE

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