FARM-OUT AGREEMENT
EXHIBIT
10.3
THIS
AGREEMENT
is dated
as of September 29th, 2005 by and between Mogul Energy Ltd., a corporation
organized and existing under the laws of the Province of British Columbia
Canada
(“Mogul”)
and
Mogul Energy International, Inc., a corporation organized and existing under
the
laws of the state of Delaware, USA (“MEI”).
WHEREAS,
Mogul,
Dover Investments Limited a corporation organized and existing under the
laws of
the Province of Ontario, Canada (“Dover”),
TransPacific Petroleum Corp., a corporation organized and existing under
the
laws of the Province of British Columbia, Canada (“TransPacific”)
and
Xxxxxxx Xxxx, an individual residing in the City of Richmond British Columbia,
Canada (“Xxxx”)
entered into a binding farm-out agreement dated as of August 6, 2005 (the
“Dover
Farm-Out Agreement”)
a copy
of which is attached hereto as Exhibit
A;
WHEREAS,
Dover
has
heretofore entered into a Concession Agreement effective as of July 18, 2002
(“Concession
Agreement”).with
the Egyptian General Petroleum Corporation (“EGPC”)
and
the Arab Republic of Egypt (“ARE”)
for
the Concession known as East Wadi Araba (“EWA
Concession”);
WHEREAS, upon
satisfaction of the terms and conditions set forth in the Dover Farm-Out
Agreement, Dover has agreed to assign and transfer to Mogul an eight-five
(85%)
percent working interest in the EWA Concession and will retain for itself,
a
fifteen (15%) percent carried working interest in the EWA
Concession;
WHEREAS,
Mogul
and Transpacific have entered into a binding joint venture agreement dated
as of
August 7, 2005 (the “Transpacific
Joint Venture Agreement”),
a
copy of which is attached hereto as Exhibit
B.
1
WHEREAS, pursuant
to the terms of the Transpacific Joint Venture Agreement, and subject further
to
the terms of the Dover Farm-Out Agreement, Mogul has agreed to assign to
Transpacific a twenty-five (25%) percent carried working interest in the
EWA
Concession;
WHEREAS,
Mogul,
Transpacific and Dover, subject to the fulfilment of the terms and conditions
set forth in the Dover Farm-Out Agreement, have the following interests in
the
EWA Concession:
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Mogul:
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60%
working interest
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Transpacific:
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25%
carried working interest
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Dover:
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15%
carried working interest;
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WHEREAS,
under
the terms of the Dover Farm-Out Agreement and the Transpacific Joint Venture
Agreement, Mogul will be responsible for providing all expenses, costs of
drilling and completion of all exploratory and development xxxxx, all production
facilities, Cairo and field offices;
WHEREAS,
under
the terms of the Dover Farm-Out Agreement the parties thereto may assign
and
transfer their respective rights and obligations thereunder without the consent
of the other parties thereto, subject however to the approval of the
EGPC;
WHEREAS,
Mogul
desires to assign and transfer to MEI and MEI desires to acquire from Mogul
a
twenty (20%) percent working interest in the EWA Concession on the terms
and
conditions set forth herein.
NOW,
THEREFORE,
the
parties hereto, in consideration of the mutual covenants set forth herein
and
other and good consideration the receipt and sufficiency of which is hereby
acknowledged, agree as follows:
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ARTICLE
I
ASSIGNMENT
AND TRANSFER
1.1 Pursuant
and subject to the terms of the Dover Farm-Out Agreement and the Concession
Agreement, Mogul hereby assigns, conveys and transfers to MEI a twenty (20%)
working interest in and to the EWA Concession.
1.2 The
interests in the EWA Concession shall be as follows:
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Mogul:
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40%
working interest
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MEI:
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20%
working interest
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Transpacific:
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25%
carried working interest
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Dover:
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15%
carried working interest.
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ARTICLE
II
CONSIDERATION
2.1 MEI,
within 14 days of the execution and delivery of this Agreement, shall pay
Mogul
the non-refundable sum of $75,000.
2.2 Except
as
set forth in 2.3 below, MEI will be responsible for the payment of one-third
(1/3), and Mogul will be responsible for the payment of two-thirds of, all
expenses, costs of drilling and completion of all exploratory and development
xxxxx, all production facilities, Cairo and field offices, the financial
commitments that are required and which arise by extending the Concession
Agreement for the third exploration period of two more years and agrees to
pay
all costs related thereto right through to production, and of Moguls obligations
as may arise or contemplated by the Dover Farm-Out Agreement..
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2.3 Anything
herein to the contrary notwithstanding, MEI shall be responsible only for
its
for its proportionate share of all costs incurred by any operating company
formed under the Concession Agreement (or the Dover Farm-Out Agreement or
Transpacific Joint Venture Agreement) on a commercial discovery being made
and
only after commercial production is achieved.
2.4 (a) MEI
shall
be responsible for securing one third (1/3) (the “MEI
Guarantee Obligation”)
and
Mogul shall be responsible for securing two-thirds (2/3) (the “Mogul
Guarantee Obligation”)
of the
Two Million US Dollar ($2,000,000 US) letter of guarantee (the “Letter
of Guarantee”)
which
Mogul is required to have issued for the benefit of EGPC, as contemplated
by the
Dover Farm-Out Agreement.
(b) Each
of
the parties hereto shall advise the other at least 15 business days prior
to the
due date of the Letter of Guarantee as to whether such party shall be able
to
secure its respective guarantee obligation hereunder. If either party (the
“Defaulting
Party”)
indicates that it will not be able to do so, the other party (the “Non-defaulting
Party”)
has
the right, but not the obligation, to secure such portion of the Defaulting
Party’s guarantee obligation as to which the Defaulting Party indicated it could
not secure. If the Non-defaulting Party elects to exercise its option hereunder,
its working interest in the EWA Concession will be automatically increased
in
proportion to such party’s total contribution to the Letter of Guarantee. The
Defaulting Party shall execute any and all instruments and documents to reflect
such increase in the Non-defaulting party’s working interest.
(c) In
the
event that the Non-defaulting Party does not exercise the option granted
under
this Section 2.4 and Mogul fails to deliver the Letter of Guarantee to EGPC
within the time set out in the Dover Farm-Out Agreement, this Agreement shall
be
at an end and the parties shall have no further obligations hereunder except
that MEI will forthwith return to Mogul all information that it received
hereunder pertaining to the EWA Concession and agrees to keep all such
information confidential.
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ARTICLE
III
PARTICIPATION
In
the
case of establishing a discovery or discoveries in EWA Concession, MEI, Dover,
Mogul and Transpacific will share proportionately, in accordance with their
respective interest, all the benefits of the entire cost recovery oil pool,
and
the profit oil portion of oil production under the Concession
Agreement.
ARTICLE
IV
MISCELLANEOUS
4.1 Joint
Operating Agreement.
Within
one month of the approval of the assignment by the ARE, MEI agrees o sign
a
Joint Operating Agreement, based on the Association of International Petroleum
Negotiators (AIPN) most recent model operating agreement, as contemplated
by the
Dover Farm-Out Agreement.
4.2 No
modification.
This
Agreement is the entire agreement between the parties and may not be modified
except in writing by agreement of the parties hereto. This agreement supersedes
all prior oral and written representations and agreements with respect to
EWA
Concession and becomes effective only after all parties have signed this
agreement, the non-refundable payment of $75,000 made and the Letter of
Guarantee is delivered.
4.3 Reassignment.
In the
event that MEI fails to perform its obligations hereunder Mogul shall have
the
option, exercisable at any time after 10 days from Mogul’s notice to MEI of
MEI's failure to timely fulfill its obligations hereunder, to require that
MEI
reassign MEI's working interest to Mogul free of cost. In this event, MEI
agrees
to execute any and all such documents as are necessary for such reassignment
in
the same form and manner as the original assignment to MEI.
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4.4 Relationship
of Parties. The
rights, duties, obligations and liabilities of the Parties under this Agreement
shall be individual, not joint or collective. It is not the intention of
the
Parties to create, nor shall this Agreement be deemed or construed to create,
a
mining or other partnership, joint venture or association or (except as
explicitly provided in this Agreement) a trust. This Agreement shall not
be
deemed or construed to authorize any Party to act as an agent, servant or
employee for any other Party for any purpose whatsoever except as explicitly
set
forth in this Agreement. In their relations with each other under this
Agreement, the Parties shall not be considered fiduciaries except as expressly
provided in this Agreement.
4.5 Further
Assurances. Each
of
the Parties shall do all such acts and execute and deliver all such documents
as
shall be reasonably required in order to fully perform and carry out the
terms
of this Agreement.
4.6 Waiver.
No
waiver
by any Party of any one or more defaults by another Party in the performance
of
any provision of this Agreement shall operate or be construed as a waiver
of any
future default or defaults by the same Party whether of a like or of a different
character. Except as expressly provided in this Agreement, no Party shall
be
deemed to have waived, released or modified any of its right under this
Agreement unless such Party has expressly stated, in writing, that it does
waive, release or modify such right.
4.7 Joint
Preparation. Each
provision of this Agreement shall be construed as though all Parties
participated equally in the drafting of the same. Consequently, the Parties
acknowledge and agree that any rule of construction that a document is to
be
construed against the drafting party shall not be applicable to this
Agreement.
4.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute therefore, and
upon
so agreeing, shall incorporate such substitute provision in this Agreement.
Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or
render unenforceable such provision in any other jurisdiction.
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4.9 Modifications.
There
shall be no modification of this Agreement except by written consent of all
Parties hereto.
4.10 Priority
of Agreement. In
the
event of any conflict between the provisions of the main body of this Agreement
and its Exhibits, the provisions of the main body of the Agreement shall
prevail. In the event of any conflict between this Agreement and the Documents,
this Agreement shall prevail.
4.11 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid
binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
4.12 Public
Announcements. No
public
announcement or statement regarding the terms or existence or this Agreement
shall be made without prior written consent of all Parties; provided that,
notwithstanding any failure to obtain such approval, no Party shall be
prohibited from issuing or making any such public announcement or statement
to
the extent it is necessary to do so in order to comply with the applicable
laws,
rules or regulations of any government, government agency, court, administrative
body, or stock exchange having jurisdiction over such Party or its
Affiliates.
4.13 Entire Agreement.
This
Agreement, together with all the exhibits hereto, constitutes and contains
the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.
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4.14 Third Parties.
Nothing
in this Agreement, express or implied, is intended to confer upon any person,
other than the parties hereto and their successors and assigns, any rights
or
remedies under or by reason of this Agreement.
4.15 Notices.
All
notices authorized or required between the Parties by any of the provisions
of
this Agreement shall be in writing (in English) and delivered in person or
by
courier service or by any electronic means of transmitting written
communications which provides written confirmation of complete transmission,
and
properly addressed to the other Party. Verbal communication does not constitute
notice for purposes of this Agreement, and e-mail addresses and telephone
numbers for the Parties are listed below as a matter of convenience only.
A
notice given under any provision of this Agreement shall be deemed delivered
only when received by the Party to whom such notice is directed, and the
time
for such Party to deliver any notice in response to such originating notice
shall run from the date the originating notice is received. “Received”
for
purposes of this Article shall mean actual delivery of the notice to the
address
of the Party specified hereunder.
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Name:
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Mogul
Energy Ltd.
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Address:
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0000-000
Xxxx Xxxxxxxx Xxxxxx
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Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
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Attention:
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Xx.
Xxxxxx Tyab
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Facsimile:
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(000)
000-0000
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Email:
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xxxxxxxxxx@xxxx.xx
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Telephone:
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(000)
000-0000
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Name:
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Address:
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000
Xxxx Xxxxx, Xxxxx 0000
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Xxxxxxx,
Xxxxxxxxxx, XXX, 00000
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Attention:
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Xx.
Xxxxx Tyab
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Facsimile:
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(000)
000-0000
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Email:
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xxxxx@xxxx.xx
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Telephone:
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(000)
000-0000
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4.16 Successors
and Assigns.
This
agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective successors, heirs and approved assignors. Each
party
is free to re-assign all or portion of its interest in this agreement to
another
party, without the approval of any of the parties to this agreement, provided
that EGPC will approve such assignments.
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4.17
Rules
of Construction.
This
Agreement shall be construed in accordance with the following rules of
construction:
(a) Calculation
of Time Period.
When calculating the period of time before which, within which or following
which any act is to be done or step taken pursuant to this Agreement, the
date
that is the reference date in calculating such period shall be excluded.
If the last day of such period is a non-Business Day, the period in question
shall end on the next succeeding Business Day.
(b) Commercially
Reasonable Efforts.
The obligation of a party to use commercially reasonable efforts to accomplish
an objective does not require an unreasonable expenditure of funds or the
incurrence of an unreasonable liability on the part of the obligated
party.
(c) Gender
and Number.
Any reference in this Agreement to gender shall include all genders, and
words
imparting the singular number only shall include the plural and vice
versa.
(d) Headings.
The headings herein are inserted for convenience only and do not constitute
a
part of this Agreement. Whenever the context requires, the gender of any
word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted
for
purposes of reference only, and shall not affect the meaning or construction
of
any of the provisions hereof.
(e) Herein.
The words such as “herein,”
“hereinafter,”
“hereof,”
and
“hereunder”
refer
to this Agreement as a whole and not merely to a subDivision in which such
words
appear unless the context otherwise requires.
(f) Including.
The word “including”
or
any
variation thereof means “including,
without limitation”
and
shall not be construed to limit any general statement that it follows to
the
specific or similar items or matters immediately following it.
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(g) Knowledge.
The word “knowledge”
or
any
similar term shall mean with respect to any Person, the actual knowledge
of such
Person or such Person’s officers, directors and employees.
(h) Payments
and Computations.
Except for the payment of the Purchase Price (which shall be paid at the
Closing), each party shall make each payment due to another party to this
Agreement not later than 2:00 p.m. New York time on the day when due. All
payments shall be measured and paid in U.S. dollars by wire transfer in
immediately available funds to the account or accounts designated by the
party
receiving such payment. All computations of interest shall be made on the
basis of a year of 365 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for
which such interest is payable. Whenever any payment under this Agreement
shall be due on a day other that a Business Day, such payment shall be made
on
the next succeeding Business Day, and such extension of time shall be included
in the computation of payment of interest.
(i) Schedules
and Exhibits.
Any matter disclosed on any one Schedule or Exfhibit hereto shall be deemed
disclosed for purposes of all other Schedules to the extent that the relevance
of such matters to other Sections of this Agreement or other applicable
Schedules or Exhibits is reasonably apparent to a reader.
(j) Interpretation
of Language.
The
language and words used in this Agreement will be deemed to be the language
and
words chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
4.18 Disputes.
(a) Subject
to
paragraph (b) of this Section 10.5, any dispute arising out of or in connection
with this Agreement which cannot first be settled amicably by mutual
consultation between the parties, shall be referred to and finally resolved
by
arbitration under the auspices of JAMS, in accordance with its rules (“Rules”).
The arbitration shall take place in New York, New York, unless the parties
otherwise mutually agree. The rules of procedures not expressly provided
by the
Rules shall be determined in accordance with the laws of the State of New
York,
whether mandatory or not. An award may be confirmed and judgment on the award
entered in the Supreme Court of the State of New York.
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(b) Nothing
in this Section 14.18 shall be deemed to preclude any Party from commencing
an
action for equitable or injunctive relief in any court having jurisdiction
over
the matter.
4.19 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in the City of New York, for the
adjudication of any dispute hereunder or in connection herewith or therewith,
or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient
forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it under this Agreement and
agrees
that such service shall constitute good and sufficient service of process
and
notice thereof. Nothing contained herein shall be deemed to limit in any
way any
right to serve process in any manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
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IN
WITNESS WHEREOF, the
parties hereto caused this Agreement to be duly executed and accepted as
of the
dates set forth below.
| Mogul Energy Ltd. |
Dated:
September 29, 2005
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By:
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/s/
Xxxxxx Xxxx
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Xxxxxx
Tyab, President
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| Mogul Energy International, Inc. |
Dated:
September 29, 2005
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By:
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/s/
Naeem Xxxx
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Xxxxx
Tyab, President
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