EXHIBIT 10.27
FARMIN & PARTICIPATION AGREEMENT
IN RELATION TO: -
31 EXPLORATION LICENSES AND 2 PRODUCTION LEASES
COVERING 3,042,624 ACRES
HELD BY MEMBERS OF THE XXXXX GROUP CONSORTIUM
IN THE REPUBLIC OF TURKEY
DATED 14 NOVEMBER 2002
TABLE OF CONTENTS
Page
1. Definitions and interpretation 2
2. Deposit 7
3. Xxxxx xxxxxx 0
0. Xxxxxxxxxx xxxxxx 00
0. Kahta farmin 12
6. Farmin to other SGC Interests 14
7. Closing of Acquisitions 15
8. Consents and approvals 17
9. Conduct and funding of Joint Operations 20
10. Representations and warranties 27
11. Indemnities and liabilities 30
12. Term and termination 30
13. Assignment and encumbrances 31
14. Confidentiality 31
15. Taxes 32
16. Default 33
17. Notices 33
18. General 35
SCHEDULES
Schedule A -Details of SGC Interests
Schedule B - Exploration Licence and Production Lease Costs
Schedule C - Expected Expenses in Tosun Prospect after Drilling of Tosun-1 Well
Schedule D - Expected Expenses in Karakilise Prospect after Drilling of
Karakilise-1 Well
Schedule E - Form of Deed of Transfer and Assignment to be submitted to GDPA
Schedule F - Tosun Drilling Program
Schedule G - Karakilise Drilling Program and Payment Schedule
Schedule H - Joint Operating Agreement
Schedule I - Tosun Drilling Contract
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THIS AGREEMENT is made on this 14th day of November 2002
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD ('AME'), a corporation organized and existing
under the laws of the State of Delaware in the U.S.A., having offices
in the city of Ankara and in the city of Wichita, Kansas, which is
the designated Operator of all Xxxxx Group Consortium Exploration
Licences and Production Leases in Turkey, ERSAN PETROL SANAYII A.S.
('ERSAN'), a corporation existing under the laws of the Republic of
Turkey, having its head office in the city of Ankara,
TRANSMEDITERRANEAN OIL COMPANY LTD. ('TMO'), a corporation existing
under the laws of the British Columbia, Canada, having head office in
the city of Vancouver, Canada, GUNEY YILDIZI PETROL URETIM SONDAJ
MUTEAHHITLIK VE TICARET A.S. ('GYP'), a corporation existing under
the laws of the Republic of Turkey, having head office in the city of
Adiyaman (hereinafter collectively referred to as the XXXXX GROUP
CONSORTIUM ('SGC')); and
(2) AVENUE ENERGY INC., a corporation organized and existing under the
laws of the State of Delaware in the U.S.A., having offices at
Xxxxxxx Oaks, CA, USA at 00000 Xxxxxxx Xxxx., 0xx Xx. Xxxxxxx Xxxx,
XX, XXX and in Australia at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx,
Xxxxxxxxx, (hereinafter referred to as 'AVENUE'); and
(3) IT TECHNOLOGY INC., a corporation organized and existing under the
laws of the State of Delaware in the U.S.A., having offices at
Xxxxxxx Oaks, CA, USA at 00000 Xxxxxxx Xxxx., 0xx Xx. Xxxxxxx Xxxx,
XX, XXX and in Australia at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx,
Xxxxxxxxx, (hereinafter referred to as 'ITTE'); and
(4) MIDDLE EAST PETROLEUM SERVICES LIMITED a corporation organized and
existing under the laws of the Isle of Man, United Kingdom, having
its registered office at Norton House, Farrants Way, Castletown, Isle
of Man, 1M9 1NR, British Isles and its representative office at Xxxxx
0, 000 Xxxxxxxxx Xxxxxx, Xxxxxx 0000, Xxxxxxxx, Xxxxxxxxx
(hereinafter referred to as 'MEPS').
RECITALS:
(A) MEPS is the exclusive agent for SGC with respect to all current
Exploration Licenses and Production Leases held by SGC in the
Republic of Turkey in which SGC, under a verbal agreement with MEPS
(the 'SGC/MEPS AGENCY AGREEMENT'), has authorized MEPS to seek
partners.
(B) MEPS is the exclusive agent for SGC with respect to all future
Applications to be made by SGC in the Republic of Turkey, except for
Applications for Exploration Licenses and Production Leases over
areas (together the 'EXCLUDED AREAS') situated within three
kilometres of the boundary any of the areas covered by Production
Lease Nos. ARI/AME - TMO/3170-3215, Petroleum District XII Gaziantep
(Zeynel and Nemrut Fields) or Production Lease Nos. IR/EPS/723 and
000, Xxxxxxxxx Xxxxxxxx XIV Adana (Bulgurdag Field) and Applications
relating to areas covered by the Excluded Interests.
(C) MEPS has introduced Avenue to SGC and has assisted those Parties in
reaching agreement on the commercial terms embodied in this
Agreement.
(D) SGC between them own and control 100% of Exploration License
AR/AME-EPS/3462 in Petroleum District XII - Gaziantep, in the
Republic of Turkey covering an areas of 3,278 hectares (the 'TOSUN
LICENSE').
(E) SGC between them own and control a 100% interest in the Exploration
Licenses AR/AME-EPS/2674, 2677 and 2678 in Petroleum District XI -
Diyarbakir, in the Republic of Turkey covering areas of 48,265
hectares, 49,775 hectares and 29,903 hectares, respectively
(collectively the 'KARAKILISE LICENSE').
(F) Avenue wishes to have, and SGC have agreed to grant to Avenue, the
right to participate in the Tosun Licence, the Karakilise Licence and
all of the other Exploration Licenses and Production Leases as set
out in Schedule 'A' hereto (but, in the case of the Kahta Lease, in
relation to the Avenue Kahta Xxxxx only).
(G) Avenue wishes to have, and SGC have agreed to grant to Avenue, the
right to participate in all of the Exploration License Applications
to be made by any of the SGC or their Affiliates (excluding those
Exploration Licenses that may be applied for by SGC in relation to
the Excluded Areas) in the period of 24 months from the date of the
execution of this Agreement (the 'FUTURE LICENCE APPLICATIONS').
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(H) In order for Avenue to participate in all or any of the Exploration
Licenses and Production Leases set out in Schedule 'A', and to
participate in the Future License Applications, Avenue must have
completed the Acquisition of a 45% Participating Interest in the
Tosun Licence and have elected to acquire a 45% Participating
Interest in the Karakilise Licence and to participate in the drilling
of the Karakilise-1 Well pursuant to the terms of this Agreement.
(I) In consideration of MEPS having facilitated the arrangements provided
for in this Agreement, SGC have agreed to transfer to MEPS or its
Nominated Affiliate, contemporaneously with and subject to closing of
the Acquisition by Avenue or its Nominated Affiliate of a
Participating Interest in an SGC Interest, a 10% Participating
Interest in that SGC Interest, as more particularly set out below.
(J) ITTE is executing this Agreement for the purposes of clause 8.1(b).
NOW, THEREFORE, for and in consideration of the terms, conditions and covenants
herein set forth, the Parties agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
ACQUISITION means the acquisition by Avenue or its Nominated
Affiliate of a 45% Participating Interest in an SGC Interest, as
contemplated by this Agreement.
AFFILIATE means, with respect to any Person, any other Person that
(a) owns or controls the first Person, (b) is owned or controlled by
the first Person, or (c) is under common ownership or control with
the first Person, where 'own' means a direct or indirect ownership of
more than 50% of the equity interests or rights to distributions on
account of equity of the Person and 'control' means the direct or
indirect power to direct the management or policies of the Person,
whether through the ownership of voting securities, by contract, or
otherwise.
APPLICATION means an application for an Exploration Licence or
Production Lease made under and in accordance with the Petroleum Law.
AVENUE KAHTA XXXXX has the meaning specified in clause 5.4(a).
BUSINESS DAY means any day (not being a Saturday, Sunday or public
holiday), on which banks are open for the commercial business in both
Ankara, Republic of Turkey and New York, New York, USA.
COMMERCIAL DISCOVERY means a discovery of hydrocarbons which the
Operating Committee under the applicable Joint Operating Agreement
determine, in accordance with that Joint Operating Agreement, is
economically feasible for development.
COMMUNICATION has the meaning specified in clause 17.1.
DEPOSIT has the meaning specified in clause 2.1.
ENCUMBRANCE means a lien, claim, encumbrance, security interest,
option, charge or restriction of any kind, but excludes the ERSAN
Royalty Interest and (in relation to the Gercus Licence) the Gercus
Royalty Interest.
ERSAN ROYALTY INTEREST means the right of ERSAN to a 2.5% overriding
royalty interest in petroleum produced from the Exploration Licences
and Production Lease listed in Schedule 'A' (other than the Gercus
Licence).
ERSAN ROYALTY AGREEMENT the agreement between the SCG members holding
interests in the subject Exploration License and Production Leases
and ERSAN, under which ERSAN is granted the ERSAN Royalty Interest.
EXCLUDED AREAS has the meaning specified in recital (B).
EXCLUDED INTERESTS means the Exploration Licenses and Production
Leases presently held by SGC (or any of them) and not listed in
Schedule A, being:
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(a) Zeynel & Nemrut Fields: Petroleum District XII Gaziantep,
Production Lease No: ARI/AME-TMO/3170-3215;
(b) South Mardin: Petroleum District XI, Diyarbakir,
Exploration Licenses No: AR/AME-SEC/ 3730, 3731, 3732,
3733, 3763, 3764, 3765, 3766 and 3767; and
(c) Bulgurdao Field: Petroleum District XIV Adana, Production
Lease No: IR/EPS/723 & 724.
EXPLORATION LICENCE means a licence issued under the Petroleum Law
and conferring on the holder the rights set out in Article 50 of the
Petroleum Law.
FUTURE LICENCE APPLICATIONS has the meaning specified in recital G.
GDPA means the General Director of Petroleum Affairs of the Republic
of Turkey, or the holder from time to time of any successor or
additional governmental office the consent of whom is required under
the Petroleum Law (or any regulations or other subordinate
legislation issued pursuant to or under authority of the Petroleum
Law) in relation to the registration of a Petroleum Rights Holder and
the transfer of an interest in an Exploration Licence or a Production
Lease.
GERCUS LICENCE has the meaning specified in clause 9.2(a)(vi).
GERCUS ROYALTY INTEREST has the meaning specified in clause
9.2(a)(vi).
JOINT OPERATING AGREEMENT means an agreement between the Participants
in respect of any one or more SGC Interests relating to the conduct
of the Joint Operations in relation to and the ownership of those SGC
Interests.
JOINT OPERATING EXPENSES means all of the expenses incurred by the
Operator and/or the Participants (or any of them) in connection with
the Joint Operations, including in respect of geological,
geophysical, engineering and other studies, Exploration License fees
and rentals, seismic, landsat or other studies, drilling, workover
and development, pipelines tank farms and any other capital costs, to
the extent those expenses are properly borne by or chargeable to the
Participants in the relevant Joint Operations (or any of them) under
the terms of this Agreement or the applicable Joint Operating
Agreement.
JOINT OPERATIONS means, in relation to any SGC Interest, all
operations conducted by, for or on behalf of the Participants in that
SGC Interest and in accordance with this Agreement and (when in
effect) the Joint Operating Agreement, or any development program and
budget plan thereunder.
KAHTA LEASE has the meaning specified in clause 5.1(a).
KAHTA OPTION means the Option granted under clause 5.
KARAKILISE DRILLING PROGRAM means the programme of work to be
undertaken by AME as drilling contractor in respect of the Karakilise
1 Well, as set out in Part A of Schedule G.
KARAKILISE LICENCE has the meaning specified in recital E.
KARAKILISE OPTION means the Option granted under clause 4.
KARAKILISE PAYMENT SCHEDULE means the schedule of payments by Avenue
or its nominated Affiliate in relation to the Karakilise Drilling
Program set out in Part B of Schedule G.
KARAKILISE-1 WELL means the well the subject of the Karakilise
Drilling Program.
NET PRE-TAX REVENUE means sales receipts (net of witholdings and
deductions at source and excluding VAT (if any), but before income or
corporate tax calculated and chargeable by reference to individual
participants), less:
(a) royalties and similar payments made or due to the
Government or under the ERSAN Royalty Interest or the
Gercus Royalty Interest in respect of such sales or related
production; and
(b) operating costs incurred by the Operator and/or the
relevant Participants (or any of them) in connection with
the production of those receipts (as determined in
accordance with the applicable Joint Operating Agreement,
but including production and transportation charges,
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commissions, salaries, fees and expenses chargeable to the
joint account of the relevant Participants).
NOMINATED AFFILIATE means, in relation to a Party, any Affiliate of
that Party designated by notice from that Party to the other Parties
as the Person to whom, at closing of an Acquisition, the relevant
Participating Interest is to be transferred, or on behalf of whom its
is to be held by AME, pursuant to this Agreement.
OPERATOR means the operator of the Joint Operations on behalf of the
Participants (subject to the provisions of the applicable Joint
Operating Agreements, the Operator shall be AME).
OPTION means each of the options granted to Avenue under clauses 4, 5
and 6, excluding any such option which has lapsed.
PARTICIPANTS means, in relation to a particular SGC Interest:
(a) in the period from the execution of this Agreement to closing of
the Acquisition of that SGC Interest:
(i) the Parties shown in Schedule 'A' as the
holders of that SGC Interest in the 'Pre Farmin'
period; or
(ii) if that SGC Interests is not listed in
Schedule 'A', the Parties who are the holders of
that SGC Interest at the at the time it is first
granted; and
(b) following closing of the Acquisition of in relation to that SGC
Interest:
(i) the Parties shown in Schedule 'A' as the
holders that SGC Interest in the 'Post Farmin'
period; or
(ii) if that SGC Interest is not listed in
Schedule 'A', Avenue and each of the other
Parties which is the holder of a Participating
Interest in that SGC Interest immediately
following closing of that Acquisition,
and their respective successors and permitted assigns as holders of
the relevant SGC Interests.
PARTICIPATING INTEREST means, in relation to an SGC Interest, an
undivided interest (expressed as a percentage) in that SGC Interest,
and in all rights, interests, obligations and liabilities attaching
thereto or arising from the conduct of the Joint Operation in
relation to that SGC Interest (including geological and geophysical
data resulting from such Joint Operations and all xxxxx resulting
from such Joint Operations).
PARTY or PARTIES means any party to this Agreement or all of them, as
the context requires, and includes their respective successors and
permitted assigns.
PERSON includes any individual, corporation, company, partnership
(general or limited), business trust, or other governmental or
non-governmental entity or association.
PETROLEUM LAW means Petroleum Law No.6326 of the Republic of Turkey,
as amended from time to time (including by Laws No. 6558, 6987, 1702,
2217 and 2208), and the Petroleum Regulations promulgated thereafter
under Government Decree 89/14111 published with the Official Gazette
on July 17th 1989 issue no: 20224 as amended from time to time.
PETROLEUM RIGHT HOLDER means a Person registered under and in
accordance with the Petroleum Law as a petroleum right holder.
PRODUCTION LEASE means a lease issued under the Petroleum Law and
conferring on the holder the rights set out in Article 60 of the
Petroleum Law.
SGC INTERESTS means each of:
(a) the Tosun Licence;
(b) the Karakilise Licence;
(c) the Kahta Lease (in relation to the Avenue Kahta Xxxxx);
5
(d) each of the other Exploration Licences and Production Leases
listed in Schedule 'A'; and
(e) the Exploration Licences issued pursuant to the Future Licence
Applications.
SGC PARTICIPANTS means, in relation to an SGC Interest, each of the
Participants which is a member of SGC.
SUNK COSTS means, in relation to an SGC Interest, the contributions
made by a Participant on or after the date of this Agreement and in
accordance with this Agreement or the applicable Joint Operating
Agreement towards the Joint Operating Expenses incurred in relation
to that SGC Interest or other expenses charged to the joint account
of the Participants in that SGC Interest (including Withholding Tax),
provided that:
(a) Avenue or, as applicable, its Nominated Affiliate shall be
entitled to claim and, in accordance with clause 9.3(d)
and, if applicable, clause 5.5(c), recover:
(i) the full amounts paid pursuant to clauses 3, 4
and 9.3(c) as 'Sunk Costs' relating to the
respective SGC Interest to which such payments
relate; and
(ii) as a 'Sunk Costs' relating to any SGC Interests
in respect of which a Commercial Discovery has
been made (but without double counting), all
stamp tax (including any related penalty for
late payment) paid by it under or in respect of
this Agreement or the transactions contemplated
herein, all fees, costs or expenses paid under
its representation and consulting agreement with
Xx X.Xxxxx relating to the activities
contemplated in this Agreement and all fees and
expenses paid by the legal advisers to Avenue
and IT Technology Inc in relation to the
negotiation, preparation and execution of this
Agreement and the consummation and closing of
the transactions provided for herein; and
(b) each SGC Participant in the Tosun Licence and the
Karakilise Licence may similarly claim and, in accordance
with clause 9.3(d), recover as 'Sunk Costs' its
contributions to the Joint Operating Expenses incurred in
relation to the drilling and other operations and works
carried out in relation to the Tosun-1 Well or the
Karakilise-1 Well on the basis that, unless otherwise
agreed by the Parties and solely for the purposes of clause
9.3 and the corresponding provisions of the applicable
Joint Operating Agreement, the amount of such contributions
shall be deemed in the aggregate to equal the amount of the
Sunk Costs claimed and recoverable by Avenue or its
Nominated Affiliate in relation to those operations and
works.
TOSUN ACQUISITION means closing of the payments and transactions to
be made, delivered or otherwise performed pursuant to clause 7.2 and,
if applicable, clause 8.2(a), in relation to the Tosun Licence.
TOSUN CLOSING DATE means the date of closing of the Tosun Acquisition
in accordance with clause 7.2 and, if applicable, clause 8.2(a).
TOSUN DRILLING CONTRACT means the agreement dated on or about the
date of this agreement between AME, in its capacity as drilling
contractor, of the one part, and AME, in its capacity as Operator on
behalf of the Participants in the Tosun Licence, of the other part,
relating to the drilling of the Tosun-1 Well, in the form of Schedule
X.
XXXXX DRILLING PROGRAM means the programme of work to be undertaken
by AME as drilling contractor in respect of the Tosun 1 Well, as set
out in Schedule X.
XXXXX JOA means the Joint Operating Agreement relating to the Tosun
Licence to be entered into by Avenue, AME, Ersan and MEPS pursuant to
clauses 7.2(c) and 9.1(a).
TOSUN LICENCE has the meaning specified in recital X.
XXXXX 1 WELL means the well the subject of the Tosun Drilling
Contract.
UNITED STATES and US means the United States of America.
VAT means value added tax applicable to the provision of goods and
services according to the Value Added Tax Law No. 3065 published in
the Turkish Official Gazette No. 18563 dated 2 November 1984 and the
Counsel of Ministers' Decrees issued under the same Law.
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WITHHOLDING TAX means the withholding from the petroleum exploration
and production revenues in accordance with Council of Ministers
Decree No. 93/5147 published in the Turkish Official Gazette No.
21805(R) dated 30 December 1993 as may be amended and any other
withholding that may be applicable to this Agreement or the Joint
Operating Agreement, the activities and payments thereunder or
hereunder or the parties hereto or thereto.
1.2 INTERPRETATION
In this Agreement, unless otherwise specified:
(a) references to clauses or Schedules are to clauses of or
Schedules to this Agreement;
(b) headings are inserted for convenience only and shall
not affect the construction of this Agreement;
(c) references to any gender include all others if
applicable in the context;
(d) all uses of include or including mean without
limitation;
(e) references to a contract, agreement, or other document
mean that contract, agreement, or document as amended,
modified, or supplemented, if applicable, from time to
time;
(f) a reference to any statute or statutory provision shall
be construed as a reference to the same as it may have
been, from time to time, amended, modified or re-enacted;
(g) references to times of the day or a day are to the time
or (as the case may be) day in the State of California,
USA;
(h) headings of clauses and Schedules are for convenience
only and do not affect the interpretation of this
Agreement;
(i) where an obligation is expressed to be assumed by more
than one Party, those Parties shall be liable jointly and
severally in respect of that obligation;
(j) an Option shall be taken to have 'lapsed' if the final date
permitted under the terms of this Agreement for exercise of
that Option has passed and the Option has not been
exercised in accordance with this Agreement;
(k) references to Avenue taking or having taken any action, or
making or having made any payment, in relation to or to its
interest in an SGC Interest shall, where Avenue has
notified a Nominated Affiliate in relation to that SGC
Interest, be taken to refer to that Nominated Affiliate;
and
(l) references to an Exploration Licence include any Production
Lease granted to or at the request of the holders of that
Exploration Licence pursuant to the terms of that
Exploration Licence or the Petroleum Law (as applicable to
that Exploration Licence or the holders thereof).
2. DEPOSIT
2.1 PAYMENT OF DEPOSIT
Avenue shall, not later than two Business Days after (and excluding)
the date of satisfaction of the condition in clause 2.4, pay to AME
the sum of US$250,000 (the 'DEPOSIT'). The Deposit shall be applied
by AME in accordance with clause 3.2 and shall be irrecoverable by
Avenue, except as provided in clause 2.2.
2.2 RECOVERY OF DEPOSIT
AME shall immediately repay to Avenue, in US Dollars to an account in
New York, New York, USA the details of which are notified to AME by
Avenue, and without set-off, withholding or deduction, the full
amount of the Deposit, if:
(a) this Agreement is terminated by Avenue pursuant to clause
7.4(c);
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(b) this Agreement terminates pursuant to clause 3.3(d) in
circumstances where a Party or Parties other than Avenue is
in material breach of its obligations under this Agreement
(including a breach of the representations and warranties
in clause 10); or
(c) the terms of a Joint Operating Agreement have not been
settled pursuant to clause 9.1 and Avenue terminates this
Agreement pursuant to clause 9.1(b).
2.3 TERMINATION FOR FAILURE TO PAY DEPOSIT
At any time while Avenue is in breach of clause 2.1 (other than due
to a banking error corrected within 2 Business Days), AME may
terminate this Agreement with immediate effect by giving notice of
termination to Avenue and MEPS. Avenue shall have no liability to any
other Party for failure to pay the Deposit or arising out of the
termination of this Agreement by reason of such a failure.
2.4 CONDITIONS PRECEDENT
(a) The respective rights and obligations of the Parties under
this Agreement (other than clause 2.4(b)), are subject to
the conditions that:
(i) Avenue shall have:
(A) notified AME that the respective
boards of directors of Avenue and ITTE
have duly approved and authorised the
entering into and performance of this
Agreement by Avenue and ITTE; and
(B) delivered to AME a copy of the board
resolutions evidencing the matters
confirmed by the notice (if any) given
under clause 2.4(a)(i)(A); and
(ii) each of the Parties other than Avenue shall have
delivered to Avenue:
(A) a copy of its current memorandum of
association, articles of association,
articles of incorporation and/or
by-laws, as applicable;
(B) (in the case of ERSAN, TMO and GYP
only) the notarised signature circular
of the relevant company, confirming
the persons authorised to sign this
Agreement for and on behalf of that
company, and the number of signatures
required; and
(C) a copy of the resolution of the board
of directors of that company approving
the entry into and performance of this
Agreement by that company.
(b) Each Party severally agrees to use its best endeavours to
satisfy the conditions in clause 2.4(a) applicable to it,
as soon as possible and in any event by not later than the
time referred to in clause 2.4(c). However, it is
recognised that satisfaction of the condition in clause
2.4(a)(i)(A), and consequently (B), is subject to the
discretion of the directors of Avenue and ITTE, which
discretion cannot be and is not fettered by this clause
2.4(b).
(c) If any of the conditions in clause 2.4(a) is not satisfied
or, in the case of the conditions in clause 2.4(a)(ii),
waived by Avenue, by 5pm on the earlier of the fifth
Business Day after (and excluding) the date of this
Agreement and 19 November 2002, this Agreement shall
terminate forthwith, and no Party shall have any further
rights or obligations under this Agreement.
3. TOSUN FARMIN
3.1 ACQUISITION OF INTEREST
In consideration of the payment of US$1 to each of AME and ERSAN (the
receipt and sufficiency of which AME and ERSAN hereby acknowledge)
and subject to the terms and conditions of this Agreement, AME and
ERSAN (each as to a 22.5% Participating Interest) agree to transfer
and assign to Avenue (or its Nominated Affiliate, if so requested by
Avenue), and Avenue agrees to accept (or procure that its Nominated
Affiliate accepts), free and clear of Encumbrances, an aggregate 45%
Participating Interest in the Tosun Licence.
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3.2 FARMIN PAYMENTS
Avenue (or its Nominated Affiliate, as the case may be) shall pay to
AME, as a fixed and final price for its share of the dry-hole costs
associated with the drilling of the Tosun-1 Well (inclusive of all
taxes (other than Withholding Tax) and other costs and expenses of
any kind), the sum of US$2,500,000, payable as follows:
(a) US$250,000 by way of payment of the Deposit in accordance
with clause 2.1;
(b) a further US$1,250,000 at closing of the Tosun Acquisition
(as specified in clause );
(c) a further US$750,000, on or prior to 20 January 2003,
provided that drilling of the Tosun-1 Well is proceeding in
accordance with the Tosun Drilling Contract; and
(d) US$250,000 within 5 Business Days after the Tosun Well has
reached a depth of not less than the 'Agreement Depth'
specified in the Tosun Drilling Contract, as notified by
AME to Avenue.
3.3 CONDITION PRECEDENT
(a) The respective rights and obligations of the Parties under
clauses 3.1, 3.2 and 3.4 are subject to the condition that
Avenue shall have notified AME that it has raised or
received funding or irrevocable and unconditional funding
commitments in respect of its obligations under this clause
3 sufficient in the aggregate to enable Avenue to make when
due each of the payments specified in clause 3.2 and clause
3.4.
(b) Avenue shall use reasonable endeavours to secure the
funding and funding commitments referred to in clause
3.3(a) as soon as practicable after the date of this
Agreement. Avenue agrees that of the first US$3,000,000 in
new capital raised by Avenue after the date of this
Agreement, not less than 80% shall be deemed to be
available for the purposes of clause 3.3(a).
(c) In the spirit of cooperation, Avenue shall notify AME as
the Operator of the Tosun License, at the earliest time
practicable, that either:
(i) it will not be able to raise the funding and
funding commitments referred to in clause 3.3(a)
by 20 December 2002; or
(ii) that the condition in clause 3.3(a) is
satisfied, in which case the relevant Parties
shall proceed to closing in accordance with
clause 7.
(d) If the condition in clause 3.3(a) is not satisfied by 5pm
on 20 December 2002, or Avenue notifies AME as set out in
clause 3.3(c)(i), then Avenue shall have no further rights
or obligations under this clause 3 (other than as stated in
clause 3.3(e)) or clauses 4, 5 or 6 of this Agreement.
(e) If the rights and obligations of Avenue under the other
provisions of this clause 3 and clauses 4, 5 and 6
terminate as provided in clause 3.3(d), then,
notwithstanding any other provision of this Agreement to
the contrary, from the date of such termination until the
Tosun Licence terminates without being replaced by a
Production Lease or, if earlier, the date of termination
of the rights and obligations of Avenue or its Nominated
Affiliate under this clause 3.3(a) in accordance with
clause 3.3(e)(i)(C), AME shall hold in trust for Avenue or
its Nominated Affiliate, and under the terms of clause
8.3(a) to (e) (both inclusive), a 4.5% Participating
Interest in the Tosun Licence. In relation to such
Participating Interest and related arrangements:
(i) AME shall ensure that Avenue or its Nominated
Affiliate receives on a timely basis:
(A) copies of all correspondence or
written communications with the
Government in relation to the Tosun
Licence or related activities, full
minutes of all meetings of the other
Participants in the Tosun Licence (or
there representatives) relating to the
Joint Operations on the Tosun Licence,
and all other information that it
would be entitled to receive or access
as the holder of a 'Percentage
Interest' in the Tosun Licence under
9
the terms of the form of Joint
Operating Agreement attached as
Schedule H;
(B) 4.5% of the Net Pre-tax Revenue
derived by the Operator or the
Participants from the Joint Operations
associated with the Tosun Licence
(including the sale of crude oil); and
(C) a copy of all periodic work,
development or production programs and
related budgets approved by the
Participants in the Tosun-1 Well at
least 45 days in advance of their
taking effect, whereupon it shall have
the right, by notice to AME given at
any time prior to the program and
budget taking effect, to terminate its
rights and obligations under this
clause 3.3(e), without prejudice to
obligations and liabilities accrued
in, or in relation to, the period
prior to such termination;
(ii) Avenue or its Nominated Affiliate shall be
responsible for 4.5% of the Joint Operating
Expenses properly incurred after the date of
this Agreement in relation to the Tosun Licence:
(A) in accordance with any program and
budget delivered to it under (C)
above; or
(B) outside such a program and budget,
provided that the Joint Operating
Expenses to which it must contribute
under this sub-paragraph (B) were not
foreseen at the time the budget was
set for the relevant period and the
total amount of such Joint Operating
Expenses shall not exceed US$50,000 in
any month or US$200,000 in any year;
and
(iii) Avenue or (as applicable) its Nominated
Affiliate shall not be entitled to vote its
Participating Interest in the Tosun Licence or
attend meetings of the operating committee.
3.4 OBLIGATIONS AT DISCOVERY
In the event of a discovery of hydrocarbons in the Tosun-1 Well which
AME and Avenue, acting reasonably, agree merits further appraisal,
AME shall, as contractor for the Participants in the Tosun Licence
and in accordance with the Tosun Drilling Program, undertake all
requisite logging, running of a completion string, cementing and
perforating at the Tosun-1 Well. The aggregate amount which AME may
invoice or otherwise charge to the Participants in the Tosun Licence
in respect of such works shall not exceed US$500,000 (of which
Avenue's share, in accordance with clause 9.3, is 50% or US$250,000).
4. KARAKILISE FARMIN
4.1 GRANT OF KARAKILISE OPTION
In consideration of the payment of US$1 to each of AME and ERSAN (the
receipt and sufficiency of which AME and ERSAN hereby acknowledge)
and subject to the terms and conditions of this Agreement, AME and
ERSAN hereby grant to Avenue the option to acquire, free from
Encumbrances, a 45% Participating Interest in the Karakilise Licence,
provided that Avenue shall not be entitled to exercise this option
unless and until the condition precedent in clause 3.3(a) has been
satisfied.
4.2 EXERCISE OF THE KARAKILISE OPTION
Exercise of the Karakilise Option shall be effected by the giving to
AME of a written notice signed by or on behalf of Avenue stating that
it is exercising the Karakilise Option. No such notice shall be
effective unless given on or before the later of:
(a) the day that is 60 days prior to the proposed date for
spudding of the Karakilise-1 Well, as advised by AME to
Avenue by the giving of not less than 90 days' prior
notice; and
(b) 20 December 2002.
AME anticipates and shall use reasonable endeavours to procure that
spudding of the Karakilise-1 Well shall occur no later than 15 May
2003. Unless Avenue agrees otherwise (such agreement not to be
10
unreasonably withheld), AME agrees that spudding of the Karakilise-1
Well shall occur no earlier than 15 February 2003.
4.3 FAILURE TO EXERCISE KARAKILISE OPTION
If the Karakilise Option has not been exercised by midnight on the
final date permitted under clause 4.2, the Karakilise Option and the
Option granted under clause 6 below shall lapse forthwith.
4.4 PAYMENTS AT CLOSING OF KARAKILISE OPTION
No amount shall be payable by Avenue at closing of the Kahta Option.
However, following and subject to closing, Avenue (or its Nominated
Affiliate, as the case may be) shall be liable to pay to AME, as a
fixed and final price for its share of the dry-hole costs associated
with the drilling of the Karakilise -1 Well (inclusive of all taxes
(other than Withholding Tax) and other costs and expenses of any
kind), the sum of US$2,000,000, payable in the instalments and at the
time specified in the Karakilise Payment Schedule.
4.5 OBLIGATIONS AT DISCOVERY
In the event that, following the exercise and closing of the
Karakilise Option, a discovery of hydrocarbons is made in relation to
the Karakilise-1 Well which AME and Avenue, acting reasonably, agree
merits further appraisal, AME shall, as contractor for the
Participants in the Karakilise Licence and in accordance with the
Karakilise Drilling Program, undertake all requisite logging, running
of a completion string, cementing and perforating at the Karakilise-1
Well. The aggregate amount which AME may invoice or otherwise charge
to the Participants in the Karakilise Licence in respect of such
works shall not exceed US$500,000, of which Avenue's share, in
accordance with clause 9.3, is 50% or US$250,000.
4.6 JOINT OPERATING AGREEMENT
As provided in clause 9.1(c), the Tosun JOA shall be amended so as to
apply also to the Karakilise Licence and related Joint Operations.
5. KAHTA FARMIN
5.1 GRANT OF KAHTA OPTION
(a) AME owns and controls a 100% interest in the
Production Lease IR/EPS/658 in Petroleum
District XII - Gaziantep (the 'KAHTA LEASE'),
covering an area of 7,060 hectares (hereinafter
referred to as the 'KAHTA FIELD').
(b) In consideration of the payment of US$1 to AME
(the receipt and sufficiency of which AME hereby
acknowledges) and subject to the terms and
conditions of this Agreement, AME hereby grants
to Avenue the option to acquire a 45%
Participating Interest in the Avenue Kahta Xxxxx
(as defined below) and, subject to clause
5.1(c), an undivided 45% Participating Interest
in the Kahta Lease.
(c) Notwithstanding clause 5.1(b) or any other
provision of this Agreement, except as expressly
provided in this clause 5 or clause 6.5(a),
Avenue or (as applicable) its Nominated
Affiliate shall not, by virtue of this Agreement
or its holding of a 45% Participating Interest
in the Kahta Lease:
(i) have any rights in respect of the
production from any xxxxx on the
Kahta Lease other than the Avenue
Kahta Xxxxx, or to any plant or
equipment situated on the Kahta
Lease (except for plant and
equipment used exclusively in
relation to the Avenue Kahta Xxxxx);
or
(ii) be required to contribute to the
costs of or arising from any
activities on the Kahta Lease, or to
the rentals and other lease payments
due under the Petroleum Law or the
Kahta Lease,
and AME shall indemnify and hold harmless Avenue or its
Nominated Affiliate from and against any and all such
costs, and all other liabilities arising as holder of an
interest in the Kahta Lease.
11
5.2 EXERCISE OF THE KAHTA OPTION
(a) Avenue shall not be entitled to exercise the Kahta Option
unless and until the condition in clause 3.3(a) has been
satisfied.
(b) Exercise of the Kahta Option shall be effected by the
giving to AME of a written notice signed by or on behalf of
Avenue stating that it is exercising the Kahta Option. No
such notice shall be effective unless given on or before
the day that is 60 days after the completion or permanent
or indefinite abandonment of the Tosun-1 Well (as notified
by AME to Avenue).
(c) Clauses 5.3 to 5.6 below apply from closing of the Kahta
Option (but not otherwise).
5.3 PAYMENTS AT CLOSING OF KAHTA OPTION
No amount shall be payable by Avenue at closing of the Kahta Option.
5.4 WORKOVER AND DRILLING OF AVENUE KAHTA XXXXX
(a) At any time and from time to time in the period of 24
months following the date of this Agreement (or until
termination of this Agreement, if earlier), Avenue shall
have the right to require AME to workover up to 5 existing
xxxxx on the Kahta Field and drill up to 3 new xxxxx on the
Kahta Field or other prospects of its choice in the Kahta
Lease (hereinafter referred to as the 'AVENUE KAHTA
XXXXX').
(b) AME shall conduct the workover operations on the Avenue
Kahta Xxxxx at a fixed turnkey price of US$150,000 per
well (including any applicable VAT).
(c) AME shall conduct drilling operations at a fixed turnkey
cost of US$400,000 per well (exclusive of any applicable
VAT, which shall be satisfied by an allocation of crude oil
from production).
(d) Avenue shall pay 100% of the costs of such workover and
drilling operations 30 days before commencement of such
operations.
5.5 PRODUCTION
(a) AME shall, at its own cost, but subject to paragraph (b)
below, ensure that upon completion of the workover
operations or drilling operations, as the case may be,
unless Avenue directs otherwise, it shall immediately put
such xxxxx on production and shall arrange for the sale,
transportation and delivery of such production at the
prevailing price for Kahta Crude.
(b) AME shall charge a turnkey operating cost of US$2.0 per
barrel and a turnkey trucking cost of US$1.0 per barrel for
each barrel produced and sold from such Avenue Kahta Xxxxx.
No other fees, commissions, expenses, costs or other
charges shall be payable by Avenue, or deducted from
revenues, in respect of the matters to be arranged by AME
pursuant to clause 5.5(a), all of which charges shall be
the responsibility of AME.
(c) Subject to paragraph (d), the Net Pre-tax Revenue derived
from production from the Avenue Kahta Xxxxx shall accrue in
the following proportions:
AME 45%
Avenue 45%
MEPS 10%
(d) At any time when the cumulative amounts received by Avenue
or its Nominated Affiliate under sub-paragraph (i) below is
less than the total amount paid by Avenue or its Nominated
Affiliate under clause 5.4(d) plus the Sunk Costs of Avenue
or its Nominated Affiliate in relation to such of the
Tosun-1 Well and the Karakilise-1 Well in respect of which
a Commercial Discovery has not been made:
(i) fifty percent (50%) of the Net Pre-tax Revenue
otherwise payable to MEPS under clause 5.5(c)
and 100% of the Net Pre-Tax Revenue otherwise
payable to AME under 5.5(c) shall instead be
payable to Avenue or its Nominated Affiliate by
way of recovery of the amounts paid under clause
5.4(d) and the Sunk Costs referred to above; and
12
(ii) Avenue shall be entitled to receive a further
forty five percent (45%), and MEPS shall be
entitled to receive the remaining five percent
(5%), of the Net Pre-tax Revenue derived from
production from the Avenue Kahta Xxxxx.
(e) For the purposes of clause 5.5(d), the application of Net
Pre-tax Revenue against payments under clause 5.4(d) or
Sunk Costs shall be made in US$, with:
(i) any receipts and operating costs used to calculate such
Net Pre-Tax Revenue; and
(ii) any such Sunk Costs,
which are denominated other than in US$ being notionally
converted into US$ at the spot rate of exchange (from the
currency of denomination to US$) quoted in "The Wall Street
Journal" (or, in the absence of such a quotation, in such
other publication as Avenue acting reasonable shall select)
for the Business Day next following the date the same are
received or, as applicable, incurred (or, if such a rate of
exchange is not quoted on the relevant Business Day, on the
nearest earlier date upon which such a rate of exchange is
so available).
5.6 JOINT OPERATING AGREEMENT
The accounting procedures in the Tosun JOA and, to the extent not
inconsistent with the foregoing provisions of this clause 5, the
other provisions of the Tosun JOA shall apply to the Joint Operations
for the Avenue Kahta Xxxxx.
6. FARMIN TO OTHER SGC INTERESTS
6.1 GRANT OF OPTION
In consideration of US$1 (the receipt and sufficiency of which SGC
hereby acknowledge) and subject to the terms and conditions of this
Agreement, the SGC Participants in relation to the relevant SGC
Interests hereby grant to Avenue the option to acquire, free from
Encumbrances, a 45% Participating Interest in all (but not some only)
of the Exploration Licences and Production Leases identified in
Schedule 'A' other than the Tosun Licence, the Karakilise Licence and
the Kahta Lease.
6.2 EXERCISE OF OPTION
(a) Avenue shall not be entitled to exercise the Option granted
under clause 6.1 unless and until it has exercised the
Karakilise Option in accordance with clause 4.2, or after
the date which is 60 days after the completion or permanent
or indefinite abandonment of the Karakilise-1 Well.
(b) Exercise of the Option granted under clause 6.1 shall be
effected by the giving to AME of a written notice signed by
or on behalf of Avenue stating that Avenue is exercising
that Option.
6.3 NEW LICENCE AND LEASE APPLICATIONS
(a) During the period of 24 months from the date of this
Agreement (but not after termination of this Agreement):
(i) Avenue shall not, make any Exploration License
or Production Lease Applications in the Republic
of Turkey including Territorial Waters, other
than through AME; and
(ii) Avenue shall have the right to request AME to
make such Exploration License or Lease
Applications as Avenue may require, and AME
shall comply with such request, but AME shall be
under no obligation to participate with Avenue
in such Applications.
(b) If, at any time while Avenue or its Nominated Affiliate is
the holder of an interest in an Exploration Licence or a
Production Lease (or has such interest held on its behalf
under the terms of clause 8.3) together with any one or
more of the members of SGC or their respective Affiliates,
any one or more of the members of SGC, or an Affiliate of a
member of SGC, (whether alone or together with any other
13
party or parties) makes or intends to make an Application
for the grant of a new Exploration Licence, other than an
Exploration Licence over the Excluded Areas, that member of
SGC shall (and, in respect of its relevant Affiliates, if
any, shall procure) that Avenue (or its Nominated
Affiliate) is:
(i) notified promptly of the intention to make the
Application, and of the information then
available which is relevant to the same
(including the relevant licence area,
participants and work program);
(ii) fully consulted in relation to the relevant
Application and all related matters and
arrangements (including as between the potential
participants in the Application or resulting
Exploration Licence); and
(iii) granted a full, fair and reasonable
opportunity, at all times in the period of 60
days after it receives the notice under
sub-paragraph (i) above (or, if later, the date
on which the relevant Application is made), and
without payment of any consideration to any
other participant (other than in accordance
with the relevant Joint Operating Agreement),
to acquire (either directly when the licence is
granted, or by way of assignment from the
relevant participants, as the circumstances
permit and as soon as is practicable) a 45%
Participating Interest in the resulting
Exploration Licence (and any resulting
Production Lease), to be held, as between the
relevant participants, upon and subject to the
terms of a Joint Operating Agreement consistent
with the Tosun JOA.
6.4 PAYMENT AT CLOSING
At closing of the Option granted under clause 6.1, Avenue shall be
required to pay to AME on behalf of SGC US$450,000, in full and final
satisfaction of Avenue's obligations to contribute to the application
fees and holding costs associated with the SGC Interests the subject
of clause 6.1.
6.5 ADMINISTRATION FEE
(a) From time to time following closing of the Option
granted under clause 6.1, Avenue shall be required to pay
to AME a monthly administration fee which shall cover the
ongoing Exploration License and Production Lease rentals
and the filings required to keep in good standing the
Exploration Licenses and Production Leases in which Avenue
or its Nominated Affiliate has an interest, as set out on
Schedule 'B' hereto.
(b) For each acre by which, following the Acquisition by
Avenue or its Nominated Affiliate of the Exploration
Licences and Petroleum Leases referred to in clause 6.5(a),
the acreage under SGC Interests in which Avenue or its
Nominated Affiliate have a Participating Interest increases
or decreases, the amount of the monthly administration fee
payable under clause 6.5(a) shall be increased (in the case
of an increase in acreage) or decreased (in the case of a
decrease in acreage) by an amount equal to the product of
(i) US$0.10 and (ii) the Participating Interest of Avenue
or its Nominated Affiliate in the relevant SGC Interest.
7. CLOSING OF ACQUISITIONS
7.1 DATE AND LOCATION OF CLOSING
Closing of each Acquisition shall be held at the offices of AME at
Ankara, Republic of Turkey, or at such other place as the relevant
SGC Participants and Avenue shall mutually agree, at 5pm (Ankara
time) on 20 December 2002 (in the case of the Tosun Acquisition) or
(in any other case) on the second Business Day after the exercise of
the relevant Option, or on such other date as the relevant Parties
may in writing agree.
7.2 ACTIONS AT CLOSING
At closing of each Acquisition:
(a) Avenue shall pay to AME, on behalf of the SGC Participants
holding Participating Interests in the relevant SGC
Interest, the amounts (if any) stated in clause 2, 3, 4, 5
or 6, as the case may be, as being payable by Avenue at
closing thereof;
14
(b) such SGC Participants shall deliver to Avenue:
(i) subject to clause 8.2, duly executed assignments
and other instruments of transfer relating to a
45% Participating Interest in the relevant SGC
Interest sufficient in each case to transfer to
Avenue full legal and beneficial title in such
45% Participating Interest free from
Encumbrances;
(ii) certificates from directors or other duly
authorised and responsible officers of each such
SGC Participant certifying, on behalf of the
relevant SGC Participant, that the
representations and warranties in clause 10.1
and, in so far as they are given by or in
relation to that SGC Participant, clause 10.2
are true and valid and not misleading in
relation to the circumstances immediately prior
to and at closing of the relevant Acquisition;
and
(iii) such documents as Avenue or its legal advisors
may reasonably request to demonstrate compliance
with the undertakings in clauses 9.2 and 9.5 and
the matters the subject of the representations
and warranties referred to in sub-paragraph (ii)
above; and
(c) Avenue and such SGC Participants shall each execute and
deliver a Joint Operating Agreement relating to the
relevant SGC Interest, or an amending agreement that
incorporates the relevant SGC Interest into an existing
Joint Operating Agreement between those Parties, as
required by and in the form agreed between Avenue, AME and
MEPS pursuant to clause 9.1.
7.3 PAYMENTS TO AME
Unless otherwise stated in this Agreement, all payments to AME
pursuant to clause 7.2(a):
(a) shall be treated as having been paid in respect of Avenue's
funding obligations as a Participant in relation to the
relevant SGC Interest, as set out in this Agreement and/or
the relevant Joint Operating Agreement; and
(b) shall be made to a US$ denominated bank account of AME held
at a branch located in the United States of America the
details of which account shall be notified by AME to Avenue
not less than one Business Day prior to closing of the
relevant Acquisition.
7.4 FAILURE TO CLOSE
If the respective obligations of Avenue, MEPS and SGC (or any of
them) under clause 7.2 and (if applicable) clause 8.2(a) are not
complied with at the date set for closing of an Acquisition, or if
any Party other than Avenue is in breach of any other provision of
this Agreement (including clause 10) on the date due for closing of
an Acquisition, then Avenue (where SGC or MEPS is in breach) or the
relevant SGC Participants (where Avenue is in breach) may:
(a) defer closing of that Acquisition (so that the preceding
provision of this clause 7 shall apply to closing of that
Acquisition as so deferred); or
(b) proceed to closing of the relevant Acquisition so far as
practicable (without limiting its rights under this
Agreement); or
(c) treat this Agreement as terminated for breach of a
condition.
7.5 EFFECT OF CLOSING
Any provision of this Agreement which is capable of being performed
after but has not been performed at or before closing of any
Acquisition and all representations and warranties and any
undertakings contained in this Agreement shall remain in full force
and effect notwithstanding the closing of any Acquisition.
7.6 TRANSFER TO MEPS
Contemporaneously with and subject to closing of each Acquisition by
Avenue or its Nominated Affiliate in relation to an SGC Interest
(other than the Kahta Lease), the SGC Participants holding
Participating Interests in that SGC Interest shall transfer to MEPS
(or its Nominated Affiliate, if so requested by MEPS, in which case
15
subsequent references in this clause to MEPS shall be treated as
references to such Nominated Affiliate), free and clear of
Encumbrances, and MEPS shall accept the transfer to it of, a 10%
Participating Interest in that SGC Interest, such that, immediately
following closing of that Acquisition and of the relevant transfer of
such Participating Interest to MEPS, the Participating Interests in
the relevant SGC Interest shall be held by the Parties, and as
between such Parties in the proportions, set out in Schedule "A" in
the column 'Post Farmin'. Notwithstanding the foregoing, if, at the
time when the preceding sentence would require the transfer of a
Participating Interest to MEPS, MEPS is not a Petroleum Right Holder,
then clauses 8.2(a) and 8.3(a) to (g) (both inclusive) shall apply,
mutatis mutandis, in respect of the relevant 10% Participating
Interest, and accordingly each transferring SGC Participant shall
hold its relevant proportion of the MEPS 10% Participating Interest
in trust for MEPS in accordance with clause 8.3(a) to (g) until such
time as MEPS becomes a Petroleum Right Holder and the relevant
Participating Interest is transferred to it.
8. CONSENTS AND APPROVALS
8.1 GOVERNMENTAL APPROVALS
(a) The Parties acknowledge that an assignment of a
Participating Interest in an SGC Interest may not be given
effect unless and until:
(i) the proposed assignee has been registered with the GDPA
as Petroleum Right Holder; and
(ii) the GDPA has registered the relevant transfer.
(b) Avenue shall use its best endeavours to provide AME with
all relevant documentation required to register Avenue or
its Nominated Affiliate as a Petroleum Right Holder and
AME will use its best endeavors to register Avenue or its
Nominated Affiliate as a Petroleum Right Holder as soon as
possible. To the extent it is obligated by the Petroleum
Law to do so, ITTE agrees to provide (through AME) to the
GDPA, in support of or as part of the application to
register Avenue or its Nominated Affiliate as a Petroleum
Right Holder, such information concerning its business and
affairs as is within its possession or control and the
disclosure of which is not prohibited by law or
obligations of confidence, and (to the extent of its power
to do so) such commitment in support of the financial
obligations of Avenue or its Nominated Affiliate under the
Petroleum Law as a Petroleum Right Holder (not being a
commitment from, or to provide credit or other support
from, a third party), as AME shall advise is required for
the purposes of such application.
(c) AME shall, on behalf of and in consultation with Avenue or
its Nominated Affiliate, promptly following the execution
of this Agreement take all necessary and appropriate
measures to obtain the consent and approval of the GDPA to
the transfers and assignments to Avenue contemplated by
this Agreement by or as soon as possible after the date
scheduled in this Agreement for closing of the relevant
Acquisition.
(d) AME has prepared appropriate deeds of transfer and
assignment, attached hereto as Schedule 'E', for the
purposes of registering with GDPA the rights and
obligations conferred on Avenue or its Nominated Affiliate
by this Agreement in relation to the Tosun Licence, and
will in anticipation of closing of an Acquisition of an
interest n another SGC Interest prepare equivalent deeds in
relation to such other Acquisition (the 'GDPA REGISTRATION
AGREEMENTS'). In the event of any discrepancy between the
terms of this Agreement or a Joint Operating Agreement to
which Avenue and AME are parties and the GDPA Registration
Agreements, the terms of this Agreement or, as applicable,
the Joint Operating Agreement, shall prevail.
8.2 FAILURE TO OBTAIN GOVERNMENTAL APPROVALS
The Parties acknowledge that there may not be sufficient time
available to register Avenue or its Nominated Affiliate as a
Petroleum Right Holder by the date specified in this Agreement for
closing of an Acquisition. In this event:
16
(a) at closing of the relevant Acquisition:
(i) AME shall, if so required by notice from Avenue
given not later than the day prior to the
scheduled closing date, deliver to Avenue or its
Nominated Affiliate, in such form as Avenue may
reasonably require, a declaration or other
instrument, duly executed by AME and providing
that the 45% Participating Interest which clause
7 would otherwise require be transferred to
Avenue or its Nominated Affiliate instead be
held in trust by AME for Avenue or its Nominated
Affiliate; and
(ii) each SGC Participant who would otherwise be
required to transfer to Avenue or its Nominated
Affiliate all or part of its Participating
Interest in the relevant SGC Interest shall
instead transfer that Participating Interest (or
part thereof) to AME to be held in trust in
accordance with this clause 8.2(a) and clause
8.3; or
(b) if Avenue fails to give such notice under clause 8.2(a)(i)
it shall be deemed to have elected to forfeit its right to
acquire the relevant SGC Interest under the terms of this
Agreement, in which event Avenue shall have no further
rights or obligations hereunder in respect of that SGC
Interest, other than in respect of any antecedent breach of
this Agreement by a Party.
8.3 TRUST ARRANGEMENT
During the period between the closing of an Acquisition in respect of
which Avenue has made an election under clause 8.2(a) and the date
upon which Avenue or its Nominated Affiliate obtains the formal
assignment of a 45% Participating Interest in the relevant SGC
Interests, AME and (in relation to paragraphs (b), (f) and (g) below
only) each SCG Participant who holds an interest in the relevant SCG
Interest and MEPS (or its Nominated Affiliate holding or entitled to
a Participating Interest in the relevant SGC Interest) shall:
(a) hold that Participating Interest as bare trustee for Avenue
or its Nominated Affiliate, as applicable;
(b) privately recognise the right, title and interest in and to
the Participating Interest held in trust by AME and deal
with Avenue or its Nominated Affiliate as the owner and
holder thereof;
(c) not assign, encumber or otherwise adversely affect title to
such Participating Interest;
(d) receive and hold all proceeds, benefits and advantages
accruing to or in respect of such interest for the benefit
of Avenue or its Nominated Affiliate, without entitlement
at any time to commingle any of the same with its own or
any other assets;
(e) in accordance with clause 9.3, deliver to Avenue or its
Nominated Affiliate in a timely manner all revenues,
production allocations, and proceeds received by it
pertaining to such interest;
(f) allow Avenue or its Nominated Affiliate to participate as a
member of the Operating Committee in accordance with the
relevant Joint Operating Agreement as if it were the holder
of the Participating Interest and a party to that Joint
Operating Agreement in respect thereof;
(g) not, without the prior written consent of Avenue or its
Nominate Affiliate, agree to any amendment or alteration of
such Joint Operating Agreement;
(h) not enter into or agree to any amendment or alteration of
any other agreement relating to the relevant SGC Interest
or otherwise commit or agree to make or incur any
undertaking, expenditures or arrangement affecting the
Participating Interest of Avenue or its Nominated Affiliate
in that SGC Interest, in any way except as expressly
provided for in this Agreement; and
(i) procure that, as soon as reasonably practicable after
Avenue or its Nominated Affiliate is registered as a
Petroleum Right Holder, there is delivered to Avenue or its
Nominated Affiliate a duly executed assignment or other
instrument of transfer sufficient to transfer to Avenue or
(as applicable) its Nominated Affiliate full legal and
beneficial title in the 45% Participating Interest which
has been held in trust as aforesaid, free and clear from
Encumbrances.
The perpetuity period in relation to the trusts referred to in
clauses 8.2(a) and 8.3(a) shall be 50 years or, if less, the maximum
period of time permitted under the law of the State of California,
17
USA, but the termination or failure of such trusts shall not affect
the rights of Avenue or its Nominated Affiliate under the other
provisions of this Agreement, including clauses 8.3(a) to (i).
8.4 PLEDGE
If so requested by Avenue at any time after GDPA has declined to
register Avenue or its Nominated Affiliate as a Petroleum Right
Holder, AME shall:
(a) promptly, but not before closing of the Acquisition
relating to the relevant SGC Interest, execute and deliver,
in such form complying with the applicable requirements of
Turkish law as Avenue shall require, an instrument or
agreement under which the Participating Interest in an SGC
Interest held or to be held by AME under the terms of
clause 8.2(a) and 8.3 is pledged, charged or otherwise
encumbered, to the maximum extent possible under Turkish
law, in favour of Avenue or its Nominated Affiliate (as
applicable) as security for the due and proper performance
by AME of its obligations under or arising out of clauses
8.2(a) and 8.3; and
(b) immediately thereafter, join with Avenue or its Nominated
Affiliate in filing such applications and other documents
with the GDPA and taking such other actions as are required
to ensure that such pledge, charge or other encumbrance is
registered under the Petroleum Law against the relevant SGC
Interest and otherwise perfected in accordance with Turkish
law.
8.5 COSTS AND EXPENSES
If Avenue makes the election under clause 8.2(a), Avenue or its
Nominated Affiliate shall:
(a) bear its share of all costs, expenses and liabilities
attributable to the Participating Interest held in trust
for it in accordance with this Agreement and the terms of
the applicable Joint Operating Agreement as if it were the
legal and beneficial owner thereof during such period; and
(b) within 14 days of having been invoiced for the same by AME,
reimburse the reasonable and documented out-of-pocket costs
and expenses incurred by AME in meeting its obligation
under clauses 8.2(a) and 8.4.
8.6 APPROVAL AND WAIVERS OF RIGHTS BY SGC AND MEPS
MEPS and each member of SGC hereby irrevocably and unconditionally
consents to and approves for all purposes the grant, exercise and
closing of the Options as contemplated in this Agreement and waives
any and all rights, interests, options or other claims or any kind
and howsoever arising that would conflict with or impede or otherwise
xxxxxx the xxxxx, exercise or closing of the Options or the
consummation of the transactions contemplated in this Agreement.
9. CONDUCT AND FUNDING OF JOINT OPERATIONS
9.1 JOINT OPERATING AGREEMENTS
(a) Promptly following the execution of this Agreement, Avenue,
AME (as representative of the relevant SGC Participants)
and MEPS shall negotiate in good faith and use all
reasonable endeavours to agree the terms of a Joint
Operating Agreement for the Tosun Licence to be entered
into on the Tosun Closing Date. Unless Avenue, AME and MEPS
agree otherwise, such Joint Operating Agreement shall be
consistent with the relevant provisions of this Agreement
(including clause 9.3) and shall be based upon and
consistent with the draft Joint Operating Agreement set out
in Schedule H.
(b) Avenue may by notice to AME terminate this Agreement with
immediate effect at any time after 30 November 2002 but
prior to exercise of the Tosun Acquisition if, despite
Avenue having complied with its obligations under clause
9.1, the terms of a Joint Operating Agreement have not for
the time being been agreed.
(c) Promptly following the Tosun Closing Date Avenue, AME (as
representative of the relevant SGC Participants) and MEPS
shall negotiate in good faith and use all reasonable
endeavours to agree:
(i) the terms of an amending agreement that
incorporates the Karakilise Licence into the
18
Tosun JOA, to be entered into at closing of the
Karakilise Option; and
(ii) in relation to each of the other SGC Interests,
the terms of one or more Joint Operating
Agreements (or, if Avenue, AME and MEPS so
agree, amending agreements to existing Joint
Operating Agreements) to be entered into by the
relevant Participants at closing of the
Acquisition relating to the relevant SGC
Interest, each such Joint Operating Agreement to
be consistent with the relevant provisions of
this Agreement (including clause 9.3) and, to
the extent relevant and appropriate, to be based
upon and consistent with the draft Joint
Operating Agreement set out in Schedule H.
(d) AME shall be the Operator of the SGC Interests under and
subject to the terms of each Joint Operating Agreement
entered into pursuant to this Agreement. SGC shall procure
that, from the time of closing of any Acquisition of a
Participating Interest in an SGC Licence, AME will hold not
less than a 15% Participating Interest in that SGC Licence.
(e) The terms of any Joint Operating Agreement entered into
pursuant to this Agreement shall, from the time it takes
effect and as between the parties to it, prevail over and
to the exclusion of any conflicting provision of this
Agreement or of any other arrangement between all or any or
those parties.
(f) Prior to the registration of MEPS or its Nominated
Affiliate pursuant to clause 7.6 as the holder of a
Participating Interest in any SGC Interest, MEPS or (as
applicable) the Nominated Affiliate must become a party to
the Joint Operating Agreement relating to that SGC Interest
in respect of the Participating Interest so transferred,
such agreement to be consistent with the rights and
obligations of MEPS or its Nominated Affiliate set forth in
clause 9.3 and (for the avoidance of doubt) to confer on
the holder of the relevant Participating Interest a right
to representation on, and to vote (to the extent of that
Participating Interest) in relation to decision of, the
operating committee established under that Joint Operating
Agreement.
(g) Notwithstanding that Avenue or its Nominated Affiliate may
not for the time being be registered as the holder of
Participating Interest held for its under clauses 8.2 and
8.3, the Joint Operating Agreement executed and delivered
under clause 7.2(c) at the closing of the Acquisition of
that Participating Interest shall have effect as between
the Parties as if Avenue or its Nominated Affiliate were
registered as the holder of that Participating Interest.
9.2 UNDERTAKINGS BY SGC
Each member of SGC (including AME, in its respective capacities as a
Participant, the Operator and the drilling contractor) undertakes as
follows:
(a) Access:
to make available to Avenue and MEPS and their respective
advisors and consultants full and unrestricted access to,
and if so requested provide to them copies (made at the
expense of the recipient) of, all agreements, instruments,
documents, books, records, assets, data and other materials
in the possession or control of each or any member of SGC
and reasonably required by Avenue in relation to this
Agreement and the matters contemplated herein, including in
relation to:
(i) the actual and planned Joint Operations and the
assets and liabilities associated therewith;
(ii) the status, financial condition, operations and
technical capabilities of each of the other
Participants and MEPS;
(iii) the existing commercial arrangements (whether or
not legally binding) between all or any of the
other Participants relating in any way to, or to
matters that may affect, the Joint Operation
(including any existing joint venture
agreements);
(iv) the ownership and status of the SGC Interests
and other interests which are, or may be, the
subject of this Agreement;
(v) the ERSAN Royalty Interest; and
19
(vi) the royalty arrangement (the 'GERCUS ROYALTY
INTEREST') with HOS GeoConsult GmbH in respect
of Licence AR/EPS-GYP numbers 3749 and 3750 (the
'GERCUS LICENCE').
(b) Conduct of Joint Operations:
in relation to the Joint Operations applicable to each of
the SGC Interests, to:
(i) consult with Avenue in relation to any material
decisions to be made in relation to the Joint
Operations, with a view to developing a
consensus with respect to the matters to be
decided;
(ii) keep Avenue fully informed, on a timely basis,
of all material developments in relation to the
Joint Operations, and furnish to Avenue, as
received, copies of all reports of all material
communications relating to the Joint Operations;
and
(iii) notify Avenue of all planned meetings of
representatives of the Participants in relation
to the Joint Operations and invite one or more
representatives of Avenue (as selected by
Avenue) to attend such meetings and, at Avenue's
cost, facilitate the attendance of such
representatives at such meetings (including by
telephone, if Avenue so requires);
(c) No inconsistent acts or omissions:
not to do, or permit or suffer to be done, any act or thing
which is inconsistent with this Agreement or the
transactions contemplated herein, or would give rise to a
breach of the representations and warranties given by SGC
to Avenue in this Agreement.
(d) Payments:
to ensure that AME, in its capacity as drilling contractor
in respect of the Tosun-1 Well and the Karakilise-1 Well,
is duly paid or otherwise receives all other payments or
other consideration due to it in respect of the dry hole
drilling of such xxxxx, other than sums payable by Avenue
or its Nominated Affiliate under clause 3 or 4 (as
applicable).
(e) Dealings with third parties:
(i) neither it nor any of its Affiliates nor any of
their officers, directors, employees, agents,
shareholders or representatives (including a
consultant) shall make, or cause to be made, in
connection with the SGC Interests, the Joint
Operations, this Agreement or the transactions
contemplated by this Agreement, payments, loans
or gifts or promises or offer of payments, loans
or gifts of any money or anything of value,
directly or indirectly:
(A) to or for the use or benefit of any
official or employee of any government
or agency or instrumentality thereof
(including without limitation any
enterprise owned or controlled by such
government), or any Person acting in
an official capacity for or on behalf
of any government, department, agency
or instrumentality;
(B) to or for the use or benefit of any
political party or official or
candidate thereof, or any official or
employee of a public international
organization, or any person acting in
an official capacity for or on behalf
of any political party or public
international organization;
(C) in violation of any applicable law; or
(D) to any other Person either as an
advance or as a reimbursement if it
knows that any part of such payment,
loan or gift will be directly or
indirectly given or paid by such other
Person to an official, party, party
official or candidate referred to in
sub-paragraph (A) or (B) above, or
will reimburse such other Person for
payments, gifts, or loans previously
made, to any such official, party,
party official or candidate;
20
(ii) the receipt by it of the consideration which may
be obtained hereunder or of any funds or
interests under the SGC Interests does not
violate the laws, decrees and regulations of the
Republic of Turkey;
(iii) it shall answer and shall cause each of its
officers, directors, employees and
attorneys-in-fact, and its Affiliates and their
respective officers, directors, employees and
attorneys-in-fact, to answer, and shall exert
reasonable commercial efforts to cause its and
their consultants to answer, in reasonable
detail, any questionnaire or other written or
oral communications, or any request for
information from Avenue or its outside auditors,
relating to the representations, warranties,
covenants and undertakings set forth in
paragraphs (i) and (ii) above; and
(iv) to provide, on or before the 30th day after
notice from Avenue so requesting, Avenue with
certification to the effect that it has not, and
its Affiliates and their personnel have not,
made or sought any payments, directly or
indirectly, in violation of paragraph (i) or
(ii) above.
9.3 SHARING OF PRODUCTION AND FUNDING OF JOINT OPERATIONS
(a) The following provisions of this clause 9.3 apply in
relation to each SGC Interest (other than the Kahta Lease)
from the time of closing of Avenue's (or its Nominated
Affiliate's) Acquisition of that SGC Interest until a Joint
Operating Agreement is entered into and comes into effect
with respect to that SGC Interest, and shall be reflected
in the applicable Joint Operating Agreements.
(b) Subject to clauses 7.6, 8.2 and 8.3, the Participating
Interests in the SGC Interests shall be held and, subject
to clause 9.3(d), the Net Pre-tax Revenue derived by the
Operator or the Participants from the Joint Operations
associated with any SGC Interest (including the sale of
crude oil by AME on behalf of the relevant Participants)
shall accrue to the Participants in that SGC Interest, in
the following proportions:
SGC Participants 45%
Avenue 45%
MEPS 10%
(c) Except as otherwise provided in this Agreement, the Joint
Operating Expenses properly incurred after the date of
this Agreement in relation to each SGC Interest shall be
borne in the following proportions:
SGC Participants 50%
Avenue 50%
For the avoidance of doubt, MEPS shall not be required to
fund the Joint Operating Expenses in relation to the SGC
Interest.
(d) If the Joint Operations relating to any SGC Interest
result in the making of a Commercial Discovery, then:
(i) at any time when the cumulative amounts received
by Avenue under this sub-paragraph (i) is less
than the total amount of Sunk Costs incurred by
it in relation to the SGC Interests (whether or
not the SGC Interests in respect of which the
Commercial Discovery has been made), twenty five
percent (25%) of the Net Pre-tax Revenue
otherwise payable to MEPS under clause 9.3(b)
shall instead be payable to Avenue by way of
recovery of such Sunk Costs;
(ii) at any time when the cumulative amounts received
by the SGC Participants in relation to such
Joint Operations this sub-paragraph (ii) is less
than the total amount of Sunk Costs incurred by
is such SGC Participants in relation to the SGC
Interests (whether or not the SGC Interests in
respect of which the Commercial Discovery has
been made), twenty five percent (25%) of the Net
Pre-tax Revenue otherwise payable to MEPS under
21
clause 9.3(b) shall instead be payable to such
SGC Participants (as between them in such
proportions as they may agree) by way of
recovery of such Sunk Costs; and
(iii) for the avoidance of doubt, while sub-paragraph
(i) or (ii) above is in operation MEPS shall
continue to be entitled to receive the remaining
75% (or, if both such sub-paragraphs are
operating simultaneously, 50%) of the Net
Pre-tax Revenue derived by the Operator or the
Participants from the Joint Operations
associated with the relevant SGC Interest.
(e) For the purposes of sub-paragraphs (i) and (ii) of clause
9.3(d), the application of Net Pre-tax Revenue against Sunk
Costs shall be made in US$, with:
(i) any receipts and operating costs used to calculate such
Net Pre-Tax Revenue; and
(ii) any such Sunk Costs,
which are denominated other than in US$ being notionally
converted into US$ at the spot rate of exchange (from the
currency of denomination to US$) quoted in "The Wall Street
Journal" (or, in the absence of such a quotation, in such
other publication as Avenue acting reasonable shall select)
for the Business Day next following the date the same are
received or, as applicable, incurred (or, if such a rate of
exchange is not quoted on the relevant Business Day, on the
nearest earlier date upon which such a rate of exchange is
so available).
(f) MEPS shall also not be entitled to participate in any sole
risk activities undertaken under the terms of a Joint
Operating Agreement, unless agreed by the other sole risk
participants in that activity. A representative of MEPS
shall be entitled to attend meetings of the Operating
Committee.
(g) Each Participant shall, in accordance with the Petroleum
Law, have the right to take its proportionate share of
production in kind at the end of any existing crude oil
sale contract by giving notice to the other Participants at
least 30 days prior to the expiration of such contract.
Such Participant taking its production in kind shall be
responsible for the cost of any additional labour or
equipment incurred as a result of its exercise of such
right.
(h) Each Party (including MEPS or its Nominated Affiliate)
individually shall be responsible for its own income and
corporate tax liabilities and for all withholding tax
applicable to payments made to it under this Agreement.
(i) All costs related to drilling, testing and production as
well as operating revenue from crude oil sales will be
handled by AME as Operator and monthly reports will be
issued to Avenue or its Nominated Affiliate and MEPS.
(j) In any case where Avenue or MEPS elects to have its
Participating Interest in an SGC Interest transferred to
its Nominated Affiliate, the references in this clause 9.3
to 'Avenue' or 'MEPS', as applicable, shall be treated as
references to that Nominated Affiliate insofar as this
clause 9.3 relates to that SGC Interest.
9.4 CONTRACTORS
(a) AME shall:
(i) undertake and complete the Tosun Drilling
Program in accordance with Schedule F and the
Tosun Drilling Contract; and
(ii) undertake and complete the Karakilise Drilling
Program in accordance with Part A of Schedule G.
(b) Provided that Avenue or its Nominated Affiliate has paid
all sums due and owing by it under clause 3 or, as
applicable, clause 4 in respect of the operations and works
in relation to which such payments were to be made, AME
shall perform under this Agreement, and, subject always to
the terms of this Agreement, the Tosun Drilling Contract
and any dry hole drilling contract entered into in relation
22
to the Karakilise-1 Well as if all other sums due and owing
to it in respect of such operations and works (whether
under such drilling contracts or otherwise) had been
properly and punctually paid in full, regardless of whether
this is in fact the case.
(c) In relation to any other drilling, workover, appraisal and
development operations to be undertaken in relation to the
SGC Interests, and the transportation to market of crude
oil produced from any of the SGC Interest and in which the
Parties (or any of them) have an interest:
(i) AME shall offer to undertake such operations or,
as applicable, provide appropriate
transportation services as contractor for the
relevant Participants at favorable rates and, in
the case of drilling operations, under the terms
of the Model Turnkey Contract of the
International Association of Drilling
Contractors; and
(ii) Avenue may call for the contract for any such
works to be put out to tender in accordance with
the terms of the applicable Joint Operating
Agreement.
9.5 INSURANCE
(a) AME, in its capacity as Operator, shall obtain and
maintain, with respect to each of the SGC Interests and the
Joint Operations and joint property relating thereto, all
insurance required under the Petroleum Law, the License or
any other applicable law. Without limitation to the
foregoing, AME shall obtain and maintain:
(i) workers' compensation insurance with limits of
US$75,000 for the death or injury to any one
person and US$225,000 for each accident;
(ii) all risk insurance (including in relation to
property and equipment damage, pollution,
contamination and other environmental risks)
with a limit of US$1,500,000 per occurrence; and
(iii) third party/public liability insurance with a
limit of US$150,000 per occurrence,
in each case with a reputable and creditworthy insurer and
on terms that are commercially reasonable and customary for
such risks in the same or similar circumstances. The cost
of such insurances shall be Joint Operating Expenses.
(b) AME shall, with respect to all insurance obtained by it
pursuant to paragraph (a) above:
(i) inform Avenue at least ten (10) Business Days
before the inception or renewal dates of the
applicable insurance contract or contracts of
the salient terms and conditions (including
premia) quoted by the insurers to AME;
(ii) promptly inform Avenue when such insurance is
taken out and supply Avenue with copies of the
relevant policies when the same are issued;
(iii) arrange Avenue and the other relevant
Participants, according to their respective
Participating Interests, to be named as
co-insureds on the relevant policies with
waivers of subrogation in favour of Avenue and
such other Participants in respect of their
Participating Interests; and
(iv) duly file and notify the relevant Participants
of all claims and take all necessary and proper
steps to collect any proceeds and credit them to
the joint account of such Participants.
(c) AME, as Operator, shall:
(i) take all reasonable steps to ensure that all
contractors (including sub-contractors)
performing work in respect to the Joint
Operations obtain and maintain all insurance
required under the License, the Petroleum Law,
any other applicable law and such other
insurance as AME or (where the relevant
contractor is AME or an Affiliate of AME,
Avenue) deems reasonable and appropriate; and
(ii) with respect to all insurance obtained by such
contractors (sub-contractors), take all
reasonable steps to arrange for such contractors
(including sub-contractors) to obtain from their
23
insurers a waiver of subrogation in favour of
the Participants in the relevant SGC Interest in
respect of their Participating Interests
therein.
(d) Nothing in this clause 9.5 shall limit or otherwise affect
the obligations of AME as contractor (including
sub-contractor) in respect of any of the Joint Operations,
including obligations under any applicable drilling
contract at its cost to obtain and maintain insurance
cover.
10. REPRESENTATIONS AND WARRANTIES
10.1 SGC'S REPRESENTATIONS AND WARRANTIES
Each member of SGC severally represents and warrants to Avenue that,
on the date of this Agreement and as at and immediately prior to
closing of each Acquisition:
(a) Each of the SGC Interests is in good standing and in
full force and effect and was entered into and granted in
full compliance with all applicable laws and regulations of
the Republic of Turkey.
(b) It has the right, power and authority to transfer and
assign the legal and beneficial ownership of the percentage
interest in the SGC Interests to Avenue or its Nominated
Affiliate under the terms and conditions herein contained.
(c) No event has occurred or circumstances exist which
would or could give rise to, cause or be the basis or
revocation, invalidation or termination of any of the SGC
Interests.
(d) Save as disclosed herein in relation to the MEPS
interest, the ERSAN Royalty Interest and the royalty
interest of the Government of Turkey arising under the
Petroleum Law and, in relation to the Gercus Licence, the
Gercus Royalty Interest, it has not transferred or assigned
to any Person, or granted or permitted or suffered to
subsist any Encumbrance of any kind and in any manner any
of the rights held by it under the SGC Interests, or agreed
to do so, and the SGC Interests are free and clear of all
Encumbrances.
(e) To the best of its knowledge, there are no pending,
threatened or outstanding claims, lawsuits, judgments of a
court of law, arbitration or administrative proceeding or
any other circumstances likely to give rise to same,
affecting the SGC Interests, this Agreement transactions to
be effected hereunder or pursuant hereto, and all
obligations under or arising out of the SGC Interests
requiring performance on or before the date of giving or
repetition of this representation and warranty have been
fully performed.
(f) Its execution, delivery and performance of this
Agreement do not and will not:
(i) conflict with;
(ii) result in a breach of;
(iii) constitute a default under;
(iv) accelerate or permit the acceleration of the
performance required by;
(v) permit the exercise of or give rise to the
giving of any required notice with respect to
any right of consent or any preferential
purchase right, option or right of first
refusal with respect to;
(vi) (except as referred to in clause 8.1(a))
require any consent, authorization or approval
under;
(vii) give rise to a right of termination under or
materially modify; or
(viii) result in the creation or imposition of any
Encumbrance upon,
the SGC Interests or any other material agreement,
licence, permit, consent or instrument to which it is a
party or is subject, or under the Petroleum Law.
(g) It has delivered to the Avenue a true, correct and
complete copy of (i) the SGC Interests listed in Schedule
'A' (including all attachments thereto) (ii) all material
correspondence between it, on the one hand, and the
24
Government of the Republic of Turkey or any department,
agency or authority thereof (including any local or
regional government or governmental agency or authority),
on the other hand, relating to the SGC (iii) all
agreements between it and all or any of the other Parties
relating in any way to or that may in any way affect the
SGC Interests or the arrangements contemplated in the
Agreement and (iv) all material technical, accounting,
geological, geophysical and geotechnical data in its
possession or control regarding the SGC Interests and the
areas covered thereby.
(h) In conducting operations with respect to the areas the
subject of the SGC Interests, and in relation to the Tosun
Drilling Program and the Karakilise Drilling Program, it
has:
(i) complied in all respects with the terms and
conditions of the SGC Interests and all
applicable laws and regulations of the Republic
of Turkey;
(ii) obtained and (to the extent such operations have
been undertaken) complied with all requisite
permits, licenses and authorizations (including
as extended, if applicable) required under such
laws and regulations; and
(iii) incurred no obligations or liabilities (whether
liquidated or unliquidated, fixed or contingent,
known or unknown) related to the area the
subject of the SGC Interest or the SGC Interests
except as expressly set forth in the terms of
SGC Interests.
(i) The information contained in Schedule 'A' is
true, accurate and complete in all respects.
10.2 MUTUAL REPRESENTATIONS AND WARRANTIES
Each Party represent and warrants severally to each other Party that,
on the date of this Agreement and as at and immediately prior to
closing of each Option exercised by Avenue:
(a) It is a duly organised, validly existing entity of the
type described in the introduction to this Agreement and is
in good standing under the laws of the jurisdiction of its
formation. It has all requisite power and authority to
enter into and to perform its obligations under this
Agreement.
(b) (Subject, in the case of Avenue and ITTE, to
satisfaction of the condition in clause 2.4(a)(i)(A)) its
execution, delivery and performance of this Agreement have
been authorised by all necessary corporate action on its
part and that of its equity owners (if required) and do not
and will not (i) violate any law, rule, regulation, order
or decree applicable to it or (ii) violate its
organisational documents.
(c) (Subject, in the case of Avenue and ITTE, to
satisfaction of the condition in clause 2.4(a)(i)(A)) this
Agreement is a legal and binding obligation of that Party,
enforceable against that Party in accordance with its
terms, except to the extent enforceability is modified by
bankruptcy, reorganisation and other similar laws affecting
the rights of creditors generally and by general principles
of equity.
(d) There is no litigation pending or, to the best of its
knowledge, threatened to which that Party or any of its
Affiliates is a party that could reasonably be expected to
have a material adverse effect on the financial condition,
prospects, or business of that Party or Affiliate its
ability to perform its obligations under this Agreement.
(e) The recitals to this Agreement, insofar as they relate
to that Party, are true and accurate.
(f) Neither it nor any of its Affiliates nor any of their
officers, directors, employees, agents, shareholders or
representatives (including a consultant) has made, or
caused to be made, in connection with the SGC Interests,
the Joint Operations, this Agreement or the transactions
contemplated by this Agreement, payments, loans or gifts or
promises or offer of payments, loans or gifts of any money
or anything of value, directly or indirectly:
(i) to or for the use or benefit of any
official or employee of any government or agency
or instrumentality thereof (including without
25
limitation any enterprise owned or controlled by
such government), or any Person acting in an
official capacity for or on behalf of any
government, department, agency or
instrumentality;
(ii) to or for the use or benefit of any
political party or official or candidate
thereof, or any official or employee of a public
international organization, or any person acting
in an official capacity for or on behalf of any
political party or public international
organization;
(iii) in violation of any applicable law; or
(iv) to any other Person either as an
advance or as a reimbursement if it knows that
any part of such payment, loan or gift will be
directly or indirectly given or paid by such
other Person to an official, party, party
official or candidate referred to in
sub-paragraph (i) or (ii) above, or will
reimburse such other Person for payments, gifts,
or loans previously made, to any such official,
party, party official or candidate.
(g) It and, by way of dividends or return of capital, its
shareholders and ultimate beneficial owners constitute all
of the Persons or entities who are to receive, directly or
indirectly, any part of the benefits which may be received
by it hereunder or under the SGC Interest or the Joint
Operations, and neither it nor any of its Affiliates nor
any director, officer, employee or attorney-in-fact of it
or any of its Affiliates, nor any shareholder or ultimate
beneficial owner of more than 5% of the issued and
outstanding shares of any class of it or any of its
Affiliates, is:
(i) an official or employee of any
government, or any department, agency or
instrumentality of any government;
(ii) a political party or official thereof;
(iii) a candidate for political office
therein;
(iv) an official or employee of a public
international organization; or
(v) a Person acting in an official capacity
for or on behalf of any government, or any
department, agency or instrumentality thereof,
any political party, or any public international
organization.
(h) The receipt by it of the consideration which may be
obtained hereunder or of any funds or interests under the
SGC Interests does not violate the laws, decrees and
regulations of the republic of Turkey.
(i) No other Person or entity claiming by, through or under
it or any of its Affiliates, and no director, officer,
employee or attorney-in-fact of or consultant to any of the
preceding is or shall be entitled to any fee or
compensation by reason of the execution or implementation
of this Agreement.
11. INDEMNITIES AND LIABILITIES
11.1 RECIPROCAL INDEMNITIES FOR BREACH
Each Party agrees that it shall indemnify and hold harmless the other
Parties from and against any and all losses, costs, demands and
damages sustained by a Party as a result of any breach by the former
of any of its representations or warranties in this Agreement or the
covenants in clauses 9.2 and 9.5.
11.2 INDEMNITY AGAINST PRE-EXISTING LIABILITIES
AME shall indemnify and hold harmless Avenue and any Nominated
Affiliate from and against any and all claims, demands, losses,
damages, expenses, costs, obligations, duties, commitments,
liabilities, judgments, orders, decrees, actions and proceedings
(including the payment of reasonable attorneys' fees) arising out of
or connected with the SGC Interests or activities relating thereto
which arose or occurred prior to the date of this Agreement.
26
11.3 LIMITATION OF LIABILITY
No Party shall be liable for any consequential, incidental, indirect,
special, exemplary or punitive damages in any action arising out of
this Agreement.
12. TERM AND TERMINATION
12.1 TERM
This Agreement takes effect from the date of execution hereof by all
of the Parties and shall remain in effect until terminated pursuant
to or as referred to in clause 12.2.
12.2 TERMINATION
This Agreement shall terminate:
(a) in accordance with clause 2.3 (Termination for failure to
pay Deposit), clause 3.3(d) (Termination for failure to
satisfy condition precedent), clause 3.5(b)(i), clause
7.4(c) (termination for failure to complete) or clause
9.1(b) (termination for failure to agree terms of Joint
Operating Agreement); or
(b) upon the giving of notice from Avenue to AME at any time
while any Party to this Agreement other than Avenue is in
breach of this Agreement or any representation and warranty
given by any such Party is untrue, inaccurate or in any
material respect misleading; or
(c) upon the giving of notice from AME to Avenue at any time
within the period of 30 days following termination of the
Joint Operating Agreement entered into on the Tosun Closing
Date by reason of breach of that agreement by Avenue.
12.3 SURVIVAL OF RIGHTS AND REMEDIES
The termination of this Agreement shall not prejudice or limit the
rights and remedies of a Party arising out of or in connection with
any antecedent breach of this Agreement (including a breach of
representation and warranty).
12.4 PROVISIONS SURVIVING TERMINATION
The following provision of this Agreement shall continue to apply
notwithstanding the termination of this Agreement:
(a) clauses 3.3(e), 11 (Indemnities) and 14 (Confidentiality);
and
(b) any other provision that expressly or by necessary
implication survives termination of this Agreement.
13. ASSIGNMENT AND ENCUMBRANCES
13.1 NO ASSIGNMENT WITHOUT CONSENT
Except as provided in this clause 13.2, none of the Parties may
transfer or assign its rights or obligations under this Agreement in
whole or in part without the prior approval of each of the other
Parties, provided that if any such other Party in its absolute
discretion is satisfied with the financial capability of the proposed
assignee or transferee, such consent shall not to be unreasonably
withheld by that Party.
13.2 ASSIGNMENT TO AFFILIATES
Each of Avenue and MEPS shall have the right to assign and transfer
all or part of its rights and obligations under this Agreement to an
Affiliate registered or with a branch in Turkey. Avenue or, as the
case may be, MEPS, shall guarantee and hereby guarantees the
performance of any such Affiliate to whom it assigns rights and
obligations under this Agreement.
13.3 DEED OF ADHERENCE
As a condition to any transfer of rights and obligations of a Party
under this Agreement, the transferee must execute a deed by which it
agrees to be bound by this Agreement.
27
13.4 DEALINGS WITH SGC INTERESTS
With the exception of the Ersan Royalty Interest and, in relation to
the Gercus Licence, the Gercus Royalty Interest, each Participant
undertakes and shall ensure that its interest in the SGC Interests
shall not be assigned, transferred or otherwise disposed or burdened
by any Encumbrance, royalty, production payment or overriding royalty
of any type whatsoever, subject only to royalties payable to the
Government of Turkey in accordance with the laws of the Republic of
Turkey.
14. CONFIDENTIALITY
14.1 DUTY OF CONFIDENCE
Each Party shall, and shall cause its Affiliates to, keep
confidential all of the terms of this Agreement and all written
and/or electronically stored financial data and other proprietary and
commercially sensitive information regarding the SGC Interests and
the Joint Operations; provided, however, that this obligation of
confidentiality shall not apply to any disclosure of information:
(a) that is in or enters the public domain without a breach
of a duty of confidentiality by the disclosing Person or
was obtained from a third party having no confidentiality
restriction to the Parties;
(b) the disclosure of which is required of the disclosing
Party or its Affiliate by law, regulation, legal process,
or order of any court or governmental body having
jurisdiction (including applicable State and Federal
securities laws, rules and regulations in the USA) or
pursuant to the regulations of any securities exchange upon
which any of the Parties or its Affiliate is (or is to be)
listed or its securities are (or are to be) traded;
(c) to its Affiliates, and to the employees, agents,
consultants, bankers, financial and professional advisers
of that Party or its Affiliate, provided that (i) they have
a reasonable need to know the information and (ii) they are
instructed and agree in writing to maintain this
information confidential; or
(d) by Avenue or its Affiliates or any Person referred to
in paragraph (c) above to whom Avenue has disclosed the
same, to investors or targeted potential investors in
Avenue or any Affiliate of Avenue in connection with a
capital raising or the listing of equities.
14.2 ANNOUNCEMENTS
Any announcement or circular or other publicity relating to this
Agreement or any termination hereof shall prior to its publication be
approved in writing by each of the Parties as to its content, form
and manner of publication (such approval not to be unreasonably
withheld or delayed) save for any announcement, circular or other
publicity required to be made or issued by any Party or its Affiliate
pursuant to applicable State and Federal securities laws, rules and
regulations in the USA or the regulations of any securities exchange
upon which it is (or is to be) listed or its securities are (or are
to be) traded. Save as permitted by the preceding sentence, no Party
shall make any announcement or issue any circular or other publicity
relating to this Agreement or any termination hereof, provided that
such Party shall use its reasonable endeavours to provide a copy of
such publicity five Business Days prior to the making or issue
thereof.
14.3 SURVIVAL
The provisions of clauses 14.1 and 14.2 shall survive for a period of
2 years following termination of this Agreement.
15. TAXES
15.1 GENERAL
Expect as otherwise stated herein, any taxes and duties (other than
VAT and stamp taxes applicable in the Republic of Turkey) or other
levies payable in the Republic of Turkey as a direct result of the
transfer and assignment of the interests in the SGC Interest (but
excluding income, corporate or similar taxes assessed separately by
reference to individual Parties) shall be paid by the Parties in
28
proportion to their respective Participation Interests in the SGC
Interest (including any such Participating Interest held on its
behalf by AME under the terms of this Agreement).
15.2 VAT
Unless otherwise expressly stated in this Agreement, all amount
expressed to be payable under this Agreement shall be inclusive of
any applicable VAT.
15.3 STAMP TAX
Avenue shall be liable for all stamp tax arising in the Republic of
Turkey in connection with the execution of this Agreement (if any).
SGC agree to cooperate, as reasonably required by Avenue, in relation
to the determination of whether, and if so how much, such stamp tax
is payable, and in relation to having stamp tax assessed in the
Republic of Turkey.
15.4 WITHHOLDING TAX
Notwithstanding any other provision of this Agreement to the
contrary, as between the SGC Participants in an SGC Interest and
Avenue or its Affiliates, any Withholding Tax incurred in relation to
the Joint Operating Expenses or other costs charged to the joint
account of the Participants in that SGC Interest, or the payments by
such Participants in relation thereto (including payments by Avenue
or its Nominated Affiliate under any of clauses 2 to 7 (both
inclusive) of this Agreement shall ultimately be borne as to 50%
percent by the relevant SGC Participants (as between them in
proportion to their respective Participating Interest) and as to the
remaining 50% by Avenue or its Nominated Affiliate; if necessary,
appropriate adjusting payment shall be made fro time to time to give
effect to the foregoing.
16. DEFAULT
In the event that a Party defaults in the performance of any of its
obligations under this Agreement, then the other Parties (or any of
them) shall be entitled to rights and remedies available at law or
equity (including damages and/or specific performance, as permitted
by applicable law).
17. NOTICES
17.1 MANNER OF SERVICE
Any written communication or document, including process in any legal
action or proceedings (a 'COMMUNICATION') which any Party may desire
to give or deliver in connection with this Agreement shall be
delivered by hand or sent by fax to the addressee at its address or
fax number set out in clause 11.3 (any such notice sent by fax to be
confirmed in hard copy form by post or by hand, provided that this
shall not prevent the notice from having been effectively delivered
upon receipt by the addressee of the relevant fax).
17.2 TIME OF NOTICE
A Communication shall be deemed to have been given, if delivered by
hand, at the time of delivery, or, if sent by fax, on the Business
Day following the day on which the same shall have been transmitted
(provided that a copy of the Communication is delivered by hand as
soon as is practicable).
17.3 ADDRESSES
The current addresses, fax numbers and, where applicable, contact
names of the Parties for the purposes of Communications are as
follows:
AME - ON BEHALF OF SGC:
Aladdin Middle East Ltd.
Attn: Xx Xxxxx Xxxxx
Sogutozu Caddesi No:23
Balgat-Ankara*
00000 Xxxxxx
Tel: x00.000.0000000 or 000 0000
Fax:x00.000.0000000 or 287 5768
29
AVENUE AND ITTE:
Attn: Xx Xxxxxxxx Xxxxxx
00000 Xxxxxxx Xxxx.,
0xx Xx. Xxxxxxx Xxxx,
XX, XXX and
Tel: x000 000 0000
Fax:x000 000 0000
COPIED TO:
Attn: Xx Xxxxxxxx Xxxxxx
00-00 Xxxx Xxxx,
Xxxxxxx,
Xxxxxxxxx, Xxxxxxxxx,.
Tel: x(000) 0000 0000
Fax:x(000) 0000 0000
AND TO:
Xx Xxxx Poll
00 Xxxxxx Xxxx,
Xxxxxxxx, XX 0000
Xxxxxxxxx
Tel: x00 0 0000 0000
Fax: + 00 0 0000 0000
MEPS:
Xxx Fellowes or Xxx Xxxxxxx
Xxxxx 0, 000 Xxxxxxxxx Xxxxxx, Xxxxxx
Xxxxxxxx 0000, Xxxxxxxxx
Tel: x00 0 0000 0000
Fax: x00 0 0000 0000
AND TO:
Xxx Fellowes and Cem Xxxxx
Sogutozu Caddesi No:23
Balgat-Ankara*
00000 Xxxxxx
Tel: x00.000.0000000 or 000 0000
Fax:x00.000.0000000 or 287 5768
30
A Party may change its address, fax number or contact name for the
purpose of Communications by serving notice on the other Parties in
accordance with this clause.
17.4 PROOF OF SERVICE
In proving service of a Communication, it shall be sufficient to
prove that the envelope containing the Communication was properly
addressed and delivered to the address shown thereon, or that fax
transmission of the Communication was made after obtaining in person
or by telephone appropriate evidence of the capacity of the addressee
to receive the same, as the case may be.
18. GENERAL
18.1 ENTIRE AGREEMENT
This Agreement shall set forth the entire agreement and understanding
between the Parties as to the subject matter thereof, and supersedes
and cancels all prior negotiations, discussions, representations,
agreements and understandings whether written or oral pertaining to
such subject matter (including the SGC/MEPS Agency Agreement).
18.2 FURTHER ASSURANCES
Each of the Parties shall do all such acts and execute and deliver
all such documents as may be reasonable required in order to fully
perform and carry out the terms of this Agreement.
18.3 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit
of each of the Parties and their respective successors and permitted
assignees.
18.4 NO WAIVER
No waiver by a Party of a failure or failures by any of the other
Parties to perform any provision of this Agreement shall operate or
be construed as a waiver in respect of any other or further failure
whether of a like or different character or a waiver by any other
Party. No failure or delay on the part of a Party in exercising any
right, power or privilege hereunder and no course of dealing between
that Party and any other Party shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies herein expressly provided are cumulative and not exclusive
of any other rights or remedies which a Party would otherwise have at
law or in equity or otherwise.
18.5 AMENDMENT
Except where specifically provided, this Agreement may be amended
only by an instrument in writing signed by duly authorised
representatives of each of the Parties.
18.6 NO PARTNERSHIP OR AGENCY; NO FIDUCIARY DUTIES
(a) Nothing in this Agreement (or in any of the arrangements
contemplated hereby) shall be deemed to constitute a
partnership between the Parties or any of them, nor
constitute any Party the agent of any other Party for any
purpose.
(b) In addition, no Party shall without the written consent of
each of the other Parties enter into contracts with third
parties as agent for the Parties nor shall any Party
describe itself as agent as aforesaid or in any way hold
itself as being agents as aforesaid or as representing the
Parties.
18.7 SEVERANCE
If any of the provisions of this Agreement is finally determined to
be, or becomes, invalid, illegal or unenforceable, or if the actions
or matters contemplated by any of the provisions of this Agreement
are finally determined to be, or become, illegal, then such
provisions shall, so far as invalid or unenforceable, be given no
effect and shall be deemed not to be included in this Agreement, but
without affecting or invalidating the remaining provisions of this
31
Agreement. Notwithstanding the foregoing, the Parties shall thereupon
negotiate in good faith in order to agree the terms of a mutually
satisfactory provision achieving as nearly as possible the same
commercial effect, to be substituted for the provision found to be
invalid, illegal or unenforceable.
18.8 COSTS AND EXPENSES
Each Party shall be responsible for all of the costs and expenses
(including, without limitation, legal costs and expenses) incurred by
that Party in connection with the preparation, negotiation and
conclusion of this Agreement.
18.9 COUNTERPARTS
This Agreement may be entered into in any number of counterparts,
each of which when executed by one or more Parties shall be an
original, but all the counterparts shall together constitute one and
the same instrument.
18.10 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, USA, excluding any provisions
thereof which would require the application of the laws of any other
jurisdiction.
18.11 ARBITRATION
(a) Any dispute arising out of or in connection with this
Agreement, including any question regarding its existence,
validity or termination, shall be referred to and finally
resolved under the rules of the London Court of
International Arbitration, which rules are deemed to be
incorporated by reference into this clause.
(b) The number of arbitrators shall be one (or three if the
Parties mutually so agree).
(c) The seat or legal place of arbitration shall be the State
of California, USA.
(d) The language to be used in the arbitral proceedings shall
be English.
32
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date above
written
ALADDIN MIDDLE EAST LTD.
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Executive Vice-President and
General Manager
ERSAN PETROL SANAYII A.S.
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Chairman of the Board
and by:
[name]
[title]
TRANSMEDITERRANEAN OIL COMPANY LTD
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Executive Vice-President and
General Manager
and by:
[name]
[title]
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK VE TICARET A.S
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Chairman of the Board
and by:
[name]
[title]
MIDDLE EAST PETROLEUM SERVICES LTD.
By: /s/ Xxx Fellowes
Mr Xxx Fellowes
Director
AVENUE ENERGY INC.
By:/s/ Xxxx Xxxxxxx
Xx Xxxx Xxxxxxx
Director
IT TECHNOLOGY INC.
By:/s/ Yam-Hin Tan
Xx Xxx-Hin Tan
33
SCHEDULE 'A'
LIST OF EXPLORATION LICENSES & PRODUCTION LEASES INCLUDED IN THE AGREEMENT
BETWEEN AVENUE & XXXXX GROUP CONSORTIUM
----------------------------------------------------------------------------------------------------------------------
SCHEDULE "A"-LIST OF EXPLORATION LICENSES & PRODUCTION LEASES INCLUDED IN THE AGREEMENT
BETWEEN ITTE & XXXXX GROUP CONSORTIUM
----------------------------------------------------------------------------------------------------------------------
NO. OF NAME OF REGION PROSPECT LICENSE LICENSE PRE FARMIN POST FARMIN TOTAL TOTAL
PETROLEUM PETROLEUM OR FIELD PREFIX NUMBER ------------- ------------------ AREA AREA
DISTRICT DISTRICT COMPANY % COMPANY % (HECTARES)(ACRES)
REGISTERED HELD REGISTERED HELD
----------------------------------------------------------------------------------------------------------------------
X SIIRT S.E RUBAI AR/AME 2759 AME 100% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 11,086 27,394
----------------------------------------------------------------------------------------------------------------------
X SIIRT X.X XXXXX XX/XXX-XXX 0000 AME 55% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
2599 TMO 45% AME 24.75%
----------------------------------------------------------------------------------------------------------------------
2600 TMO 20.25%
----------------------------------------------------------------------------------------------------------------------
2601 MEPS 10.00% 118,272 292,250
----------------------------------------------------------------------------------------------------------------------
X SIIRT S.E ARPATEPE AR/TMO 3118 TMO 100% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 38,846 95,988
----------------------------------------------------------------------------------------------------------------------
X SIIRT S.E ISPANDIKA AR/TMO-EPS-G3794 TMO 25% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
BUKAT 3795 EPS 50% EPS 22.50%
----------------------------------------------------------------------------------------------------------------------
SOFTEK GYP 25% GYP 11.25%
----------------------------------------------------------------------------------------------------------------------
TMO 11.25%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 96,492 238,432
----------------------------------------------------------------------------------------------------------------------
X SIIRT S.E GERCUS AR/EPS-GYP 3749 EPS 50% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
3750 GYP 50% GYP 27.50%
----------------------------------------------------------------------------------------------------------------------
EPS 27.50%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 99,328 245,439
----------------------------------------------------------------------------------------------------------------------
X SIIRT S.E XXXXX XXX/AME-TMO 2260 AME 95% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
FIELD TMO 5% AME 42.75%
----------------------------------------------------------------------------------------------------------------------
TMO 2.25%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 1,937 4,786
----------------------------------------------------------------------------------------------------------------------
XI DIYARBAKIR X.X XXXXX-3 AR/AME-EPS 3254 AME 70% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
EPS 30% EPS 31.50%
----------------------------------------------------------------------------------------------------------------------
GYP 13.50%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 2,145 5,300
----------------------------------------------------------------------------------------------------------------------
XI DIYARBAKIR S.E KARAKILISE AR/AME-EPS 2674 AME 95% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
2677 EPS 5% AME 42.75%
----------------------------------------------------------------------------------------------------------------------
2678 EPS 2.25%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 122,943 303,792
----------------------------------------------------------------------------------------------------------------------
XI DIYARBAKIR S.E HOTO AR/EPS-GYP 3748 EPS 50% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
GYP 50% GYP 27.50%
----------------------------------------------------------------------------------------------------------------------
EPS 27.50%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 1,452 3,588
----------------------------------------------------------------------------------------------------------------------
XII GAZIANTEP X.X XXXXX AR/AME-EPS 3462 AME 50% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
EPS 50% AME 22.50%
----------------------------------------------------------------------------------------------------------------------
EPS 22.50%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 3,278 8,100
----------------------------------------------------------------------------------------------------------------------
36
----------------------------------------------------------------------------------------------------------------------
SCHEDULE "A"-LIST OF EXPLORATION LICENSES & PRODUCTION LEASES INCLUDED IN THE AGREEMENT
BETWEEN ITTE & XXXXX GROUP CONSORTIUM
----------------------------------------------------------------------------------------------------------------------
PRE FARMIN POST FARMIN
----------------------------------------------------------------------------------------------------------------------
XII GAZIANTEP S.E ARDICOLUK AR/AME-EPS-G 3612 AME 50% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
TEKPINAR EPS 40% AME 22.50%
----------------------------------------------------------------------------------------------------------------------
KUSTEPE GYP 10% EPS 18.00%
----------------------------------------------------------------------------------------------------------------------
OLUKLU GYP 4.50%
----------------------------------------------------------------------------------------------------------------------
ZEY MEPS 10.00% 48,525 119,905
----------------------------------------------------------------------------------------------------------------------
XII GAZIANTEP ADIYAMAN KAHTA IR/EPS 658 EPS 100% ITTE 45.00%
----------------------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 7,060 17,445
----------------------------------------------------------------------------------------------------------------------
XIII HATAY S.E KILIS AR/TMO 3786 TMO 100% ITTE 45.00%
ANATOLIA
----------------------------------------------------------------------------------------------------------------------
TMO 45.00%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 49,539 122,411
----------------------------------------------------------------------------------------------------------------------
XV KONYA XXX XXXX YAZAMCA AR/EPS 3637 EPS 100% ITTE 45.00%
----------------------------------------------------------------------------------------------------------------------
SALT LAKE 3638 EPS 45.00%
----------------------------------------------------------------------------------------------------------------------
BASIN 3639 MEPS 10.00%
----------------------------------------------------------------------------------------------------------------------
3640 199,221 492,275
----------------------------------------------------------------------------------------------------------------------
XVI ANTALYA E. MED. WEST AKSU AR/AME-TMO 3726 AME 50% ITTE 45.00%
-EPS
----------------------------------------------------------------------------------------------------------------------
3727 TMO 25% AME 22.50%
----------------------------------------------------------------------------------------------------------------------
3728 EPS 25% TMO 11.25%
----------------------------------------------------------------------------------------------------------------------
EPS 11.25%
----------------------------------------------------------------------------------------------------------------------
MEPS 10.00% 149,310 368,945
----------------------------------------------------------------------------------------------------------------------
XVII IZMIR ONSHORE XPLORATION AR/AME-EPS 3700 AME 50% ITTE 45.00%
----------------------------------------------------------------------------------------------------------------------
AEGEAN 3701 EPS 50% AME 27.50%
----------------------------------------------------------------------------------------------------------------------
3702 EPS 27.50%
----------------------------------------------------------------------------------------------------------------------
3703 MEPS 10.00%
----------------------------------------------------------------------------------------------------------------------
3704
----------------------------------------------------------------------------------------------------------------------
3705 281,899 696,572
----------------------------------------------------------------------------------------------------------------------
1.0 HECTARE = 100 SQ. KILIMETERS. TOTAL 33 TOTAL HECTARES AND ACRES
100 SQ. KILOMETERS = 247.1 ACRES CONCESSIONS
----------------------------------------------------------------------------------------------------------------------
1,231,333 3,042,624
----------------------------------------------------------------------------------------------------------------------
35
SCHEDULE 'B'
AVENUE EXPLORATION LICENSE & PRODUCTION LEASE
ACQUISITION & ADMINISTRATION COSTS
----------------------------------------------------------------------------------------------------------
SCHEDULE "B" - ITTE EXPLORATION LICENSE & PRODUCTION LEASE ACQUISITION & ADMINISTRATION COST
----------------------------------------------------------------------------------------------------------
US$0.10/NET ACRE/YEAR
----------------------------------------------------------------------------------------------------------
NO. OF NAME OF LICENSE LICENSE POST FARMIN TOTAL TOTAL ITTE LICENSE
PETROLEUM PETROLEUM PREFIX NUMBER ----------- AREA AREA NET ADMIN.
DISTRICT DISTRICT COMPANY % (HECTARES) (ACRES) ACRES COST P.A.
REGISTERED HELD
----------------------------------------------------------------------------------------------------------
X SIIRT AR/AME 2759 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 11,086 27,394 12,327 $1,233
----------------------------------------------------------------------------------------------------------
X SIIRT AR/AME-TMO 2598 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
2599 AME 24.75%
----------------------------------------------------------------------------------------------------------
2600 TMO 20.25%
----------------------------------------------------------------------------------------------------------
2601 MEPS 10.00% 118,272 292,250 131,513 $13,151
----------------------------------------------------------------------------------------------------------
X SIIRT AR/TMO 3118 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 38,846 95,988 9,599 $960
----------------------------------------------------------------------------------------------------------
X SIIRT AR/TMO-EPS 3794 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
3795 EPS 22.50%
----------------------------------------------------------------------------------------------------------
GYP 11.25%
----------------------------------------------------------------------------------------------------------
TMO 11.25%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 96,492 238,432 53,647 $5,365
----------------------------------------------------------------------------------------------------------
X SIIRT AR/EPS-GYP 3749 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
3750 GYP 27.50%
----------------------------------------------------------------------------------------------------------
EPS 27.50%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 99,328 245,439 110,448 $11,045
----------------------------------------------------------------------------------------------------------
X SIIRT ARI/AME-TM 2260 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
AME 42.75%
----------------------------------------------------------------------------------------------------------
TMO 2.25%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 1,937 4,786 2,154 $215
----------------------------------------------------------------------------------------------------------
XX XXXXXXXXXX XX/XXX-XXX 0000 XXXX 45.00%
----------------------------------------------------------------------------------------------------------
EPS 31.50%
----------------------------------------------------------------------------------------------------------
GYP 13.50%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 2,145 5,300 2,385 $239
----------------------------------------------------------------------------------------------------------
XX XXXXXXXXXX XX/XXX-XXX 0000 XXXX 45.00%
----------------------------------------------------------------------------------------------------------
2677 AME 42.75%
----------------------------------------------------------------------------------------------------------
2678 EPS 2.25%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 122,943 303,792 136,706 $13,671
----------------------------------------------------------------------------------------------------------
XX XXXXXXXXXX XX/XXX-XXX 0000 XXXX 45.00%
----------------------------------------------------------------------------------------------------------
GYP 27.50%
----------------------------------------------------------------------------------------------------------
EPS 27.50%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 1,452 3,588 1,615 $161
----------------------------------------------------------------------------------------------------------
XII GAZIANTEP AR/AME-EPS 3462 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
AME 22.50%
----------------------------------------------------------------------------------------------------------
EPS 22.50%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 3,278 8,100 3,645 $364
----------------------------------------------------------------------------------------------------------
XII GAZIANTEP AR/AME-EPS 3612 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
AME 22.50%
----------------------------------------------------------------------------------------------------------
EPS 18.00%
----------------------------------------------------------------------------------------------------------
GYP 4.50%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 48,525 119,905 26,979 $2,698
----------------------------------------------------------------------------------------------------------
XII GAZI IR/EPS 658 ITTE 45.00%
ANTEP
----------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 7,060 17,445 1,745 $174
----------------------------------------------------------------------------------------------------------
XIII HATAY AR/TMO 3786 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
TMO 45.00%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 49,539 122,411 12,241 $1,224
----------------------------------------------------------------------------------------------------------
37
----------------------------------------------------------------------------------------------------------
SCHEDULE "B" - ITTE EXPLORATION LICENSE & PRODUCTION LEASE ACQUISITION & ADMINISTRATION COST
----------------------------------------------------------------------------------------------------------
US$0.10/NET ACRE/YEAR
----------------------------------------------------------------------------------------------------------
POST FARMIN
----------------------------------------------------------------------------------------------------------
XV KONYA AR/EPS 3637 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
3638 EPS 45.00%
----------------------------------------------------------------------------------------------------------
3639 MEPS 10.00%
----------------------------------------------------------------------------------------------------------
3640 199,221 492,275 221,524 $22,152
----------------------------------------------------------------------------------------------------------
XVI ANTALYA AR/AME-TMO 3726 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
3727 AME 22.50%
----------------------------------------------------------------------------------------------------------
3728 TMO 11.25%
----------------------------------------------------------------------------------------------------------
EPS 11.25%
----------------------------------------------------------------------------------------------------------
MEPS 10.00% 149,310 368,945 83,013 $8,301
----------------------------------------------------------------------------------------------------------
XVII IZMIR AR/AME-EPS 3700 ITTE 45.00%
----------------------------------------------------------------------------------------------------------
3701 AME 27.50%
----------------------------------------------------------------------------------------------------------
3702 EPS 27.50%
----------------------------------------------------------------------------------------------------------
3703 MEPS 10.00%
----------------------------------------------------------------------------------------------------------
3704
----------------------------------------------------------------------------------------------------------
3705 281,899 696,572 191,557 $19,156
----------------------------------------------------------------------------------------------------------
TOTAL CONCESSIONS 33 TOTAL HEC.&ACRES 1,231,333 3,042,624 1,001,096 $100,110
----------------------------------------------------------------------------------------------------------
INITIAL ACREAGE ACQUISITION COST C$450,000 ITTE MONTHLY ACREAGE ADMIN $8,342
FEE
----------------------------------------------------------------------------------------------------------
38
SCHEDULE 'C'
EXPECTED EXPENSES IN TOSUN PROSPECT AFTER DRILLING OF TOSUN-1 EXPLORATION
WELL (SUCCESS CASE)
1) 5,000 bbl. Capacity crude oil gathering station,
truck loading & unloading facilities US$320,000
2) 5 Km oil pipeline to be built to nearest
TPAO facility US$200,000
3) Electrification of station & xxxxx US$150,000
4) Administration Expenses (including concession
rentals, watchman, labour etc. US$ 90,000
5) Environmental Report to be prepared for
granting of 20 year Production Lease. US$ 50,000
TOTAL US$810,000
[THIS IS ESTIMATE ONLY & DOES NOT INCLUDE ANY OF THE EXPLORATION AND/OR
DEVELOPMENT XXXXX TO BE DRILLED IN THE LICENSES]
39
SCHEDULE 'D'
EXPECTED EXPENSES IN KARAKILISE PROSPECT AFTER DRILLING OF KARAKILISE -1
EXPLORATION WELL (SUCCESS CASE)
1) 5,000 bbl. Capacity crude oil gathering station,
truck loading & unloading facilities US$320,000
2) Electrification of station & xxxxx US$150,000
3) Administration Expenses (including concession
rentals, watchman, labour etc. US$90,000
4) Environmental Report to be prepared for granting
of 20 year Production Lease. US$50,000
TOTAL US$610,000
[THIS IS ESTIMATE ONLY & DOES NOT INCLUDE ANY OF THE EXPLORATION AND/OR
DEVELOPMENT XXXXX TO BE DRILLED IN THE LICENSES]
40
SCHEDULE 'E'
FORM OF TRANSFER AND ASSIGNMENT TO BE SUBMITTED TO GDPA
TRANSFER AND ASSIGNMENT
THIS TRANSFER AND ASSIGNMENT Agreement is made and entered into this _____ day
of ______, 2002, by and between [ ]* (hereinafter referred to as "ASSIGNEE") and
ALADDIN MIDDLE EAST LTD. ("AME") AND ERSAN PETROL SANAYII A.(A). ("EPS")
(hereinafter referred to individually as "ASSIGNOR" and together as
"ASSIGNORS").
WITNESSETH:
Whereas each ASSIGNOR desires to transfer 45 % of its interest in the
petroleum exploration license AR/AME-EPS/3462 issued by the General Directorate
of Petroleum Affairs, Republic of Turkey, pursuant to the provisions of the
Petroleum Law of Turkey and the Regulations promulgated thereunder, current
details of which are as follows:
PETROLEUM LICENSE NO. CASE NO. OWNERSHIP ISSUE DATE HECTARES
DISTRICT
---------------------------------------------------------------------------------------------------------------------
XII 3462 AR/AME-EPS/ AME 50 % 18.07.1998 3278
EPS 50 %
To ASSIGNEE, and,
Whereas, ASSIGNEE is desirous of acquiring from each ASSIGNOR 45 % of
its undivided interests in said License, and,
Whereas, the parties believe that a transfer of an aggregate 45 %
undivided interest in the above-said License from ASSIGNORS unto ASSIGNEE would
not be incompatible with the objectives set forth in the said Petroleum Law.
It is agreed and understood that after the approval mentioned in (2)
above, the License shall be operated by Aladdin Middle East Ltd. as Operator for
and on behalf of all parties hereto.
This Transfer and Assignment is subject to any and all approvals and
consents required by the Petroleum Law and Regulations of the Republic of
Turkey. The parties will proceed diligently to secure such approvals and
consents.
------------------------------
*Insert Avenue Energy Inc or its Nominated Affiliate, as applicable
41
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and the year first hereinabove written.
(Assignor) (Assignee)
ALADDIN MIDDLE EAST LTD. [ ]*
______________________ _______________________________
(Assignor)
ERSAN PETROL SANAYII A.S.
__________________________
NOTARIAL
ATTEST :
__________________________
42
SCHEDULE 'F'
TOSUN DRILLING PROGRAM
SPUDDING STATEMENT FORM
0.XXXX OF COMPANY : Aladdin Middle East Ltd.
Ersan Petrol Sanayii A.(a).
0.XXXX OF WELL : Tosun-1
3.TYPE OF WELL : Exploration
0.XXXX OF SPUD : November 04, 2002
5.LOCATION OF WELL :
a)DISTRICT : XII - Gaziantep
b)LICENSE NO. : AR/AME-EPS/3462
c)LOCATION MAP : 1/25.000 scale topographic
map is attached.
d)WELL COORDINATES :
Lat : 37(degree)53' 17.1" x : 4 193 501
Long : 38(degree)44' 09.0" y : 476 773.90
e)ELEVATIONS:
GL : 2987.2 ft.
KB : 3005.9 ft.
f)CLOCKWISE ANGLE AND DISTANCE : In the direction N 321G 50C and at a
OF WELL LOCATION FROM NEARS distance of 948.50 m. From the bench xxxx
TRIANGULATION MONUMENT Kulo(0)xxxx Xxxx which has an elevation of
939 m. on the 1/25.000 scale of M41-a2.
6)DRILLING CONTRACTOR : Aladdin Middle East Ltd.
7)TYPE OF DRILLING RIG : National 80-B, AME Rig 6
8)RIG CAPACITY : 14.000 ft.
9)WELL PROGRAM :
A)OBJECTIVE HORIZONS :
The well Tosun-1 will be drilled to test hydrocarbon possibilities of
Karababa-C and Derdere Formations.
B)GEOLOGY
The Tosun structure is situated within the foothill belt which is
characterized by east-west trending anticline, imbricated
structures and reverse faults. Tosun structure is seismically
defined, anticline bounded by reverse fault at the south.
43
c)FORMATIONS AND THEIR THICKNESS WILL BE CUT IN THE WELL:
============================== ============================== ====================== =========================
Formation Age Tops (ft) Thickness (ft)
(a)elmo Pliocene Surface 50
Miocene
------------------------------ ------------------------------ ---------------------- -------------------------
Hoya L.Eocene 50 670
L.Oligocene
------------------------------ ------------------------------ ---------------------- -------------------------
Germav U.Paleocene 720 390
M.Maastrichtian
------------------------------ ------------------------------ ---------------------- -------------------------
Hoya L.Eocene 1110 951
L.Oligecene
------------------------------ ------------------------------ ---------------------- -------------------------
Germav U.Paleocene 2061 2231
M.Maastrichtian
------------------------------ ------------------------------ ---------------------- -------------------------
Xxxxxx M. Campanian 4292 4070
M. Maastrichtian
------------------------------ ------------------------------ ---------------------- -------------------------
Sayyndere U.Campanian 8362 325
------------------------------ ------------------------------ ---------------------- -------------------------
Karabooaz M.Campanian 8687 65
------------------------------ ------------------------------ ---------------------- -------------------------
Karababa-C L.Campanian 8752 82
U.Coniacian
------------------------------ ------------------------------ ---------------------- -------------------------
Karababa-B L.Campanian 8834 112
U.Coniacian
------------------------------ ------------------------------ ---------------------- -------------------------
Karababa-A L.Campanian 8946 79
U.Coniacian
------------------------------ ------------------------------ ---------------------- -------------------------
9025 310
Derdere Cenomanian (penetrated)
------------------------------ ------------------------------ ---------------------- -------------------------
T.D. 9335
============================== ======================
d)GEOLOGICAL CROSS SECTIONS, STRATIGRAPHIC COLUMS AND PANEL DIAGRAM:
Stratigraphic well prognosis of Tosun-1 is attached.
e)POSSIBLE RESERVOIR FORMATIONS:
Karababa-C and Derdere Formations are producing formations in Karaku(0),
Cendere and Akpynar oil fields.
f)INTERVALS OF SAMPLING AND CORING:
Cutting samples will be takne at every 10 ft. from surface to Sayyndere
Formation at 8362 ft. and every 5 ft. from 8362 ft. to T.D. Necessary intervals
of Karababa-C and Derdere Formations will be cored upon recommended
of wellsite geologist.
g)LOGS:
GR-CAL Surface - TD
BHC-SONIC 2200' - TD
DLL-MSFL8335' - TD
CNL-LDL 8335' - TD
SHDT-GR 8335' - TD
44
h)ZONES WILL BE TESTED:
Karababa-C and Derdere Formations will be tested if necessary depending
On recommendations of wellsite geologist.
i)DRILLING DIFFICULTIES:
The deviation problem is expected from 350 ft. to 4.200 ft.
j)MAPS OF THE AREA INCLUDING THIS WELL :
1/25.000 scale topographic map is attached.
10.DRILLING PROGRAM:
a)TOTAL DEPTH AND FORMATION TD:
9.335 ft. - Derdere Formation.
b)CASINGS:
20" Surface - 40'
13 3/8" Surface - 2150'
9 5/8" Surface - 8362'
7" Surface - 9025' - 9335' (optional)
c)POSSIBLE LOSS CIRCULATION ZONES AND PREVENTING METHODS:
Loss circulation is expected in Hoya Formation.
d)MUD PROGRAM:
Ligno sulphanate mud system will be used between surface to total
depth.
e)SOURCE OF DRILLING WATER:
Two water well will be drilled in order to supply drilling water.
f)WELL CONTROL SYSTEM:
AME Mud logging Unit No. 1
45
STRATIGRAPHIC WELL PROGNOSIS
TOSUN - 1
[GRAPHIC OMITTED]
46
LOCATION MAP
[GRAPHIC OMITTED]
47
TOSUN #1 wELL HEAD DIAGRAM
[GRAPHIC OMITTED]
48
TOSUN #1 wELL HEAD DIAGRAM
[GRAPHIC OMITTED]
49
TOSUN #1 wELL HEAD DIAGRAM
[GRAPHIC OMITTED]
50
SCHEDULE 'G'
KARAKILISE DRILLING PROGRAM AND PAYMENT SCHEDULE
PART A - KARAKILISE DRILLING PROGRAM
SPUDDING STATEMENT FORM
0.XXXX OF COMPANY : Aladdin Middle East Ltd.
Ersan Petrol Sanayii A.(a).
0.XXXX OF WELL : North Karakilise
3.TYPE OF WELL : Exploration
0.XXXX OF SPUD :
5.LOCATION OF WELL :
a)DISTRICT : XI - Diyarbakyr
b)LICENSE NO. : AR/AME-EPS/2677
c)LOCATION MAP : 1/25.000 scale topographic
map is attached.
d)WELL COORDINATES :
Lat : 38(degree)04'05" x : 4 214 120 (North)
Long: 40(degree)12'21" y : 605 772 (East)
e)ELEVATIONS:
GL : 2332.6 ft. (711 m.)
KB : 2351.3 ft. (716.7 m.)
f)CLOCKWISE ANGLE AND DISTANCE : In the direction N 211(degree)00' and at a
OF WELL LOCATION FROM NEARS distance of 330 m. from the bench xxxx
TRIANGULATION MONUMENT has elevation of of 709 m. on the
1/25.000 scale of L44-d3.
6)DRILLING CONTRACTOR : Aladdin Middle East Ltd.
7)TYPE OF DRILLING RIG : National 80-B
8)RIG CAPACITY : 14.000 ft.
9)WELL PROGRAM :
A)OBJECTIVE HORIZONS :
The well North Karakilise will be drilled to test hydrocarbon possibilities
of Mardin Carbonates.
B)GEOLOGY
Karakilise structure is in contact between the overthrust belt to
the north and the foreland province to the south. Foreland type
anticlinal closure and leads have been identified by
reconnaissance. The total stratigraphic section likely ranges in
age from Pre-Cambrian to recent.
51
c)FORMATIONS AND THEIR THICKNESS WILL BE CUT IN THE WELL:
================================= ============================== =============================== ==============================
FORMATION AGE TOPS (FT) THICKNESS (FT)
Basalt Pleistocene Surface 50
--------------------------------- ------------------------------ ------------------------------- ------------------------------
(a)elmo Pliocene 50 280
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Germik M.Eocene 330 200
Oligocene
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Midyat M.U.Eocene 530 240
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Gercu(0) U.Paleocene 770 1340
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Kayakoy X-X Paleocene 2210 1260
--------------------------------- ------------------------------ ------------------------------- ------------------------------
U.Sinan X-X Paleocene 3370 350
--------------------------------- ------------------------------ ------------------------------- ------------------------------
U.Xxxxx X-X. Paleocene 3720 230
--------------------------------- ------------------------------ ------------------------------- ------------------------------
L.Sinan U.Maastrichtian 3950 270
--------------------------------- ------------------------------ ------------------------------- ------------------------------
X.Xxxxx U.Maastrichtian 4220 500
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Xxxxxx U.Campanian 4720 3180
M.Maastrichtian
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Sayyndere M.Campanian 7900 200
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Mardin L.Campanian 8100 940
Aptian (Penetrated)
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Base Mardin 9040 TD
--------------------------------- ------------------------------ ------------------------------- ------------------------------
d)POSSIBLE RESERVOIR FORMATIONS:
These formations are similar to the producing formation in the N.V.
Turkse Perernco-TPAO overthrust trend oil fields adjacent to the
north boundry of the subject.
e)INTERVALS OF SAMPLING AND CORING:
Cutting sample will be taken at every 30 ft. from surface to Sayyndere (7900 ft.) every 10 ft. from 7900 ft. to T.D.
Necessary intervals of Mardin Carbonates will be cored upon recommended of the well-site Geologist.
f)LOGS:
GR-BHC-SONICSurface - 9040 ft.
LDL-CNL 7900 ft. - 9040 ft.
DLL-MSFL-SP 7900 ft. - 9040 ft.
HDT-GR 7900 ft. -9040 ft.
g)ZONES WILL BE TESTED:
Mardin Carbonates will be tested if necessary depending on
Recommendations of wellsite geologist.
h)DRILLING DIFFICULTIES:
Lost circulation zones is expected in Midyat and Mardin Carbonates.
52
i) MAPS OF THE AREA INCLUDING THIS WELL :
1/25.000 scale topographic map is attached.
10.DRILLING PROGRAM:
a)TOTAL DEPTH AND FORMATION TD:
9.190 feet - Mardin Carbonates.
b)CASINGS:
Surface - 1.000 ft................ 13 3/8"
Surface - 5.000 ft................ 9 5/8"
Surface - 8.100 ft................ 7"
c)POSSIBLE LOSS CIRCULATION ZONES AND PREVENTING METHODS:
Midyat Formation - drilling will continue with water upon encountering
losses in this formation to 13 3/8" casing depth.
d) MUD PROGRAM:
Prehydrated bentonite mud : Surface - 1000 ft.
Lignosulphanate mud with fresh
water system will be used : 1000 ft. - T.D.
e) SOURCE OF DRILLING WATER.
Water stream closest to wellsite will be used as a drilling water
source.
f) WELL CONTROL SYSTEM:
AME Mud logging Unit No. 1 (XXXXX)
53
STRATIGRAPHIC WELL PROGNOSIS NORTH KARAKILISE
[GRAPHIC OMITTED]
54
LOCATION MAP
[GRAPHIC OMITTED]
55
PART B - KARAKILISE PAYMENT SCHEDULE
The following payments shall be made to AME in respect of drilling of the
Karakilise-1 Well:
DATE OR TIME AMOUNT
30 Business Days prior to spudding US$500,000
5 Business Days after spudding US$500,000
5 Business Days after notification of well depth of 5000 feet US$500,000
5 Business Days after notification of well depth of 7,500 feet US$250,000
5 Business Days after notification closing of drilling (to a depth of not less than the US$250,000
'Total Depth' specified in the Karakilise Drilling Program)
TOTAL US$2,000,000
[NOTE: AVENUE'S SHARE OF THE ABOVE IS 50% (I.E. US$2,000,000).]
56
SCHEDULE 'H'
JOINT OPERATING AGREEMENT
The attached form of Joint Operating Agreement (including the annotations
therein) shall form the basis for negotiations pursuant to clause 9.1(a). In the
event of inconsistency between the attached form of Joint Operating Agreement
and any provisions of this Agreement, the provisions of this Agreement shall
prevail. For the avoidance of doubt, the voting pass-xxxx on the Operating
Committee shall at all times be sixty six percent (66%) of all Participating
Interests, and the final form of Joint Operating Agreement shall include an
accounting procedure in terms consistent with accounting procedures typically
adopted for international oil and gas joint ventures of this kind.
57
SCHEDULE 'I'
TOSUN DRILLING CONTRACT
58
