MINING USUFRUCT AGREEMENT
With Respect to
Prospecting for and Exploration and Exploitation of
Natural Gas and Oil
Between
THE STATE TREASURY
OF THE REPUBLIC OF POLAND
And
FX ENERGY POLAND Sp. z o.o. and Partners
commercial partnership
This Agreement is entered into this 30th day of October, 1997 by and between the
STATE TREASURY OF THE REPUBLIC OF POLAND (herein the "Treasury"), represented by
the Minister of Environmental Protection, Natural Resources and Forestry Mr.
Xxxxxxxxx Xxxxxxxxxxx (herein the "Minister"), acting through Xx. Xxxxxxxx
Szmalek, Secretary of State
and
FX ENERGY POLAND SP. Z O.O. and PARTNERS, COMMERCIAL PARTNERSHIP, a Polish
commercial partnership, with its seat at Wal MiedzeszyNski 000, 00-000 Xxxxxxxx,
Xxxxxx, entered into the Commercial Register kept by the District Court in
Warsaw, under number RHA 317 (herein the "Partnership"), represented by Xx.
Xxxxx X. Xxxxxx.
WHEREAS, the Partnership desires to explore for and exploit Natural Gas and Oil
in the Republic of Poland; and
WHEREAS, the Partnership, through its partners and their parent company, has the
experience, financial and technical ability and resources, and professional
expertise efficiently to explore for, develop and exploit Natural Gas and Oil in
the Republic of Poland; and
WHEREAS, the ownership of all Natural Gas and Oil existing in its natural
condition within the territory of the Republic of Poland belongs to the
Treasury;
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms when used in this Agreement shall have the meaning
ascribed to them in the Geological and Mining Law as in effect on the date
of this Agreement:
Prospecting
Exploration
Exploitation
Geological Documentation
Mineral Deposit
Mining Area
Geological Works
Geological Works Plan
1.2 The following terms when used in this Agreement shall have the meaning
ascribed to them hereunder:
1.2.1 "Block" means any of the areas specified in Schedule "A". At the
effective date of this Agreement there are ten (10) Blocks, identified
in Schedule "A" hereto as Blocks 85, 86, 87, 88, 89, 105, 108, 109,
129 and 149.
1.2.2 "Concession" means an Exploration Concession or an Exploitation
Concession.
1.2.3 "Exploration Concession" means the Concession granted under the
Geological and Mining Law for the Prospecting for and Exploration of
Natural Gas and Oil of the type referred to in Article 15.2 of the
Geological and Mining Law.
1.2.4 "Exploitation Concession" means the Concession granted under the
Geological and Mining Law for the Exploitation of Natural Gas and Oil
of the type referred to in Article 15.2 of the Geological and Mining
Law.
1.2.5 "Concession Effective Date" as to any particular Concession means
the date on which the Minister signs the Concession.
1.2.6 "Concession Operations" means all or any of the operations covered
by the applicable Concession.
1.2.7 "Exploitation Period" means the thirty (30) years beginning on the
Concession Effective Date of the last Exploitation Concession for
which the Partnership has duly applied prior to the end of the
Exploration Period, and with respect to any individual Mining Area
from which Natural Gas or Oil in paying quantities is then being
recovered, such Exploitation Period can be extended upon the
Partnership's request so long as Natural Gas or Oil is being produced
therefrom in paying quantities.
1.2.8 "Exploration Period" means the First 3-Year Exploration Period and
the Second 3-Year Exploration Period.
1.2.9 "First 3-Year Exploration Period" means the three (3) years
beginning on the Concession Effective Date of the last Exploration
Concession issued to the Company for all eight (8) Blocks specified in
Schedule "A"
1.2.10 "Second 3-Year Exploration Period" means the three (3) years
beginning on the first day after the end of the First 3-Year
Exploration Period.
1.2.11 "Mining Usufruct Area " means the Block or Blocks described in
Schedule "A" excluding any portion thereof which is subject to third
party mining usufruct regarding Oil and Gas, as more specifically
described in Schedule B, and excluding any portion thereof in respect
of which the Partnership's rights hereunder are from time to time
relinquished or surrendered by the Partnership.
1.2.12 "Oil" means mineral oil, asphalt, ozokerite and all kinds of
hydrocarbons and bitumens, both in solid and in liquid form, in their
natural state or obtained from Natural Gas by condensation or
extraction.
1 2.13 "Designated Entity" means an entity designated by the Minister to
represent it for certain purposes under this Agreement as set forth in
Article XVII.
1.2.14 "Natural Gas" or "Gas" means hydrocarbons that are in a gaseous
state under normal atmospheric conditions of temperature and pressure,
including wet gas, dry gas, casinghead gas and all other gaseous
hydrocarbons including the residue gas remaining after the
condensation or extraction of liquid hydrocarbons from gas, but
excluding condensed or extracted liquid hydrocarbons.
1.2.15 "Parties" means the Treasury and the Partnership, and "Party "
means either of the Parties.
1.2.16 "Geological and Mining Law" means the Act of February 4th, 1994.
ARTICLE II
ESTABLISMENT OF MINING USUFRUCT
2. l The Minister acting on behalf of the Treasury, as the sole owner of the
Mineral Deposits, hereby establishes in favor of the Partnership a mining
usufruct in the Mining Usufruct Area regarding the Prospecting for,
Exploration and Exploitation of Natural Gas and Oil. Such right is of an
exclusive nature.
2.2 The mining usufruct regarding the Prospecting for and Exploration with
respect to each Block is subject to the Partnership obtaining an
Exploration Concession covering such Block. The mining usufruct regarding
the Exploitation with respect to any area is subject to the Partnership
obtaining an Exploitation Concession covering such area. The Minister
agrees to use its best efforts leading to the issuance of eight Exploration
Concessions covering all the eight (8) Blocks and leading to the issuance
of Exploitation Concessions which may be requested by the Partnership from
time to time, and to the designation and approval of Mining Area
boundaries.
ARTICLE III
GRANT OP RIGHTS AND EFFECTIVENESS
This Agreement is effective when executed by both Parties, but may be
terminated after sixty (60) days' written notice by the Partnership if any of
the eight Exploration Concessions referred to in Article 2.2 is not granted
within four (4) months after the Partnership submits the concession application.
3.2 The Partnership shall submit application for Exploration Concessions within
ninety (90) days from the date hereof.
3.3 This Agreement shall terminate if no Exploration Concession is granted, or
upon the expiry or withdrawal of the last Concession granted to the
Partnership within the Mining Usufruct Area, or as otherwise provided by
law and in Article 3.5 below.
3.4 Subject to this Article, the duration of this Agreement shall be for so
long as any Concession granted to the Partnership within the Mining
Usufruct Area remains in effect.
3.5 In order to ensure that certain rights of Polish Oil and Gas Company S.A.
in Warsaw (POGC) are protected, the following provisions shall apply:
3.5.1 Within twelve ( 12) months from the date hereof the Partnership
shall submit to the Minister
a. an agreement between the Partnership or its partners or their
controlling entities and POGC which shall specify the terms of
accession by POGC to the activities performed hereunder, together
with a statement by POGC confirming that in connection with
entering into such agreement POGC agrees to the Prospecting,
Exploration and Exploitation of Oil and Gas within the Mining
Usufruct Area by the Partnership; or
b. a written statement by POGC including its consent to the conduct
by the Partnership of the aforesaid activity without
participation of POGC.
3.5.2 Failing the documents specified in Article 3.5.1, the Treasury
may terminate this Agreement, with respect to the whole or a part of
the Mining Usufruct Area by 30 day written notice. In such a case:
a. the Minister shall withdraw all or some of the Concessions, as
appropriate; and
b. the Partnership's obligations hereunder regarding the conduct of
work or payments which have not been fulfilled prior to the
serving of the termination notice shall cease.
ARTICLE IV
WORK PROGRAM
4.1 The Partnership will commence its work program not later than thirty (30)
days after the beginning of the Exploration Period.
4.2 Geological and Geophysical Evaluation
The Partnership will carry out and complete a regional evaluation during
the First 3-Year Exploration Period which shall cover one or more Blocks.
This evaluation will include the following:
a. Analysis, interpretation and reprocessing of existing seismic
data
b. Analysis of existing well log data
c. Integration and evaluation of seismic, log, gravity and magnetic
data
d. Identification of structural and stratigraphic traps
e. Identification and analysis of potential reservoir rock
characteristics
f. Determination of appropriate drilling, completion and production
techniques
g. Acquisition of 2-D seismic data over 500 km of seismic lines.
4.3 During the First 3-Year Exploration Period the Partnership shall drill two
(2) exploratory xxxxx to a depth of approximately 2,000 to 3,000 meters, as
necessary to test a Carboniferous/Devonian objective. The first two xxxxx
may be located anyplace within the Mining Usufruct Area at the discretion
of the Partnership.
4.4 Unless the Partnership has relinquished all of its interest in the Mining
Usufruct Area on or before the end of the First 3-Year Exploration Period,
then during the Second 3-year Exploration Period the Partnership will drill
at least one well in each of the Blocks, excluding the Blocks which have
been relinquished on or before the end of the First 3-Year Exploration
Period and the Blocks in which a well was drilled during the First 3-Year
Exploration Period. Each of such xxxxx shall be drilled to the depth
necessary to test a Carboniferous/Devonian objective, which is estimated to
be 2,000 to 3,000 meters.
4.5 Conducing seismic acquisition or drilling on territories adjacent to
existing mining establishments shall require coordination with the
operation program of such establishments.
ARTICLE V
DESIGNATION OF MINING AREAS
5.1 During the term of this Agreement, the Partnership may discover Natural Gas
and Oil deposits which it believes can be extracted profitably, in which
such case the Partnership shall prepare appropriate documents and request:
5.1.1 approval of the Geological Documentation by the appropriate
agency of the state geological administration; and
5.1.2 an Exploitation Concession.
5.2 The Mining Area shall be designated based on geological documentation and
it will include the entire surface area within the contour of the deposit
of Natural Gas and Oil demonstrated by available seismic, gravity and well
data.
5.3 The Partnership shall have the right to extract and exploit Natural Gas and
Oil upon approval of Geological Documentation and issuance of the relevant
Exploitation Concession.
ARTICLE VI
OWNERSHIP OF DATA AND NATURAL GAS AND OIL
6.1 Ownership of all information and data obtained as a result of Concession
Operations shall be vested in the Partnership. The Partnership shall,
however, provide the Minister with the information and reports described in
Article 8.5 and 8.6.
6.2 Ownership of all Natural Gas and Oil produced by the Partnership from the
Mining Usufruct Area shall pass to the Partnership at the wellhead.
6.3 Area the Concession Effective Date of an Exploration Concession, the
Partnership will have access to and the right to copy, free of cost other
than reasonable costs of reproduction and handling, all geological,
geophysical, geochemical, drilling, engineering, well log, and other
information and data relating to Natural Gas and Oil owned or possessed by
the Treasury or the Minister in relation to the Block covered by such
Exploration Concession.
ARTICLE VII
RELINQUISHMENT
7.1 The Partnership shall relinquish part or parts of the Mining Usufruct Area
as follows:
7.1.1 At the end of the Exploration Period the Partnership shall
relinquish all of the lands within the Mining Usufruct Area which are
not within the boundaries of any Mining Areas that have been
designated for Exploitation in connection with the issuance of an
Exploitation Concession or duly applied by the Partnership for such
designation.
7.1.2 The Partnership may relinquish all or part of the Mining Usufruct
Area at the end of the First 3-Year Exploration Period or at any time
during the Second 3-Year Exploration Period subject to fulfillment of
any accrued obligations.
7.2 The areas to be relinquished under this Article shall be determined by the
Partnership, provided that areas to be relinquished shall be of sufficient
size and convenient shape to enable activities to be carried out thereon by
others. The Partnership shall give notice in writing to the Minister of
said area(s) no later than thirty (30) days prior to the end of the
relevant period, including a map showing said area(s) with the geographic
location and the coordinates of the connecting points of the boundary
lines. The Minister shall advise the Partnership within fifteen (15) days
of such notice whether it agrees with the area(s) selected for
relinquishment in accordance with the aforementioned criteria relating to
size and shape.
ARTICLE VIII
CONDUCT OF OPERATIONS
8.1 The Partnership is responsible for the conduct of the Concession Operations
contemplated by this Agreement and the Concessions and is to provide all
capital, machinery, equipment, technology and personnel necessary for the
conduct of Concession Operations.
8.2 The Partnership shall conduct the Concession Operations diligently and in
accordance with the laws of Poland and good international petroleum
industry practices as designed to permit the economic, efficient and safe
exploration for, and development and production of, Natural Gas and Oil.
8.3 The Minister will endeavor to provide the Partnership with assistance as
described below when the Minister believes it is in the best interest of
the Partnership to do so, but failure to provide the described assistance
will not result in an extension of time in which the Partnership is to
perform the relevant obligations, nor create any liability or
responsibility on the part of the Treasury.
8.3.1 The Minister will assist the Partnership in its application for
and insofar as possible in granting by national and local Polish
government of permissions required for the performance of Concession
Operations, including, but not limited to, licenses, permits,
approvals, authorizations, consents, visas, work permits, surface
rights and easements.
8.3.2 The Minister will assist in obtaining and providing to the
Partnership such general information as may be reasonably required by
the Partnership for planning and executing projects incidental to
Concession Operations.
8.4 Prior to commencing any Geological Works, the Partnership shall submit to
the Minister the applicable Geological Works Plan. The Partnership shall
also notify the Minister in advance (two months in advance, if possible) of
abandonment of any xxxxx that have been in production. In the event such
advance notice is not practical, or in the event of emergency, the
Partnership shall notify the Minister within forty-eight (48) hours
following such event.
8.5 The Partnership shall provide to the Minister or to the Designated Entity,
as defined in Article XVII, data and information collected and compiled
with respect to Concession Operations in the Mining Usufruct Area, as
follows:
8.5.1 one set of geological reports, studies, or interpretations and
the maps, sections and other documents related thereto;
8.5.2 one set of ail geophysical recordings, measurements and reports,
with all maps profiles, sections, interpretations, studies, and other
documents relating thereto, and copies of recordings (tapes or
otherwise and all supporting data);
8.5.3 one set of final well reports and composite logs representing the
lithology and other parameters relating to each well drilled;
8.5.4 a representative portion of all cores, samples, fluids and other
materials taken from outcrops and xxxxx; and
8.5.5 one set of fluid measurements, analyses or other results in final
form produced by or for the Partnership in connection with Concession
Operations.
All of such information shall be kept confidential by the Minister or the
Designated Entity for a period of one year after it is provided.
8.6 The Partnership shall make such other reports to the Minister in such form,
detail, and at such time as the Minister may reasonably require with
respect to exploration, production, employment or training, or such other
matters related to the conduct of Concession Operations hereunder,
provided, however, that the Minister's requests for such reports shall not
interfere unreasonably with the Partnership's ability to carry out
Concession Operations efficiently or necessitate any undue expense.
Pursuant to the above mentioned determination, the Partnership shall submit
annually to the Minister a report of the progress of the work and a short
memorandum of the results thereof.
8.7 The Partnership shall give prompt written notice to the Minister in the
event of any change of the Partnership's name, organizational form,
increase or decrease of the Partnership's capital structure, petition for
bankruptcy, restructuring of debt, or liquidation. The Minister may request
any necessary clarification in these matters.
ARTICLE IX
PROTECTION OF THE ENVIRONMENT--SAFETY
9.1 The Partnership shall conduct Concession Operations in accordance with the
laws of Poland and good international petroleum industry practice relating
to the protection of the environment, including but not necessarily limited
to the following:
9.1. 1 The Partnership shall in particular take all commercially
reasonable steps required by Polish law and good international
petroleum industry practice to:
a. ensure that its operations minimize ecological damage or
destruction;
b. control the flow and prevent the avoidable escape or waste of
Natural Gas and Oil or ground water discovered in or produced
from the Mining Usufruct Area
c. prevent damage to Natural Gas and Oil or ground water bearing
strata; and
d. prevent damage to land, fresh water supplies, animal life, flora,
crops, buildings or other structures.
9. 1.2 If there is a release of Natural Gas or Oil or other material on
land, fresh water, or any other form of pollution or other harm to
fresh water, land, animal life or flora as a result of Concession
Operations, the Partnership shall promptly take all necessary measures
to control the pollution, to clean up any Natural Gas and Oil or
released material, or to repair, to the extent commercially feasible,
any damage resulting from such circumstances.
9.1.3 In the event of an emergency the Partnership shall notify the
Minister immediately and shall take such action as may be prescribed
by the appropriate governmental authority and otherwise act in
accordance with good international petroleum industry practice.
9.1.4 The Partnership shall take steps to ensure restoration of the
operating environment upon termination of the Concessions. The
Partnership shall provide the Minister a copy of the plans for
restoration of the operating environment that are required by law.
ARTICLE X
EMPLOYMENT AND TRAINTNG
10.1 Subject to the applicable provisions of law, the Partnership shall be
free to employ such personnel and sub-contractors as it may choose for the
purpose of carrying out the Concession Operations. To the extent the
Partnership deems it reasonable and prudent to do so, and as far as is
consistent with efficient operations and with the Partnership's
responsibility for the conduct of the Concession Operations, in recruiting
employee candidates the Partnership shall give preference to Polish
citizens who are qualified by education, training and experience to conduct
the tasks for which they are considered; and in selecting subcontractors to
carry out the Concession Operations in the Republic of Poland the
Partnership shall give preference to Polish sub-contractors, provided they
are competitive in terms of quality, cost, and the ability to meet required
schedules.
10.2 The Partnership shall provide such training as it deems appropriate
for Polish citizens. employed directly or indirectly in the Concession
Operations during term of this Agreement.
10.3 Notwithstanding the above, the Partnership will spend US $25,000 per
year during the Exploration Period on training of Polish citizens, as
directed by the Minister. The amounts and kinds of such expenditures
thereafter shall be determined from time to time by further agreement
between the Partnership and the Minister.
ARTICLE XI
ASSIGNMENT
11.1 The Partnership has the right to assign or transfer ail or part of its
rights and obligations under this Agreement to any affiliate or third
party, subject to the requirement that the Partnership obtain the prior
written consent of the Treasury, which consent shall not be unreasonably
withheld or delayed provided that the Minister shall be satisfied that any
such assignee shall be technically and financially able to carry out the
terms and conditions of this Agreement.
11.2 A change of the legal persons who from the Partnership or a change of
ownership of shares of any of such legal persons shall not be considered an
assignment or transfer of rights under this Agreement.
ARTICLE XII
FORCE MAJEURE
12.1 Performance under this Agreement by the Partnership or the Treasury
shall be excused in the event such performance is delayed or prevented by
acts of Force Majeure. Acts of Force Majeure are events beyond the
reasonable control of the Party claiming to be affected by any such event,
which have not been brought about at its insistence and include, but are
not limited to, war, insurrection, riot, civil disorder, embargo, blockade,
explosion, fire, lightening, earthquake or other adverse weather
conditions, strikes, non-availability of equipment or any other event of a
similar nature, whether or not of the same type or kind. The foregoing is
based on the proviso, however, that the Partnership or the Treasury, as the
case may be, shall be required to use reasonable diligence to seek to
overcome the obstacle and resume performance within a reasonable time after
the obstacle is removed.
12.2 If Concession Operations are delayed, curtailed or prevented by such
causes, then the time for carrying out the obligations affected thereby,
the duration of the relevant period of Concession Operations, the term of
this Agreement, and all rights and obligations hereunder, all shall be
extended for a period equal to the delay caused by the Force Majeure
occurrence plus such period of time as is necessary to reestablish
operations.
12.3 The Party whose ability to perform its obligations is so affected
shall notify forthwith the other Party thereof in writing stating the
cause, and the Parties shall do all that is reasonably within their power
to remove such cause.
ARTICLE XIII
TERMINATION
13.1 The Partnership may relinquish all or any part of its rights and be
relieved of the related obligations under this Agreement on sixty (60)
days' notice to the Minister.
13.2 In the event the Partnership takes an action or fails to take an
action which results in a material breach of this Agreement, then within
ninety (90) days of receiving written notice from the Minister of such
alleged material breach the Partnership shall take action reasonably
intended to remedy such alleged breach. If within the time allowed the
Partnership fails to take remedial action, then this Agreement may be
terminated by the Minister on behalf of the Treasury on sixty (60) days'
written notice.
13.3 Should the Partnership dispute the existence of circumstances in
Article 13.2, the Partnership may refer the dispute at any time before the
end of ninety (90) days after receipt of the notice of termination from the
Minister to arbitration as provided by Article XIV and termination of the
Agreement by the Minister on behalf of the Treasury shall not take effect
except under the terms of any arbitration award which results.
13.4 Termination under this Article XIII shall take place without prejudice
to any right which may have accrued to the Treasury or the Partnership
under the Agreement prior to such termination.
ARTICLE XIV
ARBITRATION
14.1 Any dispute as to any matter or operation arising out of or in
connection with this Agreement, including, without limitation, any dispute
as to the validity, construction, enforceability or breach of this
Agreement shall be exclusively and finally settled by arbitration, and any
Party may submit such a dispute to arbitration.
14.2 Arbitration proceedings shall be conducted by three (3) arbitrators in
accordance with the Rules of UNCITRAL, the United Nations Commission on
International Trade Law.
14.3 Unless otherwise agreed in writing by the Parties, the third
arbitrator appointed pursuant to Article 14.2 shall not be a national of
Poland or of the same nationality as the main shareholder(s) of
Partnership.
14.4 In any arbitration proceeding hereunder:
14.4.1 proceedings shall, unless otherwise agreed in writing by the
Parties' be held in Warsaw, Poland;
14.4.2 the Polish language shall be the official language for all
purposes; and
14.4.3 the decision of the majority of the arbitrators shall be final
and binding and shall be enforceable in any court of competent
jurisdiction.
14.5 In case of arbitration, the Parties shall continue their performance
of this Agreement unless it is impossible to do so for reason of Force
Majeure or unless the Partnership's rights hereunder have been
expropriated, nationalized or otherwise taken.
14.6 The costs of arbitration shall be borne in the manner determined by
the arbitration tribunal.
14.7 Each of the Parties hereby irrevocably waives any and all claims to
immunity in regard to the arbitration proceedings and any proceedings to
enforce, recognize or execute any arbitral award rendered by a tribunal
constituted pursuant to this Agreement including, without limitation,
immunity from service of process, immunity from jurisdiction of any court,
and immunity of such of its property as is of a commercial nature from
execution.
ARTICLE XV
GOVERNING LAW AND STABLIZATION
15.1 This Agreement shall be governed by the laws of Poland and
international treaties which Poland has adopted.
15.2 The Minister on behalf of the Treasury acknowledges that the
Partnership has entered into this Agreement in reliance on the Polish law
as in existence on the date the Partnership executes this Agreement,
particularly the laws and ordinances relating to royalties, taxation, the
export of Oil, the sale of Natural Gas, and the repatriation of profits.
The Minister on behalf of the Treasury hereby represents that all rights
granted to the Partnership hereunder are in conformity with Polish law as
in effect on the date the Partnership executes this Agreement, as such law
applies to the Partnership. In the event that any change to the law of
Poland occurs or the Government takes any other action which restricts,
divests or limits any rights or benefits accruing to the Partnership or
which increases the Partnership's obligations or costs of operation under
this Agreement or under the law of Poland, the Partnership may, at any time
thereafter so notify the Minister in writing. Promptly upon receipt of such
notice, the Minister and the Partnership shall meet to negotiate in good
faith and agree upon the modifications which need to be made to the terms
of this Agreement to restore the Partnership's rights and benefits to a
level equal to what they would have been had such change not occurred, or
upon such other remedy as they agree may be appropriate. In the event the
Parties are unable to agree within ninety (90) days after the Partnership's
notice to the Minister upon the modifications which are needed to the
Agreement or upon such other remedy as may be required, then either Party
may at any time thereafter refer the matter or matters in dispute to
arbitration pursuant to Article XIV.
ARTICLE XVI
MINING USUFRUCT FEES & OTHER PAYMENTS
16.1 The Partnership shall pay the Treasury a mining usufruct fee as
follows:
16. 1.1 As mining usufruct fee with respect to the Prospecting and
Exploration for the eight Blocks, the Partnership shall pay the Polish
zloty equivalent of the following amounts:
a. US$25,000 within 60 days from obtaining the last Joint
Concessions;
b. US$50,000 within one year from obtaining the last Joint
Concessions; and
c. US$50,000 within two years from obtaining the last Joint
Concessions
16.1.2 Moreover, the Partnership will be obligated to pay the Treasury a
mining usufruct fee with respect to Exploitation in Zlotys based on
the market value of the reserves in place. The fee will be negotiated
by the Treasury and the Partnership within the range of 0.01 to 0.5
per mil of market value of the reserves in place as determined in
accordance with standard international petroleum industry engineering
criteria. The mining usufruct fee shall:
a. apply to only so much of the reserves that can be extracted using
conventional primary recovery methods;
b. be negotiated and determined with respect to each Mining Area at
the time the boundaries thereof are designated pursuant to
Article 5.2 above; and
c. be payable in five consecutive annual installments, commencing on
the date such Mining Area is designated and the applicable
Exploitation Concession is issued.
16.1.3 The mining usufruct fee shall be paid to the following bank
account:
Ministry of Environmental Protection, Natural Resources and Forestry
Biuro Administracyjno-Budzetowe
NBP 0/0 Warszawa
account # 00000000-000-000-0
title: 28.31.3996 S 64 - mining usufruct fee;
or such other account as the Minister may notify to the Partnership in
writing.
16.2 The concession fee referred to in Article 85 of the Geological and
Mining Law of February 4, 1994 shall amount to the zloty equivalent of US
$12.500 per each Exploration Concession covering one Block, payable in full
within sixty (60) days from obtaining the Exploration Concession. Sixty
percent (60%) of the fee shall constitute the revenue of the local
authorities on whose territory the activities under the Concession are to
be conducted and the remaining forty percent (40%) shall constitute the
revenue of the National Fund for Environmental Protection and Water
Management.
16.3 The Partnership envisages that it will spend the equivalent of US
$5,000,000 during the First 3-Year Exploration Period and US$ 10,000,000
during the Second 3-Year Exploration Period, subject to positive results of
the first phase of exploration.
ARTICLE XVII
DESIGNATED ENTITY
17.1 The Minister may designate an entity of its choice to represent the
Minister for the purposes of receipt and safekeeping of reports,
interpretations, maps, data, cores, samples, and other information.
17.2 The appointment of a Designated Entity notwithstanding, the Treasury
shall remain responsible to the Partnership for all of its obligations to
the Partnership as provided herein.
17.3 The Minister shall notify the Partnership in writing of its naming of
the Designated Entity, of the specific purpose to which such designation
relates, and of all communication and other details which the Partnership
requires to know about such Designated Entity. Such notification shall be
made in good time to enable the Partnership to comply with its obligations
hereunder and so as not to disrupt or delay Concession Operations.
ARTICLE XVIII
NOTICES
18.1 All notices, applications, requests, agreements, approval, consents,
instructions, delegations, waivers or other communications to be given,
submitted or made hereunder by any Party to another shall be sufficiently
given if in writing and delivered in person to an authorized representative
of the Party to whom such notice is directed or when sent by registered
post, postage paid, or by telegram, telex, facsimile or cable, to the
address or addressee of the other Party as follows, or to such other
address as a Party may specify in writing to the other:
for the Treasury Xxxxx Wr6blewski, Vice-Director
or the Minister: Department of Geology and
Geological Concessions
Ministry of Environmental Protection,
Natural Resources and Forestry
00/00 Xxxxxxxx Xxxxxx, 00-000 Xxxxxx
Facsimile: 25-15-03
for the
Partnership: Xxxxx X. Xxxxxx
FX Energy Poland Sp. Zo.o. and Partners,
Commercial Partnership
Wal Miedzeszynski 000,
00-000 Xxxxxxxx Xxxxxx
Facsimile: 671-66-4O, 000-00-00
18.2 Notices when given in terms of Article 18.1 shall be made in the
Polish language, shall be effective when delivered, if delivered during
business hours of working days; if received outside business hours such
notices shall be effective on the next following working day.
18.3 The Partnership shall appoint, by written notice to the Minister, a
plenipotentiary for cooperation with the Minister and other state
authorities. Such plenipotentiary shall be authorized to act on behalf of
the Partnership in any matters regarding this Agreement. The first such
plenipotentiary shall be Xx. Xxxxx X. Xxxxxx. Any removal of
plenipotentiary and appointment of a new one shall require a written notice
to the Minister.
18.4 This Agreement superseded the Mining Usufruct Agreement entered into by the
Parties hereto as of October 14, 1997.
IN WITNESS WHEREOF, the representatives of the Parties to this Agreement being
duly authorized have hereunto set their hands and have executed these presents
this 30th day of October, 1997.
The Minister of Environmental Protection,
Natural Resources and Forestry
of The Republic of Poland .
/s/ Xx. Xxxxxxxxx Xxxxxxxx, Secretary of State
FX Energy Poland Sp. z o.o. and Partners, Commercial Partnership
/s/ Xxxxx X. Xxxxxx
SCHEDULE "A"
MAP AND COORDINATES OF THE MINING USUFRUCT AREA
In the event of conflict between the coordinates specified below and the map
attached hereto, the coordinates shall control.
The Mining Usufruct Area shall include the following Xxxxxx:
XXXXX X X XXXXX X X
Xxxxx 00 00. 00' 0" 16. 00' 0" Block 105 53. 45' 0" 16. 00' 0"
54. 00' 0" 16. 30' 0" 53. 45' 0" 16. 30' 0"
53. 45' 0" 16. 30' 0" 53. 30' 0" 16. 30' 0"
53. 45' 0" 16. 00' 0" 53. 30' 0" 16. 00' 0"
Block 86 54. 00' 0" 16. 30' 0" Block 108 53. 45' 0" 17. 30' 0"
54. 00' 0" 17. 00' 0" 53. 45' 0" 18. 00' 0"
53. 45' 0" 17. 00' 0" 53. 30' 0" 18. 00' 0"
53. 45' 0" 16. 30' 0" 53. 30' 0" 17. 30' 0"
Block 87 54. 00' 0" 17. 00' 0" 109 53. 45' 0" 18. 00' 0"
54. 00' 0" 17. 30' 0" 53. 45' 0" 18. 30' 0"
53. 45' 0" 17. 30' 0" 53. 30' 0" 18. 30' 0"
53. 45' 0" 17. 00' 0" 53. 30' 0" 18. 00' 0"
Block 88 54. 00' 0" 17. 30' 0" 129 53. 30' 0" 18. 00' 0"
54. 00' 0" 18. 00' 0" 53. 30' 0" 18. 30' 0"
53. 45' 0" 18. 30' 0" 53. 15' 0" 18. 30' 0"
53. 45' 0" 18. 30' 0" 53. 15' 0" 18. 00' 0"
Block 89 54. 00' 0" 18. 00' 0" 149 53. 15' 0" 18. 00' 0"
54. 00' 0" 18. 30' 0" 53. 15' 0" 18. 30' 0"
53. 45' 0" 18. 30' 0" 53. 00' 0" 18. 30' 0"
53. 45' 0" 18. 00' 0" 53. 30' 0" 18. 00' 0"
excluding the following existing concession area of Ciechnowo - Polczn Zdroj
which is described in Schedules B hereto. However, the areas so excluded may be
subject to concessions issued to the Partnership in the future, provided that
the third party rights thereto shall have by then expired or shall have been
acquired by the Partnership; in this case such area shall be part of the Mining
Usufruct Area.
[Attached is outline map of northern section of Poland in which concessions are
located containing grid of concession boundaries and numbers]
[Attached is a description of transaction as entered into the
Commercial Register kept by the District Court in Warsaw RHA-317]
