EXHIBIT 10.1
AGREEMENT AMENDING
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
THIS AGREEMENT is made on this 20th day of December 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) The Parties entered into a Farmin and Participation Agreement
on 14 November 2002 (the 'FARMIN AND PARTICIPATION
AGREEMENT'), which is in full force and effect.
(B) ITTE has procured and Avenue has paid the Deposit of
US$250,000 as required pursuant to clause 2.1 of the Farmin
and Participation Agreement.
(C) ITTE and Avenue have confirmed that Avenue is in a position to
make when due the payment of US$1,250,000 under clause 3.2(b)
of the Farmin and Participation Agreement and a further
payment of US$500,000 on 10 February 2003, but have requested
additional time for ITTE to raise additional funds for Avenue
to acquire the full 45% interest in the Tosun License as
contemplated in the Farmin and Participation Agreement.
(D) SGC and MEPS have agreed to cooperate with ITTE and Avenue on
the terms and conditions set out in this Agreement.
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 Unless otherwise defined in this Agreement, terms defined in clause 1.1
of the Farmin and Participation Agreement same meaning where used in
this Agreement.
1.2 Clause 1.2 of the Farmin and Participation Agreement shall apply as if
set out in full herein.
2. AMENDMENTS TO FARMIN AND PARTICIPATION AGREEMENT
2.1 GENERAL
The Parties hereby agree to amend the Farmin and Participation
Agreement as set out in this clause 2. Each Party acknowledges and
agrees that the Farmin and Participation Agreement, as amended by this
clause 2, is and shall remain in full force and effect.
2.2 AMENDMENTS TO CLAUSE 3
Clause 3 of the Farmin and Participation Agreement is deleted and
replaced with the following:
3. TOSUN FARMIN
3.1 ACQUISITION OF INTERESTS
(a) 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 17.5%
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 35% Participating Interest in the Tosun Licence. The
closing of such transfer and assignment shall occur
immediately following the making of the payment referred to in
clause 3.2(a)(ii).
(b) 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 5% Participating
Interest) hereby grant to Avenue (or its Nominated Affiliate)
the option to acquire, free and clear of Encumbrances, an
additional 10% Participating Interest in the Tosun Licence.
Exercise of such 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 such option. No such notice shall be
effective unless given on or prior to 10 February 2003.
(c) In the event that Avenue exercises the Karakilise Option but
does not exercise the option under clause 3.1(b) by midnight
on 10 February 2003, AME and ERSAN (each as to a 5%
Participating Interest) shall transfer and assign to Avenue
(or its Nominated Affiliate, if so requested by Avenue), and
Avenue shall accept (or procure that its Nominated Affiliate
accepts), free and clear of Encumbrances, an additional 10%
Participating Interest in the Tosun Licence. The closing of
such transfer and assignment shall occur within 5 Business
Days after the exercise of the Karakilise Option.
(d) For the avoidance of doubt, clauses 3.1(b) and 3.1(c) are
mutually exclusive.
3.2 FARMIN PAYMENTS
(a) Avenue shall pay (or procure that its Nominated Affiliate
pays) 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 following sums:
(i) US$250,000 by way of payment of the Deposit in
accordance with clause 2.1 (the receipt of which is
hereby acknowledged);
(ii) a further US$1,250,000 promptly following execution
of this Agreement; and
(iii) a further US$500,000 on or prior to 10 February 2003,
provided that drilling of the Tosun-1 Well is
proceeding in accordance with the Tosun Drilling
Contract.
(b) If Avenue or its Nominated Affiliate acquires a further 10%
Participating Interest in the Tosun Licence pursuant to clause
3.1(b), then as a further contribution to the drilling costs
referred to in clause 3.2(a) Avenue shall pay (or procure that
its Nominated Affiliate pays) to AME an additional US$500,000
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.
(c) If Avenue or its Nominated Affiliate acquires a further 10%
Participating Interest in the Tosun Licence pursuant to clause
3.1(c), then at closing of that acquisition Avenue shall pay
(or procure that its Nominated Affiliate pays) to AME:
(i) if the Tosun-1 Well has resulted in a commercial
discovery, the sum of US$1,325,000 (being (A) 250% of
the amount specified in clause 3.2(b), plus (B) a
further US$75,000 in respect of the logging, running
of a completion string, cementing and perforating at
the Tosun-1 Well referred to in clause 3.3); or
(ii) if the Tosun-1 Well has not resulted in a commercial
discovery, the sum of US$500,000 (being 100% of the
amount specified in clause 3.2(b)).
For purposes of sub-paragraphs (i) and (ii) above, "commercial
discovery" means any discovery of reserves of petroleum which
(1) are tested and produced in the well encountering the same,
or if not so tested, are determined by AME and Avenue as being
capable of being produced, and (2) can be exploited on a
commercial basis.
3.3 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 is:
(a) in the event that Avenue has not acquired and does
not acquire an additional 10% Participating Interest
in the Tosun Licence pursuant to either clause 3.1(b)
or clause 3.1(c), 40% (being a maximum of
US$200,000); or
(b) in the event that Avenue has acquired or does acquire
an additional 10% Participating Interest in the Tosun
Licence pursuant to either clause 3.1(b) or clause
3.1(c), 50% (being a maximum of US$250,000).
3.4 TOSUN JOA
(a) AME, ERSAN and Avenue have executed together with this
Agreement the Tosun JOA in a form agreed with MEPS pursuant to
clause 9.1(a). The Tosun JOA is in terms which assume that
Avenue (or its Nominated Affiliate) holds a 35% Participating
Interest in the Tosun Licence.
(b) Unless and until such time as Avenue acquires, pursuant to
clause 3.1(b) or (c), an additional 10% Participating Interest
in the Tosun Licence, clause 9.3(b) and (c) shall be deemed to
be replaced with the following insofar as they relate to the
Tosun Licence (but not in relation to any other SGC Interest):
"(b) Subject to clauses 7.6, 8.2 and 8.3, the
Participating Interests in the Tosun License 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 the Tosun
Licence (including the sale of crude oil by AME on
behalf of the relevant Participants) shall accrue to
the Participants in the Tosun License, in the
following proportions:
SGC Participants 55%
Avenue 35%
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 the Tosun
License shall be borne in the following proportions:
SGC Participants 60%
Avenue 40%
For the avoidance of doubt, MEPS shall not be
required to fund the Joint Operating Expenses in
relation to the Tosun License."
(c) Immediately upon Avenue acquiring, pursuant to clause
3.1(b) or (c), an additional 10% Participating
Interest in the Tosun Licence, the Tosun JOA shall
be, and shall be deemed to have been, amended as
follows:
(i) by the deletion of the first sentence of
Article 3.2.4 and its replacement with the
following:
"Notwithstanding Article 3.1, the share of
any costs or expenses which the holder of
the Carried Interest (or part thereof) is,
or but for this Article 3.2.4 would be,
required under the terms of Article 3.1 to
contribute by virtue of the Carried Interest
(or part thereof) held by it shall be the
responsibility of and advanced by the
Parties holding Percentage Interests that
(in whole or part) are not the Carried
Interest (including the holder of the
Carried Interest or part thereof, in respect
of that part of such holder's Percentage
Interest (if any) that is not comprised of
the Carried Interest or part thereof), as
between them in proportion to their
respective Percentage Interests (excluding
any part thereof comprising the Carried
Interest or part thereof).";
(ii) by the deletion from Articles 5.10.1 and
8.4.5 of the words "seventy percent (70%)"
and their replacement with the words "fifty
five percent (55%)";
(iii) by the deletion from Article 9.2.1(iv) of
the reference to "35%" and its replacement
with a reference to "45%"; and
(iv) by deleting from the definition of "Sunk
Costs" the words "one hundred and fifty
percent (150%) of".
(d) For the avoidance of doubt, as stated in clause 9.1(e) the
terms of the Tosun JOA shall prevail over and to the exclusion
of any conflicting provision of this Agreement, including in
the period referred to in clause 3.4(b), provided that no
consent shall be required under the Tosun JOA to the transfer
pursuant to this Agreement of a Participating Interest in the
Tosun Licence and a corresponding interest under the Tosun
JOA.
2.3 AMENDMENTS TO CLAUSE 4
(a) Clause 4.1 of the Farmin and Participation Agreement is
deleted and replaced with the following:
"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 ITTE
confirms in writing to AME that the funding required under
clause 4.4 and (if applicable) clause 3.2(c) is available to
Avenue."; .
(b) Clause 4.2 of the Farmin and Participation Agreement is
amended by deleting the reference to "60 days" and replacing
it with a reference to "45 days".
2.4 AMENDMENTS TO CLAUSE 5
(a) Clause 5.2(a) of the Farmin and Participation Agreement is
deleted and replaced with the following:
"If Avenue does not exercise the option in clause 3.1(b), then
with effect from midnight on 10 February 2003:
(i) the "45%" percentage figure set out against the
reference to "AME" in clause 5.5(c) shall be deemed
to be amended to and read as "55%";
(ii) the "45%" percentage figure set out against the
reference to "Avenue" in clause 5.5(c) shall be
deemed to be amended to and read as "35%";
(iii) all other references in clause 5 to "45%" shall be
deemed to be amended to and read as "35%";
(iv) for the purposes of the closing of the Acquisition of
the interests the subject of clause 5.1(b) (but not
any other Acquisition), the references to "45%" in
clauses 7.2(b)(i), 8.2(a)(i) and 8.3 shall be deemed
to refer to "35%"; and
(v) in connection with the Acquisition of the interests
the subject of clause 5.1(b) (but not in connection
with any other Acquisition in relation to which
clause 7.6 applies), the words:
"shall be held by the Parties, and as
between such Parties in the proportions, set
out in Schedule "A" in the column 'Post
Farmin'"
shall be deemed to be deleted from clause 7.6 and
replaced with the words:
"shall be held by Avenue or its Nominated
Affiliate (as to a 35% Participating
Interest), MEPS or its Nominated Affiliate
(as to a 10% Participating Interest) and AME
(as to the remaining 55% Participating
Interest)"
(b) The following shall be inserted into the Farmin and
Participation Agreement as a new clause 5.2(d):
"If Avenue exercises the Kahta Option at a time when it is
still able to but has not exercised the option in clause
3.1(b) (so that it cannot be determined whether Avenue will be
acquiring a 35% or 45% Participating Interest under clause
5.1(b)):
(i) closing of the Kahta Option will be delayed until (1)
12th February 2003 or (2) if Avenue exercises the
option under clause 3.1(b), the date upon which
closing is to occur in respect of that option
(whichever such date is the earlier);
(ii) notwithstanding clause 5.2(c), clauses 5.3 to 5.6
shall apply with immediate effect on the assumption
that Avenue or its Nominated Affiliate will acquire a
35% Participating Interest only under clause 5.1(b),
provided that if the option in clause 3.1(b) is
exercised so that such Participating Interest is 45%,
then the rights and obligations of the Parties under
clauses 5.4 and 5.5 and the related Joint Operating
Agreement shall be determined as if Avenue or its
Nominated Affiliate had acquired such 45%
Participating Interest on the date upon which the
option in clause 5.1(b) was exercised; and
(iii) AME shall not be required to conduct workover or
drilling operations under clause 5.4 at any time when
it determines that weather conditions do not so
permit."
2.5 CONSEQUENTIAL AMENDMENTS
As a consequence of the amendments made pursuant to clauses 2.2, 2.3
and 2.4 above, the following additional amendments are made to the
Farmin and Participation Agreement (clause numbers below refer to
clauses in the Farmin and Participation Agreement):
(a) in the definition of 'Acquisition', the reference to
45% is deleted;
(b) in paragraph (b) of the definition of 'Sunk Costs',
if Avenue or its Nominated Affiliate do not acquire,
pursuant to clause 3.1(b) or (c), a further 10%
Participating Interest in the Tosun Licence, the
words "one hundred and fifty percent (150%) of" shall
be deemed to be inserted after the words "deemed in
the aggregate to equal";
(c) in relation to clause 7.6:
(i) there shall be inserted after the words "other than
the Kahta Lease" the words "and excluding any
Acquisition by Avenue or its Nominated Affiliate of a
further 10% Participating Interest in the Tosun
Licence pursuant to clause 3.1(b) or (c)"; and
(ii) in connection with the acquisition by Avenue or its
Nominated Affiliate pursuant to clause 3.1(a) of a
35% Participating Interest in the Tosun Licence (but
not in connection with any other Acquisition in
relation to which clause 7.6 applies), the words:
"shall be held by the Parties, and as
between such Parties in the proportions, set
out in Schedule "A" in the column 'Post
Farmin'"
shall be deemed to be deleted from clause 7.6 and
replaced with the words:
"shall be held by Avenue or its Nominated
Affiliate (as to a 35% Participating
Interest), MEPS or its Nominated Affiliate
(as to a 10% Participating Interest) and AME
and ERSAN (as to a 27.5% Participating
Interest each)"
(d) for the purposes of the closing of the Acquisition in
clause 3.1(a) and (if applicable) clause 3.1(b) or
(c) (but not any of the other Acquisitions), the
references to "45%" in clauses 7.2(b)(i), 8.2(a)(i)
and 8.3 of the Farmin and Participation Agreement
shall be deemed to refer to the actual Participating
Interests the subject of the relevant Acquisition
(i.e. 35% or 10%, as the case may be);
(e) in clause 15.4, unless and until Avenue or its Nominated
Affiliate acquire, pursuant to clause 3.1(b) or (c), a further
10% Participating Interest in the Tosun Licence, the words:
"50% percent by the relevant SGC Participants (as
between them in proportion to their respective
Participating Interests) and as to the remaining 50%
by Avenue or its Nominated Affiliate"
shall be deemed to be deleted and replaced with the words:
"60% percent by the relevant SGC Participants (as
between them in proportion to their respective
Participating Interests) and as to the remaining 40%
by Avenue or its Nominated Affiliate";
(f) in relation to Schedule 'E', the prescribed form of
Transfer and Assignment to be submitted to GDPA shall
be amended to by replacing all references to "45%"
with a reference to "35%";
(g) in Schedule 'I' (Tosun Drilling Contract), Article 11 (Special
Provisions) shall be deemed to be amended to reflect the
revised arrangements provided for in this Agreement; and
(h) in clause 9.1(c), the words "Promptly following the Tosun
Closing Date" are deleted and replaced with the words
"Promptly following the exercise of the option in clause
3.1(b) or of the Karakilise Option (whichever is the sooner)".
2.5 CORRECTIONS
In order to correct typographical errors and internal inconsistencies
in the original agreement, the Farmin and Participation Agreement is
further amended as follows:
(a) in Recital (G), the words "in the period of 24 months from the
date of the execution of this Agreement" are deleted;
(b) the definition of Sunk Costs is deleted and replaced with the
following:
"SUNK COSTS" means the contributions made by a Participant on
or after 14 November 2002 and in accordance with this
Agreement or any Joint Operating Agreement (including, but not
limited to, contributions made on behalf of MEPS) towards the
cost and expenses incurred in relation to Joint Operations on
any SGC Interest in which Avenue or its Affiliate holds an
interest (or has an interest held on its behalf by AME)
acquired pursuant to this Agreement, and includes (without
limiting the generality of the foregoing):
(a) any payment of or in respect of Withholding Tax
payable in relation to any such cost or expenses or
the contribution of a Party thereto;
(b) in relation to Avenue or its Affiliate:
(i) the full amounts paid pursuant to clauses
3, 4 and 9.3(c) of this Agreement;
(ii) all stamp tax paid by it under or in
respect of the Farmin and Participation
Agreement or the transaction contemplated
therein;
(iii) all fees, costs or expenses paid under any
representation and consulting agreement
with Xx X.Xxxxx relating to the activities
contemplated in this Agreement; and
(iv) all fees and expenses paid to the legal
advisers to Avenue and ITTI in relation to
the negotiation, preparation and execution
of this Agreement and the consummation and
closing of the transactions provided for
herein; and
(c) in relation to AME and ERSAN, its contributions to
the cost and expenses of Joint Operations incurred in
relation to the drilling and other operations and
works carried out in relation to either the Tosun-1
Well or the Karakilise-1 Well or both, as the case
may be, on the basis that, unless otherwise agreed by
the Parties and solely for the purposes of clause 9.3
of this Agreement and the corresponding provisions of
any 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 Affiliate in
relation to those operations and works;".
(c) the definition of Tosun JOA is deleted and replaced
with the following "means the Joint Operating
Agreement dated on or about 20 December 2002 between
AME, ERSAN and Avenue and relating to the Tosun
Licence";
(d) in clause 5.5(d), "10% of" shall be inserted after the words
"is less than";
(e) at the end of clause 8.3, the words "including
clauses 8.3(a) to (i)" are deleted and replaced with
the words "including clauses 8.3(b) to (i)";
(f) in clause 9.1(c)(ii), the words "the draft Joint
Operating Agreement set out in Schedule H" are
deleted and replaced with the words "the Tosun JOA";
(g) in clauses 9.3(d)(i) and (ii), "10% of" is inserted
after the words "is less than" and the words "that
percentage of" is inserted before the words "such
Sunk Costs"; and
(h) in clause 17.2, the parenthetical is deleted.
3. GENERAL
Clauses 13 (Assignment and encumbrances), 14 (Confidentiality), 17
(Notices) and 18 (General) of the Farmin and Participation Agreement
shall apply to this Agreement as if set out in full herein.
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
TRANSMEDITERRANEAN OIL COMPANY LTD
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Executive Vice-President and
General Manager
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK VE TICARET A.S
By: /s/ Oyman Xxxxx
Xx Xxxxx Xxxxx
Chairman of the Board
MIDDLE EAST PETROLEUM SERVICES LTD.
By: /s/ Cem Xxxxx
Mr Cem Xxxxx
Authorised Signatory on behalf of Middle East Petroleum Services Ltd.
AVENUE ENERGY INC.
By: /s/ Xxxxxxxx Xxxxxx
Xx Xxxxxxxx Xxxxxx
President
IT TECHNOLOGY INC.
By: /s/ Xxxxxxxx Xxxxxx
Xx Xxxxxxxx Xxxxxx
Exec. Vice President
