AGREEMENT
BETWEEN
POLISH OIL AND GAS MINING JOINT STOCK COMPANY
AND
EUROGAS, INC.
DATED OCTOBER 23, 1997
PREAMBLE
EUROGAS Inc. states that it is a sole owner of POL-TEX METHANE, a limited
liability company, with the participation of foreign capital, registered in the
commercial register of the District Court in Katowice - VII Commercial Register
Department at No. RHB 5508, based on the verdict of the Court dated 5th Sept.
1990.
CONSIDERING the EUROGAS Inc. wants to explore, develop, exploit and process
Natural Gas and Crude Oil in the area of the Republic of Poland, and it has the
experience, possibilities, financial and technical resources, as well as the
professional knowledge enabling the effective running of such an Activity;
CONSIDERING that to run its Activity EUROGAS Inc. is going to set up
companies with foreign capital participation, in particular with the
participation of PGNiG S.A.;
Furthermore, CONSIDERING that having the consent of PGNiG S.A. - O.B.G.
GEONAFTER, EUORGAS Inc. has entered into the rights and obligations of POL-TEX
METHANE arising form the Letter of Intent signed on 28th May 1997 in Warsaw
between the above mentioned PGNiG S.A. - O.B.G. GEONAFTA and POL-TEX METHANE,
the parties agree on the below:
ARTICLE 1
DEFINITIONS
For the purpose of the present agreement, unless something else appears
from the context, the definition of this Article are comprehended as follows:
1. "JOINT VENTURE" - means the whole of undertakings, including the
particular undertakings aiming at achieving the target described in Art. 2.
2. "PARTIES" - means subjects entering into the present agreement:
1/Polish Oil and Gas Mining joint stock company, with its registered
office at 0 Xxxxxx Xxxxxx xxxx 00, 00-000 Xxxxxx, Xxxxxx - Branch
Geological Bureau GEONAFTA (PGNiG);
2/EUROGAS Inc. 00 Xxxxx Xxxxxx Xxxxxxxxx Xxx Xxxx, XX 00000 (EUROGAS);
while the PARTY is the adequate for the above mentioned ones.
3. "SHAREHOLDERS" - in any case such a definition appears it is
equivalent of the notion "parties".
4. "COMPANY" - means the company or the companies formed by the parties
to accomplish the joint venture.
5. "BODIES OF THE COMPANY" - means bodies of the company appointed by the
parties according to the Polish Commercial Code and the deed of company
formation.
6. "INVESTMENT" - it is the equivalent of the notice "joint venture".
7. "CAPITAL EXPENDITURES" - means the value of goods and services
indispensable to accomplish the Investment.
8. "OPERATOR" - the party holding the concession or its organizational or
associated unit with the required powers and qualifications, or any person
contracted by the party suiting the conditions.
9. "ADVISORY COMMITTEE" - the group of experts appointed by the parties
according to Art. 7.
10. "THE AREAS COMPRISED BY PGNiG CONCESSIONS"
"THE AREAS OF PGNiG INTEREST"
"THE AREAS COMPRISED BY EUROGAS CONCESSIONS"
"THE AREAS OF EUROGAS INTEREST"
-means the areas designated by coordinates, mentioned in appendix I to the
agreement.
11. "CONCESSION ACTIVITY" - means the performance rights arising of the
concession by any of the Parties or the Company.
12. "NATURAL GAS" or "GAS" - means hydrocarbons in gas state in normal
atmospheric conditions of temperature and pressure, including wet gas, dry gas,
raw gas and other hydrocarbons in gas state, as well as gas left after the
condensation or extraction of fluid hydrocarbons from gas, excluding condensed
or extracted fluid hydrocarbons.
13. "CRUDE OIL" - means mineral oil, and other kinds of hydrocarbons, both
in constant and fluid state, in natural state or obtained from natural gas
through condensation or extraction.
14. "FORCE MAJEURE" - any sudden event caused by the external
circumstances out of the objec6tive control of the parties, as well as the
necessity of submission to any statute, directive or regulation promulgated by
the entitled authority, including the decision of central or local authorities
in Poland or any other country where the party or its successor in right has the
seat.
15. Definitions used in this agreement, in particular:
1/extracted mineral
2/mineral deposit
3/mining area
4/mining enterprise
5/mining usufruct
6/concession
7/concession authority
8/other definitions set up in the Mining and Geological Law 1994 (Dz.
U. No. 27, s. 96) or any other commonly binding statute shall be
understood as the statute orders it.
ARTICLE 2
THE AIM OF THE AGREEMENT
Unless the agreement issues different targets, it aims to accomplish the
joint venture of the parties, especially exercising the parties' concession
rights or to explore and develop natural gas and crude oil deposits, as well as
their natural derivatives from the areas mentioned in appendix 1 to the present
agreement, designated by coordinates there, and to exploit and process the
extracted minerals, due to concessions which shall be granted to the parties or
the company formed by them.
The aim of the agreement comprises the undertakings to choose the areas for
prospecting which shall result in applying for prospecting concession as well.
ARTICLE 3
THE CONDITIONS OF JOINT VENTURE
1. The parties confirm that before the day of signing the present
agreement, the conditions set in the III part of the Letter of Intent of 28th
May 1997, have been fulfilled. In particular the parties have chosen the
exploration concessions and the areas they are interested in, and which are not
specified in the concessions. The concessions and areas mentioned above the
parties treat as the joint preliminary Option, and it should be realized
according to the mode and rules of this agreement, through the detailed Options.
2. EUROGAS confirms the assertion of the point 3, II part of the Letter
of Intent, made by POL-TEX METHANE, takes it over as its own obligation to
involve capital and equipment of the concerted value of 15,000,000 USD (fifteen
million) to accomplish the aim of the agreement during the first three years of
the Letter of Intent being in force, and irrevocably states it shall engage the
above costs at its own risk.
3. Subject to Art. 4.3, while the present agreement is binding, none of
the parties can, against the provisions of the agreement, make offers, negotiate
nor enter into a contract of joint venture concerning any of the concessions or
areas agreed by the Parties in the Meaning of the Letter of Intent dated May 28.
ARTICLE 4
DETAILED OPTIONS
1. For the time the agreement is in force, each of the parties intending
to start the performance of the concession comprised by the preliminary Option,
shall be obliged to propose the other party the participation in such an
undertaking (Proposal), presenting:
1/a copy of the concession for prospecting and discerning of deposits
of Gas and Oil, issued by the concession authority, due to Art. 22 and 23
of Mining and Geological Law;
2/a copy of the mining usufruct contract in the area where the
prospecting and discernment of the mentioned extracted minerals shall be
led;
3/planned scope, schedule and cost of works;
4/the other party's proposal of financing the works referred to
planned costs.
2. If the detailed Option means the involvement into the program for the
concession already executed by PGNiG then PGNiG can propose to EUROGAS the
option to develop this concession. If the detailed Option means the involvement
into the program for the concession already executed by EUROGAS, then EUROGAS
will propose to PGNiG the option to develop this concession. In such a case,
the party offering the participation shall as well deliver the other party:
1/listing of the works done till that very moment, including the
records;
2/documentary evidence statement for the expenditures of present
works.
3. In relation to areas of interest of the parties comprised by the
preliminary Option, the Proposal for the other party concerning such an area,
shall contain its indication, documents mentioned in points 1.3 and 1.4 of this
article and the obligation to apply with a motion to the concession authority to
grant the concession. The project of the motion shall be contained in the
Proposal. As the concession is granted, the party making the Proposal shall
hand over the documents of point 1.1 and 1.2 of the article to the other party
within 14 days.
4. Within 90 days since the Proposal is received, the party receiving it
can make a statement concerning the accession to the proposed undertaking; the
statement shall include the obligation to finance the agreed part of the planned
costs. Within the same time limit the parties shall conclude the contract
settling the rules of the undertaking's realization (detailed contract). The
lack of response within the above mentioned time limit shall be understood as
the resignation from the detailed Option in question. In extraordinary and
necessary situations the parties can agree on only prolongation of the above
time limit; the time limit however cannot be prolonged for more than the next 90
days.
5. In case the situation of point 3 occurs, the statement of accession to
the proposed undertaking can be canceled within 1 month from the day of
receiving the documents mentioned in point 1.1 and 1.2, if the party making the
statement finds the conditions of the concession or the mining usufruct contract
to be unsatisfactory or arduous.
6. In the case that one Party already did some works in the area of the
concession to be granted to other Party, Parties in the separate agreement will
decide to include these costs into investment of Party which will have the
concession granted. The costs can include also the costs of future works. The
agreement will also define the ownership of the data (geological documentation).
In case if EUROGAS will cover the above mentioned costs. These costs will be
used to offset the investment as defined in Art. 3 pt. 2 of this agreement.
ARTICLE 5
MANAGING THE JOINT VENTURE, OPERATOR
1. To manage the joint venture the parties, acting through their
statutory bodies, shall appoint the proxies in number of 2 persons per Party, to
constitute the Board of Directors. The competence, rules and mode of work of
the Board of Directors shall be defined in regulations agreed by the parties.
2. Managing each of the joint venture undertakings shall be within the
competence of the Operator. This shall be served by the party having the
concession to conduct activity of the subject undertaking.
ARTICLE 6
PROTECTION OF THE CONCESSION
The operator shall be bound to carry on the joint venture agreement
accordingly to the conditions of the concession, mining usufruct contract, the
provisions of law and the detailed contract. In case of danger of withdrawal or
expiration of the concession the Operator shall take up the factual acts and use
all possible measures necessary to keep the concession. The Operator shall
immediately inform the other party about the danger and the acts undertaken on
that ground. In case of withdrawal or expiration of the concession, for the
reasons on the Operator's side, he shall be obliged to redress the damage due to
provisions of the detailed contract.
ARTICLE 7
ADVISORY COMMITTEE
1. Within 30 days since the agreement has been signed the Advisory
Committee of six members shall be created; three members shall be appointed by
PGNiG S.A. and another three by EUROGAS.
2. Each of the parties shall appoint from the members of the Committee
the chairman to alternatively preside the succeeding meetings of the Advisory
Committee.
3. The Advisory Committee meetings shall be held at least every six
months and at any other time agreed by the members. At the party's request the
chairman shall convene the meeting; the other party shall be notified at least
15 days before, and in case of urgent works notification must be done within the
time concluded by the members. The notification should specify the date,
location and agenda of the meeting. The resolutions of the Advisory Committee
may be adopted by correspondence, including telex and fax, provided that all the
members assent to it.
4. To adopt the resolution the presence of at least four members of the
Advisory Committee is required. The resolutions shall be passed by the majority
of votes, and each of the members shall have one vote.
5. The Advisory Committee's main task is general works' supervision and
assuring the effective contact and cooperation between the parties, not
encroaching their rights and obligations as the works' conducting is concerned.
The Advisory Committee is enabled to examine and pronounce opinions in all the
matters arising out of the agreement.
ARTICLE 8
TRAINING
EUROGAS will designate 15,000 USD per year for the training of Polish
citizens to enhance their knowledge to properly conduct the works as defined in
this Agreement.
ARTICLE 9
EXPENSES' CONTROL
Each of the parties has the right to make inquiries into the land and
mortgage register, other registers and records concerning the joint venture,
kept by the Operator, provided that at least 14 days before the inquiring party
notifies the Operator about the time of inspection and appoints the person or
persons to do it.
ARTICLE 10
THE RIGHT OF ACCESS
At any reasonable time, at its own risk and cost, each of the parties shall
have the right of access to the concession area and the works of the joint
venture, provided that the Operator is notified early enough about the time when
such an access or entering shall take place and the persons entitled to access
are appointed.
ARTICLE 11
THE JOINT DATA BASE
While the present agreement is binding, all the technical data and
information concerning the Joint Venture, known to the parties shall be
exchanged. In compliance with the situation the Operator shall use the
information to create the Joint Data Base available to both of the parties.
ARTICLE 12
CONFIDENTIAL INFORMATION
1. All the elaboration, pricing, samples, geophysical and engineering
data, reports, working plans, other information and data acquired by the parties
on the ground of the present agreement, or any information concerning the Joint
Venture, as well as the information exchanged by the parties before signing the
present agreement ("confidential information") shall be kept in secret by the
party knowing it. Those items of information must not be revealed to any person
without the previous written consent of the other party. The Confidential
Information must not be used for any other reason than realization and
estimation of the Joint Venture.
2. Independently of the above, each of the parties getting acknowledged
with the information, is entitled to disclose the Confidential Information
without the previous written consent in cases listed below:
1/to members of the Board of Directors, members of management board,
directors or workers of each of the parties, and to any other associated
person to whom the Confidential Information shall be disclosed, only to
realize or estimate the present Joint Venture agreement, provided that the
present provisions are binding for such a person.
2/to in- and out- consultants providing their services professionally,
to whom the Confidential Information shall be revealed for the purpose of
carrying their work on behalf of the party or the Joint Venture, and on the
ground of estimation of the present Joint Venture. The Consultants shall
be pledged in writing to keep in secret such information, accordingly to
the present provision;
3/to any central administration institution entitled to acquire such
information, as well as any court or other office in reply to court appeal
or legal proceedings;
4/in good faith, to any bank or financial institution, provided that
the bank or the institution pledges in writing to keep the Confidential
Information in secret, accordingly to the present provision;
5/within the scope the information is commonly known to public, or has
been possessed by the party acquiring it before disclosure, or the party
has acquired it due to the provisions of law, independently from the
present agreement.
3. The present Art. 11 shall be in force for the time of 5 (five) years
after the expiration of the agreement.
4. The parties state that there is no proper remedial measure in case of
fundamental breach of any of the provisions of the present Art. 11, which
lasting undisturbed, will cause the damages that cannot be repaired. In case of
the above, the wronged party shall be entitled to demand an immediate cessation
of the fundamental breach of Art. 11. The party can perform the above right
together with any other remedial measure accessible to her.
ARTICLE 13
THE SCOPE OF OPENNESS
None of the parties is forbidden to make public advertisements, which the
party, being in good faith, shall acknowledge as indispensable to be in
agreement with the applicable law or the rules of any stock exchange, where the
party's shares are.
ARTICLE 14
CESSION
1. The party's rights and obligations arising out of the present
agreement can be transferred to its associated subject or organizational unit,
provided that the other party previously grants its written consent without
unreasonable delay. The consenting party should be convinced that the successor
in right will be able to fulfill the technical and financial conditions of the
present agreement.
2. The change of the shares' ownership in the company does not constitute
the cession or any other transfer of rights of the present agreement.
ARTICLE 15
FORCE MAJEURE
1. The present agreement execution's infringements shall be justified by
the parties in case of Force Majeure being the reason of delay or preclusion of
the agreement's performance. This provision shall be used by the parties,
provided that they act with due diligence to overcome the impediment and return
to performance of the agreement without unjustified delay.
2. If the Joint Venture is delayed, limited or made impossible by the
Force Majeure circumstances, the time to comply with such affected obligations,
the time the present agreement is binding and all the rights and obligations
arising out of it shall be prolonged for the time period equal with the subject
delay, with regard to the necessary time period to recommence the activity.
3. The party whose ability to fulfill obligations is affected for above
reasons, shall immediately inform the other party in writing, giving the reasons
at the same time, so that the parties could do their best to eliminate it.
ARTICLE 16
END OF EXPLORATION WORKS
1. In case of a successful result of the exploration works, the parties
through the separate contract, concluded within three months since the
geological documentation is approved by the proper state authority, decide
either to perform the joint concession together, or to transfer by PGNiG S.A. to
EUROGAS or other economic entity the right to information got as the result of
geological works (geological documentation). Relatively they decide about the
rules and time of reciprocal settlements, in each case accordingly to the
financial conditions assuring the return of the EUROGAS and PGNiG S.A. invested
capital for the prospecting works, including the suitable profit.
2. The parties shall form the company or companies with their sole shares
and participation to perform jointly the exploitation concession.
ARTICLE 17
AGREEMENT DISSOLUTION
1. Each of the parties is allowed to renounce its rights and be dismissed
from the obligations arising out of the present agreement, maintaining the six
months notice.
2. Due to the present Article, the agreement dissolution will happen
undamaged for any rights based on the present agreement, acquired before by the
parties.
ARTICLE 18
BINDING LAW
The present agreement is subject to Polish law and the international
treaties that Poland participates in.
ARTICLE 19
THE COMPOSITION OF THE AGREEMENT
The present agreement is the one and only agreement between the parties
concerning its subject and replaces all the oral or written contracts between
the parties.
ARTICLE 20
CHANGES AND AMENDMENTS
Changes and amendments of the present agreement shall be in writing,
otherwise they should be considered null.
ARTICLE 21
DIVISIBILITY OF THE PROVISIONS
If for any reason one or some of the provisions of the present agreement
shall be considered null, illegal or in any way non-performable, the invalidity,
illegality or nonperformance will not influence the other provisions of the
agreement, and the agreement shall be approached as if those null, illegal or
non-performable provisions would not exist.
ARTICLE 22
SETTLING OF DISPUTES
All the disputes which may arise on the ground of this agreement shall be
settled by the Arbitration Court in Warsaw at the National Economic Chamber.
ARTICLE 23
CORRESPONDENCE
1. According to the present agreement all the notices, motions, requests,
contracts, approvals, consents, instructions, authorizations, licenses,
exemptions or any other documents which are to be granted, submitted or prepared
by any of the parties for the other one, shall be deemed to be handed in
properly, if they are prepared in writing and delivered personally to the
authorized representative of the other interested party; or if they are sent by
postage registered mail, telegram, telex or fax at the address of the other
party set below, or at the address as the party can record in writing:
a/for Polish Oil and Gas Mining joint Stock Company:
Geological Research Division Geonafta
Xxxxxxxxxxxx Xxxxxx 00, 00-000 Xxxxxx,
b/for EUROGAS Inc.
Lektykarska 18, 01-687 Warsaw
2. Notices handed in accordingly to point 1 of this Article shall be
considered valid, provided they are received within the office hours at week
days, and if they are received after the office hours, their validity shall
start on the very next working day.
ARTICLE 24
COPIES AND LANGUAGES
1. The present agreement has been prepared in Polish and English.
2. One Polish and one English copy are obtained by each of the parties.
3. Only Polish version is legally binding and should be used in
arbitration, due to Art. 22 of the present agreement.
ARTICLE 25
COMING INTO FORCE
The agreement enters into force on the day it is signed.
