Exhibit 10.4
PARTICIPATION AGREEMENT RELATING TO THE KARAKILISE
LICENSES, TURKEY
DATED
ALADDIN MIDDLE EAST LTD
ERSAN PETROL SANAYII A.S.
TRANSMEDITERRANEAN OIL COMPANY LTD
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK ve
TICARET A.S.
AVENUE ENERGY INC.
AVENUE GROUP INC.
MIDDLE EAST PETROLEUM SERVICES LIMITED
JKX TURKEY LIMITED
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PARTICIPATION AGREEMENT
This Agreement made and entered into as a deed the day of 2005.
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD, 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,
the Republic of Turkey at Sogutozu Caddesi Xx. 00, 00000 Xxxxxx, Xxxxxx and in
the city of Wichita, Kansas (hereinafter referred to as "AME");
(2) ERSAN PETROL SANAYII A.S.; a corporation existing under the laws of the
Republic of Turkey, having its head office in Ankara (hereinafter referred to as
"Ersan");
(3) TRANSMEDITERRANEAN OIL COMPANY LTD, a corporation existing under the laws of
British Colombia, Canada, having its head office in Vancouver, Canada
(hereinafter referred to as "TMO");
(4) GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK ve TICARET A.S., a
corporation existing under the laws of the Republic of Turkey, having its head
office in Adiyaman (hereinafter referred to as "GYP");
(5) AVENUE ENERGY INC., a corporation organized and existing under the laws of
the State of Delaware, USA, having offices at Encino, CA, USA and in Australia
at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx (hereinafter referred to as
"Avenue");
(6) AVENUE GROUP INC. (formerly IT Technology Inc.), a corporation organized and
existing under the laws of the State of Delaware, USA having offices at Encino,
CA, USA and in Australia at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx
(hereinafter referred to as "Avenue Group");
(7) 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, IM9 1NR, British Isles
(hereinafter referred to as "MEPS"); and
(8) JKX TURKEY LIMITED, a corporation organized and existing under the laws of
England, having its principal office at 0 Xxxxxxxxx Xxxxxx, Xxxxxx X0X 0XX,
Xxxxxxx (hereinafter referred to as "JKX").
Each party may hereinafter be referred to individually as a "Party" or
collectively as "Parties". Parties (1), (2), (3) and (4) hereinafter referred to
collectively as the "Xxxxx Group Consortium" or "SGC". Parties (1) to (7)
inclusive hereinafter referred to collectively as the "Subordinating Parties".
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WITNESSETH THAT:
WHEREAS, AME and Avenue respectively own an 80% and 15% undivided interest
in Exploration Licenses AR/AME-EPS-AVE/2674, 2677 and 2678 in Petroleum District
XI, Diyarbakir, in the Republic of Turkey comprising 122,943 hectares which
licenses were granted on an initial 4 year term on 30 November 2002 and the
Karakilise-1 Well which was drilled and put on test production on 15 September
2003 and in any other "License" (as "License" is defined in Article 1 of the
Current JOA (as hereinafter defined) (hereinafter collectively referred to as
the "Exploration Licenses"); and
WHEREAS, Ersan owns an undivided five percent (5%) interest in the
Karakilise Licenses and is the registered holder under GDPA Decision No. 4900
dated 1 June 2004 of a seven point five percent (7.5%) royalty interest in
Petroleum (as defined in Article 1 of the Current JOA) produced from the
Karakilise Licenses. Ersan holds two point five percent (2.5%) of such royalty
interest for itself and the remaining five percent (5%) as trustee for MEPS
pursuant to Clause 2.4(c) of the Participation Agreement dated 22 January 2004
between SGC, Avenue and MEPS. Ersan has agreed to relinquish its two point five
percent (2.5%) royalty interest and shall from the Effective Date hold only a
five percent (5%) royalty interest on trust for MEPS (the "ERSAN Royalty
Interest") which royalty is calculated in accordance with the existing GDPA
Decision No. 4900 dated 1 June 2004; and
WHEREAS, JKX has agreed to participate in the drilling of the Karakilise-2
Appraisal Well on the terms of this Agreement; and
WHEREAS, in exchange for such participation, AME has offered to transfer
an undivided twenty five point five percent (25.5%) interest (the "AME
Interest") and Avenue has offered to transfer an undivided four point five
percent (4.5%) interest (the "Avenue Interest") in the Karakilise Licenses to
JKX including the Karakilise-1 Well, the Karakilise -2 Appraisal Well and the
present and future rights to any production lease(s) in the Exploration Licenses
(hereinafter collectively referred to as the "Karakilise Licenses"); and secure
that any parties who have any future or present rights, asserted or unasserted
claims or causes of action in the Karakilise Licenses shall subordinate and
waive, as appropriate, such rights, claims or interests to the aggregate thirty
per cent (30%) undivided interest in the Karakilise Licenses to be transferred
to JKX; and
WHEREAS, the Subordinating Parties agree in consideration of JKX
participating in the Karakilise-2 Appraisal Well and taking the Transferred
Interest (as defined below) to subordinate and waive, as provided in this
Agreement, any present or future rights, asserted or unasserted claims or
interests affecting said Transferred Interest;
WHEREAS, JKX desires to acquire the AME Interest from AME and acquire the
Avenue Interest from Avenue on the terms of this Agreement; and
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WHEREAS, AME, Ersan and Avenue are the only participants and parties to
the current Joint Operating Agreement dated 22 October 2004 which regulates the
operations under the Karakilise Licenses attached as Exhibit A ("Current JOA")
and which shall be terminated and replaced by a new Joint Operating Agreement
attached as Exhibit B (the "New JOA") on the Transfer Date (as defined in
Article 1.2 below); and
WHEREAS, AME, Avenue, Ersan and JKX agree to become parties to the New JOA
on the Transfer Date; and
WHEREAS, AME, Ersan and Avenue are the only parties to the Turnkey
Drilling Contract dated 22 January 2004 for the drilling of the Karakilise-2
Appraisal Well between AME, Ersan and Avenue ("Turnkey Drilling Contract") and
which shall be terminated on or before the Transfer Date;
NOW, THEREFORE, for and in consideration of the terms, conditions and
covenants hereinafter set forth, it is agreed as follows:
1. ASSIGNMENTS
1.1 As from the date of this Agreement (the "Effective Date") and subject only
to fulfillment of the conditions set out in Article 5 and receipt of the payment
required in Article 2.4.1, AME and Avenue hereby respectively transfer, assign,
convey and set over unto JKX good and clear title to the AME Interest and the
Avenue Interest in the Karakilise Licenses (the aggregate undivided thirty per
cent (30%) interest, the "Transferred Interest") free and clear of any claim,
mortgage, charge, pledge, hypothecation, lien, assignment by way of security,
title retention, option, right to acquire, right of preemption, right of
set-off, counterclaim, trust arrangement, or any other security, preferential
right, equity or restriction or overriding royalty obligations of any type
whatsoever and any agreement to give or create any of the foregoing
("Encumbrances") as at the Effective Date except for: (i) the ERSAN Royalty
Interest; (ii) Government royalties accruing from the Effective Date to the
Republic of Turkey (both (i) and (ii) being the "Royalty Interests"); and (iii)
the claims set out at Exhibit D. JKX shall hold the Transferred Interest,
together with all rights, benefits and advantage to be derived therefrom,
absolutely. AME and Avenue severally covenant, represent and declare (AME in
respect of the AME Interest and Avenue in respect of the Avenue Interest) that,
except for the Royalty Interests and the claims set out in Exhibit D, the AME
Interest and Avenue Interest shall not be burdened by any Encumbrance affecting
the AME Interest or Avenue Interest or any right to ownership or any claim to
current or future production from the Karakilise Licenses of any type
whatsoever.
1.2 The date upon which the conditions stated in Article 5 are fulfilled shall
be the "Transfer Date". The period of time between the Effective Date and the
Transfer Date shall be the "Interim Period". During the Interim Period AME and
Avenue shall consult and agree in advance with JKX all matters due for
consideration or vote under the Current JOA in the "Operating Committee" and on
all matters affecting or likely to affect the "Joint Account", "Joint
Operations", "Joint Petroleum" and "Joint Property" as such terms are defined in
Article 1 of the Current JOA; and AME and Avenue shall (AME in respect of the
AME Interest and Avenue in respect of the Avenue Interest) treat JKX as if JKX
were in fact the holder of the AME Interest and the Avenue Interest as from the
Effective Date, save that no liability shall accrue to JKX under the Current JOA
or otherwise in connection with the Karakilise Licenses during the Interim
Period (other than as expressly provided in this Agreement).
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2. CONSIDERATION
2.1 Karakilise-2 Appraisal Well
2.1.1 AME spudded the Karakilise-2 Appraisal Well on 27 September 2004 and
drilling commenced on 3 November 2004. AME is the drilling contractor for such
operations and is drilling the well on a turnkey basis pursuant to the Turnkey
Drilling Contract and in accordance with the Spudding Statement, (attached as
Exhibit C).
2.1.2 The Dry Hole Turnkey Price for the operations relating to the drilling of
the Karakilise-2 Appraisal Well includes drilling to any section within Mardin
group formation(s) in which commercially viable oil is tested or the bottom of
the Mardin group formations if no commercially viable oil is tested ("Turnkey
Depth").
The cost of completing the Karakilise-2 Appraisal Well, including the
installation of a suitable down hole pump, is US$644,767 (six hundred and forty
four thousand seven hundred and sixty seven US dollars) in aggregate.
Upon execution of this Agreement, JKX agrees to pay its share of the Dry Hole
Turnkey Price, being the sum of US$894,156 (eight hundred and ninety four
thousand one hundred and fifty six US dollars) in aggregate; of such sum the
amount of US$760,033 (seven hundred and sixty thousand and thirty three US
dollars) shall be payable to AME and the amount of US$134,123 (one hundred and
thirty four thousand one hundred and twenty three US dollars) shall be payable
to Avenue.
JKX will be responsible for the payment of its share of the completion costs,
amounting to US$193,430 (one hundred and ninety three thousand four hundred and
thirty US dollars) in aggregate, within three (3) days following commencement of
completion activities only if there is "commercial oil" tested in the
Karakilise-2 Appraisal Well, and this entire sum shall be payable to AME.
Whether the oil shall be qualified as "commercial oil" shall be determined by
agreement of JKX, Avenue and AME.
2.2 Backcosts - Karakilise Field
To date, AME, as operator under the JOA of the Karakilise Licenses, has incurred
infrastructure costs with regard to the License Area (as defined in Article 1 of
the Current JOA), including but not limited to: road construction and
reinforcement, camp facilities, crude oil storage tanks and electrification. A
detailed list of such infrastructure costs is attached as Exhibit L and
comprises the Joint Property of the Current JOA. The total cost for such
infrastructure amounted to US$882,233 (eight hundred and eighty two thousand two
hundred and thirty three US dollars) in aggregate. JKX agrees to pay thirty
percent (30%) of such infrastructure costs, amounting to US$264,669 (two hundred
and sixty four thousand six hundred and sixty nine US dollars) in aggregate upon
execution of this Agreement in accordance with Article 2.4, and of such
aggregate sum JXK shall pay the amount of US$224,969 (two hundred and twenty
four thousand nine hundred and sixty nine US dollars) to AME and the amount of
US$39,700 (thirty nine thousand seven hundred US dollars) to Avenue.
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2.3 Backcosts - Karakilise-1 Exploration Well
JKX shall be responsible for 30% (thirty percent) of the cost of drilling and
completion of the Karakilise-1 Exploration Well ("Karakilise-1 backcosts"),
being the sum of US$759,998 (seven hundred and fifty nine thousand nine hundred
and ninety eight US dollars) in aggregate. Of this aggregate sum, JKX shall pay
the amount of US$379,999 (three hundred and seventy nine thousand nine hundred
and ninety nine US dollars) to AME and the amount of US$379,999 (three hundred
and seventy nine thousand nine hundred and ninety nine US dollars) to Avenue.
Payment of this amount shall be made in accordance with Article 2.4.3 and in
installments equal to the Net Revenues (as defined and specified in Article 3)
received by JKX from the Karakilise-1 Well from the Effective Date as well as
from any other producing xxxxx in the area the subject of the Karakilise
Licenses after the Effective Date.
2.4 Payment & Election
2.4.1 Upon execution of this Agreement, JKX shall pay its thirty percent (30%)
share of (i) the Turnkey Price in the amount of US$894,156 (eight hundred and
ninety four thousand one hundred and fifty six US dollars) in aggregate, of such
sum the amounts payable to AME and Avenue shall be as set out in Article 2.1.2;
and (ii) US$264,669 (two hundred and sixty four thousand six hundred and sixty
nine US dollars) in aggregate in respect of infrastructure costs, of such sum
the amounts payable to AME and Avenue shall be as set out in Article 2.1.2.
2.4.2 JKX shall pay its thirty percent (30%) share of the completion costs
referred to in Article 2.1.2, in the amount of US$193,430 (one hundred and
ninety three thousand four hundred and thirty US dollars) in aggregate, of such
sum the entire amount is payable to AME as set out in Article 2.1.2, within
three (3) Days following commencement of completion activities only if there is
"commercial oil" tested in the Karakilise-2 Appraisal Well. Whether the oil
shall be qualified as "commercial oil" shall be determined by agreement of JKX,
AME and Avenue.
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2.4.3 JKX shall pay its thirty percent (30%) share of the Karakilise-1 backcosts
referred to in Article 2.3 in the amount of US$759,998 (seven hundred and fifty
nine thousand nine hundred and ninety eight US dollars) in aggregate, of such
sum the amounts payable to AME and Avenue shall be as set out in Article 2.3.
JKX shall pay this amount in installments equal to the Net Revenues (as defined
in Article 3) received by JKX from the Karakilise-1 Exploration Well from the
Effective Date as well as from any other producing xxxxx in the Karakilise
Licenses after the Effective Date and payments shall begin after the Transfer
Date on the date three (3) Days after the monies from the Revenue Account (as
hereinafter defined) have been transferred for value to the account nominated by
JKX in accordance with Article 3.3.
3. REVENUES
3.1 AME shall open a new Turkish Lira ("YTL") bank account within seven (7) Days
after the Effective Date with the account name of "JKX" (the "Revenue Account").
AME and JKX shall each nominate an officer to be the two joint signatories of
the Revenue Account. JKX shall be the sole beneficiary of the monies standing to
the credit of the Revenue Account. No withdrawals shall be permitted from the
Revenue Account unless both the AME and JKX representative signatory give their
prior written consent to such withdrawal. AME shall provide JKX and Avenue each
month with a bank statement setting out the Revenue Account balance.
3.2 Subject to Article 2 above, and during the Interim Period, AME and Avenue
shall ensure that the "Net Revenues" attributable to the Transferred Interest
shall be paid to the Revenue Account. For the purposes of this Agreement, "Net
Revenues" means the aggregate of gross revenues attributable to the Transferred
Interest from: (i) production from the Karakilise Licenses (including, but not
limited to, receipts under the Crude Oil Sale Agreement dated 15 February 2002);
(ii) Joint Operations under the Current JOA during the Interim Period; and (iii)
Joint Operations under the New JOA, less the Royalty Interests. During the
Interim Period, Royalty Interests shall be paid promptly by AME as Operator of
the Karakilise Licenses on behalf of the Interest Owners. For the avoidance of
doubt, in calculating Net Revenues no deduction shall be made in respect of
cash-calls, AFEs or for any capital expenses under the Current JOA or New JOA
and there shall be no set-off in respect of any obligations or indebtedness of
JKX against the Revenue Account. JKX's entitlement to the proceeds of the sale
of crude oil produced in the areas subject to the Karakilise Licenses shall be
calculated in accordance with the worked example attached as Exhibit K and AME
shall provide JKX with reasonable supporting data regarding its entitlement to
proceeds during the Interim Period.
3.3 AME shall wire transfer for value on the Transfer Date the monies standing
to the credit of the Revenue Account to a YTL account nominated by JKX in
writing. From the Transfer Date, AME and Avenue shall procure that all revenues
attributable to the Transferred Interest (including, but not limited to,
receipts under the Crude Oil Sales Agreement dated 15 February 2002) during the
Interim Period shall be paid into such nominated account.
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3.4 Within five (5) Days after completion of the transfer of monies contemplated
by Article 3.3, AME and JKX shall close the Revenue Account.
4. JOINT OPERATING AGREEMENT
4.1 JKX, AME, Ersan and Avenue agree to execute the New JOA on the Transfer Date
in identical form to that attached as Exhibit B.
4.2 Until JKX becomes a Petroleum Rights Holder, AME, as Operator of the
Karakilise Licenses, shall provide JKX with all financial information regarding
any joint operations on a monthly basis.
5. COMPLETION
5.1 AME, Avenue and JKX acknowledge and agree that completion of the respective
official transfers and assignments by AME and Avenue to JKX of the AME Interest
and Avenue Interest are subject to the following conditions being fulfilled. AME
and Avenue (or AME if such condition relates only to AME) shall use its best
endeavours to satisfy the conditions in (ii), (iii), (iv) (vi) and (ix). JKX
shall give AME and Avenue reasonable assistance in satisfying such conditions
and shall use its best endeavours to satisfy the conditions (i) and (vii). AME,
Avenue and JKX shall use their reasonable endeavours to jointly satisfy the
conditions in (v). AME and JKX shall use their reasonable endeavours to satisfy
the condition in (viii).
(i) Within 45 days following signature of this Agreement, JKX, or a wholly
owned subsidiary of JKX, shall submit an application to the GDPA to become
a Petroleum Right Holder in the Karakilise Licenses in the Republic of
Turkey under the Petroleum Law. JKX shall provide notice of such
application to AME and Avenue pursuant to Article 17.1 within 2 days after
it has submitted such application. Within 2 days after receipt of such
notice, AME and Avenue shall submit applications to the GDPA for the
transfer and assignment of the AME Interest and Avenue Interest to JKX so
that JKX, or its wholly owned subsidiary will become a Petroleum Right
Holder in the Karakilise Licenses;
(ii) The delivery by AME and Avenue to JKX of the written, unconditional
consent and approval of the GDPA to:
(a) the transfer and assignment to JKX of the Transferred Interest;
(b) Ersan's relinquishment of its two point five percent (2.5%)
royalty interest in Petroleum produced from the Karakilise Licenses
and registration of Ersan as a holder of a five percent (5%) royalty
interest in Petroleum produced from the Karakilise Licenses with
confirmation that the Ersan Royalty Interest is at five percent (5%)
and is calculated on the same basis as set out in GDPA Decision No.
4900 dated 1 June 2004 and the worked example attached as Exhibit
K);
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(iii) The delivery by AME and Avenue of an original executed deed (in the
form attached as Exhibit E) pursuant to which Ersan relinquishes its two
point five per cent (2.5%) royalty interest in Petroleum produced from the
Karakilise Licenses.
(iv) Termination of the Current JOA and delivery of an original executed
deed of termination and waiver (in the form attached as Exhibit F).
(v) Execution by AME, Avenue, Ersan and JKX of the New JOA in identical
form to that set out in Exhibit B.
(vi) Delivery of an original deed executed by AME, Avenue and Ersan (in
the form attached as Exhibit G) under which they waive any rights arising
or capable of arising under the Turnkey Drilling Contract that could
affect the Transferred Interest (including any right that JKX has or may
have to production from the Karakilise Licenses and any rights under the
New JOA including the Joint Account thereunder).
(vii) Evidence that JKX, or a wholly owned subsidiary of JKX, has
registered a branch office in the Republic of Turkey with the GDPA,
Ministry of Trade and Industry and the relevant Trade Registry Office.
(viii) Delivery of an original executed crude oil sale agreement in
respect of the Karakilise Licenses (in the form attached as Exhibit H).
(ix) Delivery by AME to JKX of evidence satisfactory to JKX that Xxxxxx
Xxx'x claims as plaintiff in case 2003/498 (as particularized in Exhibit
D) and any other claim that Xxxxxx Xxx may have in relation to the subject
matter of case 2003/498 have been fully and finally waived or settled.
Within two (2) business days following receipt of the last documentation
evidencing fulfillment of the conditions set out above AME and Avenue shall sign
and deliver separate interest assignment agreements in the form attached as
Exhibit I evidencing the assignment of the AME Interest and the Avenue Interest
with effect from the Effective Date.
5.2 AME and Avenue shall each use its best efforts to procure the consent and
approval of the GDPA of all the transfers and assignments to JKX hereunder on or
before 150 (one hundred and fifty) days from submission to the GDPA of the
relevant applications for transfer and assignment. If such consents and
approvals have not been secured by this date or have been given on terms
unacceptable to JKX, JKX may terminate this Agreement without any liability to
AME, Avenue or the Subordinating Parties whatsoever and without prejudice to its
accrued rights hereunder by giving a written notice of termination to AME and
Avenue and AME and Avenue shall repay to JKX within fourteen (14) days following
such notice any and all sums paid by JKX under this Agreement from the Effective
Date and this Agreement shall terminate. JKX shall provide reasonable assistance
to AME and Avenue in their applications to the GDPA pursuant to this Article
5.2.
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5.3 AME shall use its best efforts in the Interim Period to carry out such
operations in good faith and in the best interests of JKX and the holders of the
Karakilise Licenses and by doing so shall act as a Reasonable and Prudent
Operator, as defined in Article 1 of the Current JOA.
5.4 After the Transfer Date AME, Avenue, Ersan and JXK's participating interests
in the Karakilise Licenses shall be in accordance with Part B of Exhibit J. JKX
shall share, together with the other New JOA participants, in accordance with
their respective participating interests (expressed as a percentage) in the
liabilities and expenses properly incurred by the New JOA Operator under the New
JOA and in credits to the Joint Account. JKX's liability and Joint Account
balance shall be nil on the Transfer Date. Each party to the New JOA shall be
responsible for filing its own corporate tax returns, and payment of corporate
tax, withholding taxes, and third party liabilities (as stated in Article 68 of
the Petroleum Regulations of the Republic of Turkey). Royalty Interests shall be
paid promptly by AME as Operator of the Karakilise Licenses on behalf of the
parties to the New JOA.
5.5 Oyman Xxxxx is the joint representative of the Karakilise Licenses and shall
be appointed as the joint representative by JKX and the Subordinating Parties
for the Karakilise Licenses with the GDPA and any other agency or department of
the Government of the Republic of Turkey as required under the Petroleum Law
once JKX is registered as a Petroleum Right Holder in the Karakilise Licenses.
From the Effective Date, AME shall procure that Oyman Xxxxx reports to JKX
regularly, as required by JKX, on the conduct of all discussions with and
documents submitted to the GDPA and any other agency or department of the
Government of the Republic of Turkey.
5.6 JKX agrees to execute an agreed Turkish text translation of the New JOA
within 21 days following the Transfer Date. The English text versions of the New
JOA shall from the date consent is received to the transfer of the Transferred
Interest, govern the operations in respect of the Karakilise Licenses and
establish the rights and obligations between AME, Avenue, Ersan and JKX. The
Turkish translation will although signed by JKX not become effective as between
AME, Avenue, Ersan and JKX in any dispute under this Agreement or the JOA but
the Turkish translation will be submitted to the General Directorate of
Petroleum Affairs of Turkey ("GDPA") and other Governmental agencies as required
as part of the registration process.
6. INTERIM PERIOD
6.1 During the Interim Period, each of AME and/or Avenue shall respectively:
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(i) hold the AME Interest or Avenue Interest and all proceeds, benefits
and interests accruing to the AME Interest or Avenue Interest on trust
(including all sales proceeds received and Net Revenues attributable to
the AME Interest and Avenue Interest) for the benefit of JKX without
entitlement of AME on Avenue at any time to co-mingle any monies or assets
attributable to the same with their own or any other assets except as
provided under Article 3 of this Agreement. If any Net Revenues
attributable to, or proceeds, benefits and advantages accruing to or in
respect of, the AME Interest or Avenue Interest are received by AME or
Avenue, such sums shall be paid to the Revenue Account within two (2) days
following receipt;
(ii) as between itself and JKX and as between each other, recognize JKX's
right, title and interest in and to the Karakilise Licenses and deal with
JKX as if it were an owner thereof;
(iii) not assign, encumber or otherwise affect title to the AME Interest
or Avenue Interest in the Karakilise Licenses;
(iv) agree with JKX in advance on all matters to be discussed, voted upon
or considered by the Operating Committee;
(v) not, without JKX's prior written consent, agree to any amendment or
alteration of the Current JOA or any other agreement relating to the AME
Interest or Avenue Interest or otherwise commit or agree to make or give
any undertaking, under any expenditures or enter into any arrangement
affecting the AME Interest or Avenue Interest in any way except as
provided for in this Agreement;
(vi) exercise its rights under the Current JOA in such a way as to ensure
and take all action necessary to ensure that no Exclusive Operation (as
defined in the Current JOA) is conducted in respect of the Karakilise
Licenses, except in the event that JKX does not participate in the
completion of the Karakilise-2 Appraisal Well and the Karakilise-2
Appraisal Well is completed by AME and Avenue, in such case the
Karakilise-2 Appraisal Well shall, from the Transfer Date, be deemed to be
an Exclusive Operation of AME and/or Avenue under the New JOA; and
(vii) secure that: JKX's interest in the Karakilise Licenses is noted on
related insurance policies, JKX is named as a co-insured on such polices
and JKX's rights under such policies are not subrogated without JKX's
prior written consent.
6.2 During the Interim Period, expenditure on the Joint Operations shall not
exceed the expenditure related to the drilling and completion of the
Karakilise-2 Appraisal Well as detailed in this Participation Agreement. The
current routine operating costs for the Karakilise Licenses shall not exceed
US$40,000 (forty thousand US dollars) per calendar month or such pro rata amount
for periods less than one month.
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6.3 In respect of all payments made under Article 6.2 during the Interim Period
AME shall provide JKX with monthly statements no later than the 25th day of each
month giving full particulars of each item of such expenditure and reasonable
supporting data and calculations. In no event shall JKX's liabilities in respect
of the routine operating costs exceed the amount attributable to the Transferred
Interest nor the threshold amount in Article 6.2. JKX shall pay its share of
accrued routine operating costs on the Transfer Date. In the event VAT and/or
Withholding Tax is due on such invoices JKX will be responsible for payment of
any such tax. All prices in this Agreement are in net terms.
6.4 If the application of JKX to be registered as a Petroleum Right Holder or as
the owner of the Transferred Interest with the GDPA is: (a) rejected or (b)
granted on terms unacceptable to JKX, then AME and Avenue shall pay back the
amount corresponding to all payments made during the Interim Period, within 14
(fourteen) days following receipt of JKX's notice demanding the same.
7. REPRESENTATIONS AND WARRANTIES OF AME, AVENUE AND THE SUBORDINATING PARTIES
7.1 AME and Avenue each severally represent and warrant to JKX that, as of the
Effective Date:
(i) the Karakilise Licenses are in good standing and in full force and
effect and were entered into and granted in full compliance with all
applicable laws and regulations of the Republic of Turkey;
(ii) it has the right and authority to transfer and assign the legal and
beneficial ownership of the AME Interest or Avenue Interest (as
applicable) to JKX under the terms and conditions contained herein;
(iii) it has done no act or permitted any omission which would or could
give rise to, cause or be the basis or revocation, invalidation or
termination of the Karakilise Licenses;
(iv) there are no unasserted or pending, threatened or outstanding claims,
lawsuits, judgments of a court of law, arbitration criminal or
administrative proceedings threatened or pending and there are no events
or circumstances (including the signature or performance of this
Agreement) likely to give rise to the same, affecting the Karakilise
Licenses, the Transferred Interest or any rights of production that may
arise from the area subject to the Karakilise License other than the
lawsuits described in Exhibit D;
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(v) all obligations contained in the Karakilise Licenses requiring
performance on or before the date of giving or repetition of this
representation have been fully performed;
(vi) it has the right and authority to create valid trusts of the AME
Interest or Avenue Interest (as applicable) and all proceeds, benefits and
interests accruing thereto prior to the transfer and assignment of the
legal and beneficial ownership of the AME Interest and Avenue Interest to
JKX on the Transfer Date;
(vii) it has at all times complied with the Karakilise Licenses and no
event has occurred or circumstances exist which would or could give rise
to cause or be the basis of revocation, invalidation or termination of any
of the Karakilise Licenses;
(viii) save as disclosed herein in relation to the Royalty Interests 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 on any
of the rights held by it under the Karakilise Licenses, or agreed to do
so, and the Karakilise Licenses are free and clear of all Encumbrances;
(ix) its execution, delivery and performance of this Agreement does not
and will not:
(a) conflict with;
(b) result in a breach of;
(c) constitute a default under;
(d) accelerate or permit the acceleration of the performance
required by;
(e) 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;
(f) (except as referred to in Article 5.1 (i) and (ii)) require any
consent, authorization or approval under;
(g) give rise to a right of termination under or materially modify;
or
(h) (except as referred to in Article 6.1) result in the creation or
imposition of any Encumbrance upon,
13
the Karakilise Licenses or any other material agreement, license,
permit, consent or instrument to which it is a party or is subject,
or under the Petroleum Law;
(x) it has delivered a true, correct and complete copy of (i) the
interests held in the Karakilise Licenses (as set out in Exhibit J) (ii)
all material correspondence between it, on the one hand, and the
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
Karakilise Licenses (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
Karakilise Licenses or the arrangements contemplated in this Agreement and
(iv) all material technical, accounting, geological, geophysical and
geotechnical data in its possession or control regarding the Karakilise
Licenses and the areas covered thereby;
(xi) in conducting operations with respect to the areas the subject of the
Karakilise Licenses and in relation to the Karakilise Drilling Program, it
has:
(i) complied in all respects with the terms and conditions of the
Karakilise Licenses 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 Karakilise Licenses except as expressly set
forth in the terms of the Karakilise Licenses and as disclosed in
Exhibit L in respect of the Karakilise 2 Appraisal Well;
(xii) the information contained in Exhibit J is true, accurate and
complete in all respects;
(xiii) any trust created of an overriding royalty interest in favour of
MEPS in the Karakalise Licenses pursuant to Clause 2.4(c) the
Participation Agreement dated 22 January 2004 between AME, Ersan and
Avenue is validly constituted and shall be calculated in accordance with
the worked example attached as Exhibit K; and
(xiv) it is able to declare the trusts contemplated in Article 6 and such
trusts shall be recognized and validly constituted under the laws of
Turkey.
14
7.2 AME, Avenue and the Subordinating Parties, each severally represent and
warrant to JKX that:
(i) Part A of Exhibit J is a true, correct and complete representation of
the interests held in the Karakilise Licenses immediately prior to the
Effective Date;
(ii) as of the Effective Date, part B of Exhibit J is a true, correct and
complete representation of the interests in the Karakilise Licenses;
(iii) it is the presently held intention of AME, Avenue and the
Subordinating Parties that on the occurrence of the Transfer Date part C
of Exhibit J is a true, correct and complete representation of the
interests held in the Karakilise Licenses; and
(iv) neither it, nor any of its directors, company officials or employees
is a beneficiary of, and shall not assert any claim to, the ERSAN Royalty
Interest.
7.3 On the Transfer Date, AME, Avenue and the Subordinating Parties each
severally represent and warrant to JKX that Part C of Exhibit J is a true,
correct and complete representation of the interests in the Karakilise Licenses
as of the Transfer Date.
8. MUTUAL REPRESENTATIONS AND WARRANTIES
8.1 Each of the Parties hereby represents and covenants to the other that:
(i) it is duly organized and validly existing under the laws of the
jurisdiction of its incorporation and in those jurisdictions in which it
owns assets;
(ii) it has full corporate power, authority and right to enter into this
Agreement and to execute the transactions contemplated herein and the
execution, delivery and performance of the Agreement have been duly
authorized by all necessary corporate action;
(iii) the performance of this Agreement will not violate any agreement or
instrument to which such Party is bound, or any judgment, decree, order,
statute, rule or regulation applicable to such Party;
(iv) it has the financial capability to participate in the exploration,
appraisal and development projects in the Karakilise Licenses; and
(v) this Agreement constitutes a legal, valid and binding obligation of
such Party.
8.2 AME, Avenue and the Subordinating Parties shall be deemed to restate the
representations and warranties set out in Article 7 and this Article 8 to JKX
immediately prior to the Transfer Date by reference to the circumstances
subsisting at that time and shall not merge in the completion on the Transfer
Date.
15
8.3 JKX and the Subordinating Parties acknowledge and accept that each other
party is entering into this Agreement in reliance upon the representations and
warranties made by each of them hereunder.
8.4 Subject as specifically provided otherwise in this Agreement, the
representations and warranties shall remain in full force and effect after the
Transfer Date.
9. SUBORDINATION, WAIVER AND RELINQUISHMENT
9.1 Save for in accordance with Article 9.2, 9.3 and 9.4, AME, Avenue and the
Subordinating Parties agree that any rights or claims that each has or may have
in the future arising out of, or in connection with, the Karakilise Licenses or
Licenses (as defined in Article 1 of the Current JOA) pursuant to any agreement
(oral or written), trust (actual, constructive or otherwise) or other
arrangement including, but not limited to:
(i) the assignment and release agreement effective as of 10 March 1995
between Xxxx International Petroleum Corporation and AME;
(ii) the farm in and participation agreement dated 14 November 2002 in
relation to 31 exploration licenses and 2 production leases held by
members of the Xxxxx Group Consortium in the Republic of Turkey between
AME, Ersan, TMO, GYP, Avenue, Avenue Group and MEPS (as such agreement has
been amended, including, but not limited to the amending agreements dated
20 December 2002 and 31 July 2003);
(iii) the Memorandum of Understanding dated 22 May 2003 between the Xxxxx
Group Consortium, Avenue and MEPS;
(iv) the joint operating agreement in respect of the Karakilise Licenses
dated 22 January 2004 between AME, Ersan and Avenue;
(v) the participation agreement dated 22 January 2004 relating to Avenue
Kahta Xxxxx and new exploration license and production lease applications
between the Xxxxx Group Consortium, Avenue and MEPS;
(vi) the revised and restated participation agreement dated 22 October
2004 between the Xxxxx Group Consortium and Avenue relating to Kahta
Production Lease and various exploration licenses; and
(vii) the Current JOA,
((i) to (vii), the "Subordinated Agreements"), shall be subordinate to the
Transferred Interest assigned and transferred to JKX by this Agreement
(including any rights that JKX has or may have to production from the area
subject to the Karakilise Licenses and the New JOA to be entered into by AME,
Avenue, Ersan and JKX on or prior to the Transfer Date pursuant to this
agreement) and AME, Avenue and the Subordinating Parties waive to the fullest
extent permissible by law any right, claim or cause of action existing now or in
the future against or affecting the Transferred Interest (including any rights
that JKX has or may have to production from the area subject to the Karakilise
Licenses or the New JOA), save for any accrued rights Avenue and AME have
against JKX under, or relating to the performance of, this Agreement.
16
9.2 Termination of the Current JOA on or prior to the Transfer Date shall be
without prejudice to the accrued rights of the parties thereto but AME, Ersan
and Avenue irrevocably waive any future or present right, asserted or unasserted
claims or cause of action that has arisen or may arise out of the Subordinated
Agreements and the Current JOA against or affecting the Transferred Interest
(including any rights that JKX has or may have to production from the area
subject to the Karakalise Licenses or the New JOA).
9.3 Ersan relinquishes its two point five per cent (2.5%) royalty interest in
Petroleum produced from the Karakilise License and irrevocably waives any future
or present right, asserted or unasserted claim or cause of action that has
arisen or may arise out of such royalty interest in consideration of JKX
participating in the Karakilise-2 Appraisal Well and accepting the Transferred
Interest and transfer of the AME Interest and Avenue Interest by AME and Avenue
respectively to JKX. MEPS agrees that it has no rights in respect of the
Karakilise Licenses (including any rights to production) or future applications
for licenses other than its right to enforce as sole beneficiary against Ersan
as sole trustee the proper administration by Ersan of the trust created under
Clause 2.4(c) of the participation agreement dated 22 January 2004 between SGC,
Avenue and MEPS. MEPS agrees that the basis for calculating its entitlement
under such trust is as set out in the GDPA Decision No.4900 dated 1 June 2004
relating to the ERSAN Royalty Interest and shown in the worked example set out
in Exhibit K. MEPS shall not assign the benefit of such trust without the prior
written approval of AME, Avenue and JKX. MEPS agrees that it will only claim
against Ersan for payments due under such trust and will not make any claim or
demand against JKX, Avenue or AME in respect thereof. Ersan and MEPS further
agree not to claim against JKX or the Transferred Interest for any outstanding
or unpaid royalty payments.
10. DATA AND INFORMATION
AME and Avenue shall make available to JKX all geological, geophysical,
production, reservoir engineering and other data and information obtained from
or related to the Karakilise Licenses in their possession or known to it. JKX
may request copies of all such data and information which may be reproduced at
JKX's expense. Notwithstanding the foregoing, the terms and conditions of the
Confidentiality Agreement dated 11 October 2004 executed by JKX remain valid and
in effect until the Transfer Date.
17
11. TAXES, LEVIES AND COSTS
Each Party shall be liable for its own application fees and license registration
fees with respect to the transfer of the AME Interest and Avenue Interest to JKX
with the GDPA. Each Party shall be responsible for their respective taxes and
duties (including stamp tax). For the avoidance of doubt, in the event stamp tax
arises in the Republic of Turkey due to the transfer and assignment of the AME
Interest or Avenue Interest in the Karakilise Licenses to JKX, the Party
responsible for the assessment of such stamp tax shall be liable for payment of
the entire amount of such stamp tax.
12. CRUDE OIL SALES
On the Transfer Date, JKX and AME shall enter into a crude oil sale agreement in
the form attached as Exhibit H relating to the sale by JKX to AME of crude oil
attributable to the Transferred Interest.
13. CO-OPERATION
13.1 Co-Operation
13.1.1 AME and JKX agree to work together in determining well costs and creating
AFE's and budgets with regard to the Karakilise Licenses with the aim of
reducing materials and service costs. JKX shall provide AME with any information
from its own operations that may assist in the determination of such costs and
preparation of AFE's and budgets. Any AFE's and budgets must be approved in a
duly held Joint Operating Committee meeting as provided in the New JOA.
13.2 Drilling and Workover Services
If the parties to the New JOA agree that drilling services may be carried out by
AME on a turnkey basis. AME's dry hole turnkey quotes for the drilling of
Karakilise-3 and Karakilise-4 to Cretaceous reservoir shall not exceed
$2,000,000 per well.
14. DEFAULT
14.1 Default by JKX
In the event that JKX defaults by failing to make payment for its share of the
Dry Hole Turnkey Price in respect of the Karakilise-2 Appraisal Well and for its
share of Karakilise Field infrastructure backcosts in accordance with Article 2
above, JKX shall forfeit and reassign all of its rights, title and interest in
and to any and all property acquired hereunder.
18
14.2 Default by AME or Avenue
14.2.1 In the event AME or Avenue fails to transfer and assign to JKX any
part of the AME Interest or Avenue Interest, free and clear of all liens,
burdens, charges and encumbrances of any nature except as provided in this
Agreement or as required by any applicable law or AME fails to carry out
any of its obligations hereunder as operator or AME or Avenue fails to
carry out any of its obligations as trustee as contemplated in Article 6,
then JKX shall have the right, at its sole discretion, without prejudice
to its accrued rights to terminate this Agreement and to receive a refund
of all its funds paid under this Agreement; provided, however, that such
right of termination shall not arise unless JKX gives AME and Avenue
written notice of such failure and they have failed to remedy same within
thirty (30) days after their receipt of such notice.
14.2.2 For the avoidance of doubt, in the event AME or Avenue is in
default, and regardless of whether JKX has given AME or Avenue written
notice of default, JKX shall have the right to enforce the provisions of
this Agreement.
15. INDEMNITIES AND LIABILITIES
15.1 Each Party agrees that it shall severally 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 indemnifying Party of any
of its representations or warranties in this Agreement.
00.0 XXX, Xxxxxx and the Subordinating Parties shall severally indemnify and
hold harmless JKX 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 (1) the Karakilise Licenses or
activities relating thereto which arose or occurred prior to the date of this
Agreement, during the Interim Period or prior to the Transfer Date, except as
incurred with the prior written consent of JKX and (2) any failure of the
subordination of the Subordinating Agreements and any rights, claims or actions
whatsoever arising thereunder.
15.3 AME and Avenue shall severally indemnify and hold harmless JKX from and
against any and all losses, costs, demands and damages (including the payment of
reasonable attorneys' fees) sustained by JKX in excess of US$80,000 (eighty
thousand US Dollars) in relation to the disputes set out in Exhibit D and any
other claims in respect of the Karakilise Licenses relating to the period prior
to the Transfer Date (whenever such claims are brought).
15.4 No Party shall be liable for any consequential, incidental, indirect,
special, exemplary or punitive damages in any action arising out of this
Agreement.
19
16. TERMS AND MANNER OF PAYMENT
16.1 All payments by JKX to AME required hereunder shall be made in U.S. Dollars
by wire transfer and deposited to the account with:
Citibank N.A.
Ankara Branch
Ataturk Bulvari Xx. 00/00
00000 Xxxxxxx, Xxxxxx, Xxxxxx,
US$ Account No. 310 030 031
SWIFT Code: XXXXXXXX
Beneficiary: Aladdin Middle East Ltd.
16.2 All payments by JKX to Avenue required hereunder shall be made in U.S.
Dollars by wire transfer and deposited to the account with:
Avenue Energy, Inc.
x/x Xxxxxx Xxxxx, Xxx.
Xxxxxxxx Xxxx, Xxxxxxxxxx
Routing Number: 000-000-000
Acct Nr. 1891154120
Beneficiary: Avenue.
16.3 All payments by AME and Avenue to JKX required hereunder shall be made in
U.S. Dollars by wire transfer and deposited to the Account with:
Bank of Scotland
Xxxxxxx Xxxxx
00 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx X0 0XX
Account number: 04517USD01
Beneficiary: JKX Oil & Gas Plc
17. NOTICES
17.1 Any notices or other communication to be given hereunder, other than the
notices specified in Article 17.2 of this Agreement, shall be deemed to have
been properly given when delivered, if delivery by hand, or when received, if
sent by facsimile (provided the sender receives written confirmation of
completed delivery), or when delivered by registered mail as well as e-mail to
the Parties at the following address:
To: AME
To: Ersan
To: TMO
To: GYP
Attn: Oyman Xxxxx & Cem Xxxxx
Sogutozu Caddesi No:23
Balgat-Ankara
00000 Xxxxxx
Tel: x00 000 000 0000 or 287 1988
Fax: x00 000 000 0000 or 000 0000
E-mail: xxxxxxxx@xxxxxxxxxx.xxx
20
To: Avenue
To: Avenue Group
Attn: Xxxxxx X. Xxxxxx
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000 XXX
Tel: x000 000 0000
Fax: x000 000 0000
E-mail: xxxxxxxxxxxx@xxx.xxx
Copied to:
Xxxxxx X. Xxxxxx
000 X. Xxxxxxxx Xx.
Xxxxxx, XX 00000, XXX
Tel: x0 000 000 0000
E-mail: xxxxxxxxxxxx@xxx.xxx
To: MEPS
Attn: Xxx Fellowes
Xxxxx 0, 000 Xxxxxx Xxxxxx, Xxxxxx
Xxxxxxxx 0000, Xxxxxxxxx
Tel: x00 0 0000 0000
Fax: x00 0 0000 0000
E-mail: xxx@xxxxxxx.xxx
To: JKX Turkey Limited
Attn: Xxxxxx X. Xxxx
0 Xxxxxxxxx Xxxxxx,
Xxxxxx X0X 0XX, Xxxxxxx
Tel: x00 000 000 0000
Fax: x00 000 000 0000
E-mail: xxx.xxxx@xxxx.xxxxx.xxx
17.2 Notices or communications described in Article 20/III of the Turkish
Commercial Code (consisting principally of notices of default, termination or
rescission) shall be sufficiently given only if delivered via a Turkish notary,
by telegram, or by registered mail, return receipt requested, and shall be
deemed to have been given as of the date of proper service in accordance with
Turkish law.
17.3 A Party may change its address for notices upon giving notice to the other
Party as provided above.
21
18. GENERAL
18.1 In the event of any discrepancy between the terms of this Agreement and the
Exhibits hereto, the terms of this Agreement shall prevail.
18.2 This Agreement shall set forth the entire agreement and understanding
between the Parties as to the subject matter thereof, and supersede and cancel
all prior negotiations, discussions, representations, agreements and
understandings whether written or oral pertaining to such subject matter,
notwithstanding the Confidentiality Agreement executed by JKX on 11 October
2004. The Confidentiality Agreement shall terminate on the Transfer Date.
18.3 Each of the Parties shall do all such acts and execute and deliver all such
documents as may be required in order to fully perform and carry out the terms
of this Agreement, including, but not limited to, any actions that may be
required to perfect the subordination of the Subordinating Agreements pursuant
to Article 9.
18.4 This Agreement shall be governed by and construed in accordance with the
Laws of England excluding any provisions thereof which would require the
application of the laws of any other jurisdiction. All disputes arising out of
or in connection with the present contract shall in the first instance be
discussed by the relevant Parties' chairmen or chief executives or their
nominees (such nominees to be senior management executives) within thirty (30)
days following a Party notifying the other Parties of reasonably full
particulars of the dispute; and if such representatives are unable to resolve
the matter it may then be referred by any Party to arbitration and shall be
finally settled under the Rules of Arbitration of the London Court of
International Arbitration ("Rules") by one or more arbitrators appointed in
accordance with the said Rules. The place of arbitration shall be London and the
language shall be English. Any arbitral award shall be final and binding upon
the Parties.
18.5 This Agreement shall be binding upon and shall inure to the benefit of each
of the Parties and their respective successors and assignees.
18.6 Any reference to JKX shall also include reference to its designated
affiliate or assignee, where applicable.
18.7 JKX may assign the benefits of this Agreement without the consent of the
Parties and such rights as are assigned shall be enforceable by the assignee
against the Parties. Except as specifically provided for in this Agreement, the
Parties do not intend to create any other rights enforceable by third parties
under the Contract (Rights of Third Parties) Xxx 0000.
18.8 If any of the trusts envisaged by this Agreement fail for whatever reason
JKX shall be entitled to the return of all monies paid under this Agreement.
22
18.9 Time shall be of the essence in the performance of AME, Avenue, Ersan and
JKX's obligations under this Agreement.
18.10 Save for in accordance with Article 6, nothing herein contained shall be
construed as creating a partnership of any kind, an association or a trust, or
as imposing upon any or all of the Parties hereto any fiduciary duty,
partnership duty, obligation or liability.
19. AMENDMENT The terms set forth in this Agreement may only be modified by
agreement in writing by the Parties.
Executed as a deed and delivered on the date appearing at the beginning of this
Agreement.
ALADDIN MIDDLE EAST LTD JKX TURKEY LIMITED
By Director: _________________ By Director: ____________________
By Director/Secretary:____________ By Director/Secretary: ____________
MIDDLE EAST PETROLEUM
SERVICES LIMITED ERSAN PETROL SANAYII A.S.
By Director: ____________________ By Director: ____________________
By Director/Secretary: ____________ By Director/Secretary: ____________
TRANSMEDITERRANEAN OIL GUNEY YILDIZI PETROL URETIM
COMPANY LTD SONDAJ MUTEAHHITLIK ve
TICARET A.S.
By Director: _________________ By Director: ____________________
By Director/Secretary:____________ By Director/Secretary: ____________
AVENUE ENERGY INC. AVENUE GROUP INC.
By Director: _________________ By Director: ____________________
By Director/Secretary:____________ By Director/Secretary: ____________
23
Exhibit A - Current JOA
Exhibit B - Form of New JOA
Exhibit C -Spudding Statement for Karakalise - 2 Appraisal Well
Exhibit D - Litigation
------------------------------------------------------------------------------------------------------------------------------------
PLAINTIFF(S) DEFENDANT(S) FILE NO. COURT SUBJECT
------------------------------------------------------------------------------------------------------------------------------------
Republic of Turkey, Mehmet Can, Medine YavuzHacy 2004/571 Diyarbakir Determination of value of land
Treasury Karatas, Xxxxxx Xxxxxxx, Veli 1st Civil expropriated and registration of
Karatas, Xxxx Xxxxxxx, Xxxxxx Xxx Court expropriation with the Registry of
(a)ehmus Bartan, Xxxxxxx Xxxxx Deeds.
(a)ehnaz Temiz, Ay(0)e Sevinc
Xxxxxx Xxxxx, Ne(0)e temiz The land the subject of the lawsuit
Xxxxxxx Xxxxx, Hatice Kubra Ate(0) was expropriated by the GDPA in
Nezmiye Boz, (a)eref Temiz decision no. 373 published in the
(a)ahin Temiz, Xxxxxx Goru Official Gazette dated 17.8.2003 and
Xxxxxx Xxx Temiz, Sava(0) Temiz numbered 25202 for use for
Seval Temiz Karakilise-1.
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxx Ersan Petrol Sanayii A.S. 2003/498 Diyarbakir Wrongful possession, damages.
Aladdin Middle East Ltd. 3rd Civil Plaintiff claims that the defendants
Guney Yildizi Petrol, Uretim Sondaj Court companies wrongfully possessed his
ve Muteahhitlik A.S. land (the subject of Karakilise-1).The
case relates to 4 land portions. One
of those land portions has been
expropriated. But the expropriation
has not been finalized so far. The
lawsuit to determine the value of this
land portion is ongoing (2004/571).
The Plaintiff is requesting (1) the
prevention of the unlawful possession;
(2) the dismantling of the buildings
on the land; and (3) damages for his
land that allegedly lost its capacity
for agriculture and cotton crops based
on an expert determination valued at
105,065.50 YTL. The plaintiff did not
reserve his rights to request further
damage but as the damages are ongoing,
the Plaintiff may still request
damages relating to the period after
the filing of the case. The Plaintiff
also requested precautionary measures
and the Court has granted them with
its decision dated 21.12.2004 to
ensure that the lands which are the
subject matter of the case are not
transferred or assigned to a third
party.
------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
PLAINTIFF(S) Dispute
---------------------------------------------------------------
Republic of Turkey, To be determined by the court. The
Treasury issue is the value of the land that
has been expropriated.
The lawsuit for the expropriation
of Karakilise-2 ruled that the land
was valued at 62,916.05 YTL and it
is expected that the value of
Karakilise-1 will be valued very
similar to this amount.
---------------------------------------------------------------
Xxxxxx Xxx The Court will decide on the
following:
(1) the prevention of Defendants'
unlawful possession;(2) the
dismantling of the buildings on the
land; and
(3) the payment of an
indemnification at the amount of
105,065,500,000 TL
(105,065.50 YTL) by the Defendants.
---------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Mehmet Can Ersan Petrol Sanayii A.S. 2003/811 Diyarbakir Damages based on the wrongful
Aladdin Middle East Ltd. 2nd Civil possession (without expropriation).
Guney Yildizi Petrol, Uretim Sondaj Court Plaintiff claims that the defendants,
ve Muteahhitlik A.S. due to the drilling of their well in
2003 (Karakilise-1) that his melon and
watermelon crops suffered and is
requesting damages.
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx, Xxxxx Aladdin Middle East Ltd. 2003/894 Diyarbakir Wrongful possession, damages.
Yakar, Xxxxx Xxxxx, Guney Yildizi Petrol, Uretim Sondaj 3rd Civil Plaintiffs claim that the defendants
Xxxxx Xxxxx, ve Muteahhitlik A.S. Court built a road on their land and damaged
Xxxxxxxxxxx Seyithan their crops. The Plaintiffs are
yakar, Xxxxx Xxxxx, requesting (1) the prevention of the
Emine Aydyn, Yusuf unlawful possession; and (2) an
Xxxx, Xxxxxx Xxx Xxxx, indemnification.
Sahabettin Ates, Xxxxx
Xxxx The Plaintiffs also requested
provisory injunction regarding the
unlawful possession.
------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
Mehmet Can The payment of an indemnification
at the amount of 120,000,000,000 TL
(120,000 YTL) plus the interest at
the higher bank deposit interest
rate starting from the date of the
wrongful possession.
The Plaintiff has reserved its rights
in relation to further monetary
demands.
---------------------------------------------------------------
Xxxxx Xxxxx, Xxxxx The Court will decide on the
Yakar, Xxxxx Xxxxx, following:
Orhan Xxxxx,
Xxxxxxxxxxx Seyithan (1) the prevention of Defendants'
yakar, Xxxxx Xxxxx, unlawful possession;
Emine Aydyn, Yusuf (2) the payment of an
Xxxx, Xxxxxx Xxx Xxxx, indemnification at the amount of
Sahabettin Xxxx, Xxxxx 50,000,000,000 TL (50,000 YTL).
Ates
The Plaintiff has reserved its
rights in relation to further
monetary demands.
An expert opinion has been issued in
support of the plaintiff's claim. The
expert's value of the claim is
56,771,558,000 Turkish liras. The expert
has also stated in his report that the
roads are unlawfully used by AME. AME
has objected to this expert opinion. The
Court ordered that a new expert opinion
be issued. This second report is still
outstanding.
The Court also requested information
from the State Water works in relation
to the ownership of the roads and
whether AME has been permitted to use
them. This information is still
outstanding as well.
---------------------------------------------------------------
Exhibit E - Form of Deed of Relinquishment of
Ersan's royalty interest
--------------------------------------------------------------------------------
DEED OF RELINQUISHMENT AND WAIVER
--------------------------------------------------------------------------------
(1) ERSAN SANAYII A.S.
(2) ALADDIN MIDDLE EAST LIMITED
(3) AVENUE ENERGY INC.
(4) JKX TURKEY LIMITED
DATED [ ] 2005
THIS DEED OF RELINQUISHMENT AND WAIVER is made on the [ ] day of
[ ] 2005
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD, 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,
the Republic of Turkey at Sogutozu Caddesi Xx. 00, 00000 Xxxxxx, Xxxxxx and in
the city of Wichita, Kansas (hereinafter referred to as "AME");
(2) ERSAN PETROL SANAYII A.S.; a corporation existing under the laws of the
Republic of Turkey, having its head office in Ankara (hereinafter referred to as
"Ersan");
(3) AVENUE ENERGY INC., a corporation organized and existing under the laws of
the State of Delaware, USA, having offices at Encino, CA, USA and in Australia
at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx (hereinafter referred to as
"Avenue");
(4) JKX TURKEY LIMITED, a corporation organized and existing under the laws of
England, having its principal office at 0 Xxxxxxxxx Xxxxxx, Xxxxxx X0X 0XX,
Xxxxxxx (hereinafter referred to as "JKX"),
being referred to collectively as the "Parties" and individually as a "Party".
WHEREAS:
(A) Ersan is the registered holder of under General Directorate of Petroleum
Affairs of Turkey ("GDPA") Decision No. 4900 dated 1 June 2004 of a seven point
five percent (7.5%) royalty interest in Petroleum (as defined in the
Participation Agreement) produced from the Karakilise Licenses. Ersan holds two
point five percent (2.5%) of such royalty interest for itself (the "Relinquished
Interest") and the remaining five percent (5%) royalty interest on trust for
Middle East Petroleum Services Limited.
(B) The Parties entered into a participation agreement dated [ ] (the
"Participation Agreement"), under which, inter alia, Ersan agreed to relinquish
the Relinquished Interest.
IT IS HEREBY AGREED as follows:
1. RELINQUISHMENT AND WAIVER
Ersan relinquishes the Relinquished Interest and waives any present or future
rights, asserted or unasserted claims or interests arising or capable of arising
under the Relinquished Interest.
2. FURTHER ASSURANCE
Ersan shall, at its own expense, do all such acts and execute and deliver all
such documents as may be required in order to fully relinquish and waive its
Relinquished Interest, including (but not limited to) seeking a new decision
from the GDPA or its successor confirming that it no longer has the Relinquished
Interest.
Executed as a deed and delivered on the date first shown above.
ALADDIN MIDDLE EAST LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
ERSAN PETROLEUM SANAYII A.S.
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
AVENUE ENERGY INC.
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
JKX TURKEY LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
Exhibit F - Form of Deed of Termination of
Current JOA
--------------------------------------------------------------------------------
DEED OF WAIVER AND TERMINATION RELATING
TO A JOINT OPERATING AGREEMENT DATED 22 OCTOBER 2004
IN RESPECT OF EXPLORATION LICENSES
AR/AME-EPS-AVE 2674, 2677 AND 2678
IN PETROLEUM DISTRICT XI, DIYARBAKIR,
REPUBLIC OF TURKEY
--------------------------------------------------------------------------------
(1) ALADDIN MIDDLE EAST LIMITED
(2) ERSAN PETROLEUM SANAYII A.S.
(3) AVENUE ENERGY INC.
(4) JKX TURKEY LIMITED
DATED [ ]2005
THIS DEED OF TERMINATION AND WAIVER is made on the [ ] day of
[ ] 2005
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD, 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,
the Republic of Turkey at Sogutozu Caddesi Xx. 00, 00000 Xxxxxx, Xxxxxx and in
the city of Wichita, Kansas (hereinafter referred to as "AME");
(2) ERSAN PETROL SANAYII A.S.; a corporation existing under the laws of the
Republic of Turkey, having its head office in Ankara (hereinafter referred to as
"Ersan");
(3) AVENUE ENERGY INC., a corporation organized and existing under the laws of
the State of Delaware, USA, having offices at Encino, CA, USA and in Australia
at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx (hereinafter referred to as
"Avenue");
(4) JKX TURKEY LIMITED, a corporation organized and existing under the laws of
England, having its principal office at 0 Xxxxxxxxx Xxxxxx, Xxxxxx X0X 0XX,
Xxxxxxx (hereinafter referred to as "JKX"),
being referred to collectively as "Parties" and individually as a "Party".
WHEREAS:
(A) Under a participation agreement dated [ ] (the "Participation Agreement")
entered into, inter alios, by the Parties, AME and Avenue agreed to transfer the
Transferred Interest (as defined in the Participation Agreement) and AME,
Avenue, Ersan and the Subordinating Parties (as defined in the Participation
Agreement) agreed to waive and subordinate any present or future rights,
asserted or unasserted claims or interests affecting the Transferred Interests
and in particular arising or capable of arising under the Subordinated
Agreements in consideration of JKX participating in the Karakilise-2 Appraisal
Well and taking the Transferred Interest.
(B) The joint operating agreement dated 22 October 2004 in respect of
Exploration Licenses AR/AME-EPS-AVE 2674, 2677 and 2678 (the "Current JOA") is
one of the Subordinated Agreements.
(C) AME, Avenue and Ersan (the "Continuing Parties") wish to waive and
subordinate any present or future rights, asserted or unassociated claims or
interests arising or capable of arising under the Current JOA to the Transferred
Interest but wish, as between themselves, to maintain any accrued rights and
liabilities arising under or capable of arising under the Current JOA.
(D) JKX are a party to this Deed so that it can take the benefit of the
covenants hereunder.
IT IS HEREBY AGREED as follows:
1. TERMINATION, WAIVER AND SUBORDINATION BY CONTINUING PARTIES
1.1 The Continuing Parties terminate the Current JOA, such termination to be
effective as of the Transfer Date.
1.2 The Continuing Parties waive and subordinate any present or future rights,
asserted or unasserted claims or interests arising or capable of arising under
the Current JOA to the Transferred Interest.
1.3 The Continuing Parties acknowledge that they have entered into this Deed for
the benefit of JKX.
2. CONTINUING PARTIES' RIGHTS INTER SE
Nothing in this Deed shall prejudice the Continuing Parties' rights of action
against one another in respect of any accrued rights or liabilities under the
Current JOA.
3. TRANSFER OF JOINT ACCOUNT
3.1 The proceeds of the Joint Account (as defined in the Current JOA) shall be
transferred to a new bank account which shall be the Parties' joint account (the
"New Joint Account") for the purposes of the operating agreement to be entered
into on the Transfer Date in respect of the Karakilise Licenses (the "New JOA").
3.2 On the Transfer Date, JKX's liabilities in respect of the New Joint Account
shall be nil.
4. FURTHER ASSURANCE
The Continuing Parties shall, at their own expense, do all such acts and execute
and deliver all such documents as may be required in order to implement the
waiver and subordination contemplated by this Deed, including (but not limited
to) securing appropriate resolutions and ratifications of the Operating
Committee under the Current JOA.
5. GOVERNING LAW AND DISPUTE RESOLUTION
This Deed shall be governed by and construed in accordance with the laws of
England excluding any provisions thereof which would require the application of
the laws of any other jurisdiction. In the event of any dispute, the provisions
of Article 18.4 of the Participation Agreement shall apply.
Executed as a deed and delivered on the date appearing at the beginning of this
Agreement.
ALADDIN MIDDLE EAST LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
ERSAN PETROLEUM SANAYII A.S.
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
AVENUE ENERGY INC.
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
JKX TURKEY LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
Exhibit G - Form of Deed of Termination
of Turnkey Drilling Contract
--------------------------------------------------------------------------------
DEED OF WAIVER AND TERMINATION RELATING
TO THE TURNKEY DRILLING CONTRACT
DATED 22 JANUARY 2004
FOR THE DRILLING OF THE KARAKILISE - 2 APPRAISAL WELL
--------------------------------------------------------------------------------
(1) ALADDIN MIDDLE EAST LIMITED
(2) ERSAN PETROLEUM SANAYII A.S.
(3) AVENUE ENERGY INC.
(4)JKX TURKEY LIMITED
DATED [ ] 2005
THIS DEED OF TERMINATION AND WAIVER is made on the [ ] day of
[ ] 2005
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD, 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,
the Republic of Turkey at Sogutozu Caddesi Xx. 00, 00000 Xxxxxx, Xxxxxx and in
the city of Wichita, Kansas (hereinafter referred to as "AME");
(2) ERSAN PETROL SANAYII A.S.; a corporation existing under the laws of the
Republic of Turkey, having its head office in Ankara (hereinafter referred to as
"Ersan");
(3) AVENUE ENERGY INC., a corporation organized and existing under the laws of
the State of Delaware, USA, having offices at Encino, CA, USA and in Australia
at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx (hereinafter referred to as
"Avenue");
(4) JKX TURKEY LIMITED, a corporation organized and existing under the laws of
England, having its principal office at 0 Xxxxxxxxx Xxxxxx, Xxxxxx X0X 0XX,
Xxxxxxx (hereinafter referred to as "JKX"),
being referred to collectively as "Parties" and individually as a "Party".
WHEREAS:
(A) The Parties, inter alios, entered into a participation agreement dated [ ]
(the "Participation Agreement"), under which AME and Avenue agreed to transfer
the Transferred Interest (as defined in the Participation Agreement) and AME,
Avenue and Ersan agreed to waive and subordinate any present or future rights,
asserted or unasserted claims or interests affecting the Transferred Interests
and in particular arising or capable of arising under the turnkey drilling
contract dated 22 January 2004 for the drilling of the Karakilise-2 Appraisal
Well between AME, Ersan and Avenue (the "Turnkey Drilling Contract").
(B) AME, Avenue and Ersan (the " Turnkey Parties") wish to waive and subordinate
any present or future rights, asserted or unasserted claims or interests arising
or capable of arising under the Turnkey Drilling Contract to the Transferred
Interest but wish, as between themselves, to maintain any accrued rights and
liabilities arising under or capable of arising under the Turnkey Drilling
Contract.
(C) JKX are a party to this Deed so that it can take the benefit of the
covenants hereunder.
IT IS HEREBY AGREED as follows:
1. WAIVER AND SUBORDINATION BY CONTINUING PARTIES
1.1 The Turnkey Parties agree to terminate the Turnkey Drilling Contract as at
the date of this Agreement and waive and subordinate any accrued rights,
asserted or unasserted claims or interests arising or capable of arising under
the Turnkey Drilling Contract to the Transferred Interest.
1.2 The Turnkey Parties acknowledge that they have entered into this Deed for
the benefit of JKX.
2. CONTINUING PARTIES' RIGHTS INTER SE
Nothing in this Deed shall prejudice the Turnkey Parties' rights of action
against one another in respect of any accrued rights or liabilities under the
Turnkey Drilling Contract.
3. FURTHER ASSURANCE
The Turnkey Parties shall, at their own expense, do all such acts and execute
and deliver all such documents as may be required in order to implement the
waiver and subordination contemplated by this Deed.
4. GOVERNING LAW AND DISPUTE RESOLUTION
This Deed shall be governed by and construed in accordance with the laws of
England excluding any provisions thereof which would require the application of
the laws of any other jurisdiction. In the event of any dispute, the provisions
of Article 18.4 of the Participation Agreement shall apply.
Executed as a deed and delivered on the date appearing at the beginning of this
Agreement.
ALADDIN MIDDLE EAST LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
ERSAN PETROLEUM SANAYII A.S.
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
AVENUE ENERGY INC
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
JKX TURKEY LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
Exhibit H - Form of crude oil sale agreement
OIL SALES / PURCHASE AGREEMENT
This Agreement is entered into on the __ day of _____ 2005 ("Effective Date"),
by and between;
ALADDIN MIDDLE EAST LTD., 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,
Republic of Turkey and the city of Wichita, Kansas, USA with the registered
number 1361985, whose registered office is 000 X. Xxxxxx, Xxxxxxx, 00000 X.X.X.
(hereinafter referred to as "AME")
and
JKX TURKEY LIMITED, a public limited company organized and existing under the
laws of England with the registered number 5404183, having its registered office
at 0 Xxxxxxxxx Xxxxxx, Xxxxxx X0X 0XX, Xxxxxxx (hereinafter referred to as
"JKX").
Each party may hereinafter be referred to individually as a "Party" or
collectively as "Parties".
WHEREAS, AME, Avenue Energy Inc. and JKX have entered into a Participation
Agreement dated _______ 2005, together with several other parties defined as
Subordinating Parties therein ("Participation Agreement"), whereby AME and
Avenue Energy Inc. have agreed to transfer collectively a 30% (thirty percent)
interest in Exploration Licenses AR/AME-EPS-AVE/2674, 2677 and 2678 in Petroleum
District XI, Diyarbakir, the Republic of Turkey (hereinafter referred to as the
"Karakilise Licenses"); and
WHEREAS, JKX has agreed to acquire from AME and Avenue Energy Inc. a total of a
30% interest in the Karakilise Licenses; and
WHEREAS, the Parties have agreed that JKX shall have the right to production
from producing xxxxx in the area the subject of the Karakilise Licenses; and
WHEREAS, JKX desires to sell its production from producing xxxxx in the area the
subject of the Karakilise Licenses to AME; and
WHEREAS, AME agrees to purchase from JKX its production from producing xxxxx in
the area the subject of the Karakilise Licenses;
NOW, THEREFORE, for and in consideration of the terms and conditions and
covenants hereinafter set forth, it is agreed as follows:
1. Definitions
As used in this Agreement (including the recitals), the following terms shall
have the meanings ascribed to them below:
API Gravity means a function of specific gravity at 60(degree)F as shown with
the following formula: API Gravity (60(degree)F) = (141.5/specific gravity at
60(degree)F) - 131.5.
ASTM means the American Society for Testing and Materials.
Barrel Factor means the number of barrels contained in one ton of crude oil, at
the given API (60(degree)F).
Domestic Crude Oil Sale / Purchase Agreement means the agreement for the sale by
AME and purchase by TUPRAS (Turkish Petroleum Refineries Corporation) dated
13.2.2002 for domestic crude oil delivered to the Batman Refinery, a copy of
which is attached as exhibit A hereto.
Karakilise Crude Oil means the crude oil produced in the area the subject of the
Karakilise Licenses (including any production lease(s) granted from the
Karakilise Licenses subject area where JKX is a party).
Karakilise Licenses means Exploration Licenses AR/AME-EPS-AVE/2674, 2677 and
2678 in Petroleum District XI, Diyarbakir, the Republic of Turkey, comprising
122,943 hectares.
Net Barrels means the net barrels of crude oil after deducting the bottom
sediment, free water, suspended water and sediment (S + W).
Royalty Interests means total of the Government Royalty, as set forth in the
Petroleum Law No. 6326 and the ERSAN Royalty Interest, as defined in the
Participation Agreement.
S + W means suspended water and sediment in crude oil as per ASTM 1796.
2. Effective Date and Term
This Agreement shall have effect from the Effective Date (as defined in the
preamble to this Agreement) and shall continue in effect so long as JKX has the
right to production from producing xxxxx in the area the subject of the
Karakilise Licenses (including any production lease(s) granted in the areas
subject to the Karakilise Licenses to which JKX is a party) and for so long as
the Domestic Crude Oil Sale / Purchase Agreement remains in effect, or until
terminated in accordance with Clause 15 of this Agreement.
3. Scope
The purpose of this Agreement is to establish the respective rights and
obligations of the Parties with respect to the sale of JKX's share of Karakilise
Crude Oil to AME.
4. Specifications of Crude Oil
Pursuant to the terms of the Domestic Crude Oil Sale/Purchase Agreement, the
Karakilise Crude Oil shall be settled and free of any scum and/or gas. As
Operator under a joint operating agreement between, inter alios, the Parties of
the area the subject of the Karakilise Licenses, AME shall ensure that the
Karakilise Crude Oil shall have the following properties: The quantity of (S +
W) shall not be more than 2%; the API Gravity shall not be less than 32(degree)
API; and the salt content shall not be more than 100 lb/1000 barrels.
5. Place of Delivery
The Karakilise Crude Oil shall be delivered to AME's tanks, No. 10007 and No.
10008 located at the Batman Refinery (hereinafter referred to as the "Batman
Refinery").
6. Measurement
The amount of the Karakilise Crude Oil delivered to the Batman Refinery shall be
determined for each delivery as follows:
1) The tankers used to transport the Karakilise Crude Oil from the
Karakilise field to the Batman Refinery shall wait a reasonable
period of time so that the water content may settle;
2) A sample shall be taken of the Karakilise Crude Oil to determine API
Gravity and S + W%;
3) Each tanker shall first be weighed once full, using the Batman
Refinery's weighbridge, and once again after unloading its entire
crude oil load. Loaded weight (MTon) - Unloaded weight (MTon) = a
(MTon) a = gross weight of the crude oil delivered.
4) Net weight (b) of the crude oil delivered shall be calculated using
the following formula: a/100*[100 - S + W%].
5) The (b) value shall be multiplied by the Barrel Factor which
corresponds to the API value of the sample to determine the
Karakilise net barrel quantity (c) delivered (c = Net Barrels).
7. Notification of JKX's Share of Karakilise Crude Oil and Price
7.1 AME shall notify JKX of the gross amount of Karakilise Crude Oil production
along with the total Net Barrels by sending a notice in the form attached as
exhibit B hereto (the "Karakilise Monthly Production Report") within the first
10 (ten) days of the month in respect of production amounts in the previous
month. AME shall also submit the Karakilise Monthly Production Report to the
General Directorate of Petroleum Affairs for the calculation of the Government
Royalty on Karakilise Crude Oil.
7.2 The price of Karakilise Crude Oil shall be determined according to its API
Gravity multiplied by the market price calculated as per Article 10 of the
Petroleum Market Law No. 5015, as may be amended from time to time and as
notified to AME by Turkiye Petrolleri Anonim Ortakligi (Turkish Petroleum
Corp.). AME shall send to JKX any and all notices that it receives from the
Turkish Petroleum Corp. regarding the price of Karakilise Crude Oil. AME shall
notify JKX of the price of JKX's Net Barrels for production within the first 10
(ten) days of the immediately following month.
8. Invoicing and Payment
8.1 JKX shall prepare and submit to AME an invoice for oil sales by the 14th
(fourteenth) day of the month. AME shall wire transfer for value to JKX the
amount stated on the invoice by the 16th (sixteenth) day of the month. In the
event the 16th (sixteenth) day falls on a weekend, bank or religious holiday (in
either Turkey or the United Kingdom), the wire transfer for value shall be made
on the first business day thereafter. AME shall not set-off any amounts due
under the New JOA (as defined in the Participation Agreement) against any sums
due under the invoice. Without prejudice to its rights to resolve any dispute in
accordance with Article 11 hereof, AME shall make payments of any disputed
invoice in full and continue to make payments in respect of invoices submitted
by JKX until such time as the dispute is resolved and thereafter in accordance
with the settlement of the dispute.
8.2 AME shall make payments to the bank account nominated by JKX from time to
time on the invoice.
8.3 Invoiced amounts not paid by the due date shall be subject to interest at
the London Inter Bank Offered Rate for 3 (three) month US$ deposits (as
published in the Financial Times, London edition) plus 3 (three) per cent from
the due date until receipt of payment.
9. Handling Fees and Insurance
9.1 TUPRAS currently charges AME US $ 2.00 per ton as a handling fee for the
crude oil delivered to the Batman Refinery. JKX shall be charged monthly for its
proportionate share of the TUPRAS handling fee, along with the routine operating
costs for the Karakilise Field, as set forth in the Participation Agreement. In
the event there is a change in the amount of the handling fee charged by TUPRAS
to AME, this shall be notified to JKX and shall be reflected in the charge made
to JKX.
9.2 AME shall bear the risk of the oil from the Karakilise field to the Batman
Refinery and shall be responsible for obtaining insurance against fire and other
perils and submitting a copy of the policy to TUPRAS. AME shall charge JKX its
proportionate share of such insurance on a yearly basis. AME shall also name JKX
as a co-insured on such insurance policy for its share of Karakilise Crude Oil
and provide JKX with copies of all relevant policies and evidence that the
premiums are paid up.
10. Force Majeure
No Party shall be deemed liable towards the other Party for its failure in
fulfilling its liabilities arising from this Agreement as a result of an event
of force majeure. For the purpose of this Agreement, force majeure shall mean
acts of God, war, insurrections and other force majeure circumstances which are
beyond the reasonable control of the Parties and which could not have been
avoided or mitigated by such Party acting reasonably and prudently. For the
avoidance of doubt, governmental acts, lack of credit, lack of funds, lack of
financing, economical crises, inflation, deflation, exchange rate accrual and
currency fluctuations (including devaluations) shall not be deemed force
majeure. The Party affected by such a force majeure event is obliged to notify
the other Party about the occurrence and reason(s) of force majeure and also
estimate the period of time required to remedy the force majeure event. The
affected Party shall use reasonable diligence to remedy the force majeure event
as soon as possible.
11. Governing law and disputes
11.1 This Agreement shall be governed by the laws of England.
11.2 All disputes arising out of or in connection with this Agreement shall in
the first instance be discussed by the Party's chairman or chief executive or
their nominee (such nominee to be a senior management executive) within thirty
(30) days following a Party notifying the other Party of reasonably full
particulars of the dispute; and if such representatives are unable to resolve
the matter it may then be referred by any Party to arbitration in accordance
with Articles 11.3 and 11.4.
11.3 Any disputes relating to the specification and quantity of oil delivered
under this Agreement (including measurement of the same) and not resolved in
accordance with Article 11.2 shall be finally settled by one arbitrator under
the Expedited Rules of the Arbitration Institute of the Stockholm Chamber of
Commerce. The place of arbitration shall be London and the language shall be
English. Any arbitral award shall be final and binding upon the Parties.
11.4 Any disputes not relating to the matters specified in Article 11.3 and not
resolved in accordance with Article 11.2 shall be finally settled under the
Rules of Arbitration of the London Court of International Arbitration ("Rules")
by one or more arbitrators appointed in accordance with the said Rules. The
place of arbitration shall be London and the language shall be English. Any
arbitral award shall be final and binding upon the Parties.
12. Taxes and Duties
Any tax, charge, stamp duty and/or notary fees that arise from or in connection
with execution of this Agreement shall be borne by JKX.
13. Modifications
Any modification to this Agreement shall be made in writing and agreed to by all
Parties to this Agreement.
14. Notices
14.1 Any notice or communication to be given hereunder, other than the notices
specified in Article 14.2 of this Agreement, shall be deemed to have been
properly given when delivered, if delivered by hand, or when received, if sent
by facsimile (provided the sender receives written confirmation of completed
delivery), or when delivered by registered mail as well as e-mail to the Parties
at the following address:
ALADDIN MIDDLE EAST LTD.
Sogutozu Caddesi Xx. 00
00000 Xxxxxx, Xxxxxx
Xxxxxx
Attn: Oyman Xxxxx & Cem Xxxxx
Tel: 00 000 000 0000
Fax: 00 000 000 0000
E-mail: xxxxxxxx@xxxxxxxxxx.xxx
JKX TURKEY LIMITED
0 Xxxxxxxxx Xxxxxx
Xxxxxx X0X 0XX, Xxxxxx Xxxxxxx
Attn: Xxxxxx X. Xxxx
Tel: x00 000 000 0000
Fax: x00 000 000 0000
E-mail: xxx.xxxx@xxxx.xxxxx.xxx
14.2 Notices or communications described in Article 20/III of the Turkish
Commercial Code (consisting principally of notices of default, termination or
rescission) shall be sufficiently given only if delivered via a Turkish notary,
by telegram, or by registered mail, return receipt requested, and shall be
deemed to have been given as of the date of proper service in accordance with
Turkish law.
14.3 A Party may change its address for notices upon giving notice to the other
Party as provided above in Article 14.1
15. Termination
Notwithstanding anything herein contained, JKX may terminate this Agreement,
without prejudice to its accrued rights, by giving at least 30 days written
notice to AME.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
JKX TURKEY LIMITED ALADDIN MIDDLE EAST LTD.
By its duly authorized By its duly authorized
representative representative
-------------------------- --------------------------
(Signature) (Signature)
NAME: NAME: Cem Xxxxx
TITLE: TITLE: General Coordinator
"Exhibit A to Crude Oil Sale Agreement"
Exhibit A - Domestic Oil Sale Purchase Agreement
"Exhibit B to Crude Oil Sale Agreement"
Exhibit B - Karakalise Monthly Production Report
Exhibit I - Form of interest assignment agreements
--------------------------------------------------------------------------------
DEED OF INTEREST ASSIGNMENT RELATING TO
EXPLORATION LICENSES AR/AME-EPS-AVE 2674,
2677 AND 2678 IN PETROLEUM DISTRICT XI, DIYARBAKIR,
REPUBLIC OF TURKEY
--------------------------------------------------------------------------------
(1) ALADDIN MIDDLE EAST LIMITED
(2) JKX TURKEY LIMITED
DATED [ ] 2005
THIS DEED OF ASSIGNMENT is made on the day of 2005
BETWEEN:
(1) ALADDIN MIDDLE EAST LIMITED, a corporation incorporated under the laws of
the State of Delaware in the USA (hereinafter "AME"); and
(2) JKX TURKEY LIMITED, incorporated under the laws of England (hereinafter
referred to as "JKX"),
being referred to collectively as "Parties" and individually as a "Party".
WHEREAS:
(A) Under a participation agreement dated [ ] in respect of the Exploration
Licenses AR/AME-EPS-AVE 2674, 2677 and 2678 (as therein defined) dated [ ] (the
"Participation Agreement") and entered into, inter alios, between the Parties,
AME has agreed to assign and transfer to JKX a twenty five point five percent
(25.5%) undivided interest in the Karakilise Licenses (as defined in the
Participation Agreement) (the "AME Interest") and Avenue Energy Inc. has agreed
to assign and transfer to JKX a four point five percent (4.5%) undivided
interest in the Karakilise Licenses (the "Avenue Interest") with effect from the
Effective Date (as therein defined).
(B) The GDPA has issued [a] letter[s] of approval to the assignment of the AME
Interest and the Avenue Interest reference numbers [ ] dated [ ] advising that
the GDPA has authorised such assignments.
(C) The Parties agree to hereby effect by this deed of assignment the transfer
and assignment of the AME Interest contemplated in the Participation Agreement
(the transfer and assignment of the Avenue Interest will take place
contemporaneously by a separate deed of assignment).
IT IS HEREBY AGREED as follows:
1. Words and expressions defined in the Participation Agreement shall have the
same meanings when used in this Deed of Assignment.
2. AME hereby assigns, transfers and conveys, as legal and beneficial owner, the
AME Interest to JKX, with all and any benefits and other rights accruing or
attaching thereto and JKX hereby accepts the same. Therefore the undivided
interests in the Karakilise Licenses after the transfer of the AME Interest and
the Avenue Interest shall be:
JKX 30%
AME 54.5%
Ersan 5%
Avenue 10.5%
3. AME and JKX hereby expressly state that JKX as assignee of the AME Interest,
is bound by all the terms and provisions contained in the Karakilise Licenses,
and any modifications or additions thereto.
4. JKX hereby agrees to hold harmless and indemnify AME in respect of matters
relating to the AME Interest which occur and relate to the period on or after
the Transfer Date.
5. AME shall, at its own expense, do all such acts and execute and deliver all
such documents as may be required in order to fully assign and transfer the AME
Interest.
6. The construction, validity and performance of this Deed of Assignment shall
be governed by English law.
Executed as a deed and delivered on the date appearing at the beginning of this
deed.
ALADDIN MIDDLE EAST LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
JKX TURKEY LIMITED
By Director:
------------------------------------------
By Director/Secretary:
--------------------------------
--------------------------------------------------------------------------------
DEED OF INTEREST ASSIGNMENT RELATING TO
EXPLORATION LICENSES AR/AME-EPS-AVE 2674,
2677 AND 2678 IN XXXXXXXXX XXXXXXXX XX, XXXXXXXXXX,
XXXXXXXX OF TURKEY
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(1) AVENUE ENERGY INC.
(2) JKX TURKEY LIMITED
DATED [ ]2005
THIS DEED OF ASSIGNMENT is made on the day of 2005
BETWEEN:
(1) AVENUE ENERGY INC., a corporation incorporated under the laws of the State
of Delaware in the USA (hereinafter "Avenue"); and
(2) JKX TURKEY LIMITED, incorporated under the laws of England (hereinafter
referred to as "JKX"),
being referred to collectively as "Parties" and individually as a "Party".
WHEREAS:
(A) Under a participation agreement dated [ ] in respect of the Exploration
Licenses AR/AME-EPS-AVE 2674, 2677 and 2678 (as therein defined) dated [ ] (the
"Participation Agreement") and entered into, inter alio, between the Parties,
Aladdin Middle East Limited has agreed to assign and transfer to JKX a twenty
five point five percent (25.5%) undivided interest in the Karakilise Licenses
(as defined in the Participation Agreement) (the "AME Interest") and Avenue has
agreed to assign and transfer to JKX a four point five percent (4.5%) undivided
interest in the Karakilise Licenses (as defined in the Participation Agreement)
(the "Avenue Interest") with effect from the Effective Date (as therein
defined).
(B) The GDPA has issued [a] letter[s] of approval to the assignment of the AME
Interest and the Avenue Interest reference numbers [ ] dated [ ] advising that
the GDPA has authorised such assignments.
(C) The Parties agree to hereby effect by this deed of assignment the transfer
and assignment of the Avenue Interest contemplated in the Participation
Agreement (transfer and assignment of the AME Interest will take place
contemporaneously with this transfer by a separate deed of assignment).
IT IS HEREBY AGREED as follows:
1. Words and expressions defined in the Participation Agreement shall have the
same meanings when used in this Deed of Assignment.
2. Avenue hereby assigns, transfers and conveys, as legal and beneficial owner,
the Avenue Interest to JKX, with all and any benefits and other rights accruing
or attaching thereto and JKX hereby accepts the same. Therefore the undivided
interests in the Karakilise Licenses after the transfer of the Avenue Interest
and the AME Interest shall be:
JKX 30%
AME 54.5%
Ersan 5%
Avenue 10.5%
3. Avenue and JKX hereby expressly state that JKX as assignee of the Avenue
Interest, is bound by all the terms and provisions contained in the Karakilise
Licenses, and any modifications or additions thereto.
4. JKX hereby agrees to hold harmless and indemnify Avenue in respect of matters
relating to the Avenue Interest which occur and relate to the period on or after
the Transfer Date.
5. Avenue shall, at its own expense, do all such acts and execute and deliver
all such documents as may be required in order to fully assign and transfer the
Avenue Interest.
6. The construction, validity and performance of this Deed of Assignment shall
be governed by English law.
Executed as a deed and delivered on the date appearing at the beginning of this
deed.
AVENUE ENERGY INC.
By Director:
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By Director/Secretary:
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JKX TURKEY LIMITED
By Director:
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By Director/Secretary:
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Exhibit J - Summary of Interests and Production Rights as at Effective
Date and as at Transfer Date
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Participation License Ownership & JOA Participating Interest
Agreement (expressed as a percentage of the total 100% interests)
PART A
Event Party Interest
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Immediately prior to Aladdin Middle East LTD 80%
Effective Date Ersan Petrol Sanayii A.S. 5%
Avenue Energy INC. 15%
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PART B
Event Party Interest
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Effective Date Aladdin Middle East LTD 54.5%
Ersan Petrol Sanayii A.S. 5%
Avenue Energy INC. 10.5%
JKX Turkey Limited 30%
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PART C
Event Party Interest
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Closing Aladdin Middle East LTD 54.5%
Ersan Petrol Sanayii A.S. 5%
Avenue Energy INC. 10.5%
JKX Turkey Limited 30%
Exhibit K - Worked example of revenue entitlement from production
Karakilise Field
Example Calculation Of Revenue Distribution
Input Data
$ YTL Comments
Volume of Oil
Delivered Directly
to Batman Refinery
or To AME Blending Measured at delivery point to AME Blending Facility or to
Facility Bbls 2000 Batman Refinery if delivered directly
Gravity of Measured at delivery point to AME Blending Facility or to
Karakilise Oil API 32.58 Batman Refinery if delivered directly
Market Price of
32.58 API
Karakilise Oil
determined under
Petroleum Market
Law (Determined by
TPAO) $/bo 30.7234 30.7234 43.0158 Determined by TPAO According To Petroleum Market Law
Exchange Rate YTL/US$ 1.4001 Determined by TPAO According To Petroleum Market Law
Internal transportation from Mediterranean port to Batman
Refinery
Official /bo determined by Petrol Offisi. Different from the actual cost
Transportation Cost $ 6.8142 6.8142 9.5406 of transporting Karakilise oil to Batman.
Well Head Price 23.9092 33.4753 Subtract official transportation price from Market Price
VAT % 18
Working Interests
AME % 54.5
Ersan % 5
Avenue % 10.5
JKX % 30
Royalty
State % 12.5
Ersan Royalty % 5
Calculation of
Revenue Entitlement
Gross Revenue 61,446.80 86,031.66 Market Price times Oil Volume Delivered
Well Head Revenue 47,818.40 66,950.54 Wellhead Price times Oil Volume Delivered
State Royalty 5,977.30 8,368.82 Well Head Revenue times State Royalty %
Well Head Revenue
After State Royalty 41,841.10 58,581.72
Ersan Royalty 2,092.06 2,929.09 Well Head Revenue After State Royalty times Ersan Royalty
Net Revenue After
Royalty 53,377.45 74,733.76 Gross Revenue less State and Ersan Royalties
Revenue Entitlement
Excluding VAT
AME 29,090.71 40,729.90 Working Interest Share of Gross Revenue After Royalty
Ersan 2,668.87 3,736.69
Avenue 5,604.63 7,847.04
JKX 16,013.23 22,420.13
Revenue Entitlement
Including VAT
AME 34,327.03 48,061.28
Ersan 3,149.27 4,409.29
Avenue 6,613.47 9,259.51
JKX 18,895.62 26,455.75
Exhibit L - Itemized Infrastructure Costs
