EXHIBIT 10.1
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SECOND AGREEMENT AMENDING
FARMIN & PARTICIPATION AGREEMENT
IN RELATION TO: -
31 EXPLORATION LICENSES AND 2 PRODUCTION LEASES
COVERING 3,042,624 ACRES
HELD BY MEMBERS OF THE XXXXX GROUP CONSORTIUM
IN THE REPUBLIC OF TURKEY
DATED 14 NOVEMBER 2002
THIS AGREEMENT is made as of 31 July 2003
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD ('AME'), a corporation organised and existing
under the laws of the State of Delaware in the U.S.A., having offices
in the city of Ankara and in the city of Wichita, Kansas, which is the
designated Operator of all Xxxxx Group Consortium Exploration Licenses
and Production Leases in Turkey, ERSAN PETROL SANAYII A.S. ('ERSAN'), a
corporation existing under the laws of the Republic of Turkey, having
its head office in the city of Ankara, TRANSMEDITERRANEAN OIL COMPANY
LTD. ('TMO'), a corporation existing under the laws of the British
Columbia, Canada, having head office in the city of Vancouver, Canada,
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK VE TICARET A.S.
('GYP'), a corporation existing under the laws of the Republic of
Turkey, having head office in the city of Adiyaman (hereinafter
collectively referred to as the XXXXX GROUP CONSORTIUM ('SGC')); and
(2) AVENUE ENERGY INC., a corporation organised and existing under the laws
of the State of Delaware in the U.S.A., having offices at Xxxxxxx Oaks,
CA, USA at 00000 Xxxxxxx Xxxx., 0xx Xx. Xxxxxxx Xxxx, XX, XXX and in
Australia at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx,
(hereinafter referred to as 'AVENUE'); and
(3) AVENUE GROUP INC., a corporation organised and existing under the laws
of the State of Delaware in the U.S.A., having offices at Xxxxxxx Oaks,
CA, USA at 00000 Xxxxxxx Xxxx., 0xx Xx. Xxxxxxx Xxxx, XX, XXX and in
Australia at 00-00 Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx, (formerly
called IT Technology Inc., and hereinafter referred to as 'AVENUE
GROUP'); and
(4) MIDDLE EAST PETROLEUM SERVICES LIMITED a corporation organised and
existing under the laws of the Isle of Man, United Kingdom, having its
registered office at Norton House, Farrants Way, Castletown, Isle of
Man, 1M9 1NR, British Isles and its representative office at Xxxxxx
0000, Xxxxxxxx, Xxxxxxxxx (hereinafter referred to as 'MEPS').
(AME, XXXXX, XXX, XXX, Xxxxxx, Xxxxxx Group and MEPS are referred to herein
collectively as the 'PARTIES' and individually as a 'Party').
RECITALS:
(A) The Parties are parties to a Farmin and Participation Agreement dated
14 November 2002 (as amended by an Agreement Amending Farmin &
Participation Agreement dated 14 November 2002, and as supplemented by
Memorandum of Understanding between the parties dated 22 May 2003, the
'FARMIN AND PARTICIPATION AGREEMENT').
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(B) Avenue has validly exercised the Tosun Option and the Karakilise Option
and is now registered as a Petroleum Right Holder and as the holder of
a 45% Participating Interest in the Tosun Licence and the Karakilise
Licence.
(C) Pursuant to clause 4.4 of the Farmin and Participation Agreement,
Avenue has paid to AME the sum of US$500,000 and is due to pay to AME a
further US$1,500,000 on the dates and in the instalments set out in
Part B of Schedule G to the Farmin and Participation Agreement.
(D) Avenue is in a position, upon execution of this Agreement by all of the
Parties, to pay the second instalment of US$500,000 payable under
clause 4.4 of the Farmin and Participation Agreement, but the Parties
wish to modify the arrangements regarding payment of the additional
US$1,000,000 and to provide for a corresponding adjustment to the level
of Participating Interest held by Avenue in the Karakilise Licence in
the event it contributes less than the full US$1,000,000.
(E) SGC and MEPS wish to enter into negotiations with Tethys Oil AB, a
corporation organised and existing under the laws of Sweden having its
principal office in the city of Stockholm ('TETHYS'), with a view to
agreeing the terms of a farmout to Tethys of an interest in certain of
the Exploration Licenses the subject of the Option in clause 6.1 of the
Farmin and Participation Agreement, and has requested the approval of
Avenue to such an arrangement.
(F) The Parties wish to amend the Farmin and Participation Agreement in
order to accommodate the requests referred to in recitals (D) and (E)
above and to make certain other modifications thereto, as more
particularly set out in this Agreement.
NOW, THEREFORE, for and in consideration of the terms, conditions and covenants
herein set forth, the Parties agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Unless otherwise defined in this Agreement, terms defined in clause 1.1
of the Farmin and Participation Agreement have the same meanings where
used in this Agreement.
1.2 Clause 1.2 of the Farmin and Participation Agreement shall apply as if
set out in full herein.
2. CONDITION PRECEDENT
a.1. CONDITION
Clause 3 of this Agreement is conditional upon and shall not
take effect unless and until Avenue has paid to AME the second
instalment of US$500,000 payable under clause 4.4 of the
Farmin and Participation Agreement in respect of the dry-hole
drilling costs of the Karakilise-1 Well.
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2.2 EFFECT OF PAYMENT
If the condition in clause 2.1 is satisfied, neither AME nor any other
Party shall have, and each of them irrevocably waives, any rights or
remedies under or arising out of the Farmin and Participation Agreement
in respect of the failure of Avenue to make the payment referred to in
clause 2.1 within 5 Business Days after spudding of the Karakilise-1
Well.
3. AMENDMENTS TO FARMIN AND PARTICIPATION AGREEMENT
3.1 GENERAL
The Parties hereby agree to amend the Farmin and Participation
Agreement as set out in this clause 3. Each Party acknowledges and
agrees that the Farmin and Participation Agreement, as amended by this
clause 3, is in full force and effect.
3.2 AMENDMENTS TO CLAUSE 4
Clauses 4.4 to 4.6 of the Farmin and Participation Agreement are
deleted and the text of Schedule A to this Agreement is inserted in
their place as new clauses 4.4 to 4.7.
3.3 AMENDMENTS TO CLAUSE 6
(a) Clauses 6.1 and 6.2 of the Farmin and Participation Agreement
are deleted and replaced with the following:
'6.1 GRANT OF OPTION
(a) In consideration of US$1 (the receipt and
sufficiency of which SGC hereby acknowledge)
and subject to the terms and conditions of
this Agreement, the SGC Participants in
relation to the relevant SGC Interests
hereby grant to Avenue the option to
acquire, free from Encumbrances, a
Participating Interest, in a percentage to
be determined in accordance with clause
6.1(b), in all (but not some only) of the
Exploration Licenses and Production Leases
identified in Schedule 'A' other than:
(i) the Tosun Licence, the Karakilise
Licence and the Kahta Lease; and
(ii) Exploration Licenses
AR/TMO-EPS/GYP/3794 and 3795 in
Petroleum District X1-Siirt,
Exploration Licence AR/EPS-GYP/3748
in Petroleum District
XI-Diyarbakir, and Exploration
Licenses AR/AME-EPS/3700, 3701,
3702, 3703, 3704 and 3705 in
Petroleum District XVII-Izmir (each
a 'TETHYS LICENCE' and collectively
the 'TETHYS LICENSES').
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(b) The Option in clause 6.1(a) relates to a 45%
Participating Interest in the relevant SGC
Interests, provided that if:
(i) Avenue has transferred or is
required to transfer to AME
pursuant to clause 4.7 a Percentage
Interest in the Karakilise Licence;
and
(ii) Avenue has not waived the Option
granted to it under clause 6.6(c)
at or prior to the time when the
Option in clause 6.1(a) is
exercised,
then the percentage value of the
Participating Interest to which the option
in clause 6.1(a) applies shall equal 45%
less the percentage value of the
Participating Interest in the Karakilise
Licence transferred or to be transferred to
AME pursuant to clause 4.7.
6.2 EXERCISE OF OPTION
(a) Avenue shall not be entitled to exercise the
Option granted under clause 6.1:
(i) before the earlier of (A) the Final
Exercise Date (as defined in clause
4.4(c)(ii)) and (B) the date upon
which the Cumulative Farmin Payment
equals US$2,000,000; or
(ii) after the date which is 60 days
after the completion or permanent
or indefinite abandonment of the
Karakilise-1 Well.
(b) Exercise of the Option granted under clause
6.1 shall be effected by the giving to AME
of a written notice signed by or on behalf
of Avenue stating that Avenue is exercising
that Option.'
(b) Clause 6.4 of the Farmin and Participation Agreement is
deleted and replaced with the following:
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'6.4 PAYMENT AT CLOSING
At closing of the Option granted under clause 6.1,
Avenue shall be required to pay to AME on behalf of
SGC, in full and final satisfaction of Avenue's
obligations to contribute to the application fees and
holding costs associated with the SGC Interests the
subject of clause 6.1, an amount equal to US$315,000
multiplied by a fraction the numerator of which is
the percentage figure of the Participating Interests
in relevant SGC Interests transferred to Avenue
pursuant to clause 6.1 (expressed as an absolute
number rather than a percentage), and the denominator
of which is 45.'
(c) Clause 6.5 of the Farmin and Participation Agreement is
amended by adding the following as a new clause 6.5(c):
'(c) Notwithstanding anything in clause 6.5(a) or 6.5(b)
to the contrary:
(i) for the purposes of clause 6.5(b), the
removal of the Tethys Licenses from the
Option granted under clause 6.1, as given
effect by the Second Amendment to the Farmin
and Participation Agreement made between the
parties hereto dated as of 31 July 2003,
shall be treated as a reduction of 'the
acreage under SCG Interests in which Avenue
or its Nominated Affiliate have a
Participating Interest' in an amount equal
to the acreage of the Tethys Licenses, and
the Tethys Licenses shall be disregarded for
the purpose of any future determination of
the monthly administration fee payable under
clause 6.5(a); and
(ii) if the Participating Interests in relevant
SGC Interests transferred to Avenue pursuant
to clause 6.1 is less than 45%, the amount
of the monthly administration fee otherwise
payable under clause 6.5(a) (after any
adjustment to be made pursuant to clause
6.5(b) or 6.5(c)(i)) shall be reduced in the
proportion that percentage value of the
Participating Interests so transferred to
Avenue bears to 45%.'
(d) There shall be added to the Farmin and Participation Agreement
a new clause 6.6, the text of which is set out in Schedule B
to this Agreement.
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3.4 AMENDMENTS TO CLAUSE 9
(a) Clause 9.1(c) of the Farmin and Participation Agreement is
deleted and replaced with the following:
'(c) The terms of any Joint Operating Agreement to be
entered into at closing of an Acquisition pursuant to
clause 6.1 shall be the same, mutatis mutandis, as
the terms of the Tosun JOA (incorporating the
amendments thereto made pursuant to the Agreement
Amending Farmin and Participation Agreement dated 20
December 2002), provided that if Avenue acquires less
than a 45% Participating Interest in the relevant SGC
Interests adjustments equivalent to those set out in
paragraphs (a) to (e) of clause 4.6 shall be made.
Unless the Participants in a relevant SGC Interest
agree otherwise, a separate Joint Operating Agreement
shall be entered into in relation to each of the
prospects or fields referenced in Schedule 'A'
relating to the SGC Interests comprised in that
prospect or field.'
(b) Clauses 9.3(b) and (c) of the Farmin and Participation
Agreement are deleted and replaced with the following:
'(b) Subject to clauses 7.6, 8.2 and 8.3, the
Participating Interests in the relevant SGC Interests
shall be held and, subject to clause 9.3(d), the Net
Pre-tax Revenue derived by the Operator or the
Participants from the Joint Operations associated
with any SGC Interest (including the sale of crude
oil by AME on behalf of the relevant Participants)
shall accrue to the Participants in that SGC Interest
in proportion to their respective Participating
Interests in the relevant SGC Interest. For the
purposes of this clause 9.3(b) and of clause 9.4(c)
below, a Participating Interest held in trust for, or
otherwise on behalf of, one Party by another shall be
treated as being held by the first-mentioned Party
(i.e., the beneficiary) only.
(c) Except as otherwise provided in this Agreement,
Avenue shall bear a portion of the Joint Operating
Expenses properly incurred after the date of this
Agreement in relation to a relevant SGC Interest
equal to the sum of:
(i) the Participating Interest held by it the
relevant SG Interest; and
(ii) five per cent (5%),
and the balance of such Joint Operating Expenses
shall be borne by the SGC Participants in the
relevant SGC Interest. For the avoidance of doubt,
MEPS shall not be required to fund the Joint
Operating Expenses in relation to any SGC Interest.'
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3.5 AMENDMENTS TO SCHEDULE G
Part A of Schedule G to the Farmin and Participation Agreement is
deleted and replaced with Attachment 'A' to this Agreement. Part B of
Schedule G to the Farmin and Participation Agreement, and the
definition of the term 'Karakilise Payment Schedule' in clause 1.1 of
that agreement, are deleted.
3.6 MISCELLANEOUS
The following additional amendments are made to the Farmin and
Participation Agreement (clause numbers below refer to clauses in the
Farmin and Participation Agreement):
(a) the following new definition is inserted into clause 1.1 (in
appropriate alphabetical order):
KARAKILISE MULTIPLIER means the absolute value of the
Participating Interest that is or will be held by
Avenue in the Karakilise Licence immediately after
completion of any transfer made or to be made by
Avenue to AME pursuant to clause 4.7; by way of
example, if the relevant Participating Interest has a
value of 45%, the Karakilise Multiplier equals 45).
(b) if Avenue is required, pursuant to clause 4.7 of the Farmin
and Participation Agreement to transfer to AME a Participating
Interest in the Karakilise Licence, then in paragraph (b) of
the definition of 'Sunk Costs' there shall be deemed to be
inserted after the words 'deemed in the aggregate to equal'
the words:
'a percentage equal to 100 multiplied by a fraction
the numerator of which is 100 minus the sum of 5%
plus the Percentage Interest held by AVENUE
immediately after giving effect to the transfer
required under clause 4.7 of the Farmin and
Participation Agreement, and the denominator of which
is the sum of 5% plus the Percentage Interest held by
AVENUE immediately after giving effect to the said
transfer, of';
(c) for the purposes of the closing of any Acquisition made
pursuant to clause 6.1 of the Farmin and Participation
Agreement, the references to '45%' in clauses 7.2(b)(i),
8.2(a)(i) and 8.3 of the Farmin and Participation Agreement
shall be deemed to refer to the actual Participating Interest
the subject of the relevant Acquisition; and
(d) Clause 15.4 (Withholding Tax) of the Farmin and Participation
Agreement is deleted and replaced with the following:
15.4 WITHHOLDING TAX
Notwithstanding any other provision of this Agreement
to the contrary, in relation to any SGC Interest in
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which Avenue or its Nominated Affiliate holds a
Participating Interest, as between the SGC
Participants in that SGC Interest and Avenue or its
Affiliates, any Withholding Tax incurred in relation
to the Joint Operating Expenses or other costs
charged to the joint account of the Participants in
that SGC Interest, or the payments by such
Participants in relation thereto (including payments
by Avenue or its Nominated Affiliate under any of
clauses 2 to 7 (both inclusive) of this Agreement)
shall ultimately be borne by the SGC Participants
having an interest in the relevant SGC Interest, and
by Avenue or (if applicable) its Nominated Affiliate,
as between them in proportion to their relative
Participating Interests; if necessary, appropriate
adjusting payments shall be made from time to time to
give effect to the foregoing. For the purposes of the
foregoing, a Participating Interest held in trust
for, or otherwise on behalf of, a Party by another
Party pursuant to clause 4.7, 7.6 or 8.3 shall be
treated as held by the first-mentioned Party only.
4. GENERAL
Clauses 13 (Assignment and encumbrances), 14 (Confidentiality), 17
(Notices) and 18 (General) of the Farmin and Participation Agreement
shall apply to this Agreement as if set out in full herein.
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SCHEDULE A
Pursuant to clause 3.2 of this Agreement, the following are inserted into the
Farmin and Participation Agreement as new clauses 4.4 to 4.7:
4.4 PAYMENTS IN RESPECT OF KARAKILISE FARMIN
(a) No amount shall be payable at closing of the Karakilise
Option.
(b) Avenue has paid or must pay to AME, as an initial contribution
to the dry-hole costs associated with the drilling of the
Karakilise-1 Well:
(i) US$500,000, payable on or before the 30th day prior
to spudding of the Karakilise-1 Well (receipt of
which sum is hereby acknowledged by AME); and
(ii) a further US$500,000, payable forthwith upon the
execution and delivery by all of the Parties of the
Second Amendment to the Farmin and Participation
Agreement made between the parties hereto dated as of
31 July 2003, being the sum referred to in clause 2.1
of that agreement.
(c) Avenue shall have the right, but not the obligation, to pay to
AME, as a further contribution to the dry-hole costs
associated with the drilling of the Karakilise-1 Well, up to
an additional US$1,000,000. Such additional contribution may
be made in one or more instalments, each of which must:
(i) be in the amount of US$250,000 or an integral
multiple thereof; and
(ii) be made by not later than 5 Business Days after the
giving of a notice from Avenue to AME of its
intention to make such payment, such notice to be
given by not later than 4 Business Days after the
date (the 'FINAL EXERCISE DATE') upon which AME
notifies Avenue that the Karakilise-1 Well has
reached the 9 5/8th inch casing point, prognosed at a
depth of approximately 8,700 feet (depending on the
depth at which the Sayindere Formation is
intersected) and that AME is preparing to run such
casing.
(d) Notwithstanding any provision of this Agreement to the
contrary, in no event shall Avenue be under an obligation to
contribute in excess of the sums referred to in clause 4.4(b)
and (if applicable) clause 4.5 in respect of the costs
associated with the drilling of the Karakilise-1 Well. AME
represents, warrants and undertakes to Avenue that the
performance by AME of its obligation under clause 9.4(a)(ii)
to undertake and complete the Karakilise Drilling Program in
accordance with Schedule G will satisfy in full the
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obligations of the licensees under the Karakilise Licence
(whether arising under the terms of that licence, under the
Petroleum Law, or otherwise) in relation to the drilling of an
initial exploration well on the Karakilise Licence area, and
that no other drilling or other exploratory activities are or
will be required on the part of such licensees in respect of
the drilling of an initial exploration well on the Karakilise
Licence area in order to prevent the revocation of the
Karakilise Licence.
4.5 OBLIGATIONS AT DISCOVERY
In the event that a discovery of hydrocarbons is made in relation to
the Karakilise-1 Well which AME and Avenue, acting reasonably, agree
merits further appraisal, AME shall, as contractor for the Participants
in the Karakilise Licence and in accordance with the Karakilise
Drilling Program, undertake all requisite logging, running of a
completion string, cementing and perforating at the Karakilise-1 Well.
The aggregate amount which AME may invoice or otherwise charge to the
Participants in the Karakilise Licence in respect of such works shall
not exceed US$500,000, of which Avenue's share shall be a percentage
determined in accordance with clause 9.3(c). For the avoidance of
doubt, in no event shall Avenue's contribution to the aforesaid charges
exceed US$250,000.
4.6 JOINT OPERATING AGREEMENT
AME, Ersan and Avenue shall promptly agree the terms of and enter into
a separate Joint Operating Agreement relating exclusively to the
Karakilise Licence. The terms of such Joint Operating Agreement shall
be the same, mutatis mutandis, as the terms of the Tosun JOA
(incorporating the amendments thereto made pursuant to the Agreement
Amending Farmin & Participation Agreement dated 20 December 2002),
provided that if Avenue is required pursuant to clause 4.7 to transfer
to AME any of its Participating Interest in the Karakilise Licence:
(a) the percentage figure in Articles 5.10.1 and 8.4.5 shall be
seventy percent (70%) rather than fifty five percent (55%);
(b) the reference in Article 9.2.1(iv) to '45%' shall be
substituted with a reference to '35%';
(c) in paragraph (c) of the definition of 'Sunk Costs', there
shall be inserted after the words 'deemed in the aggregate to
equal' the words 'a percentage equal to 100 multiplied by a
fraction the numerator of which is 100 minus the sum of 5%
plus the Percentage Interest held by AVENUE immediately after
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giving effect to the transfer required under clause 4.7 of the
Farmin and Participation Agreement, and the denominator of
which is the sum of 5% plus the Percentage Interest held by
AVENUE immediately after giving effect to the said transfer,
of';
(d) Article 3.2.4 shall be revised to reflect that Avenue shall
remain obliged to carry 50% of MEPS's 10% carried interest in
the Karakilise Licence notwithstanding that it holds a
Participating Interest of less than 45%, and that the other
Parties (excluding MEPS) shall carry the remaining 50% of
MEPS's carried interest as between them in proportion to their
relative Participating Interests;
(e) a provision shall be included to the effect that,
notwithstanding any other provision of the Joint Operating
Agreement to the contrary, all decisions of the Parties to the
Joint Operating Agreement, or of the Operating Committee, in
relation to the following matters shall have no effect and not
be implemented unless and until Avenue has given its prior
consent in writing thereto:
(i) the relinquishment of all or any part of the acreage
under the Karakilise Licence, except as may be
required in accordance with the Petroleum Law in
connection with the creation of a Production Lease;
(ii) the renewal of the Karakilise Licence; and
(iii) approving or authorising any Joint Operations that go
beyond or are not a necessary incident to the minimum
work obligations for the time being under the
Karakilise Licence.
4.7 RE-TRANSFER TO SGC
If, at the end of the fifth Business Day after the Final Exercise Date,
the cumulative amount paid by Avenue under clause 4.4 (the cumulative
amount so paid being herein referred to as the 'CUMULATIVE FARMIN
PAYMENT') is less than US$2,000,000:
(a) Avenue shall promptly execute in favour of and deliver to AME
an instrument transferring to AME, subject to registration
with the GDPA, a Participating Interest in the Karakilise
Licence equal to 45% multiplied by a fraction the numerator of
which is US$2,000,000 minus the Cumulative Farmin Payment and
the denominator of which is US$2,000,000;
(b) pending approval of any such assignment by the GDPA, Avenue
shall hold the Participating Interest to be transferred in
trust for AME and privately recognise the right, title and
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interest of AME in and to the Participating Interest so held
in trust and deal with AME as the owner and holder thereof;
and
(c) an appropriate adjusting payment shall be made to Avenue
pursuant to clause 15.4, such that the proportion of any
Withholding Tax borne by Avenue in relation to the Karakilise
Licence (including in relation to the period prior to the end
of the fifth Business Day after the Final Exercise Date) shall
be calculated based on the reduced Participating Interest to
be held by Avenue in the Karakilise Licence following
completion of the transfer referred to in clause 4.7(a).
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SCHEDULE B
Pursuant to clause 3.3(d) of this Agreement, the following is inserted into the
Farmin and Participation Agreement as new clauses 6.6:
6.6 TETHYS FARMIN AND LICENSES
(a) Subject to clause 6.6(f), AME (on behalf of itself and the SGC
Participants having an interest in the Tethys Licence) is
hereby authorised to negotiate the terms of and, subject to
clause 6.6(b), enter with either Tethys Oil AB, a corporation
organised and existing under the laws of Sweden having its
principal office in the city of Stockholm ('TETHYS'), or a
wholly owned subsidiary of Tethys having adequate technical
and financial capability, (the relevant party to the agreement
being referred to as the 'FARMINEE') into:
(i) a farmin agreement (the 'TETHYS FARMIN AGREEMENT')
under which the relevant Parties holding
Participating Interests in the Tethys Licenses agree
to transfer to the Farminee an equal Participating
Interest in all or any of the Tethys Licenses in
which the Farminee agrees to participate, in exchange
for which the Farminee agrees at its cost and expense
to perform specified exploratory work on the Tethys
Licence areas; and
(ii) a Joint Operating Agreement relating to the Tethys
Licenses (the 'TETHYS JOA'),
provided that no more than one Tethys Farmin Agreement may be
entered into pursuant to this clause 6.6(a) unless both or (as
the case may be) all such Tethys Farmin Agreements are entered
into on the same date, and no Tethys JOA may be entered into
pursuant to this clause 6.6(a) other than contemporaneously
with the Tethys Farmin Agreement to which it relates.
(b) The Tethys Farmin Agreement and the Tethys JOA shall be on
such terms as SGC, in its discretion, considers fit, provided
that, unless Avenue waives the Option referred to in clause
6.6(c) or fails to exercise that Option by the final date
permitted under clause 6.6(c) (the 'FINAL EXERCISE DATE'),
such agreements must:
(i) be in writing, in the English language and on arm's
length commercial terms;
(ii) comprise the entire agreement between the Tethys and
its Affiliates, of the one part, and all or any of
the SGC (of the other part), in relation to the
Tethys Licenses;
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(iii) be on terms:
(A) such that the benefit (subject to the
burden) of the arrangement (including any
carry granted by the Farminee in favour of
all or any of the relevant SGC Participants)
is made available to Avenue in the event of
its exercise of the option conferred under
clause 6.6(c) and in its capacity as the
holder of a Participating Interest in the
Tethys Licenses;
(B) that are consistent with and facilitate the
requirements of clauses 6.6(c) and (d);
(C) that will not discriminate between Avenue,
of the one part, and all or any of the SGC
Participants, of the other part (provided
that the appointment of AME as operator on
reasonable and customary arm's length terms
shall not of itself be treated as
discriminatory);
(iv) not be entered into prior to Avenue having been
provided with a copy of the proposed form of the
agreement and afforded a reasonable opportunity (and
in any case not less than 3 Business Days) to comment
on the same (it being recognised, however, that AME
is under no obligation to accommodate Avenue's
requirements in relation to the terms of the
agreement, provided that the requirements of
sub-paragraphs (i) to (iii) above are satisfied); and
(v) not be amended, supplemented or otherwise modified in
any way that might adversely affect the rights and
interests of Avenue (whether actual, contingent or
prospective) in relation to the Tethys Licenses.
(c) Subject to the terms and conditions of this Agreement, the SGC
Participants in relation to the relevant Tethys Licenses
hereby grant to Avenue the option to acquire, free from
Encumbrances, a Participating Interest in the Tethys Licenses.
Exercise of this option shall be effected by the giving to AME
of a written notice signed by or on behalf of Avenue stating
that Avenue is exercising that Option, which notice may given
no later than the date which is 60 days after the completion
or permanent or indefinite abandonment of the Karakilise-1
Well.
(d) At closing of the option referred to in clause 6.6(c):
(i) the percentage of the Participating Interest in a
Tethys Licence to be transferred to Avenue shall be:
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(A) if the Farminee has not, at such time,
acquired a Participating Interest in the
relevant Tethys Licence, the Percentage
Interest that is or will be held by Avenue
in the Karakilise Licence immediately after
completion of any transfer made or to be
made by Avenue to AME pursuant to clause
4.7; or
(B) if by that time the Farminee has acquired a
Participating Interest in the relevant
Tethys Licence, a proportion (expressed as a
percentage) of the total Participating
Interests held by the SGC Participants in
the relevant Tethys Licence immediately
after completion of the transfer of such
Participating Interest to the Farminee (and
excluding any part thereof held in trust for
MEPS) equal to the product of (1) 50% and
(2) a fraction the numerator of which is the
Karakilise Multiplier and the denominator of
which is 45;
(ii) the consideration payable by Avenue to AME (on behalf
of the relevant SGC Participants) shall be the
product of US$135,000 and a fraction, the numerator
of which is the Karakilise Multiplier and the
denominator of which is 45;
(iii) Avenue, in its capacity as the holder of a
Participating Interest the relevant Tethys Licenses,
must execute an agreement or agreements by which it
agrees to be bound by and to become a party to any
Tethys Farmin Agreement or the Tethys JOA which has
then been entered into in accordance with clause
6.6(a);
(iv) AME shall procure that the other parties to such
agreements execute an agreement or agreements under
which, subject to execution by Avenue of the
agreement of agreements referred to in paragraph
(iii) above, Avenue becomes a party to and entitled
to the benefit of such agreements; and
(v) if any consideration has passed from the Farminee or
Tethys to any member of SGC in relation to its
acquisition or prospective acquisition of an interest
in a Tethys Licence, AME (on behalf of SGC) shall pay
to Avenue an amount equal to the product of:
(A) the aggregate of (1) the total amount of the
cash consideration so paid and (2) the
aggregate value to the relevant member of
SGC of any consideration so passed other
than in cash; and
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(B) 50%; and
(C) a fraction, the numerator of which is the
Karakilise Multiplier and the denominator of
which is 45.
(e) For the avoidance of doubt (and without limitation to the
operation in accordance with its terms of any provision of
this Agreement not referred to below):
(i) clauses 7.1 to 7.6, 8.1, 8.3, 8.4, 8.6, 9.1(d), 9.2,
10, 13 and 14 apply; and
(ii) subject to clause 6.6(g), clauses 7.6, 9.1(c),
9.1(e), 9.1(f), 9.1(g), 9.3, 9.5, 15.1, 15.3 and 15.4
do not apply,
to the Tethys Licenses (including any activities conducted
thereon or in relation thereto) and the option conferred under
clause 6.6(c).
(f) The authorisation conferred by clause 6.6(a) shall immediately
cease (but without prejudice the validity of any Tethys Farmin
Agreement or Tethys JOA that has been entered into before that
date in accordance with clause 6.6(a)) on the date that is
three Business Days prior to the Final Exercise Date.
Thereafter, no arrangement of the kind described in clause
6.6(a) shall be entered into with Tethys or any other person
in relation to a Tethys Licence without obtaining the prior
consent of Avenue, unless:
(i) the Option in clause 6.6(c) has lapsed; or
(ii) the Option in clause 6.6(c) has been exercised and
closed, and neither Avenue nor an Affiliate of Avenue
continues to hold or be entitled to a Participating
Interest in the relevant Tethys Licence.
(g) Notwithstanding clause 6.6(e)(ii), each of the clauses of this
Agreement referred to in clause 6.6(e)(ii) shall apply to any
Tethys Licence (including any activities conducted thereon or
in relation thereto), and the related option over that Tethys
Licence conferred under clause 6.6(c), if:
(i) SGC does not enter into a Tethys Farmin Agreement in
relation to that Tethys License by the date that is
three Business Days prior to the Final Exercise Date;
and
(ii) Avenue exercises the option conferred under clause
6.6(c).
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IN WITNESS WHEREOF the parties have executed this Agreement as of the date above
written
ALADDIN MIDDLE EAST LTD.
By: /s/ OYMAN XXXXX
Xx Xxxxx Xxxxx
Executive Vice-President and
General Manager
ERSAN PETROL SANAYII A.S.
By: /s/ OYMAN XXXXX
Xx Xxxxx Xxxxx
Chairman of the Board
TRANSMEDITERRANEAN OIL COMPANY LTD
By: /s/ OYMAN XXXXX
Xx Xxxxx Xxxxx
Executive Vice-President and
General Manager
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK VE TICARET A.S
By: /s/ OYMAN XXXXX
Xx Xxxxx Xxxxx
Chairman of the Board
MIDDLE EAST PETROLEUM SERVICES LTD.
By: /s/ CEM XXXXX
Mr Cem Xxxxx
Authorised Signatory
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AVENUE ENERGY INC.
By: /s/ XXXXXXXX XXXXXX
Xx Xxxxxxxx Xxxxxx
President
AVENUE GROUP INC.
By: /s/ XXXXXXXX XXXXXX
Xx Xxxxxxxx Xxxxxx
Executive Vice President
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ATTACHMENT A
KARAKILISE DRILLING PROGRAM
[see attached Spudding Statement Form dated 05.06.2003]
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