PARTICIPATION AGREEMENT
This Participation Agreement is made and entered into the 1st. day of April
1996, by and between EVERGREEN RESOURCES, INC. (EVERGREEN), a corporation
organised under the laws of the State of Colorado of the United States of
America and EMPRESA NACIONAL DEL PETROLEO ("ENAP"), a Chilean State owned
company, hereinafter referred to individually as "Party" or collectively as
"Parties".
WITNESSETH:
WHEREAS, on December 7th, 1995, EVERGREEN and ENAP submitted to the Minister of
Mining of the State of Chile a proposal for the exploration and exploitation of
Hydrocarbons in the Areas of the Tamarugal Basin of Chile, shown as Blocks 1 and
2 on the attached Exhibit "1".
WHEREAS, by letter dated January 19, 1996 the Minister of Mining advised the
Parties that EVERGREEN and ENAP were selected to negotiate a Special Petroleum
Operation Contract to conduct Petroleum Operations within the areas outlined in
Exhibit "1" located in the Tamarugal Basin.
WHEREAS, the Parties desire to set forth their agreement with respect to certain
aspects of their joint participation in exploration until such time as a Joint
Operating Agreement between them can be negotiated and executed and in which
EVERGREEN will be appointed the initial operator.
NOW THEREFORE, in consideration of the mutual covenants and obligations
contained in this Agreement, subject to such approvals as may be required by the
Chilean governmental authorities, the Parties agree as follows:
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1. PURPOSE.
The Parties shall:
(a) negotiate Special Petroleum Operation Contracts ("SPOC") with the
Ministry of Mining of the State of Chile for the Areas of Tamarugal
Sur and Tamarugal Norte of Chile; and
(b) negotiate a Joint Operating Agreement ("JOA") between them
providing for all Petroleum Operations under both Special Operation
Contracts.
2. PARTICIPATING INTEREST
Subject to the interest of the State of Chile pursuant to the SPOCS,
each Party as of the date hereof shall own an undivided interest
(hereinafter referred to as "Participating Interest") in the rights and
obligations under this Participation Agreement as follows:
ENAP: 25 PERCENT
EVERGREEN: 75 PERCENT
3. MANAGEMENT COMMITTEE.
3.1 A Management Committee composed of the representatives of the
Parties shall be established as of the execution date of the SPOCS,
or before should the Parties so decide.
The names of each Party's representative are as follows:
PARTY REPRESENTATIVE ALTERNATE
----- -------------- ---------
ENAP ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ----
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EVERGREEN ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
3.2 The Representative of each Party is authorized and empowered to
bind such Party with respect to any matter for which the Management
Committee has responsibility. The Representative of a Party may be
replaced at any time by such Party by written notice to all other
Parties.
3.3 The Chairman of the Management Committee shall be a representative
of the Operator.
3.4 The Management Committee shall be responsible for and shall have
authority to decide all matters under and pursuant to this
Agreement, with the exception given to routine operational matters.
3.5 The Operator may at any time, and shall upon the request of any
Representative, call a meeting of the Management Committee to
consider any matter pertinent to the Committee. Notice of the date,
time, place, and agenda of such meeting shall be given to each
Representative. The Chairman shall endeavor to give as much advance
notice as possible, but notice shall be timely if given at least
ten (10) days prior to the time of said meeting. Only matters set
forth in the notice of the meeting may be decided by the Management
Committee unless unanimously agreed otherwise by the
Representatives of all Parties.
Unless otherwise agreed by the Parties, meetings of the Management
Committee will be held in Santiago, Chile.
3.6 A vote may also be taken without a meeting of the Management
Committee by written instrument or fax with written confirmation.
It is agreed, however, that no vote without a meeting shall be
valid unless all Representatives are given at least forty-eight
(48) hours prior notice (excluding Saturdays,
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Sundays and legal holidays observed in the office of the recipient)
of the matters to be decided, unless all Representatives shall
waive such notice requirement.
Any vote by written instrument or fax with written confirmation
shall be directed to the Chairman of the Management Committee with
copies to all Representatives. In the event a vote is taken without
a meeting, and the Chairman of the Management Committee has not
received a written notice or fax of the vote of a Party within the
time specified for the vote in said notice, that Party shall be
deemed to have cast a vote against the matter being voted upon.
3.7 Each Representative shall be entitled to vote at meetings of the
Management Committee in accordance with the Participating Interest
of the Party which that person represents. Unless otherwise
provided for in this Agreement, a decision of the Management
Committee shall require the vote of the Representatives of two or
more Parties having an aggregate Participating Interest of more
than seventy five percent (75%) (hereinafter referred to as
"Determination"). A Determination by the Management Committee shall
bind all Parties.
4. OPERATOR
Subject to the direction of the Management Committee and on behalf of
the Parties, EVERGREEN is designated as Operator. It is the intention of
EVERGREEN to make its best efforts to employ duly qualified personnel of
ENAP for the development and execution of the exploitation work
programs.
Operator shall coordinate the evaluation and interpretation of any data
by the Parties, and direct Petroleum Operations under the SPOC. Each
Party to this Agreement is
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entitled, as it deems appropriate for the purpose of obtaining relevant
information to attend all meetings arranged with the Minister of Mining.
Operator shall be the spokesman for the Parties at such meetings.
Operator shall provide notice to the Parties at least ten (10) days
prior to the date of any such meeting.
5. JOINT OPERATING AGREEMENT.
5.1 The Parties agree that as soon as reasonably possible but not later
than 60 days after the effective date of the SPOC, they shall
endeavor to negotiate, settle, and execute a mutually acceptable
JOA containing provisions customary in the petroleum industry for
international operations and which shall govern the relationship of
the Parties. In the event the Parties mutually decide, an extension
of time shall be permitted to continue the negotiations of the JOA.
The JOA shall designate EVERGREEN as the initial Operator.
The JOA shall come into effect as of the effective date of the SPOC
and shall provide, among other things, (a) that all Determinations
made by the Operating Committee shall require the affirmative vote
of two or more Parties having more than seventy five (75%) of the
voting interest, (b) liability and property insurance coverage for
the Joint Account, (c) the right of either Party to assign all or
part of its Participating Interest with the consent of the other
Party, which consent shall not be unreasonably withheld (subject to
necessary consents of the government of Chile), provided that
neither the assigned interest nor the retained interest shall be
less than ten percent (10%), (e) overhead charges in accordance to
the provisions to be agreed by the Parties in the JOA. Overhead
shall be deemed to cover the actual cost (being salaries, wages,
burden and benefits paid by Operator and/or its Affiliates in
accordance with its standard personnel policy in force and the
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provision of office accommodation and services reasonably necessary
for operating and maintaining offices) incurred for services
rendered by Operator and/or its affiliates for treasury, payroll,
taxation, insurance, communications, accounting, personnel,
executive and administrative management, and research and
development which could not, without unreasonable effort, be
charged directly, and which are allocable to operations. It is
agreed, however, that services performed by the above listed
departments and other departments which are directly referable to
operations shall be charged as direct costs. The overhead rates
applicable to the Exploitation Stage relating to the first field
declared to be a Commercially Exploitable Field shall be agreed
between the Parties within 40 days as of such declaration.
5.2 It is understood that pursuant to the SPOC the Exploration Stage
may be in effect simultaneously with one or more Exploitation
Stages. In such event the overhead rates applicable to the
Exploration Stage shall remain in effect as to Exploration
Operations and the overhead rates to be agreed upon pursuant to
Section 5.1 above shall be applicable to Exploitation Operations.
6. COSTS.
6.1 All costs and expenses incurred under this Agreement or the SPOC
shall be charged to the Joint Account in accordance with Exhibit
"A" and each Party shall bear and pay its Participating Interest
share of all approved Joint Account costs.
6.2 Costs to the Joint Account shall include, but not be limited to (a)
any acquisition or reproduction costs of the data, (b) the salaries
and benefits of the personnel of Operator and/or its Affiliates,
directly engaged in performing Petroleum Operations, in accordance
with the approved ▇▇▇▇▇▇▇ budget (e)
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third party invoices, (d) overhead charges of Operator, (e) the
actual travel and living expenses of those employees in the
performance of Petroleum Operations when away from their regular
locations of employment, and (f) other costs, expenses, or charges
incurred in Petroleum Operations, previously approved by the
Parties.
Joint Account charges shall be shared by the Parties in proportion
to their Participating Interest and each Party shall pay within
fifteen (15) days of receipt of Operator's invoice, in accordance
with instructions on the invoice, its respective share of such
charges. Alternatively, Operator may cash call Non-Operator(s),
upon fifteen (15) days notice, the anticipated cash requirements
for the next succeeding calendar month, which cash call shall be
due and payable on the first day of such succeeding calendar month.
6.3 Costs and expenses, credits, invoices, cash calls, and audit
procedures relating to the Joint Account shall be handled in
accordance with the Accounting Procedure attached hereto as Exhibit
"A".
7. OPERATIONAL MATTERS.
7.1 The Operator shall act for and on behalf of Contractor under the
SPOC. The Operator shall have charge of and shall conduct all
Petroleum Operations in a proper, workmanlike manner in accordance
with standard international petroleum industry practice. All such
operations shall be conducted by Operator or by its duly authorized
agents or independent contractors. Adequate bidding procedures will
be agreed.
7.2 Operator shall not be liable for any loss or damage unless such
loss or damage results from the willful misconduct or gross
negligence of Operator's corporate officers or permanent, salaried
employees having overall
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supervision and control of operations. For the purpose hereof, the
term "permanent, salaried employees having overall supervision and
control of operations" shall mean those persons who, according to
the international petroleum industry practice, should be charged
with prescribing adequate controls and safety measures for the
Petroleum Operations being conducted, and who have direct line
responsibility for such Petroleum Operations.
7.3 In no case shall Operator be liable to any Party for such Party's
consequential loss or damage, including but not limited to lost
production or profits.
8. NEGOTIATIONS
During any negotiations with the Ministry of Mining with regard to SPOC
terms and conditions, each Party may have representatives who shall be
permitted to participate in such negotiations. However, the
representative of the Operator shall be the primary negotiator for the
Parties. All terms and conditions of the SPOC and any modification or
amendment thereof, including decisions to accept or reject conditions or
changes imposed or suggested by Ministry authorities, shall be
determined by the unanimous vote of the Parties.
9. NOTICES.
9.1 Any notice or advise permitted or required to be given by any Party
to another Party shall be in writing and sent by personal delivery,
or fax with written confirmation, further, telephone meetings shall
also require written confirmation, to the following addresses:
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IF TO BE GIVEN TO ENAP:
Empresa ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇
ATTN.: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ B.
Fax: ▇▇-▇-▇▇▇▇▇▇▇
Telephone in Santiago: ▇▇-▇-▇▇▇▇▇▇▇
Telephone in Punta Arenas: ▇▇-▇▇-▇▇▇▇▇▇
IF TO BE GIVEN TO EVERGREEN:
EVERGREEN RESOURCES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, CO. 80202-1625
ATTN.: Mr. ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: ▇ ▇▇▇ ▇▇▇ ▇▇▇▇
FAX NO.: ▇ ▇▇▇ ▇▇▇ ▇▇▇▇ or
1 303 534 0420
9.2 If a notice is served by fax, it shall be deemed to have been
received by the addressee thereof when acknowledged received. If a
notice is delivered by hand, it shall be deemed delivered and
received at the time of delivery at the address for notices
receipted by an employee of that address.
9.3 The address or telefax number of each of the Parties specified
above may be changed for any and all purposes of this Agreement by
ten (10) days advance written notification from the Party changing
its address or telefax number to the other Party.
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10. CONFIDENTIAL INFORMATION.
The Parties agree that all information and data acquired or obtained by
them in respect of matters covered by this Agreement shall be considered
confidential and shall not be disclosed to any third Party without the
prior written consent of all other Parties, which consent will not be
unreasonably withheld, provided, that such information or data may be
disclosed:
(a) to an Affiliate of a Party provided that such Affiliate shall agree
to be bound to the confidentiality provisions of this Section 10;
and
(b) as and to the extent required:
(i) by law; or
(ii) by the rules and regulations of any stock exchange upon
which the shares or other securities of a Party are listed
or in connection with an application to any stock exchange
for listing for any such shares or other securities.
At such time as the JOA becomes effective, the confidentiality
provisions of such agreement shall control. In the event that no JOA
becomes effective, the confidentiality provisions of this Agreement
shall remain in force so long as the SPOC remains in force. Should the
SPOC never become effective this confidentiality provision shall remain
in force for two (2) years.
11. ASSIGNMENT.
A Party shall not have the right to assign its interest in this
Participation Agreement to any party other than a technically and
financially competent Affiliate, without the consent of all Parties,
which consent will not be unreasonably withheld.
For purposes of this Agreement, "Affiliate" shall mean:
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(a) a company who owns directly or indirectly more than fifty (50%)
percent of the issued and outstanding voting stock of a Party;
(b) any company which a Party owns directly or indirectly more than
fifty (50%) percent of the issued and outstanding voting stock; and
(c) any company which the company described in (b) above owns directly
or indirectly more than fifty (50%) percent of the issued and
outstanding voting stock.
12. TERMINATION OF AGREEMENT
12.1 This Agreement shall become effective on the date first above
written and shall terminate in any of the following instances:
(a) Upon the termination of the SPOC.
(b) Upon the mutual written agreement of EVERGREEN and ENAP.
(c) Upon the effective date of the JOA as provided in Section 5
hereof.
(d) If the JOA has not been agreed to by the Parties in
accordance with section 5, or such agreement has not
received the approval and consent required by the Chilean
governmental authorities including the Banco Central de
Chile 90 days after its execution date.
(e) If the Parties are unable to reach a satisfactory agreement
with the State of Chile as to the terms and conditions of
the SPOC within a period of one year as from the execution
of this Agreement.
12.2 If either Party fails to make any payments required hereunder, and
such failure continues for a period of sixty (60) days after notice
thereof to the Party failing to make such payment, the other Party
may elect to terminate this Agreement and the Party failing to make
such payment shall forfeit its rights and interests in and under
this Agreement and the SPOC to the other Party.
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12.3 The termination of this Agreement shall be without prejudice to any
rights or causes of action which accrued prior to such termination,
and the provisions of Sections 10,12.2 and 13 and the provisions of
the Accounting Procedure shall survive the termination of this
Agreement.
13. FORCE MAJEURE.
13.1 The obligations of each Party under this Participation Agreement
shall be excused while and to the extent that such Party is
prevented from performing such obligations, in whole or in part, by
"Force Majeure", which, as used in this Agreement, means, without
limitation, strikes, labor and civil disturbances, acts of God,
laws, rules, regulations or orders of any government having at any
time de facto or de jure control over such Party or the SPOC, acts
of war or conditions arising out of or attributable to war, whether
declared or undeclared, unavoidable shortage of essential
equipment, materials or labor, including restrictions or
limitations upon the use thereof, unavoidable delays in
transportation or communication, adverse weather conditions, fire
or any other circumstances beyond the reasonable control of such
Party. In the event of Force Majeure, the affected Party shall give
notice in writing to the other Party hereto as soon as reasonably
possible, stating in such notice the date when the event of Force
Majeure occurred, reasonable details of the nature thereof, and the
expected extent and duration thereof. The Party whose obligations
have been excused because of Force Majeure shall resume performance
of said obligations as soon as reasonably possible after the event
of Force Majeure has ended and shall forthwith notify the other
Party, except this obligation shall not require a Party to settle
any labor dispute.
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13.2 The date and time periods for the performance of obligations under
this Participation Agreement shall be extended as to any Party for
the period such Party's performance of such obligations is excused
by Force Majeure.
13.3 The provisions of this Article shall not excuse the obligation of
any Party to pay money or fulfill any financial obligation under
this Participation Agreement.
14. ARBITRATION AND APPLICABLE LAW. UNDER REVISION
14.1 All disputes arising in connection with this Agreement shall be
finally settled under the Rules of Conciliation and Arbitration of
the International Chamber of Commerce by three (3) arbitrators
subject to the rules provided therein and appointed pursuant to the
procedure established in section 14.2 below.
14.2 If any Party desires to submit a dispute to arbitration, that Party
shall give notice to the other Party(ies) and shall name its
arbitrator in such notice. The other Party(ies) shall name its
arbitrator within fifteen (15) days of the date of such notice.
The two arbitrators thus appointed shall name a third arbitrator
within fifteen (15) days after the second arbitrator is appointed.
If any Party fails to nominate an arbitrator, or if the two
arbitrators cannot agree on a third arbitrator, the President of
the Chamber of Commerce shall appoint the arbitrator(s). The
arbitrators shall have no pecuniary or other interest in any Party
or in the subject matter of the arbitrator.
14.3 The arbitration shall be held in Santiago, Chile, and in the
Spanish language, with simultaneous translation into English where
practicable. However, documents originally written in English,
shall be accepted in such language.
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14.4 When the generally accepted principles of the international oil
industry are relevants for the settlement of a dispute, the
arbitrators shall request the opinion of internationally recognized
experts in the matter.
14.5 Judgment upon the award may be entered in any court having
jurisdiction over the party against which enforcement of the
judgement is sought, or application may be made to such court for
judicial acceptance and enforcement of the award.
14.6 This Participation Agreement shall be governed by and construed in
accordance with the terms hereof and the laws of Chile. However, in
the absence of applicable Chilean laws, the general principles of
law internationally used and accepted (including those which may
have been used by international tribunal) shall be applicable. In
such arbitration procedure, the arbitrators shall rule at law.
15. MISCELLANEOUS
15.1 This Participation Agreement may not be altered or amended except
in writing and signed by all the Parties.
15.2 This Participation Agreement shall be binding upon the Parties,
their successors and assigns.
15.3 Headings used in this Participation Agreement are for convenience
only and shall neither affect nor be used in the construction of
this Agreement.
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IN WITNESS WHEREOF, all of the Parties hereto have executed this agreement in
▇▇▇▇▇▇▇▇ de Chile this the ... 1996.-
EMPRESA NACIONAL DEL PETROLEO
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ A.
-------------------------------
BY: ▇▇▇▇▇▇ ▇▇▇▇▇▇ A.
TITLE: General Manager
EVERGREEN RESOURCES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
BY: ▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: President
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E X H I B I T "A"
ACCOUNTING PROCEDURE
The purpose of this Accounting Procedure is to set forth equitable
principles for determining Joint Account charges and credits incurred and
for determining relevant advances to be made by the Non-Operator(s) while
the Parties are conducting Petroleum Operations under the SPOC pursuant to
this Participation Agreement. In the event of a conflict between the
provisions of this Accounting Procedure and any other provision of this
Participation Agreement, the latter shall control.
1. STATEMENTS, INVOICES AND ADJUSTMENTS.
1.01 Operator shall invoice Non-Operator(s) on or before the last
day of each month for Non-Operator(s)' share of all Joint
Account expenditures for the preceding month. Such invoices
shall be accompanied by statements of all charges and credits,
summarized by accounting classifications in accordance with
generally accepted accounting principles in Chile and all
chilean statutory and legal requirements. Such statement shall
be indicative of the nature of the charges or credits, and
Operator, upon request of any Party, shall furnish a
description of the accounting classifications.
1.02 Operator shall, in accordance with accounting practices
generally accepted in the international petroleum industry,
keep accurate records of and furnish the Parties with:
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(a) monthly statements showing costs incurred by the
Operator under this Agreement;
(b) application of funds provided by the Parties to satisfy
such costs and expenditures;
(c) other statements that may be required and agreed by the
Parties.
For the purposes of this Agreement, the above records and
statements will be maintained in chilean pesos and in the
spanish language. Operator will also keep the account in U.S.
Dollars as an aid to Non-Operators in their accounting duties.
1.03 In the conversion of currencies for the purpose of currency
transactions with respect to operations under this
Participation Agreement, it is intended that the Operator
shall not experience an exchange gain or loss at the expense
of, or to the benefit of, the Non-Operator(s). Operator shall
furnish Non-Operator(s) sufficient currency exchange data to
enable it to translate the invoices to the currency of their
accounts.
1.04 Payment of an invoice shall not prejudice the right of
Non-Operator(s) to protest or question the correctness
thereof; however, all invoices and statements rendered to
Non-Operator(s) during a Calendar Year shall be conclusively
presumed to be true and correct twenty-four (24) months after
the end of such Calendar Year, unless within said twenty-four
(24) months Non-Operator(s) has notified Operator of its
disagreement and made a claim for adjustment. No adjustment
favorable to any Party shall be made unless it is made within
the same prescribed period.
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2. AUDITS.
2.01 Non-Operator(s), upon at least sixty (60) days advance written
notice to Operator, shall have the right at its sole expense
to audit Operator's records relating to Petroleum Operations
for any Calendar Year or portion thereof within the
twenty-four (24) months following the end of such Calendar
Year.
2.02 Audit rights granted under Clause 2.01 shall neither enlarge
or reduce the periods provided in Clause 1.04 concerning the
matters referred to therein.
3. ADVANCES AND PAYMENTS.
3.01 Upon Operator's request, Non-Operator(s) shall advance to
Operator the Non-Operator(s) share of the cash requirements
for the next succeeding calendar month's operations as
estimated monthly by Operator. Operator shall make written
request to Non-Operator(s) at least fifteen (15) days prior to
the date by which Non-Operator(s) is to make such advances.
The date for payment of such advances shall be set by
Operator, but shall be no sooner than the first day of the
month with respect to which the advances are required. Cash
requirements shall be specified by the Operator in the
currency(ies) required for the operations and Non-Operator(s)
shall advance its share in the currency(ies) as specified.
3.02 Should it be necessary to make any large payments on behalf of
the Parties in connection with operations hereunder, which
payments were unforeseen at the time of Operator's monthly
estimate of its requirements, Operator may request a special
advance to cover such payments. Non-Operator(s) shall make
such advance within fifteen (15) days after receipt of the
request.
3.03 If Non-Operator(s)'s advances are less than actual
expenditures, the deficiency shall, at Operator's option, be
added to subsequent cash advance
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requirements or paid by Non-Operator(s) within fifteen (15)
days following receipt of invoice therefore.
If Non-Operator(s)'s advances exceed its share of actual
expenditures, the next succeeding cash advance requirements,
after such determination, shall be reduced accordingly.
However, Non-Operator(s) may request that excess advances be
refunded. The Operator shall make such refund in same currency
as that advanced within fifteen (15) days after receipt of
Non-Operator(s)' request.
3.04 Payments of advances or invoices to Operator and refunds to
Non-Operator(s) shall be made on or before the due date, and
if not so paid, the unpaid balance as expressed in U.S.
Dollars shall bear interest after the due date until paid in
U.S. Dollars with an annual charge rate of a maximum of 1.75%
over the Prime Rate then being quoted by Chase Manhattan Bank,
N.A. of New York, or the highest interest rate allowed by law,
whichever is the lesser. Advances denominated in currencies
other than U.S. Dollars that are paid after the due date will
be converted into U.S. Dollars at the exchange rate (to
purchase U.S. dollars) prevailing on the respective due dates
as quoted by the Chase Manhattan Bank, N.A. in New York.
3.05 All cash calls in US Dollars shall be made by wire transfer to
EVERGREEN'S account as follows: NORWEST BANK DENVER, N.A.
ABA NO. ▇▇▇▇▇▇▇▇▇
Account No. 101 ▇▇▇▇▇▇▇
EVERGREEN RESOURCES, INC.
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