EXHIBIT 99.2
PARTICIPATION AGREEMENT BETWEEN THE ▇▇▇▇▇ GROUP CONSORTIUM AND AVENUE ENERGY,
INC. AND MIDDLE EAST PETROLEUM SERVICES LIMITED DATED JANUARY 22, 2004
PARTICIPATION AGREEMENT
BETWEEN
THE ▇▇▇▇▇ GROUP CONSORTIUM
AND
AVENUE ENERGY INC.
AND
MIDDLE EAST PETROLEUM SERVICES LIMITED
RELATING TO
AVENUE KAHTA ▇▇▇▇▇
AND
NEW EXPLORATION LICENSE AND PRODUCTION LEASE APPLICATIONS
IN THE REPUBLIC OF TURKEY
DATED 22 JANUARY 2004
TABLE OF CONTENTS
Page
----
1. Definitions and interpretation............................................3
2. Closing...................................................................8
3. Kahta farmin.............................................................11
4. Farmin to other SGC Interests............................................14
5. Administration Fee.......................................................15
6. Consents and approvals...................................................16
7. Undertakings.............................................................19
8. Representations and warranties...........................................22
9. Indemnities and liabilities..............................................27
10. Term and termination.....................................................27
11. Assignment and encumbrances..............................................28
12. Confidentiality..........................................................28
13. Taxes....................................................................30
14. Default..................................................................30
15. Notices..................................................................30
16. General..................................................................32
Schedule 'A' - Acquisition and administration costs
Schedule 'B' - Operating Agreement Agreed Form
i
THIS AGREEMENT is made as of this 22nd day of January, 2004.
BETWEEN:
(1) ALADDIN MIDDLE EAST LTD ('AME'), a corporation organized and existing under
the laws of the State of Delaware in the U.S.A., having offices in the city
of Ankara and in the city of Wichita, Kansas, which is the designated
Operator of all ▇▇▇▇▇ 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 ▇▇▇▇▇ GROUP
CONSORTIUM ('SGC')); and
(2) AVENUE ENERGY INC., a corporation organized and existing under the laws of
the State of Delaware in the U.S.A., having offices at ▇▇▇▇▇▇▇ Oaks, CA,
USA at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇ and in Australia
at ▇▇-▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, (hereinafter referred to
as 'Avenue'); and
(3) MIDDLE EAST PETROLEUM SERVICES LIMITED a corporation organized and existing
under the laws of the Isle of Man, United Kingdom, having its registered
office at Norton House, Farrants Way, Castletown, Isle of Man, 1M9 1NR,
British Isles and its representative office at ▇▇▇▇▇ ▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (hereinafter referred to as 'MEPS').
RECITALS:
(A) On 14 November 2002 the Parties entered into a Farmin and Participation
Agreement dated 14 November 2002 (as amended by amending agreements dated
20 December 2002 and 31 July 2003, and as supplemented by Memorandum of
Understanding between the parties dated 22 May 2003, the 'FPA').
(B) Pursuant to the FPA, Avenue holds a 45% Participating Interest in each of
the Tosun Licence and the Karakilise Licence and has validly exercised the
options granted to it under clause 5 of the FPA (the "KAHTA OPTION"),
clause 6.1 of the FPA (the 'CLAUSE 6.1 OPTION'), and clause 6.6(c) of the
FPA (the 'TETHYS OPTION').
(C) Pursuant to the terms of the FPA, AME holds in trust for MEPS a 10%
Participating Interest in both the Tosun Licence and the Karakilise
Licence, and at closing of the Clause 6.1 Option is required to hold in
trust for MEPS a 10% Participating Interest in the Licenses the subject of
the Clause 6.1 Option, and at closing of the of the Kahta Option is
required to hold in trust for MEPS a 10% Participating Interest in the
Avenue Kahta ▇▇▇▇▇ and (as modified by this Agreement) the Kahta Lease and
pursuant to Clauses 6.3 and 7.6 of the FPA AME is required to hold in trust
for MEPS a 10%
1
Participating interest in Future License Applications (the Participating
Interests so held, or to be held, in trust for MEPS, (which, for the
avoidance of doubt MEPS was not required to fund the Joint Operating
Expenses in relation to such Participating Interests), being referred to
herein as the 'MEPS CARRIED INTERESTS').
(D) The Parties wish to record their agreement regarding, inter alia:
(a) the entering into of a Joint Operating Agreement in relation to the
Karakilise License;
(b) the procedures for closing of the Clause 6.1(a) Option and the Tethys
Option;
(c) the replacement of the MEPS Carried Interests with the MEPS Royalty
Interest; and
(d) the amendment and restatement of the Joint Operating Agreement
relating to the Tosun License; and
(e) the termination of the FPA.
NOW, THEREFORE, for and in consideration of the terms, conditions and covenants
herein set forth, the Parties agree as follows:
II. Definitions and interpretation
A. Definitions
In this Agreement:
AFFILIATE means, with respect to any Person, any other Person that (a) owns
or controls the first Person, (b) is owned or controlled by the first
Person, or (c) is under common ownership or control with the first Person,
where 'own' means a direct or indirect ownership of more than 50% of the
equity interests or rights to distributions on account of equity of the
Person and 'control' means the direct or indirect power to direct the
management or policies of the Person, whether through the ownership of
voting securities, by contract, or otherwise.
APPLICATION means an application for an Exploration License or Production
Lease made under and in accordance with the Petroleum Law.
AVENUE KAHTA ▇▇▇▇▇ has the meaning specified in clause 3.2(a).
CLAUSE 6.1 OPTION has the meaning specified in recital B.
COMMUNICATION has the meaning specified in clause 15.1.
2
ENCUMBRANCE means a lien, claim, encumbrance, security interest, option,
charge or restriction of any kind, but excludes the ERSAN Royalty Interest
and the MEPS Royalty Interest.
ERSAN ROYALTY INTEREST means the right of ERSAN to a 2.5% overriding
royalty interest in petroleum produced from the Exploration Licenses,
(except for the Tethys Licenses where the overriding royalty is
proportionately reduced to the SGC and Avenue Participating Interests and
does not burden Tethys' Participating Interest), and other than the Gercus
Licenses).
EXCLUDED AREAS means all areas within, or within three kilometres of, the
boundary of the areas covered by:
(a) Zeynel & Nemrut Fields: Petroleum District XII Gaziantep, Production
Lease No: ARI/AME-TMO/3170-3215;
(b) South Mardin: Petroleum District XI, Diyarbakir, Exploration Licenses
No: AR/AME-SEC/ 3730, 3731, 3732, 3733, 3763, 3764, 3765, 3766 and
3767; and
(c) Bulgurdao Field: Petroleum District XIV Adana, Production Lease No:
IR/EPS/723 & 724.
EXPLORATION LICENSE means a License issued under the Petroleum Law and
conferring on the holder the rights set out in Article 50 of the Petroleum
Law.
FPA has the meaning specified in recital A.
GERCUS LICENSES means Exploration Licenses AR/EPS-GYP 3749 and 3750 in
Petroleum District X, Siirt in the Republic of Turkey.
Gercus Royalty Interest means the royalty arrangement with HOS GeoConsult
GmbH in the amount of a 3% overriding royalty in respect of the Gercus
Licenses.
GDPA means the General Director of Petroleum Affairs of the Republic of
Turkey, or the holder from time to time of any successor or additional
governmental office the consent of whom is required under the Petroleum Law
(or any regulations or other subordinate legislation issued pursuant to or
under authority of the Petroleum Law) in relation to the registration of a
Petroleum Rights Holder and the transfer of an interest in an Exploration
License or a Production Lease.
JOINT OPERATING AGREEMENT means an agreement between the Participants in
respect of any one or more SGC Interests relating to the conduct of the
Joint Operations in relation to and the ownership of those SGC Interests.
JOINT OPERATING EXPENSES means all of the expenses incurred by the Operator
and/or the Participants (or any of them) in connection with the Joint
Operations, including but not
3
limited to geological, geophysical, engineering and other studies,
Exploration License fees and rentals, seismic, landsat or other studies,
drilling, workover and development, pipelines tank farms and any other
capital costs, to the extent those expenses are properly borne by or
chargeable to the Participants in the relevant Joint Operations (or any of
them) under the terms of this Agreement or the applicable Joint Operating
Agreement.
JOINT OPERATIONS means, in relation to any SGC Interest, all operations
conducted by, for or on behalf of the Participants in that SGC Interest and
in accordance with this Agreement and (when in effect) the Joint Operating
Agreement, or any development program and budget plan thereunder.
KAHTA LEASE has the meaning specified in clause 3.1.
KARAKILISE LICENSE means each of Exploration Licenses AR/AME-EPS-AVE/2674,
2677 and 2678 in Petroleum District XI - Diyarbakir in the Republic of
Turkey.
MEPS CARRIED INTEREST has the meaning specified in recital C.
MEPS ROYALTY INTEREST means the 5% overriding royalty interest granted to
MEPS pursuant to clauses 2, 3, and 4 hereof which, in the case of the
Tethys Licenses, such 5% overriding royalty interest shall be
proportionately reduced in such Tethys Licenses, such that the interest
held by Tethys from time to time pursuant to the terms of a Participation
Agreement dated November 7, 2003 between Tethys and SGC shall not be
burdened by the MEPS Royalty Interest, which burden shall only apply to the
interests held by Avenue and the relevant SGC companies in such Tethys
Licenses.
NET PRE-TAX REVENUE means sales receipts (net of witholdings and deductions
at source and excluding VAT (if any), but before income or corporate tax
calculated and chargeable by reference to individual Participants), less:
(a) royalties or similar payments made or due to the Government or under
the ERSAN Royalty Interest and the MEPS Royalty Interest in respect of
such sales or related production; and
(b) operating costs incurred by the Operator and/or the relevant
Participants (or any of them) in connection with the production of
those receipts (as determined in accordance with the applicable Joint
Operating Agreement, but including production and transportation
charges, commissions, salaries, fees and expenses chargeable to the
joint account of the relevant Participants).
NOMINATED AFFILIATE means, in relation to a Party, any Affiliate of that
Party designated by notice from that Party to the other Parties as the
Person to whom, at closing of an acquisition of a Participating Interest
under this Agreement, the relevant Participating Interest is to be
transferred, or on behalf of whom its is to be held by AME, pursuant to
this Agreement.
4
OPERATOR means the operator of the Joint Operations on behalf of the
Participants (subject to the provisions of the applicable Joint Operating
Agreements, the Operator shall be AME).
PARTICIPANTS means, in relation to a particular SGC Interest:
(a) the Persons who from time to time are registered with the GDPA as the
holders of that SGC Interest; and
(b) in respect of the period between closing of an acquisition by Avenue
of an interest in that SGC Interest and the registration of Avenue as
a licensee in respect of that SGC Interest, where the context so
admits, Avenue.
PARTICIPATING INTEREST means, in relation to an SGC Interest, an undivided
interest (expressed as a percentage) in that SGC Interest, and in all
rights, interests, obligations and liabilities attaching thereto or arising
from the conduct of the Joint Operation in relation to that SGC Interest
(including geological and geophysical data resulting from such Joint
Operations and all ▇▇▇▇▇ resulting from such Joint Operations).
PARTY or PARTIES means any party to this Agreement or all of them, as the
context requires, and includes their respective successors and permitted
assigns.
PERSON includes any individual, corporation, company, partnership (general
or limited), business trust, or other governmental or non-governmental
entity or association.
PETROLEUM LAW means Petroleum Law No.6326 of the Republic of Turkey, as
amended from time to time (including but not limited to Laws No. 6558,
6987, 1702, 2217 and 2208), Petroleum Regulations promulgated thereafter
under Government Decree 89/14111 published with the Official Gazette on
July 17th 1989 issue no: 20224 as amended from time to time and the
Petroleum Marketing Law No. 5015, enacted on December 4, 2003 and published
in the Official Gazette, No. 25322, on December 20, 2003.
PETROLEUM RIGHT HOLDER means a Person registered under and in accordance
with the Petroleum Law as a petroleum right holder.
PRODUCTION LEASE means a lease issued under the Petroleum Law and
conferring on the holder the rights set out in Article 60 of the Petroleum
Law.
SGC INTERESTS means each of:
(a) the Tosun License;
(b) the Karakilise License;
(c) the Kahta Lease (in relation to the Avenue Kahta ▇▇▇▇▇);
5
(d) each of the other Exploration Licenses and Production Leases listed in
Schedule 'A' to the FPA; and
(e) the Exploration Licenses issued pursuant to any Application which is
the subject of clause 4.2.
SGC PARTICIPANTS means, in relation to an SGC Interest, each of the
Participants in that SGC Interest which is a member of SGC.
Tethys Option has the meaning specified in recital ▇.
▇▇▇▇▇ LICENSE means Exploration License AR/AME-EPS-AVE/3462 in Petroleum
District XII, Gaziantep in the Republic of Turkey.
UNITED STATES and US means the United States of America.
VAT means value added tax applicable to the provision of goods and services
according to the Value Added Tax Law No. 3065 published in the Turkish
Official Gazette No. 18563 dated 2 November 1984 and the Counsel of
Ministers' Decrees issued under the same Law.
WITHHOLDING TAX means the withholding from the petroleum exploration and
production revenues in accordance with Council of Ministers Decree No.
93/5147 published in the Turkish Official Gazette No. 21805(R) dated 30
December 1993 as may be amended and any other withholding that may be
applicable to this Agreement or the Joint Operating Agreement, the
activities and payments thereunder or hereunder or the parties hereto or
thereto.
B. Interpretation
In this Agreement, unless otherwise specified:
1. references to clauses or Schedules are to clauses of or Schedules
to this Agreement;
2. headings are inserted for convenience only and shall not affect the
construction of this Agreement;
3. references to any gender include all others if applicable in the
context;
4. all uses of include or including mean without limitation;
5. references to a contract, agreement, or other document mean that
contract, agreement, or document as amended, modified, or
supplemented, if applicable, from time to time;
6
6. a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, from time to
time, amended, modified or re-enacted;
7. references to times of the day or a day are to the time or (as the
case may be) day in the State of California, USA;
8. where an obligation is expressed to be assumed by more than one
Party, those Parties shall be liable jointly and severally in respect
of that obligation;
9. an Option shall be taken to have `lapsed' if the final date
permitted under the terms of this Agreement for exercise of that
Option has passed and the Option has not been exercised in accordance
with this Agreement;
10. references to Avenue taking or having taken any action, or making
or having made any payment, in relation to or to its interest in an
SGC Interest shall, where Avenue has notified a Nominated Affiliate in
relation to that SGC Interest, be taken to refer to that Nominated
Affiliate; and
11. references to an Exploration License include any Production Lease
granted to or at the request of the holders of that Exploration
License pursuant to the terms of that Exploration License or the
Petroleum Law (as applicable to that Exploration License or the
holders thereof).
III. Closing
A. Date and time for closing
Closing under clause 2.2 shall occur immediately following the
execution and delivery of this Agreement by all of the Parties, or on
such other date or at such other time as the Parties may agree.
B. Obligations at closing
1. Closing of the Clause 6.1 Option shall occur in accordance with
clause 7 of the FPA, provided that:
a. the Joint Operating Agreements to be entered into by the
relevant Participants in relation to the SGC Interests the
subject of the Clause 6.1 Option shall be in form attached
hereto as Schedule B;
b. Avenue shall be transferred a 50% Participating Interest,
rather than a 45% Participating Interest, in each such SGC
Interest,
7
subject to the Ersan Royalty Interest, the MEPS Royalty
Interest and the Tethys Option; and
c. for the purposes of the FPA (including clause 7) and this
Agreement (including this paragraph (a) and clause 2.3
below), the SGC Interests the subject of the Clause 6.1
Option shall be deemed to include Exploration Licenses
AR/EPS/3700, 3701, 3702, 3703, 3704 and 3705 in Petroleum
District XVII-Izmir, which shall cease to be the subject of
the Tethys Option; and
d. for the avoidance of doubt, the payment of Three Hundred
Fifteen Thousand Dollars (US$315,000) to AME (on behalf of
SGC) with respect to the transfer of a 50% Participating
Interest in relation to the SGC Interests referred to in
paragraphs (a) (ii) and a (iii) hereof; and
e. Contemporaneously with and subject to closing of the
acquisition by Avenue or its Nominated Affiliate of a
Participating Interest the SGC Licenses pursuant to this
clause 2.2, the Participants holding Participating Interests
in such SGC License hereby grant to MEPS a 5% overriding
royalty interest in such SGC Licenses which interest MEPS is
receiving as full consideration for its transfer and
assignment back to Avenue and the respective member of SGC
all of MEPS Carried Interest in each such SGC License
reflected in Schedule A; and
f. If, at the time when paragraph (a) (v) above would require
the grant of an overriding royalty interest to MEPS, MEPS is
not a Petroleum Right Holder, ERSAN shall be granted the
overriding royalty interest to hold in trust for MEPS until
such time as MEPS becomes a Petroleum Right Holder and the
relevant overriding royalty interest is transferred to it.
2. closing of the Tethys Option shall occur in accordance with
clause 2.3 (which shall apply to such closing to the exclusion of
the corresponding provisions of the FPA);
3. AME and ERSAN shall transfer to Avenue one-half of the 10%
Participating Interest presently held by them in trust for MEPS
in each of the Tosun License and the Karakilise License, so that
Avenue shall hold a 50% Participating Interest in each such SGC
Interest, subject to the Ersan Royalty Interest, the MEPS Royalty
Interest and the Tethys Option; and
4. Avenue, AME and ERSAN shall enter into an amended and restated
Joint Operating Agreement in relation to the Tosun License in the
form attached as Schedule B hereto.
8
C. Tethys Option
SGC entered into a Participation Agreement with Tethys on November 7, 2003,
in accordance with the FPA, covering AR/TMO-EPS-GYP/ 3794 AND 3795 and
AR/AME-EPS/3748. Under the terms of such Participation Agreement, Tethys
acquired an undivided 10% interest in said Licenses with an option to
acquire an additional 35% participating interest in said Licenses upon the
completion of certain work requirements, set forth in said Participation
Agreement. SGC shall arrange for the preparation of a Restatement of the
Operating Agreement executed by SGC and Tethys which will restate the
substantive terms of the initial Operating Agreement expanded to include
Avenue as a signatory party, in recognition of Avenue's Participating
Interest in the Tethys Licenses and related Operating Agreement. Upon
agreement by all parties to the restated Tethys JOA and the payment of One
Hundred Thirty Five Thousand Dollars (US $135,000.00) to AME (on behalf of
SGC), Assignments of the Tethys Licenses (AR/TMO-EPS-GYP 3794 & 3795 and
AR/EPS-GYP 3748) will be delivered to Avenue.
D. MEPS Royalty Interest
1. Contemporaneously with and subject to closing of the acquisition
by Avenue or its Nominated Affiliate of a Participating Interest
the Tethys Licenses pursuant to clause 2.3, the Participants
holding Participating Interests in such Tethys License, Tosun
License, Karakilise License and Clause 6.1 Option Licenses hereby
grant to MEPS an overriding royalty interest equivalent to 5% of
the interest so held by Avenue and SGC in the Tethys Licenses,
which interest MEPS is receiving as full consideration for its
transfer and assignment back to Avenue and the respective member
of SGC all of MEPS Carried Interest in each such License
reflected in Schedule A.
2. For the avoidance of doubt, the MEPS Royalty Interest in Tethys
Licenses shall represent an interest of not less than a 2.75%
overriding royalty interest and in the event that Tethys does not
earn its full 45% Participating Interest, then such MEPS Royalty
Interest shall be adjusted to reflect an overriding royalty
interest equivalent to 5% of the combined Participating Interests
held by Avenue and SGC from time to time.
3. If, at the time when paragraph (a) or (b) above would require the
grant of an overriding royalty interest to MEPS, MEPS is not a
Petroleum Right Holder, ERSAN shall be granted the overriding
royalty interest to hold in trust for MEPS until such time as
MEPS becomes a Petroleum Right Holder and the relevant overriding
royalty interest is transferred to it.
E. Trust
Pending registration of the transfer to Avenue of a Participating Interest
pursuant to paragraph (b), (c) or (d) of clause 2.2, AME shall hold that
Participating Interest in trust and for the benefit of Avenue, on the
terms, mutatis mutandis, of clause 6.3.
9
F. Termination of FPA
Immediately following the closing under clause 2.2, the FPA shall terminate
and cease to be of any force or effect. Such termination shall be without
prejudice to any antecedent rights and remedies of the Parties accrued
under or arising out of the FPA and where Definitions in this Agreement
refer to Definitions in the FPA, such Definitions shall be adopted for the
purpose of this Agreement.
IV. Kahta farmin
▇. ▇▇▇▇▇ of Participating Interest
1. AME owns and controls a 100% interest in the Production Lease
IR/EPS/658 in Petroleum District XII - Gaziantep (the 'Kahta
Lease'), covering an area of 7,060 hectares (hereinafter referred
to as the 'Kahta Field').
2. Upon the giving of notice by Avenue under clause 3.2(a) in
respect of any Avenue Kahta Well, AME shall, as soon as possible
thereafter:
▇. ▇▇▇▇▇ to Avenue, free from Encumbrances, a 50% Participating
Interest in that Avenue Kahta Well;
b. in relation to the first such notice only, transfer to
Avenue, free from Encumbrances, a 50% Participating Interest
in the Kahta Lease; and
c. procure that Avenue's interest in the relevant Avenue Kahta
Well as so granted, and (if applicable) Avenue's interest in
the Kahta Lease, is registered with the GDPA in accordance
with the Petroleum Law.
3. Notwithstanding clause 3.1(b) or any other provision of this
Agreement, except as expressly provided in this clause 3 or
clause 5, Avenue shall not, by virtue of this Agreement or its
holding of a 50% Participating Interest in the Kahta Lease or the
Avenue Kahta ▇▇▇▇▇:
a. have any rights in respect of the production from any ▇▇▇▇▇
on the Kahta Lease other than the Avenue Kahta ▇▇▇▇▇, or to
any plant or equipment situated on the Kahta Lease (except
for plant and equipment used exclusively in relation to the
Avenue Kahta ▇▇▇▇▇); or
b. be required to contribute to the costs of or arising from
any activities on the Kahta Lease, or to the rentals and
other lease payments due under the Petroleum Law or the
Kahta Lease,
and AME shall indemnify and hold harmless Avenue from and against any
and all such costs, and all other liabilities arising as holder of an
interest in the Kahta Lease or the Avenue Kahta ▇▇▇▇▇.
10
B. Workover and drilling of Avenue Kahta ▇▇▇▇▇
1. At any time and from time up to and including 14 November 2004,
Avenue shall have the right, by notice to AME, to require AME to
workover up to 5 (in the aggregate) existing ▇▇▇▇▇ on the Kahta
Field and drill up to 3 (in the aggregate) new ▇▇▇▇▇ on the Kahta
Field or other prospects of its choice in the Kahta Lease
(hereinafter referred to as the 'Avenue Kahta ▇▇▇▇▇').
2. AME shall conduct the workover operations on the Avenue Kahta
▇▇▇▇▇ at a fixed turnkey price payable by Avenue in the amount of
US$150,000 per well (exclusive of any applicable VAT).
3. AME shall conduct drilling operations on the Avenue Kahta ▇▇▇▇▇
at a fixed turnkey cost payable by Avenue in the amount of
US$400,000 per well (exclusive of any applicable VAT.
4. Avenue shall pay to AME 100% of the costs of such workover and
drilling operations 30 days before commencement of such
operations.
C. Production
1. AME shall, at its own cost, but subject to clause 3.3 (b), ensure
that upon completion of the workover operations or drilling
operations, as the case may be, unless Avenue directs otherwise,
it shall immediately put such ▇▇▇▇▇ on production and shall
arrange for the sale, transportation and delivery of such
production at the prevailing price for Kahta crude.
2. AME shall charge a turnkey operating cost of US$2.0 per barrel
and a turnkey trucking cost of US$1.0 per barrel for each barrel
produced and sold from such Avenue Kahta ▇▇▇▇▇. No other fees,
commissions, expenses, costs or other charges shall be payable by
Avenue, or deducted from revenues, in respect of the matters to
be arranged by AME pursuant to clause 3.3(a), all of which
charges shall be the responsibility of AME.
3. Except where clause 3.3(d) applies, the Net Pre-tax Revenue
derived from production from the Avenue Kahta ▇▇▇▇▇ shall accrue
in the following proportions:
AME 50%
Avenue 50%
11
4. At any time when the aggregate Net Pre-tax Revenue derived from
production from the Avenue Kahta ▇▇▇▇▇ and received by Avenue
under clause 3.3(c) or this clause 3.3(d) is less than the sum
of:
a. the amount paid by Avenue under clause 3.2(d), plus
b. US$$2,750,000 (being Avenue's costs in relation to the
drilling of the Tosun-1 Well),
Avenue shall, subject to clause 3.3(b), be entitled to receive and
retain all Net Pre-tax Revenue derived from production from the Avenue
Kahta ▇▇▇▇▇, by way of recovery of such payments and costs.
5. Except when clause 3.3(d) applies, each of AME and Avenue shall,
in accordance with the Petroleum Law, have the right to take its
proportionate share of production in kind at the end of any
existing crude oil sale contract by giving notice to the other
Participants at least 30 days prior to the expiration of such
contract. Such Participant taking its production in kind shall be
responsible for the cost of any additional labour or equipment
incurred as a result of its exercise of such right.
6. AME and Avenue individually shall be responsible for their own
income and corporate tax liabilities and for all withholding tax
applicable to payments made to it under this clause 3.
7. All costs related to drilling, testing and production as well as
operating revenue from crude oil sales will be handled by AME as
Operator and monthly reports will be issued to Avenue or its
Nominated Affiliate.
D. Joint Operating Agreement
The accounting procedures in the Karakilise JOA and, to the extent not
inconsistent with the foregoing provisions of this clause 3, the other
provisions of the Karakilise JOA shall apply for the Avenue Kahta ▇▇▇▇▇.
E. MEPS Royalty Interest
1. Contemporaneously with and subject to the grant to Avenue
pursuant to clause 3.1(b)(i) of a Participating Interest in any
Avenue Kahta Well, AME and Avenue shall grant to MEPS a 5%
overriding royalty interest in that Avenue Kahta Well.
2. If, at the time when paragraph (a) above would require the grant
of an overriding royalty interest to MEPS, MEPS is not a
Petroleum Right Holder, ERSAN shall be granted the overriding
royalty interest to hold in
12
trust for MEPS until such time as MEPS becomes a Petroleum Right
Holder and the relevant overriding royalty interest is
transferred to it.
▇. ▇▇▇▇▇▇ to other SGC Interests
A. New License and lease applications
Prior to 14 November 2004 (but not after termination of this Agreement):
1. Avenue shall not make any Exploration License or Production Lease
Applications in the Republic of Turkey including Territorial
Waters, other than through AME; and
2. Avenue shall have the right to request AME to make such
Exploration License or Lease Applications as Avenue may require,
and AME shall comply with such request, but AME shall be under no
obligation to participate with Avenue in such Applications.
B. New applications by SGC or its Affiliates
If, at any time prior to 14 November 2004, while Avenue or its Nominated
Affiliate is the holder of an interest in an Exploration License or a
Production Lease (or has such interest held on its behalf under the terms
of clause 6) together with any one or more of the members of SGC or their
respective Affiliates, any one or more of the members of SGC, or an
Affiliate of a member of SGC, (whether alone or together with any other
party or parties) makes or intends to make an Application for the grant of
a new Exploration License, other than an Exploration License over the
Excluded Areas, that member of SGC shall procure that Avenue (or its
Nominated Affiliate) is:
1. notified promptly of the intention to make the Application, and
of the information then available which is relevant to the same
(including the relevant License area, participants and work
program);
2. fully consulted in relation to the relevant Application and all
related matters and arrangements (including as between the
potential participants in the Application or resulting
Exploration License); and
3. granted a full, fair and reasonable opportunity, at all times in
the period of 60 days after it receives the notice under
paragraph (a) above (or, if later, the date on which the relevant
Application is made), and without payment of any consideration to
any other participant (other than in accordance with the relevant
Joint Operating Agreement), to acquire (either directly when the
License is granted, or by way of assignment from the relevant
participants, as the circumstances permit and as soon as is
practicable) a Participating Interest equal to 50% of the
Participating Interest acquired by the SGC in the resulting
Exploration License (and any resulting
13
Production Lease) provided that SGC may not bring in a joint
venture partner or farminee without Avenue's prior written
consent, if Avenue elects to acquire a Participating Interest.
C. Joint Operating Agreements
Upon the issue of an Exploration License in respect of which Avenue or its
Nominated Affiliate has notified its wish to acquire a Participating
Interest pursuant to clause 4.3(c), Avenue or (as the case may be) the
Nominated Affiliate and the other Participants shall enter into a Joint
Operating Agreement relating to their respective interests therein, such
agreement shall be based upon the agreed form Operating Agreement attached
hereto as Schedule B, specific to the Exploration Licenses in each prosect.
D. MEPS Royalty Interest
1. Contemporaneously with and subject to closing of each acquisition
by Avenue or its Nominated Affiliate of a Participating Interest
in an SGC Interest pursuant to clause 4.2, the Participants
holding Participating Interests in that SGC Interest hereby grant
to MEPS a 5% overriding royalty interest in the SGC Interest,
which interest MEPS is receiving as full consideration for its
transfer and assignment back to Avenue and the respective member
of SGC all of MEPS Carried Interest in each Exploration License
included within the SGC Interest, reflected on Schedule A.
2. If, at the time when paragraph (a) above would require the grant
of an overriding royalty interest to MEPS, MEPS is not a
Petroleum Right Holder, ERSAN shall be granted the overriding
royalty interest to hold in trust for MEPS until such time as
MEPS becomes a Petroleum Right Holder and the relevant overriding
royalty interest is transferred to it.
3. The form of assignment of royalty interest to MEPS shall be in
the form of Schedule C hereto.
VI. Administration Fee
A. Monthly fee
Following the date of this Agreement, Avenue shall be required to pay to
AME a monthly administration fee which shall cover the ongoing Exploration
License and Production Lease rentals and the filings required to keep in
good standing the Exploration Licenses and Production Leases in which
Avenue or its Nominated Affiliate has an interest, as set out on Schedule
'A' hereto.
B. Adjustments to acreage
For each acre by which, following the date of this Agreement, the acreage
under SGC Interests in which Avenue or its Nominated Affiliate have a
Participating Interest
14
increases or decreases, the amount of the monthly administration fee
payable under clause 5.1 shall be increased (in the case of an increase in
acreage) or decreased (in the case of a decrease in acreage) by an amount
equal to the product of (i) US$0.10 and (ii) the Participating Interest of
Avenue or its Nominated Affiliate in the relevant SGC Interest divided by
twelve (12).
VII. Consents and approvals
A. Governmental approvals
1. The Parties acknowledge that a grant or assignment to Avenue or
its Nominated Affiliate of a Participating Interest in an SGC
Interest may not be given full effect unless and until:
a. the proposed grantee or assignee has been registered with
the GDPA as Petroleum Right Holder; and
b. the GDPA has registered the relevant transfer or grant.
2. AME shall, on behalf of and in consultation with Avenue or its
Nominated Affiliate, take all necessary and appropriate measures
to obtain the consent and approval of the GDPA to the grants,
transfers and assignments to Avenue or its Nominated Affiliate
contemplated by this Agreement.
B. Nominated Affiliates of Avenue
1. If Avenue nominates a Nominated Affiliate to acquire an interest
in an SGC Interest pursuant to clause 4.2, Avenue shall use its
best endeavours to provide AME with all relevant documentation
required to register its Nominated Affiliate as a Petroleum Right
Holder and AME will use its best endeavors to register Avenue's
Nominated Affiliate as a Petroleum Right Holder as soon as
possible.
2. If such a Nominated Affiliate has not been registered as a
Petroleum Right Holder by the date upon which, pursuant to clause
4.2, a Participating Interest would otherwise be required to be
granted or transferred to the Nominated Affiliate:
a. AME shall deliver to Avenue or its Nominated Affiliate, in
such form as Avenue may reasonably require, a declaration or
other instrument, duly executed by AME and providing that
the Participating Interest which clause 4.2 would otherwise
require be granted or (as the case may be) transferred to
Avenue's Nominated Affiliate instead be held in trust by AME
for Avenue's Nominated Affiliate; and
b. each SGC Participant who would otherwise be required to
transfer to Avenue's Nominated Affiliate all or part of its
Participating Interest in the relevant SGC Interest shall
instead transfer that
15
Participating Interest (or part thereof) to AME to be held
in trust in accordance with this clause 6.2(b)(i) and clause
6.3.
C. Trust arrangement
During the period when a Participating Interest in an SGC Interest is to be
held in trust pursuant to clause 6.2(b)(i), until the date upon which
Avenue's Nominated Affiliate obtains the formal grant or assignment of that
Participating Interest, AME and (in relation to paragraphs (b), (f) and (g)
below only) each SCG Participant who holds an interest in the relevant SCG
Interest shall:
1. hold that Participating Interest as bare trustee for Avenue's
Nominated Affiliate;
2. privately recognise the right, title and interest in and to the
Participating Interest held in trust by AME and deal with
Avenue's Nominated Affiliate as the owner and holder thereof;
3. not assign, encumber or otherwise adversely affect title to such
Participating Interest;
4. receive and hold all proceeds, benefits and advantages accruing
to or in respect of such interest for the benefit of Avenue's
Nominated Affiliate, without entitlement at any time to commingle
any of the same with its own or any other assets;
5. in accordance with the relevant Joint Operating Agreement,
deliver to Avenue's Nominated Affiliate in a timely manner all
revenues, production allocations, and proceeds received by it
pertaining to such interest;
6. allow Avenue's Nominated Affiliate to participate as a member of
the Operating Committee in accordance with the relevant Joint
Operating Agreement as if it were the holder of the Participating
Interest and a party to that Joint Operating Agreement in respect
thereof;
7. not, without the prior written consent of Avenue's Nominate
Affiliate, agree to any amendment or alteration of such Joint
Operating Agreement;
16
8. not enter into or agree to any amendment or alteration of any
other agreement relating to the relevant SGC Interest or
otherwise commit or agree to make or incur any undertaking,
expenditures or arrangement affecting the Participating Interest
of Avenue's Nominated Affiliate in that SGC Interest, in any way
except as expressly provided for in this Agreement; and
9. procure that, as soon as reasonably practicable after Avenue's
Nominated Affiliate is registered as a Petroleum Right Holder,
there is delivered to Avenue's Nominated Affiliate a duly
executed assignment or other instrument of grant or transfer
sufficient to transfer to Avenue's Nominated Affiliate full legal
and beneficial title in the Participating Interest which has been
held in trust as aforesaid, free and clear from Encumbrances.
The perpetuity period in relation to the trusts referred to in clauses
6.2(b)(i) and 6.3(a) shall be 50 years or, if less, the maximum period of
time permitted under the law of the State of California, USA, but the
termination or failure of such trusts shall not affect the rights of Avenue
or its Nominated Affiliate under the other provisions of this Agreement,
including clauses 6.3(b) to (i).
D. Refusal of GDPA to register Nominated Affiliate
If so requested by Avenue at any time after GDPA has declined to register
Avenue's Nominated Affiliate as a Petroleum Right Holder, the relevant
interest shall be transferred to Avenue.
E. Costs and expenses
If AME is required to hold a Participating Interest in trust for Avenue's
Nominated Affiliate under clause 6.2(b)(i), Avenue or its Nominated
Affiliate shall:
1. bear its share of all costs, expenses and liabilities
attributable to the Participating Interest held in trust for
Avenue's Nominated Affiliate in accordance with this Agreement
and the terms of the applicable Joint Operating Agreement as if
it were the legal and beneficial owner thereof during such
period; and
2. within 14 days of having been invoiced for the same by AME,
reimburse the reasonable and documented out-of-pocket costs and
expenses incurred by AME in meeting its obligation under clauses
6.2(b)(i) and 6.4.
F. Approval and waivers of rights by SGC and MEPS
MEPS and each member of SGC hereby irrevocably and unconditionally consents
to and approves for all purposes the grant, exercise and closing of the
acquisition by Avenue or its Nominated Affiliate of Participating Interest
in the SGC Interests, as contemplated in
17
this Agreement, and waives any and all rights, interests, options or other
claims or any kind and howsoever arising that would conflict with or impede
or otherwise ▇▇▇▇▇▇ any such grant, exercise or closing or the consummation
of the transactions contemplated in this Agreement.
VIII. Undertakings
A. Undertakings by SGC
Each member of SGC (including AME, in its respective capacities as a
Participant, the Operator and the drilling contractor) undertakes as
follows:
1. Access:
to make available to Avenue and its advisors and consultants full and
unrestricted access to, and if so requested provide to them copies (made at
the expense of the recipient) of, all agreements, instruments, documents,
books, records, assets, data and other materials in the possession or
control of each or any member of SGC and reasonably required by Avenue in
relation to this Agreement and the matters contemplated herein, including
in relation to:
a. the actual and planned Joint Operations and the assets and
liabilities associated therewith;
b. the status, financial condition, operations and technical
capabilities of each of the other Participants;
c. the existing commercial arrangements (whether or not legally
binding) between all or any of the other Participants
relating in any way to, or to matters that may affect, the
Joint Operations (including any existing joint venture
agreements); and
d. the ownership and status of the SGC Interests and other
interests which are, or may be, the subject of this
Agreement.
2. No inconsistent acts or omissions:
not to do, or permit or suffer to be done, any act or thing which is
inconsistent with this Agreement or the transactions contemplated herein,
or would give rise to a breach of the representations and warranties given
by SGC to Avenue in this Agreement.
3. Dealings with third parties:
18
a. neither it nor any of its Affiliates nor any of their
officers, directors, employees, agents, shareholders or
representatives (including a consultant) shall make, or
cause to be made, in connection with the SGC Interests, the
Joint Operations, this Agreement or the transactions
contemplated by this Agreement, payments, loans or gifts or
promises or offer of payments, loans or gifts of any money
or anything of value, directly or indirectly:
(1) to or for the use or benefit of any official or
employee of any government or agency or instrumentality
thereof (including without limitation any enterprise
owned or controlled by such government), or any Person
acting in an official capacity for or on behalf of any
government, department, agency or instrumentality;
(2) to or for the use or benefit of any political party or
official or candidate thereof, or any official or
employee of a public international organization, or any
person acting in an official capacity for or on behalf
of any political party or public international
organization;
(3) in violation of any applicable law; or
(4) to any other Person either as an advance or as a
reimbursement if it knows that any part of such
payment, loan or gift will be directly or indirectly
given or paid by such other Person to an official,
party, party official or candidate referred to in
sub-paragraph (A) or (B) above, or will reimburse such
other Person for payments, gifts, or loans previously
made, to any such official, party, party official or
candidate;
19
b. the receipt by it of the consideration which may be obtained
hereunder or of any funds or interests under the SGC
Interests does not violate the laws, decrees and regulations
of the Republic of Turkey;
c. it shall answer and shall cause each of its officers,
directors, employees and attorneys-in-fact, and its
Affiliates and their respective officers, directors,
employees and attorneys-in-fact, to answer, and shall exert
reasonable commercial efforts to cause its and their
consultants to answer, in reasonable detail, any
questionnaire or other written or oral communications, or
any request for information from Avenue or its outside
auditors, relating to the representations, warranties,
covenants and undertakings set forth in paragraphs (i) and
(ii) above; and
d. to provide, on or before the 30th day after notice from
Avenue so requesting, Avenue with certification to the
effect that it has not, and its Affiliates and their
personnel have not, made or sought any payments, directly or
indirectly, in violation of paragraph (i) or (ii) above.
B. Insurance
1. AME, in its capacity as Operator, shall obtain and maintain, with
respect to each of the Avenue Kahta ▇▇▇▇▇ and the operations and
property relating thereto, all insurance required under the
Petroleum Law, the Kahta Lease or any other applicable law.
Without limitation to the foregoing, AME shall obtain and
maintain:
a. Workers' Compensation and Employer's Liability Insurance;
b. Employer's Third Party Liability Insurance; and,
c. Comprehensive General Liability Insurance,
in each case with a reputable and creditworthy insurer and on terms
that are commercially reasonable and customary for such risks in the
same or similar circumstances.
2. AME shall, with respect to all insurance obtained by it pursuant
to paragraph (a) above:
20
a. inform Avenue at least ten (10) days before the inception or
renewal dates of the applicable insurance contract or
contracts of the salient terms and conditions (including
premia) quoted by the insurers to AME;
b. promptly inform Avenue when such insurance is taken out and
supply Avenue with copies of the relevant policies when the
same are issued;
c. arrange Avenue and the other relevant Participants,
according to their respective Participating Interests, to be
named as co-insureds on the relevant policies;
d. duly file and notify the relevant Participants of all claims
and take all necessary and proper steps to collect any
proceeds and credit them to the joint account of such
Participants.
Subject to the foregoing, any of the Parties may obtain such insurance
as it deems advisable for its own account and at its own expense,
provided that each such policy contains a waiver of subrogation in
favor of the other Parties.
3. AME, as Operator, shall:
a. take all reasonable steps to ensure that all contractors
(including sub-contractors) performing work in respect to
the Joint Operations obtain and maintain all insurance
required under the Kahta Lease, the Petroleum Law and any
other applicable law, and such other insurance as AME or
(where the relevant contractor is AME or an Affiliate of
AME) Avenue deems reasonable and appropriate; and
b. with respect to all insurance obtained by such contractors
(sub-contractors), take all reasonable steps to arrange for
such contractors (including sub-contractors) to obtain from
their insurers a waiver of subrogation in favour of the
Participants in the relevant Avenue Kahta ▇▇▇▇▇ in respect
of their Participating Interests therein.
4. Nothing in this clause 7.2 shall limit or otherwise affect the
obligations of AME as contractor (including sub-contractor) in
respect of any of the Joint Operations, including obligations
under any applicable drilling contract at its cost to obtain and
maintain insurance cover.
IX. Representations and warranties
A. SGC's representations and warranties
Each member of SGC severally represents and warrants to Avenue that, on the
date of this Agreement and at and immediately prior to closing of each
acquisition by Avenue or its Nominated Affiliate of a Participating
Interest in an SGC Interest pursuant to clause 2.2, 3.1(b) or 4.2:
21
1. Each of the SGC Interests is in good standing and in full force
and effect and was entered into and granted in full compliance
with all applicable laws and regulations of the Republic of
Turkey.
2. It has the right, power and authority to grant or (as applicable)
transfer and assign the legal and beneficial ownership of the
Participating Interest in the relevant SGC Interests to Avenue or
its Nominated Affiliate under the terms and conditions herein
contained.
3. No event has occurred or circumstances exist which would or could
give rise to, cause or be the basis or revocation, invalidation
or termination of the relevant SGC Interests.
4. Save as disclosed herein in relation to the ERSAN Royalty
Interest, MEPS Royalty Interest, Gercus Royalty Interest and the
royalty interest of the Government of Turkey arising under the
Petroleum Law, 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 any of the rights held by it under the
relevant SGC Interests, or agreed to do so, and the relevant SGC
Interests are free and clear of all Encumbrances.
5. To the best of its knowledge, there are no pending, threatened or
outstanding claims, lawsuits, judgments of a court of law,
arbitration or administrative proceeding or any other
circumstances likely to give rise to same, affecting the relevant
SGC Interests, this Agreement or the transactions to be effected
hereunder or pursuant hereto, and all obligations under or
arising out of the relevant SGC Interests requiring performance
on or before the date of giving or repetition of this
representation and warranty have been fully performed.
6. Its execution, delivery and performance of this Agreement do not
and will not:
22
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. require any consent, authorization or approval under;
g. give rise to a right of termination under or materially
modify; or
h. result in the creation or imposition of any Encumbrance
upon,
the relevant SGC Interests or any other material agreement, license,
permit, consent or instrument to which it is a party or is subject, or
under the Petroleum Law.
7. It has delivered to Avenue a true, correct and complete copy of:
a. the relevant SGC Interests (including all attachments
thereto);
b. 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 SGC Interests;
c. 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 relevant SGC Interests or the arrangements contemplated
in the Agreement; and
d. all material technical, accounting, geological, geophysical
and geotechnical data in its possession or control regarding
the relevant SGC Interests and the areas covered thereby.
8. In conducting operations with respect to the areas the subject of
the SGC Interests, it has:
a. complied in all respects with the terms and conditions of
the SGC Interests and all applicable laws and regulations of
the Republic of Turkey;
b. 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
c. incurred no obligations or liabilities (whether liquidated
or unliquidated, fixed or contingent, known or unknown)
related to
23
the area the subject of the SGC Interests except as
expressly set forth in the terms of SGC Interests.
B. Mutual representations and warranties
Each Party represent and warrants severally to each other Party that:
1. It is a duly organised, validly existing entity of the type
described in the introduction to this Agreement and is in good
standing under the laws of the jurisdiction of its formation. It
has all requisite power and authority to enter into and to
perform its obligations under this Agreement.
2. Its execution, delivery and performance of this Agreement have
been authorised by all necessary corporate action on its part and
that of its equity owners (if required) and do not and will not
(i) violate any law, rule, regulation, order or decree applicable
to it or (ii) violate its organisational documents.
3. This Agreement is a legal and binding obligation of that Party,
enforceable against that Party in accordance with its terms,
except to the extent enforceability is modified by bankruptcy,
reorganisation and other similar laws affecting the rights of
creditors generally and by general principles of equity.
4. There is no litigation pending or, to the best of its knowledge,
threatened to which that Party or any of its Affiliates is a
party that could reasonably be expected to have a material
adverse effect on the financial condition, prospects, or business
of that Party or Affiliate its ability to perform its obligations
under this Agreement.
5. The recitals to this Agreement, insofar as they relate to that
Party, are true and accurate.
6. Neither it nor any of its Affiliates nor any of their officers,
directors, employees, agents, shareholders or representatives
(including a consultant) has made, or caused to be made, in
connection with the SGC Interests, the Joint Operations, this
Agreement or the transactions contemplated by this Agreement,
payments, loans or gifts or promises or offer of payments, loans
or gifts of any money or anything of value, directly or
indirectly:
a. to or for the use or benefit of any official or employee of
any government or agency or instrumentality thereof
(including without limitation any enterprise owned or
controlled by such
24
government), or any Person acting in an official capacity
for or on behalf of any government, department, agency or
instrumentality;
b. to or for the use or benefit of any political party or
official or candidate thereof, or any official or employee
of a public international organization, or any person acting
in an official capacity for or on behalf of any political
party or public international organization;
c. in violation of any applicable law; or
d. to any other Person either as an advance or as a
reimbursement if it knows that any part of such payment,
loan or gift will be directly or indirectly given or paid by
such other Person to an official, party, party official or
candidate referred to in sub-paragraph (i) or (ii) above, or
will reimburse such other Person for payments, gifts, or
loans previously made, to any such official, party, party
official or candidate.
7. It and, by way of dividends or return of capital, its
shareholders and ultimate beneficial owners constitute all of the
Persons or entities who are to receive, directly or indirectly,
any part of the benefits which may be received by it hereunder or
under the SGC Interest or the Joint Operations, and neither it
nor any of its Affiliates nor any director, officer, employee or
attorney-in-fact of it or any of its Affiliates, nor any
shareholder or ultimate beneficial owner of more than 5% of the
issued and outstanding shares of any class of it or any of its
Affiliates, is:
a. an official or employee of any government, or any
department, agency or instrumentality of any government;
b. a political party or official thereof;
c. a candidate for political office therein;
d. an official or employee of a public international
organization; or
e. a Person acting in an official capacity for or on behalf of
any government, or any department, agency or instrumentality
thereof, any political party, or any public international
organization.
8. The receipt by it of the consideration which may be obtained
hereunder or of any funds or interests under the SGC Interests
does not violate the laws, decrees and regulations of the
republic of Turkey.
9. No other Person or entity claiming by, through or under it or any
of its Affiliates, and no director, officer, employee or
attorney-in-fact of or consultant to any of the preceding is or
shall be entitled to any fee or compensation by reason of the
execution or implementation of this Agreement.
25
X. Indemnities and liabilities
A. Reciprocal indemnities for breach
Each Party agrees that it shall 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 former of any of its
representations or warranties in this Agreement or the undertakings in
clause 7.
B. Indemnity against pre-existing liabilities
AME shall indemnify and hold harmless Avenue and any Nominated Affiliate
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 the SGC Interests or
activities relating thereto which arose or occurred prior to November 14,
2002. The Parties recognize that there exist disagreements regarding the
costs incurred for the rental of tanks at the Batman Tupra(0) Refinery and
the tanks constructed on the Karakilise License, which are unresolved and
unaffected by the indemnification set forth above.
C. Limitation of liability
No Party shall be liable for any consequential, incidental, indirect,
special, exemplary or punitive damages in any action arising out of this
Agreement.
XI. Term and termination
A. Term
This Agreement takes effect from the date of execution hereof by all of the
Parties and shall remain in effect until terminated pursuant to or as
referred to in clause 10.2.
B. Termination
This Agreement may be terminated by any Party upon the giving of a
Communication to any other Party which has failed to cure any material
breach of this Agreement, following a 30 day prior Communication to such
breaching Party, which Communication shall state the nature of such alleged
breach. Any termination of this Agreement shall not release the breaching
party from liability for damages to any other Parties hereunder.
Notwithstanding the foregoing, the Parties acknowledge that they are
fiduciaries to each other within the scope of the terms of this Agreement,
and fiduciary duties under California law of loyalty, disclosure and fair
dealing between the Parties shall be applicable.
C. Survival of rights and remedies
The termination of this Agreement shall not prejudice or limit the rights
and remedies of a Party arising out of or in connection with any antecedent
breach of this Agreement (including a breach of representation and
warranty).
10.4 Provisions surviving termination
The following provision of this Agreement shall continue to apply
notwithstanding the termination of this Agreement:
1. clauses 9 (Indemnities) and 12 (Confidentiality); and
2. any other provision that expressly or by necessary implication
survives termination of this Agreement.
XII. Assignment and encumbrances
A. No assignment without consent
Except as provided in this clause 11, none of the Parties may transfer or
assign its rights or obligations under this Agreement in whole or in part
without the prior approval of each of the other Parties, provided that if
any such other Party in its absolute discretion is satisfied with the
financial capability of the proposed assignee or transferee, such consent
shall not to be unreasonably withheld by that Party.
B. Assignment to Affiliates
Each of Avenue and MEPS shall have the right to assign and transfer all or
part of its rights and obligations under this Agreement to an Affiliate
registered or with a branch in Turkey. Avenue or, as the case may be, MEPS,
shall guarantee and hereby guarantees the performance of any such Affiliate
to whom it assigns rights and obligations under this Agreement.
C. Deed of adherence
As a condition to any transfer of rights and obligations of a Party under
this Agreement, the transferee must execute a deed by which it agrees to be
bound by this Agreement.
D. Dealings with SGC Interests
Until such time as Avenue or its Nominated Affiliate receives an Assignment
of its Participating Interest in any Licenses comprising the SGC Interests,
AME undertakes and shall ensure that its interest in the SGC Interests
shall not be assigned, transferred or otherwise disposed or burdened by any
Encumbrance, royalty, production payment or overriding royalty of any type
whatsoever, subject only to the Ersan Royalty Interest, the MEPS Royalty
Interest, Gercus Royalty Interest, Tethys Option and royalties payable to
the Government of Turkey in accordance with the laws of the Republic of
Turkey.
XIII. Confidentiality
A. Duty of confidence
Each Party shall, and shall cause its Affiliates to, keep confidential all
of the terms of this Agreement and all written and/or electronically stored
financial data and other proprietary and commercially sensitive information
regarding the SGC Interests and the Joint Operations; provided, however,
that this obligation of confidentiality shall not apply to any disclosure
of information:
26
1. that is in or enters the public domain without a breach of a duty
of confidentiality by the disclosing Person or was obtained from
a third party having no confidentiality restriction to the
Parties;
2. the disclosure of which is required of the disclosing Party or
its Affiliate by law, regulation, legal process, or order of any
court or governmental body having jurisdiction (including
applicable State and Federal securities laws, rules and
regulations in the USA) or pursuant to the regulations of any
securities exchange upon which any of the Parties or its
Affiliate is (or is to be) listed or its securities are (or are
to be) traded;
3. to its Affiliates or a bona fide potential assignee of the
disclosing Party, and to the employees, agents, consultants,
bankers, financial and professional advisers of that Party, its
Affiliate or any such bona fide potential assignee, provided that
(i) they have a reasonable need to know the information and (ii)
they are instructed and agree in writing to maintain this
information confidential; or
4. by any Party or its Affiliates or any Person referred to in
paragraph (c) above to whom Avenue has disclosed the same, to
investors or targeted potential investors in any Party or its
Affiliates or financial institutions or their advisors, in
connection with a capital raising or the listing of equities or
project financing or the like.
B. Announcements
Any announcement or circular or other publicity relating to this Agreement
or any termination hereof shall prior to its publication be approved in
writing by each of the Parties as to its content, form and manner of
publication (such approval not to be unreasonably withheld or delayed) save
for any announcement, circular or other publicity required to be made or
issued by any Party or its Affiliate pursuant to applicable State and
Federal securities laws, rules and regulations in the USA or the
regulations of any securities exchange upon which it is (or is to be)
listed or its securities are (or are to be) traded. Save as permitted by
the preceding sentence, no Party shall make any announcement or issue any
circular or other publicity relating to this Agreement or any termination
hereof, provided that such Party shall use its reasonable endeavours to
provide a copy of such publicity five days prior to the making or issue
thereof.
C. Survival
The provisions of clauses 12.1 and 12.2 shall survive for a period of 2
years following termination of this Agreement.
27
XIV. Taxes
A. General
Expect as otherwise stated herein, any taxes and duties (other than VAT and
stamp taxes applicable in the Republic of Turkey) or other levies payable
in the Republic of Turkey as a direct result of the transfer and assignment
of the interests in the SGC Interests to Avenue or its Nominated Affiliate
pursuant to this Agreement (but excluding income, corporate or similar
taxes assessed separately by reference to individual Parties) shall be paid
by the Parties in proportion to their respective Participating Interests in
the relevant SGC Interest (including any such Participating Interest held
on its behalf by AME under the terms of this Agreement).
B. VAT
Unless otherwise expressly stated in this Agreement, all amount expressed
to be payable under this Agreement shall be inclusive of any applicable
VAT.
C. Stamp tax
Avenue shall be liable for all stamp tax arising in the Republic of Turkey
in connection with the execution of this Agreement (if any). SGC agree to
cooperate, as reasonably required by Avenue, in relation to the
determination of whether, and if so how much, such stamp tax is payable,
and in relation to having stamp tax assessed in the Republic of Turkey.
XV. Default
In the event that a Party defaults in the performance of any of its
obligations under this Agreement, then the other Parties (or any of them)
shall be entitled to rights and remedies available at law or equity
(including damages and/or specific performance, as permitted by applicable
law).
XVI. Notices
A. Manner of service
Any written communication or document, including process in any legal
action or proceedings (a 'Communication') which any Party may desire to
give or deliver in connection with this Agreement shall be delivered by
hand or sent by fax or email to the addressee at its address or fax number
or email address set out in clause 15.3. Any such notice sent by fax or
email shall be confirmed in hard copy form by post or by hand, provided
that a failure or delay in this regard shall not prevent the notice from
having been effectively delivered upon receipt by the addressee of the
relevant fax or email as stated below.
B. Time of notice
A Communication shall be deemed to have been given and received:
1. if delivered by hand, at the time of delivery; or
28
2. if sent by fax, on the day following the day of acknowledgement
by the addressee's facsimile receiving equipment of receipt of
the entire Communication; or
3. if sent by email, on the day following the day of acknowledgement
of the addressee's receipt of the email by confirmation back to
the sender from the recipient in an electronic communication
initiated by the recipient, but not otherwise.
C. Addresses
The current addresses, fax numbers and, where applicable, contact names of
the Parties for the purposes of Communications are as follows:
AME - on Behalf of SGC:
ALADDIN MIDDLE EAST LTD.
Attn: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ and Cem ▇▇▇▇▇
Sogutozu Caddesi No:23
Balgat-Ankara*
▇▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇▇.▇▇▇.▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇
Fax:▇▇▇.▇▇▇.▇▇▇▇▇▇▇ or 287 5768
Email: ▇▇▇▇▇▇@▇▇.▇▇▇
Avenue:
Attn: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇, ▇▇▇
Tel: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Fax:▇▇▇▇ ▇▇▇ ▇▇▇▇
Email: ▇▇▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Copied to:
Attn: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇-▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Tel: ▇(▇▇▇) ▇▇▇▇ ▇▇▇▇
Fax:▇(▇▇▇) ▇▇▇▇ ▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇.▇▇▇
29
Copied to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Jeffer, Mangels, ▇▇▇▇▇▇ & Marmaro LLP
Seventh Floor
1900 Avenue of the Stars
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇@▇▇▇▇.▇▇▇
And to:
▇▇ ▇▇▇▇ Poll
▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇
Tel: ▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇
Fax: + ▇▇ ▇ ▇▇▇▇ ▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇.▇▇
MEPS:
▇▇▇ Fellowes or ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Tel: ▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇
Email: ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
And to:
▇▇▇ Fellowes and Cem ▇▇▇▇▇
Sogutozu Caddesi No:23
Balgat-Ankara*
▇▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇▇.▇▇▇.▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇
Fax:▇▇▇.▇▇▇.▇▇▇▇▇▇▇ or 287 5768
Email: ▇▇▇▇▇▇@▇▇.▇▇▇
A Party may change its address, fax number, email address or contact name
for the purpose of Communications by serving notice on the other Parties in
accordance with this clause.
D. Proof of service
In proving service of a Communication, it shall be sufficient to prove that
the envelope containing the Communication was properly addressed and
delivered to the address shown thereon, or that fax transmission of the
Communication was made after obtaining in person or by telephone
appropriate evidence of the capacity of the addressee to receive the same,
as the case may be.
XVII. General
A. Entire agreement
This Agreement shall set forth the entire agreement and understanding
between the Parties as to the subject matter thereof, and supersedes and
cancels all prior negotiations,
30
discussions, representations, agreements and understandings whether written
or oral pertaining to such subject matter.
B. Further assurances
Each of the Parties shall do all such acts and execute and deliver all such
documents as may be reasonable required in order to fully perform and carry
out the terms of this Agreement.
C. Successors and assigns
This Agreement shall be binding upon and shall inure to the benefit of each
of the Parties and their respective successors and permitted assignees.
D. No waiver
No waiver by a Party of a failure or failures by any of the other Parties
to perform any provision of this Agreement shall operate or be construed as
a waiver in respect of any other or further failure whether of a like or
different character or a waiver by any other Party. No failure or delay on
the part of a Party in exercising any right, power or privilege hereunder
and no course of dealing between that Party and any other Party shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any other rights or remedies which a Party would otherwise
have at law or in equity or otherwise.
E. Amendment
Except where specifically provided, this Agreement may be amended only by
an instrument in writing signed by duly authorised representatives of each
of the Parties.
F. No partnership or agency;
1. Nothing in this Agreement (or in any of the arrangements
contemplated hereby) shall be deemed to constitute a partnership
between the Parties or any of them, nor constitute any Party the
agent of any other Party for any purpose. Notwithstanding the
foregoing the parties acknowledge they are fiduciaries to each
other and fiduciary duties under California law of loyalty,
disclosure and fair dealing shall be applicable.
2. In addition, no Party shall without the written consent of each
of the other Parties enter into contracts with third parties as
agent for the Parties nor shall any Party describe itself as
agent as aforesaid or in any way hold itself as being agents as
aforesaid or as representing the Parties.
▇. ▇▇▇▇▇▇▇▇▇
If any of the provisions of this Agreement is finally determined to be, or
becomes, invalid, illegal or unenforceable, or if the actions or matters
contemplated by any of the provisions of this Agreement are finally
determined to be, or become, illegal, then such
31
provisions shall, so far as invalid or unenforceable, be given no effect
and shall be deemed not to be included in this Agreement, but without
affecting or invalidating the remaining provisions of this Agreement.
Notwithstanding the foregoing, the Parties shall thereupon negotiate in
good faith in order to agree the terms of a mutually satisfactory provision
achieving as nearly as possible the same commercial effect, to be
substituted for the provision found to be invalid, illegal or
unenforceable.
H. Costs and expenses
Each Party shall be responsible for all of the costs and expenses
(including, without limitation, legal costs and expenses) incurred by that
Party in connection with the preparation, negotiation and conclusion of
this Agreement.
I. Counterparts
This Agreement may be entered into in any number of counterparts, each of
which when executed by one or more Parties shall be an original, but all
the counterparts shall together constitute one and the same instrument.
J. Governing law
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, USA, excluding any provisions thereof,
which would require the application of the laws of any other jurisdiction.
K. Arbitration
1. Any dispute arising out of or in connection with this Agreement,
including any question regarding its existence, validity or
termination, shall be referred to and finally resolved under the
rules of the London Court of International Arbitration, which
rules are deemed to be incorporated by reference into this
clause.
2. The number of arbitrators shall be one (or three if the Parties
mutually so agree).
3. The seat or legal place of arbitration shall be San Francisco,
California, USA.
4. The language to be used in the arbitral proceedings shall be
English.
5. The arbitrators' award may include compensatory damages against
either Party, but under no circumstances shall the arbitrators be
authorized to nor shall they award punitive damages or multiple
damages against any Party.
32
6. The Parties hereby exclude any right of application or appeal to
any court, to the extent that they may validly so agree, and in
particular in connection with any question of law arising during
the course of the arbitration or out of the arbitration panel.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date above
written
ALADDIN MIDDLE EAST LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ PETROL SANAYII A.S.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Attorney-in-fact
TRANSMEDITERRANEAN OIL COMPANY LTD
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Attorney-in-fact
GUNEY YILDIZI PETROL URETIM SONDAJ MUTEAHHITLIK ve TICARET A.S
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Attorney-in-fact
AVENUE ENERGY INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
MIDDLE EAST PETROLEUM SERVICES LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Attorney-in-fact
33
SCHEDULE 'A'
AVENUE EXPLORATION LICENSE & PRODUCTION LEASE
ACQUISITION & ADMINISTRATION COSTS
----------------------------------------------------------------------------------------------------------
SCHEDULE "A" - AVENUE ENERGY INC EXPLORATION LICENSE & PRODUCTION LEASE ACQUISITION & ADMINISTRATION COST
----------------------------------------------------------------------------------------------------------
US$0.10/net acre/year
----------------------------------------------------------------------------------------------------------
POST FARMIN
No. OF NAME OF LICENSE LICENSE ------------------ TOTAL TOTAL Avenue LICENSE
PETROLEUM PETROLEUM PREFIX NUMBER COMPANY %-- AREA AREA NET ADMIN.
DISTRICT DISTRICT REGISTERED HELD (HECTARES) (ACRES) ACRES FEE
----------------------------------------------------------------------------------------------------------
COMPANY %
REGISTERED HELD
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
X SIIRT AR/AME 2759 Avenue 50.00%
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
11,086 27,394 13,697 $1,370
----------------------------------------------------------------------------------------------------------
X SIIRT AR/AME- 2598, Avenue 50.00%
TMO 2599,
2600,
2601
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
118,272 292,250 146,125 $14,613
----------------------------------------------------------------------------------------------------------
X SIIRT AR/TMO 3118 Avenue 50.00%
----------------------------------------------------------------------------------------------------------
AME 30.00%
----------------------------------------------------------------------------------------------------------
TMO 20.00%
----------------------------------------------------------------------------------------------------------
38,846 95,988 47,994 $4,799
----------------------------------------------------------------------------------------------------------
X SIIRT AR/TMO- 3794, Avenue 27.50%
EPS-GYP 3795
----------------------------------------------------------------------------------------------------------
EPS 10.00%
----------------------------------------------------------------------------------------------------------
GYP 25.00%
----------------------------------------------------------------------------------------------------------
AME 27.50%
----------------------------------------------------------------------------------------------------------
Tethys 10.00%
----------------------------------------------------------------------------------------------------------
96,492 238,432 65,569 $6,557
----------------------------------------------------------------------------------------------------------
X SIIRT AR/EPS- 3749, Avenue 50.00%
GYP 3750
----------------------------------------------------------------------------------------------------------
AME 40.00%
----------------------------------------------------------------------------------------------------------
EPS 10.00%
----------------------------------------------------------------------------------------------------------
99,328 245,439 122,720 $12,272
----------------------------------------------------------------------------------------------------------
X SIIRT ARI/AME- 2260 Avenue 50.00%
TMO
----------------------------------------------------------------------------------------------------------
AME 20.00%
----------------------------------------------------------------------------------------------------------
TMO 30.00%
----------------------------------------------------------------------------------------------------------
1,937 4,786 2,393 $239
----------------------------------------------------------------------------------------------------------
X SIIRT AR/AME- 3254 Avenue 50.00%
EPS
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
2,145 5,300 2,650 $265
----------------------------------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇/▇▇▇- ▇▇▇▇, ▇▇▇▇▇▇ 50.00%
EPS-AVE 2677,
2678
----------------------------------------------------------------------------------------------------------
AME 45.00%
----------------------------------------------------------------------------------------------------------
EPS 5.00%
----------------------------------------------------------------------------------------------------------
122,943 303,792 151,896 $15,190
----------------------------------------------------------------------------------------------------------
XI DIYARBAKIR AR/EPS- 3748 Avenue 27.50%
AME
----------------------------------------------------------------------------------------------------------
AME 27.50%
----------------------------------------------------------------------------------------------------------
EPS 35.00%
----------------------------------------------------------------------------------------------------------
Tethys 10.00%
----------------------------------------------------------------------------------------------------------
1,452 3,588 987 $99
----------------------------------------------------------------------------------------------------------
XII GAZIANTEP AR/AME- 3462 Avenue 50.00%
EPS-AVE
----------------------------------------------------------------------------------------------------------
AME 27.50%
----------------------------------------------------------------------------------------------------------
EPS 22.50%
----------------------------------------------------------------------------------------------------------
3,278 8,100 4,050 $405
----------------------------------------------------------------------------------------------------------
XII GAZIANTEP AR/AME- 3612 Avenue 50.00%
EPS-GYP
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
48,525 119,905 59,953 $5,995
----------------------------------------------------------------------------------------------------------
XII GAZIANTEP IR/EPS 658 Avenue 50.00%
----------------------------------------------------------------------------------------------------------
EPS 50.00%
----------------------------------------------------------------------------------------------------------
7,060 17,445 8,723 $872
----------------------------------------------------------------------------------------------------------
XIII HATAY AR/TMO 3786 Avenue 50.00%
----------------------------------------------------------------------------------------------------------
TMO 25.00%
----------------------------------------------------------------------------------------------------------
AME 25.00%
----------------------------------------------------------------------------------------------------------
49,539 122,411 61,205 $6,121
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
SCHEDULE "A" - AVENUE ENERGY INC EXPLORATION LICENSE & PRODUCTION LEASE ACQUISITION & ADMINISTRATION COST
----------------------------------------------------------------------------------------------------------
US$0.10/net acre/year
----------------------------------------------------------------------------------------------------------
POST FARMIN
No. OF NAME OF LICENSE LICENSE ------------------ TOTAL TOTAL Avenue LICENSE
PETROLEUM PETROLEUM PREFIX NUMBER COMPANY %-- AREA AREA NET ADMIN.
DISTRICT DISTRICT REGISTERED HELD (HECTARES) (ACRES) ACRES FEE
----------------------------------------------------------------------------------------------------------
COMPANY %
REGISTERED HELD
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
XV KONYA AR/EPS 3637, Avenue 50.00%
3638,
3639,
3640
----------------------------------------------------------------------------------------------------------
EPS 10.00%
----------------------------------------------------------------------------------------------------------
AME 40.00%
----------------------------------------------------------------------------------------------------------
199,221 492,275 246,138 $24,614
----------------------------------------------------------------------------------------------------------
XVI ANTALYA AR/AME- 3726, Avenue 50.00%
TMO-EPS 3727,
3728
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
149,310 368,945 184,473 $18,447
----------------------------------------------------------------------------------------------------------
XVII IZMIR AR/AME- 3700, Avenue 50.00%
EPS 3701,
3702,
3703,
3704,
3705
----------------------------------------------------------------------------------------------------------
AME 50.00%
----------------------------------------------------------------------------------------------------------
281,899 696,572 348,286 $34,829
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
TOTAL Concessions 33 TOTAL Hec.&Acres 1,231,333 3,042,6241,466,858 $111,857
----------------------------------------------------------------------------------------------------------
INITIAL ACREAGE ACQUISITION COST $450,000 Avenue MONTHLY ACREAGE ADMIN FEE $9,321
----------------------------------------------------------------------------------------------------------
SCHEDULE 'B'
OPERATING AGREEMENT AGREED FORM