FARMOUT AGREEMENT BETWEEN TANGANYIKA OIL COMPANY LTD.
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED AND GHP EXPLORATION (EGYPT)
LTD.
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INDEX
Article Number Heading Page
- -------------- ------- ----
1.0 Definitions 2
2.0 Obligations of the Parties 4
3.0 Joint Operating Agreement 6
4.0 Representations and Warranties 7
5.0 Relationship of the Parties 9
6.0 Information 9
7.0 Applicable Law & Resolution of Disputes 10
8.0 Miscellaneous 11
Annexure "A" Concession Agreement
Annexure "B" Deed of Assignment
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FARMOUT AGREEMENT
THIS AGREEMENT is made and entered into as of the ________ day of April 1998,
by and
between:
TANGANYIKA OIL COMPANY LTD., a company organised and existing under the laws
of Canada ("Tanganyika");
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED, a company organised and
existing under the laws of the Republic of Ireland ("Dublin"), a wholly-owned
subsidiary of Tanganyika; and
GHP EXPLORATION (EGYPT) LTD., a company organised and existing under the laws
of Bermuda ("GHP") a wholly-owned subsidiary of GHP EXPLORATION CORPORA TION,
a company organised and existing under the laws of the Yukon Territory.
WITNESSETH WHEREAS:
A. On November 17, 1997, Dublin was notified of the acceptance by the
Exploration Offers Committee of the Egyptian General Petroleum
Corporation (EGPC) of Dublin's application in a concession covering an
area of approximately 2,320 onshore square kilometres known as Block H,
West Gharib, Gulf of Suez, Egypt.
B. On December 1, 1997, Dublin and EGPC initiated a concession agreement
(the "CA") pursuant to which Dublin was granted the right to explore for
and exploit petroleum in the Contract Area (as hereinafter defined). The
CA is subject to ratification by the Government of the Arab Republic of
Egypt (the "Government").
C. On December 28, 1997, Dublin and EGPC signed a Pre-Effective Date
Expenditure Agreement pursuant to which Dublin's Concession expenditures
after December 28, 1997 would be recoverable under the CA prior to the
effective date of the CA.
D. On March 24, 1998 Dublin was notified by EGPC that Law No. 15 for 1998
concerning the CA was issued.
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E. Subject to the approvals of the Government and EGPC, Dublin is willing to
transfer and assign to GHP an undivided thirty percent (30%)
Participating Interest in the CA, together with all rights and
obligations pertaining thereto; and
F. GHP is desirous of acquiring the said thirty-percent (30%) Participating
Interest on the basis of the terms and conditions set forth herein.
NOW THEREFORE in consideration of the mutual promises, agreements and covenants
hereinafter set forth, the parties hereto agree as follows:
1.0 DEFINITIONS
1.01 The terms defined in the recitals hereof or at other instances herein
shall have the meanings attributed to them thereby. In addition, the following
words and expressions shall, for the purpose of this Agreement, bear the
meanings respectively set opposite them:
"Acquired Interest" means a thirty (30%) undivided Participating
Interest free and clear of all encumbrances to be
transferred and assigned as contemplated herein by
Dublin to GHP;
" Affiliate" means in relation to each Party, any company,
corporation or other entity
a. which is directly or indirectly controlled by
such Party; or
b. which directly or indirectly controls such
Party; or
c. which is directly or indirectly controlled by
a company, corporation or other entity that
also directly or indirectly controls such
Party.
To this effect, control is conclusive by fact of
owning directly or indirectly shares, or other
ownership rights, in the company, corporation or
entity representing more than fifty percent (50%) of
the voting rights.
" Agreernent" means this Farmout Agreement;
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"Contract Area" means the area described in the Concession Agreement
(CA);
"Contract Depth" means at depth of 200 feet into the Nubia Formation
or 9,000 feet whichever is shallower.
"Deed of Assignment" means the instrument of transfer to be submitted to
the Government and EGPC for the purpose of obtaining
all the necessary official consents to the
assignment of the Acquired Interest by Dublin to
GHP, which instrument will substantially be in the
form set forth in Annex "B" attached hereto or in
the form required by the Government and EGPC;
"Effective Date" means the date of execution of this Agreement;
"Joint Operating means the Joint Agreement to be enter into
Agreement" or "JOA" between the Parties which shall
govern the rights and duties of the Parties in
relation to the CA. The JOA shall be based on, and
shall be substantially in the form of, the 1995
Association of International Petroleum Negotiators
Model Form International Operating Agreement;
"Participating Interest" means an undivided percentage in the CA and the JOA
and all rights and obligations pertaining thereto;
"Party" means a party to this Agreement.
All other terms specifically defined in the CA and not defined herein shall
have the meanings assigned to them in the CA unless the context clearly
requires otherwise. A copy of the CA is attached hereto as Annexure "A".
1.02 Unless the context otherwise requires, reference to any Article is to
an Article of this Agreement. In addition, where the context requires, the
singular shall include the plural and the plural shall include the singular.
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2.0 OBLIGATIONS OF THE PARTIES
2.01 GHP shall, within seven (7) days of the later of the Effective Date or
the date GHP receives written notification from Dublin that the CA is
signed by the Government, pay to Dublin the following:
a. fifty-one thousand United States Dollars (US$51,000), being thirty
percent (30%) of all costs incurred prior to the Effective Date;
b. two hundred twenty five thousand United States Dollars
(US$225,000), being thirty percent (30%) of the Signature Bonus
payable to EGPC;
c. twelve thousand United States Dollars (US $12,000), being thirty
percent (30%) of the CA administration costs payable to EGPC;
d. fifteen thousand United States Dollars (US$15,O00), being thirty
percent (30%) of the annual training bonus payable to EGPC.
Payments shall be effected to Tanganyika's bank account numbered 1489057.202
with Cantrade Ormond Burrus Banque Privee S.A., 12 rue Ami-Lullin, P.O. Box
3142, CH-1211 , Geneva 3, Switzerland.
2.02 From and after the effective date of the CA, GHP shall, subject to the
provisions of this Agreement and the JOA, bear and pay thirty percent
(30%) of all costs and expenses including but not limited to the
Financial Obligations related to the CA.
2.03 At such time as the CA is executed by the Government, GHP shall be
obligated to bear and pay sixty percent (60%) of the costs and expenses
associated with the drilling of an exploratory well to Contract Depth
including casing to total depth and subsequent testing approved by the
Parties or abandonment of said well in the Initial Exploration Period.
Notwithstanding the above, upon the earlier to occur of (a) the drilling
and testing (if approved) of this exploratory well, or (b) total
cumulative costs incurred in drilling and completing or abandoning the
said well equal to one million five hundred thousand United States
Dollars (US$1 ,500,000), or a maximum cost to GHP of nine hundred
thousand United
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States Dollars (US$900,000); GHP thereafter shall pay thirty percent (30%) of
all costs and expenses with any further activity related to this well.
2.04 GHP shall, within seven (7) days of the Effective Date, provide either
Dublin or Tanganyika (at Dublin's option) with a corporate surety bond
issued by Underwriters Indemnity (or a form of guarantee acceptable to
Dublin's bank) in favour of either Dublin or in favour of either Dublin
or Tanganyika (at Dublin's option) for the amount of one million five
hundred thousand United States Dollars (US$1,500,000), being thirty
percent (30%) of the letter of Guarantee. GHP shall be entitled to
reduce the amount of the bond, or guarantee, as the amount of the Letter
of Guarantee is reduced pursuant to the CA. Until the Deed of Assignment
is approved by EGPC and the Government, Dublin and Tanganyika shall hold
the Acquired Interest in trust for GHP. Dublin and Tanganyika shall
immediately provide GHP with a Trust Agreement covering the Acquired
Interest.
2.05 Dublin shall, upon receipt of the sums set out in Article 2.01 and the
security set out in Article 2.04, prepare, execute and submit the Deed of
Assignment to GHP for execution by GHP.
2.06 Dublin shall, as soon as possible following the date of receiving the
fully executed Deed of Assignment, submit the same for approval by EGPC
and the Government and will use its best efforts to obtain said
approvals.
2.07 Following the approval of the Deed of Assignment by EGPC and the
Government, the respective Participating Interests of the Parties shall
be as follows:
Dublin 70%
GHP 30%
----
100%
Notwithstanding the Parties' Participating Interests, GHP and Dublin agree
that hydrocarbons allocated to the Contractor for recovery of costs as
provided in Article VII of the CA shall be allocated between the Parties in
the same percentages as recoverable expenditures are incurred by the Parties.
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2.08 GHP agrees, subject to the provisions of this Agreement and the JOA, to
assume its respective share of the rights and obligations of Dublin
arising from and under the CA with respect to the Acquired Interest from
and after the date of execution of the Deed of Assignment.
2.09 Notwithstanding anything herein to the contrary, Dublin and Tanganyika
shell defend, indemnify and hold GHP, its directors, officers, employees,
agents and representatives harmless from and against any and all claims,
demands, causes of action, judgments and liabilities of every kind and
character arising out of or in connection with any operations or
activities conducted pursuant to or in relation to the CA prior to the
Effective Date.
3.0 JOINT OPERATING AGREEMENT
3.01 The Parties shall use reasonable efforts to execute the JOA, which shall
take effect as of the Effective Date, within thirty (30) days after
execution of this Agreement.
3.02 The Parties agree that the Operator shall be Dublin. The Operator shall
conduct all operations in accordance with the provisions of the CA, the
JOA and the directions and instructions of the Operating Committee
created under the JOA.
3.03 The JOA shall govern the operations on the Contract Area including, but
not limited to, the design and implementation of any seismic and drilling
programs. Under the JOA, there shall be created an Operating Committee
which shall provide overall supervision and direction of all operations
and which shall, without limitation, have the right to approve all key
agreements with consultants and contractors in connection with the CA.
Each Party shall have a representative on the Operating Committee with a
voting interest equal to that Party's Participating Interest. GHP shall
be entitled to have one of its technical personnel work with the
personnel of Dublin, at GHP's cost, in the formation of the seismic and
drilling programs.
3.04 Article IV(c) of the CA provides for a joint committee to be established
by EGPC and the Contractor, referred to as the "Exploration Advisory
Committee". The Exploration Advisory Committee consists of six members,
three of whom shall be appointed by EGPC and three of whom shall be
appointed by Contractor. Dublin shall provide for one of its three
members to be a representative of GHP, subject to approval by EGPC.
Dublin shall consult
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with GHP and consider GHP's input, regarding all meetings and negotiations with
EGPC and the Government and shall keep GHP informed of all matters relative
thereto, including but not limited to budgets and work programs.
3.05 The JOA shall provide that hydrocarbons allocated to the Contractor for
recovery of costs as provided in Article VII of the CA shall be allocated
among the parties to the JOA in the percentages that such parties have
incurred recoverable expenditures under the CA.
4.0 REPRESENTATIONS AND WARRANTIES
4.01 Dublin and Tanganyika hereby represent and warrant to GHP that:
a. Dublin is duly established and existing under the Jaws of the Republic of
Ireland and has the power and authority to own its own assets and to
conduct the business which it carries on;
b. Dublin has the corporate power to enter into this Agreement, the JOA and
the Deed of Assignment and to carry out the transactions provided for
therein, it has taken all necessary corporate action to authorise the
execution and delivery of this Agreement, the Deed of Assignment and the
JOA, which agreements constitute legally binding obligations on it, and
it has duly executed and delivered this Agreement;
c. Dublin is not the subject of an order for the liquidation or winding up,
nor has it entered into a scheme or arrangement with its creditors or any
class of them, nor has any official manager, receiver and/or trustee been
appointed in respect of it or its property or assets;
d. there have been no actions taken in relation to the CA, by or on behalf
of Dublin or Tanganyika, that would cause GHP, Dublin or Tanganyika to be
in violation of the FOREIGN CORRUPT PRACTICES ACT of the United States of
America;
e. Dublin in qualified to carry on business in The Arab Republic of Egypt;
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f. the CA is valid and in full force and effect, approved by Majlis AI Shaab
(Egyptian Parliament) and in good standing and there has been no default
by Dublin under, or breach by Dublin of the CA and Dublin has not
received any notice or claim by EGPC or the Government that the CA will
or may be terminated;
g. Dublin and Tanganyika own a 100% interest in the CA and Law No. 15 for
1998 has been issued by the Government recognizing that Dublin and
Tanganyika own a 100% interest in the CA and authorizing the Minister of
Petroleum to sign the CA on behalf of the Government of the Arab Republic
of Egypt;
h. the CA and all applicable laws, prior to the signing of the CA by the
Minister of Petroleum and Dublin and Tanganyika, have been complied with
and all taxes, rentals, charges and other payments required in connection
with the CA and any applicable laws have been paid;
i. other than the payment of the administration costs payable to EGPC, the
deposit of the Letter of Guarantee and the obligation to complete the
minimum work commitment for the Initial Exploration Phase of the CA,
there are no outstanding obligations under the CA;
j. there are no mortgages, charges, liens, encumbrances or adverse interests
of any nature against or relating to the CA or the Acquired Interest,
other than those of EGPC and the Government set out in the CA;
k. there is no pending or threatened litigation, or other claim related to
the CA or the Contract Area, which would materially affect the
consumption of, and benefits under this Agreement, the Deed of Assignment
and/or the JOA; and
l. they are not aware of any facts which may give rise to any proceeding and
they are not involved in or aware of any dispute with any person or
entity prejudicial to the exercise of any rights related to the Acquired
Interest.
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4.02 GHP hereby represents and warrants to Dublin and Tanganyika that:
a. it is duly established and existing under the laws of the United States
of America;
b. it has the corporate power to enter into this Agreement, the Deed of
Assignment and the JOA, and to carry out the transactions provided for
therein and has taken all necessary corporate action to authorise the
execution and delivery of this Agreement the Deed of Assignment and the
JOA which agreements constitute legally binding obligations on it and it
has duly executed and delivered this Agreement.
5.0 RELATIONSHIP OF THE PARTIES
5.01 The rights, duties, obligations and liabilities of the Parties herein
shall be several and not joint or collective; and nothing herein
contained shall ever be construed as creating a partnership of any kind,
an association, or a trust, or as imposing upon any or all of the Parties
hereto any partnership duty, obligation or liability. Each Party shall be
individually responsible only for its obligations as set out in this
Agreement.
6.0 INFORMATION
6.01 On the Effective Date, Dublin will make available and furnish to GHP all
data and information related to the Contract Area and the CA.
6.02 Subject to the CA, the Parties hereto agree that the terms of this
Agreement shall be considered confidential and shall not be disclosed to
any third party, except to the extent provided below. Neither Party
shall, without the prior written consent of the other Party , disclose
during the currency of this Agreement to any third party any data or
information acquired or obtained by any of them under the CA, except to
the extent provided below:
a. to the Government and EGPC;
b. to an Affiliate;
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c. to any technical, financial or other professional consultant retained by
it or its Affiliate, which requires the information or data to provide
professional services to Dublin or GHP; 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 any Party or an Affiliate are listed or in
connection with an application to any stock exchange for listing of any
such shares or other securities;
e. to any third party with which bona fide negotiations for a Participating
Interest are conducted; or
f. to the extent that the information is in the public domain; provided
always that with the exception of disclosure under (a), (b), (d), and (f)
hereinabove, the recipient of any information agrees in writing to keep
the same strictly confidential. Upon execution of the JOA, the
confidentiality provisions in the JOA shall control.
7.0 APPLICABLE LAW AND RESOLUTION OF DISPUTES
7.01 This Agreement shall be governed by and construed in accordance with the
laws of Canada, excluding, however, any of its conflict of law rules
which would direct or refer to the laws of another jurisdiction. The
Parties hereto specifically attorn and submit themselves to the
jurisdiction of the courts of Canada. In addition, each Party irrevocably
waives any objection which it may now or hereafter have to laying of
venue of any suit, action or proceeding arising out of or relating to
this Agreement in the courts of Canada, and irrevocably waives any claim
that any such suit, action or proceeding brought in the courts of Canada
has been brought in an inconvenient forum and further irrevocably waives
the right to object, with respect to such claim, suit action or
proceeding brought in the courts of Canada that such court does not have
jurisdiction over such Party.
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8.0 MISCELLANEOUS
8.01 Each Party shall prepare and submit any and all filings in relation to
this Agreement required of such Party by any governmental agency having
jurisdiction. Each Party shall in a timely fashion provide the other with
copies of all such filings.
8.02 Any obligation of the Parties hereunder shall be suspended while they or
any of them is prevented or hindered from complying therewith by any
cause of force majeure as that term is defined in the Force Majeure
Article of the CA. Any time limitations set forth in the Agreement shall
be automatically extended for the same period of time that the
obligations are so suspended.
8.03 The terms, conditions, warranties and representations in this Agreement
shall survive the execution of the Deed of Assignment and the JOA.
8.04 This Agreement may be amended only by a written instrument executed by
the Parties hereto.
8.05 Whether or not the transactions contemplated herein shall be consummated,
each of the Parties shall (except as otherwise specifically provided
herein) pay his own expenses incidental to the preparation, execution and
performance of this Agreement.
8.06 Either of the Parties shall execute and deliver such other certificates,
agreements and other documents and take such other actions as may
reasonably be requested by the other Party in order to consummate or
implement the transactions contemplated by this Agreement.
8.07 All notices, requests, demands or other communications hereunder shall be
in writing, and shall be delivered by hand or sent by courier. Notices
sent by fax are deemed to be received on the working day of the recipient
following dispatch provided that the recipient acknowledge receipt by
return fax.
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a. If to DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED:
Suite 1320-885 West Georgia Street
Vancouver, BC
Canada V6V3E8
Attention: Mr. Lukas Lundin
Telephone: (604) 6897842
Facsimile: (604) 689 4250
b. If to GHP EXPLORATION (EGYPT) LTD: Suite 900, 1900 West Loop South
Houston, Texas U.S.A. 77027
Attention: Mr. Barry Lasker Telephone: (713) 626 9373 Facsimile: (713)
626 9374.
The address of each Party hereto may be changed for any or all purposes of the
Agreement by five (5) days advance written notification from the Party changing
its address to the other Party.
8.08 This Agreement and all the provisions hereof shall be binding upon and
enure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of
the rights, interest or obligations hereunder shall be assigned by
operation of law or otherwise, without the consent of the other Party,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, each Party shall be entitled, upon notification, to assign to
an Affiliate without the consent of the other Party.
8.09 This Agreement may be executed in one or more counterparts, all of which
will constitute one and the same instrument.
8.10 The section headings in this Agreement are for convenience and reference
only and shall not be deemed to alter or affect the meaning or
interpretation of any provision thereof.
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8.11 This Agreement and the JOA supersede any and all other agreements, oral
or written, and constitutes the entire agreement among the Parties
hereto
Respect of the subject matter of this Agreement.
IN WITNESS WHEREOF, The Parties hereto have executed this Agreement as of the
day and year first above written.
TANGANYIKA OIL COMPANY LTD.
Name:
Title:
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
Name:
Title:
GHP EXPLORATION (EGYPT) LIMITED
Name:
Title:
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