Exhibit 10.64
FARMOUT AGREEMENT
ENTERED INTO BY AND BETWEEN
FX ENERGY POLAND Sp. z o.o.
AND
CALENERGY POWER (POLSKA) Sp. z o.o.
COVERING THE "FENCES AREA"
IN THE FORESUDETIC MONOCLINE
THIS Farmout Agreement (hereinafter referred to as the "Agreement") is made as
of the 9th day of January, 2003, among:
FX ENERGY POLAND Sp. z o.o. with its registered seat in Warsaw, at al. Jana
Paw(3)a II 29, 00-867 Warsaw, entered into the Polish Court Register maintained
by the District Court in Warsaw under the KRS No. 0000052459 ("FX"), represented
by Mr. David Pierce, a member of the Management Board; and
CALENERGY POWER (POLSKA) Sp. z o.o. with its registered seat in Warsaw at
Niedzwiedzia 8C, 02-737, Warsaw entered into the Polish Court Register
maintained by the District Court in Warsaw under the RHB No. 52059 ("CE Power"),
represented under power of attorney by Mr. Peter Youngs;
WITNESSETH:
WHEREAS, Polskie Gornictwo Naftowe I Gazownictwo S.A. with its registered seat
in Warsaw, at Krucza 6/14, 00-537 Warsaw, entered into the Polish Court Register
maintained by the District Court in Warsaw under the KRS No. [ ] ("POGC") has
entered into that certain Mining Usufruct dated September 28, 2001, with the
State Treasury of the Republic of Poland, dated September 28, 2001, covering
prospecting for and exploring deposits of oil and natural gas in the
"Srem-Jarocin" area (the "Fences Mining Usufruct") and POGC has also received
Concession #29/2001/p relating thereto (the "Fences Concession");
WHEREAS, POGC and FX entered into that certain Agreement on Cooperation in
Exploration of Hydrocarbons on Foresudetic Monocline dated April 11, 2000, (the
"Fences Cooperation Agreement") and that certain Joint Operating Agreement dated
May 12, 2000, (the "Fences JOA"), all of which agreements grant FX certain
rights and obligations with respect to the area (the "Fences Area") covered by
the Fences Mining Usufruct and the Fences Concession;
WHEREAS, POGC and FX entered into that certain Settlement Agreement (the "Fences
Settlement Agreement") dated January 8, 2003 such agreement clarifying and
resolving matters and issues arising under the Fences Cooperation Agreement.
WHEREAS, CE Power wishes to earn and acquire from FX undivided interests in the
Fences Mining Usufruct and the Fences JOA, and FX is willing to have CE Power
participate in operations conducted in the Fences Area and to earn the
interests;
WHEREAS, the Parties wish to set out the terms and conditions upon which FX will
transfer and CE Power will earn and receive a transfer of such interests;
WHEREAS this Agreement is intended to set forth in more detail the respective
rights and obligations of the Parties hereto with respect to the aforesaid
agreements;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions
1.1 In this Agreement the following capitalized words and
expressions shall have the following respective meanings:
2
"AFE" shall have the meaning defined in the Fences JOA.
"Affiliate" shall have the meaning defined in the Fences JOA.
"Agreement" means this agreement.
"Best Efforts" means that the Party in question shall immediately carry
out all actions that could be expected of it in order to discharge the
relevant obligation placed upon it by this Agreement, which shall
include lending all assistance to the other Parties as could reasonably
be expected.
"Business Day" shall have the meaning defined in the Fences JOA.
"CE Gas" means CalEnergy Gas (Holdings) Ltd, an English company with
its registered office in London at 60 Gray's Inn Road, London, England
(Registration Number 2772202).
"CalEnergy Resources Limited" means an English company with its
registered office in Carliol House, Market Street, Newcastle, England
(Registration Number 04508881).
"Contract Area" shall have the meaning defined in the Fences JOA.
"Data" means all data which any Party has a right to dispose of,
whether in hard copy or digital form (where available) including, but
not limited to, geoscientific and engineering data and logs.
"Day" shall have the meaning defined in the Fences JOA.
"Dollars" means United States of America dollars.
"Drilling" means (in addition to its usual meaning) preparation for
drilling, drilling, taking and running logs, cores and flow and
formation tests to evaluate formations encountered which are
prospectively productive of hydrocarbons, together with plugging and
abandonment (in the case of a dry hole), suspension or completion as a
producer.
"End Date" means the date specified in Clause 3.10.
"Fences Area" means the land area covered by the Fences JOA, the Fences
Mining Usufruct and the Fences Concession.
"Fences Concession" means that certain concession, number 29/2001/p,
issued to POGC by the Minister of Environment, a copy of which is
attached at Exhibit 2.
"Fences Cooperation Agreement" means that certain Agreement on
Cooperation in Exploration of Hydrocarbons on Foresudetic Monocline
dated April 11, 2000, between POGC and FX, pertaining to exploration
and exploitation of hydrocarbons in the Fences Area, a copy of which is
attached at Exhibit 3.
3
"Fences JOA" means that certain Joint Operating Agreement dated May 12,
2000, between POGC and FX, as amended by inter alia the Fences
Settlement Agreement, a copy of which is attached at Exhibit 4.
"Fences Mining Usufruct" means that certain Mining Usufruct dated
September 28, 2001 between the State Treasury of the Republic of Poland
represented by the Minister of Environment and POGC covering
prospecting for and exploring deposits of oil and natural gas in the
"Srem-Jarocin" area, a copy of which is attached at Exhibit 1.
"Fences Settlement Agreement" means that certain Settlement Agreement
regarding the Fences Area dated January 8, 2003, a copy of which is
attached at Exhibit 5.
"First Earning Well" means the well in respect of which CE Power may
elect to pay an amount equal to the Drilling costs pursuant to Clause
2.3.
"Force Majeure" means any reason or circumstance (other than lack of
financial resources) which has a direct impact on the performance of
the obligations of a Party hereunder and which is beyond the reasonable
control of the Party concerned and which it could not have predicted or
prevented acting with due care in accordance with good international
petroleum industry practices;
"Maximum Carried Well Cost" means Drilling costs of Two Million Five
Hundred Thousand US Dollars.
"Minimum Earned Acreage" means in respect of each of the First Earning
Well and the Second Earning Well, the minimum area surrounding such
First Earning Well or Second Earning Well (as the case may be) which CE
Power may earn an interest in by paying an amount equal to the Drilling
costs of such well in accordance with the terms of this Agreement.
"Non-Operator" means a Non-Operator as defined in the Fences JOA.
"Operating Committee" means the Operating Committee as defined in the
Fences JOA.
"Operator" means the Operator as defined in the Fences JOA.
"Party" means a party to this Agreement and Parties means all of them.
"Second Earning Well" means the well in respect of which CE Power may
elect to pay an amount equal to the Drilling costs pursuant to Clause
5.3.
"Total Depth" means as to the First Earning Well or the Second Earning
Well the maximum depth actually reached during those drilling
operations.
"VAT" means the value added tax applied if due in accordance with the
laws of Poland.
4
1.2 In this Agreement and the Schedules hereto, unless the context
otherwise requires:
1.2.1 a reference to a statute or statutory provision
includes a reference to:
(A) that statute or provision as consolidated,
modified, re-enacted or replaced by any
statute or statutory provision prior to the
date of this Agreement;
(B) any repealed statute or statutory provision
which it re-enacts (with or without
modification) prior to the date of this
Agreement; and
(C) any subordinate legislation made under the
relevant statute prior to the date of this
Agreement;
1.2.2 words in the singular shall include the plural, and
vice versa;
1.2.3 the masculine gender shall include the feminine and
neuter and vice versa;
1.2.4 a reference to a Recital, Clause, Exhibit or Schedule
(other than to a schedule to a statutory provision)
shall be a reference to a Recital, Clause, Exhibit or
Schedule of or to this Agreement;
1.2.5 the headings are for convenience only and shall not
affect the interpretation of any provision of this
Agreement; and
1.2.6 the Schedules form part of this Agreement and have
the same force and effect as if expressly set out in
the body of this Agreement and any reference to this
Agreement shall include the Schedules.
2. The First Earning Well Decision.
2.1 Selection of Drillsite. On the date of this Agreement CE Power
shall give notice to FX of its choice of drillsite for the
First Earning Well and FX shall forthwith give notice to POGC
advising of such choice. The CE Power notice shall also
include CE Power's proposal for the Minimum Earned Acreage
(defined by the aerial extent of the prospect as mapped
delineated by the lowest closing contour or by a defined
hydrocarbon contact determined by a well penetration whichever
is deeper) to be earned by CE Power in connection with the
First Earning Well. During the 60 days following the date of
this Agreement the technical representatives of CE Power will
make themselves available to meet at convenient times and
places with the technical representatives of POGC and FX to
discuss the drillsite selection and all other matters in
respect of the First Earning Well.
2.2 Drilling Plan, etc
2.2.1 As soon as practicable after receipt of notice from
CE Power under Clause 2.1 FX shall use its Best
Efforts to procure that POGC, in its capacity as
Operator under the Fences JOA, makes appropriate
arrangements to work with CE Power, either by
appointment as agent or otherwise in a manner
satisfactory to CE Power, in preparing and finalizing
the drilling program proposal for the First Earning
Well, to be presented and decided upon at the
Operating Committee meeting referred to in Clause
2.2.2.
5
2.2.2 As soon as practicable after receipt of notice from
CE Power under Clause 2.1, FX shall use its Best
Efforts to procure that POGC shall also confirm
acceptance of CE Power's proposal or submit a
counterproposal for the drillsite and the Minimum
Earned Acreage and nominate a date for a meeting of
the Operating Committee and the representatives of CE
Power, which meeting shall be at least 30 days but
not more than 45 days after the date that CE Power is
appointed agent or other arrangements are agreed
under Clause 2.2.1.
2.2.3 CE Power, whether as agent for POGC or as otherwise
agreed, shall prepare proposals for the Operating
Committee meeting covering the well program, AFE,
insurance coverage and the selection of the
contractors and subcontractors (suppliers and
services) including contract terms.
2.2.4 The Parties agree that the purpose of the Operating
Committee meeting will be to discuss and endeavor to
agree the proposals that CE Power shall make on all
details of the well program, AFE, insurance coverage,
list of contractors and subcontractors including
contract terms, Minimum Earned Acreage, and any other
matters related to the First Earning Well.
2.2.5 FX shall use its Best Efforts to procure that the
final decisions of the Operating Committee will be
reported to CE Power in writing within 7 Days
following the meeting in the form of a final proposal
for the well program, AFE, insurance coverage, list
of contractors and subcontractors including contract
terms, Minimum Earned Acreage, and any other matters
related to the First Earning Well.
2.3 Decision to Drill or Terminate. Within 7 Days after receipt of
the final decisions of the Operating Committee pursuant to
Clause 2.2.5, CE Power shall notify FX of its decision whether
or not to pay an amount equal to the Drilling costs of the
First Earning Well, which decision shall be entirely within
the discretion of CE Power. If CE Power elects to pay an
amount equal to the Drilling costs of the First Earning Well,
FX shall use its Best Efforts to procure that POGC, in its
capacity as Operator under the Fences JOA, promptly appoints
CE Power as agent for the management of the drilling operation
of the First Earning Well. In its capacity as agent CE Power
shall be required to manage the Drilling of the First Earning
Well in accordance with the terms of the Fences JOA. If either
the Operating Committee meeting referred to in Clause 2.2.5 is
not held, or the final decisions thereof are not reported as
required by Clause 2.2.5, by the End Date, then CE Power may
elect to terminate this Agreement by giving FX seven (7) Days
written notice. If CE Power elects not to pay an amount equal
to the Drilling costs of the First Earning Well, or fails to
notify FX within the said 7 Days, this Agreement shall
terminate forthwith.
6
2.4 Effect of Termination under Clause 2.3. If this Agreement is
terminated pursuant to Clause 2.3, then save and except for
matters in this Clause 2.4 and Clause 11, this Agreement shall
be at an end and no Party shall have any further rights or
obligations hereunder and CE Power shall forthwith return to
FX, or destroy all Data received from FX related to the Fences
Area, except for that portion thereof which consists of
analyses, compilations, studies or other documents prepared by
or on behalf of CE Power.
3. Conditions Precedent.
3.1 Transfer of Interest; Amendment of JOA. Promptly following
timely receipt of an affirmative notice from CE Power under
Clause 2.3, the Parties shall execute and FX shall procure
that POGC also execute an amendment to the Fences JOA in the
form attached hereto as Schedule 1, to:
3.1.1 effect the transfer of a 24.5% working interest in
and under the Fences JOA from FX to CE Power and
record the unconditional assumption by CE Power of
the obligations of a Non-Operator in respect of such
24.5% working interest in accordance with Article XI
and other applicable provisions of the Fences JOA;
3.1.2 prohibit all operations under the Fences JOA, except
for operations specifically referred to in this
Agreement, without the unanimous consent of all
parties to the Fences JOA until this Agreement has
been terminated;
3.1.3 conform the definition of the Contract Area to the
areas described in the Fences Concession and the
Fences Mining Usufruct, excluding the Kleka 11 well;
3.1.4 amend the provision regarding governing law;
3.1.5 amend the provision regarding dispute resolution; and
3.1.6 add a provision regarding future amendments to
conform to international petroleum industry
practices; 3.1.7 add a provision requiring that in
the event of the termination of this Agreement
pursuant to Clauses 5.3, 6.3, 6.4 or 7.1 the Parties
and POGC will:
(A) amend the Fences JOA so that it no longer
covers the land comprising the Minimum
Earned Acreage in respect of the First
Earning Well or the Minimum Earned Acreage
in respect of the Second Earning Well, as
applicable;
(B) execute a new joint operating agreement
("JOA") to govern the rights and obligations
of the Parties and POGC in respect of
operations conducted on the Minimum Earned
Acreage for each of the First Earning Well
and the Second Earning Well, as applicable,
which JOA shall contain the same terms and
conditions as the Fences JOA except, for the
purposes of identification only, with such
alterations as are necessary to reflect the
identity of the parties and their respective
working interests and the area to be covered
by the JOA.
Execution by the Parties and POGC of the amendment of
the Fences JOA shall be a Condition Precedent.
7
3.2 Interest Fully Earned; No Pre-Existing Obligations. FX shall
use its Best Efforts to obtain the acknowledgement and written
agreement of POGC that the interest to be transferred to CE
Power will be fully earned by FX and unencumbered by any claim
by POGC (notwithstanding any agreement between FX and POGC) at
the date of such transfer (subject only to future performance
as set forth in this Agreement and in the Fences JOA, the
Fences Concession and the Fences Mining Usufruct) and not be
subject to any claims, liabilities or obligations other than
as set forth in this Agreement and in the Fences JOA. In
particular, such acknowledgement and written agreement shall
specify that neither CE Gas nor CE Power shall under any
circumstances whatever be subject to any claims, liabilities
or obligations connected with the Fences Cooperation Agreement
and the Fences Settlement Agreement. Receipt of such written
agreement from POGC, in form and substance satisfactory to CE
Power, shall be a Condition Precedent.
3.3 Assignment of Usufruct. FX shall promptly submit for approval
by the Minister of Environment representing the Polish State
Treasury an executed assignment in the form set out in
Schedule 2, from FX to CE Power, of 24.5% of the Fences Mining
Usufruct. FX shall deliver to CE Power copies of such
assignment when submitted and, on receipt, copies of the
Minister's approval of such assignment. Receipt of the consent
of the Minister of Environment to such assignment, in form and
substance reasonably satisfactory to the Parties, shall be a
Condition Precedent.
3.4 Waiver of Lien by RRPV. FX shall promptly seek the written
consent of Rolls Royce Power Ventures Limited ("RRPV") to the
transfer of interests to CE Power contemplated by this
Agreement, such transfer to be free and clear of any lien or
other encumbrance of RRPV. Such consent shall be substantially
in the form attached hereto as Schedule 4. Receipt of the
consent of RRPV to such assignment shall be a Condition
Precedent.
3.5 Gas Sales Matters. FX will use its Best Efforts to cause the
Parties and POGC to execute an amendment, substantially in the
form attached hereto as Schedule 5, to the Natural Gas Sale
and Purchase Agreement dated [insert] December 2000 between
[insert], (the "GSA") to the effect that:
3.5.1 CE Power shall become a party to the GSA;
3.5.2 gas produced from any wells located within the
Minimum Earned Acreage in respect of the First
Earning Well or the Second Earning Well may be added,
at the seller's option, to the gas required to be
taken by the buyer under the GSA; and
3.5.3 the term of the GSA will be extended to at least
December 31, 2008.
Execution of such amendment to the GSA by POGC, FX, and CE
Power shall be a Condition Precedent.
3.6 Confirmation of Certain Gas Sales Matters. FX shall use its
Best Efforts to cause POGC, as Operator under the Fences JOA,
to confirm the following matters and receipt of such
confirmation shall be a Condition Precedent:
3.6.1 the entry pressure into the POGC gas system in the
Fences Area does not exceed 300 psi; and
8
3.6.2 subject to gas meeting applicable quality
specifications, POGC knows of no impediment that
would restrict gas produced in the Fences Area from
being immediately accepted into the nearest
appropriate entry point of the POGC gas system for
sale.
3.7 Ownership and Transfer of Data. Upon signing the amendment to
the Fences JOA referred in Clause 3.1, CE Power shall become
the owner of 24.5% interest in the Data pertaining to the
Fences area, and FX shall promptly seek the consent of the
Minister of Environment acting as the geological
administration authority for the transfer of the Data. On
receipt of such consent FX shall deliver to CE Power a copy of
such consent along with copies of all Data as to which it has
rights pertaining to the Contract Area. Receipt of the consent
of the Minister of Environment to such transfer shall be a
Condition Precedent.
3.8 Transfer of Ownership of CE Power. CE Gas shall have procured
that CE Power is a wholly owned subsidiary of CalEnergy
Resources Limited. The transfer of CE Power to the ownership
of CalEnergy Resources Limited shall be a Condition Precedent.
3.9 Corporate Approvals. Each of the Parties shall have already
obtained, and on the date of execution of this Agreement shall
provide a copy to each other Party of the approval of its
management board and any other necessary corporate consents to
entering into this Agreement and any other agreements
contemplated by this Agreement, and FX shall solicit the
approval/consent of the management board of POGC to the
actions to be taken by POGC pursuant to the terms of this
Agreement. The provision of the approvals and consents
described in this Clause 3.9, including without limitation the
receipt of the approval/consent of POGC, shall be a Condition
Precedent.
3.10 Termination for Failure to Satisfy Conditions Precedent. FX
shall use all reasonable endeavors to procure that each of the
Conditions Precedent except the Condition Precedent contained
in Clause 3.8 is satisfied as expeditiously as possible. CE
Power shall, to the extent not already done so by CE Gas, use
all reasonable endeavours to procure that the Conditions
Precedent contained in Clause 3.8 and 3.9 are satisfied as
expeditiously as possible. Each Party must keep the other
Party fully informed of the status of the satisfaction of the
Conditions Precedent and must notify the other Party
immediately upon becoming aware that each Condition Precedent
has been satisfied. CE Power may, in its sole discretion,
waive the requirement for satisfaction of any or all of the
Conditions Precedent. If the Conditions Precedent are not
satisfied or waived by 31 March 2003, or such later date as
the Parties may agree ("End Date"), then either Party may
terminate this Agreement by giving the other Party 14 days
written notice delivered at any time following the End Date.
9
3.11 Effect of Termination under Clause 3.10. If this Agreement is
terminated pursuant to Clause 3.10 then save and except for
this Clause 3.11 and Clause 11, this Agreement shall be at an
end and no Party shall have any further rights or obligations
hereunder and CE Power shall forthwith: (i) return to FX or
POGC, as applicable, or destroy all Data related to the Fences
Area, except for that portion thereof which consists of
analyses, compilations, studies or other documents prepared by
or on behalf of CE Power; (ii) reassign all interests in the
Fences JOA and Fences Mining Usufruct that it has received
from FX and/or POGC pursuant to this Agreement; (iii) execute
all other documents as may be reasonably necessary to return
the Parties and POGC as nearly as practicable to their
positions prior to the execution of this Agreement.
3.12 Clauses 4, 5, 6, 7 and 8 of this Agreement will be of no force
and effect until all of the conditions contained in Clauses
3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 ("Conditions
Precedent") have been satisfied or waived in accordance with
this Clause 3.
4. Drilling the First Earning Well.
4.1 Commitment to Pay Drilling Costs; JOA to Govern Drilling.
Provided that CE Power has elected under Clause 2.3 to pay an
amount equal to the Drilling costs of the First Earning Well,
the start date for drilling operations shall be the earliest
practicable date thereafter as determined by the Operator
after due consultation with CE Power as agent. The First
Earning Well shall be drilled in accordance with the final
proposal issued by the Operating Committee under Clause 2.2
and in accordance with the terms of the Fences JOA, which
shall govern all aspects of the First Earning Well except as
expressly provided in this Agreement. In addition to an amount
equal to the Drilling costs, CE Power shall also pay an amount
equal to 100% of the costs of any geological or geophysical
work that the Operator conducts at the sole written request of
CE Power prior to testing and completing or plugging and
abandoning (as a dry hole) the well.
4.2 Limitation on Drilling Costs. CE Power's commitment to pay an
amount equal to the Drilling costs of the First Earning Well
means that CE Power agrees to pay to the Operator 24.5% of the
Drilling costs in accordance with the Fences JOA and to FX
75.5% of the Drilling costs as a first installment for the
Fences Mining Usufruct up to the Maximum Carried Well Cost. If
the cumulative Drilling costs on the First Earning Well exceed
an amount equal to the Maximum Carried Well Cost then CE
Power, in its sole discretion, has the right to require, by
giving notice in writing to the Operator and FX, that the
Operator cease all Drilling forthwith ("First Earning Well
Cease Notice") and to plug and abandon the well immediately.
CE Power shall remain liable for Drilling costs on the First
Earning Well including such plugging and abandonment (payable
24.5% to the Operator and 75.5% to FX).
4.3 Takeover of the First Earning Well. If the First Earning Well
is to be plugged and abandoned pursuant to Clause 4.2 then any
one or more parties to the Fences JOA other than CE Power
shall have the right to propose taking over the well as an
Exclusive Operation under the Fences JOA and such party or
parties must provide a notice ("First Earning Well
Continuation Notice") to CE Power within 24 hours of receipt
of a First Earning Well Cease Notice. If any party to the JOA
issues a First Earning Well Continuation Notice then CE
Power's obligation to pay an amount equal to the subsequent
Drilling costs of the First Earning Well shall cease and be
deemed to have ceased from the time of receipt of the First
Earning Well Cease Notice.
10
4.4 Reassignment on Issuance of First Earning Well Cease Notice.
If CE Power issues a First Earning Well Cease Notice then CE
Power shall be obliged to reassign to FX all of CE Power's
interest in the Fences Area and CE Power shall be obliged to
return to POGC or FX, as appropriate, or destroy all Data
received from POGC or FX related to the Fences Area, except
for that portion thereof which consists of analyses,
compilations, studies or other documents prepared by or on
behalf of CE Gas or CE Power.
5. The Second Earning Well Decision.
5.1 Selection of Drillsite. If CE Power wishes to drill the Second
Earning Well, which decision shall be entirely within its sole
discretion, and if CE Power has fully performed its
obligations under Clause 4, then within 20 Days after the
First Earning Well has reached Total Depth, CE Power shall
give notice to the other parties to the Fences JOA of its
choice of drillsite for the Second Earning Well. The notice
shall also include its proposal for the Minimum Earned Acreage
(defined by the aerial extent of the prospect as mapped
delineated by the lowest closing contour or by a defined
hydrocarbon contact determined by a well penetration whichever
is deeper) to be earned in connection with the Second Earning
Well. The Parties and representatives of POGC shall then meet
within the next 10 days at a convenient time and place to
discuss drillsite selection and all other matters in respect
of the Second Earning Well.
5.2 Drilling Plan, etc
5.2.1 As soon as practicable after receipt of notice from
CE Power under Clause 5.1, FX shall use its Best
Efforts to procure that POGC, in its capacity as
Operator under the Fences JOA, makes appropriate
arrangements to work with CE Power, either by
appointment as agent or otherwise in a manner
satisfactory to CE Power, in preparing and finalizing
the drilling program proposal for the Second Earning
Well, to be presented and decided upon at the
Operating Committee Meeting referred to in Clause
5.2.2.
5.2.2 As soon as practicable after receipt of notice from
CE Power under Clause 5.1 FX shall use its Best
Efforts to procure that POGC shall also confirm
acceptance or submit a counterproposal for the
drillsite and the Minimum Earned Acreage and provide
a date for a meeting of the Operating Committee and
the representatives of CE Power, which meeting shall
be at least 30 days but not more than 45 days after
the date that CE Power is appointed agent or other
arrangements are agreed under Clause 5.2.1.
5.2.3 CE Power, whether as agent for POGC or as otherwise
agreed, shall prepare proposals for the Operating
Committee Meeting covering the well program, AFE,
insurance coverage and the selection of the
contractors and subcontractors (suppliers and
services).
11
5.2.4 The purpose of the Operating Committee meeting will
be to discuss and endeavor to agree the proposals
that CE Power shall make on all details of the well
program, AFE, insurance coverage, list of contractors
and subcontractors including contract terms, Minimum
Earned Acreage, and any other matters related to the
Second Earning Well.
5.2.5 FX shall use its Best Efforts to procure that the
final decisions of the Operating Committee will be
reported in writing within 7 Days following the
meeting in the form of a final proposal for the well
program, AFE, insurance coverage, list of contractors
and subcontractors including contract terms, Minimum
Earned Acreage, and any other matters related to the
Second Earning Well.
5.3 Decision to Drill or Terminate. Within 7 Days after receipt of
the final proposal of the Operating Committee pursuant to
Clause 5.2.5, CE Power shall notify FX of its decision whether
or not to pay an amount equal to the Drilling costs of the
Second Earning Well, which decision shall be entirely within
the discretion of CE Power. If CE Power elects to pay an
amount equal to the Drilling costs of the Second Earning Well,
FX shall use its Best Efforts to procure that POGC in its
capacity as Operator under the Fences JOA promptly appoints CE
Power as agent for the management of the drilling operation of
the Second Earning Well. In its capacity as agent, CE Power
shall be required to manage the Drilling of the Second Earning
Well in accordance with the terms of the Fences JOA. If either
the Operating Committee Meeting referred to in Clause 5.2.5 is
not held or the final decisions thereof are not reported as
required by Clause 5.2.5, by 75 days after the First Earning
Well has reached Total Depth, then CE Power may terminate this
Agreement by giving FX seven (7) days written notice. If CE
Power elects not to pay an amount equal to the Drilling costs
of the Second Earning Well, or fails to notify FX within the
said 7 Days, this Agreement shall terminate forthwith. If CE
Power elects to pay an amount equal to the Drilling costs of
the Second Earning Well, it shall also pay to FX the sum of
One Million Dollars as a second installment for the Fences
Mining Usufruct not later than seven (7) days after CE Power
has notified FX of its election to pay an amount equal to the
Drilling costs of the Second Earning Well under this Clause
5.3 ("Due Date One"), which decision shall be entirely within
the discretion of CE Power If such payment is not made by Due
Date One, this Agreement shall terminate forthwith.
5.4 Effect of Termination under Clause 5.3. If this Agreement is
terminated pursuant to Clause 5.3, then save and except for
matters in this Clause 5.4 and Clause 11, this Agreement shall
be at an end and no Party shall have any further rights or
obligations hereunder. If this Agreement is terminated
pursuant to Clause 5.3, then CE Power shall promptly:
5.4.1 return to POGC or FX, as appropriate, or destroy all
Data received from POGC or FX related to the Fences
Area outside the Minimum Earned Acreage surrounding
the First Earning Well, except for that portion
thereof which consists of analyses, compilations,
studies or other documents prepared by or on behalf
of CE Gas or CE Power; and
12
5.4.2 transfer to FX all of CE Power's interest in and
under the Fences JOA and the Fences Mining Usufruct
outside the Minimum Earned Acreage surrounding the
First Earning Well;
6. Drilling the Second Earning Well.
6.1 Commitment to Pay Drilling Costs; JOA to Govern Drilling.
Provided CE Power has elected under Clause 5.3 to pay an
amount equal to the Drilling costs of the Second Earning Well,
and provided it has made a timely payment to FX under Clause
5.3, the start date for drilling operations shall be the
earliest practicable date thereafter as determined by the
Operator after due consultation with CE Power as agent. The
Second Earning Well shall be drilled in accordance with the
final proposal issued by the Operating Committee under Clause
5.2 and in accordance with the terms of the Fences JOA, which
shall govern all aspects of the Second Earning Well except as
expressly provided in this Agreement. In addition to an amount
equal to the Drilling costs, CE Power shall also pay an amount
equal to 100% of the costs of any geological or geophysical
work that the Operator conducts at the sole written request of
CE Power prior to testing and completing or plugging and
abandoning the well (as a dry hole).
6.2 Limitation on Drilling Costs. CE Power's commitment to pay an
amount equal to the Drilling costs of the Second Earning Well
means that CE Power agrees to pay to the Operator 24.5% of the
Drilling costs in accordance with the Fences JOA and to FX
75.5% of the Drilling costs as a third installment for the
Fences Mining Usufruct up to the Maximum Carried Well Cost. In
the event cumulative Drilling costs on the Second Earning Well
exceed an amount equal to the Maximum Carried Well Cost then
CE Power, in its sole discretion, has the right to require, by
giving notice in writing to the Operator and FX, that the
Operator cease all Drilling forthwith ("Second Earning Well
Cease Notice") and to plug and abandon the well immediately.
CE Power shall remain liable for Drilling costs on the Second
Earning Well including such plugging and abandonment (payable
24.5% to the Operator and 75.5% to FX).
6.3 Takeover of Second Earning Well. If the Second Earning Well is
to be plugged and abandoned pursuant to Clause 6.2 then any
one or more parties to the Fences JOA other than CE Power
shall have the right to propose taking over the well as an
Exclusive Operation under the Fences JOA and such party or
parties must provide a notice ("Second Earning Well
Continuation Notice") to CE Power within 24 hours of receipt
of a Second Earning Well Cease Notice. If any party issues a
Second Earning Well Continuation Notice then CE Power's
obligations to pay an amount equal to the subsequent Drilling
costs of the Second Earning Well shall cease and be deemed to
have ceased from the time of receipt of the Second Earning
Well Cease Notice and this agreement shall have terminated.
13
6.4 Reassignment on Issuance of Second Earning Well Cease Notice.
If CE Power issues a Second Earning Well Cease Notice then CE
Power shall be obliged to reassign to FX all of CE Power's
interest in the Fences Area except the Minimum Earned Area
surrounding the First Earning Well and CE Power shall be
obliged to return to POGC or FX, as appropriate, or destroy
all Data received from POGC or FX related to the Fences Area
except the Minimum Earned Acreage surrounding the First
Earning Well, except for that portion thereof which consists
of analyses, compilations, studies or other documents prepared
by or on behalf of CE Gas or CE Power.
7. The Final Earning Decision and Action.
7.1 Decision to Retain Entire Interest. If CE Power has fully
performed its obligations under Clauses 4 and 6, then on or
before the earlier of: (a) 50 Days after the Second Earning
Well has reached Total Depth, or (b) December 15, 2003 ("Due
Date Two") CE Power shall give notice to FX ("Final Earning
Notice") of its decision whether or not to retain its interest
in the Contract Area outside the Minimum Earned Acreage
surrounding the First Earning Well and the Second Earning
Well. Such decision shall be entirely within the discretion of
CE Power. If such decision is negative, or if no notice is
received by Due Date Two, this Agreement shall terminate
forthwith with no liability on CE Power to make any further
payments. If CE Power makes an affirmative decision CE Power
shall pay to FX a fourth installment for the Fences Mining
Usufruct. This installment will be calculated as the sum of
Ten Million Six Hundred Thousand Dollars less (i) the
cumulative amounts paid by CE Power to either the Operator or
FX measured by Drilling costs of the First Earning Well and
the Second Earning Well, (ii) the cumulative amounts paid by
CE Power to either the Operator or FX measured by the costs of
any geological or geophysical work that the Operator has
conducted at the sole written request of CE Power but which
has also been approved by the Operating Committee and as such
qualifies as earn in expenditure that FX is required to pay to
POGC under the Fences Cooperation Agreement and (iii) the sum
of One Million Dollars made to FX under Clause 5.3. Such sum
shall be received by FX not later than Due Date Two. If such
payment is not made by Due Date Two, this Agreement shall
terminate forthwith.
7.2 Effect of Termination under Clause 7.1. If this Agreement is
terminated pursuant to Clause 7.1, then save and except for
matters in this Clause 7.2 and Clause 11, this Agreement shall
be at an end and no Party shall have any further rights or
obligations hereunder. If this Agreement is terminated
pursuant to Clause 7.1, then CE Power shall promptly:
7.2.1 return to POGC or FX, as appropriate, or destroy all
Data received from POGC or FX related to the Fences
Area outside the Minimum Earned Acreage surrounding
the First Earning Well and the Second Earning Well,
except for that portion thereof which consists of
analyses, compilations, studies or other documents
prepared by or on behalf of CE Gas or CE Power; and
7.2.2 transfer to FX all of CE Power's interest in and
under the Fences JOAand the Fences Mining Usufruct
outside the Minimum Earned Acreage surrounding the
First Earning Well and the Second Earning Well;
14
8. Indemnity.
8.1 This Clause 8 is without prejudice to the other provisions of
this Agreement.
8.2 With respect to the interests transferred to CE Power under
Clause 3, FX shall be liable for all costs, charges, expenses,
liabilities and obligations in respect of the relevant
transferred interest (together the "Obligations") which are
attributable to events or circumstances occurring in any
period before the effective date of the transfer and FX shall
be entitled to all income, receipts, credits, reimbursements,
monies receivable, rebates and other benefits in respect of
the relevant transferred interest (together the "Benefits")
which are attributable to events or circumstances occurring in
any period before the effective date of the transfer.
8.3 From and after the effective date of the transfer of interests
under Clause 3, CE Power shall be liable for its pro-rata
percentage of Obligations and entitled to the equivalent
pro-rata Benefits which accrue in or relate to any period on
or after the effective date of transfer.
8.4 If applicable FX shall pay a 50% share and CE Power shall pay
a 50% share of any stamp duty due with respect to the transfer
of the interests under Clause 3.
9. Warranties of FX.
9.1 Subject to the provisions of this Clause 9, FX represents,
warrants and undertakes to CE Power that each of the
statements set out in Schedule 6 is true and accurate as at
the date hereof.
9.2 Each of FX's Warranties shall be separate and independent and,
save as expressly provided to the contrary, shall not be
limited by reference to or inference from any other term of
this Agreement.
9.3 No claim for breach of any FX Warranty set out in Schedule 6
shall be made against FX unless written notice thereof (giving
such details of the matter in respect of which the claim is
made as shall then be reasonably practicable) shall have been
given by or on behalf of CE Power to FX on or before the date
occurring 12 months after the date of this Agreement.
9.4 The maximum aggregate liability of FX in respect of all claims
for breach of FX's Warranties shall not exceed 10,600,000.00
(ten million six hundred thousand) Dollars.
10. Warranties of CE Power
10.1 Subject to the provisions of this Clause 10 CE Power
represents and warrants to FX that each of the statements set
out in Schedule 7 is true and accurate as at the date hereof.
15
10.2 CE Power's Warranties shall be separate and independent and,
save as expressly provided to the contrary, shall not be
limited by reference to or inference from any other term of
this Agreement.
10.3 No claim for breach of any warranty set out in Schedule 7
shall be made against CE Power unless written notice thereof
(giving such details of the matter in respect of which the
claim is made as shall then be reasonably practicable) shall
have been given to CE Power on or before the date occurring 12
months after the date of this Agreement.
10.4 The maximum aggregate liability of CE Power in respect of all
claims for breach of CE Power's Warranties shall not exceed
$50,000 (fifty thousand) Dollars
11. Costs.
11.1 The Parties shall pay their own costs and expenses in relation
to the preparation and negotiation of this Agreement and the
documents contemplated hereby or executed pursuant hereto.
12. Invoicing
12.1 Installments for the Fences Mining Usufruct pursuant to
Clauses 4.2, 5.3, 6.2 and 7.1 will be paid subsequently by CE
Power upon presentation of invoices issued by FX. Installments
will be outside the scope of Polish VAT unless the Law is
changed.
12.2 Charges from POGC to CE Power will be paid by CE Power in
accordance with the Fences JOA.
13. Notices.
13.1 Any notice pursuant to this Agreement may be given by
facsimile transmission or by letter to the Party to be served
at the address stated in Clause 12.3 or such other address as
may be given for the purposes of this Agreement by written
notice to the other Parties.
13.2 A notice given by facsimile transmission shall, provided that
such notice is also sent by post on the same day, be deemed to
be served on the first Business Day following the date of
dispatch, but a notice sent by post or delivered personally
shall not be deemed to be delivered until received.
16
13.3 The respective addresses for service are:
FX: FX Energy Poland Sp. z o.o.
al. Jana Paw(3)a II 29, 00-867, Warsaw, Poland
with a copy to FX Energy, Inc., attn: David Pierce
3006 Highland Dr., #206, Salt Lake City, Utah 84106 USA
Fax: 1-801-486-5575
CE Power CalEnergy Power (Polska) Sp. z o.o.
Niedzwiedzia 8C,
02-737 Warsaw, Poland
with a copy to CalEnergy Resources Limited,
attn Managing Director 60 Grays Inn Road,
London, WC1X 8LU
Fax: 44 20 7208 1610
14. Announcements.
14.1 Subject to Clause 13.2 any Party shall be entitled to make a
public announcement or statement regarding the Transferred
Interest except that the prior approval of the other Party
(such approval not to be unreasonably withheld) shall be
required where such announcement or statement relates to:
14.1.1 the execution of this Agreement or its completion; or
14.1.2 the terms of this Agreement or the negotiation of
such Agreement; or
14.1.3 any dispute or litigation or potential litigation
with a third party or parties relating to or arising
in connection with this Agreement;
PROVIDED THAT no such prior approval shall be required where such
announcement or statement is required by law or by a competent
government agency or other regulatory body excluding any relevant stock
exchange.
14.2 Where a Party is required pursuant to the regulations of any
relevant stock exchange to make a public announcement or
disclosure, no prior approval of the other Party shall be
required provided that not less than 24 hours notice is given
to the other Party for comment prior to such announcement or
disclosure.
15. Assignment.
15.1 None of the rights, liabilities or obligations of a Party
under this Agreement shall be assignable except with the prior
written consent of the other Party except where the assignment
is to an Affiliate when no such consent is required
16. General.
16.1 This Agreement constitutes the entire agreement between the
Parties and supersedes all warranties and representations
previously made, and all previous agreements, arrangements or
understandings between the Parties relating to the matters
contained herein whether oral or in writing made or dated
prior to the date hereof.
16.2 No waiver by any Party of any breach of a provision of this
Agreement shall be binding unless made expressly in writing.
Further, any such waiver shall relate only to the breach to
which it expressly relates and shall not apply to any
subsequent or other breach.
17
16.3 Under pain of nullity the provisions of this Agreement shall
only be varied by an agreement in writing executed by each of
the Parties and specifically referring to this Agreement.
16.4 This Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the
Parties.
16.5 This Agreement has been executed in three counterparts in
Polish and three counterparts in English. In the event of a
discrepancy between the Polish and English versions, the
Polish version shall prevail.
17. Governing Law.
17.1 This Agreement shall be interpreted in accordance with the
laws of Poland and in accordance with the Treaty between
Poland and the United States of America concerning Business
and Economic Relations dated March 21, 1990, and, as
applicable, principles of international law and decisions of
international tribunals, and international treaties to which
Poland is a party particularly the Convention on the
Regulation and Enforcement of Foreign Arbitral Awards dated
June 10, 1958.
18. Dispute Resolution.
18.1 Any dispute, controversy or claim arising out of, or relating
to this Agreement, or the breach, termination or invalidity
thereof including, without limitation, any dispute as to the
construction, enforceability or the carrying out of the terms
of this Agreement, which cannot be settled amicably before the
passing of sixty (60) days from the giving of notice of one
Party regarding such dispute, controversy or claim, may then
be referred by any Party to arbitration under the UNCITRAL
Arbitration rules as contemplated hereunder:
18.1.1 the appointing authority shall be the Arbitration
Institute of the Stockholm Chamber of Commerce, PO
Box 16050, S-10322, Stockholm, Sweden;
18.1.2 there shall be one arbitrator;
18.1.3 the arbitrator shall not be a national of Great
Britain, Poland or the United States of America;
18.1.4 the arbitrator shall be a prominent legal figure
expert in the laws of international investment;
18.1.5 the arbitrator shall call upon the services of an
expert if there appears to be a need to ascertain
good international petroleum industry practices;
18.1.6 the place of arbitration shall be Stockholm, Sweden;
18.1.7 the language to be used in the proceeding shall be
English, with translation into Polish;
18.1.8 the decision of the arbitrator shall be final and
binding and the Parties hereby agree to exclude any
right of application or appeal to any court in
connection with the award or its enforcement;
18
18.1.9 the decision shall be given in English and Polish and
shall include resolution regarding the cost of
arbitration; and
18.1.10 judgement upon the award may be entered in any court
having jurisdiction and application may be made to
such court for a judicial acceptance of the award and
an order of enforcement, as the case may be.
18.2 In the event of the commencement of dispute settlement
procedures, the Parties shall continue their performance of
this Agreement unless it is impossible to do so for reason of
Force Majeure or unless the rights to be transferred hereunder
have been expropriated, nationalized or otherwise taken.
18.3 To the extent consistent with and authorized under Polish Law,
each Party agrees and acknowledges that it is entering into
this Agreement as a "commercial act" and not in any capacity
as "sovereign" and hereby irrevocably waives any and all
claims to immunity including sovereign immunity or immunity of
jurisdiction with respect to any claims brought against it by
any Party under this Agreement and with respect to the dispute
resolution and arbitration proceedings and any proceedings to
enforce, recognize or execute any arbitral award rendered by a
tribunal constituted pursuant to this Agreement including,
without limitation, immunity from service of process, immunity
from jurisdiction of any court, and immunity of such of his
property as is of a commercial nature from execution.
IN WITNESS whereof each Party has caused its duly authorized representative to
sign this Agreement on the day and year first above written.
CALENERGY POWER(POLSKA) Sp.zo.o
By: /s/ Peter R.A. Youngs
- -----------------------------------------------------
Title: Attorney in Fact (under Power of Attorney)
Date: January 9, 2003
FX ENERGY POLAND Spolka z ograniczona odpowiedzialnooecia
By: David N. Pierce
- -----------------------------------------------------
Title: Member of the Management Board
Date: January 9, 2003
19
SCHEDULE 1
Form of Amendment of the Fences JOA
There shall be added at Section 1 of the Fences JOA the following definition:
"Best Efforts" means that the Party in question shall immediately carry out all
actions that could be expected of it in order to discharge the relevant
obligation placed upon it by this Agreement, which shall include lending all
assistance to the other Parties as could reasonably be expected.
Section 1.27 of the Fences JOA is hereby amended to read as follows:
"1.27 Party means any of the entities named in the first paragraph to this
Agreement and CalEnergy Power (Polska) Sp. z o.o. and any respective
permitted successors or assigns thereof, if any."
Section 3.2 of the Fences JOA is hereby amended to read as follows: "3.2
Interests in the Joint Venture Subject to Articles XI and XII, the interests of
the Parties shall be:
FX: 24.5%
POGC: 51%
CE Power: 24.5%"
Contract Area. The Contract Area as set forth in the Fences JOA is hereby
amended to read as follows:
The Contract Area consists of the area covered by Concession #29/2001/p and by
that certain Mining Usufruct dated September 28, 2001, covering prospecting for
and exploring deposits of oil and natural gas in the "Srem-Jarocin" area. The
following areas and wells shall not constitute part of the Contract Area:
Concessions Wells
Name Number Solec 7
Kaleje 127/93 Solec 8
Jarocin 128/93 Kaleje 11
Kleka 129/93 Kaleje 14
Radlin 172/94 Kleka 11
THERE SHALL BE ADDED TO THE FENCES JOA THE FOLLOWING PROVISIONS:
17. GOVERNING LAW
This Agreement shall be interpreted in accordance with the laws of
Poland and in accordance with the Treaty between Poland and the United
States of America concerning Business and Economic Relations dated
March 21, 1990, and, as applicable, principles of international law and
decisions of international tribunals, and international treaties to
which Poland is a party particularly the Convention on the Regulation
and Enforcement of Foreign Arbitral Awards dated June 10, 1958.
18. DISPUTE RESOLUTION
18.1 Any dispute, controversy or claim arising out of, or relating
to this Agreement identified by the Transferee for Phase 2
Drilling), or the breach termination or invalidity thereof
including, without limitation, any dispute as to the
construction, enforceability or the carrying out of the terms
of this Agreement, which cannot be settled amicably before the
passing of sixty (60) days from the giving of notice of one
Party regarding such dispute, controversy or claim, then any
Party may refer such dispute controversy or claim to
arbitration under the UNCITRAL Arbitration rules as completed
hereunder:
(i) the appointing authority shall be the Arbitration
Institute of the Stockholm Chamber of Commerce, PO
Box 16050, S-10322, Stockholm, Sweden;
(ii) there shall be one arbitrator;
(iii) the arbitrator shall not be a national of Great
Britain, Poland or the United States of America;
(iv) the arbitrator shall be a prominent legal figure
expert in the laws of international investment;
(v) the arbitrator shall call upon the services of an
expert if there appears to be a need to ascertain
good international petroleum industry practices;
(vi) the place of arbitration shall be Stockholm, Sweden;
(vii) the language to be used in the proceeding shall be
English, with translation into Polish;
(viii) the decision of the arbitrator shall be final and
binding and the Parties hereby agree to exclude any
right of application or appeal to any court in
connection with the award or its enforcement;
(ix) the decision shall be given in English and Polish and
shall include resolution regarding the cost of
arbitration; and
(x) judgement upon the award may be entered in any court
having jurisdiction and application may be made to
such court for a judicial acceptance of the award and
an order of enforcement, as the case may be.
18.2 In the event of the commencement of dispute settlement
procedures, the Parties shall continue their performance of
this Agreement unless it is impossible to do so for reason of
Force Majeure or unless the Transferor's rights hereunder have
been expropriated, nationalised or otherwise taken.
18.3 To the extent consistent with and authorised under Polish Law,
each Party agrees and acknowledges that it is entering into
this Agreement as a "commercial act" and not in any capacity
as "sovereign" and hereby irrevocably waives any and all
claims to immunity including sovereign immunity or immunity of
jurisdiction with respect to any claims brought against it by
any Party under this Agreement and with respect to the dispute
resolution and arbitration proceedings and any proceedings to
enforce, recognise or execute any arbitral award rendered by a
tribunal constituted pursuant to this Agreement including,
without limitation, immunity from service of process, immunity
from jurisdiction of any court, and immunity of such of his
property as is of a commercial nature from execution.
19. ADDITIONAL COVENANT
The Parties acknowledge that this Agreement, due to certain Polish legal
requirements does not fully reflect the standard international petroleum
industry practices (the "Practices"). As soon as the Parties become satisfied,
through consultation with the applicable Polish authorities or otherwise, that
acting fully in accordance with the Practices will not adversely affect their
legal or financial position, they shall negotiate amendments to the this
Agreement and use their Best Efforts in order to bring this Agreement in line
with the Practices.
20. ADDITIONAL OBLIGATION
In the event of the termination of the Farmout Agreement Covering the Fences
Area in the Foresudetic Monocline between CalEnergy Power (Polska) Sp. z o.o.
and FX Energy Poland Sp. z o.o. dated 9th January 2003 (the "Farmout Agreement")
pursuant to Clauses 5.3, 6.3, 6.4 or 7.1 of the Farmout Agreement, the Parties
shall:
A amend this Agreement so that it no longer covers the land
comprising the Minimum Earned Acreage in respect of the First
Earning Well or the Minimum Earned Acreage in respect of the
Second Earning Well ( all of these terms being as defined in
the Farmout Agreement), as applicable;
B execute a new joint operating agreement ("JOA") to govern the
rights and obligations of the Parties in respect of operations
conducted on the Minimum Earned Acreage for each of the First
Earning Well and the Second Earning Well ( all of these terms
being as defined in the Farmout Agreement), as applicable,
which JOA shall contain the same terms and conditions as this
Agreement except, for the purposes of identification only,
with such alterations as are necessary to reflect the identity
of the parties and their respective working interests and the
area to be covered by the JOA.
SCHEDULE 2
Form of the Mining Usufruct Transfer Agreement
THIS AGREEMENT is made the __ day of January, 2003
BETWEEN:
1. FX ENERGY POLAND Sp. z o.o. with its registered seat in Warsaw, at al.
Jana Pawla II 29, 00-867 Warsaw, entered into the National Court
Register maintained by the District Court for the city of Warsaw under
the KRS No. 0000052459 ("FX"),
and
2. CALENERGY POWER (POLSKA) Sp. z o.o. with its registered seat in Warsaw,
at Niedzwiedzia 8C, 02-737, Warsaw, entered into the National Court
Register maintained by the District Court for the city of Warsaw under
the RHB No. 52059 ("CE Power"),
jointly called the "Parties" and each of them individually a "Party".
Article 1
Purpose
The Parties enter into this Agreement pursuant to Clause 3.3 of the Farmout
Agreement between them of even date herewith.
Article 2
FX title to Fences Mining Usufruct
FX represents that it holds 49% interest in the mining usufruct for exploration
of oil and natural gas (the "Fences Mining Usufruct") in the "Srem-Jarocin" area
(also called the "Fences Area") established pursuant to the Agreement on
Establishment of the Mining Usufruct dated September 28, 2001 and the Concession
#29/2001/p. The interest in the Fences Mining Usufruct being transferred hereby
is free of any encumbrances or third party claims.
Article 3
Transfer of interest in the Fences Mining Usufruct
3.1 FX hereby transfers to CE Power and CE Power receives, a 24.5%
interest in the Fences Mining Usufruct, subject to Clause 3.2
below and subject to the condition precedent of obtaining a
consent from the State Treasury for the transfer, as required
under the relevant mining usufruct agreement. As soon as the
consent is obtained, FX shall notify that to CE Power in
writing.
3.2 No interest in the Fences Mining Usufruct is transferred
hereby with respect to:
a) the areas covered by the following exploitation
concessions held by POGC: Kaleje (no. 127/93);
Jarocin (no.128/93); Kleka (no. 129/93); Radlin (no.
172/94); and
b) the following wells: Solec 7; Solec 8; Kaleje 11;
Kaleje 14; Kleka 11.
Article 4
Transfer of geological information
4.1 FX, as the owner of a 49% interest in the geological
documentation regarding the Fences Area acquired before
January 1, 2002, hereby transfers to CE Power and CE Power
receives a 24.5% interest in ownership of all of that
documentation, subject to the condition precedent of obtaining
a consent from the Minister of Environment, as required
pursuant to the Geological and Mining law. As soon as the
consent is obtained, FX shall notify that to CE Power in
writing.
4.2 FX, as the holder of a 49% interest in the exclusive right to
commercially use the geological documentation regarding the
Fences Area acquired on and after January 1, 2002, hereby
grants to CE Power and CE Power receives a 24.5% interest in
the above right.
Article 5
Costs
FX and CE Power shall share equally all administrative cost and taxes due in
connection with this Agreement.
Article 6
Miscellaneous
6.1 Any disputes related to this Agreement shall be settled by
theArbitration Court at the Polish Chamber of Commerce in
Warsaw in accordance with its rules.
6.2 This Agreement shall be interpreted in accordance with the
laws of Poland and in accordance with the Treaty between
Poland and the United States of America concerning Business
and Economic Relations dated March 21, 1990, and, as
applicable, principles of international law and decisions of
international tribunals, and international treaties to which
Poland is a party.
6.3 This Agreement has been executed in Polish and English. In
case of any dispute, the Polish version shall prevail.
6.4 Under pain of nullity any amendments to this Agreement must be
in writing.
CALENERGY POWER (POLSKA) SP. Z O.O.
____________________
FX ENERGY POLAND SP. Z O.O.
___________________
SCHEDULE 3
NOT USED
SCHEDULE 4
RRPV Consent to Transfer Interests and Release of Encumbrances the "Consent")
ROLLS-ROYCE POWER VENTURES LIMITED, with its registered seat in London, 150
Victoria Street, SW1E 5 LB, ("RRPV"), represented by ___________ in his capacity
as __________________________;
hereby consents to and agrees with
FX ENERGY POLAND Sp. z o.o. with its registered seat in Warsaw, at Al. Jana
Paw(3)a II 29, 00-867 Warsaw, entered into the National Court Register under the
KRS No. 0000052459 ("FX"), represented by David N. Pierce in his capacity as
Managing Director;
AS FOLLOWS:
A) WHEREAS, on March, 9, 2001, FX, as a pledgor, and RRPV, as a
pledgee, entered into the Agreement for Registered Pledge of
Receivables No. 1, the Agreement for Registered Pledge of
Receivables No. 3 and the Agreement for Registered Pledge of
Receivables No. 4 (hereinafter jointly referred to as the
"Pledge Agreements") . The pledges created subsequently under
the Pledge Agreements were registered in the Register of
Pledges by the District Court for the City of Warsaw, XVIII
Economic Division - Pledge Register on 13.08.2001, 11.04.2002,
22.05.2002, 5.06.2002 and 14.08.2002 under the Register
numbers 848722, 900604, 908946, 911907, 911909 and 928609;
B) WHEREAS, pursuant to the Pledge Agreements, FX pledged in
favour of RRPV the rights and receivables arising out of the
certain agreements entered into with Polskie Gornictwo Naftowe
i Gazownictwo S.A. with its registered seat in Warsaw, at
Krucza 6/14, 00-537 Warsaw, entered into the Polish Court
Register maintained by the District Court in Warsaw under the
KRS No. 59492 (hereinafter referred to as "POGC"), i.e. the
Natural Gas Sale and Purchase Agreement, Fences Area Fields,
Republic of Poland dated December 18, 2000, the Joint
Operating Agreement Covering Areas in the Foresudetic
Monocline dated May 12, 2000, and the Agreement on
Co-operation in Exploration of Hydrocarbons on Foresudetic
Monocline dated April 11, 2000, respectively (hereinafter
jointly referred to as the "Relevant Agreements").
C) WHEREAS, pursuant to the Article III clause 4 of each of the
Pledge Agreements FX may not, without a prior written consent
of the RRPV, amend either of the Relevant Agreements or
voluntarily sell, transfer or otherwise dispose of all or any
portion of its interest in rights and receivables arising out
of the Relevant Agreements.
D) WHEREAS, FX desires to transfer one-half of its working
interest in the Relevant Agreements to CalEnergy Power
(Polska) Sp. z o.o. with its seat in Warsaw, at Niedzwiedzia
8C, 02-737, Warsaw, entered into the Polish Court Register
maintained by the District Court in Warsaw under the RHB No.
52059 (hereinafter referred to as "CE Power"), free from any
liens and encumbrances including registered pledges.
E) WHEREAS, the transaction with CE Power shall involve
transferring 50% of all current rights and receivables of FX
under the Relevant Agreements, whether present or future,
actual or contingent (the "Transferred Interest") and amending
the Relevant Agreements as appropriate.
E) WHEREAS, RRPV is prepared to release the Transferred Interest
from any its liens, rights or claims.
THEREFORE:
1. RRPV hereby agrees that the registered pledges established pursuant to
the Pledge Agreements shall be fully released in so far as they attach
to the Transferred Interest or any part thereof, upon or immediately
prior to their transfer to CE Power, and agrees that thereafter the
pledges shall attach solely to the rights and receivables of FX.
2. RRPV hereby agrees for each of the Relevant Agreements to be amended by
the parties thereto so as to document the acquisition of the
Transferred Interest by CE Power and to introduce any other changes [
can these be specified? ] aimed at clarification or improvement of the
position of FX and CE Power thereunder, provided that such amendments
shall not diminish the rights of FX thereunder in any material way
(other than as results directly from the disposal of the Transferred
Interest).
3. RRPV confirms that the Transferred Interest shall be free from any
other encumbrances, claims, rights or restrictions of RRPV, as of its
transfer to CE Power.
4. RRPV confirms that it shall not raise against CE Power any claims it
may have in connection with any breach by FX of any of the Pledge
Agreements or any other agreements or instruments.
5. RRPV and FX agree to promptly execute, at the request of either of
them, all agreements or instruments required under Polish law to fully
achieve the release of pledges as provided above. In particular, RRPV
undertakes to file a motion to the appropriate Register of Pledges in
order to cancel any registered pledges granted in connection with the
Transferred Interests immediately after the execution of this Consent.
These agreements and instruments shall ensure that RRPV current rights
under the Pledge Agreements shall not be adversely affected in any
material way, except as results directly from the disposal of the
Transferred Interest or as may temporarily be required to fulfil the
purpose of this Consent.
6. This Consent shall be governed and construed in accordance with Polish
law.
7. This Consent has been executed in Polish and English language versions.
In the event of conflict between the two language versions the Polish
language version shall prevail.
Executed this __ day of January, 2003
ROLLS ROYCE POWER VENTURES LIMITED:
______________________
FX ENERGY POLAND SP. Z O.O.:
______________________
SCHEDULE 5
GAS SALES AGREEMENT AMENDMENT
Dated ________, between
1) Polskie Gornictwo Naftowe i Gazownictwo S.A., with its seat in Warsaw,
at Krucza 6/14;
and
2) FX Energy Poland Sp. z o.o. with its seat in Warsaw at Al. Jana Paw(3)a
II 29
hereinafter called the "Parties", and each of them a "Party"
Article 1
In connection with the execution on January 8, 2003, of the Settlement Agreement
Regarding the Fences Area, the Parties agree to amend the Natural Gas Sale and
Purchase Agreement, Fences Area Fields, Republic of Poland of December 18, 2000
(the "Agreement"), as follows:
In Article 11 sec. 6, the first sentence shall read as follows:
,,The Agreement becomes effective upon its execution and shall continue
in effect until December 31, 2008"
Article 2
All other provisions of the Agreement shall remain unchanged.
FX Energy Poland Sp. z o.o.
________________________
Polskie Gornictwo Naftowe i Gazownictwo S.A.
__________________________
SCHEDULE 6
FX'S WARRANTIES
1. FX is duly incorporated with limited liability and validly exists under
the laws of Poland.
2. The documents which contain or establish FX's constitution incorporate
provisions which authorise, and all necessary corporate actions have
been taken to authorise, FX to sign and deliver, and perform the
transactions contemplated by, this Agreement.
3. Neither the signing and delivery of this Agreement nor the performance
of any of the transactions contemplated by this Agreement, will:
(i) contravene or constitute a default under any provision
contained in any agreement, instrument, law, judgment, order,
licence, permit or consent by which FX or any of its assets is
bound or affected: or
(ii) cause any limitation on FX or the powers of its directors,
whether imposed by or contained in any document which contains
or establishes its constitution or in any law, order,
judgment, agreement, instrument or otherwise, to be exceeded.
4. No order has been made or petition presented or resolution passed for
the winding-up of FX or for the appointment of a compulsory manager in
respect of FX or any substantial part of its assets.
5. No litigation, arbitration or administrative proceeding or claim which
might, by itself or together with any other such proceedings or claims,
have a material adverse effect on its business, assets or condition or
which might adversely affect its ability to observe or perform its
obligations under this Agreement and the agreements contemplated
hereby, is presently in progress or pending or, to the best of the
knowledge, information and belief of FX, threatened against FX.
6. FX is the legal owner, free from all Encumbrances of the 24.5% working
interest in the Fences JOA to be transferred to CE Power in accordance
with this Agreement and is entitled to transfer that 24.5% working
interest with full title guarantee to CE Power.
7. To the best of FX's knowledge, information and belief (after making
reasonable enquiries, including making enquiries of POGC where
necessary):
(a) POGC as Operator is not in breach of any obligations under the
Fences Mining Usufruct or the Fences Concession that would
justify the Minister of Environment to revoke either the
Fences Mining Usufruct or the Fences Concession;
(b) POGC as Operator is not in any dispute with any person in
relation to the Fences JOA or any operations on the Fences
Mining Usufruct or the Fences Concession;
(c) There are no outstanding work obligations or commitments to be
performed by FX under the Fences JOA;
(d) FX is not in breach of any term of the Fences JOA; and
(e) The copies of the Fences JOA, Fences Mining Usufruct and
Fences Concession provided to CE Power by FX are true and
accurate copies of those documents.
8. Neither FX or any of its Affiliates, nor any of their respective
officers, directors, employees or agents has in the past engaged in,
and shall not in the future engage in, any conduct in violation of
Polish law or US law, including the Foreign Corrupt Practices Act.
SCHEDULE 7
CE GAS/CE POWER WARRANTIES
1. CE Power is duly incorporated and validly exists under the laws of
Poland.
2. The documents which contain or establish CE Power's constitution
incorporate provisions which authorise and all necessary corporate
actions have been taken to authorise CE Power to sign and deliver, and
perform the transaction contemplated by, this Agreement.
3. Neither the signing and delivery of this Agreement nor the performance
of any of the transactions contemplated by this Agreement, will:
(i) contravene or constitute a default under any provision
contained in any agreement, instrument, law, judgment, order,
licence, permit or consent by which CE Power or any of its
assets is bound or affected; or
(ii) cause any limitation on CE Power or the powers of its
directors, whether imposed by or contained in any document
which contains or establishes its constitution or in any law,
order, judgment, agreement, instrument or otherwise, to be
exceeded.
4. No litigation arbitration or administrative proceeding or claim which
might by itself or together with any other such proceedings or claims
have a material adverse effect on its business, assets or condition or
which might adversely affect its ability to observe or perform its
obligations under this Agreement and the agreements contemplated
hereby, is presently in progress or pending or, to the best of the
knowledge, information and belief of CE Power, threatened against CE
Power.
5. No order has been made or petition presented or resolution passed for
the winding-up of the CE Power or for the appointment of a compulsory
manager in respect of the CE Power or any substantial part of its
assets.
6. Neither CE Power or any of its Affiliates, nor any of their respective
officers, directors, employees or agents has in the past engaged in,
and shall not in the future engage in, any conduct in violation of
Polish law or US law, including the Foreign Corrupt Practices Act.
EXHIBIT ONE
FENCES MINING USUFRUCT
EXHIBIT TWO
FENCES CONCESSION
EXHIBIT THREE
FENCES COOPERATION AGREEMENT
EXHIBIT FOUR
FENCES JOA
EXHIBIT FIVE
FENCES SETTLEMENT AGREEMENT