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1.
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Definitions
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In
this Agreement, unless the context otherwise
requires:
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1.1
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“Acreage”
means the lands more particularly described in the Schedule attached
hereto, in which the Grantor holds any right or interest and includes
the
Petroleum Substances which, upon or under such lands, together with
the
right to explore for and recover same insofar as such rights are
granted
by the Documents;
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1.2
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“Documents”
means the Oil, Petroleum Substances and/or Gas Licences, leases,
farmouts,
options or other agreements to which the Grantor is or becomes a
party,
including any extensions or renewals thereof and any new grant acquired
in
addition to the Licences or pertaining to the
Acreage;
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1.3
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“Gas”
means and refers to all natural gas produced from the premises (including
casinghead gas) and all of its constituent elements, including but
not
limited to sulphur contained in the gas, and natural gasoline, condensate,
distillate, butanes, propanes, and other hydrocarbons condensed,
absorbed,
or separated out of or from the gas after it leaves the lease, including
without limitation casinghead gas and flared or vented
gas;
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1.4
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“Licence(s)”
means the exploration licences in the Kurgan region of the Russian
Federation held by the Grantor at the Acreage (as more particularly
detailed in the Schedule) and including any other licences obtained
by the
Grantor;
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1.5
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“Oil”
means and refers to any hydrocarbons produced from the premises,
regardless of gravity, capable of being produced in liquid form at
the
well by ordinary production methods including without limitation
condensate, distillate and other liquid hydrocarbons recovered from
oil or
gas run through a separator or other equipment at the lease.
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1.6
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“Petroleum
Substances” means the Grantor’s share of Oil, petroleum and natural Gas
and related hydrocarbons, all other gases and all minerals and substances
(whether condensate, liquid or solid and whether hydrocarbons or
not) in
association with any of the foregoing or found in any water contained
in
an Oil and/or Gas reservoir but only insofar as and to the extent
that the
same are granted;
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2.
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Interpretations
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2.1
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References
to a statute or statutory provision include that statute or provision
as
from time to time modified or re-enacted or consolidated whether
before or
after the date of this Agreement so far as such modification or
re-enactment or consolidation applies or is capable of applying to
any
transactions entered into in accordance with this Agreement and (so
far as
liability thereunder may exist or can arise) shall include also any
past
statutory provision (as from time to time modified or re-enacted
or
consolidated) which such provision has directly or indirectly
replaced.
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2.2
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The
expressions “holding company” and “subsidiary” shall have the same
meanings in this Agreement as their respective definitions in the
Act.
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2.3
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References
to this Agreement include any Recitals and Schedules to it and this
Agreement as from time to time amended and references to Clauses
and
Schedules are to Clauses of and Schedules to this
Agreement.
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2.4
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Headings
shall be ignored in construing this
Agreement.
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2.5
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Any
provision of this Agreement which is expressed to bind more than
one
person shall, save where inconsistent with the context, bind them
jointly
and each of them severally.
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2.6
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References
to time of day are to London, United Kingdom time unless otherwise
stated.
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2.7
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References
to the winding-up of a person include the amalgamation, reconstruction,
reorganisation, administration, dissolution, liquidation, merger
or
consolidation of such person and any equivalent or analogous procedure
under the law of any jurisdiction in which that person is incorporated,
domiciled or resident or carries on business or has
assets.
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2.8
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Any
reference to books, records or other information means books, records
or
other information in any form including paper, electronically stored
data,
magnetic media, film and microfilm.
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2.9
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Any
reference to any English legal term or concept (including for any
action,
remedy, method of judicial proceeding, document, legal status, statute,
court, official governmental authority or agency) shall, in respect
of any
jurisdiction other than England, be interpreted to mean the nearest
and
most appropriate analogous term to the English term in the legal
language
in that jurisdiction as the context reasonably requires so as to
produce
as nearly as possible the same effect in relation to that jurisdiction
as
would be the case in relation to
England.
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2.10
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Any
previously undefined reference to a term commonly used in the oil
and gas
industry shall be as defined from time to time on www.glossary.oilfield.slb.com
or
any successor website.
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3.
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Gross
Overriding Royalty
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3.1
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The
Grantor hereby reserves out, grants, sets over and conveys to the
Grantee
an interest in the Licences, the Petroleum Substances and the Documents
in
the form of a gross overriding royalty of 3% (THREE
PERCENTUM)
percent of the Grantor’s gross interest in all Petroleum Substances
(and/or turnover of the Grantee deriving therefrom) to be found to
exist
or deemed to exist within, upon or under the Licences or in the Acreage
and which are produced, marketed and/or saved therefrom (hereinafter
called the “Royalty”).
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3.2
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The
Royalty shall be paid free and clear of any and all cost or expense
of
every kind and nature whatsoever incurred in (inter alia) connection
with
maintaining, renewing and extending, exploring, drilling, re-completing,
side-tracking, producing, co-mingling of wells and reservoirs, and
processing, treatment and compressing and operating costs of such
Petroleum Substances subject to the provisions of Clause 8 hereof
and save
that the no Royalty shall be payable on any VAT validly charged by
the
Grantor on any sale of Petroleum Substances on behalf of the Grantee
under
the terms hereunder.
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3.3
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The
Royalty will apply until the Grantor has received the total aggregate
figure of US$ 20,000,000 (TWENTY
MILLION DOLLARS)
from the gross sales of all or any Petroleum Substances production
produced or occuring at the Wellhead in the Acreage, such value to
be
calculated by reference to the best prevailing
market price
of
the relevant Petroleum Substances at the wellhead in Kurgan, Western
Siberia, Russian Federation and
in the event the sale price is in roubles then the conversion rate
for
dollars shall be at the rate between $ (dollars) to R (rouble) being
the
mid price on the relevant day as detailed in the Financial
Times.
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12.
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Lien
for Royalty
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(a)
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The
Grantee shall be entitled to and shall have a lien upon the Grantor’s
share of all Petroleum Substances from time to time produced from
the
Licences to secure the payment of the gross overriding royalty granted
to
the Grantee under this Agreement. Such lien shall not operate to
release
the Grantor from its liability for monies due to the Grantee. Such
lien
shall attach to the Grantor’s share of the Petroleum Substances sold or
otherwise disposed of from the Licences. Upon default occurring in
payment
by the Grantor of monies payable to the Grantee, the Grantee shall
notify
the Grantor of same and request the default to be remedied within
fourteen
days. If the default is not remedied within the said fourteen days,
such
lien shall operate as an assignment to the Grantee in respect of
the
consideration thereafter payable to the Grantee for the Petroleum
Substances sold up to the amount owed to the Grantee and not so paid
by
the Grantor.
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(b)
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Service
of a copy of this Agreement upon the Grantor and any purchaser of
Petroleum Substances together with written notice from the Grantee
shall
constitute written authorization on the part of the Grantor for such
purchaser to pay to the Grantee the proceeds from any sale or sales
of the
Grantor’s share of the Petroleum Substances up to the amount owed to the
Grantee by the Grantor and such purchaser is authorized to rely upon
the
statement of the Grantee as to the amount owed to the Grantee by
the
Grantor.
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(c)
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The
books and records kept by the Grantee shall constitute written proof
of
the existence of such default, although no purchaser shall be obliged
to
examine same before acting upon such notice of
default.
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13.
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Further
Assurances
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16.1
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Shareholder
approval
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None
of the parties shall make any public announcement or issue any circular
relating to this Agreement or any matters or information provided
pursuant
hereto without the prior written approval of the other Parties. This
does
not affect any announcement or circular required by law or any regulatory
body or the rules of any recognised stock exchange, but the Party
with an
obligation to make an announcement or issue a circular shall consult
with
the other Party/Parties so far as is reasonably practicable before
complying with such obligation.
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16.2
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Oral
statements
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The
Parties intend that any oral statements made or replies to questions
given
by either Parties relating to the Group shall be consistent with
any such
public announcements or circulars.
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The
parties shall use all reasonable endeavours to keep confidential
and to
ensure that their respective Associated Companies and their respective
officers, employees, agents and professional and other advisers keep
confidential any information (the “Confidential Information”):
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18.1
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No
party may use for its own business purposes or disclose to any third
party
any Confidential Information without the consent of the other
parties.
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18.2
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This
Clause does not apply to:
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(a)
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information
which is or becomes publicly available (otherwise than as a result
of a
breach of this Clause);
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(b)
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information
which is independently developed by the relevant party or acquired
from a
third party, to the extent that it is acquired with the right to
disclose
it;
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(c)
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information
which was lawfully in the possession of the relevant party free of
any
restriction on disclosure;
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(d)
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information
which following disclosure under this Clause, becomes available to
the
relevant party from a source which is not bound by any obligation
of
confidentiality in relation to such
information;
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(e)
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the
disclosure by a party of Confidential Information to its principal
shareholders or its directors or employees or to those of its Associated
Companies who need to know that confidential information in its reasonable
opinion for purposes relating to this Agreement but those principal
shareholders, directors and employees shall not use that Confidential
Information for any other purpose;
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(f)
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the
disclosure of information to the extent required to be disclosed
by law or
any court of competent jurisdiction, any governmental official or
regulatory authority (including the London Stock Exchange, the Financial
Services Authority, the Panel on Takeovers and Mergers and the United
States Securities and Exchange Commission) or any binding judgment,
order
or requirement of any other competent
authority;
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(g)
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the
disclosure of information to any tax authority to the extent reasonably
required for the purposes of the tax affairs of the party concerned
or any
member of its group; or
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(h)
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the
disclosure to a party’s professional advisers of information reasonably
required to be disclosed for purposes relating to this
Agreement.
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18.3
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Each
party shall inform any shareholder, officer, employee or agent or
any
professional or other adviser advising it in relation to matters
relating
to this Agreement, or to whom it provides Confidential Information,
that
such information is confidential and shall instruct
them:
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19.1
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Addresses
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Any
notice, claim or demand in connection with this Agreement shall be
in
writing in English (each a “Notice”) shall be sufficiently given if
delivered or sent to the recipient at its fax number, telex number
or
address set out in the Schedule or any other fax number, telex number
or
address notified to the sender by the recipient for the purposes
of this
Agreement.
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19.2
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Form
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Any
Notice shall be in writing in English and may be sent by messenger,
telegram, telex, fax or prepaid first class post (first class in
the case
of service in the United Kingdom and airmail in the case of international
service). Any Notice shall be deemed to have been received on the
next
working day in the place to which it is sent, if sent by telegram,
telex
or fax, or 60 hours from the time of posting, if sent by
post.
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20.1
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Whole
agreement
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This
Agreement contains the whole agreement between the parties relating
to the
subject matter of this Agreement at the date hereof to the exclusion
of
any terms implied by law which may be excluded by contract and supersedes
any previous written or oral agreement between the Parties in relation
to
the matters dealt with in this Agreement. In this Clause “this Agreement’
includes all documents entered into pursuant to this Agreement.
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20.2
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JV
Agreement
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20.3
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Legal
advice
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Each
party to this Agreement confirms it has received independent legal
advice
relating to all the matters provided for in this Agreement, including
the
provisions of this Clause, and agrees, having considered the terms
of this
Clause and the Agreement as a whole, that the provisions of this
Clause
are fair and reasonable.
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20.4
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No
inducement
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Each
of the Parties acknowledges that it has not been induced to enter
into
this Agreement by any representation, warranty or undertaking not
expressly incorporated into it.
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21.1
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Survival
of rights, duties and obligations
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Termination
of this Agreement for any cause shall not release a Party from any
liability which at the time of termination has already accrued to
another
Party or which thereafter may accrue in respect of any act or omission
prior to such termination.
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21.2
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No
partnership
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Nothing
in this Agreement shall be deemed to constitute a partnership between
the
Parties nor constitute any party the agent of any other party for
any
purpose.
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21.3
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Release
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Any
liability to any party under this Agreement may in whole or in part
be
released, compounded or compromised or time or indulgence given by
that
party in its absolute discretion as regards any party under such
liability
without in any way prejudicing or affecting its rights against any
other
party under the same or a like liability, whether joint and several
or
otherwise.
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21.4
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Waiver
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No
failure of any party to exercise, and no delay by it in exercising,
any
right, power or remedy in connection with this Agreement (each a
“Right”)
shall operate as a waiver of that Right, nor shall any single or
partial
exercise of any Right preclude any other or further exercise of that
Right
or the exercise of any other Right. The Rights provided in this Agreement
are cumulative and not exclusive of any other Rights (whether provided
by
law or otherwise). Any express waiver of any breach of this Agreement
shall not be deemed to be a waiver of any subsequent
breach.
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21.5
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Payments
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All
payments due under this Agreement shall be paid in full without any
deduction or withholding other than as required by law or under this
Agreement and the paying party shall not be entitled to assert any
credit
set off or counterclaim against any other party in order to justify
withholding payment of any such amount in whole or in
part.
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21.6
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Variation
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No
variation of this Agreement shall be effective unless in writing
and
signed by or on behalf of each of the
parties.
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21.7
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Assignment
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21.7.1.
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This
Agreement shall be binding on and inure to the benefit of the parties
and
their successors and permitted assigns. The parties may not assign
or
transfer all or any part of their rights or obligations under this
Agreement nor any benefit arising under or out of this Agreement
without
the prior written consent of the other
parties.
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21.7.2
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Except
as otherwise expressly provided in this Agreement, the benefit of
the
provisions of this Agreement may not be assigned to any Associated
Company.
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21.8
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Time
of the essence
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Time
shall be of the essence of this Agreement, both as regards any dates,
times and periods mentioned and as regards any dates, times and periods
which may be substituted for them by agreement in writing between
the
parties.
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21.9
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Further
assurance
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At
any time after the date of this Agreement the parties shall, and
shall use
all reasonable endeavours to procure that any necessary third party
shall,
at the cost of the relevant party execute such documents and do such
acts
and things as that party may reasonably require for the purpose of
giving
to that party the full benefit of all the provisions of this
Agreement.
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21.10
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Illegality
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If
any provision in this Agreement shall be held to be illegal, invalid
or
unenforceable, in whole or in part, under the law of any jurisdiction,
the
legality, validity or enforceability of such provision or part under
the
law of any other jurisdiction and the legality, validity and
enforceability of the remainder of this Agreement shall not be
affected.
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21.11
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Counterparts
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This
Agreement may be entered into in any number of counterparts, all
of which
taken together shall constitute one and the same instrument. Any
party may
enter into this Agreement by executing any such
counterpart.
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21.12
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Costs
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Each
party shall bear all costs incurred by it in connection with the
preparation, negotiation and entry into this Agreement and the documents
to be entered into pursuant to it.
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21.13
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Language
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This
deed may be executed in English and in Russian. In case of any conflict
between the English and Russian versions, the terms of the English
version
shall prevail
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23.1
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Governing
law
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This
Agreement shall be governed by and construed in accordance with English
law.
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23.2
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Jurisdiction
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All
the parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any dispute which may arise out
of or in
connection with this Agreement.
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23.3
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Submission
and waiver
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All
the parties irrevocably submit to the jurisdiction of such courts
and
waive any objection to proceedings in any such court on the ground
of
venue or on the ground that the proceedings have been brought in
an
inconvenient forum.
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23.4
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Appointment
of Process Agent
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The
Grantee (the “Principal”)
irrevocably appoints Tim Peara of 24 Hoop Lane, London NW11 8BU (the
“Agent”)
as its agent to accept service of process in England in any legal
action
or proceedings arising out of or in connection with this Agreement
provided that:
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23.4.1
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service
upon the Agent shall be deemed valid service upon the Principal
whether or
not the process is forwarded to or received by the Principal;
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23.4.2
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the
Principal shall inform all other parties to this Agreement, in
writing, of
any change in the address of the Agent within 28 days of such
change;
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23.4.3
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if
the Agent ceases to be able to act as a process agent or to have
an
address in England, the Principal irrevocably agrees to appoint
a new
process agent in England acceptable to the other parties and to
deliver to
the other parties within 14 Business Days a copy of a written acceptance
of appointment by the new process agent; and
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23.4.4
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nothing
in this Agreement shall affect the right to serve process in any
other
manner permitted by law.
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EXECUTED
as
a
DEED by
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Baltic
Petroleum (E&P) Limited
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acting
by a Director and
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a
Director/Secretary
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EXECUTED
as
a
DEED
by
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OOO
Zauralneftegaz
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acting
by General Director
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)
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