Ex hibit 10.12
The Democratic Republic of
São Tomé e Principé
Environmental Remediation Holding
Corporation
Annex
A
Option
Agreement
CONTENTS
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RELINQUISHMENT OF RIGHTS BY
ERHC
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JDZ
JOINT AUTHORITY AND JOINT MINISTERIAL COUNCIL
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THIS AGREEMENT is made on the
2 nd
of April,
2003
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The
Democratic Republic of São Tomé Principé
(“DRSTP"); and
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Environmental Remediation Holding
Corporation a company incorporated in the State of Colorado in the
United States of America with a place of business at Suite 1570,
5444 Westheimer, Houston, Texas, USA (“ERHC"),
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DRSTP and ERHC were party to certain
arrangements relating to oil, gas and mineral reserves which were
submitted to dispute resolution by arbitration (the "
Arbitration ").
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In
a treaty done on 21 February 2001 (the " Treaty ") the
Federal Government of Nigeria (" FGN ") and
DRSTP agreed to jointly develop the natural resources of an area of
the exclusive economic zones between their respective territories
in respect of which their maritime claims overlap (the " JDZ
").
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In
the Treaty, FGN and DRSTP agreed to cooperate regarding prior
dealings with third persons in respect of any part of the JDZ in an
equitable manner.
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DRSTP and ERHC entered into an
agreement on 21 May 2001 in order to settle the Arbitration. (the
“ Agreement ”).
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DRSTP and ERHC have now agreed to
further arrangements in relation to the JDZ and the MoA on the
terms of this agreement (the " Agreement ").
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THE PARTIES AGREE AS
FOLLOWS:
"
Administration Agreement " means the agreement set out in
Annex A;
"
Block " means an area designated as an individual unit for
the exploration and/or production of hydrocarbon within the JDZ
under the JDZ Regulations;
"
ERHC Override " means all amounts to which ERHC is entitled
pursuant to clause 3.3 of the MoA;
"
ERHC Profit OU Share " means all amounts to which ERHC is
entitled pursuant to clause 3.1 of the MoA;
"
ERHC Signature Bonus Share " means all amounts to which ERHC
is entitled pursuant to clause 3.2 of the MoA;
Annex
A
Option
Agreement
"
ERHC Working Interest Option " means the option granted to
ERHC pursuant to clause 3.4 of the MoA;
"
ExxonMobil " means ExxonMobil Corporation or any affiliate
or member of the ExxonMobil group;
"
ExxonMobil Agreement" means the agreement between ExxonMobil
and DRSTP dated 22 nd of February, 2003 pursuant to which
ExxonMobil is entitled to certain working interests in the JDZ on a
preferential basis;
"
ExxonMobil Preferential Working Interest ” or
EPWT" means a working interest which ExxonMobil is entitled
to acquire pursuant to the ExxonMobil Agreement;
"
First Licensing Round " means the first Licensing Round held
in respect of the JDZ;
"
Final Relinquishment Date ” means the earlier of the
date on which:
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(a)
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all
working interests to whichERHC has rights pursuant to this
Agreement have been granted by the JDA to or as directed by ERHC
and fully, irrevocably and unconditionally vested in ERHC;
or
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(b)
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the
Take-Up Period relating to ERHC's final choice pursuant to Clause
4.1 of this Agreement expires;
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"
JDA ” means the Authority established
pursuant to Part Three of the Treaty;
"
JMC " means the Joint Ministerial Council established
pursuant to Part Two of the Treaty;
"
JDZ Regulations " means the Treaty and all laws,
regulations, guidelines or similar instruments adopted by the JDA
pursuant to the authority given to the JDA and/or the JMC
by
"
Licensing Round " means any process administered
by the JDA in which persons bid and/or apply for and/or
are awarded licenses to explore for and/or exploit the hydrocarbon
resources of the JDZ;
“ Map ” means the
map set out in Annex B;
“ Preferential Working
Interests ” or “ PWI ” means a paid
working interest acquired by ERHC pursuant to the rights
granted in clause 4.1 of this Agreement;
"
PSC " means any production sharing agreement or other grant
of rights entered into between a person or persons and JDA to
explore for and/or exploit hydrocarbon resources and/or to acquire
working interests or similar rights in the JDZ;
"
Signature Bonus " means any funds payable to the JDA
pursuant to the JDZ Regulations to acquire the right to sign a
production sharing contract or other grant of rights to explore for
and/or exploit the hydrocarbon resources of the JDZ;
Annex
A
Option
Agreement
"
Subsidiary" means any entity in respect of which a
Party, or any venture or consortium of which a Party is part, is in
a position to exercise control over corporate decision making and
function;
"
Take-Up Period " means, in respect of any one of the
working interests to which ERHC has rights pursuant to clause 4.1,
a reasonable time from the date on which the JDA provides a bona
fide opportunity as part of a Licensing Round in accordance with
the procedure set out in the Administration Agreement for ERHC to
exercise any or all such rights;
"
Tender Documentation " means the documentation made
available relating to a Licensing Round.
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The
headings and paragraphs in this Agreement are for ease of reference
only and are to be ignored in construing its substantive
provisions.
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Words denoting the singular shall
include the plural and vice versa.
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A
reference to a Party includes its permitted assignees, successors
in title and/or any venture or consortium of which it is
part.
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$
means United States Dollars.
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RELINQUISHMENT OF RIGHTS BY
ERHC
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ERHC agrees to relinquish its rights
pursuant to the MoA in respect of:
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the
ERHC Signature Bonus Share;
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the
ERHC Profit Oil Share;
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the
ERHC Working Interest Option,
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(together, the " Relinquished
Rights ”) in accordance with the procedure set out in
clause 6.
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In
consideration of the relinquishment by ERHC pursuant to clause 3
and subject to this clause 4, DRSTP grants to ERHC the rights
to;
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nominate a Block and acquire a 15%
working interest in that Block (" Choice 1 Interest
");
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nominate a second Block and acquire
a 15% working interest in that Block (" Choice 2 Interest
");
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Annex
A
Option
Agreement
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nominate a third Block and acquire a
20% working interest in that Block (" Choice 3
Interest "),
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nominate a fourth Block and acquire
a 30% working interest in that Block (" Choice 4 Interest
");
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nominate a fifth Block and acquire a
25% working interest in that Block (" Choice 5 Interest ");
and
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nominate a sixth Block and acquire
20% working interest in that Block (" Choice 6 Interest
"),
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all
of which will be chosen from Blocks that correlate substantially to
the nine Blocks shown on the Map.
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DRSTP and ERHC acknowledge that the
rights granted to ERHC pursuant to clause 4.1 of this Agreement are
options that, if not exercised, will lapse upon the expiry of their
respective Take-Up Periods in accordance with the terms of this
Agreement.
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Subject to clause 4.4, DRSTP
undertakes that the only condition, criteria, restriction or
further requirement that ERHC must observe or meet in order to
exercise its rights under this Agreement and properly and fully
acquire any or all of the working interests referred to in clause
4.1 is payment of the Signature Bonuses in the amounts set out in
Column 2 of the table hereunder, as well as all applicable taxes,
fees and charges adopted by the JMC and implemented by the JDA in
accordance with the procedure set out in the JDZ Regulations. For
the avoidance of doubt, ERHC will be beneficiary of not less
favourable treatment than the one that is granted to
others:
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Column 1
Block
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Column 2
Signature Bonus
Payable
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Choice 1 Interest
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$0.00
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Choice 2 Interest
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100% of that proportion of the
Signature Bonus for that Block payable in respect of ERHC’s
15% PWI
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Choice 3 Interest
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$0.00
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Choice 4 Interest
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$0.00
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Choice 5 Interest
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$0.00
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Choice 6 Interest
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100% of that proportion of the
Signature Bonus for that Block payable in respect of ERHC’s
20% PWI
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Subject to any obligation to
purchase an initial 3-D seismic survey from a specified seismic
vendor, as may be set out in the terms and conditions of a PSC by
the JDA, the Parties agree that ERHC shall have the right to
conduct seismic activity in any Block it may select under this
Agreement.
Annex
A
Option
Agreement
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DRSTP agrees that notwithstanding
the holding of any Licensing Round the processes set out
in the
Administration Agreement will be the processes by which ERMC or its
nominee will be entitled to acquire full and proper title to each
PWI.
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ERHC agrees that it will not
exercise its right to acquire:
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the
Choice 1 Interest in a Block where ExxonMobil has exercised a right
to acquire an EPWI of 40%;
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the
Choice 2 Interest in a Block where ExxonMobil has exercised a right
to acquire an EPWI of 40%;
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the
Choice 3 interest in a Block where ExxonMobil has exercised a right
to an EPWI Of either 25% or 40%;
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the
Choice 4 Interest in a Block where ExxonMobil has exercised a right
to an EPWI of either 25% or 40%;
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the
Choice 5 Interest in a Block where ExxonMobil has exercised a right
to an EPWI of either 25% or 40%; or
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the
Choice 6 Interest in a Block where ExxonMobil has exercised a right
to an EPWI
of either 25% or 40 %,
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but
nothing in this Agreement will be taken to preclude ERHC from
bidding for and/or acquiring interests other than or in addition to
a PWI (" Additional Interest ") in any Block where
ExxonMobil has exercised a right to acquire an EPWI provided that,
in respect of the Additional Interest, ERHC follows the normal
processes and guidelines for acreage bidding.
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JDZ JOlNTAUTHORITY AND JOINT
MINISTERIAL COUNCIL
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this Agreement is approved by the
JMC prior to or at the meeting of the JMC where the JMC authorises
the First Licensing Round to be carried out;
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evidence which is reasonably
satisfactory to ERHC of the approval contemplated by clause 5(a) is
provided to ERHC in writing within seven days of being
given;
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the
execution by the JDA of the Administration Agreement is approved by
the JMC prior to or at the meeting of the JMC where the JMC
authorises the First Licensing Round to be carried
out;
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evidence which is reasonably
satisfactory to ERHC of the approval contemplated by clause
5(c) is provided to ERHC within seven days of being
given;
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the
JDA executes an agreement in the form of the Administration
Agreement prior to commencement of the Licensing Round;
and
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Annex
A
Option
Agreement
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nothing in the JD2 Regulations or in
any other relevant law, regulation, rule, agreement or arrangement
prevents, amends, or is in any way inconsistent with the rights
granted to ERHC pursuant to this Agreement.
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DRSTP acknowledges that the
JDA has continuing obligations to comply with the
Administration Agreement and undertakes that the JDA performs all
such continuing obligations.
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relinquishment, because of expiry of
a Take-Up Period in respect of a choice of working interest
pursuant to clause 4.1, will only occur when ERHC is no longer in a
position to exercise a future right in such choice;
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subject to clause 6 (a), upon the
vesting in ERHC of, or earlier expiry of the Take-Up Period in
relation to, any of the working interests to which ERHC is entitled
pursuant to clause 4, the amounts to which ERHC is entitled
pursuant to the Relinquished Rights will be reduced by the amounts
of any Signature Bonuses waived by DRSTP in relation to such
working interests m accordance with this Agreement;
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the
Relinquished Rights will only be relinquished in accordance with
this clause 6, and prior to the Final Relinquishment Date all
rights granted to ERHC pursuant to the MoA which have not been
relinquished will continue in full force and effect and be
enforceable by ERHC;
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on
the Final Relinquishment Date, all rights in the Relinquished
Rights which have not been relinquished pursuant to this clause 6
will be relinquished in full by ERHC; and
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following the Final Relinquishment
Date, all provisions of the MoA which do not relate to the rights
relinquished by ERHC pursuant to this Agreement will remain m full
force and effect and, in particular, nothing tn this Agreement is
intended to affect or amend the rights granted to ERHC pursuant to
the MoA in respect of the exclusive economic zone of
DRSTP.
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REPRESENTATIONS AND
WARRANTIES ;
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ERHC represents and warrants
that:
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it
is a duly formed corporate entity and currently exists in good
standing under the laws of its place of incorporation and it has
full power and authority to execute this Agreement;
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it
has not gone into liquidation, made a general assignment for the
benefit of creditors, declared or been declared bankrupt or
insolvent by a competent court or had a receiver appointed in
respect of the whole or any part of its assets and has no plans to
do so; and
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Annex
A
Option
Agreement
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it
has access to 2-D seismic survey covering the JDZ under a duly
executed Data Use License.
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DRSTP represents, warrants and
undertakes that:
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the
number, designation, boundaries and respective sizes of the Blocks
will not be materially different to those shown on the
Map;
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the
person or persons executing this Agreement on its behalf have full
authority to commit DRSTP to this Agreement;
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no
laws, regulations, rules, contracts or agreements are currently in
existence that prohibit the enforcement of or conflict with any of
the terms of this Agreement;
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neither ExxonMobil nor any of its
affiliates has or will be granted any preferential right other than
the right to acquire a working interest of 40% in one Block and
25% in each of two further Blocks, and
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neither DRSTP nor the JDA has
entered into any contract or agreement, or granted any other rights
to another parry (including ExxonMobil) which would hinder or
prohibit the implementation and enforcement of, or in any way
conflict with, the terms of this Agreement or otherwise diminish
ERHC's rights under this Agreement and DRSTP will not, and
undertakes that the JDA will not, enter into any such contract or
arrangement or grant any such rights.
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should any law, regulation or rule
be issued or promulgated into law or any other act or thing be done
by DRSTP or the JDA (including without limitation any amendment to
the JDZ Regulations or issuance of a new rule in respect of the
JDZ) which have the effect of diminishing the economic value of or
materially adversely affecting ERHCs rights pursuant to this
Agreement or the MoA; and/or
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if
the acreage of any Block offered in a Licensing Round is materially
less than that indicated on the Map,
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DRSTP shall
compensate ERHC either financially or through alternative
commercial arrangements that are reasonably acceptable to ERHC in
order to maintain the economic value to ERHC of such rights both
indvidually and in aggregate.
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This agreement and all negotiations
leading to it shall be governed by the laws of England and Wales
and tbe courts of England and Wales shall have exclusive
jurisdiction.
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ERHC's interest in this Agreement
shall be assignable in whole or in part Subsidiary
without the consent of DRSTP, however ERHC will give notice of any
such assignment to DRSTP within 45 days of such assignment being
completed. The prior written consent of DRSTP will
be
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