Exhibit 10.13
-------------------------------------------------------------
ACQUISITION AGREEMENT,
dated as of December 16, 1996
by and among
Chelsea Corporation
▇.▇. ▇▇▇▇▇ International Corporation
and
URAL Petroleum Corporation
-------------------------------------------------------------
ACQUISITION AGREEMENT
Acquisition Agreement, dated as of December 16, 1996, by and among
Chelsea Corporation, a Colorado corporation ("Chelsea"), ▇.▇. ▇▇▇▇▇
International Corporation, an Oklahoma corporation ("RHSI" and, together with
Chelsea, the "Sellers"), and Ural Petroleum Corporation, a Delaware corporation
("UPC" and, together with the Sellers, the "Parties").
RECITALS
1.1. The sole assets and liabilities of Chelsea consist of its 36
percent partnership interest in ▇▇▇▇▇▇▇▇/▇▇▇▇▇ International - Chernogorskoye, a
Colorado general partnership established February 3, 1993 ("ASIC"), and rights
and obligations with respect to ASIC under a Capital Loan Agreement, dated
January 1, 1992 (the "Capital Loan Agreement"). Parish Corporation ("Parish")
owns all of the outstanding capital stock of Chelsea. ASIC holds a fifty percent
interest in the Chernogorskoye Joint Venture formed September 27, 1991 (the
"Joint Venture").
1.2. The sole assets and liabilities of RHSI on the Closing Date (as
described in Section 6.1 hereof) will consist of a 2.56 percent interest in ASIC
and rights and obligations with respect to ASIC under the Capital Loan
Agreement. ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") owns all of the outstanding capital stock of
RHSI. The interests of Chelsea and RHSI in ASIC are hereinafter referred to
individually as the "Partnership Interest" and collectively as the "Partnership
Interests."
1.3. Chelsea desires to sell its Partnership Interest; RHSI desires
to sell its Partnership Interest; UPC desires to purchase the Partnership
Interests of Chelsea and RHSI; and such sales and purchases (together, the
"Acquisition") shall be upon the terms and conditions set forth in this
Agreement.
ACQUISITION
2.1. Upon the terms and subject to the conditions set forth in this
Agreement, and in reliance on the representations, warranties and agreements
contained herein, on the Closing Date, each Seller will contribute to the LLC
(as hereinafter defined) its Partnership Interest together with its rights and
obligations under the Capital Loan Agreement with respect to ASIC in exchange
for an aggregate consideration, which shall have the notional value of
$20,000,000, which shall consist in part of the Seller LLC Interests (as
hereinafter defined), paid in accordance with this Article 2.
2.2. Upon the terms and subject to the conditions set forth in this
Agreement, and in reliance on the representations, warranties and agreements
contained herein, on the Closing Date, UPC will contribute to the LLC
consideration having a value equal to $8,000,000 (U.S.) to the LLC (the "Initial
Contribution") in exchange for the UPC LLC Interest (as hereinafter defined).
2.3. On the Closing Date, UPC shall contribute the Initial
Contribution to the LLC in exchange for a managing member interest and a
preferred limited liability company interest (the "UPC LLC Interests") which
will obligate the LLC to distribute to UPC 75% percent of all distributions
received by LLC from the Partnership Interests and the Capital Loan Agreement
until the distributions to UPC pursuant to the UPC LLC Interest total $8,000,000
(U.S.) (the "Distribution Flip-Over Date"), following which the UPC LLC Interest
will obligate the LLC to distribute to UPC 25% percent of all distributions
received by the LLC from the Partnership Interests and the Capital Loan
Agreement until such time as all distributions to the Sellers pursuant to the
Seller LLC Interests total $12,000,000 (U.S.) plus Interest as hereinafter
defined (the "Distribution Pay-Off Date"), as follows:
2.3.1. Six million dollars (U.S.), less the Deposit as defined
in Section 2.8, in cash or immediately available funds; and
2.3.2. Two million dollars (U.S.) in the form of fully paid
and non-assessable shares of common stock, no par value, of UPC ("UPC Common
Stock"). For such purpose and except as set forth below, the shares of UPC
Common Stock contributed to the LLC (the "Contribution Shares") shall have the
same per share value as accorded UPC Common Stock in a private placement of such
UPC Common Stock to be made by UPC between the date of this Agreement and the
Closing Date (the "UPC Private Placement"). Notwithstanding the foregoing, if
(i) the aggregate consideration in the UPC Private Placement does not consist of
at least $3,000,000 (U.S.) of UPC Common Stock in the aggregate purchased
collectively (A) in arm's-length transactions with persons having no other
previous or present affiliation with UPC or with any affiliate of UPC and (B) by
The Millennium Fund and (ii) Chelsea, RHSI and UPC do not otherwise reach
agreement on a per share value of the Contribution Shares prior to the Closing
Date, the per share value of the Contribution Shares shall be determined within
thirty days following the Closing Date by an independent evaluator with
nationally recognized experience in valuing common stock comparable to the
Contribution Shares. If Chelsea, RHSI and UPC do not agree on such an
independent evaluator within ten days after the Closing Date, Chelsea and RHSI
acting together, shall select one such evaluator and UPC shall select another
such evaluator and those two evaluators shall jointly select a third evaluator
whose per share valuation of the Contribution Shares shall be final and binding.
Each of the Parties shall pay any fees of the evaluator selected by such Party
and shall share equally payment of the fees of the third evaluator. On the
Closing Date, Chelsea, RHSI and UPC shall enter into an agreement with respect
to the ownership and disposition of the Contribution Shares and any other UPC
2
Common Stock acquired by Chelsea and RHSI containing the terms set forth in
Exhibit A hereto and in a form customary therefor.
2.4. On the Closing Date, each Seller shall contribute to the LLC
its Partnership interest and its rights and obligations under the Capital Loan
Agreement with respect to ASIC in exchange for the Initial Contribution and for
preferred limited liability company interests (the "Seller LLC Interests" and,
together with the UPC LLC Interest, the "Preferred LLC Interests") which will
obligate the LLC to distribute to such Sellers 25% of all distributions received
by the LLC from the Partnership Interests and the Capital Loan Agreement until
the Distribution Flip-Over Date, following which the Seller LLC Interests will
obligate the LLC to distribute to the Sellers 75% of all distributions received
by the LLC from the Partnership interests and the Capital Loan Agreement until
the Distribution Pay-off Date.
2.5. On the Closing Date, each of the Sellers and UPC shall execute
the Operating Agreement described below and UPC shall file the Certificate of
Formation described below with the Secretary of State of the State of Delaware
providing for the formation of a Delaware limited liability company (the "LLC"),
pursuant to which:
(a) each of the Sellers shall hold its respective Seller LLC Interest,
pursuant to which Chelsea and RHSI shall receive 93.4735 and 6.5265
percent, respectively, of any distributions to the Sellers pursuant to the
Seller LLC Interests;
(b) (i) on the Closing Date, each Seller shall receive its respective
share of a pledge of the Partnership Interests pursuant to a Security
Agreement and Financing Statement in customary form entitling each of the
Sellers in the event of any default by UPC or the LLC to receive from
distributions by ASIC with respect to the Partnership Interest the amounts
from and after such default which the Sellers would have been entitled to
receive under this Agreement from the LLC;
(c) UPC shall hold the UPC LLC Interest;
(d) at such time as all distributions to the Sellers pursuant to the
Seller LLC Interests total $12,000,000 (U.S.) plus Interest, the LLC will
redeem the Seller LLC Interests at no cost; and
(e) the LLC Certificate of Formation and Operating Agreement shall be in
customary form and consistent with the provisions of this Agreement
including, but not limited to, establishing that the Sellers shall have no
obligation to make any contribution to the capital of the LLC other than
the contributions set forth in Section 2.4.
3
Interest shall equal 10% per annum on an amount equal to $12,000,000 (U.S.) less
any distributions to the Sellers pursuant to the Seller LLC Interests (excluding
Interest).
2.6. For a period of twenty days following the receipt of notice
from UPC of UPC's intention to commence an initial public offering of UPC Common
Stock pursuant to a registration statement under the Securities Act of 1933, as
amended, which notice shall set forth the anticipated terms of such public
offering and all other material information then available which is reasonably
relevant to such public offering, each of the Sellers may elect one or more of
the following alternatives with respect to some portion or all (or none) of its
Seller LLC Interest, with such elected alternative to be effective upon the
completion of such public offering:
2.6.1. Each of the Sellers may elect to require UPC to
purchase, using the net proceeds from the initial public offering, its Seller
LLC Interest at a price equal to the lesser of (i) the Remaining Value with
respect to such portion of its Seller LLC Interest and (ii) the product of (a)
the portion of the Seller LLC Interest to be redeemed, expressed as a percentage
and (b) $12,000,000 (U.S.) less any distributions to the Sellers pursuant to the
Seller LLC Interests (excluding Interest) plus accrued unpaid interest. For
purposes of this Section 2.6.1, the Remaining Value of such portion of the
Seller LLC Interest shall be the cash flows to be received subsequent to such
election with respect to such portion as described in Section 2.4 determined by
the engineering data and assumptions to be disclosed in the above-described
registration statement discounted to present value utilizing a discount rate of
twenty percent per annum applied on the basis of a monthly convention, but in no
event shall the Remaining Value with respect to such portion of such Seller LLC
Interest be less than $6,000,000 (U.S.) multiplied by the portion of the Seller
LLC Interest to be redeemed, expressed as a percentage. The notice provided for
by Section 2.6 shall set forth such Remaining Value if then available and if
not, shall set forth what the Remaining Value would be if based upon the most
recent available engineering data and assumptions.
2.6.2. Each of the Sellers may elect to convert all or any
portion of its Seller LLC Interest into UPC Common Stock. For purposes of such
conversion, such portion of the Seller LLC Interest shall be valued at the
lesser of (i) the product of (a) the portion of the Seller LLC Interest to be
converted, expressed as a percentage and (b) $12,000,000 (U.S.) less any
distributions to the Sellers pursuant to the Seller LLC Interests (excluding
Interest) plus accrued unpaid interest and (ii) the Remaining Value of such
portion, and UPC stock shall be valued at one hundred twenty percent of the
per-share value of the UPC Contribution Shares as determined pursuant to Section
2.3.2. Notwithstanding anything to the contrary contained in the foregoing, the
Sellers may not acquire pursuant to the conversion election set forth in this
Section 2.6.2 more than twenty percent of the UPC Common Stock outstanding
following the above-described initial public offering and to the extent such
conversion would exceed such percentage, such conversion may not be elected by
either of the Sellers.
4
2.6.3. In the event that prior to an initial public offering
of UPC Common Stock there is an initial public offering of a corporation
controlled by UPC which holds directly or indirectly any portion of the
Partnership Interests, Chelsea and RHSI may elect to convert their Contribution
Shares into the capital stock of such affiliate and the rights set forth in
Sections 2.6.1 and 2.6.2 above shall apply to such affiliate and to its capital
stock. If Chelsea, RHSI and UPC do not agree on an equitable basis for applying
such conversion rights to the capital stock of such affiliate, such basis shall
be determined by an independent evaluation in the same manner as described in
Section 2.3.2.
2.6.4. Any election of a Seller pursuant to the foregoing
provisions of this Section 2.6 may be conditioned by such Seller upon the
initial public offering of UPC Common Stock occurring at a minimum per share
price or involving a minimum amount of gross proceeds as stated in such
election. In the event that the initial public offering of UPC Common Stock does
not occur within one hundred eighty days of the notice thereof from UPC, each of
the Sellers may elect to rescind any election made by it pursuant to this
Section 2.6. Notwithstanding the foregoing, if UPC is pursuing the completion of
such public offering with reasonable diligence, such one hundred eighty day
period may be extended but not to exceed an aggregate period from the date of
such notice of two hundred seventy days.
2.6.5. In the event that neither UPC nor an affiliate of UPC
which holds directly or indirectly any portion of the Partnership Interests
completes an initial public offering within three years after the Closing Date,
Chelsea and RHSI may, within thirty days after such period, exercise the
conversion right set forth in Section 2.6.2.
2.7. Notwithstanding anything to the contrary contained in the
foregoing Sections, in the event of any acquisition of substantially all of the
Partnership Interests or of a majority of UPC's capital stock or of the UPC LLC
Interest by a non-affiliate of UPC, the LLC Agreement shall provide that each
Seller may elect to require with respect to some portion or all (or none) of its
Seller LLC Interest that such portion of its Seller LLC Interest be redeemed in
exchange for an amount equal to the cash flows to be received subsequent to such
election with respect to such portion as described in Section 2.4 determined by
reasonable engineering data and assumptions to be provided by an independent
nationally recognized engineering firm discounted to present value utilizing a
discount rate of twenty percent per annum applied on the basis of a monthly
convention, but in no event shall such amount with respect to such portion of
such Seller LLC Interest be less than $6,000,000 (U.S.) multiplied by the
portion of the Seller LLC Interest to be redeemed, expressed as a percentage. If
UPC and the Seller or Sellers electing to redeem such LLC Interest do not agree
on such an independent engineering firm within ten days after the notice of such
election, such Seller or Sellers shall select one such firm and UPC shall select
another such firm and those two firms shall jointly select a third firm whose
data and assumptions shall be final and binding. Each of the Parties shall pay
any fees
5
of the engineering firm selected by such Party and shall share equally payment
of the fees of the third engineering firm.
2.8. Upon the execution of this Agreement, UPC shall pay Chelsea and
RHSI $200,000 (U.S.) (the "Deposit") which shall be placed in an
interest-bearing escrow account. The Deposit and the interest earned thereon
shall be applied to the Initial Contribution, as described in Section 2.2, and
shall be refunded to UPC with interest earned thereon only if this Agreement is
terminated pursuant to Section 6.1 hereof and such termination is not the result
of (i) a breach by UPC of a provision hereof, (ii) a failure of the condition
set forth in Section 5.2.7 to be satisfied, or (iii) a failure of the condition
set forth in Section 5.2.8 to be satisfied unless such failure is a result of a
breach by J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ of any agreement entered into by him with respect to
such condition including the Acquisition and Employment Outline between UPC and
▇▇. ▇▇▇▇▇▇ of even date herewith. If this Agreement is terminated for any other
reason, the Deposit with interest earned thereon shall be paid to the Sellers.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Chelsea. Chelsea hereby
represents and warrants to UPC that:
3.1.1. Chelsea is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and is, to
the best of Chelsea's knowledge, not required to be qualified as a foreign
corporation in any other jurisdiction.
3.1.2.The authorized capital stock of Chelsea consists of
100,000 shares of common stock (the "Chelsea Common Stock"), of which 50,000
shares are issued and outstanding on the date of this Agreement, all of which
are owned by Parish free and clear of all liens and encumbrances.
3.1.3. Chelsea has the corporate power to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary actions, Corporate or
otherwise, on the part of Chelsea. This Agreement has been duly and validly
executed and delivered and, assuming the due authorization execution and
delivery by the Sellers and UPC, is the valid and binding obligation of Chelsea,
enforceable against it in accordance with its terms. Other than in connection
with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"H-S-R Act"), if applicable, and the consents of the European Bank for
Reconstruction and Development ("EBRD") and the Overseas Private Investment
Corporation ("OPIC") and termination of the right to purchase of the other
partners of ASIC pursuant to Section 9.2 of the Amended and Restated Partnership
Agreement,
6
no authorization, consent or approval of, notice to or filing with, any public
body or authority, is necessary for the consummation by Chelsea of the
transactions contemplated hereby.
3.1.4. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, constitute a breach, violation or default under the Articles of
Incorporation or By-Laws of Chelsea or under any law, rule, regulation,
judgment, decree, order, injunction, statute; governmental permit or license of
any Court or governmental authority, domestic or foreign, applicable to Chelsea
or any mortgage, indenture, contract, agreement, lease or other instrument or
agreement of any kind to which Chelsea is a party or by which Chelsea or any of
its assets may be bound.
3.1.5. The sole assets and liabilities of Chelsea consist of
its interests, rights and obligations under the Amended and Restated Partnership
Agreement of ASIC and under the Capital Loan Agreement with respect to ASIC.
Such assets are free and clear of all liens, encumbrances and restrictions other
than as set forth in such Agreements. Except for such liabilities arising out of
the Amended and Restated Partnership Agreement of ASIC and the Capital Loan
Agreement, Chelsea has no obligations or liabilities, whether known, unknown,
fixed or contingent.
3.1.6. There is no action, suit, proceeding or investigation
pending or, to the best knowledge of Chelsea, threatened against Chelsea or ASIC
or the Joint Venture, at law or in equity, or before any federal, state or other
domestic or foreign governmental or other regulatory or administrative agency,
commission, board, bureau, agency or instrumentality.
3.1.7. Chelsea is not obligated to pay any broker or finder a
commission or fee with respect to the transactions contemplated hereby and
Chelsea and RHSI shall pay the commissions or fees due with respect to the
transactions contemplated hereby to Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and J. ▇▇▇▇▇▇
▇▇▇▇▇▇.
3.1.8. Chelsea owns a 36 percent interest in ASIC and ASIC
owns a fifty percent interest in the Joint Venture, thereby providing ASIC with
fifty percent of the economic benefit of the Joint Venture for all purposes,
subject to .5 and one percent interests of ▇▇▇▇▇ ▇▇▇▇▇▇ and Halliburton Energy
Services, Inc., respectively, in the net revenues of ASIC as described more
fully in the Information Memorandum attached hereto as Exhibit 3.1.11. Following
the Acquisition, Chelsea will not have any rights or obligations relating to
ASIC other than those arising out of LLC. Immediately following the Acquisition,
ASIC will continue to own a fifty percent interest in the Joint Venture.
3.1.9. Neither Chelsea nor, to the best of its knowledge and
belief following reasonable inquiry, any past or present employee of Chelsea,
ASIC, any past or present employee of ASIC, the Joint Venture or any past or
present employee of the Joint
7
Venture, but without inquiry with respect to the Joint Venture, has violated the
Foreign Corrupt Practices Act.
3.1.10. Except for J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, neither
Chelsea nor ASIC has any current employees.
3.1.11. To the best of its knowledge and belief, the November
1996 Information Memorandum of Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ attached hereto as
Exhibit 3.1.11 does not contain any untrue statements of a material fact and
does not omit to state any material fact necessary to make the statements
therein not misleading. The foregoing representation and warranty is made
notwithstanding the last sentence of the "Important Notice" page of such
Information Memorandum.
3.1.12. The balance sheet and income statement of Chelsea
dated June 30, 1996 attached hereto as Exhibit 3.1.12 have been prepared in
accordance with generally accepted accounting principles (exclusive of footnote
disclosures), consistently applied, and are correct and complete in all material
respects. Since the date of such financial statements there has been no material
adverse change in the assets, liabilities, or financial condition of Chelsea.
3.1.13. To the best of its knowledge and belief, for United
States Federal income tax purposes, ASIC is classified as a partnership and is
not classified as an association, or a publicly traded partnership, or taxable
as a corporation.
3.1.14. ASIC is a general partnership duly organized, validly
existing and in good standing under the laws of the State of Colorado and is, to
the best of Chelsea's knowledge, not required to be qualified as a foreign
corporation in any other jurisdiction
3.1.15. For purposes of the EBRD and OPIC consents described
in Section 5.2.9., (a) each of ▇▇▇▇▇▇▇▇ International Corporation, Mohan
International Corporation and A/D Holdings International Corporation is a United
States person, and (b) ▇▇▇▇▇▇▇▇ International Corporation, Mohan International
Corporation and A/D Holdings International Corporation collectively own an
aggregate 35.44 percent interest in ASIC.
3.1.16. Attached hereto as Exhibit 3.1.16 are December 31,
1995 financial statements for ASIC. Such financial statements have not been
prepared in accordance with generally accepted accounting principles but to the
best of Chelsea's knowledge and belief fairly present the financial results and
condition of ASIC for the period and date indicated therein. No other financial
statements with respect to ASIC as of any subsequent date or for any subsequent
period are available to Chelsea. To the best of Chelsea's knowledge and belief,
ASIC has no liabilities or obligations, contingent or otherwise, except as (a)
set forth in the Information Memorandum attached hereto as Exhibit 3.1.11, (b)
provided for by the ASIC
8
Amended and Restated Partnership Agreement and the Joint Venture Agreement, (c)
provided for by the agreements with EBRD and OPIC, (d) set forth in the
foregoing financial statements or (e) incurred in the ordinary course of the
business of ASIC since December 31, 1995.
3.2. Guarantees of Parish and St. ▇▇▇▇. Parish and St. ▇▇▇▇ ▇▇▇▇ &
Exploration Company, the sole shareholder of Parish, hereby unconditionally
guarantee, in favor of UPC the representations and warranties of Chelsea made in
Section 3.1 of this Agreement.
3.3. Representations and Warranties of RHSI. RHSI hereby represents
and warrants to UPC that:
3.3.1. RHSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma and, to the best of
RHSI's knowledge, is not required to be qualified as a foreign corporation in
any other jurisdiction.
3.3.2. The authorized capital stock of RHSI consists of 100
shares of common stock ("RHSI Common Stock"), all of which are issued and
outstanding on the date of this Agreement all of which are owned by ▇▇▇▇▇ free
and clear of all liens and encumbrances.
3.3.3. RHSI has the corporate power to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary actions, corporate or
otherwise, on the part of RHSI. This Agreement has been duly and validly
executed and delivered and, assuming the due authorization execution and
delivery by the Sellers and UPC, is the valid and binding obligation of RHSI,
enforceable against it in accordance with its terms. Other than in connection
with the H-S-R Act, if applicable, and the consents of EBRD and OPIC and
termination of the right to purchase of the other partners of ASIC pursuant to
Section 9.2 of the Amended and Restated Partnership Agreement, no authorization,
consent or approval of, notice to or filing with, any public body or authority,
is necessary for the consummation by RHSI of the Acquisition.
3.3.4. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, constitute a breach, violation or default under the Articles of
Incorporation or By-Laws of RHSI or under any law, rule, regulation, judgment,
decree, order, injunction, statute, governmental permit or license, of any Court
or governmental authority, domestic or foreign, applicable to RHSI or any
mortgage, indenture, contract, agreement, lease or other instrument or agreement
of any kind to which RHSI is a party or by which RHSI or any of its assets may
be bound, or create any right on the part of any party to any such instrument or
agreement to unilaterally modify, amend or terminate any such instrument or
agreement.
9
3.3.5. The sole assets and liabilities of RHSI at the Closing
hereunder will consist of its interests, rights and obligations under the
Amended and Restated Partnership Agreement for ASIC and under the Capital Loan
Agreement with respect to ASIC. Such assets are free and clear of all liens,
encumbrances and restrictions other than as set forth in such Agreements. Except
for such liabilities arising out of the Amended and Restated Partnership
Agreement of ASIC and the Capital Loan Agreement, RHSI has no obligations or
liabilities, whether known, unknown, fixed or contingent.
3.3.6. RHSI owns a 2.56 percent interest in ASIC and ASIC owns
a fifty percent interest in the Joint Venture, thereby providing ASIC with fifty
percent of the economic benefit of the Joint Venture for all purposes, subject
to .5 and one percent interests of ▇▇▇▇▇ ▇▇▇▇▇▇ and Halliburton Energy Services,
Inc., respectively, in the net revenues of ASIC as described more fully in the
Information Memorandum attached hereto as Exhibit 3.1.11. Following the
Acquisition, RHSI will not have any rights or obligations relating to ASIC other
than those arising out of LLC. Immediately following the Acquisition, ASIC will
continue to own a fifty percent interest in the Joint Venture.
3.3.7. There is no action, suit, proceeding or investigation
pending or, to the best knowledge of RHSI, threatened against RHSI or ASIC or
the Joint Venture, at law or in equity, or before any federal, state or other
domestic or foreign governmental or other regulatory or administrative agency,
commission, board, bureau, agency or instrumentality.
3.3.8. RHSI is not obligated to pay any broker or finder a
commission or fee with respect to the transactions contemplated hereby and RHSI
and Chelsea shall pay the commissions or fees due with respect to the
transactions contemplated hereby to Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and J. ▇▇▇▇▇▇
▇▇▇▇▇▇.
3.3.9. Neither RHSI nor, to the best of its knowledge and
belief following reasonable inquiry, any past or present employee of RHSI, ASIC,
any past or present employee of ASIC, the Joint Venture or any past or present
employee of the Joint Venture, but without inquiry with respect to the Joint
Venture, has violated the Foreign Corrupt Practices Act.
3.3.10. Neither RHSI nor ASIC has any current employees.
3.3.11. To the best of its knowledge and belief, the November
1996 Information Memorandum of Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ attached hereto as
Exhibit 3.1.11, does not contain any untrue statements of a material fact and
does not omit to state any material fact necessary to make the statements
therein not misleading. The foregoing representation and warranty is made
notwithstanding the last sentence of the "Important Notice" page of such
Information Memorandum.
10
3.3.12. No financial statements with respect to RHSI, as of
any date or for any period, have been prepared or are available.
3.3.13. To the best of its knowledge and belief, for United
States Federal income tax purposes, ASIC is classified as a partnership and is
not classified as an association, or a publicly traded partnership, or taxable
as a corporation.
3.3.14. ASIC is a general partnership duly organized, validly
existing and in good standing under the laws of the State of Colorado and is, to
the best of RHSI's knowledge, not required to be qualified as a foreign
corporation in any other jurisdiction.
3.3.15. For purposes of the EBRD and OPIC consents described
in Section 5.2.9., (a) each of ▇▇▇▇▇▇▇▇ International Corporation, Mohan
International Corporation and A/D Holdings International Corporation is a United
states person, and (b) ▇▇▇▇▇▇▇▇ International Corporation, Mohan International
Corporation and A/D Holdings International Corporation collectively own an
aggregate 35.44 percent interest in ASIC.
3.3.16. Attached hereto as Exhibit 3.1.16 are December 31,
1995 financial statements for ASIC. Such financial statements have not been
prepared in accordance with generally accepted accounting principles but to the
best of RHSI's knowledge and belief fairly present the financial results and
condition of ASIC for the period and date indicated therein. No other financial
statements with respect to ASIC as of any subsequent date or for any subsequent
period are available to RHSI. To the best of RHSI's knowledge and belief, ASIC
has no liabilities or obligations, contingent or otherwise, except as (a) set
forth in the Information Memorandum attached hereto as Exhibit 3.1.11, (b)
provided for by the ASIC Amended and Restated Partnership Agreement and the
Joint Venture Agreement, (c) provided for by the agreements with EBRD and OPIC,
(d) set forth in the foregoing financial statements or (e) incurred in the
ordinary course of the business of ASIC since December 31, 1995.
3.4. Guarantee of ▇▇▇▇▇. ▇▇▇▇▇ hereby unconditionally guarantees in
favor of UPC the representations and warranties of RHSI made in Section 3.3 of
this Agreement.
3.5. Representations and Warranties of UPC. UPC hereby represents
and warrants to Chelsea and RHSI that:
3.5.1. UPC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and, to the best of
UPC's knowledge, is not required to be qualified as a foreign corporation in any
other jurisdiction.
3.5.2. The authorized capital stock of UPC consists of 1,500
shares of common stock of which 1,000 shares are issued and outstanding on the
date of this Agreement.
11
All the issued and outstanding shares of the UPC Common Stock are duly
authorized, validly issued, fully paid and non-assessable. Except for 92 shares
set aside for issuance to UPC management pursuant to stock options contemplated
to be granted and except as set forth in the Information Memorandum attached
hereto as Exhibit 3.5.9, there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character obligating UPC to issue any securities.
3.5.3. UPC has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the Acquisition have been duly
authorized by all necessary corporate actions on the part of UPC. This Agreement
is, assuming the due authorization, execution and delivery by the Sellers, the
valid and binding obligation of UPC, enforceable against it in accordance with
its terms. Other than in connection with the H-S-R Act, if applicable, EBRD and
OPIC, no authorization, consent or approval of, or filing with, any public body
or authority is necessary for the consummation by UPC of the Acquisition.
3.5.4. The execution, delivery and performance of this
Agreement and the consummation of the Acquisition will not constitute a breach,
violation or default under the Articles of Incorporation or By-Laws of UPC or
under any law, rule or regulation, judgment, decree, order, governmental permit
or license, or any mortgage, indenture, contract, agreement, lease or other
instrument or agreement of any kind to which UPC is a party or by which UPC or
any of its assets may be bound.
3.5.5. (a) The financial statements of UPC for the period from
January 1,1996 to September 30, 1996, attached hereto as Exhibit 3.5.5, have
been prepared on a cash basis and are based on records made available to UPC by
its directors. The financial statements in Exhibit 3.5.5 are unaudited and have
not been prepared in accordance with generally accepted accounting principles.
(b) Such financial statements fairly present the financial condition and results
of UPC for the period indicated. Except as set forth in the Information
Memorandum attached hereto as Exhibit 3.5.9, since the date of such financial
statements, no material adverse change in the assets, liabilities or financial
condition of UPC has occurred.
3.5.6. (a) UPC owns 943 shares of Ural Petroleum Ventures
Limited, 1,000 shares of Ural Petroleum Management Limited, one share of Ural
Petroleum (UK) Limited and the general partnership interest, representing 21.66
percent of the partnership, of Ural Partners LP all of which shares and
interests are free and clear of all liens, encumbrances and restrictions other
than those set forth in the financial statements described in Section 3.5.5, in
the Information Memorandum described in Section 3.5.9 and in the agreements
described in such Information Memorandum. (b) All material commitments or
undertakings of UPC, including those for the acquisition or disposition of
assets, and all material liabilities of UPC, not set
12
forth in the financial statements described In Section 3.5.5, are set forth in
the Information Memorandum attached hereto as Exhibit 3.5.9.
3.5.7. There is no action, suit, proceeding or investigation
pending or, to the best knowledge of UPC, threatened against UPC, at law or in
equity, or before any federal, state or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality.
3.5.8. Neither UPC nor, to the best of its knowledge and
belief, any employee of UPC has violated the Foreign Corrupt Practices Act.
3.5.9. To the best of its knowledge and belief, the December ,
1996 Information Memorandum attached hereto as Exhibit 3.5.9 does not contain
any untrue statements of a material fact and does not omit to state any material
fact necessary to make the statements therein not misleading.
3.6. Guarantee by Brunswick. Brunswick Investments Limited, a Jersey
corporation ("Brunswick"), a principal shareholder of UPC, hereby
unconditionally guarantees in favor of Chelsea and RHSI the representations and
warranties of UPC made in Section 3.5 of this Agreement as they relate
specifically to UPC, provided that Brunswick shall not guarantee the performance
of UPC in respect of any claim under Section 3.5 arising from any fact or other
matter of which Brunswick was not aware as of the date of this Agreement, it
being acknowledged by the Sellers that Brunswick has not made any independent
investigation in connection with Section 3.5, and provided further that
Brunswick shall guarantee the performance of UPC in respect of any claim under
Sections 3.5.5(b), 3.5.6(b) and 3.5.9 arising from any fact or other matter only
if (a) Brunswick has actual knowledge of such fact or matter as of the date
hereof, (b) such fact or matter is not reflected in the financial statements of
UPC or contained in the Information Memorandum attached hereto as Exhibit 3.5.9
and (c) the omission of such fact or matter therefrom would make such financial
statements or Information Memorandum misleading to a reasonable investor.
COVENANTS
4.1. H-S-R Act Filings. If applicable, Chelsea, RHSI and UPC shall
promptly make their respective filings, and shall thereafter promptly make any
required submissions, under the H-S-R Act with respect to the Acquisition and
shall cooperate with each other in connection with the foregoing.
4.2. Interim Operations of Chelsea and RHSI. During the period from
the date of this Agreement to the Closing, neither Chelsea nor RHSI shall
acquire or dispose of any assets, except for the distribution by RHSI to ▇▇▇▇▇
of all assets other than its interests in and
13
under ASIC and under the Capital Loan Agreement with respect to ASIC, or incur
or assume any liabilities other than those associated with ASIC and the Capital
Loan Agreement with respect to ASIC. Neither Chelsea nor RHSI shall (i) amend or
otherwise change its Articles of Incorporation or By-Laws; (ii) issue, sell or
authorize for issuance or sale, shares of any class of its securities or grant
any subscriptions, options, warrants, rights, convertible securities or enter
into any other agreements or commitments of any character obligating it to issue
such securities; (iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property) with respect to its capital
stock (other than as set forth in the first sentence of this Section with
respect to RHSI); (iv) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock; (v) enter into any agreement, commitment
or transaction (including, but not limited to, any borrowing, capital
expenditure or sale of assets); (vi) except with respect to J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇ and expenses associated with them, compensate or agree to
compensate, any of its directors, officers or employees, or provide for them any
bonus, insurance, pension or other employee benefit plan, payment or
arrangement; or (vii) take any other action not in the ordinary course of
business consistent with past practice or (viii) take any action which would not
keep available the services of the present officers and employees of ASIC.
4.3. Access. Chelsea, RHSI and UPC shall afford to each other and
each other's agents and representatives full access during normal business hours
throughout the period prior to the Closing to all of their respective
properties, books, contracts, commitments and records and each of such
corporations shall furnish or make available promptly to the other all other
material information concerning its business and properties; provided, however,
no past or future investigation pursuant to this Section 4.3 shall affect or be
deemed to modify or waive any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Acquisition. Any future investigation shall be conducted by each party and its
representatives in such a manner so as not to interfere unnecessarily with the
business or operations of the other parties.
4.4. Conditions. UPC, Chelsea and RHSI shall utilize their good
faith best efforts to complete the conditions set forth in Section 5 hereof
prior to the Closing Date.
4.5. Arm's-Length Stock Sales. At all times that Chelsea and RHSI
continue to own UPC securities entitled to vote, UPC shall not sell any UPC
securities in other than an arm's-length transaction for fair and full
consideration, without the prior written consent of Chelsea and RHSI, except for
shares sold to directors, employees and consultants of UPC pursuant to stock
options provided that at no time shall shares subject to such options exceed 15%
of the outstanding capitalization of UPC.
4.6. General. Subject to the terms and conditions provided herein,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions and
14
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Acquisition
including but not limited to satisfying the conditions thereto set forth in
Section 5 of this Agreement.
4.7. Confidentiality. Each party agrees that it will not at any time
subsequent to the date of signing this Agreement, disclose or use any
information obtained during the negotiation or due diligence process nor any
other confidential information otherwise obtained regarding another party,
without first obtaining the prior written consent of such party, except to the
extent that such disclosure may be required by law, provided, however that this
Section 4.7 shall not prevent (i) UPC or the Sellers from providing such
information to its representatives (including investment bankers, experts,
attorneys, accountants, economists and other advisors) or (ii) UPC from
disclosing such information to potential investors in connection with the UPC
Private Placement.
4.8. Further Assurances. From time to time, without further
consideration, each of UPC and the Sellers will execute and deliver such
documents to the other party as such party may reasonably request in order to
more effectively consummate the transaction contemplated hereby. In case at any
time after the Closing Date any further action is necessary or desirable to
carry out the purposes of this Agreement, each of UPC and the Sellers will take
or cause its proper officers and directors to take all such necessary action.
4.9. Publicity. Neither of the Sellers nor UPC nor any of their
affiliates shall make or issue, or cause to be made or issued, any announcement
or written statement concerning this Agreement or the transactions contemplated
hereby for dissemination to the general public without, whenever practicable,
consulting with the other party concerning the timing and content of such
announcement before such announcement is made. Pursuant to the foregoing,
Chelsea and UPC shall prior to the Closing agree upon the contents of an
announcement by Chelsea with respect to its description of UPC.
CONDITIONS
5.1. Conditions to the Obligations of Chelsea and RHSI. The
obligations of Chelsea and RHSI to consummate the Acquisition are subject to the
satisfaction, at or before the Closing, of the following conditions:
5.1.1. The representations and warranties of LPC set forth in
Section 3.5 hereof shall be true and correct in all material respects (except
for such representations and warranties qualified by materiality which shall be
true and correct in all respects) as of the date hereof and as of the Closing
Date as if made on the Closing Date; UPC shall have complied in all material
respects with all covenants and agreements set forth herein to be performed by
it on
15
or prior to the Closing Date; and each of Chelsea and RHSI shall have received a
certificate of the President of UPC attesting to the foregoing.
5.1.2. No injunction, restraining order or other order of any
federal or state court in the United States which prevents the consummation of
the transactions contemplated herein shall be in effect.
5.1.3. No action, suit, proceeding or investigation shall be
instituted by any party and remain pending which, in the reasonable opinion of
Chelsea and RHSI (following consultation with their counsel, which may be an
internal counsel), poses a significant risk that such action, suit, proceeding
or investigation would have a material adverse effect on the assets, liabilities
or business of UPC; and no governmental agency shall have indicated its
intention to institute any action, suit, proceeding or investigation which
Chelsea and RHSI reasonably believes (after consultation with their counsel,
which may be an internal counsel) has a significant likelihood of being
instituted if the Acquisition is consummated.
5.1.4. No statute, rule or regulation shall have been enacted
by any state or governmental agency or any self-regulated agency in the United
States or by the federal government that would prevent the consummation of the
Acquisition.
5.1.5. If applicable, all notifications to the Antitrust
Division of the United States Department of Justice and to the Federal Trade
Commission shall have been timely given by UPC or timeliness shall have been
waived by such Division or Commission; there shall not be pending any action by
such Division or Commission seeking to restrain or enjoin the Acquisition; such
Division or Commission shall not be threatening to seek to enjoin or restrain
the Acquisition; and any applicable waiting period under the H-S-R Act shall
have expired or been terminated.
5.1.6. The consents to the Acquisition shall have been
obtained from EBRD and OPIC and the period in which the right of purchase of the
other partners of ASIC pursuant to Section 9.2 of the Amended and Restated
Partnership Agreement shall have expired with such right unexercised.
5.1.7. UPC shall have delivered to Chelsea and RHSI an opinion
or opinions dated the Closing, of counsel for UPC, in form and substance
reasonably satisfactory to Chelsea and RHSI, with respect to matters set forth
in Sections 3.5.1, 3.5.2 and 3.5.3 hereof.
5.1.8. Chelsea and RHSI shall have satisfied themselves with
respect to the business, assets, liabilities and prospects of UPC. UPC shall as
rapidly as practicable, and to the maximum extent practicable, provide the
information relating to UPC requested in the December 4, 1995 letter of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ on behalf of Chelsea and RHSI to ▇▇▇▇ ▇.
16
▇▇▇▇▇▇▇▇▇▇▇ of UPC. Such condition shall be deemed to have been satisfied unless
Chelsea and RHSI give notice to UPC that such condition has not been satisfied
on or before the earlier of (a) five business days after UPC has notified
Chelsea and RHSI that it has provided as much of the above referred to requested
information as practicable or (b) December 30, 1996.
5.2. Conditions to the Obligations of UPC. The obligation of UPC to
consummate the Acquisition is subject to the satisfaction, at or before the
Closing, of each of the following conditions:
5.2.1. The representations and warranties of Chelsea and RHSI
set forth in Sections 3.1 and 3.3 hereof shall be true and correct in all
material respects (except for such representations and warranties qualified by
materiality which shall be true and correct in all respects) as of the date
hereof and as of the Closing as if made at and as of the Closing; Chelsea and
RHSI shall have complied in all material respects with all covenants and
agreements set forth herein to be performed by them on or prior to the Closing;
and UPC shall have received certificates of the Presidents of Chelsea and RHSI
attesting to the foregoing.
5.2.2. No injunction, restraining order or other order of any
federal or state court in the United States which prevents the consummation of
the Acquisition shall be in effect.
5.2.3. No action, suit, proceeding or investigation shall be
instituted by any party and remain pending which, in the reasonable opinion of
UPC (following consultation with its counsel, which may be an internal counsel),
poses a significant risk that such action, suit, proceeding or investigation
would have a material adverse effect on the assets, liabilities or business of
Chelsea and RHSI; and no governmental agency shall have indicated its intention
to institute any action, suit, proceeding or investigation which UPC reasonably
believes (after consultation with its counsel, which may be an internal counsel)
has a significant likelihood of being instituted if the Acquisition is
consummated.
5.2.4. No statute, rule or regulation shall have been enacted
by any state or governmental agency or any self-regulated agency in the United
States or by the federal government that would prevent the consummation of the
Acquisition.
5.2.5. If applicable, all notifications to the Antitrust
Division of the United States Department of Justice and to the Federal Trade
Commission shall have been timely given by Chelsea and RHSI or timeliness shall
have been waived by such Division or Commission; there shall not be pending any
action by such Division or Commission seeking to restrain or enjoin the
Acquisition; such Division or Commission shall not be threatening to seek to
enjoin or restrain the Acquisition; and any applicable waiting period under the
H-S-R Act shall have expired or been terminated.
17
5.2.6. Chelsea and RHSI shall have delivered to UPC an opinion
or opinions dated the Closing, of counsel for Chelsea and RHSI, in form and
substance reasonably satisfactory to UPC, with respect to matters set forth in
Sections 3.1.1, 3.1.2, 3.1.3, 3.3.1, 3.3.2 and 3.3.3 hereof.
5.2.7. UPC shall have completed the UPC Private Placement and
realized therefrom gross proceeds of not less than $6,000,000 (U.S.).
5.2.8. UPC shall have acquired all of the capital stock of
▇.▇. ▇▇▇▇▇▇ International Corporation and J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have become an
employee of UPC.
5.2.9. Consents to the Acquisition shall have been obtained
from EBRD and OPIC and EBRD and OPIC shall have given final approval for the
disbursement to the Joint Venture of an additional loan of $5,000,000 (U.S.) for
utilization in the Chernogorskoye project on terms and conditions equivalent to
those existing on the date of this Agreement for such disbursement, other than
additional conditions with respect to the continued membership on the Board of
Directors of the Joint Venture of J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ (or his successor, who shall
be approved by EBRD and OPIC which approval shall not be unreasonably withheld)
and the ownership of not less than 33 percent of UPC Common Stock by United
States persons.
5.2.10. UPC shall have received satisfactory evidence that
proper notice of UPC's intent to purchase the Partnership Interests has been
given pursuant to Section 9.2 of the Amended and Restated Partnership Agreement
and that the period in which the right of purchase may be exercised pursuant to
the Amended and Restated Partnership Agreement has expired with such right
unexercised.
CLOSING
6.1. Time and Place of Closing. Upon the terms and subject to the
conditions of this Agreement, the Closing shall take place within five days
following the satisfaction or waiver of all of the conditions to Closing set
forth in Section 5. If such conditions have not been satisfied or waived and the
Closing has not occurred by December 31, 1996 and if the foregoing is not the
result of a breach of any provision of this Agreement by one of the parties
hereto, this Agreement may be terminated by Chelsea or UPC, with notice to the
other and RHSI, and, except with respect to Sections 2.8, 4.7, 6.1, 8.1, 8.2,
8.3 and 8.6 hereof, (a) this Agreement shall forthwith become void and (b) there
shall be no liability on the part of UPC or the Sellers. Notwithstanding
anything to the contrary contained in the foregoing, in the event a condition
set forth in Section 5.2.7, 5.2.8 or 5.2.9 has not been satisfied or waived by
that date, Chelsea by notice to UPC and RHSI or UPC by notice to Chelsea and
RHSI from time to
18
time extend such December 31, 1996 Closing deadline provided that the aggregate
of such extensions shall not exceed thirty days.
6.2. Conduct of Closing. At the Closing, Chelsea and RHSI shall
execute and deliver assignments of the Partnership Interests to UPC; UPC shall
execute and deliver the Security Agreement and Financing Statement; Chelsea,
RHSI and UPC shall execute the agreement embodying the terms set forth in
Exhibit A. Chelsea, RHSI and UPC shall also execute and deliver such other
documents and take such other actions as are necessary or desirable in the
reasonable opinion of their respective counsel to carry out the Acquisition and
the provisions of this Agreement.
SECURITIES REPRESENTATIONS
7.1. By Chelsea and RHSI. The Sellers represent and warrant that
they will be acquiring the Contribution Shares for investment and not for
distribution within the meaning of the Securities Act of 1933, as amended,
except with respect to registration rights granted for the UPC Common Stock, and
that the Contribution Shares are being acquired pursuant to the private
placement exemption of Section 4(2) of such Act. The Sellers acknowledge that
certificates representing the Contribution Shares will be endorsed with a
customary legend confirming such representation, warranty and exemption.
MISCELLANEOUS
8.1. Expenses. Each party to this Agreement shall bear and discharge
all of its expenses in connection with the Acquisition and this Agreement.
8.2. Survival of Warranties and Covenants. The representations,
warranties and covenants set forth in this Agreement shall survive the Closing
for purposes of Section 8.3 only.
8.3. Indemnification. From and after the Closing, each Party to this
Agreement shall indemnify and hold harmless all of the other Parties to this
Agreement from and against any costs or expenses, judgments, fines, losses,
claims and damages, as incurred, to the extent they relate to, or arise out of
or are a result of any breach of any representation, warranty or covenant
attributable to such party.
8.4. Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party (or parties) entitled to the benefits thereof,
and this Agreement may be amended or supplemented by all parties hereto at any
time. No such waiver, amendment or supplement shall be effective unless in
writing and signed by the party or parties sought to be bound thereby.
19
8.5. Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the transaction contemplated hereby.
8.6. Chelsea Overhead. For the period from and after November 15,
1996 and up until the Closing, UPC shall bear and reimburse Chelsea for one-half
of its costs incurred in connection with the employment of J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇, together with the other overhead costs of Chelsea but exclusive of
travel expenses, with such reimbursement to amount to a payment by UPC to
Chelsea at the rate of $6,854 per month. UPC shall bear and reimburse Chelsea
for all costs of ▇▇. ▇▇▇▇▇▇ for travel which has been approved in advance by
UPC.
8.7. Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this agreement.
8.8. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without
reference to the conflict of laws principles thereof.
8.9. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or by courier service or sent by registered or certified mail,
postage prepaid, with return receipt requested, addressed as follows:
If to Chelsea, St. ▇▇▇▇ or Parish, to:
St. ▇▇▇▇ ▇▇▇▇ & Exploration Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice-President and General Counsel
If to RHSI or ▇▇▇▇▇, to:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Copper Oaks Center, Suite 800
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to UPC or Brunswick, to:
Ural Petroleum Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
8.10. Benefit. The terms and conditions of this Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding the foregoing, UPC may not assign its
rights under this Agreement without the prior written consent of Chelsea and
RHSI and Chelsea and RHSI may not assign their rights under this Agreement
without the prior written consent of UPC; provided, however, that UPC may at any
time and without such prior consents assign the UPC LLC Interests to any wholly
owned subsidiary of UPC and provided further, however, that each of Chelsea and
RHSI may at any time and without such prior consents assign its rights in the
Seller LLC Interests to any wholly owned subsidiary or to any holder of all of
the capital stock of such Seller.
8.11. Counterpart and Facsimile Execution. This Agreement may be
executed in counterparts and by facsimile.
21
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
CHELSEA CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------
Vice President
▇.▇. ▇▇▇▇▇ INTERNATIONAL
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Attorney-In-Fact
URAL PETROLEUM CORPORATION
By:
--------------------------------
22
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the Parties hereto on the date
first hereinabove written.
CHELSEA CORPORATION
By:
--------------------------------
▇.▇. ▇▇▇▇▇ INTERNATIONAL
CORPORATION
By:
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
Attorney-In-Fact
URAL PETROLEUM CORPORATION
By: /s/ [ILLEGIBLE]
--------------------------------
As to Section 3.2:
ST. ▇▇▇▇ ▇▇▇▇ & EXPLORATION
COMPANY
By: /s/ [ILLEGIBLE]
--------------------------------
As to Section 3.2:
PARISH CORPORATION
By: /s/ [ILLEGIBLE]
--------------------------------
President
As to Section 3.3.
▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Attorney-in-Fact
As to Section 3.6:
BRUNSWICK INVESTMENTS LIMITED
By:
--------------------------------
23
ST. ▇▇▇▇ ▇▇▇▇ & EXPLORATION
COMPANY
By:
--------------------------------
As to Section 3.2:
PARISH CORPORATION
By:
--------------------------------
As to Section 3.3.
▇▇▇▇▇ ▇. ▇▇▇▇▇
By:
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Attorney-in-Fact
As to Section 3.6:
BRUNSWICK INVESTMENTS LIMITED
By: /s/ [ILLEGIBLE]
--------------------------------
EXHIBIT A
EXHIBIT A
Shareholder Agreement Term Sheet
Reference is made to the Acquisition Agreement, dated December __, 1996 (the
"Agreement"), among Chelsea Corporation ("Chelsea"), ▇. ▇. ▇▇▇▇▇ International
Corporation ("RHSI" and together with Chelsea, the "Sellers"), and Ural
Petroleum Corporation ("UPC" or the "Company", and together with the Sellers,
the "Parties"). Initially capitalized terms not otherwise defined herein shall
have the meanings given them in the Agreement. Set forth below are the principal
terms of the Shareholder Agreement between the Company and the Sellers.
Board Representation; Right to Information
o Chelsea shall be entitled, but not required, to designate one
representative to the UPC board of directors (the "Board") so long
as Chelsea owns more than 10%, on a fully diluted basis, of the
outstanding UPC voting stock. Chelsea shall use its best efforts to
cause its director/representative to resign promptly following a
reduction in its stock ownership below the amount specified above.
To the extent Chelsea declines to designate a representative to the
Board, subject to confidentiality, privilege and fiduciary issues,
Chelsea shall be entitled to have an observer attend meetings of the
Board and to receive materials distributed to members of the Board.
o In the event that Chelsea owns less than 10%, on a fully diluted
basis, of the outstanding UPC voting stock, but continues to hold a
Seller LLC Interest entitled to future distributions of US$2,000,000
or more, Chelsea shall be entitled to receive materials distributed
to members of the Board pertaining to the ▇▇▇▇▇▇▇▇/▇▇▇▇▇
International-Chernogoskoye Partnership, subject to confidentiality,
privilege and fiduciary issues. Such right to such materials shall
terminate immediately when Chelsea's Seller LLC Interest is entitled
to less than US$2,000,000 of future distributions.
Preemptive Rights
o If, prior to a public offering of the common stock of UPC, the
Sellers together own more than 5%, on a fully diluted basis, of UPC
voting stock and UPC proposes to sell or issue shares of UPC common
stock (or equivalents) to third parties (other than as consideration
in acquisition transactions), other than additional securities
issued or to be issued to directors, employees and consultants of
UPC not to exceed 15%, on a fully diluted basis, of the outstanding
capitalization of UPC (the "Incentive Securities"), the Sellers
shall be entitled to purchase securities on the terms and conditions
proposed to be transferred to the third parties in an amount
necessary in order that Sellers may maintain their then current
percentage ownership in UPC on a fully diluted basis.
o Similar preemptive rights provisions may be agreed to between the
Company and its other shareholders.
Additional Stock Sales
o So long as the Sellers together own more than 5%, on a fully diluted
basis, of UPC voting stock, UPC shall not sell any UPC securities,
other than Incentive Securities, in a transaction which does not
result in fair and full consideration being received by the Company.
The foregoing shall not affect the general fiduciary obligations of
UPC with respect to sales of its stock.
Sale or Transfer
o Securities laws: The transfer of UPC common stock to the Sellers is
intended to be exempt under Section 4(2) of the Securities Act of
1933. Any future sale or transfer of part or all of such stock shall
be in accordance with the provisions of the Securities Act of 1933
and the rules and regulations promulgated thereunder and the
Shareholder Agreement.
o Restrictive Legend: Restrictive legends will be placed on each
certificate representing stock issued to the Sellers.
2
o Volume Limitations: Until the fifth anniversary of the Effective
Date, the Sellers shall not sell or transfer UPC securities
representing 5% or more of the outstanding stock of any class to any
one person or group, subject to the Transfers by Mergers or
Consolidation and Transfers to Affiliates exceptions as set forth
below (the "Transfer Exceptions"). The sale or transfer of the
Contribution Shares by the Sellers will not be subject to this
volume limitation.
o Right of First Offer: Notwithstanding the foregoing but subject to
the Transfer Exceptions, each Seller must first offer to sell to UPC
any UPC securities it intends to offer for sale on the same terms
and at the same price as such securities will be offered and UPC
shall have a period of 30 days in which to give notice of its intent
to exercise its right to purchase such securities on such terms;
provided, however, in the event that the UPC securities offered for
sale or transfer constitute 10% or more of the outstanding stock of
UPC, the period which UPC shall have in which to give notice of its
intent to exercise its right to purchase such securities will be
increased to 90 days. The foregoing requirements shall not apply to
any sale of less than 2% of outstanding UPC stock after UPC has
completed a public offering.
o Transfers by Merger or Consolidation: Without regard to the Volume
Limitations and the Right of First Offer, the Sellers may sell or
transfer UPC securities in a merger or consolidation of such Seller
where such Seller is not the surviving entity, or a sale of all or
substantially all of such Seller's assets, provided that the
surviving or acquiring entity agrees to be bound by the terms of the
Shareholder Agreement.
o Transfers to Affiliates: Without regard to the Volume Limitations
and the Right of First Offer, the Sellers may sell or transfer UPC
securities to affiliates of such Seller, provided that the affiliate
agrees to be bound by the terms of the Shareholder Agreement.
Registration Rights
o In the event that UPC initiates a public offering of its common
stock, the Sellers shall, in connection with such public offering,
be entitled to register for sale all or part of the UPC common stock
it
3
holds, provided that the Sellers shall be subject to (i) standard
"cut-back" provisions, (ii) standard "lock-up" provisions, and (iii)
reasonable and customary expense reimbursement provisions.
o Similar registration rights provisions may be agreed between the
Company and its other shareholders.
Quorum/Voting
o During the Restricted Period, the Sellers shall be obligated to
cause all shares beneficially owned by them to be present for all
stockholder meetings of UPC.
o During the Restricted Period, so long as Sellers together own more
than 20%, on a fully diluted basis, of UPC voting stock, the Sellers
shall be obligated to cause all shares beneficially owned by them to
be voted in favor of director nominations approved by the Board.
o The Restricted Period shall commence on the Effective Date and end
on the fourth anniversary of the Effective Date; provided, however
that if the Seller has converted the Seller LLC Interest into UPC
common stock, the Restricted Period shall end on the earlier of (i)
the fourth anniversary of the Effective Date and (ii) the later of
(y) the second anniversary of the conversion of the Seller LLC
Interest and (z) the third anniversary of the Effective Date.
Standstill
o Except pursuant to the Preemptive Rights or the conversion of the
Seller LLC Interests, during the Restricted Period, the Sellers and
their affiliates may not, so long as the Sellers beneficially own
more than 20%, on a fully diluted basis, of the UPC voting stock,
acquire any additional UPC securities unless such acquisition is
approved by the Board.
4
Other Control Limitations
o During the Restricted Period, so long as the Sellers beneficially
own more than 20%, on a fully diluted basis, of the voting stock of
UPC, the Sellers and their affiliates will not take any action,
alone or with any other person or group, to acquire or affect
control of UPC or to encourage or assist any other person or group
to do so, other than actions taken by Chelsea's representative, if
any, on the Board which are in accordance with such representative's
fiduciary duties. The prohibited actions include but are not limited
to (i) making an offer or proposal to engage in any business
combination, change in control, acquisition of securities or
significant portion of assets, restructuring or other similar
transaction, (ii) seeking additional representation on, or change in
composition of, the Board, (iii) engaging or participating in a
proxy solicitation, (iv) depositing shares into a voting trust, (v)
making any public announcement concerning the Standstill or these
provisions, or (vi) requesting the other party to modify the
Standstill or these provisions in a public announcement.
Third Party Offers
o If, prior to the tenth anniversary of the Effective Date and only
for so long as the Sellers together own more than 20%, on a fully
diluted basis, of UPC voting stock, UPC becomes subject to a bona
fide third party offer to enter into a transaction which would
result in a change of control of UPC or a transfer of substantially
all of the assets of UPC which is approved by a majority of the
Board and supported by the holders of a majority of the shares
(other than the Sellers) which have taken a position on such
transaction, the Sellers will be required within a reasonable period
of time not to exceed 10 business days after receipt of notice of
such event, to either (i) offer to acquire the UPC securities or
assets which are subject to such third party offer on terms at least
as favorable to the holders of UPC securities as the third party
offer or (ii) support the third party offer, including by either
tendering their shares in the offer or voting all shares held by
them in favor of the offer, as applicable.
5
Charter Documents
o The UPC Certificate of Incorporation/Bylaws shall provide that, upon
UPC becoming subject to the Securities Exchange Act of 1934, public
company provisions shall become effective, including, without
limitation: (i) classified board, (ii) no action by written consent,
and (iii) advance notice for shareholder proposals/nominations.
6
EXHIBIT 3.1.11