FOUNDERS' AGREEMENT JOINT STOCK COMPANY WITH FOREIGN INVESTMENTS
"UNITED ENGINEERING COMPANY"
Article 1
THE FOUNDERS AND FORMATION
The Founders of the Joint Stock Company:
1. The State Property Fund of Ukraine, represented by the President of the Fund,
Xx. Xxxxxxxx Xxxxxxx, acting in the interests of the state-owned enterprises:
The Production Association "Southern Machine-Building Plant", "Trust # 5 for
Special Construction Works", Construction Bureau "The Southern" ;
2. The "Spivdruznist" Association of Enterprises, by Xxxxxxxxxx. X. Xxxxx, the
Managing Director, the legal address: Xxxxxxx Xxx. 0-X, Xxxxxx, Xxxxxxx Xxxxxx;
3. The Special Construction and Technology Bureau of the Electrical Welding
Institute ("The Xxxxx Institute") , by Xxxxxx X.Volgin, the Managing Director,
the Legal Address: X.Xxxxxxxxxxx Xxx., 0, Xxxxxxxx of Kievkaja Region;
4. "Ukrinvestkonversia ltd." - The Limited Liability Company, by Sergij Lutwort,
the President, the legal address: Peremoga Squ., The Officers Club, Vinnitza;
5 . The Limited Liability Company EKSKATT ltd.", by Xxxxxxxxxx X. Lashkevitch ,
the President, the legal address: Bozenko Str., 11, Kiev;
6. Research and Production Enterprise with Limited Liability "Pivdenexo", by
Xxxxxxx Xxxxxx, the Direktor General, the legal address: Xxxxxxxxxx xxx. , 00,
Xxxx xx Xxxxxxxxxxxxxxx, Xxxxxxx, and
7. Corporation "CONSORTIUM SERVICE MANAGEMENT GROUP - "C.S.M.G." registered in
Texas, USA, the certificate of incorporation issued November 17, 1992, The
Corporation Statutes # 01250009, represented by Xxxxxx Xxxxxxx, President of the
Corporation, the legal address - 701 CCNB, North Tower 500, N. Shoreline, Corpus
Christi, Texas, 78471, USA.,
have agreed to act as Founders of a closed Joint Stock Company, referred to as
"The Company", to be established in accordance with Ukrainian Law and for the
purpose of production operations and other activities herein set forth. The
Ukrainian Founders and the American Co-Founder listed herein shall be regarded
as original shareholders of the Company (to referred to as "the Founders" or
"the Shareholders"). 1.2. The Governing Laws: The Company establishment and
activities shall be governed by:
- the effective legislation of Ukraine, "The Law of Ukraine On Business
Associations" in particular, legislation on investments and on foreign
investments in Ukraine and by other legislative acts,
- by this Founders Agreement and by
- The Company Statutes that may be subject to amendments from time to time;
Article 2 DURATION
The duration of the Company shall be perpetual.
Article 3 PURPOSES AND FIELDS OF ACTIVITY
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The broad commercial purpose of the Company shall be rendering of all kinds of
engineering services which may be needed for the implementation of the
state-funded and supported and of other military conversion programs and
projects, as well as creation of certain profitable daughter enterprises and
operations. In accordance with the broad commercial purpose the scope of
business activity of the Company shall be:
- working out and development of programms, projects and technologies, focused
on the liquidation of armaments and participation in the implementation of the
said programms;
- reconstruction of military objects taken off duty as the result of liquidation
of armaments;
- liquidation, utilization and salvaging of ammunition, explosive effect
connected works.
- working out and development of rehabilitation and training programms mainly
for the army officers of the military units to be disbanded as the result of the
armaments reduction to fill the positions in the Company;
- building and sale on the low interest credit basis of housing for the army
officers leaving the Army in connection with the disarmament;
- technological engineering services, resulting mainly in providing and
transferring of certain technologies ordered by a third parties for the purpose
of creation of new industrial object or conversion of military production;
- construction engineering, resulting mainly into the activity which involves
managing supplies of and mounting of specific technological equipment, operating
in special construction and final assembly works; - consulting engineering
including the following: rendering of the intellectual services in projection of
construction sites, working out of the construction strategy, marketing
researches and feasibility studies, organization and managing of open auctions
and tenders for best supply and construction contractors, carrying out of
construction works to install equipment chosen at tender or auction,
coordination of civil engineering works, supply and assembly works;
- utilization, deep processing and salvaging of discharged metal objects,
marketing, sale, export sales of salvaged metals and of the products resulting
from its salvaging;
- developing of the technologies and production of the equipment for the needs
of agricultural sector;
- conversion of military property and hardware taken off duty and its
utilization;
- building of housing and of other civil objects;
- leasing of the equipment to the third parties;
Article 4
NAME AND THE LEGAL ADDRESS OF THE COMPANY
The name of the Company shall be:
(a) In Ukrainian: Aktionerne tovaristvo z inozemnimy investiciamy
"OBIEDNANA INGINIRINGOVA COMPANIA"
(b) In English - The Joint Stock Company With Foreign Investments
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"UNITED ENGINEERING COMPANY"
The legal address of the Company is:
Xxxxxxxxxx Xxx., 00, Xxxxxxxxxxxxxxx 000000, Xxxxxxx.
Article 5 LEGAL STATUS OF THE COMPANY
5.1. The Company is established as a closed Joint Stock Company in accordance
with The Law of Ukraine On Business Associations, i.e. a company which has a
capital fund divided into certain number of shares of equal nominal value and is
liable for its obligations only by its assets. The Company shall also enjoy the
Status of an Enterprise with foreign investments established under the Laws of
Ukraine on Foreign Investments. 5.2. As an enterprise with foreign investment
the Company may create subsidiaries, daughter companies, may acquire stock of
privatized state plants and factories and structure itself as Holding Company,
i.e. a business entity which owns controlling voting stock of daughter companies
and subsidiaries.
5.3. The Company will be liable to the demands of creditors to the extend all
its property and assets, but all shareholders are liable only within the limits
of their share value.
Article 6 CAPITAL FUND AND PERCENTAGE INTERESTS
6.1. Share Capital (Statutory Fund). The authorized share capital of the Company
("Capital Fund") at the moment of its founding to be subscribed and paid in by
the Founders upon Company establishment is one hundred million (100,000,000) of
Ukrainian karbovanetz, or if valued in order to carry out valuation of the
American Partner (the Founder) and the relevant contributions of the Ukrainian
Partners (the Founders) in the contributions convertion into hard convertible
currency - one hundred (100,000) US dollars in accordance with the following
exchange rate agreed between all of the Founders: One (1) US dollar is equal to
one thousand (1000) karbovanetz. This Capital Fund is divided into 10,000 shares
of common stock with a nominal value of UK 10,000 each.
The Founders only shall subscribe to the Company's Share Capita. The Founders
who are Ukrainian legal entities shall pay in their shares by contributing the
relevant sums of cash into the Statutory Fund. The American Founder "C.S.M.G.
inc." shall pay in its shares in kind (by certain equipment) for the total sum
of fifty thousand (50,000) US dollars, to be contributed into the Statutory
Fund: The convertion of "C. S. M. G. inc." in kind" contribution into Ukrainian
Karbovanetz shall carried out in accordance with the previously agreed exchange
rate: one (1) dollar is equal to one thousand (1000) karbovanetz.
1. The State Property Fund shall pay in the aggragate amount of 1875 shares,
that will make up 18,75% equal to 18,750,000 karbovanetz or 18,750 US dollars in
the following way:
(a) The value of 625 shares worth Ukbv.6,250,000 or 6,250 US dollars, that make
up 6,25% of the Share Capital, shall be paid in cash by the Industrial
Production Association "Southern MachineBuilding Plant";
(b) The value of 625 shares worth Ukbv.6,250,000 or 6,250 US dollars that make
up 6,25% of the Share Capital shall be paid in cash by "Trust # 5 for Special
Construction Works";
(c) The value of 625 shares worth Ukbv. 6,250,000 or 6,250 US dollars that make
up 6,25% of the Share Capital shall be paid in cash by the Construction Bureau
"The Southern"; 2: The "Spivdruznist" Association of Enterprises, shall
subscribe and pay in 625 shares worth Ukbv. 6,250,000 or 6,250 US dollars, which
will make 6,25% of the Company's Capital;
3. The Special Construction and Technology Bureau of the Electrical Welding
Institute ("The Xxxxx Institute") shall subscribe and pay in 625 shares worth
Ukbv.6,250,000 or 6,250 US dollars, which will
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make 6,25% of the Company's Capital;
4. "Ukrinvestkonversia ltd.", Limited Liability Company shall subscribe and pay
in 875 shares worth Ukbv.8,750,000 or 6,250 US dollars, which will make 8,75% of
the Company's Capital;
5. The Limited Liability Company "EKSKATT ltd." shall subscribe and pay in 500
shares worth Ukbv. 5,000,000 or 5,000 US dollars, which will make 5% of the
Company's Capital;
6. Research and Production Enterprise with Limited Liability "Pivdenexo , shall
subscribe and pay in 500 shares worth Ukbv. 5,000,000 or 5,000 US dollars, which
will make 5% of the Company's Capital;
7 Corporation "CONSORTIUM SERVICE MANAGEMENT GROUP - "C.S.M. G. shall subscribe
and pay in 5000 shares worth fifty million (Ukbv. 50,000) karbovanetz or fifty
thousand (50,000) US dollars which will make 50% of the Company's capital. The
American Founder(s) shall pay in it's shares in US dollars at the official
exchange rate effective the date of paying in the capital.
Statotur Fund Payment Order:
a) The Founders shall pay in their shares by making certain property
contribution in the amounts and by the schedule set forth by the relevant
regulations of the Ukrainian Legislation;
b) The Founders who are Ukrainian legal entities shall pay in their respective
shares by contributing certain amounts of cash into the Statutory Fund pursuant
Article 3.1. of this Syayutes.
c) The Founder - "C.S.M.G. inc." shall pay in it's shares (5000) by making
contribution in kind (contributing an automobile, a maxi-van and some office
equipment) at the aggregate value of 50,000 US dollars.
The American Founder(s) shall pay in it's shares in US dollars at the official
exchange rate effective the date of paying in the Capital.
6.2. The Company has the right to make Capital Fund increase if all the shares
previously issued were paid in at a price not less then nominal value. The
Capital Fund increase may be made by means of issuance of additional stock or by
share par value increase. 6.3. Increase in Capital Fund Procedures.
a) The Company may increase its Capital Fund after starting operations subject
to decision of Shareholders General Assembly.
b) The Company may also make increase in Capital Fund and make private placement
of additional stock issued, among Ukrainian or us enterprises, which Founders
may deem necessary to associate with the Company's operations. Additional shares
issued also shall be placed between citizens of Ukraine or USA, members of the
Board or the Management of the Company or those who are rendering helpful
services for the Company. Any decision to be taken on the issuance of additional
stock shall be subject of exclusive authority of the General Meeting of the
Shareholders and will need not less then 3/4 majority vote of all the
Shareholders. The said rule shall be also applied to the private offering of
certain amount of stock to the natural persons and legal entities of US or
Ukraine, which may belong to the executive officers of the Company, referred to
in Article 5.1. (e) of the Company's Statutes or the outsiders that ,an provide
valuable services for the Company.
6.4. The issue or private offer price of such newly issued shares may be greater
than their nominal value.
6.5. Shares. The Shares of the Company shall be registered personal shares of
common stock and shall be numbered consecutively. Each shareholder shall be
issued a certificate evidencing his\her ownership in shares of stock in the
Company.
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6.6. Creation of the New Subsidiaries.
',on the decision taken by 3/4 majority vote of the General Meeting the
Shareholders the Company may create its subsidiaries.
6.7. Equal distribution of interests between the American and the Ukrainian
Partners. In any capital increase or private placement of Company's stock policy
the Founders of the Company shall keep the equal distribution of interests in
it's Share Capital pursuant the guideline that neither all the American
Shareholders, nor the Ukrainian Shareholders shall have the ownership and voting
rights exceeding 50% of the Company Authorized Share Capital.
Article 7 FINANCING OF THE COMPANY BUSINESS
7 . 1: The Company shall open, pursuant to the Law of Ukraine, the following
bank accounts: i) a UK account in one of the local Banks;
ii) a USD account in one of the local Banks;
iii) the correspondence accounts in banking institutions of the CIS countries
and other countries of the former Soviet Union;
iiii) a hard currency account in one of the first class European or US banks,
referred to as "Foreign bank account", for the purpose of funding equipment,
operating and other necessary business expenses and to function as a receiving
account for the purpose of depositing the irrevocable letters of credit from the
sale of Companys products to the world markets. This account the Company shall
open after receiving license from the National Bank of Ukraine.
7.2. The Company can use part of the assets invested into the Capital Fund to
cover part of the office expenses costs until first profits appear.
7.3. "S.C.M.G.", in a period that will not exceed 120 days after obtaining by
the Ukrainian Founders of the documents, referred to in the Article 8.3., shall
assist in providing financing for Companys' business in form of a loan up to an
aggregate amount up to two million USD ($ 2 000,000) with the interest rate not
exceeding 9% annually to cover such an operational expenses of the Company that
the shareholders may deem necessary The repayment term shall be 36 month with a
minimum monthly payment of $70,550 and 50% of the profit payback schedule. The
first payment shall be made the first day of the month which will follow
four-month period starting from the the date of obtaining the credit.
7.4. This financing shall be in form of a loan to which the Company will be a
debtor, with loan to be provided by one of US or European Commercial Banks.
7.5. All the founders shall provide working capital to the Company on credit
terms or interest free subsidy.
7.6. The CSMG] shall provide marketing for the Company operations in order to
insure export of the Companys' products to world market at the best average
prices attainable.
7 , 7. The Ukrainian Founders shall be responsible for all the official
approvals, registration certificates or licenses, opening of the Company's
accounts in Ukraine, that may be necessary in connection with the Company
establishment and will bear all the expenses relevant to these activities. The
"SCMG" as a Founder to the Company shall be responsible for the expenses
connected with the opening of Foreign Bank Account.
Article 8. SECURITY OF THE COMPANY DEBT
8.1. Immediately after obtaining of the registration certificate of the Company
Ukrainian Founders shall
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address the appropriate Government authorities of Ukraine and the National Bank
of Ukraine in order to obtain special license for operating the Foreign Bank
account in the Company name, to handle operations referred to in the paragraph
7.1. of this Agreement;
8.2. The US Founder shall retain one of "the big six" accounting firms to
oversee the Foreign bank account operations.
8.3. The Ukrainian Founder shall seek to obtain from the Government of Ukraine a
written document, guaranteeing immediate free export to the world market of no
less then 50% of metals, objects and components, obtained by the Company out of
its salvage of military hardware operations. Should the Ukrainian Founders fail
to get the said document within 30 days after the date of official registration
of the Company, the American Founder may withdraw from the Company notifying the
other Shareholders on its decision in 5 days period .
8.4. On the Condition of the Reception of the Hard Currency Credit The Company
shall pay monthly to the Creditor beginning with the date of the first payment
and each month there after the sum referred to in the Article 7.3.
Article 9
PROFIT OF THE COMPANY AND ITS DISTRIBUTION
9.1. The Company shall keep books and records concerning all profits, losses,
income, expenditures, assets and liabilities.
9.2. Profit of the Company after all allocations to the State Budget (net
profit) if any shall be the Company property. The profit and loss distribution
between the Founders shall be proportional to their respective investments to
the Capital Fund, provided that all extra contributions to the working capital
also shall be refunded.
9.3. The Profits of the Company shall be counted for in accordance with the
accounting regulations effective in Ukraine, though financial statements
prepared in accordance with American accounting standards shall be prepared.
Article 10.
INSURANCE FUND AND LIABILITY OF FOUNDERS.
The insurance fund is created by the Company at the amount of 25 twenty five
percent (25%) of the Capital Fund. The year allocations to the Reserve Fund
shall not be less then 5% of the profit.
Article 11.
FOUNDERS OBLIGATIONS AS TO STARTING SALVAGE OPERATIONS
11.1. Immediately after registration of the Company Ukrainian founder will be
active take every effort in order to provide for the Company:
i) provide locations or shops for the Company operations with necessary elements
of industrial infrastructure in a form of associating other parties with the
Company business ;
ii) provide supplies of objects for dismantling and salvage
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iii) to provide no less then 6 dismantled strategic missiles locations for the
purpose of their usage in the Company's interests
11.2. The US Founder will take efforts in order to provide for the Company:
i) obtaining of the funding for Company operations subject to conditions set
forth hereinunder;
ii) marketing and sales to the World market of the Company products at highest
but competitive prices available;
iii) training of the Company personnel if necessary
iy) funding of the strategic study of the Company's operations at $100,000 after
receiving licese and other documents referred to in Article 8.3. of this
Agreement.
11.3. The sale out of the state-owned stock of the Company shall be carried out
by the State Property Fund of Ukraine in accordance with effective legislation.
Article 12 GENERAL RIGHTS AND RESPONSIBILITY OF THE FOUNDERS
12.1. Founders shall have rights and responsibility pursuant article 1 1 of the
law of Ukraine "On Business Associations" and in addition to those, hereby
undertake the following actions in compliance with article 26 and all other
provisions of the Law on Economic Associations:
(a) they ratify and adopt this Founders' Agreement and approve the Statutes of
the Company; (b) they authorize the undersigned to be their lawful and duly
authorized Representatives to carry out this Agreement, including:
(c) to take all actions necessary to officially register the Company as a joint
stock company, and to register the Statutes as required in accordance with
Ukrainian law;
(d) to constitute a first general meeting of Shareholders following registration
of the Company;
(e) they indemnify and hold harmless their Representatives (the undersigned)
from any and all damage, loss, liability and expense incurred or suffered by
them as a result of their
actions in furtherance of the creation of the Company.
Article 13 GOVERNING BODIES OF THE COMPANY.
13.1. The Founders shall create governing bodies of the Company pursuant to
Ukrainian legislation: General Meeting of the Shareholders Board of Directors,
Supervisory Board and Audit Commission as controlling body.
13.2. General Meeting of the Shareholders shall be convened weekly during the
six month period following the Company official registration and after
expiration of the said term - in accordance with relevant Statutes provisions.
The Shareholders at their meeting shall elect Chairman who will also bear the
title "President of the Company".
13.3. Board of Directors shall consist of ten members; US Founder on his part
and Ukrainian Founders on their part jointly shall designate equal number of
Directors and the Company will conclude a contract with each of the Directors.
Two members of the Board of Directors (one on Ukrainian part and one on US part)
shall be appointed as Directors General. Directors General shall manage every
day operations of the Company and will not be authorized to fund without the
Board of Directors approval assets which
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according to the exchange rate announced by the Bank of Ukraine exceed $500,
except for every day operational expenditures.
Article 14 ARBITRATION.
All disputes that may arise between US Founder and Ukrainian Founders shall be
subject to litigation at the International Commercial Arbitration in Stockholm.
Article 15 FINAL CLAUSES
15. 1. This Agreement shall be effective from the date of its sighing by the
Founders. From this date all other documents (correspondence, protocols of
intent) shall not be effective.
15.2. The document entitled "The Company's Statutes" shall be regarded as Annex
to this Founders' Agreement. Should any provisions of the Founders' Agreement
and the Company's Statutes contradict to each other the relevant provision of
the Founders' Agreement shall prevail.
15.3. This Agreement shall be executed in ten counterparts in Ukrainian and in
three counterparts in English each of which shall be deemed as originals, but in
case of any misunderstanding the English text will prevail.
Exhibit 10
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