EXHIBIT 10.23
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is entered into this 7th
day of August, 1997 by and among:
URAL PETROLEUM CORPORATION, a corporation organized and existing under
the laws of the State of Delaware, USA ("UPC");
WALDO SECURITIES S.A., an international business company organized and
existing under the laws of the British Virgin Islands ("Waldo");
KHANTIMANSIISKNEFTEGAZGEOLOGIIA, an open joint stock company organized
and existing under the laws of the Russian Federation ("KMNGG");
BENZ INVESTMENTS GmbH, a corporation organized and existing pursuant to
the laws of the Bahamas ("Benz");
AOZT IURIDICHESKAIA KOMPANIIA "XXXX I SINOVIA", a closed-joint stock
company organized and existing pursuant to the laws of the Russian Federation
("Xxxx & Sons");
OOO "TAGASO", a limited liability company organized and existing
pursuant to the laws of the Russian Federation ("Tagaso");
TOO "XXXXX", a limited liability company organized and existing
pursuant to the laws of the Russian Federation ("Xxxxx").
For purposes of this Agreement, Benz, Xxxx & Sons, Tagaso, and Xxxxx are from
time to time hereinafter referred to individually as an "Initial Seller" and
collectively as the "Initial Sellers", and UPC, Waldo, KMNGG and the Initial
Sellers are from time to time hereinafter referred to individually as a "Party"
and collectively as the "Parties".
WHEREAS, by a stock transfer agreement by and between UPC and Benz dated April
17, 1997 and acknowledged by Waldo as of the same date, and by a stock transfer
agreement by and among UPC and Tagaso, Xxxxx, and Xxxx & Sons dated April 17,
1997 and acknowledged by Waldo as of the same date (collectively the "Stock
Transfer Agreements"), the Initial Sellers have agreed to sell to UPC a total of
one hundred twenty-eight thousand fifty (128,050) shares of KMNGG stock (the
"Initial Shares"), subject to satisfaction of certain conditions precedent, and
whereas the purchase price with respect to such shares and certain documents
related thereto have been deposited in escrow pending satisfaction of such
conditions precedent;
WHEREAS, UPC and Waldo have entered into a loan agreement and note dated July 3,
1997 (the "Prefinancing Agreement"), pursuant to which UPC has agreed to make a
loan to Waldo of three million fifty thousand Dollars ($3,050,000) (the
"Prefinancing Loan") on the terms and conditions therein contained, and Waldo
has agreed to repay such amount and has agreed to provide certain guarantees and
security in connection therewith;
WHEREAS, UPC and the Initial Sellers have entered into a guarantee and stock
pledge agreement dated July 3, 1997 (the "Guarantee and Stock Pledge
Agreement"), pursuant to which the Initial Sellers have guaranteed the payment
by Waldo of the Prefinancing Loan and have pledged a portion of the Initial
Shares as security therefore;
WHEREAS, UPC desires to acquire a controlling interest in KMNGG through the
acquisition of KMNGG shares from the Initial Sellers, Waldo and KMNGG as
provided herein; and whereas the Initial Sellers, Waldo and KMNGG desire to
complete the transfer to UPC of the KMNGG shares specified herein, all on the
terms and conditions herein contained;
WHEREAS, Waldo desires to acquire approximately fifty percent (50%) of the total
issued and outstanding voting stock of UPC, and whereas UPC is willing to take
steps necessary to cause to be issued to Waldo such number of shares of UPC
voting stock as will be sufficient to provide Waldo with approximately fifty
percent (50%) of the total voting stock of UPC issued and outstanding as of the
date of deposit of such shares into escrow by UPC, all on the terms and
conditions herein contained; and
WHEREAS, the Parties desire to take certain additional steps in the future to
increase the value and transferability of UPC shares on domestic and
international capital markets, and to enhance the marketability of UPC;
NOW, THEREFORE, in consideration of the mutual agreements and covenants herein
contained, the Parties hereby agree as follows:
ARTICLE 1: DEFINITIONS
"Additional Costs" shall have the meaning ascribed to such term in Section 7.1.1
hereof;
"Aitorneftegaz" means zao Aitorneftegaz, a closed joint stock company organized
and existing pursuant to the laws of the Russian Federation;
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banks are required or authorized by law to be closed in New York, New York
USA and/or in Moscow, Russian Federation;
"Canceled Prefinancing Amount" means such amount as may be due and owing on the
Final Closing Date from Waldo to UPC pursuant to the Prefinancing Agreement, and
canceled on such date by UPC and Waldo as partial consideration for the Swap
Shares pursuant to the terms and conditions of the Prefinancing Agreement and
the Stock Exchange Agreement, which amount shall be confirmed by written notice
executed by each of Waldo and UPC;
"Companies" means each of the KMNGG subsidiaries formed from the Divisions upon
completion of the KMNGG Reorganization, as described in Section 3.3.4 hereof;
"Convertible Warrants" means the package of notes and convertible warrants to be
placed by UPC with the Outside Investor(s) pursuant to the terms and conditions
of the Convertible Warrant Agreement(s);
"Convertible Warrant Agreement" means the agreement or agreements to be
concluded between UPC and the Outside Investor(s) with respect to payment by
such Investor(s) to UPC (individually or collectively) of an aggregate amount
(unless otherwise agreed in writing by UPC, Waldo and KMNGG) of not less than
thirty five million Dollars ($35,000,000) in exchange for certain notes and
warrants convertible into shares of common stock of UPC;
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"Division" means each of the KMNGG divisions listed in Schedule 1 hereto, and
"Divisions" means such divisions collectively;
"Dollars" and "$" mean the lawful currency of the United States of America;
"Due Diligence Request" means that certain request for due diligence disclosure
delivered by UPC to Waldo on April 4, 1997 and delivered by counsel to UPC to
counsel for Waldo and KMNGG on April 21, 1997, along with all supplemental
requests related thereto;
"Encumbrance" shall have the meaning ascribed to such term in Section 7.1
hereof;
"Escrow" means the escrow account(s) maintained by the Escrow Agent in
accordance with the Escrow Agreement, as the same may be amended from time to
time;
"Escrow Agent" means Xxxxx Brothers Xxxxxxxx & Co., a bank organized and
existing under the laws of the State of Massachusetts, USA;
"Escrow Agreement" means that agreement by and among Waldo, UPC, the Initial
Sellers and the Escrow Agent as of July 30, 1997, as the same may be amended
from time to time (including the amendments herein described);
"Escrow Documents" means the Seller Escrow Documents and the Waldo Escrow
Documents;
"Excess Liabilities" shall have the meaning ascribed to such term in Section
7.1.1 hereof;
"Excess UPC Liabilities" shall have the meaning ascribed to such term in Section
7.2 hereof;
"Final Closing" shall have the meaning ascribed to such term in Section 6.2
hereof;
"Final Closing Date" shall have the meaning ascribed to such term in Section 6.2
hereof;
"Final Extract" shall have the meaning ascribed to such term in Section 6.3.1
hereof;
"First Closing" shall have the meaning ascribed to such term in Section 6.1
hereof;
"First Closing Date" means the date of execution of this Agreement;
"Guarantee and Stock Pledge Agreement" means that agreement concluded by and
among UPC and each of the Initial Sellers, dated as of July 3, 1997, pursuant to
which the Initial Sellers guarantee the repayment by Waldo of the Prefinancing
Loan advanced to Waldo by UPC pursuant to the Prefinancing Agreement, and
pursuant to which the Initial Sellers pledged a portion of the Initial Shares as
partial security for such repayment by Waldo:
"Initial Purchase Price" means the sum to be delivered out of Escrow to the
Initial Sellers in connection with the acquisition by UPC of the Initial Shares
pursuant to the terms and conditions of this Agreement, the Stock Transfer
Agreements and the Escrow Agreement;
"Initial Shares" means, collectively, thirty seven thousand nine hundred
(37,900) shares of KMNGG common stock to be acquired by UPC from Benz
Investments and ninety thousand one hundred fifty (90,150) shares of KMNGG
common stock to be acquired by UPC from Xxxxx, Tagaso and Xxxx & Sons pursuant
to the Stock Transfer Agreements;
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"Investment Obligations" shall have the meaning ascribed to such term in Section
6.2.9 hereof;
"Investment Obligations Certificate" shall have the meaning ascribed to such
term in Section 6.2.9 hereof;
"KMNGG Company Profile" means that description of the operations, assets,
liabilities and licensed interests of KMNGG to be provided by KMNGG to UPC and
Waldo prior to the Final Closing Date;
"KMNGG Licenses" means all of the licenses currently held by KMNGG or to be
acquired by KMNGG on or prior to the Final Closing Date, including without
limitation the licenses listed in Schedule 2 hereto;
"KMNGG New Issuance" means issuance by KMNGG of the New Issuance Shares as
provided in Section 3.3.3 hereof;
"KMNGG Reorganization" means the spin-off by KMNGG of the Divisions as separate
subsidiaries, the registration of such subsidiary as the Companies, and the
reissuance of the KMNGG Licenses to KMNGG, all as described in more detail in
Section 3.3.4 hereof;
"KMNH" means "Khantimansiiskneftehant", a closed joint stock company organized
and existing under the laws of the Russian Federation;
"KMNH Licenses" means the licenses listed in Schedule 3 hereto;
"KMNH Reorganization" means the reorganization of KMNH as described in more
detail in Section 3.3.5 hereof;
"Xxxx Plus" means OOO "Xxxx Plus", a limited liability company organized and
existing pursuant to the laws of the Russian Federation;
"Loan Agreement" means the loan agreement substantially in the form of Annex 5
hereto, to be concluded between UPC and Waldo subject to satisfaction of
conditions precedent specified in Sections 8.1 and 8.2 hereof;
"New Issuance Purchase Price" means the sum of ten million Dollars ($10,000,000)
to be delivered from Escrow to KMNGG following the Final Closing in connection
with the acquisition by UPC of the New Issuance Shares pursuant to the terms and
conditions of this Agreement and the Stock Subscription Agreement;
"New Issuance Shares" shall have the meaning ascribed to such term in Section
3.3.3 hereof;
"NGD" means Nazimgeodobycha, a company to be formed pursuant to the laws of the
Russian Federation upon the reorganization of KMNH with KMNGG as its majority
shareholder, which company shall hold the KMNH Licenses;
"Outside Investor(s)" shall have the meaning ascribed to such term in Section
3.2.3 hereof;
"Prefinancing Agreement" shall have the meaning ascribed to such term in the
preamble hereto;
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"Registrar" means zao Ob'edinennyi registrator, a closed joint stock company
organized pursuant to the laws of the Russian Federation, or such other entity
as KMNGG may from time to time specify in written notice to the other Parties
hereto as being the entity officially maintaining the Shareholders' Register;
"Reorganization Expenses" shall have the meaning ascribed to such term in
Section 7.1.1 hereof;
"Retainer Agreement" means the revolving credit agreement substantially in the
form of Annex 4 hereto to be concluded between UPC and Waldo subject to
satisfaction of conditions precedent specified in Sections 8.1 and 8.2 hereof;
"Rubles" and "RR" mean the lawful currency of the Russian Federation;
"Seller Escrow Documents" means the documents and other instruments delivered or
to be delivered by the Initial Sellers to the Escrow Agent pursuant to the terms
and conditions of this Agreement, the Stock Transfer Agreements and the Escrow
Agreement;
"Shareholders' Agreement" means the agreement substantially in the form of Annex
6 hereto to be concluded between Waldo and UPC subject to satisfaction of
conditions precedent specified in Sections 8.1 and 8.2 hereof;
"Shareholders' Register" means the official shareholders' register of KMNGG,
maintained in accordance with the requirements of applicable law by the
Registrar;
"Stock Exchange Agreement" means the agreement in the form of Annex 1 hereto
concluded between Waldo and UPC as of even date herewith;
"Stock Subscription Agreement" means the agreement substantially in the form of
Annex 3 hereto, to be concluded between UPC and KMNGG subject to satisfaction of
conditions precedent specified in Sections 8.1 and 8.2 hereof;
"Stock Transfer Agreements" means, collectively, (i) the agreement for
acquisition of KMNGG shares concluded between UPC and Tagaso, Xxxxx, and Xxxx &
Sons as of April 17, 1997 and acknowledged by Waldo as of the same date, and
(ii) the agreement for acquisition of KMNGG shares concluded between UPC and
Benz Investments as of April 17, 1997 and acknowledged by Waldo as of the same
date;
"Swap Shares" means thirty-nine thousand four hundred ninety (39,490) shares of
common stock of KMNGG and eight thousand one hundred forty-one (8,141) shares of
preferred stock of KMNGG to be transferred by Waldo to UPC pursuant to the terms
and conditions of the Stock Exchange Agreement, subject to the conditions
precedent herein contained;
"Transfer" means to sell, transfer, assign or otherwise dispose of in any way
directly or indirectly;
"UPC Company Profile" means that description of the operations, assets,
liabilities and licensed interests of UPC to be provided by UPC to KMNGG and
Waldo prior to the Final Closing Date;
"UPC Refund Amount" shall have the meaning ascribed to such term in Section 7.2
hereof;
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"UPC Refund Notice" shall have the meaning ascribed to such term in Section
7.2.1 hereof;
"UPC Shares" means the one hundred fifteen thousand four hundred (115,400)
shares of common stock of UPC to be transferred by UPC to Waldo pursuant to the
terms and conditions of the Stock Exchange Agreement, subject to the conditions
precedent herein contained;
"Waldo Escrow Documents" means the documents and other instruments delivered or
to be delivered by Waldo to the Escrow Agent pursuant to the terms and
conditions of the Stock Exchange Agreement and the Escrow Agreement;
"Waldo Refund Amount" shall have the meaning ascribed to such term in Section
7.1.1 hereof;
"Waldo Refund Notice" shall have the meaning ascribed to such term in Section
7.1.2 hereof;
"Warrant-holders Agreement(s)" mean the agreement(s) to be concluded between the
Outside Investor(s) and UPC (as the same may be renamed from time to time) with
respect to ownership and management issues in UPC subject to satisfaction of
conditions precedent specified in Sections 8.1 and 8.2 hereof;
"Warrants" means the warrants issued by UPC to the Outside Investor(s) pursuant
to the terms and conditions of the Convertible Warrant Agreement(s); and
"Warrant Shares" shall have the meaning ascribed to such term in Section 3.2.3
hereof.
ARTICLE 2: EXCHANGE OF SHARES
2.1 Subject to the satisfaction of conditions precedent herein contained,
and on the terms and conditions herein described, on the Final Closing
Date:
Waldo shall receive one hundred fifteen thousand four hundred (115,400)
shares of common stock in UPC, equal to fifty percent (50%) of the
issued and outstanding shares of UPC voting stock as of the date of
deposit by UPC of the UPC Shares into Escrow;
UPC shall receive eight hundred one thousand five hundred ninety-four
(801,594) shares of common stock and eight thousand one hundred
forty-one (8,141) shares of preferred stock in KMNGG, which shares
shall collectively equal approximately eighty-six percent (86%) of the
issued and outstanding shares of KMNGG and ninety percent (90%) of the
issued and outstanding voting common shares of KMNGG as of the Final
Closing Date; and
the Parties shall take such other actions and deliver such other
instruments and documents as herein described.
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ARTICLE 3: COVENANTS OF THE PARTIES
3.1 Covenants of Waldo
3.1.1 Actions at First Closing. Immediately following execution of this
Agreement by all Parties, Waldo shall take all actions required to be
taken by it and deliver all documents and certificates required to be
delivered by it at the First Closing as provided in Section 6.1 hereof.
3.1.2 Actions at Final Closing. Subject to the satisfaction or waiver of the
conditions precedent set forth in Section 8.2 hereof, at the Final
Closing Waldo shall take all actions required to be taken by it and
deliver all documents and certificates required to be delivered by it
at the Final Closing as provided in Section 6.2 hereof.
3.1.3 Voting of KMNGG Shares. For the duration of the Escrow, Waldo shall
vote shares which it owns in KMNGG (including Swap Shares) in favor of
the transactions contemplated by this Agreement and shall take such
additional actions as may be necessary to authorize and/or procure the
fulfillment by KMNGG and the Initial Sellers of their obligations under
this Agreement.
3.1.4 No Encumbrances. For the duration of the Escrow, Waldo shall not enter
into any agreement for creation of, or permit to be created, any
mortgage, pledge, lien, security, interest, encumbrance, restriction or
charge of any kind (other than in favor of UPC as provided herein and
in the Prefinancing Agreement) on or with respect to all or any portion
of the shares of KMNGG stock owned or acquired by Waldo (including,
without limitation, the Swap Shares).
3.1.5 Registrations and Approvals. Waldo shall undertake all measures
reasonably necessary to obtain any approval, permit, license or other
authorization of any governmental authority which may be required in
connection with implementation of any of the transactions herein
contemplated (including, without limitation, any approvals from or
notifications to the RF Antimonopoly Committee, Securities Commission
or Ministry of Finance which may be required pursuant to applicable
law), and shall make such registrations and notifications to
governmental authorities as may be required by applicable law in
connection therewith.
3.1.6 Further Assurances. Waldo shall execute such additional documents, take
such actions, and provide such assistance to KMNGG, the Initial Sellers
and UPC as may be reasonably requested by KMNGG, the Initial Sellers
and/or UPC in connection with fulfillment of obligations under this
Agreement and any of the agreements referenced herein.
3.1.7 No Actions Resulting in Chance of Representations. Unless otherwise
approved in Writing by UPC, Waldo agrees not to take any action, or
omit to take any action on or before the Final Closing Date which would
cause the representations and warranties contained in Sections 9.3
and/or 9.4 hereof to be materially inaccurate or incorrect as of the
Final Closing Date. Waldo shall promptly inform UPC of any event or
circumstance which causes or is reasonably expected to cause any of the
representations or warranties contained in Sections 9.3 and/or 9.4
hereof to be materially inaccurate or incorrect.
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3.1.8 Prefinancing Agreement; Pledge of Waldo Shares. Waldo undertakes to
repay the Prefinancing Amount in full on or before the due date
therefore pursuant to the terms and conditions of the Prefinancing
Agreement, and agrees to fulfill the terms and conditions therein
contained. In the event that the Final Closing occurs on or prior to
the due date for repayment by Waldo of the Prefinancing Loan, the
Canceled Prefinancing Amount (if any) shall be offset by the parties
against amounts owing by UPC to Waldo for the Swap Shares pursuant to
the terms and conditions of this Agreement and the Stock Exchange
Agreement.
3.2 Covenants of UPC
3.2.1 Actions at First Closing. Immediately following execution of this
Agreement by all Parties, UPC shall take all actions required to be
taken by it and deliver all documents and certificates required to be
delivered by it at the First Closing as provided in Section 6.1 hereof.
3.2.2 Actions at Final Closing. Subject to the satisfaction or waiver of the
conditions precedent set forth in Section 8.1 hereof, at the Final
Closing UPC shall take all actions required to be taken by it and
deliver all documents and certificates required to be delivered by it
at the Final Closing as provided in Section 6.2 hereof.
3.2.3 Issuance of UPC Shares. Promptly following the First Closing Date, UPC
shall take all measures reasonably necessary to amend its certificate
of incorporation to increase the authorized shares of common voting
stock of UPC to an amount sufficient to cover issuance of the UPC
Shares to Waldo, and promptly thereafter UPC shall deposit such UPC
Shares into Escrow for the benefit of Waldo as provided herein, in the
Escrow Agreement, and in the Stock Exchange Agreement.
3.2.4 Convertible Warrant Issuance. On or before the Final Closing Date, UPC
shall take all measures reasonably necessary to:
(i) amend its certificate of incorporation to increase the
authorized shares of common voting stock in UPC to an amount
sufficient to cover conversion of the Warrants pursuant to the
terms and conditions of the Convertible Warrant Agreement(s)
(such UPC common shares hereinafter referred to as the
"Warrant Shares");
(ii) identify one or more investor(s) (the "Outside Investor(s)")
willing to invest (individually or collectively) not less than
thirty-five million Dollars ($35,000,000) in UPC (or such
lesser amount as may be agreed in writing by UPC, Waldo and
KMNGG) subject to satisfaction of the conditions precedent
contained herein and in the Convertible Warrant Agreement; and
(iii) conclude Convertible Warrant Agreement(s) with such Outside
Investor(s), pursuant to which agreement(s) such Outside
Investor(s) shall pay to UPC (in the aggregate) not less than
thirty-five million Dollars ($35,000,000) (or such lesser
amount as may be agreed in writing by UPC, Waldo and KMNGG)
upon satisfaction of the conditions precedent contained herein
and in the Convertible Warrant Agreement(s) and pursuant to
which agreement(s) UPC shall issue the Warrants to such
Outside Investor(s).
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Waldo hereby acknowledges and agrees that any acquisition of UPC shares
by such Outside Investor(s) (whether by means of conversion or
otherwise) and/or by any other third party of shares of stock in UPC
shall result in proportionate dilution of all persons holding or
entitled to hold shares or rights to shares in UPC as of the date of
such acquisition, including Waldo.
3.2.5 Change of Name. On or before the Final Closing Date, UPC shall take all
measures reasonably necessary to amend its certificate of incorporation
to register a change in its official registered corporate name from
"Ural Petroleum Corporation" to "Khanty Mansiysk Oil Corporation".
3.2.6 No Actions Resulting in Chance of Representations. Unless otherwise
approved in writing by Waldo or as expressly described herein, UPC
agrees not to take any action, or omit to take any action on or before
the Final Closing Date, which would cause the representations and
warranties contained in Sections 9.5 and/or 9.6 hereof to be inaccurate
or incorrect as of the Final Closing Date. UPC shall promptly inform
Waldo of any event or circumstance which causes or is reasonably
expected to cause any of the representations or warranties contained in
Section 9.5 and/or 9.6 hereof to be materially inaccurate or incorrect.
3.3 Covenants of KMNGG
3.3.1 Actions at First Closing. Immediately following execution of this
Agreement by all Parties, KMNGG shall take all actions required to be
taken by it and deliver all documents and certificates required to be
delivered by it at the First Closing as provided in Section 6.1 hereof.
3.3.2 Actions at Final Closing. Subject to the satisfaction or waiver of the
conditions precedent set forth in Section 8.2 hereof, at the Final
Closing KMNGG shall take all actions required to be taken by it and
deliver all documents and certificates required to be delivered by it
at the Final Closing as provided in Section 6.2 hereof.
3.3.3 KMNGG New Issuance. On or before the Final Closing Date, KMNGG shall
increase its charter capital by issuance of six hundred thirty-four
thousand fifty-four (634,054) new KMNGG common shares (the "New
Issuance Shares") and shall cause such New Issuance Shares and
amendments to KMNGG's constitutional documents reflecting such issuance
to be registered in the manner required by applicable law.
3.3.4 KMNGG Reorganization. On or before the Final Closing Date, KMNGG shall:
(i) register the spin-off (vydelenie) of the Divisions into
separate subsidiaries and procure the registration of such
subsidiaries as separate legal entities with the assets and
liabilities identified in Schedule 1 hereto (such
newly-registered subsidiaries hereinafter referred to from
time to time as the "Companies") in accordance with the
requirements of applicable law;
(ii) apply for and receive the due reissuance into KMNGG's name of
any of the KMNGG Licenses not currently reflecting KMNGG (in
its open joint stock company form) as license holder, in
accordance with the requirements of applicable law; and
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(iii) procure that, as of the Final Closing Date, the outstanding
liabilities of KMNGG (whether actual or contingent) are equal
to or less than the amount which equals the remainder of (i)
twelve million two hundred thousand Dollars ($12,200,000)
minus (ii) the Canceled Prefinancing Amount (if any).
3.3.5 KMNH Reorganization. From and after the date of this Agreement, KMNGG
shall take all measures reasonably necessary to:
(i) procure that the shareholders of KMNH authorize the
reorganization of KMNH by means of spin off (vydelenie) of a
portion of the assets and liabilities of KMNGG (including,
without limitation, the KMNH licenses) into NGD as a newly
created company and procure the registration of NGD as an
independent legal entity; and
(ii) procure that KMNGG acquires not less than eighty percent (80%)
of the share capital in NGD, and procure that the KMNH
Licenses are duly reissued into the name of NGD in the manner
required by applicable law.
3.3.6 Registrations and Approvals. KMNGG shall undertake all measures
reasonably necessary to obtain any approvals, permits, licenses or
other authorizations of any governmental authority which may be
required in connection with implementation of any of the transactions
herein contemplated (including, without limitation, any approvals from
or notifications to the RE Antimonopoly Committee, Securities
Commission or Ministry of Finance which may be required pursuant to
applicable law), and shall make such registrations and notifications to
governmental authorities as may be required by applicable law in
connection therewith.
3.3.7 Registration of Transfers in KMNGG Shareholders' Register. Subject to
the satisfaction of the conditions precedent herein contained, KMNGG
shall take all measures reasonably necessary to cause the registration
of the Initial Shares, Swap Shares and New Issuance Shares into UPC's
name in the Shareholders' Register, and, promptly following receipt of
notice from UPC concerning registration of a change in the name of UPC
as provided herein, shall further take such steps as may be necessary
to cause the Registrar to amend such Shareholders' Register to reflect
such change in name.
3.3.8 No Actions Resulting in Chance of Representations. Unless otherwise
approved in writing by UPC, KMNGG agrees not to take any action, or
omit to take any action, on or before the Final Closing Date, which
would cause the representations and warranties contained in Sections
9.1 and/or 9.2 hereof to be inaccurate or incorrect as of the Final
Closing Date. KMNGG shall promptly inform UPC of any event or
circumstance which causes or is reasonably expected to cause any of the
representations or warranties contained in Sections 9.1 and/or 9.2
hereof to be inaccurate or incorrect.
3.3.9 Further Assurances. KMNGG shall execute such additional documents, take
such actions, and provide such assistance to Waldo, the Initial Sellers
and UPC as may be reasonably requested by Waldo, the Initial Sellers
and/or UPC in connection with fulfillment of obligations under this
Agreement and any of the other agreements referenced herein.
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3.4 Covenants of Initial Sellers
3.4.1 Actions at First Closing. Immediately following execution of this
Agreement by all Parties, each of the Initial Sellers shall take all
actions required to be taken by it and deliver all documents and
certificates required to be delivered by it at the First Closing as
provided in Section 6.1 hereof.
3.4.2 Actions at Final Closing. Subject to the satisfaction or waiver of the
conditions precedent set forth in Section 8.2 hereof, at the Final
Closing each of the Initial Sellers shall take all actions required to
be taken by it and deliver all documents and certificates required to
be delivered by it at the Final Closing as provided in Section 6.2
hereof.
3.4.3 Voting of KMNGG Shares. For the duration of the Escrow, each of the
Initial Sellers shall vote shares which it owns in KMNGG (including the
Initial Shares) in favor of the transactions contemplated by this
Agreement and shall take such additional actions as may be necessary to
authorize and/or procure the fulfillment by KMNGG and Waldo of their
obligations under this Agreement.
3.4.4 No Encumbrances. For the duration of the Escrow, none of the Initial
Sellers shall enter into any agreement for creation of, or permit to be
created, any mortgage, pledge, lien, security, interest, encumbrance,
restriction or charge of any kind (other than in favor of UPC as
provided herein and in the Guarantee and Pledge Agreement) on or with
respect to all or any portion of the Initial Shares.
3.4.5 Registrations and Approvals. Each of the Initial Sellers shall
undertake all measures reasonably necessary to obtain any approval,
permit, license or other authorization of any governmental authority
which may be required in connection with implementation of any of the
transactions herein contemplated (including, without limitation, any
approvals from or notifications to the RE Antimonopoly Committee,
Securities Commission or Ministry of Finance which may be required
pursuant to applicable law), and shall make such registrations and
notifications to governmental authorities as may be required by
applicable law in connection therewith.
3.4.6 Further Assurances. Each of the Initial Sellers shall execute such
additional documents, take such actions, and provide such assistance to
KMNGG, Waldo and UPC as may be reasonably requested by KMNGG, Waldo
and/or UPC in connection with fulfillment of their obligations under
this Agreement and any of the other agreements referenced herein.
3.4.7 No Actions Resulting in Chance of Representations. Unless otherwise
approved in writing by UPC, each of the Initial Sellers agrees not to
take any action, or omit to take any action on or before the Final
Closing Date which would cause the representations and warranties
contained in Sections 9.7 and/or 9.8 hereof to be materially inaccurate
or incorrect as of the Final Closing Date. Each of the Initial Sellers
shall promptly inform UPC of any event or circumstance which causes or
is reasonably expected to cause any of the representations or
warranties contained in Sections 9.7 and/or 9.8 hereof to be materially
inaccurate or incorrect.
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ARTICLE 4: CONDUCT OF BUSINESS BY KMNGG PENDING FINAL CLOSING DATE
4.1 During the period from the date of this Agreement until the Final
Closing Date, KMNGG shall conduct its operations only in accordance
with its ordinary and usual course of business and sound business
practices, and shall use its reasonable best efforts to preserve intact
its business organization (except to the extent that changes may be
required in connection with the KMNGG Reorganization), keep available
the services of its officers and employees and maintain satisfactory
relationships with licensors, suppliers, distributors, clients and
others having business relationships with it: provided, however, that
the Parties expressly acknowledge and agree that KMNGG shall enter into
the agreements herein expressly contemplated (including, without
limitation, agreements and documents required in connection with
completion of the KMNGG Reorganization and the KMNH Reorganization).
4.2 During the period from the date of execution of this Agreement until
the Final Closing Date, except as may be first expressly approved by
UPC in writing (which consent shall not be unreasonably withheld) or as
is otherwise expressly permitted or required by this Agreement, KMNGG
shall not:
(i) amend its charter or any regulations relating to its
organization and management;
(ii) change the compensation payable or to become payable by KMNGG
to any officer, employee or agent, except for ordinary
regularly-scheduled salary increases in the ordinary course of
business, or make any bonus, pension, retirement or insurance
payment or arrangement with any such persons except in the
ordinary course of business;
(iii) pay any dividends (whether in cash, shares of stock or
otherwise) on, or make any other distribution in respect of,
any shares of its capital stock, or issue, purchase, redeem or
acquire for value any shares of its capital stock (except
pursuant to the KMNGG New Issuance and KMNGG Reorganization as
contemplated by this Agreement);
(iv) enter into any agreement for or permit any of its assets to be
subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind;
(v) enter into any contract or commitment or engage in any
transaction not in the usual and ordinary course of business
and consistent with its normal business practices (other than
the KMNGG New Issuance, KMNGG Reorganization and KMNH
Reorganization);
(vi) increase its indebtedness through borrowing (whether by means
of bank loans or otherwise), except current borrowings from
banks in the ordinary course of business;
(vii) make any loan to any person;
12
(viii) write off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged
to applicable reserves, none of which individually or in the
aggregate is material to KMNGG;
(ix) cancel or waive any claims or rights of material value;
(x) do an act or omit to do any act, or permit any act or omission
to act, which would cause a material breach of any contract,
commitment or obligation of KMNGG;
(xi) make any change in any method of accounting or auditing
practice; or
(xii) agree, whether or not in writing, to do any of the foregoing.
4.3 KMNGG shall permit UPC (directly or through its authorized
representatives) to have, and shall cause the officers and employees of
KMNGG to furnish to UPC, full access during normal business hours to
all properties, books, records, contracts and documents of KMNGG and
its subsidiaries, and a full opportunity to make such investigations as
UPC shall reasonably desire to make of KMNGG and its subsidiaries, and
KMNGG shall furnish or cause to be furnished to UPC and its authorized
representatives all such information with respect to the affairs and
businesses of KMNGG and its subsidiaries as UPC may reasonably request.
KMNGG shall deliver or cause to be delivered to UPC such additional
instruments, documents, certificates and opinions as UPC may reasonably
request for the purpose of (i) verifying the information set forth in
this Agreement and any Annex and Schedule attached hereto or
certificate given hereunder, and (ii) consummating or evidencing the
transactions contemplated by this Agreement.
4.4 During the period from the date of execution of this Agreement until
the Final Closing Date, KMNGG shall:
(i) maintain its owned and leased properties in good operating
condition and repair, and shall make all necessary renewals,
additions and replacements thereto, and shall carry on its
business diligently and substantially in the same manner as
heretofore;
(ii) duly comply with all requirements of applicable law applicable
to it generally or applicable with respect to its business;
(iii) promptly advise UPC in writing of any material adverse change
in the business, condition, operations, prospects or assets of
KMNGG;
(iv) exercise its best efforts to secure, before the Final Closing
Date, the consent, in form and substance reasonably
satisfactory to UPC and UPC's counsel, to the consummation of
the transactions contemplated by this Agreement by each party
to any contract, commitment or obligation of KMNGG, under
which such transactions would constitute a default, would
accelerate obligations of KMNGG or would permit cancellation
of any such contract;
(v) not directly or through any person acting on its behalf,
negotiate, solicit or enter into any agreement with respect to
the sale of any capital stock or any substantial portion of
the assets of KMNGG or any merger or other business
13
combination of KMNGG to or with any person other than UPC,
other than pursuant to the KMNGG Reorganization and/or the
KMNH Reorganization as contemplated hereunder; and
(vi) take all reasonable efforts to cause the satisfaction of the
conditions precedent contained herein.
ARTICLE 5: CONDUCT OF BUSINESS BY UPC PENDING FINAL CLOSING DATE
5.1 During the period from the date of this Agreement until the Final
Closing Date, UPC will conduct its operations only in accordance with
its ordinary and usual course of business and will use its reasonable
best efforts to preserve intact its business organization, keep
available the services of its officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors,
clients and others having business relationships with it; provided,
however, that the Parties expressly agree that UPC shall enter into the
agreements herein contemplated and issue the Warrants and conclude the
Convertible Warrant Agreement prior to the Final Closing Date.
5.2 During the period from the date of execution of this Agreement until
the Final Closing Date, except as may be first expressly approved by
Waldo in writing (which consent shall not be unreasonably withheld) or
as is otherwise expressly permitted or required by this Agreement, UPC
shall not:
(i) amend its charter or any regulations relating to its
organization and management;
(ii) change the compensation payable or to become payable by UPC to
any officer, employee or agent, except for ordinary
regularly-scheduled salary increases in the ordinary course of
business, or make any bonus, pension, retirement or insurance
payment or arrangement with any such persons except in the
ordinary course of business;
(iii) pay any dividends (whether in cash, shares of stock or
otherwise) on, or make any other distribution in respect of,
any shares of its capital stock, or issue, purchase, redeem or
acquire for value any shares of its capital stock (other than
as may be necessary in connection with the Stock Exchange
Agreement and Convertible Warrant Agreement(s) as contemplated
by this Agreement);as contemplated by this Agreement);
(v) enter into any contract or commitment or engage in any
transaction not in the usual and ordinary course of business
and consistent with its normal business practices (other than
as may be necessary in connection with the Stock Exchange
Agreement and Convertible Warrant Agreement(s) as contemplated
by this Agreement and in connection with any agreement or
commitment set forth in Schedule 4 hereto);
(vi) increase its indebtedness through borrowing (whether by means
of bank loans or otherwise), except current borrowings from
banks in the ordinary course of business and/or as necessary
in connection with the Convertible Warrant as contemplated by
this Agreement;
14
(vii) make any loan to any person (except in the ordinary course of
business and as expressly contemplated herein);
(viii) Write off as uncollectible any notes or accounts receivable,
except write-off's in the ordinary course of business charged
to applicable reserves, none of which individually or in the
aggregate is material to UPC;
(ix) cancel or waive any claims or rights of material value;
(x) do an act or omit to do any act, or permit any act or omission
to act, which would cause a material breach of any contract,
commitment or obligation of UPC;
(xi) make any change in any method of accounting or auditing
practice; or
(xii) agree, whether or not in writing, to do any of the foregoing.
5.3 UPC shall permit Waldo (directly or through its authorized
representatives) to have, and shall cause the officers and employees of
UPC to furnish to Waldo, full access during normal business hours to all
properties, books, records, contracts and documents of UPC and its
subsidiaries in order to ascertain their financial and legal condition,
and a full opportunity to make such investigations as Waldo shall
reasonably desire to make of UPC and its subsidiaries, and UPC shall
furnish or cause to be furnished to Waldo and its authorized
representatives all such information with respect to the affairs and
businesses of UPC and its subsidiaries as Waldo may reasonably request.
UPC shall deliver or cause to be delivered to Waldo such additional
instruments, documents, certificates and opinions as Waldo may
reasonably request for the purpose of (i) verifying the information set
forth in this Agreement and any Annex attached hereto or certificate
given hereunder, and iii) consummating or evidencing the transactions
contemplated by this Agreement.
5.4 During the period from the date of execution of this Agreement until
the Final Closing Date, UPC shall:
(i) maintain its owned and leased properties in good operating
condition and repair, and make all necessary renewals,
additions and replacements thereto, and carry on its business
diligently and substantially in the same manner as heretofore;
(ii) duly comply with all requirements of applicable law applicable
to it generally or applicable with respect to its business;
(iii) promptly advise Waldo in writing of any material adverse
change in the business, condition, operations, prospects or
assets of UPC;
(iv) exercise its best efforts to secure, before the Final Closing
Date, the consent, in form and substance reasonably
satisfactory to Waldo, to the consummation of the transactions
contemplated by this Agreement by each party to any contract,
commitment or obligation of UPC, under which such transactions
would constitute a default, would accelerate obligations of
UPC or would permit cancellation of any such contract;
15
(v) not directly or through any person acting on its behalf,
negotiate, solicit or enter into any agreement with respect to
the sale of any capital stock or any substantial portion of
the assets of UPC or any merger or other business combination
of UPC to or with any person other than Waldo, other than
pursuant to the Convertible Warrants as contemplated
hereunder; and
(vi) take all reasonable efforts to cause the satisfaction of the
conditions precedent contained herein.
ARTICLE 6: TRANSACTIONS AT CLOSINGS
6.1 First Closing. The First Closing shall occur immediately upon execution
of this Agreement by each of the Parties hereto. At the First Closing,
the Parties shall take the following actions and deliver the following
documents (with such actions being taken and such documents being
delivered in the order herein sec forth unless otherwise agreed by the
Parties):
6.1.1 Each of Waldo and UPC shall cause a Stock Exchange Agreement
substantially in the form of Annex 1 hereto to be executed by
their duly authorized representatives;
6.1.2 Each of Waldo, the Initial Sellers, and UPC shall cause an
amended and restated Escrow Agreement, substantially in the
form of Annex 2 hereto, to be executed by their duly
authorized representatives, and shall take all reasonable
measures to procure that such amended and restated Escrow
Agreement is executed by a duly authorized representative of
the Escrow Agent;
6.1.3 Waldo shall deposit or cause to be deposited with the Escrow
Agent (i) its original of the Stock Exchange Agreement, and
(ii) an original stock transfer order in the form set forth in
Exhibit 1 to the Stock Exchange Agreement, signed and sealed
by Waldo and directing transfer of the Swap Shares to UPC.
Within five (5) Business Days following the First Closing
Date, Waldo shall deposit with the Escrow Agent an extract
from the Shareholders' Register showing notation in such
Shareholders' Register of registration of an encumbrance on
each of the Swap Shares in favor of UPC pursuant to the Stock
Exchange Agreement; and
6.1.4 UPC shall deposit with the Escrow Agent its original of the
Stock Exchange Agreement. Promptly following UPC's filing of a
certificate of amendment to its articles of incorporation to
increase the number of shares of authorized UPC common stock
to an amount sufficient to cover issuance of the UPC Shares,
UPC shall deliver to the Escrow Agent certificates
representing the UPC Shares, duly endorsed in blank or with
duly executed stock powers attached.
6.2 Final Closing. Subject to the satisfaction or waiver of the conditions
precedent set forth in Sections 8.1 and 8.2 hereof, the Final Closing
shall be held at the offices of UPC in Moscow, Russian Federation at
10:00 am on September 15, 1997 or at such other date and time, not
later than December 15, 1997, or such other place as the Parties may
mutually agree in writing. The date on which the Final Closing is
16
actually held is from time to time hereunder referred to as the "Final
Closing Date". At the Final Closing, the Parties shall take the
following actions and deliver the following documents (with such
actions being taken and such documents being delivered in the order
herein set forth unless otherwise agreed by the Parties):
6.2.1 Each of Waldo, KMNGG, and the Initial Sellers shall deliver to
UPC an officer's certificate, signed by the General Director
and Chief Accountant of such entity and dated as of the Final
Closing Date, making the certifications required pursuant to
Sections 8.1.1 and 8.1.4 of this Agreement;
6.2.2 UPC shall deliver to each of Waldo, KMNGG and the Initial
Sellers an officer's certificate signed by the Chief Executive
Officer of UPC and dated as of the Final Closing Date, making
the certifications required pursuant to Sections 8.2.1 and
8.2.4 of this Agreement;
6.2.3 KMNGG shall deliver to UPC an officer's certificate in form
and substance satisfactory to UPC in UPC's reasonable
discretion, signed and sealed by the General Director and
Chief Accountant of KMNGG and dated as of the Final Closing
Date, certifying that (i) the KMNGG Reorganization has been
completed in accordance with the requirements of applicable
law, (ii) as of such date, the outstanding liabilities
(whether or not then accrued) of KMNGG are less than or equal
to the amount which equals the remainder of (a) twelve million
two hundred thousand Dollars ($12,200,000) minus (b) the
Canceled Prefinancing Amount (if any); (iii) the Divisions
have been spun out into separate subsidiaries and such
subsidiaries have been duly registered as the Companies in
accordance with the requirements of applicable law; (iv) there
are no rights, title, or claims of any third party of or to
KMNGG, the Companies or the KMNGG Licenses arising in
connection with the KMNGG Reorganization, and neither KMNGG
nor the Companies have any outstanding debts or liabilities
with respect thereto; and (v) the KMNGG Licenses have been
reissued to KMNGG to reflect KMNGG's name change in accordance
with the requirements of applicable law, and such KMNGG
Licenses are and remain in full force and effect;
6.2.4 KMNGG shall deliver to UPC an officer's certificate in form
and substance satisfactory to UPC in its reasonable
discretion, signed and sealed by the General Director and
Chief Accountant of KMNGG and dated as of the Final Closing
Date, (i) certifying that (a) the New Issuance Shares have
been duly issued by KMNGG, (b) such issuance has been
registered with all relevant governmental authorities pursuant
to the requirements of applicable law, and (c) the New
Issuance Shares are available for transfer to UPC free and
clear of all claims and encumbrances, and (ii) attaching (a) a
copy of the General Shareholders' Meeting Resolution approving
the charter capital increase required in connection with the
New Issuance, and (b) an official letter from the Russian
Federal Property Fund and/or Federal Securities Commission, in
form and substance satisfactory to UPC, confirming that prior
share issuances by KMNGG were properly paid for by acquiring
shareholders;
6.2.5 KMNGG and UPC shall execute a Stock Subscription Agreement
substantially in the form of Annex 3 hereto with respect to
the New Issuance Shares, and KMNGG shall direct the Registrar
to register the New Issuance Shares into UPC's name in the
Shareholders' Register;
17
6.2.6 UPC shall deliver to Waldo an officer's certificate in form
and substance satisfactory to Waldo in its reasonable
discretion, signed and sealed by the chief executive officer
of UPC and dated as of the Final Closing Date, certifying that
the Convertible Warrant Agreement(s) have been concluded with
the Outside Investor(s) and that such Convertible Warrant
Agreement(s) provide for payment by such Outside Investor(s)
(individually or collectively) of not less than thirty-five
million Dollars ($35,000,000) (or such lesser amount as may be
agreed in writing by UPC, Waldo and KMNGG) subject to
satisfaction of the conditions precedent contained in this
Agreement and in the Convertible Warrant Agreement(s);
6.2.7 Each of UPC and Waldo shall cause a Loan Agreement
substantially in the form of Annex 5 hereto to be executed by
their duly authorized representatives;
6.2.8 Each of UPC and Waldo shall cause a Retainer Agreement
substantially in the form of Annex 4 hereto to be executed by
their duly authorized representatives;
6.2.9 KMNGG and Waldo shall jointly deliver to UPC an officer's
certificate in form and substance satisfactory to UPC in UPC's
reasonable discretion (the "Investment Obligations
Certificate"), signed and sealed by the General Director and
Chief Accountant of each of Waldo and KMNGG and dated as of
the Final Closing Date, identifying all investment obligations
outstanding with respect to the Initial Shares and the Swap
Shares as of the Final Closing Date (the "Investment
Obligations"), certifying that no other obligations or
encumbrances are outstanding with respect to such Initial
Shares and Swap Shares as of the Final Closing Date (whether
or not yet due or accrued), and attaching a written
notification, signed by each of Waldo and KMNGG and acceptable
in form and substance to UPC, of assignment of such Investment
Obligations by Waldo to UPC;
6.2.10 Waldo and the Initial Sellers shall collectively execute and
deliver to the Escrow Agent by facsimile, with follow-up
original sent by express courier, a Disbursement Notice in the
form attached as Exhibit 1B to the Escrow Agreement, directing
the Escrow Agent to deliver the Escrow Documents to the
Registrar holding the Shareholders' Register;
6.2.11 UPC shall execute and deliver to the Escrow Agent by
facsimile, with follow-up original sent by express courier, a
Disbursement Notice in the form attached as Exhibit 1A to the
Escrow Agreement directing the Escrow Agent to deliver the
Escrow Documents to the Registrar holding the Shareholders'
Register;
6.2.12 The Escrow Agent shall deliver by facsimile to UPC and Waldo
evidence of submission of the Escrow Documents to an
international express courier company for delivery to the
Registrar, with such Escrow Documents to include a direction
to the Registrar to register the Initial Shares and Swap
Shares into UPC's name in the Shareholders' Register;
18
6.2.13 UPC and Waldo shall each cause a Shareholders Agreement
substantially in the form of Annex 6 hereto to be executed by
their duly authorized representatives;
6.2.14 UPC shall deliver to KMNGG a copy of the payment instruction
given by UPC to its bank directing payment of the First
Installment of the New Issuance Purchase Price (as such terms
are defined in the Stock Subscription Agreement) to KMNGG; and
6.2.15 KMNGG shall deliver to UPC a duly formulated, executed and
sealed notice of shareholders meeting for pre-term removal of
existing members of the Board of Directors of KMNGG and for
election of new individuals to the Board of Directors of KMNGG
to fill such positions until the next annual General
Shareholders' Meeting, which notice shall include a slate of
candidates acceptable to each of Waldo, KMNGG and UPC.
6.3 Actions Taken Post-Closing
6.3.1 Within not more than five (5) Business Days after the Final
Closing Date, Waldo and KMNGG shall deliver or cause to be
delivered to UPC an extract from the Shareholders' Register
evidencing registration of the Initial Shares, the Swap Shares
and the New Issuance Shares into UPC's name in the
Shareholders' Register, satisfactory to UPC in its reasonable
discretion (the "Final Extract"), and UPC shall promptly
thereafter instruct the Escrow Agent that UPC has received
such Final Extract;
6.3.2 Promptly upon receipt by the Escrow Agent of instruction from
UPC that the Final Extract has been received by UPC, the
Escrow Agent shall release the Initial Purchase Price to the
Initial Sellers, shall release the UPC Shares to Waldo, and
shall return the remaining Escrow Documents to the parties
depositing such documents in Escrow;
6.3.3 The Convertible Warrant Agreement(s) shall provide for payment
by the Outside Investor(s) of the subscription price for the
Warrants within not more than ten (10) Business Days from the
date of receipt by UPC of the Final Extract;
6.3.4 UPC shall pay the Second Installment of the New Issuance
Purchase Price (as such terms are defined in the Stock
Subscription Agreement) to KMNGG within not more than fifteen
(15) Business Days from the date of receipt by UPC of the
Final Extract;
6.3.5 Waldo and KMNGG shall take all reasonable efforts to procure
the cancellation of stock in KMNGG held by Aitorneftegaz
promptly following confirmation by Aitorneftegaz of final
resolution, in form and substance satisfactory to the Board of
Directors of KMNGG, of the outstanding stock-related issues
between Aitorneftegaz and Xavier Mines Limited; and
6.3.6 Waldo and KMNGG shall take all reasonable efforts to cause the
prompt completion, to the satisfaction of UPC, of the KMNH
Reorganization.
19
ARTICLE 7: PRICE ADJUSTMENT
7.1 Adjustments to Acquisition Price Paid by UPC for Initial Shares, Swap
Shares and New Issuance Shares.
7.1.1 Without limitation on any other rights or remedies which may be
available to UPC in law or in equity, in the event that UPC and/or any
Outside Investor(s) discovers, at any time up to the date which is one
(1) year from the Final Closing Date, that:
(i) any of the Swap Shares, Initial Shares and/or New Issuance
Shares were, as of the Final Closing Date, subject to any
mortgage, lien, pledge, charge, security interest, option,
warrant, call, voting agreement, voting trust, trust
agreement, or other encumbrances of any kind whatever
(including, without limitation, outstanding investment
obligations not disclosed to and accepted by UPC, if any, in
the Investment Obligations Certificate as provided in Section
6.2.9 hereof) (any such encumbrance hereinafter referred to as
an "Encumbrance"); and/or
(ii) the outstanding liabilities of KMNGG as of the Final Closing
Date (whether or not then accrued) exceeded the amount equal
to the remainder of (a) twelve million two hundred thousand
Dollars ($12,200,000) minus (b) the Canceled Prefinancing
Amount (if any) (such excess amount hereinafter referred to as
the "Excess Liabilities"); and/or
(iii) any of the representations or warranties of the Initial
Sellers, Waldo, and/or KMNGG were materially inaccurate as of
the Final Closing Date and such inaccuracy results in
additional liabilities, losses, damages, costs and/or expenses
(including, without limitation, reasonable lawyers' fees) to
UPC in connection with UPC's acquisition or possession of the
Initial Shares, Swap Shares and/or New Issuance Shares and/or
exercise by UPC of control over KMNGG (such costs hereinafter
the "Additional Costs"); and/or
(iv) UPC (and/or its officers, employees, agents, advisors and
affiliates) incurs any liabilities, losses, damages, costs
and/or expenses (including, without limitation, reasonable
lawyers' fees) related to or arising, directly or indirectly,
in connection with any claim brought by any third party with
respect to or in connection with the KMNGG Reorganization (the
"Reorganization Expenses"),
then Waldo shall pay to UPC the Dollar value of such Encumbrance,
Excess Liabilities, Additional Costs and/or Reorganization Expenses, as
the case may be (such amount hereinafter the "Waldo Refund Amount"), as
reimbursement for overpayment by UPC for its acquisition of shares as
contemplated by this Agreement, and the exercise price for the Warrants
shall be adjusted accordingly in the manner set forth in the
Convertible Warrant Agreement(s).
7.1.2 Promptly upon discovery by UPC and/or any Outside Investor of any
Encumbrance, Excess Liabilities, Additional Costs and/or Reorganization
Expenses, UPC and/or such Outside Investor(s), as the case may be,
shall deliver written notice to Waldo with a copy to UPC or the Outside
Investor(s), as applicable (the "Waldo
20
Refund Notice"), identifying the Waldo Refund Amount to be paid by
Waldo to UPC and the adjustments to be made in the exercise price for
the Warrants.
7.1.3 Waldo shall pay to UPC the Waldo Refund Amount within thirty (30)
days of delivery of such Waldo Refund Notice by UPC and/or an Outside
Investor. Payment by Waldo shall be made in Dollars to the account
designated by UPC. The exercise price the Warrants shall automatically
be adjusted accordingly in the manner set forth in the Convertible
Warrant Agreement(s).
7.1.4 In the event that Waldo fails to indefeasibly pay the Waldo
Refund Amount to UPC within the thirty (30) day period herein
specified, UPC shall have the right to demand Waldo to, and in the
event of such demand Waldo shall, pay such amount to UPC by
Transferring to UPC that number of UPC Shares (valued, for purposes of
this Section 7.1 only, at four hundred fifty Dollars ($450) per share)
equal in value to the due and outstanding Waldo Refund Amount. In the
event that the value of UPC Shares Transferred by Waldo to UPC
hereunder (as calculated herein) is insufficient to cover the entire
Waldo Refund Amount, any remaining balance thereof shall remain
outstanding and shall be immediately due and payable by Waldo to UPC in
Dollars.
7.1.5 In the event of a Transfer of UPC Shares by Waldo in payment of
the Waldo Refund Amount as provided in Section 7.1.4 hereof, Waldo
shall have ninety (90) days from the date of the Waldo Refund Notice to
repurchase from UPC the UPC Shares so Transferred, for a price of four
hundred fifty Dollars ($450) per share, payable in Dollars immediately
upon such election to a bank account designated by UPC; provided,
however, that Waldo's right to exercise this option shall be subject to
UPC's prior receipt of payment in full of the entire Waldo Refund
Amount.
7.1.6 Notwithstanding the foregoing, in the event that Waldo presents
to UPC, prior to the date which is one year from the Final Closing
Date, a certified copy of official Tax Audit Resolution(s), issued by
the relevant tax authorities at the local, regional and federal level
on the basis of a tax audit order covering all local, regional and
federal taxes for the entire fiscal period (without interruptions) up
to and including the Final Closing Date, which official Tax Audit
Resolution(s) show total KMNGG tax liabilities (including all penalties
and fees) equal to or less than the amounts disclosed to UPC in the
KMNGG Company Profile, no imposition of tax claims or penalties after
the date of presentation of such official Tax Audit Resolution(s) to
UPC shall constitute "Excess Liabilities" or "Additional Costs" as such
terms are used herein.
7.2 Adjustments to Acquisition Price Paid by Waldo for UPC Shares.
Without limitation on any other rights or remedies which may be
available to Waldo in law or in equity, in the event that Waldo and/or
any Outside Investor(s) discovers, at any time up to the date which is
one (1) year from the Final Closing Date, that the outstanding
liabilities of UPC as of the Final Closing Date (whether or not then
accrued) exceeded the amount set forth in the UPC Company Profile by
more than five hundred thousand Dollars ($500,000) (such excess amount
hereinafter referred to as the "Excess UPC Liabilities"), UPC shall pay
to Waldo the amount of such Excess UPC Liabilities as reimbursement for
overpayment by Waldo for the UPC Shares (such repayment amount
hereinafter the "UPC Refund Amount"), and the exercise price for the
Warrants shall be adjusted accordingly in the manner set forth in the
Convertible Warrant Agreement(s).
21
7.2.1 Promptly upon discovery by Waldo and/or any Outside Investor(s)
of any Excess UPC Liabilities, Waldo and/or such Outside Investor(s),
as the case may be, shall deliver written notice to UPC with a copy to
Waldo or the Outside Investor(s), as applicable (the "UPC Refund
Notice") identifying the UPC Refund Amount to be paid by UPC to Waldo.
7.2.2 UPC shall pay to Waldo the UPC Refund Amount within thirty (30)
days of delivery of such UPC Refund Notice by Waldo and/or an Outside
Investor. Payment by UPC shall be made in Dollars to the account
designated by Waldo. The exercise price for the Warrants shall
automatically be adjusted accordingly in the manner set forth in the
Convertible Warrant Agreement(s).
7.2.3 In the event that UPC fails to indefeasibly pay the UPC Refund
Amount to Waldo within the thirty (30) day period herein specified,
Waldo shall have the right to demand UPC to, and in the event of such
demand UPC shall, pay such amount to Waldo by Transferring to Waldo
that number of shares of UPC stock (valued, for purposes of this
Section 7.2 only, at four hundred fifty Dollars ($450) per share) equal
in value to the due and outstanding UPC Refund Amount. In the event
that the value of the shares of UPC stock Transferred by UPC to Waldo
hereunder (as calculated herein) is insufficient to cover the entire
UPC Refund Amount, any remaining balance thereof shall remain
outstanding and shall be immediately due and payable by UPC to Waldo in
Dollars.
7.2.4 In the event of a Transfer of shares of UPC stock by UPC in
payment of the Refund Amount provided in Section 7.2.3 hereof, UPC
shall have ninety (90) days from the date of the UPC Refund Notice to
repurchase from Waldo the shares of UPC stock so Transferred, for a
price of four hundred fifty Dollars ($450) per share, payable in
Dollars immediately upon such election, to a bank account designated by
Waldo; provided, however, that UPC's right to exercise this option
shall be subject to Waldo's prior receipt of payment in full of the
entire UPC Refund Amount.
7.2.5 Notwithstanding the foregoing, in the event that UPC presents to
Waldo. prior to the date which is one year from the Final Closing Date,
a certified copy of an annual report of UPC showing total liabilities
of UPC equal to or less than the amounts disclosed to Waldo in the UPC
Company Profile, no subsequent arising or identified liabilities shall
constitute "UPC Excess Liabilities" as such terms are used herein.
7.3 Adjustment of Share Values. The share values per share specified in
Sections 7.1.4, 7.1.5, 7.2.3 and 7.2.4 hereof shall be adjusted as
appropriate for any stock splits, combinations and dividends or other
distributions consisting of, or payable in, shares of common or
preferred stock of KMNGG or common stock of UPC, respectively.
22
ARTICLE 8: CONDITIONS PRECEDENT TO FINAL CLOSING
8.1 Conditions Precedent to UPC's Obligations at Final Closing. The
obligations of UPC to fulfill its obligations at the Final Closing are
subject to fulfillment to UPC's satisfaction or written waiver by UPC
of each of the following conditions precedent:
8.1.1 The representations and warranties made by KMNGG, the Initial
Sellers and Waldo in or pursuant to this Agreement and in any
statement, certificate or other instrument delivered to UPC
pursuant hereto or in connection with the transactions
contemplated hereby shall have been correct when made and
shall be true and correct on and as of the Final Closing Date
with the same effect as though such representations and
warranties had been made on and as of such date, and KMNGG,
the Initial Sellers and Waldo shall each have delivered to UPC
a certificate signed and sealed by the General Director and
the Chief Accountant of such entity, dated as of the Final
Closing Date, to such effect;
8.1.2 Waldo, the Initial Sellers and KMNGG shall have performed and
complied with all of their obligations under this Agreement to
be performed or complied with by them prior to or at the Final
Closing;
8.1.3 No action or proceedings shall have been instituted or
threatened before any court or other government body or by any
public authority to restrain or prohibit any of the
transactions contemplated hereby;
8.1.4 KMNGG shall have delivered to UPC a certificate signed and
sealed by its General Director and Chief Accountant, dated as
of the Final Closing Date, certifying that to the best
knowledge and belief of KMNGG, there shall not have been or
threatened to be any material damage to or loss or destruction
of any properties or assets owned or leased by KMNGG (whether
or not covered by insurance) or any material change in the
condition (whether financial or otherwise), operations,
business, prospects or assets of KMNGG or imposition of any
laws, rules or regulations which would materially adversely
affect the condition (financial or otherwise), operations,
business, prospects or assets of KMNGG other than changes
approved in writing by UPC and made pursuant to the KMNGG
Reorganization and/or KMNH Reorganization as herein
contemplated;
8.1.5 All proceedings in connection with the transactions
contemplated by this Agreement and all documents delivered to
UPC pursuant to this Section 8.1 or otherwise reasonably
requested by UPC shall be reasonably satisfactory to UPC and
its counsel, and UPC shall have completed a due diligence
review of KMNGG, the Initial Sellers and Waldo to UPC's
reasonable satisfaction;
8.1.6 All consents, approvals or waivers, if any, disclosed on any
Annex, Exhibit or Schedule attached hereto or required in
connection with the consummation of the transactions
contemplated by this Agreement shall have been received, and
all of the consents, approvals, authorizations, registrations,
exemptions and waivers from governmental agencies that shall
be required in order to enable UPC to consummate the
transactions contemplated hereby shall have been obtained
(including, without limitation, the prior approval of the RF
23
Antimonopoly Committee of the acquisition by UPC of the
Initial Shares, Swap Shares and New Issuance Shares as
contemplated herein); and
8.1.7 UPC shall have received evidence in writing satisfactory to
UPC, in UPC's reasonable discretion, to the effect that:
(i) the KMNGG Reorganization has been completed in
compliance with the requirements of applicable law;
(ii) as of the Final Closing Date, the outstanding
liabilities (whether or not then accrued) of KMNGG
are less than or equal to the amount which is equal
to the remainder of (a) twelve million two hundred
thousand Dollars ($12,200,000) minus (b) the
Cancelled Prefinancing Amount (if any), and UPC shall
have received an auditor's opinion and a
certification from applicable tax authorities to such
effect;
(iii) the Divisions have been spun out into separate
subsidiaries in full compliance with the requirements
of applicable law, and the Companies resulting
therefrom have been registered as separate entities
in full compliance with the requirements of
applicable law;
(iv) there are no rights, title or claims of any third
party of or to KMNGG, the Companies or the KMNGG
Licenses arising in connection with the KMNGG
Reorganization, and neither KMNGG nor the Companies
have any outstanding debts or liabilities with
respect thereto; and
(v) the KMNGG Licenses have been duly reissued to KMNGG
to reflect KMNGG's name change in compliance with the
requirements of applicable law, and such KMNGG
Licenses are and remain in full force and effect.
8.1.8 UPC shall have (i) received the requisite shareholder
approvals necessary in order to increase its authorized shares
of common voting stock to an amount sufficient to cover
issuance of the UPC Shares and conversion of the Warrants
pursuant to the terms and conditions of the Convertible
Warrant Agreement(s) and to cover the UPC Shares; and (ii)
concluded Convertible Warrant Agreement(s) with Outside
Investor(s) pursuant to which such Outside Investor(s) shall
pay to UPC (in the aggregate) not less than thirty-five
million Dollars ($35,000,000) (or such lesser amount as may be
agreed in Writing by UPC, Waldo and KMNGG) upon satisfaction
of the conditions precedent contained herein and in the
Convertible Warrant Agreement(s).
8.1.9 UPC shall have received from KMNGG the KMNGG Company Profile
and such KMNGG Company Profile shall be acceptable in form and
substance to UPC in UPC's reasonable discretion.
8.2 Conditions Precedent to KMNGG's, the Initial Sellers' and Waldo's
Obligations at Final Closing. The obligations of KMNGG, the Initial
Sellers and Waldo to fulfill their obligations at the Final Closing are
subject to fulfillment to the
24
reasonable satisfaction or written waiver by each of Waldo, the Initial
Sellers and KMNGG of each of the following conditions precedent:
8.2.1 The representations and warranties made by UPC in or pursuant
to this Agreement and in any statement, certificate or other
instrument delivered by UPC to KMNGG, the Initial Sellers or
Waldo pursuant hereto or in connection with the transactions
contemplated hereby shall have been correct when made and
shall be true and correct on and as of the Final Closing Date
with the same effect as though such representations and
warranties had been made on and as of such date, and UPC shall
have delivered to each of KMNGG, the Initial Sellers and Waldo
a certificate of the Chief Executive Officer, dated as of the
Final Closing Date, to such effect;
8.2.2 UPC shall have performed and complied with all of its
obligations under this Agreement to be performed or complied
with by it prior to the Final Closing;
8.2.3 UPC shall have deposited or caused to be deposited the UPC
Shares with the Escrow Agent;
8.2.4 No action or proceedings shall have been instituted or
threatened before a court or other government body or by any
public authority to restrain or prohibit any of the
transactions contemplated hereby;
8.2.5 UPC shall have delivered to Waldo a certificate of its Chief
Executive Officer, dated as of the Final Closing Date,
certifying that to the best knowledge and belief of UPC, there
shall not have been or threatened to be any material damage to
or loss or destruction of any properties or assets owned or
leased by UPC (whether or not covered by insurance) or any
material adverse change in the condition (whether financial or
otherwise), operations, business, prospects or assets of UPC
or imposition of any laws, rules or regulations which would
materially adversely affect the condition (financial or
otherwise), operations, business, prospects or assets of UPC;
and
8.2.6 All proceedings in connection with the transactions
contemplated by this Agreement and all documents delivered to
Waldo pursuant to this Section 8.2 or otherwise reasonably
requested by Waldo from UPC shall be reasonably satisfactory
to Waldo and its counsel, and Waldo shall have completed a due
diligence review of UPC to Waldo's reasonable satisfaction.
8.2.7 UPC shall have delivered to KMNGG and Waldo the UPC Company
Profile, and such UPC Company Profile shall be acceptable in
form and substance to KMNGG and Waldo in their reasonable
discretion.
25
ARTICLE 9: REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of KMNGG
KMNGG hereby represents, warrants and undertakes to, and agrees with, UPC, Waldo
and the Initial Sellers that:
9.1.1 It is duly organized, validly existing and in good standing as
an open joint stock company under the laws of the Russian
Federation, with all requisite corporate power and authority
to carry on its business as now conducted;
9.1.2 No additional filing, governmental approval, consent,
registration, or amendment to or in respect of its
constitutional documents is currently required under Russian
law in connection with the formation and valid existence of
KMNGG or the conduct of its business as contemplated by its
constitutional documents;
9.1.3 The persons signing this Agreement on its behalf are its
authorized representatives and have all requisite powers and
authority to execute and deliver this Agreement, KMNGG has
authorized the execution and delivery of this Agreement in
accordance with its constitutional documents, and all actions
necessary under KMNGG's constitutional documents have been
taken to permit and authorize its execution of this Agreement;
9.1.4 KMNGG has all requisite power and authority to perform its
obligations hereunder, and upon execution by KMNGG's duly
authorized representatives this Agreement shall constitute a
valid, binding and legal obligation of KMNGG, enforceable in
accordance with its terms;
9.1.5 All of KMNGG's issued and outstanding stock is validly issued,
fully paid and nonassessable and the issuance of same has been
duly registered by all appropriate governmental organs of the
Russian Federation. Except as created by or provided for in
this Agreement, there are no outstanding subscriptions,
options, conversion rights, warrants or other agreements or
commitments of any nature whatsoever (either firm or
conditional) obligating KMNGG to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of KMNGG
stock or obligating KMNGG to grant, extend, or enter into any
such agreement or commitment;
9.1.6 There are currently no stock options, material incentive
compensations, consulting, severance, employment or similar
agreements or other material agreements between KMNGG, on the
one hand, and any directors, officers or employees of KMNGG or
Waldo, on the other hand, other than agreements concluded in
the ordinary course of business;
9.1.7 The execution and delivery of this Agreement, as well as the
Transfer of the New Issuance Shares to UPC contemplated hereby
and the performance of the terms hereof will not conflict with
any provision of KMNGG's constitutional documents or, to the
best of KMNGG's knowledge, result in any material violation or
default or loss of material benefit under, or permit
acceleration of any obligation under, any mortgage,
assignment, lease or any
26
other material agreement with, or the rights of, any third
party, or any provision of applicable law with respect to
KMNGG or its property;
9.1.8 KMNGG has a valid lease or licensed interest (directly or
through one or more subsidiaries) in the development of oil
fields described in its responses to the Due Diligence
Request, and all such leases and licenses are free and clear
of all mortgages, pledges, liens, claims or similar
restrictions;
9.1.9 To the best knowledge of KMNGG, there are no administrative,
judicial or other legal actions, proceedings or investigations
pending or threatened against it which are likely to result,
either individually or in the aggregate, in any material
adverse change in its assets, financial condition or business
operations;
9.1.10 KMNGG has filed or caused to be filed all tax returns and
reports that are required to be filed by KMNGG pursuant to
applicable law and, to the best of KMNGG's knowledge, the
returns filed by KMNGG are complete and correct and no
material financial sanctions have been asserted by any central
or local governmental authority against KMNGG with respect to
any such tax reruns or reports filed or required to be filed
by KMNGG;
9.1.11 KMNGG is not engaged to a significant extent in any business
other than geological exploration and the production,
exploration, refining, sale and distribution of crude oil, gas
and petroleum products, activities in support thereof, or
activities preparatory or auxiliary thereto;
9.1.12 UPC has been furnished with KMNGG's audited balance sheet as
of December 31, 1996 and related audited statements of income,
retained earnings and cash flows for the twelve-month period
ended December 31, 1996 on a pre-KMNGG Reorganization basis
(the "KMNGG Pre-Reorganization Financial Statements") and has
been furnished with KMNGG's pro-forma balance sheet as of June
30, 1997 and related statements of income, retained earnings
and cash flows for the six month period ended June 30, 1997 on
a post- KMNGG Reorganization basis (the "KMNGG
Post-Reorganization Financial Statements"). The KMNGG
Financial Statements are based upon books and records of
KMNGG, accurately present the financial condition and results
of operation of KMNGG as of the dates and for the periods
indicated, and have been prepared in conformity with
International Accounting Standards. Since the date of the
KMNGG Financial Statements, there has been no material adverse
change in the business, financial condition or business
operations of KMNGG;
9.1.13 KMNGG at all times has and will continue to design, construct,
operate and maintain all facilities and equipment in
compliance in all material respects with applicable
environmental, health and safety requirements of the Russian
Federation and all local authorities and agencies thereunder,
and currently holds all environmental, health and safety
permits, licenses and approvals of all Russian governmental
authorities and agencies necessary for its current operations.
To the best knowledge of KMNGG, there are currently no
outstanding material penalties assessed against KMNGG by
competent
27
governmental authorities of the Russian Federation in
connection with violations of environmental norms or
regulations;
9.1.14 The information and documents provided by KMNGG to counsel for
UPC in response to the Due Diligence Request are true,
accurate and complete in all material respects, and there is
no information which KMNGG has failed to disclose which would
make any of the statements made therein misleading or
incomplete in any material respect; and
9.1.15 Neither KMNGG nor any person (including employees, directors,
officers or agents thereof) acting at the direction of KMNGG
has offered, promised, authorized or made any payment or gift
in violation of applicable law (including, without limitation,
the United States Foreign Corrupt Practices Act) to any
governmental official, political party or official thereof, or
candidate for political office for the purpose of influencing
any act or decision in an official capacity, or of inducing
any act or omission in violation of a lawful duty in order to
assist in obtaining advantages of any kind for KMNGG or in
conducting the transactions herein contemplated.
9.2 Additional Representations and Warranties of KMNGG as of the Final
Closing Date
As of the Final Closing Date, KMNGG represents, warrants and undertakes to, and
agrees with, UPC and Waldo that:
9.2.1 The aggregate outstanding liabilities and indebtedness of
KMNGG equal twelve million two hundred thousand Dollars
($12,200,000) or less, and KMNGG has no material liabilities
or indebtedness not disclosed in the Financial Statements and
no liabilities which are likely to materially effect KMNGG's
ability to perform its obligations under this Agreement;
9.2.2 All of the representations and warranties made by KMNGG in
this Agreement, the Stock Subscription Agreement, the Stock
Exchange Agreement, and any certificates delivered by KMNGG
hereunder are true and accurate as of the Final Closing Date
as if made on such date;
9.2.3 The KMNGG Reorganization was conducted in full compliance with
all requirements of applicable law, the Companies have been
properly registered with all relevant governmental authorities
and are duly formed and properly existing in accordance with
the laws of the Russian Federation; the reorganization
balances of KMNGG and each of the Companies were duly approved
by the shareholders of KMNGG, registered with the relevant tax
authorities of the Russian Federation and all other relevant
governmental authorities to the extent required by applicable
law; the creditors of KMNGG were given notice of the KMNGG
Reorganization in accordance with applicable law; all steps
necessary to finalize such KMNGG Reorganization have been duly
completed and no claims, challenges or legal proceedings with
respect to such KMNGG Reorganization are in process or
threatened against KMNGG, the Companies or any party in
connection therewith, and neither KMNGG nor any Company has
any outstanding debts or liabilities with respect thereto
(whether direct or indirect, conditional or unconditional);
28
9.2.4 The KMNGG Licenses have been duly issued in the name of KMNGG,
and are valid and fully enforceable and serve to confer upon
KMNGG the rights therein contained in the manner envisioned by
applicable law;
9.2.5 There are no rights, title or claims of any third party of or
to the KMNGG Licenses arising in connection with the KMNGG
Reorganization and neither KMNGG nor the Companies have any
outstanding debts or liabilities in respect thereto;
9.2.6 The KMNGG New Issuance was conducted and registered in full
compliance with all requirements of applicable law; all
authorizations, approvals, consents and notices required to
enable KMNGG to Transfer the New Issuance Shares to UPC and to
cause the registration of the Initial Shares, Swap Shares and
New Issuance Shares into UPC's name (as the same may be
changed as provided herein) in the Shareholders' Register have
been made and received as of the Final Closing Date; and no
additional authorizations, approvals, consents or notices are
required to be made or obtained by KMNGG to enable UPC to take
title to such Initial Shares, New Issuance Shares and Swap
Shares free and clear of all pledges, liens, and encumbrances
(other than the Investment Obligations specified in the
Investment Obligations Certificate delivered pursuant to
Section 6.2.9 hereof, if any) and free and clear of all
rights, claims and challenges of third parties.
9.2.7 All material information about KMNGG provided to UPC in the
KMNGG Company Profile is true, accurate and correct as of the
date of such KMNGG Company Profile, and there is no
information not specified in the KMNGG Company Profile the
withholding of which would make the information provided in
the KMNGG Company Profile being materially misleading;
9.3 Representations and Warranties of Xxxxx
Xxxxx represents, warrants and undertakes to, and agrees with, KMNGG, the
Initial Sellers and UPC that:
9.3.1 It is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to carry on its
business as now conducted;
9.3.2 No additional filing, governmental approval, consent,
registration, or amendment to or in respect of its
constitutional documents is currently required under the laws
of its jurisdiction of incorporation in connection with the
formation and valid existence of Waldo or the conduct of its
business as contemplated by its constitutional documents;
9.3.3 The persons signing this Agreement on its behalf have the full
power and authority to do so, Waldo has authorized the
execution of this Agreement in accordance with its
constitutional documents, and all actions necessary under
Waldo's constitutional documents have been taken to permit and
authorize its execution of this Agreement;
9.3.4 Waldo has all requisite power and authority to perform its
obligations hereunder, and upon execution by its duly
authorized representatives, this
29
Agreement shall constitute a valid, binding and enforceable
obligation of Waldo;
9.3.5 All of Waldo's issued and outstanding stock is validly issued,
fully paid and nonassessable and the issuance of same has been
duly registered by all appropriate governmental organs of
Waldo's jurisdiction of incorporation. Except as created by or
provided for in this Agreement and the Prefinancing Agreement,
there are no outstanding subscriptions, options, conversion
rights, warrants or other agreements or commitments of any
nature whatsoever (either firm or conditional) obligating
Waldo to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of Waldo stock or obligating
Waldo to grant, extend, or enter into such agreement or
commitment;
9.3.6 There are currently no stock options, material incentive
compensations, consulting, severance, employment or similar
agreements or other material agreements between Waldo, on the
one hand, and any directors, officers or employees of KMNGG or
Waldo on the other hand, other than agreements concluded in
the ordinary course of business;
9.3.7 The execution and delivery of this Agreement, as well as the
Transfer of the Swap Shares to UPC contemplated hereby and the
performance of the terms hereof will not conflict with any
provision of Waldo's constitutional documents or, to the best
of Waldo's knowledge, result in any material violation or
default or loss of material benefit under, or permit
acceleration of any obligation under, any mortgage,
assignment, lease or any other material agreement with, or the
rights of, any third party, or any provision of applicable law
with respect to Waldo or its property;
9.3.8 To the best knowledge of Waldo, there are no administrative,
judicial or other legal actions, proceedings or investigations
pending or threatened against it, which are likely to result,
either individually or in the aggregate, in any material
adverse change in its assets, financial condition or business
operations or would be likely to have a materially adverse
effect on the consummation of the transactions contemplated
hereby;
9.3.9 Waldo has filed or caused to be filed all tax returns and
reports that are required to be filed by Waldo pursuant to
applicable law and, to the best of Waldo's knowledge, the
returns filed by Waldo are complete and correct and no
material financial sanctions have been asserted by any central
or local governmental authority against Waldo with respect to
any such tax returns or reports filed or required to be filed
by Waldo;
9.3.10 The information and documents provided by or on behalf of
Waldo to counsel for UPC in response to the Due Diligence
Request are true, accurate and complete in all material
respects, and there is no information which Waldo has failed
to disclose which would make any of the statements made
therein misleading or incomplete in any material respect;
9.3.11 Neither Waldo nor any person (including employees, directors,
officers or agents thereof) acting at the direction of Waldo
has offered, promised, authorized or made any payment or gift
in violation of applicable law (including, without limitation,
the United States Foreign Corrupt Practices
30
required under the laws of its jurisdiction of incorporation
in connection with the formation and valid existence of UPC or
the conduct of its business as contemplated by its
constitutional documents;
9.5.3 The persons signing this Agreement on its behalf have the full
power and authority to do so, UPC has authorized the execution
of this Agreement in accordance with its constitutional
documents and all actions necessary under UPC's constitutional
documents have been taken to permit and authorize its
execution of this Agreement;
9.5.4 UPC has all requisite power and authority to perform its
obligations hereunder, and upon execution by its duly
authorized representatives, this Agreement shall constitute a
legal, valid and binding obligation of UPC, enforceable in
accordance with its terms;
9.5.5 All of UPC's issued and outstanding stock is validly issued,
fully paid and nonassessable and the issuance of same has been
duly registered by all appropriate governmental organs of
UPC's jurisdiction of incorporation. Except as created by or
provided for in this Agreement, the Stock Exchange Agreement
and the Convertible Warrant Agreement(s), and except as
specified in Schedule 4 hereto (as the same may be updated
from time to time prior to the Final Closing Date), there are
no outstanding subscriptions, options, conversion rights,
warrants or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating UPC to
grant, extend, or enter into any such agreement or commitment;
9.5.6 The execution and delivery of this Agreement, as well as the
performance of the terms hereof will not conflict with any
provision of UPC's constitutional documents or, to the best of
UPC's knowledge, or result in any violation or default or loss
of material benefit under any mortgage, assignment, lease or
any other material agreement with, or the rights of, any third
party, or any provision of applicable law with respect to UPC
or its property;
9.5.7 To the best knowledge of UPC, there are no administrative,
judicial or other legal actions, proceedings or investigations
pending or threatened against it which are likely to result,
either individually or in aggregate, in any material adverse
change in its assets, financial condition or business
operations;
9.5.8 UPC has filed or caused to be filed all tax returns and
reports that are required to be filed by UPC under applicable
law of its jurisdiction of incorporation and, to the best of
UPC's knowledge, the returns filed by UPC are complete and
correct and no material financial sanctions have been asserted
by any central or local governmental authority against UPC
with respect to any such tax returns or reports filed or
required to be filed by UPC;
9.5.9 UPC is not engaged to a significant extent in any business
other than geological exploration and the production,
exploration, refining, sale and distribution of crude oil, gas
and petroleum products, activities in support thereof, or
activities preparatory or auxiliary thereto;
32
9.5.10 Waldo has been furnished With UPC's balance sheet as of June
30, 1997 and related audited statements of income, retained
earnings and cash flows for the twelve-month period ended June
30, 1997 (the "UPC Financial Statements"). The UPC Financial
Statements are based upon books and records of UPC as of the
dates and for the period indicated, and have been prepared in
conformity with International Accounting Standards. Since the
date of the UPC Financial Statements, there has been no
material adverse change in the business, financial condition
or business operations of UPC;
9.5.11 To the best knowledge of UPC, there are currently no
outstanding material penalties assessed against UPC by
competent governmental authorities of the Russian Federation
in connection with violations of environmental norms or
regulations that may adversely affect performance by UPC of
its obligations under this Agreement;
9.5.12 Neither UPC nor any person (including employees, directors,
officers or agents thereof) acting at the direction of UPC has
offered, promised, authorized or made any payment or gift in
violation of applicable law (including, without limitation,
the United States Foreign Corrupt Practices Act) to any
governmental official, political party or official thereof, or
candidate for political office for the purpose of influencing
any act or decision in an official capacity, or of including
any act or omission in violation of a lawful duty in order to
assist in obtaining advantages of any kind for UPC or in
conducting the transactions herein contemplated.
9.6 Additional Representations and Warranties of UPC as of the Final Closing
Date. As of the Final Closing Date, UPC represents, warrants and undertakes to,
and agrees with, Waldo, the Initial Sellers and KMNGG that:
9.6.1 All of the representatives and warranties made by UPC in this
Agreement, the Stock Subscription Agreement, the Stock
Exchange Agreement, and any officers' certificates delivered
by UPC hereunder are true and accurate as of the Final Closing
Date as if made on such date;
9.6.2 The Convertible Warrant Agreement(s) have been executed by
each of UPC and the Outside Investor(s) and provide for
transfer (in the aggregate) of not less than thirty-five
million Dollars ($35,000,000) (or such lesser amount as may be
agreed in writing by UPC, Waldo and KMNGG) to UPC subject to
satisfaction of conditions precedent in this Agreement and in
the Convertible Warrant Agreement(s); and
9.6.3 All authorizations, approvals, consents and notices required
to enable UPC to Transfer the UPC Shares to Waldo have been
made as of the Final Closing Date, and no additional
authorizations, approvals, consents or notices are required to
be made or obtained by UPC to enable Waldo to take title to
such shares free and clear of all pledges, liens, and
encumbrances and free and clear of all rights, claims and
challenges of third parties.
9.6.4 All material information about UPC provided to KMNGG in the
UPC Company Profile is true, accurate and correct as of the
date of such UPC Company Profile, and there is no information
not specified in the XXX
00
Company Profile the withholding of which would make the
information provided in the UPC Company Profile materially
misleading; and
9.7 Representations and Warranties of the Initial Sellers
Each of the Initial Sellers represents, warrants and undertakes to and agrees
with UPC, KMNGG and Waldo that:
9.7.1 It is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to carry on its
business as now conducted;
9.7.2 No additional filing, governmental approval, consent,
registration, or amendment to or in respect of its
constitutional documents is currently required under the laws
of its jurisdiction of incorporation in connection with its
formation and valid existence or the conduct of its business
as contemplated by its constitutional documents;
9.7.3 The persons signing this Agreement on its behalf have the full
power and authority to do so, it has authorized the execution
of this Agreement in accordance with its constitutional
documents, and all actions necessary under its constitutional
documents have been taken to permit and authorize its
execution of this Agreement;
9.7.4 It has all requisite power and authority to perform its
obligations hereunder, and upon execution by its duly
authorized representatives, this Agreement shall constitute
its legal, valid, and binding obligation, enforceable in
accordance with its terms;
9.7.5 The execution and delivery of this Agreement, as well as the
Transfer of the Initial Shares to UPC contemplated hereby and
the performance of the terms hereof will not conflict with any
provision of its constitutional documents or, to the best of
its knowledge, result in any material violation or default or
loss of material benefit under, or permit acceleration of any
obligation under, any mortgage, assignment, lease or any other
material agreement with, or the rights of, any third party, or
any provision of applicable law with respect to it or its
property;
9.7.6 To the best of its knowledge, there are no administrative,
judicial or other legal actions, proceedings or investigations
pending or threatened against it, which are likely to result,
either individually or in the aggregate, in any material
adverse change in its assets, financial condition or business
operations or would be likely to materially affect its ability
to consummate the transactions contemplated hereby;
9.7.7 It has filed or caused to be filed all tax returns and reports
that are required to be filed by it pursuant to applicable law
and, to the best of its knowledge, the returns filed by it are
complete and correct and no material financial sanctions have
been asserted by any central or local governmental authority
against it with respect to any such tax returns or reports
filed or required to be filed by it;
34
9.7.8 The information and documents provided by or on behalf of it
to counsel for UPC in response to the Due Diligence Request
are true, accurate and complete in all material respects, and
there is no information which it has failed to disclose which
would make any of the statements made therein misleading or
incomplete in any material respect;
9.7.9 Neither it nor any person (including employees, directors,
officers or agents thereof) acting at its direction has
offered, promised, authorized or made any payment or gift in
violation of applicable law (including, without limitation,
the United States Foreign Corrupt Practices Act) to any
governmental official, political party or official thereof, or
candidate for political office for the purpose of influencing
any act or omission in violation of a lawful duty in order to
assist in obtaining advantages of any kind for it or in
conducting the transactions herein contemplated; and
9.7.10 To the best of its knowledge, the representations and
warranties of KMNGG set forth in Section 9.1 hereof are true
and correct.
9.8 Additional Representations and Warranties of the Initial Sellers as of
the Final Closing Date
As of the Final Closing Date, each of the Initial Sellers represents, warrants
and undertakes to and agrees with UPC, Waldo and KMNGG as follows:
9.8.1 All of the representations and warranties made by it in this
Agreement, the Stock Exchange Agreement, Stock Transfer
Agreement, and any officers' certificate delivered by it
hereunder are true and accurate as of the Final Closing Date
as if made on such date;
9.8.2 All authorizations, approvals, consents and notices required
to enable it to Transfer the Initial Shares to UPC have been
made and received as of the Final Closing Date, and no
additional authorizations, approvals, consents or notices are
required to be made or obtained by it to enable UPC to take
title to such shares free and clear of all pledges, liens,
rights, claims and challenges of third parties; and
9.8.3 To the best of its knowledge, the representations and
warranties of KMNGG set forth in Section 9.2 hereof are true
and correct.
ARTICLE 10: CONFIDENTIALITY
10.1 At all times prior to the Final Closing Date, the parties agree to keep
confidential the existence and content of this Agreement, as well as
any information provided by the other parties hereto in connection with
performance hereunder, as well as not to disclose to third parties
(except such party's officers and authorized representatives), whether
in whole or in part, any such information for any purpose without the
written consent of the other parties. The confidentiality obligations
hereunder shall not apply to information which (i) is required by
applicable law to be disclosed (but only to the extent so required);
(ii) is available to the general public without fault of such party or
any of its officers or authorized representatives; (iii) is required to
be disclosed by UPC in connection with filing of any prospectus or
other securities filing document to be registered or filed by UPC (but
only to the extent so required); (iv) constitutes a
35
description in general terms of investments made by UPC to be provided
in periodic reports of UPC to its shareholders; (v) is disclosed by UPC
in connection with placement of the Convertible Warrant(s); or (vi) is
required to be disclosed by KMNGG in connection with filing of any
future prospectus or other securities filing document to be filed by
KMNGG (but only to the extent so required).
ARTICLE 11: TERM AND TERMINATION
11.1 This Agreement shall come into force on its date of execution and shall
continue in full force and effect until the fulfillment by the parties
of their respective obligations hereunder unless earlier terminated in
writing by agreement of the parties. Notwithstanding the foregoing,
unless otherwise agreed in writing by the Parties this Agreement shall
automatically be terminated and the respective rights and obligations
of the parties hereunder shall cease to be of any further force and
effect in the event that the Final Closing has not occurred on or
before December 15, 1997.
11.2 Either party may terminate this Agreement prior to the Final Closing
Date by delivery of written notice to the other party.
11.3 The provisions of Articles 10 and 12 shall survive any termination of
this Agreement.
11.4 In the event of any termination which occurs prior to the Final Closing
Date:
(i) either or both of Waldo and UPC shall have the right to deliver to
the Escrow Agent, pursuant to the terms and conditions of the Escrow
Agreement, a Cancellation Notice in the form of Exhibit 2 to the Escrow
Agreement. Upon receipt of any Cancellation Notice, the Escrow Agent,
pursuant to the terms and conditions of the Escrow Agreement, will
disburse to UPC the UPC Shares and all funds contributed by UPC into
Escrow, but will continue to hold the Escrow Documents until payment in
full of amounts advanced by UPC to Waldo pursuant to the Preliminary
Financing Agreement, as described in more detail in the Escrow
Agreement, the Preliminary Financing Agreement, and the Guarantee and
Stock Pledge Agreement; and
(ii) if notice of termination was delivered by Waldo, and/or was
delivered by UPC following breach of any of the provisions hereof by
Waldo, the Initial Sellers and/or KMNGG, Waldo shall promptly reimburse
to UPC all expenses and fees incurred by UPC in connection with
arranging financing for the transaction pursuant to the terms and
conditions of that certain letter of intent concluded by and between
UPC and Beacon Group Limited dated as of June 18, 1997.
36
ARTICLE 12: GOVERNING LAW; ARBITRATION
12.1 This Agreement shall be governed by and construed in accordance with
the laws of New York, notwithstanding the choice of law rules thereof.
Any dispute arising out of or in connection with this Agreement,
including any questions regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration
by a single arbitrator selected and acting in accordance with the rules
of the American Arbitration Association, which Rules are incorporated
into this paragraph by reference. The place of arbitration shall be New
York, New York, and the language of arbitration shall be English. The
arbitrators shall have the power to render declaratory judgments and to
issue injunctive orders, as well as to award monetary damages and shall
award reasonable attorneys' fees and costs to the prevailing party.
ARTICLE 13: NOTICES
13.1 Any notice, consent or any other communication hereunder shall be
deemed to be sufficiently given if delivered personally, if sent by
commercial courier, return receipt requested, or if sent by facsimile
transmission or telex to such party's facsimile or telex number, with
receipt acknowledged electronically. Notice shall be effective when
delivered personally or, if sent by courier, telex, or facsimile, when
received at the following addresses:
If to UPC, to:
Ural Petroleum Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
XXX
Attn.: Xx. Xxxx Xxxxxxxxxxx
Facsimile: x0(000) 000-0000
with a copy to:
SHH International
Gazetny per., 17/9
Xxxxxx 000000
Russian Federation
Attn.: Xxxx X. Xxxxxxxxx
Facsimile: x0 (000) 000-0000
If to Waldo, to:
Waldo Securities S.A.
Akara Building, Suite #8
Wickhams Cay, 1 Road Town
Tortola, British Virgin Islands
37
with a copy to:
AIM Advocates Bureau
Xxxxxxxx Xxxxxxxxxxxx 00/00
Xxxxxx 103051
Russian Federation
Attn.: Xxxxxx X. Xxxxxxx
Facsimile: x0 (000) 000-0000
If to KMNGG, to:
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Xxxxxxxxx Xxx, 00
00000 Xxxxx Oblast, Khantimansiisk
Attn:
Facsimile: +7 (34671) 3 61 09
If to any of the Initial Sellers, to:
ALM Advocates Bureau
Xxxxxxxx Xxxxxxxxxxxx 00/00
Xxxxxx 103051
Russian Federation
Attn.: Xxxxxx X. Xxxxxxx
Facsimile: x0 (000) 000-0000
13.2 Any party may change its address for provision of notice hereunder by
means of written notice to the other party as provided herein.
ARTICLE 14: MISCELLANEOUS
14.1 Assignment and Succession
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assignees.
14.2 Counterparts
This Agreement shall be executed in sixteen (16) originals, eight (8)
in English and eight (8) in Russian, each of which when executed shall
be deemed to be an original but all of which taken together shall
constitute one and the same agreement. In the event of discrepancies
between the English and Russian versions hereof, the English text shall
prevail and be conclusive.
14.3 Entire Agreement
This Agreement together with the agreements herein expressly referenced
and the Annexes, Exhibits and Schedules hereto and thereto constitute
the entire understanding among the parties and shall supersede all
previous communications,
38
representations or agreements, whether oral or written, between the
parties with respect to the subject matter hereof.
14.4 Amendment
This Agreement may be changed, modified or amended in whole or in part
only by a written amendment signed by each party hereto.
14.5 Waiver
Any party to this Agreement, with respect solely to such party's rights
under this Agreement and not on behalf of any other party hereto, may
(a) extend the time for the performance of any of the obligations or
other acts of another party, (b) waive any inaccuracies in the
representations and warranties of another party contained herein or in
any document delivered by another party pursuant hereto or (c) waive
compliance with any of the agreements or conditions of another party
that are contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver
of the same term or condition, or a waiver of any other term or
condition, of this Agreement. The failure of any party to assert any of
its rights hereunder shall not constitute a waiver of any such rights.
14.6 Severability, Continued Validity
The parties agree that in the event any provisions of this Agreement
become or are found invalid, illegal or unenforceable in any
jurisdiction and in any respect to the detriment of any of the parties
hereto, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired; and the parties undertake to exercise all efforts which are
necessary, desirable and sufficient to amend, supplement or substitute
any and all such invalid, illegal or unenforceable provisions with
enforceable and valid provisions which would produce as nearly as may
be possible the economic result previously intended by the parties.
14.7 Certain Terms
The terms "hereby", "herein", "hereof', "hereto", "hereunder" and any
similar terms shall refer to this Agreement. Words importing the
singular number shall mean and include the plural number and vice versa
where the context so requires. The terms "include", "including" and
similar terms shall be construed as if followed by the phrase "without
being limited to". All references in this Agreement to numbered
Articles, Sections, Annexes and Schedules are references to the
Articles, Sections, Annexes and Schedules of this Agreement.
39
14.8 Headings
The headings used in this Agreement are for convenience of reference
only and shall not affect in any way the interpretation of this
Agreement.
14.9 Annexes and Schedules
The annexes and schedules attached to this Agreement shall be deemed an
integral part of this Agreement, and are fully incorporated herein by
reference.
40
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representative to execute and deliver this Agreement on the date first above
written.
URAL PETROLEUM CORPORATION
/s/ Xxxx Xxxxxxxxxxx
----------------------------------
By: Xxxx Xxxxxxxxxxx
Title: Chief Executive Officer
WALDO SECURITIES S.A.
/s/ Nikolai Vladimirovich Bogachev
----------------------------------
By: Nikolai Vladimirovich Bogachev
Title:
KHANTIMANSIISKNEFTEGAZGEOLOGIA
/s/ Alexander [ILLEGIBLE] [SEAL]
----------------------------------
By: Alexander [ILLEGIBLE]
Title: General Director
OOO TAGASO
/s/ [ILLEGIBLE] [SEAL]
----------------------------------
By:
Title:
TOO XXXXX
/s/ [ILLEGIBLE] [SEAL]
----------------------------------
By:
Title:
AOZT IURIDICHESKAIA KOMPANIA XXXX & SINOVIA
/s/ [ILLEGIBLE] [SEAL]
----------------------------------
By:
Title:
BENZ INVESTMENTS
/s/ [ILLEGIBLE]
----------------------------------
By:
Title:
41
SCHEDULE 1
LIST OF DIVISIONS SUBJECT OF SPIN-OFF*
Nazymgeo
Pravdinskgeo
Borezovskaia NGRE
Serginskaia EKB
Krasnoleninskoe BMU
* Subject to modification by agreement of Waldo, KMNGG and XXX
00
XXXXXXXX 0
XXXXX LICENSES
Oil and Gas Extraction Licenses for drilling in:
Salynskii field (Western portion)
Potanai-Kartopinskii field
Krasnoleninskii field (Kamennoi portion)
Khantimansiisk field
Geological Exploration Licenses for use of subsoil resources in:
Kislorskii field
Severokaminskii field
43
SCHEDULE 3
Nazimgeodobycha, a company to be formed upon reorganization of KMNH, is to
acquire (through reissuance of licenses in the course of reorganization) the
following licenses (the KMNH Licenses"):
Oil and Gas Exploration and Extraction Licenses for drilling in:
Sredne-Nazymskii field
Aprel'skii field
Bol'shoi field
Galianovskii field
Olkhovskii field
Tsentral'nii field
44
SCHEDULE 4
PRE-EXISTING UPC OBLIGATIONS AND AGREEMENTS
UPC has issued and outstanding options in favor of:
Management 6,750.00 common shares
Chelsea/Xxxxx Conversion(1) 15,000.00 common shares
Directors 4,600.00 common shares
Aegis Energy Advisors Corp. 2,400.02 common shares
Notes:
(1) Chelsea and Xxxxx have an option to convert a future Chernogorskoye
production payment interest into UPC equity prior to an IPO. Depending
upon the valuation of Chernogorskoye future cash flows in the IPO
prospectus, the dilution could be higher (but not above 20% of UPC
fully diluted).
45
ANNEX 1
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is concluded this 7th day of
August, 1997 by and between:
URAL PETROLEUM CORPORATION, a corporation organized and existing under the laws
of the State of Delaware, USA ("UPC"); and
WALDO SECURITIES S.A., a company organized and existing under the laws of Cyprus
("Waldo").
WHEREAS, Waldo currently owns certain shares of common stock in OAO
Khantymansiiskneftegazgeologiia ("KMNGG") which it desires to transfer to UPC,
and whereas UPC desires to acquire such shares on the terms and conditions
herein stated;
WHEREAS, UPC desires to transfer to Waldo certain newly issued shares of UPC
common stock, and whereas Waldo desires to acquire such shares on the terms and
conditions herein stated;
NOW, THEREFORE, in consideration of the mutual agreements and covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1: DEFINITIONS
"Canceled Prefinancing Amount" means such amount as may be due and owing on the
Final Closing Date from Waldo to UPC pursuant to the Prefinancing Agreement, and
canceled on such date by UPC and Waldo as partial consideration for the Swap
Shares to the terms and conditions of this Agreement and the Investment
Agreement which amount shall be confirmed by written notice executed by each of
UPC and Waldo;
"Dollars" and "$" mean the lawful currency of the United States of America;
"Escrow Agent" means Xxxxx Brothers Xxxxxxxx & Co., a bank organized and
existing pursuant to the laws of the State of Massachusetts, USA;
"Escrow Agreement" means that escrow agreement concluded by and among Waldo,
UPC, the Escrow Agent and certain other parties and dated as of June 30, 1997,
as the same may be amended from time to time (including, without limitation, the
amendments concluded between the parties thereto as of even date herewith);
"Final Closing Date" has the meaning ascribed to such term in the Investment
Agreement;
"Investment Agreement" means that investment agreement concluded by and among
Waldo, UPC, KMNGG, Benz Investments GmbH, AOZT "Iuridicheskaya Kompania 'Xxxx I
Sinovia', OOO "Tagaso", and TOO "Xxxxx" as of even date herewith;
"Prefinancing Agreement" means that loan agreement and note executed by and
between UPC and Waldo, dated July 3, 1997, in the principal amount of three
million fifty thousand Dollars ($3,050,000);
46
"Swap Shares" means thirty-nine thousand four hundred ninety (39,490) shares of
common stock and eight thousand one hundred forty-one (8,141) shares of
preferred stock in KMNGG owned by Waldo in KMNGG as of the date of this
Agreement and to be Transferred by Waldo to UPC as provided herein;
"UPC Share Certificates" shall have the meaning ascribed to such term in Section
2.1 hereof; and
"UPC Shares" means one hundred fifteen thousand four hundred (115,400) shares of
UPC common stock to be issued by UPC to Waldo as provided herein;
ARTICLE 2: EXCHANGE OF STOCK
2.1 Subject to the terms and conditions set forth in this Agreement, Waldo
agrees to transfer into Escrow certain documents described herein
evidencing all current and future rights of Waldo with respect to the Swap
Shares;
2.2 Subject to the terms and conditions set forth in this Agreement, promptly
following execution of this Agreement, UPC agrees to take all measures
reasonably necessary to amend its certificate of incorporation to increase
the authorized number of shares of UPC common voting stock to an amount
sufficient to cover issuance of the UPC Shares to Waldo, and promptly
thereafter UPC shall issue and transfer into Escrow the UPC Shares.
2.5 Subject to the terms and conditions set forth in this Agreement and the
Investment Agreement, on the Final Closing Date (as such term is defined
in the Investment Agreement) UPC agrees to execute and deliver a
Disbursement Notice in the form of Exhibit 7A to the Escrow Agreement;
Waldo agrees to execute and deliver a Disbursement Notice in the form of
Exhibit 7B to the Escrow Agreement; and each of UPC and Waldo agrees to
take all measures reasonably necessary to procure that the Escrow Agent
delivers the Waldo Escrow Documents to the Registrar, that the Swap Shares
are registered by the Registrar into UPC's name in the Shareholders'
Register, and that the UPC Shares are released to Waldo.
2.4 The parties hereto agree that as follows: (i) payment for the UPC Shares
by Waldo shall be made at the Final Closing in the form of delivery by
Waldo to UPC of the Swap Shares as consideration for the UPC Shares; (ii)
payment for the Swap Shares by UPC shall be made at the Final Closing in
the form of delivery by UPC to Waldo of the UPC Shares and cancellation by
UPC and Waldo, as partial consideration for the Swap Shares, of the
Canceled Prefinancing Amount (if any), which Canceled Prefinancing Amount
(if any) shall be confirmed by written notice executed by each of Waldo
and UPC. The parties agree that the package of UPC Shares and the Canceled
Prefinancing Amount (if any) to be transferred by UPC to Waldo hereunder
is equal in value to the package of Swap Shares to be transferred by Waldo
to UPC and other obligations undertaken by Waldo for the benefit of UPC
hereunder and under the Investment Agreement.
47
ARTICLE 2: CLOSING
2.1 Initial Closing.
(i) On the date of execution of this Agreement, Waldo shall deliver or cause to
be delivered to the Escrow Agent for the benefit of UPC:
(a) an original duly executed share transfer order with respect to the
Swap Shares, in the form set out as Exhibit 1 hereto, duly executed by
Waldo; and
(b) Waldo's original of this Stock Exchange Agreement.
Within five (5) days from the date of execution of this Agreement, Waldo shall
deliver or cause to be delivered to the Escrow Agent for the benefit of UPC an
extract from the Shareholders' Register, showing ownership by Waldo of the Swap
Shares and showing entry of a notation in such Shareholders' Register of an
encumbrance on the Swap Shares in favor of UPC.
(ii) Promptly following execution of this Agreement and filing by UPC of a
certificate of amendment to its articles of incorporation to increase the number
of shares of authorized UPC common stock to an amount sufficient to cover
issuance of the UPC Shares, UPC shall deliver to the Escrow Agent certificates
representing the UPC Shares, duly endorsed in blank or with duly executed stock
powers attached (the "UPC Share Certificates").
2.2 FINAL CLOSING. On the Final Closing Date:
(i) Pursuant to the terms of the Escrow Agreement the Escrow agent shall
deliver to the Registrar an executed and dated original of the share
transfer order directing reregistration of the Swap Shares into the name
of UPC, and promptly thereafter Waldo shall deliver to UPC, with a copy to
the Escrow Agent, a certified extract from the Shareholders' Register,
showing registration of UPC as owner of the Swap Shares;
(ii) Pursuant to the terms of the Escrow Agreement, the Escrow Agent
shall deliver the UPC Share Certificates to Waldo; and
(iii) Pursuant to the terms and conditions hereof UPC and Waldo shall each
execute a notice specifying the amount of the Canceled Prefinancing
Amount, and Waldo shall deliver notice to UPC accepting the UPC Shares and
cancellation by UPC of Waldo's obligation to pay the Canceled Prefinancing
Amount as indefeasible payment in full of the purchase price for the Swap
Shares.
48
ARTICLE 4. REPRESENTATI0NS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF WALDO. Waldo represents and warrants to
UPC as follows:
4.1.1 No additional filing, governmental approval, consent, registration,
or amendment to or in respect of its constitutional documents is
currently required under the laws of its jurisdiction of
incorporation in connection with the formation and valid existence
of Waldo or the conduct of its I business as contemplated by its
constitutional documents.
4.1.2 The persons signing this Agreement on its behalf have the full power
and authority to do so, it has authorized the execution of this
Agreement to accordance with its constitutional documents, and all
actions necessary under its constitutional documents have been taken
to permit and authorize its execution of this Agreement;
4.1.3 Waldo has all requisite power and authority to perform its
obligations hereunder, and upon its execution by its duly authorized
representatives, this Agreement shall constitute a valid, binding
and enforceable obligation of Waldo;
4.1.4 Waldo has not retained, utilized or been represented by any broker
or finder, in connection with the negotiation or consummation of
this Agreement or the transactions contemplated hereby;
4.1.5 Except as expressly provided herein, no consents, approvals and
authorization of or registration, designation, declaration or filing
with any governmental authority (whether of the Russian Federation,
United States or other jurisdiction) on the pant of Waldo is
required in connection with the acquisition by Waldo of the UPC
Shares pursuant to this Agreement, the transfer of the Swap Shares
to UPC, or the consummation of any other transaction contemplated
hereby;
4.1.6 The Swap Shares consist of thirty-nine thousand four hundred ninety
(39,490) shares of common stock in KMNGG and eight thousand one
hundred forty-one (8,141) shares of preferred stock in KMNGG,
collectively equal to approximately 6.46% of the total issued and
outstanding shares of KMNGG as of the date of this Agreement;
4.1.7 The information furnished by or on behalf of Waldo to UPC in
connection with this Agreement and the transactions contemplated
hereby does not contain any untrue statement of material fact and
does not omit to state any material fact necessary to make the
statements made, in the context in which made, not false or
misleading, and there is no fact of which Waldo has not informed UPC
which might materially adversely affect the ability of Waldo to
perform this Agreement or any of the transactions contemplated
hereby;
4.1.8 Waldo is not in default under or with respect to any agreement,
lease or other instrument to which it is a party or by which it may
be bound and it has or will have unencumbered financial resources
sufficient to enable it to enter
49
into and fulfill its obligations in connection with the
transactions contemplated by this Agreement;
4.2 Additional Representations and Warranties of Waldo as of the Final
Closing Date
4.2.1 Waldo has good and marketable title to the Swap Shares, free
and clear of all liens and encumbrances (other than Investment
Obligations identified in the Investment Obligations
Certificate delivered by KMNGG and Waldo to UPC pursuant to
the Investment Agreement), and there are no commitments,
options, warrants, calls or other agreements or obligations
binding on Waldo which require or could require it to sell,
transfer, assign, mortgage, pledge or otherwise dispose of any
of the Swap Shares. Upon the release of the Swap Shares from
Escrow and acquisition thereof by UPC pursuant to this
Agreement, good and marketable title to the Swap Shares will
be vested in UPC free and clear of all mortgages, liens,
pledges, charges, security interests, options, warrants,
calls, voting agreements, voting trusts, trust agreements, and
other encumbrances of any kind whatever (other than Investment
Obligations identified in the Investment Obligations
Certificate delivered by KMNGG and Waldo to UPC pursuant to
the Investment Agreement);
4.2.2 Waldo has full right, power and authority to sell, assign,
transfer and deliver the Swap Shares pursuant to this
Agreement and to carry out the terms hereof; and
4.2.3 Waldo has obtained any and all consents and made any and all
notifications and filings which may be necessary in connection
with its acquisition of the Swap Shares to UPC as provided
herein (including, without limitation, such consents, notices
to or filings with the RF Antimonopoly Committee and RF
Securities Commission as may be applicable).
4.3 Representations and Warranties of UPC. UPC represents and warrants to
Waldo as follows:
4.3.1 It is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with full
all requisite corporate power and authority to carry on its
business as now conducted;
4.3.2 No additional filing, governmental approval, consent,
registration, or amendment to or in respect of its
constitutional documents is currently required under the laws
of its jurisdiction of incorporation in connection with the
formation and valid existence of UPC or the conduct of its
business as contemplated by its constitutional documents;
4.3.3 The persons signing this Agreement on its behalf have the full
power and authority to do so, it has authorized the execution
of this Agreement in accordance with its constitutional
documents and all actions necessary under its constitutional
documents have been taken to permit and authorize its
execution of this Agreement;
4.3.4 UPC has all requisite power and authority to perform its
obligations hereunder, and upon execution by its duly
authorized representatives, this
50
Agreement shall constitute its a legal, valid and binding
obligation, enforceable in accordance with its terms;
4.3.5 UPC has not retained, utilized or been represented by any
broker or finder, in connection with the negotiation or
consummation of this Agreement or the transactions
contemplated hereby;
4.4 Additional Representations and Warranties of Waldo as of the Final
Closing Date.
4.4.1 The UPC Shares consist of one hundred fifteen thousand four
hundred (115,400) shares of common stock in UPC, equal to
fifty percent (50%) of the total voting stock of UPC issued
and outstanding as of the date of deposit of such UPC Shares
into Escrow by UPC;
4.4.2 Except as expressly provided herein, no consent, approval or
authorization of or registration, designation, declaration or
filing with any governmental authority (whether of the Russian
Federation, United States or other jurisdiction) on the part
of UPC is required in connection with the acquisition by UPC
of the Swap Shares pursuant to this Agreement, the transfer of
the UPC Shares to Waldo, or the consummation of any other
transaction contemplated hereby;
4.4.3 The UPC Shares have been duly issued in accordance with the
requirements of applicable law, and UPC has good and
marketable title to the UPC Shares, free and clear of all
liens and encumbrances, and there are no commitments, options,
warrants, calls or other agreements or obligations binding on
UPC which require or could require it to sell, transfer,
assign, mortgage, pledge or otherwise dispose of any of the
UPC Shares. Upon the release of the UPC Shares from escrow and
acquisition thereof by Waldo pursuant to this Agreement, good
and marketable title to the UPC Shares will be vested in Waldo
free and clear of all mortgages, liens, pledges, charges,
security interests, options, warrants, calls, voting
agreements, voting trusts, trust agreements, and other
encumbrances of any kind whatever (except for such security
interests and other encumbrances as may be created in favor of
UPC as provided in this Agreement and/or any other written
agreement between the parties); and
4.4.4 UPC has full right, power and authority to sell, assign,
transfer and deliver the UPC Shares pursuant to this Agreement
and to carry out the terms hereof.
ARTICLE 5: ADDITIONAL OBLIGATIONS OF WALDO
5.1 From and after the date of execution of this Agreement, Waldo shall
take all actions, execute all documents and acts, make any and all
filings and accomplish any and all other formalities reasonably
necessary:
5.1.1 on the Final Closing Date, to cause the reregistration of the
Swap Shares into the name of UPC (as the same may be renamed
from time to time) or a nominee of UPC in the Shareholders'
Register, implement the transfer of title to the Swap Shares
from Waldo to UPC, and to cause the Registrar to deliver to
UPC, a certified extract from such Shareholders' Register,
evidencing registration of UPC or a nominee of UPC as
registered owner of the Swap Shares;
51
5.1.2 as may be required from time to time by legislation of the
Russian Federation (including, without limitation, the RF
Antimonopoly Committee and the RF Securities Commission), and
by competent registration and other authorities in the Russian
Federation, to sign any acts, make any filings, obtain any
approvals, permissions, authorizations, or licenses, and
accomplish any other formalities to implement passage of title
to the KMNGG Shares from Waldo to UPC as provided herein, and
to promptly provide to UPC copies of any filings, approvals,
permissions, authorizations, licenses or other documents
obtained in connection therewith.
ARTICLE 6: INDEMNIFICATION
6.1 Indemnification by Waldo. Waldo shall indemnify and hold UPC (and its
directors, officers, employees, agents, advisers and affiliates)
harmless from and against any and all claims, liabilities, losses,
damages, costs and expenses (including, without limitation, lawyer's
fees) related to or arising, directly or indirectly, in connection with
any failure or any breach by Waldo of any representation, warranty,
covenant, obligation or undertaking made by Waldo hereunder or with the
registration of Swap Shares into UPC's name or the removal of UPC's
name from the Shareholders' Register. The provisions of this Section
6.1 shall survive completion or other termination of this Agreement.
6.2 Indemnification by UPC. UPC shall indemnify and hold Waldo (and its
directors, officers, employees, agents, advisers and affiliates)
harmless from and against any and all claims, liabilities, losses,
damages, costs and expenses (including, without limitation, lawyer's
fees) related to or arising, directly or indirectly, in connection with
any failure or any breach by UPC of any representation, warranty,
covenant, obligation or undertaking made by UPC hereunder.
ARTICLE 7: TAXES AND OTHER FEES
7.1 Any and all taxes, duties and charges arising in connection with the
transactions contemplated by this Agreement under applicable laws or
regulations shall be borne by the responsible taxpayer for such tax as
designated by such applicable laws or regulations.
ARTICLE 8: TERMINATION
8.1 This Agreement shall automatically terminate in the event that the
Investment Agreement is terminated on or prior to the Final Closing
Date.
ARTICLE 9: GOVERNING LAW; ARBITRATION
9.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, USA, notwithstanding
the choice of law rules thereof.
9.2 Arbitration. This Agreement shall be governed by and construed in
accordance with the laws of New York, notwithstanding the choice of law
rules thereof. Any dispute arising out of or in connection with this
Agreement, including any questions regarding its existence, validity or
termination, shall be referred to and finally
52
resolved by arbitration by one arbitrator selected and acting in
accordance with The Rules of the American Arbitration Association,
which Rules are incorporated into this paragraph by reference. The
place of arbitration shall be New York, New York, and the language of
arbitration shall be English. The arbitrators shall have the power to
render declaratory judgments and to issue injunctive orders, as well as
to award monetary damages and shall award reasonable attorneys' fees
and costs to the prevailing party.
ARTICLE 10: NOTICES
10.1 Any notice, consent or any other communication hereunder shall be
deemed to be sufficiently given if delivered personally to the other
party, if sent by commercial courier, return receipt requested, or if
telefaxed or cabled to the other Party's telex or facsimile number,
with receipt acknowledged electronically. Notice shall be effective
when delivered personally or upon confirmation of receipt if sent by
courier, telex or facsimile at the following addresses:
If to Waldo, to:
Waldo Securities S.A.
Xxxxx Xxxxxxxx, Xxxxx # 0
Xxxxxxxx Xxx, 0 Road Town
Tortola, British Virgin Islands
with a copy to:
ALM Advocates Bureau
Xxxxxxxx Xxxxxxxxxxxx 00/00
Xxxxxx 103051
Russian Federation
Attn.: Xxxxxx X. Xxxxxxx
Fax: x0 (000) 000-0000
If to UPC, to:
Xx. Xxxx X. Xxxxxxxxxxx
Chief Executive Officer
Ural Petroleum Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Tel. x0 (000) 000-0000
Fax x0 (000) 000-0000
with a copy to:
SHH International
Gazetny per., 17/9
Xxxxxx 000000
Russian Federation
Attn.: Xxxx X. Xxxxxxxxx
Fax: x0 (000) 000-0000
53
10.2 Either party may change its address for provision of notice hereunder
by means of written notice to the other party as provided herein.
ARTICLE 11: MISCELLANEOUS
11.1 All documents to be furnished or communications to be given or made
under this Agreement shall be in the English language or, if in another
language, shall be accompanied by a translation into English.
11.2 This Agreement, together with any other written agreements concluded
between the parties on or after the date hereof with respect to the
subject matter hereof, constitute the entire understanding of the
parties with respect to the subject matter hereof, and shall supersede
all previous communications, representations or agreements, whether
oral or written, between the parties with respect to the subject matter
hereof, provided, however, that in the event of any conflict between
the terms and provisions of this Agreement and the terms and provisions
of the Investment Agreement, the Investment Agreement shall prevail.
11.3 The failure of either party to enforce at any time any provision hereof
shall not be construed to be a waiver of such provision or the right of
such party thereafter to enforce that or any other provision hereof.
11.4 Nothing in this Agreement shall be construed to authorize either party
to act as an agent for the other party, or to permit any party to
undertake any contracts or other obligations for any other party.
11.5 The rights and obligations arising from this Agreement may not be
transferred in whole or in part without the prior written consent of
the other party.
11.6 This Agreement shall be executed in six (6) originals, three (3) in
English and three (3) in Russian, each of which when executed and
delivered shall constitute an original but all of which together shall
constitute one and the same document. In the event of discrepancies
between the English and Russian versions hereof, the English text shall
prevail and be conclusive.
11.7 The headings used in this agreement are for reference only and shall
not limit or control the interpretation of the provisions herein
contained.
11.8 At all time prior to the Final Closing Date, the parties agree to keep
confidential the existence and content of this Agreement, as well as
any information provided by the other parties hereto in connection with
performance hereunder, as well as not to disclose to third parties
(except such party's officers and authorized representatives), whether
in whole or in part, any such information for any purpose without the
written consent of the other parties. The confidentiality obligations
hereunder shall not apply to information which (i) is required by
applicable law to be disclosed (but only to the extent so required);
(ii) which is available to the general public without fault of such
party or any of its officers or authorized representatives; (iii) is
required to be disclosed by UPC in connection with filing of any
prospectus or other securities filing document to be registered or
filed by UPC (but only to the extent so required); (iv) constitute
descriptions in general terms of investments made by UPC to be provided
in periodic reports of UPC to its shareholders; (v) is disclosed by UPC
in
54
connection with placement of the Convertible Note; or (vi) is required
to be disclosed by KMNGG in connection with filing of any future
prospectus or other securities filing document to be filed by KMNGG
(but only to the extent so required).
55
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
WALDO SECURITIES S.A.
-------------------------------------
By: Nikolai Vladimirovich Bogachev
Title:
URAL PETROLEUM CORPORATION
------------------------------
By: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
56
EXHIBIT 1
FORM OF STOCK TRANSFER ORDER
57
ANNEX 2
AMENDMENT TO ESCROW AGREEMENT
Pursuant to this amendment (the "Amendment") dated this 7th day of August, 1997,
each of Ural Petroleum Corporation, Waldo Securities S.A., OOO Tagaso, TOO
Xxxxx, Benz Investments GmbH, and aozt Iuridicheskaia Kompania Xxxx & Sinovia
and Xxxxx Brothers Xxxxxxxx & Co. hereby agree to amend the Escrow Agreement by
and among them, dated as of July 30, 1997, by amending and replacing such
agreement in its entirety by the following amended and restated escrow
agreement:
AMENDED AND RESTATED ESCROW AGREEMENT
THIS AMENDED AND RESTATED ESCROW AGREEMENT (this "Amended and Restated
Escrow Agreement" or this "Agreement") is made this 7th day of August 1997, by
and among:
(i) OOO TAGASO, a limited liability company organized and existing
under the laws of the Russian Federation ("Tagaso"); TOO XXXXX, a
limited liability company organized and existing under the laws of the
Russian Federation ("Xxxxx"); AOZT IOURIDICHISKAYA KOMPANIA XXXX &
SINOVIA, a closed type joint stock company organized and existing under
the laws of the Russian Federation ("IKGS"); and BENZ INVESTMENTS, a
corporation organized and existing under the laws of the Bahamas
("Benz") (Tagaso, Xxxxx, IKGS and Benz from time to time hereinafter
collectively referred to as the "Initial Sellers" and individually as
an "Initial Seller");
(ii) WALDO SECURITIES S.A., an international business company organized
and existing under the laws of the British Virgin Islands ("Waldo");
(iii) URAL PETROLEUM CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, USA (hereinafter referred to
as UPC"); and
(iv) XXXXX BROTHERS XXXXXXXX & CO, a commercial bank organized and
existing under the laws of the State of New York, USA (the "Escrow
Agent").
WITNESSETH:
WHEREAS, by a stock transfer agreement dated April 17, 1997 by and
between UPC and Benz, and by a stock transfer agreement dated April 17, 1997 by
and among UPC and Tagaso, Xxxxx, and IKOS (collectively the "Stock Transfer
Agreements"), the Initial Sellers have agreed to sell to UPC a total of 128,050
shares of common stock in OAO Khantymansiiskneftegazgeologiia, an open joint
stock company organized and existing under the laws of the Russian Federation
("KMNGG"; such shares hereinafter referred to as the "Initial Shares"), subject
to the satisfaction of the conditions precedent contained in each Stock Transfer
Agreement;
58
WHEREAS, pursuant to Article 3 of each of the respective Stock Transfer
Agreements, subsequent to the appointment of an escrow agent, UPC and the
Initial Sellers are required to deposit certain funds and documents in escrow
with the Escrow Agent;
WHEREAS, pursuant to an Investment Agreement executed by and among UPC,
Waldo, KMNGG, and the Initial Sellers as of even date herewith, the parties to
the Stock Transfer Agreements have agreed that release of the Initial Shares and
Escrow Deposit (as defined below) from Escrow (as defined below) shall occur
following satisfaction of all conditions precedent under the Investment
Agreement;
WHEREAS, pursuant to a Stock Exchange Agreement by and between Waldo
and UPC, dated as of even date herewith, Waldo has agreed to transfer to UPC
thirty-nine thousand four hundred ninety (39,490) shares of common stock of
KMNGG and eight thousand one hundred forty-one (8,141) shares of preferred stock
of KMNGG (collectively the "Swap Shares"), and UPC has agreed to transfer to
Waldo one hundred fifteen thousand four hundred (115,400) shares of common stock
of UPC (the "UPC Shares"), all subject to satisfaction of all conditions
precedent under the Investment Agreement;
WHEREAS, in the event of delivery of notice by either Waldo or UPC of
termination of the Investment Agreement prior to the Final Closing Date (as
defined in the Investment Agreement) (any such notice hereinafter referred to as
a "Termination Notice"), the conditions precedent to the Stock Transfer
Agreements and the Stock Exchange Agreement will fail to be met and such Stock
Transfer Agreements and Stock Exchange Agreement shall terminate;
WHEREAS, by a loan agreement and promissory note concluded between UPC
and Waldo, dated as of July 3, 1997 (the "Loan Agreement"), UPC has agreed to
lend to Waldo, and Waldo has agreed to borrow from and repay (in cash, in oil or
in shares) to UPC, the amount of three million fifty thousand dollars
($3,050,000) (the "Loan"), and to secure such Loan by the pledge of 36,950
shares of KMNGG common stock currently owned by Waldo (the "Waldo Common
Shares");
WHEREAS, by a Guarantee and Stock Pledge Agreement concluded between
the Sellers and UPC, dated as of July 3, 1997 (the "Guarantee Agreement"), the
Initial Sellers have agreed to act as guarantors of Waldo's repayment (in cash
or in shares) of the Loan, and have pledged a portion of the Initial Shares as
additional security therefore;
WHEREAS, UPC, Waldo and the Initial Sellers have agreed to deposit
certain documents in Escrow pending the earlier to occur of (i) repayment of the
Loan by Waldo, or (ii) fulfillment of all conditions precedent to the release of
the Escrow Deposit and Escrow Documents (as defined below) from Escrow;
WHEREAS, UPC, Waldo and the Initial Sellers desire to amend and restate
the escrow agreement first concluded by and among them as of June 30, 1997 (the
"Original Escrow Agreement") to incorporate within such Original Escrow
Agreement provisions governing deposit and release of the Swap Shares and the
UPC Shares from Escrow;
WHEREAS, UPC, Waldo and the Initial Sellers desire to have the Escrow
Agent hold the Escrow Deposit and Escrow Documents pursuant to the terms of this
Amended and Restated Escrow Agreement, pending the fulfillment of the conditions
precedent herein described, and the Escrow Agent agrees to act in accordance
with the instructions set forth in this Amended and Restated Escrow Agreement;
59
NOW, THEREFORE, in consideration of the premises and mutual agreements
in this Amended and Restated Escrow Agreement, the parties hereto do hereby
agree as follows:
1. Definitions
"Cancellation Notice" means a notice in the form of Exhibit 2 hereto;
"Completion Notice" means a notice the form of Exhibit 4 hereto;
"Demand Notice" means a notice in the form of Exhibit 3 hereto;
"Disbursement Notice" means a notice in the form of Exhibit 1 hereto;
"Dollars" and "$" mean the official currency of the United States of America;
"Dollar Equivalent" means the Dollar equivalent calculated at the RF Central
Bank Exchange rate for conversion of Dollars into Russian Rubles in effect as of
the date of first execution of the Original Escrow Agreement, which rate is five
thousand seven hundred ninety-seven (5,797) Rubles per Dollar;
"Escrow" means the escrow first established pursuant to the Original Escrow
Agreement and maintained by the Escrow Agent in accordance with this Amended and
Restated Escrow Agreement;
"Escrow Account" means account no. _________, maintained in UPC's name with the
Escrow Agent at Xxxxx Brothers Xxxxxxxx & Co., 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, XXX, ABA No. 000000000;
"Escrow Agent" has the meaning ascribed to such term in the preamble hereto;
"Escrow Deposit" means the amount of forty-eight thousand six hundred
fifty-seven Dollars and twenty cents ($48,657.20) deposited by UPC with the
Escrow Agent as provided herein;
"Escrow Documents" means, collectively, all of the originals of each of the
Stock Transfer Agreements, Loan Agreements, Guarantee Agreements, First Stock
Transfer Orders, Second Stock Transfer Orders, Waldo First Stock Transfer Order,
the Waldo Second Stock Transfer Order, and share register extracts and other
documents deposited in Escrow by each of the parties hereto;
"Guarantee Agreement" shall have the meaning ascribed to such term in the
preamble hereto;
"Initial Shares" shall have the meaning ascribed to such term in the preamble
hereto;
"Investment Agreement" shall have the meaning ascribed to such term in the
preamble hereto;
"Loan" shall have the meaning ascribed to such term in the preamble hereto;
"Loan Agreement" shall have the meaning ascribed to such term in the preamble
hereto;
60
"Registrar" means zao Ob'edinennyi registrator, an entity organized pursuant to
the laws of the Russian Federation and having its address at xx. Xxxxxxxxx, x.
0, xxx. 0, Xx. Xxxxxxxxxx, Xxxxxxx Federation, or such other entity legally
responsible for holding the KMNGG shareholders' register, as UPC may notify the
Escrow Agent in writing from time to time;
"Rubles" and "RR" mean the official currency of the Russian Federation;
"Stock Transfer Agreements" shall have the meaning ascribed to such term in the
preamble hereto;
"Termination Notice" shall have the meaning ascribed to such term in the
preamble hereto;
"UPC Share Certificates" shall have the meaning ascribed to such term in Section
1.1 hereof;
"UPC Shares" shall have the meaning ascribed to such term in the preamble
hereto;
"Waldo Common Shares" shall have the meaning ascribed to such term in the
preamble hereto.
1. Establishment of Escrow
1.1 Concurrently with the execution and delivery of this Agreement, UPC
shall deposit or cause to be deposited with the Escrow Agent in the
Escrow Account:
(i) its original executed copies of each of the Stock Transfer
Agreements;
(ii) its original executed copy of the Stock Exchange Agreement;
(iii) the Escrow Deposit of forty-eight thousand six hundred
fifty-seven Dollars and twenty cents ($48,657.20);
(iv) one original notice to the KMNGG registrar, directing the
registrar to register the Seller Shares into UPC's name pursuant to the
Stock Transfer Agreements, and to deliver to UPC an original extract
from the KMNGG shareholders' register evidencing such registration
("UPC Notice A"); and
(v) one original notice to the KMNGG registrar, directing the registrar
to register the Seller Shares and Waldo Shares into UPC's name pursuant
to the Loan Agreement and Guarantee Agreement, and to deliver to UPC an
original extract from the KMNGG shareholders' register evidencing such
registration ("UPC Notice B").
Promptly following UPC's filing of a certificate of amendment to its
articles of incorporation to increase the number of shares of
authorized UPC common stock to an amount sufficient to cover issuance
of the UPC Shares (and in no event later than the day prior to the
Final Closing Date), UPC shall deposit or cause to be deposited with
the Escrow Agent certificates representing the UPC Shares, duly
executed in bank or with duly executed stock powers attached (the "UPC
Share Certificates").
1.2 Concurrently with the execution and delivery of this Agreement, each
Initial Seller shall deposit or cause to be deposited with the Escrow
Agent:
(i) its original, executed copy of the Stock Transfer Agreements;
(ii) its original, executed copy of the Guarantee Agreement;
(iv) a duly executed share transfer order with respect to the Initial
Shares, directing re-registration of such Initial Shares into UPC's
name pursuant to the Stock Transfer Agreements (the "First Stock
Transfer Order");
61
(v) a duly executed share transfer order with respect to the Initial
Shares, directing re-registration of such Initial Shares into UPC's
name pursuant to the Guarantee Agreement (the "Second Stock Transfer
Order"); and
(vi) an extract from the KMNGG shareholders' register reflecting
registration of an encumbrance on the Initial Shares in favor of UPC.
1.3 Concurrently with execution and delivery of this Escrow Agreement,
Waldo shall deposit or cause to be deposited with the Escrow Agent:
(i) its original executed copies of each of the Stock Transfer
Agreements;
(ii) its original executed copy of the Loan Agreement;
(iii) a duly executed share transfer order directing re-registration of
a portion of the Waldo Shares into UPC's name pursuant to the Loan
Agreement (the "First Waldo Stock Transfer Order");
(iv) its original executed copy of the Stock Exchange Agreement;
(v) a duly executed share transfer order directing re-registration of
the Swap Shares into UPC's name pursuant to the Stock Exchange
Agreement (the "Second Waldo Stock Transfer Order"); and
(vi) an extract from the KMNGG shareholders' register reflecting
registration of an encumbrance on the Waldo Shares in favor of UPC.
1.4 The Escrow Agent acknowledges that it will hold the Escrow Deposit and
the Escrow Documents in Escrow subject to the terms and conditions of
this Escrow Agreement.
1.5 Upon receipt of the Escrow Deposit in the Escrow Account, the Escrow
Agent shall invest and reinvest, as appropriate, the Escrow Deposit in
a money market fund maintained by the Escrow Agent or in such other
short-term, interest-bearing investment as may be offered by the Escrow
Agent and as the Escrow Agent may deem prudent, acting at its own
reasonable discretion.
2. Delivery of Notices to Escrow Agent
2.1 Promptly upon the satisfaction or waiver of the conditions precedent to
Final Closing set forth in Article 8 of the Investment Agreement (the
"Conditions Precedent"), the Initial Sellers and Waldo shall jointly
deliver to the Escrow Agent a Disbursement Notice in the form of Annex
1B hereto, and UPC shall deliver to the Escrow Agent a Disbursement
Notice in the form of Annex 1A hereto. Deliveries of the Disbursement
Notices as provided hereunder shall be made by the facsimile with
confirmation original promptly sent by express courier.
2.2 In the event of delivery of a Termination Notice by either Waldo or
UPC, either party may deliver to the Escrow Agent a Cancellation Notice
to such effect in the form of Annex 2 hereto.
2.3 In the event that Waldo, following delivery of any Cancellation Notice,
fails to pay the Loan when due and UPC elects to exercise its rights in
the Waldo Common Shares and Initial Shares as provided in the Loan
Agreement and the Guarantee Agreement, UPC shall deliver to the Escrow
Agent, with copies to Waldo and each of the Initial Sellers, a Demand
Notice to such effect in the form of Annex 3 hereto.
2.4 In the event of satisfaction or cancellation of the Loan following
delivery of any Cancellation Notice, UPC shall deliver to the Escrow
Agent, with copies to Waldo
62
and each of the Initial Sellers, a Completion Notice to such effect in
the form of Annex 4 hereto.
3. Disposition of the Escrow Deposit and Escrow Documents
3.1 Disposition In the Event of Fulfillment of Conditions Precedent to
Stock Transfer Agreements. Immediately upon receipt of a Disbursement
Notice from UPC and a joint Disbursement Notice from the Initial
Sellers and Waldo, the Escrow Agent shall deliver or cause to be
delivered in person or by express courier, to the Registrar the
original UPC Notice marked UPC Notice A, attaching an original of each
of the Stock Transfer Agreements, the Stock Exchange Agreement, and the
original of each First Stock Transfer Order and First Waldo Stock
Transfer Order.
In the event of delivery by express courier, the Escrow Agent shall,
immediately upon submission of such documents by the Escrow Agent to
the courier company for delivery to the Registrar, notify UPC and Waldo
by facsimile of the fact of such submission. Immediately upon receipt
by the Escrow Agent of instruction from UPC that the Initial Shares and
Swap Shares have been duly reregistered into UPC's name in the KMNGG
shareholders' register, the Escrow Agent shall disburse the Escrow
Amount as follows:
3.1.1 the Escrow Agent shall deposit forty-two thousand sixty-one
Dollars and twenty cents ($42,061.20) in the correspondent account of
the Russian bank (the "Russian Bank") in which UPC shall have opened a
Xxxxx Investment (type "I") account (the details of which account UPC
shall have designated in writing to the Escrow Agent prior to the date
of such disposition).
It is understood that UPC shall have provided such Russian Bank with a
stand-by order to immediately convert such Dollar amounts into Russian
rubles, to remit such Xxxxx amount to UPC's Investment (type "I")
account, and to immediately thereafter disburse such Xxxxx amounts as
follows:
3.1.1.1 to Tagaso, the Xxxxx amount resulting from conversion of
thirty thousand eight hundred Dollars and forty-one cents
($30,800.41) into Rubles as payment for 38,830 Seller Shares;
3.1.1.2. to Xxxxx, the Xxxxx amount resulting from conversion of eight
thousand four hundred twenty-seven Dollars and seventy-seven
cents ($8,427.77) Dollars into Rubles as payment for 34,897
Seller Shares;
3.1.1.3. to IKGS, the Xxxxx amount resulting from conversion of two
thousand eight hundred thirty-three Dollars and two cents
($2,833.02) Dollars into Rubles as payment for 16,423 Seller
Shares; and
3.1.2 the Escrow Agent shall pay six thousand five hundred ninety-six
Dollars ($6,596) Dollars to the bank account designated in writing to
the Escrow Agent by Benz Investments, as payment for 37,900 Seller
Shares.
3.1.3 All interest and other amounts earned on the Escrow Deposit shall
be paid by the Escrow Agent to UPC by direct remittance by the Escrow
Agent to UPC's account in US Dollars (after deduction of fees and
expenses due to the Escrow Agent pursuant to Section 5.2 hereof). Each
of Tagaso, Xxxxx and IKGS hereby acknowledge
63
and agree that the Xxxxx amounts resulting from conversion of the
Dollar amounts to be paid to them out of Escrow as specified in Section
3.1.1 hereof shall constitute payment in full of Xxxxx amounts owing to
them pursuant to the Stock Transfer Agreements
3.1.4 Simultaneously with disbursement of the Escrow Deposit, the
Escrow Agent shall: (i) deliver or cause to be delivered the UPC Share
Certificates to Waldo, and (ii) deliver or cause to be delivered all
remaining Escrow Documents (other than the First Stock Transfer Orders
and First Waldo Stock Transfer Orders) to the parties which deposited
such Escrow Documents into Escrow.
3.2 Disposition Upon Delivery of Cancellation Notice. In the event that
either party delivers a Cancellation Notice to the Escrow Agent as
provided hereunder, the Escrow Agent shall immediately disburse the
Escrow Deposit in Dollars to UPC (after deduction of fees and expenses
due to the Escrow Agent pursuant to Section 5.2 hereof) and disburse
the UPC Share Certificates to UPC, but shall continue to hold the
Escrow Documents in Escrow pending delivery of one of the following:
3.2.1 In the event of receipt by the Escrow Agent of a Demand Notice
from UPC, the Escrow Agent shall deliver or cause to be delivered to
the Registrar the original UPC Notice marked UPC Notice B attaching an
original of the Loan Agreement, an original of the Guarantee Agreement,
the original Second Waldo Stock Transfer Order, and the original of
each Second Stock Transfer Order. Following receipt by the Escrow Agent
of confirmation from UPC that each of the Initial Shares and Waldo
Common Shares have been reregistered in UPC's name, the Escrow Agent
shall deliver or cause to be delivered the remainder of the Escrow
Documents (other than the Second Waldo Stock Transfer Order and Second
Stock Transfer Order) to the parties which deposited such Escrow
Documents into Escrow.
3.2.2 In the event of receipt by the Escrow Agent of a Completion
Notice from UPC, the Escrow Agent shall deliver or cause to be
delivered the Escrow Documents to the parties which deposited such
Escrow Documents into Escrow.
64
4. Duties of Escrow Agent
4.1 The duties of the Escrow Agent are only such as herein specifically
provided, being purely administrative in nature, and the Escrow Agent
shall incur no liability whatsoever except for damages and liabilities
arising from its willful misconduct or gross negligence. The Escrow Agent
shall act in good faith and shall not be liable or responsible for any
action taken or omitted to be taken by it in good faith and believed by it
to be authorized or within the rights or powers conferred upon it by this
Escrow Agreement and shall have full and complete authorizations and
protections for any action taken or suffered by it hereunder in good
faith. The Escrow Agent shall not have any duties or obligations other
than as stated herein, and shall be protected when acting upon any notice,
certificate or other communication not only as to its execution and the
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information therein contained, which it shall in good
faith have believed to have been valid and to have been signed or
presented by a proper person or persons. The Escrow Agent shall act in
good faith and shall not be liable or responsible for calculation of any
Dollar Equivalent of any Xxxxx amount, and shall be entitled to rely in
good faith upon the calculations herein contained in the absence of
manifest error.
4.2 Except as expressly provided herein, the Escrow Agent shall not be bound
by any notice or demand with respect hereto, or any waiver, modification,
amendment, termination or revision of the Escrow Agreement, unless
delivered in writing to the Escrow Agent and signed by all parties and, if
the duties of the Escrow Agent are changed, unless it shall have given its
prior written consent thereto. Provided that the Escrow Agent is acting in
good faith, the Escrow Agent shall be under no duty to inquire into the
authority of any person acting in connection herewith or into the
genuineness of any signature; provided, however, that each of Waldo, the
Sellers and UPC shall designate to the Escrow Agent in writing that list
of individuals who are authorized to act and execute documents on behalf
of such party.
5. Indemnification and Compensation of Escrow Agent
5.1 UPC, Waldo and the Sellers jointly and severally shall indemnify and hold
the Escrow Agent harmless against, and pay or reimburse the Escrow Agent
upon request for, any and all losses, claims, damages, liabilities and
expenses, including without limitation reasonable costs of investigation,
counsel fees and disbursements, which may be imposed upon the Escrow Agent
or incurred by the Escrow Agent in connection with carrying out its duties
under this Escrow Agreement.
5.2 The schedule and procedure for payment of the fees and agreed expenses of
the Escrow Agent for acting hereunder shall be separately agreed between
UPC and the Escrow Agent and paid to the Escrow Agent at the sole expense
of UPC.
6. Litigation or Dispute
6.1 In the event that the Escrow Agent becomes involved in litigation or a
dispute by reason hereof, it is hereby authorized to deposit with the
Clerk of a court of competent jurisdiction any and all of the Escrow
Deposit and interest earned thereon held by it pursuant hereto and,
thereupon, it shall stand fully relieved and discharged of any further
duties hereunder with reference to this Escrow Agreement. In addition, if
the Escrow Agent is threatened with litigation by reason hereof, it is
65
hereby authorized to interplead all interested parties in a court of
competent jurisdiction and deposit with the Clerk of such court any and
all funds and documents held by Escrow Agent pursuant hereto and,
thereupon, shall stand fully relieved and discharged of any further duties
hereunder in respect of such deposit and the matter(s) giving rise
thereto.
7. Termination
7.1 The parties may decide amicably in writing to terminate this agreement at
any time. In such case, the parties shall take the necessary steps to
jointly notify the Escrow Agent in writing of such termination, and
following receipt of such notification the Escrow Agent shall, unless
otherwise directed in such notice, deliver or cause to be delivered the
Escrow Deposit (after deduction of fees and expenses due to the Escrow
Agent pursuant to Section 5.2 hereof) to UPC and the Escrow Documents to
the parties which deposited such Escrow Documents into Escrow.
8. Arbitration and Governing Law
8.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, USA, notwithstanding
the choice of law rules thereof.
8.2. Arbitration. Any dispute, controversy or claim arising out of relating to
this Agreement or the breach, termination or invalidity hereof shall be
referred to and finally resolved by arbitration in accordance with the
Rules of Conciliation and Arbitration of the International Chamber of
Commerce then in effect by a panel of three arbitrators appointed in
accordance with such rules. The seat of arbitration shall be New York, New
York and the language of the arbitration shall be English. The arbitrators
shall have the power to render declaratory judgments and to issue
injunctive orders, as well as to award monetary damages and shall award
reasonable attorneys' fees and costs to the prevailing party.
9. Successor Escrow Agent
9.1 The Escrow Agent or any successor which is hereafter appointed at any time
may resign by giving notice in writing to each of UPC, Waldo and the
Sellers and shall be discharged of its duties hereunder upon the
appointment of a successor Escrow Agent. In the event of any such
resignation, a successor Escrow Agent shall be promptly appointed by UPC,
Waldo and Sellers. Any such successor Escrow Agent shall deliver to UPC,
Waldo, the Sellers and the predecessor Escrow Agent a written instrument
accepting such appointment hereunder and thereupon shall succeed to all
the rights and duties of the Escrow Agent hereunder and shall be entitled
to receive all the properties held by the predecessor Escrow Agent
hereunder.
66
10. Successors and Assigns
10.1 This Escrow Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, successors and assigns;
provided, however, that, except for assignments by UPC to a wholly-owned
subsidiary of UPC, none of the parties may assign, delegate or otherwise
transfer any of its rights or obligations under this Escrow Agreement
without the prior written consent of the other parties. Any assignment in
contravention of this Escrow Agreement shall be null and void.
11. Notices
11.1 All notices and other communications hereunder shall be in writing and
shall be personally delivered, or transmitted by telex, facsimile or wire,
or sent by registered or certified mail, and via air mail, if sent
overseas, postage and fees prepaid, return receipt requested, to the
addresses and numbers listed below:
If to any or all of the Initial Sellers, to:
ALM Advocates Bureau
Xxxxxxxx Xxxxxxxxxxxx 00/00
Xxxxxx 105051
Russian Federation
Attn.: Xxxxxx X. Xxxxxxx
Fax:x0 (000) 000-0000
If to Waldo, to:
Waldo Securities S.A.
Xxxxx Xxxxxxxx, Xxxxx # 0
Xxxxxxxx Xxx, 0 Road Town
Tortola, British Virgin Islands
with a copy to:
ALM Advocates Bureau
Xxxxxxxx Xxxxxxxxxxxx 00/00
Xxxxxx 105051
Russian Federation
Attn.: Xxxxxx X. Xxxxxxx
Fax: x0 (000) 000-0000
67
If to UPC, to:
Xx. Xxxx X. Xxxxxxxxxxx
Chief Executive Officer
Ural Petroleum Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Tel.: x0 (000) 000-0000
Fax: +l (000) 000-0000
with a copy to:
SHH International
Gazetny per., 17/9
Xxxxxx 000000
Russian Federation
Attn.: Xxxx X. Xxxxxxxxx
Fax:x0 (000) 000-0000
If to Escrow Agent, to:
Xx. Xxxxxxx Xxxxxx
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
XXX
Telex: 940709
Facsimile: x0 000 000 0000
Notices to Escrow Agent shall be effective only when actually received by
Escrow Agent. Any party may change the addresses and numbers to which
notices shall be sent, by providing written notice of such change to the
parties hereto.
12. Counterparts; Effectiveness
12.1 This Amended and Restated Escrow Agreement shall be signed in seven (7)
originals in English. This Escrow Agreement shall become effective on the
date of its execution by all parties, which date shall be the date first
stated above.
13. Requirement of Writing
13.1 Neither this Agreement nor any of its provisions may be waived, amended,
altered, superseded or modified except by a writing signed by the duly
authorized representatives of the parties.
14. Communications
14.1 All documents to be furnished or communications to be given or made under
this Agreement shall be in the English language or, if in another
language, shall be accompanied by a translation into English.
68
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Escrow Agreement to be duly executed by their respective authorized
officers as of the date first above stated.
000 TAGASO
__________________________________
By:
Title:
TOO XXXXX
__________________________________
By:
Title:
AOZT IOURIDICHESKAYA KOMPANIA XXXX & SINOVIA
__________________________________
By:
Title:
BENZ INVESTMENTS
__________________________________
By:
Title:
WALDO SECURITIES S.A.
__________________________________
By:
Title:
URAL PETROLEUM CORPORATION
__________________________________
By:
Title:
XXXXX BROTHERS XXXXXXXX & CO
__________________________________
By:
Title:
69
EXHIBIT 1A
TO AMENDED AND RESTATED ESCROW AGREEMENT
DISBURSEMENT NOTICE
[to be delivered by UPC to the Escrow Agent]
Xxxxx Brothers Xxxxxxxx & Co.
[ ]
[ ]
Dear Sirs:
Please take this letter as notice, given pursuant to Section 2.1 of the
Escrow Agreement(1) by and among your company, Ural Petroleum Corporation
("UPC"), Waldo Securities SA ("Waldo"), Benz Investments ("Benz"), OOO Tagaso
("Tagaso"), TOO Xxxxx ("Xxxxx"), and aozt Iuridicheskaya Kompania Xxxx & Sinovia
("Xxxx & Sons") first dated July 30th, 1997 and amended and restated as of
August 7, 1997 (the "Escrow Agreement"), that all conditions precedent to the
release of the Escrow Documents and Escrow Deposit from Escrow have been met.
Upon your receipt of a similar notice jointly signed by Waldo, Benz, Tagaso,
Xxxxx and Xxxx & Sons, please disburse the Escrow Documents and Escrow Deposit
in accordance with Section 3.1 of the Escrow Agreement.
Thank you.
Sincerely,
_________________________________
Ural Petroleum Corporation
By:
Title:
----------
(1) All capitalized terms not otherwise defined herein shall have the meanings
given to them in the Escrow Agreement.
70
EXHIBIT 1B
TO AMENDED AND RESTATED ESCROW AGREEMENT
DISBURSEMENT NOTICE
[to be delivered jointly by Waldo, Benz, Tagaso, Xxxxx
and Xxxx & Sons to the Escrow Agent]
Xxxxx Brothers Xxxxxxxx & Co.
[ ]
[ ]
Dear Sirs:
Please take this letter as notice, given pursuant to Section 2.1 of the
Escrow Agreement(2) by and among your company, Ural Petroleum Corporation
("UPC"), Waldo Securities SA ("Waldo"), Benz Investments ("Benz"), OOO Tagaso
("Tagaso"), TOO Xxxxx ("Xxxxx"). and aozt Iuridicheskaya Kompania Xxxx & Sinovia
("Xxxx & Sons") first dated July 30th, 1997 and amended and restated as of
August 7, 1997 (the "Escrow Agreement"), that all conditions precedent to
release of the Escrow Documents and Escrow Deposit from Escrow have been met.
Upon your receipt of similar notice from UPC, please disburse the Escrow
Documents and Escrow Deposit in accordance with Section 3.1 of the Escrow
Agreement.
Thank you.
Sincerely,
________________________________
Waldo Securities S.A.
By:
Title:
________________________________
Benz Investments
By:
Title:
----------
(2) All capitalized terms not otherwise defined herein shall have the meanings
given to them in the Escrow Agreement.
71
________________________________
OOO Tagaso
By:
Title:
________________________________
TOO Xxxxx
By:
Title:
________________________________
aozt Iuridicheskaya Kompania
Xxxx & Sinovia
By:
Title:
72
EXHIBIT 2
TO AMENDED AND RESTATED ESCROW AGREEMENT
CANCELLATION NOTICE
[Delivered by either UPC or Waldo to the Escrow Agent]
Xxxxx Brothers Xxxxxxxx & Co.
[ ]
[ ]
Dear Sirs:
Please take this letter as notice, given pursuant to Section 2.2 of the
Escrow Agreement(3) by and among your company, Ural Petroleum Corporation
("UPC"), Waldo Securities SA ("Waldo"), Benz Investments ("Benz"), 000 Tagaso
("Tagaso"), TOO Xxxxx ("Xxxxx"), and aozt Iuridicheskaya Kompania Xxxx & Sinovia
("Xxxx & Sons") first dated July 30th, 1997 and amended and restated as of
August 7, 1997 (the "Escrow Agreement"), that Waldo, UPC and KMNGG have
terminated negotiations with respect to the transactions contemplated by and to
be included in the Investment Agreement. Pursuant to the terms and conditions of
Section 3.2 of the Escrow Agreement, please immediately disburse the entire
amount of the Escrow Deposit (after deduction of fees and expenses due to the
Escrow Agent pursuant to Section 5.2 of the Escrow Agreement) and the UPC Share
Certificates to UPC. Please continue to hold the remaining Escrow Documents in
Escrow until receipt from UPC of either a Demand Notice or a Completion Notice,
as specified in Sections 3.2.1 and 3.2.2 of the Escrow Agreement.
Thank you.
Sincerely,
________________________________
[Ural Petroleum Corporation]
[Waldo Securities SA]
By:
Title:
----------
(3) All capitalized terms not otherwise defined herein shall have the meanings
given to them in the Escrow Agreement.
73
EXHIBIT 3
TO AMENDED AND RESTATED ESCROW AGREEMENT
DEMAND NOTICE
[Delivered by UPC to the Escrow Agent]
Xxxxx Brothers Xxxxxxxx & Co.
[ ]
[ ]
Dear Sirs:
Please take this letter as notice, given pursuant to Section 2.3 of the
Escrow Agreement(4) by and among your company, Ural Petroleum Corporation
("UPC"), Waldo Securities SA ("Waldo"), Benz Investments ("Benz"), OOO Tagaso
("Tagaso"), TOO Xxxxx ("Xxxxx"), and aozt Iuridicheskaya Kompania Xxxx & Sinovia
("Xxxx & Sons") first dated July 30th, 1997 and amended and restated as of
August 7, 1997 (the "Escrow Agreement"), that UPC is exercising its rights under
the Guarantee Agreement and under the Loan Agreement to the Initial Shares and
the Waldo Common Shares. Please immediately disburse the Escrow Documents in
accordance with the provisions of Section 3.2.1 of the Escrow Agreement.
Thank you.
Sincerely,
________________________________
[Ural Petroleum Corporation]
By:
Title:
----------
(4) All capitalized terms not otherwise defined herein shall have the meanings
given to them in the Escrow Agreement.
74
EXHIBIT 4
TO AMENDED AND RESTATED ESCROW AGREEMENT
CANCELLATION NOTICE
[Delivered by UPC to the Escrow Agent]
Xxxxx Brothers Xxxxxxxx & Co.
[ ]
[ ]
Dear Sirs:
Please take this letter as notice, given pursuant to Section 2.4 of the
Escrow Agreement(5) by and among your company, Ural Petroleum Corporation
("UPC"), Waldo Securities SA ("Waldo"), Benz Investments ("Benz"), 000 Tagaso
("Tagaso"), TOO Xxxxx ("Xxxxx"), and aozt Iuridicheskaya Kompania Xxxx &
Sinovia ("Xxxx & Sons") first dated July 30th, 1997 and amended and restated
as of August 7, 1997 (the "Escrow Agreement"), that repayment of the Loan has
been satisfied in full. Pursuant to the terms and conditions of Section 3.2.2
of the Escrow Agreement. please immediately return the Escrow Documents to
the parties which deposited such Escrow Documents into Escrow.
Thank you.
Sincerely,
________________________________
[Ural Petroleum Corporation]
By:
Title:
----------
(5) All capitalized terms not otherwise defined herein shall have the meanings
given to them in the Escrow Agreement.
75
ANNEX 3
STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT (the "Agreement") is concluded this ___
day of ____________, 1997 by and between:
KHANTY-MANSIYSK OIL CORPORATION (formerly named Ural Petroleum Corporation), a
corporation organized and existing under the laws of the State of Delaware, USA
("KMOC"); and
KHANTIMANSIISKNEFTEGAZGEOLOGLIIA, an open joint stock company organized and
existing under the laws of the Russian Federation (the "Company").
For purposes of this Agreement, KMOC and the Company are from time to time
hereinafter referred to individually as a "Party" and collectively as the
"Parties".
WHEREAS, in accordance with the charter of the Company (the "Charter"),
the Board of Directors of the Company is empowered to distribute up to two
million six hundred ninety-two thousand seventy-three (2,692,073) additional
common shares that are authorized by the Charter but remain undistributed;
WHEREAS, the General Shareholders Meeting issued Resolution No. __ dated
______, and the Board of Directors of the Company issued Board Resolution No. __
dated ____, empowering the Company to distribute additional shares in the
Company, such new issuance consisting of an issuance of six hundred thirty-four
thousand fifty-four (634,054) common shares, with a nominal value of one
thousand (1000) rubles each (the "New Issuance");
WHEREAS, the Company has prepared and registered with relevant
governmental organs all necessary documentation for registration of the New
Issuance, and such New Issuance has been duly registered with the relevant
governmental authorities;
WHEREAS, the Company and KMOC have executed an investment agreement dated
August 7th, 1997 (the "Investment Agreement"), outlining certain of the terms
and conditions under which UPC, subject to the terms and conditions herein,
shall acquire the New Issuance from the Company;
WHEREAS, the Company and KMOC have obtained the prior consent of the RF
Antimonopoly Committee to subscription by UPC to the New Issuance Shares, such
consent dated __________;
WHEREAS, the Company wishes to grant to UPC the right to subscribe to the
New Issuance, and UPC desires to subscribe to such New Issuance;
NOW, THEREFORE, IT IS HEREBY ACCEPTED AND AGREED AS FOLLOWS:
1. Share Purchase and Sale
1.1 Company hereby irrevocably grants to UPC the right to subscribe to six
hundred thirty-four thousand fifty-four (634,054) common shares (the "New
Issuance
76
Shares") of the Company, each with a nominal value of one thousand (1000)
Rubles, such subscription representing one hundred percent (100%) of the
common shares issued by the Company in the New Issuance.
1.2 UPC hereby exercises the right described in Article 1.1 by subscribing to
the New Issuance shares in accordance with the terms outlined herein.
2. Payment of Purchase Price and Transaction Costs
2.1 The purchase price for the New Issuance Shares shall be ________ Rubles,
such amount being equivalent to ten million Dollars ($10,00,000) (the "New
Issuance Purchase Price") as calculated in accordance with the RF Central
Bank for exchange of Dollars into Rubles quoted and in effect as of the
date of this Agreement. The New Issuance Purchase Price is the total price
to be paid by UPC to the Company.
2.2 The New Issuance Purchase Price shall be divided into and paid in two (2)
installments, payable as follows:
2.2.1 The first payment equal to one hundred fifty-eight million five
hundred thirteen thousand five hundred (158,513,500) Rubles, such
amount being equivalent to US$________ on the date hereof (the
"First Installment"), shall be paid by UPC to the Company on the
date of execution of this Agreement.
2.2.2 The second payment, equal to _______ Rubles(6), such amount being
equivalent to US$________ on the date hereof (the "Second
Installment"), shall be payable within fifteen (15) business days
following delivery by the Company to UPC of a certified extract from
the shareholders' register of the Company, verifying that UPC is the
owner of one hundred percent of the New Issuance Shares.
2.3 The New Issuance Purchase Price shall be paid by UPC to the Company by
bank transfer to the following the Company account:
Payment shall be deemed effective on the date on which UPC irrevocably
instructs its bank to make such transfer.
3. Passage of Title and Subsequent Obligations
3.1 Title to the New Issuance Shares shall pass from the Company to UPC upon
execution of this Agreement by each of the parties hereto.
3.2 At such time as title to the New Issuance Shares is transferred to UPC,
the parties shall cause the registrar holding the KMNGG shareholders'
register to amend the such shareholders' register to create a personal
account for UPC and to introduce an entry into UPC's personal account in
the register-keeping system (vneseniye prikhodnoi zapisi po litsevomu
schetu v sisteme vedeniya reestra) to reflect UPC's ownership of the New
Issuance Shares, and shall procure that the registrar issues to UPC a
certified extract from such shareholders' register evidencing registration
of the New Issuance Shares into UPC's name.
----------
(6) Such amount being the remainder of the New Issuance Purchase Price,
calculated in Rubles as of the date of execution of this Agreement.
77
3.3 The Company shall keep in its custody documents related to the sale of the
New Issuance Shares and payment of the New Issuance Purchase Price for a
period of at least three years from the date of such passage of title.
4. Accomplishment of Corporate Formalities
4.1 To the extent required by applicable legislation and by competent
registration and other authorities of the Russian Federation (including,
without limitation, the RF Federal Securities Commission), the Company
shall sign any and all acts and make, without limitation, any filings,
obtain any approvals, permissions, authorizations, and licenses, and
accomplish any other formalities necessary or required in connection with
implementation of passage to UPC of title to the New Issuance Shares as
provided in Article 3 thereof, and as may be required from time to time by
legislation of the Russian Federation.
5. Representations and Warranties
5.1 Representations and Warranties of the Company. the Company hereby
represents, warrants and undertakes to, and agrees with, UPC that:
5.1.1 It is duly organized, validly existing and in good standing as an
open joint stock company under the laws of the Russian Federation,
with all requisite corporate power and authority to carry on its
business as now conducted;
5.1.2 No additional filing, governmental approval, consent, registration,
or amendment to or in respect of its constitutional documents is
currently required under Russian law in connection with the
formation and valid existence of the Company or the conduct of its
business as contemplated by its constitutional documents;
5.1.3 The persons signing this Agreement on its behalf are its authorized
representatives and have all requisite powers and authority to
execute and deliver this Agreement, the Company has authorized the
execution and delivery of this Agreement in accordance with its
constitutional documents, and all actions necessary under the
Company's constitutional documents have been taken to permit and
authorize its execution of this Agreement;
5.1.4 the Company has all requisite power and authority to perform its
obligations hereunder, and upon execution by the Company's duly
authorized representatives this Agreement shall constitute a valid,
binding and legal obligation of the Company, enforceable in
accordance with its terms;
5.1.5 Except as expressly provided herein, no consents, approvals or
authorization of, or registration, designation, declaration or
filing with, any governmental authority is required on the part of
the Company in connection with the transfer of the New Issuance
Shares by the Company to UPC or the consummation of the transactions
contemplated hereby;
5.1.6 The New Issuance Shares consist of six hundred thirty-four thousand
fifty-four (634,054) shares of common stock in the Company,
collectively equal to approximately sixty-seven percent (67%) of the
total issued and
78
outstanding stock of KNMGG and seventy-one percent (71%) of the
issued and outstanding common stock of KMNGG as of the date of this
Agreement;
5.1.7 The issuance of the New Issuance Shares has been duly registered by
all appropriate governmental organs of the Russian Federation, and
the transfer of the New Issuance Shares to UPC and acquisition by
UPC of title thereto has been approved by the RF Antimonopoly
Committee in accordance with the requirements of applicable law;
5.1.8 The execution and delivery of this Agreement, as well as the
transfer of the New Issuance Shares to UPC contemplated hereby and
the performance of the terms hereof, will not conflict with any
provision of the Company's constitutional documents or, to the best
of the Company's knowledge, result in any material violation or
default or loss of material benefit under, or permit acceleration of
any obligation under, any mortgage, assignment, lease or any other
material agreement with, or the rights of, any third party, or any
provision of applicable law with respect to the Company or its
property;
5.1.9 The information furnished by or on behalf of the Company to UPC in
connection with this Agreement and the transactions contemplated
hereby does not contain any untrue statement of material fact and
does not omit to state any material fact necessary to make the
statements made, in the context in which made, not false or
misleading, and there is no fact of which the Company has not
informed UPC which might materially adversely affect the ability of
the Company to perform this Agreement or any of the transactions
contemplated hereby;
5.1.10 The New Issuance Shares are free and clear of all liens and
encumbrances, and there are no commitments, options, warrants, calls
or other agreements or obligations binding on the Company which
require or could require it to sell, transfer, assign, mortgage,
pledge or otherwise dispose of any of the New Issuance Shares except
to UPC as provided herein and in the Investment Agreement. Upon
execution of this Agreement by authorized representatives of the
parties hereto, good and marketable title to the New Issuance Shares
will be vested in UPC free and clear of all mortgages, liens,
pledges, charges, security interests, options, warrants, calls,
voting agreements, voting trusts, trust agreements and other
encumbrances of any kind whatever;
5.1.11 The Company has full right, power and authority to sell, assign,
transfer and deliver the New Issuance Shares to UPC pursuant to this
Agreement and to carry out the terms and conditions hereof; and
5.1.12 Neither the Company nor any person (including employees, directors,
officers or agents thereof) acting at the direction of the Company
has offered, promised, authorized or made any payment or gift in
violation of applicable law (including, without limitation, the
United States Foreign Corrupt Practices Act) to any governmental
official, political party or official thereof, or candidate for
political office for the purpose of influencing any act or decision
in an official capacity, or of inducing any act or omission in
violation of a lawful duty in order to assist in obtaining
advantages of any kind for the Company or in conducting the
transactions herein contemplated.
79
5.2 Representations and Warranties of UPC. UPC represents, warrants and
undertakes to, and agrees with the Company that:
5.2.1 It is duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, with full all
requisite corporate power and authority to carry on its business as
now conducted;
5.2.2 No additional filing, governmental approval, consent, registration,
or amendment to or in respect of its constitutional documents is
currently required under the laws of its jurisdiction of
incorporation in connection with the formation and valid existence
of UPC or the conduct of its business as contemplated by its
constitutional documents;
5.2.3 The persons signing this Agreement on its behalf have the full power
and authority to do so, UPC has authorized the execution of this
Agreement in accordance with its constitutional documents and all
actions necessary under UPC's constitutional documents have been
taken to permit and authorize its execution of this Agreement;
5.2.4 UPC has all requisite power and authority to perform its obligations
hereunder, and upon execution by its duly authorized
representatives, this Agreement shall constitute its a legal, valid
and binding obligation, enforceable in accordance with its terms;
5.2.5 The execution and delivery of this Agreement, as well as the
performance of the terms hereof will not conflict with any provision
of UPC's constitutional documents or, to the best of UPC's
knowledge, or result in any violation or default or loss of material
benefit under any mortgage, assignment, lease or any other material
agreement with, or the rights of, any third party, or any provision
of applicable law with respect to UPC or its property; and
5.2.6 Neither UPC nor any person (including employees, directors, officers
or agents thereof) acting at the direction of UPC has offered,
promised, authorized or made any payment or gift in violation of
applicable law (including, without limitation, the United States
Foreign Corrupt Practices Act) to any governmental official,
political party or official thereof, or candidate for political
office for the purpose of influencing any act or decision in an
official capacity, or of including any act or omission in violation
of a lawful duty in order to assist in obtaining advantages of any
kind for UPC or in conducting the transactions herein contemplated.
6. Taxes and Fees
6.1 the Company shall be responsible for paying all expenses, taxes, duties,
bank payments and fees, notarial and registration fees (if any) incurred
on the territory of the Russian Federation and associated with the
performance of this Agreement.
6.2 UPC shall be responsible for paying all expenses, taxes, duties, bank
payment and fees (if any) incurred on the territory of the United States
of America and associated with the performance of this Agreement.
80
7. Governing Law; Arbitration
7.1 This Agreement shall be governed by and construed in accordance with the
laws of New York, notwithstanding the choice of law rules thereof. Any
dispute arising out of or in connection with this Agreement, including any
questions regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration before the American
Arbitration Association, in accordance with the Rules of such Association,
which Rules are incorporated into this paragraph by reference. The place
of arbitration shall be New York, New York, and the language of
arbitration shall be English. The arbitrators shall have the power to
render declaratory judgments and to issue injunctive orders, as well as to
award monetary damages, and shall award reasonable attorneys' fees and
costs to the prevailing party.
8. Notices
8.1 Any notice, consent or any other communication hereunder shall be deemed
to be sufficiently given if delivered personally, if sent by commercial
courier, return receipt requested, or if sent by facsimile transmission or
telex to such party's facsimile or telex number, with receipt acknowledged
electronically. Notice shall be effective when delivered personally or, if
sent by courier, telex, or facsimile, when received at the following
addresses:
If to UPC, to:
Ural Petroleum Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
XXX
Attn.: Xx. Xxxx Xxxxxxxxxxx
Facsimile: x0(000) 000-0000
with a copy to:
SHH International
Gazetny per., 17/7
103009 Moscow
Russian Federation
Attn.: Xxxx X. Xxxxxxxxx
Fax: x0 (000) 000-0000
If to the Company, to:
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Xxxxxxxxx Xxx, 00
00000 Xxxxx Oblast, Khantimansiisk
Attn.:
Facsimile: +7 34671 3 61 09
8.2 Any party may change its address for provision of notice hereunder by
means of written notice to the other party as provided herein.
81
9. Assignment and Succession
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assignees.
10. Counterparts
This Agreement shall be executed in six (6) originals, three (3) in
English and three (3) in Russian, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute
one and the same agreement. In the event of discrepancies between the
English and Russian versions hereof, the English text shall prevail and be
conclusive.
11. Amendment
This Agreement may be changed, modified or amended in whole or in part
only by a written amendment signed by each party hereto.
12. Waiver
Any party to this Agreement, with respect solely to such party's rights
under this Agreement and not on behalf of any other party hereto, may (a)
extend the time for the performance of any of the obligations or other
acts of another party, (b) waive any inaccuracies in the representations
and warranties of another party contained herein or in any document
delivered by another party pursuant hereto or (c) waive compliance with
any of the agreements or conditions of another party that are contained
herein. Any such extension or waiver shall be valid only if set forth in
an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or
a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a
waiver of any such rights.
13. Severability, Continued Validity
The parties agree that in the event any provisions of this Agreement
become or are found invalid, illegal or unenforceable in any jurisdiction
and in any respect to the detriment of any of the parties hereto, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired; and the
parties undertake to exercise all efforts which are necessary, desirable
and sufficient to amend, supplement or substitute any and all such
invalid, illegal or unenforceable provisions with enforceable and valid
provisions which would produce as nearly as may be possible the economic
result previously intended by the parties.
82
14. Certain Terms
The terms "hereby", "herein", "hereof', "hereto", "hereunder" and any
similar terms shall refer to this Agreement. Words importing the singular
number shall mean and include the plural number and vice versa where the
context so requires. The terms "include", "including" and similar terms
shall be construed as if followed by the phrase "without being limited
to". All references in this Agreement to numbered Articles, Sections,
Annexes and Schedules are references to the Articles, Sections. Annexes
and Schedules of this Agreement.
15. Headings
The headings used in this Agreement are for convenience of reference only
and shall not affect in any way the interpretation of this Agreement.
16. Annexes and Schedules
The annexes and schedules attached to this Agreement shall be deemed an
integral part of this Agreement, and are fully incorporated herein by
reference.
83
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representative to execute and deliver this Agreement on the date first above
written.
URAL PETROLEUM CORPORATION
___________________________________
By:Xxxx Xxxxxxxxxxx
Title:Chief Executive Officer
KHANTIMANSIISKNEFTEGAZOGEOLOGIA
___________________________________
By: Xxxxxxxxx Xxxxxxxxx Xxxxxxx
Title: General Director
84
ANNEX 4
RETAINER AGREEMENT
RETAINER AGREEMENT
This Agreement, dated as of August __, 1997, is by and between Khanty
Mansiysk Oil Corporation, a corporation organized under the laws of the State
of Delaware. USA (the "Lender") and Waldo Securities S.A., an international
business company organized under the laws of the British Virgin Islands (the
"Borrower").
WHEREAS, the Borrower has requested that the Lender loan the Borrower an
amount equal to U.S.$1.200,OOO for the purpose of using the loan proceeds to
provide funding for business development activities in the petroleum industry in
the geographic region formerly known as the Soviet Union;
WHEREAS, the Borrower is willing to grant a security interest to the
Lender in (i) all of the capital stock or other evidence of beneficial interest
in the Lender owned by the Borrower (the "KMOC Stock") or hereafter acquired by
the Borrower and (ii) all options, warrants and similar rights to acquire
capital stock or other evidence of beneficial interest in the Lender, whether
now owned or hereafter acquired by the Borrower; and
WHEREAS, the Lender is willing to make a loan to the Borrower in the
amount of U.S.$1,200,000 for the purposes specified above, subject to a security
interest in the property described above and only on the terms and subject to
the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
THE LOAN
1.1 The Loan. Subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein and so long as
no Event of Default (as defined herein) exists, the Lender agrees that on
October 15, 1997 and on the 15th of each month thereafter until September 15,
1998, the Lender will make loans to the Company, each such loan to be in a
principal amount of $100,000. The aggregate principal amount of the loans made
pursuant
to this Agreement and the Note (as defined herein) at any time outstanding is
referred to as the "Loan". The Lender shall keep a record of the date and amount
of (a) each loan made by it pursuant to this Section 1.1 and (b) each payment of
principal made to it pursuant to Sections 1.4 and 1.5; provided, however, that
he failure of the Lender to make any such recordation shall not affect the
obligations of the Borrower under this Agreement or the Note.
1.2 The Note. The Loan shall be evidenced by a promissory note of the
Borrower (the "Note"), substantially in the form attached hereto as Exhibit 1.2,
payable to the order of the Lender.
1.3 Interest Rate. The Loan shall bear interest on the outstanding
principal amount thereof from the Closing Date, until the Loan becomes due or is
prepaid in full at an annually compounded rate equal to 10% per annum.
1.4 Voluntary Repayment. The Borrower may repay, in whole or in part,
using any combination of payment methods set forth in Section 1.6. the
outstanding principal amount and interest accrued on the Loan, at any time and
from time to time by giving the Lender at least 5 business day's prior
(irrevocable) written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loan and the amount of such prepayment.
1.5 Mandatory Repayment of the Loan. The Loan must be repaid by the
Borrower in full upon the first to occur of either of the following events on
the respective date of repayment sec forth below:
(a) The Loan shall mature on October 15, 1999 (the "Maturity Date")
and the outstanding principal balance thereof, together with interest accrued
thereon, shall be repaid by the Borrower on that date, without further action on
the part of the Lender.
(b) On the date on which the Lender makes a demand for repayment of
the Loan pursuant to Section 5.2 hereof.
1.6 Form and Manner of Payments. The Principal and Interest are payable on
the date such payment is due, not later than 11:00 am (New York time) at the
offices of the Lender, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000-0000, or
such other address as the Lender may specify in writing to the Borrower, in, at
the option of the Borrower and in such proportions as the Borrower may elect,
(i) lawful money of the United States of America, (ii) fully
2
paid and nonassessable shares of common or preferred stock of Khanty-
Mansiyskneftegazgeologia, a subsidiary of the Lender incorporated under the laws
of the Russian Federation ("KMNGG"), valued, solely for purposes of determining
the number of shares to be so paid pursuant to this Section 1.6, at U.S.$520.00
per share, or (iii) common stock of the Lender valued, solely for purposes of
determining the number of shares to be so paid pursuant to this Section 1.6, at
U.S.$600.00 per share; provided, however, that the values in clauses (ii) and
(iii) shall be adjusted as appropriate for any stock splits, combinations and
dividends or other distributions consisting of, or payable in, shares of common
or preferred stock of KMNGG or common stock of the Lender, respectively.
Notwithstanding the foregoing, following the completion of an initial public
offering of the Lender's common stock, the common stock of the Lender shall be
valued at the market price listed for such shares on the public exchange on
which such shares are traded.
1.7 Computations. All computations of interest shall be made by the
Lender on the basis of a year of 360 days, in each case for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest or fees are payable.
1.8 No Defense. To the fullest extent permitted by law, the Borrower shall
make all payments hereunder regardless of any defense or counterclaim,
including, without limitation, any defense or counterclaim based on any law,
rule or policy which is now or hereafter promu1gated by any governmental
authority and which may adversely affect the Borrower's obligation to make, or
the right of the Lender to receive, such payments.
1.9 Allocation. Any money paid to, received by, or collected by the Lender
pursuant to this Agreement, (including on the sale or other realization upon any
Collateral (as defined herein)), shall be applied in the following order, at the
date or dates fixed by the Lender:
First: to the payment of all costs, expenses, other fees,
commissions and taxes incurred by the Lender (including costs and expenses
of collection or other realization incurred in relation to the disposition
of the Collateral);
Second: to the indefeasible payment of all accrued interest to the
date of such payment or collection;
3
Third: to the indefeasible payment of the amounts then due and
unpaid under this Agreement for principal, in respect of which or for the
benefit of which such money has been paid or collected, according to the
amounts due and payable on the Note for principal; and
Fourth: the balance, if any, to the person lawfully entitled thereto
(including the Borrower or the Borrower's successors and assigns).
1.10 Currency of Payment. The parties acknowledge and agree that this is
a credit transaction in which specification of U.S. dollars is of the essence
and, except as otherwise provided in Section 1.6 hereof, U.s. dollars shall be
the currency of account and payment in all events. If, pursuant to a judgment or
for any other reason, payment shall be made in another currency and such
payment, after prompt conversion to U.S. dollars and transfer to New York City
in accordance with normal banking procedures, falls short of the sum due the
Lender in U.S. dollars, the Borrower shall pay the Lender such shortfall and the
Lender shall have a separate cause of action for such amount.
1.11 Conversion. The Lender may at any time, at its option, upon at least
10 days' prior written notice, convert the Loan, together with all accrued and
unpaid interest thereon and all other obligations in respect thereof then
outstanding, into shares of capital stock of the Borrower, which shares shall
represent 26% of the capital stock of the Borrower then outstanding. For
purposes of calculating such percentage, the amount of capital stock then
outstanding shall include all capital stock of the Borrower subject to then
outstanding options, warrants, convertible or exchangeable securities and all
other rights and securities pursuant to which such capital stock may be issued
upon exercise, exchange, conversion or otherwise.
1.12 Use of Proceeds. The Borrower agrees to use the proceeds of the Loan
only for the purpose of funding business development activities conducted by the
Borrower or third parties in the petroleum industry in the geographic region
formerly known as the Soviet Union. The Borrower shall notify the Lender of each
development activity in which it has invested loan proceeds and the amount of
the loan proceeds invested in such development activity. Upon the request of the
Lender, the Borrower shall provide evidence to the Lender of its investment
interests in each development activity in which the loan proceeds have been
invested. In the event that the Loan proceeds are invested in an entity other
than the Borrower or a wholly owned subsidiary of the Borrower, the Borrower
hereby agrees to obtain an option from such entity
4
granting the Lender the right to convert the Loan into a 26% ownership interest
in such entity on terms identical to those provided in Section 1.11 hereof.
1.13 Fees and Expenses.
(a) The Borrower shall pay. or reimburse he Lender for. any and all
stamp, transfer, licensing, filing or other similar taxes or fees payable or
determined to be payable in connection with (i) the execution and delivery of
this Agreement or he Note or (ii) the perfection of the Lender's Security
Interest (as defined herein) in the Collateral.
(b) The Borrower shall also reimburse the Lender for all reasonable
out of pocket fees and expenses (including, without limitation, legal,
documentation, wire transfer, currency conversion and filing fees and expenses)
incurred by the Lender in connection with providing the Loan to the Borrower.
1.14 Maximum Interest. If any interest payment or other charge or fee
payable hereunder exceeds the maximum amount then permitted by applicable law,
the Borrower shall be obligated co pay the maximum amount then permitted by
applicable law and the Borrower shall continue to pay the maximum amount
permitted from time to time by applicable law until all such interests payments
and other charges and fees otherwise due hereunder (in the absence of such
restraint imposed by applicable law) have been paid in full.
ARTICLE II
PLEDGE OF STOCK
2.1 Pledge. As collateral security for the payment and performance when
due (whether at stated maturity, by acceleration or otherwise) of all of the
Borrower's obligations hereunder, under the Note and in connection with any
other obligations owed to the Lender, the Borrower hereby pledges, assigns,
transfers and grants, a continuing first priority security interest in (the
"Security Interest"), transfers and delivers to the Lender all of the Borrower's
right, title and interest in and to each of the following (the "Collateral"):
(a) the KMOC Stock and the certificates, if any, representing the
KMOC Stock, and all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any KMOC Stock;
5
(b) all options, warrants and similar rights to acquire capital
stock or other evidence of beneficial interest in the Lender, whether now owned
or hereafter acquired by the Borrower;
(c) all additional shares (the "Additional Shares") of capital stock
of the Lender from time to time acquired by the Borrower in any manner
(including, without limitation, any shares of preferred stock issued by the
Lender) and the certificates, if any, representing such Additional Shares, and
all dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(d) all other rights appurtenant to the property described in
clauses (a) and (b) above (including, without limitation, voting rights); and
(e) all cash and noncash proceeds of any and all of the foregoing.
Promptly upon the acquisition of any Additional Shares, the Borrower will
deliver proper instruments of assignments duly executed in blank by the Borrower
together with certificates representing such Additional Shares whereupon such
Additional Shares shall be included in the definition of KMOC Stock.
2.2 Rights of the Borrower in the KMOC Stock. Unless an Event of Default
shall have occurred and be continuing:
(a) the Borrower shall be entitled to exercise any and all voting
and other consensual rights pertaining to the KMOC Stock or any part thereof for
any purpose not inconsistent with the terms of this Agreement; provided, that
the Borrower shall not exercise or refrain from exercising such right if, in the
Lender's judgment, such action would have a material adverse effect on the value
of the KMOC Stock or any part thereof, and provided, further, that the Borrower
shall give the Lender at least five days' prior written notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any
such right.
(b) The Borrower shall be entitled, from time to time, co collect
and receive for its own use all cash dividends paid on the KMOC Stock; provided,
however, that until actually paid, all rights to such dividends shall remain
subject to the lien on the Collateral created by this Agreement. All divi-
6
dends (other than cash dividends governed by the immediately preceding sentence)
and all other distributions in respect of any of the Collateral, whenever paid
or made, shall be delivered to the Lender and held by it subject to the lien on
the Collateral created by this Agreement.
2.3 Remedies with Respect to the Collateral.
(a) Upon the occurrence of an Event of Default, then or at any time
during the continuance of such occurrence, the Lender is hereby authorized and
empowered, at its election, (i) to transfer and register in its or its nominee's
name the whole or any part of the Collateral, (ii) to exercise all voting rights
with respect thereto, (iii) to demand, xxx for, collect, receive and give
acquittance for any and all cash dividends or other distributions or monies due
or to become due upon or by virtue thereof, and to settle prosecute or defend
any action or proceeding with respect thereto, (iv) to sell in one or more sales
the whole or any part of the Collateral or otherwise to transfer or assign the
same, applying the proceeds therefrom to the payment of the Borrower's
obligations under this Agreement, and (v) otherwise to act with respect to the
Collateral or the proceeds thereof as though the Lender were the outright owner
thereof, the Borrower hereby irrevocably constituting the Lender as its proxy
and attorney-in-fact, with full power of substitution to do so. The Borrower and
the Lender hereby agree that, if an Event of Default shall have occurred prior
to the completion of a public offering of common stock of the Lender and the
Lender has determined to accept the KMOC Stock as payment for the principal and
interest outstanding on the Loan, each share of KMOC Stock shall be valued,
solely for determining the number of shares to be paid pursuant to this Section
2.3(a), (i) at U.S.$520.00 or (ii) at the option of the Lender, at the appraised
value of such shares as determined by a nationally accepted accounting firm;
provided, however, that the value of each share of KMOC Stock determined
pursuant to clause (i) shall be adjusted as appropriate for any stock splits,
combinations and dividends or other distributions consisting of, or payable in,
shares of common stock of the Lender. Notwithstanding the foregoing, following
the completion of an initial public offering of the Lender's common stock, the
common stock of the Lender shall be valued at the market price listed for such
shares on the public exchange on which such shares are traded.
(b) The Borrower agrees that it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
7
the Collateral or the possession thereof by any purchaser at any sale hereunder.
and the Borrower waives the benefit of all such laws to the extent it lawfully
may do so. The Borrower agrees that it will not interfere with any right, power
and remedy of the Lender provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Lender of any one or more such rights, powers
or remedies. No failure or delay on the part of the Lender to exercise any such
right, power or remedy, and no notice or demand which may be given to or made
upon the Borrower by the Lender with respect to any such remedies, shall operate
as a waiver thereof, or limit or impair the Lender's right to take any action or
to exercise any power or remedy hereunder without notice or demand, or prejudice
its rights as against the Borrower in any respect.
2.4 Exoneration of the Lender. Other than the exercise of reasonable care
in the custody and preservation of the Collateral, the Lender shall have no duty
with respect thereto. The Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Lender in good
faith.
2.5 Release Upon Termination. Upon the satisfaction of all of the
Borrower's obligations to the Lender hereunder, the Lender shall deliver to the
Borrower the Collateral at the time subject to this Agreement and all
instruments of assignment executed in connection therewith, free and clear of
the lien hereof. When so released, such Collateral shall be free and clear of
any lien or encumbrance hereunder.
ARTICLE III
CONDITIONS TO LENDING
3.1 Conditions Precedent to Lending. The obligation of the Lender to make
the Loan shall be subject to the fulfillment of the following conditions:
(a) Agreement and Note. The Borrower shall have duly executed and
delivered to the Lender, this Agreement and the Note payable to the order of the
Lender.
8
(b) KMOC Stock Certificates. The Lender shall have received stock
certificates for the KMOC Stock in suitable form for transfer by delivery or
accompanied by duly executed transfer or assignment in blank, all in form and
substance satisfactory to the Lender.
(c) Representations and Warranties. The representations and
warranties of the Borrower set forth in Article IV of this Agreement shall be
true and correct in all material respects as of the date hereof and on the
Closing Date.
(d) Material Adverse Change. From the date hereof to the Closing
Date, no material adverse change in the business, operations, properties,
assets, prospects or condition (financial or otherwise) of the Borrower shall
have occurred.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants to the Lender that each of the statements set forth
below are true, correct and complete:
(a) Due Incorporation. The Borrower is an international business
company, duly organized, validly existing and (to the extent applicable under
the laws of its jurisdiction of incorporation) in good standing under the laws
of the British Virgin Islands. The Borrower is duly qualified or licensed to do
business in all jurisdictions in which it owns or leases property or proposes to
own or lease property or in which the conduct of its business requires it to so
qualify or be licensed, except for such jurisdiction where the failure to so
qualify or be licensed would not have a material adverse effect on the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Borrower.
(b) Binding Agreement. This Agreement has been duly executed and
delivered by the Borrower and, assuming due authorization, execution and
delivery by the Lender, constitutes a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
9
moratorium or similar laws now or hereafter in effect affecting the enforcement
of creditor's rights generally and by principles of equity (regardless of
whether enforcement is brought in a proceeding in equity or at law). The
execution and delivery of this Agreement by the Borrower have been duly
authorized by all necessary action on the part of the Borrower and no other
proceedings (corporate or otherwise) on its part (or on the part of its
shareholders) are necessary to authorize this Agreement.
(c) No Conflict. The execution, delivery and performance by the
Borrower of this Agreement does not and will not (a) conflict with or violate
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Borrower or (b) conflict with, or
result in a breach of or default under, any terms or conditions of the Articles
of the Borrower.
(d) No Required Approvals. No consent, approval, authorization or
other order of any third party or any governmental or regulatory authority is
required for (i) the execution, delivery and performance by the Borrower of this
Agreement, including without limitation, the pledge and delivery by the Borrower
of the Collateral to the Lender as provided herein, or (ii) the exercise by the
Lender of the voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement, except as may
be required in connection with the disposition of the Collateral by laws
affecting the offering and sale of securities generally.
(e) The Collateral. Except for a security interest granted to the
Lender in the Collateral pursuant to the Loan Agreement, dated as of August __,
1997 (the "Loan Agreement"), between the Lender and the Borrower, the Borrower
is the sole holder of record and beneficial owner of the KMOC Stock, free and
clear of any pledge, hypothecation, assignment, lien, charge, claim, security
interest, option, preference, priority or other preferential arrangement of any
kind or nature whatsoever thereon or affecting the title thereto. The Borrower
has the right and all requisite corporate authority to pledge, assign, grant a
security interest in, transfer and deliver the Collateral to the Lender as
provided herein.
ARTICLE V
EVENTS OF DEFAULT
10
5.1 Events of Default. Any of the following events, acts, occurrences or
state of facts shall constitute an "Event of Default" for purposes of this
Agreement:
(a) Failure to Make Payments When Due. The Borrower shall have
failed to make a payment of principal or interest on the Loan when due and such
default in payment shall continue for five (5) days;
(b) Representation or Warranties. Any representation or warranty
made by the Borrower contained in this Agreement shall have been incorrect or
misleading in any material respect when made;
(c) Security Interest. At any time after the delivery of the Loan to
the Borrower by the Lender and for so long as any principal or interest remains
outstanding on the Loan, the Lender's Security Interest in the Collateral shall
cease to be in full force and effect or cease to give the Lender the rights,
powers and privileges purported to be created thereby (including, without
limitation, a first priority perfected security interest in, and a lien on, all
of the Collateral) in favor of the Lender, superior to and prior to the rights
of all third parties;
(d) Bankruptcy or Insolvency. The Borrower shall become insolvent,
or shall be unable to pay its debts as they mature; or shall admit in writing
its inability to pay its debts as they mature; or shall make an assignment for
the benefit of its creditors; or shall file or commence or have filed or
commenced against it any proceeding which is not dismissed or stayed within 60
days of the filing or commencement thereof for any relief under any bankruptcy
or insolvency law or any law or laws relating to the relief of debtors,
readjustment of indebtedness, reorganizations, compositions or extensions, or a
receiver or trustee shall be appointed for the undersigned;
(e) Merger or Consolidation. The Borrower shall have entered into
any transaction of merger or consolidation into or with another corporation;
(f) Dissolution. The Borrower shall have dissolved or otherwise wind
up its affairs;
(g) Default Under The Loan Agreement. An Event of Default under
Section 5.1 of the Loan Agreement shall have occurred;
11
(h) Default Under This Agreement. There shall have been a default in
the observance or performance of any term, agreement or covenant of this
Agreement by the Borrower.
5.2 Acceleration. If an Event of Default shall occur and be continuing,
the Lender may terminate its obligation to make further loans under this
Agreement by furnishing notice thereof to the Borrower and, at its sole
discretion, by notice to the Borrower declare the entire unpaid principal amount
of the Loan and all interest accrued and unpaid thereon to be forthwith due and
payable, whereupon the entire unpaid principal amount of the Loan and all
interest accrued and due thereon shall be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which is
hereby expressly waived by the Borrower.
5.3 Security Rights. If an Event of Default shall occur and be continuing,
the Lender may enforce any and all rights available to it by law or in equity
pursuant to the Security Interest granted hereunder with respect to the
Collateral. Without limiting the rights available to the Lender pursuant to the
foregoing sentence, the Lender shall have all rights and remedies available to
creditors under the Uniform Commercial Code, as in effect from time to time in
the State of New York.
5.4 Rights Not Exclusive. The rights provided for in this Article 5 are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.
ARTICLE VI
COVENANTS
6.1 General. Subject to the terms and provisions contained herein, the
Borrower hereby agrees to use all reasonable efforts to take or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under the applicable laws and regulations to perfect the Lender's
Security Interest in the Collateral and to effectuate the exercise of the
Lender's rights under this Agreement, including, without limitation, the filing
of Uniform Commercial Code financing statements which the Lender in its sole
discretion may deem necessary or appropriate to further perfect its Security
Interest.
12
6.2 No Further Grants. The Borrower will not, without the prior written
consent of the Lender, sell, assign, transfer, mortgage, pledge or otherwise
encumber any of its rights in or to the Collateral or any dividends or other
distributions or payments with respect thereto or grant a Security Interest on
any thereof.
6.3 Defend Collateral. The Borrower will defend the title to the
Collateral and the Security Interest of the Lender thereon against the claim of
any person claiming against or through the Borrower and will maintain and
preserve the Lender's Security Interest in the Collateral so long as this
Agreement shall remain in effect.
6.4 Foreign Corrupt Practices Act. The Borrower will not, and will cause
its affiliates, its officers, employees, directors, representatives or agents
and the officers, employees, directors, representatives or agents of its
affiliates not to directly or indirectly take any action in contravention of the
United States Foreign Corrupt Practices Act. Such prohibition shall preclude,
among other things, the act of offering, promising, authorizing or making,
directly or indirectly, (i) any unlawful payments or (ii) payments or other
inducements (whether or not lawful) to any government official, including any
official of an entity owned or controlled by a government, with the intent or
purpose of:
(1) influencing any act or decision of such official in his official capacity;
(2) inducing such official to do or omit to do any act in violation of the
lawful duty of such official; or
(3) inducing such official to use his influence with a government or
instrumentality thereof to affect or influence any act or decision of such
government or instrumentality;
in order to assist the Company or any of its affiliates in obtaining or
retaining business for or with, or directing business to any person.
6.5 Right of First Refusal.
(a) The Grant. The Borrower hereby grants to the Lender, for the
period commencing from the Closing Date and ending on the Maturity
13
Date, a right of first refusal to participate in each Investment Opportunity (as
defined herein) in which the Borrower or any of its affiliates may be involved.
(b) Notice. In connection with such right of first refusal, the
Borrower shall, subsequent to obtaining commitments to participate in an
Investment Opportunity from interested investors ("Interested Investors"), but
prior to entering into a definitive agreement with such Interested Investors,
provide notice (the "Participation Notice") to the Lender (i) detailing the
principal terms of the Investment Opportunity and the names of the Interested
Investors and (ii) offering the Lender an opportunity to participate in the
Investment Opportunity on terms no less favorable than those offered to the
Proposed Investors.
(c) Acceptance Period. Upon receipt of the Participation Notice, the
Lender shall have 30 days to provide written notice (the "Investment Notice") to
the Borrower of its acceptance of the offer to participate in the Investment
Opportunity and the amount the Lender is willing to invest in such Investment
Opportunity. Upon receipt of the Investment Notice, the Borrower shall be
obligated to include the Lender as an investor in the Investment Opportunity for
the amounts set forth in the Investment Notice. In the event that the Lender
declines to participate in the Investment Opportunity or fails to respond within
the 30 day period, the Borrower may thereafter enter into definitive agreements
with the Interested Investors to consummate the transactions contemplated by the
Investment Opportunity on terms no more favorable to the Interested Investors
than those upon which the Investment Opportunity was offered to the Lender. In
the event that the terms of the offer to participate are subsequently changed by
the Borrower in such a way that the revised offer is more favorable to the
interested Investors than that which was previously included in the
Participation notice, the Borrower must re-offer the Investment Opportunity to
the Lender on such revised terms and provide a new 30 day response period in
which the Lender may accept such revised offer prior to entering into definitive
agreements with the Interested Investors.
(d) Investment Opportunity. As used herein, an "Investment
Opportunity" shall mean any proposed investment activity which the Borrower or
its affiliates are engaged in soliciting the participation of investors and
which, directly or indirectly, relates in any way to the petroleum industry in
the geographic region formerly known as the Soviet Union.
14
ARTICLE VII
THE CLOSING
7.1 Time and Place of Closing. Upon the terms and subject the conditions
of this Agreement, the closing (the "Closing") shall take place within five days
following the satisfaction or waiver of all of the conditions to lending set
forth in Article III hereof (the "Closing Date"). Notwithstanding the
foregoing, if the Closing does not occur on or before 30 days from the date
hereof, this Agreement may be terminated by either the Borrower or the Lender by
providing notice of such termination to the other party.
7.2 Deliveries at the C1osing. At the Closing:
(a) Agreement and Note. The Borrower shall have duly executed and
delivered this Agreement and the Note payable to the order of the Lender.
(b) KMOC Stock Certificates. The Lender shall have received stock
certificates for the KMOC Stock in suitable form for transfer by delivery or
accompanied by duly executed transfer or assignment in blank, all in form and
substance satisfactory to the Lender.
ARTICLE VIII
MISCELLANEOUS
8.1 Notice. Any notice to be given hereunder shall be in writing and shall
be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party at the address indicated below or to such other address
as such party may subsequently give notice hereunder in writing:
15
If to the Lender to:
Khanty Mansiysk Oil Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Borrower, to:
Waldo Securities S.A.
Akara Building, Suite #8
Wickhams Cay, 1 Road Town
Tortola, British Virgin Islands
Phone: (000) 000-00-00
Any notice delivered personally or by courier under this Section 8.1
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
8.2 Amendment or Modification, Waiver. No provision of this Agreement or
the Note may be modified, amended, waived or discharged unless such waiver,
modification, amendment or discharge is agreed to in writing, signed by the
parties hereto. No waiver by any party hereto at any time of any breach by
another party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any party of any breach or default under
this
16
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies either under this
Agreement, or by law otherwise afforded to any party, shall be cumulative and
not alternative.
8.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
8.4 Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
8.5 Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of his Agreement
is to be construed by reference to the heading of any section or paragraph.
8.6 Counterparts. This Agreement shall be executed in four originals, two
English and two Russian, each of which when executed shall be deemed to be an
original. In the event of a discrepancy between the English and Russian versions
of this Agreement, the English text shall prevail and be deemed conclusive as to
the agreement of the parties hereto. Each original of this Agreement may be
executed in two counterparts, each of which shall be an original but both of
which together will constitute one and the same instrument.
8.7 Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been
17
made by any party to this Agreement which are nor set forth expressly in this
Agreement.
8.8 Binding Effect; Assignment. This Agreement shall be binding upon, and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Borrower may not assign its rights or
obligations hereunder or in connection herewith or any increase herein
(voluntarily or by operation of law or otherwise) without the prior written
consent of the Lender.
8.9 Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the Note or the breach, termination or validity
thereof shall be finally settled by arbitration in accordance with the
Arbitration Association International Arbitration Rules then in effect. There
shall be one arbitrator. The arbitration shall be held in New York, and governed
by the United States Arbitration Act, 9 U.S.C. xx.xx. 1-16, 201-208. The
arbitration proceedings shall be conducted, and the award shall be rendered in
the English language. The award shall be final and binding upon the parties,
and shall be the sole and exclusive remedy between the parties regarding any
claims, counterclaims, issues, or accounting presented to the arbitrator.
Judgment upon any award may be entered in any court having jurisdiction thereof.
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
KHANTY MANSIYSK OIL CORPORATION
By:____________________________
Name: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
WALDO SECURITIES S.A.
By:____________________________
Name: Nikitina U.V.
Title: Attorney-in-Fact
19
EXHIBIT 1.2
To The
Retainer Agreement
FORM OF NOTE
--------------------------------------------------------------------------------
WALDO SECURITIES S.A.
NOTE
U.S. $1,200,000 August __, 1997
Waldo Securities S.A., an international business company organized under
the laws of the British Virgin Islands (the "Borrower"), for value received,
hereby promises to pay to the order of Khanty Mansiysk Oil Corporation, a
Delaware corporation (the "Lender"), in lawful money of the United States of
America and in immediately available funds, the principal sum of One Million Two
Hundred Thousand US Dollars (U.S.$1,200,000) or such lesser unpaid principal
amount as shall be outstanding hereunder, together with interest from the date
hereof on the unpaid principal balance of this Note, payable on the dates and at
the rate provided for in the Retainer Agreement dated August __, 1997, by and
among the Borrower and the Lender, as the same may be amended from time to time
(the "Retainer Agreement"). Capitalized terms used herein which are defined in
the Retainer Agreement shall have the meanings therein defined.
The holder of this Note is authorized to record in its books and records,
the date and principal amount of the Loan, the date and amount of each payment
or prepayment of principal and interest with respect thereto. Such recordation
shall constitute prima facie evidence of the accuracy of the information
endorsed, provided that the failure of the Lender to make such recordation shall
not affect the obligations of the Borrower hereunder or under the Retainer
Agreement.
This Note is the Note referred to in the Retainer Agreement and is
entitled to the benefits and is subject to the terms of the Retainer Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions under which the Loan evidenced hereby was made and is to be repaid.
This Note is also entitled to the benefits of the Security Interest in the
Collateral described in and provided for in the Retainer Agreement.
20
Except as otherwise provided in Sections 1.6 and 1.11 of the Retainer
Agreement, all payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America payable on the date
such payment is due, not later than 11:00 am (New York time) at the offices of
the Lender, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000-0000, or such other
address as the Lender may specify in writing to the Borrower.
This Note is subject to voluntary prepayment as provided in the Retainer
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued but unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Retainer Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Retainer Agreement.
No reference herein to the Retainer Agreement and no provision of this
Note or of the Retainer Agreement shall alter or impair the obligation of the
Borrower, which is absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective time, and in the currency
herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS NOTE OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
21
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
WALDO SECURITIES S.A.
By:__________________________
Name: Nikitina U. V.
Title: On Power of Attorney
22
ANNEX 5
LOAN AGREEMENT
LOAN AGREEMENT
This Agreement, dated as of August __, 1997, is by and between
Khanty Mansiysk Oil Corporation, a corporation organized under the laws of the
State of Delaware, USA (the "Lender") and Waldo Securities S.A., an
international business company organized under the laws of the British Virgin
Islands (the "Borrower").
WHEREAS, the Borrower has requested that the Lender loan the
Borrower an amount equal to U.S.$10,400,000 and is willing to grant a security
interest to the Lender in (i) all of the capital stock or other evidence of
beneficial interest in the Lender owned by the Borrower (the "KMOC Stock") or
hereafter acquired by the Borrower and (ii) all options, warrants and similar
rights to acquire capital stock or other evidence of beneficial interest in the
Lender, whether now owned or hereafter acquired by the Borrower; and
WHEREAS, the Lender is willing to make a loan to the Borrower in the
amount of U.S.$10,400,000 subject to a security interest in the property
described above and only on the terms and subject to the conditions set forth
herein.
NOW THEREFORE, in consideration of the mutual promises, covenants
and conditions hereinafter set forth, intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
THE LOAN
1.1 The Loan. The Lender hereby agrees, subject to the conditions
hereinafter set forth and in reliance on the representations and warranties set
forth herein, to make a loan hereunder and under the Note (as defined herein) to
the Borrower in an aggregate principal amount equal to U.S.$10,400,000 (the
"Loan") on the Closing Date (as defined herein).
1.2 The Note. The Loan shall be evidenced by a promissory note of
the Borrower (the "Note"), substantially in the form attached hereto as Exhibit
1.2, payable to the order of the Lender.
1.3 Interest Rate. The Loan shall bear interest on the outstanding
principal amount thereof from the Closing Date, until the Loan becomes due or is
prepaid in full at an annually compounded rate equal to 10% per annum.
1.4 Voluntary Repayment. The Borrower may repay, in whole or in
part, using any combination of payment methods set forth in Section 1.6, the
outstanding principal amount and interest accrued on the Loan, at any time and
from time to time by giving the Lender at least 5 business day's prior
(irrevocable) written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loan and the amount of such prepayment.
1.5 Mandatory Repayment of the Loan. The Loan must be repaid by the
Borrower in full upon the first to occur of either of the following events, on
the respective date of repayment set forth below:
(a) The Loan shall mature on August __, 1999(1) and the
outstanding principal balance thereof, together with interest accrued thereon,
shall be repaid by the Borrower on that date, without further action on the part
of the Lender.
(b) On the date on which the Lender makes a demand for
repayment of the Loan pursuant to Section 5.2 hereof.
1.6 Form and Manner of Payments. The Principal and Interest are
payable on the date such payment is due, not later than 11:00 am (New York time)
at the offices of the Lender, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, XX
00000-0000, or such other address as the Lender may specify in writing to the
Borrower, in. at the option of the Borrower and in such proportions as the
Borrower may elect, (i) lawful money of the United States of America, (ii) fully
paid and nonassessable shares of common or preferred stock of Khanty-
Mansiyskneftegazgeologia, a subsidiary of the Lender incorporated under the laws
of the Russian Federation ("KMNGG"), valued, solely for purposes of determining
the number of shares to be so paid pursuant to this Section 1.6, at U.S.$520.00
per share, or (iii) common stock of the Lender valued, solely for purposes of
determining the number of shares to be so paid pursuant to this Section 1.6, at
U.S.$600.00 per share; provided, however, that the values in clauses (ii) and
(iii) shall be adjusted as appropriate for any stock splits, combinations and
dividends or other distributions consisting of, or payable in, shares of
----------
(1) Two years from the Closing Date.
2
common or preferred stock of KMNGG or common stock of the Lender, respectively.
Notwithstanding the foregoing, following the completion of an initial public
offering of the Lender's common stock, the common stock of the Lender shall be
valued at the market price listed for such shares on the public exchange on
which such shares are traded.
1.7 Computations. All computations of interest shall be made by the
Lender on the basis of a year of 360 days, in each case for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest or fees are payable.
1.8 No Defense. To the fullest extent permitted by law, the Borrower
shall make all payments hereunder regardless of any defense or counterclaim,
including, without limitation, any defense or counterclaim based on any law,
rule or policy which is now or hereafter promulgated by any governmental
authority and which may adversely affect the Borrower's obligation to make, or
the right of the Lender to receive, such payments.
1.9 Allocation. Any money paid to, received by, or collected by the
Lender pursuant to this Agreement, (including on the sale or other realization
upon any Collateral (as defined herein)), shall be applied in the following
order, at the date or dates fixed by the Lender:
First: to the payment of all costs, expenses, other fees,
commissions and taxes incurred by the Lender (including costs and expenses
of collection or other realization incurred in relation to the disposition
of the Collateral);
Second: to the indefeasible payment of all accrued interest to
the date of such payment or collection;
Third: to the indefeasible payment of the amounts then due and
unpaid under this Agreement for principal, in respect of which or for the
benefit of which such money has been paid or collected, according to the
amounts due and payable on the Note for principal; and
Fourth: the balance, if any, to the person lawfully entitled
thereto (including the Borrower or the Borrower's successors and assigns).
3
1.10 Currency of Payment. The parties acknowledge and agree that
this is a credit transaction in which specification of U.S. dollars is of the
essence and, except as otherwise provided in Section 1.6 hereof, U.S. dollars
shall be the currency of account and payment in all events. If, pursuant to a
judgment or for any other reason, payment shall be made in another currency and
such payment, after prompt conversion to U.S. dollars and transfer to New York
City in accordance with normal banking procedures, falls short of the sum due
the Lender in U.S. dollars, the Borrower shall pay the Lender such shortfall and
the Lender shall have a separate cause of action for such amount.
1.11 Fees and Expenses.
(a) The Borrower shall pay, or reimburse the Lender for, any
and all stamp, transfer, licensing, filing or other similar taxes or fees
payable or determined to be payable in connection with (i) the execution and
delivery of this Agreement or the Note or (ii) the perfection of the Lender's
Security Interest (as defined herein) in the Collateral.
(b) The Borrower shall also reimburse the Lender for all
reasonable out of pocket fees and expenses (including, without limitation,
legal, documentation, wire transfer, currency conversion and filing fees and
expenses) incurred by the Lender in connection with providing the Loan to the
Borrower
1.12 Maximum Interest. If any interest payment or other charge or
fee payable hereunder exceeds the maximum amount then permitted by applicable
law, the Borrower shall be obligated to pay the maximum amount then permitted by
applicable law and the Borrower shall continue to pay the maximum amount
permitted from time to time by applicable law until all such interests payments
and other charges and fees otherwise due hereunder (in the absence of such
restraint imposed by applicable law) have been paid in full.
ARTICLE II
PLEDGE OF STOCK
2. 1 Pledge. As collateral security for the payment and performance
when due (whether at stated maturity, by acceleration or otherwise) of all of
the Borrower's obligations hereunder, under the Note and in connection with any
other obligations owed to the Lender, the Borrower hereby pledges, assigns,
transfers and grants, a continuing first priority security interest in (the
"Security
4
Interest"), transfers and delivers to the Lender all of the Borrower's right,
title and interest in and to each of the following (the "Collateral"):
(a) the KMOC Stock and the certificates, if any, representing
the KMOC Stock, and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any KMOC Stock;
(b) all options, warrants and similar rights to acquire
capital stock or other evidence of beneficial interest in the Lender, whether
now owned or hereafter acquired by the Borrower;
(c) all additional shares (the "Additional Shares") of capital
stock of the Lender from time to time acquired by the Borrower in any manner
(including, without limitation, any shares of preferred stock issued by the
Lender) and the certificates, if any, representing such Additional Shares, and
all dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(d) all other rights appurtenant to the property described in
clauses (a) and (b) above (including, without limitation, voting rights); and
(e) all cash and noncash proceeds of any and all of the
foregoing.
Promptly upon the acquisition of any Additional Shares, the Borrower will
deliver proper instruments of assignments duly executed in blank by the Borrower
together with certificates representing such Additional Shares whereupon such
Additional Shares shall be included in the definition of KMOC Stock.
2.2 Rights of the Borrower in the KMOC Stock. Unless an Event of
Default shall have occurred and be continuing:
(a) the Borrower shall be entitled to exercise any and all
voting and other consensual rights pertaining to the KMOC Stock or any part
thereof for any purpose not inconsistent with the terms of this Agreement;
provided, that the Borrower shall not exercise or refrain from exercising such
right if, in the Lender's judgment, such action would have a material adverse
effect on
5
the value of the KMOC Stock or any part thereof, and provided, further, that the
Borrower shall give the Lender at least five days prior written notice of the
manner in which it intends to exercise, or the reasons for refraining from
exercising any such right.
(b) The Borrower shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid on the KMOC Stock
provided, however, that until actually paid, all rights to such dividends shall
remain subject to the lien on the Collateral created by this Agreement. All
dividends (other than cash dividends governed by the immediately preceding
sentence) and all other distributions in respect of any of the Collateral,
whenever paid or made, shall be delivered to the Lender and held by it subject
to the lien on the Collateral created by this Agreement.
2.3 Remedies with Respect to the Collateral.
(a) Upon the occurrence of an Event of Default, then or at any
time during the continuance of such occurrence, the Lender is hereby authorized
and empowered, at its election, (i) to transfer and register in its or its
nominee's name the whole or any part of the Collateral, (ii) to exercise all
voting rights with respect thereto, (iii) to demand, xxx for, collect, receive
and give acquittance for any and all cash dividends or other distributions or
monies due or to become due upon or by virtue thereof, and to settle prosecute
or defend any action or proceeding with respect thereto, (iv) to sell in one or
more sales the whole or any part of the Collateral or otherwise to transfer or
assign the same, applying the proceeds therefrom to the payment of the
Borrower's obligations under this Agreement, and (v) otherwise to act with
respect to the Collateral or the proceeds thereof as though the Lender were the
outright owner thereof, the Borrower hereby irrevocably constituting the Lender
as its proxy and attorney-in-fact, with full power of substitution to do so. The
Borrower and the Lender hereby agree that, if an Event of Default shall have
occurred prior to the completion of a public offering of common stock of the
Lender and the Lender has determined to accept the KMOC Stock as payment for the
principal and interest outstanding on the Loan, each share of KMOC Stock shall
be valued, solely for determining the number of shares to be paid pursuant to
this Section 2.3(a), (i) at U.S.$520.00 or (ii) at the option of the Lender, at
the appraised value of such shares as determined by a nationally accepted
accounting firm; provided, however, that the value of each share of KMOC Stock
determined pursuant to clause (i) shall be adjusted as appropriate for any stock
splits, combinations and dividends or other distributions consisting of, or
payable in, shares of common stock of the
6
Lender. Notwithstanding the foregoing, following the completion of an initial
public offering of the Lender's common stock, the common stock of the Lender
shall be valued at the market price listed for such shares on the public
exchange on which such shares are traded.
(b) The Borrower agrees that it will not at any time plead,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Agreement, or the absolute sale of the whole or
any part of the Collateral or the possession thereof by any purchaser at any
sale hereunder, and the Borrower waives the benefit of all such laws to the
extent it lawfully may do so. The Borrower agrees that it will not interfere
with any right, power and remedy of the Lender provided for in this Agreement or
now or hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Lender of any one or more such
rights, powers or remedies. No failure or delay on the part of the Lender to
exercise any such right, power or remedy, and no notice or demand which may be
given to or made upon the Borrower by the Lender with respect to any such
remedies, shall operate as a waiver thereof, or limit or impair the Lender's
right to take any action or to exercise any power or remedy hereunder without
notice or demand, or prejudice its rights as against the Borrower in any
respect.
2.4 Exoneration of the Lender. Other than the exercise of reasonable
care in the custody and preservation of the Collateral, the Lender shall have no
duty with respect thereto. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property, and shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected by the
Lender in good faith.
2.5 Release Upon Termination. Upon the satisfaction of all of the
Borrower's obligations to the Lender hereunder, the Lender shall deliver to the
Borrower the Collateral at the time subject to this Agreement and all
instruments of assignment executed in connection therewith, free and clear of
the lien hereof. When so released, such Collateral shall be free and clear of
any lien or encumbrance hereunder.
ARTICLE III
CONDITIONS TO LENDING
7
3.1 Conditions Precedent to Lending. The obligation of the Lender to
make the Loan shall be subject to the fulfillment of the following conditions:
(a) Agreement and Note. The Borrower shall have duly executed
and delivered to the Lender, this Agreement and the Note payable to the order of
the Lender.
(b) KMOC Stock Certificates. The Lender shall have received
stock certificates for the KMOC Stock in suitable form for transfer by delivery
or accompanied by duly executed transfer or assignment in blank, all in form and
substance satisfactory to the Lender.
(c) Representations and Warranties. The representations and
warranties of the Borrower set forth in Article IV of this Agreement shall be
true and correct in all material respects as of the date hereof and on the
Closing Date.
(d) Material Adverse Change. From the date hereof to the
Closing Date, no material adverse change in the business, operations,
properties, assets, prospects or condition (financial or otherwise) of the
Borrower shall have occurred.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Borrower. The Borrower
hereby represents and warrants to the Lender that each of the statements set
forth below are true, correct and complete:
(a) Due Incorporation. The Borrower is an international
business company, duly organized, validly existing and (to the extent applicable
under the laws of its jurisdiction of incorporation) in good standing under the
laws of the British Virgin Islands. The Borrower is duly qualified or licensed
to do business in all jurisdictions in which it owns or leases property or
proposes to own or lease property or in which the conduct of its business
requires it to so qualify or be licensed, except for such jurisdiction where the
failure to so qualify or be licensed would not have a material adverse effect on
the business, opera-
8
tions, properties, assets, prospects or condition (financial or otherwise) of
the Borrower.
(b) Binding Agreement. This Agreement has been duly executed
and delivered by the Borrower and, assuming due authorization, execution and
delivery by the Lender, constitutes a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect affecting the enforcement
of creditor's rights generally and by principles of equity (regardless of
whether enforcement is brought in a proceeding in equity or at law). The
execution and delivery of this Agreement by the Borrower have been duly
authorized by all necessary action on the part of the Borrower and no other
proceedings (corporate or otherwise) on its part (or on the part of its
shareholders) are necessary to authorize this Agreement.
(c) No Conflict. The execution, delivery and performance by
the Borrower of this Agreement does not and will not (a) conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Borrower or (b) conflict with, or
result in a breach of or default under, any terms or conditions of the Articles
of the Borrower.
(d) No Required Approvals. No consent, approval, authorization
or other order of any third party or any governmental or regulatory authority
is required for (i) the execution, delivery and performance by the Borrower of
this Agreement, including without limitation, the pledge and delivery by the
Borrower of the Collateral to the Lender as provided herein, or (ii) the
exercise by the Lender of the voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, except as may be required in connection with the disposition of the
Collateral by laws affecting the offering and sale of securities generally.
(e) The Collateral. Except for a security interest granted to
the Lender in the Collateral pursuant to the Retainer Agreement, dated as of
August __, 1997 (the "Retainer Agreement"), between the Lender and the
Borrower, the Borrower is the sole holder of record and beneficial owner of the
KMOC Stock, free and clear of any pledge, hypothecation, assignment, lien,
charge, claim, security interest, option, preference, priority or other
preferential arrangement of any kind or nature whatsoever thereon or affecting
the title there-
9
to. The Borrower has the right and all requisite corporate authority to pledge,
assign, grant a security interest in, transfer and deliver the Collateral to the
Lender as provided herein.
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. Any of the following events, acts,
occurrences or state of facts shall constitute an "Event of Default" for
purposes of this Agreement:
(a) Failure to Make Payments When Due. The Borrower shall have
failed to make a payment of principal or interest on the Loan when due and such
default in payment shall continue for five (5) days;
(b) Representation or Warranties. Any representation or
warranty made by the Borrower contained in this Agreement shall have been
incorrect or misleading in any material respect when made;
(c) Security Interest. At any time after the delivery of the
Loan to the Borrower by the Lender and for so long as any principal or interest
remains outstanding on the Loan, the Lender's Security Interest in the
Collateral shall cease to be in full force and effect or cease to give the
Lender the rights, powers and privileges purported to be created thereby
(including, without limitation, a first priority perfected security interest in,
and a lien on, all of the Collateral) in favor of the Lender, superior to and
prior to the rights of all third parties;
(d) Bankruptcy or Insolvency. The Borrower shall become
insolvent, or shall be unable to pay its debts as they mature; or shall admit in
writing its inability to pay its debts as they mature; or shall make an
assignment for the benefit of its creditors; or shall file or commence or have
filed or commenced against it any proceeding which is not dismissed or stayed
within 60 days of the filing or commencement thereof for any relief under any
bankruptcy or insolvency law or any law or laws relating to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, or a receiver or trustee shall be appointed for the undersigned;
10
(e) Merger or Consolidation. The Borrower shall have entered
into any transaction of merger or consolidation into or with another
corporation;
(f) Dissolution. The Borrower shall have dissolved or
otherwise wind up its affairs;
(g) Default Under The Retainer Agreement. An Event of Default
under Section 5.1 of the Retainer Agreement shall have occurred;
(h) Default Under This Agreement. There shall have been a
default in the observance or performance of any term, agreement or covenant of
this Agreement by the Borrower.
5.2 Acceleration. If an Event of Default shall occur and be
continuing, the Lender may, at its sole discretion, by notice to the Borrower
declare the entire unpaid principal amount of the Loan and all interest accrued
and unpaid thereon to be forthwith due and payable, whereupon the entire unpaid
principal amount of the Loan and all interest accrued and due thereon shall be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which is hereby expressly waived by the Borrower.
5.3 Security Rights. If an Event of Default shall occur and be
continuing, the Lender may enforce any and all rights available to it by law or
in equity pursuant to the Security Interest granted hereunder with respect to
the Collateral. Without limiting the rights available to the Lender pursuant to
the foregoing sentence, the Lender shall have all rights and remedies available
to creditors under the Uniform Commercial Code, as in effect from time to time
in the State of New York.
5.4 Rights Not Exclusive. The rights provided for in this Article 5
are cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.
ARTICLE VI
COVENANTS
11
6.1 General. Subject to the terms and provisions contained herein,
the Borrower hereby agrees to use all reasonable efforts to take or cause to be
taken, all actions and to do, or cause to be done, all things necessary proper
or advisable under the applicable laws and regulations to perfect the Lender's
Security Interest in the Collateral and to effectuate the exercise of the
Lender's rights under this Agreement, including, without limitation, the filing
of Uniform Commercial Code financing statements which the Lender in its sole
discretion may deem necessary or appropriate to further perfect its Security
Interest.
6.2 No Further Grants. The Borrower will not, without the prior
written consent of the Lender, sell, assign, transfer, mortgage, pledge or
otherwise encumber any of its rights in or to the Collateral or any dividends or
other distributions or payments with respect thereto or grant a Security
Interest on any thereof.
6.3 Defend Collateral. The Borrower will defend the title to the
Collateral and the Security Interest of the Lender thereon against the claim of
any person claiming against or through the Borrower and will maintain and
preserve the Lender's Security Interest in the Collateral so long as this
Agreement shall remain in effect.
6.4 Foreign Corrupt Practices Act. The Borrower will not and will
cause its affiliates, its officers, employees, directors, representatives or
agents and the officers, employees, directors, representatives or agents of its
affiliates not to directly or indirectly take any action in contravention of the
United States Foreign Corrupt Practices Act. Such prohibition shall preclude,
among other things, the act of offering, promising, authorizing or making,
directly or indirectly, (i) any unlawful payments or (ii) payments or other
inducements (whether or not lawful) to any government official, including any
official of an entity owned or controlled by a government, with the intent or
purpose of:
(1) influencing any act or decision of such official in his official
capacity;
(2) inducing such official to do or omit to do any act in violation of
the lawful duty of such official; or
12
(3) inducing such official to use his influence with a government or
instrumentality thereof to affect or influence any act or decision
of such government or instrumentality;
in order to assist the Company or any of its affiliates in obtaining or
retaining business for or with, or directing business to any person.
ARTICLE VII
THE CLOSING
7.1 Time and Place of Closing. Upon the terms and subject to the
conditions of this Agreement, the closing (the "Closing") shall take place
within five days following the satisfaction or waiver of all of the conditions
to lending set forth in Article III hereof (the "Closing Date"). Notwithstanding
the foregoing, if the Closing does not occur on or before 30 days from the date
hereof, this Agreement may be terminated by either the Borrower or the Lender by
providing notice of such termination to the other party.
7.2 Deliveries at the Closing. At the Closing:
(a) Agreement and Note. The Borrower shall have duly executed
and delivered this Agreement and the Note payable to the order of the Lender.
(b) KMOC Stock Certificates. The Lender shall have received
stock certificates for the KMOC Stock in suitable form for transfer by delivery
or accompanied by duly executed transfer or assignment in blank, all in form and
substance satisfactory to the Lender.
(c) Wire Transfer. The Lender shall wire transfer
U.S.$10,400,000 to the account specified by the Borrower.
ARTICLE VIII
MISCELLANEOUS
13
8.1 Notice. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested
addressed to the party at the address indicated below or to such other address
as such party may subsequently give notice hereunder in writing:
If to the Lender, to:
Khanty Mansiysk Oil Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone:(000) 000-0000
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Phone:(000) 000-0000
Fax:(000) 000-0000
If to the Borrower, to:
Waldo Securities S.A.
Akara Building, Suite #8
Wickhams Cay, 1 Road Town
Tortola, British Virgin Islands
Phone: (000) 000-00-00
14
Any notice delivered personally or by courier under this Section 8.1
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
8.2 Amendment or Modification, Waiver. No provision of this
Agreement or the Note may be modified, amended, waived or discharged unless such
waiver, modification, amendment or discharge is agreed to in writing, signed by
the parties hereto. No waiver by any party hereto at any time of any breach by
another party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any party of any breach or default under
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies either under this
Agreement, or by law otherwise afforded to any party, shall be cumulative and
not alternative.
8.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
8.4 Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
8.5 Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
8.6 Counterparts. This Agreement shall be executed in four
originals, two English and two Russian, each of which when executed shall be
deemed to be an original. In the event of a discrepancy between the English and
15
Russian versions of this Agreement, the English text shall prevail and be deemed
conclusive as to the agreement of the parties hereto. Each original of this
Agreement may be executed in two counterparts, each of which shall be an
original but both of which together will constitute one and the same instrument.
8.7 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party to this Agreement which are not set forth expressly
in this Agreement.
8.8 Binding Effect; Assignment. This Agreement shall be binding
upon, and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign its
rights or obligations hereunder or in connection herewith or any interest herein
(voluntarily, or by operation of law or otherwise) without the prior written
consent of the Lender.
8.9 Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the Note or the breach, termination or validity
thereof shall be finally settled by arbitration in accordance with the
Arbitration Association International Arbitration Rules then in effect. There
shall be one arbitrator. The arbitration shall be held in New York, and governed
by the United States Arbitration Act, 9 U.S.C. xx.xx. 1-16, 201-208. The
arbitration proceedings shall be conducted, and the award shall be rendered in
the English language. The award shall be final and binding upon the parties, and
shall be the sole and exclusive remedy between the parties regarding any claims,
counterclaims, issues, or accounting presented to the arbitrator. Judgment upon
any award may be entered in any court having jurisdiction thereof.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
KHANTY MANSIYSK OIL CORPORATION
By:______________________________
Name:Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
WALDO SECURITIES S.A.
By:______________________________
Name: Nikitina U.V.
Title: Attorney-in-Fact
17
EXHIBIT 1.2
To The
Loan Agreement
FORM OF NOTE
--------------------------------------------------------------------------------
WALDO SECURITIES S.A.
NOTE
U.S. $10,400,000 August __,1997
Waldo Securities S.A., an international business company organized
under the laws of the British Virgin Islands (the "Borrower"), for value
received, hereby promises to pay to the order of Khanty Mansiysk Oil
Corporation, a Delaware corporation (the "Lender"), in lawful money of the
United States of America and in immediately available funds, the principal sum
of Ten Million Four Hundred Thousand US Dollars (U.S.$10,400,000) or such lesser
unpaid principal amount as shall be outstanding hereunder, together with
interest from the date hereof on the unpaid principal balance of this Note,
payable on the dates and at the rate provided for in the Loan Agreement dated
August __, 1997, by and among the Borrower and the Lender, as the same may be
amended from time to time (the Loan Agreement). Capitalized terms used herein
which are defined in the Loan Agreement shall have the meanings therein defined.
The holder of this Note is authorized to record in its books and
records, the date and principal amount of the Loan, the date and amount of each
payment or prepayment of principal and interest with respect thereto. Such
recordation shall constitute prima facie evidence of the accuracy of the
information endorsed, provided that the failure of the Lender to make such
recordation shall not affect the obligations of the Borrower hereunder or under
the Loan Agreement.
This Note is the Note referred to in the Loan Agreement and is
entitled to the benefits and is subject to the terms of the Loan Agreement to
which reference is hereby made for a more complete statement of the terms and
conditions under which the Loan evidenced hereby was made and is to be repaid.
This Note is also entitled to the benefits of the Security Interest in the
Collateral described in and provided for in the Loan Agreement.
Except as otherwise provided in Section 1.6 of the Loan Agreement,
all payments of principal and interest in respect of this Note shall be made in
lawful money of
18
the United States of America payable on the date such payment is due, not later
than 11:00 am (New York time) at the offices of the Lender, 000 Xxxx Xxxxxx,
Xxxxx 000, Xxx Xxxx, XX 00000-0000, or such other address as the Lender may
specify in writing to the Borrower.
This Note is subject to voluntary prepayment as provided in the Loan
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued but unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this
Note or of the Loan Agreement shall alter or impair the obligation of the
Borrower, which is absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective time, and in the currency
herein prescribed.
The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, isncurred in the collection and enforcement of this
Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS NOTE OR THE ACTIONS OF THE LENDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
19
ANNEX 6
SHAREHOLDERS' AGREEMENT
================================================================================
SHAREHOLDER AGREEMENT
dated as of
August __, 1997
among
KHANTY MANSIYSK OIL CORPORATION
and
WALDO SECURITIES S.A.
================================================================================
SHAREHOLDER AGREEMENT, dated as of August __, 1997, among Khanty
Mansiysk Oil Corporation, a Delaware corporation ("KMOC") and Waldo Securities
S.A. ("Waldo"), an international business company organized under the laws of
the British Virgin Islands.
WHEREAS KMOC and Waldo are parties to an Investment Agreement, dated
as of August __, 1997, (the "Investment Agreement"), pursuant to which Waldo
will acquire 115,400 shares (the "Swap Shares") of common stock, no par value,
of Khanty-Mansiysk Oil Corporation upon consummation of the transactions
contemplated therein; and
WHEREAS the parties hereto wish to set forth their agreement
concerning certain matters relating to Waldo's ownership and disposition of the
Swap Shares and any other shares of KMOC securities acquired by Waldo after the
Effective Date (collectively, the "Shares").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Definitions
SECTION 1. 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
An "affiliate" of any Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person. For purposes of the definition
of affiliate, "control" has the meaning specified in Rule 12b-2 under the
Exchange Act as in effect on the date of this Agreement.
"Applicable Law" shall mean, with respect to any Person, any
statute, law, regulation, ordinance, rule, judgment, rule of common law, order,
decree, award, Governmental Approval, concession, grant, franchise, license,
agreement, directive, guideline, policy, requirement, or other governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Author-
ity, whether in effect as of the date hereof or thereafter and in each case as
amended, applicable to such Person or its subsidiaries or their respective
assets.
A Person shall be deemed to "Beneficially Own", to have "Beneficial
Ownership" of, or to be "Beneficially Owning" any securities (which securities
shall also be deemed "Beneficially Owned" by such Person) that such Person is
deemed to "beneficially own" within the meaning of Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement.
"best efforts" with respect to any action subject to such a best
efforts obligation shall mean all efforts to take such action as may be taken in
a commercially reasonable manner.
"Change of Control" with respect to KMOC shall be deemed to have
occurred at such time as a "person or group" (within the meaning of Section
13(d)(3) of the Exchange Act) (i) becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Securities of KMOC or (ii) otherwise
obtains control of KMOC.
"Effective Date" means the date of the final closing of the
transactions contemplated by the Investment Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"First Offer Price" has the meaning set forth in Section 3.2(a).
"Governmental Approval" means any action, order, authorization,
consent, approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority.
"Governmental Authority" means any government or political
subdivision thereof, governmental department, commission, board, bureau, agency,
regulatory authority, instrumentality, judicial or administrative body having
jurisdiction over the matter or matters in question.
A "group" has the meaning set forth in Section 13(d)(3) of the
Exchange Act as in effect on the date of this Agreement.
"Indemnified Person" has the meaning set forth in Section 4.3(a).
2
"Investment Agreement" has the meaning set forth in the recitals to
this Agreement.
"KMNGG Board" has the meaning set forth in Section 5.
"KMOC" has the meaning set forth in the recitals to this Agreement.
"KMOC Board" means the board of directors of KMOC.
"KMOC Common Stock" means common stock, no par value, of KMOC.
"KMOC Voting Securities" means KMOC Common Stock and any other
issued and outstanding securities of KMOC generally entitled to vote in the
election of directors of KMOC.
"Loan Agreement" means the Loan Agreement, dated as of August __,
1997, by and between KMOC and Waldo.
"Offered Shares" has the meaning set forth in Section 32(a).
"Other KMOC Holders" means the holders of the Other KMOC Shares.
"Other KMOC Shares" means securities of KMOC not held by a Waldo
Entity.
"Permitted Transferee" has the meaning set forth in Section 3.1(d).
"Person" means any individual, group, corporation, firm,
partnership, joint venture, trust, business association, organization,
governmental entity or other entity.
"Proposed Transferee" has the meaning set forth in Section 3.2(a).
"Public Offering" means any offering of stock registered under the
Securities Act.
3
"Registrable Shares" means the maximum number of Shares that the
Waldo Entities, collectively, may register in a Public Offering. Prior to the
fifth anniversary of the Effective Date, such amount shall be determined as
follows:
(i) if the Shares are to be registered pursuant to an initial Public
Offering, Registrable Shares shall mean the number of Shares equal to 20%
of the aggregate number of Shares held by the Waldo Entities; and
(ii) if the Shares are to be registered pursuant to a Public
Offering conducted subsequent to the initial Public Offering, Registrable
Shares shall mean the number of Shares equal to 50% of the aggregate
number of Shares held by the Waldo Entities.
Subsequent to the fifth anniversary of the Effective Date, Registrable Shares
shall equal the aggregate number of Shares held by the Waldo Entities.
"Response Period" has the meaning set forth in Section 3.2(b).
"Restricted Period" shall mean the period commencing from the
Effective Date and Ending on the second anniversary of the Effective Date.
"Retainer Agreement" means the Retainer Agreement, dated as of
August __, 1997, by and between KMOC and Waldo.
"SEC" means the Securities and Exchange Commission or any successor
governmental entity.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Selling Shareholder" has the meaning set forth in Section 3.2(a).
"Shares" has the meaning set forth in the recitals to this
Agreement.
"Swap Shares" has the meaning set forth in the recitals to this
Agreement.
"Third Party Offer" means a bona fide offer to enter into a
transaction by a Person other than Waldo or any of Waldo's affiliates or any
other
4
Person acting on behalf of Waldo or any of Waldo's respective affiliates which
would result in a Change of Control of KMOC or a transfer of all or
substantially all of the assets of KMOC.
"Transfer" has the meaning set forth in Section 3.1.
"Transfer Notice" has the meaning set forth in Section 3.2(a).
"Transfer Period" has the meaning set forth in Section 3.2(c).
"Voting Agreement" means the Voting Agreement, dated as of August
__, 1997, between KMOC, Waldo, Beacon Group Energy Investment Fund, L.P. and
Brunswick Xxxxxxxxxxx Trust Company LLC.
"Waldo" has the meaning set forth in the recitals to this Agreement.
"Waldo Entities" means, collectively, Waldo and any Permitted
Transferee that holds Shares.
"Wholly Owned Subsidiary" means, with respect to any Person, as of
any date of determination, any other Person as to which such Person owns,
directly or indirectly, or otherwise controls, 100% of the voting shares or
other similar interests.
ARTICLE II
Standstill
SECTION 2.1. Standstill.
(a) During the Restricted Period, except as otherwise expressly
provided in this Agreement and the Voting Agreement, none of the Waldo Entities,
individually or with any other Person or group, shall without the express
written approval of the KMOC Board directly or indirectly, (i) take any action
to acquire or affect control of KMOC or to encourage or assist any other Person
or group to do so, (ii) seek additional representation on the KMOC Board or a
change in the size or composition of the KMOC Board, (iii) deposit any
securities in a voting trust or enter into any voting agreement or arrangement
with respect thereto (other than this Agreement and the Voting Agreement), (iv)
make any
5
public announcement concerning this Section 2.1 or disclose any intent,
purpose plan, arrangement or proposal inconsistent with the foregoing
(including any such intent, purpose, plan, arrangement or proposal that is
conditioned on or would require the waiver, amendment, nullification or
invalidation of any of the foregoing) or take any action that would require
public disclosure of any such intent, purpose, plan, arrangement or proposal,
(v) make any request to amend or waive any provision of this Section 2. 1, which
request would require public disclosure under applicable law, rule or
regulation, (vi) take any action challenging the validity or enforceability of
the foregoing or (vii) assist, advise, encourage or negotiate with any Person
with respect to, or seek to do, any of the foregoing.
(b) Nothing in this Section 2.1 shall prohibit any Waldo Entity from
holding securities of KMOC issued as dividends or distributions in respect of,
or issued upon conversion, exchange or exercise of, Shares which such Waldo
Entity is permitted to hold under this Agreement.
SECTION 2.2. Third Party Offers. If, prior to the tenth anniversary
of the Effective Date, KMOC becomes the subject of a Third Party Offer that is
(a) approved by a majority of the KMOC Board and (b) supported by the holders of
a majority of the KMOC Voting Securities (i) in the event of a Third Party
Offer, the consummation of which does not require action by the holders of the
KMOC Voting Securities, that have taken a position on such transaction, other
than the Waldo Entities, or (ii) in the event of a Third Party Offer, the
consummation of which requires action of the holders of KMOC Voting Securities,
whether at a meeting or by written consent, that have voted in favor of such
Third Party Offer, other than the Waldo Entities, KMOC shall deliver a written
notice to Waldo, briefly describing the material terms of such Third Party
Offer, and Waldo shall, within ten business days after receipt of such notice,
either (x) offer to acquire all or substantially all of the assets of KMOC or
the Other KMOC Shares, as the case may be, on terms at least as favorable to the
Other KMOC Holders as those contemplated by such Third Party Offer or (y)
confirm in writing that it will support, and at the appropriate time support,
such Third Party Offer, including by voting and causing each of the Waldo
Entities to vote all Shares Beneficially Owned by such Waldo Entity eligible to
vote thereon in favor of such Third Party Offer or, if applicable, tendering or
selling and causing each of the Waldo Entities to tender or sell all of the
Shares Beneficially Owned by it to the Person making such Third Party Offer. For
purposes of (b)(i) of the foregoing sentence of this Section 2.2, in order to
determine whether a Third Party Offer is supported by other holders of KMOC
Voting Securities, KMOC may use any reasonable method, taking into account
confidentiality concerns,
6
including engaging the services of a proxy solicitor or similar firm. The notice
referred to in the first sentence of this Section 2.2 shall be delivered
promptly after the approval of the Third Party Offer by the KMOC Board and the
determination of the support by the holders of a majority of the KMOC Voting
Securities who have taken a position on such transaction or the approval by the
holders of a majority of the KMOC Voting Securities that have voted in favor of
such Third Party Offer, as the case may be.
ARTICLE III
Transfer Restrictions
SECTION 3.1. Restrictions. Except in connection with (i) a Third
Party Offer as provided in Section 2.2 or (ii) a registered public offering
pursuant to Article IV, no Waldo Entity shall, sell, pledge, assign, grant a
participation interest in, encumber or otherwise transfer or dispose of any
Shares to any other person, whether directly, indirectly, voluntarily,
involuntarily, by operation of law, pursuant to judicial process or otherwise (a
"Transfer") except in accordance with one of the following:
(a) subject to compliance with the provisions of Section 3.2,
pursuant to a sale to any one Person or group in an amount less than 5% of the
outstanding securities of any class of KMOC; provided, however, that no such
sale shall occur prior to the end of the Restricted Period and the aggregate of
such sales made by the Waldo Entities as a group in any one year shall not
exceed 10% of the outstanding securities of any class of KMOC;
(b) pursuant to a Transfer to KMOC in accordance with the terms and
provisions of the Loan Agreement or the Retainer Agreement;
(c) pursuant to a merger, consolidation or other business
combination involving Waldo, where Waldo is not the surviving entity, or a sale
of all or substantially all of Waldo's assets; provided, however, that the
surviving or purchasing entity agrees to be bound by the terms of this Agreement
and the Voting Agreement; or
(d) pursuant to a Transfer of Shares by Waldo to a Wholly Owned
Subsidiary, from a Wholly Owned Subsidiary of Waldo to Waldo or between Wholly
Owned Subsidiaries of Waldo (any such transferee shall be referred to herein as
a "Permitted Transferee"), provided that in the case of any
7
such Transfer, Waldo shall have provided KMOC with written notice of such
proposed Transfer at least 15 days prior to consummating such Transfer stating
the name and address of the Permitted Transferee, the relationship between Waldo
and the Permitted Transferee, and the Permitted Transferee shall have executed a
copy of this Agreement and the Voting Agreement as a shareholder of KMOC. If any
Permitted Transferee to whom Shares have been Transferred pursuant to this
Section 3. 1 by Waldo ceases to be a Permitted Transferee, such Shares shall be
Transferred back to Waldo immediately prior to the time such Person ceases to be
a Permitted Transferee of Waldo. Waldo and such Permitted Transferee shall be
jointly and severally liable for any breach of this Agreement by such Permitted
Transferee.
SECTION 3.2. Right of First Refusal.
(a) If any Waldo Entity (the "Selling Shareholder") desires to sell
any Shares to any Person (the "Proposed Transferee") other than pursuant to
Sections 2.2, 3.1(b), 3.1(c) or 3.1(d) or Article IV, such Selling Shareholder
shall provide at least 30 days written notice (a "Transfer Notice") to KMOC
prior to the proposed date of sale. Such notice shall include:
(i) the principal terms of the proposed sale in so far as it relates
to the Shares, including the number of Shares to be sold (the "Offered
Shares") by the Selling Shareholder, the purchase price (the "First Offer
Price") and the name and address of the Proposed Transferee; and
(ii) an offer by the Selling Shareholder to Transfer for value the
Offered Shares to the Company.
Any offer made by the Selling Shareholder in accordance with this Section 3.2(a)
shall be on the same terms and conditions (subject to all of the provisions of
this Agreement) with respect to each Share to be sold to the Proposed Buyer.
(b) KMOC shall have the irrevocable and exclusive right, for a
period of 60 days after the Transfer Notice is received (the "Response Period")
to purchase, pursuant to the Transfer Notice, all or any part of the Offered
Shares at the First Offer Price, exercisable by delivering a written notice to
the Selling Shareholder within the Response Period, stating therein the number
of Offered Shares KMOC intends to purchase.
8
(c) If, at the end of the Response Period, KMOC has not given notice
of its decision to purchase all of the Offered Shares, then a Selling
Shareholder who has duly given such Transfer Notice shall be entitled for a
period of 45 days (the "Transfer Period") beginning the day after the expiration
of the Response Period to sell those Offered Shares which KMOC does not intend
to purchase at a price not lower than the First Offer Price and on terms not
more favorable to the Proposed Transferee than were contained in the Transfer
Notice. Promptly after any sale pursuant to this Section 3.2, the Selling
Shareholder shall notify KMOC of the consummation thereof and shall furnish such
evidence of the completion (including time of completion) of such sale and of
the terms thereof as KMOC may request.
(d) If, at the end of the Transfer Period, the Selling Shareholder
has not completed the sale of the Offered Shares to the Proposed Transferee, the
Selling Shareholder shall no longer be permitted to sell any of such Offered
Shares pursuant to this Section 3-2 without again fully complying with the
provisions of this Section 3.2 and all the restrictions on sale, transfer,
assignment or other disposition contained in this Agreement shall again be in
effect.
SECTION 3.3. Legend. Each certificate representing the Shares shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
The security evidenced by this certificate is subject to a
Shareholder Agreement, dated as of August __, 1997, between the Issuer and
the Shareholders named therein. A copy of such Shareholder Agreement is on
file with the Issuer. This Security has been acquired for investment and
has not been registered under the United States Securities Act of 1933, as
amended (the "Securities Act") or the securities laws of any other
jurisdiction, and may not be offered, sold or otherwise transferred,
pledged or hypothecated (i) unless and until (A) registered under the
Securities Act or the securities laws of any other jurisdiction, or (B) in
the opinion of counsel, in form and substance satisfactory to the Issuer,
such offer, sale, transfer, pledge or hypothecation is in compliance
therewith and (ii) in accordance with the terms and conditions of the
Shareholder Agreement.
SECTION 3.4. Compliance with Applicable Law, Etc. The exercise of
the right of first refusal set forth in Section 3.2 and the completion of
9
any transfer or sale of Shares contemplated hereunder shall be subject to
compliance with Applicable Law. KMOC and the Waldo Entities shall cooperate with
each other and shall take all such action, including, without limitation,
obtaining all Governmental Approvals required to comply with Applicable Law in
connection with the sale or transfer of the Shares pursuant to this Agreement.
Each of KMOC and the Waldo Entities shall bear its own costs and expenses in
connection with obtaining any such Governmental Approvals.
SECTION 3.5. Effect. Any purported transfer of securities that is
inconsistent with the provisions of this Article III shall be null and void and
of no force or effect and will not be registered on the stock transfer books of
KMOC.
ARTICLE IV
Registration Rights
SECTION 4.1. Incidental Registration. If KMOC proposes at any time
to register KMOC Common Stock under the Securities Act (other than pursuant to a
registration statement on Form S-8 or Form S-4 (or a similar successor form))
with respect to an offering of KMOC Common Stock for its own account or for the
account of any of its security holders, it will promptly give written notice
thereof to Waldo (but in no event less than fifteen days before the anticipated
filing date), and offer the Waldo Entities the opportunity to register such
number of Registrable Shares as the Waldo Entities may request. Upon the written
request of Waldo made within 30 days after the receipt of any such notice (which
request shall specify the Registrable Shares intended to be disposed of by each
Waldo Entity and the intended method of disposition thereof), KMOC will, subject
to the terms of this Agreement, use its best efforts to include the Registrable
Shares which KMOC has been requested to register in such registration.
(a) If the proposed registration by KMOC is an underwritten Public
Offering of KMOC Common Stock, then KMOC will use its best efforts to cause the
managing underwriter or underwriters to include the Registrable Shares requested
to be included by Waldo among those securities to be distributed by or through
such underwriters (on the same terms and conditions as the KMOC Common Stock of
KMOC included therein to the extent appropriate). Notwithstanding the foregoing,
if in the reasonable judgment of the managing underwriters or underwriters, the
success of the Public Offering would be adversely af-
10
fected by inclusion of the Registrable Shares requested to be included, KMOC
shall include in such registration the number (if any) of Registrable Shares so
requested to be included which in the opinion of such underwriters can be sold,
but only after the inclusion in such registration of KMOC Common Stock being
sold by KMOC.
(b) If, at any time after giving written notice of its intention to
register KMOC Common Stock and prior to the effective date of the registration
statement filed in connection with such registration, KMOC shall determine for
any reason either not to register, or to delay registration of, such securities,
KMOC may, at its election, give written notice of such determination to Waldo
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Shares in connection with
such registration or (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Shares, for the same
period as the delay in registering such other KMOC Common Stock.
(c) The selection of the underwriters for any such offering shall be
at the sole discretion of KMOC.
(d) KMOC will pay expenses associated with the registration and sale
of the Registrable Shares including without limitation legal, accounting,
printing and distribution fees and expenses, except for registration fees
associated with the Registrable Shares and commissions and underwriting
discounts payable with respect to the Registrable Shares, which shall be paid by
Waldo.
SECTION 4.2. Registration Procedures.
(a) If and whenever KMOC is required by the provisions of Section
4.1 hereof to effect the registration of Registrable Shares, KMOC will as
promptly as practicable:
(i) furnish to Waldo such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including
each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such
documents incorporated by reference in such registration statement
or prospectus, and such other documents, as Waldo may
11
reasonably request to facilitate the disposition of the Registrable
Shares owned by the Waldo Entities:
(ii) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions, if applicable, as
shall be reasonably appropriate for distribution of the Registrable
Shares; provided, however, that KMOC shall not be required, solely
in order to accomplish the foregoing, to qualify to do business as a
foreign corporation in any jurisdiction where it would not otherwise
be required to qualify, subject itself to taxation in any such
jurisdiction or consent to general service of process in any such
jurisdiction;
(iii) advise Waldo, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
SEC or any state securities commission or agency suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and use its best
efforts to prevent the issuance of any stop order to obtain its
withdrawal if such stop order should be issued;
(iv) notify Waldo upon KMOC's discovery that, or upon the
happening of any event as a result of which any prospectus included
in any registration statement which includes Registrable Shares, as
then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at Waldo's request prepare
and furnish to Waldo a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(v) use its best efforts to cause all such Registrable Shares
to be listed on each securities exchange or inter-dealer quotation
system on which the KMOC Common Stock is then listed or will
12
be listed following the Public Offering, provided that the
applicable listing requirements are satisfied.
(b) If any registration pursuant to Section 4.1 shall be in
connection with an underwritten Public Offering and regardless of whether the
Waldo Entities participate in such registration, the Waldo Entities agree not
to, unless agreed to in writing by the managing underwriter or underwriters or
KMOC, effect any public sale or distribution, including any sale pursuant to
Rule 144 of the Securities Act, of any Registrable Shares (other than as part of
such underwritten Public Offering) within the period commencing on a date
specified by the underwriter, not to exceed 30 days prior to the effective date
of such registration statement, and ending on a date specified by the
underwriter, not to exceed 180 days after the effective date of such
registration statement or such shorter period as any other holder of securities
of KMOC being sold pursuant to the registration statement has agreed not to
effect any public sale or distribution. The Waldo Entities agree that KMOC may
instruct its transfer agent to place stop transfer notations in its records to
enforce this Section 4.2(b).
(c) Each Waldo Entity included in such registration agrees that,
upon receipt of any notice from KMOC of the occurrence of any event of the kind
described in Section 4.2(a)(iv), it will forthwith discontinue the disposition
of Registrable Shares pursuant to the registration statement relating to such
Registrable Shares until its receipt of a supplemented or amended prospectus
from KMOC and, if so directed by KMOC, will deliver to KMOC all copies, other
than permanent file copies, then such Waldo Entity's possession, of the
prospectus relating to such Registrable Shares at the time of receipt of such
notice; provided, that if the registration statement is for an underwritten
Public Offering each Waldo Entity included in such registration will use its
best efforts to cause the underwriters of such Public Offering to discontinue
the disposition of Registrable Shares.
(d) If any Registrable Shares are included in any registration
pursuant to this Article IV, the Waldo Entity selling such shares shall take
such actions and furnish KMOC with such information regarding itself and
relating to the distribution of the Registrable Shares as KMOC may from time to
time reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement,
including, without limitation, the following: (i) enter into an appropriate
underwriting agreement containing terms and provisions then customary in
agreements of that nature and cause each underwriter of the Registrable Shares
to be sold to agree in writing
13
with KMOC to provisions with respect to indemnification and contribution that
are substantially the same as set forth in Section 4.3 hereof; (ii) enter into
such custody agreements, powers of attorney and related documents at such time
and on such terms and conditions as may then be customarily required in
connection with such offering; and (iii) distribute the Registrable Shares in
accordance with and in the manner of the distribution contemplated by the
applicable registration statement and prospectus.
SECTION 4.3. Indemnification.
(a) Indemnification by KMOC. In the event of any registration of
Registrable Shares pursuant to Section 4.1, KMOC agrees to indemnify and hold
harmless the seller of Registrable Shares and its directors and officers (each,
an "Indemnified Person") from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees and costs of
investigation) to which such Indemnified Person becomes subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses arise out of or based upon (i) any untrue statement or
alleged untrue statement of material fact contained in any registration
statement under which such securities were registered or qualified under the
Securities Act or otherwise, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto, or
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
provided that KMOC shall not be liable to such Indemnified Person in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with information furnished by such seller of Registrable Shares to
KMOC.
(b) Indemnification by the Waldo Entities. Each of the Waldo
Entities agree to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 4.3(a)), KMOC and its directors and officers
and each other person, if any, who controls KMOC within the meaning of the
Securities Act arising out of or based upon (i) any untrue statement or alleged
untrue statement of material fact contained in any registration statement under
which such securities were registered or qualified under the Securities Act or
otherwise, any preliminary prospectus, final prospectus or summary prospectus
14
included therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made solely in reliance upon and in conformity with
information furnished to KMOC by such Waldo Entity for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement.
(c) Defense of Claim. If any action or proceeding (including any
governmental investigation) shall be brought or directed against any party
hereto (or its officers, directors or agents), the party against whom
indemnification is sought shall be permitted to (or, if requested, shall) assume
the defense of such claim, including the employment of counsel and the payment
of all expenses, unless a conflict of interest may exist which respect to such
claim or differing or additional defenses may be available to the other party.
If defense of a claim is assumed by an indemnifying party, the indemnified party
shall not be liable for any settlement of such action or proceedings effected
without their prior written consent. No indemnifying party shall not consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of release from all liability in respect to such claim or
litigation. Any party entitled to indemnification hereunder agrees to give
prompt written notice to the other party of any written notice of the
commencement of any action, suit, proceedings or investigation or threat thereof
for which such party may claim indemnification or contribution pursuant to this
Agreement; provided, however, that failure to give such notice shall not limit
any party's right to indemnification or contribution hereunder. Notwithstanding
the foregoing, an indemnified party hereunder shall always have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party.
(d) Contribution. If the indemnification provided for in Sections
4.3(a) or 4.3(b) hereof is unavailable to a party that would have been an
indemnified party under any such Section in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each party that would have been an indemnifying party
thereunder shall, in lieu of indemnifying such indemnified party, contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative fault of such
indemnifying party
15
on the one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof). The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or such indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a contributing party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 4.3(c) shall include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
ARTICLE V
Special Covenants
SECTION 5.1. KMNGG Governance. From the Effective Date until the
date on which new members are appointed to the board of directors (the "KMNGG
Board") of Khanty-Mansiyskneftegazgeologia, a subsidiary of KMOC incorporated
under the laws of the Russian Federation, such that the representatives of KMOC
on the KMNGG Board constitute the majority of the members of the KMNGG Board,
Waldo agrees to cause its representatives on the KMNGG Board (a) to consult with
the representatives of KMOC on the KMNGG Board regarding all matters presented
to the KMNGG Board to be voted upon and (b) to cast their votes in the same
manner as votes cast by the representatives of KMOC with respect to any such
matter.
SECTION 5.2. KMOC Board Composition.
(a) During the Restricted Period, KMOC shall exercise all authority
under applicable law to cause any slate of directors presented to shareholders
for election to the KMOC Board to consist of such nominees that if elected,
would result in the KMOC Board consisting of five Directors nominated by Waldo.
16
(b) Waldo and KMOC agree that during the Restricted Period, each of
KMOC and Waldo shall exercise all authority under applicable law to cause Xxxxxx
De Gear to be appointed Chairman of the KMOC Board and Xxxxxxxx Dmitrievich
Tokarev and Mikolai Vladimirovich Bogatchev to each be appointed Vice-Chairmen
of the KMOC Board.
(c) The provisions of this Section 5.2 shall terminate upon the
occurrence of a Change of Control of KMOC.
ARTICLE VI
Termination
SECTION 6.1. Termination. Except with respect to Sections of this
Agreement which shall terminate on an earlier date as expressly provide herein,
this Agreement shall automatically terminate, with respect to each Waldo Entity,
on the date such Waldo Entity no longer Beneficially Owns any Shares; provided,
however, that the provisions of Section 4.3 shall survive the termination of
this Agreement with respect to each Waldo Entity.
ARTICLE VII
Miscellaneous
SECTION 7. 1. Effectiveness. This Agreement shall be effective as of
the Effective Date.
SECTION 7.2. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by hand, by nationally
recognized courier service, by facsimile transmission, receipt confirmed or
certified mail (postage prepaid, return receipt requested, if available):
17
If to KMOC, to:
Khanty-Mansiysk Oil Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx. Xxx Xxxx 00000
Phone:(000) 000-0000
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Phone:(000) 000-0000
Fax: (000) 000-0000
If to a Waldo Entity, to:
Waldo Securities S.A.
Akara Building, Suite #8
Wickhams Cay, 1 Road Town
Tortola, British Virgin Islands
Phone:(000) 000-00-00
Each such notice, request or communication shall be effective (A) if delivered
by hand or by nationally recognized courier service, when delivered at the
address specified in this Section 7.2 (or in accordance with the latest
unrevoked written direction from such party), (B) if given by fax, when such fax
is transmitted to the fax number specified in this Section 7.2 (or in accordance
with the latest unrevoked written direction from such party), and the
appropriate confirmation is received or (C) if by certified mail, upon mailing.
SECTION 7.3. Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "included,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
18
SECTION 7.4. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
parties shall negotiate in good faith with a view to the substitution therefor
of a suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision;
provided, however, that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
SECTION 7.5. Counterparts. This Agreement shall be executed in four
originals, two English and two Russian, each of which when executed shall be
deemed to be an original. In the event of a discrepancy between the English and
Russian versions of this Agreement, the English text shall prevail and be deemed
conclusive as to the agreement of the parties hereto. Each original of this
Agreement may be executed in two counterparts, each of which shall be an
original but both of which together will constitute one and the same instrument.
SECTION 7.6. Entire Agreement; No Third Parry Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
Person, other than the parties hereto, any rights or remedies hereunder.
SECTION 7.7. Further Assurances. Each party shall execute, deliver,
acknowledge and file such other documents and take such further actions as may
be reasonably requested from time to time by the other party hereto to give
effect to and carry out the transactions contemplated herein.
SECTION 7.8. Governing Law; Equitable Remedies. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties hereto shall be entitled to equitable
relief, including in the form of injunctions, in order to enforce specifi-
19
cally the provisions of this Agreement, in addition to any other remedy to which
they are entitled at law or in equity.
SECTION 7.9. Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, or the Note or the breach, termination or
validity thereof shall be finally settled by arbitration in accordance with the
Arbitration Association International Arbitration Rules then in effect. There
shall be one arbitrator. The arbitration shall be held in New York, and governed
by the United States Arbitration Act, 9 U.S.C. xx.xx. 1-16, 201-208. The
arbitration proceedings shall be conducted, and the award shall be rendered in
the English language. The award shall be final and binding upon the parties, and
shall be the sole and exclusive remedy between the parties regarding any claims,
counterclaims, issues, or accounting presented to the arbitrator. Judgment upon
any award may be entered in any court having jurisdiction thereof.
SECTION 7.10. Amendments; Waivers.
(a) No provision of this Agreement may be amended or waived unless
such amendment or waiver is in writing and signed, in the case of an amendment,
by the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 7.11. Assignment. Neither this Agreement nor any of the
rights or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party, except that either
party may assign all its rights and obligations to the assignee of all or
substantially all of the assets of such party including an acquisition through
merger, provided that such party shall in no event be released from its
obligations hereunder without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Any attempted assignment in contravention hereof shall be null and
void.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered, all as of the date first set forth above.
KHANTY-MANSIYSK OIL CORPORATION
By:______________________________
Name: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
WALDO SECURITIES S.A.
By:______________________________
Name: Nikitina U.V.
Title: Attorney-in-Fact
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and delivered by its duly authorized officer, as of the day and year and at the
place first above written.
WALDO SECURITIES S.A.
By:______________________________
Name: Nikitina U.V.
Title: On Power of Attorney
20
