EXHIBIT 1O (i)(A)
HEADS OF AGREEMENT
THIS AGREEMENT, dated December 20, 2001, is entered into between the following
persons (together the "Parties"):
(1) PUMA ENERGY INC., a company incorporated under the laws of Florida, USA
("PUMA"); and
(2) X. XXXXXXXXX & CO., GmbH, a company incorporated under the laws of Germany
("Xxxxxxxxx").
INTRODUCTION
(A) Xxxxxxxxx or its affiliate holds a 60% interest in Azergerneft, a limited
liability company formed under the legislation of the Azerbaijan Republic
(the "Company"), the remainder of the interests in which are held by the
State Oil Company of the Azerbaijan Republic ("SOCAR").
(B) The Company was incorporated pursuant to an agreement between SOCAR and
Xxxxxxxxx (the "JV Contract") to carry out the rehabilitation of existing
facilities in the Xxxxxx Field Number 7 and all ancillary activities (the
"Project") in accordance with its terms.
(C) The Company is seeking funds to carry out such rehabilitation and on August
14, 2001 Xxxxxxxxx and PUMA signed a Letter of- Intent under which PUMA
agreed to investigate the possibility of investing in the Company.
(D) The Parties now wish to record the circumstances under which PUMA will
agree to make available funds to the Offshore Company which will in turn
make available up to US$5 million to the Project.
IT IS NOW AGREED as follows:
ARTICLE I- DEFINITIONS
Article 1.01. Definitions
Unless the context otherwise requires, terms used in this Agreement shall
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more
intermediaries, has Control, is under the Control of
or is under common Control with that Person.
"Agreement" means this heads of agreement including its
Introduction and Annex.
"Company" is defined in Introduction (A).
"Control" means in respect of any entity, the ownership of more
than fifty percent of the participatory interests
(50%) authorised to vote at a general meeting, or the
ability to pass or procure the passing of a decision
(whether by the casting of votes of otherwise) at a
general meeting, or at any meeting of the executive
or management body of such entity.
"Governmental" means relating to the central government of a state,
including any and all instrumentalities, branches and
administrative and other subdivisions of or in such
government, and any and all executive and regulatory
bodies, agencies, departments, ministries,
authorities and officials of or in such government
that have the authority to govern, regulate, levy or
collect Taxes, duties or other charges, grant
licenses or permits or approve or otherwise affect
(whether financially or otherwise), directly or
indirectly, activities of the Project or any Party's
rights or obligations in respect of the Project,
notwithstanding any change at any time or from time
to time in structure, form or otherwise.
"JV Contract" is defined in Introduction (B).
"JY Documents" means the JV Contract and any charter other similar
foundation document of the Company together with all
other documents required by the jurisdiction of
formation in order to create the Company.
"Information" means the terms and conditions of this Agreement and
any confidential or proprietary information
(including any plans, drawings, reports, records,
scientific and technical data, notes and other
similar information) in written, oral or electronic
form which a Party obtains pursuant to this Agreement
or by virtue of its interest in the Project.
"Offshore Company" means a limited liability company to be formed under
the laws of Nevis or other acceptable jurisdiction to
act as the funding vehicle as described in Section
4.01. Such company shall be joint venture owned
equally by Gruenewalcl and Puma, except that Puma
shall have the controlling vote in the event of tie
vote on any matter.
"Parties" means the parties to this Agreement together with
their successors and permitted assignees.
"Person" means any physical person or any entity, including
any successor or permitted assignee of such person or
entity.
"Project" is defined in Introduction (B).
"Project Agreements" means the IV Documents, the Rehabilitation Activities
Plan and the IV Contract.
"Rehabilitation
Activities Plan" means a plan for carrying out of the Project.
"Taxes" duties, customs, imposts, contributions (such as
social fund and compulsory medical insurance
contributions), fees, assessments or other similar
charges payable to or imposed by any government or
Governmental authority (whether at central, regional
or local level), together with interest, penalties
and fines (including financial sanctions and
administrative penalties) with respect thereto,
imposed by or in Azerbaijan on the Project and its
income (whether such taxes are paid by the Company or
its owners). and "Tax" shall mean any of the
foregoing.
Article 1.02. Interpretation
In this Agreement except where the context otherwise requires:
(a) words denoting the singular include the plural and vice versa;
(b) references to a specific Article or Introduction shall be construed as a
reference to that specified Article or Introduction of this Agreement;
(c) the headings and the Table of Contents are inserted for convenience of
reference only and shall not effect the interpretation of this Agreement;
(d) the word "including" shall be read as including without limitation;
(e) references to writing shall include any method of reproducing words in a
legible and non transitory form;
(f) references to any statute or statutory provision shall include references
to such statute or statutory provision as amended, modified, re-enacted or
replaced from time to time; and
(g) references to any document or agreement shall include references to such
document or agreement as amended, modified, reenacted, or replaced from time to
time.
ARTICLE II- REPRESENTATIONS AND WARRANTIES
Article 2.01. Representations and Warranties of the Parties
Each of the Parties represents and warrants to each other Party that:
(a) it is duly organized under the laws of the jurisdiction of its formation and
it has the corporate and legislative power and authority to enter into and
perform its obligations under this Agreement and that all necessary
Governmental, corporate, shareholder and other action has been taken to
authorize the execution, delivery and performance of this Agreement;
(b) the execution and delivery of, the performance of its obligations under, and
the discharge of its liabilities in compliance with the provisions of, this
Agreement will not:
(i) contravene any existing applicable law, statute, rule, regulation,
judgement, decree or permit to which it is subject;
(ii) conflict with, or result in the breach of any of the terms of, or
constitute a default under, any agreement or other instrument to which it
is a party or is subject or by which it or any of its property is bound;
(iii)contravene or conflict with any provision of its foundation
documents; or
(iv) result in the imposition of a lien or encumbrance on any of its assets
or property;
(c) this Agreement has been duly authorised and executed by it and constitutes
legal, valid and binding obligations of such Party enforceable against such
Party in accordance with its terms;
(d) no authorization, approval or other action by, and no notice to or filing
with, any Governmental authority or regulatory body is required for the
execution, delivery or performance of this Agreement;
(e) no approval or authorization is required for any of the activities
contemplated by this Agreement by virtue of its entering into and performing
this Agreement;
(f) neither it not its property enjoy any rights of immunity from suit, set-off
or attachment or execution of judgement in respect of its obligations and
liabilities under this Agreement; and
(g) there exist no litigation or claim which would prohibit or impair it from
entering into or performing this Agreement.
Article 2.02. Further Representations and Warranties of the Parties.
Each Party hereby represents and warrants to the other that all Information
which has been made available in connection with this Agreement or the
activities to be undertaken pursuant to this Agreement:
(a) is complete and accurate and all assumptions on which such Information
is based and opinions expressed in such Information are reasonable;
(b) does not contain any untrue or misleading statement or omit any
material fact; and
(c) has been prepared in good faith and in a prudent and competent manner.
Article 2.03. Inducement
Each Party acknowledges that it has made the representations and warranties
contained in this Article II with the intention of inducing each other Party to
enter into this Agreement and that each such other Party has entered into this
Agreement on the basis of, and in full reliance on, each of such representations
and warranties.
ARTICLE III- DUE DILIGENCE
Article 3.01. Co-operation
(a) Xxxxxxxxx shall procure that the Company shall permit PUMA to complete its
legal, operational, financial and Tax due diligence on the Company and its
activities including the audit described in Exhibit 4.02(a) and render PUMA
every assistance in obtaining Information in respect of such due diligence.
(b) Such due diligence shall be completed on or before March 31, 2002.
ARTICLE IV- FUNDING METHODS
Article 4.01. The Offshore Company
(a) Upon execution of this Agreement, PUMA shall cause to be formed a
subsidiary in Azer baijan ("PUMA AZ") to acquire the Company interest, and the
Offshore Company. The PUMA subsidiary shall be owned 100% by PUMA. The Offshore
Company shall be owned 50% by PUMA AZ, and 50% by Xxxxxxxxx.
(b) Each of PUMA AZ and Xxxxxxxxx shall appoint one member to the Offshore
Company governing board. In the event of a deadlock between such member, PUMA AZ
may appoint a third member to the Board.
(c) Upon satisfaction of all conditions to this Agreement, there shall be held
a closing (the "Closing") at which PUMA will provide a funding commitment to the
Offshore Company equal to USD 5 million through December 31, 2004. Drawdowns of
committed funds shall be timed to coincide with budgeted expenditures on the
Project.
(d) All funding for the benefit of the Company shall be made by and through the
Offshore Company, and the shares of the Parties' revenues in the Company shall
be paid to the Offshore Company for further distribution to the Parties. PUMA AZ
shall receive a return on the funds it invests in or loans to the Offshore
Company, and Xxxxxxxxx shall receive a return on all amounts it documents as
owed to (Xxxxxxxxx by the Company or as further invested in or loaned to the
Offshore Company. Such payments shall be applied one-third to Xxxxxxxxx and
two-thirds to Puma until all amounts have been repaid. Such returns shall bear
interest at the rate of three month LIBOR, reset monthly, plus 5%. After all
returns have been made, revenue shall be distributed to the Parties in
proportion to their percentage interest in the Company.
(e) The Offshore -Company will handle all contracting and supervise all work to
be performed on the Project for the Parties.
Article 4.02 Acquisition of Company Interest
(a) As a condition to Closing, a fair market valuation of the oil and gas
reserves of the Proj - ect shall have been conducted as of December 31, 2001 by
Xxxxxxx Xxxxx & Associates on the premise of the relationships described herein
and the conditions precedent hereto, and such re serve values shall be carried
forward in a financial audit of the Company as of such date to be performed by
an international accounting firm chosen by the Parties. Fair market value is
defined as the price that would be paid by a willing buyer to a willing seller.
The valuation of the Com pany, including the reserves, shall determine the fair
market value of the Company. If Xxxxxxx Cline's estimates are unacceptable to
either Xxxxxxxxx or Puma, an arbitration process will be established wherein a
third party will resolve the differences.
(b) Based upon the value of the Company so determined, including all
indebtedness payable to any party, PUMA shall have the right to purchase from
Xxxxxxxxx an interest in the Company equal to a minimum of a 30% Joint Venture
Interest and a maximum of a 42% Joint Venture Interest. In the event Xxxxxxxxx
cannot directly convey a Joint Venture Interest, PUMA shall have the right as an
alternative to acquire ownership of Xxxxxxxxx equal to a minimum of 50% and a
maximum of 70% of Xxxxxxxxx). The determination whether Xxxxxxxxx can convey a
direct Joint Venture interest shall be made if possible before March 31, 2002.
(c) The purchase price for Xxxxxxxxx'x interest in the Joint Venture (or for
Xxxxxxxxx) shall be payable in full in cash at the Closing. Alternatively, if
the Parties so agree, all or part of the purchase price may be paid in the
common stock of PUMA.
(d) The Parties shall control a majority of the governing board of the Joint
Venture and shall comply in all respects with the Joint Venture Agreement.
ARTICLE V - OTHER CONDITIONS PRECEDENT
Article 5.01 Other Conditions Precedent
(a) Legal Documentation: each of the Project Agreements shall be in effect and
valid, legal and binding and enforceable in accordance with its terms.
(b) Unpaid Royalties and Taxes: the Company shall have delivered to PUMA
evidence, in form and substance satisfactory to PUMA, that any outstanding Tax
liability (including any fine or penalty) with~ any national ~or local Tax
authority will be included in the audited financial statements.
(c) Oil Sales: Xxxxxxxxx shall have delivered to PUMA evidence, in form and
substance satisfactory to PUMA, that the status of all executed petroleum sales
with the Azerbaijan Repub lic, including reaching an appropriate agreement for
'making up' approximately 40,000 tonnes of 'World Market Share' petroleum
previously classified as 'Local Market Share' petroleum, shall be resolved in
the valuation.
(d) Accounting and Administrative Procedures: the Company shall have introduced
and be implementing through the Offshore Company the accounting and
administrative procedures specified in the JV Contract to the satisfaction of
PUMA and PUMA shall be satisfied with the level of commitment to such procedures
demonstrated by the Company and its owners.
(e) Rehabilitation Activities Plan: the Offshore Company shall have prepared
and decided to introduce the Rehabilitation Activities Plan in form and
substance satisfactory to PUMA.
(f) No Adverse Change: until the date of initial funding of PUMA's commitment,
nothing shall have occurred which:
(i) is likely to have a material adverse effect on the rights or remedies
of PUMA or on the ability of the Company, Xxxxxxxxx or SOCAR to perform
their respective obli gations under any of the Project Agreements; and
(ii) in the opinion of PUMA, may have an adverse material effect on the
business, condition (financial or other), results of operations,
operations, property, assets, liabilities or prospects of the Company or
the Guarantors.
ARTICLE VI- EXPENSES
Article 6.01 Responsibility
Each of the Parties shall be responsible for all expenses incurred by it in
connection with entry into and performance of this Agreement including, legal,
travel and other out-of-pocket expenses. The Parties shall equally divide the
costs of the audit and will negotiate in good faith regarding the sharing of the
costs of the valuation, giving credit to work previously commis sioned by
Xxxxxxxxx and delivered to Xxxxxxx, Xxxxx & Associates, all as described in
Article 4.02(a).
ARTICLE VII- MISCELLANEOUS
Article 7.01 Assignment
No Party shall assign or otherwise transfer all or any part of its rights
or obligations under this Agreement without the prior written consent of the
other Parties except that Puma and its permitted assignees shall have the right
to assign or otherwise transfer to an Affiliate without consent.
Article 7.02 Notices
Any notice or other communication to be given or made under this Agreement
shall be in writing. Such notice or other communication shall be deemed to have
been duly given or made when it is delivered by hand, airmail, or fax to the
Party to which it is required or permitted to be given or made at such Party's
address specified below:
For: Puma Energy, Inc.
Attention: Xx. Xxxxxx Xxxxxxxx
1600 Three Lincoln Centre
0000 XXX Xxxxxxx
Xxxxxx, Xxxxx
XXX 00000-0000
Tel: x0 000 000-0000
Fax: x0 000 000-0000
For: Xxxxxxxxx
Attention: Xxxxxxxx Xxxxxxxxx
Grosse Xxxxxxxxxx 000
X-0000 Xxxxxxx, Xxxxxxx
Tel: x00 00 0000000
Fax: x00 00 000000
Article 7.03 Illegality
Each of the provisions contained in this Agreement shall be severable and
distinct from one another and if at any time any one or more such provisions is
or becomes invalid, illegal or unenforceable, the validity, legality and
enforceability of each of the remaining provisions of this Agreement shall not
in any way be affected prejudiced or impaired thereby.
Article 7.04 Amendments
No amendment or waiver of any provision of this Agreement, and no consent
to any departure by any Party from the provisions of the Agreement, shall in any
event be effective unless the same shall be in writing and signed by the
Parties, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
Article 7.05 English language
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 certified by a representative
of the relevant Party.
Article 7.06 Arbitration and Jurisdiction
(a) All Disputes which cannot be amicably settled, shall be exclusively and
finally settled by arbitration. In the event that an amicable settlement is not
achieved within thirty (30) days after receipt of written notice of Dispute by
any Party from any other Party, then any disputant may submit the Dispute to
arbitration by notice to the other Parties to the Dispute.
(b) Except as otherwise provided in this Article 7.06, the arbitration
proceedings shall be conducted by three (3) arbitrators in accordance with the
Arbitration Rules of the United Nations Commission on International Trade Law
(IJ7NCITRAL), as in existence on the effective date of this Agreement.
Notwithstanding the foregoing provisions of this Article 7.06, only one (1)
arbitrator shall be used if all disputants unanimously agree to use only one (1)
arbitrator.
(c) Unless otherwise expressly agreed by the disputants, the arbitrators shall
be appointed in accordance with the procedure set forth in the Arbitration Rules
specified in Article 8.06(b); provided, however, that the appointing authority
under the said Rules is hereby agreed to be the then President of the Stockholm
Chamber of Commerce.
(d) Unless otherwise expressly agreed in writing by all disputants:
(i) the arbitration proceedings shall be held in Stockholm, Sweden, and
shall be conducted in the English language;
(ii) the arbitrator(s) shall be fluent in the English language and shall
remain at all times wholly independent, impartial, and financially
disinterested;
(iii)only the English language text of this Agreement shall be used by the
arbitrators;
(iv) the costs of the arbitration proceedings (including the disputants'
legal fees and costs) shall be borne in the manner determined by the
arbitrator(s);
(v) the decision of the sole arbitrator or all or a majority of the
arbitrators, as the case may be, shall be reduced to writing; shall be
final and binding without the right of application or appeal on any
question of law or otherwise, or the necessity of being confirmed by any
court; shall be the sole and exclusive remedy regarding any Dispute
presented to the arbitrators; shall be made and promptly paid in US
Dollars, free of any deductions or offsets; and any costs and fees
incidental to enforcing the award shall, to the maximum extent permitted,
be charged to the Party or Parties (as the case may be) resisting such
enforcement;
(vi) judgement upon the award may be entered in any court having
jurisdiction over the person or assets of any Party (as the case may be)
owing the judgement, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case
may be;
(vii)each Party for the Purposes of allowing such arbitration and the
enforcement and execution of any arbitration decision, award, issuance of
any attachment, provisional remedy or other pre-award remedy, hereby waives
any and all claims to or defenses of immunity, including claims or defenses
of sovereign immunity;
(viii) the arbitrators shall not have the power to award any consequential
loss or damage, punitive damages or exemplary damages;
(ix) the award shall include interest from the date of any breach or
violation of this Agreement, as determined by the arbitral award, and from
the date of the award until paid in full, at the interest rate determined
by the arbitrator(s) or at the maximum rate permitted by law, whichever is
lesser;
(x) whenever the disputants are of more than one citizenship, the single
arbitrator or the presiding arbitrator, as the case may be, shall not be of
the same citizenship as any of the disputants;
(xi) the arbitration shall proceed in the absence of any disputant who,
after due notice, fails to answer or appear. An award shall not be made
solely by reason of a disputant's absence or failure to participate in the
arbitration, but the arbitrator(s) shall require the disputant(s) who is
present to submit such evidence as the arbitrator(s) may reasonably require
to make an award;
(xii)if an arbitrator should die, withdraw, or otherwise become incapable
of serving, or refuse to serve, a successor arbitrator shall be selected
and appointed in the same manner as the original arbitrator; and
(xiii) each Party waives any and all requirements of any applicable laws
relating to notice of demand for interest or damage for the loss of use of
funds.
Article 7.07. Governing Law
This Agreement shall be governed by and construed in accordance with the
substantive laws of England and Wales, without reference to choice of law
principles.
Article 7.08. Confidentiality
(e) No Party shall, until (5) years after this Agreement has expired or
terminated, without prior written consent of each of the other Parties, disclose
any Information to any Person.
(f) For the purposes of the provisions of this Article 7.08, the consent
specified by Article 7.08(a) shall not be required for disclosure of Information
to:
(i) the directors, officers and employees or the shareholder, owner or
Affiliate of the Party concerned;
(ii) the Persons professionally engaged by the Party concerned; and
(iii)the relevant Governmental, legislative, administrative or judicial
authorities of the Parties or their Affiliates concerned or any relevant
stock exchange authority to the extent the Information is required or
requested to be disclosed; and
(iv) relevant financing institutions, investors or potential assignees,
provided that:
(A) any disclosure of Information by the relevant Party must be
justified by a reasonable need-to-know on the part of any such Person
to whom the disclosure is made;
(B) in the case of Article 7.08(b)(i) the relevant Party shall use
(C) Persons referred to in Article 7.08(b)(ii) and (iv) shall be
required by such Party to first agree in writing with such Party
to be bound by confidentiality provisions that are no less
stringent than those contained in this Article 8.08 and provided
further that such Party shall use reasonable efforts to secure
compliance with such undertaking.
(g) No Party shall be required to obtain the prior consent of any other Party
in respect of the disclosure to another Person of Information which:
(i) becomes generally available to the public other than by reason of a
breach of this Agreement;
(ii) is already known by the relevant Party at the time of its receipt or
acquisition pursuant to this Agreement or is subsequently independently
developed by the relevant Party; or
(iii)subsequently lawfully acquired by the relevant Party without any
obligation to maintain the confidential nature of the Information to a
Person who is not a Party to this Agreement.
(h) No Party shall issue or make any public announcement or statement regarding
this Agreement or the Project unless prior to such announcement or statement
such Party furnishes to each of the other Parties a copy of such announcement or
statement and obtains the prior approval of each other Party as provided in
Article 7.08(a).
(i) With respect to matters that have been previously disclosed by any other
Party, each Party may make disclosures in securities analysts meetings, in
annual reports, employee and stockholder newsletters, magazines and the like of
summarizations of a general nature relating to the Project which are customarily
or routinely described or reported in such analysts meeting or publications.
(j) Nothing in this Agreement shall be deemed to grant to any Party a license
or other rights under any existing or future intellectual property rights owned
or controlled by any other Party or the right to use any patents, copyrights,
and other intellectual property of any other Party in any operations, including
joint venture operations in which such Party or any Affiliate has an interest.
Article 7.09. Obligations Several
The rights, duties, obligations and liabilities of the Parties are several
and not joint or collective. It is not the intention of the Parties to create,
nor shall this Agreement create, any partnership, trust, or association, or to
authorize any Party to act as an agent, servant, or employee for any other Party
for any purpose whatsoever except as may be expressly set out in this Agreement.
In their relations with each other under this Agreement, the Parties are not,
and are not to be considered, fiduciaries.
Article 7.10. Entirety of the Agreement
This Agreement supersedes all prior agreements, written or oral, among the
Parties with respect to the subject matter of this Agreement.
Article 7.11. No Third Party Rights
This Agreement is not intended to, and does not, create any right of any
person and is not enforceable by any person who is not a party to this
Agreement. This Article is intended to exclude, without limitation, all such
rights as may otherwise arise pursuant to the Contracts (Rights of Third
Parties) Act of 1999.
ARTICLE VIII -TERMINATION
Article 8.01 Date
(a) This Agreement shall terminate on June 30, 2002, if all conditions set
forth herein have not been satisfied, and shall be superceded by the provisions
of the IV Documents and the Off shore Company governing documents, provided that
the provisions of Articles V, VI, 7.06 7.07 and 7.08 shall survive termination.
* * * SIGNATURES FOLLOW* * *
THE PARTIES, acting through duly authorised representatives, have caused this
Agreement to be signed in their respective names on the date first above
written.
X. Xxxxxxxxx & Co. GmbH
By: /s/ X. Xxxxxxxxx
------------------
Xxxxxxxx Xxxxxxxxx
PUMA ENERGY, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxx, President
