Exhibit 10.22
SHAREHOLDER AGREEMENT
dated as of
October 14, 1997
by and between
KHANTY MANSIYSK OIL CORPORATION
and
__________________________________
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.1 Definitions ........................................... 1
ARTICLE II
Third Party Offers
SECTION 2.1. Third Party Offers .................................... 4
ARTICLE III
Transfer Restrictions
SECTION 3.1. Restrictions .......................................... 5
SECTION 3.2. Right of First Offer .................................. 6
SECTION 3.3. Legend ................................................ 8
SECTION 3 4. Compliance with Applicable Law ........................ 8
SECTION 3.5. Effect ................................................ 8
ARTICLE IV
Registration Rights
SECTION 4.1. Incidental Registration ............................... 9
SECTION 4.2. Registration Procedures ............................... 10
SECTION 4.3. Indemnification ....................................... 13
ARTICLE V
Voting Covenants
SECTION 5.1. Voting Shares ......................................... 15
ARTICLE VI
Additional Rights
SECTION 6.1. Voting and Transfer Agreement ......................... 15
ARTICLE VII
Termination
SECTION 7.1. Termination ........................................... 15
ARTICLE VIII
Miscellaneous
SECTION 8.1. Effectiveness ......................................... 16
SECTION 8.2. Notices ............................................... 16
SECTION 8.3. Interpretation ........................................ 17
SECTION 8.4. Severability .......................................... 17
i
Page
----
SECTION 8.5. Counterparts .......................................... 17
SECTION 8.6. Entire Agreement; No Third Party Beneficiaries ........ 18
SECTION 8.7. Further Assurances .................................... 18
SECTION 8.8. Governing Law; Equitable Remedies ..................... 18
SECTION 8.9. Amendments; Waivers ................................... 18
SECTION 8.10. Assignment ............................................ 18
ii
SHAREHOLDER AGREEMENT, dated as of October 14, 1997, by and between
Khanty Mansiysk Oil Corporation, a Delaware corporation ("KMOC") and __________
(the "Investor").
WHEREAS KMOC and the Investor are parties to a Note and Warrant
Purchase Agreement, dated as of October 10, 1997, (the "Purchase Agreement"),
pursuant to which KMOC, in exchange for a $7,500,000 capital investment by the
Investor, has agreed to issue to the Investor one or more notes and 16,667
warrants to purchase common stock, no par value, of KMOC at an exercise price
of $450.00 per share (the "Warrants"), all upon the terms and conditions set
forth in the Purchase Agreement; and
WHEREAS the parties hereto wish to set forth their agreement
concerning certain matters relating to the Investor's ownership and disposition
of any shares of common stock, no par value, of KMOC acquired by the Investor
pursuant to its exercise of the Warrants or by any other means subsequent to 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 closing of the transactions
contemplated by the Purchase 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
"Investor" has the meaning set forth in the recitals to this
Agreement.
"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.
"Offered Shares" has the meaning set forth in Section 3.2(a).
"Other KMOC Holders" means the holders of the Other KMOC Shares.
"Other KMOC Shares" means securities of KMOC not held by a
Shareholder.
"Permitted Transferee" has the meaning set forth in Section 3.1(c).
"Person" means any individual, group, corporation, firm,
partnership, joint venture, trust, business association, organization,
governmental entity or other entity.
"Public Offering" means any offering of stock registered under the
Securities Act.
"Purchase Agreement" has the meaning set forth in the recitals to
this Agreement.
"Response Period" has the meaning set forth in Section 3.2(b).
"SEC" means the Securities and Exchange Commission or any successor
governmental entity.
3
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" has the meaning set forth in the recitals to this
Agreement.
"Shareholder" means the Investor at such time as the Investor
Beneficially Owns Shares or any Permitted Transferee that holds Shares.
"Third Party Offer" means a bona fide offer to enter into a
transaction by a Person other than the Investor or any of the Investor's
affiliates or any other Person acting on behalf of the Investor or any of the
Investor'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).
"Warrants" has the meaning set forth in the recitals to this
Agreement.
"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
Third Party Offers
SECTION 2.1. 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 Shareholders, 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
4
Third Party Offer, other than the Shareholders, KMOC shall deliver a written
notice to the Investor, briefly describing the material terms of such Third
Party Offer, and the Investor 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 Shareholders to vote all Shares Beneficially Owned by such Shareholder
eligible to vote thereon in favor of such Third Party Offer or, if applicable,
tendering or selling and causing each of the Shareholders 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 2.1, 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, including engaging the services of a proxy solicitor
or similar firm. The notice referred to in the first sentence of this Section
2.1 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 2.1 or (ii) a registered Public Offering
pursuant to Article IV, no Shareholder 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") without the prior written consent of KMOC, which shall not be
unreasonably withheld, 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 the aggre-
5
gate of such sales made by the Shareholders as a group in any one year shall not
exceed 10% of the outstanding securities of any class of KMOC;
(b) pursuant to a merger, consolidation or other business
combination involving the Investor, where the Investor is not the surviving
entity, or a sale of all or substantially all of the Investor's assets;
provided, however, that the surviving or purchasing entity agrees to be bound by
the terms of this Agreement; or
(c) pursuant to a Transfer of Shares by the Investor to a Wholly
Owned Subsidiary, from a Wholly Owned Subsidiary of the Investor to the Investor
or between Wholly Owned Subsidiaries of the Investor (any such transferee shall
be referred to herein as a "Permitted Transferee"), provided that in the case of
any such Transfer, the Investor 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 the Investor and the Permitted Transferee, and the Permitted Transferee
shall have executed a copy of this Agreement as a shareholder of KMOC. If any
Permitted Transferee to whom Shares have been Transferred pursuant to this
Section 3.1 by the Investor ceases to be a Permitted Transferee, such Shares
shall be Transferred back to the Investor immediately prior to the time such
Person ceases to be a Permitted Transferee of the Investor. The Investor 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 Offer.
(a) If a Shareholder desires to transfer any Shares to any Person
other than pursuant to the provisions of Sections 2.1, 3.1(b) or 3.1(c) or
Article IV, the Shareholder shall first give written notice (a "Transfer
Notice") to that effect to KMOC containing (i) the number of Shares proposed to
be transferred (the "Offered Shares"), and (ii) the purchase price (the "First
Offer Price") which the Shareholder proposes to be paid for the Offered Shares.
(b) KMOC shall have a period of 30 days after the date of receipt of
the Transfer Notice (the "Response Period") to accept the offer made pursuant to
the Transfer Notice to purchase all of the Offered Shares (on its own behalf or
on the behalf of others) at the First Offer Price by delivering written notice
of acceptance to the Shareholder within the Response Period.
6
(c) If KMOC elects to purchase (on its behalf or on the behalf of
others) all of the Offered Shares, the closing of the sale of the Offered
Shares will be held at KMOC's principal office in New York on a date to be
specified by KMOC which is not less than 10 days nor more than 60 days after the
end of the Response Period. At the closing, KMOC will deliver the consideration
in accordance with the terms of the offer set forth in the Transfer Notice, and
the Shareholder will deliver the Offered Shares to KMOC, duly indorsed for
transfer, free and clear of all liens, claims and encumbrances.
(d) If, at the end of the Response Period, KMOC has not given notice
of its decision to purchase all of the Offered Shares, then the Shareholder
shall be entitled for a period of 90 days beginning the day after the expiration
of the Response Period to sell the Offered Shares at a price not lower than the
First Offer Price and on terms not more favorable to the transferee than were
contained in the Transfer Notice. Promptly after any sale pursuant to this
Section 3.2, the 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.
(e) If, at the end of any such 90-day period provided for in this
Section 3.2. the Shareholder has not completed the sale of the Offered Shares,
the 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.
(f) Notwithstanding the foregoing, in the event that KMOC fails to
close the purchase of the Offered Shares on the date specified in its notice of
acceptance, the Shareholder shall be entitled, for a period of 120 days from the
closing date originally set by KMOC in its offer of acceptance, to sell the
Offered Shares at any reasonably negotiated price to any third party without
having to further comply with the provisions of this Section 3.2; provided,
however, that in the event that KMOC's failure to close the purchase is due to
an order, injunction or other similar mandate from a regulatory body of
competent jurisdiction and KMOC is using its best efforts to cause such order,
injunction or mandate, as the case may be, to not apply to the purchase of the
Offered Shares then KMOC shall have until the earlier of (i) the expiration of
30 days from the closing date originally set by KMOC in its acceptance or (ii)
such time as the order, injunction or mandate becomes final and non-appealable,
in which to close the purchase of the Offered Shares before the provisions of
this clause (f) become applicable.
7
SECTION 3.3. Legend. Each certificate representing the Shares shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
RESTRICTIONS ON TRANSFER OF SECURITIES: THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN A SHAREHOLDER AGREEMENT DATED
OCTOBER 14, 1997. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE
CORPORATION TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE. THESE SECURITIES MAY NOT BE RESOLD OR TRANSFERRED UNLESS
SUCH CONDITIONS ARE COMPLIED WITH AND UNLESS REGISTERED OR EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS.
SECTION 3.4. Compliance with Applicable Law, Etc. The exercise of
the right of first offer set forth in Section 3.2 and the completion of any
transfer or sale of Shares contemplated hereunder shall be subject to compliance
with Applicable Law. KMOC and the Shareholders 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. KMOC and the
transferring Shareholder 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.
8
ARTICLE IV
Registration Rights
SECTION 4.1. Incidental Registration. If KMOC proposes at any time
to resister 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 the Investor (but in no event less than fifteen days before the
anticipated filing date), and offer the Shareholders the opportunity to register
such number of Shares as the Shareholders may request. Upon the written request
of the Investor made within 20 days after the receipt of any such notice (which
request shall specify the Shares intended to be disposed of by each Shareholder
and the intended method of disposition thereof), KMOC will, subject to the terms
of this Agreement, use its best efforts to include the 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 Shares requested to be
included by the Investor (including Shares to be included on behalf of other
Shareholders) 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 affected by inclusion of the
Shares requested to be included, KMOC shall include in such registration the
number (if any) of Shares so requested to be included which in the opinion of
such underwriters can be sold, but (i) only after the inclusion in such
registration of KMOC Common Stock being sold by KMOC and (ii) only after the
inclusion in such registration of KMOC Common Stock being sold by persons
exercising any demand registration rights they may have in respect of KMOC. If,
in the opinion of such underwriters, some but not all of the Shares requested to
be included may be included in such registration, all Shareholders requested to
be included therein, and any other holders of KMOC Common Stock that have
substantially similar registration rights to the holders of Shares and have
requested registration of such shares, shall share pro rata in the number of
such shares requested to be included therein based on the number of such shares
so requested to be included by such persons.
9
(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 the
Investor and, thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Shares in connection with
such registration or (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any 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 Shares including without limitation legal, accounting, printing and
distribution fees and expenses, except for registration fees associated with the
Shares and commissions and underwriting discounts payable with respect to the
Shares, which shall be paid by the Investor.
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 Shares, KMOC will as promptly as
practicable:
(i) furnish to the Investor 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 the Investor
may reasonably request to facilitate the disposition of the Shares
included in such registration by the Shareholders;
(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 rea-
10
sonably appropriate for distribution of the 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 the Investor, 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 the Investor 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 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 the Investor's request
prepare and furnish to the Investor 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
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 Shares to be listed
on each securities exchange or inter-dealer quotation system on
which the KMOC Common Stock is then listed or will 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
Shareholders participate in such registration, the Investor agrees and each of
the other Shareholders shall agree not to, unless agreed to in writing by the
manag-
11
ing underwriter or underwriters or KMOC, effect any public sale or distribution,
including any sale pursuant to Rule 144 of the Securities Act, of any 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 Investor agrees, and each of
the other Shareholders shall agree, that KMOC may instruct its transfer agent to
place stop transfer notations in its records to enforce this Section 4.2(b).
(c) The Investor agrees, and each of the other Shareholders included
in such registration shall agree, 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 Shares pursuant to the registration
statement relating to such 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 in such Shareholder's possession,
of the prospectus relating to such Shares at the time of receipt of such notice;
provided, that if the registration statement is for an underwritten Public
Offering, each Shareholder included in such registration will use its best
efforts to cause the underwriters of such Public Offering to discontinue the
disposition of Shares.
(d) If any Shares are included in any registration pursuant to this
Article IV, the Investor agrees, and each of the other Shareholders selling
Shares shall agree, to take such actions and furnish KMOC with such information
regarding itself and relating to the distribution of the 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 Shares to be sold to
agree in writing 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
Shares in accordance with and in the manner of the distribution contemplated by
the applicable registration statement and prospectus.
12
SECTION 4.3. Indemnfication.
(a) Indemnification by KMOC. In the event of any registration of
Shares pursuant to Section 4.1, KMOC agrees to indemnify and hold harmless the
seller of Shares and its directors and officers and each other person, if any,
who controls the seller (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 Shares to KMOC.
(b) Indemnification by the Shareholders. The Investor agrees, and
each of the other Shareholders participating in a registration of shares
pursuant to this Article IV shall 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 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 Shareholder
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
13
(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 with 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 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 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
14
Shareholder, on the date such Shareholder no longer Beneficially Owns any Shares
or Warrants; provided, however, that the provisions of Section 4.3 shall survive
the termination of this Agreement with respect to each Shareholder.
ARTICLE VIII
Miscellaneous
SECTION 8.1. Effectiveness. This Agreement shall be effective as of
the Effective Date.
SECTION 8.2. 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):
If to KMOC, to:
Khanty Mansiysk Oil Corporation
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxxx
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
15
If to the Investor or any other Shareholder, to:
Name: _________________________________
_________________________________
Address: ______________________________
______________________________
Attention: ___________________________
Phone: ___________________________
Fax: ___________________________
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 8.2 (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 8.2 (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 8.3. 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."
SECTION 8.4. 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 8.5. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and all of which shall,
taken together, be considered one and the same agreement, it being understood
that both parties need not sign the same counterpart.
16
SECTION 8.6. Entire Agreement; No Third Party 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 8.7. 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 8.8. 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 specifically
the provisions of this Agreement, in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 8.9. 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 8.10. 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
substan-
17
tially 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.
18
