EXHIBIT 10.1
AGREEMENT
This Agreement is entered into and made between: MED SHIPPING AND TRADING S.A.
(MED), a Corporation under the Laws of the Republic of Liberia with office at
Xxxxxxxxxxxxx 00. x/x Xxxxxxxxx & Xxxxxxx, 00000 Xxxxxxxxx xx Xxxx Xxxxxxx;
represented by its Chairman Xxxxxxxx Xxxxxxx and AMERICAN INTERNATIONAL
PETROLEUM CORPORATION (AIPC), a Nevada Corporation with office at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, XX 00000, represented by its Chairman Xx. Xxxxxx X. Xxxxx.
MED represents that it holds and controls a ninety (90) percent interest in the
undivided interests of Exploration License, dated November 15, 1996 signed by
the Prime Minister of Kazakstan, Xxxxxx XX, No. 953 (Oil), issued to Scientific
Industrial Firm DANK TOO (DANK). License and translation attached to Exhibit "A"
(hereforth License). MED also represents that it has the authorization to
transfer or assign all or part of its interest in the License to AIPC in
accordance with its Agreements with the license holder DANK.
AIPC represents that it will accept an equity interest to participate in the
License and guarantee the execution and completion of the minimum work program,
and all expenditures related thereto, as specified in Section "B" of the
License, on the following basis.
1. MED will have the License transferred to MSUP in accordance with the
requirements of the Kazakstan government to the Joint Venture Company.
MSUP MED SHIPPING USTURT PETROLEUM Company Limited (MSUP). MED will
provide Financial Statements of MSUP as of March 31, 1997 which have been
signed by the authorized officers of MSUP. The Financial Statements of
MSUP will be prepared by AIPC's accounting representative with
representations from the management that there are no liabilities or
contingent liabilities subsequent to the statement date. The statements
will be made part of this Agreement and will be attached as Exhibit "B".
MED represents that MSUP has no liabilities as of this date, except for a
contingent liability of the annual payments of approximately USD $190,000
each beginning July 1998 for the procurements of the date upon the
transfer of the License to MSUP.
2. The Charter Documents and/or Articles of Incorporation of MSUP will be
modified to reflect the following conditions.
a). Percent of Ownership:
- AIPC 70%
- MED 20%
- DANK 10%
b). Board of Directors. The existing directors will resign and seven new
directors will be appointed to reflect the following distribution:
- AIPC 4
- MED 2
- DANK 1
c). Authorized Capital: 1,000,000 (US DOLLARS EQUIVALENT)
- AIPC 700,000
- MED 200,000
- DANK 100,00
d). The value of the License No. 953 when assigned to MSUP will be equal
to the respective capital contributions of MED (USD $200,000) and
DANK (USD $100,000) and recorded in the MSUP records as their
respective initial capital contributions. Thereafter all further
valuations will be proportionate to the ownership of MSUP.
e). Revenue: All revenue will first be dedicated tot he liquidation of
all operating and capital expenditures and provisions for
appropriate taxes and required provisions. Eighty-five percent (85%)
of all remaining revenues are to be dedicated to the retirement of
principal and interest on financial loans related to MSUP and the
License Operations.
3. In consideration of the above and purchase of seventy percent (70%)
interest in MSUP from MED, AIPC will issue 700,000 common shares under the
regulation "S" provisions of the U.S. Securities Exchange Commission to
MED. The 700,000 shares will be issued and placed in trust with Xxxxxx
Xxxxxxxxx. The shares will be issued to the Trustee to coincide with the
effective date of transfer of the seventy percent interest to AIPC in the
joint venture company MSUP, and the above listed modifications to the
company charter are made. The said 700,000 shares will be held in trust by
Xxxxxx Xxxxxxxxx until the License No. 953 is officially transferred to
MSUP. The modifications to the MSUP charter will be done by AIPC's legal
representative and execution of this Agreement hereby authorizes AIPC's
legal representative to implement the claimer modifications immediately,
limited only to the terms mentioned above. AIPC commits to meet all
reasonable criteria of a "going concern" including demonstration of
financial capability to facilitate the transfer of the License to MSUP.
4. AIPC will make additional payments to MED when the License is transferred
to MSUP. These payments will be made in the following forms within fifteen
(15) days of the official written approval of the transfer of the License
to MSUP by the appropriate government entity; and the money, warrants and
shares mentioned below at a), b) and c) will be sent to Xxxxxx Xxxxxxxxx,
Trustee:
a) payment of USD 150,000
b) Issuance of five (5) year warrants to purchase 500,000 common shares
of AIPC stock at USD $2/share.
c) Issuance of 500,000 common shares of AIPC stock with a restrictive
legend that prohibits sale unless the five day average bid price of
AIPC stock is quoted on the NASDAQ National Marketing System is
equal to or greater than $2/share.
5. A special bonus will be paid to MED when an Execution License (Production
License), with royalties and bonuses acceptable to AIPC becomes effective.
This bonus will be paid with the Issuance of 1,500,000 shares of AIPC
common stock to be placed to trust with Xxxxxxxxx & Partner. The Trustee,
Xxxxxx Xxxxxxxxx understands and agrees NOT to sell or dispose of the
1,500,000
shares unless the five day average bid price of AIPC stock as quoted on
the NASDAQ National Marketing System is equal to or greater than USD
$5/share. A legend to that effect will be placed on the stock certificate.
6. AIPC warrants that it will be responsible for the planning execution and
evaluation required by the License minimum work programs. This program
will be funded by way of direct interest bearing loans to MSUP in addition
in the formation capital of the joint venture company. These loans will be
made either from AIPC corporate offices directly to MSUP or through the
wholly-owned subsidiary of AIPC established for operations in Kazakstan.
The interest rate will not exceed 3.5 times the U.S. prime interest rate
quoted by Chase Manhattan Bank New York.
7. All MSUP Co., Ltd. operations related to the License Series MG 953, both
in the Exploration and Extraction phases, will be executed and managed by
the wholly-owned subsidiary of AIPC established for operations in
Kazakstan. A standard International Joint Operating Agreement will be
executed between MSUP Co., Ltd. and the subsidiary to govern and control
all aspects of the joint operations related to the License. A draft of
this standard form has been presented to MED and is included herein as
Annex A.
8. The AIPC wholly-owned subsidiary for Kazakstan operations will develop a
Technical Service Contract with DANK to provide the required local
technical support, governmental contracts, and the required interphase
with ministerial and regulatory entities. This Technical Services Contract
will be executed on an "arms length" basis and all fees will be supported
by appropriate documentation of completed work. Contract fee amounts will
not exceed normal local rates for similar services.
9. As additional consideration, AIPC will enter into a separate consulting
agreement with MED, simultaneously with the execution of this Agreement,
for the services of Xx. Xxxxxxxx Xxxxxxx. A draft of this consulting
agreement is included herein as Annex B. This agreement will provide for
the direct support of Xx. Xxxxxxx in the transition of establishing the
local APIC subsidiary's operation in Kazakstan establishment of contracts
for crude sales and marketing, development of production properties, and
other activities related to the enhancement of the License and AIPC's
Kazakstan operations. In addition, Xx. Xxxxxxx will be available to
prepare reports and presentations on the project which may be required for
presentation to industry analysts, potential investors and/or business
partners. MED will be pre-paid USD $23,000,000 per month for these
services starting with the execution of this Agreement, which includes all
international travel and related expenses. It is anticipated that Xx.
Xxxxxxx will be required to make at least four trips a year to Kazakstan
in execution of these functions reasonable travel expenses for additional
trips by Xx. Xxxxxxx will be reimbursed upon submittal of appropriate
documentation of expenditures. AIPC will reimburse Xx. Xxxxxxx for all
reasonable travel expenses ____ for trips requested by AIPC in relation to
reports on presentations to the investor community. Said expenses will be
supported by adequate documentation and receipts in accordance with normal
company practices. This Consulting Agreement will continue for a term not
to exceed three years, and will terminate automatically with:
a). the sale, transfer or assignment of any portion of MED or of AIPC's
increase in the License in and/or MSUP Co., Ltd. to an unrelated
entity, subject to the provisions of section 10.a) and 10.b), or
b). Initiation of a production program with the sustained production
rates of 3,000 bbls/day or gas equivalent, and the corresponding
actual distribution of revenue is made to MED in
replacement of the consulting fee. In the event that the
distribution is less than the stated consulting fee, AIPC shall make
up the difference in cash, or
c). involuntary removal of AIPC as Operator of the License; or
d). Xx. Xxxxxxx is not able to comply with the terms of the Consulting
Agreement due to his involvement in other projects, physical
incapability or separation from MED.
10. Each of the shareholders of MSUP Co. Ltd., will have a preferential right
to purchase shares offered by any of the original shareholders or any
proposed sale of transfer of any shares in the company as stipulated in
article 10 of the Charter of MSUP Co., Ltd. The Charter should be revised
to state that any partial sale or transfer of interest will be made in
proportion to the original interest of the parties of AIPC, MED and DANK,
and at each party's option. It is agreed that MED's representative, Xx.
Xxxxxxxx Xxxxxxx, is appointed as the President of the Executive Operating
Committee as provided in the Join Operating Agreement governing operations
of the License No. 953.
a). In the event that AIPC transfers all of its interest in MSUP, the
receiving party will assume all of the obligations of AIPC related
to the consulting agreement with MED. It will be AIPC's
responsibility to make such arrangements.
b). If AIPC transfers part of its interest in MSUP, the new party will
participate proportionally in the obligations of AIPC related in the
consulting agreement with MED. It will be AIPC's responsibility to
make such arrangements.
11. MED will provide, simultaneously with the execution of this Agreement,
satisfactory disclosure to AIPC on all agreements for payments it has made
with third parties or shareholders of MED in relation to the execution of
the License that could commit AIPC for future payments to maintain the
License. MED represents that it has not made any commitments on AIPC's
behalf, financial or otherwise, as of this date.
12. If MED and DANK are not able to have the License No. 953 transferred to
MSUP within three months from the execution date of this Agreement, AIPC
will receive a 10% interest in the License for the consideration it has
paid MED to date, through a Joint Venture Agreement with MED and DANK. In
this event, AIPC will be responsible only for its proportionate share of
costs related to the development of the Joint Venture and the obligations
under the License No. 953; in addition no payments under sections, 3, 4,
5, 8 and 9 will be due. This date can only be extended at AIPC's option by
evidence in writing of said extension from AIPC reasonable extensions will
be granted if the delay in transfer of the License is due to
non-performance by AIPC or the government's reluctance to transfer the
License to MSUP without a completed Contract as specified under clause 8.1
of the License.
13. The parties assure one another of their good faith. Any disputes shall be
resolved by amicable discussions and negotiations. Any remaining dispute
controversy or claim arising out of or in relation to or in connection
with this Agreement or operations carried out under this Agreement,
including without limitation any dispute as to the contribution, validity,
interpretation, enforceability or breach of this Agreement shall be
exclusively and finally settled by arbitration, and any party may submit
such a dispute, controversy or claim to arbitration; and English law shall
apply. The arbitration shall take place in London, England in the English
language under the rules of the London Court of International Arbitration,
which
are herewith referred to and declared part of this present Agreement; and
the decision of the arbitration will be binding and final on the parties.
The losing party will pay for the reasonable costs and legal fees of the
other side incurred in reference to the arbitration.
14. No amendments, changes or modifications to this Agreement shall be valid
except if the same are in writing or telefax and signed by a duly
authorized representative of each of the parties. At any time the parties
may unanimously agree to amend this Agreement. This Agreement may be
executed in one or more counterparts, all which when taken together shall
constitute one and the same document. This Agreement may be executed by
facsimile, and such execution shall have the same force and effect as if
executed in the original.
15. This Agreement comprises the full and complete agreement of the parties
hereto with respect to the transfer of interest in the License No. 953 and
related operations, and contracts with MED, and supersedes and cancel all
prior understandings and agreements between the parties hereto, whether
written, oral expressed or implied. In the event of any conflicts between
the provisions of this Agreement and provisions in any other related
documents, the provisions of this Agreement shall control.
16. This Agreement shall inure to the benefit of and be binding upon the
successors, assignees and transferees of the parties; provided, however,
this section shall not be deemed to authorize successions, assignments or
transfers not otherwise expressly permitted herein.
17. During the term of this Agreement, no party shall in respect of its
participation interest create any royalty interest, overriding royalty
interest, net profits interest, or other similar interest, out of its
participating interest hereunder which would in any way effect the
participating interests of any of the other parties.
Both parties represent that their respective Boards have been informed of this
Agreement and approve execution. The parties agree to supply written
documentation of the respective board resolutions authorizing execution of this
Agreement.
Agreed to at Frankfurt and New York, this 22nd day of April 1997.
----------------------------- ----------------------------
Xxxxxxxx Xxxxxxx Xx. Xxxxxx X. Xxxxx
Chairman and President of MED Chairman and CEO of AIPC
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Xxxxxx Xxxxxxxxx, Trustee
ANNEX B
CONSULTING SERVICES
AGREEMENT
1. This CONSULTING SERVICES AGREEMENT ("AGREEMENT") is effective this 22nd
day of April 1997 between American International Petroleum Corporation
("AIPC") with office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX represented by
its President, Xx. Xxxxxx X. Xxxxx, and MED Shipping and Trading S.A.
("MED"), with office c/x Xxxxxxxxx & Partner, Xxxxxxxxxxxxx 00, 00000
Xxxxxxxxx xx Xxxx, Xxxxxxx, represented by its President Xxxxxxxx Xxxxxxx.
2. Both parties agree that this AGREEMENT does not form any employer-employee
relationship between them, MED is an independent Consultant for oil and
gas with Xxxxxxxx Xxxxxxx ("Armenis") as its President. MED represents
that it is not controlled by U.S. citizens as defined in the SEC
regulations. MED herewith waives all benefits that normally are paid or
granted only to an employee in the sense of labor law (for instance,
social security, termination protection, pension rights, etc.).
3. In connection with his Presidency for MED Shipping and Trading S.A., MED
herewith offers his services as an independent non-employed Consultant for
all business questions and problems related to the License dated 16th of
November 1996, signed by the Prime Minister of the Republic of Kazakstan.
Series MG No. 953 (Oil) ("License") and related to the Agreement between
AIPC and MED as shown in Exhibit "A" to this AGREEMENT.
4. AIPC herewith accepts MED's foregoing offer.
5. Both parties agree that ARMENIS shall use his personal contacts with
business people and government officials and government advisors in
Kazakstan, USA and Europe in order to further the profitable development
and exploitation of the License. Specifically:
a). ARMENIS will provide all help and support reasonably at his
disposition for the transition of establishing the local AIPC
subsidiary's operations in Kazakstan, establishment of contacts for
crude sales and marketing, development of production properties, and
other activities related to the enhancement of the License and
AIPC's Kazakstan operations. (Agreement between AIPC and MED , Sect.
9). In addition, ARMENIS will be available to prepare reports and
presentations on the project which may be required for presentation
to industry analysts, potential investors, and/or business partners.
b). In relation to development of production properties, it is
understood that ARMENIS will offer all and any opportunities first
to AIPC and nothing will be interpreted as conflict of interest for
ARMENIS to secure an appropriate interest for MED's benefit.
However, if AIPC decides that it does not wish to pursue any of
these opportunities, ARMENIS will be deemed free to pursue those
opportunities for the full benefit of MED without any obligations or
reimbursements to AIPC.
c). In compensation for ARMENIS's consultant services, MED (c/x
Xxxxxxxxx & Partners trust account), will be paid US$23,000 (twenty
three thousand US dollars) per month prepaid, which is to start with
the Execution of the Agreement between MED and AIPC and which
includes all international travel and related expenses. It is
anticipated that
ARMENIS will be required to make at least four trips a year to Kazakstan
in execution of those functions. Reasonable travel expenses for additional
trips by ARMENIS will be reimbursed upon submittal of appropriate
documentation of expenditures (Kazak invoices will be in Russian and Tenge
currency). AIPC will reimburse MED for all reasonable travel expenses
incurred for the trips requested by AIPC in relation to reports or
presentations to the investor community. Said expenses will be supported
by adequate documentation and receipts in accordance with normal company
practices.
d). This AGREEMENT will become effective upon the execution of the
Agreement between MED and AIPC. It will continue for a term not to
exceed three (3) years, and will terminate automatically under the
provisions of sect.8a.), 8b), 8c) and 8d) of the Agreement between
MED and AIPC, which are further repeated and expanded as follows:
(i) the sale, transfer, or assignment of any portion of MED's
interest in the License and/or in MSUP MED Shipping Usturt
Petroleum Co., Ltd. to an unrelated entity or
(ii) Initiation of a production program with sustained production
rates of 3,000 barrels per day or gas equivalent, and the
corresponding actual distribution of revenues flowing to MED
is at least equivalent to the consulting fee, AIPC shall have
the right to make up the difference in cash, or
(iii) ARMENIS is unable to comply with the terms of this Agreement
due to separation from MED, physical incapacity, or
involvement in other projects; however, this clause is not
arbitrary and does not give permission to AIPC to make
unreasonable requests. AIPC shall notify ARMENIS at least
seven (7) days before any travel requests.
6. MED's consultant shall not be construed as an agency of AIPC or its
subsidiaries. Neither MED nor ARMENIS shall have power of attorney to
create legal obligations on behalf of AIPC.
7. Election of law and Arbitration agreements shall be identical with the
respective passages in the Agreement between AIPC and MED (there, sect.
73).
Date: _________
---------------------------------------
Xx. Xxxxxx X. Xxxxx
President
American International Petroleum Corporation
---------------------------------------
Xxxxxxxx Xxxxxxx
as President of MED Shipping and Trading S.A. and as Consultant
Additional, Clause per the handwritten "Note" above:
Consultant and MED expressly agrees to indemnify and hold harmless AIPC and its
agents, directors, officers and employees from and against all losses, expenses
(including, but not limited to, attorney's fees), claims, demands, liabilities
or causes of action arising in connection with the performance of this Agreement
which are the result of illness, injury or loss of life.
