Preview of our top selling Russia - Joint Venture Agreement
Siberian Energy Group - Joint Venture Shareholders' Agreement
DATED OCTOBER 14, 2005
(1) BALTIC PETROLEUM (E&P) LIMITED
and
(2) SIBERIAN ENERGY GROUP INC.
and
(3) ZAURALNEFTEGAZ LIMITED
JOINT VENTURE SHAREHOLDERS' AGREEMENT
COVINGTON & BURLING
REGISTERED FOREIGN LAWYERS AND SOLICITORS - LONDON
265 STRAND
LONDON WC2R 1BH
TABLE OF CONTENTS
CLAUSE PAGE
1. INTERPRETATION 1
2. CONDITIONS AND COMPLETION 5
3. ESTABLISHMENT OF THE COMPANY 6
4. CONDUCT PRIOR TO COMPLETION 8
5. WARRANTIES AND INDEMNITIES 9
6. THE BUSINESS OF THE COMPANY 12
7. DIRECTORS AND MANAGEMENT 13
8. RESERVED MATTERS 15
9. BUDGETS AND FINANCIAL INFORMATION 17
10. DISTRIBUTION POLICY AND MANAGEMENT FEES 17
11. FINANCE FOR THE COMPANY 18
12. TRANSFERS OF SHARES 19
13. DEADLOCK 22
14. DEFAULT 25
15. DETERMINATION OF FAIR VALUE 28
16. TERMS AND CONSEQUENCES OF TRANSFERS OF SHARES 29
17. ENFORCEMENT OF RIGHTS 32
18. COMPETITION WITH THE BUSINESS 32
19. PUBLIC ANNOUNCEMENTS 35
20. INFORMATION, INSURANCE, RECORDS, LICENCES 35
21. CONSORTIUM TAX RELIEF 36
22. DURATION AND TERMINATION 36
23. CONFIDENTIALITY 37
24. NOTICES 38
25. WHOLE AGREEMENT AND REMEDIES 39
26. GENERAL 39
27. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 42
28. GOVERNING LAW AND SUBMISSION TO JURISDICTION 42
29. AUTHORITY TO DELIVER 42
SCHEDULE 1 44
AGREED TERMS DOCUMENTS 44
SCHEDULE 2 45
DEED OF ADHERENCE 45
SCHEDULE 3 46
WARRANTIES 46
SCHEDULE 4 57
DISCLOSURE SCHEDULE 57
SCHEDULE 5 58
PARTIES' DETAILS 58
SCHEDULE 6 59
NEW LICENCES 59
THIS AGREEMENT is made on 14th October 2005
BETWEEN:
(1) BALTIC PETROLEUM (E&P) LIMITED, a company incorporated in England under company number 05303991 and whose registered office is at c/o Gilchrist Solicitors, 18b Charles Street, London W1J 5DU, United Kingdom ("BP");
(2) SIBERIAN ENERGY GROUP INC., a corporation incorporated under the laws of the State of Nevada, United States and whose principal place of business is at 275 Madison Avenue, 6th Floor, New York, NY 10016, United States ("SEG"); and
(3) ZAURALNEFTEGAZ LIMITED, a company registered in England under company number 05525360 whose registered office is at c/o Gilchrist Solicitors, 18b Charles Street, London W1J 5DU, United Kingdom (the "COMPANY").
RECITALS:
(A) Pursuant to the terms of an option agreement between Baltic Petroleum
Limited ("BALTIC") and SEG dated 28 April 2005, as amended (the "OPTION
AGREEMENT"), Baltic and SEG agreed, inter alia, to establish the Company as
a joint venture company to carry on the Business and to enter into this
Agreement for the purposes of regulating their relationship with each other
and the Company;
(B) The Company was incorporated in England on 2 August 2005 with company
number 05525360 As at the date of this Agreement, it has an authorised
share capital of 100 divided into 100 ordinary shares of 1 each ("ORDINARY
SHARES" and each an "ORDINARY SHARE"). 2 Ordinary Shares have been issued
at a subscription price of 1 per share. BP holds 1 Ordinary Share and SEG
holds 1 Ordinary Share.
(C) SEG is the holder of all of the participatory interests in OOO
Zauralneftegaz, a Russian limited liability company ("ZNG"). SEG has agreed
to contribute all of such participatory interests in ZNG (the "ZNG
INTERESTS") to the Company as consideration for the subscription for
further Ordinary Shares on the terms and conditions of this Agreement. BP
has agreed to procure the provision of certain loans to the Company and to
subscribe for further Ordinary Shares in consideration for the payment of
$75,000, in each case on the terms and conditions of this Agreement.
IT IS AGREED as follows:
1. INTERPRETATION
In this Agreement (including the Recitals):
1.1 DEFINITIONS
"ACT" means the Companies Act 1985 as amended;
"A DIRECTOR" means a director appointed by the A Shareholder in
accordance with the Articles and "A DIRECTORS" shall be construed
accordingly;
"AGREED TERMS" means those documents in the terms agreed between the parties and signed for identification by or on behalf of the parties, a list of which is set out in Schedule 1;
"AREA" means the Western Siberian region of the Russian Federation and the Former Soviet Union;
"ARTICLES" means the proposed new articles of association of the Company in the agreed terms;
"A SHAREHOLDER" means the registered holder(s) of the A Shares;
"A SHARES" means the Ordinary Shares designated as A Shares in the capital of the Company;
"ASSOCIATE" shall be as defined in Section 52 of the Companies Act 1989;
"ASSOCIATED COMPANY" means, in relation to a Shareholder (that is a body corporate), any holding company of which the Shareholder is a subsidiary or a subsidiary of the Shareholder or of any holding company of which the Shareholder is a subsidiary;
"AUDITED ACCOUNTS" means the report and audited accounts of the Company and of each Group Company and the audited consolidated accounts of the Group for the financial period ending on the relevant balance sheet date;
"AUDITORS" means such firm of Chartered Accountants appointed as auditors of the Company pursuant to the terms of this Agreement from time to time;
"B DIRECTOR" means a director appointed by the B Shareholder in accordance with the Articles and "B DIRECTORS" shall be construed accordingly;
"B SHAREHOLDER" means the registered holder(s) of the B Shares;
"B SHARES" means the Ordinary Shares designated as B Shares in the capital of the Company;
"LEND CO" means Caspian Finance Limited, a wholly-owned subsidiary of BP, incorporated in England under company number 05530897;
"BOARD" means the board of directors of the Company;
"BUDGET" means the budget for the Group in the agreed terms, as updated from time to time in accordance with Clause 9.2;
"BUSINESS" means the business of exploration for, and development, production and sale of, oil and gas assets in the Area, together with associated and ancillary activities;
"BUSINESS DAY" means a day which is not a Saturday or Sunday or a bank or public holiday in England and Wales or New York, New York, United States;
"BUSINESS PLAN" means the business plan for the Group in the agreed terms, as amended by agreement between the parties, prepared annually in respect of the forthcoming one year period setting out details of the Group's strategic planning in respect of, inter alia, exploration, development and production of oil and gas, customers, capital expenditure, financing, tax, competitors and contingency planning;
"CEO" means the chief executive officer of the Company from time to time;
"CHAIRMAN" means the chairman of the Board from time to time;
"COMPLETION" means the performance by the parties of the obligations assumed by them respectively pursuant to Clause 3;
"COMPLETION DATE" means the date on which Completion takes place pursuant to Clause 2.5;
"CONTROL" means, in relation to a Shareholder, where a person (or persons acting in concert) acquires or agrees to acquire or has options over direct or indirect control (1) of the affairs of that Shareholder, or (2) over more than 50 per cent. of the total voting rights conferred by all the issued shares in the capital of that Shareholder which are ordinarily exercisable in general meeting or (3) of the composition of the main board of directors of a Shareholder. For these purposes "PERSONS ACTING IN CONCERT", in relation to a Shareholder, are persons which actively co-operate through the acquisition by them of shares in that Shareholder, pursuant to an agreement or understanding (whether formal or informal) with a view to obtaining or consolidating Control of that Shareholder;
"DEED OF ADHERENCE" means a deed in the form set out in Schedule 2;
"DIRECTORS" means the A Directors and the B Directors, and "DIRECTOR" means any one of them;
"ENCUMBRANCE" means and includes any interest or equity of any person (including, without limitation, any right to acquire, option, right of pre-emption or right of conversion) or any mortgage, charge, pledge, lien, assignment or any other encumbrance, priority or security interest or arrangement of whatever nature over or in the relevant property;
"EXISTING SECURITY" means the security interest over the ZNG Interests granted by SEG in favour over Baltic pursuant to the pledge and security agreement dated 28 April 2005;
"FAIR VALUE" means the value of the Shares calculated in accordance with Clause 15;
"GROUP" means the Company and its subsidiaries and "GROUP COMPANY" means any one of them;
"GUARANTEE" means the guarantee to be given by the Company in respect of ZNG's obligations under the Loans in the agreed terms;
"LOAN AGREEMENT" means the agreement to be entered into between Lend Co and ZNG pursuant to which Lend Co shall make the Loans to ZNG;
"LOAN PERIOD" means the period commencing on the date hereof and ending when all amounts under the Loan Agreement and under the loans to be made pursuant to Clause 11.1.2 (including interest and costs) have been repaid in full;
"LOANS" means the loans to be made by Lend Co to ZNG under the Loan Agreement;
"OPTION AGREEMENT" shall be as defined in the Recitals;
"ORDINARY SHARES" shall be as defined in the Recitals;
"PERMITTED CONDITION" means a bona fide consent, clearance, approval or permission necessary to enable the relevant person to be able to complete a transfer of Shares under (1) its constitutional documents (2) the rules or regulations of any stock exchange on which it or its parent company is quoted or (3) any governmental, statutory or regulatory body in those jurisdictions where that person carries on business;
"SECURITY DOCUMENTS" means the debenture and the pledge over the ZNG Interests to be granted by the Company in the agreed terms;
"SHAREHOLDERS" means the A Shareholder and the B Shareholder;
"SHARES" means the A Shares and the B Shares and (1) any shares issued in exchange for those shares or by way of conversion or reclassification and (2) any shares representing or deriving from those shares as a result of an increase in, reorganisation or variation of the capital of the Company;
"US$" means United States Dollars;
"WARRANTIES" means the warranties, representations and undertakings to be given by SEG and BP under Clause 5, and "WARRANTY" shall be construed accordingly;
"ZNG" shall be as defined in the Recitals;
"ZNG INTERESTS" shall be as defined in the Recitals; and
"ZNG WARRANTIES" means the Warranties given by SEG in relation to ZNG as set out in Section A of Part I of Schedule 3.
1.2 The Interpretation Act 1978 shall apply to this Agreement in the same
way as it applies to an enactment.
1.3 References to a statutory provision include any subordinate
legislation made from time to time under that provision.
1.4 References to a statute or statutory provision include that statute or
provision as from time to time modified or re-enacted or consolidated
whether before or after the date of this Agreement so far as such
modification or re-enactment or consolidation applies or is capable of
applying to any transactions entered into in accordance with this Agreement
and (so far as liability thereunder may exist or can arise) shall include
also any past statutory provision (as from time to time modified or
re-enacted or consolidated) which such provision has directly or indirectly
replaced.
1.5 The expressions "holding company" and "subsidiary" shall have the same
meanings in this Agreement as their respective definitions in the Act.
1.6 References to this Agreement include any Recitals and Schedules to it
and this Agreement as from time to time amended and references to Clauses
and Schedules are to Clauses of and Schedules to this Agreement.
1.7 Headings shall be ignored in construing this Agreement.
1.8 Any provision of this Agreement which is expressed to bind more than
one person shall, save where inconsistent with the context, bind them
jointly and each of them severally.
1.9 References to time of day are to London, United Kingdom time unless
otherwise stated.
1.10 References to the winding-up of a person include the amalgamation,
reconstruction, reorganisation, administration, dissolution, liquidation,
merger or consolidation of such person and any equivalent or analogous
procedure under the law of any jurisdiction in which that person is
incorporated, domiciled or resident or carries on business or has assets.
1.11 Any reference to books, records or other information means books,
records or other information in any form including paper, electronically
stored data, magnetic media, film and microfilm.
1.12 Any reference to any English legal term or concept (including for any
action, remedy, method of judicial proceeding, document, legal status,
statute, court, official governmental authority or agency) shall, in
respect of any jurisdiction other than England, be interpreted to mean the
nearest and most appropriate analogous term to the English term in the
legal language in that jurisdiction as the context reasonably requires so
as to produce as nearly as possible the same effect in relation to that
jurisdiction as would be the case in relation to England.
2. CONDITIONS AND COMPLETION
2.1 CONDITIONS PRECEDENT
Completion of this Agreement is conditional on satisfaction or waiver
by BP of the following conditions:
2.1.1 completion of the transfer by SEG to the Company of the ZNG
Interests in accordance with the terms of the sale and purchase
agreement relating to the ZNG Interests between SEG and the Company of
even date herewith, as evidenced by filing an original notification of
such transfer with ZNG and delivery of a notarised copy of such
notification to BP;
2.1.2 adoption by ZNG of the amended Charter in the agreed terms and
registration of the same with the appropriate Russian corporate
authorities to the full satisfaction of BP and its legal counsel; and
2.1.3 SEG shall have demonstrated to BP to its absolute satisfaction,
which shall include providing appropriate documentary evidence, its
full and unfettered title to the ZNG Interests.
2.2 RESPONSIBILITY OF THE PARTIES
SEG undertakes to procure that the conditions in Clause 2.1 are
satisfied by 31 October 2005. SEG shall procure that the Company acquires
good title to the ZNG Interests, free from any Encumbrance (save for the
Existing Security which shall be released at Completion in accordance with
Clause 3.2.8 below).
2.3 NON-SATISFACTION
SEG shall promptly give notice to BP of the satisfaction of the
conditions above within two Business Days of becoming aware of the same. If
any of the conditions in Clause 2.1 are not satisfied or waived by BP (in
its absolute discretion) on or before 30 November 2005 (or such later date
as BP may determine) this Agreement shall lapse and no party shall have any
claim against any other in respect of this Agreement, except for any prior
breach of the terms of this Agreement and except for Clauses 2.4
(Liquidated Damages) 5.11 (Indemnification), 24 (Notices) and 28 (Governing
Law and Submission to Jurisdiction), which shall remain in full force and
effect.
2.4 LIQUIDATED DAMAGES
In the event the Agreement terminates in accordance with Clause 2.3 or
is rescinded pursuant to Clause 3.3.3 in circumstances where SEG has failed
to satisfy its obligations under Clause 3.2, SEG shall pay to BP the
following sums:
2.4.1 US$500,000 on 31 December 2005; and
2.4.2 US$500,000 on 30 April 2006.
SEG acknowledges that the above sums consist of liquidated damages
that represent a genuine pre-estimate of the loss (including its costs,
expenses and loss of profit) that would be suffered by BP if Completion
does not occur due to SEG's failure to satisfy the conditions in Clause 2.1
or its obligations under Clause 3.2 and are fair and reasonable in all the
circumstances. SEG waives any right which it may have to challenge the
validity at law of any obligation to pay the liquidated damages.
2.5 COMPLETION
Completion shall take place at the registered office of BP two
Business Days following fulfilment or waiver of the conditions set out in
Clause 2.1, or at such other place or on such other date as may be agreed
between the BP and SEG.
3. ESTABLISHMENT OF THE COMPANY
3.1 WRITTEN RESOLUTIONS OF THE COMPANY
On the Completion Date, BP and SEG shall sign the written resolutions
of the Company in the agreed terms for the purposes of:
3.1.1 adopting the Articles in substitution for the existing articles
of association of the Company;
3.1.2 re-designating the issued Ordinary Share in the capital of the
Company registered in the name of BP as an A Share and re-designating
the issued Ordinary Share in the capital of the Company registered in
the name of SEG as a B Share;
3.1.3 re-designating the 98 unissued Ordinary Shares in the capital of
the Company as 49 A Shares and 49 B Shares; and
3.1.4 authorising the Directors to issue and allot 49 A Shares and 49
B Shares to the Shareholders in accordance with this Agreement.
3.2 COMPLETION OBLIGATIONS
Once the resolutions in Clause 3.1 have been passed:
3.2.1 BP and SEG shall subscribe for new Ordinary Shares as follows:
(a) BP shall subscribe in cash the sum of $75,000 for 49 A
Shares; and
(b) SEG shall, in consideration for the transfer to the Company
of the ZNG Interests, subscribe for 49 B Shares;
3.2.2 BP and SEG shall procure that a Board meeting of the Company is
convened and resolutions in the agreed terms are passed:
(a) approving the Shareholders' applications for the numbers of
A Shares and B Shares set out above and allotting those Shares;
(b) adopting 31 December as the Company's accounting reference
date;
(c) adopting the Business Plan and the Budget; and
(d) appointing Coutts & Co. as its bankers;
3.2.3 the Company shall allot and issue 49 A Shares to BP and 49 B
Shares to SEG, in each case credited as fully paid, and the
Shareholders shall procure that the names of BP and SEG are entered in
the Company's register of members as the respective holders of such
shares;
3.2.4 BP shall appoint its first A Directors pursuant to the Articles
and this Agreement;
3.2.5 SEG shall appoint its first B Directors pursuant to the Articles
and this Agreement;
3.2.6 Baltic, ZNG and Lend Co shall enter into a deed of novation in
the agreed terms in relation to the loan agreement dated 28 April 2005
and immediately thereafter BP shall procure that Lend Co shall enter
into the Loan Agreement in accordance with Clause 11.1;
3.2.7 the Company shall enter into the Guarantee and Security
Documents in accordance with Clause 11.2;
3.2.8 BP shall procure that Baltic releases SEG from its obligations
under the guarantee given by SEG to Baltic dated 28 April 2005 and in
respect of the Existing Security by executing the releases in the
agreed terms;
3.2.9 SEG shall confirm that it has no claims against ZNG by executing
the letter of acknowledgement in the agreed terms;
3.2.10 SEG shall provide to the Company the waiver letters in the
agreed terms signed by the shareholders and creditors of SEG;
3.2.11 BP shall pay to the Company the sum of $75,000 as the proceeds
for the subscription for Shares referred to at Clause 3.2.1(a);
3.2.12 the Company shall pay to SEG the sum of $75,000 as
consideration for the transfer to it of the ZNG Interests;
3.2.13 SEG shall procure that the employment agreements for all staff
of ZNG and those between SEG and Messrs Eret, Potapov and Zhuravlev
are terminated and provide to BP written evidence of the same; and
3.2.14 SEG shall provide to the Company and BP written confirmations
from its 9 largest shareholders in the agreed terms agreeing to
observe the restrictions in Clause 18.1.1.
3.3 FAILURE TO PERFORM OBLIGATIONS
If any of the requirements under this Clause 3 are not complied with
on the date fixed for Completion the Shareholder not in default may
(without prejudice to its other rights and remedies including the right to
claim damages for the breach):
3.3.1 defer Completion to a date not more than 30 days after such date
(and so that the provisions of this Clause 3 (apart from this Clause
3.3) shall apply to Completion as so deferred);
3.3.2 proceed to Completion so far as practicable (without prejudice
to its rights under this Agreement);
3.3.3 rescind this Agreement without liability to the other
Shareholder (otherwise than pursuant to Clause 2.4); or
3.3.4 waive all or any of the obligations in question of the Shareholder in
default.
4. CONDUCT PRIOR TO COMPLETION
4.1 BP and SEG each undertake to procure that until Completion the Company
remains a non-trading dormant company and neither of them shall transfer or
otherwise dispose of any interest in or create an Encumbrance over their
respective Ordinary Shares.
4.2 SEG undertakes to regularly consult with BP about the conduct of ZNG's
business between the date of this Agreement and Completion and shall
procure that such business is carried out in the usual course of business
consistent with past practice so as to maintain the same as an on-going
concern and that no transaction outside the usual course of business is
carried out without the prior written consent of the BP. In particular, SEG
shall procure that until Completion unless with the prior written consent
of BP:
4.2.1 no further participatory interests in ZNG will be created or
issued and, other than as required by Clause 2.1.1, SEG shall not
transfer or otherwise dispose of any interest in, or create any
Encumbrance over, the participatory interests in ZNG;
4.2.2 other than as referred to in Clause 2.1.2, no alteration or
amendment shall be made to the Charter or the operating,
organisational or constitutional documents of ZNG;
4.2.3 ZNG shall not make any change in the nature or scope of its
business as carried on at the date of this Agreement, nor shall it
deal in any way with its existing oil and gas exploration licenses or
the proposed new oil and gas exploration licences detailed in Schedule
6 (including (without limitation) any amendment to the terms of,
nature or scope of such licenses or the work programmes attached to
them);
4.2.4 ZNG shall not enter into any transaction, contract or
arrangement that is not in the normal or ordinary course of its
business as carried on at the date hereof nor enter into any
transaction which is not on arm's length terms nor effect any
acquisitions or disposals of any material assets;
4.2.5 ZNG shall not borrow any money or incur any material
indebtedness;
4.2.6 ZNG shall not appoint or terminate, or alter the terms of
employment of, any employees or personnel in a managerial capacity;
4.2.7 ZNG shall not create any Encumbrance over any of its assets;
4.2.8 ZNG shall not institute or settle any legal proceedings nor take
any steps to wind itself up or commence any insolvency proceedings in
relation to itself; and
4.2.9 ZNG shall not declare or pay any dividend, or otherwise make any
other form of distribution to its members.
5. WARRANTIES AND INDEMNITIES
5.1 SEG WARRANTIES
SEG warrants and represents to, and undertakes with, BP and JV Co in
the terms of Part I of Schedule 3.
5.2 BP WARRANTIES
BP warrants and represents to, and undertakes with, SEG in the terms
of Part II of Schedule 3.
5.3 REPETITION OF WARRANTIES
SEG shall be deemed to warrant, represent and undertake to BP and the
Company in the terms of the ZNG Warranties at all times up to Completion
with reference to the facts and circumstances then subsisting (save that a
reference to any fact, matter, event or circumstance existing, occurring or
having occurred at or before the date of this Agreement shall also be
construed as a reference to its existing, occurring or having occurred at
or before such time. SEG undertakes (except only as may be necessary to
give effect to this Agreement or except with the prior written consent of
BP) that it will not and will procure that ZNG will not do, allow or
procure any act or omission before Completion which would constitute a
breach of or would be inconsistent with any of the Warranties if given at
any time prior to Completion.
5.4 TERMINATION
SEG shall immediately disclose to BP in writing any of the following
which may become known to it after the date of this Agreement and before
Completion:
5.4.1 any material breach of any of the ZNG Warranties;
5.4.2 anything occurring which has, or would be likely to have after
Completion, a material adverse effect on the business of ZNG (as
presently carried on) including, without limitation, any litigation or
arbitration proceedings being instituted or threatened by or against
ZNG.
If any such disclosure shall be made, or if BP otherwise becomes aware
of any such matter or thing, BP may at any time before Completion, by
written notice to SEG, rescind this Agreement. A breach or claim or adverse
effect shall, for the purposes of this Clause, be treated as material if,
in the reasonable opinion of BP, when taken together with any other breach,
claim or adverse effect of the nature described in this Clause, such
breach, claim or adverse effect causes or is reasonably likely to cause or
would have caused or would be reasonably likely to have caused BP, the
Company or ZNG damage or loss in aggregate in excess of US$20,000.
5.5 DISCLOSURE
The ZNG Warranties are given subject to the matters disclosed in
Schedule 4 (the "DISCLOSURE SCHEDULE"). Save to the extent it is fully,
fairly and accurately disclosed in such Schedule, no fact, matter, event or
circumstance of which a person seeking to make a claim under the Warranties
(actual, imputed or constructive) shall prejudice any such claim made by
such person or operate to reduce any amount recoverable.
5.6 SEG'S KNOWLEDGE
Where any statement in the Warranties is qualified by the expression
"to the best of the knowledge, information and belief of SEG" or "so far as
SEG is aware" or any similar expression, SEG shall be deemed to have
knowledge of anything of which ZNG has knowledge or anything of which it or
ZNG would have had knowledge had either of them made due and careful
enquiry of their respective officers and employees immediately before
giving the Warranties.
5.7 RELIANCE
The parties acknowledge that each of them is entering into this
Agreement in reliance on those Warranties which are being given to them.
5.8 EFFECT OF COMPLETION
Subject to any other terms of this Agreement, the Warranties shall
continue in full force and effect notwithstanding Completion.
5.9 CONSTRUCTION
Each of the Warranties shall be construed separately and none of the
Warranties shall limit or govern the extent, application or construction of
any other of the Warranties.
5.10 NOTIFICATION
Each party giving the Warranties agrees to notify in writing the
party/parties to whom they are being given, as soon as reasonably
practicable after it becomes aware of the same, all details of which it is
aware of any fact or circumstance which renders or might render untrue or
misleading any of the Warranties it has given.
5.11 INDEMNIFICATION
Each of the parties (the "INDEMNIFYING PARTY") undertakes to
indemnify, and to keep indemnified, each of the other parties (each an
"INDEMNIFIED PARTY" and together the "INDEMNIFIED PARTIES") against all
losses or liabilities (including, without limitation, any direct or
indirect consequential losses, loss of profit, loss of reputation, damages,
claims, demands, proceedings, costs, legal and other professional fees and
costs, penalties and expenses) which may be suffered or incurred by any of
the Indemnified Parties and which arise directly or indirectly in
connection with (1) a breach of any of the Warranties given by the
Indemnifying Party to any of the Indemnified Parties and (2) a default
under or breach of any of the terms of this Agreement.
5.12 LIMITATIONS
Except in the case of case of fraud, dishonesty or wilful misconduct
or concealment, SEG shall not be liable for any claim under ZNG Warranties
unless written notice of such claim giving reasonable details thereof has
been given to it by or on behalf of BP or the Company, as the case may be,
in respect of a claim under paragraph 13 of the ZNG Warranties (Tax
Matters), on or before the tenth anniversary of the date of this Agreement
and in respect of any other claim, on or before the date which is eighteen
months from the date of this Agreement.
5.13 GROSS-UP
If a payment due from an Indemnifying Party to an Indemnified Party
under Clause 5.11 is subject to tax (whether by way of direct assessment or
withholding at its source), the Indemnified Party shall be entitled to
receive from the Indemnifying Party such amounts as will ensure that the
net receipt, after tax, to the Indemnified Party in respect of the payment
is the same as it would have been were the payment not subject to tax.
6. THE BUSINESS OF THE COMPANY
6.1 CONDUCT OF THE BUSINESS
The Shareholders agree that their respective rights in the Company
shall be regulated by this Agreement and the Articles. The Shareholders and
the Company agree to be bound by and comply with the provisions of this
Agreement which relate to them and all provisions of the Articles will be
enforceable by the parties between themselves in whatever capacity. The
Shareholders shall:
6.1.1 promote the best interests of the Company;
6.1.2 (so far as they lawfully can) ensure that the Company performs
and complies with all of its obligations under this Agreement and the
Articles; and
6.1.3 ensure that the Business is conducted in accordance with sound
and good business practice and the highest ethical standards.
6.2 PROMOTION OF THE BUSINESS
6.2.1 Subject to Clause 8.2.1, the business of the Company shall be
confined to the Business.
6.2.2 The Shareholders shall procure that the Company and any Group
Company shall have complete independence in operations and that any
expansion, development or evolution of the Business (whether to be
conducted as part of or in connection with the Company's main business
or ancillary to it) will only be effected through the Company or a
wholly-owned subsidiary. If such consent is obtained, all Shareholders
shall be entitled to participate in any firm or company formed for the
purpose of such expansion, development or evolution pro rata to their
holdings of Shares unless all the Shareholders shall otherwise agree.
6.2.3 The Company and any Group Company shall use all reasonable and
proper means to maintain, improve and extend the Business in
accordance with the Business Plan.
6.3 HEAD OFFICE
The head office of the Company shall be situated in the Lond...
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