SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Under to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 12, 1996
Commission File Number: 33-1381-D
EuroGas, Inc.
(Exact Name of Registrant as Specified in its Charter)
Utah 87-0427676
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
435 West Universal Circle, Sandy, Utah 84070
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(801) 255-0862
(Former name, former address, and formal fiscal year, if changed since last
report)
Page 1 of consecutively numbered pages, including exhibits.
----
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On July 12, 1996, EuroGas, Inc. (the "Company"), completed the acquisition
of Danube International Petroleum Company, Inc., a Texas corporation ("Danube"),
as a wholly owned subsidiary.
Danube's primary asset is a joint venture with Nafta Gbely a.s. (part of
the recently privatized Slovakian national gas company) which owns the rights to
explore and develop hydrocarbons, principally natural gas, on approximately
128,000 acres located in the East Slovak Basin (the "Slovakian Concession").
Between 1960 and 1982 (13 years prior to Danube's involvement in the area)
eleven wells were drilled on the Slovakian Concession, all of which tested gas
or had gas shows, with the most significant wells testing up to 2 million cubic
feet per day (mmcf). None of these wells were completed for commercial
production due to (1) gas prices that were significantly lower then the current
$3.50 per thousand cubic feet ("mcf") (Eastern European gas prices averaged more
than $3.15 per mcf during all of 1995); (2) a prior focus on producing fields to
the north; and (3) the fact that modern completion techniques, such as fracing,
were not then available under the Czech communist regime.
The joint venture intends to concentrate on the exploration of regional gas
occurrences in areas which are generally characterized by large gross reserve
thickness, sometimes known as "pay zones", up to several thousand feet. The
initial wells are to be drilled only a short distance from the wells drilled in
the past. Danube is required to pay 75% of the costs for the initial test phase
which is estimated to be approximately $6,600,000. If warranted, Danube would
then pay for 60% of the costs of drilling for the next production phase
estimated to be about $6,800,000. Thereafter, the drilling is expected to be
completed on a 50-50 basis. Danube holds a 47.5% net revenue interest in the
Slovak concession.
Danube is currently drilling the first well, the Trebisov 5R, of a multiple
well program on the Slovakian Concession. The well is expected to reach a total
depth of 8,600 feet by late July, 1996, after which it will be fraced by
Schlumberger. Initial shows indicate that the well contains multiple zones with
large gross reservoir thicknesses although extended flow tests have not been
conducted. The "fracing of the well" is not expected to be completed before
mid-August 1996, at which point a decision of whether to complete the well for
production will be made.
Danube also has a joint venture with Moravske Naftave Doly a.s., a recently
privatized national owned Czech company which owns the oil and gas exploration
rights to approximately 40,000 acres located near the city of Brno (the "Czech
Concession"). That joint venture agreement provides that Danube shall act as an
operator for the project and shall provide an initial $1,200,000 for the testing
of the field in exchange for a 25% working interest. There were four wells
previously drilled and tested on approximately 735 acres of the Czech
Concession. Danube is planning to retest those wells in early August to
determine if their flow rates are sufficient to complete them for production and
to hook them up to delivery pipelines and then will develop a more comprehensive
drilling program during the last quarter of 1996.
Under the terms of the agreement with Danube (the " Agreement"), the
Company acquired all of the issued and outstanding stock of Danube in exchange
for $3,000,000 in cash ($500,000 paid at closing and $2,500,000 to be paid on
December 31, 1996), 2,500,000 shares of the Company's restricted common stock,
1,250,000 shares of a newly created preferred stock which is convertible into
2,500,000 additional shares of the Company's common stock, and the right to
purchase up to 5,000,000 shares of common stock for $3.00 per share during the
next five years. The Danube assets are subject to approximately $1,000,000 of
indebtedness which the Company plans to pay in the normal course of events. The
Company also agreed to register certain of the shares at the earliest practical
date and expects to file a registration statement for this purpose by December
31, 1996. Sales pursuant thereto will be limited to no more than 1,000,000
shares within the first six months after the effective date of the registration
statement and 2,500,000 shares within the first twelve months after the
effective date.
As part of the transaction with Danube, Dr. Martin A. Schuepbach agreed to
become president and chief executive officer of EuroGas. Dr. Schuepbach is an
internationally recognized authority in oil and gas exploration and production,
and has particular expertise in Eastern Europe. Prior to his involvement with
Danube, Dr. Schuepbach was Senior Vice President of Exploration for Maxus Energy
Company during a period in which is expanded into Eastern Europe and the CIS,
Africa, the Far East and South America. Prior to joining Maxus, Dr. Schuepbach
was Geological Manager with Standard Oil International working in exploration of
Europe, Argentina, and China. Prior to his tenure with Standard Oil
International, Dr. Schuepbach was employed as Chief Geologist of Aminoil. Dr.
Schuepbach also worked for Exxon Corporation for ten years in exploration
research and production, including a three-year period in Germany where he
developed new exploration concepts which led to significant oil and gas
discoveries. The employment agreement with Dr. Schuepbach is for an initial
term of three years and carries an annual salary of $240,000 with stock options.
Concurrently, the Company acquired the rights held by a third party,
Chemilabco, to participate in the projects of Danube. Chemilabco had already
provided $500,000 in financing for drilling by Danube. In the past, Chemilabco
had also arranged financing for EuroGas' existing Polish Concession. In
exchange for Chemilabco's participation rights, prior accommodations for the
Company, and the arrangement of an additional $3,500,000 in financing (completed
July 5, 1996), Chemilabco received 5,000,000 shares of the Company's common
stock and a contingent right to receive 1,000,000 shares of EuroGas common stock
for each commercial well developed on Danube's Czech and Slovak concessions, but
in no event more than an additional 16,000,000 shares. The initial 5,000,000
shares issued to Chemilabco are to be included in the registration statement to
be filed for the Danube shareholders, but will also be subject to restrictions
on the amount of stock which may be resold within the first twelve months.
The Company paid a $100,000 fee to SBC-Warburg, a leading United Kingdom
investment bank, for providing merger advisory services to the Company in
connection with the Danube transaction.
ITEM 7. EXHIBITS
The Company had not prepared current audited financial statements in the
ordinary course of its business, making it impracticable to provide the
financial statements and pro forma information required under this form. The
Company currently anticipates that such financial statements and pro forma
information will be prepared and filed not later than 75 days subsequent to the
date of this report.
<TABLE>
<CAPTION>
Exhibit SEC
No. Reference No. Description Location
<S> <C> <C> <C>
1 (4) Designation of Rights, Privileges, This Filing
and Preferences of 1996 Series
Preferred Stock
2 (4) Warrant Agreement This Filing
3 (4) Registration Rights Agreement This Filing
4 (10) Agreement in Principle between EuroGas This Filing
and Chemilabco
5 (10) Agreement and Plan of Merger This Filing
between EuroGas, Inc. and
Danube International Petroleum
Company, Inc., dated July 3, 1996,
as amended (without schedules).
6 (10) Employment Agreement between This Filing
EuroGas, Inc. and Martin A. Schuepbach
7 (10) The Convertible Debenture issued to This Filing
Lux Immobilian for $3,500,000
</TABLE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 29, 1996 EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer
(Principal Financial and Accounting
Officer)
ARTICLES OF AMENDMENT
OF
EUROGAS, INC.
Designation of Rights, Privileges and Preferences
of 1996 Series Preferred Stock
Pursuant to the provisions of Section 16-10a-602 of the Utah Revised
Business Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment for the purpose of designating a series of
preferred stock and fixing and determining the relative rights and preferences
thereof:
FIRST: The name of the corporation is EuroGas, Inc. (the "Corporation").
SECOND: The following resolution, designating a series of preferred stock
of the Corporation and fixing and determining the relative rights and
preferences thereof, was duly adopted by the Board of Directors of the
Corporation in accordance with the Articles of Incorporation of the Corporation,
as amended, and the Utah Revised Business Corporation Act:
RESOLVED, that the Board of Directors of the Corporation, pursuant to the
authority expressly vested in it by the Articles of Incorporation of the
Corporation, as amended (the "Articles of Incorporation"), hereby provides for
the issuance of up to 1,250,000 shares of a new series of the preferred stock,
par value $.001 per share ("Preferred Stock"), of the Corporation and hereby
establishes the designations, preferences, limitations and relative rights of
such series:
1. Designation of Series. There shall be a series of Preferred Stock
designated as "1996 Series Preferred Stock" (the "1996 Preferred Stock"), and
the number of shares constituting such series shall initially be 1,250,000.
2. Dividends. The holders of the outstanding shares of 1996 Preferred
Stock shall be entitled to receive cumulative cash dividends at the rate of $.05
per share per annum as and when declared by the Board of Directors of the
Corporation out of assets of the Corporation which are by law available for the
payment of dividends. Such dividends shall be payable 31 days after the end of
each fiscal year, commencing on January 31, 1997, to the holders of record of
shares of the 1996 Preferred Stock as they appear on the stock register of the
Corporation on a record fixed by the Board of Directors of the Corporation date,
which shall not be more than 60 days prior to the date of payment thereof.
Dividends shall be cumulative and shall accrue on each share of 1996
Preferred Stock from the date of its original issuance, whether or not earned or
declared. Any payment made by the Corporation in respect of unpaid cumulative
dividends shall, if the amount of such payment is less than the total amount of
the unpaid cumulative dividends, be applied first to those dividends which have
been accrued for the longest time.
So long as any shares of 1996 Preferred Stock are outstanding, if any
cumulative dividends on the outstanding shares of 1996 Preferred Stock shall not
have been paid, such unpaid dividends shall be paid in full before any dividend
or other distribution shall be paid on or declared or set apart for payment on
any shares of common stock, par value $.001 per share, of the Corporation or any
shares of Preferred Stock or other capital stock of the Corporation of any other
class or series which ranks junior to the 1996 Preferred Stock in respect of
dividends or distributions of assets upon liquidation (all of which are
hereinafter embraced in the term "Junior Stock"). In addition, so long as any
shares of 1996 Preferred Stock are outstanding, no dividend or other
distribution shall be paid on or declared or set apart for payment on any shares
of the series of Preferred Stock designated as "1995 Series Preferred Stock"
(the "1995 Preferred Stock") unless at the same time dividends or distributions
in like proportion shall be paid on the outstanding shares of 1996 Preferred
Stock. As used in this Section 2, (i) the term "distribution" shall mean any
dividend, distribution or other transfer of cash or property, with or without
consideration, and shall include the purchase or redemption of shares of the
Corporation for cash or property either directly or by a subsidiary of the
Corporation and (ii) the term "in like proportion" shall mean, when used with
reference to dividends and distributions on the 1996 Preferred Stock, in the
same proportion as the number of outstanding shares of such series bears to the
total number of outstanding shares of 1996 Preferred Stock and 1995 Preferred
Stock (collectively, "Senior Stock").
3. Liquidation. In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, whether voluntary or otherwise (all of
which are hereinafter embraced in the term "liquidation"), after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of the 1996 Preferred Stock shall be entitled to receive, out of the
remaining net assets of the Corporation, the amount of $5.00 per share of 1996
Preferred Stock, together with all dividends unpaid and accumulated thereon to
the date of such liquidation, whether earned or declared or not (the "1996
Preferred Stock Liquidation Amount"), prior to any distribution to the holders
of any shares of Junior Stock. In the event of any liquidation, no distribution
shall be made on any shares of 1995 Preferred Stock unless at the same time a
distribution in like proportion shall be paid on the outstanding shares of 1996
Preferred Stock. As used in this Section 3, (i) the term "distribution" shall
mean any distribution or other transfer of cash or property, with or without
consideration, and shall include the purchase or redemption of shares of the
Corporation for cash or property either directly or by a subsidiary of the
Corporation and (ii) the term "in like proportion" shall mean, when used with
reference to distributions on the 1996 Preferred Stock, in the same proportion
as the product of (x) the 1996 Preferred Stock Liquidation Amount and (y) the
number of outstanding shares of 1996 Preferred Stock bears to the product of
(x) the amount of the per share liquidation preference to which the holders of
1995 Preferred Stock are entitled in accordance with Section 1.01 of the
Designation of Rights, Privileges, and Preferences of 1995 Series Preferred
Stock filed in the office of the Division of Corporations and Commercial Code of
the State of Utah on May 18, 1995 as in effect on the date hereof and (y) the
number of outstanding shares of 1995 Preferred Stock.
If upon any liquidation the assets distributable among the holders of 1996
Preferred Stock shall be insufficient to permit the payment in full to such
holders of the 1996 Preferred Stock Liquidation Amount, then the assets of the
Corporation available for distribution to such holders shall be distributed
ratably among the holders of 1996 Preferred Stock.
Neither the merger nor consolidation of the Corporation into or with any
other corporation, nor the merger or consolidation of any other corporation into
or with the Corporation, nor a disposition of all or any part of the assets of
the Corporation, shall be deemed to be a liquidation within the meaning of this
Section 3.
4. Optional Redemption. The Corporation may at its option redeem all,
but not less than all, of the outstanding shares of 1996 Preferred Stock on any
date set by the Board of Directors (the "Redemption Date"). The per share cash
redemption price for the 1996 Preferred Stock shall be an amount in cash equal
to $36.84 per share, together with all dividends accrued and unpaid thereon,
whether or not declared, to the date fixed for redemption (the "Redemption
Price").
Not more than 60 nor less than 20 days prior to the Redemption Date, the
Corporation shall give notice by first class mail, postage prepaid, to the
holders of record of the 1996 Preferred Stock, addressed to such stockholders at
their last addresses as shown on the stock transfer books of the Corporation.
Such notice of redemption shall identify the shares called for redemption and
shall state the Redemption Date, the Redemption Price, the place or places of
payment, that payment will be made upon presentation and surrender of the shares
of 1996 Preferred Stock and that, on and after the Redemption Date, dividends
will cease to accumulate on such shares in accordance with this Section 4.
On or after the Redemption Date, each holder of shares of 1996 Preferred
Stock shall surrender the certificate evidencing such shares to the Corporation
at the place designated in such notice and shall thereupon be entitled to
receive payment of the Redemption Price. If, on the Redemption Date, funds
necessary for redemption shall be available therefor and shall have been
irrevocably deposited or set aside for the benefit of the holders of 1996
Preferred Stock, then, notwithstanding the fact that any certificates evidencing
shares of 1996 Preferred Stock shall not have been surrendered, dividends with
respect to such shares shall cease to accrue after the Redemption Date, such
shares shall no longer be deemed outstanding and the holders thereof shall cease
to have any rights with respect to such shares (except the right of the holders
to receive the Redemption Price upon surrender of the certificates evidencing
their shares).
5. Conversion.
(a) Mandatory Conversion. On July 3, 1997 (the "Conversion Date"), each
share of 1996 Preferred Stock then outstanding shall automatically be converted
into fully paid and nonassessable shares of Common Stock initially at the rate
of two shares of Common Stock for each share of 1996 Preferred Stock.
(b) Conversion Procedures. Immediately following the Conversion Date,
each holder of shares of 1996 Preferred Stock shall surrender the certificate or
certificates evidencing such shares of 1996 Preferred Stock at the office of the
transfer agent for the 1996 Preferred Stock, which certificate or certificates,
if the Corporation shall so require, shall be accompanied by written notice to
the Corporation specifying the name and address in which a certificate or
certificates evidencing shares of Common Stock are to be issued.
No payment or adjustment in respect of dividends on shares surrendered for
conversion or any dividend on the Common Stock issued upon conversion shall be
made upon the conversion of shares of 1996 Preferred Stock.
The Corporation shall, as soon as practicable after each such surrender of
certificates evidencing shares of 1996 Preferred Stock accompanied by the
written notice referred to above, deliver at such office of such transfer agent
to the person for whose account such shares of 1996 Preferred Stock were so
surrendered, or to the nominee or nominees of such person, certificates
evidencing the number of shares of Common Stock to which such person shall be
entitled as aforesaid. Such conversion shall be deemed to have been made as of
the Conversion Date, notwithstanding the fact that the shares of 1996 Preferred
Stock shall be surrendered as of a later date, and the person or persons
entitled to receive the Common Stock deliverable upon conversion of such 1996
Preferred Stock shall be treated for all purposes as the record holder or
holders of such Common Stock as of the Conversion Date.
(c) Adjustment of Conversion Rate. The number of shares of Common Stock
(and number or amount of any other securities and property as hereinafter
provided) into which a share of 1996 Preferred Stock is convertible (the
"Conversion Rate") shall be subject to adjustment from time to time as follows:
(i) In case the Corporation, at any time after the date hereof and
prior to the Conversion Date, shall (1) pay a dividend or make a
distribution on its Common Stock that is paid or made in other shares of
stock of the Corporation or in rights to purchase stock or other securities
if such rights are not separable from the Common Stock except upon the
occurrence of a contingency, (2) subdivide its outstanding shares of Common
Stock into a greater number of shares, (3) combine its outstanding shares
of Common Stock into a smaller number of shares or (4) issue any shares of
its capital stock in a reclassification of the Common Stock, then in each
such case the Conversion Rate in effect immediately prior thereto shall be
adjusted so that each holder of shares of 1996 Preferred Stock shall be
entitled to receive upon conversion thereof the number of shares of Common
Stock and other shares and rights to purchase stock or other securities
(or, in the event of the redemption of any such shares or rights, any cash,
property or securities paid in respect of such redemption) which such
holder would have owned or have been entitled to receive after the
occurrence of any event described above had such shares of 1996 Preferred
Stock been converted immediately prior to the occurrence of such event. An
adjustment made pursuant to this subparagraph (i) shall become effective
immediately after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date in the case
of a subdivision, combination or reclassification.
(ii) In case the Corporation, at any time after the date hereof and
prior to the Conversion Date, shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
expiring within 45 days after the date fixed for determination mentioned
below) to subscribe for or purchase shares of Common Stock at a price per
share less than the then current market price per share (determined as
provided below) of the Common Stock on the date fixed for the determination
of stockholders entitled to receive such rights or warrants, then the
Conversion Rate in effect at the opening of business on the day following
the date fixed for such determination shall be increased by multiplying
such Conversion Rate by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase and the denominator shall be
the number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number
of shares of Common Stock so offered for subscription or purchase would
purchase at such current market price, such increase to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this subparagraph (ii),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation.
(iii) In case the Corporation shall, at any time after the date
hereof and prior to the Conversion Date, by dividend or otherwise,
distribute to all or substantially all holders of its Common Stock
evidences of its indebtedness, cash (excluding ordinary cash dividends paid
out of retained earnings of the Corporation), other assets or rights or
warrants to subscribe for or purchase any security (excluding those
referred to in subparagraphs (i) and (ii) above), then in each such case
the Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which
the numerator shall be the current market price per share (determined as
provided below) of the Common Stock on the date fixed for such
determination and the denominator shall be such current market price per
share of the Common Stock less the amount of cash and the then fair market
value (as determined by the Board of Directors, whose determination shall
be set forth in a resolution of the Board of Directors) of the portion of
the assets, rights or evidences of indebtedness so distributed applicable
to one share of Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive such
distribution.
(iv) In case the Corporation shall, at any time after the date hereof
and prior to the Conversion Date, sell or issue shares of Common Stock, or
rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding (A) shares, rights, options, warrants or convertible or
exchangeable securities issued in any of the transactions described in
subparagraphs (i), (ii) or (iii) above, (B) shares issued upon conversion,
exercise or exchange of rights, options, warrants or convertible or
exchangeable securities described in this subparagraph (iv), (C) the
warrants issued pursuant to the Warrant Agreement, dated July 12, 1996,
among the Corporation and the other parties named therein, and any shares
issued on exercise thereof, (D) up to 21,000,000 shares of Common Stock
issued to Chemilabco B.V. pursuant to agreements entered into between the
Corporation and Chemilabco B.V. prior to the date hereof, (E) shares issued
for compensatory purposes pursuant to an employee stock option or similar
plan providing for options or other similar rights to purchase (or
issuances pursuant to incentive bonus plans) and (F) shares to be issued on
any debentures of EuroGas outstanding as of July 10, 1996) at a price per
share of Common Stock (determined in the case of such rights, options,
warrants or convertible or exchangeable securities, by dividing (x) the
total amount receivable by the Corporation in consideration of the sale and
issuance of such rights, options, warrants or convertible or exchangeable
securities, plus the total consideration payable to the Corporation upon
exercise, conversion or exchange thereof, by (y) the total number of shares
of Common Stock issuable upon exercise, conversion or exchange of such
rights, options, warrants or convertible or exchangeable securities) that
is less than the Applicable Percentage (as hereinafter defined) of the then
current market price (determined as set forth below) per share of Common
Stock in effect immediately prior to such sale and issuance, then
Conversion Rate shall be adjusted such that the number of shares issuable
upon conversion of a share of 1996 Preferred Stock shall be that number
determined by multiplying the number of shares of Common Stock issuable
upon conversion immediately prior to such adjustment by a fraction, the
numerator of which is the total number of shares of Common Stock
outstanding immediately after such sale or issuance and the denominator of
which is an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such sale and issuance plus (B) the
number of shares of Common Stock which the Adjusted Consideration Amount
(as hereinafter defined) would purchase at the then current market price
per share of Common Stock. As used herein, (i) the term "Applicable
Percentage" shall mean 85%; provided, however, that if the shares of Common
Stock, or rights, options, warrants or convertible or exchangeable
securities, issued or sold by the Corporation are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), and the Corporation is not obligated to register
such shares or other securities under the Securities Act for a period of at
least one year from the date of issuance or sale thereof, the Applicable
Percentage shall be 65% and (ii) the term "Adjusted Consideration Amount"
shall mean the sum of (x) the aggregate consideration (determined as
provided below) received by the Corporation for the issuance and sale of
the shares of Common Stock and (y) a percentage equal to 100% less the
Applicable Percentage, multiplied by the product of (1) the number of the
number of shares of Common Stock issued or sold by the Corporation and (2)
the current market price per share of Common Stock. For the purposes of
such adjustments, the shares of Common Stock which the holder of any such
rights, options, warrants or convertible or exchangeable securities shall
be entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of the sale and issuance of the rights, warrants
or convertible or exchangeable securities and the consideration received by
the Corporation therefor shall be deemed to be the consideration received
by the Corporation for such rights, options, warrants or convertible or
exchangeable securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible or exchangeable securities to be
paid for the shares of Common Stock issuable upon exercise, conversion or
exchange thereof. In case the Corporation shall sell and issue shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the "price
per share of Common Stock" for purposes of the first sentence of this
subparagraph (iv), the Board of Directors of the Corporation shall
determine, in good faith, the fair value of said property and such
determination shall be set forth in a resolution of the Board of Directors.
Such determination by the Board of Directors shall be binding on all
holders of 1996 Preferred Stock in the absence of manifest error.
(v) For purposes of any computation under this Section 5, the current
market price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices of the shares of Common Stock for
the 10 consecutive trading days (as defined below) preceding the applicable
record date. The closing price for each day shall be the last reported
sales price or in case no such reported sale takes place on such day, the
average of the closing bid and asked prices for such day, in each case on
the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading, or, if not listed or admitted to
trading, the last sale price for the Common Stock as reported by the Nasdaq
Stock Market, or if such last sale price is not so reported by the Nasdaq
Stock Market or if no such sale takes place on such day, the mean between
the closing bid and asked prices for the Common Stock as reported by the
Nasdaq Stock Market. For the purpose of this subparagraph (v), trading day
shall mean a day on which the securities exchange specified for purposes of
this subparagraph (v) shall be open for business or, if the shares of
Common Stock are not listed on any exchange for such period, a day with
respect to which quotations of the character referred to in the next
preceding sentence shall be reported.
(vi) No adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
subparagraph (vi) are not required to be made shall be carried forward and
cumulated with in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be.
(vii) Whenever the Conversion Rate is adjusted as provided in any
provision of this Section 5:
(1) the Corporation shall compute the adjusted Conversion Rate in
accordance with this Section 5 and shall prepare a certificate signed by
the principal financial officer of the Corporation setting forth the
adjusted Conversion Rate and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be
filed with the transfer agent of the 1996 Preferred Stock; and
(2) a notice stating that the Conversion Rate has been adjusted and
setting forth the adjusted Conversion Rate shall forthwith be mailed by the
Corporation to all record holders of 1996 Preferred Stock at their last
addresses as they shall appear in the stock transfer books of the
Corporation.
(viii) In the event that at any time, as a result of any adjustment
made pursuant to this Section 5, the holder of any shares of 1996 Preferred
Stock thereafter surrendered for conversion shall become entitled to
receive any shares of the Corporation other than shares of Common Stock or
to receive any other securities, the number of such other shares or
securities so receivable upon conversion of any share of 1996 Preferred
Stock shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions contained in
this Section 5 with respect to the Common Stock.
(d) Reclassification, Consolidation, Merger or Sale of Assets. In case of
any reclassification of the Common Stock, any consolidation of the Corporation
with, or merger of the Corporation into, any other person, any merger of another
person into the Corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Corporation), any sale or transfer of all or substantially
all of the assets of the Corporation or any compulsory share exchange, pursuant
to which share exchange the Common Stock is converted into other securities,
cash or other property, then lawful provision shall be made as part of the terms
of such transaction whereby the holder of each share of 1996 Preferred Stock
then outstanding shall have the right thereafter, during the period such share
shall be convertible, to convert such share only into the kind and amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock of the Corporation into which such share of
1996 Preferred Stock might have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange. The
Corporation, the person formed by such consolidation or resulting from such
merger or which acquires such assets or which acquires the Corporation's shares,
as the case may be, shall make provisions to establish such right. The document
making such provisions shall provide for adjustments which, for events
subsequent to the effective date of such event, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5. The above
provisions shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(e) Reservation of Shares; Transfer Taxes; Etc. The Corporation shall at
all times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of effecting the conversion of the 1996 Preferred Stock,
such number of shares of its Common Stock free of preemptive rights as shall
from time to time be sufficient to the effect the conversion of all shares of
1996 Preferred Stock from time to time outstanding. The Corporation shall from
time to time, in accordance with the laws of the State of Utah, increase the
authorized number of shares of Common Stock if at any time the number of shares
of Common Stock not outstanding shall not be sufficient to permit the conversion
of all the then outstanding shares of 1996 Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the 1996 Preferred Stock hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be issued upon conversion, the Corporation will in good faith
and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be; provided, however, that, the
Corporation shall not be required to (i) qualify to do business in any
jurisdiction in which it would not be otherwise required to qualify but for the
provisions of this subparagraph (e); (ii) consent to general service of process
in any such jurisdiction; or (iii) subject itself to general taxation in any
such jurisdiction.
The Corporation shall pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of the 1996 Preferred Stock. The Corporation shall not, however, be
required to pay any income taxes on any individual gain recognized by
stockholders on such delivery or any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of 1996 Preferred Stock
so converted were registered.
Before taking any action which would cause an adjustment reducing the
Conversion Rate, such that the effective conversion price (for all purposes an
amount equal to $5.00 divided by the Conversion Rate applicable to one share of
1996 Preferred Stock as in effect at such time) would be below the then par
value of the Common Stock, the Corporation shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of Common
Stock at the Conversion Rate as so adjusted.
(f) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings (excluding any special or nonrecurring or other
extraordinary dividend) or (2) declare or authorize a redemption or
repurchase of in excess of 10% of the then-outstanding shares of Common
Stock; or
(ii) the Corporation shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a change
in par value, or from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation shall
be required, or of the sale or transfer of all or substantially all of the
assets of the Corporation or of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
1996 Preferred Stock, and shall cause to be mailed to the holders of record of
the 1996 Preferred Stock, at their most recent addresses as they shall appear
upon the stock transfer books of the Corporation, at least 15 days prior to the
applicable record date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, redemption, repurchase or granting of rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(g) Other Changes in Conversion Rate. The Corporation from time to time
may increase the Conversion Rate by any amount for any period of time if the
period is at least 20 days and if the increase is irrevocable during the period.
Whenever the Conversion Rate is so increased, the Corporation shall mail to
holders of record of the 1996 Preferred Stock a notice of the increase at least
15 days before the date the increased Conversion Rate takes effect, and such
notice shall state the increased Conversion Rate and the period it will be in
effect.
The Corporation may make such increases in the Conversion Rate, in addition
to those required or allowed by this Section 5, as shall be determined by it, as
evidenced by a resolution of the Board of Directors, to be advisable in order to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock or issuance of rights or warrants to purchase
or subscribe for stock or from any event treated as such for income tax
purposes.
6. Status of Acquired Shares. Shares of 1996 Preferred Stock redeemed by
the Corporation, received upon conversion pursuant to Section 5 or otherwise
acquired by the Corporation will be restored to the status of authorized but
unissued shares of Preferred Stock, without designation as to series, and may
thereafter be issued as shares of any one or more other series.
7. Ranking. The 1996 Preferred Stock shall rank prior in right of
payment to all classes or series of Junior Stock and shall rank pari passu in
right of payment with all other classes or series of Senior Stock.
8. Voting.
(a) Except as otherwise provided herein or as required by law or the
Articles of Incorporation, the 1996 Preferred Stock shall not be entitled to
vote such shares on any matter submitted to a vote of the stockholders of the
Corporation.
(b) In addition to any vote or consent of shareholders required by law or
the Articles of Incorporation, the affirmative consent of the holders of all of
the shares of 1996 Preferred Stock at the time outstanding shall be necessary
for effecting or validating any of the following actions:
(i) Any amendment, alteration or repeal of any of the provisions of
the Articles of Incorporation (including without limitation this
Designation of Rights, Privileges and Preferences of 1996 Series Preferred
Stock) or the bylaws of the Corporation, which affects adversely the voting
powers, preferences and relative, participating, optional and other special
rights of the holders of shares of 1996 Preferred Stock;
(ii) Any authorization or creation of any shares of any class or any
security of any class or series ranking senior to shares of 1996 Preferred
Stock with respect to the distribution of assets on any liquidation,
dissolution, or winding up of the Corporation or in the payment of
dividends;
(iii) Any authorization or creation of any shares of any class or
series ranking pari passu with shares of Senior Stock with respect to the
distribution of assets on any liquidation, dissolution, or winding up of
the Corporation or in the payment of dividends;
(iv) Any increase in the authorized amount of any shares of any class
or series of Senior Stock; or
(v) Any decrease (other than by redemption or conversion) in the
total number of authorized shares of 1996 Preferred Stock.
(c) The rights of the holders of the 1996 Preferred Stock set forth in
this Section 8 may be exercised at a special meeting of the holders of 1996
Preferred Stock, at any annual or special meeting of shareholders of the
Corporation or by the written consent of the holders of 1996 Preferred Stock.
IN WITNESS WHEREOF, EuroGas, Inc. has caused this Designation of Rights,
Privileges and Preferences of 1996 Series Preferred Stock to be signed on its
behalf by Paul Hinterthur, its President, and attested by Hank Blankenstein, its
Secretary, this 12th day of July, 1996.
ATTEST: EUROGAS, INC.
By /s/ Hank Blankenstein By /s/ Paul Hinterthur
Hank Blankenstein, Secretary Paul Hinterthur, President
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On July 12, 1996, before me, the undersigned, a notary public in and for
the above county and state, personally appeared Hank Blankenstein and Paul
Hinterthur, who being by me duly sworn, did state, each for themselves, that he,
Paul Hinterthur, is the president, and he Hank Blankenstein, is the secretary,
of EuroGas, Inc., a Utah corporation, and that the foregoing Designation of
Rights, Privileges and Preferences of 1996 Series Preferred Stock of EuroGas,
Inc. was signed on behalf of such corporation by authority of a resolution of
its board of directors, and that the statements contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
/s/ Linda Diaz Pia
[SEAL] Notary Public
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement"), entered into as of July 12, 1996,
among EuroGas, Inc., a Utah corporation (the "Company"), and the other persons
named on the signature page hereof (the "Warrantholders"),
W I T N E S S E T H:
WHEREAS, as of July 3, 1996, the Company and Danube International Petroleum
Corporation ("Danube") entered into an Agreement and Plan of Merger (the "Merger
Agreement") providing for the merger of Danube with and into a wholly owned
subsidiary of the Company; and
WHEREAS, pursuant to the Merger Agreement, the Company has agreed to issue
warrants (the "Warrants") to the Warrantholders for the purchase of an aggregate
of 5,000,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company;
NOW, THEREFORE, in consideration of the premises, the terms and conditions
set forth herein, the mutual benefits to be gained from the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Warrant Certificates; Execution.
(a) Certificates evidencing Warrants (each, a "Warrant Certificate") and
elections to purchase shares of Common Stock issuable upon the exercise of
Warrants ("Shares") shall be in substantially the form attached as Exhibit A
hereto.
(b) Each Warrant Certificate shall be executed on behalf of the Company by
its President or by a Vice President. A Warrant Certificate bearing the
signature of an individual who was at any time the proper officer of the Company
shall bind the Company, notwithstanding the fact that such individual shall have
ceased to hold such office prior to the delivery of such Warrant Certificate or
did not hold such office on the date of this Agreement.
(c) The Warrants shall be numbered and shall be registered on the books of
the Company when issued.
SECTION 2. Transferability.
(a) Subject to compliance with the restrictions imposed by federal and
state securities laws as set forth in subparagraph (b) below, the Warrants shall
be transferable on the books of the Company maintained at its principal office,
upon delivery thereof duly endorsed by the Warrantholder or by its duly
authorized attorneys or representatives. Upon any registration of transfer, the
Company shall execute and deliver new Warrants to the person or persons entitled
thereto. As a condition to any transfer, the Company may require the transferee
to execute and deliver a counterpart of this Agreement.
(b) Each Warrant Certificate shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OR OTHER COMPLIANCE WITH THE SECURITIES ACT OR THE LAWS OF THE
APPLICABLE STATE OR A `NO-ACTION' OR AN INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE
EFFECT THAT THE TRANSFER OR SALE IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT AND SUCH STATE STATUTES."
SECTION 3. Exchange of Warrant Certificates. Any Warrant Certificate
may be exchanged for another Warrant Certificate or Certificates entitling the
Warrantholder to purchase the same number of Shares as the Warrant Certificate
or Certificates surrendered then entitled such Warrantholder to purchase. Any
Warrantholder desiring to exchange a Warrant Certificate shall make such request
in a writing delivered to the Company, and shall surrender to the Company the
Warrant Certificate evidencing the Warrant to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
Certificate or Certificates as so requested.
SECTION 4. Exercise of Warrants.
(a) Each Warrantholder shall have the right, at any time or from time to
time during the period commencing on the date of this Agreement and ending at
the close of business in Dallas, Texas on July 3, 2001 (the "Termination Date"),
to exercise a Warrant and purchase from the Company up to the number of fully
paid and nonassessable Shares which the Warrantholder shall at the time be
entitled to purchase pursuant to such Warrant and this Agreement.
(b) A Warrant may be exercised by a Warrantholder by (i) surrendering to
the Company at its principal office the Warrant Certificate evidencing such
Warrant, together with the form of election to purchase contained on the
reverse thereof duly completed and signed, and (ii) delivering to the Company
payment in full of the Warrant Price (as hereinafter defined) for the number of
Shares in respect of which such Warrants are then exercised in the manner set
forth in paragraph (c) below.
(c) Payment of the aggregate Warrant Price due upon exercise of a Warrant
shall be made by wire transfer of immediately available funds to an account
designated in writing by the Company or by certified or cashiers' check, or any
combination thereof.
(d) Upon such surrender of a Warrant Certificate and payment of the
Warrant Price as aforesaid, the Company shall promptly issue and cause to be
delivered to, or pursuant to the written order of, the exercising Warrantholder
a certificate or certificates for the number of Shares so purchased upon the
exercise of such Warrant. Such certificate shall be deemed to have been issued
and the exercising Warrantholder therein shall be deemed to have become a holder
of record of such Shares as of the date of surrender of the Warrants and payment
of the Warrant Price, notwithstanding the fact that the certificate or
certificates representing such Shares shall not actually have been delivered or
that the stock transfer books of the Company shall then be closed.
(e) Warrants shall be exercisable, at the election of the Warrantholder,
either in full or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of less than all of the Shares specified
therein at any time prior to the Termination Date, a new Warrant Certificate
evidencing the unexercised portion of the Warrants formerly represented by the
surrendered Warrant Certificate shall be issued to or upon the written order of
the exercising Warrantholder.
SECTION 5. Payment of Taxes. The Company will pay all issue and other
taxes that may be payable in respect of the initial issuance of the Shares. The
Company will not, however, be required to pay any income taxes on any individual
income or gain recognized by the holder on the issuance of the Shares or any tax
which may be payable in respect of any transfer involved in the issue or
delivery of the Shares in a name other than that in which a Warrant was
registered.
SECTION 6. Mutilated or Missing Warrants. In case a Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of a Warrantholder, issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant Certificate or Certificates,
or in lieu of and substitution for the lost, stolen or destroyed Warrant
Certificate or Certificates, a new Warrant Certificate or Certificates of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant.
SECTION 7. Reservation of Shares. So long as any Warrants remain
outstanding, the Company shall at all times keep reserved out of its authorized
Common Stock, such number of shares of Common Stock as shall be issuable upon
exercise of such outstanding Warrants.
SECTION 8. Warrant Price. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the "Warrant Price") shall
initially be $3.00, subject to adjustment as provided in Section 9 hereof.
SECTION 9. Adjustments. The Warrant Price and the number of Shares
issuable upon the exercise of Warrants shall be subject to adjustment from time
to time as follows:
(a) In case the Company, at any time after the date hereof and prior to
the Termination Date, shall (i) pay a dividend or make a distribution on its
Common Stock that is paid or made in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then in any such case the Warrant
Price in effect immediately prior thereto shall be adjusted to a price obtained
by multiplying such Warrant Price by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
action and the denominator of which shall be the number of shares of Common
stock outstanding immediately after giving effect to such action. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) In case the Company, at any time after the date hereof and prior to
the Termination Date, shall issue rights or warrants to all or substantially all
holders of its Common Stock entitling them (for a period expiring within 45 days
after the date fixed for determination mentioned below) to subscribe for or
purchase shares of Common Stock at a price per share less than the then current
market price per share (determined as provided below) of the Common Stock on the
date fixed for the determination of stockholders entitled to receive such rights
or warrants, then the Warrant Price in effect at the opening of business on the
day following the date fixed for such determination shall be decreased by
multiplying such Warrant Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at the then
current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such decrease to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company.
(c) In case the Company shall, at any time after the date hereof and prior
to the Termination Date, by dividend or otherwise, distribute to all or
substantially all holders of its Common Stock evidences of its indebtedness,
cash (excluding ordinary cash dividends paid out of retained earnings of the
Company), other assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in paragraphs (a) and (b) above), then in
each such case the Warrant Price shall be adjusted so that the same shall equal
the price determined by multiplying the Warrant Price in effect immediately
prior to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which the
numerator shall be the current market price per share (determined as provided
below) of the Common Stock less the amount of cash and the then fair market
value (as determined by the Board of Directors, whose determination shall be set
forth in a resolution of the Board of Directors) of the portion of the assets,
rights or evidences of indebtedness so distributed applicable to one share of
Common Stock and the denominator shall be the current market price per share of
the Common Stock on the date fixed for such determination, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution.
(d) In case the Company shall, at any time after the date hereof and prior
to the Termination Date, sell or issue shares of Common Stock, or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock (excluding (i) shares,
rights, options, warrants or convertible or exchangeable securities issued in
any of the transactions described in paragraphs (a), (b) or (c) above, (ii)
shares issued upon conversion, exercise or exchange of rights, options, warrants
or convertible or exchangeable securities described in this paragraph (d), (iii)
the Warrants issued pursuant to this Agreement and the Shares issuable upon the
exercise thereof, (iv) up to 21,000,000 shares of Common Stock issued to
Chemilabco B.V. pursuant to agreements entered into between the Company and
Chemilabco B.V. prior to the date hereof, (v) shares issued for compensatory
purposes pursuant to an employee stock option or similar plan providing for
options or other similar rights to purchase (or issuances pursuant to incentive
bonus plans) and (vi) shares issued pursuant to the conversion of convertible
debentures of the Company outstanding as of July 10, 1996) at a price per share
of Common Stock (determined in the case of such rights, options, warrants or
convertible or exchangeable securities, by dividing (x) the total amount
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants or convertible or exchangeable securities, plus the
total consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of shares of Common Stock issuable upon
exercise, conversion or exchange of such rights, options, warrants or
convertible or exchangeable securities) that is less than the Applicable
Percentage of the then current market price (determined as set forth below) per
share of Common Stock in effect immediately prior to such sale and issuance,
then the number of Shares issuable upon the exercise of each Warrant shall be
adjusted and shall be that number determined by multiplying the number of shares
of Common Stock issuable upon exercise of a Warrant immediately prior to such
adjustment by a fraction, the numerator of which is the total number of shares
of Common Stock outstanding immediately after such sale or issuance and the
denominator of which is an amount equal to the sum of (A) the number of shares
of Common Stock outstanding immediately prior to such sale and issuance plus (B)
the number of shares of Common Stock which the Adjusted Consideration Amount (as
hereinafter defined) would purchase at the then current market price per share
of Common Stock. As used herein, (i) the term "Applicable Percentage" shall mean
85%; provided, however, that if the shares of Common Stock, or rights, options,
warrants or convertible or exchangeable securities, issued or sold by the
Company are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), and the Company is
not obligated to register such shares or other securities under the Securities
Act for a period of at least one year from the date of issuance or sale thereof,
the Applicable Percentage shall be 65% and (ii) the term "Adjusted Consideration
Amount" shall mean the sum of (x) the aggregate consideration (determined as
provided below) received by the Company for the issuance and sale of the shares
of Common Stock and (y) a percentage equal to 100% less the Applicable
Percentage, multiplied by the product of (1) the number of the number of shares
of Common Stock issued or sold by the Company and (2) the current market price
per share of Common Stock. For the purposes of such adjustments, the shares of
Common Stock which the holder of any such rights, options, warrants or
convertible or exchangeable securities shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of the sale
and issuance of the rights, warrants or convertible or exchangeable securities
and the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible or exchangeable securities, plus the consideration or premiums
stated in such rights, options, warrants or convertible or exchangeable
securities to be paid for the shares of Common Stock issuable upon exercise,
conversion or exchange thereof. In case the Company shall sell and issue shares
of Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the "price per share of Common
Stock" for purposes of the first sentence of this paragraph (d), the Board of
Directors of the Company shall determine, in good faith, the fair value of said
property and such determination shall be set forth in a resolution of the Board
of Directors.
(e) For purposes of any computation under this Section 9, the current
market price per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices of the shares of Common Stock for the 10
consecutive trading days (as defined below) preceding the applicable record
date. The closing price for each day shall be the last reported sales price or
in case no such reported sale takes place on such day, the average of the
closing bid and asked prices for such day, in each case on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading, or, if not listed or admitted to trading, the last sale
price for the Common Stock as reported by the Nasdaq Stock Market, or if such
last sale price is not so reported by the Nasdaq Stock Market or if no such sale
takes place on such day, the mean between the closing bid and asked prices for
the Common Stock as reported by the Nasdaq Stock Market. For the purpose of
this paragraph (e), trading day shall mean a day on which the securities
exchange specified for purposes of this paragraph (e) shall be open for business
or, if the shares of Common Stock are not listed on any exchange for such
period, a day with respect to which quotations of the character referred to in
the next preceding sentence shall be reported.
(f) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this paragraph (f)
are not required to be made shall be carried forward and cumulated with in any
subsequent adjustment. All calculations under this Section 9 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
(g) Upon each adjustment of the Warrant Price pursuant to this Section 9,
each Warrant outstanding prior to the making of such adjustment in the Warrant
Price shall thereafter evidence the right to purchase, at the adjusted Warrant
Price, that number of shares of Common Stock (calculated to the nearest
hundredth) obtained by (i) multiplying the number of shares of Common Stock
purchasable upon exercise of such Warrant prior to such adjustment by the
Warrant Price in effect prior to such adjustment and (ii) dividing the product
so obtained by the Warrant Price in effect after such adjustment of the Warrant
Price.
(h) Whenever the Warrant Price or the number of Shares purchasable upon
the exercise of the Warrants is adjusted as herein provided, the Company shall
cause to be promptly mailed to each Warrantholder by first class mail, postage
prepaid, a certificate signed by the Chairman of the Board, the President or any
Vice President and the Secretary, Treasurer, Controller, any Assistant
Secretary, Assistant Treasurer or Assistant Controller of the Company, setting
forth (x) the adjusted or readjusted Warrant Price calculated as provided in
this Section 9 together with a brief statement of the facts requiring such
adjustment or readjustment and the computation thereof and (y) the number of
shares of Common Stock (or portion thereof) purchasable upon exercise of a
Warrant after such adjustment or readjustment in the Warrant Price and the
record date therefor.
(i) Upon any adjustment in the Warrant Price or the number of Shares
issuable upon exercise of Warrants as provided herein, Warrant Certificates
theretofore issued shall be deemed to represent the right to purchase a number
of Shares at a Warrant Price that in each case gives effect to such adjustment.
SECTION 10. Rights Upon Consolidation, Merger, Sale, Transfer or
Reclassification.
(a) In case of any consolidation of the Company with or merger of the
Company into another corporation (other than a merger or consolidation in which
the Company is the surviving corporation), or in case of any lease, sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety, the Company shall enter into an agreement with such successor or
leasing or purchasing person or entity, as the case may be, (i) providing that
each Warrantholder shall have the right thereafter (until the Termination Date)
to receive, upon exercise of a Warrant, in lieu of each share of Common Stock of
the Company that would have been deliverable upon such exercise immediately
prior to such event, the kind and amount of shares and/or other securities
and/or property and/or cash receivable upon such consolidation, merger, lease,
sale or conveyance by a holder of one share of Common Stock of the Company, and
(ii) setting forth the Warrant Price for the shares and/or other securities
and/or property and/or cash so issuable, which shall be an amount equal to the
Warrant Price in effect immediately prior to such event. If, as a result of
this paragraph (a), the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock of the Company, the Board of Directors of the Company shall
determine in good faith (as described in a statement delivered to the
Warrantholder) the allocation of the Warrant Price between and among shares of
such classes of capital stock.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or as a result of a subdivision or
combination) or in case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing corporation and in which
the holders of the shares of Common Stock thereafter receive shares and/or other
securities and/or property and/or cash for such shares of Common Stock
(including for this purpose shares reflecting a change in par value or from par
value to no par value or as a result of a subdivision or combination of the
shares of Common Stock), (i) each Warrantholder shall have the right thereafter
(until the Termination Date) to receive, upon exercise thereof, in lieu of each
share of Common Stock that would have been deliverable upon such exercise
immediately prior to such event, the kind and amount of shares and/or other
securities and/or property and/or cash receivable upon such reclassification,
change, consolidation or merger by a holder of one share of Common Stock, and
(ii) the Warrant Price for the shares and/or other securities and/or property
and/or cash so issuable, shall be an amount equal to the Warrant Price in effect
immediately prior to such event. If, as a result of this paragraph (b), the
holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock of the Company, the
Board of Directors of the Company shall determine in good faith (as described in
a statement delivered to the Warrantholder) the allocation of the Warrant Price
between or among shares of such classes of capital stock.
(c) Any agreement entered into pursuant to this Section 10 shall (i) where
appropriate, state the Warrant Price in terms of one full share of Common Stock
of the Company or one full share of the capital stock of any successor, leasing
or purchasing corporation or entity and (ii) provide for adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 8 above and this Section 10.
(d) The provisions of this Section 10 shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, leases, sales or conveyances by the Company and its
successors.
(e) In the event that at any time, as a result of the provisions of this
Section 10, the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares or other securities other than shares of
Common Stock, the price or prices of such other shares or other securities so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in Section 9 above and this Section 10.
SECTION 11. Notice of Certain Corporate Actions. In case the Company
shall propose to (i) pay any dividend or other distribution payable in cash,
property or stock or securities (including warrants, options, or similar rights)
of any class other than Common Stock to the holders of Common Stock, (ii) offer
the holders of Common Stock rights to subscribe for or to purchase any shares of
stock of any class or any other securities, rights or options, (iii) effect any
reclassification of Common Stock (other than a reclassification involving only
the subdivision or combination of outstanding shares of Common Stock or a change
in par value), (iv) effect any capital reorganization, (v) effect any share
exchange, consolidation, merger or sale, transfer or other disposition of all or
substantially all its property, assets or business, (vi) effect any transaction
contemplated by Section 11 hereof or (vii) effect the liquidation, dissolution
or winding up of the Company, then, in each such case, the Company shall mail to
each Warrantholder a notice of such proposed action, which shall specify the
date on which a record is expected to be taken for the purposes of such stock
dividend, distribution or rights offering, or the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up is expected to
take place and the record date for participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall also set forth such
facts with respect thereto that are known by the Company as of the date of such
notice as shall be reasonably necessary to indicate the effect of such action on
the Common Stock and the number and kind of any other shares of stock which will
be receivable in respect of a share of Common Stock, and the purchase price or
prices thereof, after giving effect to any adjustment which will be required as
a result of such action. Such notice shall be so given in the case of any
action described in clause (i) or (ii) above at least 10 days prior to the
record date for determining holders of the Common Stock for purposes of such
action and, in the case of any other such action, at least 10 days prior to the
earlier of the date of the taking of such proposed action or the record date for
participation therein by the holders of Common Stock.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be given by delivery in person, by registered or
certified mail (return receipt requested and with postage prepaid thereon) or by
cable, telex or facsimile transmission to the parties at the following addresses
(or at such other address as any of the parties shall have furnished to the
others in accordance with the terms of this Section 12):
if to the Company, to:
EuroGas, Inc.
435 West Universal Circle
Sandy, Utah 84070
Attention: Hank Blankenstein
with a copy to:
Kruse, Landa & Maycock
50 West Broadway (300 South)
Eighth Floor, Bank One Tower
Salt Lake City, Utah 84101-2034
Attention: Howard S. Landa
If to the Warrantholders, to:
Martin A. Schuepbach
2651 North Harwood
Suite 430
Dallas, Texas 75201
Mempo Trust
2651 North Harwood
Suite 450
Dallas, Texas 75201
Attention: J. Gabriel Barbier-Mueller
Dobbins Partners, L.P.
2651 North Harwood
Suite 500
Dallas, Texas 75201
Attention: J. Robert Dobbins
in each case, with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Geoffrey L. Newton
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 12 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails and (c) if delivered by
cable, telex or facsimile transmission, upon transmission thereof and receipt of
the appropriate answerback.
SECTION 13. Successors and Assigns. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrantholders shall
bind and inure to the benefit of their respective successors and assigns
hereunder. Unless the context indicates otherwise, the term "Warrantholder"
shall include the holder of any Warrant, and the term "Warrants" shall include
any and all warrants outstanding pursuant to this Agreement, including those
evidenced by a Warrant Certificate or Certificates issued upon division,
exchange or substitution pursuant to this Agreement. The holder of agrees, by
receipt thereof, to be bound by and comply with the terms of this Agreement.
SECTION 14. Applicable Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Utah,
without regard to the principles of conflicts of law that would result in the
application of the laws of any other jurisdiction.
SECTION 15. Registration Rights Agreement. Concurrently with the
initial issuance by the Company of the Warrants to the Warrantholders, the
Company and the Warrantholders are entering into a Registration Rights Agreement
conferring upon the Warrantholders certain registration rights with respect to
the Shares issuable upon exercise of the Warrants. The terms of the
Registration Rights Agreement are incorporated by reference herein as fully as
if the same were set forth herein.
SECTION 16. Amendment. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
SECTION 17. Interpretation. The table of contents and headings
contained herein are for convenience of reference only, do not constitute a part
of this Agreement and shall not be deemed to limit, extend or otherwise affect
the meaning of any of the provisions hereof. As used in this Agreement, words
which denote a singular number shall include the plural (and vice versa), words
which denote one gender shall include all genders and words which denote natural
persons shall include corporations and partnerships (and vice versa), in each
case to the extent appropriate in the context.
SECTION 18. Counterpart. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer
MARTIN A. SCHUEPBACH
/s/ Martin A. Schuepbach
MEMPO TRUST
By /s/
Name
Trustee
DOBBINS PARTNERS, L.P.
By /s/ J. Robert Dobbins
Dobbins Capital Corporation,
its Managing General Partner
By /s/ J. Robert Dobbins
J. Robert Dobbins
President
Exhibit A
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE WITH THE SECURITIES ACT OR THE LAWS OF THE
APPLICABLE STATE OR A "NO-ACTION" OR AN INTERPRETIVE LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER AND ITS COUNSEL TO THE EFFECT THAT THE TRANSFER OR SALE IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE STATUTES.
Warrant Certificate No.
Warrants to Purchase
Shares of Common Stock
--------------
EUROGAS, INC.
Incorporated under the laws
of the State of Utah
This certifies that, for value received, , the registered
--------------
holder hereof (the "Warrantholder"), is entitled to purchase from EUROGAS, INC.
(the "Company"), at any time during the period commencing the date hereof and
ending at the close of business in Dallas, Texas on July 3, 2001, at a purchase
price per share of $3.00 (the "Warrant Price"), the number of shares of Common
Stock of the Company set forth above (the "Shares"). The number of shares of
Common Stock of the Company purchasable upon exercise of these Warrants and the
Warrant Price shall be subject to adjustment from time to time as set forth in
the Warrant Agreement (as hereinafter defined).
These Warrants may be exercised in whole or in part by presentation of this
Warrant Certificate with the Purchase Form attached hereto duly executed,
accompanied by payment of the Warrant Price, at the principal office of the
Company. Payment of the Warrant Price shall be made by wire transfer of
immediately available funds or by certified or cashiers' check or any
combination thereof.
These Warrants are issued under and in accordance with a Warrant Agreement
(the "Warrant Agreement"), dated as July 12, 1996, between the Company and
certain Warrantholders and are subject to the terms and provisions contained in
the Warrant Agreement.
Upon any partial exercise of these Warrants, there shall be signed and
issued to the Warrantholder a new Warrant Certificate in respect of the Shares
as to which these Warrants shall not have been exercised. These Warrants may be
exchanged at the office of the Company by surrender of this Warrant Certificate
properly endorsed for one or more new Warrant Certificates representing the same
aggregate number of Shares as are evidenced by the Warrant or Warrants
exchanged.
EUROGAS, INC.
By
President
Dated:
---------------
EUROGAS, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Common Stock (the "Shares") provided for therein, and requests that
certificates for the Shares be issued in the name of:
(Please print or type name, address and Social Security Number or Taxpayer
Identification Number)
and, if said number of Shares shall not be all the Shares purchasable
thereunder, that a new Warrant Certificate with respect to the balance of the
Shares purchasable under the within Warrant Certificate be registered in the
name of the undersigned Warrantholder as below indicated and delivered to the
address stated below.
Dated:
---------------
Name of Warrantholder:
- -------------------------
(Please Print)
Address:-----------------
- -------------------------
Signature:---------------
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), entered into as July
12, 1996, by and among EuroGas, Inc., a Utah corporation ("EuroGas"), Dobbins
Partners, L.P., a Texas limited partnership ("Dobbins Partners"), Mempo Trust, a
trust formed under the laws of Liechtenstein ("Mempo Trust"), and Martin A.
Schuepbach ("Schuepbach"),
W I T N E S S E T H:
WHEREAS, as of July 3, 1996, EuroGas and Danube International Petroleum
Company, a Texas corporation ("Danube"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the merger (the "Merger") of
Danube with and into a wholly owned subsidiary of EuroGas;
WHEREAS, the Merger Agreement provides that, at the effective time of the
Merger (the "Effective Time"), each of EuroGas, Dobbins Partners, Mempo Trust
and Schuepbach (collectively, the "Danube Stockholders") shall execute this
Agreement; and
WHEREAS, in accordance with the Merger Agreement, at the Effective Time,
the Danube Stockholders or persons designated by them pursuant to Section 2.10
of the Merger Agreement will receive, in exchange for the shares of common stock
of Danube held by the Stockholders, aggregate merger consideration consisting of
(i) 2,500,000 shares (the "EuroGas Common Shares") of common stock, par value
$.001 per share ("EuroGas Common Stock"), of EuroGas, (ii) 1,250,000 shares (the
"EuroGas 1996 Series Preferred Shares") of 1996 Series Preferred Stock, par
value $.001 per share, of EuroGas and (iii) warrants (the "EuroGas Warrants")
exercisable for 5,000,000 shares of EuroGas Common Stock;
NOW, THEREFORE, in consideration of the premises, the terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
As used herein, the terms set forth below have the following respective
meanings:
"Commission" means the Securities and Exchange Commission.
"EuroGas Conversion Shares" means the shares of EuroGas Common Stock
issuable upon conversion of the EuroGas Preferred Shares.
"EuroGas Warrant Shares" means the shares of EuroGas Common Stock issuable
upon exercise of the EuroGas Warrants.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the Danube Stockholders and any other recipients of
Registrable Securities pursuant to the Merger Agreement, and, if applicable, any
transferees of any such Registrable Securities directly or indirectly (in a
chain of title) from the Danube Stockholders or any such other recipients, to
whom all or a portion of their rights under this Agreement have been assigned in
accordance with Section 13 hereof.
"Majority Holders" means Holders who are the record owners of at least a
majority of the Registrable Securities outstanding at any time.
"Registrable Securities" means the EuroGas Common Shares, the EuroGas
Conversion Shares and the EuroGas Warrant Shares and any other securities issued
or issuable with respect to any such shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or reorganization. Any Registrable Securities will cease to be
such when (i) a registration statement covering such Registrable Securities has
been declared effective by the Commission and such Registrable Securities have
been disposed of pursuant to such effective registration statement or (ii) such
Registrable Securities are distributed to the public pursuant to Rule 144 or 145
under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement as contemplated by this Agreement.
(a) Each of the terms set forth below has the meaning set forth in the
provision set forth opposite such term in the following table:
<TABLE>
<CAPTION>
Term Provision
<S> <C>
Shelf Registration Effective Date Section 2(b)
Shelf Registration Period Section 2(b)
Shelf Registration Statement Section 2(a)
Registration Expenses Section 5
</TABLE>
SECTION 2. Shelf Registration.
(a) Prior to or on the later of (i) September 30, 1996 or (ii) 30 days
after receipt by EuroGas of the audited year-end and interim period financial
statements of EuroGas and Danube required in order for EuroGas to file a
registration statement under the Securities Act (but in no event later than
December 31, 1996 unless Danube has failed to prepare and deliver the financial
statements of Danube required to be included therein as a direct result of any
actions taken or omitted to be taken by Danube prior to the Effective Time)
EuroGas will file with the Commission a "shelf" registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act with respect to
all of the Registrable Securities (the "Shelf Registration Statement").
(b) EuroGas agrees to use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing thereof and to keep the Shelf Registration
Statement continuously effective for a period ending on the later of (i) the
fifth anniversary of the date on which the Shelf Registration Statement is
declared effective (the "Shelf Registration Effective Date") or (ii) the second
anniversary of the earliest date upon which all of the EuroGas Warrants have
been exercised in accordance with their terms (the "Shelf Registration Period").
EuroGas further agrees to supplement or amend the Shelf Registration Statement
as promptly as practicable in order to update from time to time any information
with respect to the Holders or their plan of distribution, if requested by the
Majority Holders or any underwriter for the Majority Holders, and EuroGas agrees
to furnish to the Holders copies of any such supplement or amendment promptly
after it has been filed with the Commission. EuroGas shall be permitted to
register shares of EuroGas Common Stock other than the Registrable Securities
pursuant to the Shelf Registration Statement; provided, however, that the
registration and sale of any such shares shall have no effect on the rights of
the Holders hereunder.
(c) The following restrictions shall apply to sales of EuroGas Common
Shares by the Holders pursuant to the Shelf Registration Statement:
(i) During the six-month period immediately following the Shelf
Registration Effective Date, the Holders may sell not more than an
aggregate of 1,000,000 EuroGas Common Shares pursuant to the Shelf
Registration Statement.
(ii) During the twelve-month period immediately following the
Shelf Registration Effective Date, the Holders may sell not more than
an aggregate of 2,500,000 EuroGas Common Shares (including any such
shares sold during the six-month period following the Shelf
Registration Effective Date) pursuant to the Shelf Registration
Statement.
(iii) During any calendar month within the twelve-month
period immediately following the Shelf Registration Effective Date,
the Holders may not sell pursuant to the Shelf Registration Statement
an aggregate number of EuroGas Common Shares that is more than the
greater of (A) 1% of the total number of shares of EuroGas Common
Stock outstanding at the beginning of such calendar month and (B) the
average daily trading volume of EuroGas Common Stock during the
immediately preceding calendar month.
SECTION 3. Piggy-Back Registration.
(a) If, at any time prior to the fifth anniversary of the date hereof,
EuroGas proposes to file a registration statement under the Securities Act with
respect to an offering for its own account or for the account of any other
person or entity of any class of its equity securities, including any securities
convertible into or exchangeable for any equity securities (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form for comparable
purposes that may be adopted by the Commission) or (ii) a registration statement
filed in connection with an exchange offer or an offering of securities solely
to EuroGas' existing security holders), then EuroGas shall in each case give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable, but in no event later than 30 days prior to the
anticipated filing date, and such notice shall offer to such Holders the
opportunity to register such number of Registrable Securities as each such
Holders may request. Upon the written request of a Holder made within 20 days
after receipt of such notice by the Holder, EuroGas shall include in any
registration described in the first sentence of this Section 3(a) all
Registrable Securities requested by such Holder to be included therein, subject
to the provisions of Section 3(b) hereof.
(b) In the case of a proposed underwritten offering, EuroGas shall use its
best efforts to cause the managing underwriter or underwriters of such offering
to permit all Registrable Securities requested by a Holder to be included in the
registration statement for such offering to be included on the same terms and
conditions as any similar securities of EuroGas included therein. Notwith-
standing the foregoing, if the managing underwriter or underwriters of such
offering determine in writing that the success of the offering would be
materially and adversely affected by inclusion of the Registrable Securities
requested to be included, then the securities offered for the account of the
Holders in such offering shall be reduced to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided, however,
that the proportion by which the amount of Registrable Securities intended to be
offered by the Holders is reduced shall not exceed the proportion by which the
amount of securities intended to be offered by any person or entity other than
EuroGas is reduced.
(c) To the extent not inconsistent with applicable law, each Selling
Holder whose securities are included in a registration statement pursuant to
this Section 3 agrees not to effect any public sale or distribution of the
security being registered, including a sale pursuant to Rule 144 under the
Securities Act, during the 15 days prior to and during the 90-day period (or
such shorter period as may be required by the managing underwriter or
underwriters with respect to any officer or director or shareholder of EuroGas)
beginning on, the effective date of a registration statement (except, in each
case, as part of such registration), if and to the extent requested by the
managing underwriter or underwriters for an underwritten public offering.
SECTION 4. Registration Procedures.
(a) If and whenever EuroGas is required to effect the registration of any
Registrable Securities in accordance with this Agreement, EuroGas will as
expeditiously as practicable:
(i) prepare and file with the Commission such amendments and
supplements to any such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of the securities covered thereby for
(A) in the case of a registration pursuant to Section 2, the Shelf
Registration Period or (B) in the case of a registration pursuant to
Section 3, a period of at least nine months after the applicable
registration statement becomes effective (unless all of the Registrable
Securities registered thereunder have been sold or disposed of prior to the
expiration of said nine-month period);
(ii) furnish to each Selling Holder such number of copies of such
registration statement and of each amendment and supplement thereto (in
each case including all exhibits thereto) and of the prospectus included in
such registration statement (including each preliminary prospectus) and any
prospectus filed pursuant to Rule 424 under the Securities Act and of such
other documents as each Selling Holder may reasonably request in order to
facilitate the disposition of its Registrable Securities;
(iii) use commercially reasonable efforts to register or qualify
the Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Selling Holders
shall reasonably request, keep such registration or qualification in effect
for so long as such registration statement remains in effect and do any and
all other acts and things which may be reasonably necessary or appropriate
to enable the Selling Holders to dispose of such Registrable Securities in
such jurisdictions (provided, however, that EuroGas will not be required to
(a) qualify to do business as a foreign corporation in any jurisdiction
where it would not otherwise be required to be so qualified, (b) consent to
general service of process in any jurisdiction; or (c) subject itself to
general taxation in any such jurisdiction where it would not otherwise be
subject to such taxation;
(iv) use commercially reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the Selling Holders
to dispose of such Registrable Securities;
(v) notify each Selling Holder promptly (A) when such registration
statement and any post-effective amendment thereto has become effective
under the Securities Act, (B) of any request by the Commission for an
amendment or supplement to such registration statement or the prospectus
included therein or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation of any proceedings for that
purpose, (D) of the receipt of any notification with respect to the
suspension of the registration or qualification of any Registrable
Securities in any jurisdiction in which they are registered or qualified or
the initiation of any proceedings for that purpose and (E) of the
occurrence of any event as a result of which the prospectus included in
such registration statement or any document incorporated or deemed to be
incorporated by reference therein includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) use commercially reasonable efforts to obtain the withdrawal at
the earliest possible moment of any stop order suspending the effectiveness
of such registration statement and the lifting at the earliest possible
moment of any suspension of the registration or qualification of the
Registrable Securities in any jurisdiction in which they are registered or
qualified;
(vii) upon the occurrence of any event of specified in clause (E)
of subparagraph (v) above, promptly prepare and furnish to each Selling
Holder an amendment or supplement to the prospectus included in such
registration statement so that, as thereafter delivered to the purchasers
of the Registrable Securities, such prospectus and any document
incorporated or deemed to be incorporated therein by reference will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(viii) otherwise use commercially reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(ix) grant to the Selling Holders and their respective counsel and
accountants the opportunity to participate in the preparation of such
registration statement and any amendment thereof or supplement thereto, and
grant to a representative jointly appointed by all Selling Holders and its
counsel such access to its books and records and such opportunities to
discuss the business of EuroGas with its officers and independent public
accountants as shall be necessary, in the judgment of the Selling Holders
based upon the advice of their counsel, to conduct a reasonable
investigation within the meaning of the Securities Act; and
(x) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on any securities exchange on
which any securities of such class are then listed.
(b) If and whenever EuroGas is required to effect the registration of any
Registrable Securities in accordance with this Agreement, each Holder agrees as
follows:
(i) to cooperate with EuroGas by providing in writing such
information as EuroGas shall reasonably request in order to comply with the
applicable provisions of the Securities Act and applicable state securities
laws in connection with the disposition of Registrable Securities by such
Holder as described herein, including information regarding the identity of
the Holder effecting such disposition and the proposed method of effecting
such disposition;
(ii) In the case of an underwritten offering, enter into any agreement
(including underwriting agreement in customary form) with any underwriter
engaged to effect the distribution of the Registrable Securities; provided,
however, that the Selling Holders shall not be required to agree to any
terms or conditions more stringent than those agreed to by all other
participants in the registration;
(iii) On receipt of any notice from EuroGas of a happening of an
event described in clause (E) of subparagraph (a)(v) above, to promptly
discontinue disposition of securities pursuant to the registration
statement until they are advised in writing by EuroGas that the use of the
prospectus can be resumed and have received copies of any amended or
supplemental material; provided, however, that in no event shall the
Selling Holders be required to discontinue sales pursuant to this
subparagraph (b)(iii) for a period of more than 30 consecutive days or for
more than 60 days during any calendar year;
(iv) At the end of any period during with EuroGas is required to keep
the registration statement effective, to discontinue sales of securities
pursuant to such registration statement on notice from EuroGas of its
intent to remove such securities from registration and to promptly provide
EuroGas with written confirmation of the number of securities held by the
Holder that remain unsold; and
(v) To conduct any sales pursuant to the registration statement in
accordance with the description set forth in the plan of distribution
contained in the registration statement and the limitations and conditions
imposed upon the Selling Holders by any applicable state securities laws.
SECTION 5. Registration Expenses. All expenses incident to the
performance of or compliance with this Agreement by EuroGas, including without
limitation all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing of the securities
to be registered on each securities exchange on which similar securities issued
by EuroGas are then listed, and fees and disbursements of counsel for EuroGas
and its independent certified public accountants (including the expenses of any
special audit or comfort letters required by or incident to such performance),
securities acts liability insurance (if EuroGas elects to obtain such
insurance), the reasonable fees and expenses of any special experts retained by
EuroGas in connection with such registration, and fees and expenses of other
persons retained by EuroGas, in connection with each registration hereunder (but
not including any underwriting discounts or commissions or brokerage fees or
transfer taxes attributable to the sale of Registrable Securities or the fees
and expenses of any counsel, accountant or other representative retained by the
Selling Holders) (collectively, "Registration Expenses") shall be borne by
EuroGas.
SECTION 6. Indemnification; Contribution.
(a) Indemnification by EuroGas. EuroGas agrees to indemnify and hold
harmless each Selling Holder, its officers, directors, partners and agents and
each person, if any, who controls a Selling Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages (whether in contract, tort or otherwise),
liabilities and expenses (including reasonable costs of investigation)
whatsoever (as incurred or suffered) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities or
in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or based upon 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, except insofar as such losses, claims, damages,
liabilities or expenses arise out of, or are based upon, any such untrue
statement or omission or allegation thereof based upon information furnished in
writing to EuroGas by such Selling Holder expressly for use therein. EuroGas
also agrees to indemnify any underwriters of the Registrable Securities, their
officers, partners and directors and each person who controls such underwriters,
on substantially the same basis as that of the indemnification of the Selling
Holder provided in this Section 6 or such other indemnification customarily
obtained by underwriters at the time of offering.
(b) Conduct of Indemnification Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
a Selling Holder (or its officers, directors, partners or agents) or any person
controlling a Selling Holder in respect of which indemnity may be sought from
EuroGas, EuroGas shall assume the defense thereof, including the employment of
counsel selected by EuroGas in its reasonable discretion, and shall assume the
payment of all expenses. The Selling Holder or any controlling person of the
Selling Holder shall 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 the Selling Holder or such controlling
person unless (i) EuroGas has agreed in writing to pay such fees and expenses or
(ii) the named parties to any such action or proceeding (including any impleaded
parties) include both the Selling Holder or such controlling person and EuroGas,
and the Selling Holder or such controlling person shall have been advised by
counsel that there may be one or more legal defenses available to such Selling
Holder or such controlling person which are different from or additional to
those available to EuroGas (in which case, if the Selling Holder or such
controlling person notifies EuroGas in writing that it elects to employ separate
counsel at the expense of EuroGas, EuroGas shall not have the right to assume
the defense of such action or proceeding on behalf of the Selling Holder or such
controlling person). EuroGas shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if settled with
its written consent, or if there be a final judgment for the plaintiff in any
such action or proceeding, EuroGas agrees to indemnify and hold harmless the
Selling Holder and such controlling person from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment.
(c) Indemnification by Selling Holder. Each Selling Holder agrees to
indemnify and hold harmless EuroGas, its directors and officers and each person,
if any, who controls EuroGas within the meaning of either Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from EuroGas to the Selling Holder, but only with respect to information
furnished to EuroGas in writing by such Selling Holder expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against EuroGas or its directors or
officers, or any such controlling person, in respect of which indemnity may be
sought against the Selling Holder, the Selling Holder shall have the rights and
duties given to EuroGas, and EuroGas or its directors or officers or such
controlling person shall have the rights and duties given to the Selling Holder,
by the preceding paragraph. Notwithstanding the foregoing, the liability of the
Selling Holder pursuant to this Section 6(c) shall not exceed the amount by
which the total price at which the Registrable Securities of the Selling Holder
were offered to the public exceeds the amount the Selling Holder has otherwise
been required to pay by reason of this Section 6.
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to EuroGas, the Selling Holders or the underwriters in respect of
any losses, claims, damages, liabilities or judgments referred to herein, then
each such indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) as between
EuroGas and the Selling Holders on the one hand and the underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by EuroGas and the Selling Holders on the one hand and the underwriters
on the other from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of EuroGas and the Selling Holders on the one hand and of the underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations and (ii) as between EuroGas, on the one hand,
and the Selling Holders on the other, in such proportion as is appropriate to
reflect the relative fault of EuroGas and of the Selling Holders in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by EuroGas and the Selling
Holders on the one hand and the underwriters on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by EuroGas and the Selling Holders bear to the total underwriting discounts and
commissions received by the underwriters, in each case as set forth in the table
on the cover page of the prospectus. The relative fault of EuroGas on the one
hand and of the Selling Holders on the other 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 party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation (even if
the Selling Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities,
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), the Selling Holders shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of the Selling Holders were offered to the public
exceeds the amount of any damages which the Selling Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 7. Participation in Underwritten Registrations. No person may
participate in any underwritten registration hereunder unless such person agrees
to sell its securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements.
SECTION 8. Rule 144 and Reports. At all times from and after the date
of the filing of the Shelf Registration Statement and prior to the expiration of
the period during which EuroGas is required to keep such registration statement
effective in accordance with Section 2(b) hereof, EuroGas covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
and it will take such other action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon request of
any Holder, EuroGas will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 9. Notices. All notices and other communications hereunder shall
be in writing and shall be delivered in person, by United States mail (first
class and with postage prepaid thereon) or by cable, telex or facsimile
transmission to the parties at the following addresses (or at such other address
as any party shall have furnished to the others in accordance with the terms of
this Section 9):
if to EuroGas, to:
EuroGas, Inc.
435 West Universal Circle
Sandy, Utah 84091
Attention: Hank Blankenstein
if to Dobbins Partners, to:
Dobbins Partners, L.P.
2651 North Harwood
Suite 500
Dallas, Texas 75201
Attention: J. Robert Dobbins
if to Mempo Trust, to:
Mempo Trust
2651 North Harwood
Suite 260
Dallas, Texas 75201
Attention: J. Gabriel Barbier-Mueller
if to Schuepbach, to:
Martin A. Schuepbach
2651 North Harwood
Suite 120
Dallas, Texas 75201
if to any other Holder, to such address as such Holder provides to EuroGas or,
if no such address is provided, to the address of such Holder reflected in the
stock transfer records of EuroGas.
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 9 shall be deemed duly and validly given (i) if
delivered in person, upon delivery, (ii) if delivered by United States mail
(first class and with postage paid thereon), 72 hours after being placed in a
depository of the United States mails and (iii) if delivered by cable, telex or
facsimile transmission, upon transmission thereof and receipt of the appropriate
answerback.
SECTION 10. Conflicting Agreements. EuroGas agrees that it will not
grant any rights of registration under the Securities Act relating to its
capital stock or other equity securities to any person or entity other than
pursuant to this Agreement, unless the rights so granted do not limit or
restrict in any manner the rights of the Holders granted pursuant to this
Agreement (except as expressly provided in Section 3(b) hereof).
SECTION 11. Amendment; Waivers. The provisions of this Agreement may be
amended only by a written instrument executed by each of the parties hereto, and
compliance with any provision hereof may be waived only by a written instrument
executed by each party entitled to the benefits of the same. No failure to
exercise any right, power or privilege granted hereunder shall operate as a
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 granted hereunder.
SECTION 12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, whether written or oral,
between the parties with respect thereto.
SECTION 13. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The rights of a Holder under this Agreement may be
assigned without the consent of EuroGas to any person or entity who acquires any
Registrable Securities directly or indirectly (in a chain of title) from such
Holder if (i) such Holder executes a written instrument which expressly provides
that such person or entity shall succeed to all or a portion of the rights of
such Holder hereunder and (ii) such person or entity agrees to be bound by all
of the terms and conditions hereof.
SECTION 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah (without regard to
any conflicts of law principles that would require the application of the laws
of any other jurisdiction).
SECTION 15. Rights Cumulative. The rights of the parties under this
Agreement are cumulative and shall not preclude the assertion by any party of
any rights now or hereafter available to it under any other agreement, by law or
otherwise.
SECTION 16. Severability. If any provision contained herein is held to
be invalid, illegal or unenforceable for any reason, the invalidity, illegality
or unenforceability of such provision shall in no way affect any other provision
hereof.
SECTION 17. Specific Performance. The parties hereto recognize that the
obligations imposed on them in this Agreement are special, unique and of
extraordinary character, and that irreparable damage would occur in the event of
a breach of any of the provisions hereof. Accordingly, the parties agree that
each of them shall be entitled to seek injunctive relief to prevent breaches of
this Agreement and to obtain specific enforcement of the provisions hereof, in
addition to any other remedy now or hereafter available at law or in equity or
otherwise.
SECTION 18. Headings. The headings contained in this Agreement are for
convenience of reference only and shall in no way define, limit or extend the
scope or intent of any provisions set forth herein.
SECTION 19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer
DOBBINS PARTNERS, L.P.
By /s/ J. Robert Dobbins
Dobbins Capital Corporation,
its General Partner
By /s/ J. Robert Dobbins
J. Robert Dobbins
President
MEMPO TRUST
By /s/
Trustee
/s/ M.A. Schuepbach
Martin A. Schuepbach
AGREEMENT IN PRINCIPLE
THIS AGREEMENT IN PRINCIPLE (this "Agreement") is made and entered into
this day of June, 1996, by and between EUROGAS, INC., a Utah corporation
-----
("EuroGas") and CHEMILABCO, B.V., a company registered in the Netherlands
("Chemilabco"), based on the following:
Premises
A. EuroGas is a publicly-held corporation engaged in the exploration and
development of methane gas reserves located in Poland.
B. Concurrently with the execution of this Agreement, EuroGas has entered
into an agreement in principle with Danube International Petroleum Company
("Danube") whereby EuroGas would acquire all of Danube. A copy of the agreement
in principle between EuroGas and Danube has been circulated to the parties and
is incorporated herein by reference.
C. Danube is a privately-held corporation engaged in the exploration and
development of oil and gas reserves located in the Czech Republic and Slovakia.
Attached hereto as Schedule 1 is a description of the rights held by Danube.
D. Chemilabco holds, by way of assignment, the right to acquire 51% of
Danube's interests as described in Schedule 1 and has provided $2,500,000 [U.S.]
of interim financing to EuroGas and Danube.
E. The parties have held discussions about Chemilabco exchanging its
interests and provide additional financing in exchange for EuroGas stock.
F. The parties wish to enter into this Agreement to set forth the
principal terms and conditions of the transaction.
G. The execution and delivery of this Agreement has been approved by the
Boards of Directors of EuroGas and Chemilabco.
H. The parties intend to enter into a definitive agreement with respect
to this transaction to close concurrently or simultaneously with EuroGas'
acquisition of Danube.
Agreement in Principle
1. Incorporation of Premises. The foregoing premises are incorporated by
this reference.
2. The Transaction. On the terms and subject to the conditions set forth
in the Definitive Agreement to be executed between EuroGas and Chemilabco,
Cemilabco will deliver to EuroGas $2,500,000 [U.S.] in additional financing and
assign all of its interests in the Danube project. In exchange therefore,
EuroGas shall deliver to Chemilabco:
(a) 5,000,000 shares of EuroGas restricted common stock with
registration rights as set forth below; and
(b) 1,000,000 shares of EuroGas restricted common stock for each
commercial well put into production by EuroGas in the areas described in
Schedule 1, not to exceed 16,000,000 shares in the aggregate. A commercial
well shall be defined as any oil or gas well producing revenue equal to or
in excess of the costs of operating the well, the taxes and royalties
payable thereon, and an amount reasonably necessary to amortize the cost of
drilling over the expected life of the well.
3. Restricted Nature of Securities. Chemilabco acknowledges that the
completion of the Transaction and the issuance of the consideration constitute
the offer and sale of securities as those terms are defined under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state statutes.
The Transaction shall be consummated in reliance on certain exemptions from the
registration requirements of federal and state securities laws, which depend,
among other items, on the circumstances under which such securities are
acquired. at the time of execution and delivery of the Definitive Agreement,
Chemilabco will arrange for each of its stockholders to execute and deliver a
letter acceptable to EuroGas containing reasonable and customary representations
upon which EuroGas shall be entitled to rely as a basis for its determination
that the issuance of the EuroGas Common Stock is exempt from the registration
requirements of the Securities Act and similar state laws. Until such time as
such securities shall have been registered under the Securities Act as
contemplated by this Agreement, each of the certificates representing the
EuroGas Common Stock shall bear a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS
OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS
OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND SUCH STATE STATUTES.
4. Registration Rights. At the time of the consummation of the
Transaction, EuroGas will enter into an agreement with Chemilabco which will
provide as follows:
(a) On or before the later of September 30, 1996 or thirty (30) days
after receipt by EuroGas of audited and stub period financial statements of
EuroGas and Chemilabco necessary to file a registration statement, but no
later than December 31, 1996, EuroGas will file with the SEC a "shelf"
registration statement (the "Shelf Registration Statement") on an
appropriate form pursuant to Rule 415 under the Securities Act will respect
to the shares of EuroGas Common Stock issued in connection with the
Transaction (sometimes referred to as the "Registrable Securities").
EuroGas will use its best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act as promptly as
practicable after the filing thereof until all the Registrable Securities
are sold.
The following restrictions will apply to the sales of the EuroGas
Common Stock by Chemilabco or its shareholders (the "Holders") pursuant to
the Shelf Registration Statement:
(i) During the first six months after the effective date of the
Shelf Registration Statement, the Holders will not sell an aggregate
of more than 1,000,000 EuroGas Common Shares;
(ii) During the first year after the effective date of the Shelf
Registration Statement, the Holders will not sell an aggregate of more
than 2,500,000 EuroGas Common Shares (including any securities sold in
the first six months after the consummation of such effective date);
and
(iii) During any calendar month within the first year after
the effective date of the Shelf Registration Statement, the Holder
will not sell an aggregate number of EuroGas Common Shares greater
than the higher of (A) 1% of the total number of shares of EuroGas
Common Stock outstanding at the beginning of such calendar month and
(B) the average daily trading volume of EuroGas Common Stock during
the preceding calendar month.
(b) If at any time prior to the date that is five years after the
consummation of the Transaction, EuroGas intends to file a registration
statement to register any of its securities under the Securities Act,
EuroGas will give the Holders written notice of its intention to do so.
The Holders will have 20 days subsequent to such notice to elect to have
the Registrable Securities then held by them included in such registration
statement. In the case of a proposed underwritten offering, if the
managing underwriter or underwriters determine in writing that, because of
the size of the offering intended to be made, the success of the offering
would be materially and adversely affected by inclusion of the Registrable
Securities, then the securities to be included in such offering will be
reduced to the amount recommended by such managing underwriter or
underwriters (provided, however, that the proportion by which the amount of
Registrable Securities intended to be offered by the Holders is reduced
shall not exceed the proportion by which the amount of securities intended
to be offered by EuroGas or any other person or entity is reduced). The
provisions of this paragraph shall not apply to registration statements
filed on forms S-8, S-4 or successor forms.
(c) The Holders, if requested by the managing underwriter or
underwriters for any underwritten, registered offering of the securities of
EuroGas, agree not to effect any public sale or distribution of the
Registrable Securities, including sales pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the 15
days prior to, and during the 90-day period commencing on the effective
date of such registration statement (except as part of such registration).
(d) EuroGas will indemnify each Holder against all liabilities
arising from any misstatements or omissions in any registration statement
covering the Registrable Securities, other than liabilities arising from
information provided by such Holder expressly for inclusion therein.
(e) The Holders will agree to cooperate with EuroGas by providing in
writing such information as EuroGas shall reasonably request in order to
comply with the provisions of the Securities Act applicable in connection
with the disposition of the Registrable Securities, including information
regarding the identity of such Holders and the intended method of
disposition of the Registrable Securities.
(f) All costs and expenses of the registration will be borne by
EuroGas, including fees and expenses of counsel and accountants for EuroGas
and all other costs and expenses of EuroGas incident to the preparation,
printing, and filing under the Securities Act and furnishing copies thereof
and of the prospectus included therein; provided, however, that EuroGas
will not bear the costs and expenses of the Holders in connection with the
sale of the securities subject to the registration statement that are
underwriting commissions related to the Registrable Securities, brokerage
fees, transfer taxes, or the fees and expenses of any counsel, accountant,
or other representative retained by a Holder.
(g) At all times on or after December 31, 1996, EuroGas will file all
reports required to be filed by it under the Securities Exchange Act of
1934, as amended, in order to permit public sales of the Registrable
Securities to be made in reliance on Rule 144 thereunder.
(h) EuroGas may include other EuroGas shares in the Shelf
Registration Statement, however, the sale of any such included shares shall
not be counted as any sale by Chemilabco or its shareholders for purposes
of calculating the amount of permissible sales set forth above.
5. Conditions to Closing. The closing of the Transaction is subject to
the satisfaction of the following conditions precedent:
(a) EuroGas and Chemilabco shall have negotiated and entered into a
Definitive Agreement and plan of merger providing for the Transaction and
the other matters contemplated hereby, which agreement shall contain
appropriate representations, warranties, covenants, and other terms and
provisions;
(b) All legal matters, instruments, and documents necessary to
complete the Transaction have been approved by legal counsel for the
respective parties.
(c) The parties have obtained all necessary governmental, regulatory,
and other third party approvals required in connection with the
Transaction.
(d) EuroGas has completed its acquisition of Danube.
6. Costs. Each of the parties shall bear its respective costs associated
with the Transaction contemplated by this Agreement, including legal fees,
accounting fees, and other costs and expenses.
7. Information. Each of the parties acknowledges that much of the
information to be furnished to it and to its representatives pursuant hereto may
consist of confidential and/or proprietary information of the furnishing party.
Accordingly, each party agrees to preserve and protect the confidentiality of
all information made available to such party or its representative hereunder,
regardless of whether such information is acquired before or after execution of
this Agreement, except to the extent that such information is available to the
public generally. Each of the parties shall ensure that all representatives,
advisors, and experts retained by such parties for the purpose of investigating
and reviewing the affairs of the other party shall agree to abide by the
foregoing confidentiality provisions.
8. Term. This Agreement will expire on September 30, 1996 if the
Definitive Agreement is not executed and delivered by such date.
9. Announcements. The parties agree that neither they nor their
respective employees, officers, directors, or agents will make any disclosure of
the existence or terms of this Agreement or any transactions contemplated
hereby, without the express written consent of the other party. Notwithstanding
the foregoing, Chemilabco acknowledges that EuroGas is subject to the disclosure
requirements of the Securities and Exchange Act of 1934, as amended, and agrees
that EuroGas can make a public announcement of the existence and terms of this
Agreement provided that it shall have delivered to Chemilabco a copy of any such
proposed announcement at least 24 hours in advance of its release to the public.
10. Definitive Agreement. This Agreement sets forth the principal terms
and conditions of the proposed Transaction between the parties as currently
contemplated. Consummation of this Transaction requires negotiation and
drafting of the Definitive Agreement setting forth terms and conditions not
inconsistent with the foregoing and other terms and conditions as are customary
and usual under the circumstances. The Definitive Agreement shall govern all
rights and obligations of the parties with respect to the completion of the
Transaction contemplated by this Agreement.
11. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EuroGas:
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer
Chemilabco:
CHEMILABCO, B.V.
By /s/ Armando Ulrich
Armando Ulrich, Managing Director
AGREEMENT AND PLAN OF MERGER
between
DANUBE INTERNATIONAL PETROLEUM COMPANY
and
EUROGAS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - CERTAIN DEFINITIONS 1
SECTION 1.1. Certain Definitions 1
ARTICLE II - THE MERGER 7
SECTION 2.1. The Merger 7
SECTION 2.2. Effective Time 7
SECTION 2.3. Effects of the Merger 7
SECTION 2.4. Charter 7
SECTION 2.5. Bylaws 7
SECTION 2.6. Directors 8
SECTION 2.7. Officers 8
SECTION 2.8. Conversion of Shares 8
SECTION 2.9. Merger Sub Common Stock 9
SECTION 2.10. Exchange Procedures. 9
SECTION 2.11. Certain Limitations on Rights and Transfers 10
ARTICLE III - FORMATION OF MERGER SUB 10
SECTION 3.1. Formation of Merger Sub 10
SECTION 3.2. Assumption of Obligations 10
SECTION 3.3. Assets and Liabilities 11
ARTICLE IV - THE CLOSING 11
SECTION 4.1. Closing 11
SECTION 4.2. Closing Deliveries; Certain Actions 11
ARTICLE V - REPRESENTATIONS AND WARRANTIES 12
SECTION 5.1. Existence; Corporate Authority; Good Standing 12
SECTION 5.2. Authority; Binding Effect 12
SECTION 5.3. Absence of Conflicts. 13
SECTION 5.4. Governmental Consents and Filings 13
SECTION 5.5. Capitalization. 14
SECTION 5.6. Issuance of Purchaser Securities. 15
SECTION 5.7. Subsidiaries 16
SECTION 5.8. Commission Reports 17
SECTION 5.9. Financial Statements. 17
SECTION 5.10. Absence of Undisclosed Liabilities. 18
SECTION 5.11. Absence of Certain Changes 18
SECTION 5.12. Litigation. 18
SECTION 5.13. Compliance with Laws and Other Requirements 19
SECTION 5.14. Concessions and Licenses 19
SECTION 5.15. Absence of Defaults 19
SECTION 5.16. Books and Records 20
SECTION 5.17. Taxes 20
SECTION 5.18. Certain Business Practices 21
SECTION 5.19. Disclosure. 21
SECTION 5.20. Financing. 21
SECTION 5.21. Fees and Commissions. 21
ARTICLE VI - COVENANTS 21
SECTION 6.1. Conduct of Businesses 21
SECTION 6.2. Financial Statements; Certain
Commission Reports 23
SECTION 6.3. Best Efforts 24
SECTION 6.4. Access to Information; Confidentiality 24
SECTION 6.5. Notification of Certain Matters 25
SECTION 6.6. Purchaser Board of Directors 26
SECTION 6.7. Certain Consents. 26
ARTICLE VII - CONDITIONS TO CONSUMMATION OF MERGER 26
SECTION 7.1. Conditions to the Obligations of all Parties 26
SECTION 7.2. Conditions to the Obligations of the
Purchaser and Merger Sub 27
SECTION 7.3. Conditions to the Obligations of
the Company 28
ARTICLE VIII - TERMINATION 29
SECTION 8.1. Termination 29
SECTION 8.2. Effect of Termination 31
ARTICLE IX - INDEMNIFICATION 31
SECTION 9.1. Indemnification. 31
SECTION 9.2. Survival of Indemnification Rights. 33
SECTION 9.3. Third Party Claims; Certain Procedures 33
ARTICLE X - MISCELLANEOUS 34
SECTION 10.1. Survival or Nonsurvival of Representations
and Warranties 34
SECTION 10.2. Fees and Expenses 34
SECTION 10.3. Notices 34
SECTION 10.4. Public Announcements 35
SECTION 10.5. Amendment; Waiver 35
SECTION 10.6. Entire Agreement 36
SECTION 10.7. Parties in Interest; Assignment 36
SECTION 10.8. Governing Law 36
SECTION 10.9. Severability 37
SECTION 10.10. Specific Performance 37
SECTION 10.11. Interpretation 37
SECTION 10.12. Counterparts 37
</TABLE>
LIST OF EXHIBITS
Exhibit A Form of Certificate of Designation(1)
Exhibit B Form of Merger Sub Assumption Agreement(1)
Exhibit C Form of Purchaser Promissory Note(1)
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Schuepbach Employment Agreement(1)
Exhibit F Form of Warrant Agreement(1)
Exhibit G Form of opinion of counsel to the Company(1)
Exhibit H Form of opinion of counsel to the Purchaser(1)
- -------------------------
(1) To be incorporated as a part of this Agreement pursuant to a separate
instrument to be executed by the parties hereto prior to the Closing Date as
contemplated by Section 7.1(a) hereof.
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), entered into as of
July 3, 1996 by and between Danube International Petroleum Company, a Texas
corporation (the "Company"), and EuroGas, Inc., a Utah corporation (the
"Purchaser"),
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Company and the Purchaser have
each approved this Agreement and have determined that it is advisable and in the
best interests of their respective stockholders for the Company to be merged
with and into Merger Sub (as hereinafter defined) upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the stockholders of the Company have approved this Agreement in
accordance with the Texas Act (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises, the terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions.
(a) As used in this Agreement, the terms set forth below shall have
the following meanings:
"Applicable Transaction Documents" means, when used in reference to
the Company, the Purchaser or Merger Sub (as the case may be), all Transaction
Documents to which it is a party or by which it is bound or to which it will be
a party or by which it will be bound as of the Closing Date.
"Applicable Latest Balance Sheet" means (i) when used in reference to
the Company, the December 31, 1995 Company Balance Sheet and (ii) when used in
reference to the Purchaser, the most recent pro forma condensed combined balance
sheet for the Purchaser and Globegas B.V. contained in the Commission Reports
(which balance sheet is contained in Amendment No. 1 to the Quarterly Report on
Form 10-QSB/A of the Purchaser for the quarterly period ended March 31, 1995).
"Bylaws" means, with respect to any corporation, the bylaws of such
corporation, as in effect at all times on or after the date hereof.
"Certificate of Designation" means the Certificate of Designation
relating to the EuroGas 1996 Series Preferred Stock, in the form attached as
Exhibit A hereto, to be adopted by the Board of Directors of the Purchaser and
filed with the Division of Corporations and Commercial Code of the State of
Utah.
"Charter" means, with respect to any corporation, the certificate or
articles of incorporation (or similar governing document) of such corporation,
as in effect at all times on or after the date hereof.
"Closing Date" means the date and time of the Closing, as determined
in accordance with Section 4.1 hereof.
"Commission" means the Securities and Exchange Commission.
"Commission Reports" means, with respect to any Person, all reports,
forms, schedules and statements required to be filed by said Person with the
Commission pursuant to the Securities Act or the Exchange Act or the rules and
regulations promulgated thereunder by the Commission.
"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Consent" means any consent, approval, permit, notice, action or
authorization of any Person not a party to this Agreement.
"Danube Licenses" means the following licenses for the development of
oil and gas reserves:
(a) License granted to Moravske Naftove Doly a.s., as in effect on
the date hereof; and
(b) License Number granted to NAFTA a.s. Gbely, as in effect on the
date hereof.
"EuroGas Common Shares" means the shares of EuroGas Common Stock that
are included in the Aggregate Merger Consideration pursuant to Section
2.8(a)(ii) hereof.
"EuroGas Common Stock" means the common stock, par value $.001 per
share, of EuroGas.
"EuroGas Concessions" means the following concessions granted by the
Minister of Environmental Protection, Natural Resources and Forestry of Poland
for the exploitation of methane deposits:
(a) Concession Number 134/93 granted on June 26, 1993 to Pol-Tex
Methane, a Polish joint venture with limited liability, as modified by (i) a
Decision dated September 30, 1994, (ii) a Decision dated September 30, 1995 and
(iii) a Decision dated March 19, 1996 and as in effect on the date hereof;
(b) Concession granted to McKenzie Methane Jastrzebie, a Polish joint
venture with limited liability, as in effect on the date hereof; and
(c) Concession granted to McKenzie Methane Rybnik, a Polish joint
venture with limited liability, as in effect on the date hereof.
"EuroGas 1995 Series Preferred Stock" means the series of EuroGas
Preferred Stock designated as such in or pursuant to the Charter of EuroGas.
"EuroGas Stock Options" means the options to purchase EuroGas Common
Stock which are outstanding under the incentive stock compensation plans and
programs of EuroGas.
"EuroGas 1996 Preferred Shares" means the shares of EuroGas 1996
Series Preferred Stock that are included in the Aggregate Merger Consideration
pursuant to Section 2.8(a)(iii) hereof.
"EuroGas 1996 Series Preferred Stock" means the series of EuroGas
Preferred Stock to be designated as such in or pursuant to the Charter of
EuroGas upon the filing of the Certificate of Designation with the Division of
Corporations and Commercial Code of the State of Utah.
"EuroGas Preferred Stock" means preferred stock, par value $.001 per
share, of EuroGas.
"EuroGas Conversion Shares" means the shares of EuroGas Common Stock
issuable upon conversion of the EuroGas 1996 Preferred Shares as provided in the
Certificate of Designation.
"EuroGas Warrant Shares" means the shares of EuroGas Common Stock
issuable upon exercise of the EuroGas Warrants.
"EuroGas Warrants" means the warrants to purchase EuroGas Common Stock
issuable pursuant to the Warrant Agreement that are included in the Aggregate
Merger Consideration pursuant to Section 2.8(a)(iv) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof, any federal or state court and any other agency
or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976), as amended.
"Investment Letter" means a letter, in form and substance acceptable
to the Purchaser, to be executed by each of the Company Stockholders and each
other Person to whom the Aggregate Merger Consideration is to be distributed
pursuant to Section 2.10 hereof which contains reasonable and customary
representations upon which the Purchaser shall be entitled to rely as a basis
for its determination that the issuance of the EuroGas Common Shares, the
EuroGas 1996 Preferred Shares and the EuroGas Warrants is exempt from the
registration requirements of the Securities Act and similar state laws.
"Material Adverse Effect" means an effect that is or would be
materially adverse to the business, financial condition or results of operations
of, (i) when such term is used in reference to the Company, the Company and its
Subsidiaries, taken as a whole, or, (ii) when such term is used in reference to
the Purchaser, the Purchaser and its Subsidiaries (including, if applicable,
Merger Sub), taken as a whole.
"Merger" means the merger of the Company with and into Merger Sub upon
the terms and subject to the conditions set forth in this Agreement.
"Merger Sub Assumption Agreement" means the Assumption Agreement, in
the form attached as Exhibit B hereto, to be executed by Merger Sub prior to the
Closing Date in favor of the Company and the Company Stockholders.
"Merger Sub Common Stock" means the common stock of Merger Sub.
"Person" means any individual, corporation, partnership, association,
trust or any other entity or organization of any kind or character, including a
Governmental Authority.
"Purchaser Promissory Note" means the promissory note or promissory
notes (as specified in the Distribution Schedule) in the aggregate principal
amount of $2,500,000, in the form attached as Exhibit C hereto, to be executed
by the Purchaser and delivered the Company Stockholders on the Closing Date,
which promissory note shall be due and payable in full on December 31, 1996.
"Registration Rights Agreement" means the Registration Rights
Agreement, in the form attached as Exhibit D hereto, to be entered into as of
the Closing Date among the Purchaser and the Company Stockholders.
"Schuepbach" means Martin A. Schuepbach.
"Schuepbach Employment Agreement" means the Employment Agreement, in
the form attached as Exhibit E hereto, to be entered into as of the Closing Date
between the Purchaser and Schuepbach.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the outstanding shares of Company Common Stock.
"Subsidiary" means, with respect to any Person, any other Person of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by such Person.
"Texas Act" means the Texas Business Corporation Act.
"Transaction Documents" means this Agreement, the Certificate of
Designation, the Merger Sub Assumption Agreement, the Registration Rights
Agreement, the Schuepbach Employment Agreement and the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement, in the form attached
as Exhibit F hereto, to be entered into as of the Closing Date among the
Purchaser and the Company Stockholders.
(b) Each of the terms set forth below has the meaning set forth in
the provision set forth opposite such term in the following table:
<TABLE>
<CAPTION>
Term Provision
<S> <C>
Aggregate Merger Consideration Section 2.8(a)
Articles of Merger Section 2.2
Certificates Section 2.10
Company Stockholder Section 2.10
Constituent Corporations Section 2.3
Closing Section 4.1
December 31, 1995 Company Balance Sheet Section 5.9(a)
Disclosure Schedule Article V
Distribution Schedule Section 2.10
Effective Time Section 2.2
Examined Party Section 6.4(b)
Examining Party Section 6.4(b)
Indemnified Party Section 9.3
Indemnified Party Section 9.3
Letter of Transmittal Section 2.10
Merger Sub Section 3.1
Representatives Section 6.4(a)
Surviving Corporation Section 2.1
Surviving Representations Section 9.1(a)
</TABLE>
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
set forth herein, and in accordance with the Texas Act, at the Effective Time,
the Company shall be merged with and into Merger Sub and the separate corporate
existence of the Company shall thereupon cease. Merger Sub shall be the
surviving corporation (the "Surviving Corporation") in the Merger and shall
continue to be governed by laws of the State of Texas.
SECTION 2.2 Effective Time. The Merger shall be effected through the
filing of articles of merger (the "Articles of Merger") with the Secretary of
State of the State of Texas as provided in Section 5.04 of the Texas Act, and
shall be effective as of the time of filing, or at such other time as may be
specified in the Articles of Merger in accordance with applicable law (the
"Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 5.06 of the Texas Act. Without limiting the generality of
the foregoing, at the Effective Time, the Surviving Corporation shall possess
all the rights, privileges, powers and franchises of a public as well as of a
private nature, of Merger Sub and the Company (collectively, the "Constituent
Corporations"); and all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations; and the title to any real estate vested by deed or otherwise in
either of the Constituent Corporations shall be vested in the Surviving
Corporation without any reversion or impairment; but all existing liens and
encumbrances upon any property of either of the Constituent Corporations shall
be preserved unimpaired; and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts and
liabilities had been incurred by it.
SECTION 2.4 Charter. The Charter of Merger Sub as in effect immediately
prior to the Effective Time shall be the Charter of the Surviving Corporation.
SECTION 2.5 Bylaws. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation.
SECTION 2.6 Directors. The persons serving as directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately after such time.
SECTION 2.7 Officers. The persons serving as officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation immediately after such time.
SECTION 2.8 Conversion of Shares.
(a) By virtue of the Merger and without any action on the part of the
holders of any Shares, the Shares issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive the following
aggregate consideration (the "Aggregate Merger Consideration") in accordance
with the terms and subject to the conditions set forth herein:
(i) $500,000 in cash;
(ii) the Purchaser Promissory Note;
(iii) 2,500,000 shares of EuroGas Common Stock;
(iv) 1,250,000 shares of EuroGas 1996 Series Preferred Stock;
and
(v) EuroGas Warrants initially exercisable for 5,000,000 shares
of EuroGas Common Stock.
The Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Certificate evidencing any Shares shall cease to have any rights with
respect thereto, except the right to receive the portion of the Aggregate Merger
Consideration to which such holder is entitled in accordance with the provisions
set forth herein.
(b) By virtue of the Merger and without any action on the part of the
Company, each share of Company Common Stock that is held in the treasury of the
Company, if any, shall automatically be canceled and retired and shall cease to
exist, and no payment shall be made in respect thereof.
SECTION 2.9 Merger Sub Common Stock. Each share of Merger Sub Common
Stock that is issued and outstanding immediately prior to the Effective Time
shall not be affected in any way as a result of the Merger and shall continue to
be issued and outstanding after the such time.
SECTION 2.10 Exchange Procedures. On the Closing Date, each record
holder (each, a "Company Stockholder") of a certificate or certificates (the
"Certificates") evidencing Shares that were issued and outstanding immediately
prior to the Effective Time shall execute a distribution schedule (the
"Distribution Schedule") setting forth the manner in which the Aggregate Merger
Consideration will be divided among the Company Stockholders and, if applicable,
any other Persons designated by the Company Stockholders therein; provided,
however, that it shall be a condition to the issuance or delivery by the
Purchaser of any portion of the Aggregate Merger Consideration to any Person
other than a Company Stockholder that (i) the necessary documents required to
evidence and effect the transfer of the rights to receive such portion of the
Aggregate Merger Consideration be furnished to the Purchaser; (ii) any
applicable stock transfer taxes shall have been paid; (iii) such transfer shall
not result in the loss of any exemption from the registration requirements of
the Securities Act and similar requirements of any applicable state statutes
being relied on by Purchaser in connection with the issuance of the EuroGas
Common Shares, the EuroGas 1996 Preferred Shares or the EuroGas Warrants; and
(iv) such Person shall have executed and delivered an Investment Letter. Upon
the execution by each of the Company Stockholders of the Distribution Schedule
and the surrender to the Surviving Corporation of the Certificates evidencing
the Shares, together with duly executed Investment Letters executed by each
Person to whom any EuroGas Common Shares, EuroGas Preferred Shares or EuroGas
Warrants are to be issued by the Purchaser, the Surviving Corporation shall
distribute the Aggregate Merger Consideration to the Company Stockholders or
their designees in accordance with the Distribution Schedule. The Surviving
Corporation shall use its best efforts to complete the payment and distribution
of the Aggregate Merger Consideration on the Closing Date, subject only to
compliance by the Company Stockholders with the procedures set forth in this
Section 2.10. The Surviving Corporation shall pay all charges and expenses
(other than any applicable transfer taxes payable in connection with the
issuance of shares of EuroGas Common Stock, EuroGas Preferred Stock or EuroGas
Warrants to a Person other than a Company Stockholder) in connection with the
payment and distribution of the Aggregate Merger Consideration.
SECTION 2.11 Certain Limitations on Rights and Transfers.
(a) From and after the Effective Time, until surrendered in accordance
with the provisions of Section 2.10, each Certificate shall represent for all
purposes only the right to receive the portion of the Aggregate Merger
Consideration to which the holder of such Certificate is entitled in accordance
with the terms of this Agreement. From and after the Effective Time, the Company
Stockholders shall have no right to vote or to receive any dividends or other
distributions with respect to any Shares theretofore evidenced thereby, and
shall have no other rights other than as specifically provided herein or by law.
(b) No dividends, interest or other distributions with respect to the
EuroGas Common Shares or EuroGas 1996 Preferred Shares shall be paid to any
Company Stockholder unless and until the Certificates registered in the name of
such holder have been surrendered in accordance with Section 2.10 hereof. Upon
the issuance of such shares in accordance with Section 2.10 hereof, the
Purchaser shall pay, without interest, all dividends and other distributions
payable with respect to the EuroGas Common Stock and EuroGas 1996 Series
Preferred Stock that were declared or accrued subsequent to the Effective Time
but were not paid as contemplated by this Section 2.11(b).
(c) From and after the Effective Time, there shall be no transfers of
Shares on the stock transfer books of the Company which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for transfer, they shall
be canceled and exchanged in accordance with this Article II.
ARTICLE III
FORMATION OF MERGER SUB
SECTION 3.1 Formation of Merger Sub. Prior to the Closing Date, the
Purchaser will organize a new corporation under the laws of the State of Texas
("Merger Sub"), which shall be a wholly-owned subsidiary of the Purchaser.
SECTION 3.2 Assumption of Obligations. Prior to the Effective Time, the
Purchaser shall cause Merger Sub to execute the Merger Sub Assumption Agreement
pursuant to which Merger Sub shall agree to perform and comply with all of the
provisions of this Agreement and the other Applicable Transaction Documents
applicable to it in the same manner and to the same extent as if it were a party
hereto.
SECTION 3.3 Assets and Liabilities. Immediately prior to the Effective
Time, Merger Sub shall have sufficient assets to permit it to transact business
in accordance with the Texas Act. In addition, immediately prior to the
Effective Time, Merger Sub shall have no material liabilities or obligations
other than its obligations set forth in this Agreement.
ARTICLE IV
THE CLOSING
SECTION 4.1 Closing. Upon the terms and subject to the conditions set
forth herein, on the third business day after the fulfillment or waiver of the
conditions set forth in Article VII, a closing (the "Closing") shall be held in
order to confirm the fulfillment or waiver of such conditions and take all such
other and further actions as are necessary to make the Merger effective under
applicable law. The Closing shall be held at such location as shall be mutually
agreed by the Company and the Purchaser.
SECTION 4.2 Closing Deliveries; Certain Actions. At the Closing, the
parties shall take the following actions:
(a) The Company and Merger Sub shall execute and deliver the Articles of
Merger and shall cause them to be filed in the office of the Secretary of State
of the State of Texas, and each of the parties hereto shall take all such other
and further actions as may be required by law to make the Merger effective;
(b) The Purchaser shall execute and deliver the Certificate of Designation
and shall cause it to be filed in the office of the Secretary of State of the
State of Utah;
(c) The Purchaser and the Company Stockholders (or their designees in
accordance with Section 2.10 hereof) shall execute and deliver the Warrant
Agreement;
(d) The Purchaser and the Company Stockholders (or their designees in
accordance with Section 2.10 hereof) shall execute the Registration Rights
Agreement;
(e) The Purchaser and Schuepbach shall execute and deliver the Schuepbach
Employment Agreement;
(f) The Company shall deliver, or cause to be delivered, to the Purchaser
the officers' certificate referred to in Section 7.2(g) hereof;
(g) The Purchaser shall deliver, or cause to be delivered, to the Company
the officers' certificate referred to in Section 7.3(i) hereof;
(h) The Company shall cause to be delivered to the Purchaser the opinion
of counsel referred to in Section 7.2(h) hereof; and
(i) The Purchaser shall cause to be delivered to the Company the opinion
of counsel referred to in Section 7.3(j) hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Purchaser, and the
Purchaser hereby represents and warrants to the Company, that, except as set
forth in a disclosure schedule ("Disclosure Schedule") to be delivered by it to
the other party after the execution and delivery of this Agreement (which
schedule shall appropriately identify the representations and warranties to
which the disclosures therein relate):
SECTION 5.1 Existence; Corporate Authority; Good Standing. It is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. It has all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted. It is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which the character of the properties owned or leased by
it or the nature of the activities conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
SECTION 5.2 Authority; Binding Effect. It has all requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and each of the other Applicable Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by it of this Agreement and each of the other Applicable Transaction
Documents have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings or shareholder actions are necessary
for it to authorize this Agreement or any of the other Applicable Transaction
Documents, the performance by it of its obligations hereunder or thereunder or
the consummation by it of the transactions contemplated hereby or thereby. This
Agreement has been duly executed and delivered by it, and this Agreement
constitutes (and when executed and delivered by it, each of the other Applicable
Transaction Documents will constitute) a legal, valid and binding obligation of
it, enforceable against it in accordance with the terms hereof and thereof.
SECTION 5.3 Absence of Conflicts. The execution and delivery by it of
this Agreement and each of the other Applicable Transaction Documents, the
performance by it of its obligations hereunder and thereunder and the
consummation by it of the transactions contemplated hereby and thereby will not
(i) conflict with, or result in any violation or breach of, any provision of the
Charter or Bylaws of it or any of its Subsidiaries, (ii) conflict with, result
in any violation or breach of, or constitute a default under, any term or
provision of any note, bond, mortgage, indenture, lease, franchise, permit,
license, contract or other instrument or document to which it or any of its
Subsidiaries is a party or by which its or their properties or assets are bound
or (iii) assuming that the filings and Consents referred to in Section 5.4
hereof are made or obtained, conflict with, or result in any violation of, any
law, ordinance, statute, rule or regulation of any Governmental Authority or of
any order, writ, injunction, judgment or decree of any court, arbitrator or
Governmental Authority applicable to it or any its Subsidiaries or its or their
respective properties or assets, except for any of the matters referred to in
clauses (ii), (iii) or (iv) above which could not reasonably be expected to have
a Material Adverse Effect.
SECTION 5.4 Governmental Consents and Filings. There is no requirement
applicable to it to obtain any Consent of, or to make or effect any declaration,
filing or registration with, any Governmental Authority for the valid execution
and delivery of this Agreement or any of the other Applicable Transaction
Documents, the due performance by it of its obligations hereunder or thereunder
or the lawful consummation by it of the transactions contemplated hereby or
thereby, except for (i) the filing and recordation of the Articles of Merger as
required by the Texas Act, (ii) compliance with the registration requirements of
the Securities Act and any similar state laws in connection with the resale of
any securities issued by the Purchaser in accordance with this Agreement and
(iii) such other Consents, declarations, filings or registrations which, if not
made or obtained, could not be reasonably expected to have a Material Adverse
Effect. It is not, and is not part of, a "person" (as defined in Section 801.1
of the rules and regulations promulgated under the HSR Act) which has annual net
sales or total net assets of $100,000,000 or more, as determined as of the date
hereof or the Closing Date for purposes of the HSR Act and the rules and
regulations promulgated thereunder.
SECTION 5.5 Capitalization.
(a) In the case of the representations and warranties made by the
Company: As of the date hereof, the authorized capital stock of the Company
consists of 10,000 shares of Company Common Stock, of which 2,997 shares are
issued and outstanding and no shares are held in the treasury of the Company.
All of the issued and outstanding shares of capital stock of the Company have
been duly authorized and are validly issued, fully paid and nonassessable. None
of the issued and outstanding shares of capital stock of the Company has been
issued in violation of, or subject to, any preemptive rights or similar rights
of subscription. All offers, issuances and sales by the Company of any shares
of its capital stock or other equity securities have been made in compliance
with the requirements of all applicable federal and state securities laws. As
of the date hereof, there are no outstanding options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
pursuant to which the Company is or may be obligated to issue or sell any issued
or unissued shares of its capital stock or other equity securities or to
purchase or redeem any shares of its capital stock or other equity securities or
make any other payments in respect thereof, and there are no shares of its
capital stock or other equity securities reserved for issuance for any purpose.
The Company has not agreed to register any shares of its capital stock or other
equity securities under the Securities Act.
(b) In the case of the representations and warranties made by the
Purchaser: As of the date hereof, the authorized capital stock of the Purchaser
consists of (i) 5,000,000 shares of preferred stock, par value $.001 per share,
of which 2,391,968 have been designated as EuroGas 1995 Series Preferred Stock
and are issued and outstanding and of which no shares are held in the treasury
of the Purchaser and (ii) 325,000,000 shares of EuroGas Common Stock, of which
(A) 33,009,033 shares are issued and outstanding, (B) 4,783,936 are reserved for
issuance upon conversion of shares of EuroGas 1995 Series Preferred Stock, (C)
up to 2,000,000 shares are (or will be at the Effective Time) reserved for
issuance upon the exercise of EuroGas Stock Options, (D) up to 21,000,000 shares
are (or will be at the Effective Time) reserved for issuance to Chemilabco in
connection with a transaction to be consummated concurrently with the Merger and
(E) up to 6,800,000 shares are (or will be at the Effective Time) reserved for
issuance pursuant to convertible debentures issued by the Purchaser and of which
no shares are held in the treasury of the Company. All of the issued and
outstanding shares of capital stock of the Purchaser have been duly authorized
and are validly issued, fully paid and nonassessable. None of the issued and
outstanding shares of capital stock of the Purchaser has been issued in
violation of, or subject to, any preemptive rights or similar rights of
subscription. All offers, issuances and sales by the Purchaser of any shares of
its capital stock or other equity securities have been and will be made in
compliance with the requirements of all applicable federal and state securities
laws. Except as set forth in the Disclosure Schedule, there are no outstanding
options, warrants, calls, rights, convertible securities or other agreements or
commitments of any character pursuant to which the Purchaser is or may be
obligated to issue or sell any issued or unissued shares of its capital stock or
other equity securities or to purchase or redeem any shares of its capital stock
or other equity securities or make any other payments in respect thereof, and
there are no shares of its capital stock or other equity securities reserved for
issuance for any purpose. Except as described in the Disclosure Schedule, the
Purchaser has not agreed to register any shares of its capital stock or other
equity securities under the Securities Act.
SECTION 5.6 Issuance of Purchaser Securities. In the case of the
representations and warranties made by the Purchaser:
(a) The issuance of the EuroGas Common Shares in accordance with the
terms of this Agreement has been duly authorized by all necessary corporate
action on the part of the Purchaser, and when issued and delivered to the
Company Stockholders pursuant to this Agreement, the EuroGas Common Shares will
be validly issued, fully paid and nonassessable. The issuance of the EuroGas
Common Shares will not violate, or be subject to, any preemptive or similar
rights of subscription.
(b) The issuance of the EuroGas Preferred Shares in accordance with
this Agreement and the Certificate of Designation has been duly authorized by
all necessary corporate action on the part of the Purchaser, and when issued and
delivered to the Company Stockholders pursuant to this Agreement and the
Certificate of Designation, the EuroGas Preferred Shares will be validly issued,
fully paid and nonassessable. The issuance of the EuroGas Preferred Shares will
not violate, or be subject to, any preemptive or similar rights of subscription.
(c) The issuance of the EuroGas Conversion Shares upon conversion of
the EuroGas Preferred Shares in accordance with the Certificate of Designation
has been duly authorized by all necessary corporate action on the part of the
Purchaser, and when issued and delivered to the holders of EuroGas 1996 Series
Preferred Stock upon conversion thereof in accordance with the Certificate of
Designation, the EuroGas Conversion Shares will be validly issued, fully paid
and nonassessable. The issuance of the EuroGas Conversion Shares will not
violate, or be subject to, any preemptive or similar rights of subscription.
(d) The issuance of the EuroGas Warrants in accordance with this
Agreement and the Warrant Agreement has been duly authorized by all necessary
corporate action on the part of the Purchaser, and when issued and delivered to
the Company Stockholders pursuant to this Agreement, the EuroGas Warrants will
be validly issued, fully paid and nonassessable. The issuance of the EuroGas
Warrants will not violate, or be subject to, any preemptive or similar rights of
subscription.
(e) The issuance of the EuroGas Warrant Shares upon exercise of the
EuroGas Warrants in accordance with the Warrant Agreement has been duly
authorized by all necessary corporate action on the part of the Purchaser, and
when issued and delivered to the holders of EuroGas Warrants upon exercise
thereof in accordance with the Warrant Agreement, the EuroGas Warrant Shares
will be validly issued, fully paid and nonassessable. The issuance of the
EuroGas Warrant Shares will not violate, or be subject to, any preemptive or
similar rights of subscription.
SECTION 5.7 Subsidiaries.
(a) The Disclosure Schedule sets forth (i) the name of each of its
Subsidiaries, (ii) the jurisdiction of incorporation or formation of each of its
Subsidiaries, (iii) the authorized, issued and outstanding capital stock or
other equity securities of, or ownership interests in, each of its Subsidiaries
and (iv) the names of the stockholders or equity holders of, or holders of
ownership interests in, each of its Subsidiaries.
(b) Each of its Subsidiaries is duly incorporated or formed and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and has all requisite corporate or partnership power
and authority to own, lease and operate its properties and to carry on its
business as presently conducted. Each of its Subsidiaries is duly qualified to
transact business as a foreign corporation or limited partnership and is in good
standing in each jurisdiction in which the nature of its activities or the
character of the properties that it owns, leases or operates makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
(c) All of the issued and outstanding shares of capital stock or other
equity securities of, or ownership interests in, each of its Subsidiaries have
been duly authorized, are validly issued, fully paid and nonassessable and are
directly or indirectly owned by it, free and clear of all liens, claims and
encumbrances. There are no outstanding options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
pursuant to which any such Subsidiary is or may be obligated to issue or sell
any issued or unissued shares of its capital stock or other equity securities,
and there are no shares of capital stock or other equity securities of any such
Subsidiary reserved for issuance for any purpose.
SECTION 5.8 Commission Reports. In the case of the representations and
warranties made by the Purchaser: It has filed all required Commission Reports
for all periods ended prior to or on December 31, 1994, all of which (as they
may have been amended prior to the date hereof) complied as of their filing
dates in all material respects with all applicable requirements of the
Securities Act or Exchange Act, as the case may be. None of the Commission
Reports contained as of their filing dates any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The Purchaser
has disclosed to the Company in writing all material information regarding the
Purchaser and its business, prospects, financial condition and results of
operations that would have been set forth in Commission Reports filed by the
Purchaser for all periods ended after December 31, 1994 if the Purchaser were in
compliance with its obligations to file such reports; provided, however, that
the Company acknowledges that it has not received copies of the financial
statements and related notes that would be included in such reports but has
instead discussed the available information that would be covered by such
financial statements and related notes with officers and other representatives
of the Purchaser.
SECTION 5.9 Financial Statements.
(a) In the case of the representations and warranties made by the
Company: The Disclosure Schedule delivered by it contains true and correct
copies of the Company's unaudited consolidated financial statements as of and
for the year ended December 31, 1995, which consist of an unaudited balance
sheet as of such date (the "December 31, 1995 Company Balance Sheet") and an
unaudited statement of operations and unaudited statement of cash flows for the
year then ended. Such financial statements were prepared in accordance with
generally accepted accounting principles (subject to the absence of notes
thereto), are in accordance with and accurately based on the books and records
of the Company and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
date thereof and the consolidated results of operations and changes in cash
flows of the Company and its consolidated subsidiaries for the year then ended.
(b) In the case of the representations and warranties made by the
Purchaser: Each of the consolidated financial statements (including any notes
thereto) contained in the Commission Reports was prepared in accordance with
generally accepted accounting principles (subject to the absence of notes
thereto) applied on a consistent basis throughout the periods covered thereby
and the requirements of Regulation S-B promulgated under the Securities Act, is
in accordance with and accurately based on its books and records and fairly
presents in all material respects the consolidated financial position of the
Purchaser and its consolidated subsidiaries as of the date thereof and the
consolidated results of operations and changes in cash flows of the Purchaser
and its consolidated subsidiaries for the period indicated.
SECTION 5.10 Absence of Undisclosed Liabilities. As of the date of the
Applicable Latest Balance Sheet, neither it nor any of its Subsidiaries had or
was subject to any liabilities or obligations of a type required to be reflected
on a balance sheet prepared in accordance with generally accepted accounting
principles, except as set forth on such balance sheet. Since the date of the
Applicable Latest Balance Sheet, neither it nor any of its Subsidiaries has
incurred or become subject to any liabilities or obligations of a type required
to be reflected on a balance sheet prepared in accordance with generally
accepted accounting principles, except as heretofore disclosed pursuant to the
Disclosure Schedule delivered by it and except for liabilities and obligations
incurred in the ordinary course of business after the date of such balance sheet
and which have not had, and could not be reasonably expected to have, a Material
Adverse Effect.
SECTION 5.11 Absence of Certain Changes. Since the date of the
Applicable Latest Balance Sheet, it and its Subsidiaries have conducted their
respective businesses only in the ordinary course of business and there has not
been (i) any change, development, event, fact or condition which had, or could
reasonably be expected to have, a Material Adverse Effect; (ii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock or any direct or indirect redemption, purchase or other
acquisition of any shares of its capital stock; (iii) any damage, destruction or
loss (whether or not covered by insurance) to any material properties or assets
of it or any of its Subsidiaries; or (iv) any significant change in its
accounting principles, practices or methods.
SECTION 5.12 Litigation. There is no action, suit, inquiry,
investigation or other proceeding pending or threatened against it or any of its
Subsidiaries or any of their respective properties or assets in any court or
before any arbitrator or any foreign or United States federal, state or local
Governmental Authority which has had, or could reasonably be expected to have, a
Material Adverse Effect.
SECTION 5.13 Compliance with Laws and Other Requirements. Neither it nor
any of its Subsidiaries is in breach or violation of, or default under, any
provision of its Charter or Bylaws, any term or provision of any note, bond,
mortgage, indenture, lease, franchise, permit, license, contract or other
instrument or document to which it is a party or by which its properties or
assets are or may be bound or any term of any law, ordinance, statute, rule or
regulation of any Governmental Authority or of any order, writ, injunction,
judgment or decree of any court, arbitrator or Governmental Authority applicable
to it or its properties or assets, except for any breach, violation or default
which has not had, and could not reasonably be expected to have, a Material
Adverse Effect.
SECTION 5.14 Concessions and Licenses.
(a) In the case of the representations and warranties made by the
Company: Each of the Danube License Agreements has been duly and validly
authorized, executed and delivered and constitutes a valid and binding agreement
of the parties thereto, enforceable against each such party in accordance with
the terms thereof. None of the Danube License Agreements has been assigned by
any party thereto, no default has occurred in the performance of the terms of
any such agreements and there is no present condition or fact which would
prevent compliance in all material respects with the terms of any such agreement
by any party thereto. It has no knowledge that any other party to the Danube
License Agreements has any intention not to render full performance in all
material respects as contemplated by the terms thereof. It has provided to the
Purchaser true, correct and complete copies of the Danube License Agreements.
(b) In the case of the representations and warranties made by the
Purchaser: Each of the EuroGas Concession Agreements has been duly and validly
authorized, executed and delivered and constitutes a valid and binding agreement
of the parties thereto, enforceable against each such party in accordance with
the terms thereof. None of the EuroGas Concession Agreements has been assigned
by any party thereto, no default has occurred in the performance of the terms of
any such agreements and there is no present condition or fact which would
prevent compliance in all material respects with the terms of any such agreement
by any party thereto. It has no knowledge that any other party to the EuroGas
Concession Agreements has any intention not to render full performance in all
material respects as contemplated by the terms thereof. It has provided to the
Company true, correct and complete copies of the EuroGas Concession Agreements.
SECTION 5.15 Absence of Defaults. There is no default in any material
respect under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to its business, operations, properties, assets or
financial condition, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which it has not taken adequate steps to prevent such a default from
occurring.
SECTION 5.16 Books and Records. The books and records of it and its
Subsidiaries and their accounting practices are sufficient to permit the
preparation of audited financial statements in accordance with generally
accepted accounting practices and Regulation S-B adopted by the Commission under
the Securities Act and the Exchange Act. It will maintain and preserve its
books and records in such a fashion so as to permit the preparation of
historical audited financial statements as may be required by the Securities Act
and the Exchange Act and the rules and regulations adopted thereunder. It and
its Subsidiaries have maintained a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions have been and
are executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting principles
or any other criteria applicable to such statements and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
SECTION 5.17 Taxes. It has filed all tax returns and reports as required
by law. All such returns and reports are accurate and correct in all material
respects. It does not have any liabilities with respect to the payment of any
federal, state, county, local, or other taxes (including any deficiencies,
interest, or penalties) accrued for or applicable to the period ended on the
date of the most recent balance sheet included in the Schedules and all such
dates and years and periods prior thereto and for which it may at said date have
been liable in their own right or as transferee of the assets of, or as
successor to, any other corporation or other entity, except for taxes accrued
but not yet due and payable. None of such federal income tax returns has been
audited or is currently being audited by the Internal Revenue Service. It has
not made any election pursuant to the Code (other than elections which relate
solely to methods of accounting, depreciation, or amortization) which would have
a material adverse effect on the other party, their financial condition, their
business as presently conducted or as proposed to be conducted, or any of their
properties or material assets. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any of its tax
returns.
SECTION 5.18 Certain Business Practices. Except for such actions as have
not had, and could not reasonably be expected to have, a Material Adverse
Effect, none of it, its Subsidiaries or any directors, officers, agents or
employees of it or its Subsidiaries has (i) used any funds for unlawful
contributions, gifts or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic governmental officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
SECTION 5.19 Disclosure. The representations and warranties made by it
in this Agreement and the statements contained in the documents, certificates
and other writings furnished or to be furnished by it pursuant to this Agreement
and the other Applicable Transaction Documents or in connection with the
transactions contemplated hereby and thereby, when taken in their entirety, do
not and will not contain any untrue statement of material fact or information,
and do not and will not omit to state any material fact necessary, in light of
the circumstances under which it was made, in order to make the statements
therein not misleading.
SECTION 5.20 Financing. In the case of the representations and
warranties made by the Purchaser: The Purchaser has, or will have at the
Effective Time, the funds necessary to pay the cash portion of the Aggregate
Merger Consideration and to pay all related fees and expenses required to be
paid by it under the terms of this Agreement.
SECTION 5.21 Fees and Commissions. There is no investment banker,
broker, finder or other intermediary who has been retained by or is authorized
to act on behalf of it or any its Subsidiaries and who might be entitled to any
fee or commission from the other party or any of its Subsidiaries or affiliates
in connection with the consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Businesses. From the date hereof until the
Closing Date, each of the Company and the Purchaser shall, and shall cause each
of its Subsidiaries to, conduct its operations in the ordinary and regular
course and use commercially reasonable efforts to preserve intact its business
organization and goodwill and its relations with customers, suppliers, employees
and business associates. Without limiting the generality of the foregoing, from
the date hereof until the Closing Date, except as expressly provided in this
Agreement, each of the Company and the Purchaser shall not, and shall cause each
of its Subsidiaries not to, take any of the following actions without the prior
written consent of the other party:
(a) amend, modify or make any change in the Charter, Bylaws or other
organizational documents of it or any of its Subsidiaries;
(b) split, combine or reclassify any of the outstanding capital stock
of it or any of its Subsidiaries;
(c) declare, set aside or pay any dividend payable in cash, stock or
property with respect to any of the capital stock of it or any of its
Subsidiaries; provided, however, that its Subsidiaries shall not be prohibited
from declaring, setting aside or paying any dividend payable exclusively to it
or one or more of its direct or indirect wholly owned Subsidiaries;
(d) repurchase, redeem or otherwise acquire any shares of the capital
stock of it or any of its Subsidiaries or any securities convertible into or
exercisable for any shares of such capital stock;
(e) issue, sell, pledge or dispose of, or authorize the issuance,
sale, pledge or disposition of, any shares of capital stock or other equity
securities of it or any of its Subsidiaries (except, in the case of the
Purchaser, for the issuance of shares of EuroGas Common Stock to be made as
disclosed pursuant to the Disclosure Schedule)or any options, warrants, calls or
other rights to acquire any shares of capital stock or other equity securities
of it or any of its Subsidiaries;
(f) make any material capital expenditure (including any payment made
to acquire oil and gas properties and related assets) except in the ordinary
course of business consistent with past practice;
(g) consolidate with, or merge with or into, any Person;
(h) guarantee any material obligation of any Person except in the
ordinary course of business consistent with past practice;
(i) make any material investment in assets, stock or other securities
of any Person (other than one or more of its wholly owned Subsidiaries) except
in the ordinary course of business consistent with past practice;
(j) enter into any material contract or agreement or terminate, amend
or modify the Danube License Agreements (in the case of the Company) or the
EuroGas Concession Agreements (in the case of the Purchaser) or any other
existing material contract or agreement;
(k) cancel or compromise any material claim, waive or release any
material rights or change or terminate any material contract or agreement of it
or any of its Subsidiaries, except in the ordinary course of business consistent
with past practice;
(l) change the accounting principles or methods of it or any of its
Subsidiaries, except as required by law or as a result of any mandatory change
in accounting standards;
(m) fail to maintain the books and records of it or any of its
Subsidiaries in the usual, regular and ordinary manner; or
(n) take any action which would cause any of its representations or
warranties made by it under this Agreement to be untrue or incorrect as of the
date when made or as of any future date.
SECTION 6.2 Financial Statements; Certain Commission Reports.
(a) The Purchaser will take all commercially reasonable steps to
prepare as promptly as practicable its (i) audited consolidated financial
statements as of and for the year ended September 30, 1995, (ii) unaudited
interim financial statements for the quarters ended December 31, 1995, March 31,
1996 and June 30, 1996 and (iii) unaudited interim financial statements for any
quarterly period ending after June 30, 1996 and prior to the Closing Date for
which the Purchaser is required to file Commission Reports with the Commission
under the Exchange Act or the Securities Act. Upon completion of such financial
statements, the Purchaser shall promptly prepare and file with the Commission
reports on Form 10-KSB and Form 10-QSB, as appropriate, which reports shall
include financial statements for the applicable period and such other
information as may be required by such forms. All such financial statements
shall be prepared in accordance with generally accepted accounting principles
(subject, in the case of unaudited financial statements, to the absence of notes
thereto) and the requirements of Regulation S-B promulgated under the Securities
Act. None of such reports shall contain, as of their filing dates, any untrue
statements of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(b) The Company will take all commercially reasonable steps to
prepare as promptly as practicable its (i) audited consolidated financial
statements for the years ended December 31, 1994 and 1995, (ii) unaudited
interim consolidated financial statements for the quarter ended March 31, 1996
and (iii) unaudited interim financial statements for any quarterly period ending
after March 31, 1996 and less than 45 days prior to the Closing Date. All such
financial statements shall be prepared in accordance with generally accepted
accounting principles (subject, in the case of unaudited financial statements,
to the absence of notes thereto) and the requirements of Regulation S-B
promulgated under the Securities Act.
(c) The Purchaser shall deliver to the Company the financial
statements and reports described in paragraph (a) above, and the Company shall
deliver to the Purchaser the financial statements described in paragraph (b)
above, if and to the extent such financial statements and reports are completed
prior to the Closing Date; provided, however, that the delivery of such
financial statements and reports by the Purchaser and the Company shall not be a
condition to the obligations of the parties to consummate the transactions
contemplated hereby.
SECTION 6.3 Best Efforts. Subject to the terms and conditions hereof,
each of the parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things which
are necessary, proper or advisable under applicable laws and regulations or
otherwise in order to consummate and make effective the transactions
contemplated by this Agreement and the other Transaction Documents. Without
limiting the generality of the foregoing, each of the parties hereto shall
execute and deliver, or cause to be executed and delivered, all agreements,
certificates and other instruments and shall use its reasonable best efforts
promptly to obtain all Consents from, and to effect all registrations, filings
and notices with or to, any Governmental Authorities or other Persons which are
necessary or appropriate in connection with said transactions or in order to
fulfill all conditions to obligations of the parties under this Agreement and
the other Transaction Documents.
SECTION 6.4 Access to Information; Confidentiality.
(a) Upon reasonable notice, each of the Company and the Purchaser
agrees that it shall, and shall cause each of its Subsidiaries to, afford to the
other party and its officers, employees, counsel, accountants and other
authorized representatives ("Representatives") access, during normal business
hours throughout the period between the date hereof and the Closing Date, to its
properties, books, contracts and records and, during such period, shall, and
shall cause each of its Subsidiaries to, furnish promptly to the other party all
information concerning its business, properties and personnel as may reasonably
be requested; provided, however, that no investigation pursuant to this
Section 6.3 shall affect or be deemed to modify any representation or warranty
made by the party furnishing such information.
(b) Each party shall not, and will cause its respective
Representatives not to, use any information obtained pursuant to this
Section 6.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, pending
consummation of the Merger, each party conducting an investigation hereunder
(the "Examining Party") will keep confidential, and will cause its
Representatives to keep confidential, all information and documents obtained
from the other party (the "Examined Party"). In the event that the Examining
Party is requested in any proceeding to disclose any such confidential
information, the Examining Party will give the Examined Party prompt notice of
such request so that the Examined Party may seek an appropriate protective
order. If in the absence of a protective order the Examining Party is
nonetheless compelled to disclose any such confidential information, the
Examining Party may disclose such information without liability hereunder;
provided, however, that the Examining Party gives the Examined Party written
notice of the information to be disclosed as far in advance of its disclosure as
is practicable and, upon the request of the Examined Party and at its expense,
uses its best efforts to obtain assurances that confidential treatment will be
accorded to such information. Upon any termination of this Agreement, each
party will (i) collect and deliver to the other party all nonpublic documents
obtained by it or any of its Representatives from the other party and then in
their possession and any copies thereof and (ii) destroy or cause to be
destroyed all notes, memoranda or other documents in the possession of it or any
of its Representatives containing or reflecting any nonpublic information
obtained from the other party.
SECTION 6.5 Notification of Certain Matters. Each of the Company and
the Purchaser shall promptly notify the other of (i) any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement or any of the other Transaction
Documents and (ii) any notice or other communication from any Person alleging
that the Consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or any of the other Transaction
Documents.
SECTION 6.6 Purchaser Board of Directors. If requested by the Company
prior to the Effective Time, the Purchaser will take all necessary actions
(including, but not limited to, increasing the number of members of the Board of
Directors of the Purchaser and accepting the resignation of an incumbent
director) to cause one person designated by the Company to be appointed as a
member of the Board of Directors of the Purchaser as of the Effective Time.
SECTION 6.7 Certain Consents. Promptly after the Effective Date, the
Company shall take all commercially reasonable steps necessary to obtain any
required written consent from the parties to the Danube License Agreements other
than the Company to the Merger and the other transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 7.1 Conditions to the Obligations of all Parties. The
respective obligations of the parties to effect the Merger shall be subject to
the fulfillment, prior to or concurrently with the Closing, of the following
conditions:
(a) no statute, rule, regulation, decree, shall have been enacted,
promulgated or enforced which has the effect of making illegal or prohibiting
the consummation of the Merger;
(b) no court or other Governmental Authority shall have issued or
entered any judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which has the effect of prohibiting the consummation
of the Merger; and
(c) each of the parties shall have executed a written instrument
pursuant to which they shall have agreed upon the forms of the following
documents and provided that forms of such documents shall incorporated as
exhibits to this Agreement:
(i) the Certificate of Designation;
(ii) the Merger Sub Assumption Agreement;
(iii) the Purchaser Promissory Note;
(iv) the Schuepbach Employment Agreement;
(v) the Warrant Agreement;
(vi) the opinion of counsel to the Company referred to in Section
7.2(h) hereof; and
(vii) the opinion of counsel to the Purchaser referred to in
Section 7.3(i) hereof.
SECTION 7.2 Conditions to the Obligations of the Purchaser and Merger
Sub. The respective obligations of the Purchaser and Merger Sub to consummate
the Merger shall be subject to the fulfillment, prior to or concurrently with
the Closing, of the following conditions (any one or more of which may be
waived, in whole or in part, by the Purchaser):
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on such date;
(b) The Company shall have performed and complied in all material
respects with all provisions, covenants and conditions contained in this
Agreement which are required to be performed or complied with by it prior to or
on the Closing Date;
(c) Since the date of this Agreement, there has not occurred any
material adverse change in the financial condition, business or operations of
the Company, nor has any event occurred which, with the lapse of time or giving
of notice, would cause or create any material adverse change in the financial
condition, business or operations of the Company;
(d) The Company Stockholders have executed any instrument required in
order to evidence that they have effectively waived the provisions of any Texas
law providing for dissenters' rights in connection with the Merger;
(e) Schuepbach shall have executed and delivered the Schuepbach
Employment Agreement;
(f) The Company has obtained a Certificate of Good Standing of recent
date from the Secretary of State of the State of Texas;
(g) The Company shall have delivered to the Purchaser a certificate
of the chief executive officer and chief financial officer of the Company, dated
as of the Closing Date, certifying that the conditions set forth in paragraphs
(a), (b) and (c) above have been fulfilled;
(h) The Company shall have caused to be delivered to the Purchaser an
opinion of Baker & Botts, L.L.P., counsel to the Company, to the effect set
forth in Exhibit G hereto; and
(i) the Company shall have delivered to the Purchaser the Disclosure
Schedule required to be delivered by it pursuant to Article V hereof, and the
Purchaser shall not have objected in good faith to any fact, information or
other matter disclosed in such Disclosure Schedule (which objection shall not
have been resolved by agreement of the parties).
SECTION 7.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger shall be subject to the
fulfillment, prior to or concurrently with the Closing, of the following
conditions (any one or more of which may be waived, in whole or in part, by the
Company):
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on such date;
(b) The Purchaser shall have performed and complied in all material
respects with all provisions, covenants and conditions contained in this
Agreement which are required to be performed or complied with by it prior to or
on at the Closing Date;
(c) Since the date of this Agreement, there has not occurred any
material adverse change in the financial condition, business or operations of
the Purchaser, nor has any event occurred which, with the lapse of time or
giving of notice, would cause or create any material adverse change in the
financial condition, business or operations of the Purchaser;
(d) The Purchaser shall have executed and delivered the Schuepbach
Employment Agreement;
(e) Merger Sub shall have executed and delivered the Merger Sub
Assumption Agreement;
(f) Each of the representations and warranties of Merger Sub
contained in the Merger Sub Assumption Agreement shall be true and correct in
all material respects as of the Closing Date as if made on such date;
(g) Merger Sub shall have performed and complied in all material
respects with all provisions, covenants and conditions contained in the Merger
Sub Assumption Agreement and this Agreement which are required to be performed
or complied with by it prior to or on at the Closing Date;
(h) The Company has obtained a Certificate of Good Standing of recent
date from the Secretary of State of the State of Texas;
(i) The Purchaser shall have delivered to the Company a certificate
of the chief executive officer and chief financial officer of the Purchaser,
dated as of the Closing Date, certifying that the conditions set forth in
paragraphs (a), (b), (c), (f) and (g) above have been fulfilled;
(j) The Purchaser shall have caused to be delivered to the Company an
opinion of Kruse, Landa & Maycock, L.L.C., counsel to the Purchaser, to the
effect set forth in Exhibit H hereto; and
(k) the Purchaser shall have delivered to the Company the Disclosure
Schedule required to be delivered by it pursuant to Article V hereof, and the
Company shall not have objected in good faith to any fact, information or other
matter disclosed in such Disclosure Schedule (which objection shall not have
been resolved by agreement of the parties).
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
the approval of this Agreement by the stockholders of the Company, as follows:
(a) by mutual written consent of the parties hereto;
(b) by either the Purchaser or the Company if:
(i) any court or other Governmental Authority shall have issued
or entered any judgment, decree, injunction or other order prohibiting
consummation of the Merger and such order, writ, injunction, judgment
or decree shall have become final and nonappealable; or
(ii) the Merger shall not have been consummated by August 1,
1996; provided, however, that the party terminating this Agreement
pursuant to this subparagraph (b)(ii) shall not have violated or
breached in any material respect its obligations under this Agreement
in a manner that shall have caused or resulted in the failure of the
Merger to have been consummated prior to or on such date.
(c) by the Purchaser if:
(i) there shall have been any violation or breach in any
material respect by the Company of its representations or warranties
contained in this Agreement or a failure on the part of the Company to
perform or comply in any material respect with the covenants or
agreements under this Agreement required to be performed by it prior
to or on the date of termination; or
(ii) all of the conditions to the obligations of the Company set
forth in Article VII hereof shall have been fulfilled or waived as
contemplated hereby and the Company shall have failed or refused to
consummate the Merger on the Closing Date as required under the terms
of this Agreement; or
(d) by the Company if:
(i) there shall have been any violation or breach in any
material respect by the Purchaser of its representations or warranties
contained in this Agreement or a failure on the part of the Purchaser
to perform or comply in any material respect with the covenants or
agreements under this Agreement required to be performed by it prior
to or on the date of termination;
(ii) there shall have been any violation or breach in any
material respect by Merger Sub of its representations or warranties
contained in the Merger Sub Assumption Agreement or a failure on the
part of Merger Sub to perform or comply in any material respect with
the covenants or agreements under the Merger Sub Assumption Agreement
or this Agreement required to be performed by it prior to or on the
date of termination; or
(iii) all of the conditions to the obligations of the
Purchaser and Merger Sub set forth in Article VII hereof shall have
been fulfilled or waived as contemplated hereby and either of them
shall have failed or refused to consummate the Merger on the Closing
Date as required under the terms of this Agreement.
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement in accordance with Section 8.1 hereof, this Agreement shall
forthwith become void and of no further force or effect, and there shall be no
liability hereunder on the part of any party or its affiliates, directors,
officers, shareholders, agents or other representatives; provided, however, that
(i) this Section 8.2 and Sections 6.4(b), 10.2 and 10.4 hereof shall survive any
termination of this Agreement and (ii) nothing contained herein shall relieve
any party from liability for any breach of the provisions of this Agreement
occurring prior to the date of termination.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnification.
(a) The Purchaser hereby agrees to indemnify and hold harmless the
Company and each Company Stockholder and their respective affiliates, successors
and assigns from and against any liability, loss, fine, penalty, claim, cost or
expense (including reasonable costs of investigation and settlement and legal
and accounting fees and expenses) arising out of any inaccuracy in or breach of
the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement, whether or not such inaccuracy or breach gives rise
to a claim by a third party and whether or not the party claiming
indemnifications relied thereon or had knowledge thereof (any such liability,
loss, fine, penalty, claim, cost or expense being hereinafter referred to as a
"Company Claim"); provided, however, that (x) the obligations of the Purchaser
under this Section 9.02(a) shall only become operative and effective if the
aggregate of all Company Claims for which any Persons are seeking
indemnification hereunder exceeds $50,000 (it being understood that all such
Company Claims shall accumulate until such time as they exceed $50,000, at which
time the Purchaser shall be obligated to indemnify any Persons seeking
indemnification pursuant to this Section 9.02(a) for the full amount of any
Company Claims, including the first $50,000 thereof) and (y) the liability of
the Purchaser in respect of any Company Claims shall in no event exceed an
aggregate of $12,500,000.
(b) From and after the Effective Time, the Company Stockholders
hereby agree to indemnify and hold harmless the Purchaser and its affiliates,
successors and assigns from and against any liability, loss, fine, penalty,
claim, cost or expense (including reasonable costs of investigation and
settlement and legal and accounting fees and expenses) arising out of any
inaccuracy in or breach of the representations and warranties of the Company
contained in this Agreement or the covenants and agreements contained in this
Agreement to be performed by the Company prior to the Effective Time, whether or
not such inaccuracy or breach gives rise to a claim by a third party and whether
or not the party claiming indemnification relied thereon or had knowledge
thereof (any such liability, loss, fine, penalty, claim, cost or expense being
hereinafter referred to as a "Purchaser Claim"); provided, however, that (x) the
obligations of the Company Stockholders under this Section 9.02(b) shall only
become operative and effective if the aggregate of all Purchaser Claims for
which any Persons are seeking indemnification hereunder exceeds $50,000 (it
being understood that all such Purchaser Claims shall accumulate until such time
as they exceed $50,000, at which time the Company Stockholders shall be
obligated to indemnify any Persons seeking indemnification pursuant to this
Section 9.02(b) for the full amount of any Purchaser Claims, including the first
$50,000 thereof) and (y) the liability of the Company Stockholders in respect of
any Company Claims shall in no event exceed the value of the EuroGas 1996
Preferred Shares held by the Company Stockholders or EuroGas Conversion Shares
issued upon conversion thereof (collectively, the "Subject Shares"). Any
liability of a Company Stockholder under this Section 9.2(b) shall be satisfied
solely through the cancellation by the Purchaser of a number of Subject Shares
held by such Company Stockholder having a fair market value at the time of
cancellation equal to the amount of such liability; provided, however that the
Purchaser shall not be entitled to cancel any Subject Shares unless and until a
final judgment shall have been entered by a court of competent jurisdiction with
respect to the liability of such Company Stockholder pursuant to this Section
9.2(b) (or, alternatively, EuroGas and such Company Stockholder shall have
agreed in writing as to the cancellation of such shares). If within two years
after the Effective Time a Company Stockholder shall transfer any Subject Shares
to any other Person, such Company Stockholder shall, at its option, (i) cause
such Person to assume all liability of such Company Stockholder under this
Section 9.2(b) or (ii) substitute for the Subject Shares other property having a
fair market value equal to the Subject Shares transferred by such Company
Stockholder; provided, however, that if such Company Stockholder does not take
the actions referred to in clause (i) or (ii) above, such Company Stockholder
shall be personally liable pursuant to this Section 9.2(b) for up to the value
of Subject Shares transferred by it as of the date upon which such transfer was
effected. Except as expressly provided in the immediately preceding sentence,
in no event shall the Company Stockholders have any personal liability under or
in connection with this Section 9.2(b) and in no event shall any liability
arising out of this Section 9.2(b) be satisfied out of the assets of any Company
Stockholder (other than the Subject Shares held by such Company Stockholder).
SECTION 9.2 Survival of Indemnification Rights. The rights to
indemnification provided pursuant to this Article IX shall survive the Closing,
and shall thereafter continue in full force and effect until the expiration of
the last statute of limitations applicable to any such liability, loss, fine,
penalty, claim, cost or expense for which indemnification is available
hereunder.
SECTION 9.3 Third Party Claims; Certain Procedures. If any party
claiming indemnification under this Article IX (each, an "Indemnified Party")
shall receive notice of an action asserting a liability for which it is entitled
to be indemnified under this Article IX, it shall promptly notify the party from
whom it is seeking indemnifications (each, an "Indemnifying Party"). The
failure so to notify any Indemnifying Parties shall not relieve such
Indemnifying Parties from its obligations to provide indemnification hereunder,
except to the extent the defense of the action by it is materially prejudiced
thereby. The Indemnifying Parties may participate in the defense of such action
and may jointly assume the defense with counsel satisfactory to the Indemnified
Party if the Indemnifying Parties shall have confirmed in writing their
obligation to provide indemnification for the liability asserted in such action.
If the Indemnified Party shall reasonably conclude based on the advice of its
counsel that its interests in such action are materially different from those of
the Indemnifying Party or that it may have defenses that are different from or
in addition to those available to the Indemnifying Party, the Indemnified Party
may use separate counsel to assert such defenses and otherwise participate in
the defense of such action. If the Indemnifying Parties shall assume the
defense with counsel satisfactory to the Indemnified Party, the Indemnifying
Parties shall not be liable for any legal expenses (other than investigation
expenses) subsequently incurred by the Indemnified Party, unless the Indemnified
Party shall have employed separate counsel as contemplated by the preceding
sentence.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Survival or Nonsurvival of Representations and Warranties.
The Surviving Representations shall survive the closing and the Effective Time
and shall thereafter continue in full force and effect until the expiration of
the last statute of limitations applicable to any loss, liability, fine,
penalty, claim, cost or expense arising out of any inaccuracy in or breach of
any Surviving Representations, and, to the extent such representations and
warranties are made by the Purchaser, shall inure to the benefit of the Company
Stockholders and their respective heirs, representatives, successors and
assigns. All other representations and warranties of the Company and the
Purchaser made in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive beyond the Effective Time.
SECTION 10.2 Fees and Expenses. Except as expressly provided herein,
whether or not the Merger is consummated, all fees and expenses incurred by any
of the parties hereto in connection with this Agreement or any of the
transactions contemplated hereby shall be borne and paid solely by the party
incurring such fees and expenses.
SECTION 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be given by delivery in person, by registered or
certified mail (return receipt requested and with postage prepaid thereon) or by
cable, telex or facsimile transmission to the parties at the following addresses
(or at such other address as any of the parties shall have furnished to the
others in accordance with the terms of this Section 10.3):
if to the Company:
Danube International Petroleum Company
2651 North Harwood
Suite 120
Dallas, Texas 75201
Facs.: (214) 880-9035
Attention: Martin A. Schuepbach
with copies to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Facs.: (214) 953-6503
Attention: Geoffrey L. Newton
if to the Purchaser or Merger Sub:
EuroGas, Inc.
435 West Universal Circle
Sandy, Utah 84070
Facs.: (801) 225-0862
Attention: Hank Blankenstein
with copies to:
Kruse, Landa & Maycock, L.L.C.
50 West Broadway 300 South
Salt Lake City, Utah 84101
Facs.: (801) 359-3954
Attention: Howard S. Landa
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 10.3 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails and (c) if delivered by
cable, telex or facsimile transmission, upon transmission thereof and receipt of
the appropriate answerback.
SECTION 10.4 Public Announcements. The Company on the one hand and the
Purchaser and Merger Sub on the other will consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement, the Merger or the other transactions contemplated hereby.
SECTION 10.5 Amendment; Waiver. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of Directors;
provided, however, that no amendment shall be made to this Agreement which by
law requires the further approval of the stockholders of the Company without
obtaining such further approval. The terms and provisions of this Agreement may
be modified or amended only by a written instrument executed by each of the
parties hereto. Compliance with the terms and provisions hereof may be waived
only by a written instrument executed by each party entitled to the benefits of
the same. Except as expressly provided herein to the contrary, no failure to
exercise any right, power or privilege hereunder shall operate as a 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
granted hereunder.
SECTION 10.6 Entire Agreement. This Agreement (including the other
Transaction Documents, the Disclosure Schedules and the certificates, opinions
and documents delivered in accordance with the provisions hereof) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior written or oral agreements and understandings and all
contemporaneous oral agreements and understandings among the parties or any of
them with respect to the subject matter hereof. All of the other Transaction
Documents, the Disclosure Schedules and the certificates, opinions and other
documents delivered in accordance with the provisions hereof are expressly made
a part of this Agreement as fully and with the same effect as if they were set
forth herein.
SECTION 10.7 Parties in Interest; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and (to the extent
provided herein) the Company Stockholders and their respective successors and
assigns. Nothing contained in this Agreement, other than the provisions
relating to the issuance and delivery of the Aggregate Merger Consideration set
forth in Article II, Article IX and Section 10.1 hereof (which are expressly
intended to inure to the benefit of the Persons referred to therein and to be
enforceable by such Persons as fully and to the same extent as if they were
parties hereto), is intended to or shall confer upon any Person other than the
parties hereto any rights, benefits or remedies under or by reason of this
Agreement. No party may assign this Agreement without the prior written consent
of each of the other parties hereto. Any attempted or purported assignment by
any party of this Agreement in violation of this Section 10.7 shall be null and
void.
SECTION 10.8 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Texas,
without regard to the principles of conflicts of law that would result in the
application of the laws of any other jurisdiction.
SECTION 10.9 Severability. In the event any provision contained in this
Agreement shall be held to be invalid, illegal or unenforceable for any reason,
the invalidity, illegality or unenforceability thereof shall not affect any
other provision hereof, which shall remain in full force and effect.
SECTION 10.10 Specific Performance. 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 the terms hereof. Accordingly,
the parties agree that each of them shall be entitled to seek injunctive relief
to prevent breaches of the terms of this Agreement and to seek specific
performance of the terms hereof, in addition to any other remedy now or
hereafter available at law or in equity, or otherwise.
SECTION 10.11 Interpretation. The table of contents and headings
contained herein are for convenience of reference only, do not constitute a part
of this Agreement and shall not be deemed to limit, extend or otherwise affect
the meaning of any of the provisions hereof. As used in this Agreement, words
which denote a singular number shall include the plural (and vice versa), words
which denote one gender shall include all genders and words which denote natural
persons shall include corporations and partnerships (and vice versa), in each
case to the extent appropriate in the context.
SECTION 10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
DANUBE INTERNATIONAL PETROLEUM
CORPORATION
By /s/ Martin A. Schuepback
Martin A. Schuepbach
President
PURCHASER:
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer
The undersigned have executed this Agreement solely for the purpose of
evidencing that they are bound by the provisions of Sections 4.2(c), (d) and (e)
and Article IX hereof, and they shall have no other obligation or liability
under or in connection with this Agreement.
DOBBINS PARTNERS, L.P.
By
Dobbins Capital Corporation,
its General Partner
By
J. Robert Dobbins
President
MEMPO TRUST
By
Trustee
/s/ M.A. Schuepback
Martin A. Schuepbach
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT TO AGREEMENT AND PLAN OF MERGER ("Amendment"), entered into
as of July 12, 1996, by and between Danube International Petroleum Company, a
Texas corporation (the "Company"), and EuroGas, Inc., a Utah corporation (the
"Purchaser"),
W I T N E S S E T H:
WHEREAS, as of July 3, 1996, the Company and the Purchaser entered into the
Agreement and Plan of Merger (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement in certain
respects and to evidence their agreement with respect to certain matters
relating to the consummation of the transactions contemplated thereby;
NOW THEREFORE, in consideration of the premises, the terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used herein without definition shall have the
respective meanings set forth in the Agreement.
2. The Agreement is hereby amended as follows:
(a) Section 4.1 shall be amended by adding the following text at the
end of such provision:
"Notwithstanding the fact that the Closing Date will
occur on the date specified above, and except as required by
law or as set forth in Article II hereof, the parties hereto
acknowledge and agree that it is their intention to treat
the transactions contemplated hereby as having been
consummated as of July 3, 1996 for all purposes. In
furtherance of the foregoing intention of the parties, the
parties agree that (i) the EuroGas Common Shares, the
EuroGas Preferred Shares and the EuroGas Warrants shall be
deemed to have been issued on July 3, 1996, and the holders
thereof shall be entitled to receive at the Closing an
amount equal to any and all dividends and distributions
(whether of cash, property or securities) declared or paid
in respect of the such securities that such holders would
have been entitled to receive had they held such securities
on July 3, 1996; and (ii) the Purchaser Promissory Note
shall be deemed to have been issued on July 3, 1996, and
interest shall accrue on the unpaid principal balance
thereof commencing on July 3, 1996."
(b) Section 1.1(a) shall be amended by deleting the definition of the
term "Transaction Documents" contained therein and substituting the
following in lieu thereof:
"Transaction Documents" means this Agreement, the
Certificate of Designation, the Merger Sub Assumption
Agreement, the Purchaser Promissory Note, the Registration
Rights Agreement, the Schuepbach Employment Agreement and
the Warrant Agreement.
(c) Section 1.1(b) shall be amended by deleting the reference to
"Letter of Transmittal" contained therein.
(d) Section 5.5(b) shall be amended by (i) deleting the number
"2,000,000" contained in clause (ii)(C) of the first sentence of such
section and substituting in lieu thereof the number "2,033,512"; (ii)
deleting the number "6,800,000" contained in clause (ii)(E) of the first
sentence of such section and substituting in lieu thereof the number
"2,503,918"; and (iii) deleting the words "the Company" at the end of
clause (ii)(E) of the first sentence of such section and substituting in
lieu thereof the words "the Purchaser."
3. The form of Certificate of Designation attached as Annex 1 hereto
shall be attached as Exhibit A to the Agreement and incorporated as a part of
such agreement as of the date hereof.
4. The form of Merger Sub Assumption Agreement attached as Annex 2 hereto
shall be attached as Exhibit B to the Agreement and incorporated as a part of
such agreement as of the date hereof.
5. The form of Purchaser Promissory Note attached as Annex 3 hereto shall
be attached as Exhibit C to the Agreement and incorporated as a part of such
agreement as of the date hereof.
6. The form of Schuepbach Employment Agreement attached as Annex 4 hereto
shall be attached as Exhibit E to the Agreement and incorporated as a part of
such agreement as of the date hereof.
7. The form of Warrant Agreement attached as Annex 5 hereto shall be
attached as Exhibit F to the Agreement and incorporated as a part of such
agreement as of the date hereof.
8. The form of opinion of Baker & Botts, L.L.P. attached as Annex 6
hereto shall be attached as Exhibit G to the Agreement and incorporated as a
part of such agreement as of the date hereof.
9. The form of opinion of Kruse, Landa & Maycock attached as Annex 7
hereto shall be attached as Exhibit H to the Agreement and incorporated as a
part of such agreement as of the date hereof.
10. The Purchaser acknowledges and agrees that the conditions to its
obligations and the obligations of Merger Sub set forth in Section 7.2(i) of the
Agreement have been fully satisfied or effectively waived on or prior to the
date hereof.
11. The Company hereby acknowledges and agrees that the conditions to its
obligations set forth in Section 7.3(k) of the Agreement have been fully
satisfied or effectively waived on or prior to the date hereof.
12. As contemplated by the Texas Act, the parties to the Agreement will
adopt and enter into a Plan of Merger (the "Plan of Merger") which reflects the
provisions of the Agreement that are required to be included in the Articles of
Merger pursuant to Articles 5.04 and 5.05 of the Texas Act. In the event of any
conflict between the provisions of the Plan of Merger and the Agreement as
amended hereby, the terms of the Agreement as amended hereby shall govern and
control in all cases.
13. The Agreement is hereby ratified by each of the parties hereto, and
the terms and provisions of the Agreement as amended hereby shall remain in full
force and effect.
14. From and after the date hereof, each reference to "hereof,"
"hereunder," "herein" and "hereby" and each reference to "this Agreement" and
each other reference of like import in the Agreement shall be deemed to refer to
the Agreement as amended hereby.
15. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the date first above written.
COMPANY:
DANUBE INTERNATIONAL PETROLEUM COMPANY
By /s/ Martin A. Schuepbach
Martin A. Schuepbach, President
PURCHASER:
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein, Secretary/Treasurer
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is made and entered
into this 12th day of July, 1996, by and between MARTIN SCHUEPBACH ("Executive")
and EUROGAS, INC., a Utah corporation ("EuroGas"), based on the following:
The Board of Directors of EuroGas (the "Board") has determined that it is
in the best interests of EuroGas and its shareholders for EuroGas to employ the
Executive and to provide the Executive with compensation and benefits
arrangements which ensure that his expectations with respect to compensation and
benefits will be satisfied and which are competitive with those of other
corporations.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefit to the parties to be
derived herefrom, it is hereby agreed as follows:
1. Employment and Term.
(a) EuroGas hereby employs Executive and Executive hereby accepts
employment upon the terms and conditions set forth herein. The term of
employment of the Executive under this Agreement will commence on the date
hereof and will end on the third anniversary of the date hereof; provided,
however, that such term shall automatically be extended for an additional
three-year period commencing on the third anniversary of the date hereof
unless Executive or EuroGas by written notice to the other not less than 60
days prior to such anniversary notifies the other that the term hereof
shall not be so extended (such term of employment, as the same may be
extended from time to time as provided herein, being thereafter referred to
as the "Employment Period").
(b) During the Employment Period, Executive will serve as EuroGas'
President and Chief Executive Officer. The Board shall take all necessary
action to cause Executive to be elected to serve as a member of the Board
effective as of the date hereof. In addition, EuroGas shall use its best
efforts to ensure that Executive shall serve as a member of the Board at
all times during the Employment Period; provided, however that if Executive
is nominated by the Board for election as a director at an annual meeting
of the stockholders of EuroGas but is not elected at such meeting, EuroGas
shall not be obligated to nominate Executive for election as a director
until the next annual meeting of the stockholders of EuroGas. Executive
agrees to serve in such offices or positions with EuroGas and agrees to
perform such duties appropriate for an executive officer of EuroGas as may
be assigned to him from time to time by EuroGas and as described in the
bylaws of EuroGas. The Board shall direct, control, and supervise the
duties and work of Executive.
(c) During the Employment Period, the Executive shall reside in
Dallas, Texas and the services to be provided by him hereunder shall be
performed primarily in the Dallas, Texas area and in such other locations
as EuroGas and the Executive shall agree.
2. Performance of Services.
(a) During the Employment Period, Executive agrees to perform
faithfully the duties assigned to him by the Board to the best of his
ability, to devote his full and undivided business time, attention, and
services to the business of EuroGas and not to engage in any other
substantial business activities other than at the direction or with the
approval of the Board; provided, however, that nothing herein shall
restrict Executive from conducting incidental personal business that does
not conflict with his obligations under the terms of this Agreement.
(b) Executive shall observe and comply with the commercially
reasonable rules and regulations of EuroGas respecting its business and
shall carry out and perform such commercially reasonable orders,
directions, and policies of EuroGas as they may be from time to time
communicated to Executive either orally or in writing. Executive shall
observe and comply with all applicable rules, regulations, and laws
governing the business of EuroGas known to Executive.
3. Exclusivity of Services and Nondisclosure of Confidential Information.
(a) Executive agrees that, in the event the Executive voluntarily
terminates his employment with EuroGas during the Employment Term, other
than for Good Reason (as defined below), or is terminated by EuroGas for
Cause pursuant to paragraph 6(a), for a period ending on the first
anniversary of the termination of the Employment Period:
(i) he will not engage in any Covered Activity (as defined
below) in competition with the business of EuroGas or any of its
subsidiaries (the "EuroGas Group"), directly or indirectly, in the
Covered Area (as defined below), whether as employer, proprietary
owner, partner, stockholder (other than the holder of less than five
percent (5%) of the stock of an entity, the securities of which are
traded on a national securities exchange or in the over-the-counter
market), director, officer, employee, consultant, or agent;
(ii) he will not solicit, in competition with the EuroGas Group,
any person who is a customer of the business conducted by the EuroGas
Group and to whom EuroGas provides contracts or services related to
any Covered Activity in the Covered Area at any time during the
Employment Period; and
(iii) he will not induce or attempt to persuade any employee
of the EuroGas Group to terminate his or her employment relationship
in order to enter into employment with any party engaged in any
Covered Activity in the Covered Area in competition with the EuroGas
Group.
(b) Executive further agrees that he will not, at any time during the
Employment Period or at any time after the termination of this Agreement,
irrespective of the time, manner, or cause of termination, use, disclose,
copy, or assist any other person or firm in the use, disclosure, or copying
of any trade secrets or other confidential information of the EuroGas
Group, except to the extent authorized in writing by EuroGas or as required
in connection with the due and proper performance of his duties under this
Agreement. Upon termination of his employment hereunder, Executive will
surrender to EuroGas all records and other documents containing
confidential information obtained by him or entrusted to him during the
course of his employment by EuroGas (together with all copies thereof);
provided, however, that Executive may retain copies of such documents as
are necessary for Executive's personal records for income tax purposes.
For purposes of this section 3, proprietary information about the business
of the EuroGas Group shall be treated as confidential until it has been
published or is generally or publicly known outside the EuroGas Group or
until it has been recognized as standard practice outside the EuroGas
Group. The provisions of this paragraph 3(b) shall remain in effect for a
period of three (3) years subsequent to the termination of the Employment
Period.
(c) The following provisions shall apply to the covenants of
Executive contained in this section 3:
(i) The activities in which the Executive will be restricted
from engaging pursuant to subsection (a) above (the "Covered
Activities") will consist of the exploration for, and development and
production of, oil and gas reserves, including coal bed methane gas
reserves.
(ii) The covenants contained in clauses (i) and (ii) of
subsection 3(a) shall apply in the area (the "Covered Area") within
100 miles of any location where EuroGas is actively engaged in
conducting any Covered Activity at the termination of the Employment
Period and those locations in which the EuroGas Group has publicly or
internally issued written plans to conduct such activities which have
been approved by the Board or senior management of EuroGas prior to
the termination of the Employment Period.
(iii)Executive agrees that a breach or threatened breach on
his part of any covenant contained in this section 3 will cause such
damage to EuroGas as will be irreparable. Therefore, without limiting
the right of EuroGas to pursue all other legal and equitable remedies
available for violation by Executive of the covenants contained in
this section 3, it is expressly agreed that remedies other than
injunctive relief cannot fully compensate the EuroGas Group for such a
violation and that EuroGas and the EuroGas Group shall be entitled to
seek injunctive relief to prevent any such violation or continuing
violation thereof.
(vi) It is the intent and understanding of each party hereto that
if, in any action before any court or agency legally empowered to
enforce the covenants contained in this section 3, any term,
restriction, covenant, or promise contained therein is found to be
unreasonable and for that reason unenforceable, then such term,
restriction, covenant, or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.
(v) The Executive shall not be subject to the restrictions set
forth in subsection 3(c) with respect to information which (A) becomes
generally available to the public other than as a result of disclosure
by the Executive or his agents or representatives; (B) becomes
available to the Executive on a non-confidential basis from a source
other than EuroGas or its agents or representatives, provided that to
the knowledge of the Executive such source lawfully obtained such
information and is not bound by a confidentiality agreement with
EuroGas; or (C) is required to be disclosed by law or judicial or
administrative process.
4. Compensation and Benefits. For all services rendered by Executive
pursuant to this Agreement, EuroGas shall compensate Executive as follows:
(a) As annual compensation for Executive's services hereunder, in
accordance with its normal payroll practices, EuroGas agrees to pay
Executive during the Employment Period a base salary of $240,000 per annum,
with an annual increase, as shall be determined in the sole discretion of
the board of directors of EuroGas or the designated compensation committee
thereof, taking into consideration the performance of EuroGas and its
subsidiaries, and the contribution of Executive to such performance, and
such other factors as the board of directors or the designated compensation
committee thereof may deem appropriate. In addition, the rate of salary
may be further or otherwise increased at any time and in such amount as the
Board or the designated compensation committee thereof may determine
appropriate. In no event may the base salary of the Executive be decreased
at any time during the Employment Period without the prior written consent
of the Executive.
(b) EuroGas shall provide to Executive such bonuses as shall be
determined appropriate in the sole discretion of the Board or the
designated compensation committee thereof, taking into consideration the
performance of EuroGas and its subsidiaries, and the contribution of
Executive to such performance, or such other factors as the Board or the
designated compensation committee thereof may deem appropriate.
(c) As promptly as practicable after the date hereof, confirm in a
written instrument in form reasonably acceptable to the Executive a grant
of an option on January 16, 1996 to acquire 250,000 shares of common stock
of EuroGas at any time prior to January 16, 2001, such option to have an
exercise price of $1.50 per share. Executive shall have the right to
exercise twenty percent (20%) of such option as of the date of grant and an
additional twenty percent (20%) of such option on each following
anniversary of the date of grant. After July 1, 1997, all shares of common
stock issuable upon the exercise of the option shall be covered by an
effective registration statement on form S-8 kept current by EuroGas until
January 16, 2001, or such later date to which the option exercise period
may be extended. The option granted to the Executive shall not be subject
to forfeiture except as expressly provided herein.
(d) EuroGas shall include Executive as a participant in any stock
option or benefit plans hereinafter adopted, including but not limited to,
incentive stock option plans, director stock option plans, or 401k
retirement plans in accordance with the most favorable plans, practices,
programs, and policies of EuroGas in effect for similarly situated
executives. However, EuroGas shall not be required to adopt any such
plans.
(e) EuroGas shall provide to Executive, at the principal executive
offices of EuroGas, suitable executive offices and facilities appropriate
for Executive's position and suitable for the performance of Executive's
responsibilities.
(f) Executive shall be entitled to vacation and sick leave of at
least four weeks in any calendar year or such greater period of time as may
be mutually agreed by EuroGas and the Executive. Vacations shall be taken
by Executive at a time and with starting and ending dates mutually
convenient to EuroGas and Executive. Vacations or portions of vacations
not used in one employment year shall carry over to the succeeding
employment year, but shall thereafter expire if not used within such
succeeding year.
(g) EuroGas shall reimburse Executive for all proper expenses
incurred by him in the performance of his duties hereunder in accordance
with the most favorable plans, practices, programs, and policies of EuroGas
in effect for similarly situated executives.
(h) EuroGas shall provide Executive, at EuroGas' expense, with
health, medical, and disability insurance policies in accordance with the
most favorable plans, practices, programs, and policies of EuroGas in
effect for similarly situated executives; provided, however, that to the
extent that the Executive elects to maintain in effect coverage currently
in force for himself and the members of his immediate family under existing
health and medical insurance policies and any renewals and extensions
thereof, EuroGas will promptly reimburse the Executive for the premiums and
other costs of such policies so long as they do not substantially exceed
the costs that would be incurred under the existing plans, practices,
programs, and policies of EuroGas. EuroGas shall additionally provide to
Executive incentive, retirement, pension, profit sharing, stock option, or
other employee benefit plans which are consistent with and similar to such
plans provided by EuroGas to its executive employees generally in
accordance with the most favorable plans, practices, programs, and policies
of EuroGas in effect for similarly situated executives. All costs of such
plans shall be an expense of EuroGas and shall be paid by EuroGas.
Executive shall also have the right to participate in any other employee
benefit programs provided by the EuroGas Group in accordance with the most
favorable plans, practices, programs, and policies of EuroGas in effect for
similarly situated executives.
(i) EuroGas shall assume and pay reasonable dues of Executive in
local, state, and national societies and associations, and in such other
clubs and organizations, as shall be approved and authorized by the board
of directors of EuroGas.
(j) EuroGas shall withhold from Executive's compensation hereunder
all proper federal and state payroll taxes and income taxes on compensation
paid to Executive and shall provide an accounting to Executive for such
amounts withheld.
5. Continuation of Compensation During Disability. If Executive is
unable to perform his services by reason of disability, Executive shall be
entitled to his base salary for the initial six months, one-half of his base
salary during the next succeeding consecutive three-month period, and one-fourth
of his base salary during the following consecutive three-month period. If such
illness or incapacity does not cease to exist within the 12 consecutive month
period provided herein, Executive and EuroGas may thereupon terminate this
Agreement. For purposes of this Agreement, Executive is "disabled" when he is
unable to continue his normal duties of employment for a period of at least 90
consecutive business days, by reason of a medically determined physical or
mental impairment. In determining whether or not Executive is disabled, EuroGas
may rely upon the opinion of any doctor or practitioner of any recognized field
of medicine or psychiatric practice selected jointly by EuroGas and Executive
and such other evidence as EuroGas deems necessary.
6. Termination of Agreement.
(a) Termination by EuroGas for Cause. EuroGas shall have the right,
without further obligation to Executive other than for compensation
previously accrued, to terminate this Agreement for cause ("Cause") by
showing that (i) Executive has materially breached the terms hereof which
breach has not been cured within 30 days after notice thereof from EuroGas
to the Executive; (ii) Executive, has been grossly negligent or engaged in
material willful or gross misconduct in the performance of his duties; or
(iii) Executive has committed or been convicted of fraud, embezzlement,
theft, or dishonesty or other criminal conduct against EuroGas.
(b) Termination Upon Death or Disability of Executive. This
Agreement shall terminate immediately upon Executive's death, and this
Agreement may be terminated at the option of EuroGas in accordance with
Section 6 if the Executive becomes disabled.
If this Agreement is terminated pursuant to this Section 7(b), EuroGas
shall have no obligation to provide further compensation to the Executive
except for compensation previously accrued and except for the amount set
forth in Subsections 7(c)(ii) and (iii).
(c) Termination by Executive for Cause, for Good Reason; Termination
by EuroGas for Any Other Reason. Executive shall have the right to
terminate this Agreement in the event of (i) EuroGas' breach of any
covenant or term of this Agreement, but only if EuroGas fails to cure such
breach within thirty (30) days following the receipt of notice by Executive
setting forth the conditions giving rise to such breach; (ii) an assignment
to Executive of any duties inconsistent with, or a significant change in
the nature or scope of, Executive's authority or duties from the authority
and duties held by Executive as of the date hereof and as increased from
time to time, including the removal, replacement, or non-election of
Executive as a member of the Board; (iii) the failure by EuroGas to obtain
the assumption of the commitment to perform this Agreement by any successor
corporation (any such grounds for termination by the Executive being
hereafter referred to as "Good Reason").
If this Agreement is terminated pursuant to this Section 7(c), the
Executive shall be entitled to receive all compensation previously accrued
and the following amounts and benefits:
(i) the amount of base salary that would have been paid to
Executive pursuant to the provisions of this Agreement for the
remainder of the Employment Period determined as if Executive's
employment with EuroGas had not been terminated, such amounts to be
payable at the same and under the same terms and conditions as would
have been applicable had Executive's employment continued;
(ii) effective as of the date of termination, (x) immediate
vesting and exercisability of, and termination of any restrictions on
sale or transfer (other than any such restriction arising by operation
of law) with respect to each and every stock option, restricted stock
award, restricted stock unit award and other equity-based award and
performance award (each a "Compensatory Award") that is outstanding as
of a time immediately prior to the date of termination, including, but
not limited to, the option referred to in Subsection 4(c) hereof, and
(y) the extension of the term during which each and every Compensatory
Award may be exercised by the Executive until the earlier of (1) the
first anniversary of the date of termination or (2) the date upon
which the right to exercise any Compensatory Award would have expired
if the Executive has continued to be employed by EuroGas under the
terms of this Agreement;
(iii)for the remainder of the Employment Period benefits to
be provided at the expense of EuroGas pursuant to Subsection 4(h) for
the longer of one year or the period required by law to allow
continuation of insurance benefits (currently known as COBRA), but in
no event longer than three (3) years.
The Executive shall also be entitled to the foregoing compensation if
EuroGas terminates or purports to terminate this Agreement other than as
expressly permitted pursuant to Subsections 6(a) and (b) hereof.
7. Indemnification. EuroGas shall indemnify Executive and hold Executive
harmless from liability for acts or decisions made by Executive while performing
services for EuroGas to the greatest extent permitted by applicable law.
EuroGas shall use its best efforts to obtain coverage for Executive under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of EuroGas against such liability.
Executive agrees to indemnify and to hold EuroGas harmless from any and all
damages, losses, claims, liabilities, costs, or expenses arising from
Executive's acts or omissions in violation of his duties under this Agreement
which constitute fraud.
8. Notice. Any notice or request required or permitted to be given
hereunder shall be sufficient if in writing and delivered personally, sent by
facsimile transmission, or sent by registered mail, return receipt requested, to
the addresses hereinabove set forth or to any other address designated by either
of the parties hereto by notice similarly given. Such notice shall be deemed to
have been given upon such personal delivery, facsimile transmission, or mailing,
as the case may be, to the addresses set forth below:
If to Executive, to: Martin Schuepbach, President
Danube International Petroleum Company
2651 N. Harwood, Suite 120
Dallas, Texas 75201
Fax: (214) 880-9608
With a copy to: Mr. Geoffrey Newton
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Fax: (214) 953-6503
If to EuroGas, to: Hank Blankenstein
EuroGas, Inc.
435 West Universal Circle
Sandy, Utah 84070
Fax: (801) 255-2005
Confirmation: (801) 255-0862
With a copy to: Howard S. Landa, Esq.
Kruse, Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101
Fax: (801) 359-3954
Confirmation: (801) 531-7090
9. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of EuroGas shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
EuroGas and its successors and assigns.
(c) EuroGas will require any successor (whether direct or indirect,
by purchase merger, consolidation, or otherwise) to all or substantially
all of the business and/or assets of EuroGas to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that
EuroGas would be required to perform it if no such succession had taken
place. As used in this Agreement, "EuroGas" shall mean EuroGas has
hereinabove defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law, or otherwise.
10. Attorneys' Fees. In the event that any action, suit, arbitration, or
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall be entitled to recover all of such party's costs,
including reasonable attorneys' fees, incurred in each and every such action,
suit, arbitration, or other proceeding, including any and all appeals or
petitions therefrom.
11. Validity of Provisions and Severability. If any provision of this
Agreement is, or becomes, or is deemed invalid, illegal, or unenforceable in any
jurisdiction, such provision shall be deemed amended to conform to the
applicable jurisdiction, or if it cannot be so amended without materially
altering the intention of the parties, it will be stricken. However, the
validity, legality, and enforceability of any such provisions shall not in any
way be effected or impaired thereby in any other jurisdiction and the remainder
of this Agreement shall remain in full force and effect.
12 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties pertaining to the subject matter of this
Agreement. This Agreement supersedes all prior agreements, if any, any
understandings, negotiations, and discussions, whether oral or written. No
supplement, modification, waiver, or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby.
13. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the state of Utah.
14. Superseding. This Agreement shall supersede any and all previous
employment agreements executed between the Executive and Danube International
Petroleum Company, or any of its subsidiaries or affiliates.
IN WITNESS WHEREOF, EuroGas has caused this Agreement to be signed by its
duly authorized officer and Executive has signed this Agreement as of the date
first above written.
EuroGas:
EUROGAS, INC.
By /s/ Hank Blankenstein
Hank Blankenstein, Secretary/Treasurer
Executive:
/s/ Martin Schuepbach
Martin Schuepbach
$3,500,000 Issued July 2, 1996
DEBENTURE AGREEMENT
EUROGAS, INC.
CONVERTIBLE DEBENTURE
(Due December 31, 1999)
THE SECURITIES ISSUED PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE TRANSFERRED OR SOLD IN THE UNITED STATES IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR THE LAWS OF THE APPLICABLE
STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AND
ITS COUNSEL, TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND SUCH STATE STATUTES.
This original Debenture Agreement represents your right to
payment, and it is important that you retain it in a safe
place. This original Debenture Agreement must be delivered
to the Company on payment or conversion.
EuroGas, Inc. (the "Company"), hereby promises to pay to the holder of this
debenture, Lux Immobilien, GMBH, or its assigns (the "Holder"), the principal
sum of $3,500,000 [U.S.] on or before December 31, 1999, and interest as
provided herein, subject to the terms and conditions set forth below.
1. Payment of Principal and Interest. The Company shall pay to the
Holder of this Debenture the principal sum stated hereon, on December 31, 1999,
at the offices of the Company at 435 West Universal Circle, Sandy, Utah 84070,
in such lawful money of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debt, and shall pay
semi-annually (June 30 and December 31 of each year) in lawful tender interest
thereon commencing on the date of issuance and continuing thereafter, at a rate
of 7.5% per annum until the principal is either paid or converted.
2. Conversion by Holder. The Holder of this Debenture is entitled at any
time prior to maturity, or in case this Debenture or some portion hereof shall
have been called for prepayment prior to maturity, then until 30 days after the
date of the notice of prepayment, to convert the Debenture (or any portion of
the principal amount and interest hereof at the rate of $3.00 per share), into
an aggregate of 1,166,667 fully paid and nonassessable shares of common stock,
par value $0.001 per share, of the Company (the "Shares"). The conversion right
shall be exercised by proper surrender of the original of the Debenture to the
Company, accompanied by written notice that the Holder hereof elects to convert
the Debenture.
3. Conversion by Company. Any time after one year from the date of
issuance, the Company may require the conversion of this Debenture on the terms
set forth in paragraph 2 if the Company's common stock trades on NASDAQ (either
national market, small cap or bulletin board) or a national exchange at a bid
price equal to or in excess of $6.00 per share for a period of twenty-one (21)
consecutive days.
4. Adjustment of Conversion Rate and Price. The conversion price, number
of Shares issuable upon conversion of the Debenture, and the trading price for
conversion set forth in paragraph 3, shall be appropriately adjusted if the
Company declares a stock dividend, split, reclassification, distribution, or
similar event.
5. Registration Rights. The Company hereby grants to the Holder the
following registration rights:
(a) Within thirty (30) days after receipt by the Company of a written
request for registration by the Holder (or as soon thereafter as the
Company has all audited and stub period financial statements of the Company
necessary to file a registration statement), the Company will file with the
SEC a registration statement (the "Registration Statement") on an
appropriate form under the Securities Act with respect to the shares of the
Company's Common Stock issuable upon the conversion of this debenture
collectively, the "Registrable Securities"). The Company will use its best
efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as practicable after the filing thereof and
to keep the Registration Statement, if necessary, continuously effective
for a period ending one (1) year after the date of issuance of this
debenture. The Company will further supplement or amend the Registration
Statement as promptly as practicable from time to time (i) if required by
the Securities Act or the rules and regulations promulgated thereunder,
(ii) if required so that the Registration Statement does not contain an
untrue statement of material fact or omit any statement required in order
to make the statements therein not misleading or (ii) to update information
with respect to the Holder of Registrable Securities or the plan of
distribution. The debenture shall be deemed to be converted on the
effective date of the Registration Statement.
(b) If at any time prior to the date that is two (2) years after the
issuance of the debenture, the Company intends to file a registration
statement to register any of its securities under the Securities Act, the
Company will give the Holder written notice of its intention to do so. The
Holder will have 20 days subsequent to such notice to elect to have the
Registrable Securities included in such registration statement. In the
case of a proposed underwritten offering, if the managing underwriter or
underwriters determine in writing that, because of the size of the offering
intended to be made, the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities, then the
securities to be included in such offering will be reduced to the amount
recommended by such managing underwriter or underwriters (provided,
however, that the proportion by which the amount of Registrable Securities
intended to be offered by the Holder is reduced shall not exceed the
proportion by which the amount of securities intended to be offered by the
Company or any other person or entity is reduced). The provisions of this
paragraph shall not apply to registration statements filed on forms S-8, S-
4 or successor forms.
(c) The Holder, if requested by the managing underwriter or
underwriters for any underwritten, registered offering of the securities of
the Company, agrees not to effect any public sale or distribution of the
Registrable Securities, including sales pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the 15
days prior to, and during the 90-day period commencing on the effective
date of such registration statement (except as part of such registration).
(d) The Company will indemnify the Holder against all liabilities
arising from any misstatements or omissions in any registration statement
covering the Registrable Securities, other than liabilities arising from
information provided by such Holder expressly for inclusion therein.
(e) The Holder will cooperate with the Company by providing in
writing such information as the Company shall reasonably request in order
to comply with the provisions of the Securities Act applicable in
connection with the disposition of the Registrable Securities, including
information regarding the identity of such Holder and the intended method
of disposition of the Registrable Securities.
(f) All costs and expenses of the registration will be borne by the
Company, including fees and expenses of counsel and accountants for the
Company and all other costs and expenses of the Company incident to the
preparation, printing, and filing under the Securities Act and furnishing
copies thereof and of the prospectus included therein; provided, however,
that the Company will not bear the costs and expenses of the Holder in
connection with the sale of the securities subject to the registration
statement that are underwriting commissions related to the Registrable
Securities, brokerage fees, transfer taxes, or the fees and expenses of any
counsel, accountant, or other representative retained by the Holder.
(g) The Company need not file a Registration Statement or include the
Holder's shares in any of the Company's registration statements if the
holding period required for resale in reliance on Rule 144 will be met by
the Holder within one hundred (120) days of requested registration or being
entitled to registration pursuant to subparagraph (b).
(h) The Company may include other shares of the Company in the
Registration Statement.
6. Prepayment. Any time after two years from the date of issuance, this
Debenture is subject to prepayment, in whole or in part, at the election of the
Company at any time, on not less than 30 days notice. During the 30 days
following the date of any notice of prepayment, the Holder will have the right
to convert the Debenture into shares of Common Stock on the terms and conditions
provided in paragraph 2. On the date fixed for prepayment, the Debenture shall
cease to bear interest with respect to the amount of principal actually paid.
Upon the surrender of the original of this Debenture to the Company for
prepayment, the amount of principal and interest then due shall be paid. Any
Debenture which is prepaid only in part shall be presented to the Company for
notation thereon of such partial prepayment.
7. Acceleration of Maturity. In the event of default on the payment of
the Debenture, the holder hereof shall have the right to accelerate the maturity
date of the Debenture and pursue all of the holder's rights and remedies under
law.
8. Events of Default. "Event of Default," when used herein, means any
one of the following events:
(a) Default in the payment of any interest on any Debenture when it
becomes due and payable, and continuance of such default of payment for a
period of 30 days; or
(b) Default in the payment of principal of any Debenture in this
series when due, whether at maturity, upon prepayment, or otherwise; or
(c) Default in the performance or breach of any covenant or warranty
of the Company in any Debenture (other than a covenant or warranty, the
breach or default in performance of which is elsewhere in this section
specifically dealt with), and continuation of such default or breach for a
period of 60 days after there has been given to the Company by registered
or certified mail by the Holder; or
(d) The entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Company under the
Federal Bankruptcy Act or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(e) The institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or a filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Act, or any other applicable federal or state law of
similar tenor, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by the Company of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such action
9. Notices to Holder; Waiver. Where the Debentures provide for notice to
Holder of any event, such notice shall be sufficiently given if in writing and
sent by courier providing for delivery within 72 hours or mailed, return receipt
requested and postage prepaid, to each Holder affected by such event, at his
address as it appears in the Debenture register maintained by the Company, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. Such notice shall be deemed given as of the date
delivered to the courier or deposited in the mail. Neither the failure to
deliver or mail such notice, nor any defect in any notice so delivered or mailed
to any particular Holder shall affect the sufficiency of such notice with
respect to the Holder of other Debentures issued in this series. Where the
Debenture provides for notice to the Company, such notice shall be sufficiently
given if in writing and mailed, return receipt requested and postage prepaid, to
the Company at its address set forth above, not later than the latest date, and
not earlier than the earliest date prescribed for the giving of such notice.
Where the Debenture provides for notice in any matter, such notice may be waived
in writing by the person entitled to receive such notice, whether before or
after the event, and any such waiver shall be equivalent to such notice.
10. Withholding. The Company shall be entitled to withhold from all
payments of principal and interest on the Debenture any amounts required to be
withheld under the applicable provisions of the United States Internal Revenue
Code of 1986, as amended, applicable state tax laws, or any other applicable law
at the time of such payments.
11. Governing Law. The Debenture shall be governed by and construed and
interpreted in accordance with the laws of the state of Utah.
12. Miscellaneous. This Debenture is subject to the following additional
terms and conditions:
(a) If this Debenture is placed with an attorney for collection, or
if suit is instituted for collection, or if any other remedy provided by
law is pursued by the registered Holder hereof, because of any Event of
Default, the undersigned agrees to pay reasonable attorney's fees, costs,
and other expenses incurred by the registered Holder hereof in so doing.
(b) Subject to the limitations on transfer imposed by United States
federal and state securities laws, this Debenture may be transferred,
subject to compliance with the provisions hereof.
EUROGAS, INC.
By /s/ Paul Hinterthur
Paul Hinterthur, President
ATTEST:
By /s/ Hank Blankenstein
Hank Blankenstein, Secretary/Treasurer
