Additional Interests Grant Agreement dated June 14, 2011 between Stranded Oil Resources Corporation and Laredo Oil, Inc

ADDITIONAL INTERESTS GRANT AGREEMENT

between

and

___________________________

___________________________

 

 

 

THIS ADDITIONAL INTERESTS GRANT AGREEMENT (this “Agreement”) is dated as of June 14, 2011 (“Agreement Date”), and is between STRANDED OIL RESOURCES CORPORATION, a Delaware corporation (the “Company”) and LAREDO OIL, INC., a Delaware corporation (“Laredo”).

 

 

WHEREAS, concurrently herewith the Company and Laredo are entering into a certain License Agreement dated of even date herewith (“Laredo License Agreement”) pursuant to which the Company will obtain from Laredo an exclusive license (“Laredo License”) to use and exploit certain intellectual property owned by Laredo and Mark See, an individual (“MS”), relating to the UGD Process and the Selection Process under the terms and conditions set forth in the Laredo License Agreement;

 

WHEREAS, concurrently herewith, Laredo and MS are entering into a certain License Agreement of even date herewith (“MS-Laredo License Agreement”) pursuant to which MS grants to Laredo an exclusive license to use the “Licensed Intellectual Property” defined therein solely for the purpose of including such “Licensed Intellectual Property” in the Licensed Intellectual Property which is the subject of the Laredo License Agreement;

 

WHEREAS, concurrently herewith the Company and Laredo are entering into a certain Management Services Agreement of even date herewith (“Management Services Agreement”);

 

WHEREAS, concurrently herewith, Licensee and Alleghany Capital Corporation, a Delaware corporation (“Alleghany”) are executing and delivering a certain Funding Agreement of even date herewith (“Funding Agreement”);

 

WHEREAS, the Company is willing to issue and grant to Laredo the “Additional Interests” (as defined in Section 1 below) in consideration of (a) the grant of the Laredo License under the Laredo License Agreement and the continuation of the Laredo License; and (b) the past satisfactory performance by Laredo of its duties and obligations under the Management Services Agreement and the continued satisfactory performance by Laredo of its duties and obligations under the Management Services Agreement, subject to the terms and conditions of this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Laredo, on the one hand, and the Company, on the other, hereby agree as follows:

 

 

1.           Defined Terms

 

1.1           All terms not herein defined shall have the meaning attributed to them in the Laredo License Agreement.

 

1.2           As used in this Agreement, the following terms shall have the following meanings.

 

“Additional Interests” means (a) interests in the “Net Profits” (as this term is defined in the Laredo License Agreement) of the Company, containing substantially the same terms and conditions as the “Royalty” referred to in the Laredo License Agreement, including the conversion provisions set forth in the Laredo License Agreement, and containing such other terms and conditions, including, without limitation, vesting restrictions, as the Company may, in its sole and absolute discretion, determine; and/or (b) restricted common stock of the Company, options to purchase common stock of the Company, or other common stock equity grants or incentives, containing such terms and conditions, including, without limitation, vesting restrictions, as the Company may, in its sole and absolute discretion, determine.  The Additional Interests available for issuance shall represent the “Percentage Interest” (as defined below) in the Net Profits referred to in subparagraph (a) above and the common stock equity referred to in subparagraph (b) above, assuming full conversion of the Net Profits interests into common stock of the Company pursuant to Section 3.4 of the Laredo License Agreement, and assuming full vesting and lapse of all other restrictions, and exercise of all options, with respect to the common stock equity.

 

“Alleghany” means Alleghany Capital Corporation, a Delaware corporation.

 

“Aggregate Payoff Amount” shall have the meaning set forth in Section 2.1 below.

 

“Change of Control” with respect to Laredo shall have the meaning set forth in the Laredo License Agreement.

 

“Corporate Event” shall have the meaning set forth in the Laredo License Agreement.

 

“Effective Date” means the Agreement Date.

 

“Event of Default” means the existence or occurrence of any one or more of the following: (a) any breach or failure on the part of Laredo to perform one or more of its duties and obligations under this Agreement or any Related Agreement and, if such breach or failure is capable of being cured or remedied, such breach or failure is not cured or remedied (i) within thirty (30) days after Laredo receives written notice of such breach or failure or (ii) if any other cure period for such breach or failure is expressly set forth in this Agreement or any Related Agreement, within such cure period expressly set forth in this Agreement or any Related Agreement; (b) the breach or inaccuracy of any representation or warranty made by Laredo in this Agreement or any Related Agreement and, if such breach or inaccuracy is capable of being cured or remedied, such breach or inaccuracy is not cured or remedied (i) within thirty (30) days after Laredo receives written notice of such breach or inaccuracy or (ii) if any other cure period for such breach or inaccuracy is expressly set forth in this Agreement or any Related Agreement, within such cure period expressly set forth in this Agreement or any Related Agreement; (c) any breach or failure on the part of Laredo to perform one or more of its duties and obligations under any other written agreement with any Person other than the Company if such breach or failure materially and adversely affects or is reasonably expected to materially and adversely affect Licensor’s ability to perform its duties and obligations under this Agreement or any Related Agreement; (d) any MS-Laredo Event of Default; and/or (e) any termination of the Laredo License Agreement, the MS-Laredo License Agreement and/or the Management Services Agreement, including, without limitation, any such termination or deemed termination in any bankruptcy proceeding.

 

 

“Issued Additional Interests” means Additional Interests which are actually granted or issued.

 

“MS-Laredo Event of Default” shall have the meaning set forth in the Laredo License Agreement.

 

“Net Profits” shall have the meaning set forth in the Laredo License Agreement.

 

“Payoff Percentage” means a percentage determined by application of the following formula:

 

.50% x A ÷ B

 

 

 

For avoidance of doubt, if the Aggregate Payoff Amount is zero, then the Payoff Percentage will be zero.

 

“Percentage Interest” means a percentage determined by application of the following formula:

 

2.74%, minus the Payoff Percentage

 

“Person” or “person” means any individual, sole proprietorship, corporation, limited liability company, general partnership, limited partnership, limited liability partnership, trust, association, fund, firm or other entity.

 

“Qualified IPO” shall have the meaning set forth in the Laredo License Agreement.

 

“Related Agreements” means and includes all of the following: (a) the Management Services Agreement; (b) that certain Loan Agreement dated as of November 22, 2010 between Alleghany Capital Corporation and Laredo; (c) that certain Senior Promissory Note dated November 22, 2010 made by Laredo; (d) that certain Loan Agreement dated as of April 6, 2011 between Alleghany Capital Corporation and Laredo; (e) that certain Senior Promissory Note dated April 6, 2011 made by Laredo; and (f) the Laredo License Agreement; (g) the MS-Laredo License Agreement; (h) the “MS License” (as this term is defined in the Funding Agreement); and (i) any other written agreement entered into either as of the Effective Date or after the Effective Date between the Company and/or its Affiliates, on the one hand, and Laredo and/or its Affiliates, on the other hand.

 

“Selection Process” shall have the meaning set forth in the definition of the term “Licensed Intellectual Property” as set forth in the Laredo License Agreement.

 

“Term” has the meaning set forth in Section 8.1 of the Laredo License Agreement.

 

“UGD Process” shall have the meaning set forth in the definition of the term “Licensed Intellectual Property” as set forth in the Laredo License Agreement.

 

2.           Payoff Amount; Additional Interests

 

2.1           Aggregate Payoff Amount.  During the sixty (60) day period following the Effective Date, the Company shall fund to Laredo an aggregate amount not to exceed Four Hundred and Fifteen Thousand Dollars ($415,000.00) to be used by Laredo for the sole purpose of paying and retiring in full one or more of Laredo’s debt obligations listed on Exhibit A attached hereto (“Laredo Debt Obligations”).  The actual aggregate amount funded by the Company to Laredo pursuant to this Section 2.1 during such 60-day period is referred to as the “Aggregate Payoff Amount.”  Prior to funding any amounts pursuant to this Section 2.1, the Company may require such documentation (including, without limitation, a written payoff demand from the holder of the applicable Laredo Debt Obligations) and such other evidence as the Company may reasonably request to verify that such funds are being used to pay in full and retire one or more of the Laredo Debt Obligations.  If and to the extent funds for the Aggregate Payoff Amount are contributed to the Company by Alleghany, such funds shall constitute capital contributed in respect of the common stock of the Company owned by Alleghany and shall not constitute “Preferred Stock Capital” as this term is defined in the Laredo License Agreement.

 

2.2           Additional Interests.  The Company acknowledges that the Additional Interests have been set aside for issuance or grant by the Company to Laredo and/or such additional executive officers, key employees and key consultants of the Company as the Company’s Board of Directors may determine, from time to time, in its sole and absolute discretion.  The Company agrees that so long as the Laredo License Agreement remains in full force and effect and there has been no termination by Laredo of the exclusivity of the Laredo License by reason of any Development Failure pursuant to Section 8.2 of the Laredo License Agreement (a) the Additional Interests will not be issued or granted by the Company to any employees of Laredo; and (b) the Additional Interests will not be issued or granted to any shareholder of the Company who is not also an officer and/or employee of the Company, or to any director, officer or shareholder of Alleghany or any of its Affiliates.  For avoidance of doubt, once any such Additional Interests are issued or granted by the Company to Laredo pursuant to this Agreement, then Laredo shall have the right, as determined by the Board of Directors or Compensation Committee of Laredo, in its sole and absolute discretion, to transfer such Additional Interests to one or more officers, directors or employees of Laredo.

 

2.3           Grant of Additional Interests to Laredo.

 

(a)           Upon the occurrence of a Corporate Event, all Additional Interests which have not been issued or granted prior to the date of such Corporate Event shall be issued or granted to Laredo if: (i) no Event of Default has occurred and continues to exist as of the date of such Corporate Event; (ii) prior to the date of such Corporate Event the exclusivity of the Laredo License has not been terminated by Laredo by reason of any Development Failure pursuant to Section 8.2 of the Laredo License Agreement; (iii) the Company reasonably believes that the Laredo License under the Laredo License Agreement will continue on an exclusive basis after the date of such Corporate Event; (iv) the Company reasonably believes that the performance by Laredo of its duties and obligations under the Management Services Agreement prior to the date of such Corporate Event has been satisfactory; and (v) the Company reasonably believes that the performance by Laredo of its duties and obligations under the Management Services Agreement will continue at a satisfactory level for at least eighteen (18) months after the date of such Corporate Event.

 

 

(b)           If no Corporate Event has occurred prior to the date (“Production Level Date”) on which the Company has produced a cumulative aggregate of ten (10) million barrels of oil through the UGD Facilities, then all Additional Interests which have not been issued or granted prior to such date shall be issued or granted to Laredo if: (i) no Event of Default has occurred and continues to exist as of the Production Level Date; (ii) prior to the Production Level Date the exclusivity of the Laredo License has not been terminated by Laredo by reason of any Development Failure pursuant to Section 8.2 of the Laredo License Agreement; (iii) the Company reasonably believes that the Laredo License under the Laredo License Agreement will continue on an exclusive basis after the Production Level Date; (iv) the Company reasonably believes that the performance by Laredo of its duties and obligations under the Management Services Agreement prior to the Production Level Date has been satisfactory; and (v) the Company reasonably believes that the performance by Laredo of its duties and obligations under the Management Services Agreement will continue at a satisfactory level for at least eighteen (18) months after the Production Level Date.

 

3.           Termination.  The Company shall have the right, exercisable in its sole and absolute discretion, to terminate this Agreement at any time after the existence or occurrence of one or more of the following circumstances, conditions or events:

 

4.           Miscellaneous

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives as of the Agreement Date.

 

 

LAREDO LAREDO OIL, INC., a Delaware corporation   By:  ______________________ Name:  ___________________ Title:  ____________________

COMPANY STRANDED OIL RESOURCES CORPORATION, a Delaware corporation   By:  ______________________ Name:  ___________________ Title:  ____________________

 

 

 

 

la-1119735

 

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