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  1. Ohio Shale Corporation – Ohio/NYSE Company. Ohio Shale Corporation, Inc. (Ohio Shale) is a company incorporated and headquartered in Ohio and registered to do business in the states of New York, Pennsylvania, and West Virginia. It is listed on the New York Stock Exchange and is widely held by institutional investors. Its latest financial statements are attached.
  2. Ohio Shale’s Business.
  3. Ohio Shale is engaged in the exploration and production of petroleum and natural gas. Ohio Shale is the largest exploration and production company in these states that is focused on the exploration and product of natural gas from the Utica shale formation through the use of horizontal drilling.  It has 35% of the market for natural gas production in its marketing area for both commercial and residential users.
  4. 60% of Ohio Shale’s workforce are members of the United Brotherhood of Gas Workers (the “Union”).
  5. Ohio Shale has invested heavily in technology and has an extensive research and development department. Ohio Shale owns numerous patents and patent applications on various aspects of the production of shale gas in the US. Ohio Shale has not applied for any patents in China.  Ohio Shale also maintains much of its technology as a trade secret which it has licensed to no one.
  6. Ohio Shale has been subject to several lawsuits alleging that its wells have caused contamination of the nearby groundwater.  Ohio Shale denies that any of its wells have caused such problems and aggressively defends itself in those lawsuits.
  7. Ohio Shale’s financial statements are attached and been prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP).
  8. Ohio Shale Officers and Directors.
  9. The Chief Executive Officer (CEO) of Ohio Shale is Peter Pipe, better known in the industry as “Petroleum Pete,” a title he acquired by his “slippery” and aggressive business dealings.
  10. His directives have also concerned Ohio Shale’s Chief Financial Officer (CFO) Constance Bean, a tough and detail-oriented woman who tends to speak her mind.
  11. The Ohio Shale Board of Directors has nine members, including:
  • Peter Pipe, his sister and brother-in-law
  • Jim Acre, the CEO of a real estate company that has numerous oil and gas leases signed with Ohio Shale in Ohio and Pennsylvania
  • Two childhood friends of Petroleum Pete, one of whom has a consulting contract with Ohio Shale for occasional government relations assignments and
  • Three CEO’s from unrelated companies.
  1. Petroleum Pete is Chairman of the Board and Chairman of the Board’s Executive Committee which also includes his sister and brother-in-law. The Board also has an Audit Committee whose members include Jim Acre and Petroleum Pete’s two childhood friends, none of whom is a CPA or financial expert.
  2. Wuhan Energy’s Business and President.
  3. Wuhan Energy Company (Wuhan Energy) is the second largest manufacturer of oil and gas drilling equipment in China.
  4. Over 40% of oil and gas exploration and production in China is done with the use of Wuhan Energy’s equipment. Wuhan Energy has not yet entered the US or European markets, but has an interest in doing so.
  5. Wuhan Energy’s financial statements are attached. They have already been translated from RMBs into U.S. dollars in accordance with US GAAP.
  6. Wuhan Energy’s President, Yu Jun Yang, is a former General in the People’s Liberation Army of China.  While a General, he was responsible for the army’s purchase of oil and gas equipment.  Yu Jun Yang has a reputation of being very careful and not making decision quickly.  He also believes that Wuhan Energy needs to expand its operations into Canada and United States.  Also, he would like to gain access to US technologies and believes that a research center in the USA is a first step in that direction.
  7. Yu Jun Yang is also the brother of the Head of the Permanent Discipline Inspection Group of the Ministry of Environmental Protection of the People’s Republic of China.
  8. The Proposed Transaction.
  9. Peter Pipe has developed the idea of asking Wuhan Energy to enter into a joint venture with Ohio Shale for purposes of financing additional exploration activities and to develop the US market nationally for the use of Wuhan Energy’s equipment.
  10. Petroleum Pete believes he can entice Yu Jun Yang to enter into a business transaction with Ohio Shale by offering Wuhan Energy with an entrance into the US market for its equipment.
  11. If he can persuade Wuhan Energy to enter into such a transaction, Petroleum Pete believes Ohio Shale, through this operation, will also be able to develop an exploration and production business in China.
  12. Concerned with mounting debt on Ohio Shale’s balance sheet, Petroleum Pete advises his CFO, Constance Bean, that he wants her to set up an offshore entity, headed by Petroleum Pete’s brother-in-law, to act as the holding company for Ohio Shale’s interest in the potential transaction with Wuhan Energy. In that manner, he believes, any borrowings by the offshore entity will not appear on Ohio Shale’s balance sheet.
  13. Petroleum Pete is convinced that a public announcement of the Ohio Shale/Wuhan Energy deal will cause the price of Ohio Shale shares to rise significantly. He therefore phones his stock broker to be ready to buy 500,000 shares of Ohio Shale on the open market once he calls him with those instructions.  Once Petroleum Pete gets the feeling that a deal will be entered into, he plans to issue those instructions.
  14. Further in the back of his mind, Petroleum Pete wonders if Northeast or its soon-to-be-formed offshore company can obtain favorable loans from Chinese banks or financial institutions.  He believes that Yu Jun Yang’s government contacts might be helpful in this regard.
  15. Dinner and Advice.
  16. You are in your law office in Cleveland when you receive a call from Peter Pipe, stating that he would like you to represent Ohio Shale in outlining and negotiating a deal with Wuhan Energy. Petroleum Pete said he would come to Cleveland to have dinner with you to discuss the alternatives available to Ohio Shale. He says he is a little confused whether he should form a joint venture or simply contract with Wuhan Energy in some manner and would like your advice.
  17. Following Petroleum Pete’s call, you receive a call from Constance Bean, Ohio Shale’s CFO. She states that she has heard you have been retained by Ohio Shale on the “Confidential” Wuhan Energy project. She expresses concern about Petroleum Pete’s directive that she set up an offshore affiliate to conduct this project and would like your advice as to how to proceed. She ends the call by asking you not to tell Petroleum Pete that she spoke to you or that you are advising her.

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