PETRO RIO SA Rio de Janeiro, October 24, 2014 - HRT Participações em Petróleo S.A. ("Company" or "HRT") (BM&FBOVESPA: HRTP3, TSX-V: HRP), pursuant to Article 157, paragraph 4 of Law 6404 of December 15, 1976, as amended ("Corporation Law") and Brazilian Securities Commission ("CVM") Instruction No. 358 of January 3, 2002 ("CVM Instruction 358"), hereby informs its shareholders and the market that the Board of Directors in a meeting held on October 24, 2014 ("BoDM") approved the issuance of convertible debentures, in a single series, of a subordinated type and without guaranties of the Company's First Issuance ("Debentures" and "Issuance," respectively), which will be privately issued, totaling, on the Issuance Date (as defined below), the amount of up to R$90,000,000.00 (ninety million Reais), as stated in the BoDM minutes and the Indenture for HRT Participações em Petróleo S.A.'s 1st Convertible Debenture Private Issuance, in a single series, of a subordinated type ("Indenture"). Oliveira Trust Distribuidora de Títulos e Valores Mobiliários S.A., a financial institution headquartered in the city of Rio de Janeiro, state of Rio de Janeiro, at Avenida das Américas 500, Block 13, Group 205, Barra da Tijuca, postal code 22640-100, enrolled with the National Corporate Taxpayers Register of the Ministry of Finance (CNPJ/MF) under number 36.113.876/0001-91 ("Fiduciary Agent") will represent the Debenture holders pool ("Debenture holders").
All terms defined in this Notice to Shareholders are also provided for in the Indenture, which full version is available on the Company's website (http://www.hrt.com/ir) and on the websites of the CVM and Brazilian Stock, Commodities and Futures Exchange ("BM&FBOVESPA") and may be consulted at branches of the Mandatary Bookkeeping Institution (as defined below).
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The Issuance will observe the following conditions and characteristics:
Characteristics of the Debentures:
1. Total Issuance Amount: The total amount to be issued is of up to R$90,000,000.00 (ninety million Reais) ("Total Issuance Amount"), subject to the possibility of placing a Minimum Amount (as defined below).
2. Series: One single series will be issued.
3. Quantity: will be issued up to 4,500,000 (four million and five hundred thousand) Debentures subject to the possibility of placing the Minimum Amount (as defined below).
4. Par Value: The Debentures' par value will be R$20.00 (twenty Reais) ("Par Value").
5. Use of Proceeds: Proceeds from the Debenture issuance will be used: (i) to develop oil reserves by making investments in the existing production fields and in those that may be acquired and (ii) to acquire new oil and gas related assets, including acquisition by our subsidiary HRT O&G Exploração e Produção de Petróleo Ltda., of an interest in Maersk Energia Ltda. in the Polvo Field in the Campos Basin, as disclosed to the market by the Company through a Material Fact announced on July 8, 2014.
6. Form and Ownership: The Debentures will be issued in book-entry form without warrants or certificates representing them.
7. Type: The Debentures will be subordinated to any creditors of the Company, including unsecured creditors, and will not be secured by any additional guarantees.
8. Issue Date: The Debentures' issuance date will be October 24, 2014 ("Issuance Date").
9. Subscription Price and Payment Conditions: The Debentures will be subscribed at their Par Value to be paid in cash in local currency, upon subscription ("Payment Date").
10. Placement: The Debentures will be issued for private issuance without the intermediation of institutions dealing in securities and/or any effort to sell to investors, being allowed the partial placement of the Debentures as long as subscribed debentures correspond to a minimum of R$60,000,000.00 (sixty million Reais) ("Minimum Amount").
10.1. Once the Minimum Amount has been reached, after making any Apportionments (as defined in the Indenture), Debentures not yet placed will be canceled by the Company.
11. Effectiveness and Maturity Date: The Debentures will be effective for 5 (five) years, thus due on October 24, 2019 ("Maturity Date").
12. Repayment and Scheduled Renegotiation: The Unit Par Value of the Debentures shall be fully paid on the Maturity Date. The Debentures will not be subject to scheduled renegotiation.
13. Early Maturity: The Debentures and all obligations stated in the Indenture will be considered accelerated, thus becoming the Par Value payable by the Company, added to the Remuneration, calculated pro rata from the Issuance Date until the date of actual payment, subject, when applicable, to Late Penalties and any other amounts owed by the Company upon the occurrence of events described in Section 4.12 of the Indenture ("Early Maturity Events").
14. Early Redemption: The Debentures may be redeemed in advance at the Issuer's discretion and in accordance with the Indenture, upon which they shall be canceled. Redemption may be total or partial at Par Value plus (i) remuneration on a pro rata basis and (ii) premium of 5% (five percent) on the balance to be redeemed ("Early Redemption").
15. Monetary restatement and Remuneration: The Debentures' Par Value will not be subject to restatement. The Debentures will bear an interest rate of 90% (ninety percent) of the accumulated variation of the average one-day daily Interbank Deposit, Extra-group Over ("DI Rate"), as calculated and announced daily by the CETIP S.A. - Balcão Organizado de Ativos e Derivativos ("CETIP") in daily bulletins on its website (http://www.cetip.com.br), expressed in percentage form per year based on two hundred and fifty two (252) business days, levied upon the Debentures' Par Value or Par Value balance from their Subscription Date and paid up by the end of each Capitalization Period pro rata temporis, according to the formula established in the Indenture ("Remuneration").
15.1. Remuneration will be payable semiannually, according to the dates provided for in item 4.10.1 of the Indenture, with the first payment being made 6 (six) months after Issuance Date.
16. Registration for Distribution and Trading: The Debentures will be privately issued and therefore will not be registered for distribution on any organized market. However, the Debentures will be listed for trading on the secondary market through the Multi-Asset Platform Trading System (locally known as PUMA Trading System Plataforma Unificada de Multi Ativos - organized over-the-counter market) managed and operated by BM&FBOVESPA.
17. Mandatary Bookkeeping Institution and Settlement Bank: The institution providing the Debentures' mandatary bookkeeping services is Itaú Corretora de Valores S.A., a financial institution headquartered in the city of São Paulo, state of São Paulo ("Mandatary Bookkeeping Institution"). The settlement bank for this Issuance will be Itaú Unibanco S.A., a financial institution headquartered at city of São Paulo, state of São Paulo ("Settlement Bank").
Preemptive Rights:
18. Preemptive Rights:
18.1. Preemptive rights to subscribe Debentures will be reserved for holders of HRT common shares of record on October 24, 2014 ("Shareholders"), in proportion to the share position held by each shareholder on that date ("Preemptive Right").
18.1.1. Due to the private nature and characteristics of the Issuance, the Company and Deutsche Bank Trust Company Americas, a financial institution headquartered in the City and State of New York, at 60 Wall Street, USA, as depositary under the Company's Global Depositary Shares ("GDSs") program, listed on the Toronto Stock Exchange Ventures ("TSX-V"), in Canada, decided that the right to subscribe the Debentures will not be extended to GDS holders as permitted under Section 4.04 of the Deposit Agreement, executed on April 8, 2011 and amended on May 4, 2012, by and between Deutsche Bank Trust Company Americas and the Issuer. Deutsche Bank Trust Company Americas, the depositary of the GDSs, may sell the corresponding Debenture subscription rights and shall distribute the proceeds thereof, if any, to GDS holders. Additional information concerning any cash distributions to GDS holders will be given in a further Notice to Shareholders.
18.2. The Preemptive Rights may be exercised within the 30 (thirty) day period as from October 28, 2014 (inclusive) and ending November 26, 2014 (inclusive) ("Period for Exercise of Preemptive Rights").
19. Convertibility and Conversion Exercise Period:
19.1. The Debentures may be converted into Shares of the Issuer, at the sole discretion of Debenture holders as of October 24, 2015 until the Debentures' Maturity Date (exclusive) ("Exercise Period for Conversion"), and Debenture holders are assured the right to vote at Debenture holder General Meetings to determine by simple majority the shortening of the term from which the Debentures may be converted, subject to following the procedures for exercise of conversion stated in the Indenture.
19.2. The Shares resulting from Debenture conversions (i) will have the same characteristics and conditions and will be entitled to the same rights and benefits statutorily assigned to the Shares on their delivery date, and (ii) will participate fully in earnings, including dividends and interest on own capital that may be declared as of the date of delivery of these Shares.
19.3. Procedures for the exercise of conversion are set forth in the Indenture.
20. Conversion Price:
20.1. The number of Shares to be delivered to the Debenture holders on the Debenture Conversion Date will be the result of dividing the Par Value of the Debentures by the lesser of: (i) the weighted average, by daily volume, of the closing price of the Shares over the last 10 (ten) BM&FBOVESPA trading sessions as of the day after Issuance Date, with a discount of 25% (twenty five percent); or (ii) the weighted average by daily volume of the closing price of the Shares over the last 10 (ten) BM&FBOVESPA trading sessions prior to the receipt of the request for conversion by the Bookkeeping and Mandatary Institution or by the custody agent by BM&FBOVESPA, whichever is applicable, with a discount of 25% (twenty five percent) ("Conversion Price").
20.2. The Conversion Price is justified in as far as it was attributed by the Company in order to ensure the Debentures' attractiveness to investors without resulting in undue dilution.
21. Lock-up period for shares resulting from conversion:
21.1. The shares resulting from conversion will be subject to trading restrictions and transfer for a period of 12 (twelve) months from the Debentures' conversion date ("Restricted Shares" and "Lock-up Period").
For additional information, please contact HRT`s Investor Relations Department.
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