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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 25, 1999
CHAPARRAL RESOURCES, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-7261 84-0630863
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
16945 Northchase, Suite 1440
Houston, Texas 77060
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281) 877-7100
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ITEM 5. OTHER EVENTS
8% Non-Negotiable Convertible Subordinated Promissory Notes. October 25,
1999 and November 12, 1999, Chaparral Resources, Inc., a Delaware corporation
(the "Registrant"), issued to various investors an aggregate principal amount of
$4.0 million of its unsecured 8% Non-Negotiable Convertible Subordinated
Promissory Notes (the "Notes"). The Notes contain a provision permitting the
holders of the Notes to convert them into shares of the Registrant's common
stock, par value $0.0001 per share (the "Common Stock"), at a conversion price
of $1.86 per share, subject to adjustment under certain conditions; provided,
however, the conversion provision is subject to the approval of the stockholders
of the Registrant. Upon stockholder approval, the Notes will automatically
convert into shares of Common Stock without any further action on the part of
the Registrant or the holders of the Notes. The Registrant will deliver
certificates representing such shares not later than the tenth business day
following approval by the stockholders. If the stockholders do not approve the
conversion provision of the Notes, (1) the annual interest rate payable under
the Notes will increase to the lesser of 25% or the maximum rate allowed by
applicable law and (2) the Notes will be subordinate to the Loan, as discussed
below. The Registrant will use approximately $1.0 million of the proceeds to
repay an outstanding bank loan, and will use the remaining $3.0 million to
provide interim funding until various conditions under the Loan have been
satisfied.
Loan Agreement. The Registrant, Central Asian Petroleum (Guernsey) Limited,
Central Asian Petroleum, Inc., Karakuduk Munay, JSC ("KKM"), Shell Capital
Services Limited ("Shell"), Shell Capital Limited, and certain other persons
entered into a loan agreement, dated as of November 1, 1999 (the "Loan"),
pursuant to which the Registrant can borrow up to $24.0 million subject to
compliance with certain affirmative and negative covenants. The Registrant
intends to use the proceeds from the Loan to continue KKM's development of the
Karakuduk Field located in the Mangistau Region of the Republic of Kazakhstan.
The consummation of the Loan is subject to several conditions which
include, without limitation, (i) an equity infusion of at least $9.0 million,
(ii) the acquisition of political and transportation risk insurance, (iii) the
hedging of a significant portion of the Registrant's future oil production, and
(iv) the retirement, conversion or subordination of all of the Registrant's
outstanding approximately $9.1 million of term and demand debt, which includes
$5.1 million of secured stockholder bridge loans (the "Stockholder Loans") and
the $4.0 million of Notes.
In order to fulfill the remainder of the equity infusion required to
consummate the Loan, the Board of Directors of the Registrant has authorized and
plans to effect a dutch auction format rights offering (the "Rights Offering")
of its Common Stock, pursuant to which stockholders would be able to purchase,
on a pro rata basis, additional shares of the Registrant's common stock at $1.86
per share. The Rights Offering is subject to stockholder approval, and will only
be made by means of a prospectus, after a registration statement to be filed by
the Registrant with the Securities and Exchange Commission becomes effective.
Additionally, in connection with the requirement under the Loan that the
Registrant retire, convert or subordinate its outstanding term and demand debt,
the Registrant has offered to issue additional Notes to the holders of the
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secured Stockholder Loans. All of the holders of the secured Stockholder Loans
have agreed to this exchange and each will receive a new Note upon the
Registrant's receipt of such holder's loan documentation.
In connection with the Loan, the Registrant will issue to Shell a warrant
to purchase up to 15% of the Registrant's outstanding Common Stock. The warrant
will be non-transferable and will not be exercisable for a period of
approximately 18 months after its initial issuance. Additionally, it will
contain registration rights provisions. The warrant exercise price will be
determined by reference to the average closing price of the Common Stock for the
90-day period immediately preceding November 1, 1999, subject to certain anti-
dilution provisions.
The conversion of the Notes, including the Notes to be issued in exchange
for the secured Stockholder Loans, and the issuance of the warrant to Shell will
result in the issuance, in the aggregate, of approximately 5.3 million shares of
the Registrant's common stock. In addition, since the Registrant's Series A
Preferred Stock contains certain anti-dilution provisions, the issuance of the
Notes may result in the issuance of an additional 225,000 shares of Common
Stock.
This summary is qualified in its entirety by the Registrant's November 1,
1999 press release, the Registrant's November 3, 1999 press release, the Notes
and the Loan Agreement attached as exhibits and incorporated by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Number Exhibit
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4.1 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $2,000,000, to Allen & Company
Incorporated
4.2 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $250,000, to Global
Undervalued Securities Fund, LP
4.3 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $200,000, to Pecos Joint
Venture
4.4 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $125,000, to Thomas G. Murphy
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4.5 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $125,000, to William Keller
4.6 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $100,000, to Duncan A. Lee
4.7 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $100,000, to Patrick McGee
4.8 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
October 25, 1999, principal amount $100,000, to Marathon Special
Opportunity Fund, LLC
4.9 8% Non-Negotiable Convertible Subordinated Promissory Note, dated
November 12, 1999, principal amount $1,000,000, to Whittier
Ventures, LLC
10.1 $24,000,000 Loan Agreement dated as of November 1, 1999
99.1 Press Release, dated November 1, 1999, of Chaparral Resources, Inc.
99.2 Press Release, dated November 3, 1999, of Chaparral Resources, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHAPARRAL RESOURCES, INC.
Date: November 16, 1999 By: /s/ Michael B. Young
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Michael B. Young, Treasurer
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Exhibit 4.1
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$2,000,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Allen & Company Incorporated ("Payee"), in
lawful money of the United States of America, the principal amount (the
"Principal Amount") of TWO MILLION DOLLARS (US$2,000,000.00), together with
interest in arrears on the unpaid principal balance at an annual rate equal to
eight percent per annum (8.0%), in the manner and subject to adjustment as
provided below. Interest shall be calculated on the basis of a year of 365 or
366 days, as applicable, and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common
stock, $0.0001 par value ("Common Stock"), not later than the tenth (10th)
business day following the approval by the shareholders of the Maker, at a
general meeting or special meeting called in whole or in part for such
purpose, of the terms of this Paragraph 2.2(a). The number of shares of
Maker Common Stock to be issued pursuant to this Paragraph 2.2(a) shall be
equal to the product of the Principal Amount together with accrued and
unpaid interest thereon divided by $1.86 (the "Conversion Price). Payment
shall be made be delivering such shares to Payee at 711 Fifth Avenue, New
York, New York 10022, or at such other place as Payee shall designate to
Maker in writing. Delivery of such stock certificates shall be made by
registered mail, return receipt requested, or by a recognized overnight
delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the
interest rate of this Note shall automatically, without any action required
to be taken by Maker or Payee, be increased to the lesser of twenty five
percent (25%) per annum or the maximum rate allowed by the laws of the
State of Texas and (ii) the Principal Amount, together with all accrued and
unpaid interest shall be due and payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate
power and authority to own and lease its properties and to conduct its
business as presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker
and constitutes the valid and binding agreement of Maker, enforceable
against Maker in accordance with its terms, except as the enforceability
hereof may be subject to applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights generally and to general
principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly
authorized and, upon the issuance thereof will be validly issued, fully
paid and non-assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated
by this Note or where the absence would not have a material adverse effect
on the Maker, require consent, approval, waiver or authorization from or
registration or filing with any party, including but not limited to any
party to any material agreement to which the Maker is a party or by which
it is bound or by any regulatory or governmental agency, body or entity or
(ii) violate any statute, law, rule, regulation or ordinance, or any
judgment, decree, order, regulation or rule of any court, tribunal,
administrative or governmental agency, body or entity to which the Maker or
its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as
amended (the "Act"). Payee further represents that Payee considers itself
to be a sophisticated investor in companies similarly situated to the
Maker, and Payee has substantial knowledge and experience in financial and
business matters (including knowledge of finance, securities and
investments, generally, and experience and skill in investments based on
actual participation) such that Payee is capable of evaluating the merits
and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance
upon the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under
the securities laws of any state. Consequently, Payee agrees that pursuant
to this Note, such shares cannot be resold, unless they are registered
under the Act and applicable state securities laws, or unless an exemption
from such registration requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on
behalf of, any other person. Payee is acquiring any such shares with the
intention of holding such shares for investment, with no present intention
of participating, directly or indirectly, in a subsequent public
distribution of the shares, unless registered under the Act and applicable
state securities laws, or unless an exemption from such registration
requirements is available. Payee shall not make any sale, transfer or
other disposition of any of the shares in violation of any state or federal
law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Payee has
been advised and further agrees that the Maker will refuse to permit the
transfer of the shares out of Payee's name in the absence of compliance
with the terms of such legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean
the holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued
pursuant to this Note; provided, however, that shares of Registrable
Stock will cease to be Registrable Stock if they are sold or
transferred pursuant to a registered public offering or other
transaction which does not result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration
under this Paragraph 5(b) within nine months after the completion of
any Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the
Registrable Stock of a Participating Holder in any registration
statement or post-effective amendment prepared at its own instance
unless such Participating Holder shall furnish such information and
sign such documents as may be required by the Commission or reasonably
requested by the Maker, in accordance with generally accepted
practices, in connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
The Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and
blue sky fees and expenses, but not including (i) the fees and expenses of
counsel for the Participating Holders in connection with such registration;
and (ii) the underwriting discounts and commissions and underwriters'
expenses allocable to the Registrable Stock being registered or state
transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or
sells Additional Shares of Common Stock (as hereinafter defined), other
than as a dividend or other distribution on any class of stock for an
Effective Price per share (as hereinafter defined) that is less than the
Conversion Price, then and in each such case, the Payee shall be entitled
to an additional number of shares of Common Stock (the "Adjusted Shares")
which when added to the number of shares acquired pursuant to Paragraph
2(a) and divided by the by the Conversion Price shall be equal to the
Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the
Maker after deduction of any expenses payable by the Maker and any
underwriting or similar commissions, compensation, or concessions paid or
allowed by the Maker in connection with such issuance or sale, and (ii) to
the extent it consists of property other than cash, be computed at the fair
value of that property as reasonably determined in good faith by the
Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of
Common stock or options or warrants to acquire Common Stock issued to
management, directors or employees of, or consultants to, the Maker or any
Subsidiary, (ii) shares of Common Stock issuable upon exercise of
convertible securities, (iii) shares of Common Stock issued to Allen &
Company, Whittier Trust or any other current holders of any debt of the
Maker, (iv) shares of Common Stock issued pursuant to any rights offering
to current shareholders and (iii) shares of Common Stock or options or
warrants to acquire Common Stock issued in connection with investment
banking, financial advisory or legal services provided to the Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of
debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary case or
proceeding; (ii) consent to the entry of an order for relief against it in
an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment
for the benefit of its creditors; or (v) admit in writing its inability to
pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official
for Maker or substantially all of Maker's properties, or (iii) orders the
liquidation of Maker, and in each case the order or decree is not dismissed
within one hundred and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i)
by written notice to Maker, declare the entire unpaid principal balance of
this Note, together with all accrued interest thereon, immediately due and
payable regardless of any prior forbearance, and (ii) exercise any and all
rights and remedies available to it under applicable law, including,
without limitation, the right to collect from Maker all sums due under this
Note. Maker shall pay all reasonable costs and expenses incurred by or on
behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation,
reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may
be requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee agrees
to execute and deliver to Shell a subordination agreement relating to this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in
full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect
to the extent not held invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or
Paragraphs of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided,
the words "hereof" and "hereunder" and similar references refer to this
Note in its entirety and not to any specific Paragraph or subParagraph
hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:
---------------------------
James A. Jeffs, Co-Chairman
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Exhibit 4.2
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$250,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Global Undervalued Securities Fund, LP
("Payee"), in lawful money of the United States of America, the principal amount
(the "Principal Amount") of TWO HUNDRED FIFTY THOUSAND DOLLARS (US$250,000.00),
together with interest in arrears on the unpaid principal balance at an annual
rate equal to eight percent per annum (8.0%), in the manner and subject to
adjustment as provided below. Interest shall be calculated on the basis of a
year of 365 or 366 days, as applicable, and charged for the actual number of
days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
c/o Klein-Heinz Capital Partners, 201 Main Street - Suite 2001, Fort Worth,
Texas 76102, or at such other place as Payee shall designate to Maker in
writing. Delivery of such stock certificates shall be made by registered mail,
return receipt requested, or by a recognized overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is
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acquiring any such shares with the intention of holding such shares for
investment, with no present intention of participating, directly or
indirectly, in a subsequent public distribution of the shares, unless
registered under the Act and applicable state securities laws, or unless an
exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in
violation of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being imposed on the public transfer
by virtue of federal or state securities laws; and provided further
that Registrable Stock will cease to be Registrable Stock if the
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holder could sell or transfer all such Shares held by him/her pursuant
to Rule 144 promulgated under the Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker may,
at its election, by delivery of written notice to the Participating
Holders, (i) in
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the case of a determination not to effect registration, relieve itself
of its obligations to register any Registrable Stock in connection
with such registration, or (ii) in the case of determination to delay
the registration, delay the registration of such Registrable Stock for
the same period as the delay in the registration of such other shares
of Common Stock or other securities convertible into or exercisable
for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with any
registration under this Paragraph 5, the Maker will, as expeditiously as is
reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and blue
sky fees and expenses, but not including (i) the fees and expenses of counsel
for the Participating Holders in connection with such registration; and (ii) the
underwriting discounts and commissions and underwriters' expenses allocable to
the Registrable Stock being registered or state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold,
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into the aggregate consideration received, or deemed to have been recieved by
the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee
agrees to execute and deliver to Shell a subordination agreement relating to
this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:_______________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.3
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$200,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Pecos Joint Venture ("Payee"), in lawful money
of the United States of America, the principal amount (the "Principal Amount")
of TWO HUNDRED THOUSAND DOLLARS (US$200,000.00), together with interest in
arrears on the unpaid principal balance at an annual rate equal to eight percent
per annum (8.0%), in the manner and subject to adjustment as provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
2911 Turtle Creek Boulevard - Suite 1240, Dallas, Texas 75219, or at such other
place as Payee shall designate to Maker in writing. Delivery of such stock
certificates shall be made by registered mail, return receipt requested, or by a
recognized overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in violation
of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with any
registration under this Paragraph 5, the Maker will, as expeditiously as is
reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and blue
sky fees and expenses, but not including (i) the fees and expenses of counsel
for the Participating Holders in connection with such registration; and (ii) the
underwriting discounts and commissions and underwriters' expenses allocable to
the Registrable Stock being registered or state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may
be requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee agrees
to execute and deliver to Shell a subordination agreement relating to this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:___________________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.4
8.0% Non-Negotiable CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$125,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Thomas G. Murphy ("Payee"), in lawful money of
the United States of America, the principal amount (the "Principal Amount") of
ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS (US$125,000.00), together with interest
in arrears on the unpaid principal balance at an annual rate equal to eight
percent per annum (8.0%), in the manner and subject to adjustment as provided
below. Interest shall be calculated on the basis of a year of 365 or 366 days,
as applicable, and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
19108 North 93rd Way, Scottsdale, Arizona 85255, or at such other place as Payee
shall designate to Maker in writing. Delivery of such stock certificates shall
be made by registered mail, return receipt requested, or by a recognized
overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in violation
of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and blue
sky fees and expenses, but not including (i) the fees and expenses of counsel
for the Participating Holders in connection with such registration; and (ii) the
underwriting discounts and commissions and underwriters' expenses allocable to
the Registrable Stock being registered or state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee
agrees to execute and deliver to Shell a subordination agreement relating to
this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may be
prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:_________________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.5
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$125,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of William Keller ("Payee"), in lawful money of the
United States of America, the principal amount (the "Principal Amount") of ONE
HUNDRED TWENTY-FIVE THOUSAND DOLLARS (US$125,000.00), together with interest in
arrears on the unpaid principal balance at an annual rate equal to eight percent
per annum (8.0%), in the manner and subject to adjustment as provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
c/o Keller Construction, 9350 Flair Drive - Suite 204, El Monte, California
91731,or at such other place as Payee shall designate to Maker in writing.
Delivery of such stock certificates shall be made by registered mail, return
receipt requested, or by a recognized overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
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<PAGE>
(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in violation
of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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<PAGE>
may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and blue
sky fees and expenses, but not including (i) the fees and expenses of counsel
for the Participating Holders in connection with such registration; and (ii) the
underwriting discounts and commissions and underwriters' expenses allocable to
the Registrable Stock being registered or state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee
agrees to execute and deliver to Shell a subordination agreement relating to
this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or
Paragraphs of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:_____________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.6
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Duncan A. Lee ("Payee"), in lawful money of the
United States of America, the principal amount (the "Principal Amount") of ONE
HUNDRED THOUSAND DOLLARS (US$100,000.00), together with interest in arrears on
the unpaid principal balance at an annual rate equal to eight percent per annum
(8.0%), in the manner and subject to adjustment as provided below. Interest
shall be calculated on the basis of a year of 365 or 366 days, as applicable,
and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
Via Santo Spirito 23, Florence 50125, Italy, or at such other place as Payee
shall designate to Maker in writing. Delivery of such stock certificates shall
be made by registered mail, return receipt requested, or by a recognized
overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in violation
of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and
blue sky fees and expenses, but not including (i) the fees and expenses of
counsel for the Participating Holders in connection with such registration;
and (ii) the underwriting discounts and commissions and underwriters'
expenses allocable to the Registrable Stock being registered or state
transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received by
the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee
agrees to execute and deliver to Shell a subordination agreement relating to
this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may be
prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:__________________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.7
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Patrick McGee ("Payee"), in lawful money of the
United States of America, the principal amount (the "Principal Amount") of ONE
HUNDRED THOUSAND DOLLARS (US$100,000.00), together with interest in arrears on
the unpaid principal balance at an annual rate equal to eight percent per annum
(8.0%), in the manner and subject to adjustment as provided below. Interest
shall be calculated on the basis of a year of 365 or 366 days, as applicable,
and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common
stock, $0.0001 par value ("Common Stock"), not later than the tenth (10th)
business day following the approval by the shareholders of the Maker, at a
general meeting or special meeting called in whole or in part for such
purpose, of the terms of this Paragraph 2.2(a). The number of shares of
Maker Common Stock to be issued pursuant to this Paragraph 2.2(a) shall be
equal to the product of the Principal Amount together with accrued and
unpaid interest thereon divided by $1.86 (the "Conversion Price). Payment
shall be made be delivering such shares to Payee at 200 Crescent Court -
Suite 1600, Dallas, Texas 75201, or at such other place as Payee shall
designate to Maker in writing. Delivery of such stock certificates shall
be made by registered mail, return receipt requested, or by a recognized
overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the
interest rate of this Note shall automatically, without any action required
to be taken by Maker or Payee, be increased to the lesser of twenty five
percent (25%) per annum or the maximum rate allowed by the laws of the
State of Texas and (ii) the Principal Amount, together with all accrued and
unpaid interest shall be due and payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate
power and authority to own and lease its properties and to conduct its
business as presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker
and constitutes the valid and binding agreement of Maker, enforceable
against Maker in accordance with its terms, except as the enforceability
hereof may be subject to applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights generally and to general
principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly
authorized and, upon the issuance thereof will be validly issued, fully
paid and non-assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated
by this Note or where the absence would not have a material adverse effect
on the Maker, require consent, approval, waiver or authorization from or
registration or filing with any party, including but not limited to any
party to any material agreement to which the Maker is a party or by which
it is bound or by any regulatory or governmental agency, body or entity or
(ii) violate any statute, law, rule, regulation or ordinance, or any
judgment, decree, order, regulation or rule of any court, tribunal,
administrative or governmental agency, body or entity to which the Maker or
its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as
amended (the "Act"). Payee further represents that Payee considers itself
to be a sophisticated investor in companies similarly situated to the
Maker, and Payee has substantial knowledge and experience in financial and
business matters (including knowledge of finance, securities and
investments, generally, and experience and skill in investments based on
actual participation) such that Payee is capable of evaluating the merits
and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance
upon the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under
the securities laws of any state. Consequently, Payee agrees that pursuant
to this Note, such shares cannot be resold, unless they are registered
under the Act and applicable state securities laws, or unless an exemption
from such registration requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on
behalf of, any other person. Payee is acquiring any such shares with the
intention of holding such shares for investment, with no present intention
of participating, directly or indirectly, in a subsequent public
distribution of the shares, unless registered under the Act and applicable
state securities laws, or unless an exemption from such registration
requirements is available. Payee shall not make any sale, transfer or
other disposition of any of the shares in violation of any state or federal
law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Payee has
been advised and further agrees that the Maker will refuse to permit the
transfer of the shares out of Payee's name in the absence of compliance
with the terms of such legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean
the holder of any shares issued pursuant to this Note.
(iii) The terms ``register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued
pursuant to this Note; provided, however, that shares of Registrable
Stock will cease to be Registrable Stock if they are sold or
transferred pursuant to a registered public offering or other
transaction which does not result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration
under this Paragraph 5(b) within nine months after the completion of
any Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the
Registrable Stock of a Participating Holder in any registration
statement or post-effective amendment prepared at its own instance
unless such Participating Holder shall furnish such information and
sign such documents as may be required by the Commission or reasonably
requested by the Maker, in accordance with generally accepted
practices, in connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
The Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and
blue sky fees and expenses, but not including (i) the fees and expenses of
counsel for the Participating Holders in connection with such registration;
and (ii) the underwriting discounts and commissions and underwriters'
expenses allocable to the Registrable Stock being registered or state
transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or
sells Additional Shares of Common Stock (as hereinafter defined), other
than as a dividend or other distribution on any class of stock for an
Effective Price per share (as hereinafter defined) that is less than the
Conversion Price, then and in each such case, the Payee shall be entitled
to an additional number of shares of Common Stock (the "Adjusted Shares")
which when added to the number of shares acquired pursuant to Paragraph
2(a) and divided by the by the Conversion Price shall be equal to the
Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the
Maker after deduction of any expenses payable by the Maker and any
underwriting or similar commissions, compensation, or concessions paid or
allowed by the Maker in connection with such issuance or sale, and (ii) to
the extent it consists of property other than cash, be computed at the fair
value of that property as reasonably determined in good faith by the
Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of
Common stock or options or warrants to acquire Common Stock issued to
management, directors or employees of, or consultants to, the Maker or any
Subsidiary, (ii) shares of Common Stock issuable upon exercise of
convertible securities, (iii) shares of Common Stock issued to Allen &
Company, Whittier Trust or any other current holders of any debt of the
Maker, (iv) shares of Common Stock issued pursuant to any rights offering
to current shareholders and (iii) shares of Common Stock or options or
warrants to acquire Common Stock issued in connection with investment
banking, financial advisory or legal services provided to the Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of
debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary case or
proceeding; (ii) consent to the entry of an order for relief against it in
an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment
for the benefit of its creditors; or (v) admit in writing its inability to
pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official
for Maker or substantially all of Maker's properties, or (iii) orders the
liquidation of Maker, and in each case the order or decree is not dismissed
within one hundred and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i)
by written notice to Maker, declare the entire unpaid principal balance of
this Note, together with all accrued interest thereon, immediately due and
payable regardless of any prior forbearance, and (ii) exercise any and all
rights and remedies available to it under applicable law, including,
without limitation, the right to collect from Maker all sums due under this
Note. Maker shall pay all reasonable costs and expenses incurred by or on
behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation,
reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may
be requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee agrees
to execute and deliver to Shell a subordination agreement relating to this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in
full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect
to the extent not held invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or
Paragraphs of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided,
the words "hereof" and "hereunder" and similar references refer to this
Note in its entirety and not to any specific Paragraph or subParagraph
hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:
---------------------------
James A. Jeffs, Co-Chairman
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Exhibit 4.8
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
October 25, 1999 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Marathon Special Opportunity Fund, LLC
("Payee"), in lawful money of the United States of America, the principal amount
(the "Principal Amount") of ONE HUNDRED THOUSAND DOLLARS (US$100,000.00),
together with interest in arrears on the unpaid principal balance at an annual
rate equal to eight percent per annum (8.0%), in the manner and subject to
adjustment as provided below. Interest shall be calculated on the basis of a
year of 365 or 366 days, as applicable, and charged for the actual number of
days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business day
following the approval by the shareholders of the Maker, at a general meeting or
special meeting called in whole or in part for such purpose, of the terms of
this Paragraph 2.2(a). The number of shares of Maker Common Stock to be issued
pursuant to this Paragraph 2.2(a) shall be equal to the product of the Principal
Amount together with accrued and unpaid interest thereon divided by $1.86 (the
"Conversion Price). Payment shall be made be delivering such shares to Payee at
c/o Richards Hanover Group, 230 Park Avenue, New York, New York 10169, or at
such other place as Payee shall designate to Maker in writing. Delivery of such
stock certificates shall be made by registered mail, return receipt requested,
or by a recognized overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum rate allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker and
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the issuance thereof will be validly issued, fully paid and non-
assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated by
this Note or where the absence would not have a material adverse effect on the
Maker, require consent, approval, waiver or authorization from or registration
or filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition of any of the shares in violation
of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued pursuant
to this Note; provided, however, that shares of Registrable Stock will
cease to be Registrable Stock if they are sold or transferred pursuant
to a registered public offering or other transaction which does not
result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under
this Paragraph 5(b) within nine months after the completion of any
Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the Registrable
Stock of a Participating Holder in any registration statement or post-
effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such
documents as may be required by the Commission or reasonably requested
by the Maker, in accordance with generally accepted practices, in
connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with any
registration under this Paragraph 5, the Maker will, as expeditiously as is
reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and blue
sky fees and expenses, but not including (i) the fees and expenses of counsel
for the Participating Holders in connection with such registration; and (ii) the
underwriting discounts and commissions and underwriters' expenses allocable to
the Registrable Stock being registered or state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the by the Conversion Price
shall be equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issuable upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties, or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee
agrees to execute and deliver to Shell a subordination agreement relating to
this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in full
force and effect. Any provision of this Note held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subParagraph hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:_______________________________
James A. Jeffs, Co-Chairman
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Exhibit 4.9
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
November 12, 1999 US$1,000,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Whittier Ventures, LLC ("Payee"), in lawful
money of the United States of America, the principal amount (the "Principal
Amount") of ONE MILLION DOLLARS (US$1,000,000.00), together with interest in
arrears on the unpaid principal balance at an annual rate equal to eight percent
per annum (8.0%), in the manner and subject to adjustment as provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2.2(b), the Principal Amount and accrued
and unpaid interest thereon shall be made in shares of the Maker's common
stock, $0.0001 par value ("Common Stock"), not later than the tenth (10th)
business day following the approval by the shareholders of the Maker, at a
general meeting or special meeting called in whole or in part for such
purpose, of the terms of this Paragraph 2.2(a). The number of shares of
Maker Common Stock to be issued pursuant to this Paragraph 2.2(a) shall be
equal to the product of the Principal Amount together with accrued and
unpaid interest thereon divided by $1.86 (the "Conversion Price"). Payment
shall be made be delivering such shares to Payee at 1600 Huntington Drive,
South Pasadena, California 91030, or at such other place as Payee shall
designate to Maker in writing. Delivery of such stock certificates shall
be made by registered mail, return receipt requested, or by a recognized
overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 2.2(a), (i) the
interest rate of this Note shall automatically, without any action required
to be taken by Maker or Payee, be increased to the lesser of twenty five
percent (25%) per annum or the maximum rate allowed by the laws of the
State of Texas and (ii) the Principal Amount, together with all accrued and
unpaid interest shall be due and payable on October 31, 2001.
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3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate
power and authority to own and lease its properties and to conduct its
business as presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker
and constitutes the valid and binding agreement of Maker, enforceable
against Maker in accordance with its terms, except as the enforceability
hereof may be subject to applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights generally and to general
principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly
authorized and, upon the issuance thereof will be validly issued, fully
paid and non-assessable.
(d) The execution and delivery of this Note will not (i) except for filings
that may be made under the securities laws and with NASDAQ, as contemplated
by this Note or where the absence would not have a material adverse effect
on the Maker, require consent, approval, waiver or authorization from or
registration or filing with any party, including but not limited to any
party to any material agreement to which the Maker is a party or by which
it is bound or by any regulatory or governmental agency, body or entity or
(ii) violate any statute, law, rule, regulation or ordinance, or any
judgment, decree, order, regulation or rule of any court, tribunal,
administrative or governmental agency, body or entity to which the Maker or
its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as
amended (the "Act"). Payee further represents that Payee considers itself
to be a sophisticated investor in companies similarly situated to the
Maker, and Payee has substantial knowledge and experience in financial and
business matters (including knowledge of finance, securities and
investments, generally, and experience and skill in investments based on
actual participation) such that Payee is capable of evaluating the merits
and risks of this Note.
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note have not been registered under the Act, in reliance
upon the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under
the securities laws of any state. Consequently, Payee agrees that pursuant
to this Note, such shares cannot be resold, unless they are registered
under the Act and applicable state securities laws, or unless an exemption
from such registration requirements is available.
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(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on
behalf of, any other person. Payee is acquiring any such shares with the
intention of holding such shares for investment, with no present intention
of participating, directly or indirectly, in a subsequent public
distribution of the shares, unless registered under the Act and applicable
state securities laws, or unless an exemption from such registration
requirements is available. Payee shall not make any sale, transfer or
other disposition of any of the shares in violation of any state or federal
law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Payee has
been advised and further agrees that the Maker will refuse to permit the
transfer of the shares out of Payee's name in the absence of compliance
with the terms of such legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
state securities laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in accordance with such Act
and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker,
which may include an opinion of counsel, that the registration
provisions of such Act have been compiled with or that such
registration is not required and that such transfer will not violate
any applicable state securities laws."
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5, the following terms shall
have the respective meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock" shall mean
the holder of any shares issued pursuant to this Note.
(iii) The terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document by the Commission.
(iv) The term "Registrable Stock" means (a) the shares issued
pursuant to this Note; provided, however, that shares of Registrable
Stock will cease to be Registrable Stock if they are sold or
transferred pursuant to a registered public offering or other
transaction which does not result in restrictions on resale being
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imposed on the public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will
cease to be Registrable Stock if the holder could sell or transfer all
such Shares held by him/her pursuant to Rule 144 promulgated under the
Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders ("Initiating
Holders") of at least 30% of the shares of Registrable Stock, which
request shall state the intended method of disposition by such
Initiating Holders and shall request that the Maker effect the
registration of all or part of the Registrable Stock under the
Securities Act, the Maker shall promptly give written notice of such
requested registration to all other holders, if any, of Registrable
Stock. If, after the expiration of 30 days from the giving of such
notice to the holders of Registrable Stock, the Maker shall have
received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of
disposition of such securities by such holders, the Maker shall use
all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering and sale
of such Registrable Stock in the United States in compliance with the
provisions of the Securities Act, all to the extent required to permit
the disposition (in accordance with the intended methods thereof as
aforesaid) by the holders of the Registrable Stock so to be registered
(the "Participating Holders"). If such sale of Registrable Stock is
to be pursuant to an underwritten offering, the underwriter shall be
selected by the Initiating Holders and shall be reasonably acceptable
to the Maker. If the underwriter selected determines that the number
of shares so to be included is required to be limited due to market
conditions or otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall share pro
rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such
underwriter) and registered for their account. The Maker shall only be
required to effect two registrations pursuant to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration
under this Paragraph 5(b) within nine months after the completion of
any Registered offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration
statement or post-effective amendment filed pursuant to this Paragraph
5(b), other securities of the Maker then proposed to be distributed,
except that, to the extent consistent with the rights of other holders
of the Maker's securities, if and to the extent that the underwriter
or underwriters acting with respect of such registered offering
reasonably determine that the inclusion of such other securities may
substantially prejudice or hinder the offering of Registrable Stock,
the number of such other securities shall be reduced or eliminated
prior to any reduction in the number of shares of Registrable Stock so
to be registered.
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(iv) If the registration under this Paragraph 5(b) is effected on a
Form S-3 (or any successor form thereto), and the effectiveness of
such registration statement can be maintained without significant
additional expense to the Maker, then the Maker agrees to maintain the
effectiveness of such registration statement for a period of six
months after its initial effective date.
(c) Incidental or Piggyback Registration.
(i) If the Maker at any time or from time to time proposes to file
with the Commission a registration statement under the Act with
respect to any proposed distribution of any of its securities (other
than a registration to be effected on Form S-4, S-8 or other similar
limited purpose form), whether for sale for its own account or for the
account of any other person holding registration rights with respect
to the securities of the Maker, then the Maker shall give written
notice of such proposed filing to the holders of Registrable Stock at
least ten days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall offer the
holders of Registrable Stock the opportunity to register such number
of shares of Registrable Stock as the holders of Registrable Stock may
request. Upon receipt by the Maker by the anticipated filing date of
written requests from Participating Holders for the Maker to register
their Registrable Stock, the Maker shall permit, or in the event of an
underwritten offering, shall use its reasonable best efforts to cause
the managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Maker included therein; provided,
however, that if in the opinion of the managing underwriter or
underwriters of such offering, the inclusion of the total amount
Registrable Stock which it or the Maker, and any other persons or
entities, intend to include in such offering would interfere, hinder,
delay, reduce or prevent the effectiveness or sale of the Maker's
securities proposed to be so registered, or would otherwise adversely
affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of the Maker and each holder
of Maker Securities (including without limitation Registrable Stock)
or securities convertible into or exercisable for Maker securities
proposed to be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in proportion to
their respective values to the extent necessary to reduce the total
amount of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Paragraph, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register securities and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Maker determines for any reason either not to
effect such registration or to delay such registration, the Maker
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<PAGE>
may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(ii) The Maker shall not be required to include any of the
Registrable Stock of a Participating Holder in any registration
statement or post-effective amendment prepared at its own instance
unless such Participating Holder shall furnish such information and
sign such documents as may be required by the Commission or reasonably
requested by the Maker, in accordance with generally accepted
practices, in connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with
any registration under this Paragraph 5, the Maker will, as expeditiously
as is reasonably practicable:
(i) Prepare and file with the Commission a registration statement
with respect to such Participating Holders and, subject to the last
sentence of Paragraph 5(c)(i) hereof, use its reasonable best efforts
to cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers of copies of
a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as the selling shareholders may reasonably request in order to
facilitate the disposition of Registrable Stock owned by the
Participating Holders.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall
be reasonably requested by the Participating Holders; provided,
however, that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
The Participating Holders shall also enter into and perform their
obligations under such an agreement.
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(vi) Notify the Participating Holders, at any time when a prospectus
relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, 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 not misleading in the light of the circumstances then
existing.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements filed under this Paragraph 5 including, without
limitation, the Maker's legal and accounting fees, printing expenses and
blue sky fees and expenses, but not including (i) the fees and expenses of
counsel for the Participating Holders in connection with such registration;
and (ii) the underwriting discounts and commissions and underwriters'
expenses allocable to the Registrable Stock being registered or state
transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or
sells Additional Shares of Common Stock (as hereinafter defined), other
than as a dividend or other distribution on any class of stock for an
Effective Price per share (as hereinafter defined) that is less than the
Conversion Price, then and in each such case, the Payee shall be entitled
to an additional number of shares of Common Stock (the "Adjusted Shares")
which when added to the number of shares acquired pursuant to Paragraph
2(a) and divided by the by the Conversion Price shall be equal to the
Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the
Maker after deduction of any expenses payable by the Maker and any
underwriting or similar commissions, compensation, or concessions paid or
allowed by the Maker in connection with such issuance or sale, and (ii) to
the extent it consists of property other than cash, be computed at the fair
value of that property as reasonably determined in good faith by the
Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of
Common stock or options or warrants to acquire Common Stock issued to
management, directors or employees of, or consultants to, the Maker or any
Subsidiary, (ii) shares of Common Stock issuable upon exercise of
convertible securities, (iii) shares of Common Stock issued to Allen &
Company, Whittier Trust or any other current holders of any debt of the
Maker, (iv) shares of Common Stock issued pursuant to any rights offering
to current shareholders and (iii) shares of Common Stock or options or
warrants to acquire Common Stock issued in connection with investment
banking, financial advisory or legal services provided to the Maker.
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold,
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into the aggregate consideration received, or deemed to have been received
by the Maker for the issuance of such Additional Shares of Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of
debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary case or
proceeding; (ii) consent to the entry of an order for relief against it in
an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment
for the benefit of its creditors; or (v) admit in writing its inability to
pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official
for Maker or substantially all of Maker's properties, or (iii) orders the
liquidation of Maker, and in each case the order or decree is not dismissed
within one hundred and twenty (120) days.
(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i)
by written notice to Maker, declare the entire unpaid principal balance of
this Note, together with all accrued interest thereon, immediately due and
payable regardless of any prior forbearance, and (ii) exercise any and all
rights and remedies available to it under applicable law, including,
without limitation, the right to collect from Maker all sums due under this
Note. Maker shall pay all reasonable costs and expenses incurred by or on
behalf of Payee in connection with Payee's exercise of any or all of its
rights and remedies under this Note, including, without limitation,
reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may
be requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum
(Guernsey) Limited, Central Asia Petroleum Inc., Karakuduk-Munay, Inc. and
certain other facilities agents and lenders. If requested by Shell, Payee agrees
to execute and deliver to Shell a subordination agreement relating to this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may
be prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
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10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Note will remain in
full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect
to the extent not held invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or
Paragraphs of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided,
the words "hereof" and "hereunder" and similar references refer to this
Note in its entirety and not to any specific Paragraph or subParagraph
hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPARRAL RESOURCES, INC.
By:
------------------------------
John C. McMillian, Co-Chairman
9
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Exhibit 10.1
================================================================================
$24,000,000
LOAN AGREEMENT
among
CHAPARRAL RESOURCES, INC.
as Borrower
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED,
CENTRAL ASIAN PETROLEUM , INC.
AND
CLOSED TYPE JSC KARAKUDUKMUNAY
as Co-Obligors
SHELL CAPITAL SERVICES LIMITED
as Arranger
SHELL CAPITAL LIMITED
as Modeller
SHELL CAPITAL LIMITED
as Facility Agent
and
THE BANKS, FINANCIAL INSTITUTIONS AND OTHER PERSONS
named as Lenders
1 November 1999
===============================================================================
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TABLE OF CONTENTS
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1. DEFINITIONS AND INTERPRETATION....................................... 1
1.1 Definitions.................................................... 1
1.2 Interpretation................................................. 21
1.3 Certain References............................................. 22
1.4 The Table of Contents and the Headings......................... 22
2. THE FACILITIES....................................................... . 22
2.1 Grant of the Facilities......................................... 22
2.2 Purpose and Application......................................... 22
2.3 Lenders' Obligations Several.................................... 23
2.4 Lenders' Rights Several......................................... 23
3. CONDITIONS PRECEDENT.................................................. 23
3.1 Initial Conditions Precedent.................................... 23
3.2 Conditions Precedent to each Advance............................ 23
4. DRAWDOWNS............................................................. 24
4.1 Drawdown........................................................ 24
4.2 Completion of Notice of Drawdowns............................... 25
4.3 Advances by Lenders............................................. 25
5. INTEREST PERIODS...................................................... 26
5.1 Duration........................................................ 26
5.2 Non-Business Days............................................... 26
5.3 Coincidence with Final Maturity Date and Reduction Dates........ 26
5.4 Consolidation................................................... 26
5.5 Notification.................................................... 26
6. INTEREST.............................................................. 26
6.1 Rate of Interest............................................... 26
6.2 Absence of Quotations.......................................... 27
6.3 Due Dates and Calculations..................................... 27
6.4 Notification................................................... 27
6.5 Interest due on or prior to the Project Completion Date........ 27
6.6 Mandatory Costs................................................ 28
7. REPAYMENT, PREPAYMENT AND CANCELLATION................................ 28
7.1 Repayment..................................................... 28
7.2 Mandatory Prepayment to Meet Financial Ratios.................. 29
7.3 Voluntary Prepayment........................................... 29
(i)
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7.4 Voluntary Cancellation......................................... 30
7.5 Additional Right of Prepayment and Cancellation................ 30
7.6 Excess Cash Flow Mandatory Prepayment.......................... 30
7.7 Insurance Mandatory Prepayment................................. 31
7.8 Automatic Cancellation......................................... 32
7.9 Miscellaneous Provisions....................................... 32
7.10 Broken Funding Costs........................................... 32
8. CHANGES IN LAW OR CIRCUMSTANCES....................................... 33
8.1 Payment of Increased Costs..................................... 33
8.2 Exceptions..................................................... 33
8.3 Illegality..................................................... 34
9. MARKET DISRUPTION..................................................... 34
9.1 Notice of Market Disruption....................................... 34
9.2 Suspension of Drawdown............................................ 35
9.3 Alternative Basis................................................. 35
10 TAXES................................................................. 36
10.1 Tax Gross-up..................................................... 36
10.2 Tax Indemnity.................................................... 36
10.3 Notification of Requirement to Deduct Tax........................ 36
10.4 Evidence of Payment of Tax....................................... 36
10.5 Submission of tax relief forms................................... 37
11 REPRESENTATIONS AND WARRANTIES........................................ 37
11.1 Status and Due Authorisation..................................... 37
11.2 Capacity......................................................... 37
11.3 Validity and Enforceability...................................... 37
11.4 Security Interests............................................... 38
11.5 Consents......................................................... 38
11.6 No Default....................................................... 38
11.7 Financial Statements............................................. 39
11.8 No Immunity...................................................... 39
11.9 Obligations Permitted............................................ 39
11.10 Litigation...................................................... 39
11.11 Filings......................................................... 39
11.12 Taxes........................................................... 39
11.13 Year 2000....................................................... 40
11.14 Obligors' Business.............................................. 40
11.15 Information...................................................... 40
11.16 Project Documents................................................ 40
11.17 Compliance with Environmental Laws............................... 41
11.18 Share ownership.................................................. 41
11.19 Project Ownership................................................ 41
11.20 Insurances....................................................... 41
11.21 Subsidiaries..................................................... 42
(ii)
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11.22 Notice of Drawdown................................................ 42
11.23 Financial Model................................................... 42
11.24 Licences.......................................................... 42
11.25 Residence......................................................... 42
11.26 Repetition........................................................ 42
12. BUDGETS................................................................. 42
12.1 Annual Operating Budgets........................................... 42
12.2 Distribution of Draft Annual Operating Budgets..................... 43
12.3 Annual Operating Budget Approval Procedure......................... 43
12.4 Changes to Annual Operating Budgets................................ 43
12.5 Changes to Project Budget.......................................... 44
12.6 Budget Undertakings................................................ 44
13. CASH FLOW FORECASTS..................................................... 44
13.1 Semi-annual Cash Flow Forecasts.................................... 44
13.2 Financial Covenants................................................ 46
14. FINANCIAL INFORMATION................................................... 46
14.1 Financial Statements............................................... 46
14.2 Accounting Standards............................................... 46
14.3 Compliance Certificates............................................ 46
14.4 Change of Law...................................................... 47
14.5 Financial Year End................................................. 47
14.6 Change of Auditors................................................. 47
15. PROJECT INFORMATION..................................................... 47
15.1 Project Reports.................................................... 47
15.2 Operating Reports.................................................. 49
15.3 Report Undertakings................................................ 50
15.4 Other Information.................................................. 51
15.5 Notice to the Facility Agent....................................... 51
15.6 Access to Project Facilities, Records and Accounts................. 51
16. POSITIVE COVENANTS...................................................... 52
16.1 Maintenance of Legal Validity...................................... 52
16.2 Statutory Accounts................................................. 52
16.3 Pari Passu Ranking of Obligations.................................. 52
16.4 Taxes.............................................................. 52
16.5 Project Documents.................................................. 52
16.6 Security........................................................... 53
16.7 Year 2000.......................................................... 53
16.8 KKM Consents....................................................... 54
16.9 Environmental Laws................................................. 54
16.10 Insurances........................................................ 54
16.11 Hedging Arrangements.............................................. 55
16.12 Project Accounts.................................................. 55
(iii)
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16.13 Project Completion................................................ 56
16.14 Performance Tests................................................. 56
16.15 Operation......................................................... 56
16.16 Voting Rights..................................................... 56
16.17 Consents.......................................................... 57
16.18 Funding to CAP(G)................................................. 57
16.19 Funding to KKM.................................................... 57
16.20 Independent Registrar............................................. 57
16.21 Project Assets.................................................... 57
16.22 CRI Letter of Credit.............................................. 57
16.23 The Updated Reserves Report....................................... 58
16.24 Syndication....................................................... 58
17. NEGATIVE COVENANTS...................................................... 59
17.1 Negative Pledge.................................................... 59
17.2 Financial Indebtedness............................................. 59
17.3 Leases............................................................. 59
17.4 Loans and Investments.............................................. 59
17.5 Constitutional Documents........................................... 60
17.6 No Consolidation or Merger......................................... 60
17.7 Business Alteration................................................ 60
17.8 Immunity........................................................... 61
17.9 Distributions...................................................... 61
17.10 Contractual Relationships......................................... 61
17.11 Disposals......................................................... 62
17.12 Abandonment....................................................... 62
17.13 Business Activities............................................... 62
17.14 Expenditure....................................................... 63
17.15 Business of CAP(G)................................................ 63
17.16 Disposals by the Borrower, CAP(G) and CAP(D)...................... 63
17.17 Share Capital..................................................... 64
17.18 Workers' Rights................................................... 65
18. EVENTS OF DEFAULT....................................................... 65
18.1 Failure to Pay..................................................... 65
18.2 Performance of Obligations......................................... 66
18.3 Misrepresentation.................................................. 66
18.4 Performance of Project Documents................................... 67
18.5 Cross Default...................................................... 67
18.6 Insolvency......................................................... 67
18.7 Composition and Dissolution, etc................................... 67
18.8 Attachment......................................................... 68
18.9 Judgment........................................................... 68
18.10 Analogous Proceedings............................................. 68
18.11 Expropriation..................................................... 68
18.12 Moratorium........................................................ 68
18.13 Immunity.......................................................... 69
(iv)
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18.14 The Borrower's Business........................................... 69
18.15 Illegality........................................................ 69
18.16 Project Documents................................................. 69
18.17 Finance Documents................................................. 69
18.18 Consents.......................................................... 70
18.19 Project Completion................................................ 70
18.20 Ownership of Borrower............................................. 70
18.21 Ownership of CAP(G) and CAP(D).................................... 70
18.22 Ownership of KKM.................................................. 70
18.23 Abandonment....................................................... 70
18.24 Loss or Damage.................................................... 71
18.25 Breach of Ratios.................................................. 71
18.26 CRI Debt Service Reserve Account.................................. 71
18.27 Payment of Salaries............................................... 71
18.28 Material Adverse Effect........................................... 71
18.29 The Updated Reserves Report....................................... 71
18.30 OPIC.............................................................. 72
18.31 Consequences of the Occurrence of an Event of Default............. 72
19. DEFAULT INTEREST AND INDEMNITY.......................................... 72
19.1 Guarantee and Indemnity............................................ 72
19.2 Default Interest................................................... 76
19.3 Indemnity.......................................................... 76
20. CURRENCY OF ACCOUNT AND PAYMENT......................................... 77
20.1 Currency of Account................................................ 77
20.2 Currency Indemnity................................................. 77
21. PAYMENTS................................................................ 78
21.1 Place.............................................................. 78
21.2 Funds.............................................................. 78
21.3 Distribution....................................................... 78
21.4 Non-Business Days.................................................. 78
21.5 Partial payments................................................... 79
21.6 Evidence of Debt................................................... 79
21.7 Certificate Conclusive and Binding................................. 79
21.8 Payments to Finance Parties........................................ 80
22. SET-OFF................................................................ .80
22.1 Contractual Set-off................................................ 80
22.2 Set-off not Mandatory.............................................. 80
23. SHARING................................................................. 80
23.1 Redistribution of Payments......................................... 80
23.2 Repayable Recoveries............................................... 81
23.3 Exceptions......................................................... 81
23.4 No Security Interest............................................... 81
(v)
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24. FEES, COSTS AND EXPENSES................................................ 82
24.1 Commitment Fee..................................................... 82
24.2 Agency Fee......................................................... 82
24.3 Upfront Fees....................................................... 82
24.4 Security Trustee Fee............................................... 82
24.5 Account Bank Fee................................................... 82
24.6 Transaction Costs.................................................. 82
24.7 Preservation and Enforcement Costs................................. 83
24.8 Stamp Taxes........................................................ 83
24.9 Facility Agent's Additional Costs.................................. 83
24.10 Payment of Fees, Costs and Expenses............................... 83
24.11 Value Added Tax................................................... 83
25. THE FACILITY AGENT, THE ARRANGER AND THE MODELLER....................... 84
25.1 Appointment of the Facility Agent.................................. 84
25.2 Role of the Arranger and the Modeller.............................. 84
25.3 Facility Agent's Discretions....................................... 84
25.4 Facility Agent's Obligations....................................... 85
25.5 Excluded Obligations............................................... 86
25.6 Lender Indemnification............................................. 87
25.7 Exclusion of Liabilities........................................... 87
25.8 No Actions......................................................... 87
25.9 Business with the Borrower......................................... 87
25.10 Resignation of the Facility Agent................................. 87
25.11 Own Responsibility................................................ 88
25.12 Information....................................................... 89
25.13 Tax Status of Lenders............................................. 89
25.14 Certificates of Facility Agent.................................... 89
25.15 No Restriction of Business........................................ 89
25.16 Borrower Indemnification.......................................... 89
26.MISCELLANEOUS............................................................. 90
26.1 Execution.......................................................... 90
26.2 Entire Agreement................................................... 90
26.3 Disclosure of Information.......................................... 90
26.4 Facility Offices................................................... 90
26.5 Reference Banks.................................................... 90
26.6 Independent Engineer............................................... 90
27. ASSIGNMENTS AND TRANSFERS............................................... 91
27.1 Binding Agreement.................................................. 91
27.2 The Borrower; Prohibition on Transfers, etc........................ 91
27.3 Lenders; Limitations on Transfer Amounts........................... 92
27.4 Conditions for Effective Transfers................................. 92
27.5 Limit on Responsibility of Existing Lender......................... 92
27.6 Confirmations of New Lender........................................ 93
27.7 No Recourse Between Existing Lender and New Lender................. 93
(vi)
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27.8 Payment by New Lender.............................................. 93
27.9 Procedure for Novations............................................ 93
27.10 Effect of Transfer Certificate.................................... 93
27.11 Payments to Existing Lender....................................... 94
27.12 Register.......................................................... 94
27.13 Participation..................................................... 94
28. REMEDIES AND WAIVERS, PARTIAL INVALIDITY................................ 94
28.1 Remedies and Waivers............................................... 94
28.2 Partial Invalidity................................................. 95
29. NOTICES................................................................. 95
29.1 Giving of Notices.................................................. 95
29.2 Addresses for Notices.............................................. 95
29.3 English Language................................................... 97
30. AMENDMENTS.............................................................. 97
30.1 Procedure.......................................................... 97
30.2 Amendments Requiring Unanimity..................................... 98
31. LAW AND JURISDICTION..................................................... 99
31.1 ENGLISH LAW........................................................ 99
31.2 JURISDICTION....................................................... 99
31.3 PROCESS AGENT...................................................... 99
31.4 WAIVER OF IMMUNITY.................................................100
31.5 CONSENT TO ENFORCEMENT.............................................100
31.6 ARBITRATION........................................................100
THE FIRST SCHEDULE...........................................................105
Commitments.............................................................105
THE SECOND SCHEDULE..........................................................106
Form of Transfer Certificate............................................106
THE THIRD SCHEDULE...........................................................108
Condition Precedent Documents...........................................108
THE FOURTH SCHEDULE..........................................................120
Notice of Drawdown......................................................120
THE FIFTH SCHEDULE...........................................................123
Reduction Instalments...................................................123
THE SIXTH SCHEDULE...........................................................124
Terms of CRI Letter of Credit...........................................124
(vii)
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THE SEVENTH SCHEDULE.........................................................125
Disclosure of Outstanding Security Interests............................125
THE EIGHTH SCHEDULE..........................................................126
Disclosure of Existing Defaults.........................................126
THE NINTH SCHEDULE...........................................................127
Disclosure of Existing Claims...........................................127
THE TENTH SCHEDULE...........................................................128
Disclosure of Outstanding Indebtedness..................................128
APPENDIX A...................................................................129
FORM OF CERTIFICATE OF ENCUMBENCY............................................130
(viii)
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THIS AGREEMENT is dated 1 November 1999 AMONG
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under the
laws of Delaware, as borrower (the "Borrower");
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised and
existing under the laws of Guernsey ("CAP(G)"), CLOSED TYPE JSC KARAKUDUKMUNAY
with registration number 2860-1900-AO(NY), a company organised and existing
under the laws of The Republic of Kazakhstan ("KKM") and CENTRAL ASIAN
PETROLEUM, INC., a company organised and existing under the laws of the state of
Delaware ("CAP(D)") (each a "Co-Obligor");
(3) SHELL CAPITAL SERVICES LIMITED, a company organised and existing under
the laws of England in its capacity as the Arranger of the Facilities (the
"Arranger");
(4) SHELL CAPITAL LIMITED a company organised and existing under the laws
of England, in its capacity as Facility Agent for the Finance Parties (the
"Facility Agent");
(5) SHELL CAPITAL LIMITED a company organised and existing under the laws
of England, in its capacity as the Modeller for the Facilities (the "Modeller");
and
(6) THE BANKS, FINANCIAL INSTITUTIONS AND OTHER PERSONS listed in Parts I
and II of the First Schedule (Commitments) as lenders (each a "Lender" and,
collectively, the "Lenders").
IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following terms have the meanings given to them in
this Clause 1.1:
"Abandonment" shall be deemed to have occurred if KKM:
(a) ceases to carry out or suspends all or a substantial part of the work
of construction and installation of the Project Facilities prior to the
Project Completion Date for a continuous period of 90 days or more;
(b) fails to commence all or any substantial part of the operation of the
Project Facilities after the Project Completion Date or ceases to carry out
or suspends all or a substantial part of the operation of the Project for a
continuous period of 90 days; or
(c) publicly announces its intention to permanently cease construction or
operation of the Project,
and "Abandon" shall be construed accordingly.
1
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"Accounts Agreement" means the agreement entered or to be entered into
between, inter alia, KKM, CAP(G), the Borrower, the Facility Agent and the
Accounts Bank in respect of the establishment and operation of the Project
Accounts.
"Accounts Bank" means the financial institution appointed pursuant to the
terms of the Accounts Agreement as the Accounts Bank.
"Additional Gross Revenues" means, for any period, all revenues and other
income of whatever kind and from whatever source received by or on behalf of the
Borrower or CAP(G) during that period less, in the case of CAP(G), any payments
received from KKM and, in the case of the Borrower, any payments received from
CAP(G) during that period.
"Additional Permitted Expenses" means, for any period, the aggregate of the
following:
(a) premia paid by the Borrower in respect of the Political Risk Policy;
(b) premia paid by the Borrower in respect of the Transportation Risk
Insurance Policy;
(c) the Hedging Payment; and
(d) any CRI Overheads not covered under (a), (b) and (c) above.
"Advance" means each borrowing by the Borrower under this Agreement or (as
the context so requires) the principal amount outstanding of that borrowing.
"Affiliate" means in relation to a person, any entity directly or
indirectly controlling, controlled by or under common control with that person.
"Annual Operating Budget" means the KKM Annual Operating Budget and the CRI
Annual Operating Budget or either of them as the context so requires.
"Applicable Law" means any applicable law, statute, by-law, regulation,
treaty, rule, order or delegated legislation of or made by the Government of the
Republic of Kazakhstan or the governmental authority of any other jurisdiction
having authority over any Obligor or to which the Project is subject.
"Applicable Margin" means the Margin applicable from time to time pursuant
to the terms of this Agreement.
"Auditors" means, with respect to each Obligor, Ernst & Young, or such
other internationally recognised firm of accountants as such Obligor (with the
prior written consent of the Facility Agent) may appoint from time to time.
"Authorised Investments" has the meaning assigned to it in the Accounts
Agreement.
"Authorised Signatory" means, in relation to an entity, any one or more
persons who are duly authorised, whether singly or jointly, to act to bind that
entity.
2
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"Availability Period" means the period commencing on the date of this
Agreement and ending on the earlier of (i) 30th September 2001, (ii) the Project
Completion Date and (iii) the date on which the Facilities are fully drawn or
cancelled under this Agreement.
"Available Net Cash Flow" means, on a Reduction Date, the aggregate of the
KKM Gross Revenues and the Additional Gross Revenues received during the Payment
Period ending immediately prior to such Reduction Date, less the aggregate of
the KKM Permitted Expenses and the Additional Permitted Expenses paid or
scheduled to be paid during the latter half of such Payment Period and the first
half of the next succeeding Payment Period.
"Base Case Cash Flow Forecast" means the initial report prepared by the
Modeller and approved by the Borrower setting out the projected Net Cash Flow
for the life of the Project and the assumptions for calculating the Cover
Ratios, delivered to and approved by the Facility Agent pursuant to Clause 3.1
(Initial Conditions Precedent).
"Business Day" means a day (other than a Saturday or a Sunday) when banks
and foreign exchange markets are generally open for business in London and, if
on that day a payment is to be made hereunder, commercial banks are open in the
City of New York.
"Calculation Date" means each of the following dates:
(a) in respect of the Cash Flow Forecast delivered pursuant to Clause
13.1(a), the date falling 15 Business Days after such delivery;
(b) in respect of the Cash Flow Forecast delivered pursuant to Clause
13.1(b), the Project Completion Date;
(c) in respect of a Cash Flow Forecast delivered pursuant to Clause
13.1(c), fifteenth February and fifteenth August in each year; and
(d) in respect of a Cash Flow Forecast delivered pursuant to Clause
13.1(d), the date falling 15 Business Days after such delivery.
"CAP(D) Shares" means the shares representing all of the issued voting
share capital of CAP(D).
"CAP(G) Disbursement Account" means the account so designated in the
Accounts Agreement.
"CAP(G)-KKM Loan Agreement" means the loan agreement entered or to be
entered into between CAP(G) and KKM.
"CAP(G) Receipts Account" means the account so designated in the Accounts
Agreement.
"CAP(G) Shares" means the shares representing all of the issued voting
share capital of CAP(G).
"Capital Expenditure" means for any period, all costs of a capital nature
incurred by KKM during such period including costs of constructing wells and
associated infrastructure
3
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as set forth in the Project Budget or the then current KKM Operating Budget, as
the case may be.
"Capitalised Interest Amounts" means, at any time, the aggregate amount by
which the Subordinated Facility has been increased prior to that time pursuant
to Clause 6.5(b).
"Cash Flow Forecast" means the Base Case Cash Flow Forecast, each Pre-
Completion Cash Flow Forecast, the Initial Cash Flow Forecast and each Semi-
annual Cash Flow Forecast, or any of them as the case may be.
"Challenger Claim" means the demand made for arbitration by Challenger Oil
Services, PLC to the Borrower, KKM and CAP(G) under the American Association
Arbitration Commercial Arbitration Rules on October 1 1999 in connection with
the drilling contract dated April 7 1998 between Challenger Oil Services, PLC
and KKM.
"Commitment" means, to the extent not cancelled or reduced pursuant to this
Agreement:
(a) in relation to a Lender which is a Lender at the date of this
Agreement, the amount specified in the First Schedule (Commitments) (as
varied by any transfers, assignments or novations); or
(b) in the case of a bank or financial institution which becomes a Lender
after the date of this Agreement, the amount (as varied by any transfers,
assignments or novations) specified as having been assumed by that Lender
in the relevant Transfer Certificate.
"Completion Guarantee" means any guarantee provided by the Completion
Guarantor to the Facility Agent for and on behalf of itself and the Senior
Lenders and designated as the Completion Guarantee by the Facility Agent
pursuant to Clause 16.24(d) (Syndication).
"Completion Guarantor" means Shell Capital Limited or any Shell Affiliate
so nominated by Shell Capital Limited as the Guarantor under the Completion
Guarantee.
"Computer System" means any computer hardware or software or any equipment
operated by electronic means.
"Consent" means each authorisation, approval, license, permit, consent,
exemption, registration, notarisation, ruling, order, filing, notification,
regulation, privilege, approval or franchise necessary or required by Applicable
Law or which should in accordance with Reasonable and Prudent Industry Standards
be obtained or maintained, in each case in connection with the Project or the
operation of the Project Facilities or the entry into, performance, legality,
validity and enforceability of the Transaction Documents, and the transactions
contemplated by, any of the Transactions Documents, including Environmental
Consents.
"Constitutive Documents" means in respect of KKM:
(a) its articles of association dated 14 April 1999;
4
<PAGE>
(b) its foundation agreement dated 14 April 1999; and
(c) its charter dated 14 April 1999.
"Counter-Indemnity" means any agreement entered into between, inter alia,
the Completion Guarantor and the Obligors in respect of counter indemnifying the
obligations of the Completion Guarantor under the Completion Guarantee and
designated as the Counter-Indemnity by the Facility Agent by notice to the
parties to this Agreement pursuant to Clause 16.24(d) (Syndication).
"Cover Ratios" means each of the Field Life Cover Ratio, the Loan Life
Cover Ratio and the Debt Service Cover Ratio.
"CRI Annual Operating Budget" means a revised operating budget delivered
by the Borrower to the Facility Agent pursuant to Clause 12.1 (Annual Operating
Budgets) and approved by the Facility Agent (acting on the instructions of the
Special Majority Lenders) pursuant to clause 12.3 (Annual Operating Budget
Approval Procedure), each revised budget to be prepared on a basis substantially
similar to the CRI Initial Operating Budget, to contain substantially similar
types of information and list the same categories of Additional Gross Revenues
and operating expenditure as listed in the CRI Initial Operating Budget but
covering only the five forthcoming fiscal years and including any material
updates or variations thereto permitted pursuant to Clause 12.4 (Changes to
Annual Operating Budgets).
"CRI Bridge Notes" means the notes issued or to be issued to the CRI
Bridge Note Holders in respect of the provision of subordinated short term
bridge financing to the Borrower.
"CRI Bridge Note Holders" means those note holders providing short term
bridge financing to the Borrower under the terms of the CRI Bridge Notes.
"CRI-CAP(G) Loan Agreement" means the loan agreement entered or to be
entered between the Borrower and CAP(G).
"CRI Debt Service Reserve Account" means the account so designated, as is
more particularly described in the Accounts Agreement.
"CRI Disbursement Account" means the account so designated in the Accounts
Agreement.
"CRI Existing Notes" means the notes issued to the CRI Existing Note
Holders in respect of the provision of subordinated financing to the Borrower.
"CRI Existing Note Holders" means those note holders who have provided
subordinated financing to the Borrower under the terms of the CRI Existing
Notes.
"CRI Initial Operating Budget" means the initial operating budget for the
Borrower prepared by the Borrower and delivered to and approved by the Facility
Agent (acting on the instructions of the Lenders) in accordance with Clause 3.1
(Initial Conditions Precedent) covering each of the first five fiscal years and
including any material updates or variations to such budget permitted pursuant
to Clause 12.4 (Changes to Annual Operating Budgets).
5
<PAGE>
"CRI Letter of Credit" has the meaning assigned to it in Clause 16.22 (CRI
Letter of Credit).
"CRI Operating Budget" means at any time the CRI Initial Operating Budget
as revised from time to time by the CRI Annual Operating Budget as contemplated
by Clause 12 (Budgets).
"CRI Overheads" means for a period, all costs and expenses paid or payable
by CRI in respect of its operations as contemplated in the CRI Operating Budget
during such period.
"CRI Receipts Account" means the account so designated in the Accounts
Agreement.
"CRI Subordination Agreement" means the subordination agreement entered or
to be entered into between, inter alia, the CRI Bridge Note Holders, the CRI
Existing Note Holders and the Facility Agent in respect of the subordination of
the loans made or to be made available under the CRI Bridge Notes and the CRI
Existing Notes.
"CRI Warrant Agreement" means the warrant purchase agreement entered or to
be entered into between the Borrower and Shell Capital Limited.
"Debt Service Cover Ratio" means on any date, the result, determined on the
basis of the most recently delivered Cash Flow Forecast, of dividing:
(a) the aggregate of the projected Net Cash Flow for the twelve months
immediately following such date; by
(b) the aggregate of all fees, interest and principal repayments scheduled
to be due under the Finance Documents during the 12 months immediately
following such date.
"Default Interest Period" has the meaning assigned to it in Clause 19.2(a)
(Default Interest).
"Development Plan" means the field development study dated 16 September
1999 prepared by the Borrower on behalf of KKM in respect of the Project.
"Disbursement Accounts" means the CRI Disbursement Account and the CAP(G)
Disbursement Account.
"Dollars" and "$" each mean the lawful currency for the time being of the
United States of America.
"Drawdown Date" means, in relation to each Advance, the date of the making
of such Advance.
"Drilling Contract" means the drilling contract for the Project entered or
to be entered into between KKM and Joint Drilling Venture KazakOil-Drilling LLC.
"Drilling/Wellbore Exploration Services Contract" means the supply of
drilling/wellbore exploration services contract entered or to be entered into
between Baker
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Hughes Services International, Inc. Kazakhstan including its contractual joint
venture alliance with KazakOil Drilling Services Company and KKM.
"Economic Assumptions" means the assumptions used by the Modeller (and
agreed by the Subordinated Lender) for the purposes of running the Financial
Model.
"Environmental Claim" means any claim by any person in respect of losses or
liabilities actually suffered or incurred by that person as a result of or in
connection with any violation of any Environmental Law by KKM or giving rise to
any remedy or penalty that may be enforced or assessed against KKM by private or
public legal action as a result of environmental contamination or any
application for interim or final judicial or administrative decree, injunction,
cease and desist order, abatement order, compliance order, consent order, clean-
up order or enforcement notice, stop notice, improvement notice, prohibition
notice or revocation order (or their equivalent under Applicable Law) in respect
of environmental contamination or other remedial action or action to comply
which KKM is obliged to undertake pursuant to any Environmental Laws or other
law in respect of any environmental contamination.
"Environmental Consents" means any consent required under Environmental
Law.
"Environmental Laws" means any Applicable Law relating to the environment,
health or safety, emissions, discharge, releases or threatened releases of
pollutants, environmental contaminants, chemicals or toxic or hazardous
substances or wastes into the environment including, without limitation, air,
surface water, groundwater or land, or otherwise relating to the extraction,
processing, distribution, use, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or toxic or hazardous substances
or waste.
"Environmental Plan" means the plan dated April 1996 prepared by Ratheon
Engineers and Constructors on behalf of KKM in respect of the Project.
"Event of Default" means any of the events or circumstances described as
such in Clause 18 (Events of Default).
"Event of Force Majeure" means any event which is not within the control
or which is not at the risk of any party to the Project Documents to the extent
that such event is unavoidable notwithstanding the reasonable care of or the
taking of reasonable steps by the party affected and which could not have been
reasonably foreseen. Without limiting the foregoing, the events falling within
Events of Force Majeure shall include acts of God, force of nature, lightning,
earthquakes, floods, tidal waves, acts of war or public enemy and riots.
"Excess Cash Flow" means, with reference to any Reduction Date, an amount
equal to the Available Net Cash Flow on that Reduction Date less the aggregate
of all fees, interest principal repayments and any other amounts scheduled to
become due for payment to the Finance Parties under this Agreement on that
Reduction Date.
"Excess Funds" has the meaning assigned to it in the Accounts Agreement.
"Existing Lender" has the meaning assigned to it in Clause 27.4 (Conditions
for Effective Transfer).
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"Facilities" means the Senior Facility and the Subordinated Facility.
"Facility Office" means the office identified in the Parts I and II of
First Schedule (Commitments) (or in the case of a New Lender, in the schedule to
the Transfer Certificate to which such New Lender is a party) through which a
Lender will perform its obligations under this Agreement or such other office as
a Lender may from time to time select by notice to the Facility Agent and the
Borrower.
"Fee Letters" means each of the letters referred to in Clause 24.2 (Agency
Fee), Clause 24.3 (Upfront Fee), Clause 24.4 (Security Trustee Fee) and Clause
24.5 (Account Bank Fee).
"Field Life Cover Ratio" means on any date, the result, determined on the
basis of the most recently delivered Cash Flow Forecast, of dividing:
(a) the aggregate of the NPV of the projected Net Cash Flow for each year
for the projected residual life of the Project; by
(b) aggregate amount of principal, interest and fees outstanding in respect
of the Loan as at such date.
"Final Maturity Date" means 30 September 2004.
"Final Termination Date" means the date on which:
(a) the Finance Parties have ceased to be under any commitment, obligation
or liability (whether actual or contingent) under or in respect of the Finance
Documents;
(b) the Loan has been repaid in full and all other amounts owing to the
Finance Parties under or pursuant to the terms of the Finance Documents have
been paid; and
(c) none of the Obligors nor the Completion Guarantor has any further
obligation or liability (whether actual or contingent) to make payments to any
of the Finance Parties under or pursuant to the terms of the Finance Documents.
"Finance Documents" means:
(a) this Agreement;
(b) the CRI-CAP(G) Loan Agreement;
(c) the CAP(G)-KKM Loan Agreement;
(d) the CRI Subordination Agreement;
(e) the Security Documents;
(f) the Accounts Agreement;
(g) the Hedging Agreement;
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(h) the Fee Letters;
(i) the Political Risk Policy;
(j) the Transportation Risk Insurance Policy;
(k) the CRI Letter of Credit;
(l) such other document which the Facility Agent designates as a Finance
Document pursuant to Clause 16.24(c) (Syndication); and
(m) such other document which the Borrower and the Facility Agent agree to
designate as a Finance Document.
"Finance Lease" means any lease entered into primarily as a means of
raising finance or financing the acquisition of the asset leased.
"Finance Parties" means the Lenders, the Arranger, the Facility Agent, the
Modeller, the Accounts Bank and the Security Trustee.
"Financial Indebtedness" means any indebtedness in respect of:
(a) moneys borrowed;
(b) any debenture, bond, note, loan stock or other security;
(c) any acceptance credit or documentary credit;
(d) receivables sold or discounted (otherwise than on a non-recourse
basis);
(e) the acquisition cost of any asset or service to the extent payable
before or after the time of acquisition or possession by the party liable where
the advance or deferred payment is arranged primarily as a method of raising
finance or financing the acquisition of that asset or service;
(f) Finance Leases;
(g) any currency swap or interest swap, cap or collar arrangements or any
other derivative instrument;
(h) amounts raised under any other transaction having the commercial effect
of a borrowing or raising of money; or
(i) any guarantee, indemnity or other obligation (whatever called) of any
person to pay, purchase, provide funds (whether by the advance of money, the
purchase of or subscription for shares or other securities, the purchase of
assets or services, or otherwise) for the payment of, to indemnify against the
consequences of default in the payment of or otherwise to be responsible for any
indebtedness of any other person of any of the types referred to in (a) to (h)
above.
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"Financial Model" means the computer model in the form agreed between the
Modeller and the Borrower represented by material contained in or on computer
discs and printouts as deposited with the Facility Agent pursuant to Clause 3.1
(Conditions Precedent) and including any material updated and amendments to such
Financial Model.
"First Drawdown Date" means the date the first Advance is made under the
Facilities.
"First Reduction Date" means (i) the first Quarterly Date falling after the
Project Completion Date (provided that if such Quarterly Date falls within 60
days after the Project Completion Date, the First Reduction Date shall be the
next succeeding Quarterly Date) or (ii) 31 December 2001, whichever occurs
first.
"Hedging Agreement" means the agreement entered into or to be entered into
between the Borrower and the Hedging Bank for the put arrangements in respect of
the prices for the Hydrocarbons the subject of the Offtake Agreement.
"Hedging Bank" means such financial institution as is acceptable in all
respects to the Facility Agent.
"Hedging Payment" means the payment made by the Borrower to the Hedging
Bank under the Hedging Agreement in respect of the put arrangements.
"Hedging Receipts" means any amounts received by the Borrower under the
Hedging Agreement including as a result of any termination of that Hedging
Agreement.
"Holding Company" means, in relation to a person, an entity of which that
person is a Subsidiary.
"Hydrocarbons" means crude oil, condensate and liquid petroleum gas
produced from the Karakuduk Oil Field by or on behalf of KKM under the Petroleum
Licence.
"Improved Recovery Methods" means all methods of supplementing natural
reservoir energy to increase ultimate recovery from a reservoir, including
without limitation (a) pressure maintenance, (b) cycling, (c) water flooding,
(d) thermal methods, (e) chemical flooding, and (f) the use of miscible and
immiscible displacement fluids.
"Independent Engineer" means any technical consultant appointed by the
Facility Agent and approved by the Borrower and any replacement consultant
appointed pursuant to Clause 26.6 (d) (Independent Engineer).
"Independent Expert" has the meaning assigned to it in Clause 13.1(g).
"Information Memorandum" means any information memorandum prepared by or
on behalf of the Borrower in connection with any proposed Syndication.
"Initial Cash Flow Forecast" means the report prepared by the Modeller
pursuant to Clause 13.1(b) (Semi-Annual Cash Flow Forecasts).
"Intercreditor and Subordination Agreement" means any agreement entered
into between, inter alia, the Senior Lenders, the Subordinated Lender and the
Obligors in respect
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of any intercreditor and subordination arrangements and designated as the
Intercreditor and Subordination Agreement by the Facility Agent pursuant to
Clause 16.24(d) (Syndication).
"Interest Payment Date" means the last day of an Interest Period.
"Interest Period" means each interest period determined in accordance with
Clause 5 (Interest Periods).
"KKM Annual Operating Budget" means a revised operating budget delivered
by KKM to the Facility Agent pursuant to Clause 12.1 (Annual Operating Budgets)
and approved by the Facility Agent (acting on the instructions of the Special
Majority Lenders) pursuant to clause 12.3 (Annual Operating Budget Approval
Procedure), each revised operating budget to be prepared on a basis
substantially similar to the KKM Initial Operating Budget, to contain
substantially similar types of information and list the same categories of Gross
Revenues, operating expenditure and capital expenditure (for the period from the
Project Completion Date) as listed in the KKM Initial Operating Budget but
covering only the five forthcoming fiscal years and including any material
updates or variations thereto permitted pursuant to Clause 12.4 (Changes to
Annual Operating Budgets).
"KKM Gross Revenues" means for, any period, the aggregate of the following:
(a) Project Revenues and all other amounts received by KKM from the sale or
other disposal of Hydrocarbons, any by-products and all other assets of the
Project;
(b) all payments received by KKM under or by virtue of the Project
Documents;
(c) all interest, investment income, profits and realised gains arising in
respect of balances in the KKM Proceeds Account (or from any Authorised
Investments);
(d) KKM Insurance Proceeds; and
(e) any other income, receipts or gains from whatever source received by
KKM.
"KKM Initial Operating Budget" means the initial operating budget
consisting of, without limitation, projected Net Cash Flow (including projected
capital expenditure for the period following the Project Completion Date) for
KKM prepared by KKM and delivered to and approve by the Facility Agent (acting
on the instructions of the Special Majority Lenders) in accordance with Clause
3.1 (Initial Conditions Precedent), covering each of the first five fiscal years
and including any material updates or variations to such budget permitted
pursuant to Clause 12.4 (Changes to Annual Operating Budgets).
"KKM Insurance Proceeds" means the proceeds of any insurances received by
KKM.
"KKM Operating Budget" means at any time the KKM Initial Operating Budget
as revised from time to time by the KKM Annual Operating Budget as contemplated
by Clause 12 (Budgets).
"KKM Permitted Expenses" means for any period, the aggregate of the
following:
(a) Capital Expenditure;
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(b) Royalties;
(c) all costs payable by KKM to dismantle, plug or abandon any part of the
Project;
(d) Project Taxes;
(e) fees and costs payable under the Technical Services Agreements; and
(f) any Operating Costs not covered under (a) - (e) above.
"KKM Proceeds Account" means the account so designated in the Accounts
Agreement.
"KKM Shares" means shares representing all of the issued voting share
capital of KKM.
"Law" means any constitutional provision, treaty, convention, statute, act,
law, directive, decree, ordinance, subsidiary or subordinate legislation, order,
rule, regulation or regulatory requirement and any rule of civil or common law
or equity.
"LIBOR" means, in relation to an Advance or the Loan, as the case may be,
for an Interest Period:
(a) the rate per annum appearing on Telerate page 3750 at or about 11.00
a.m. on the Rate Fixing Date for the relevant Interest Period for the offering
of deposits in Dollars for a period comparable to that Interest Period; and
(b) if no such rate is available at the relevant time, the arithmetic mean
(rounded upward to the nearest four decimal places) of the rates quoted by the
Reference Banks to leading banks in the London interbank market at or about
11.00 a.m. on the Rate Fixing Date for the relevant Interest Period for the
offering of deposits in Dollars in an amount comparable to that Advance or the
Loan for a period comparable to the relevant Interest Period
and for purposes of this definition, "Telerate page 3750" means the display
designated as "Page 3750" on the Telerate Service (or such other page as may
replace Page 3750 on that service or such other service as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for deposits
in Dollars).
"Loan" means the aggregate of the principal amounts advanced and for the
time being outstanding under the Facilities.
"Loan Life Cover Ratio" means on any date, the result, determined on the
basis of the most recently delivered Cash Flow Forecast, of dividing:
(a) the aggregate of the NPV of the projected Net Cash Flow for each year
until the Final Maturity Date; by
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(b) aggregate amount of principal, interest and fees outstanding in respect
of the Loan as at such date.
"Majority Lenders" means, at any time:
(a) if no Advances are outstanding, one or more Lenders the Commitments of
which amount (or, if all the Commitments have been terminated, one or more
Lenders the Commitments of which immediately prior to such termination amounted)
in aggregate to at least 67% of the Total Commitments; or
(b) if any Advance is outstanding, one or more Lenders to which in
aggregate at least 67% of the Loan for the time being outstanding is owed.
"Mandatory Cost" means the cost imputed to a Lender in relation to its
Participation in the Loan in compliance with (a) the requirements of the
Financial Services Authority and (b) any reserve asset requirements of the
European Central Bank.
"Margin" means 17.75% per annum on or prior to the Project Completion Date
and 12.75% thereafter.
"Net Cash Flow" means, for any period, the aggregate of the KKM Gross
Revenues and the Additional Gross Revenues for that period, less the aggregate
of the KKM Permitted Expenses and the Additional Permitted Expenses for that
period.
"New Lender" has the meaning assigned to it in Clause 27.4 (Conditions for
Effective Transfer).
"Notice of Drawdown" means a notice substantially in the form set out in
the Fourth Schedule (Notice of Drawdown).
"Notifying Lender" has the meaning assigned to it in Clause 9.1 (Notice of
Market Disruption).
"NPV" means, with respect to any amount, the net present value of such
amount, determined by discounting that amount back to the date at which the
calculation is to be made (applying the bases and assumptions arrived at
pursuant to the procedures established in calculating the Base Case Cash Flow
Forecast).
"Obligors" means, together, the Borrower and the Co-Obligors, or any of
them.
"Offtake Agreement" means the agreement entered or to be entered into
between KKM and STASCO to offtake liquid hydrocarbons produced by the Project.
"Operating Costs" means for a period, all costs and expenses paid or
payable by KKM in operating or maintaining the Project Facilities as
contemplated in the KKM Operating Budget.
"OPIC" means The Overseas Private Investment Corporation, an agency of the
Government of the United States of America.
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"Participation" means, in relation to each Lender, the proportion of an
Advance, the Loan or other amount, as the case may be, which is to be made by
or, as the case may be, is owing to that Lender.
"Payment Period" means, in the case of the first Payment Period, the
period commencing on the Project Completion Date and ending three Business Days
prior to the First Reduction Date and in the case of each subsequent Payment
Period, the period commencing on the expiry of the immediately preceding Payment
Period and ending three Business Days prior to the next succeeding Reduction
Date.
"Permitted Indebtedness" means:
(a) indebtedness incurred under the Finance Documents;
(b) in the case only of KKM, trade or similar accounts payable constituting
current liabilities incurred in the ordinary course of business in accordance
with the terms of this Agreement and which are payable within ninety days and
not in default;
(c) in the case only of the Borrower, trade or similar accounts payable
constituting current liabilities incurred in the ordinary course of business in
accordance with the terms of this Agreement and which are payable within ninety
days and not in default;
(d) the CRI Bridge Notes and the CRI Existing Notes; and
(e) any indebtedness approved by the Facility Agent (such approval not to
be unreasonably withheld or delayed) which is fully subordinated in all respects
to all sums owing from time to time under the Financing Documents on terms and
conditions acceptable to the Facility Agent.
"Permitted Security Interest" means:
(a) any Security Interest created by or pursuant to the Security Documents;
(b) any Security Interest previously approved in writing by the Facility
Agent;
(c) any Security Interest arising by both operation of law and in the
ordinary course of KKM's business provided that such Security Interest (other
than a Security Interest for a sum which is not yet overdue) is discharged
within 30 days of so arising; and
(d) any Security Interest arising by both operation of law and in the
ordinary course of the Borrower's business provided that such Security Interest
(other than a Security Interest for a sum which is not yet overdue) is
discharged within 30 days of so arising.
"Petroleum Agreement" means the agreement entitled "Agreement for
Exploration, Development and Production of Oil in Karakuduk Oil Field in
Mangistau Oblast of the Republic of Kazakhstan" dated 30 August 1995 between
KKM and the Ministry of Oil and Gas Industries of the Republic of Kazakhstan in
relation to the conduct of petroleum recovery activities by KKM in the Karakuduk
Oil Field.
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"Petroleum Licence" means the licence for the right to use the subsurface
in the Republic of Kazakhstan Series MG # 249 (oil) issued by the Government of
the Republic of Kazakhstan to KKM for exploration and production of hydrocarbons
at Karakuduk oilfield in Mangystau Oblast dated June 28, 1995 as amended from
time to time.
"Political Risk Policy" means a policy of insurance issued by OPIC to the
Borrower in respect of certain specified political risk events in relation to
its indirect investment in the Project.
"Potential Event of Default" means any event which with the passage of
time, the giving of notice or the making of any determination would constitute
an Event of Default.
"Pre-Completion Cash Flow Forecast" means the report prepared by the
Modeller pursuant to 13.1(a)(Semi-annual Cash Flow Forecasts):
"Project" means the further development of the Karakuduk Oil Field in the
Republic of Kazakhstan (more particularly described in clause 1.7 of the
Petroleum Agreement) including:
(a) the drilling and work over of 70-90 wells as described in the
Development Plan;
(b) the construction of related infrastructure including pipeline
interconnection equipment;
(c) the installation of water injection facilities and infrastructure;
(d) the installation of gas lift facilities and infrastructure; and
(e) the installation of sewage, produced water and gas disposal facilities
which comply with the environmental requirements of this Agreement.
"Project Accounts" has the meaning assigned to it in the Accounts
Agreement.
"Project Budget" means the budget of projected expenditure to achieve
Project Completion, delivered by KKM to and approved by the Facility Agent in
accordance with Clause 3.1 (Initial Conditions Precedent) and prepared by
reference to monthly periods covering each year of construction up to the
Project Completion Date and including any approved changes, material updates or
variations permitted by Clause 12.5 (Changes to Project Budget).
"Project Completion" means the occurrence of the following:
(a) fulfilment of the technical completion tests set out in Appendix A;
(b) the Facility Agent has received the Reserves Report from the
Independent Engineer certifying that the Proven Developed Reserves of the
Project are at least 30 million barrels;
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(c) no Event of Default or Potential Event of Default has occurred and is
continuing;
(d) the credit balance of the CRI Debt Service Reserve Account is at least
equal to the Reserve Balance;
(e) the Initial Cash Flow Forecast has been delivered pursuant to Clause
13.1 (a) and demonstrates that the Field Life Cover Ratio is not less than 2,
the Loan Life Cover Ratio is not less than 1.75 and the Debt Service Cover Ratio
is not less than 1.5; and
(f) all Consents have been obtained and are in full force and effect.
"Project Completion Date" means the date upon which Project Completion has
occurred.
"Project Document Party" means any person (other than an Obligor) party to
a Project Document.
"Project Documents" means:
(a) the Petroleum Licence and all other Consents;
(b) the Constitutive Documents and the constitutive documents of each of
the other Obligors;
(c) the Petroleum Agreement;
(d) the Technical Services Agreements;
(e) the Offtake Agreement;
(f) the general contract for geophysical operations between KKM and Geotex
JSC dated 21 November 1995;
(g) the Drilling Contract;
(h) the Service Contract;
(i) the Drilling/Wellbore Exploration Services Contract;
(j) the contract of Karakuduk field surface facilities construction TPS
start up minimum construction at station 6 between KKM and Keenoil Limited, UK
dated 5 August 1999;
(k) the KazTransOil agreement on acceptance, storage and transportation of
oil entered or to be entered into between National Compnay on Transporation of
Oil (KazTransOil) and KKM;
(l) contract # 180/96 on working out and handing over the project of
"Environmental Impact Assessment in development and exploitation of the
Karakuduk oil field" between NIPI-Munaigas and KKM dated 12 June 1996;
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(m) the oil marketing services contract entered or to be entered into
between Kazakoil, JSC and KKM;
(n) the STASCO Service Agreement;
(o) any other document material to the Project (other than a Financing
Document) approved by the Facility Agent (acting on the instructions of the
Special Majority Lenders) entered into or to be entered into by an Obligor in
connection with the Project; and
(p) any other document which the Borrower and the Facility Agent agree to
designate as a Project Document.
"Project Facilities" means all of the following:
(a) all wells drilled or to be drilled, worked over or rehabilitated or to
be worked over or rehabilitated, as part of the Project, including
production and injection wells and all equipment installed or to be
installed in and on such wells; and
(b) any other pipelines, pumping facilities, storage or loading facilities,
structures, machinery, equipment and other facilities, installations or
improvements which are at any time constructed or acquired or are otherwise
to be used in connection with the Project or required in order to achieve
the Project Completion Date.
"Project Revenues" means all amounts received from STASCO pursuant to the
Offtake Agreement.
"Project Taxes" means all taxes payable by KKM which are attributable to
the Project.
"Proven Reserves" has the meaning assigned to it in the "Definitions for
Oil and Gas Reserves" approved by the Board of Directors of the Society of
Petroleum Engineers (SPE), Inc. March 7 1997.
"Proven Developed Reserves" has the meaning assigned to it in the
"Definitions for Oil and Gas Reserves" approved by the Board of Directors of the
Society of Petroleum Engineers (SPE), Inc. March 7 1997.
"Quarterly Date" means 31 March, 30 June, 30 September and 31 December in
each calendar year.
"Rate Fixing Date" means, in relation to any Interest Period, the day
falling two Business Days before the commencement of that Interest Period.
"Reasonable and Prudent Industry Standards" means standards, practices,
methods and procedures conforming to Applicable Law and complying with all
applicable Consents and to that degree of skill, diligence, prudence and
foresight which would reasonably and ordinarily be expected from a skilled and
experienced person engaged in the business of owning and operating an oil field
and related oil field facilities (financed on a limited recourse basis), under
the same or similar circumstances.
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"Reduction Date" means the First Reduction Date and each Quarterly Date
thereafter up to the Final Maturity Date.
"Reduction Percentage" means the percentage of the Loan to be repaid on
each Reduction Date as set forth in columns (2) and (3) of the Fifth Schedule
(Reduction Instalments).
"Reference Banks" means the principal London offices of Barclays Bank PLC,
Deutsche Bank AG and Banque Nationale de Paris and such other bank or banks as
may from time to time be appointed by the Facility Agent.
"Reserve Balance" has the meaning assigned to it in the Accounts Agreement.
"Reserves Report" means, prior to the issue of the Updated Reserves Report
the report on Proven Reserves and Proven Developed Reserves dated 13 January
1995 prepared by Ryder Scott Company, Petroleum Engineers as the same may be
revised and updated from time to time with the consent of the Facility Agent and
following the issue of the Updated Reserves Report by the Independent Engineer
to and for the benefit of the Facility Agent for and on behalf of the Lenders in
accordance with Clause 16.23 (The Updated Reserves Report), the Updated Reserves
Report as the same may be revised and updated from time to time with the consent
of the Facility Agent.
"Road Runner" means Road Runner Service Company Inc., a company organised
and existing under the laws of the state of Colorado.
"Royalties" means Royalty (State Share) (as defined in the Petroleum
Agreement) and production bonuses, payable pursuant to the last four paragraphs
of clause 9.3.1(B) of the Petroleum Agreement
"Security Documents" means :
(a) the documents creating the following Security Interests:
(i) first priority pledge by CAP(G) of its shareholding in KKM in favour of
the Security Trustee;
(ii) first priority fixed charge by CAP(D) of its shareholding in CAP(G) in
favour of the Security Trustee;
(iii) first priority fixed charge by the Borrower of its shareholding in
CAP(G) in favour of the Security Trustee;
(iv) first priority pledge by the Borrower of its shareholding in CAP(D) in
favour of the Security Trustee;
(v) first priority assignment by way of security by the Borrower of its
right, title and interest in and to the Political Risk Policy and its proceeds
in favour of the Security Trustee;
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(vi) first priority assignment by way of security by the Borrower of its
right, title and interest in and to (A) the Transport Risk Insurance Policy and
its proceeds; (B) the Hedging Agreement and the Hedging Receipts; (C) CRI-
CAP(G) Loan Agreement and its proceeds; and (D) the Service Contract and its
proceeds, in favour of the Security Trustee;
(vii) first priority assignment by way of security by CAP(G) of its
right, title and interest in and to of the CAP(G)-KKM Loan Agreement in favour
of the Security Trustee;
(viii) first priority assignment by way of security by KKM of its right,
title and interest in and to (A) the Offtake Agreement and (B) the insurances
for the Project in favour of the Security Trustee;
(ix) first priority fixed charge by KKM over the KKM Proceeds Account in
favour of the Security Trustee;
(x) first priority fixed charge by the Borrower over the CRI Debt Service
Reserve Account, the CRI Receipts Account and the CRI Disbursement Account in
favour of the Security Trustee; and
(xi) first priority fixed charge by CAP(G) over the CAP(G) Receipts Account
and the CAP(G) Disbursement Account in favour of the Security Trustee, and
(b) such other document which the Borrower and the Facility Agent agree to
designate as a Security Document.
"Security Interest" means any mortgage, charge, pledge, hypothecation,
lien, assignment by way of security, right of set-off, title retention
arrangement, encumbrance or other security interest or any other arrangement
having the effect of conferring security.
"Security Trustee" means Law Debenture Trust Corporation p.l.c. or such
other person as may be nominated by the Facility Agent (acting on the
instructions of the Lenders) from time to time
"Semi-annual Cash Flow Forecast" means the report prepared by the Modeller
pursuant to 13.1(c)(Semi-annual Cash Flow Forecasts).
"Senior Facility" means the term loan facility granted to the Borrower in
accordance with Clause 2.1(a) (Grant of the Facilities).
"Senior Lenders" means the party or the parties identified as such in Part
I of the First Schedule (Commitments).
"Senior Loan" means the principal amount outstanding under the Senior
Facility from time to time.
"Service Contract" means the service contract entered or to be entered
into between KKM and the Borrower.
"Shareholder Distribution" has the meaning assigned to it in Clause 17.9
(Distributions).
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"Shell Affiliate" means:
(a) N.V. Koninklijke Nederlandsche Petroleum Maatschappij or The "Shell"
Transport and Trading Company, plc (each for the purpose of this definition a
"Parent Company"); or
(b) any company which is for the time being directly or indirectly
controlled by the Parent Companies or either of them (for the purpose of this
definition the interpretation given to the words "control", "controlled" and
"controlling" in Clause 1.2 (Interpretation) shall not apply).
For this purpose:
(i) a company is directly controlled by another company or companies if
that other company or those other companies beneficially hold shares
carrying the majority of votes at a general meeting of the first mentioned
company; and
(ii) a company is indirectly controlled by the Parent Company or Companies
if a series of companies can be specified, beginning with the Parent
Company or Companies and ending with the particular company, so related
that each company of the series except the Parent Company or Companies is
directly controlled by one or more of the preceding companies in the
series.
"Special Majority Lenders" means, at any time:
(a) if no Advances are outstanding, one or more Lenders the Commitments of
which amount (or, if all the Commitments have been terminated, one or more
Lenders the Commitments of which immediately prior to such termination amounted)
in aggregate to at least 76% of the Total Commitments; or
(b) if any Advance is outstanding, one or more Lenders to which in
aggregate at least 76% of the Loan for the time being outstanding is owed.
"STASCO" means Shell International Trading and Shipping Company Limited, a
company organised and existing under the laws of England.
"STASCO Service Agreement" means the agreement ancillary to the Offtake
Agreement entered or to be entered into between STASCO and KKM.
"Subordinated Facility" means the term loan facility granted to the
Borrower in accordance with Clause 2.1(b) (Grant of the Facilities).
"Subordinated Lender" means the party or parties identified as such in Part
II of the First Schedule (Commitments).
"Subordinated Loan" means the principal amount outstanding under the
Subordinated Facility from time to time.
"Subsidiary" means, in relation to a person, any company or corporation:
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(a) which is controlled, directly or indirectly, by that person;
(b) 50% or more of the issued share capital of which is beneficially owned,
directly or indirectly, by that person; or
(c) which is a Subsidiary of another Subsidiary of that person.
"Syndication" means the syndication of either or both of the Facilities by
the Facility Agent in the loan syndication market.
"Technical Services Agreements" means the agreement entitled "E&P Support
Agreement" entered or to be entered into between Shell Capital Services Limited
and Shell International Exploration and Production B.V. in relation to the
provision of technical services to the Project and the agreement entitled
"Technical Services Agreement" entered or to be entered into between KKM and
Shell Capital Services Limited for the provision of technical services to the
Project either directly or through a consultant.
"Total Commitments" means the aggregate for the time being of all of the
Commitments.
"Transaction Documents" means the Finance Documents and the Project
Documents.
"Transfer Certificate" has the meaning assigned to it in Clause 27.9
(Procedure for Novations).
"Transport Risk Insurance Policy" means the insurance policy relating to
the transportation of the Hydrocarbons issued by an insurer or insurers
acceptable to the Facility Agent and the Borrower.
"Updated Reserves Report" has the meaning assigned to it Clause 16.23 (The
Updated Reserves Report).
"Unpaid Equity Contributions" means, on the date the CRI Letter of Credit
is issued, an amount equal to $12 million less the principal amount of Dollar
denominated funds which have been disbursed to the Borrower under the CRI Bridge
Notes at that time.
"US GAAP" means accounting principles general accepted in the United
States of America from time to time.
"US GAAP Subsidiary" means, in relation to a person, any company or
corporation which constitutes a subsidiary for the purposes of US GAAP.
"Year 2000 Compliant" means, in relation to any Computer System, that any
reference to or use of a date before, on or after 31 December, 1999 in the
operation of that Computer System with respect to mission critical functions
will not have an adverse effect on the use of that Computer System.
1.2 INTERPRETATION
Any reference in this Agreement to:
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the "assets" of a person include the undertaking, business and property of
that persons and all of that persons other assets (whether tangible or
intangible), revenues (including rights to receive revenues) and rights of every
kind, present, future or contingent, and any interest in any asset;
"control" means the power to direct the management or policies of an
entity, directly or indirectly, through the ownership of voting capital
(provided that the direct or indirect ownership of 50% or more of the share
capital or similar right of ownership in an entity shall be deemed to constitute
control of that entity), and "controlled" and "controlling" have corresponding
meanings;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month, except that, if there is no numerically corresponding day in the month in
which that period ends, that period shall end on the last day in that calendar
month;
a "Lender" includes a New Lender but excludes a Lender if no amount is or
may be owed to or by it under the Finance Documents and its Commitment has been
cancelled or reduced to zero;
a "person" shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or more of
the foregoing; and
"tax" means any tax, value added tax, levy, impost, duty or other charge of
a similar nature (including any penalty or interest payable in connection with
any failure to pay or any delay in paying any of the same).
the "winding-up", "dissolution", "administration", "liquidation" or
"bankruptcy" of a company or corporation shall be construed so as to include any
equivalent or analogous proceedings under the law of the jurisdiction in which
such company or corporation is incorporated or any jurisdiction in which such
company or corporation carries on business including the seeking of liquidation,
winding-up, reorganisation, dissolution, administration, arrangement,
adjustment, protection or relief of debtors.
1.3 CERTAIN REFERENCES
Any reference in this Agreement to:
(a) a statute shall be construed as a reference to such statute as from
time to time amended or re-enacted;
(b) a person includes its permitted successors and assigns;
(c) a Finance Document or any other agreement or document shall be
construed as a reference to that Finance Document or, as the case may be,
such other agreement or document, as the same may have been, or may from
time to time be, amended, novated or supplemented; and
(d) the singular includes the plural and vice versa.
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1.4 THE TABLE OF CONTENTS AND THE HEADINGS
The table of contents and Clause and Schedule headings are for ease of
reference only and shall not form part of this Agreement.
2. THE FACILITIES
2.1 GRANT OF THE FACILITIES
(a) The Senior Lenders severally grant to the Borrower, upon the terms and
subject to the conditions of this Agreement, a Dollar term facility in an
aggregate principal amount not exceeding $18,000,000 (eighteen million Dollars)
(the "Senior Facility").
(b) The Subordinated Lender grants to the Borrower, upon the terms and
subject to the conditions of this Agreement, a Dollar term facility in an
aggregate principal amount not exceeding $6,000,000 (six million Dollars) (the
"Subordinated Facility").
(c) No Lender shall be obliged to lend more than its Commitment.
2.2 PURPOSE AND APPLICATION
The Facilities shall be applied by the Borrower for the following purposes:
(a) in or towards funding CAP(G) under the CRI-CAP(G) Loan Agreement which
in turn will fund KKM under the CAP(G) KKM Loan Agreement for the purposes of
the Project; and
(b) in or towards payment of (i) interest due for payment under Clause
6.5(a), (ii) any fees, expenses or other costs due for payment to the Finance
Parties under the Finance Documents, (iii) premia due in respect of the
Political Risk Policy, (iv) premia due in respect of the Transport Risk
Insurance Policy, (v) the Hedging Payment and (vi) CRI Overheads.
None of the Finance Parties shall be obliged to concern themselves with
such application.
2.3 LENDERS' OBLIGATIONS SEVERAL
The obligations of each Lender under the Finance Documents are several and
the failure by a Lender to perform any of those obligations shall not affect the
obligations of any of the Obligors towards any other Lender under this Agreement
nor shall any other party be liable for the failure by such Lender to perform
its obligations under this Agreement. The failure of any Lender to perform its
obligations under this Agreement shall not relieve any other Lender or the
Facility Agent of any of its respective obligations, nor shall a Lender or the
Facility Agent be responsible for the obligations of any other Lender.
2.4 LENDERS' RIGHTS SEVERAL
The rights of each Lender under the Finance Documents are several and each
Lender may enforce this Agreement directly and independently of the other
Lenders in respect of that Lender's rights under this Agreement.
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3. CONDITIONS PRECEDENT
3.1 INITIAL CONDITIONS PRECEDENT
The obligation of each Lender to make any amount available under Clause 4.3
(Advances by Lenders) to the Borrower is subject to the conditions precedent
that before the Facility Agent receives the first Notice of Drawdown the
Facility Agent has notified the Borrower that it has received or (acting on the
instructions of that Lender) waived receipt of all documents set out in the
Third Schedule (Condition Precedent Documents), each in form and substance
satisfactory to the Facility Agent (acting on the instructions of that Lender)
provided that if any Lender has not provided such information to the Facility
Agent, no Lender shall be obliged to make an advance until it is satisfied that
the each of the other Lenders will fund its proportion of the relevant Advance.
3.2 CONDITIONS PRECEDENT TO EACH ADVANCE
The obligation of each Lender to make any amount available under Clause 4.3
(Advances by Lenders) is subject to the further conditions precedent that on
both the date of the Notice of Drawdown and the Drawdown Date for each Advance:
(a) each Finance Party has received payment of all costs, fees and expenses
(including legal fees) due under this Agreement on or before such Drawdown
Date;
(b) all representations and warranties made by the Obligors in or in
connection with the Finance Documents are true and correct with reference
to the facts and circumstances then subsisting;
(c) no Event of Default or Potential Event of Default has occurred and is
continuing or might reasonably be expected to result from the making of
such Advance;
(d) each Lender and the Facility Agent has received all other information,
documents, opinions, certificates, consents and assurances as it may
reasonably request to evaluate whether, at that time, an Event of Default
or Potential EvenT of Default exists and is continuing or is reasonably
likely to result from the making of such Advance;
(e) if the Facility Agent reasonably requests, the Facility Agent has
received an additional legal opinion or opinions, in form and substance
satisfactory to it, from counsel acceptable to the Facility Agent, and from
counsel for the Obligors, with respect to any matters relating to the
Advance;
(f) nothing has occurred which in the opinion of the Facility Agent (acting
on the instructions of the Majority Lenders (acting reasonably)) has or
could reasonably be expected to have a material and adverse effect on the
Project or on the financial or business condition of any Obligor or on the
ability of any Obligor to observe and perform any of its obligations under
a Transaction Document;
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(g) the Facility Agent shall have received evidence, in a form acceptable
in all respects to the Facility Agent, that the proceeds of the Advance are
to be applied in accordance with the current Project Budget within 30 days
of such Advance;
(h) after the relevant Advance is made, the Field Life Cover Ratio shall be
not less than 2, the Loan Life Cover Ratio shall be not less than 1.75 and
the Debt Service Cover Ratio shall not be less than 1.5 as determined on
the basis of the most recently delivered Base Case Cash Flow Forecast; and
(i) after the making of such Advance, the ratio of the aggregate Advances
made under the Senior Facility to the aggregate Advances made under the
Subordinated Facility shall be no greater than 3:1 (it being agreed that
the Senior Lenders will only disburse to the extent that the Subordinated
Lender disburses its proportion of the relevant Advance).
4. DRAWDOWNS
4.1 DRAWDOWN
Subject to the terms and conditions of this Agreement, an Advance shall be
made to the Borrower during the Availability Period following receipt by the
Facility Agent from the Borrower of a duly completed Notice of Drawdown by no
later than 10.00 a.m. (London time) five Business Days prior to the proposed
Drawdown Date. The undrawn amount (if any) of the Total Commitments shall
automatically be cancelled at the close of business in London on the last day of
the Availability Period. There shall be no more than one Notice of Drawdown
outstanding at any time.
4.2 COMPLETION OF NOTICE OF DRAWDOWNS
(a) A Notice of Drawdown will not be regarded as having been duly completed
unless:
(i) the proposed Drawdown Date is a Business Day falling on or before
the last day of the Availability Period;
(ii) the amount of the Advance requested in the Notice of Drawdown is
a minimum of $2,000,000 or any larger amount which is an integral
multiple of $100,000 or the undrawn balance of the Total Commitments;
(iii) the first Interest Period selected complies with Clause 5
(Interest Periods);
(iv) the Notice of Drawdown is accompanied by a certificate from the
Borrower (in the form attached to Exhibit A to the Notice of Drawdown)
evidencing that the proceeds of the Advance are required to be applied
for permitted purposes as set out in the Project Budget;
(b) A Notice of Drawdown shall be irrevocable and the Borrower shall be
bound to borrow in accordance with such Notice of Drawdown. The Facility Agent
shall notify each
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Lender promptly of its receipt of a Notice of Drawdown and of the details of the
relevant Advance.
4.3 ADVANCES BY LENDERS
(a) The Facility Agent shall, as soon as it becomes aware of such
circumstances, notify the Borrower if, because of any of the conditions
described in Clause 3 (Conditions Precedent) or this Clause 4 not being
satisfied, an Advance will not be made pursuant to a Notice of Drawdown. The
parties acknowledge that the fact that an Advance is made pursuant to the Notice
of Drawdown in circumstances in which there was no obligation so to do or the
Notice of Drawdown was invalid, shall not in any way impair the ability of any
Finance Party to exercise all or any of its rights or remedies under or in
relation to this Agreement.
(b) Subject to the terms of this Agreement, each Lender shall on each
Drawdown Date make available to the Facility Agent for the account of the
Borrower its Participation in the Advance requested in the relevant Notice of
Drawdown in the proportion which its Commitment then bears to the Total
Commitments.
(c) Each Advance shall comprise drawings from the Senior Facility and the
Subordinated Facility to be made simultaneously and on a pro-rata basis in the
proportion that each of the Senior Facility and the Subordinated Facility bears
to the total amount of the Loan.
4.4 PAYMENT OF PROCEEDS
The Facility Agent shall forthwith transfer all such amounts made available
to it to the CRI Disbursement Account and in each case in like funds as they are
received by the Facility Agent.
5. INTEREST PERIODS
5.1 DURATION
Save as provided in Clause 5.2 (Non-Business Days), Clause 5.3 (Coincidence
with Final Maturity Date and Reduction Dates) and Clause 5.4 (Consolidation),
each Interest Period for an Advance shall be of three months' duration. Each
Interest Period for an Advance shall commence on the Drawdown Date of the
Advance concerned or (as the case may be) on the expiry of the preceding
Interest Period relative thereto.
5.2 NON-BUSINESS DAYS
If any Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period shall instead end on the next Business Day in that
calendar month (if there is one) or the immediately preceding Business Day (if
there is not or if the next Business Day would be after the Final Maturity
Date).
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5.3 COINCIDENCE WITH FINAL MATURITY DATE AND REDUCTION DATES
If an Interest Period would otherwise end after the next Reduction Date,
such Interest Period shall be shortened so that it ends on that Reduction Date
and if an Interest Period would otherwise end after the Final Maturity Date,
such Interest Period shall be shortened so that it ends on the Final Maturity
Date.
5.4 CONSOLIDATION
The first Interest Period for any Advance made after the first Advance
shall end on the last day of the current Interest Period for the Loan and
thereafter such Advance shall be consolidated with the Loan and treated as a
single Loan.
5.5 NOTIFICATION
The Facility Agent will notify the Lenders of the duration of each Interest
Period promptly after ascertaining the same.
6. INTEREST
6.1 RATE OF INTEREST
(a) Subject to paragraph (b) of this Clause 6.1, the rate of interest
applicable to the Loan or an Advance, as the case may be, for each Interest
Period is the rate per annum determined by the Facility Agent to be the sum of
the Applicable Margin and LIBOR for the relevant Interest Period.
(b) If the Facility Agent gives a notice under Clause 9.1 (Notice of Market
Disruption) then the rate of interest payable on the Loan or an Advance, as the
case may be, will be at the rate and for the period determined in accordance
with Clause 9.2 (Suspension of Drawdown) and Clause 9.3 (Alternative Basis).
6.2 ABSENCE OF QUOTATIONS
If, at any time when LIBOR is being determined on the basis of quotations
supplied by the Reference Banks, a Reference Bank does not supply an offered
rate by 11.30 a.m. (London time) two Business Days prior to the first day of the
relevant Interest Period, the applicable LIBOR shall, subject to Clause 9.1
(Notice of Market Disruption), be determined on the basis of the quotations of
the remaining Reference Banks.
6.3 DUE DATES AND CALCULATIONS
Except as otherwise provided in this Agreement, accrued interest on the
Loan or an Advance, as the case may be, shall be paid by the Borrower on each
Interest Payment Date and interest shall accrue on the principal amount
outstanding hereunder from day to day and be computed on the basis of a year of
360 days and the actual number of days elapsed.
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6.4 NOTIFICATION
Each determination of a rate of interest by the Facility Agent shall be
conclusive and binding upon the Borrower and the Lenders, in the absence of
manifest error, and shall be promptly notified by the Facility Agent to the
Borrower and the Lenders.
6.5 INTEREST DUE ON OR PRIOR TO THE PROJECT COMPLETION DATE
(a) On each Interest Payment Date falling on or prior to the Project
Completion Date, interest due on that Interest Payment Date on the amount
outstanding under the Senior Facility may be paid by the drawdown of an Advance
on the Interest Payment Date applicable thereto. No such drawdown may be made
unless the requirements of Clause 3 (Conditions Precedent) or Clause 4
(Drawdowns) are complied with in relation to each such Advance. Notwithstanding
the foregoing, the Borrower acknowledges that the obligation to pay interest is
absolute and unconditional. In the event that interest is not for any reason
financeable under the Facilities, the Borrower shall pay such interest to the
Facility Agent when due in accordance with the provisions of this Agreement.
(b) On each Interest Payment Date falling on or prior to the Project
Completion Date, interest due on that Interest Payment Date on the amount
outstanding under the Subordinated Facility shall be added to the principal
amount outstanding under the Subordinated Facility and shall itself bear
interest in accordance with this Clause and shall otherwise for all purposes
form part of the Subordinated Facility. For the avoidance of doubt, Capitalised
Interest Amounts will not reduce the Commitment of the Subordinated Lender under
the Subordinated Facility. In the event that interest cannot for any reason be
capitalised in accordance with this Clause 6.5(b), the Borrower shall pay such
interest to the Facility Agent when due in accordance with the provisions of
this Agreement.
6.6 MANDATORY COSTS
(a) The Borrower shall compensate each Lender for Mandatory Costs incurred
by it in relation to its Participation in the Loan.
(b) The Borrower shall, on each occasion when interest is payable
hereunder, pay to each Lender an additional amount of interest at the rate which
that Lender has notified to the Borrower (through the Facility Agent) not less
than five Business Days before the date for the payment of that interest as its
Mandatory Cost. The relevant Lender shall, in its notification to the Borrower,
set out the calculation of its Mandatory Cost in reasonable detail but that
Lender need not provide information which it reasonably considers to be
confidential or disclosure of which would be contrary to its banking policies.
7. REPAYMENT, PREPAYMENT AND CANCELLATION
7.1 REPAYMENT
(a) Subject to Clause 7.1(b) below, the Borrower shall repay to the Facility
Agent, for the account of the Lenders, the Loan (as of the last day of the
Availability Period) by repaying on each Reduction Date the percentages of
the Senior Loan and the Subordinated Loan set forth opposite such Reduction
Date in columns (2) and (3) of the Fifth Schedule (Reduction Instalments).
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(b) (i) For each Reduction Date that falls prior to 31 December 2001, a
corresponding Reduction Date (each an "Additional Reduction Date") shall be
added to the end of column (1) of the Fifth Schedule (Reduction
Instalments) so that the last Reduction Date under the schedule will always
fall on the Final Maturity Date.
(ii) In the event that there are Additional Reduction Dates, the Reduction
Percentages shall be calculated as follows:
(A) The Reduction Percentages in respect of each Additional Reduction Date
(the "Additional Reduction Percentages") for each of Columns (2) and (3)
of the Fifth Schedule (Repayment Instalments) shall be equal to:
1/N x 100
where: N is the number of Reduction Dates (including any Additional
Reduction Dates); and
(B) each Reduction Percentage for each Reduction Date (other than an
Additional Reduction Date) shall be reduced by an amount equal to:
RP/100 x ARP
where: RP is the Reduction Percentage for that Reduction Date; and
ARP is the sum of the Additional Reduction Percentages.
(c) Any amount repaid under Clause 7.1(a) or (b) shall be applied first to
repay the reduction instalment of the Senior Facility due on that Reduction Date
and second, only if such reduction instalment has been fully repaid, to repay
the reduction instalment of the Subordinated Facility due on that Reduction
Date.
7.2 MANDATORY PREPAYMENT TO MEET FINANCIAL RATIOS
(a) On the date falling 10 Business Days after each Calculation Date, the
Borrower shall pay to the Facility Agent for application in or towards
prepayment of the Loan, such amount as is necessary to ensure that (A) the Field
Life Cover Ratio on such Calculation Date is maintained at no less than 2, (B)
the Loan Life Cover Ratio on such Calculation Date is maintained at no less than
1.75 and (C) the Debt Service Cover Ratio on such Calculation Date is maintained
at no less than 1.5.
(b) Any amount prepaid under Clause 7.2(a) shall be applied first to prepay
the outstanding reduction instalments of the Senior Facility in inverse order of
maturity and second, only if the Senior Facility has been repaid to prepay the
reduction instalments under the Subordinated Facility in the inverse order of
maturity.
7.3 VOLUNTARY PREPAYMENT
The Borrower may, by giving not less than 15 Business Days' prior written
notice to the Facility Agent, prepay the Loan on the last day of an Interest
Period in whole or in part
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(but, if in part, in a minimum amount of $2,000,000 and in an integral multiple
of $100,000) subject to the following conditions:
(a) the Borrower shall pay a prepayment fee at the same time as the
prepayment amount is paid by the Borrower, which shall be calculated as follows:
(i) if the prepayment occurs prior to the Project Completion Date, the
Borrower shall pay a prepayment fee equal to 1% of the amount to be
prepaid;
(ii) if the prepayment occurs on or after the Project Completion Date
but prior to the First Reduction Date the Borrower shall pay a
prepayment fee equal to 0.75% of the amount to be prepaid; and
(iii) if the prepayment occurs on or after the First Reduction Date
the Borrower shall pay a prepayment fee equal to 0.50% of the amount
to be prepaid;
(b) the Borrower shall not be entitled to prepay any amount which would
(where relevant) following the prepayment, result in KKM having insufficient
funds to achieve Project Completion;
(c) amounts prepaid under this Clause 7.3 shall be applied first to prepay
the outstanding reduction instalments of the Senior Facility in inverse order of
maturity and second, only if the Senior Facility has been repaid, to prepay the
reduction instalments under the Subordinated Facility in the inverse order of
maturity; and
(d) any prepayment fee paid under this Clause 7.3 shall be applied pro rata
between the Senior Facility and the Subordinated Facility in the proportion in
which the amounts outstanding under such Facilities bear to the Loan outstanding
at that time (but excluding from the determination of such proportions any
Capitalised Interest Amounts).
7.4 VOLUNTARY CANCELLATION
(a) The Borrower may, by giving not less than 5 Business Days' prior
written notice to the Facility Agent, cancel the undrawn amount of the Total
Commitments in whole or in part (but, if in part, in a minimum amount of
$2,000,000 and integral multiples of $100,000) provided that the Borrower shall
not be entitled to cancel any undrawn amount of the Total Commitments if CAP(G)
and KKM has not cancelled their undrawn commitments (in equivalent amounts)
under the CRI-CAP(G) Loan Agreement and the CAP(G)-KKM Loan Agreement,
respectively, or if, as a result of the cancellation, KKM would not have
sufficient funds to achieve Project Completion. Upon such notice of cancellation
taking effect, the Commitment of each Lender shall be reduced proportionately;
(b) The Borrower shall pay a cancellation fee at the same time as such
undrawn amount is cancelled equal to 1% of the undrawn amount to be so
cancelled.
(c) Any cancellation fee paid under this Clause 7.4 shall be applied pro
rata between the Senior Facility and the Subordinated Facility in the proportion
in which the amounts outstanding under such Facilities bear to the Loan
outstanding at that time.
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7.5 ADDITIONAL RIGHT OF PREPAYMENT AND CANCELLATION
If the Borrower is required to pay to a Senior Lender any amount under
Clause 8.1 (Payment of Increased Costs) or any additional amounts under Clause
10 (Taxes) or interest on a Lender's Participation in any Advance or the Loan is
being calculated in accordance with Clause 9.2 (Suspension of Drawdown) or
Clause 9.3 (Alternative Basis), then, without prejudice to the obligations of
the Borrower under those Clauses, the Borrower may, so long as the circumstances
continue, give a notice of prepayment and cancellation to that Senior Lender
through the Facility Agent. On the Interest Payment Date immediately succeeding
the date of the giving of the notice or (in the case of paragraph (b) of this
Clause 7.5) if earlier at the end of the Availability Period:
(a) the Borrower shall prepay that Senior Lender's Participation in the
Loan (without premium or penalty or payment of any prepayment or
cancellation fee) together with all other amounts payable by it to that
Lender under the Finance Documents; and
(b) the Commitment of that Senior Lender shall be cancelled.
7.6 EXCESS CASH FLOW MANDATORY PREPAYMENT
(a) If there is any Excess Cash Flow on a Reduction Date, such Excess Cash
Flow shall be applied in or towards prepayment of the Loan (without premium or
penalty or payment of any prepayment or cancellation fee) on such Reduction
Date.
(b) At least four Business Days prior to a Reduction Date the Borrower
shall provide the Facility Agent with notification of the Excess Cash Flow to be
paid on such Reduction Date together with the data on which the calculation of
such Excess Cash Flow is based.
(c) Amounts prepaid under this Clause 7.6 shall be applied first to prepay
the outstanding reduction instalments of the Senior Facility in inverse order of
maturity and second, only if the Senior Facility has been repaid, to prepay the
reduction instalments under the Subordinated Facility in the inverse order of
maturity.
7.7 INSURANCE MANDATORY PREPAYMENT
(a) Subject to Clause 7.7(b) below, the Borrower shall prepay the Loan in
an aggregate amount equal to any KKM Insurance Proceeds received by KKM promptly
upon receipt. If any KKM Insurance Proceeds are received by the Security
Trustee or the Facility Agent in accordance with the terms of the Accounts
Agreement or any Security Document, the prepayment will be made promptly upon
receipt by the Security Trustee or the Facility Agent, as the case may be.
(b) Paragraph (a) above shall not apply to:-
(i) any receipt of Insurance Proceeds in respect of which the Facility
Agent agrees in advance that the provision of Clause 7.7(a) above shall not
apply; or
(ii) any receipt of Insurance Proceeds:
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(A) if the aggregate amount of all such Insurance Proceeds received or
receivable in respect of any one incident is less than $1,000,000 (or
its equivalent in any other currency); or
(B) if the aggregate amount of all such Insurance Proceeds received or
receivable in respect of any one incident equals or exceeds $1,000,000
but is less than $10,000,000 (or their equivalents in other
currencies); and
(I) the Borrower has notified the Facility Agent of the relevant
incident immediately upon becoming aware of the same and in any
event within 30 days of its occurring; and
(II) the Borrower has notified the Facility Agent, within 90
days of the relevant incident, that it proposes to reinstate,
replace or repair the damaged assets and it has demonstrated to
the satisfaction of the Special Majority Lenders that it has or
will have sufficient funds available to it (taking the relevant
Insurance Proceeds into account) to do so and will complete that
reinstatement, replacement or repair as soon as reasonable
practicable after the incident and provided that the expected
timetable for completion of the works to reinstate, replace or
repair the assets damaged or destroyed in the incident is
approved by the Special Majority Lenders; or
(iii) any receipt of Insurance Proceeds in respect of third-party
liabilities to the extent that those Insurance Proceeds are or are to be
applied in meeting the liabilities in respect of which they were paid.
(c) The Borrower shall prepay the Loan in an aggregate amount equal to any
proceeds actually received by it pursuant to the Political Risk Policy or
the Transport Risk Insurance Policy. If any such proceeds are received by
the Security Trustee or the Facility Agent in accordance with the terms of
the Accounts Agreement or any Security Document, such prepayment will be
made promptly upon receipt by the Security Trustee or the Facility Agent,
as the case may be.
(d) Amounts prepaid under this Clause 7.7 shall be applied first to prepay the
outstanding reduction instalments of the Senior Facility in inverse order
of maturity and second, only if the Senior Facility has been repaid, to
prepay the reduction instalments under the Subordinated Facility in the
inverse order of maturity.
7.8 AUTOMATIC CANCELLATION
The undrawn Commitment of each Lender shall be automatically cancelled at
the close of business at the end of the last day of the Availability Period. No
Advance may be borrowed after the end of the Availability Period.
7.9 MISCELLANEOUS PROVISIONS
(a) Any notice of prepayment or cancellation under this Agreement is
irrevocable and shall specify the date upon which the prepayment or cancellation
is to take effect.
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(b) Any prepayment pursuant to this Agreement shall be made together with
accrued interest on the amount prepaid, any other amounts due and payable under
this Agreement and, if the date of prepayment is not on an Interest Payment Date
applicable thereto, any amounts payable under Clause 7.10 (Broken Funding
Costs).
(c) No prepayment or cancellation is permitted except in accordance with
the express terms of this Agreement.
(d) No amount prepaid or repaid under this Agreement may subsequently be
re-borrowed.
(e) No amount of any Commitment cancelled under this Agreement may
subsequently be reinstated.
(f) The Facility Agent shall as soon as reasonably practicable (and in any
event at least three Business Days prior to the date specified for such
prepayment or cancellation) notify the relevant Lenders of any prepayment or
cancellation.
7.10 BROKEN FUNDING COSTS
If any Lender or the Facility Agent on its behalf receives or recovers all
or any part of such Lender's Participation in the Loan otherwise than on the
last day of an Interest Period, the Borrower shall pay to the Facility Agent on
demand for account of such Lender an amount equal to the amount (if any) by
which (a) the additional interest which would have been payable on the amount so
received or recovered had it been received or recovered on the last day of that
Interest Period exceeds (b) the amount of interest which in the opinion of the
Facility Agent would have been payable to the Facility Agent on the last day of
that Interest Period in respect of a deposit in Dollars equal to the amount so
received or recovered placed by it with a leading bank in London for a period
starting on the third Business Day following the date of such receipt or
recovery and ending on the last day of that Interest Period.
8. CHANGES IN LAW OR CIRCUMSTANCES
8.1 PAYMENT OF INCREASED COSTS
(a) Subject to Clause 8.2 (Exceptions), the Borrower shall on demand by the
Facility Agent pay to the Facility Agent for and on behalf of the relevant
Lender the amount of any increased cost incurred by that Lender or its Holding
Company as a result of the introduction of, or any change in (or in the
interpretation or application of), any Law or compliance by that Lender or its
Holding Company with any Law made after the date of this Agreement (including
any Law relating to tax or reserve assets, special deposits, cash ratios,
liquidity or capital adequacy requirements or any other form of banking or
monetary control).
(b) A Lender shall, as soon as reasonably practicable, through the Facility
Agent notify the Borrower upon it becoming aware of the imposition of an
increased cost which would result in the Borrower being required to pay any
amount under this Clause 8.1.
(c) In this Agreement, "increased cost" means:
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(i) an additional cost incurred by a Lender or its Holding Company as
a result of such Lender having entered into or performing, maintaining
or funding its obligations under this Agreement; or
(ii) that portion of an additional cost incurred by a Lender or its
Holding Company in making, funding or maintaining all or any advances
or commitments comprised in a class of advances or commitments formed
by or including that Lender's Participation in any Advance or the Loan
made available or to be made available under this Agreement as is
attributable to that Lender making, funding or maintaining that
Participation; or
(iii) a reduction in any amount payable to a Lender or the effective
return to a Lender under this Agreement or the effective return to
that Lender or its Holding Company on its capital which is
attributable to the funding under this Agreement or that Lender's
Commitment; or
(iv) the amount of any payment made by a Lender or its Holding
Company, or the amount of any interest or other return foregone by a
Lender or its Holding Company, in both cases calculated by reference
to any amount received or receivable by or for the account of that
Lender from any person under this Agreement.
(d) Any demand made by a Lender under paragraph (a) of this Clause 8.1
shall contain reasonable details of the increased cost and the events giving
rise to it, but such Lender need not disclose any information which it
reasonably considers to be confidential or disclosure of which would be contrary
to its banking policies.
8.2 EXCEPTIONS
Clause 8.1 (Payment of Increased Costs) does not apply to any increased
cost:
(a) compensated for by the operation of Clause 10 (Taxes); or
(b) attributable to any change in the structure or application of any
deductions or allowances in relation to the taxation of, or the rate of tax on,
the overall net income of a Lender (or the overall net income of a division or
branch of such Lender) imposed in the jurisdiction in which such Lender is
incorporated or its Facility Office is, for the time being, situated; or
(c) attributable to any Law relating to any of the matters set out in the
paper entitled "International Convergence of Capital Measurement and Capital
Standards" dated July 1988 and prepared by the Basle Committee on Banking
Regulations and Supervisory Practices, as amended in November 1991, as the same
is in force and applied and interpreted at the date of this Agreement.
8.3 ILLEGALITY
(a) If it is or becomes unlawful or contrary to the Law of any relevant
jurisdiction for any Senior Lender to give effect to its obligations under this
Agreement or to fund or maintain its Commitment or its Participation in the Loan
or any Advance, then if that Senior
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Lender shall (through the Facility Agent) so notify the Borrower, the amount of
that Senior Lender's undrawn Commitment shall be immediately reduced to zero and
the Borrower shall within five Business Days of receipt of the notice or, if
later, when so required, repay such Senior Lender's Participation in the Loan
(without premium or penalty) together with accrued interest and all other
amounts due and payable to such Senior Lender under the Finance Documents and
any amounts payable pursuant to Clause 7.10 (Broken Funding Costs).
(b) If it is or becomes unlawful or contrary to the Law of any relevant
jurisdiction for the Subordinated Lender to give effect to its obligations under
this Agreement or to fund or maintain its Commitment or its Participation in the
Loan or any Advance, then if the Subordinated Lender shall (through the Facility
Agent) so notify the Borrower, the undrawn Commitments of all of the Lenders
shall be immediately reduced to zero and the Borrower shall within five Business
Days of receipt of the notice or, if later, when so required, repay the
Participation of each of the Lenders in the Loan (without premium or penalty)
together with accrued interest and all other amounts due and payable to the
Lenders under the Finance Documents and any amounts payable pursuant to Clause
7.10 (Broken Funding Costs).
9. MARKET DISRUPTION
9.1 NOTICE OF MARKET DISRUPTION
The following provisions of this Clause shall take effect if on any Rate
Fixing Date:
(a) when LIBOR is being determined on the basis of quotations supplied by
the Reference Banks, no, or only one, Reference Bank supplies a rate for
the purposes of determining LIBOR; or
(b) the Facility Agent (after consultation with the Reference Banks)
otherwise determines that adequate and fair means do not exist for
ascertaining LIBOR; or
(c) the Facility Agent receives notification from Lenders, the
Participations of which exceed 30% of the Loan (each a "Notifying Lender")
(or, if no Advance has been made before that Rate Fixing Date, 30% of the
Total Commitments at that Rate Fixing Date), that in their opinion:
(i) matching deposits may not be available to those Lenders in the
London interbank market in the ordinary course of business to fund
their respective Participations for the relevant Interest Period; or
(ii) the cost to them of obtaining matching deposits in the London
interbank market would be in excess of LIBOR for the relevant Interest
Period,
whereupon the Facility Agent shall promptly so notify the Borrower.
9.2 SUSPENSION OF DRAWDOWN
If the notification which the Facility Agent gives under Clause 9.1 (Notice
of Market Disruption) applies to an Advance which has not been made that Advance
shall not be made. However, within five Business Days of receipt of that
notification, the Borrower and the
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Facility Agent (acting on the instructions of the Majority Lenders) shall enter
into negotiations for a period of not more than 30 days with a view to agreeing
an alternative basis for determining the rate of interest and/or basis of
funding applicable to that and any future Advance. Any alternative basis agreed
shall be, with the prior consent of all of the Lenders, binding on all the
parties to this Agreement.
9.3 ALTERNATIVE BASIS
(a) If the notification which the Facility Agent gives under Clause 9.1
(Notice of Market Disruption) applies to the Loan then, notwithstanding any
other provision of this Agreement:
(i) within five Business Days of receipt of that notification, the
Borrower and the Facility Agent (acting on the instructions of the
Majority Lenders) shall enter into negotiations for a period of not
more than 30 days with a view to proposing an alternative basis for
determining the rate of interest and/or basis of funding applicable to
the Loan;
(ii) any alternative basis proposed under paragraph (i) of this Clause
9.3(a) shall, with the prior written consent of all of the Lenders, be
binding for the purposes of this Agreement on all parties and may be
retrospective to and take effect from the beginning of the Interest
Period concerned;
(iii) if no alternative basis receives that written consent within
such 30 day period, each Notifying Lender shall (through the Facility
Agent) certify on or before the last day of the Interest Period to
which the notification relates an alternative basis for maintaining
its Participation in the Loan;
(iv) any such alternative basis may include an alternative method of
fixing the interest rate, alternative interest periods or alternative
currencies reflecting the cost to that Notifying Lender of funding, on
an arm's length basis, its Participation in the Loan from whatever
sources it may in good faith select plus the Applicable Margin and the
Mandatory Costs (if any); and
(v) each alternative basis so certified under paragraph (iii) of this
Clause 9.3(a) may be retrospective to and take effect from the
beginning of the Interest Period concerned, binding on the Borrower
and that Notifying Lender and be treated as part of this Agreement.
(b) So long as any alternative basis is in force, the Facility Agent, in
consultation with the Borrower and the Lenders, shall from time to time (but at
least monthly) review whether or not the circumstances referred to in Clause 9.1
(Notice of Market Disruption) continue with a view to returning to the
application of Clause 5 (Interest Periods) and Clause 6 (Interest).
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10. TAXES
10.1 TAX GROSS-UP
All sums payable by an Obligor under the Finance Documents shall be paid in
full without set-off or counterclaim or any restriction or condition and, except
to the extent required by any Law, free and clear of any deduction or
withholding on account of tax or otherwise. If an Obligor or any other person is
required by any Law to make any such deduction or withholding, such Obligor
shall, together with the relevant payment, pay such additional amount as will
ensure that the person to which the relevant sum is owed receives and is
entitled to retain, free and clear of any such deduction or withholding, the
full amount which it would have received if no such deduction or withholding had
been required.
10.2 TAX INDEMNITY
Without limiting Clause 10.1 (Tax Gross-up), if any person or the Facility
Agent on its behalf is required by Law to make any payment on account of tax
(not being in the case of a Finance Party a tax imposed on and calculated by
reference to the overall net income paid to and received by its principal office
in the jurisdiction in which it is incorporated or in which its Facility Office
is, for the time being, situated) or otherwise on or in relation to any sum
received or receivable under a Finance Document by such person or the Facility
Agent on its behalf (including any sum received or receivable under this Clause
10 (Taxes)) or any liability in respect of any such payment is asserted,
imposed, levied or assessed against such person or the Facility Agent on its
behalf, the Obligors shall, upon demand by the Facility Agent, promptly
indemnify, jointly and severally, such person against such payment or liability,
together with any interest, penalties, costs and expenses payable or incurred in
connection therewith.
10.3 NOTIFICATION OF REQUIREMENT TO DEDUCT TAX
If, at any time, an Obligor is required by any Law to make any deduction or
withholding from any sum payable by it under a Finance Document (or there is any
change in the rates at which or the manner in which such deductions or
withholdings are calculated), it shall promptly supply to the Facility Agent
details of such requirement or change.
10.4 EVIDENCE OF PAYMENT OF TAX
If an Obligor makes any payment under this Agreement in respect of which it
is required to make any deduction or withholding, it shall pay the full amount
required to be deducted or withheld to the relevant taxation or other authority
within the time allowed for such payment under applicable Law and shall deliver
to the Facility Agent for each Lender, within ten days of receiving a receipt
for such payment from the applicable authority, an original receipt (or a
certified copy thereof) issued by such authority evidencing the payment to such
authority of all amounts so required to be deducted or withheld in respect of
that Lender's share of such payment.
10.5 SUBMISSION OF TAX RELIEF FORMS
Without prejudice to the obligations of the Obligors under Clauses 10.1 and
10.2, the Obligors shall provide each Lender with such filing information and
forms as may be
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necessary in order for such Lender to comply with the requirements of any double
taxation treaty (if any) in relation to the payment of any interest and
commitment fees hereunder to such Lender free (or subject to any applicable
reduced rate) of deduction or withholding of or on account of any tax which
would otherwise be applicable and as soon as reasonably practicable after
receipt of such filing information and forms, such Lender shall submit such
forms to the appropriate revenue authorities as may reasonably be necessary in
order to comply with the requirements of any such double taxation treaty (if
any), provided that any Lender failing to submit such forms shall not be deemed
to be in breach of this Clause if its failure is due to events or circumstances
beyond its control.
11. REPRESENTATIONS AND WARRANTIES
Each of the Obligors jointly and severally makes the representations and
warranties set out in this Clause 11 (Representations and Warranties) to the
Facility Agent for itself and to each other Finance Party.
11.1 STATUS AND DUE AUTHORISATION
It is a limited liability company duly incorporated in good standing and
validly existing under the laws of its state of incorporation and has full power
and authority to own its property and assets and to carry on its business.
11.2 CAPACITY
It has full power and authority to execute and perform the Transaction
Documents to which it is a party and has taken all necessary action to authorise
the execution and performance of the Transaction Documents to which it is a
party and the transactions contemplated thereby.
11.3 VALIDITY AND ENFORCEABILITY
(a) Each Finance Document constitutes, or when executed in accordance with
its terms will constitute, its legal, valid and binding obligations enforceable
in accordance with its terms.
(b) Each Project Document constitutes, or when executed in accordance with
its terms will constitute, the legal, valid and binding obligations of each
Obligor that is a party thereto enforceable against each such party in
accordance with its terms.
(c) Each Finance Document is, or will when executed be, in full force and
effect and has not been breached by any Obligor or to the best knowledge and
belief of the Obligors, any party (other than the Finance Parties) thereto.
(d) Each Project Document is, or will when executed be, in full force and
effect, has not been breached by any party thereto and no notice has been
provided or received by it that any Project Document is intended to be
terminated, cancelled or suspended.
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11.4 SECURITY INTERESTS
(a) No Security Interest exists on any of its assets other than Permitted
Security Interests, except, prior to the First Drawdown Date, the Security
Interests set forth in the Seventh Schedule (Disclosure of Outstanding Security
Interests).
(b) It is the sole legal and beneficial owner of the assets over which it
purports to create a Security Interest with full title guarantee and each
Security Document to which it is a party creates a Security Interest of the
type, over the assets and with the priority that such Security Document purports
to create.
(c) No Security Interest purported to be created by an Obligor pursuant to
a Security Document is subject to avoidance on liquidation of such Obligor or in
bankruptcy, composition or other insolvency proceedings related to such Obligor.
(d) Its execution of the Transaction Documents and the exercise of its
rights and performance of its obligations under the Transaction Documents to
which it is a party will not result in the existence of nor oblige it to create
any Security Interest over all or any of its present or future assets (other
than Permitted Security Interests).
(e) The claims of the Finance Parties against it under the Finance
Documents will rank at least pari passu with the claims of all of its other
unsecured creditors and, to the extent of the Security Interests granted to the
Finance Parties pursuant to the Security Documents, senior to claims of
unsecured creditors save those whose claims are preferred solely by the
operation of law.
11.5 CONSENTS
All Consents have been obtained and are in full force and effect and all
material conditions of each such Consent have been complied with.
11.6 NO DEFAULT
(a) No Event of Default or Potential Event of Default has occurred and is
continuing or might reasonably be expected to result from the borrowing of any
Advance or the Loan remaining outstanding, as the case may be.
(b) No other event is outstanding which constitutes (or with the giving of
advice, lapse of time, determination of materiality or the fulfilment of any
other applicable condition or any combination of the foregoing, might
constitute) a default by it and, so far as it is aware, by any other party under
(or entitles any other party to terminate, by reason of default) a Project
Document or Consent or any other document which is binding on it or any of its
assets, except, prior to the First Drawdown Date, the events set forth in the
Eighth Schedule (Disclosure of Existing Defaults).
11.7 FINANCIAL STATEMENTS
The consolidated audited financial statements and the unaudited semi-annual
financial statements of the Obligors most recently delivered to the Facility
Agent have been prepared in accordance with US GAAP consistently applied and
fairly presents the financial condition
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of the each of the Obligors at and as of the date thereof and there has been no
material adverse change in the financial or business condition of any of the
Obligors since the date of such financial statements.
11.8 NO IMMUNITY
It is not subject to civil and commercial law with respect to its
obligations under the Transaction Documents and neither it nor any of its assets
have any right of immunity from jurisdiction of courts, suit, execution upon a
judgment, attachment prior to judgment or in aid of execution upon a judgment,
set-off or any other legal process with respect to its obligations under the
Finance Documents.
11.9 OBLIGATIONS PERMITTED
Neither the execution, delivery or performance by it of its obligations,
nor the exercise of its rights, under the Transaction Documents to which it is
or will be a party does or will conflict with any Law or judicial or official
order or conflict with the Laws and documents incorporating and constituting it
or conflict with any document which is binding on it or on any of its assets or
cause any limitation on its powers or result in, or oblige it to create, any
Security Interest on the whole or any part of its assets (other than Permitted
Security Interests).
11.10 LITIGATION
Except as set forth in the Ninth Schedule (Disclosure of Existing Claims),
no litigation, arbitration or administrative proceedings are presently in
process, pending or threatened against it or any of its assets which might
adversely affect its business or financial condition or its ability to perform
any obligation under the Transaction Documents to which it is a party or which
question the legality, validity or binding effect of any provision of the
Transaction Documents.
11.11 FILINGS
Except as may be necessary in connection with the perfection of Security
Interests under the Security Documents, it is not necessary that a Transaction
Document be filed, recorded, registered, notarised, legalised or enrolled with
any governmental agency or other relevant authority or person to ensure the
validity, enforceability or admissibility in evidence of that Finance Document.
11.12 TAXES
All amounts payable by it under the Finance Documents may be made free and
clear of and without deduction for or on account of any tax and no stamp or
registration duty or similar taxes or charges are payable in respect of the
Finance Documents, all necessary returns have been (or in the case of the
Borrower, prior to the First Drawdown Date, will have been) delivered by or on
its behalf to the relevant taxation or other authorities and it has not failed
to pay any taxes when due except to the extent that such taxes are being
contested by it in good faith by appropriate proceedings.
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11.13 YEAR 2000
Having undertaken a comprehensive review and assessment, all Computer
Systems used by it and, to the best of its knowledge and belief, its principal
customers or suppliers, are Year 2000 Compliant.
11.14 OBLIGORS' BUSINESS
It is in compliance in all material respects with all Applicable Laws
affecting its business and operations.
11.15 INFORMATION
All factual information supplied by it in writing to the Finance Parties,
or any of them, was true in all material respects at the time it was supplied to
such Finance Parties. It has not omitted any information which if disclosed
might adversely affect the decision of a person considering whether to enter
into the Finance Documents. All estimates, forecasts and expressions of opinion
it has supplied in writing to the Finance Parties, or any of them, were made in
good faith, with due care and on reasonable assumptions. Nothing has occurred
since the time any item of information was received by the Finance Parties, or
any of them, which renders such information untrue or misleading in any material
respect.
11.16 PROJECT DOCUMENTS
(a) Each original or certified copy of a Project Document delivered to the
Facility Agent (on behalf of the Finance Parties) was, at the time it was
delivered, a correct and complete, original or authentic copy of the relevant
document as in force at that time.
(b) Each original or authentic copy of a Consent delivered to the Facility
Agent was, at the time it was delivered, a correct and complete original or
authentic copy of the relevant document as in force at that time.
(c) No other documents, contracts or arrangements are in existence (except
for any of which a copy, or all relevant details, has been given to the Facility
Agent) which constitute Project Documents or Consents to which it is a party in
connection with the Project or the Transaction Documents (or which so far as it
is aware amend or supplement any Project Document or Consent.)
(d) No event has occurred or circumstance arisen whereby (i) any Project
Document may be terminated or will terminate automatically or (ii) KKM may
become subject to any penalty (other than delay interest) or increased contract
price.
(e) No Obligor has received any notice that any Project Document is
intended to be terminated, cancelled or suspended.
11.17 COMPLIANCE WITH ENVIRONMENTAL LAWS
(a) KKM and the Project have complied in all material respects with, and
are in compliance in all material respects with all Environmental Laws and KKM
has taken all measures necessary to ensure that its business and operations are
being carried out in all
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material respects in accordance with any environmental and ecological standards
prescribed under the terms of the Political Risk Policy;
(b) KKM and the Project have complied in all material respects with, and
are in compliance in all material respects with the terms and conditions of all
Environmental Consents; and
(c) There is no Environmental Claim which is current, or to its knowledge
and belief (having made all reasonable enquiries), pending or threatened against
KKM and, to the best of its knowledge and belief (having made all reasonable
enquiries), since the date of this Agreement there has not been any act,
omission, event or circumstance which could form the basis for any Environmental
Claim against KKM.
(d) The Project is being undertaken in all material respects in accordance
with the Environmental Plan.
11.18 SHARE OWNERSHIP
(a) The Borrower owns (both beneficially and legally) and will continue to
own 80% of the CAP(G) Shares and all of the CAP(D) Shares.
(b) CAP(D) owns (both beneficially and legally) and will continue to own
20% of the CAP(G) Shares.
(c) CAP(G) owns (directly or indirectly) (both beneficially and legally)
and will continue to own 50% of the KKM Shares, except, prior to the First
Drawdown Date, for the Security Interests set forth in the Seventh Schedule
(Disclosure of Outstanding Security Interests).
11.19 PROJECT OWNERSHIP
CAP(G) owns (directly or indirectly) and will continue to own at least a
fifty percent ownership interest in the Project.
11.20 INSURANCES
All insurances (including the Political Risk Policy and the Transport Risk
Insurance Policy) which by the terms of this Agreement are to be in place are,
or will be, prior to the First Drawdown Date, in place and are, or will be prior
to the First Drawdown Date, in full force and effect. None of the Obligors is
aware of any facts or circumstances that have not been disclosed to its insurers
and which might reasonably be expected, if so disclosed, to adversely affect the
nature or extent of the cover to be provided under the insurances (including the
Political Risk Policy and the Transport Risk Insurance Policy).
11.21 SUBSIDIARIES
KKM has no Subsidiaries, and CAP(G) has no Subsidiaries other than KKM, and
CAP(D) has no Subsidiaries other than CAP(G) and KKM, and the Borrower has no
Subsidiaries other than CAP(D), Road Runner, Chaparral Acquisition Corporation,
CAP(G) and KKM.
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11.22 NOTICE OF DRAWDOWN
Each statement made in each Notice of Drawdown is true and not misleading
at the time the Notice of Drawdown is delivered and on the relevant Drawdown
Date.
11.23 FINANCIAL MODEL
So far as it is aware there are no defects in the Financial Model which
would materially and adversely affect the computations contemplated by this
Agreement in respect of the calculation of the Cover Ratios.
11.24 LICENCES
It is not necessary or advisable under the Laws of the Republic of
Kazakhstan, Guernsey or the States of Delaware or Texas in order to enable a
Finance Party to enforce its rights under the Finance Documents or by reason of
the execution of the Finance Documents or the performance by a Finance Party of
its obligations under the Finance Documents, that such Finance Party should be
licensed, qualified or otherwise entitled to carry on business in The Republic
of Kazakhstan, Guernsey or the state of Delaware.
11.25 RESIDENCE
No Finance Party is or will be deemed to be resident, domiciled or carrying
on business in the Republic of Kazakhstan, Guernsey or the States of Delaware or
Texas or any political sub-division thereof by reason only of the execution,
delivery or the performing of its obligations under each Finance Document or by
reason only of the enforcement of a Finance Document.
11.26 REPETITION
Each of the representations and warranties contained in this Clause 11
(Representations and Warranties) shall be deemed to be repeated by each Obligor
on the date of each Notice of Drawdown, on each Drawdown Date and on each
Interest Payment Date by reference to the facts and circumstances existing at
that time.
12. BUDGETS
12.1 ANNUAL OPERATING BUDGETS
(a) KKM shall, not less than two months prior to the end of the year 2000
and each subsequent fiscal year covered by the KKM Initial Operating Budget,
deliver to the Facility Agent (in sufficient copies for itself and the Lenders
(each Lender receiving one copy)) a draft KKM Annual Operating Budget for each
of the forthcoming five fiscal years.
(b) The Borrower shall, not less than two months prior to the end of the
year 2000 and each subsequent fiscal year covered by the CRI Initial Operating
Budget, deliver to the Facility Agent (in sufficient copies for itself and the
Lenders (each Lender receiving one copy)) a draft CRI Annual Operating Budget
for each of the forthcoming five fiscal years.
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(c) Each KKM Operating Budget shall be prepared by reference to monthly
periods for the first two fiscal years of each five year period and on an
aggregated annual basis for the remaining three fiscal years.
(d) Each CRI Operating Budget shall be prepared by reference to monthly
periods for the first fiscal year of each five year period and on an aggregated
annual basis for the remaining four fiscal years.
12.2 DISTRIBUTION OF DRAFT ANNUAL OPERATING BUDGETS
Promptly upon receipt of a draft Annual Operating Budget, the Facility
Agent shall distribute the same to the Lenders and request that each Lender
delivers an instruction within fifteen Business Days as to whether or not such
draft Annual Operating Budget should be approved.
12.3 ANNUAL OPERATING BUDGET APPROVAL PROCEDURE
(a) The Facility Agent shall act on the instructions of the Special
Majority Lenders in respect of the draft Annual Operating Budget distributed to
the Lenders for approval.
(b) In the event that the Special Majority Lenders do not approve the
draft Annual Operating Budget (which approval shall not be unreasonably withheld
or delayed), the Facility Agent shall promptly so notify KKM and CRI following
which KKM or CRI, as the case may be, shall revise the draft Annual Operating
Budget and deliver the same to the Facility Agent, whereupon the provisions of
this Clause 12 (Budgets) shall apply to such revised Annual Operating Budget as
if the same had been delivered pursuant to Clause 12.1 (Annual Operating
Budgets).
(c) The draft Annual Operating Budget shall become the Annual Operating
Budget for the purposes of the Finance Documents upon the Facility Agent
notifying KKM or CRI, as the case may be, of the approval of the draft Annual
Operating Budget. Until the draft Annual Operating Budget has been approved by
the Special Majority Lenders, KKM or CRI, as the case may be, shall only be
entitled to request payments out of the Project Accounts up to a level of
expenditure which is the lesser of that contained in the draft and that set out
in the then existing Operating Budget.
12.4 CHANGES TO ANNUAL OPERATING BUDGETS
Any changes to an Annual Operating Budget (as approved pursuant to the
terms of this Agreement), will be effective only if agreed between KKM or CRI,
as the case may be, and the Facility Agent acting on the instructions of the
Special Majority Lenders provided that any item of operating expenditure
contained in such Annual Operating Budget may be exceeded by up to ten per cent.
without being treated as a change requiring approval provided that the overall
budget is not exceeded by more than five per cent. in aggregate.
12.5 CHANGES TO PROJECT BUDGET
Any changes to the Project Budget will be effective only if agreed between
KKM and the Facility Agent acting on the instructions of the Special Majority
Lenders provided that any item of capital contained in the Project Budget may be
exceeded by up to five per cent.
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without being treated as a change requiring approval provided that the overall
budget is not exceeded.
12.6 BUDGET UNDERTAKINGS
KKM undertakes, in relation to the Project Budget and each KKM Operating
Budget delivered pursuant to this Clause 12 (Budgets) and the Borrower
undertakes, in relation to each CRI Operating Budget delivered pursuant to this
Clause 12 (Budgets), that, as at the date of preparation or, as the case may be,
delivery of such budget:
(a) all of the factual information set out therein will be true, complete
and accurate in all material respects and will be compiled with due care and
attention; and
(b) all projections, forecasts, estimates and opinions made by it therein
will be bona fide and will be made on the basis of assumptions disclosed therein
which it will be reasonable for it to make at such time and which shall be made
acting in good faith and with all due care and diligent consideration.
13. CASH FLOW FORECASTS
13.1 SEMI-ANNUAL CASH FLOW FORECASTS
(a) The Modeller may and shall, if so directed by any Lender, prepare a
Pre-Completion Cash Flow Forecast on one occasion in each six month period
commencing after the First Drawdown Date and occurring prior to the Project
Completion Date utilising the most recent month-end accounting data available
and, as appropriate, the format agreed for the Base Case Cash Flow Forecast and
shall deliver each such Pre-Completion Cash Flow Forecast to the Borrower and
KKM.
(b) The Modeller shall prepare the Initial Cash Flow Forecast utilising the
most recent month-end accounting data available and, as appropriate, the format
agreed for the Base Case Cash Flow Forecast and such Initial Cash Flow Forecast
shall be delivered to the Borrower at least 15 Business Days before the
scheduled Project Completion Date. If the Initial Cash Flow Forecast is
delivered to the Borrower but Project Completion does not subsequently occur on
or prior to the scheduled Project Completion Date, an updated Initial Cash Flow
Forecast shall be prepared and delivered to the Borrower 15 days prior to the
actual Project Completion Date.
(c) The Modeller shall prepare a Semi-annual Cash Flow Forecast for each
Calculation Date commencing after the Project Completion Date utilising the most
recent month-end accounting data available and, as appropriate, the format
agreed for the Initial Cash Flow Forecast and such Semi-annual Cash Flow
Forecast shall be delivered to the Borrower at least 15 Business Days before
such Calculation Date provided that if the first Calculation Date for a Semi-
annual Cash Flow Forecast falls within 30 days after the Project Completion
Date, the first Semi-annual Cash Flow Forecast shall be prepared on the first
Calculation Date next succeeding such Calculation Date.
(d) The Modeller may and shall, if so directed by any Lender, prepare one
additional Semi-annual Cash Flow Forecast at any time between the date of the
Initial Cash Flow Forecast or, previous Semi-annual Cash Flow Forecast, and the
next Semi-annual Cash
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Flow Forecast utilising the most recent month-end accounting data available and,
as appropriate, the format agreed for the immediately preceding Semi-annual Cash
Flow Forecast and shall deliver such Semi-annual Cash Flow Forecast to the
Borrower and KKM.
(e) The Obligors shall promptly provide the Modeller with all information
reasonably required by the Modeller to enable it to prepare a Cash Flow
Forecast. The Modeller will provide each of the Lenders with a copy of any Cash
Flow Forecast at least five Business Days prior to delivering such Cash Flow
Forecast to the Borrower for its approval.
(f) Each Cash Flow Forecast shall be prepared by Modeller on the basis of
(i) information provided by the Obligors pursuant to Clause 13.1 (e) above, (ii)
the Reserves Report, (iii) the Economic Assumptions (unless the Modeller is of
the opinion, based on information available to them, that such Economic
Assumptions do not accurately reflect the future Net Cash Flow for the life of
the Project) and (iv) such other assumptions as the Modeller considers
appropriate. The Borrower shall have the right to dispute any of the
assumptions used in the preparation of a Cash Flow Forecast (the "Forecast
Assumptions") in accordance with the provisions of Clause 13.1 (g) and (h)
below. If the Borrower fails to dispute any of the Forecast Assumptions within
five Business Days of receipt of any Cash Flow Forecast, the Borrower shall be
deemed to have approved such Cash Flow Forecast and such Cash Flow Forecast
shall be used as the basis for determining the Cover Ratios for the Calculation
Date relating to such Cash Flow Forecast.
(g) If the Borrower notifies the Modeller that it disputes any Forecast
Assumptions and the Modeller and the Borrower fail to agree on the Forecast
Assumptions to be used in a Cash Flow Forecast during the next succeeding five
Business Days, such matters shall be determined in accordance with customary
industry practices for forecasting assumptions by an independent consultant
(acting as an expert and not as an arbitrator) (the "Independent Expert")
selected by the Modeller with the consent of the Borrower or, failing such
consent, nominated (on the application of the Modeller) by the President for the
time being of the Institute of Petroleum Engineers (the expenses involved in
such nomination and the fees of such Independent Expert being payable by the
Borrower).
(h) If any dispute on the Forecast Assumptions has not been resolved by the
Calculation Date relating to such Cash Flow Forecast, the Modeller shall in any
event use such Cash Flow Forecast as the basis for determining the Cover Ratios
for that Calculation Date. If the Independent Expert subsequently reaches a
determination on the disputed Forecast Assumptions which has an effect on the
Cash Flow Forecast, such changes shall be made to the Cover Ratios for that
Calculation Date to reflect the revised Cash Flow Forecast and such revised
Cover Ratios shall be the Cover Ratios for that Calculation Date.
13.2 FINANCIAL COVENANTS
Each of the Cover Ratios shall be calculated by the Modeller on the
relevant Calculation Date on the basis of the then applicable Cash Flow Forecast
for such Calculation Date.
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14. FINANCIAL INFORMATION
The undertakings in this Clause 14 shall remain in full force and effect
until the Final Termination Date.
14.1 FINANCIAL STATEMENTS
The Borrower shall deliver to the Facility Agent (in sufficient copies for
the Facility Agent to distribute the same to itself and each Lender (each Lender
receiving one copy)):
(a) as soon as the same become available, but in any event no later than
120 days after the end of each financial year;
(i) the consolidated audited financial statements (including a balance
sheet, income statement and statement of changes in financial position) of
itself and its US GAAP Subsidiaries audited by its Auditors for such
financial year; and
(ii) the audited financial statements (including a balance sheet,
income statement and statement of changes in financial position) of KKM
audited by its Auditors for such financial year, and
(b) as soon as the same become available, but in any event no later than 45
days after the end of each quarterly fiscal period of each financial year:
(i) the unaudited quarterly financial statements (including a balance
sheet, income statement and statement of changes in financial position) of
the Borrower for such quarterly period; and
(ii) the trial balance reports of KKM for such quarterly period.
14.2 ACCOUNTING STANDARDS
Each of the Obligors shall ensure that each set of financial statements
delivered by it pursuant to Clause 14.1 (Financial Statements) is prepared in
accordance with US GAAP consistently applied and certified for and on its behalf
by its Authorised Signatory as giving a true and fair view of its financial
condition in all material respects as at the end of the period to which those
financial statements relate and of the results of its operations during such
period.
14.3 COMPLIANCE CERTIFICATES
(a) Each Obligor shall supply the Facility Agent, together with each set of
audited financial statements delivered by it pursuant to Clause 14.1 (Financial
Statements), with a report from its Auditors as to the adequacy of its financial
procedures, accounting systems and management information and cost control
systems.
(b) If the Facility Agent so requests and, on reasonable grounds, believes
that an Event of Default or Potential Event of Default may have occurred since
the date of the last such certificate, each Obligor shall promptly supply the
Facility Agent with a certificate signed by its Authorised Signatory confirming
that there did not exist any Event of Default or
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(to the best of his knowledge
and belief after due enquiry) Potential Event of Default, or if an Event of
Default or Potential Event of Default did then exist, specifying the same in
reasonable detail.
14.4 CHANGE OF LAW
If, at any time, an Obligor is required by any Law to change the basis upon
which the financial statements referred to in Clause 14.1 (Financial Statements)
are made or prepared, then such Obligor shall provide the Facility Agent with
details of such change and the effect of such change on the information
contained in the last such set of its audited or unaudited financial statements
delivered pursuant to Clause 14.1 (Financial Statements) before the said change
together with such additional information from its Auditors as the Facility
Agent may reasonably request.
14.5 FINANCIAL YEAR END
No Obligor shall alter its financial year end from that used for the
financial statements provided to and approved by the Facility Agent pursuant to
Clause 3.1 (Initial Conditions Precedent) without the prior written consent of
the Facility Agent.
14.6 CHANGE OF AUDITORS
No Obligor shall change its Auditors without the prior written consent of
the Facility Agent.
15. PROJECT INFORMATION
15.1 PROJECT REPORTS
(a) During the period from the execution of this Agreement until the Project
Completion Date, the Borrower shall (or shall procure that KKM shall), at the
times more particularly provided below, deliver to the Facility Agent copies (in
sufficient numbers for itself and each of the Independent Engineer and each
Lender) of a Project progress report in form and substance reasonably acceptable
to the Facility Agent, which shall be commented on by the Independent Engineer
in a manner reasonably acceptable to the Facility Agent. Each such Project
progress report shall be signed by an Authorised Signatory of the Borrower and
delivered to the Facility Agent no later than 15 days after the end of each
calendar month and shall be given in respect of the progress made in such
calendar month.
(b) Each such Project progress report shall contain, or be accompanied by
the following information or details:
(i) details of the progress made on the construction and installation
of the Project Facilities, including full details of actual progress
thereof compared with planned progress thereof during the period
covered by such report giving details of any differences between such
planned and actual progress and a detailed explanation for such
differences;
(ii) KKM's forecast of the likely Project Completion Date and if the
forecasted Project Completion Date is later than that previously
forecasted, or
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is forecasted to be achieved after 30 September 2001, giving details
of the reasons for the delay in achieving Project Completion and any
action the Obligors are taking or proposing to take to address the
delay resulting from such event;
(iii) KKM's estimate of the Capital Expenditure and operating costs
necessary to achieve Project Completion and, if such estimate is not
the same as the KKM's estimate set out in the immediately preceding
Project progress report delivered pursuant to this Clause 15.1
(Project Reports), an explanation therefor (including a summary
variance analysis relating to material variations from the Project
Budget);
(iv) KKM's estimate of cost overruns (if any);
(v) KKM's commentary on areas of significant concern (if any) and
material disputes or proceedings (if any) concerning the Project
(including with respect to any of the Project Documents or the Project
Document Parties) and the action being taken to resolve such
significant concerns or material disputes;
(vi) details of any events or circumstances (i) in respect of which an
Obligor or any Project Document Party has, pursuant to the relevant
Project Document, claimed force majeure relief or of which it is aware
and which an Obligor could reasonably expect to lead to a claim by KKM
or a Project Document Party for force majeure relief under the
relevant Project Document;
(vii) an analysis showing the amount actually spent by KKM in respect
of the Project during the calendar month to which the current Project
progress report relates against the Project Budget for such calendar
month and, if there is any material difference between the amounts so
budgeted and the amount so spent, an explanation therefor;
(viii) details of any matters which are likely to materially and
adversely affect the construction and installation of the Project
Facilities;
(ix) except as previously disclosed in writing, details of any Event
of Default or Potential Event of Default which may have occurred and
of which any Obligor is aware during the calendar month preceding the
date of such Project progress report;
(x) details of KKM's progress in obtaining Consents and of any non-
compliance with any Consents and with Applicable Law; and
(xi) all other information which the Independent Engineer may
reasonably require to prepare its conclusions and recommendations to
the Lenders for such period.
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15.2 OPERATING REPORTS
During the period commencing from the date of Project Completion and ending
on the Final Termination Date, the Borrower shall (or shall procure that KKM
shall) deliver no later than the one month after the end of each successive six
months falling during such period to the Facility Agent copies (in sufficient
copies for itself and each of the Independent Engineer and each Lender) of an
operating report signed by an Authorised Signatory of the Borrower and covering
that six month period in form and substance reasonably satisfactory to the
Facility Agent and which shall contain, inter alia, the following information:
(i) a summary of operations for the six month period to which such
operating report relates;
(ii) except as previously disclosed in writing to the Facility Agent,
details of any material claims, disputes or other proceedings with
which any of the Obligors was involved during the six month period to
which such operating report relates (including any material post-
completion claims against contractors provided that if any such
material claim, dispute or other proceedings is or are of an on-going
nature, the Borrower shall, in each operating report, include an
update on the status of such claim, dispute or proceedings;
(iii) a comparison between actual results for the six month period to
which such operating report relates and the projected results in the
Cash Flow Forecast for such period and, if there is any significant
difference between the actual results and the Cash Flow Forecast
results, an explanation therefor;
(iv) details of the actual level of production from the Project
Facilities and details of all Gross Revenues generated during the six
month period to which such operating report relates including details
of the total quantity and value of Hydrocarbons lifted and sold during
such period;
(v) details of any overhaul or other material maintenance of the
Project Facilities conducted during the six month period to which such
operating report relates, or planned for the next succeeding six month
period including details of any significant matters having occurred,
or anticipated (as the case may be) in relation to the operation
and/or maintenance of the Project Facilities during such six month
period;
(vi) any material defects or material malfunctions of the Project
Facilities during the six month period to which such operating report
relates which are likely to have a material adverse effect together
with summary details of the action being taken to remedy those
material defects or malfunctions; and
(vii) such other information concerning the operation and/or
maintenance of the Project Facilities, including any actual or
potential contravention of Environmental Laws or the environmental and
ecological standards prescribed under the terms of the Political Risk
Policy as the Facility Agent (acting on the advice of the Independent
Engineer) may reasonably require.
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15.3 REPORT UNDERTAKINGS
Each of the Borrower and KKM undertakes in relation to each Project
progress report, operating report and Cash Flow Forecast delivered pursuant to
Clause 15.1 (Project Reports), Clause 15.2 (Operating Reports) and Clause 13
(Cash Flow Forecasts) that, as at the date of delivery thereof:
(a) all the factual information set out therein will be true, complete and
accurate in all material respects and will be compiled with due care and
attention; and
(b) all projections, forecasts, estimates and opinions made by it therein
will be bona fide and will be made on the basis of assumptions disclosed therein
which it would be reasonable for it to make at such time and which shall be made
in good faith and with all due care and diligent consideration.
15.4 OTHER INFORMATION
The Borrower shall (or shall procure that KKM shall) provide to the
Facility Agent copies (one for itself and one for each of the Independent
Engineer and each Lender) of the following regular information at the times
specified or as otherwise reasonably required by the Facility Agent or promptly
upon obtaining or becoming aware of, as the case may be, the relevant
information, documents or events:
(a) notice of any performance tests issued by KKM and confirmed by the
Independent Engineer;
(b) certified copies of all preliminary and final acceptance certificates
issued to the relevant contractors and suppliers in respect of the Project
Facilities;
(c) notice of any breakdown, stoppage or suspension of the construction,
installation or operation of the Project Facilities which might have a material
adverse effect on the Project or the ability of any Obligor or any Project
Document Party to perform its obligations under any Transaction Document to
which it is a party, and any routine and planned stoppage of operations in the
normal course of operation and maintenance activities;
(d) where any Event of Force Majeure has occurred or is, in the reasonable
opinion of the Borrower or KKM, imminent which has or is likely to have a
material adverse effect on the financial or business condition of an Obligor or
on the ability of any Obligor to perform any of its obligations under a
Transaction Document, details of that Event of Force Majeure together with
weekly updates of the situation so long as the Event of Force Majeure continues
or more frequent updates if the Facility Agent so reasonably requests;
(e) details of any events of which the Obligors, or any of them, is aware
which are likely to cause interruption to the production of or to delivery of
Hydrocarbons from the Project Facilities which would not be regarded as being
immaterial;
(f) after the end of each calendar quarter, details of the debit and credit
balances on each of the Project Accounts;
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(g) promptly, details of any suspension of production or delivery of
Hydrocarbons for a period in excess of five days except when the suspension is a
result of scheduled maintenance;
(h) generally provide necessary financial and operational data reasonably
required by the Facility Agent, sufficient to enable the review and analyse the
Base Case Cash Flow Forecast, the Initial Cash Flow Forecast or any Semi-annual
Cashflow Forecast;
(i) promptly upon becoming aware of them, the details of any litigation,
arbitration, administrative proceedings or claims in relation to any Obligor or
the Project which are current, pending or threatened and which have or are
likely to have a material adverse effect;
(j) the commencement by any Obligor of any negotiations with any of its
creditors for the readjustment or rescheduling of any of its indebtedness;
(k) any dispute between an Obligor and any governmental authority with
respect to the payment of Taxes or any other matter;
(l) any change of the board of directors or senior management of any
Obligor;
(m) promptly, upon becoming aware of the same, details of any Environmental
Claim or contaminant affecting the Project site where KKM or any other Obligor
is required by Applicable Law to take material action regarding the same;
(n) a copy of all notices delivered to shareholders of any of the Obligors;
(o) promptly, such further information in the possession or control of an
Obligor regarding its business, financial condition or operations or the
construction and installation or operation of the Project Facilities in form and
substance reasonably acceptable to the Facility Agent, after consultation with
the Independent Engineer, as the Facility Agent may reasonably request; and
(p) a copy of all reports and other filings made by the Borrower to the
U.S. securities and exchange commission.
15.5 NOTICE TO THE FACILITY AGENT
(a) Each Obligor shall promptly notify the Facility Agent and provide it
with all relevant details regarding any Event of Default or Potential Event of
Default (and, in either case, the steps, if any, being taken to remedy it),
promptly upon becoming aware of it.
(b) Each Obligor will notify the Facility Agent of any default by an
Obligor or a Project Document Party under a Project Document which if not
remedied is likely to have a material adverse effect, promptly upon becoming
aware of it.
15.6 ACCESS TO PROJECT FACILITIES, RECORDS AND ACCOUNTS
(a) KKM will procure that the Facility Agent and, to the extent required to
carry out its functions under the Finance Documents, the Independent Engineer,
be allowed access
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at reasonable times on reasonable notice to inspect the Project Facilities and
the related technical data, books, records and other data in the possession and
control of KKM.
(b) Prior to the Project Completion Date, KKM will meet at the Project
site, semi-annually or as reasonably requested, with the Facility Agent and the
Independent Engineer, to discuss progress on the Project.
16. POSITIVE COVENANTS
The undertakings in this Clause 16 shall remain in full force and effect
until the Final Termination Date.
16.1 MAINTENANCE OF LEGAL VALIDITY
(a) Each Obligor shall maintain its status and preserve and keep in full
force and effect its corporate existence and each Obligor shall at all times
comply with all Applicable Laws.
(b) The Borrower will at all times maintain its listing on The Nasdaq Stock
Exchange, the American Stock Exchange or the New York Stock Exchange.
16.2 STATUTORY ACCOUNTS
Each Obligor shall keep and maintain up-to-date, in accordance with good
business practice and all applicable laws, all its statutory books and books of
account.
16.3 PARI PASSU RANKING OF OBLIGATIONS
Each Obligor shall procure that (subject only to the Intercreditor and
Subordination Agreement (if any)), its obligations under the Finance Documents
do and will rank at least pari passu with all its other present and future
unsecured and unsubordinated obligations except for liabilities which are
preferred solely by bankruptcy or insolvency laws or similar laws of general
application.
16.4 TAXES
Each Obligor shall file all tax returns and duly and punctually pay or
cause to be paid when due all taxes and governmental charges payable by it as
appropriate, other than taxes which are being contested by it in good faith by
appropriate proceedings, pending determination of which payment may be lawfully
withheld, provided that adequate reserves with respect to any such taxes so
contested have been set aside.
16.5 PROJECT DOCUMENTS
Each Obligor shall:
(a) promptly provide the Facility Agent with copies of each Project
Document to which it is a party and any amendment, modification or waiver to a
Project Document to which it is a party and which are entered into after the
date of this Agreement;
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(b) ensure that none of its rights under or in respect of any of the
Project Documents to which it is a party are at any time terminated, suspended
or revoked in any way otherwise than by full performance or expiration of its
term (including any extension of its term that has come into effect) except with
the prior written consent of the Special Majority Lenders;
(c) not agree to any waiver, amendment or modification of any Project
Document to which it is a party (including without limitation any specification
therein) in any manner or to any extent except with the prior written consent of
the Facility Agent (acting on the instructions of the Special Majority Lenders;
(d) duly and properly perform its obligations under the Project Documents
to which it is a party;
(e) maintain and in good faith enforce its rights, and ensure (so far as is
within its control) that others perform their obligations under the Project
Documents to which it is a party;
(f) promptly upon becoming aware of the same notify the Facility Agent of
any act or attempt by any other person to terminate, suspend, revoke or restrict
its rights under any of the Project Documents to which it is a party;
(g) not, save with the consent of the Facility Agent, surrender, withdraw,
assign or transfer any of its rights or obligations under any Project Document
to which it is a party or consent to any Obligor or any other Project Document
Party surrendering, withdrawing, assigning or transferring any of its rights or
obligations under them;
(h) promptly provide the Facility Agent with copies of any material notices
or demands made under any of the Project Documents to which it is party;
(i) ensure that each Project Document to which it is party entered into
hereafter does not restrict the assignment or transfer of the benefit of such
contract (or is assignable or transferable only if consent is obtained or some
other conditions fulfilled) to the Finance Parties other than as previously
agreed to by the Facility Agent; and
(j) exercise its rights in respect of any Project Documents in a manner
consistent with its obligations under the Finance Documents.
16.6 SECURITY
Each of the Obligors shall take all action necessary to procure that the
priority of the Security Interests created under the Security Documents are
maintained and preserved.
16.7 YEAR 2000
Each Obligor shall ensure that all Computer Systems used by it or its
principal customers or suppliers are Year 2000 Compliant except, in the case of
its suppliers, where such failure to be Year 2000 Compliant would not be likely
to have a material adverse effect on the financial or business condition of such
Obligor or the ability of such Obligor to observe and perform any of its
obligations under a Transaction Document.
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16.8 KKM CONSENTS
KKM shall:
(a) (i) obtain, maintain in full force (and where appropriate renew) and
comply in all material respects with the terms of; and
(ii) supply (at the request of the Facility Agent) copies (certified
by an Authorised Signatory of KKM) to the Facility Agent,
of each Consent applicable to it;
(b) not, save with the consent of the Facility Agent, agree to any waiver,
amendment or modification of any Consent applicable to it; and
(c) exercise its rights under the Consents applicable to it so far as is
practicable in a manner consistent with its obligations under the Finance
Documents.
16.9 ENVIRONMENTAL LAWS
KKM shall comply in all material respects with all Environmental Laws and
shall take all measures necessary to ensure that KKM's business and operations
are carried out in all material respects in accordance with any environmental
and ecological standards prescribed under the terms of the Political Risk Policy
and shall ensure that the Project Facilities are operated at all times in all
material respects in accordance with the Environmental Plan.
16.10 INSURANCES
(a) Each of the Obligors shall maintain insurance and reinsurance on and in
relation to its business and assets with reputable underwriters or insurance
companies on reasonable terms, against such risks and to such extent as is
generally accepted as following Reasonable and Prudent Industry Standards.
(b) The Borrower shall procure that the Political Risk Policy is maintained
at all times and shall procure that nothing is done (or that nothing is failed
to be done, including making disclosures which should be made prior to the
issuance of such Political Risk Policy) which would result in the Political Risk
Policy being rendered void or voidable and shall ensure that the Project will be
operated and maintained in accordance with the requirements of such Political
Risk Policy. The Borrower shall notify the Facility Agent as soon as it becomes
aware of any claim or potential claim it has or may have for compensation under
the Political Risk Policy and provide the Facility Agent with any information
that it may from time to time receive in respect of such claim or potential
claim. The Borrower agrees not to pursue any claim or potential claim for
compensation under the Political Risk Policy or withdraw any claim for
compensation unless it has obtained the prior written consent of the Facility
Agent (acting on the instructions of the Special Majority Lenders). The
Borrower shall consult with, and obtain the prior approval of, the Facility
Agent before making an election to increase or decrease the Covered Amount (as
defined in the Political Risk Policy) under the Political Risk Policy and shall
ensure that the amount of the Investment (as defined in the Political Risk
Insurance Policy) is not increased to the extent that the proportion of
compensation recoverable from OPIC under the Political Risk Policy would fall
below 100%.
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(c) The Borrower shall procure that the Transport Risk Insurance Policy is
maintained at all times and shall procure that nothing is done (or that nothing
is failed to be done, including making disclosures which should be made prior to
the issuance of such Political Risk Policy) which would result in the Transport
Risk Insurance Policy being rendered void or voidable and shall ensure that the
Project will be operated and maintained in accordance with the requirements of
such Transport Risk Insurance Policy. The Borrower shall notify the Facility
Agent as soon as it becomes aware of any claim or potential claim it has or may
have for compensation under the Transport Risk Insurance Policy and provide the
Facility Agent with any information that it may from time to time receive in
respect of such claim or potential claim. The Borrower agrees not to pursue any
claim or potential claim for compensation with insurer or insurers under the
Transport Risk Insurance Policy unless it has obtained the prior written consent
of the Facility Agent (acting on the instructions of the Special Majority
Lenders).
(d) KKM shall ensure that all premia and other fees arising in respect of
its insurance policies are paid when due pursuant to the terms thereof.
(e) The Borrower shall ensure that all premia and other fees arising under
the Political Risk Policy and the Transport Risk Insurance Policy are paid when
due pursuant to the terms thereof.
16.11 HEDGING ARRANGEMENTS
(a) The Borrower shall at all times comply with the terms of the Hedging
Agreement.
(b) The Borrower shall ensure that the Hedging Payment is paid when due
pursuant to the terms of the Hedging Agreement.
(c) The Borrower shall not, without the consent of the Special Majority
Lenders, cancel or terminate the Hedging Agreement and shall not enter into any
other hedging arrangements without the consent of the Special Majority Lenders.
16.12 PROJECT ACCOUNTS
(a) KKM shall procure that all KKM Gross Revenues are paid directly into
the Project Accounts in accordance with the terms of the Accounts Agreement and
the other Finance Documents.
(b) The Borrower shall procure that all Additional Gross Revenues which are
for its account (including, without limitation, all proceeds of the Political
Risk Policy and the Transport Risk Insurance Policy and all Hedging Receipts but
excluding any disbursements under this Agreement and any equity contributions)
are paid directly into the CRI Receipts Account and that all disbursements under
this Agreement and equity contributions received by it are paid directly into
the CRI Disbursement Account.
(c) CAP(G) shall procure that any payments received under the CRI-CAP(G)
Loan Agreement are paid directly into the CAP(G) Disbursement Account and that
all equity contributions received by it together with all other Additional Gross
Revenues (other than disbursements under the CRI-CAP(G) Loan Agreement) which
are for its account are paid
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directly into the relevant Project Account in accordance with the terms of the
Accounts Agreement.
(d) The Borrower shall procure that the CRI Debt Service Reserve Account is
at all times funded as required in accordance with the terms of the Accounts
Agreement and the other Finance Documents.
(e) The Obligors shall procure that all amounts required by the terms of
the Accounts Agreement and the other Finance Documents to be credited to any of
the Project Accounts shall be so credited forthwith upon receipt thereof.
(f) The Obligors may only withdraw funds standing to the credit of any of
the Project Accounts in accordance with the terms of the Accounts Agreement and
the other Finance Documents.
(g) The Obligors may only open and maintain a bank account with the prior
written consent of the Facility Agent, other than bank accounts permitted by the
terms of the Accounts Agreement.
16.13 PROJECT COMPLETION
KKM shall use its best endeavours to ensure that Project Completion occurs
not later than 30 September 2001.
16.14 PERFORMANCE TESTS
KKM shall give timely notice to the Independent Engineer of any undertaking
of any of the technical completion tests set out in Appendix A and take all
action reasonably available to it to ensure that the Independent Engineer is
given the opportunity to attend such tests.
16.15 OPERATION
KKM shall at all times diligently operate and maintain the Project and the
Project Facilities, in a safe, efficient and business-like manner and in
accordance with:
(a) all material provisions of the Project Documents, the Consents and the
Development Plan;
(b) all Applicable Laws; and
(c) in accordance with Reasonable and Prudent Industry Standards.
16.16 VOTING RIGHTS
The Borrower, CAP(D) and CAP(G) shall exercise their voting and other
rights and powers, so far as is permitted under Applicable Law, in a manner
consistent with full and prompt performance of their obligations under the
Transaction Documents and the obligations of each other Obligor under the
Transaction Documents.
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16.17 CONSENTS
Each of the Borrower, CAP(D) and CAP(G) shall obtain, maintain in full
force and effect and comply in all material respects with the terms of all
Consents applicable to them.
16.18 FUNDING TO CAP(G)
The Borrower and CAP(G) shall at all times comply with the terms of the
CRI-CAP(G) Loan Agreement and the Borrower shall ensure that proceeds of the
Loan are applied to meet Additional Permitted Expenses or are otherwise
immediately on-lent to CAP(G) in accordance with, and subject to, the terms and
conditions of the CRI-CAP(G) Loan Agreement and the Accounts Agreement.
16.19 FUNDING TO KKM
CAP(G) and KKM shall at all times comply with the terms of the CAP(G)-KKM
Loan Agreement and CAP(G) shall ensure that all funding received from the
Borrower in accordance with the CRI-CAP(G) Loan Agreement is immediately on-lent
to KKM in accordance with, and subject to, the terms of the CAP(G)-KKM Loan
Agreement and the Accounts Agreement.
16.20 INDEPENDENT REGISTRAR
KKM shall maintain an independent registrar to maintain its share register
in accordance with Kazakh company law.
16.21 PROJECT ASSETS
KKM shall at all times maintain good and valid marketable title to the
Project Facilities and all other assets material to the Project free and clear
of all Security Interests other than Permitted Security Interests.
16.22 CRI LETTER OF CREDIT
(a) The Borrower shall, on or before the First Drawdown Date, ensure that one
or more of its securities holders opens or causes to be opened, maintained
and delivered to the Facility Agent, one or more irrevocable standby
letters of credit (the "CRI Letter of Credit") in favour of the Facility
Agent, as beneficiary, on the terms set out in Clause 16.22(b) and payable
to the Facility Agent with a face amount equal to the Unpaid Equity
Contributions, which CRI Letter of Credit shall be capable of being drawn
in whole or in part by the Facility Agent at any time and from time to time
and the proceeds of which shall be paid (i) into the CAP(G) Disbursement
Account for application in or towards any KKM Permitted Expenditure or
Additional Permitted Expenditure due and outstanding; or (ii) on the
occurrence and during the continuance of an Event of Default, in or towards
any payment due and unpaid by the Obligors under the Finance Documents,
provided that the Facility Agent shall be permitted to draw under the CRI
Letter of Credit only if the Borrower does not receive into the CRI
Disbursement Account equity contributions from its stockholders equal to
the Unpaid Equity Contributions during the period between the First
Drawdown Date and 31 March 2000.
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(b) The CRI Letter of Credit shall be on the following terms:
(i) the issuer or issuers or confirming bank or banks of the CRI Letter of
Credit shall be persons acceptable to the Facility Agent;
(ii) the CRI Letter of Credit shall be substantially in a form complying
with the description contained in this Clause 16.22 and the Sixth Schedule
(Terms of CRI Letter of Credit); and
(iii) when issued, the CRI Letter of Credit shall remain in effect for
the period from the date of this Deed until the earlier of (A) the date
upon which the Facility Agent receives evidence satisfactory to it that the
Borrower has received equity contributions from the stockholders of the
Borrower into the CRI Disbursement Account of an amount at least equal to
the Unpaid Equity Contributions during the period between the First
Drawdown Date and 31 March 2000 or (B) 30 April 1999.
16.23 THE UPDATED RESERVES REPORT
KKM shall procure that the Reserves Report is reviewed, verified, revised
and updated by the Independent Engineer in accordance with terms of reference
agreed by the Independent Engineer with the Facility Agent and that the updated
Reserves Report (the "Updated Reserves Report") is issued to and for the benefit
of the Facility Agent for and on behalf of the Lenders by no later than 31 March
2000.
16.24 SYNDICATION
(a) Each Obligor shall provide the Facility Agent with such assistance as
is requested by the Facility Agent in effecting and completing the Syndication
including (i) the provision by such Obligor and procuring the provision by its
advisers of such information as may be deemed necessary by the Facility Agent in
connection with Syndication (including, without limitation, in connection with
the preparation of any Information Memorandum for potential lending
institutions), (ii) making available the management, of and advisers to, such
Obligors for the purposes of making presentations to potential lending
institutions, (iii) making appropriate representations in respect of the
Information Memorandum and any other relevant information and (iv) using its
best efforts to ensure that the Syndication efforts benefit from such Obligor's
existing banking relationships.
(b) Each of the Obligors agrees to enter into such documentation
(including, without limitation, an intercreditor and subordination agreement) in
form and substance satisfactory to the Facility Agent as the Facility Agent
determines (acting reasonably) to be advisable to facilitate the successful
Syndication of the Facilities. If the Completion Guarantor issues a guarantee
to the Senior Lenders in support of any pre-completion obligations of the
Obligors (or any of them) under any Finance Document as part of the Syndication,
the Obligors agree to issue a counter-indemnity agreement in form and substance
satisfactory to the Facility Agent and the Completion Guarantor. Each of the
Obligors agrees to enter into such supplementary documentation as is requested
by the Facility Agent for the purpose of making reasonable amendments to the
terms of the Finance Documents arising from (i) comments of the financial
institutions who wish to become
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Lenders hereunder and (ii) the role of the Facility Agent being transferred to a
successor Facility Agent appointed by such Facility Agent.
(c) Any document which is executed pursuant to this Clause 16.24 may, at
the discretion of the Facility Agent, be designated as a Finance Document.
(d) The Facility Agent may, at its discretion, designate any or all of the
agreements entered into in connection with the Syndication pertaining to the
completion guarantee from the Completion Guarantor, the related counter-
indemnity from the Obligors and the intercreditor and subordination terms as the
Completion Guarantee, the Counter-Indemnity and the Intercreditor and
Subordination Agreement respectively by notification of such designations to the
Obligors.
17. NEGATIVE COVENANTS
The undertakings in this Clause 17 shall remain in full force and effect
until the Final Termination Date.
17.1 NEGATIVE PLEDGE
No Obligor shall create or permit to subsist any Security Interest over all
or any of its assets except for any Permitted Security Interest except, prior to
the First Drawdown Date, for the Security Interests set forth in the Seventh
Schedule (Disclosure of Security Interests).
17.2 FINANCIAL INDEBTEDNESS
No Obligor shall incur or maintain any Financial Indebtedness other than
Permitted Indebtedness except, prior to the First Drawdown Date, for the
Financial Indebtedness set forth in the Tenth Schedule (Disclosure of Financial
Indebtedness).
17.3 LEASES
No Obligor shall enter into any agreement or arrangement to acquire by
lease or license the use of any property or equipment of any kind except:
(a) in the case of KKM, for any lease entered into under the
Drilling/Wellbore Exploration Services Contract or the Drilling Contract in
respect of the Project or leases or licenses (other than Finance Leases) in
respect of the Project under which the aggregate lease or license payments do
not exceed the equivalent (in whatever currency) of $ 1,000,000 in any financial
year; and
(b) in the case of the Borrower, for leases or licenses (other than Finance
Leases) under which the aggregate lease or license payments do not exceed the
equivalent (in whatever currency) of $ 200,000 in any financial year.
17.4 LOANS AND INVESTMENTS
No Obligor shall make any loan or extend any other form of credit or
financial accommodation (any such loan, credit or other financial accommodation
being herein referred
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to as "Financial Support") to or invest (including an investment in kind) in any
other person except for:
(a) in the case of KKM, a trade credit made on commercial terms in the
ordinary course of its business for a term not exceeding ninety (90) days;
(b) in the case of the Borrower, a trade credit made on commercial terms in
the ordinary course of its business for a term not exceeding ninety (90) days;
(c) loans provided by the Borrower pursuant to the terms of the CRI-CAP(G)
Loan Agreement and CAP(G) pursuant to the terms of the CAP(G)-KKM Loan
Agreement;
(d) Financial Support approved by the Special Majority Lenders (such
approval not to be unreasonably withheld or delayed); and
(e) investments in Authorised Investments pursuant to the terms of the
Accounts Agreement.
17.5 CONSTITUTIONAL DOCUMENTS
No Obligor shall amend its constitutional documents other than with the
prior written consent of the Facility Agent.
17.6 NO CONSOLIDATION OR MERGER
No Obligor shall:
(a) enter into any amalgamation, demerger, merger or reconstruction or take
any step with a view to its dissolution, liquidation or winding-up; or
(b) enter into any agreement whereby its income or profits are to be shared
with any other party; or
(c) vote for the amalgamation, demerger, merger or reconstruction of any of
its Subsidiaries or vote for any steps to be taken with a view to the
dissolution, liquidation or winding up of any of its Subsidiaries.
17.7 BUSINESS ALTERATION
No Obligor shall (and it shall procure that no Subsidiary shall):
(a) acquire or subscribe for any share or other capital equity or capital
interest in any company or person unless otherwise agreed by the Facility Agent
(acting on the instructions of the Special Majority Lenders);
(b) in the case of the Borrower, vote in favour of CAP(D) engaging in any
business unrelated to the business of owning the CAP(G) Shares;
(c) in the case of the Borrower and CAP(D), vote in favour of CAP(G)
engaging in any business unrelated to the business of owning the KKM Shares;
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(d) cease or propose to cease to carry on its business or any substantial
part thereof and in the case of CAP(G), it shall not vote in favour of KKM
ceasing to carry on its business or any substantial part thereof ; or
(e) in the case of CAP(G), vote in favour of KKM engaging in any business
unrelated to its business as now currently operated.
17.8 IMMUNITY
No Obligor shall claim immunity from process, execution, attachment or
other legal process, whether in the Republic of Kazakhstan or in any other
jurisdiction.
17.9 DISTRIBUTIONS
(a) KKM shall not declare or pay any dividend or make any distribution
(whether in cash or in kind) on or in respect of share capital ("Shareholder
Distribution") to its shareholders or any other person, except after the Project
Completion Date and subject to the following conditions:
(i) no Event of Default or Potential Event of Default has occurred and is
continuing or would result from such Shareholder Distribution;
(ii) the Field Life Cover Ratio would after the making of such Shareholder
Distribution, be not less than 2, the Loan Life Cover Ratio would after the
making of such Shareholder Distribution, be not less than 1.75 and the Debt
Service Cover Ratio would after the making of such Shareholder
Distribution, be not less than 1.5;
(iii) the credit balance of the CRI Debt Service Reserve Account is equal
to at least the Reserve Balance;
(iv) any mandatory prepayment in accordance with Clause 7 (Repayment,
Prepayment and Cancellation) has been made;
(v) such Shareholder Distribution is made in an amount not exceeding the
Excess Funds available at that time; and
(vi) such Shareholder Distribution is made or declared within 30 days after
a Reduction Date.
(b) None of the Borrower, CAP(G) or CAP(D) shall declare or pay any
dividend or make any distribution (whether in cash or in kind) on or in respect
of share capital to its shareholders or any other person without the prior
written consent of the Facility Agent (acting on the instructions of the Special
Majority Lenders).
17.10 CONTRACTUAL RELATIONSHIPS
(a) KKM shall only enter into transactions that are at arm's length and on
normal commercial terms.
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(b) No Obligor shall enter into any contracts or arrangements that impose
material obligations on such Obligor except for the Transaction Documents,
contracts or agreements expressly contemplated by or expressly permitted under
the Finance Documents or contracts entered into with the prior written consent
of the Facility Agent (acting on the instruction of the Special Majority
Lenders).
(c) Prior to 31 December 1999, KKM shall be entitled to sell crude oil
produced by the Project on a spot basis in Dollars provided that the proceeds
from the sale of such crude oil is paid directly into the KKM Proceeds Account
on and with effect from the First Drawdown Date. On and with effect from 1
January 2000, KKM shall commence deliveries of crude oil to STASCo in accordance
with the terms of the Offtake Agreement and all crude oil produced by the
Project on or after 1 January 2000 shall be sold to STASCO under the terms of
the Offtake Agreement other than those quantities of crude oil which KKM is
obliged to deliver to the Government of the Republic of Kazakhstan in respect of
Royalties in kind under the terms of the Petroleum Agreement.
17.11 DISPOSALS
(a) KKM shall not (whether by a single transaction or a series of
transactions and whether at the same time or over a period of time) sell,
assign, transfer, surrender or otherwise dispose of all or any part of its right
in or title to or interest in (whether present or future):
(i) the Project;
(ii) the benefit of any Project Document or the CAP(G)-KKM Loan
Agreement;
(iii) the Project Facilities; or
(iv) any of its other assets.
(b) Clause 17.11(a) (Disposals) does not apply to:
(i) disposals which are expressly permitted by the Finance Documents;
or
(ii) disposals of output from the Project permitted pursuant to Clause
17.10(c) (Contractual Relationships); or
(iii) disposals which are made on arm's length commercial terms in
the ordinary course of business of the Borrower of the equipment,
plant or other assets of the Borrower which are obsolete or no longer
serviceable or required or which are to be replaced by other assets
which are comparable or superior to the assets disposed of; or
(iv) disposals consented to by the Special Majority Lenders (such
consent not to be unreasonably withheld or delayed).
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17.12 ABANDONMENT
KKM shall not Abandon the Project for any reason whatsoever.
17.13 BUSINESS ACTIVITIES
KKM's business will be that of oil producer and supplier in and from the
Republic of Kazakhstan and it will not engage in any other business or activity,
whether alone or in partnership or joint venture with any other person, other
than:
(a) that directly associated with the development, maintenance and
operation of the Project Facilities; or
(b) those consented to by the Special Majority Lenders.
17.14 EXPENDITURE
(a) Subject to Clause 17.14(b), KKM shall not cause or permit to be made
any expenditure other than KKM Permitted Expenditure incurred pursuant to the
relevant Project Budget or KKM Operating Budget, as the case may be, and
expenditure which is expressly permitted pursuant to the terms of the Finance
Documents or which has otherwise been approved by the Facility Agent (acting on
the instructions of the Special Majority Lenders).
(b) If an incident occurs at or in connection with the Project Facilities
which is immediately threatening or hazardous to human life or the environment,
KKM shall be permitted (without the necessity for obtaining the prior written
consent of the Facility Agent) to make such payments (not exceeding $300,000 in
aggregate for any and all such incidents) as it believes (acting reasonably) are
essential to incur in order to reduce or eliminate such threat or hazard,
provided that KKM simultaneously notifies the Facility Agent of such incident
together with its plan of action. If KKM believes that it is necessary to make
additional expenditure in excess of $300,000 (in the aggregate for any and all
such incidents) to reduce or eliminate such threat or hazard it shall notify and
obtain the prior written consent of the Facility Agent (acting on the
instructions of the Majority Lenders (with each Lender being deemed to have
given authority to the Facility Agent to make a decision on its behalf relating
to such consent if it fails to respond to the Facility Agent within five
Business Days of any request therefor)) before incurring such additional
expenditure.
(c) The Borrower shall not cause or permit to be made any expenditure other
than Additional Permitted Expenditure incurred pursuant to the CRI Operating
Budget and other expenditure which is expressly permitted pursuant to the terms
of the Finance Documents or which has otherwise been approved by the Facility
Agent (acting on the instructions of the Special Majority Lenders).
(d) Neither CAP(G) nor CAP(D) shall cause or permit to be made any
expenditure other than as expressly permitted pursuant to the terms of the
Finance Documents.
17.15 BUSINESS OF CAP(G)
CAP(G) shall not engage in any business unrelated to the ownership of the
KKM Shares.
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17.16 DISPOSALS BY THE BORROWER, CAP(G) AND CAP(D)
(a) The Borrower shall at all times retain (directly or indirectly) legal
and beneficial ownership in the CAP(D) Shares and 80% of the CAP(G) Shares and
shall not sell, assign, transfer, surrender or otherwise dispose of all or any
part of its right in or title to or interest in the Project, the CRI-CAP(G) Loan
Agreement, the Political Risk Policy, the Transport Risk Insurance Policy, the
Hedging Agreement, the Project Documents, the CAP (D) Shares or its 80%
ownership interest in the CAP(G) Shares or any of its other material assets or
enter into any transaction which in effect constitutes such a sale, assignment,
transfer, surrender or disposal except with the prior written approval of the
Lenders (acting in their sole discretion).
(b) CAP(G) shall at all times retain (directly or indirectly) legal and
beneficial ownership in 50% of the KKM Shares and shall not sell, assign,
transfer, surrender or otherwise dispose of all or any part of its right in or
title to or interest in the Project, the CAP(G)-KKM Loan Agreement, the Project
Documents or its ownership interest in 50% of the KKM Shares or any of its other
material assets or enter into any transaction which in effect constitutes such a
sale, assignment, transfer, surrender or disposal except with the prior written
approval of the Lenders (acting in their sole discretion).
(c) CAP(D) shall at all times retain (directly or indirectly) legal and
beneficial ownership in 20% of the CAP(G) Shares and shall not sell, assign,
transfer, surrender or otherwise dispose of all or any part of its right in or
title to or interest in the Project, the Project Documents or its ownership
interest in 20% of the CAP(G) Shares or any of its other material assets or
enter into any transaction which in effect constitutes such a sale, assignment,
transfer, surrender or disposal except with the prior written approval of the
Lenders (acting in their sole discretion).
17.17 SHARE CAPITAL
(a) None of the Oligors shall (and to the extent that an Obligor is a
shareholder in another Obligor, it shall procure that such Obligor shall not)
without the prior written consent of the Facility Agent (acting in accordance
with the instructions of the Special Majority Lenders) purchase, cancel or
redeem any of its issued share capital, reduce its issued share capital, make or
apply for any alteration to its shares or alter any rights attaching to its
shares or issue any share or loan capital, except for:
(i) the warrant to purchase certain shares of common stock of the Borrower
to Shell Capital Limited pursuant to the CRI Warrant Agreement;
(ii) the Series A Preferred Stock of the Borrower as specified in its
constitutional documents as at the date of this Agreement which is issued and
outstanding at the date of this Agreement;
(iii) the non-qualified employee stock options to purchase up to 57,517
shares of the common stock of the Borrower issued which are outstanding at the
date of this Agreement;
(iv) certain warrants to purchase up to 60,079 shares of the common stock
of the Borrower which are outstanding at the date of this Agreement;
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(v) the conversion of outstanding indebtedness of the Borrower to the CRI
Bridge Note Holders under the CRI Bridge Notes and to the CRI Existing Note
Holders under the CRI Existing Notes, into common stock of the Borrower and/or
warrants to purchase common stock of the Borrower; and
(vi) up to 15% of the common stock of the Borrower to be issued in
connection with incentive stock options or grants to officers, directors,
employees or contract employees of any Obligor,
provided that the Borrower shall procure that no warrants issued or to be
issued by the Borrower under sub-paragraphs (i) or (v) above or held by Whittier
Energy Company, Whittier Ventures or Allen & Company Incorporated shall be
exercisable or exercised until the earlier to occur of (i) 18 months after the
date of this Agreement and (ii) 30 September 2001.
17.18 WORKERS' RIGHTS
The Borrower shall not take action to prevent employees of KKM from
lawfully exercising their right of association and their right to organize and
bargain collectively. The Borrower shall, and shall cause KKM, not to interfere
with or coerce an employee of KKM on the basis of trade union activities or
membership. The Borrower shall, and shall cause KKM, not to take any action on
the basis of such activities or membership which may result in the termination,
suspension, demotion, or transfer of said employee by KKM, or by an officer,
agent or other representative thereof. The Borrower shall cause KKM to perform
all Project activities in accordance with occupational health and safety
standards that meet or exceed the World Bank Environment, Health and Safety
Guidelines for Onshore Oil and Gas Development, dated May 12, 1994. The
Borrower shall, and shall cause KKM, to allow employees of KKM to avoid or
remove themselves from dangerous work situations without jeopardy to continued
employment. The Borrower shall, and shall cause KKM, to observe Applicable Laws
relating to a minimum age for employment of children, acceptable conditions of
work with respect to minimum wages, hours of work, and occupational health and
safety, and not to use forced labour.
18. EVENTS OF DEFAULT
Each of the events and circumstances listed in Clause 18.1 (Failure to Pay)
to Clause 18.30 (OPIC) constitute an Event of Default for the purposes of this
Agreement (whether or not caused by any reason whatsoever outside the control of
the Borrower or any other person).
18.1 FAILURE TO PAY
(a) The Borrower fails to pay any sum due under any Finance Document to
which it is a party at the time and in the manner stipulated in that Finance
Document, unless the Facility Agent is satisfied that such failure is due solely
to a technical or administrative delay
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in the transfer of funds outside the control of the Borrower and such amount is
paid within three Business Days of the due date for payment.
(b) CAP(G) fails to pay any sum due under the CRI-CAP(G) Loan Agreement or
Clause 19.1 of this Agreement at the time and in the manner stipulated in the
CRI-CAP(G) Loan Agreement and Clause 19.1 of this Agreement, unless the Facility
Agent is satisfied that such failure is due solely to a technical or
administrative delay in the transfer of funds outside the control of CAP(G) and
such amount is paid within three Business Days of the due date for payment.
(c) KKM fails to pay any sum due under the CAP(G)-KKM Loan Agreement at the
time and in the manner stipulated in the CAP(G)-KKM Loan Agreement, unless the
Facility Agent is satisfied that such failure is due solely to a technical or
administrative delay in the transfer of funds outside the control of KKM and
such amount is paid within three Business Days of the due date for payment.
(d) the Completion Guarantor fails to pay any sum due under the Completion
Guarantee at the time and in the manner stipulated in the Completion Guarantee,
unless the Facility Agent is satisfied that such failure is due solely to a
technical or administrative delay in the transfer of funds outside the control
of the Completion Guarantor and such amount is paid within three Business Days
of the due date for payment.
18.2 PERFORMANCE OF OBLIGATIONS
(a) An Obligor fails duly and punctually to comply with, perform or observe
or commits any breach of any obligation or undertaking (other than those
referred to in Clause 18.1(a), (b), (c) or (d) (Failure to Pay) or those
expressly set out in this Clause 18) expressed to be assumed by it under Clause
16.1 (Maintenance of Legal Validity), Clause 16.4 (Taxes), Clause 16.8 (KKM
Consents), Clause 16.9 (Environmental Laws), Clause 16.10 (Insurances), Clause
16.15 (Operation), Clause 16.17(Consents), Clause 16.19 (Funding to KKM) or
Clause 17.9 (Distributions).
(b) An Obligor fails duly and punctually to comply with, perform or observe
or commits any breach of any obligation or undertaking expressed to be assumed
by it under a Finance Document or any other agreement related thereto to which
it is a party (other than those referred to in Clause 18.1(a), (b) or (c)
(Failure to Pay), Clause 18.2(a) (Performance of Obligations) or those expressly
set out in this Clause 18) and, in respect of any such non-compliance, failure
to perform or observe or breach which in the opinion of the Facility Agent
(which opinion shall be conclusive) is capable of remedy, such action as the
Facility Agent may require to remedy the same shall not have been taken by such
Obligor within 30 days (or such longer period as the Facility Agent may approve)
after receipt of written notice from the Facility Agent requiring it to do so.
(c) The Completion Guarantor fails duly and punctually to comply with,
perform or observe or commits any breach of any obligation or undertaking
expressed to be assumed by it under the Completion Guarantee (other than those
referred to in Clause 18.1(d) (Failure to Pay) or those expressly set out in
this Clause 18) and, in respect of any such non-compliance, failure to perform
or observe or breach which in the opinion of the Facility Agent (which opinion
shall be conclusive) is capable of remedy, such action as the Facility
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Agent may require to remedy the same shall not have been taken by the Completion
Guarantor within 30 days (or such longer period as the Facility Agent may
approve) after receipt of written notice from the Facility Agent requiring it to
do so.
18.3 MISREPRESENTATION
Any representation, warranty or statement given, made or deemed to have
been made or repeated by an Obligor in or pursuant to any Finance Document to
which it is a party or the Completion Guarantor under the Completion Guarantee
or in any notice or other document, certificate or statement referred to in or
delivered pursuant to or in connection with any Finance Document or the
Completion Guarantee is or proves to have been incorrect or misleading in any
material respect when given, made or deemed to have been made or repeated.
18.4 PERFORMANCE OF PROJECT DOCUMENTS
(a) An Obligor fails duly and punctually to comply with, perform or observe
or commits any breach of any obligation or undertaking expressed to be assumed
by it under a Project Document or any other agreement related thereto and, in
respect of any such non-compliance, failure to perform or observe or breach
which in the opinion of the Facility Agent (which opinion shall be conclusive)
is capable of remedy, such action as the Facility Agent may require to remedy
the same shall not have been taken by such Obligor within 30 days (or such
longer period as the Facility Agent may approve) after receipt of written notice
from the Facility Agent requiring it to do so.
(b) A Project Document Party breaches any of its respective obligations
under any Project Document to which it is a party and that breach, if capable of
remedy, is not remedied within 30 days from the date the Borrower is notified or
becomes aware of that breach where the relevant breach would be reasonably
likely have a material adverse effect on the financial or business condition of
the Obligors, or any of them, or on the ability of the Obligors, or any of them,
to comply with their obligations under the Finance Documents.
18.5 CROSS DEFAULT
Any Financial Indebtedness of any Obligor is not paid when due or any
Financial Indebtedness of any Obligor becomes payable or capable of being
declared payable prior to its specified maturity by reason of an event of
default (however described) or any Financial Indebtedness of any Obligor is
accelerated or placed on demand or any Security Interest over any asset of an
Obligor becomes enforceable.
18.6 INSOLVENCY
(a) The Borrower is or is deemed for the purposes of any Applicable Law to
be, unable to pay its debts as they fall due or to be insolvent or admits its
inability to pay its debts as they fall due or stops, suspends or threatens to
stop or suspend payment of all or a material part of its debts or makes a
general assignment or arrangement or composition with or for the benefit of its
creditors or a moratorium is agreed or declared, whether by operation of law or
otherwise, in respect of or affecting all or a material part of its indebtedness
or it begins
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negotiations or takes any proceedings or other steps to effect a re-adjustment
or rescheduling of its indebtedness.
(c) Any Co-Obligor or the Completion Guarantor is or is deemed for the
purposes of any Applicable Law to be, unable to pay its debts as they fall due
or to be insolvent or admits its inability to pay its debts as they fall due or
stops, suspends or threatens to stop or suspend payment of all or a material
part of its debts or makes a general assignment or arrangement or composition
with or for the benefit of its creditors or a moratorium is agreed or declared,
whether by operation of law or otherwise, in respect of or affecting all or a
material part of its indebtedness or it begins negotiations or takes any
proceedings or other steps to effect a re-adjustment or rescheduling of its
indebtedness.
18.7 COMPOSITION AND DISSOLUTION, ETC.
Any steps (including any petition, proposal or convening of a meeting) are
taken with a view to effecting a general assignment or arrangement or
composition with or for the benefit of the creditors of an Obligor or the
Completion Guarantor or with a view to its rehabilitation, liquidation,
administration, winding-up or dissolution or a liquidator, trustee in
bankruptcy, judicial custodian, compulsory manager, receiver, administrative
receiver, administrator or the like is appointed in respect of such Obligor or
the Completion Guarantor or its assets or the directors of such Obligor or the
Completion Guarantor request such an appointment or a meeting of such Obligor or
the Completion Guarantor is convened for the purpose of considering any
resolution for (or petition for) its winding-up, liquidation, administration or
dissolution or an order for its winding-up, liquidation, administration or
dissolution is made.
18.8 ATTACHMENT
Any attachment, sequestration, distress or execution is levied over or
affects any assets of an Obligor and is not fully discharged or discharged or
otherwise dealt with to the satisfaction of the Facility Agent within 21 days of
the commencement of the process of such attachment, sequestration, distress or
execution and is in respect of an amount exceeding $50,000 (or its equivalent in
any other currency).
18.9 JUDGMENT
(a) Without prejudice to the provisions of Clause 18.8 (Attachment), any
judgment, award or similar process in an amount exceeding $50,000 (or its
equivalent in other currencies) (other than in respect of the Challenger Claim)
is made, issued or levied against an Obligor or any part of its assets and such
judgment, award or similar process is not satisfied, discharged or released
within 21 days after its making, issue or levy unless such judgement, award or
similar process has been appealed in good faith, when it must be satisfied,
discharged or released within 21 days of the determination of any final appeal.
(b) Any judgment, award or similar process in an amount exceeding
$1,400,000 (or its equivalent in other currencies) is made, issued or levied
against an Obligor or any part of its assets pursuant to or in connection with
the Challenger Claim.
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18.10 ANALOGOUS PROCEEDINGS
There occurs in relation to an Obligor any event anywhere which corresponds
with any of those mentioned in Clauses 18.6 (Insolvency) to 18.9 (Judgment)
(inclusive).
18.11 EXPROPRIATION
(a) All or any substantial part of the assets of KKM are expropriated,
nationalised, compulsorily acquired or taken into public ownership or KKM shall
cease to be able or entitled to exercise the rights of control or ownership of
the same or any governmental or public body or authority states officially that
it will take any steps towards such expropriation, nationalisation or
requisition; or
(b) all or any parts of the share capital of KKM is nationalised,
compulsorily acquired or taken into public ownership.
18.12 MORATORIUM
If any moratorium or other similar arrangement or circumstance occurs which
has the purpose or effect of altering the terms on which, or the manner in
which, any external indebtedness of the government of the Republic of
Kazakhstan or any relevant agency of the government of the Republic of
Kazakhstan is to be repaid or paid.
18.13 IMMUNITY
An Obligor at any time claims or threatens to claim immunity from process,
execution, attachment or other legal process, whether in the Republic of
Kazakhstan, Guernsey, England, the United States of America or in any other
jurisdiction.
18.14 THE BORROWER'S BUSINESS
An Obligor ceases or threatens to cease all or a substantial part of its
business.
18.15 ILLEGALITY
At any time it is or becomes unlawful for an Obligor or any other party
(other than a Finance Party but including a Project Document Party) to perform
or comply with any of its obligations under a Transaction Document.
18.16 PROJECT DOCUMENTS
Any material provision of any Project Document is revoked, terminate,
amended or ceases to be in full force and effect in any way (otherwise than by
full performance or expiration of its term (including any extension of its term
that has come into effect) without, in each case, the prior consent of the
Facility Agent (acting on the instructions of the Special Majority Lenders), or
the performance of any obligation under any such document becomes unlawful or
any such document is declared to be void or is repudiated or its validity or
enforceability at any time is challenged by any person, except in the case of
repudiation or challenge, if such repudiation or challenge is withdrawn within
30 days or such Project Document is replaced within 60 days (during which period
KKM continues to operate the
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Project in the ordinary course) with such party and on such terms as are
satisfactory in all respects to the Special Majority Lenders without any
material increased cost or obligation on the Obligors;
18.17 FINANCE DOCUMENTS
(a) Any provision of any Finance Document is revoked, terminated, amended
or ceases to be in full force and effect or the security the subject of the
Security Documents ceases to constitute a valid and enforceable Security
Interest with the intended priority or performance or any obligation under any
Finance Document becomes unlawful or any Finance Document is declared to be void
or is repudiated or its validity or enforceability at any time is challenged by
any person, except in the case of a repudiation or challenge, if such
repudiation or challenge is withdrawn within 30 days and pending its withdrawal,
such repudiation or challenge has no adverse effect.
(b) The Borrower does not receive into the CRI Disbursement Account equity
contributions from its stockholders in an amount at least equal to the Unpaid
Equity contributions during the period between the First Drawdown Date and 31
March 2000.
18.18 CONSENTS
Any Consent:
(a) is revoked, suspended, cancelled or withdrawn or otherwise fails to
remain in full force and effect or is not binding on any person expressed
to be a party prior to its normal maturity or any Law shall be enacted or
issued which shall impair the ability or right of such Obligor to perform
those obligations;
(b) is not valid or sufficient to create the permission or authorisation
sought;
(c) is modified or varied without the prior consent in writing of the
Facility Agent; and
(d) is breached or a default occurs, and if capable of remedy, is not
remedied within ten Business Days after notice requiring remedy of that
breach or default has been given to the relevant person.
18.19 PROJECT COMPLETION
The Project Completion Date does not occur on or before 30 September 2001.
18.20 OWNERSHIP OF BORROWER
There occurs any change in the control of the shareholding of the Borrower
from that which existed at the date of this Agreement which has or will have a
material adverse effect on the financial or business condition of the Obligors,
or any of them, or the ability of the Obligors, or any of them, to perform their
obligations under the Transaction Documents.
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18.21 OWNERSHIP OF CAP(G) AND CAP(D)
(a) The Borrower shall at any time cease to own legally and beneficially,
in aggregate, 100% of the issued voting share capital of CAP(D) except with the
prior written approval of the Facility Agent (acting on the instructions of all
of the Lenders).
(b) The Borrower and CAP(D) shall at any time cease to own legally and
beneficially, in aggregate, 100% of the issued voting share capital of CAP(G)
except with the prior written approval of the Facility Agent (acting on the
instructions of all of the Lenders).
18.22 OWNERSHIP OF KKM
CAP(G) shall at any time ceases to legally and beneficially own 50% of the
KKM Shares except with the prior written approval of the Facility Agent (acting
on the instructions of all of the Lenders).
18.23 ABANDONMENT
The Project is abandoned.
18.24 LOSS OR DAMAGE
All or a substantial part of the Project Facilities is lost, damaged beyond
economic repair, destroyed or declared by insurers to be a constructive total
loss.
18.25 BREACH OF RATIOS
(a) The Field Life Cover Ratio shall on any Calculation Date be less than
1.75;
(b) the Loan Life Cove Ratio shall on any Calculation Date be less than
1.5; or
(c) the Debt Service Cover Ratio shall on any Calculation Date be less than
1.25,
and such breach (to the extent that the Forecast Assumptions on which the Cash
Flow Forecast for such Cover Ratios are based are not the subject of an on-going
dispute which has not been finally determined by the Independent Expert pursuant
to Clause 13.1(f)) has not been remedied within a period of ten Business Days
from the date of notice being given by the Facility Agent to the Borrower
requiring any such breach to be remedied by the Borrower.
18.26 CRI DEBT SERVICE RESERVE ACCOUNT
(a) Subject to Clause 18.26(b), at any time after the Project Completion
Date, the balance standing to the credit of the CRI Debt Service Reserve Account
falls below the Reserve Balance.
(b) If the Field Life Cover Ratio shall be no less than 2, the Loan Life
Cover Ratio shall be no less than 1.75 and the Debt Service Cover Ratio shall be
no less than 1.5 during the period in which the credit balance of the CRI Debt
Service Reserve Account is below the Reserve Balance, such credit balance may
remain below the Reserve Balance for two consecutive quarterly periods before
such an event shall be deemed to constitute an Event of Default for the purposes
of this Agreement.
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18.27 PAYMENT OF SALARIES
KKM fails to pay any salaries due to its employees on the due date for
payment.
18.28 MATERIAL ADVERSE EFFECT
Any event or series of events occurs which in the opinion of the Facility
Agent (acting on the instructions of the Majority Lenders (acting reasonably))
has or will have a material and adverse effect the financial or business
condition of any Obligor or the ability of any Obligor to observe and perform
any of its obligations under a Transaction Document.
18.29 THE UPDATED RESERVES REPORT
The Updated Reserves Report is not in form and substance satisfactory to
the Facility Agent (acting on the instructions of the Special Majority Lenders).
18.30 OPIC
An event covered by the Political Risk Policy occurs which gives the
Borrower the right to compensation from OPIC pursuant to the terms of the
Political Risk Policy assuming due submission of an application for compensation
to OPIC.
18.31 CONSEQUENCES OF THE OCCURRENCE OF AN EVENT OF DEFAULT
On or at any time after the occurrence of an Event of Default (and for as
long as the same is continuing) the Facility Agent may and shall, if so directed
by any of the Lenders, by notice to the Borrower take any or all of the
following actions:
(a) terminate the Facilities and cancel the Total Commitments in whole or
in part;
(b) demand that the Loan or part thereof, together with accrued interest
and all other amounts accrued under this Agreement, be immediately due and
payable whereupon the same shall become immediately due and payable;
(c) demand that the Loan or part thereof be payable on demand whereupon the
same shall immediately become payable on demand;
(d) require the Security Trustee to exercise any or all of the rights and
powers available to it under all or any of the Security Documents; or
(e) invoke the terms of the step-in arrangements pursuant to the Technical
Services Agreements.
19. GUARANTEE, DEFAULT INTEREST AND INDEMNITY
19.1 GUARANTEE AND INDEMNITY
(a) CAP(G), as primary obligor and not merely as surety, unconditionally and
irrevocably:
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(i) guarantees to each Finance Party the due and punctual payment of any
and all sums from time to time due from the Borrower under the Finance
Documents and the due and punctual performance of the Borrower's other
obligations under the Finance Documents;
(ii) undertakes to pay to each Finance Party on demand any sum due from the
Borrower under any Finance Document which is unpaid; and
(iii) agrees to indemnify each Finance Party on demand against any loss
incurred by such Finance Party as a result of any Finance Document being or
becoming, in whole or in part, void, voidable or unenforceable for any
reason whatsoever, whether or not known to such Finance Party (the amount
of such loss being the amount which such Finance Party would otherwise have
been entitled to recover from the Borrower).
(b) Each Finance Party shall be at liberty without thereby affecting its rights
hereunder or otherwise conferred by law at any time at its absolute
discretion and with or without the assent or knowledge of or notice to
CAP(G):
(i) to give time to the Borrower for the payment of all or any sums due or
payable under any Finance Document;
(ii) to neglect or forbear to enforce payment of all or any sums due or
payable under this Agreement and (without prejudice to the foregoing) to
grant any time or other indulgence or forbearance to and fail to assert or
pursue or delay in asserting or pursuing any right or remedy against the
Borrower;
(iii) to accept, vary, exchange, renew, abstain from perfecting or release
any security now held or to be held by it for or on account of any sums
payable or expressed to be payable under any Finance Document;
(iv) to amend, add to or vary the terms of any Finance Document; and
(v) to compound with, accept compositions from and make any other
arrangements with the Borrower.
(c) This Clause 19.1 (Guarantee and Indemnity) and the rights of each Finance
Party hereunder or otherwise conferred by law shall not be affected by the
appointment of a receiver, administrator, trustee in bankruptcy, liquidator
or any other person appointed to carry out any similar or analogous role
under the laws of any jurisdiction or by any alteration of the Borrower's
status or by any other act or circumstance which (apart from this
provision) would or might constitute a legal or equitable defence for or
discharge of a surety or guarantor. CAP(G)'s obligations under this Clause
19.1 (Guarantee and Indemnity) may be called up and enforced without steps
or proceedings first being taken against the Borrower or the exercise of
any other remedy under any Finance Document and CAP(G) irrevocably waives
any right it may have of first requiring each Finance Party (or any
trustee, agent or other person acting on behalf) to proceed against or
enforce any other rights or security or claim its payment from any person
(including, without limitation the Borrower) before claiming from CAP(G)
under this Clause 19.1 (Guarantee and Indemnity).
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(d) Any unenforceability, illegality or invalidity of any obligation of any
person (including without limitation any Obligor) under any Finance
Document shall not reduce, release or prejudice any obligation of CAP(G)
under this Clause 19.1 (Guarantee and Indemnity) which obligation shall
remain in full force and effect notwithstanding any such unenforceability,
illegality or invalidity.
(e) Where any discharge (whether in respect of the obligations of the Borrower
under this Agreement or any other Finance Document) is made in whole or in
part or any arrangement is made on the faith of any payment, security or
other disposition which is avoided or must be restored upon an insolvency
or liquidation or any similar event, the liability of CAP(G) hereunder
shall continue or be reinstated (as the case may be) as if such discharge
or arrangement had not occurred. Each Finance Party (or any trustee, agent
or other person acting on its behalf) may concede or compromise any claim
that any payment, security or other disposition is liable to avoidance or
restoration.
(f) Until all amounts which may be or become payable by the Borrower under or
in connection with each Finance Document have been irrevocably paid in
full, each Finance Party (or any trustee, agent or other person acting on
its behalf) may:
(i) refrain from applying or enforcing any other moneys, security or rights
held or received by it (or such trustee, agent or other person) in respect
of such amounts, or apply and enforce the same in such manner and order as
it sees fit (whether against such amounts or otherwise) and CAP(G) shall
not be entitled to the benefit of the same; and
(ii) hold in a suspense account any moneys received from CAP(G) or on
account of CAP(G)s' liability under this Clause 19.1 (Guarantee and
Indemnity), bearing interest at such market rates as the Facility Agent
(for and on behalf of each Finance Party) shall in its discretion
determine.
(g) Each Finance Party shall not be required before exercising any of the
rights, powers or remedies available to or conferred on it under this
Clause 19.1 (Guarantee and Indemnity) or by law (i) to make any demand on
or the Borrower, (ii) to take any other action or obtain any judgment in
any court against the Borrower, (iii) to make or file any action or proof
in any winding-up, dissolution or other similar proceeding in respect of
the Borrower or (iv) to enforce or seek to enforce any other security as
may then have been granted or pledged in respect of the obligations of the
Borrower guaranteed under this Clause 19.1 (Guarantee and Indemnity).
(h) The obligations of CAP(G) under this Clause 19.1 (Guarantee and Indemnity)
are continuing obligations and shall remain in force until all sums payable
or expressed to be payable by the Borrower under each Finance Document have
been paid in full. Any full or partial settlement or discharge between
CAP(G) and any Finance Party entered into as a consequence of payment by
the Borrower of sums hereby guaranteed or any other act shall be
conditional upon such payment or other act not being avoided or reduced by
virtue of any provision of law or enactment (including, without limitation,
any such relating to liquidation of the Borrower) for the time being in
force.
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(i) The obligations of CAP(G) under this Clause 19.1 (Guarantee and Indemnity)
shall be in addition to and shall not be in any way prejudiced or affected
by any collateral or other security hereafter held by the Finance Parties
for any or all the moneys payable or expressed to be payable by the
Borrower under each Finance Document nor shall such collateral or other
security or any lien to which the Finance Parties may be otherwise entitled
or the liability of any person or persons for all or any part of such
moneys be in any manner prejudiced or affected by CAP(G)'s obligations
under this Clause 19.1 (Guarantee and Indemnity).
(j) Unless and until all sums payable or expressed to be payable under each
Finance Document shall have first been completely discharged, CAP(G) shall
not (i) be entitled as against the Finance Parties by paying off all or
part only of the moneys hereby secured or on any other ground to claim any
set-off or counterclaim against the Borrower in respect of any liability on
the part of CAP(G) to the Finance Parties in respect of any payment by
CAP(G) in respect of its obligations under this Clause 19.1 (Guarantee and
Indemnity), (ii) be entitled to claim or have the benefit of any set-off,
counterclaim or proof against or dividend, composition or payment by the
Borrower or any benefit of any security which the Finance Parties may now
or hereafter hold for such sums or to have any share therein or (iii) claim
payment of, or prove in any bankruptcy, winding-up, liquidation,
composition or arrangement relating to the Borrower for, any other moneys
for the time being due to CAP(G) from the Borrower or exercise any right or
a remedy in respect thereof.
(k) If the Borrower shall become bankrupt or go into liquidation or be wound up
or enter into a composition or make any arrangements with its creditors,
each Finance Party shall be at liberty to prove for the whole of the moneys
owing to it under each Finance Document in priority to any right of proof
on the part of CAP(G) and to accept any composition or any dividends or
payments, as if the obligations of CAP(G) under this Clause 19.1 (Guarantee
and Indemnity) had not been undertaken and to appropriate any such
composition, dividends or payments in reduction of any obligation of the
Borrower in priority to any claim by CAP(G) in respect thereof, and so that
its right to recover from CAP(G) to the full extent of the obligations of
CAP(G) under this Clause 19.1 (Guarantee and Indemnity) shall not be
prejudiced and so that the obligations of CAP(G) under this Clause 19.1
(Guarantee and Indemnity) shall apply to and secure any ultimate balance
which after receipt of such composition, dividends or payments may remain
due and owing to it under each such Finance Document.
(l) Subject to Clauses 19.1(m) and 19.1(n) (including without limitation the
complete payment and discharge of all sums payable by the Borrower under
each Finance Document), CAP(G) shall be fully subrogated, to the extent of
its payments hereunder, to the rights under each Finance Document of the
Finance Parties.
(m) Any moneys obtained by CAP(G) from the Borrower prior to the complete
payment and discharge of all sums payable under each Finance Document,
whether in breach of the provisions of this Clause 19.1 (Guarantee and
Indemnity) or otherwise, shall be held by CAP(G) on trust to pay the same
in or towards discharge of its obligations hereunder.
(n) Any liberty or power which may be exercised or any determination which may
be made hereunder by the Finance Parties may be exercised or made in its
absolute and unfettered discretion which shall not be under any obligation
to give reasons therefor.
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(o) Any settlement or discharge between CAP(G) and the Finance Parties shall be
conditional upon no security or payment to the Finance Parties by the
Borrower or CAP(G) or any other person on behalf of the Borrower or, as the
case may be, CAP(G) being avoided or reduced by virtue of any provisions or
enactments relating to bankruptcy, insolvency, liquidation or similar laws
of general application for the time being in force and, if any such
security or payment is so avoided or reduced, the Finance Parties shall be
entitled to recover the value or amount of such security or payment from
CAP(G) subsequently as if such settlement or discharge had not occurred.
(p) If any amount so guaranteed under Clause 19.1(a) above (the "Guaranteed
Amount") or any part of it is:
(i) irrecoverable from the Borrower; or
(ii) not recoverable by the Finance Parties from CAP(G), or any of them, on
the footing of a guarantee,
then CAP(G):
(A) shall pay to the Finance Parties an amount equal to such Guaranteed
Amount; and
(B) shall indemnify the Finance Parties against any claim, action, damage,
loss, liability, cost, charge and expense, outgoing or payment suffered,
paid or incurred by the Finance Parties in relation to the non-payment of
such Guaranteed Amount.
(q) Clause 19.1(p) above applies to any part of such Guaranteed Amount which is
or may be irrecoverable irrespective of whether:
(i) it is or may be irrecoverable by reason of any event described in
Clause 19.1 (Guarantee and Indemnity); or
(ii) the transactions or any of them relating to those moneys are void or
illegal or avoided or otherwise unenforceable; or
(iii) it is or may be irrecoverable by reason of any other fact or
circumstance whatsoever.
19.2 DEFAULT INTEREST
(a) If any Obligor fails to pay any amount payable by it under a Finance
Document on the due date for payment, it shall pay interest on the overdue
amount from the due date up to the date of actual payment, as well as after as
before judgment, at a rate (the "default rate") determined by the Facility Agent
to be 2% per annum above the rate which would have been payable in respect
thereof if the overdue amount had, during the period of non-payment, constituted
an Advance, bearing interest calculated for such successive interest periods of
such duration (which may be of one Business Day's duration) not exceeding three
months as the Facility Agent may determine (each a "Default Interest Period");
provided that, if the overdue amount is of principal which fell due otherwise
than on the last day of an Interest Period relating thereto then during the
unexpired portion of that Interest Period the
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overdue amount shall bear interest at the rate of 2% per annum above the rate
applicable thereto immediately before it fell due.
(b) The default rate will be determined by the Facility Agent on each
Business Day or two Business Days before the first day of the relevant Default
Interest Period, as appropriate.
(c) If it is not possible to determine LIBOR in accordance with paragraph
(a) of the definition of LIBOR and the Facility Agent determines that Dollar
deposits are not at the relevant time being made available by the Reference
Banks to leading banks in the London interbank market, the default rate
applicable in respect of that part of the overdue amount owed to each Lender
will be determined by reference to the rate notified by such Lender to the
Facility Agent to be the sum of (i) the cost to it of funding that part of the
overdue amount owed to it, (ii) the Applicable Margin and (iii) two% per annum.
(d) The relevant Obligor shall pay default interest on the last day of each
Default Interest Period and to the extent not so paid, default interest will be
compounded at the end of such Default Interest Period.
19.3 INDEMNITY
The Borrower shall on demand indemnify each Finance Party against any loss
or liability which it may incur as a consequence of:
(a) the occurrence of a Potential Event of Default or an Event of Default;
(b) the operation of Clause 18.31 (Consequences of the Occurrence of an
Event of Default) or Clause 23 (Sharing); or
(c) (other than by reason of gross negligence or wilful default by that
Finance Party) any Advance not being made after the Borrower has delivered a
Notice of Drawdown.
The Borrower's liability in each case includes any loss of the Applicable
Margin and any expense on account of funds borrowed, contracted for or utilised
to fund any amount payable under the Finance Documents, any amount repaid or
prepaid or the Loan.
20. CURRENCY OF ACCOUNT AND PAYMENT
20.1 CURRENCY OF ACCOUNT
The Dollar is the currency of account and payment for each sum payable by
an Obligor under the Finance Documents provided that:
(a) each payment in respect of costs and expenses shall be made in the
currency in which the same were incurred; and
(b) each payment pursuant to Clause 8.1 (Payment of Increased Costs) or
Clause 10.2 (Tax Indemnity) shall be made in the currency specified by the party
claiming thereunder.
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20.2 CURRENCY INDEMNITY
(a) If a Finance Party receives an amount in respect of an Obligor's
liability under the Finance Documents or if that liability is converted into a
claim, proof, judgment or order in a currency other than Dollars:
(i) the relevant Obligor shall indemnify that Finance Party as an
independent obligation against any loss or liability arising out of or
as a result of the conversion;
(ii) if the amount received by that Finance Party, when converted into
Dollars at a market rate in the usual course of its business is less
than the amount owed in Dollars, the relevant Obligor shall forthwith
on demand pay to that Finance Party an amount in Dollars equal to the
deficit; and
(iii) the relevant Obligor shall pay to that Finance Party on demand
any exchange costs and taxes payable in connection with any such
conversion.
(b) Each of the Obligors waives any right it may have in any jurisdiction
to pay any amount under the Finance Documents in a currency other than that in
which it is expressed to be payable.
21. PAYMENTS
21.1 PLACE
All payments by the Borrower or a Lender under the Finance Documents shall
be made to the Facility Agent to its account at such office or bank as it may
notify to the Borrower or such Lender for this purpose.
21.2 FUNDS
Payments under the Finance Documents to the Facility Agent shall be made
for value on the due date at such times and in such funds as the Facility Agent
may specify to the party concerned as being customary at the time for the
settlement of transactions in the relevant currency in the place for payment.
21.3 DISTRIBUTION
(a) Each payment received by the Facility Agent under a Finance Document
for another party to that Finance Document shall, subject to the terms of the
Intercreditor and Subordination Agreement (if any) and paragraphs (b) and (c) of
this Clause 21.3, be made available by the Facility Agent to that party by
payment (on the date and in the currency and funds of receipt) to its account
with such office or bank in the principal financial centre of the country of the
relevant currency as that party may notify to the Facility Agent for this
purpose by not less than five Business Days' prior notice.
(b) The Facility Agent may apply any amount received by it for an Obligor
in or towards payment (on the date and in the currency and funds of receipt) of
any amount due from such Obligor under a Finance Document.
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(c) Where a sum is to be paid to the Facility Agent under a Finance
Document for another party to that Finance Document, the Facility Agent is not
obliged to pay that sum to that party until it has established that it has
actually received that sum. The Facility Agent may, however, assume that the
sum has been paid to it in accordance with this Agreement, and, in reliance on
that assumption, make available to that party a corresponding amount. If the
sum has not been made available but the Facility Agent has paid a corresponding
amount to another party, that party shall on demand by the Facility Agent refund
the corresponding amount together with interest on that amount from the date of
payment to the date of receipt, calculated at a rate determined by the Facility
Agent to reflect its cost of funds plus, where such other party is the Borrower,
the relevant Margin.
21.4 NON-BUSINESS DAYS
(a) Subject to paragraph (b) of this Clause 21.4, if a payment under a
Finance Document is due on a day which is not a Business Day, the due date for
that payment shall instead be the next Business Day in the same calendar month
(if there is one) or the preceding Business Day (if there is not or if the next
Business Day would occur after the Final Maturity Date).
(b) During any extension of the due date for payment of any principal under
this Agreement interest shall be payable on that principal at the rate payable
on the original due date.
21.5 PARTIAL PAYMENTS
If the Facility Agent receives a payment insufficient to discharge all the
amounts then due and payable by an Obligor under a Finance Document, the
Facility Agent shall apply that payment towards the obligations of such Obligor
under that Finance Document in the order set out in the Intercreditor and
Subordination Agreement (if any) but otherwise in the following order:
(i) firstly, in or towards payment of any unpaid fees, costs and expenses
of the Agent payable under the Finance Documents;
(ii) secondly, in or towards payment pro rata of any accrued interest due
but unpaid under this Agreement;
(iii) thirdly, in or towards payment pro rata of any principal due but
unpaid under this Agreement; and
(iv) fourthly, in or towards payment pro rata of any other sums due but
unpaid under the Finance Documents.
(b) The Agent shall, if so directed by all of the Finance Parties, vary the
order set out in sub-paragraphs (a) (ii) to (iv) above.
(c) Paragraphs (a) and (b) above will override any direction made by the
Borrower.
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21.6 EVIDENCE OF DEBT
The Facility Agent shall maintain in accordance with its usual practice
accounts recording the amounts from time to time owing by an Obligor under each
Finance Document to each Finance Party. Each Finance Party shall maintain in
accordance with its usual practice accounts recording the amounts from time to
time owing by an Obligor under each Finance Document to that Finance Party. In
any legal proceeding and otherwise for the purposes of each Finance Document the
entries made in such accounts shall, in the absence of manifest error, be
conclusive and binding on each of the Obligors as to the existence and amounts
of the obligations of the Borrower recorded in that Finance Document.
21.7 CERTIFICATE CONCLUSIVE AND BINDING
Where any provision of a Finance Document provides that a Finance Party may
certify or determine an amount or rate payable by an Obligor, a certificate by
such Finance Party as to such amount or rate shall be conclusive and binding on
such Obligor in the absence of manifest error.
21.8 PAYMENTS TO FINANCE PARTIES
(a) Provided that no notice has been given by the Facility Agent pursuant
to Clause 18.31 (Consequences of the Occurrence of an Event of Default), any
amount due to a Finance Party by an Obligor pursuant to Clause 6.6 (Mandatory
Costs), Clause 7.7(a) (Insurance Mandatory Prepayment), Clause 8 (Change in Law
or Circumstances), Clause 10 (Taxes), Clause 19.3 (Indemnity) or Clause 25.16
(Borrower Indemnification) of this Agreement or under any of the other Finance
Documents (the "Outstanding Amount") shall be payable on the Quarterly Date
immediately succeeding such due date (provided that if such due date falls on a
Quarterly Date it will be payable on that Quarterly Date). If the Outstanding
Amount is paid on the applicable Quarterly Date it will not be liable to default
interest charges under Clause 19.2 (Default Interest) provided that the relevant
Obligor meets the relevant Finance Party's cost of funding such Outstanding
Amount (as notified by such Finance Party to the relevant Obligor) from the date
it falls due until the date payment is scheduled to be made under this Clause
21.8. Such cost of funds shall be due for payment on the same date as the
related Outstanding Amount.
22. SET-OFF
22.1 CONTRACTUAL SET-OFF
Each Obligor authorises each Finance Party to set-off and apply any credit
balance to which such Obligors is entitled on any account of such Obligors with
that Finance Party in satisfaction of any sum due and payable from such Obligor
to such Finance Party under the Finance Documents but unpaid; for this purpose,
each Finance Party is authorised to purchase with the moneys standing to the
credit of any such account such other currencies as may be necessary to effect
such application. Each Finance Party shall forthwith notify the Facility Agent
of any exercise of its rights under this Clause. This Clause shall not affect
any general or banker's lien, right of set-off or other right to which any
Finance Party may be entitled and is not intended to create any Security
Interest.
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22.2 SET-OFF NOT MANDATORY
No Finance Party shall be obliged to exercise any right given to it by
Clause 22.1 (Contractual Set-off).
23. SHARING
23.1 REDISTRIBUTION OF PAYMENTS
Except for payments to a Lender which were received by the Facility Agent
for the account of such Lender in accordance with a Finance Document and subject
to the terms of the Intercreditor and Subordination Agreement (if any), if, at
any time, any Lender (a "Recovering Lender") shall receive or recover (whether
by payment, the exercise of a right of set-off or combination of accounts or
otherwise) all or part of any amount payable to a Lender (a "Relevant Payment'')
under that Finance Document by an Obligor in a proportion which, in relation to
any amounts received by one or more other Lenders, represents more than its
proportional Participation in such amount payable (such excess being called in
this Agreement an "Excess Amount"), then:
(a) such Recovering Lender shall pay to the Facility Agent an amount equal
to the Excess Amount;
(b) there shall thereupon become due from such Obligor to the Recovering
Lender an amount equal to the amount paid by the Recovering Lender pursuant to
paragraph (a) of this Clause 23.1, the amount so due being, for the purposes
hereof, treated as if it were an unpaid part of the Recovering Lender's portion
of the Relevant Payment; and
(c) the Facility Agent shall treat the amount received by it from the
Recovering Lender pursuant to paragraph (a) of this Clause 23.1 above as if such
amount had been received by the Facility Agent from an Obligor in respect of
Relevant Payment and shall distribute such amount to the persons entitled to the
Relevant Payment (including the Recovering Lender) pro rata to their respective
entitlements thereto.
23.2 REPAYABLE RECOVERIES
If the whole or any part of any sum (a "Relevant Sum") received or
recovered by a Recovering Lender in respect of any amount owing to it by an
Obligor becomes repayable and is repaid to such Obligor by such Recovering
Lender, then:
(a) each Lender which has received a share of the Relevant Sum by reason of
the implementation of Clause 23.1 (Redistribution of Payments) shall, upon
request of the Facility Agent, pay to the Facility Agent for account of the
Recovering Lender an amount equal to its share of the Relevant Sum; and
(b) there shall become due from such Obligor to each Lender an amount equal
to the amount paid by it pursuant to paragraph (a) of this Clause 23.2, the
amount so due being, for the purposes of the Finance Documents, treated as if it
were the sum payable to such Lender against which such Lender's share of
Relevant Sum was applied.
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23.3 EXCEPTIONS
(a) A Recovering Lender need not redistribute any Excess Amount to the
extent that it would not, after the redistribution, have a valid claim against
an Obligor in the amount of the redistribution pursuant to Clause 23.1
(Redistribution of Payments).
(b) A Recovering Lender is not obliged to share with any other Lender any
amount which the Recovering Lender has received or recovered as a result of
taking legal proceedings if the other Lender had an opportunity to participate
in those legal proceedings but did not do so or did not take separate legal
proceedings.
23.4 NO SECURITY INTEREST
This Clause 23 (Sharing) is not intended to and shall not constitute a
Security Interest over any sums received or receivable by a Lender.
24. FEES, COSTS AND EXPENSES
24.1 Commitment Fee
The Borrower shall pay to the Facility Agent, in Dollars, for the account
of the Lenders (to be distributed among the Lenders in the proportions their
respective Commitments bears to the Total Commitments) a commitment fee (the
"Commitment Fee"), on the undrawn, uncancelled amount of the Total Commitments.
The Commitment Fee shall accrue from day to day and be calculated (on the basis
of the actual number of days elapsed and a year of 360 days) at the rate of 1.5%
per annum from the earlier to occur of (i) the First Drawdown Date and (ii) 1
December 1999 until the end of the Availability Period and shall be payable by
the Borrower to the Facility Agent quarterly in arrears from the date hereof.
24.2 AGENCY FEE
The Borrower shall pay to the Facility Agent for its own account an agency
fee in the amounts and at the times agreed in a separate letter to be agreed by
the Facility Agent and the Borrower.
24.3 UPFRONT FEES
The Borrower shall pay or cause to be paid to the Arranger an upfront fee
in the amount and at the time agreed in a separate letter to be agreed by the
Arranger and the Borrower.
24.4 SECURITY TRUSTEE FEE
The Borrower shall pay or cause to be paid to the Security Trustee a
Security Trustee fee in the amounts and at the times agreed in a separate letter
to be agreed by the Security Trustee and the Borrower.
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24.5 ACCOUNT BANK FEE
The Borrower shall pay or cause to be paid to the Accounts Bank an Accounts
Bank fee in the amounts and at the times agreed in a separate letter to be
agreed by the Accounts Bank and the Borrower.
24.6 TRANSACTION COSTS
The Borrower shall, on written demand (accompanied by copies of the
invoices therefor), pay the Finance Parties all reasonable legal and other fees
on a full indemnity basis (including without limitation, the fees of the
Independent Engineer, and any other consultants and all printing, translation,
communication, advertising, travel and other out-of-pocket expenses) incurred by
them in connection with the arrangement and syndication of the Facilities, the
negotiation, preparation and execution of the Finance Documents, the Updated
Reserves Report, the completion of the transactions contemplated in the Finance
Documents, any amendment of the Finance Documents and any calculation, approval,
consent or waiver to be made or given by the Finance Parties pursuant to or in
respect of any provision of a Finance Document.
24.7 PRESERVATION AND ENFORCEMENT COSTS
The Borrower shall, from time to time on demand pay to each Finance Party
all costs and expenses (including legal and other fees and the fees of the
Independent Engineer and any other consultants on a full indemnity basis and
printing, translation, communication, advertisement, travel and all other out-
of-pocket expenses) incurred in or in connection with the preservation and/or
enforcement (or attempted preservation and/or enforcement) of any right of a
Finance Party under a Finance Document.
24.8 STAMP TAXES
The Borrower shall pay all stamp, registration and other taxes and duties
and all notarial registration, recording and other like fees to which a Finance
Document or any judgment given in connection with that Finance Document is or at
any time may be subject and shall on demand indemnify each Finance Party against
any liabilities, costs, claims and expenses resulting from any failure to pay or
any delay in paying any such tax or duty or fees.
24.9 FACILITY AGENT'S ADDITIONAL COSTS
The Borrower shall, from time to time on demand of the Facility Agent (and
without prejudice to the provisions of Clause 24.6 (Transaction Costs) and 24.7
(Preservation and Enforcement Costs), compensate the Facility Agent at such
daily and/or hourly rates as the Facility Agent shall from time to time
reasonably determine and on demand indemnify the Facility Agent against all
reasonable costs and expenses (including telephone, fax, copying, travel and
personnel costs) incurred by the Facility Agent in connection with its taking
such action as it may deem appropriate or in complying with any instructions
from the Majority Lenders or any request by the Borrower in connection with:
(a) the granting or proposed granting of any waiver or consent requested by
an Obligor under a Finance Document;
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(b) any actual, potential or suspected breach by an Obligor of its
obligations under a Finance Document;
(c) the occurrence of an Event of Default or a Potential Event of Default;
or
(d) any amendment or proposed amendment to a Finance Document requested by
an Obligor.
24.10 PAYMENT OF FEES, COSTS AND EXPENSES
If on a Drawdown Date, there is due and payable and unpaid any amount
payable by the Borrower under this Clause 24, the Facility Agent or a Finance
Document may deduct such amount from the Advance then to be made available to a
Borrower and pay such amount to the Finance Party entitled thereto in accordance
with this Clause 24 or that Finance Document.
24.11 VALUE ADDED TAX
Any fee, cost or expense referred to in this Clause 24 is exclusive of any
value added Tax or any other similar Tax chargeable in connection with that fee,
cost or expense. The Borrower shall pay any value added Tax or other similar Tax
so chargeable at the same time as it pays the relevant fee, cost or expense.
25. THE FACILITY AGENT, THE ARRANGER AND THE MODELLER
25.1 Appointment of the Facility Agent
(a) Each Finance Party (other than the Facility Agent) irrevocably appoints
the Facility Agent to act as its Facility Agent under and in connection with the
Finance Documents.
(b) Each Finance Party irrevocably authorises the Facility Agent on its
behalf to perform the duties and to exercise the rights, powers and discretions
that are specifically delegated to it under or in connection with the Finance
Documents, together with any other incidental rights, powers and discretions.
(c) The Facility Agent has only those duties which are expressly specified
in this Agreement which are solely of a mechanical and administrative nature.
(d) The relationship between the Facility Agent and the other Finance
Parties is that of agent and principal only. Nothing in this Agreement or any
other Finance Document constitutes the Facility Agent as trustee or fiduciary
for any other party or any other person and the Facility Agent need not hold in
trust any moneys paid to it for a party or be liable to account for interest on
those moneys.
25.2 ROLE OF THE ARRANGER AND THE MODELLER
(a) Each Finance Party (other than the Modeller) irrevocably appoints the
Modeller to perform the duties and to exercise the rights, powers and
discretions that are
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specifically delegated to it under or in connection with this Agreement,
together with any other incidental rights, powers and discretions.
(b) The Modeller has only those duties which are expressly specified in
this Agreement which are solely of a mechanical and administrative nature.
(c) Nothing in this Agreement or any other Finance Document constitutes the
Modeller as trustee or fiduciary for any other party or any other person.
(e) Except as specifically provided in this Agreement, neither the Arranger
nor the Modeller has any obligation of any kind to any other party under or in
connection with any Finance Document.
25.3 FACILITY AGENT'S DISCRETIONS
The Facility Agent may:
(a) assume, unless it has, in its capacity as Facility Agent, received
notice to the contrary from any other party to this Agreement or it has actual
knowledge to the contrary, that:
(i) each representation made by an Obligor in connection with this
Agreement is true,
(ii) no Event of Default or Potential Event of Default has occurred
and is continuing,
(iii) no Obligor is in breach of or default under its obligations
under a Finance Document, and
(iv) any right, power, authority or discretion vested in this
Agreement upon the Majority Lenders, the Special Majority Lenders, the
Lenders or any other person or group of persons has not been
exercised;
(b) assume that the Facility Office of each Lender is that identified with
such Lender in the First Schedule (Commitments) (or, in the case of a New
Lender, at the end of the Transfer Certificate to which it is a party as a New
Lender) unless it has received from such Lender a notice designating some other
office of such Lender to replace its Facility Office;
(c) engage and pay for the advice or services of any lawyers, accountants,
surveyors or other experts whose advice or services may to it seem necessary,
expedient or desirable and rely upon any advice so obtained;
(d) rely as to any matters of fact which might reasonably be expected to be
within the knowledge of an Obligor upon a certificate signed by or on behalf of
the Borrower;
(e) rely upon any communication or document believed by it to be genuine;
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(f) refrain from exercising any right, power or discretion vested in it in
its capacity as Facility Agent under a Finance Document unless and until
instructed by the Majority Lenders as to whether or not such right, power or
discretion is to be exercised and, if it is to be exercised, as to the manner in
which it should be exercised; and
(g) refrain from acting in accordance with any instructions of the Majority
Lenders to begin any legal action or proceeding arising out of or in connection
with a Finance Documents until it has been indemnified and secured to its
satisfaction (whether by way of payment in advance or otherwise) against all
costs, claims, losses, expenses (including legal fees) and liabilities together
with any tax thereon which it will or may expend or incur in complying with such
instructions.
25.4 FACILITY AGENT'S OBLIGATIONS
The Facility Agent shall:
(a) promptly inform each Lender of the contents of any material notice or
document received by it in its capacity as Facility Agent from an Obligor under
a Finance Document;
(b) promptly notify each Lender of the occurrence of any Event of Default
or any default by an Obligor in the due performance of or compliance with its
obligations under a Finance Document of which the Facility Agent has notice from
any other party hereto;
(c) save as otherwise provided in this Agreement, act as Facility Agent
under the Finance Documents in accordance with any instructions given to it by
the Majority Lenders, which instructions shall be binding on the Arranger and
all the Lenders;
(d) not, save as otherwise provided in this Agreement, start legal
proceedings on behalf of a Lender without that Lender's prior written consent;
(e) if so instructed by the Majority Lenders, refrain from exercising any
right, power or discretion vested in it as Facility Agent under the Finance
Documents;
(f) consult with the Lenders to the extent practicable before making any
declaration or demand under Clause 18.31 (Consequences of the Occurrence of an
Event of Default) or effecting any amendment or waiver under Clause 30
(Amendments); and
(g) promptly account to each Lender for its due proportion of all payments
received by the Facility Agent from an Obligor or otherwise in connection with
the Facility.
25.5 EXCLUDED OBLIGATIONS
Notwithstanding anything to the contrary expressed or implied in this
Agreement, neither the Facility Agent, the Arranger nor the Modeller shall:
(a) be bound to enquire as to:
(i) whether or not any representation made by an Obligor in connection
with this Agreement is true,
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(ii) the occurrence or otherwise of any Event of Default or Potential
Event of Default,
(iii) the performance by an Obligor of its obligations under a
Finance Document or
(iv) any breach of or default by an Obligor of its obligations under a
Finance Document;
(b) be bound to account to any Lender for any sum received by it (other
than for the account of the Lenders) by way of fees or reimbursement of expenses
in connection with the Finance Documents or for any benefit received by it
arising out of any present or future banking or other relationship with any
Obligor or any person connected with the Borrower or the profit element of any
sum received by it for its own account;
(c) be bound to disclose to any other person any information relating to an
Obligor if such disclosure would or might in its opinion constitute a breach of
any Law or be otherwise actionable at the suit of any person and in any other
case, except as expressly stated in the Finance Documents; and
(d) be under any obligations other than those for which express provision
is made in this Agreement.
25.6 LENDER INDEMNIFICATION
(a) Without limiting the liability of any Obligor under the Finance
Documents, each Lender shall on demand indemnify the Facility Agent and the
Modeller for that Lender's proportion of any liability or loss incurred by the
Facility Agent or, as the case may be, the Modeller in any way relating to or
arising out of its acting as Facility Agent or, as the case may be, Modeller,
except to the extent that the liability or loss arises directly from the
Facility Agent's, or as the case may be, Modeller's gross negligence or wilful
misconduct.
(b) A Lender's proportion of the liability set out in paragraph (a) of this
Clause 25.6 will be the proportion which its Participation in the Loan (if any)
bears to the Loan on the date of the demand (or, if the Loan has then been
repaid in full, immediately prior to the final repayment thereof). However, if
no Advance has been made before the date of demand, then the proportion will be
the proportion which its Commitment bears to the Total Commitments at the date
of demand or, if the Total Commitments have then been cancelled, bore to the
Total Commitments immediately before being cancelled.
25.7 EXCLUSION OF LIABILITIES
None of the Facility Agent, Arranger or the Modeller accepts any
responsibility for the accuracy and/or completeness of any other information
supplied by an Obligor in connection with this Agreement (whether or not such
information was or is circulated by the Facility Agent, the Arranger or the
Modeller) or for the legality, validity, effectiveness, adequacy, authorisation,
genuineness, sufficiency or enforceability of a Finance Document or the
collectability of any amount payable under a Finance Document and none of the
Facility Agent, the Arranger or the Modeller shall be under any liability as a
result of taking or
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omitting to take any action in relation to a Finance Document, save in the case
of its gross negligence or wilful misconduct.
25.8 NO ACTIONS
Each Lender agrees that it will not assert or seek to assert against any
director, officer or employee of the Facility Agent, the Arranger or the
Modeller any claim it might have against any of them in respect of any matter
referred to in Clause 25.7 (Exclusion of Liabilities).
25.9 BUSINESS WITH THE BORROWER
The Facility Agent may accept deposits from, lend money to, and generally
engage in any kind of banking or other business with, an Obligor or any person
connected with an Obligor.
25.10 RESIGNATION OF THE FACILITY AGENT
(a) Notwithstanding its irrevocable appointment, the Facility Agent may
resign by giving notice to the Lenders and the Borrower, in which case the
Facility Agent may forthwith appoint one of the Shell Affiliates or any Lender
as successor Facility Agent or, failing that, the Majority Lenders may appoint a
successor Facility Agent.
(b) If the appointment of a successor Facility Agent is to be made by the
Majority Lenders but they have not, within 30 days after notice of resignation,
appointed a successor Facility Agent which accepts the appointment, the Facility
Agent may appoint a successor Facility Agent.
(c) The resignation of an Facility Agent and the appointment of any
successor Facility Agent will both become effective only upon the successor
Facility Agent notifying all the parties that it accepts its appointment.
Subject to paragraph (f) of this Clause 25.10, on giving the notification, the
successor Facility Agent will succeed to the position of the Facility Agent and
the term "Facility Agent" will mean the successor Facility Agent.
(d) A retiring Facility Agent shall, at its own cost, make available to the
successor Facility Agent such documents and records and provide such assistance
as the successor Facility Agent may reasonably request for the purposes of
performing its functions as the Facility Agent under the Finance Documents.
(e) Upon its resignation becoming effective, this Clause 25 shall continue
to benefit the retiring Facility Agent in respect of any action taken or not
taken by it under or in connection with the Finance Documents while it was the
Facility Agent, and, subject to paragraph (d) of this Clause 25.10, it shall
have no further obligations under the Finance Documents.
(f) The Majority Lenders or the Subordinated Lender may, by notice to the
Facility Agent, require it to resign in accordance with paragraph (a) of this
Clause 25.10 in which event, the Facility Agent shall resign in accordance with
that paragraph but shall not be entitled to appoint one of its Affiliates as
successor Facility Agent.
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(g) Provided no Event of Default or Potential Event of Default has occurred
and is continuing and unless such appointment is being made in connection with
the Syndication, the Borrower shall have the right to approve the appointment of
any successor Facility Agent (which approval shall not be unreasonably withheld
or delayed).
25.11 OWN RESPONSIBILITY
It is understood and agreed by each Lender that it has itself been, and
will continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Obligors and, accordingly, each Lender
warrants to the Facility Agent, the Arranger and the Modeller that it has not
relied on and will not hereafter rely on the Facility Agent, the Arranger or the
Modeller:
(a) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by an Obligor in connection with the
Finance Documents or the transactions contemplated in (whether or not such
information has been or is hereafter circulated to such Lender by the Facility
Agent, the Arranger or the Modeller); or
(b) to assess or keep under review on its behalf the financial condition,
creditworthiness, condition, affairs, status or nature of the Borrower.
25.12 INFORMATION
The Facility Agent shall promptly send to each Lender a copy of any
document received by it under Clause 3 (Conditions Precedent) but the Facility
Agent shall not be obliged to check its accuracy or completeness and, if
requested by that Lender, copies of all documents received by the Facility Agent
under Clause 14 (Financial Information) and Clause 16 (Positive Covenants).
25.13 TAX STATUS OF LENDERS
Each Lender (other than Shell Capital Limited) confirms in favour of the
Facility Agent (on the date of this Agreement, or, in the case of a New Lender,
on the date on which the relevant transfer becomes effective) that either:
(a) it is not resident for tax purposes in the United Kingdom and is
beneficially entitled to the Loan and the interest on the Loan; or
(b) it is a bank as defined for the purposes of Section 349 of the Income
and Corporation Taxes Act 1988 and is beneficially entitled to the Loan and the
interest on the Loan,
and each Lender agrees to notify the Facility Agent if there is any change in
its position from that set out above.
25.14 CERTIFICATES OF FACILITY AGENT
Where any provision of a Finance Document provides that an Facility Agent
may certify or determine an amount or rate payable by the Lenders or any of
them, a certificate by
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the Facility Agent as to such amount or rate shall be conclusive and binding on
each such Lender in the absence of manifest error.
25.15 NO RESTRICTION OF BUSINESS
The Facility Agent shall have the same rights and powers in its capacity as
Lender as any other Lender and may exercise such rights and powers as if it were
not acting as the Facility Agent in relation to the Finance Documents.
25.16 BORROWER INDEMNIFICATION
The Borrower shall forthwith on demand indemnify each of the Facility Agent
and the Modeller for its proportion of any and all liabilities, losses, damages,
penalties, actions, judgments, costs, expenses or disbursements of any kind
whatsoever which may be imposed, incurred by or asserted against the Facility
Agent in any way relating to or arising out of:
(a) it acting as Facility Agent for the Finance Parties or, as the case may
be, Modeller for the Facilities,
(b) it performing its duties under this Agreement and the other Finance
Documents as Facility Agent for the Finance Parties or, as the case may be,
Modeller for the Facilities or
(c) any action taken or omitted by it under this Agreement or any of the
other Finance Documents as Facility Agent for the Finance Parties or, as the
case may be, Modeller for the Facilities (including, without limitation, the
charges and expenses referred to in Clause 24 (Fees, Costs and Expenses) and all
stamp taxes or registration fees on or in connection with the Finance Documents
in respect of which it acts as Facility Agent for the Finance Parties, or as the
case may be, Modeller for the Facilities),
except to the extent that the liability or loss arises directly from the gross
negligence or wilful misconduct of the Modeller or the Facility Agent, as the
case may be.
26. MISCELLANEOUS
26.1 EXECUTION
This Agreement shall be effective as from its date. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts which when taken together shall constitute one agreement.
26.2 ENTIRE AGREEMENT
This Agreement and the other Finance Documents constitute the entire
obligations of the Finance Parties and supersede any previous expressions of
intent or understandings in respect of this transaction.
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26.3 DISCLOSURE OF INFORMATION
A Lender may disclose on a confidential basis such information about the
Obligors, or any of them, as such Lender shall consider appropriate to any
existing or potential assignee, transferee or sub-participant as referred to in
Clause 27 (Assignments and Transfers), any Holding Company of such Lender or any
Subsidiary of such Lender or of its Holding Company or any Shell Affiliate, its
professional advisers, any banking or other regulatory authority and any other
person if required by any applicable Law. The foregoing shall not limit any
other circumstances in which a Lender may lawfully disclose information.
26.4 FACILITY OFFICES
Each Lender shall participate in the Facility through its Facility Office,
but may change its Facility Office from time to time in relation to all or part
of its participation in the Facility on giving not less than five Business Days'
prior notice to the Facility Agent.
26.5 REFERENCE BANKS
If a Reference Bank ceases to act as a Reference Bank for any reason, the
Facility Agent (after consultation with the Lenders and the Borrower) shall
appoint another Lender or an internationally recognised bank or financial
institution with an office in London to replace that Reference Bank.
26.6 INDEPENDENT ENGINEER
(a) The Finance Parties hereby confirm any appointment which is made by the
Facility Agent of an Independent Engineer, upon the terms and subject to the
conditions to be separately agreed between the Facility Agent and the
Independent Engineer (the "Engagement Letter").
(b) Each party to this Agreement acknowledges that the Independent Engineer
will be appointed to act as consultant and adviser to the Finance Parties in
relation to technical matters relating to the Project within its own sphere of
competence. The terms of its appointment will be set out in Engagement Letter,
a copy of which will be given to, and acknowledged by, the Borrower. The
Facility Agent may, acting reasonably and consistently with the agreed scope of
work for the Independent Engineer, will request it to provide advice or services
in relation to the Project. All reports and other material prepared by the
Independent Engineer shall be provided to the Borrower or KKM at or about the
same time as they are provided to the Facility Agent provided that there shall
be excluded from any such material distributed to the Borrower and KKM any
portions reasonably determined by the Facility Agent in its discretion to
constitute advice to the Finance Parties in the context of negotiations or
disputes relating to the financing of the Project.
(c) Save as referred to in Clause 26.6 (b) and save in the case of any
breach by the Independent Engineer of its duty of confidentiality or any
undertaking of confidentiality, the Obligors acknowledge that the Independent
Engineer shall be responsible solely to the Finance Parties and has no
obligations, responsibility or liability towards or in favour of the Obligors.
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(d) The Facility Agent may at any time terminate the appointment of the
Independent Engineer if it considers it necessary or appropriate to do so, and
shall promptly give notice of any such termination to the Borrower. If the
Facility Agent terminates the appointment of the Independent Engineer it may
appoint as a replacement Independent Engineer, on such reasonable terms as it
sees fit, any person approved (which approval shall include an approval of the
fees and expenses to be payable to that person by the Borrower) for this purpose
by the Borrower (which approval may not be unreasonably withheld or delayed).
The terms of any such appointment shall be set out in an engagement letter
between such replacement Independent Engineer and the Facility Agent. The
termination of the Independent Engineer's or additional Independent Engineer's
appointment shall not in any way limit or affect the Borrower's obligations
under Clause 24.6 (Transaction Costs) above in respect of fees or expenses
levied or incurred by Independent Engineer or additional Independent Engineer on
or before such termination.
27. ASSIGNMENTS AND TRANSFERS
27.1 Binding Agreement
This Agreement shall be binding upon and ensure to the benefit of each
party to this Agreement and its successors and assigns.
27.2 THE BORROWER; PROHIBITION ON TRANSFERS, ETC.
The Borrower may not assign, transfer, novate or dispose of any of, or any
interest in, its rights or obligations under the Finance Documents.
27.3 LENDERS; LIMITATIONS ON TRANSFER AMOUNTS
Any Lender may, at its own cost, but subject to the provisions of this
Clause 27 (Assignments and Transfers), transfer all or part of its rights or
obligations under this Agreement and under the other Finance Documents to any
bank, financial institution or other company, provided that (save for (i) in the
case of a transfer to any Affiliate of such Lender, any other Lender or any
Affiliate of any other Lender or any Shell Affiliate or (ii) a transfer or
transfers to any bank, financial institution or other company in connection with
the Syndication)) no such transfer may be made without the prior consent of the
Borrower (such consent not to be unreasonably withheld or delayed and to be
deemed given if not refused within 15 days of receipt by the Borrower of the
request therefor or if an Event of Default shall have occurred and is
continuing) and provided further that:
(a) following such assignment, transfer or novation, the New Lender's
undrawn and uncancelled Commitment is not less than $1,000,000 and its
Participation in the Loan is not less than $1,000,000 (unless otherwise agreed
by the Facility Agent); and
(b) the amount of the Loan and the undrawn and uncancelled Commitment that
is assigned or transferred in any one transaction is not, in each case, less
than $ 1,000,000 (unless otherwise agreed by the Facility Agent).
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27.4 CONDITIONS FOR EFFECTIVE TRANSFERS
A transfer of obligations by any Lender (the "Existing Lender") to another
bank, financial institution or company (which may already be a Lender) (the "New
Lender") will be effective only if either:
(a) the obligations are novated in accordance with Clause 27.9 (Procedure
for Novations); or
(b) the New Lender confirms to the Facility Agent and the Borrower that it
undertakes to be bound by the terms of this Agreement as a Lender in form and
substance satisfactory to the Facility Agent. On the transfer becoming
effective in this manner the Existing Lender shall be relieved of its
obligations under this Agreement to the extent that they are transferred to the
New Lender.
27.5 LIMIT ON RESPONSIBILITY OF EXISTING LENDER
An Existing Lender is not responsible to a New Lender for:
(a) the execution, genuineness, validity, enforceability or sufficiency of
any Finance Document or any other document;
(b) the collectability of amounts payable under any Finance Document; or
(c) the accuracy of any statements (whether written or oral) made in or in
connection with any Finance Document.
27.6 CONFIRMATIONS OF NEW LENDER
Each New Lender confirms to the Existing Lender and the other Finance
Parties that it:
(a) has made its own independent investigation and assessment of the
financial condition and affairs of the Obligors and its related entities in
connection with its participation in this Agreement and has not relied
exclusively on any information provided to it by the Existing Lender in
connection with any Finance Document; and
(b) will continue to make its own independent appraisal of the
creditworthiness of the Obligors and its related entities while any amount is or
may be outstanding under this Agreement or any Commitment is in force.
27.7 NO RECOURSE BETWEEN EXISTING LENDER AND NEW LENDER
Nothing in any Finance Document obliges an Existing Lender to:
(a) accept a re-transfer from a New Lender of any of the Commitment and/or
rights and/or obligations transferred under this Clause; or
(b) support any losses incurred by the New Lender by reason of the non-
performance by the Obligors of their respective obligations under the Finance
Documents or otherwise.
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27.8 PAYMENT BY NEW LENDER
On each occasion an Existing Lender transfers its Commitment and/or any of
its rights and/or obligations under this Agreement, the New Lender shall, on the
date the transfer takes effect, pay to the Facility Agent for its own account a
fee of $ 1,000 (unless otherwise agreed by the Facility Agent).
27.9 PROCEDURE FOR NOVATIONS
(a) A novation is effected if the Existing Lender and the New Lender
deliver to the Facility Agent a duly completed certificate, substantially in the
form set out in the Second Schedule (a "Transfer Certificate") and the Facility
Agent executes it (such execution not to be unreasonably withheld or delayed).
(b) Each party to this Agreement (other than the Existing Lender and the
New Lender) irrevocably authorises the Facility Agent promptly to execute any
duly completed Transfer Certificate on its behalf.
27.10 EFFECT OF TRANSFER CERTIFICATE
To the extent that they are expressed to be the subject of the novation in
the Transfer Certificate:
(a) the Existing Lender and the other parties to this Agreement (the
"existing parties") will be released from their obligations to each other (the
"discharged obligations");
(b) the New Lender and the existing parties will assume obligations towards
each other which differ from the discharged obligations only insofar as they are
owed to or assumed by the New Lender instead of the Existing Lender;
(c) the rights of the Existing Lender against the existing parties and vice
versa (the "discharged rights") will be cancelled; and
(d) the New Lender and the existing parties will acquire rights against
each other which differ from the discharged rights only insofar as they are
exercisable by or against the New Lender instead of the Existing Lender,
all on the date of execution of the Transfer Certificate by the Facility Agent
or, if later, the date specified in the Transfer Certificate.
27.11 PAYMENTS TO EXISTING LENDER
All amounts (if any) payable to an Existing Lender by the Borrower on or
before the effective date of any transfer (including, without limitation, all
interest and fees payable on such effective date) in respect of any period
ending prior to such effective date shall be for the account of the Existing
Lender, and the New Lender shall not have any interest in, or any rights in
respect of, any such amount.
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27.12 REGISTER
The Facility Agent shall keep a register of all the parties to this
Agreement and shall supply any other party to this Agreement (at that party's
expense) with a copy of the register on request and the first Schedule will be
amended to take account any transfer.
27.13 PARTICIPATION
Nothing in this Clause 27 shall prevent any Lender from granting sub-
participations in its rights under this Agreement and the other Finance
Documents if the relationship between such Lender and the persons to whom such
sub-participations are granted is that of debtor and creditor and if the
existence of such sub-participations does not affect the rights or obligations
of any of the other parties to this Agreement or the other Finance Documents or
prevent any person from acquiring rights and benefits by way of security or
subrogation.
28. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
28.1 REMEDIES AND WAIVERS
Time is of the essence of each Obligor's obligations under this Agreement
but no failure to exercise, nor any delay in exercising, on the part of a
Finance Party, any right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
prevent any further or other exercise thereof or the exercise of any other right
or remedy. The rights and remedies contained in this Agreement are cumulative
and not exclusive of any rights or remedies provided by law. A Finance Party
may agree to any waiver of any of its rights or remedies under this Agreement on
such terms as it sees fit.
28.2 PARTIAL INVALIDITY
If, at any time, any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
neither the legality, validity or enforceability of the remaining provisions of
this Agreement under the law of that jurisdiction nor the legality, validity or
enforceability of that or any other provision of this Agreement under the law of
any other jurisdiction shall in any way be affected or impaired thereby unless
the effect of the foregoing would be substantially to alter the rights and
obligations of the parties originally agreed.
29. NOTICES
29.1 GIVING OF NOTICES
All notices or other communications shall be given in writing or by telex
or facsimile. Any such notice shall be deemed to be given as follows:
(a) if in writing, when delivered;
(b) if by telex, when despatched, but only if, at the time of transmission,
the correct answerback appears at the start and at the end of the sender's copy
of the notice; and
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(c) if by facsimile, when the answerback is received.
However, a notice given in accordance with the above but received on a non-
working day or after business hours in the place of receipt shall only be deemed
to be given on the next working day in that place.
29.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Facility Agent is:
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
or such other as the Facility Agent may notify to the other parties by not less
than five Business Days' notice.
(b) The address and facsimile number of the Arranger is:
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
or such other as the Arranger may notify to the other parties by not less than
five Business Days' notice.
(c) The address and facsimile number of the Modeller is:
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
or such other as the Modeller may notify to the other parties by not less than
five Business Days' notice.
(d) The address and facsimile number of the Borrower is:
Chaparral Resourses, Inc.,
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA.
Attention:
Facsimile: (281) 877 0985
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or such other as the Borrower may notify to the other parties by not less than
five Business Days' notice.
(e) The address and facsimile number of KKM is:
Karakuduk-Munay Inc.,
Microdistrict 3, Building 82,
Aktau, Republic of Kazakhstan.
Attention:
Facsimile: (7-3292) 518 336
or such other as KKM may notify to the other parties by not less than five
Business Days' notice.
(f) The address, telex number and facsimile number of CAP(G) is:
Central Asian Petroleum (Guernsey) Limited,
c/o Chaparral Resources, Inc.,
16945 Northchase Drive, Suite 1440,
Houston, Texas 77060, USA.
Attention:
Facsimile: (281) 877 0985
or such other as CAP(G) may notify to the other parties by not less than five
Business Days' notice.
(g) The address, telex number and facsimile number of CAP(D) is:
Central Asian Petroleum, Inc.,
c/o Chaparral Resources, Inc.,
16945 Northchase Drive, Suite 1440,
Houston, Texas 77060, USA.
Attention:
Facsimile: (281) 877 0985
or such other as CAP(D) may notify to the other parties by not less than five
Business Days' notice.
(h) The address, telex number, facsimile number and Facility Office (if
appropriate) of the Lenders for all notices or other communications are as set
out in the First Schedule (Commitments) (or, in the case of a New Lender, at the
end of the Transfer Certificate to which it is a party as New Lender) or such
other address, telex number, facsimile number or Facility Office (if
appropriate) as may be notified by such Lender for this purpose to the Facility
Agent by not less than five Business Days' prior notice.
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(i) All notices from or to an Obligor shall, except as otherwise expressly
provided in a Finance Document, be sent through the Facility Agent.
(j) The Facility Agent shall, promptly upon request from any party to the
Agreement, give to that party the address, telex number or facsimile number of
any other party to the Agreement applicable at the time for the purposes of this
Clause 29.
29.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to another
pursuant to the Finance Documents shall be in the English language or
accompanied by a translation thereof into English certified (by an officer of
the person making or delivering the same) as being a true and accurate
translation thereof.
30. AMENDMENTS
30.1 PROCEDURE
(a) Subject to Clause 30.2 (Amendments Requiring Unanimity) and save where
otherwise expressly provided in any Finance Document, no term or condition of
the Finance Documents may be amended or waived without the consent of the
Obligors and the Special Majority Lenders. The Facility Agent may effect, on
behalf of all the Lenders, an amendment, modification or waiver to which the
Special Majority Lenders have agreed.
(b) The Facility Agent shall promptly supply to the other parties to this
Agreement copies of any amendment or waiver effected under paragraph (a) of this
Clause 30.1, and any such amendment or waiver shall be binding on all the
parties to this Agreement.
(c) Where any consent, approval, determination, waiver or other decision is
required to be given, made or taken by the Special Majority Lenders, the
Facility Agent shall by notice to the Lenders specify the period of time (not
being less than three Business Days) within which replies are required and
whether the procedure in paragraph (d) of this Clause 30.1 will apply.
(d) If a Lender does not reply within the period specified by the Facility
Agent, the amount of its Participation in the Loan or its Commitment (as the
case may require) shall be disregarded (unless the Facility Agent otherwise
determines and so states in the notice) for the purpose of determining whether
or not the requisite percentage vote has been achieved.
(e) Any amendment or waiver made or given with respect to any Finance
Document which is required by this Clause 30.1 to be authorised by the Special
Majority Lenders shall, when made or given by the Facility Agent on behalf of
the Lenders, be binding upon all the Lenders. The Obligors shall not be bound
to enquire in connection therewith whether the provisions of this Clause 30.1
have been observed.
30.2 AMENDMENTS REQUIRING UNANIMITY
No amendment or waiver may be made or given with respect to a Finance
Document without the consent of all the parties to this Agreement which:
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(a) changes the definition of "Majority Lenders" or "Special Majority
Lenders" in Clause 1.1 (Definitions);
(b) extends the date for, or decreases the amount or changes the currency
of, any payment to or for a Finance Party under this Agreement;
(c) increases or reduces a Lender's Commitment;
(d) amends or waives a term of this Agreement which expressly requires the
consent of that Lender;
(e) increases or reduces a Lender's Participation in the Loan; or
(f) reduces, amends, waives or releases any Security Interest contained in
any Finance Document (other than as specifically provided for in that
Finance Document or a release which is not, in the reasonable opinion of
the Special Majority Lenders, material to the interests of the Finance
Parties under this Agreement); or
(g) amends or waives any term of the Intercreditor and Subordination
Agreement (if any); or
(h) increases or reduces any fee payable to a Lender under the Finance
Documents; or
(i) imposes any new obligation on a Lender;
(j) any increase in the Margin;
(k) changes the ratio of 3:1 between the amounts outstanding under the
Senior Facility and the amounts outstanding under the Subordinated
Facility; or
(l) amends Clause 23 (Sharing) or this Clause 30.2.
31. LAW AND JURISDICTION
31.1 ENGLISH LAW
THIS AGREEMENT SHALL BE GOVERNED BY ENGLISH LAW.
31.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE FINANCE PARTIES, EACH OF THE OBLIGORS
IRREVOCABLY AGREES THAT THE COURTS OF ENGLAND ARE TO HAVE JURISDICTION TO SETTLE
ANY DISPUTES WHICH MAY ARISE OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND
THAT ACCORDINGLY ANY SUIT, ACTION OR PROCEEDINGS (TOGETHER IN THIS CLAUSE 31
REFERRED TO AS "PROCEEDINGS") ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT MAY BE BROUGHT IN SUCH COURTS, SUBJECT TO THE OPTION REFERRED TO IN
CLAUSE 31.6 (ARBITRATION).
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(b) EACH OF THE OBLIGORS IRREVOCABLY WAIVES AND AGREES NOT TO RAISE ANY
OBJECTION WHICH IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OF ANY
PROCEEDINGS IN ANY SUCH COURT AS IS REFERRED TO IN THIS CLAUSE 31.2 AND ANY
CLAIM THAT ANY SUCH PROCEEDINGS HAVE BEEN BROUGHT IN AN INCONVENIENT OR
INAPPROPRIATE FORUM AND FURTHER IRREVOCABLY AGREES THAT A JUDGMENT IN ANY
PROCEEDINGS BROUGHT IN THE ENGLISH COURTS SHALL BE CONCLUSIVE AND BINDING UPON
EACH OF THE OBLIGORS AND MAY BE ENFORCED IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) NOTHING CONTAINED IN THIS CLAUSE 31.2 SHALL LIMIT THE RIGHT OF A
FINANCE PARTY TO TAKE PROCEEDINGS AGAINST ANY OF THE OBLIGORS IN ANY OTHER COURT
OF COMPETENT JURISDICTION, NOR SHALL THE TAKING OF PROCEEDINGS IN ONE OR MORE
JURISDICTIONS PRECLUDE THE TAKING OF PROCEEDINGS IN ANY OTHER JURISDICTION,
WHETHER CONCURRENTLY OR NOT.
31.3 PROCESS AGENT
EACH OF THE OBLIGORS HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) APPOINTS LAW DEBENTURE TRUST CORPORATION, WHOSE ADDRESS IS AT 95
GRESHAM STREET, LONDON EC2V 7LY, LONDON, ENGLAND AS ITS PROCESS AGENT TO
RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN ENGLAND IN ANY PROCEEDINGS
WITH RESPECT TO ANY FINANCE DOCUMENT;
(b) AGREES THAT FAILURE BY ANY SUCH PROCESS AGENT TO GIVE NOTICE OF SUCH
PROCESS TO IT SHALL NOT IMPAIR THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT
BASED THEREON; AND
(c) AGREES THAT NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
31.4 WAIVER OF IMMUNITY
TO THE EXTENT THAT ANY OF THE OBLIGORS MAY NOW OR HEREAFTER BE ENTITLED, IN
ANY JURISDICTION IN WHICH PROCEEDINGS MAY AT ANY TIME BE COMMENCED WITH RESPECT
TO THIS AGREEMENT, TO CLAIM FOR ITSELF OR ANY OF ITS UNDERTAKING, PROPERTIES,
ASSETS OR REVENUES PRESENT OR FUTURE ANY IMMUNITY (SOVEREIGN OR OTHERWISE) FROM
SUIT, JURISDICTION OF ANY COURT, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OF A JUDGMENT, EXECUTION OF A JUDGMENT OR FROM SET-OFF, BANKER'S
LIEN, COUNTERCLAIM OR ANY OTHER LEGAL PROCESS OR REMEDY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS AGREEMENT
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AND/OR TO THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED TO
SUCH OBLIGOR, ANY SUCH IMMUNITY (WHETHER OR NOT CLAIMED), SUCH OBLIGOR HEREBY TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW IRREVOCABLY AGREES NOT TO CLAIM,
AND HEREBY TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW WAIVES, ANY SUCH
IMMUNITY.
31.5 CONSENT TO ENFORCEMENT
EACH OF THE OBLIGORS CONSENTS GENERALLY IN RESPECT OF ANY PROCEEDINGS TO
THE GIVING OF ANY RELIEF OR THE ISSUE OF ANY PROCESS IN CONNECTION WITH SUCH
PROCEEDINGS INCLUDING THE MAKING, ENFORCEMENT OR EXECUTION AGAINST ANY PROPERTY
WHATSOEVER (IRRESPECTIVE OF ITS USE OR INTENDED USE) OF ANY ORDER OR JUDGMENT
WHICH MAY BE MADE OR GIVEN IN SUCH PROCEEDINGS.
31.6 ARBITRATION
IF ANY DISPUTE ARISES IN RELATION TO THIS AGREEMENT, INCLUDING ANY QUESTION
AS TO EXISTENCE, VALIDITY OR TERMINATION, SUCH DISPUTE SHALL, AT THE OPTION ONLY
OF A FINANCE PARTY, BE REFERRED TO AND FINALLY RESOLVED BY ARBITRATION UNDER THE
RULES OF THE LONDON COURT OF INTERNATIONAL ARBITRATION WHICH ARE APPLICABLE AT
THE TIME OF REFERENCE TO THE ARBITRATION AND ARE DEEMED TO BE INCORPORATED BY
REFERENCE INTO THIS CLAUSE 31.6. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON,
ENGLAND AND SHALL BE CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE
NOMINATED BY THE BORROWER, ONE BY THE RELEVANT FINANCE PARTY AND THE THIRD TO BE
AGREED BETWEEN THE TWO ARBITRATORS SO NOMINATED AND IN DEFAULT HE SHALL BE
NOMINATED BY THE PRESIDENT OF THE LONDON COURT OF INTERNATIONAL ARBITRATION. THE
LANGUAGE IN WHICH SUCH ARBITRATION SHALL BE CONDUCTED SHALL BE ENGLISH. ANY
AWARD RENDERED SHALL BE FINAL AND BINDING ON THE PARTIES THERETO AND MAY BE
ENTERED INTO ANY COURT HAVING JURISDICTION OR APPLICATION MAY BE MADE TO SUCH
COURT FOR AN ORDER OF ENFORCEMENT AS THE CASE MAY REQUIRE. NO PARTY MAY APPEAL
TO ANY COURT FROM ANY AWARD OR DECISION OF THE ARBITRAL TRIBUNAL AND, IN
PARTICULAR, BUT WITHOUT LIMITATION, NO APPLICATIONS MAY BE MADE UNDER SECTION 45
OF THE ARBITRATION ACT 1996 AND NO APPEAL MAY BE MADE UNDER SECTION 69 OF THE
SAID ACT.
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IN WITNESS WHEREOF this Agreement has been executed by the parties hereto
on the date stated at the beginning of this Agreement and it is intended to be
and is hereby delivered as a deed by Central Asian Petroleum (Guernsey) Limited.
THE BORROWER
------------
CHAPARRAL RESOURCES, INC.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE CO-OBLIGORS
---------------
EXECUTED as a DEED and DELIVERED by
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
acting by
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
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CENTRAL ASIAN PETROLEUM, INC.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CLOSED TYPE JSC
KARAKADUKMUNAY
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE FACILITY AGENT
------------------
SHELL CAPITAL LIMITED
as Facility Agent
By:_________________________________
Name:
Title:
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THE ARRANGER
------------
SHELL CAPITAL SERVICES LIMITED
as Arranger
By:_________________________________
Name:
Title:
THE MODELLER
------------
SHELL CAPITAL LIMITED
as the Modeller
By:_________________________________
Name:
Title:
THE LENDERS
-----------
SHELL CAPITAL LIMITED
as a Senior Lender
By:_________________________________
Name:
Title:
SHELL CAPITAL LIMITED
as the Subordinated Lender
By:_________________________________
Name:
Title:
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106
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THE FIRST SCHEDULE
COMMITMENTS
PART I
<TABLE>
<CAPTION>
LENDER AND FACILITY OFFICE ADDRESS FOR NOTICES COMMITMENT $
- ------------------------------- ----------------------------------- -------------------------------
<S> <C> <C>
SHELL CAPITAL LIMITED Shell Centre, London $18,000,000
Shell Centre, London SE1 7NA
SE1 7NA
</TABLE>
PART II
<TABLE>
<CAPTION>
LENDER AND FACILITY OFFICE ADDRESS FOR NOTICES COMMITMENT $
- ------------------------------- ----------------------------------- -------------------------------
<S> <C> <C>
SHELL CAPITAL LIMITED Shell Centre, London $6,000,000
Shell Centre, London SE1 7NA
SE1 7NA
</TABLE>
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THE SECOND SCHEDULE
FORM OF TRANSFER CERTIFICATE
.
$. LOAN AGREEMENT DATED ., .
This Transfer Certificate (the "Transfer Certificate") relates to a Loan
Agreement (the "Loan Agreement") dated . , . among (the "Borrower"), the Co-
Obligors, (as defined therein) the Arranger (as defined therein), the Modeller
(as defined therein), the Lenders (as defined therein), and ., as the Facility
Agent. Terms defined in the Loan Agreement are used herein as so defined.
1. We _____________ (the "Existing Lender") and _____________ (the "New
Lender") agree to the Existing Lender and the New Lender novating the Existing
Lender's Commitment (or part) and/or rights and obligations referred to in the
Schedule in accordance with Clause 27.9 (Procedure for Novations) of the Loan
Agreement.
2. The Facility Office and address for notices of the New Lender for the
purposes of Clause 29.2 (Addresses for Notices) of the Loan Agreement are set
out in the Schedule to this Transfer Certificate.
3. The New Lender undertakes to pay the fee required by Clause 27.8 (Payment by
New Lender) of the Loan Agreement.
4. This Transfer Certificate is governed by English law.
IN WITNESS WHEREOF, the Existing Lender, the New Lender and the Facility
Agent have executed this Transfer Certificate.
___________________________________
as New Lender
By:________________________________
Name:
Title:
___________________________________
as Existing Lender
By:_________________________________
Name:
Title:
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.
as Facility Agent, on behalf of itself and the
other parties to the Loan Agreement other than
the Existing Lender
By:_________________________________
(Authorised Signatory)
Name:
Title:
THE SCHEDULE
------------
1. Existing Lender's Commitment: $
2. Existing Lender's Participation in the Loan: $
3. Portion of Commitment Transferred: $
4. Portion of Loan Transferred: $
5. Date of Transfer:
6. Amount, if any, payable to Existing Lender by New Lender:
$___________ for value ___________ by transfer to account no.___________ at
___________
__________________________ __________________________________
as Existing Lender as New Lender
By:_______________________ By:_______________________________
Name: Name:
Title: Title:
Date:_____________________ Date:
New Lender's Facility Office details: New Lender's notice details:
Address: Address:
Telephone: Telephone:
Fax: Fax:
Attention: Attention:
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THE THIRD SCHEDULE
CONDITION PRECEDENT DOCUMENTS
The following are the documents referred to in Clause 3.1 (Initial
Conditions Precedent). Documents shall be supplied in such number of copies or
counterparts as the Facility Agent may require. Copies may be required to be
certified or notarised in a manner satisfactory to the Facility Agent.
1. (a) Originals of each of the Finance Documents (other
than the Security Documents) duly executed by all the parties thereto).
(b) Originals of each of the Security Documents duly executed by all the
parties thereto, together with the notices and acknowledgements and other
documents ancillary to the Security Documents duly executed by the parties
thereto.
2. (a) Each of the Project Documents duly executed by all the parties thereto
together with evidence satisfactory to the Facility Agent that all conditions to
the effectiveness of the Project Documents have been fulfilled (save, subject to
paragraph 3 below) where the only condition to its effectiveness is the first
drawing under the Facilities).
(b) Evidence satisfactory to the Facility Agent that all payments due under
the STASCO Service Agreement have been made and the conditions to effectiveness
contained in article 2.1 ii and iii of the Offtake Agreement have been fulfilled
(except for any payment due under the STASCO Service Agreement which may be paid
from the proceeds of the first Advance).
3. A certificate of encumbency duly executed by an Authorised Signatory of an
Obligor substantially in the form attached hereto as Exhibit A attaching:
(a) certified copies of the constitutional documents of such Obligor;
(b) certified copies of the resolutions of the board of directors and, if
required by law, the shareholders of such Obligor authorising such Obligor to
enter into the Transaction Documents and the transactions contemplated under the
Transaction Documents and authorising a specified person or persons to sign and
deliver the Transaction Documents on its behalf, and further authorising a
specified person or persons to give all notices and to take all other action
required pursuant to or in connection with the Transaction Documents on the part
of such Obligor;
(c) in the case of the Borrower and CAP(D), up-to-date certificates of
goodstanding from the Secretary of State of the State of Delaware; and
(d) a specimen signature, duly authenticated on behalf of such Obligor of
each of the persons referred to paragraph 3(b) above authorised to act on its
behalf.
4. (a) Legal opinions in form and substance satisfactory to the Facility
Agent from:
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(i) legal counsel (approved by the Facility Agent) to each of the Obligors
in the Republic of Kazakhstan, Guernsey, the states of Delaware and Texas
in relation to the Transaction Documents to which an Obligor is a party;
and
(ii) legal counsel to the Finance Parties in England, Guernsey and the
Republic of Kazakhstan in relation to the Finance Documents.
(b) A certificate of encumbency duly executed by an Authorised Signatory of
each Project Document Party substantially in the form attached hereto as
Exhibit A attaching:
(i) certified copies of the constitutional documents of such Project
Document Party; and
(ii) certified copies of the resolutions of the board of directors of such
Project Document Party authorising such Project Document Party to enter
into the Project Documents to which it is party and authorising a specified
person or persons to sign and deliver the Transaction Documents on its
behalf.
5. Evidence that each of the Obligors has appointed an agent to accept service
of process in London in accordance with the terms of the Finance Documents and
of the acceptance by such agent of its appointment.
6. The Project Budget.
7. The KKM Initial Operating Budget and the CRI Initial Operating Budget.
8. The Base Case Cash Flow Forecast.
9. The Financial Model and any banking cases and other sensitivities prepared
by the Lenders, audited by an independent auditor.
10. The Reserves Report.
11. the Development Plan and the Environmental Plan.
12. Certified copies of the most recent financial statements of the Borrower
and its US GAAP Subsidiaries as required to be maintained in accordance with
Clause 14.1 (Financial Statements).
13. Certified copies of each of the Consents (including without limitation, the
Permanent Licence from the National Bank of the Republic of Kazakhstan in
respect of convertibility and repatriation of KKM revenues and the
establishment of the KKM Proceeds Account and the Consents relating to the
security arrangements and the Technical Services Agreements).
14. (a) Certified copies of the Political Risk Policy and
the Transport Risk Insurance Policy and evidence satisfactory to the Facility
Agent that each of the Political Risk Policy and the Transport Risk Insurance
Policy is in place and all premiums are paid up to date.
(b) Certified copies of the Hedging Agreement and evidence satisfactory to
the Facility Agent that the put is in place and that Hedging Payment has been
made.
111
<PAGE>
15. Evidence satisfactory to the Facility Agent that the Project Accounts have
be established in accordance with the Accounts Agreement.
16. (a) The CRI Bridge Notes and the CRI Existing Notes.
(b) Evidence that the proceeds of the CRI Existing Notes and the CRI Bridge
Notes have been used only in or towards KKM Permitted Expenses, Additional
Permitted Expenses or repayment of the Chase Promissory Notes.
17. The CRI Letter of Credit.
18. Evidence satisfactory to the Facility Agent that KKM has appointed an
independent share registrar in compliance with Kazakh company law and that it
holds the updated Share Register for KKM.
19. Evidence satisfactory to the Facility Agent that CAP(G) is in compliance
with Guernsey corporate law.
20. CRI Warrant Agreement.
21. Report from the National Securities Commission in relation to the issuance
and distribution of shares in KKM.
22. An agreement evidencing the irrevocable appointment of a representative of
Shell Capital Limited to the board of directors of the KKM and CAP(G) and, on a
best efforts basis, the Borrower, on terms satisfactory to Shell Capital
Limited.
23. Release of all pledges of shares in CAP(G) more particularly identified in
the Seventh Schedule (Disclosure of Outstanding Severity Interests).
24. Approval by KKM's general meeting (3/4 majority) of the Security Documents.
25. Approval by KKM's board of directors of the CAP(G)-KKM Loan Agreement.
26. Evidence that the services contract for the Project between KKM and Road
Runner has terminated.
27. A certificate issued by the Auditors in respect of the solvency of each of
the Obligors.
28. Evidence satisfactory to the Lenders that the Security Interests set forth
in the Seventh Schedule (Disclosure of Outstanding Security Interests) have or
upon first disbursement will have been irrevocably discharged.
29. Evidence satisfactory to the Lenders that the events set forth in the
Eighth Schedule (Disclosure of Existing Defaults) have or upon first
disbursement will have been cured.
30. Evidence satisfactory to the Lenders that the indebtedness of the Obligors
set forth in the Tenth Schedule (Disclosure of Financial Indebtedness) has or
upon first disbursement will have been irrevocably discharged.
112
<PAGE>
31. Evidence satisfactory to the Lenders that all Computer Systems used by each
of the Obligors or its principal customers or suppliers with respect to mission
critical functions are Year 2000 Compliant.
32. The share certificates and blank transfer forms duly executed by the
relevant chargor together with certified copies of the share registers to be
delivered pursuant to the share charges listed in paragraphs (i) to (iv) of the
definition of "Security Documents" in Clause 1.1(Definitions) and signed but
undated resignation letters from the directors of the relevant Chargor.
113
<PAGE>
THE FOURTH SCHEDULE
NOTICE OF DRAWDOWN
From:
To:
Date:_________________
Dear Sirs,
1. We refer to the Loan Agreement (as from time to time amended, varied,
novated or supplemented, the "Loan Agreement") dated and made among , as
borrower, the Co-Obligors (as defined therein), Shell Capital Services Limited,
as Arranger, , as Facility Agent, Shell Capital Limited, as the Modeller and
the banks and financial institutions named therein as lenders. Terms defined in
the Loan Agreement shall have the same meanings in this notice.
2. We wish to borrow an Advance under the Loan Agreement in the amount of
$_______ as follows:
(a) Drawdown Date
(b) Payment Instructions: [Details of Account]
(c) First Interest Period: _________ months [in the case of the first
Advance]
(d) the purpose of the Advance is [ ]
3. We confirm that:
(a) each of the conditions contained in Clause 3 (Conditions Precedent) of
the Loan Agreement (other than those which have been waived by the Facility
Agent, acting on the instructions of the Majority Lenders) is satisfied on the
date of this Notice of Drawdown and will be satisfied immediately after giving
effect to the making of such Advance;
(b) the representations and warranties contained in Clause 11
(Representations and Warranties) of the Loan Agreement which are expressed to be
made or repeated on the date of this Notice of Drawdown are true and correct
with reference to the facts and circumstances now subsisting and will be true
and correct immediately after the Advance is made; and
(c) no Event of Default or Potential Event of Default has occurred and is
continuing or might reasonably be expected to result from the Advance.
114
<PAGE>
4. We attach to this Notice of Drawdown a certificate as to the use of the
proceeds of such Advance (which forms an integral part of this Notice of
Drawdown).
5. This Notice of Drawdown shall be governed by English law.
Yours faithfully,
By:_________________________________
Name:
Title:
115
<PAGE>
EXHIBIT A
CERTIFICATE AS TO USE OF LOAN PROCEEDS
--------------------------------------
U.S.$[ ] Loan Agreement dated [ ] 199[ ]
----------------------------------------------------
Certificate as to use of Advance Proceeds
-----------------------------------------
To: [ ] as Facility Agent
From: Chaparral Resources, Inc. as Borrower
Dated: [ ]
In respect of Notice of Drawdown No: [ ]
1. This certificate is attached to, and forms part of, the Notice of Drawdown
dated [ ]. References herein to Clauses and Schedules are, save as
otherwise indicated, references to Clauses of, and Schedules to, the above
mentioned Loan Agreement.
2. We confirm that:
[(a) the costs against which the proceeds of the Advance will be applied,
have been or will be incurred in respect of Capital Expenditure in accordance
with the Project Budget;
(b) any such costs have been paid or are due or will be due by KKM before
or on the proposed Drawdown Date or within thirty (30) days thereof in or
towards the following Capital Expenditure:
[itemise Capital Expenditure] ]
[OR]
[itemised CRI Overheads]
[OR]
[the costs against which the proceeds of the Advance will be applied, have
been or will be incurred in respect of [fees/interest - specify amount] due for
payment under the Loan Agreement by CRI on or before the proposed Drawdown
Date.]
116
<PAGE>
117
<PAGE>
THE FIFTH SCHEDULE
REDUCTION INSTALMENTS
<TABLE>
<CAPTION>
Column (1) Column (2) Column (3)
REDUCTION RATE SENIOR LOAN PERCENTAGE SUBORDINATED LOAN PERCENTAGE
<S> <C> <C>
First Reduction Date 5.56 0
Second Reduction Date 6.25 2.45
Third Reduction Date 6.25 2.45
Fourth Reduction Date 10.42 4.08
Fifth Reduction Date 10.42 4.08
Sixth Reduction Date 12.50 4.89
Seventh Reduction Date 12.50 4.89
Eighth Reduction Date 12.50 7.07
Ninth Reduction Date 12.50 30.96
Tenth Reduction Date 11.10 26.09
Eleventh Reduction Date 0 6.52
Twelfth Reduction Date 0 6.52
</TABLE>
118
<PAGE>
THE SIXTH SCHEDULE
TERMS OF CRI LETTER OF CREDIT
The letter of credit to be opened and maintained under Clause 16.22 (CRI Letter
of Credit) shall include the following terms:
(i) it shall be governed by English law;
(ii) the proceeds shall be payable in Dollars;
(iii) the proceeds of such letter of credit shall be assignable in
accordance with the Finance Documents;
(iv) it shall be an on-demand irrevocable letter of credit and the Facility
Agent shall be the sole beneficiary;
(v) it shall comply with the description set out in Clause 16.22 (CRI
Letter of Credit);
(vi) it shall be subject to the terms of the Uniform and Customary Practice
Documentary Credits (the 1993 Revision) ICC Publication Number 500;
(vii) the form and substance of the letter of credit shall be subject
to the prior written approval of the Facility Agent on behalf of the Finance
Parties.
119
<PAGE>
THE SEVENTH SCHEDULE
DISCLOSURE OF OUTSTANDING SECURITY INTERESTS
(SEE ATTACHED)
120
<PAGE>
THE EIGHTH SCHEDULE
DISCLOSURE OF EXISTING DEFAULTS
(SEE ATTACHED)
121
<PAGE>
THE NINTH SCHEDULE
DISCLOSURE OF EXISTING CLAIMS
(SEE ATTACHED)
122
<PAGE>
THE TENTH SCHEDULE
DISCLOSURE OF OUTSTANDING INDEBTEDNESS
(SEE ATTACHED)
123
<PAGE>
APPENDIX A
----------
<TABLE>
<CAPTION>
Test Over Time Period Technique to measure
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil Production on an average 45 days KazTransoil Metered tickets
daily rate over the period
of 13,000 b/d including
facilities downtime,
whether planned or unplanned
- ---------------------------------------------------------------------------------------------------------
Water Injection on an 45 days Documentation as supplied to
average daily rate over the NIPI-Munaigas
period of 15,000 b/d
including facilities
downtime, whether planned
or unplanned
- ---------------------------------------------------------------------------------------------------------
Gas Lift System Running of compressors, Witnessed by engineer
injection of lift gas into appointed by Shell Capital
one well over 24 Hour period. Limited
- ---------------------------------------------------------------------------------------------------------
Evacuation through station 6 24 Hours Witnessed by engineer
into main export line appointed by Shell Capital
Limited
- ---------------------------------------------------------------------------------------------------------
Oil is exported and Two export sales delivered Stasco Bills of Lading
delivered to approved
Stasco lifting points
- ---------------------------------------------------------------------------------------------------------
Associated Gas Disposal Compliance with local Witnessed by engineer
regulations. appointed by Shell Capital
Limited.
- ---------------------------------------------------------------------------------------------------------
Produced Water disposal Compliance with local Witnessed by engineer
regulations. appointed by Shell Capital
Limited.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
124
<PAGE>
EXHIBIT A
[FORM OF CERTIFICATE OF ENCUMBENCY ]
[Letterhead of [OBLIGOR]
To: Shell Capital Limited, as Facility Agent
Date: [ ]
I, [ ] a Director of [OBLIGOR] (the "COMPANY") HEREBY CERTIFY THAT:
(a) attached hereto marked "A", are true and correct and up-to-date copies of
all documents which contain or establish the constitution of the Company;
(b) attached hereto marked "B", is a true and correct copy of the [minutes of a
meeting] of the [Board of Directors] of the Company authorizing:
(i) the Company to enter into the following documents(1):
[
] (the "TRANSACTION DOCUMENTS"); and
(ii) the following officers of the Company to execute the Transaction
Documents for and on behalf of the Company and to give all notices and to take
all other action required pursuant to or in connection with the Transaction
Documents on the part of the Company:
[
] (the "AUTHORISED SIGNATORIES").
[(c) attached hereto marked "C", is a true and correct copy of the resolution
of the shareholders of the Company authorizing the execution of the Transaction
Documents by the Company;](2)
[(d) attached hereto marked "D" is an up-to-date certificate of goodstanding
for the Company (dated not less than 10 days prior to the first drawing under
the Loan Agreement) from the Secretary of State of the state of Delaware; and]
(e) attached hereto marked "E" are the true signatures of the Authorised
Signatories referred to in paragraph (b) above.
Signed:
By:________________________
Name:
Title: Director
(1) To include the Project Documents
(2) This may only be relevant for KKM security
125
<PAGE>
Name:
Title:
126
<PAGE>
Exhibit 99.1
CHAPARRAL
CHAPARRAL RESOURCES, INC.
================================================================================
JOINT NEWS RELEASE
***For Immediate Release***
For further information:
------------------------
Natalie S. Hairston
Director of Corporate Affairs
Chaparral Resources, Inc.
281-877-7100
Mark Turner
Director International Upstream Oil & Gas Group
Shell Capital Services Limited
+44-171-934-1234
CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL SERVICES LIMITED
- ------------------------------------------------------------
ANNOUNCE SIGNING OF $24.0 MILLION LOAN AGREEMENT
- ------------------------------------------------
HOUSTON, TEXAS, NOVEMBER 1, 1999--CHAPARRAL RESOURCES, INC. (NASDAQ: CHAR),
Karakuduk-Munay, JSC ("KKM") and Shell Capital Services Limited announced the
signing today of a $24.0 million loan agreement which will enable Chaparral
Resources and KKM to develop the Karakuduk Field located in the Mangistrau
Region of the Republic of Kazakhstan. KKM holds a license to develop the
Karakuduk Field, which covers an area of approximately 17,000 acres. In
addition, KKM entered into a Crude Oil Sale and Purchase Agreement with Shell
Trading International Limited for the purchase of oil production from the
Karakuduk Field.
John G. McMillian, Co-Chairman of Chaparral Resources, stated, "We are committed
to the development of the Karakuduk Field, and we will, as expediently as
possible, satisfy the various conditions to funding, including the conversion of
outstanding loans by stockholders to Chaparral Resources, the repayment of
certain indebtedness, and an equity infusion of approximately $9.0 million". It
is anticipated that funding will begin in mid to late November 1999.
Chaparral Resources also announced the issuance of $3.0 million of its 8%
Non-Negotiable Convertible Subordinated Promissory Notes as interim financing
until funding under the loan agreement.
Chaparral Resources, Inc. is an international oil and gas exploration and
production company. The Company participates in the development of the Karakuduk
Field through Karakuduk-Munay, Inc. ("KKM") of which the Company is the
operator. The Company owns a 50% beneficial ownership interest in KKM with the
other 50% ownership interest being held by Kazakh investors, including
KazakhOil, the government-owned oil company.
===============================================================================
16945 Northchase . Suite 1440 . Houston, Texas 77060
281-877-7100 . 281-877-0985 Fax
www. CahparralResources.com
<PAGE>
Joint Press Release
November 1, 1999
Page 2
Information Regarding Forward-Looking Statements: Except for historical
information contained herein, the statements in this Press Release are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties which may cause the
Company's actual results in future periods to differ materially from forecasted
results. These risks and uncertainties include, among other things, volatility
of oil prices, product demand, market competition, risks inherent in the
Company's international operations, imprecision of reserve estimates and the
Company's ability to replace and expand oil and gas reserves. These and other
risks are described in the Company's Annual Report on Form 10-K/A and other
filings with the Securities and Exchange Commission.
===============================================================================
16945 Northchase . Suite 1440 . Houston, Texas 77060
281-877-7100 . 281-877-0985 Fax
www.ChaparralResources.com
<PAGE>
Exhibit 99.2
CHAPARRAL
CHAPARRAL RESOURCES, INC.
================================================================================
NEWS RELEASE
***For Immediate Release***
For further information:
------------------------
Natalie S. Hairston
281/877-7100
CHAPARRAL RESOURCES, INC. ANNOUNCES FURTHER FINANCING DEVELOPMENTS
- ------------------------------------------------------------------
HOUSTON, TEXAS, NOVEMBER 3, 1999 -- CHAPARRAL RESOURCES, INC. (NASDAQ: CHAR)
announced on November 1, 1999 that a $24.0 million loan transaction was signed
between Chaparral Resources, Inc. (the "Company"), Karakudak Munay, JSC, and
Shell Capital Services Limited ("Shell"). The Company is aware of the recent
activity in its common stock since such announcement, and it has no knowledge of
any material events relating to the Company, other than such announcement, that
may have contributed to the recent activity. The consummation of the loan with
Shell is subject to a number of significant conditions, including, without
limitation, (i) an equity infusion of at least $9.0 million, (ii) obtaining
political risk insurance, (iii) the hedging of a significant portion of the
Company's future oil production, and (iv) the retirement or conversion of all of
the Company's outstanding approximate $9.1 million of term and demand debt;
namely, (a) the $5.1 million of secured stockholder bridge loans (the
"Stockholder Loans"), (b) the $3.0 million of the Company's unsecured 8%
Non-negotiable Convertible Promissory Notes (the "Notes"), and (c) the $1.0
million of outstanding indebtedness of the Company to a domestic lender (the
"Bank Loan"). The Company announces that as of November 2, 1999, the three
holders of the Stockholder Loans intend to exercise their right pursuant to the
terms of such Stockholder Loans, to exchange the Stockholder Loans for debt
containing terms and conditions identical to the Notes issued to eight investors
in connection with the interim financing announced on November 1, 1999,
including a conversion price equal to $1.86 per share of the Company's common
stock. The Stockholder Loans and other indebtedness of the Company are described
in detail in the Company's periodic reports filed with the Securities and
Exchange Commission. The conversion provisions of the Notes are subject to
stockholder approval. The failure of the stockholders to approve the conversion
provisions of the Notes will result in an increase of the annual interest rate
payable under the Notes to the lesser of 25% or the maximum rate allowed by
applicable law.
In connection with consummation of the loan, the Company will issue to Shell a
warrant to purchase up to 15% of the Company's outstanding common stock. The
warrant is non-transferable and may not be exercised for a period of
approximately 18 months after its initial issuance. The warrant exercise price
is determined by reference to the average closing price of the
-- more --
===============================================================================
16945 Northchase . Suite 1440 . Houston, Texas 77060
281-877-7100 . 281-877-0985 Fax
www.ChaparralResources.com
<PAGE>
Chaparral Resources, Inc. News Release
November 3, 1999
Page 2
Company's common stock for the 90-day period immediately preceding November 1,
1999 and contains anti-dilution and registration rights provisions.
To satisfy the $9.0 million equity infusion condition to the funding under the
Shell loan, the Board of Directors of the Company, on November 2, 1999,
authorized a Dutch Auction format rights offering of its common stock at $1.86
per share (governed by each stockholders' proportionate stockholdings). Other
significant matters relating to the rights offering have not been finalized as
of today, including, the record date for stockholders entitled to participate in
the rights offering, the approximate date upon which the rights are to be issued
and the proposed term or expiration date of the rights. In addition to the
conversion provisions of the Notes being subject to stockholder approval, the
rights offering is also subject to stockholder approval. The rights offering
will be made only by means of a prospectus, after effectiveness of a
registration statement to be filed by the Company with the Securities and
Exchange Commission.
The effect of the conversion of the Notes, the issuance of the Notes to
eliminate the Stockholder Loans and the issuance of the warrant to Shell will
result in the issuance, in the aggregate, of approximately 5.3 million shares of
the Company's common stock. The Company's Series A Preferred Stock contains
certain anti-dilution provisions; consequently, the issuance of the Notes
discussed above may result in the issuance of an additional 225,000 shares of
the Company's common stock pursuant to such anti-dilution provisions. In
addition, the Company may issue additional Notes, shares or common stock or
securities convertible into common stock in order to eliminate the approximate
$1.0 million Bank Loan.
The Company has received a fairness opinion from its independent financial
advisor with respect to the conversion of the Stockholder Loans, the conversion
of the outstanding Notes and the rights offering. No assurances can be given by
the Company that (i) the loan with Shell will be consummated, (ii) the
stockholders of the Company will approve the conversion provisions of the Notes,
or (iii) that the raising of $9.0 million in new equity will be successfully
completed or raised on terms favorable to the Company.
Chaparral Resources, Inc. is an international oil and gas exploration and
production company. The Company participates in the development of the Karakuduk
Field through KKM of which the Company is the operator. The Company owns a 50%
beneficial ownership interest in KKM with the other 50% ownership interest being
held by Kazakh investors, including KazakhOil, the government-owned oil company.
Information Regarding Forward-Looking Statements: Except for historical
information contained herein, the statements in this Press Release are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties which may cause the
Company's actual results in future periods to differ materially from forecasted
results. These risks and uncertainties include, among other things, the ability
of the Company to secure financing, volatility of oil prices, product demand,
market competition, risks inherent in the Company's international operations,
imprecision of reserve estimates and the Company's ability to replace and expand
oil and gas reserves. These and other risks are described in the Company's
Annual Report on Form 10-K/A and other filings with the Securities and Exchange
Commission.
Chaparral Resources, Inc. News Release
November 3, 1999
Page 2
###
