_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 14, 2000
CHAPARRAL RESOURCES, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-7261 84-0630863
(State or Other (Commission (IRS Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
16945 Northchase, Suite 1620 77060
Houston, Texas (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code: (281) 877-7100
_________________________________________________________________________
ITEM 5. OTHER EVENTS
LOAN AGREEMENT DEVELOPMENTS. On February 14, 2000, Chaparral
Resources, Inc., a Delaware corporation (the "Registrant"), announced the
finalization and first drawdown of $8.3 million under its $24.0 million
loan agreement, as amended, with Shell Capital Services Limited ("Shell").
Subsequent drawdowns by the Registrant under the loan agreement must be at
least $2.0 million. The loan bears interest at LIBOR plus 17.75% prior to
completion of the development of the Karakuduk Field and at LIBOR plus
12.75% after completion. For purposes of the loan agreement, completion of
the development of the Karakuduk Field will occur when (i) an independent
engineer certifies that the proven developed reserves of the Karakuduk
Field are at least 30 million barrels, (ii) average daily oil production
from the Karakuduk Field is at least 13,000 barrels, (iii) daily water
injection at the Karakuduk Field is at least 15,000 barrels, and (iv)
successful implementation of a gas lift system for one well over a 24-hour
period. Project completion must occur on or before September 30, 2001. The
loan agreement requires that the Registrant comply with a number of
covenants during the term of the loan, including the maintenance of certain
financial ratios. The loan must be repaid on scheduled quarterly reduction
dates beginning on the earlier of three months after the completion of the
development of the Karakuduk Field or December 31, 2001. The Registrant can
voluntarily repay the loan at any time upon payment of a fee. The loan
matures on September 30, 2004.
In connection with the loan agreement, the Registrant issued to Shell
a warrant to purchase up to 15% of the Registrant's outstanding common
stock, or 146,693 shares, with an exercise price of $15.45 per share. The
Shell warrant is not exercisable until approximately 18 months after the
date of its issuance and expires five years after the earliest of
completion of the development of the Karakuduk Field or June 30, 2001.
Since January 1999, the Registrant issued $13,339,769 of its 8% Non-
Negotiable Convertible Subordinated Promissory Notes (the "Notes") to
partially satisfy the equity infusion requirements of the loan agreement
and facilitate first drawdown under the loan agreement. All of the Notes
are identical, including the right to convert the outstanding principal
balance of the Notes, together with interest thereon, into common stock of
the Registrant at the conversion price of $1.86 per share. The Notes also
contain anti-dilution and registration rights provisions. In order to
comply with Nasdaq's marketplace rules, the conversion provisions of the
Notes are required to be approved by the Registrant's stockholders. Upon
approval of the conversion provision of the Notes by the stockholders, the
Registrant will issue to the holders of the Notes 7,171,919 shares of
common stock of the Registrant, representing 88% of the Registrant's
outstanding common stock.
RIGHTS OFFERING. The board of directors of the Registrant has
authorized a rights offering of $6 to $10 million, or 3,225,806 to
5,376,344 shares of common stock of the Registrant, to its stockholders.
The rights will be issued on a pro rata basis to the holders of the
Registrant's common stock and will be exercisable at $1.86 per share. Other
matters relating to the rights offering have not been finalized as of
February 14, 2000, including the expiration date of the rights. To fulfill
a condition of the loan agreement with Shell, two of the Registrant's
largest stockholders have undertaken to subscribe for and purchase their
full pro rata portion of the rights offering. The rights offering will be
made only by means of a prospectus, after effectiveness of a registration
statement to be filed by the Registrant with the United States Securities
and Exchange Commission.
STOCKHOLDER APPROVALS. The board of directors has authorized the
Registrant to ask its stockholders to consider a proposal to approve (i)
the conversion terms of the Notes and (ii) the terms of the proposed rights
offering, including the setting of the record date for stockholders
entitled to participate in the rights offering to a date after the date of
conversion of the Notes. If the stockholders fail to approve the proposal,
the interest rate on the Notes will, in accordance with their terms,
increase to the lesser of 25% per annum or the maximum rate allowed by
applicable law and the rights offering will most likely be abandoned. To
avoid the Registrant being in default of the loan agreement, two
stockholders of the Registrant have agreed to purchase $4 million of the
Registrant's common stock at $1.86 per share if the rights offering is not
completed by June 30, 2000.
STOCK OPTION PLAN. The Registrant has instituted a stock option plan
for its directors, employees and consultants. The Registrant has reserved
15% of its outstanding common stock, or 146,693 shares, for issuance under
the stock option plan, a portion of which will be issued at $1.86 per share
of common stock. The granting of stock options with an exercise price below
the current market price of the Registrant's common stock will result in a
charge to the Registrant's earnings for the period covering the granting of
such options as compensation expense.
DILUTION ISSUES. The Shell warrant and the Registrant's stock option
plan contain anti-dilution provisions. Consequently, if the Registrant's
stockholders approve the conversion provision of the Notes and a $10
million rights offering, the Shell warrant will represent the right to
purchase up to 2,028,933 shares of the common stock of the Registrant and
2,028,933 shares of common stock of the Registrant will be reserved for
issuance with the stock option plan.
Stockholders that are not holders of the Notes will suffer significant
dilution from 72.55%, as of February 14, 2000, to 7.31%, on a fully-diluted
basis, assuming (i) the Notes are converted, (ii) all outstanding options
and warrants, including the Shell warrant are fully exercised, (iii) the
Registrant grants the maximum number of options permitted by the stock
option plan and such options are fully exercised by the holders, and (iv)
the conversion of the Registrant's outstanding Series A Convertible
Preferred Stock, which contain anti-dilution provisions.
The foregoing summary description of the loan agreement, the Shell
warrant and the Notes is qualified in its entirety by the documents
relating thereto filed by the Registrant with the United States Securities
and Exchange Commission and by the Registrant's press release dated
February 14, 2000 attached hereto as an exhibit and incorporated by
reference.
STOCKHOLDER PROPOSALS. In order to be eligible for inclusion in the
proxy statement for the annual stockholder meeting for the year 2000,
stockholder proposals must be received by the Registrant at its principal
executive office by April 11, 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
NUMBER EXHIBIT
- ------ -------
10.1 Accounts Agreement, dated February 8, 2000, among Chaparral
Resources, Inc., Central Asian Petroleum (Guernsey) Limited,
Closed Type JSC Karakudukmunay, Shell Capital Services Limited,
ABN Amro Bank N.V., London Branch and The Law Debenture Trust
Corporation p.l.c.
10.2 CRI Accounts Assignment, dated February 7, 2000, between
Chaparral Resources, Inc. and The Law Debenture Trust
Corporation p.l.c.
10.3 CAP(G) Accounts Assignment, dated February 7, 2000, between
Central Asian Petroleum (Guernsey) Limited and The Law
Debenture Trust Corporation p.l.c.
10.4 KKM Accounts Assignment, dated February 7, 2000, between Closed
Type JSC Karakudukmunay and The Law Debenture Trust Corporation
p.l.c.
10.5 CRI Assignment, dated February 8, 2000, between Chaparral
Resources, Inc. and The Law Debenture Trust Corporation p.l.c.
10.6 CAP(G) Assignment, dated February 7, 2000, between Central
Asian Petroleum (Guernsey) Limited and The Law Debenture Trust
Corporation p.l.c.
10.7 KKM Assignment, dated February 7, 2000, between Closed Type JSC
Karakudukmunay and The Law Debenture Trust Corporation p.l.c.
10.8 Assignment of Insurance Proceeds, dated February 7, 2000,
between Chaparral Resources, Inc. and The Law Debenture Trust
Corporation p.l.c.
10.9 KKM Assignment of Insurances, dated February 7, 2000, between
Closed Type JSC Karakudukmunay and The Law Debenture Trust
Corporation p.l.c.
10.10 Assignment of Reinsurance, dated February 8, 2000, among Closed
Type JSC Karakudukmunay, Kazakinstrakh JSC, Schwarzmeer und
Ostsee Insurance Co. Limited (Sovag) U.K. and The Law Debenture
Trust Corporation p.l.c.
10.11 CRI-CAP(D) Pledge Agreement, dated February 7, 2000, between
Chaparral Resources, Inc. and The Law Debenture Trust
Corporation p.l.c.
10.12 KKM Pledge Agreement, dated February 7, 2000, between Central
Asian Petroleum (Guernsey) Limited and The Law Debenture Trust
Corporation p.l.c.
10.13 CRI-CAP(G) Loan Agreement, dated February 7, 2000, between
Chaparral Resources, Inc. and Central Asian Petroleum
(Guernsey) Limited.
10.14 CRI-CAP(G) Charge Over Shares, dated February 7, 2000, between
Chaparral Resources, Inc. and The Law Debenture Trust
Corporation p.l.c.
10.15 CAP(D)-CAP(G) Charge Over Shares, dated February 7, 2000,
between Central Asian Petroleum, Inc. and The Law Debenture
Trust Corporation p.l.c.
10.16 CAP(G)-KKM Loan Agreement, dated February 7, 2000, between
Closed Type JSC Karakudukmunay and Central Asian Petroleum
(Guernsey) Limited.
10.17 Security Trust Deed, dated February 7, 2000, among Chaparral
Resources, Inc., Central Asian Petroleum (Guernsey) Limited,
Central Asian Petroleum, Inc., Closed Type JSC Karakudukmunay,
Shell Capital Services Limited and The Law Debenture Trust
Corporation p.l.c.
10.18 Warrant Agreement, dated February 8, 2000, between Chaparral
Resources, Inc. and Shell Capital Limited.
10.19 Supplemental Agreement, dated February 10, 2000, among Shell
Capital Limited, Shell Capital Services Limited, Chaparral
Resources, Inc., Central Asian Petroleum (Guernsey) Limited,
Closed Type JSC Karakudukmunay and Central Asian Petroleum,
Inc.
10.20 Technical Services Agreement, dated February 8, 2000, Shell
Capital Services Limited and Closed Type JSC Karakudukmunay.
10.21 Contract of Insurance No. 158, dated December 29, 1999, between
the Overseas Private Investment Corporation and Chaparral
Resources, Inc.
10.22 Amendment No. 1 to Contract of Insurance No. F158, dated as of
February 4, 2000, between the Overseas Private Investment
Corporation and Chaparral Resources, Inc.
10.23 Trade Confirmation, dated February 11, 2000, between Deutsche
Bank AG New York and Chaparral Resources, Inc.
10.24 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Patrick McGee.
10.25 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Whittier Ventures, LLC.
10.26 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Pecos Joint Venture.
10.27 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Thomas G. Murphy.
10.28 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Duncan Lee.
10.29 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Marathon Special Opportunity Fund.
10.30 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
William Keller.
10.31 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Global Undervalued Securities Fund, LP.
10.32 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Cord Family Exempt Trust.
10.33 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Cord Capital, LLC.
10.34 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Capco Energy, Inc.
10.35 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Rose Dosti IRA UTA Charles Schwab Inc. Contributory DTD.
10.36 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
John G. McMillian.
10.37 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.38 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Helen Jacobs Strauss Trust.
10.39 Subordination Agreement, dated January 28, 2000, between
Chaparral Resources, Inc., Shell Capital Services Limited and
Allen & Company Incorporated.
10.40 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated December 10, 1999, principal amount $150,000, to Cord
Family Exempt Trust.
10.41 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated December 10, 1999, principal amount $100,000, to Cord
Capital, LLC.
10.42 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated December 15, 1999, principal amount $500,000, to Capco
Energy, Inc.
10.43 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 7, 2000, principal amount $150,000, Rose Dosti
IRA UTA Charles Schwab Inc. Contributory DTD.
10.44 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 14, 2000, principal amount $250,000, to Capco
Energy, Inc.
10.45 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 19, 2000, principal amount $250,000, to John G.
McMillian.
10.46 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 19, 2000, principal amount $200,000, to Akin,
Gump, Strauss, Hauer & Feld.
10.47 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 21, 2000, principal amount $250,000, to Helen
Jacobs Strauss Trust.
10.48 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated January 27, 2000, principal amount $750,000, to Allen &
Company Incorporated.
10.49 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated February 9, 2000, principal amount $100,000, to EcoTels
International Limited.
10.50 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated February 9, 2000, principal amount $100,000, to Helen
Jacobs Strauss Trust.
10.51 8% Non-Negotiable Convertible Subordinated Promissory Note,
dated February [10], 2000, principal amount $1,250,000, to
Allen & Company Incorporated.
99.1 Press Release, dated February 14, 2000, of Chaparral Resources,
Inc.
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: March 22, 2000 By: /s/ Michael B. Young
-------------------------------------
Michael B. Young, Treasurer
==========================================================================
ACCOUNTS AGREEMENT
among
CHAPARRAL RESOURCES, INC.
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
and
CLOSED TYPE JSC KARAKUDUKMUNAY
as Accountholders
and
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
and
ABN AMRO BANK N.V., LONDON BRANCH
as Accounts Bank
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
8 February, 2000
==========================================================================
White & Case
7-11 Moorgate
London EC2R 6HH
This ACCOUNTS AGREEMENT (this "Agreement") is dated 8 February, 2000
between:
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of the state of Delaware, as borrower (the "BORROWER");
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey ("CAP (G)");
(3) CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing
under the laws of the Republic of Kazakhstan ("KKM");
(4) SHELL CAPITAL SERVICES LIMITED, a company organised and existing
under the laws of England, acting as the facility agent for the Lenders
(the "Facility Agent");
(5) ABN AMRO BANK N.V., a company organised and existing under the
laws of the Netherlands, acting through its London branch as the accounts
bank (the "Accounts Bank"); and
(6) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, acting as security trustee for the
Lenders (the "Security Trustee").
W H E R E A S:
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
therein), the Lenders have agreed to make available to the Borrower secured
loan facilities in an aggregate principal amount not exceeding
US$24,000,000 on the terms and subject to the conditions contained in the
Loan Agreement.
(B) This Agreement sets out the terms and conditions of the
establishment, operation and maintenance of certain bank accounts to be
opened by the Borrower, CAP(G) and KKM.
(C) It is a condition precedent to the Lenders making the Facilities
available to the Borrower that the Borrower, CAP(G) and KKM enter into this
Agreement.
(D) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
NOW THIS AGREEMENT WITNESSES AS FOLLOWS:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS
Words and expressions defined in the Loan Agreement shall bear the
same meanings when used in this Agreement (including the recitals) unless
otherwise defined in this Agreement. The following words have the meanings
shown opposite them:
"Accountholders" means the Borrower, CAP(G) and KKM.
"Account Request" means a written payment request given to the
Facility Agent in respect of a Charged Account substantially in the
appropriate form set out in Parts I to VIII of Schedule 1, or in such other
form as may be agreed between the Facility Agent and the Borrower, and
signed by an Authorised Signatory of the person giving such request.
"Authorised Investments" means (i) cash deposits at a bank in London
having at the time of the deposit capital and surplus of at least
$1,000,000,000 (or the equivalent in any other currency) and having a long-
term debt rating of A or better by Standard & Poor's Rating Group or A2 or
better by Moody's Investors Service Limited, or A by Duff & Phelps Credit
Rating Co., provided that such deposit is in Dollars and is callable on not
more than one months' notice without penalty or otherwise matures on the
last Business Day of the succeeding calendar month and (ii) shares or units
in a money market investment fund company approved by the Facility Agent
with total assets under management of at least $500,000,000 (or the
equivalent in any other currency) and having a money market fund rating of
AAAm by Standard & Poor's Ratings Services or Aaa/MR1+ by Moody's Investor
Services Inc., provided that such shares are held in the Dollar fund of the
investment company and are redeemable within one Business Day.
"Bank Instruction" means:
(a) an instruction given by the Facility Agent to the Accounts Bank
in respect of a Charged Account in the form set out in Part IX(A)
(BANK INSTRUCTION) of Schedule 1 (or in such other form as may be
agreed between the Facility Agent and the Accounts Bank); or
(b) an instruction given by the Facility Agent to the Accounts Bank
in respect of an Authorised Investment in the form set out in Part
IX(B) (BANK INSTRUCTION) of Schedule 1 (or in such other form as may
be agreed between the Facility Agent and the Accounts Bank); or
(c) any other written instruction given by the Facility Agent to the
Accounts Bank pursuant to this Agreement.
"CAP(G) Disbursement Account" means the account so designated and
maintained pursuant to Clause 2.1(b)(i) (ESTABLISHMENT OF THE CHARGED
ACCOUNTS).
"CAP(G) Receipts Account" means the account so designated and
maintained pursuant to Clause 2.1(b)(ii) (ESTABLISHMENT OF THE CHARGED
ACCOUNTS).
"Charged Accounts" means the KKM Proceeds Account, the CAP(G)
Disbursement Account, the CAP(G) Receipts Account, the CRI Disbursement
Account, the CRI Receipts Account and the CRI Debt Service Reserve Account.
"CRI Debt Service Reserve Account" means the account so designated and
to be maintained pursuant to Clause 2.1(c)(iii) (ESTABLISHMENT OF THE
CHARGED ACCOUNTS).
"CRI Disbursement Account" means the account so designated and to be
maintained pursuant to Clause 2.1(c)(i) (ESTABLISHMENT OF THE CHARGED
ACCOUNTS).
"CRI Operating Account" means the account so designated and to be
maintained pursuant to Clause 2.4 (ESTABLISHMENT OF THE CRI OPERATING
ACCOUNT).
"CRI Receipts Account" means the account so designated and to be
maintained pursuant to Clause 2.1(c)(ii) (ESTABLISHMENT OF THE CHARGED
ACCOUNTS).
"Default Notice" means a notice given by the Facility Agent to the
Borrower and the Accounts Bank substantially in the form of Part I (DEFAULT
NOTICE) of Schedule 2.
"Default Revocation Notice" means a notice given by the Facility Agent
to the Borrower and the Accounts Bank substantially in the form of Part II
(DEFAULT REVOCATION NOTICE) of Schedule 2.
"Facility Agent's Account" means the account of the Facility Agent at
such office or bank as it may notify to the Borrower from time to time for
the purpose of receiving payments from the Borrower for and on behalf of
the Finance Parties under the Finance Documents.
"Instruction" means any and each of:
(a) a Bank Instruction;
(b) a Default Notice;
(c) a Default Revocation Notice; or
(d) an instruction given by the Security Trustee pursuant to Clause
8.2.
"KKM Dollar Operating Account" means the dollar denominated account so
designated and to be maintained pursuant to Clause 2.3(a)(i) (ESTABLISHMENT
OF THE KKM OPERATING ACCOUNTS) or any account which replaces such account
pursuant to Clause 2.3(c).
"KKM Operating Accounts" means the KKM Dollar Operating Account and
the KKM Tenge Operating Account.
"KKM Tenge Operating Account" means the Tenge denominated account so
designated and to be maintained pursuant to Clause 2.3(a)(ii)
(ESTABLISHMENT OF THE KKM OPERATING ACCOUNTS) or any account which replaces
such account pursuant to Clause 2.3(c).
"KKM Proceeds Account" means the account so designated and to be
maintained pursuant to Clause 2.1(a) (ESTABLISHMENT OF THE CHARGED
ACCOUNTS).
"Operating Accounts" means the KKM Operating Accounts and the CRI
Operating Account.
"Project Accounts" means the Charged Accounts, the Operating Accounts
and any additional account established pursuant to Clause 2.7.
"Related Assets" means, in respect of a Project Account:
(a) the balance for the time being of that Project Account, together
with all interest accrued on that Project Account and the
corresponding debt owing by the Accounts Bank to the relevant
Accountholder; and
(b) all Authorised Investments acquired with moneys standing to the
credit of that Project Account (together with all moneys payable in
respect of, and all rights relating to, such Authorised Investments
and all debts represented by such Authorised Investments, moneys or
rights).
"Reserve Balance" means as of any date of determination, an amount
equal to all principal, fees and interest scheduled to be paid in respect
of the Senior Facility pursuant to the terms of the Loan Agreement in the
six months next succeeding such date of determination.
"Secured Obligations" means all the obligations and liabilities
whatsoever, whether for principal, commission or otherwise in whatever
currency which may now or at any time in the future be due, owing or
incurred by any Accountholder under any of the Finance Documents whether
present or future, actual or contingent and whether alone, severally or
jointly as principal guarantor, surety or otherwise and in whatever name or
style and whether on any current or other account, or in any other manner
whatsoever.
"Security Period" means the period commencing on the date of this
Agreement and terminating on the date on which all the Secured Obligations
have been irrevocably paid and discharged in full.
"Tenge" means the lawful currency for the time being of the Republic
of Kazakhstan.
1.2 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 lawful 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.
1.3 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. ESTABLISHMENT OF THE PROJECT ACCOUNTS
2.1 ESTABLISHMENT OF THE CHARGED ACCOUNTS
(a) On or prior to the First Drawdown Date, KKM shall have
established the KKM Proceeds Account in its name with the Accounts Bank and
shall maintain such account throughout the Security Period.
(b) On or prior to the First Drawdown Date, CAP(G) shall have
established the following accounts in its name with the Accounts Bank:
(i) the CAP(G) Disbursement Account; and
(ii) the CAP(G) Receipts Account;
and shall maintain each of those accounts throughout the Security Period.
(c) On or prior to the First Drawdown Date, the Borrower shall have
established the following accounts in its name with the Accounts Bank:
(i) the CRI Disbursement Account;
(ii) the CRI Receipts Account; and
(iii) the CRI Debt Service Reserve Account.
and shall maintain each of those accounts throughout the Security Period.
2.2 LOCATION OF CHARGED ACCOUNTS
Each of the Charged Accounts shall be maintained at the offices of the
Accounts Bank at 250 Bishopsgate, London, England, or such other place in
England as the Borrower and the Facility Agent may agree in writing.
2.3 ESTABLISHMENT OF THE KKM OPERATING ACCOUNTS
(a) On or prior to the First Drawdown Date, KKM shall have
established the following accounts in its name:
(i) the KKM Dollar Operating Account; and
(ii) the KKM Tenge Operating Account,
and shall maintain each of those accounts throughout the Security Period.
(b) Both of the KKM Operating Accounts shall be maintained at the
Aktau branch of Halyk Savings Bank throughout the Security Period or,
subject to Clause 2.3(c) below, such other bank or financial institution as
KKM and the Facility Agent may agree.
(c) KKM shall promptly upon receipt of instructions from the Facility
Agent (acting at its sole discretion) establish new operating accounts in
its name with the Accounts Bank in the Republic of Kazakhstan (or any
subsidiary of the Accounts Bank located in the Republic of Kazakhstan)
which shall replace the existing operating accounts maintained by KKM at
the Aktau branch of Halyk Savings Bank as the KKM Operating Accounts for
the purposes of this Agreement. Upon the establishment of such new
operating accounts, KKM shall forthwith cause any funds standing to the
credit of the existing operating accounts to be transferred to the new
operating accounts and such existing operating accounts to be closed.
2.4 ESTABLISHMENT OF THE CRI OPERATING ACCOUNT
(a) On or prior to the First Drawdown Date, CRI shall have
established the CRI Operating Account in its name.
(b) The CRI Operating Account shall be maintained at the Houston
branch of Chase Bank of Texas, N.A. or such other bank or financial
institution as the Borrower and the Facility Agent may agree.
2.5 CURRENCY OF THE PROJECT ACCOUNTS
(a) Each of the Charged Accounts and the CRI Operating Account shall
be denominated in Dollars only.
(b) The KKM Dollar Operating Account shall be denominated in Dollars
only and the KKM Tenge Operating Account shall be denominated in Tenge
only.
2.6 TRANSFERS BETWEEN PROJECT ACCOUNTS
Promptly after the Accountholders, or any of them, becomes aware that
any amount deposited to the credit of a Project Account should, under the
terms of this Agreement, have been paid to another Project Account, the
relevant Accountholder shall make the necessary arrangements (including,
where appropriate, the submission of an Account Request to the Facility
Agent who shall, subject to the terms of this Agreement, in turn give a
corresponding Bank Instruction to the Accounts Bank) to procure the
transfer of such amounts into the correct Project Account.
2.7 ADDITIONAL ACCOUNTS
Each Accountholder shall with the consent or at the request of the
Facility Agent from time to time establish such additional accounts
(intended to be the Project Accounts) in its name as may be necessary to
give effect to this Agreement. The relevant Accountholder shall promptly
notify the Facility Agent in writing of the details of any such additional
Project Account opened pursuant to this Clause 2.7.
2.8 OTHER BANK ACCOUNTS
None of the Accountholders shall at any time during the Security
Period maintain any bank accounts (whether in their own name or otherwise)
other than the Project Accounts except with the prior written consent of
the Facility Agent.
2.9 ACCOUNT FACILITIES
Deposits and withdrawals from the Project Accounts shall be governed
by Clause 4 (THE KKM PROCEEDS ACCOUNT), Clause 5 (THE CAP(G) ACCOUNTS),
Clause 6 (THE CRI ACCOUNTS) and Clause 7 (THE OPERATING ACCOUNTS) of this
Agreement. There will be no cheque drawing facility in respect of any of
the Charged Accounts. None of the Project Accounts may go into overdraft
and the Accounts Bank shall not comply with any Instruction to the extent
that it would cause any of the Project Accounts to do so.
3. ACCOUNT REQUESTS AND INSTRUCTIONS
3.1 SUBMISSION OF INSTRUCTIONS AND ACCOUNT REQUESTS
(a) Any Account Request submitted by an Accountholder to the Facility
Agent shall be executed by an Authorised Signatory of that Accountholder
and, following an Event of Default, shall be copied to the Security
Trustee. Any Bank Instruction given by the Facility Agent shall be copied
to the Borrower and, in the event that the Bank Instruction is in respect
of the KKM Proceeds Account, KKM. Any Account Request given with respect
to the KKM Proceeds Account shall also be copied to the Borrower.
(b) All Bank Instructions and Account Requests shall be given
substantially in the forms set out in Schedule 1.
(a) The Facility Agent shall not be required to issue a Bank
Instruction in respect of an Account Request if a Default Notice is
outstanding and a corresponding Default Revocation Notice has not been
issued.
(b) (i) Subject to Clause 8.1(c), if a Default Notice is
outstanding and a corresponding Default Revocation Notice
has not been issued, the Accounts Bank shall act in
accordance with the terms of such Default Notice
notwithstanding any Bank Instruction which is inconsistent
with the terms of such Default Notice.
(ii) The Accounts Bank shall comply with any Instruction given by
the Security Trustee pursuant to Clause 8.2 without any
further authorisation from the Facility Agent
notwithstanding any Bank Instruction which is inconsistent
with the terms of any such Instruction.
(iii) For the avoidance of doubt, a Bank Instruction, once
given, may subsequently be revoked pursuant to the terms of
any Default Notice issued by the Facility Agent in
accordance with Clause 8.1 or pursuant to the terms of any
Instruction given by the Security Trustee in accordance with
Clause 8.2.
3.2 PAYMENT PROCEDURE
(a) Subject to Clause 3.2(b), upon receipt of any Account Request
from an Accountholder, the Facility Agent shall, not later than three
Business Days following the date of receipt deliver a Bank Instruction to
the Accounts Bank and the Accounts Bank shall make the disbursement or
transfer in accordance with such Bank Instruction as promptly as possible.
(b) Upon receipt of an Account Request from KKM pursuant to Clause
4.2(d), the Facility Agent shall, if such Account Request is received by it
on a Business Day before 1p.m., on the date of its receipt, and if
thereafter, on the next Business Day, deliver a Bank Instruction to the
Accounts Bank and the Accounts Bank shall make the disbursement or transfer
in accordance with such Bank Instruction as promptly as possible.
4. THE KKM PROCEEDS ACCOUNT
4.1 PAYMENTS INTO THE KKM PROCEEDS ACCOUNT
KKM shall procure that all KKM Gross Revenues (including, without
limitation, all KKM Insurance Proceeds and disbursements made under the
CAP(G)-KKM Loan Agreement) are paid into the KKM Proceeds Account,
including by notifying any person who is obligated to pay any amount
forming part of such KKM Gross Revenues to pay that amount in Dollars
direct to the KKM Proceeds Account. If notwithstanding the instructions of
KKM or for any other reason, any such KKM Gross Revenues are received
directly by KKM or are deposited into any other account maintained by KKM,
KKM shall hold such amounts on trust for the Finance Parties and shall
promptly remit such amounts in Dollars to the Accounts Bank for deposit
into the KKM Proceeds Account.
4.2 PAYMENTS OUT OF THE KKM PROCEEDS ACCOUNT
(a) No amounts may be withdrawn from the KKM Proceeds Account without
the prior approval of the Facility Agent.
(b) Subject to Clause 4.4 (LIMITATIONS), KKM may submit an Accounts
Request (substantially in the form set out in Part I of Schedule 1) to the
Facility Agent (which shall give a corresponding Bank Instruction to the
Accounts Bank) for the payment of funds standing to the credit of the KKM
Proceeds Account (other than those funds representing KKM Insurance
Proceeds) to be applied in or towards:
(i) meeting KKM Permitted Expenses (including, without
limitation, Capital Expenditure) contemplated in the Project
Budget or the then current KKM Operating Budget, as the case
may be, and due and payable during the calendar month
falling immediately after the date of receipt of the
relevant Bank Instruction by the Accounts Bank, with
payments being made direct to the person or persons to whom
KKM is required to pay such KKM Permitted Expenses (at the
times and in the amounts set forth in the Accounts Request
attached to the relevant Bank Instruction);
(ii) on the first Business Day of each calendar month falling
immediately after the date of receipt of the relevant Bank
Instruction by the Accounts Bank, the transfer to the KKM
Dollar Operating Account (at the times and in the amounts
set forth in such Accounts Request) of an amount equal to
KKM Permitted Expenses (including, without limitation,
Capital Expenditure) which are due and payable or are
projected (in the Project Budget or the then current KKM
Operating Budget, as the case may be) to be due and payable
during that calendar month and KKM shall apply amounts so
transferred from the KKM Proceeds Account pursuant to this
sub-Clause solely to pay such KKM Permitted Expenses;
(iii) on each Quarterly Date falling prior to the first
Reduction Date, the transfer to the CAP(G) Receipts Account
of such amounts as are necessary to meet the Reserve Balance
for the CRI Debt Service Reserve Account on the Project
Completion Date;
(iv) on each Quarterly Date falling prior to the first Reduction
Date, the transfer to the CAP(G) Receipts Account of an
amount sufficient to pay any Additional Permitted Expenses
due and payable or projected (in the then current CRI
Operating Budget) to be due and payable from such Quarterly
Date to the date falling immediately prior to the next
succeeding Quarterly Date and the Borrower shall apply the
amounts so transferred from the KKM Proceeds Account
pursuant to this sub-Clause solely to pay such Additional
Permitted Expenses.
(c) KKM may from time to time submit an Account Request
(substantially in the form set out in Part V of Schedule 1) to the Facility
Agent (which shall give a corresponding Bank Instruction to the Accounts
Bank) for the payment of those funds standing to the credit of the KKM
Proceeds Account which represent KKM Insurance Proceeds deposited into the
KKM Proceeds Account:
(i) (to the extent that those funds represent KKM Insurance
Proceeds to which clause 7.7(a) of the Loan Agreement
applies) to the CAP(G) Receipts Account for onward transfer
to the CRI Receipts Account in or towards the mandatory
prepayment of the Loan pursuant to clause 7.7(a) of the Loan
Agreement;
(ii) (to the extent that those funds represent KKM Insurance
Proceeds to which clause 7.7(b)(i) of the Loan Agreement
applies) as the Facility Agent and KKM may agree;
(iii) (to the extent that those funds represent KKM Insurance
Proceeds to which Clause 7.7(b)(ii)(A) or Clause
7.7(b)(ii)(B) of the Loan Agreement applies) direct to the
person or persons entitled to be paid in connection with any
reinstatement, replacement or repair in or towards the cost
of such reinstatement, replacement or repair; and
(iv) (to the extent that those funds represent KKM Insurance
Proceeds in respect of third-party liabilities) direct to
any account or person provided that the provisions of clause
7.7(b)(iii) of the Loan Agreement are complied with.
(d) KKM may from time to time submit an Account Request
(substantially in the form set out in Part VIII of Schedule 1) to the
Facility Agent (which shall give a corresponding Bank Instruction to the
Accounts Bank) for the payment of funds standing to the credit of the KKM
Proceeds Account (other than those funds representing KKM Insurance
Proceeds) to be applied in or towards meeting emergency expenditure
permitted to be incurred pursuant to clause 17.14(b) of the Loan Agreement
and due and payable on the date requested for its disbursement with payment
being made direct to the person or persons to whom KKM is required to pay
in respect of emergency expenditure.
4.3 INVESTMENT RECOVERY
(a) Subject to Clause 4.3(b), on each Reduction Date the Facility
Agent shall give a Bank Instruction to the Accounts Bank for the transfer
to the CAP(G) Receipts Account of any and all funds standing to the credit
of the KKM Proceeds Account on such Reduction Date after deducting from
such credit balance an amount equal to:
(i) the aggregate of those funds standing to the credit of the
KKM Proceeds Account which are allocated for transfer
pursuant to Accounts Requests or Bank Instructions received
by the Accounts Bank in accordance with Clause 4.2(b) and
(d) but not yet transferred;
(ii) the aggregate of those funds standing to the credit of the
KKM Proceeds Account which represent KKM Insurance Proceeds;
and
(iii) KKM Permitted Expenses due and payable within the first
45 days immediately succeeding such Reduction Date (to the
extent not otherwise allocated for payment pursuant to
Clause 4.2(b)(ii) (PAYMENTS OUT OF THE KKM PROCEEDS
ACCOUNT)).
(b) Such funds available for transfer pursuant to Clause 4.3(a) are
herein referred to as the "KKM CREDIT BALANCE".
(c) If on any Reduction Date:
the KKM Credit Balance on such Reduction Date
will be greater than
59.8% of the KKM Gross Revenues received into the KKM Proceeds
Account during the immediately preceding three calendar months,
the Facility Agent will determine the amount by which the KKM Credit
Balance exceeds 59.8% of such KKM Gross Revenues (the "EXCESS FUNDS"). The
KKM Credit Balance available for transfer to the CAP(G) Receipts Account on
such Reduction Date shall be reduced by an amount equal to such Excess
Funds and the Facility Agent shall give a Bank Instruction to the Accounts
Bank specifying the reduced amount to be transferred from the KKM Proceeds
Account on such Reduction Date.
(d) On or within 30 days after a Reduction Date, subject to the
payment being permitted under clause 17.9 of the Loan Agreement, KKM may
submit an Account Request (substantially in the form of Part I of Schedule
1) to the Facility Agent (which shall give a corresponding Bank Instruction
to the Accounts Bank) for the payment of an amount equal to the Excess
Funds, if any, available as at such Reduction Date as Shareholder
Distributions to its shareholders. Any Shareholder Distributions for the
account of CAP(G) will be transferred to the CAP(G) Receipts Account. Any
Excess Funds not distributed as Shareholder Distributions within 30 days
after a Reduction Date will form part of KKM Gross Revenues for determining
the KKM Credit Balance on the next succeeding Reduction Date.
4.4 LIMITATIONS
(a) On receipt of an Account Request for the transfer of funds to the
KKM Dollar Operating Account pursuant to Clause 4.2(b)(ii) (PAYMENTS OUT OF
THE KKM PROCEEDS ACCOUNT) to meet KKM Permitted Expenses for any calendar
month, the Facility Agent shall arrange for the budgeted expenses due for
payment in the first half of such calendar month to be transferred to the
KKM Dollar Operating Account on the first Business Day of such calendar
month and for the budgeted expenses due for payment in the second half of
such calendar month to be transferred to the KKM Dollar Operating Account
on the eleventh Business Day of such calendar month.
(b) For the purposes of Clause 4.2(b)(ii) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT), if:
(i) the payment for which funds are to be transferred into the
KKM Dollar Operating Account is in respect of Royalties or
Project Taxes; or
(ii) more than $100,000 is payable to a single recipient in
respect of KKM Permitted Expenses for which funds are to be
transferred into the KKM Dollar Operating Account,
KKM shall, in the relevant Account Request, direct that those amounts are
paid direct to the person or persons to whom KKM is required to pay such
KKM Permitted Expenses rather than to a KKM Operating Account.
(c) Any Account Request submitted pursuant to Clause 4.2(b) or Clause
4.2(c) (PAYMENTS OUT OF THE KKM PROCEEDS ACCOUNT) shall contain:
(i) if in respect of Clause 4.2(b)(i) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT), a certification by KKM that the amounts
of the disbursements requested are to meet KKM Permitted
Expenses which are due for payment on the dates requested
for their disbursement, and that the amounts to be disbursed
do not exceed the amounts projected in the then current
Project Budget or Operating Budget, as the case may be, to
be paid at the relevant time;
(ii) if in respect of Clause 4.2(b)(ii) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT), a certification by KKM that the amount of
the disbursement requested is to meet KKM Permitted Expenses
which are to be paid within the relevant calendar month and
that the amount to be disbursed does not exceed the amount
projected in the then current Project Budget or Operating
Budget, as the case may be, to be paid, at the relevant
time;
(iii) if in respect of Clause 4.2(c)(iii) (PAYMENTS OUT OF
THE KKM PROCEEDS ACCOUNT), a certification by KKM that the
amount of the disbursement requested is to meet the costs of
any reinstatement, replacement or repair which are due for
payment on the date requested for their disbursement, and
that the amount to be disbursed does not exceed the KKM
Insurance Proceeds available to meet such costs at the
relevant time;
(iv) if in respect of Clause 4.2(c)(iv) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT), a certification by KKM that the amount of
the disbursement requested is to meet the costs of any third
party liabilities which are due for payment on the date
requested for their disbursement, and that the amount to be
disbursed does not exceed the KKM Insurance Proceeds
available to meet such costs at the relevant time;
(v) if in respect of Clause 4.2(d) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT), a certification by KKM that the amount of
the disbursement requested is to pay for emergency
expenditures permitted pursuant to clause 17.14(b) of the
Loan Agreement which are due for payment on the date
requested for its disbursement, and that the amount to be
disbursed, when aggregated with all other amounts previously
disbursed pursuant to clause 17.14(b) of the Loan Agreement,
does not exceed, in aggregate, $300,000 (unless the Facility
Agent has countersigned the Bank Instruction for any such
disbursement over and above the aggregated $300,000);
(vi) a certification by KKM that no other amounts have been
withdrawn from any Project Account to meet any such
expenses;
(vii) a statement briefly describing those expenses; and
(viii) where necessary, an irrevocable request on behalf of
KKM to the Facility Agent to pay the amount direct to the
relevant recipient.
4.5 AVAILABLE FUNDS
To the extent that the credit balance of the KKM Proceeds Account
(excluding for this purpose the value of any Authorised Investments
acquired from funds standing to the credit of the KKM Proceeds Account) on
any particular date are insufficient to make all payments due to be made
from the KKM Proceeds Account on or before that date pursuant to Clause
4.2(b) (PAYMENTS OUT OF THE KKM PROCEEDS ACCOUNT), the Facility Agent shall
instruct the Accounts Bank in a Bank Instruction to apply the available
funds in making the relevant payments or transfers in the order of priority
set out in Clause 4.2(b)(i), (ii), (iii) and (iv) (PAYMENTS OUT OF THE KKM
PROCEEDS ACCOUNT).
4.6 AUTHORISED INVESTMENTS
On the last Business Day of each month, KKM may submit an Account
Request (substantially in the form attached as Part II of Schedule 1) to
the Facility Agent (which shall give a corresponding Bank Instruction to
the Accounts Bank) for the investment of part or all of the funds standing
to the credit of the KKM Proceeds Account at that time (subject to such
funds exceeding $250,000) in Authorised Investments. On maturity of any
Authorised Investments all of the proceeds of such Authorised Investments
shall be credited to the KKM Proceeds Account. The Facility Agent shall not
be obliged to give a Bank Instruction pursuant to such an Account Request
unless it is satisfied that the Authorised Investments are the subject of
security in favour of the Security Trustee in form and substance
satisfactory to the Facility Agent.
5. THE CAP(G) ACCOUNTS
5.1 PAYMENTS INTO THE CAP(G) DISBURSEMENT ACCOUNT
CAP(G) shall ensure that the proceeds of each Advance under the CRI-
CAP(G) Loan Agreement and all contributions from the shareholders of CAP(G)
are paid directly into the CAP(G) Disbursement Account.
5.2 PAYMENTS OUT OF THE CAP(G) DISBURSEMENT ACCOUNT
(a) The Accountholders shall ensure that the proceeds of any transfer
from the CRI Disbursement Account for the purpose of further advance from
CAP(G) to KKM under the CAP(G)-KKM Loan Agreement are promptly applied to
meet expenditures required to achieve Project Completion which are
contemplated by the Project Budget or the then current KKM Operating
Budget.
(b) No amounts may be withdrawn from the CAP(G) Disbursement Account
without the prior approval of the Facility Agent.
(c) CAP(G) may from time to time submit an Account Request
(substantially in the form set out in Part III of Schedule 1) to the
Facility Agent (which shall give a corresponding Bank Instruction to the
Accounts Bank) for payment of funds standing to the credit of the CAP(G)
Disbursement Account to be transferred to KKM Proceeds Account on the first
Business Day of each calendar month falling immediately after receipt of
the relevant Bank Instruction in respect of advances under the CAP(G)-KKM
Loan Agreement.
5.3 PAYMENTS INTO THE CAP(G) RECEIPTS ACCOUNT
(a) CAP(G) shall ensure that the following amounts are paid directly
into the CAP(G) Receipts Account:
(i) all amounts due to CAP(G) from KKM under the CAP(G)-KKM Loan
Agreement (including, without limitation, all amounts
transferred from the KKM Proceeds Account pursuant to Clause
4.2(b)(iii) and (iv), Clause 4.2(c)(i) and Clause 4.3); and
(ii) all Shareholder Distributions made by KKM to CAP(G).
5.4 PAYMENTS OUT OF THE CAP(G) RECEIPTS ACCOUNT
(a) No amounts shall be withdrawn from the CAP(G) Receipts Account
without the prior approval of the Facility Agent.
(b) On each Quarterly Date the Facility Agent shall give a Bank
Instruction to the Accounts Bank for the transfer to the CRI Receipts
Account of any and all funds standing to the credit of the CAP(G) Receipts
Account on such Quarterly Date.
5.5 AUTHORISED INVESTMENTS
On the last Business Day of each calendar month, CAP(G) may submit an
Account Request (substantially in the form attached as Part II of Schedule
1) to the Facility Agent (which shall give a corresponding Bank Instruction
to the Accounts Bank) for the investment of part or all of the funds
standing to the credit of the CAP(G) Disbursement Account or the CAP(G)
Receipts Account at that time (subject to such funds exceeding $250,000) in
Authorised Investments. On maturity of any Authorised Investments all of
the proceeds of such Authorised Investments shall be credited to the CAP(G)
Disbursement Account or the CAP(G) Receipts Account, as applicable. The
Facility Agent shall not be obliged to give a Bank Instruction pursuant to
such an Account Request unless it is satisfied that the Authorised
Investments are the subject of security in favour of the Security Trustee
in form and substance satisfactory to the Facility Agent.
6. THE CRI ACCOUNTS
6.1 PAYMENTS INTO THE CRI DISBURSEMENT ACCOUNT
The Borrower shall ensure that the following amounts are paid directly
into the CRI Disbursement Account:
(a) the proceeds of each Advance under the Loan Agreement; and
(b) all contributions and other funds received by the Borrower from
any of its shareholders (including in respect of any of the Bridge Notes
or the Existing Notes).
6.2 PAYMENTS OUT OF THE CRI DISBURSEMENT ACCOUNT
(a) No amounts may be withdrawn from the CRI Disbursement Account
without the prior approval of the Facility Agent.
(b) Subject to Clause 6.3 (LIMITATIONS) the Borrower may from time to
time prior to the Project Completion Date submit an Account Request
(substantially in the form set out in Part IV of Schedule 1) to the
Facility Agent (which shall give a corresponding Bank Instruction to the
Accounts Bank) for the payment of funds standing to the credit of the CRI
Disbursement Account to be applied in or towards:
(i) on the first Business Day of each calendar month following
receipt of the relevant Bank Instruction by the Accounts
Bank, transfer to the CRI Operating Account of an amount
such that, after giving effect to such transfer, the credit
balance of the CRI Operating Account does not exceed the CRI
Overheads which are due and payable or are projected (in the
then current CRI Operating Budget) to be due and payable
within the remainder of that calendar month and the Borrower
shall apply amounts so transferred from the CRI Disbursement
Account pursuant to this sub-Clause solely to pay such CRI
Overheads;
(ii) the Hedging Payment which is contemplated by the Hedging
Agreement and approved by the Special Majority Lenders
current on the date of the requested withdrawal by payment
direct to the Hedging Bank;
(iii) meeting premia in respect of the Political Risk Policy
which is due for payment on the date requested for the
disbursement with payment being made direct to the person or
persons to whom the Borrower is required to pay such
expenditure;
(iv) meeting premia in respect of the Transport Risk Insurance
Policy which is due for payment on the date requested for
the disbursement with payment being made direct to the
person or persons to whom the Borrower is required to pay
such expenditure;
(v) interest due for payment in respect of the Senior Facility
and fees and expenses and other payments due in respect of
any of the Finance Documents; and
(vi) on the first Business Day of each calendar month following
receipt of the relevant Bank Instruction by the Accounts
Bank, transfer to the CAP(G) Disbursement Account in respect
of advances under the CRI-CAP(G) Loan Agreement which
advances are in turn to be advanced by CAP(G) to KKM under
the CAP(G)-KKM Loan Agreement by payment direct to the KKM
Proceeds Account.
6.3 LIMITATIONS
Any Account Request pursuant to Clause 6.2 (PAYMENTS OUT OF THE CRI
DISBURSEMENT ACCOUNT) shall contain:
(a) if in respect of Clause 6.2(b)(i) (PAYMENTS OUT OF THE CRI
DISBURSEMENT ACCOUNT), a certification by the Borrower that the amount of
the disbursement requested is to meet CRI Overheads which are due for
payment in the relevant calendar month, and that the amount to be disbursed
does not exceed the amount projected in the then current CRI Operating
Budget to be paid at the relevant time;
(b) a certification by the Borrower that no other amounts have been
withdrawn from any Project Account to meet any expenses under Clause 6.2(b)
(PAYMENTS OUT OF THE CRI DISBURSEMENT ACCOUNT);
(c) a statement briefly describing those expenses; and
(d) where necessary, an irrevocable request on behalf of the Borrower
to the Facility Agent to pay the amount directly to the specified
recipient.
6.4 PAYMENTS INTO THE CRI RECEIPTS ACCOUNT
The Borrower and CAP(G) shall ensure that the following amounts are
paid into the CRI Receipts Account:
(a) all amounts due to the Borrower from CAP(G) under the CRI-CAP(G)
Loan Agreement;
(b) all proceeds of the Political Risk Insurance;
(c) all Hedging Receipts; and
(d) on each Reduction Date, a transfer from the CRI Debt Service
Reserve Account to the extent the balance of that account is in excess of
the Reserve Balance for the next succeeding six calendar months.
6.5 PAYMENTS OUT OF THE CRI RECEIPTS ACCOUNT
(a) No amounts shall be withdrawn from the CRI Receipts Account
without the prior approval of the Facility Agent.
(b) Subject to Clause 6.7 (LIMITATIONS) the Borrower may submit an
Account Request (substantially in the form set out in Part VI of Schedule
1) to the Facility Agent (which shall give a corresponding Bank Instruction
to the Accounts Bank) for the payment of moneys standing to the credit of
the CRI Receipts Account to be applied in or towards:
(i) meeting any premium in respect of the Political Risk Policy
which is due for payment on the date requested for the
disbursement with payment being made direct to the person or
persons to whom the Borrower is required to pay the same;
(ii) on the first Business Day of each month following receipt of
the relevant Bank Instruction by the Accounts Bank, a
transfer to the CRI Operating Account of an amount such
that, after giving effect to such transfer, the credit
balance of the CRI Operating Account does not exceed the CRI
Overheads which are due and payable or are projected (in the
then current CRI Operating Budget) to be due and payable
during the remainder of such calendar month and the Borrower
shall apply amounts transferred from the CRI Receipts
Account solely to pay such CRI Overheads;
(iii) making payment to the Facility Agent's Account of an
amount equal to any costs, expenses and indemnities payable
by the Accountholders, or any of them, to the Facility
Agent, the Security Trustee, the Accounts Bank, the
Arrangers or any of them under or in respect of any of the
Finance Documents;
(iii) on each Quarterly Date, a transfer to the CRI Debt
Service Reserve Account to the extent the balance of that
account is less than the Reserve Balance at that time; and
(iv) making payment to the Facility Agent's Account of an amount
equal to any fees, interest and principal repayments and
prepayments (other than pursuant to Clause 7.6 of the Loan
Agreement) due to the Finance Parties under or in respect of
the Loan Agreement;
(c) On each Reduction Date, the Facility Agent shall give a Bank
Instruction to the Accounts Bank for all funds standing to the credit of
the CRI Receipts Account at the end of the Payment Period immediately prior
to such Reduction Date to be transferred to the Facility Agent's Account
for application as a mandatory prepayment of the Loan pursuant to clause
7.6 of the Loan Agreement after deducting from such credit balance, an
amount equal to:
(i) the aggregate of those funds allocated for transfer pursuant
to Bank Instructions received by the Accounts Bank in
accordance with Clause 6.5(b) but not yet transferred;
(ii) any CRI Overheads scheduled to be paid prior to the
immediately succeeding Reduction Date (to the extent not
otherwise allocated for payment pursuant to Clause
6.5(b)(ii)); and
(iii) any premia in respect of the Political Risk Policy
scheduled to be paid prior to the immediately succeeding
Reduction Date.
6.6 AVAILABLE FUNDS
To the extent that the credit balance of the CRI Receipts Account on
any particular date is insufficient to make all payments due to be made
from the CRI Receipts Account on or before that date pursuant to Clause
6.5(b) (PAYMENTS OUT OF THE CRI RECEIPTS ACCOUNT), the Facility Agent shall
instruct the Accounts Bank in a Bank Instruction to apply the available
funds in making the relevant payments or transfers in the order of priority
set out in Clause 6.5(b)(i), (ii), (iii), (iv) and (v) (PAYMENTS OUT OF THE
CRI RECEIPTS ACCOUNT).
6.7 LIMITATIONS
Any Account Request submitted pursuant to Clause 6.5(b) (PAYMENTS OUT
OF THE CRI RECEIPTS ACCOUNT) shall contain:
(a) if in respect of Clause 6.5(b)(ii) (PAYMENTS OUT OF THE CRI
RECEIPTS ACCOUNT), a certification by the Borrower that the amount of the
disbursement requested is to meet CRI Overheads which are due for payment
within the relevant calendar month and that the amount to be disbursed does
not exceed the amount projected in the then current CRI Operating Budget,
to be paid, at the relevant time;
(b) a certification by the Borrower that no other amounts have been
withdrawn from any Project Account to meet any expenses under Clause
6.5(b);
(c) a certification by the Borrower that no amounts have been
withdrawn from the CRI Disbursement Account to meet the obligations of the
Borrower under the Service Contract; and
(d) a statement briefly describing those expenses.
6.8 CRI DEBT SERVICE RESERVE ACCOUNT
(a) Subject to Clause 6.8(b), the Borrower shall at all times on and
with effect from the Project Completion Date maintain a credit balance in
the CRI Debt Service Reserve Account at least equal to 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 three month periods before breaching the provisions of Clause
6.8(a).
(c) No amounts shall be withdrawn from the CRI Debt Service Reserve
Account without the prior approval of the Facility Agent.
(d) If the credit balance of the CRI Debt Service Reserve Account at
the close of business on any Reduction Date exceeds the Reserve Balance for
the immediately succeeding six calendar months, the Borrower may, by
delivery of an Account Request (substantially in he form of Part VII of
Schedule 1) to the Facility Agent (which shall give a Bank Instruction to
the Accounts Bank)transfer such excess to the CRI Receipts Account.
(e) The Facility Agent may at any time give a Bank Instruction to the
Accounts Bank for the payment of funds standing to the credit of the CRI
Debt Service Reserve Account to be applied in meeting payments to the
Senior Lenders in respect of principal, fees, interest and indemnities
scheduled or required to be paid to the Senior Lenders pursuant to the
Finance Documents which the Facility Agent considers will not be met out of
funds standing to the credit of the CRI Receipts Account.
6.9 AUTHORISED INVESTMENTS
On the last Business Day of each calendar month, the Borrower may
submit an Account Request (substantially in the form attached as Part II of
Schedule 1) to the Facility Agent (which shall give a corresponding Bank
Instruction to the Accounts Bank) for the investment of part or all of the
funds standing to the credit of the CRI Debt Service Reserve Account, the
CRI Disbursement Account or the CRI Receipts Account at that time (subject
to such funds exceeding $250,000) in Authorised Investments. On maturity of
any Authorised Investment all proceeds from such Authorised Investments
shall be credited to the CRI Debt Service Reserve Account, the CRI
Disbursement Account or the CRI Receipts Account. The Facility Agent shall
not be obliged to give a Bank Instruction pursuant to such an Account
Request unless it is satisfied that the Authorised Investments are the
subject of security in favour of the Security Trustee in form and substance
satisfactory to the Facility Agent.
7. THE OPERATING ACCOUNTS
7.1 PAYMENTS INTO THE KKM OPERATING ACCOUNTS AND THE CRI OPERATING
ACCOUNT
The relevant Accountholder may submit an Account Request with respect
to the KKM Proceeds Account, the CRI Disbursement Account or the CRI
Receipts Account to the Facility Agent (which shall give a corresponding
Bank Instruction to the Accounts Bank) for the transfer of moneys from the
KKM Proceeds Account, the CRI Disbursement Account or the CRI Receipts
Account to the KKM Dollar Operating Account or the CRI Operating Account,
as the case may be, in the circumstances contemplated by, and in accordance
with Clause 4.2(b)(ii) (PAYMENTS OUT OF THE KKM PROCEEDS ACCOUNT), Clause
6.2(b)(i) (PAYMENTS OUT OF THE CRI DISBURSEMENT ACCOUNT) and Clause
6.5(b)(ii) (PAYMENTS OUT OF THE CRI RECEIPTS ACCOUNT), but not otherwise.
7.2 PAYMENTS OUT OF THE KKM OPERATING ACCOUNTS AND THE CRI OPERATING
ACCOUNT
(a) Unless otherwise agreed by the Facility Agent, KKM may only make
the following disbursements or transfers from the KKM Dollar Operating
Account:
(i) disbursements of funds to meet KKM Permitted Expenses
(including, without limitation, Capital Expenditure)
contemplated in the then current budget and due and payable
on the date requested for the disbursement with payment
being made direct to the person or persons to whom KKM is
required to pay such KKM Permitted Expenses; and
(ii) subject to Clause 7.2(c) below, disbursements of funds to
the KKM Tenge Operating Account in order to meet KKM
Permitted Expenses which are due and payable in Tenge within
seven days of such disbursement.
(b) CRI may only make disbursements of funds from the CRI Operating
Account to meet CRI Overheads contemplated in the then current CRI
Operating Budget and due and payable on the date requested for the
disbursement with payment being made direct to the person or persons to
whom CRI is required to pay such Additional Permitted Expenses.
(c) The Borrower and KKM may only make disbursements under this
Clause 7.2 in or towards payment of KKM Permitted Expenses or CRI
Overheads, as the case may be, to the extent that funds have not been
withdrawn from any other Project Account to meet such expenses.
8. DEFAULT
8.1 DEFAULT NOTICE
(a) Notwithstanding any other provision of the Finance Documents and
in addition to the rights and restrictions arising under Clause 8.2
(ENFORCEMENT), no amount may be withdrawn from any Charged Account without
the prior written consent of the Facility Agent if a Default Notice has
been delivered to the Accounts Bank unless the Accounts Bank has received a
Default Revocation Notice relating to that Default Notice.
(b) The Facility Agent may give a Default Notice to the Accounts Bank
(with a copy to the Borrower) at any time when a Potential Event of Default
or an Event of Default is subsisting. Once given, a Default Notice will
continue in force until the Accounts Bank receives a Default Revocation
Notice from the Facility Agent (with a copy to the Borrower). The Facility
Agent shall give a Default Revocation Notice to the Accounts Bank (with a
copy to the Borrower) (promptly upon being asked to do so by the Borrower)
if, at the time the Facility Agent does so, no Potential Event of Default
or Event of Default (whether or not the one in respect of which the Default
Notice then in force was given) is subsisting, but the Facility Agent shall
not be obliged to give any Default Revocation Notice unless so requested by
the Borrower.
(c) For the avoidance of doubt, the Accounts Bank shall not be
obliged to comply with the terms of either a Default Notice or a Default
Revocation Notice until it has received the same from the Facility Agent.
8.2 ENFORCEMENT
(a) Notwithstanding any other provision of the Financing Documents,
the Security Trustee, acting on the instructions of the Facility Agent,
may, at any time during the continuance of an Event of Default take any
action with respect to the Charged Accounts in any manner it sees fit
including:
(i) instructing the Accounts Bank to sell or otherwise realise
any Authorised Investments and pay the proceeds to related
Project Account or otherwise as the Security Trustee may
determine (acting on the instructions of the Facility
Agent); and
(ii) instructing the Accounts Bank to pay any amounts standing to
the credit of any Charged Account to the Security Trustee
for application in accordance with the provisions of clause
14 of the Security Trust Deed.
The Accountholders acknowledge that if an Event of Default is
continuing, the Security Trustee is entitled to apply amounts standing to
the credit of any Charged Account as contemplated in this Clause 8.2.
(b) The Accounts Bank shall promptly comply with an Instruction given
by the Security Trustee as contemplated by this Clause 8.2 (without
reference to any inconsistent request or instruction from any Accountholder
or otherwise).
(c) The Security Trustee may, during the continuance of an Event of
Default, exercise its rights, acting on the instructions of the Facility
Agent, under this Clause 8.2 as frequently as it considers appropriate.
9. GENERAL PROVISIONS RELATING TO THE PROJECT ACCOUNTS
9.1 NO SECURITY INTERESTS
(a) None of the Accountholders shall at any time during the Security
Period:-
(i) create or permit to subsist any Security Interest in all or
any part of the Project Accounts or the Related Assets other
than any Security Interest created by the Finance Documents;
or
(ii) assign, transfer or otherwise dispose of all or any part of
its right or title to the Project Accounts or the Related
Assets otherwise than in accordance with, or as permitted
by, the terms of this Agreement.
9.2 INSTRUCTIONS
(a) The Accountholders and, to the extent necessary, all other
parties to this Agreement, irrevocably and unconditionally instruct the
Accounts Bank to act upon Instructions and to make any other
appropriations, payments and transfers into or between any of the Project
Accounts which this Agreement expressly provides should be made.
(b) Any payments, transfers or withdrawals from any of the Project
Accounts may only be made in accordance with the terms of this Agreement.
No person other than the CAP(G), KKM or the Borrower (as provided in this
Agreement), may give any instructions or requests to the Facility Agent for
any such payments, transfers or withdrawals and no person may give any
instruction to the Accounts Bank for any payment, transfer or withdrawal
other than the Facility Agent, and in the case of any Instruction given
pursuant to Clause 8.2, the Security Trustee.
(c) (i) Except as expressly provided otherwise by this
Agreement, the Accounts Bank shall, as soon as reasonably
practicable after receipt, comply with the terms of an
Instruction and may assume without enquiry that the person
giving an Instruction is entitled to do so under the
provisions of this Agreement and that Instruction is valid
and given in accordance with the terms of this Agreement.
(ii) Without prejudice to any Security Interest over the Charged
Accounts acknowledged by the Accounts Bank, the Accounts
Bank shall not have any responsibility for the subsequent
application of any moneys paid from any Charged Account.
(iii) Save for wilful misconduct or negligence, neither the
Facility Agent nor the Accounts Bank shall be liable for any
loss resulting from any delay or failure to implement an
Account Request or Instruction or to make any other
appropriation, payment or transfer required by this
Agreement where such delay or failure results from:
(A) any act or omission on the part of any other party; or
(B) there being insufficient time between receipt of an
Account Request by the Facility Agent and the date on
which any payment specified in such Account Request is
required to be made; or
(C) an Accounts Bank acting in accordance with a
certificate or Instruction from the Security Trustee or
the Facility Agent issued pursuant to this Agreement.
9.3 CURRENCIES
To the extent that the Accounts Bank receives, in respect of a Charged
Account, any amount in a currency other than Dollars, the Accounts Bank
shall if so requested by the Facility Agent, promptly convert such amount
into Dollars in such manner as directed by the Borrower or, failing
direction, in accordance with the Accounts Bank's normal practice and the
Accounts Bank may charge its usual expenses with respect to such
conversion. If the Accounts Bank is unable to convert any such amount into
Dollars for any reason, it will, if permitted by applicable Law, deposit
such amount in a suspense account at ABN AMRO Bank Kazakhstan Ltd., Almaty
(or such other bank in Kazakhstan as the Accounts Bank may select from time
to time ) and seek the instructions of the Facility Agent.
9.4 INTEREST
(a) Each of the Charged Accounts shall earn interest at such rate(s)
as may be agreed from time to time among the Borrower, the Facility Agent
and the Accounts Bank.
(b) All interest earned on the balance standing to the credit of any
Charged Account shall be credited to such Charged Account.
9.5 RELIANCE ON CERTIFICATES
(a) Any certificate or document (including an Account Request or
Instruction) delivered pursuant to this Agreement shall be conclusive save
in the case of manifest error, and the Facility Agent and the Accounts Bank
shall be entitled to act in reliance on any certificate or document
(including as aforesaid) so delivered.
(b) The Security Trustee, after consulting the Borrower and the
Facility Agent and acting on the instructions of the Facility Agent, and
the Facility Agent, after consulting with the Borrower shall be entitled to
correct what it considers, in its absolute discretion, to be manifest
errors and to make non-material amendments which it considers, in its
absolute discretion, to be necessary to give effect to the provisions of
this Agreement, to any certificate or document of a kind referred to in
Clause 9.5(a) and shall incur no liability for any resulting loss to any
other party to this Agreement.
(c) Neither the Accounts Bank nor the Security Trustee shall be
obliged to enquire into any of the underlying transactions or to verify any
of the contents of any certificate or document of a kind referred to in
Clause 9.6(a).
9.6 ACCESS TO RECORDS
(a) Each Accountholder shall, on request from and without charge to
Security Trustee or the Facility Agent, provide such party with copies of
bank statements for any of the Project Accounts maintained in its name and
such other information relating to transactions effected or to be effected
on any of the Project Accounts as the Security Trustee or the Facility
Agent may from time to time request.
(b) Neither the Facility Agent, the Security Trustee nor the Accounts
Bank shall disclose the contents of any statement or information received
under this Agreement to any person, except as may be required under any
applicable law or by any governmental authority, and other than to:
(i) any other party to this Agreement; or
(ii) any Finance Party; or
(iii) where required, any financial or legal adviser or
banker to such party,
provided that, before making any such disclosure, the disclosing party
concerned shall obtain from any person (other than any person described in
(i), (ii) or (iii) above) to whom it proposes to disclose the contents of
any statements or information received under this Agreement (unless such
person is bound by a duty of confidentiality imposed by law, regulation or
practice by virtue of that person's profession or business) an undertaking
that the person concerned shall keep confidential all documents or
information disclosed to it.
9.7 INFORMATION
(a) To enable the Facility Agent and the Security Trustee to perform
their respective obligations under this Agreement, each other party to this
Agreement shall provide to the Facility Agent and the Security Trustee
(upon request), such information as they shall reasonably require and
neither the Facility Agent nor the Security Trustee shall be liable for any
loss resulting from any delay or failure to perform its obligations under
this Agreement, where such delay or failure results from a delay or failure
to provide the Facility Agent or the Security Trustee, as the case may be,
with any information so required by it.
(b) The Facility Agent shall be entitled to rely upon the figures and
limits contained in any Account Request given by any Accountholder.
9.8 RESOLVING ADMINISTRATIVE PROBLEMS
Notwithstanding any provision of the Transaction Documents to the
contrary, the Facility Agent, the Security Trustee, the Accounts Bank and
the relevant Accountholder may agree between themselves in writing rules
governing any of the Project Accounts in order to resolve administrative
problems and thereby facilitate the operation of this Agreement including,
without limitation, rules governing the provision of information relating
to Accounts, but no such rules shall be binding on the other parties to
this Agreement without their respective prior written agreement.
9.9 ACKNOWLEDGEMENTS
(a) Each Accountholder acknowledges that neither any insufficiency of
funds in the Project Accounts (or any of them), nor any inability to apply
any funds in the Project Accounts (or any of them) against any or all
amounts owing under any Finance Document, shall at any time limit, reduce
or otherwise affect the Accountholders' payment obligations under any
Finance Document.
(b) For the avoidance of doubt, nothing in this Agreement shall in
any way limit or affect any person's rights, or any restriction on any
person's rights or actions, under any other Finance Document or be
construed as permitting any person to take any action which would be
prohibited by any provision of any other Finance Document.
(c) Each party to this Agreement acknowledges that neither the
Facility Agent, the Security Trustee nor the Accounts Bank shall incur any
obligation or liability in circumstances where there are insufficient funds
standing to the credit of any Account to make a payment in full which would
otherwise have been made pursuant to the terms of this Agreement, including
where Authorised Investments have been acquired out of funds standing to
the credit of that Account.
10. REPRESENTATIONS AND WARRANTIES
The Accountholders each represent and warrant to each of the other
parties to this Agreement that:
(a) this Agreement constitutes its legal, valid and binding
obligations enforceable in accordance with its terms;
(b) the entry into and performance of this Agreement is within its
powers;
(c) the entry into and performance of this Agreement has been duly
authorised by it;
(d) this Agreement does not and will not breach its constitutional
documents or any agreement by which such party is bound;
(e) all consents and approvals required by it in relation to this
Agreement and in relation to the opening and maintenance of the
Project Accounts have been obtained and are in force and effect; and
(f) each Project Account is free from Security Interests and third
party rights other than in respect of the Security Interests created
by or pursuant to the Finance Documents.
11. THE ACCOUNTS BANK
11.1 ACCOUNTS BANK TERMS AND CONDITIONS
The Accounts Bank shall act in accordance with the terms of this
Agreement and the terms and conditions separately agreed between the
Accounts Bank and the Accountholders with respect to the operation of the
Charged Accounts provided that such terms and conditions shall not be
inconsistent or conflict with the terms of this Agreement.
11.2 WAIVER OF SET-OFF, ETC.
The Accounts Bank confirms that:
(a) each Project Account is and will be at all times maintained in
the sole name of the Borrower, CAP(G) or KKM, as appropriate, and the
Accounts Bank shall not recognise, or be in any way concerned with,
any interest of any other person in (or in respect of) any of the
Project Accounts held with it other than pursuant to the terms of this
Agreement or the other Finance Documents or where required by
applicable law in any relevant jurisdiction; and
(b) it has neither claimed or exercised nor will it claim or exercise
(except with the Security Trustee's prior written consent) any
Security Interest, right of set-off, consolidation of accounts or
counterclaim or any other right against or in respect of any of the
Project Accounts held with it.
11.3 CHANGE OF ACCOUNTS BANK
(a) The Accounts Bank (and any successor Accounts Bank) may at any
time resign by giving its written notice of resignation to the other
parties to this Agreement. The Accounts Bank shall then deliver the funds
held in the Charged Accounts to the successor Accounts Bank designated in
writing by the Facility Agent (with the consent of the Borrower such
consent not to be unreasonably withheld or delayed except if an Event of
Default or Potential Event of Default is continuing, in which event no such
consent shall be required), or failing such appointment within 60 days of
the resignation of the Accounts Bank, to any court of competent
jurisdiction, whereupon the Accounts Bank shall be discharged of and from
any and all further obligations arising in connection with this Agreement.
The resignation of any Accounts Bank will take effect on the earliest of:
(i) the appointment of a successor;
(ii) the payment of funds into a court of competent jurisdiction;
and
(iii) the day which is three months after the date of
delivery of its written notice of resignation to the other
parties to this Agreement. If, at that time, such Accounts
Bank has not received a designation of a successor Accounts
Bank, such Accounts Bank's sole responsibility after that
time shall be to keep the Charged Accounts until receipt of
a designation of successor Accounts Bank or a joint written
disposition instruction by the other parties to this
Agreement or a final order of a court of competent
jurisdiction.
(b) In the event of its replacement or resignation, the resigning
Accounts Bank shall be released from any obligations hereunder in respect
of the Project Accounts maintained by it (save for liabilities and
obligations accrued prior to the date of replacement or resignation) but it
shall remain entitled to its rights (if any) under Clause 8 (GENERAL
PROVISIONS RELATING TO THE PROJECT ACCOUNTS).
11.4 FEES, ETC.
The Borrower will pay to the Accounts Bank for its own account a fee
as agreed in separate fee letters between the Borrower and the Accounts
Bank.
11.5 COSTS OF THE ACCOUNTS BANK
(a) The Borrower shall pay to the Accounts Bank all reasonable costs,
charges and expenses (including travelling expenses) of the Accounts Bank
properly incurred in the negotiation, preparation and execution of this
Agreement and in the exercise and performance of its rights, duties,
powers, liabilities and obligations under this Agreement (in each case
including but not limited to legal fees and any applicable stamp duty).
(b) The Accountholders shall jointly and severally indemnify the
Accounts Bank and keep it indemnified against all liabilities, costs,
claims, penalties, taxes (other than taxes imposed on the net income of
such Accounts Bank or the office or location through which it acts as
Accounts Bank), proceedings, fines, demands, charges and expenses
(including in each case value added tax and any similar tax charged or
chargeable in respect of such costs, charges and expenses):
(i) to which the Accounts Bank becomes subject by reason of
being the Accounts Bank or properly incurred by it in its
capacity as Accounts Bank; and
(ii) in respect of any matter or thing done or omitted in any way
relating to this Agreement,
provided that the indemnities contained in this Agreement shall not extend
to any of the above where they are sustained or incurred by such Accounts
Bank as a result of its negligence or wilful misconduct.
12. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
12.1 REMEDIES AND WAIVERS
Time is of the essence of each of the Accountholder's obligations
under this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Accounts Bank, the Security Trustee or the
Facility Agent, 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.
Any of the Accounts Bank, the Security Trustee or the Facility Agent may
agree to any waiver of any of its rights or remedies under this Agreement
on such terms as it sees fit.
12.2 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
relevant 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 in this Agreement.
13. NOTICES
13.1 GIVING OF NOTICES
(a) All notices or other communications shall be in writing addressed
to the relevant party at its address specified in Schedule 3. A written
notice includes a notice by telex or facsimile transmission.
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered;
(ii) 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
(iii) if by facsimile, when received.
(c) 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.
13.2 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to the this Agreement shall be in the English language or
accompanied by a translation into English certified (by an officer of the
person making or delivering the same) as being a true and accurate
translation thereof.
14. AMENDMENTS
This Agreement may not be amended except by an instrument in writing
signed by each of the Facility Agent, the Security Trustee (acting on the
instructions of the Facility Agent) and the Accountholders, provided that
no amendment to this Agreement shall impose any additional obligations on
the Security Trustee, the Facility Agent or the Accounts Bank without the
affected party's prior written consent.
15. LAW AND JURISDICTION
15.1 ENGLISH LAW
This Agreement shall be governed by English law.
15.2 JURISDICTION
(a) For the exclusive benefit of the Finance Parties, each of the
Accountholders 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 15 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 15.6 (ARBITRATION).
(b) Each of the Accountholders 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
15.2 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 Accountholders and may be enforced
in the courts of any other jurisdiction.
(c) Nothing contained in this Clause 15.2 shall limit the right of a
Finance Party to take proceedings against any of the Accountholders 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.
15.3 PROCESS AGENT
Each of the Accountholders hereby irrevocably and unconditionally:
(a) appoints Law Debenture Corporate Services Limited, whose address
is at Princes House, 95 Gresham Street, London EC2V 7LY, 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.
15.4 WAIVER OF IMMUNITY
To the extent that any of the Accountholders 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 and to the extent that in any such jurisdiction there may be
attributed to any Accountholder any such immunity (whether or not claimed),
each of the Accountholders 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.
15.5 CONSENT TO ENFORCEMENT
Each of the Accountholders 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.
15.6 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
15.6. 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 that Act.
16. TRANSFERS
16.1 TRANSFERS BY THE BORROWER, KKM AND CAP(G)
None of the Accountholders may assign, transfer, novate or dispose of
any of, or any interest in, its rights or obligations under this Agreement.
16.2 TRANSFERS BY THE SECURITY TRUSTEE
The Security Trustee may not assign, transfer, novate or dispose of
any of, or any interest in, its rights or obligations under this Agreement
except in accordance with Clause 10 of the Security Trust Deed.
16.3 TRANSFERS BY THE FACILITY AGENT
The Facility Agent may not assign, transfer, novate or dispose of any
of, or any interest in, its rights or obligations under this Agreement
except in accordance with Clause 25.10 (RESIGNATION OF THE FACILITY AGENT)
of the Loan Agreement.
16.4 TRANSFERS BY THE ACCOUNTS BANK
The Accounts Bank may not assign, transfer, novate or dispose of any
of, or any interest in, its rights or obligations under this Agreement
except in accordance with Clause 11.3 (CHANGE OF ACCOUNTS BANK).
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement on the date first above written.
THE ACCOUNTHOLDERS
SIGNED on behalf of
CHAPARRAL RESOURCES, INC.
by /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Co-Chairman
In the presence of:
/S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
SIGNED on behalf of
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED
by /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
SIGNED on behalf of
CLOSED TYPE JSC KARAKUDUKMUNAY
by /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
THE FACILITY AGENT
SIGNED on behalf of
SHELL CAPITAL SERVICES LIMITED
by /S/ MARK L.G. TURNER
-----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
In the presence of:
/S/ ZURINA SABAR
-----------------------------
Name: Zurina Sabar
SECURITY TRUSTEE
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
was hereunto affixed in the presence of:
by /S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
by /S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
ACCOUNTS BANK
SIGNED on behalf of
ABN AMRO BANK N.V.
by /S/ B. RUBINGH
-----------------------------
Name: B. Rubingh
Title: Vice President
by /S/ MARTIN SAUER
-----------------------------
Name: Martin Sauer
Title: Vice President
SCHEDULE 1
ACCOUNT REQUESTS
PART I
FORM OF KKM PROCEEDS ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED
as Facility Agent (the "Facility Agent")
cc: Chaparral Resources, Inc.
[Date]
Dear Sirs,
KKM PROCEEDS ACCOUNT REQUEST
<F1>EITHER
[1. We refer to Clause 4.2(b)(i) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby certify that:
(a) the items (if any) listed in Schedule 1(a) to this Account
Request constitute KKM Permitted Expenses which are to be paid in
the amounts and on the dates set out opposite such items in
Schedule 1(a) direct to the accounts of the relevant payees set
out opposite such items in Schedule 1(a) to meet expenditures
required to achieve Project Completion; and
(b) each of the amounts set out in Schedule 1(a) do not exceed the
amounts projected to be paid under the [Project Budget/KKM
Operating Budget] on or before the dates set out in Schedule
1(a).
2. We hereby irrevocably request that the amounts set out opposite the
items of expenses listed in Schedule 1(a) are transferred for value on
the relevant dates from the KKM Proceeds Account to the relevant
payees to meet such items of expenditure.
OR
[1. We refer to Clause 4.2(b)(ii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
certify that:
_______________
<F1> Delete as applicable.
<PAGE>
(a) the items (if any) listed in Schedule 1(a) to this Account
Request constitute KKM Permitted Expenses which are due and
payable or are projected to be due and payable during the
calendar month following receipt of the Bank Instruction
corresponding to this Account Request; and
(b) the amount set out in paragraph 2 below does not exceed the
aggregate amount projected to be paid under the [Project Budget/
KKM Operating Budget] during the calendar month following receipt
of this Account Request.
2. We hereby irrevocably request that on the first Business Day of the
calendar month following receipt of the Bank Instruction corresponding
to this Account Request, an amount equal to $[ ] be transferred
from the KKM Proceeds Account to *[insert name of payee and account
details][the KKM Dollar Operating Account] and on the eleventh
Business Day of the calendar month following receipt of this Bank
Instruction corresponding to this Account Request, an amount equal to
$[ ] be transferred from the KKM Proceeds Account to *[insert name
of relevant payee and account details][the KKM Dollar Operating
Account].
*3. We confirm that *[no more than $100,000 is payable to a single
recipient in respect of KKM Permitted Expenses.] *[an amount equal to
or more than $100,000 is payable to [insert details of single
recipient] and we instruct you to make such payment direct to the
recipient in accordance with the request in paragraph 2 above].
*4. We confirm that the payment requested in paragraph 2 *[is not required
to make payments of [Royalties][Project Taxes.] *[is required to make
payments of [Royalties][Project Taxes] and we instruct you to make
such payment direct to the recipient in accordance with the request in
paragraph 2 above.]
OR
[1. We refer to Clause 4.2(b)(iii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others.
2. We hereby irrevocably request that on the first Quarterly Date
following receipt of the Bank Instruction corresponding to this
Account Request, an amount equal to $[ ] be transferred from the
KKM Proceeds Account to the CAP(G) Receipts Account which will be
applied in or towards meeting the Reserve Balance for the CRI Debt
Service Reserve Account on the Project Completion Date.]
OR
[1. We refer to Clause 4.2(b)(iv) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
certify that:
(a) the items (if any) listed in Schedule 1(a) to this Account
Request constitute Additional Permitted Expenses which are due
and payable during the period commencing on the Quarterly Date
following receipt of the Bank Instruction corresponding to this
Account Request and ending on the date falling immediately prior
to the next succeeding Quarterly Date;
(b) the amount set out in paragraph 2 below does not exceed the
aggregate amount projected to be paid under the CRI Operating
Budget during the relevant period.
2. We hereby irrevocably request that on the first Quarterly Date
following receipt of the Bank Instruction corresponding to this
Account Request, an amount equal to $[ ] be transferred from the
KKM Proceeds Account to the CAP(G) Receipts Account.]
OR
[1. We refer to Clause 4.3(d) of the Accounts Agreement dated [ ] 2000
(the "Accounts Deed"), made between ourselves and others and certify
that the amount to be transferred from the KKM Proceeds Account in
accordance with paragraph 2 below:
(a) will be used to make payments permitted under Clause 17.9 of the
Loan Agreement; and
(b) is equal to the Excess Funds available as at the Reduction Date.
2. We hereby irrevocably request that as soon as reasonably practicable
and in any event for value within 30 days following the Reduction
Date, an amount equal to $[ ] be transferred from the KKM
Proceeds Account. $[ ] of the amount shall be transferred to the
CAP(G) Receipts Account and $[ ] of the amount shall be
transferred to [insert name of payee and account details].]
*[3/5]. In respect of the direct payment of [Additional Permitted
Expenses][KKM Permitted Expenses], we certify that the amounts
set out
in Schedule 1(a) are:
(a) [Additional Permitted Expenses][KKM Permitted Expenses] which
[are][is] due and payable and [has][have] not been paid;
(b) no amounts have been previously requested or withdrawn from any
Project Account to meet such expenses; and
(c) we attach a statement briefly listing the [Additional Permitted
Expenses][KKM Permitted Expenses] and identifying the person to
whom we are required to pay such amounts and confirm that the
details in such list are accurate and correct.
*[4/6]. We confirm that the payments requested in this Account Request,
and the application of such payments, will not result in a
contravention of the Finance Documents and are consistent with
the
terms of Clauses 4 of the Accounts Agreement.
*[5/7]. We confirm that no Potential Event of Default or Event of Default
has occurred and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CLOSED TYPE JSC KARAKUDUKMUNAY
*Delete as applicable.
SCHEDULE 1(A) TO KKM PROCEEDS ACCOUNT REQUEST
[insert items constituting Additional Permitted Expenses, expenditures or
KKM Permitted Expenses, as applicable, which are to be paid directly to the
account of the recipient or to the Project Accounts]
SCHEDULE 1
PART II
FORM OF INVESTMENT REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "FACILITY
AGENT")
[Date]
Dear Sirs,
INSTRUCTION IN RESPECT OF PAYMENTS TO BE APPLIED TOWARDS AUTHORISED
INVESTMENTS
1. We refer to Clause *[4.6] *[5.5] *[6.9] of the Accounts Agreement,
dated [ ] 2000 (the "Accounts Deed"), made between and among
ourselves and yourselves and others.
2. We irrevocably request the transfer, on [DATE], of an amount equal to
$ [ ] from the *[KKM Proceeds Account] *[CAP(G) Disbursement
Account] *[CAP(G) Receipts Account] *[CRI Debt Service Reserve
Account] *[CRI Disbursement Account] *[CRI Receipts Account] to
[insert details of investment account].
3. We confirm that the credit balance of the *[KKM Proceeds Account]
*[CAP(G) Disbursement Account] *[CAP(G) Receipts Account] *[CRI Debt
Service Reserve Account] *[CRI Disbursement Account] *[CRI Receipts
Account] at the date of this Account Request exceeds $250,000.
4. We confirm that the payments requested in this Account Request, and
the application of such payments, will not result in a contravention
of the Finance Documents and are consistent with the terms of Clause
*[4.6] *[5.5] *[6.9] of the Accounts Agreement.
5. We confirm that no Potential Event of Default or Event of Default has
occurred and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
*[CLOSED TYPE JSC KARAKUDUKMUNAY] *[CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED] *[CHAPARRAL RESOURCES, INC.]
*Delete as applicable.
SCHEDULE 1
PART III
FORM OF CAP(G) DISBURSEMENT ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "FACILITY
AGENT")
[Date]
Dear Sirs,
CAP(G) DISBURSEMENT ACCOUNT REQUEST
1. We hereby irrevocably request that for value on the first Business Day
of the calendar month following receipt of the Bank Instruction
corresponding to this Account Request an amount equal to $[ ] be
transferred from the CAP(G) Disbursement Account to the KKM Proceeds
Account in respect of advances under the CAP(G)-KKM Loan Agreement.
2. We confirm that the payments requested in this Account Request, and
the application of such payments, will not result in a contravention
of the Finance Documents and are consistent with the terms of Clause
5.2 of the Accounts Agreement.
3. We confirm that no Potential Event of Default or Event of Default is
continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
SCHEDULE 1
PART IV
FORM OF CRI DISBURSEMENT ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "FACILITY
AGENT")
[Date]
Dear Sirs,
CRI DISBURSEMENT ACCOUNT REQUEST
EITHER<F2>
[1. We refer to Clause 6.2(b)(i) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby certify that:
(a) the items (if any) listed in Schedule 1(a) to this Account
Request constitute CRI Overheads which are due and payable or
projected to be due and payable during the calendar month
following receipt of the Bank Instruction corresponding to this
Account Request; and
(b) the amount set out in paragraph 2 below does not exceed the
aggregate amount projected to be paid under the CRI Operating
Budget during the calendar month following receipt of the Bank
Instruction corresponding to this Account Request.
2. We hereby irrevocably request that for value on [DATE]] an amount
equal to $[ ] be transferred from the CRI Disbursement Account to
the CRI Operating Account to meet the expenses referred to in
paragraph 1 above.
OR
[1. We refer to Clause 6.2(b)(ii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to
Deutsche Bank AG, New York Branch [insert details of account] in
respect of the Hedging Payment which is due and payable as
contemplated under the Hedging Agreement.]
OR
_______________
<F2> Delete as applicable.
<PAGE>
[1. We refer to Clause 6.2(b)(iii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to
[insert name of payee and account details] in respect of premiums
which are due for payment under the Political Risk Policy.]
OR
[1. We refer to Clause 6.2(b)(iv) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to
[insert name of payee and account details] in respect of premiums
which are due for payment under the Transportation Risk Insurance
Policy.]
OR
[1. We refer to Clause 6.2(b)(v) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to
[insert name of payee and account details] in respect of interest due
for payment under the Senior Facility and fees and expenses due for
payment in respect of any of the Finance Documents.]
OR
[1. We refer to Clause 6.2(b)(vi) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to
[insert name of payee and account details] in respect of advances
under the CRI-CAP(G) Loan Agreement which advances are in turn to be
advanced by CAP(G) to KKM under the CAP(G)-KKM Loan Agreement.]
[2/3.] We certify that:
(a) no amounts have been previously requested or withdrawn from any
Project Account to meet any of the expenses detailed above; and
(b) no amounts have been withdrawn from the CRI Disbursement Account
to meet any of our obligations under the Service Contract.
[3/4.] We confirm that the payments requested in this Account Request,
and the application of such payments, will not result in a
contravention of the Finance Documents and are consistent with
the
terms of Clause 6 of the Accounts Agreement.
[4/5.] We confirm that no Potential Event of Default or Event of Default
has occurred and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CHAPARRAL RESOURCES INC.
SCHEDULE 1(A) TO CRI DISBURSEMENT ACCOUNT REQUEST
[insert items constituting CRI Overheads which are to be paid directly to
the account of the recipient or to the CRI Operating Account]
SCHEDULE 1
PART V
FORM OF INSURANCE REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "Facility
Agent")
[Date]
Dear Sirs,
INSURANCE REQUEST
1. We refer to Clause 4.2(c) of the Accounts Agreement dated [ ] 2000
(the "Accounts Deed"), made between ourselves and others and hereby
certify that:
(a) the items (if any) listed in Schedule [1 ] attached to this
Account Request constitute Insurance Proceeds to which Clause
7.7(a) of the Loan Agreement apply;
(b) the items (if any) listed in Schedule [2 ] attached to this
Account Request constitute Insurance Proceeds to which Clause
7.7(b)(i) of the Loan Agreement apply;
(c) the items (if any) listed in Schedule [3 ] attached to this
Account Request constitute Insurance Proceeds to which Clause
7.7(b)(ii)(A) of the Loan Agreement apply;
(d) the items (if any) listed in Schedule [4 ] attached to this
Account Request constitute Insurance Proceeds to which Clause
7.7(b)(ii)(B) of the Loan Agreement apply; and
(e) the items (if any) listed in Schedule [5 ] attached to this
Account Request constitute Insurance Proceeds in respect of third-
party liabilities and the provisions of Clause 7.7(b)(iii) of the
Loan Agreement have been complied with.
2. We irrevocably request you to transfer, as soon as is reasonably
practicable, and in any event for value on [DATE]]:
(a) with respect to the items listed in the attached Schedule [ 1 ],
$[ ] from the KKM Proceeds Account to the CAP(G)
Receipts Account;
(b) with respect to the items listed in the attached Schedule [ 2 ],
$[ ] from the KKM Proceeds Account to [insert name of
payee and details of account];
(c) with respect to the items listed in the attached Schedule [ 3 ],
$[ ] from the KKM Proceeds Account to [insert name of
payee and account details];
(d) with respect to the items listed in the attached Schedule [ 4 ],
$[ ] from the KKM Proceeds Account to [insert name of payee
and details of account]; and
(e) with respect to the items listed in the attached Schedule [ 5 ],
$[ ] from the KKM Proceeds Account to [insert name of
payee and details of account].
3. We certify that:
(a) in respect of any transfer contemplated under paragraph 2(b)
above, the Facility Agent has approved the application of such
Insurance Proceeds to the recipient named therein;
(b) in respect of the transfer contemplated under paragraphs 2(c) and
2(d) above, the amount of the disbursement is required to meet
the costs of any reinstatement, replacement or repair which is
due for payment on the date of the requested disbursement and the
amount disbursed does not exceed the Insurance Proceeds available
to meet such costs on or before such date;
(c) in respect of the transfer contemplated under paragraph 2(e)
above, the amount of the disbursement is required to meet the
costs of third party liabilities which are due for payment on the
date of the requested disbursement and the amount disbursed does
not exceed the Insurance Proceeds available to meet such costs on
or before such date;
(d) the payments requested in this Account Request, and the
application of such payments, will not result in a contravention
of the Finance Documents and are consistent with the terms of
Clauses 4.2(c) and 4.4 of the Accounts Agreement;
(e) no other amounts have been previously requested and withdrawn
from any Project Account to meet the payments contemplated by
this Account Request; and
(f) no Potential Event of Default or Event of Default has occurred
and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement. This Account
Request is governed by and shall be construed in accordance with the laws
of England.
Yours faithfully,
...........................................
For and on behalf of
CLOSED TYPE JSC KARAKUDUKMUNAY
SCHEDULE 1
PART VI
FORM OF CRI RECEIPTS ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "FACILITY
AGENT")
[Date]
Dear Sirs,
CRI RECEIPTS ACCOUNT REQUEST
EITHER<F3>
[1. We refer to Clause 6.5(b)(i) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Receipts Account to [insert
name of payee and account details] in respect of premiums which are
due for payment under the Political Risk Policy;]
OR
[1. We refer to Clause 6.5(b)(ii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby certify that:
(a) the items (if any) listed in Schedule 1(a) to this Account
Request constitute CRI Overheads which are due and payable during
the calendar month following receipt of the Bank Instruction
corresponding to this Account Request; and
(b) the amount set out in paragraph 2 below does not exceed the
aggregate amount projected to be paid under the CRI Operating
Budget during the relevant period.
2. We hereby irrevocably request that for value on [DATE]] an amount
equal to $[ ] be transferred from the CRI Receipts Account to the
CRI Operating Account.
OR
[1. We refer to Clause 6.5(b)(iii) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Receipts Account to the
Facility Agent [insert details of Facility Agent's account] in respect
of any costs, expenses and indemnities payable by the Accountholders,
or any
_______________
<F3> Delete as applicable.
<PAGE>
of them, to the Facility Agent, the Security Trustee, the Accounts
Bank, the Arranger or any of them under or in respect of any of the
Finance Documents.]
OR
[1. We refer to Clause 6.5(b)(iv) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby certify that the amount set out in paragraph 2 below is
required to ensure that the balance in the CRI Debt Service Reserve
Account is at least equal to the Reserve Balance.
2. We hereby irrevocably request that for value on [DATE] an amount equal
to $[ ] be transferred from the CRI Receipts Account to the CRI
Debt Service Reserve Account.]
OR
[1. We refer to Clause 6.5(b)(v) of the Accounts Agreement dated [ ]
2000 (the "Accounts Deed"), made between ourselves and others and
hereby irrevocably request that for value on [DATE]] an amount equal
to $[ ] be transferred from the CRI Disbursement Account to the
Facility Agent [insert details of Facility Agent's account] in respect
of [fees/interest/ principal repayments/prepayments] due to the
Finance Parties under or in respect of the Loan Agreement.]
[2/3/5.] We certify that:
(a) no amounts have been previously requested and withdrawn from any
Project Account to meet the expenses contemplated by this Account
Request;
(b) no amounts have been withdrawn from the CRI Disbursement Account
to meet our obligations under the Service Contract; and
[3/4/6.] We confirm that the payments requested in this Account Request,
and the application of such payments, will not result in a
contravention of the Finance Documents and are consistent with
the
terms of Clause 6.5 of the Accounts Agreement.
[4/5/6.] We confirm that no Potential Event of Default or Event of Default
has occurred and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CHAPARRAL RESOURCES, INC.
* Delete as applicable.
SCHEDULE 1(A) TO CRI RECEIPTS ACCOUNT REQUEST
[insert items constituting CRI Overheads which are to be paid directly to
the account of the recipient.]
SCHEDULE 1
PART VII
FORM OF CRI DEBT SERVICE ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED as Facility Agent (the "Facility
Agent")
[Date]
Dear Sirs,
DEBT SERVICE ACCOUNT REQUEST
1. We refer to Clause 6.8 of the Accounts Agreement dated [ ] 2000
(the "Accounts Deed"), made between ourselves and others.
2. We hereby certify that the amount requested to be transferred from the
Debt Service Reserve Account to the CRI Receipts Account in accordance
with paragraph 3 constitutes the credit balance of the CRI Debt
Service Reserve Account which is in excess of the Reserve Balance.
3. We irrevocably request the payment for value on [DATE]] of $[ ]
from the CRI Debt Service Account to the CRI Receipts Account.
4. We confirm that the payments requested in this Account Request, and
the application of such payments, will not result in a contravention
of the Finance Documents and are consistent with the terms of Clause
6.8 of the Accounts Agreement.
5. We confirm that no Potential Event of Default or Event of Default is
continuing under the Finance Documents other than as specified below.
Unless otherwise defined herein, defined terms used in this Account
Request have the meaning provided in the Accounts Agreement.
This Account Request is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CHAPARRAL RESOURCES, INC.
SCHEDULE 1
PART VIII
FORM OF KKM EMERGENCY ACCOUNT REQUEST
To: SHELL CAPITAL SERVICES LIMITED (the "Facility Agent").
Cc: CHAPARRAL RESOURCES, INC.
Dear Sirs,
BANK INSTRUCTION
1. We refer to Clause 4.2(d) the Accounts Agreement dated [ ]
2000 (the "Accounts Deed") made between, amongst others, ourselves as
an Accountholder, yourselves as Facility Agent and ABN AMRO Bank N.V.,
London Branch as Accounts Bank (the "Accounts Bank").
2. We hereby irrevocably request that an amount equal to $[ ]
be transferred from the KKM Proceeds Account to [insert name of payee
and account details].
3. We certify that:
(a) the amount of the disbursement requested in paragraph 2 above is
to pay for emergency expenditures permitted pursuant to clause
17.14(b) of the Loan Agreement which are due for payment on the
date of this Bank Instruction;
(b) *[the amount to be disbursed, when aggregated with all other
amounts previously disbursed pursuant to clause 17.14(b) of the
Loan Agreement, does not exceed, in aggregate, $300,000] *[the
amount to be disbursed, when aggregated with all other amounts
previously disbursed pursuant to clause 17.14 (b) of the Loan
Agreement does exceed, in aggregate, $300,000 and the Facility
Agent has countersigned this Bank Instruction];
(c) no other amounts have been withdrawn from any Project Account to
meet any such expenses; and
(d) we attach a statement briefly listing the expenses and
identifying the person to whom we are required to pay such
amounts and confirm that the details in such list are accurate
and correct.
4. We confirm that the payments requested in this Bank Instruction, and
the application of such payments, will not result in a contravention
of the Finance Documents and are consistent with the terms of Clauses
4.2(d) and 4.4 of the Accounts Agreement.
5. We confirm that no Potential Event of Default or Event of Default has
occurred and is continuing under the Finance Documents.
Unless otherwise defined herein, defined terms used in this Bank
Instruction have the meaning provided in the Accounts Agreement.
This Bank Instruction is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
CLOSED TYPE JSC KARAKUDUKMUNAY
* Delete as applicable.
SCHEDULE 1
PART IX(A)
FORM OF BANK INSTRUCTION
To: ABN AMRO BANK N.V., LONDON BRANCH as Accounts Bank (the "Accounts
Bank")
Cc: CHAPARRAL RESOURCES, INC.
[CLOSED TYPE JSC KARAKUDUKMUNAY]
Dear Sirs,
BANK INSTRUCTION
We refer to the Accounts Agreement dated [ ] 2000 (the "Accounts
Deed") made between, amongst others, ourselves as Facility Agent and
yourselves as Accounts Bank.
1. We confirm that we have received the attached request in respect of
*[KKM Proceeds Account / CAP(G) Disbursement Account / CRI Debt
Service Reserve Account / CRI Disbursement Account / CRI Receipts
Account / KKM Emergency Account] Request (the "REQUEST") from *[ the
Borrower / KKM / CAP(G)].
OR
[2. Pursuant to Clause 4.3 of the Accounts Agreement we irrevocably
instruct you to transfer from account number [ ], the
KKM Proceeds Account, to account number [ ], the
CAP(G) Receipts Account, an amount equal to $[ ]
representing the KKM Credit Balance [after deduction of an amount of
$[ ] representing Excess Funds] for value on [Date].]
OR
[2. Pursuant to Clause 4.2(d) of the Accounts Agreement we irrevocably
instruct you to transfer from account number [ ],
the KKM Proceeds Account, to the [insert details of payee and account
details] an amount equal to $[ ] to meet emergency
expenditure permitted to be incurred pursuant to Clause 17.14(b) of
the Loan Agreement for value on [DATE].]
OR
[2. Pursuant to Clause 5.2 of the Accounts Agreement we irrevocably
instruct you to transfer from account number [ ],
the CAP(G) Receipts Account, to account number [ ],
the CRI Receipts Account, an amount equal to $[ ]
representing all funds standing to the credit of the CAP(G) Receipts
Account for value on [Date].]
OR
[2. Pursuant to Clause 6.5(c) of the Accounts Agreement we irrevocably
instruct you to transfer from account number [ ],
the CRI Receipts Account, to the Facility Agent [insert details of
Facility Agent's account] an amount equal to $[ ] as a
mandatory prepayment of the Loan pursuant to clause 7.6 of the Loan
Agreement for value on [DATE].]
OR
[2. Pursuant to Clause 6.8(e) of the Accounts Agreement we irrevocably
instruct you to transfer from account number [ ],
the CRI Debt Service Reserve Account, to the Facility Agent [insert
details of Facility Agent's account] an amount equal to $[ ]
representing the shortfall in funds standing to the credit of the CRI
Receipts Account to meet payments due to the Senior Lenders under the
Finance Documents for value on [DATE].]
*[2/3.] We irrevocably instruct you to make the payments for value on
[DATE]] *[on the next Reduction Date] *[on the next Quarterly
Date]
and otherwise in accordance with the Request and Clause 3.2 of
the
Accounts Agreement.
Unless otherwise defined herein, defined terms used in this Bank
Instruction have the meaning provided in the Accounts Agreement.
This Bank Instruction is governed by and shall be construed in
accordance with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
* Delete as applicable.
SCHEDULE 1
PART IX(B)
FORM OF BANK INSTRUCTION
To: ABN AMRO BANK N.V., LONDON BRANCH as Accounts Bank (the "Accounts
Bank")
Cc: CHAPARRAL RESOURCES, INC.
[CLOSED TYPE JSC KARAKUDUKMUNAY]
Dear Sirs,
INVESTMENT INSTRUCTION
We refer to the Accounts Agreement dated [ ] 2000 (the "Accounts
Deed") made between, amongst others, ourselves as Facility Agent and
yourselves as Accounts Bank.
1. We confirm that we have received the attached Investment Request.
2. We have consented to the Investment Request and have agreed to the
payment being made from the *[KKM Proceeds Account / CAP(G)
Disbursement Account / CAP(G) Receipts Account / CRI Debt Service
Reserve Account / CRI Disbursement Account / CRI Receipts Account] and
we irrevocably instruct you to make the payment for value on [DATE]]
and otherwise in accordance with the Investment Request and Clause 3.2
of the Accounts Agreement.
3. We also confirm that the Security Trustee will receive satisfactory
security in accordance with the terms of the Accounts Agreement in
respect of amounts invested as Authorised Investments pursuant to this
Instruction.
Unless otherwise defined herein, defined terms used in this
Instruction have the meaning provided in the Accounts Agreement.
This Instruction is governed by and shall be construed in accordance
with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
* Delete as applicable.
SCHEDULE 2
DEFAULT AND ENFORCEMENT NOTICES
PART I
DEFAULT NOTICE
To: ABN AMRO BANK N.V. LONDON BRANCH as Accounts Bank
cc: CHAPARRAL RESOURCES, INC.
[Date]
Dear Sirs,
DEFAULT NOTICE
1. We refer to Clause 8.1 (Default Notices) of the Accounts Agreement
dated [ ], 2000 (the "Accounts Deed") made between ourselves
and others.
2. We hereby inform you that * [a Potential Event of Default/Event of
Default] is subsisting.
3. We hereby instruct you, unless you receive our express written consent
to the contrary, not to withdraw any amount from any Charged Account
upon the instruction or request of the Borrower whilst this Default
Notice is in force.
4. This Default Notice shall remain in force until you receive a Default
Revocation Notice from us.
Unless otherwise defined herein, defined terms used in this
Instruction have the meaning provided in the Accounts Agreement.
This Instruction is governed by and shall be construed in accordance
with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
* Delete as applicable.
SCHEDULE 2
PART II
FORM OF DEFAULT REVOCATION NOTICE
To: ABN AMRO BANK N.V. LONDON BRANCH as Accounts Bank
cc: CHAPARRAL RESOURCES, INC. as Borrower
[Date]
Dear Sirs,
DEFAULT REVOCATION NOTICE
1. We refer to Clause 8.1 (Default Notices) of the Accounts Agreement
dated [ ] (the "Accounts Deed"), 2000, made between
ourselves and others and the Default Notice addressed to you dated [
] a copy of which is attached to this notice.
2. We hereby revoke the Default Notice referred to in paragraph 1 with
effect commencing upon the date of this Default Revocation Notice.
Unless otherwise defined herein, defined terms used in this
Instruction have the meaning provided in the Accounts Agreement.
This Instruction is governed by and shall be construed in accordance
with the laws of England.
Yours faithfully,
...........................................
For and on behalf of
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
SCHEDULE 3
ADDRESSESS FOR NOTICES
(a) The address and facsimile number of the Borrower is:
Chaparral Resources, Inc.,
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA.
Attention: President
Facsimile: (281) 877 0985
or such other as the Borrower may notify to the other parties by not less
than five Business Days' notice.
(b) The address 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: President
Facsimile: (281) 877 0985
or such other as CAP(G) may notify to the other parties by not less than
five Business Days' notice.
(c) The address and facsimile number of KKM is:
Closed Type JSC Karakudukmunay
Microdistrict 3, Building 82,
Aktau, Republic of Kazakhstan.
Attention:
Facsimile: (7-3292) 518 336
Cc: the Borrower
or such other as KKM may notify to the other parties by not less than five
Business Days' notice.
(d) The address and facsimile number of the Facility Agent is:
Shell Capital Services 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.
(e) The address and facsimile number of the Accounts Bank is:
ABN AMRO Bank N.V., London Branch,
250 Bishopsgate
London EC2M 4AA
Attention: Accounts Administration Department
Facsimile: 00 44 207 678 6690
or such other as the Accounts Bank may notify to the other parties by not
less than five Business Days' notice.
(f) The address and facsimile number of the Security Trustee is:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street,
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
Telex: 888347/8956803
or such other as the Security Trustee may notify to the other parties by
not less than five Business Days' notice.
TABLE OF CONTENTS
PAGE
1. Definitions and Construction . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Certain References . . . . . . . . . . . . . . . . . . . . 4
1.3 The Table of Contents and the Headings. . . . . . . . . . . 5
2. Establishment of the Project Accounts. . . . . . . . . . . . . . 5
2.1 Establishment of the Charged Accounts . . . . . . . . . . . 5
2.2 Location of Charged Accounts. . . . . . . . . . . . . . . . 5
2.3 Establishment of the KKM Operating Accounts . . . . . . . . 5
2.4 Establishment of the CRI Operating Account. . . . . . . . . 6
2.5 Currency of the Project Accounts. . . . . . . . . . . . . . 6
2.6 Transfers between Project Accounts. . . . . . . . . . . . . 6
2.7 Additional Accounts . . . . . . . . . . . . . . . . . . . . 6
2.8 Other Bank Accounts . . . . . . . . . . . . . . . . . . . . 7
2.9 Account Facilities . . . . . . . . . . . . . . . . . . . . 7
3. Account Requests and Instructions . . . . . . . . . . . . . . . 7
3.1 Submission of Instructions and Account Requests . . . . . . 7
3.2 Payment Procedure . . . . . . . . . . . . . . . . . . . . . 8
4. The KKM Proceeds Account . . . . . . . . . . . . . . . . . . . . 8
4.1 Payments into the KKM Proceeds Account. . . . . . . . . . . 8
4.2 Payments out of the KKM Proceeds Account. . . . . . . . . . 8
4.3 Investment Recovery . . . . . . . . . . . . . . . . . . . . 10
4.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Available Funds . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Authorised Investments. . . . . . . . . . . . . . . . . . . 12
5. The CAP(G) Accounts. . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Payments into the CAP(G) Disbursement Account . . . . . . . 13
5.2 Payments out of the CAP(G) Disbursement Account . . . . . . 13
5.3 Payments into the CAP(G) Receipts Account . . . . . . . . . 13
5.4 Payments out of the CAP(G) Receipts Account . . . . . . . . 13
5.5 Authorised Investments. . . . . . . . . . . . . . . . . . . 14
6. The CRI Accounts . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Payments into the CRI Disbursement Account. . . . . . . . . 14
6.2 Payments out of the CRI Disbursement Account. . . . . . . . 14
6.3 Limitations . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Payments into the CRI Receipts Account. . . . . . . . . . . 15
6.5 Payments out of the CRI Receipts Account. . . . . . . . . . 16
6.6 Available Funds . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Limitations . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 CRI Debt Service Reserve Account. . . . . . . . . . . . . . 17
6.9 Authorised Investments. . . . . . . . . . . . . . . . . . . 18
7. The Operating Accounts . . . . . . . . . . . . . . . . . . . . . 18
7.1 Payments into the KKM Operating Accounts and the CRI
Operating Account . . . . . . . . . . . . . . . . . . . . . 18
7.2 Payments out of the KKM Operating Accounts and the CRI
Operating Account . . . . . . . . . . . . . . . . . . . . . 19
8. Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Default Notice . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 20
9. General Provisions Relating to the Project Accounts. . . . . . . 20
9.1 No Security Interests . . . . . . . . . . . . . . . . . . . 20
9.2 Instructions. . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Currencies. . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.5 Reliance on certificates. . . . . . . . . . . . . . . . . . 22
9.6 Access to records . . . . . . . . . . . . . . . . . . . . . 22
9.7 Information . . . . . . . . . . . . . . . . . . . . . . . . 23
9.8 Resolving administrative problems . . . . . . . . . . . . . 23
9.9 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . 23
10. Representations and Warranties . . . . . . . . . . . . . . . . . 24
11. The Accounts Bank. . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Accounts Bank Terms and Conditions. . . . . . . . . . . . . 24
11.2 Waiver of set-off, etc. . . . . . . . . . . . . . . . . . . 24
11.3 Change of Accounts Bank . . . . . . . . . . . . . . . . . . 25
11.4 Fees, etc. . . . . . . . . . . . . . . . . . . . . . . . . 25
11.5 Costs of the Accounts Bank. . . . . . . . . . . . . . . . . 25
12. Remedies and waivers, partial invalidity . . . . . . . . . . . . 26
12.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . . . 26
12.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . 26
13. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.1 Giving of Notices . . . . . . . . . . . . . . . . . . . . . 26
13.2 English Language. . . . . . . . . . . . . . . . . . . . . . 27
14. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15. Law And Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 27
15.1 English Law . . . . . . . . . . . . . . . . . . . . . . . . 27
15.2 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . 27
15.3 Process Agent . . . . . . . . . . . . . . . . . . . . . . . 28
15.4 Waiver of Immunity . . . . . . . . . . . . . . . . . . . . 28
15.5 Consent to Enforcement. . . . . . . . . . . . . . . . . . . 28
15.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 28
16. Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16.1 Transfers by the Borrower, KKM and CAP(G) . . . . . . . . . 29
16.2 Transfers by the Security Trustee . . . . . . . . . . . . . 29
16.3 Transfers by the Facility Agent . . . . . . . . . . . . . . 29
16.4 Transfers by the Accounts Bank. . . . . . . . . . . . . . . 29
17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Schedule 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
FORM OF KKM PROCEEDS ACCOUNT REQUEST . . . . . . . . . . . . . . 32
FORM OF INVESTMENT REQUEST . . . . . . . . . . . . . . . . . . . 37
FORM OF CAP(G) DISBURSEMENT ACCOUNT REQUEST. . . . . . . . . . . 38
FORM OF CRI DISBURSEMENT ACCOUNT REQUEST . . . . . . . . . . . . 39
FORM OF INSURANCE REQUEST. . . . . . . . . . . . . . . . . . . . 43
FORM OF CRI RECEIPTS ACCOUNT REQUEST . . . . . . . . . . . . . . 45
FORM OF CRI DEBT SERVICE ACCOUNT REQUEST . . . . . . . . . . . . 48
FORM OF KKM Emergency Account Request. . . . . . . . . . . . . . 49
FORM OF BANK INSTRUCTION . . . . . . . . . . . . . . . . . . . . 51
FORM OF BANK INSTRUCTION . . . . . . . . . . . . . . . . . . . . 53
Schedule 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
DEFAULT NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 54
FORM OF DEFAULT REVOCATION NOTICE. . . . . . . . . . . . . . . . 55
Schedule 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ADDRESSESS FOR NOTICES . . . . . . . . . . . . . . . . . . . . . 56
==========================================================================
CRI ACCOUNTS ASSIGNMENT
between
CHAPARRAL RESOURCES, INC.
as the Company
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
7 February 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
THIS ACCOUNTS ASSIGNMENT dated 7 February 2000 is made as a deed (this
"Deed") between:
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under the
laws of the state of Delaware (the "COMPANY"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised and
existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "SECURITY
TRUSTEE").
W H E R E A S:
A. Pursuant to a loan agreement dated 1 November, 1999 (the "LOAN
AGREEMENT") between the Company, the Co-Obligors, Shell Capital
Services Limited, Shell Capital Limited and the Lenders (as such terms
are defined in the Loan Agreement), the Lenders have agreed, subject
to the terms and conditions of the Loan Agreement, to make available
to the Company a secured loan in an aggregate amount not exceeding US$
24,000,000 (the "LOAN").
B. At the request of the Facility Agent, the Security Trustee has agreed
to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
C. It is a condition precedent to the Lenders making the Loan available
to the Company that the Company shall have executed and delivered this
Deed to the Security Trustee.
NOW IT IS AGREED:
1. INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases used in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"ACT" means the Law of Property Act 1925.
"ADMINISTRATION" means administration under Part II of the Insolvency
Act 1986;
"ASSIGNED ACCOUNTS" means the CRI Debt Service Reserve Account, the
CRI Disbursement Account and the CRI Receipts Account;
"ASSIGNED ASSETS" means the Assigned Accounts and the Assigned Moneys;
"ASSIGNED MONEYS" means the aggregate of all sums from time to time
standing to the credit of any of the Assigned Accounts and all investments
(including Authorised Investments), interest, income, investment proceeds
and other Rights from time to time accruing to or arising in connection
with such sums;
"ASSIGNMENT" means all or any of the security created, or which may at
any time be created, by or pursuant to this Deed;
"ATTORNEY" means any person appointed as such by the Company pursuant
to Clause 17.1 (Appointment);
"AUTHORISED INVESTMENTS" means (i) cash deposits at a bank in London
having at the time of the deposit capital and surplus of at least
$1,000,000,000 (or the equivalent in any other currency) and having a long-
term debt rating of A or better by Standard & Poor's Rating Group or A2 or
better by Moody's Investors Service Limited, or A by Duff & Phelps Credit
Rating Co., provided that such deposit is in Dollars and is callable on not
more than one months' notice without penalty or otherwise matures on the
last Business Day of the succeeding calendar month and (ii) shares or units
in a money market investment fund company approved by the Facility Agent
with total assets under management of at least $500,000,000 (or the
equivalent in any other currency) and having a money market fund rating of
AAAm by Standard & Poor's Ratings Services or Aaa/MR1+ by Moody's Investor
Services Inc., provided that such shares are held in the Dollar fund of the
investment company and are redeemable within one Business Day;
"DISSOLUTION" means any of the bankruptcy, insolvency, liquidation,
amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of a person, any
equivalent or analogous proceeding by whatever name known and in whatever
jurisdiction or the presentation of a petition for the making of an
administration order (or any equivalent or analogous order) or the passing
of a resolution for or with a view to any of the foregoing;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"RECEIVER" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act;
"RELEVANT TRANSACTION" has the meaning given to it in Clause 16.2
(Retention of Deed);
"RIGHTS" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever);
"SECURED LIABILITIES" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement; (ii) this Deed; or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities; and
"TAX" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 RULES OF INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) headings are for convenience only and do not affect the
interpretation of this Deed;
(b) words importing the singular include the plural and vice versa;
(c) a reference to a Clause, Sub-Clause, party or Schedule is a
reference to that Clause, Sub-Clause, or that party or Schedule to, this
Deed;
(d) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any
amendment, supplement, replacement or novation made in breach of this Deed;
and
(e) a reference to a party to any document includes that party's
successors and permitted assigns.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Company covenants with the Security Trustee that it will on demand
pay and discharge all the Secured Liabilities at the time or times when
due.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or any Receiver under this Deed.
3. SECURITY
3.1 ASSIGNMENT
The Company, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties, the Assigned
Account and the Assigned Moneys.
3.2 NO OBLIGATIONS
Notwithstanding this Deed or any contrary or inconsistent provision of
any Finance Document:
(a) the Company shall remain liable to perform all of its obligations
under or in respect of the Assigned Assets and the Security Trustee shall
be under no obligation of any kind whatsoever if the Company fails to
perform any of those obligations;
(b) the exercise by the Security Trustee of any of the rights,
benefits, interests or claims assigned by this Deed shall not release the
Company from any of its obligation towards the Security Trustee (except for
the application of funds in the discharge of any of the Secured Liabilities
and then only to the extent of such application); and
(c) except to the extent expressly provided in this Deed the Security
Trustee shall not, by reason of or arising out of this Deed or anything
done under or in connection with it, have any obligation or liability
whatsoever to any person (including the Company) to:
(i) perform (whether as a result of the non-performance, or
mis-performance, of the Company or otherwise) any of the obligations
of the Company under or in respect of any of the Assigned Assets; or
(ii) enforce payment or performance of any obligations of
any person party to any agreement forming part of the Assigned Assets;
or
(iii) make any enquiry as to the nature or sufficiency of any
payment received by it under or in respect of this Deed or any of the
Assigned Assets, or to make any claim or take any other action to
collect any moneys or to enforce any rights and benefits assigned to
the Security Trustee or to which the Security Trustee may at any time
be entitled under this Deed.
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
4.1 NO DEALING
The Company shall not deal with the Assigned Moneys or operate the
Assigned Accounts except with the prior written consent of the Security
Trustee or otherwise than is permitted by the Accounts Agreement.
4.2 NEGATIVE PLEDGE
The Company shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interest on,
over, or with respect to, the Assigned Assets except for the Permitted
Security Interests.
4.3 ACKNOWLEDGEMENT
Without prejudice to Clause 4.1 (No Dealing), if the withdrawal of any
amount from an Assigned Account is permitted pursuant to the Accounts
Agreement then (other than in respect of transfers between accounts) on the
payment of the relevant amount to the permitted recipient, the relevant
amount shall be automatically released from the Assignment. When an amount
is transferred from one Assigned Account to another Assigned Account
pursuant to the Loan Agreement or the Accounts Agreement, the amount
transferred shall, upon deposit in the other Assigned Account, become
automatically subject to the Assignment over that other Assigned Account.
5. INSTRUCTIONS TO ACCOUNTS BANK
The Company irrevocably authorises the Security Trustee to give the
Accounts Banks all instructions and notices which the Security Trustee may
from time to time and in the Security Trustee's absolute discretion
consider necessary or appropriate in relation to any of the matters
contemplated by this Deed including, but without limitation, the
enforcement of the Assignment.
6. GENERAL COVENANTS
The Company undertakes:
(a) to take whatever actions the Security Trustee may require at the
Company's expense, for establishing or maintaining the Assignment and
facilitating the exercise of any right, power or discretion exercisable by
the Security Trustee in respect of this Deed including, without limitation,
to execute and deliver any and all such further instruments and documents
as the Security Trustee may deem desirable to obtain the full benefit of
this Deed and of the rights and powers granted under it;
(b) to provide the Security Trustee with such information as the
Security Trustee may from time to time reasonably request with respect to
any of the Assigned Assets;
(c) to permit the Security Trustee, or its officers and agents, to
have access to and examine at all reasonable times minute books and other
corporate records, and books of account and financial records of the
Company in relation to the Assigned Assets;
(d) to defend the Assigned Assets against all claims and demands of
all persons at any time claiming the same or interest in them;
(e) except for the Assignment, not to grant directly or indirectly,
any other Security Interest in respect of, or otherwise dispose of, all or
any part of the Assigned Assets for as long as any of the Secured
Liabilities remains outstanding;
(f) to at all times maintain the balance of the Assigned Accounts in
accordance with the Accounts Agreement;
(g) to neither release, grant time or indulgence or compound with any
third party or suffer to arise any set-off or other adverse rights against
the Assigned Assets nor do or omit to do anything which may delay or
prejudice the right of the Security Trustee to receive payment from the
Assigned Accounts once it is entitled to such payment under the terms of
this Agreement;
(h) to deposit with the Security Trustee, or otherwise as the
Security Trustee may direct, all certificates of deposit, deposit receipts,
or other instruments or securities relating to the Assigned Assets
together, where appropriate, with such forms of transfer or other
instructions duly executed as the Security Trustee may from time to time
reasonably require;
(i) to forthwith inform the Security Trustee of any claim or notice
relating to the Assigned Assets received from any other party and of all
other matters relevant to that claim;
(j) to immediately, following execution of this Deed, give to the
Accounts Bank a notice in the form of Schedule 1 and procure that the
Accounts Bank promptly (and in any event within 7 days of receipt of the
notice) execute and deliver to the Security Trustee (with a copy thereof to
the Company) an acknowledgement substantially in the form of Schedule 2;
(k) on the date an Authorised Investment is made, give a notice
substantially in the form of Schedule 3 to the person with whom the
Authorised Investment is made and procure that such person executes and
delivers to the Security Trustee an acknowledgement of that notice as soon
as possible (and in any event within 3 days of receipt of the notice)
substantially in the form of Schedule 4; and
(l) at the request of the Security Trustee and at the Company's cost
and expense, to execute in favour of the Security Trustee, or as it may
reasonably direct, such further or other legal assignments, transfers,
mortgages, charges, applications, notices or other documents as in any such
case the Security Trustee shall reasonably stipulate over the Company's
estate or interest in any of the Assigned Assets:
(i) for perfecting, preserving, maintaining, establishing or
protecting any security intended to be created by or pursuant to this
Deed over the Assigned Assets; or
(ii) upon the occurrence and during the continuance of an Event
of Default when the Security Trustee has taken any step to enforce the
security created by this Deed, for facilitating the realisation of any
Assigned Asset or the exercise by the Security Trustee or any of its
delegates of any right, power or discretion granted by this Deed or by
law.
Without prejudice to the generality of this Sub-Clause (l), such
assignments, transfers, mortgages, charges, applications, notices or other
documents shall be in such form as shall be prepared on behalf of the
Security Trustee and may contain provisions such as are contained in this
Deed or provisions to the like effect and such other provisions of
whatsoever kind as the Security Trustee shall reasonably require for the
perfection of the security constituted by or pursuant to this Deed. The
obligations of the Company under this Sub-Clause (l) shall be in addition
to and not in substitution of the covenants or further assurances deemed to
be included in this Deed by applicable law.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Company represents and warrants to the Security Trustee, as
at the date of this Deed, that:
(a) it is and will be the sole legal and beneficial owner and holder
of the Assigned Accounts and Assigned Moneys;
(b) it has the corporate power to enter into, execute and deliver
this Deed and to perform its obligations under this Deed;
(c) all actions, conditions and things required to be taken,
fulfilled and done (including, without limitation, the obtaining of
necessary Consents) in order to (i) enable the Company lawfully to enter
into, perform and comply with its obligations under this Deed, (ii) ensure
that those obligations are valid and legally binding, (iii) permit the
creation of the Assignment and ensure that (subject to all necessary
registrations thereof being made) the Assignment is valid, legally binding
and enforceable and has and will have the priority and ranking it is
expressed to have and (iv) make this Deed admissible in evidence in the
courts of England, have been taken, fulfilled and done;
(d) the Assigned Accounts are not the subject of a pledge or any
Security Interest to the benefit of persons other than the Finance Parties
and no demands or claims or any other encumbrances whatsoever have been
made by anyone with respect to all or any part of the Assigned Accounts;
(e) the obligations of the Company under this Deed and the Assignment
are, and will be, until fully discharged, valid, legally binding and
enforceable and, in the case of the Assignment, has the ranking and
priority it is expressed to have;
(f) the execution and delivery and the performance of this Deed will
not violate any law or regulation, or any order or decree of any court, or
any provision of the charter of the Company, constitute a default under any
agreement or other instrument to which the Company is a party or by which
it is bound and will not result in the creation or imposition of any
Security Interest, upon any property of the Company;
(g) it has not performed any acts which might prevent the Security
Trustee from enforcing any of the terms of this Deed or which would limit
the Security Trustee in any such enforcement; and
(h) upon the signing of this Deed by all the parties, and delivery of
the notice in the form of Schedule 1 to the Accounts Bank, and receipt of
the acknowledgement in the form of Schedule 2, this Deed shall constitute
valid and perfected Security Interests in the Assigned Assets, enforceable
against third parties, and the rights of the Security Trustee in such
Assigned Assets will be prior to all other Security Interests and rights of
others in such Assigned Assets.
7.2 REPETITION
The representations and warranties contained in Clause 7.1 shall be
made on the date of this Deed and shall be repeated thereafter on each
other day on which the representations and warranties set out in the Loan
Agreement are to be repeated and on each day on which an Advance is made by
reference to the facts and circumstances then existing.
7.3 SECURITY TRUSTEE'S RELIANCE
(a) The Company acknowledges that it makes the representations in
Clause 7.1 with the intention of inducing the Security Trustee to enter
into this Deed and the other Finance Documents and that the Security
Trustee enters into this Deed and the other Finance Documents on the basis
of, and in full reliance on, each of such representations.
(b) The Company warrants to the Security Trustee that each of such
representations is true and correct in all material respects as of the date
of this Deed and that none of the omits any matter the omission of which
makes any of such representations misleading.
7.4 Notwithstanding anything contained herein:
(a) the Security Trustee shall be under no obligation or liability
under or in respect of any of the Assigned Assets or liable to make any
payment under or in respect of them;
(b) the Security Trustee shall not be obliged to take any steps
necessary to preserve the Assigned Assets, or to make any enquiries as to
the nature or sufficiency of any payment received by it; and
(c) the Company shall remain solely and fully liable under or in
respect of each Assigned Account to pay all losses, costs, expenses, taxes
and damages to or in connection with any of the Assigned Accounts.
8. FURTHER ASSURANCES
8.1 GENERAL
The Company shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require:
(a) to ensure that the Assignment will be a legally valid and binding
assignment of the Assigned Assets;
(b) for perfecting, preserving or protecting the Assignment or the
priority of the Assignment; and
(c) for facilitating the appropriation of the Assigned Moneys in
accordance with Clause 9.2 (Appropriation of Assigned Moneys) or the
exercise of any Rights vested in the Security Trustee.
9. ENFORCEMENT
9.1 SECURITY TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Company shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by section 103 of the Act as to the giving of notice
or otherwise.
9.2 APPROPRIATION OF ASSIGNED MONEYS
Upon the occurrence of an Event of Default, the Security Trustee shall
be entitled, on the instructions of the Facility Agent, and is hereby
irrevocably and unconditionally authorised, without giving any other prior
notice to the Company or obtaining the consent of the Company but at the
cost of the Company, to require payment by the Accounts Bank to the
Security Trustee or as it may direct of the whole or any part of the
Assigned Moneys for application in the following order of priority (but
without prejudice to the right of the Security Trustee to recover any
shortfall from the Company):
(a) firstly, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and all
outgoings paid by it;
(b) secondly, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its absolute
discretion may from time to time determine; and
(c) thirdly, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Company.
9.3 FIXED PERIOD
Clause 9.2 (Appropriation of Assigned Moneys) shall apply
notwithstanding that the Assigned Money or any part of it may have been
made or deposited for a fixed period and that such period may not have
expired.
9.4 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.5 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Company, or
following the Dissolution of the Company, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Company or otherwise and in such manner and upon such terms
and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental or
conducive to any of the rights, powers or discretions conferred on a
Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of exercising if
the Receiver were the absolute beneficial owner of the same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Company for all purposes and
the Company shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Company alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the security constituted by this Deed has become
enforceable, irrespective of whether the Security Trustee shall have taken
possession of the Assigned Assets or appointed a Receiver.
12.2 SUSPENSE ACCOUNT
For as long as any of the Secured Liabilities have not been paid or
discharged in full, the Security Trustee, acting upon the instructions of
the Facility Agent, may place and retain on an interest bearing suspense
account on deposit, for as long as it considers fit, any moneys received,
recovered or realised under or in connection with this Deed to the extent
of such Secured Liabilities without any obligation to apply the same in or
towards the discharge of such Secured Liabilities.
12.3 REDEMPTION OF PRIOR SECURITY
The Security Trustee may, at any time, redeem any Security Interest
over the Assigned Assets having priority to the Assignment or procure the
transfer thereof to the Security Trustee and may settle the accounts of
encumbrancers. Any accounts so settled shall, in the absence of manifest
error, be conclusive and binding on the Company. The Company shall, on
demand, pay to the Security Trustee all principal moneys, interest, costs,
charges, losses, liabilities and expenses of, and incidental to, any such
redemption or transfer.
12.4 NEW ASSIGNED ACCOUNT
At any time following (i) the Security Trustee's having received
notice (either actual or constructive) of any subsequent security affecting
the Assigned Assets (other than a Permitted Security Interest) or (ii) the
Dissolution of the Company, the Security Trustee may open a new account in
the name of the Company (whether or not it permits any existing account to
continue). If the Security Trustee does not open such a new account, it
shall nevertheless be treated as if it had done so at the time when the
notice was received or was deemed to have been received or, as the case may
be, the Dissolution commenced. Thereafter, all payments made by the Company
to the Security Trustee or received by the Security Trustee for the account
of the Company shall be credited or treated as having been credited to the
new account and shall not operate to reduce the amount secured by this Deed
at the time when the Security Trustee received or was deemed to have
received such notice or, as the case may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 RIGHT OF SET-OFF
The Security Trustee may, without notice to the Company and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Company,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the market
rate of exchange which may be obtained by the Security Trustee at the date
of set-off.
12.7 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Company or any other person for anything except
the Security Trustee's own actual receipts; or
(b) to the Company or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected with,
any realisation of the Assigned Assets or from any act, default, omission
or misconduct of the Security Trustee, its officers, employees or agents in
relation to the Assigned Assets except to the extent that they shall be
caused by the Security Trustee's own fraud, gross negligence or wilful
misconduct or that of its officers, employees or agents.
12.8 RECEIVER'S LIABILITY
All the provisions of Clause 12.7 (Security Trustee's Liability) shall
apply, mutatis mutandis, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
12.9 INDEMNITY
The Security Trustee and every delegate, Receiver, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
reasonable purported execution of any of their respective Rights and
against all actions, proceedings, costs, claims and demands in respect of
any matter or thing done or omitted in any way relating to the Assigned
Assets, and the Security Trustee and any such delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder may
retain and pay all sums in respect of the same out of any moneys received
unless such liabilities and expenses were incurred as a result of the gross
negligence or wilful default of the Security Trustee, delegate, attorney,
manager, agent or other person appointed by the Security Trustee.
13. CONTINUING SECURITY AND OTHER MATTERS
13.1 CONTINUING AND INDEPENDENT SECURITY
The Assignment shall be continuing and independent security for the
Secured Liabilities and shall not be satisfied, discharged or affected by
any intermediate payment or settlement of account (whether or not any
Secured Liabilities remain outstanding thereafter) or any other matter or
thing whatsoever.
13.2 PRIMARY OBLIGATIONS
This Deed and the Assignment constitute original, independent and
absolute securities (and not secondary or collateral securities) for the
Secured Liabilities.
14. OTHER SECURITY
The Assignment shall be in addition to, and shall not be prejudiced
by, any other security or any guarantee or indemnity or other document
which the Security Trustee or any of the other Finance Parties may at any
time hold for the payment of the Secured Liabilities.
15. ASSIGNMENT NOT TO BE AFFECTED
Without prejudice to Clauses 13 (Continuing Security and Other
Matters) and 14 (Other Security), neither the Assignment nor the liability
of the Company for the Secured Liabilities shall be prejudiced or affected
by:
(a) any variation or amendment of, or waiver or release granted under
or in connection with, any other security or any guarantee or indemnity or
other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee or any other Finance Party to the Company
or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the Security
Trustee or any other Finance Party or any other person of any other
security, or any guarantee or indemnity or document;
(d) the Dissolution of any Obligor or any other person;
(e) any arrangement or compromise entered into by the Security
Trustee or any other Finance Party with any Obligor or any other person;
(f) any change in the constitution of any Obligor;
(g) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the whole
or any part of the assets of any Obligor to any other person;
(h) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(i) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the Security
Trustee or any other Finance Party or any other person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee or any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision, might
operate to prejudice or affect the liability of the any Obligor for the
Secured Liabilities.
16. RELEASE OF ASSIGNED ASSETS
16.1 RELEASE OF ASSIGNED ASSETS
If the Security Trustee, acting upon the instructions of the Facility
Agent, is satisfied that all the Secured Liabilities have been irrevocably
paid or discharged in full and the Security Trustee is satisfied that the
time period within which the payment or discharge of such Secured
Liabilities or such substitute security can be avoided, reduced or
invalidated by virtue of applicable law or for any other reason whatsoever
has expired, or that the payment, discharge or substitute security will not
be avoided, reduced or invalidated then, subject to Clause 16.2 (Retention
of Deed), the Security Trustee shall at the request and cost of the Company
execute such deeds and do all such acts and things as may be necessary to
release the Assigned Assets from the Assignment.
16.2 RETENTION OF DEED
If the Company requests the Security Trustee to release the Assigned
Assets from the Assignment following any payment or discharge of the
Secured Liabilities by a person other than the Company (a "RELEVANT
TRANSACTION"), the Security Trustee shall at the cost of the Company
execute such documents and deeds and do all such acts and things as may be
necessary to release the Assigned Assets from the Assignment provided the
Security Trustee is satisfied that the payment or discharge will not be
avoided, reduced or invalidated. If the Security Trustee is not so
satisfied, the Security Trustee shall be entitled to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment for
such further period as the Security Trustee may determine.
17. POWER OF ATTORNEY
17.1 APPOINTMENT
The Company appoints, irrevocably and by way of security, the Security
Trustee, every Receiver and every delegate severally to be the Attorney of
the Company (with full powers of substitution and delegation), on its
behalf and in its name or otherwise, at such time and in such manner as the
Attorney may think fit:
(a) to do anything which the Company is obliged to do (but has not
done) under this Deed including, but without limitation, to complete and
execute any transfer of, or security over, the Assigned Assets;
(b) generally to exercise all or any of the Rights conferred on the
Security Trustee, every Receiver or every delegate in relation to the
Assigned Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
17.2 RATIFICATION
The Company covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 17.1.
18. DEFAULT INTEREST
If the Company fails to pay any Secured Liabilities on the due date
for payment, the Company shall pay to the Security Trustee on demand
interest at the "default rate" (as such term is defined in the Clause 19.2
(Default Interest) of the Loan Agreement) from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 21 (Costs and Expenses), the date on which
the relevant cost, charge, loss, liability, expense or sum was expended,
paid or debited on account by the Security Trustee without the necessity of
any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liabilities became due,
until full payment and discharge of the relevant Secured Liabilities
(both before and after any judgment).
19. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the Company's
liability under this Deed or if that liability is converted into a claim,
proof, judgment or order in a currency other than Dollars:
(a) the Company shall indemnify the Security Trustee as an
independent obligation against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business and after
expenses and commissions is less than the amount owed in Dollars, the
Company shall forthwith on demand pay to the Security Trustee an amount in
Dollars equal to the deficit; and
(c) the Company shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such conversion.
The Company waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which it is
expressed to be payable.
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
of the Security Trustee as to the amount of any indebtedness comprised in
the Secured Liabilities or as to any applicable rate of interest shall, in
the absence of manifest error, be conclusive evidence against the Company
as to that amount or rate.
21. COSTS AND EXPENSES
21.1 TRANSACTION COSTS
The Company shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including, without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
21.2 PRESERVATION AND ENFORCEMENT COSTS
The Company shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including without limitation legal and
other fees 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 the Security
Trustee under this Deed.
21.3 STAMP TAXES
The Company shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
21.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Company shall, from time to time on demand of the Security Trustee
(and without prejudice to the provisions of Clause 21.1 (Transaction Costs)
and 21.2 (Preservation and Enforcement Costs) compensate the Security
Trustee at such daily and/or hourly rates as the Security Trustee shall
from time to time determine and on demand indemnify the Security Trustee
against all costs and expenses (including without limitation telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Security Trustee
or the other Finance Parties or any request by the Company in connection
with:
(a) the granting or proposed granting of any waiver or consent
requested by the Company under this Deed;
(b) any actual, potential or suspected breach by the Company of its
obligations under this Deed;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Company.
21.5 TAX
Any fee, cost or expense referred to in this Clause 21 (Costs and
Expenses) is exclusive of any Tax chargeable in connection with that cost
or expense. The Company shall pay any Tax so chargeable at the same time as
it pays the relevant fee, cost or expense.
22. NOTICES
22.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission. Any
such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
22.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Company by not
less than five (5) Business Days' notice.
(b) The address and facsimile number of the Company are:
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Company may notify to the Security Trustee by not
less than five (5) Business Days' notice.
22.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY
23.1 REMEDIES AND WAIVERS
Time is of the essence of the Company's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
23.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
24. ASSIGNMENT OF RIGHTS
The Security Trustee may at any time, without the consent of the
Company, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Company
may not assign its rights under this Deed.
25. LAW AND JURISDICTION
25.1 ENGLISH LAW
THIS DEED SHALL BE GOVERNED BY ENGLISH LAW.
25.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE SECURITY TRUSTEE AND THE
FACILITY AGENT, THE COMPANY 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 DEED AND THAT ACCORDINGLY ANY SUIT, ACTION OR
PROCEEDINGS (TOGETHER IN THIS CLAUSE 25 (LAW AND JURISDICTION) 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 25.6
(ARBITRATION).
(B) THE COMPANY 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 25.2 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 THE COMPANY AND MAY BE ENFORCED IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) NOTHING CONTAINED IN THIS CLAUSE 25.2 SHALL LIMIT THE RIGHT OF
THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE COMPANY 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.
25.3 PROCESS AGENT
THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) APPOINTS LAW DEBENTURE CORPORATE SERVICES LIMITED, WHOSE ADDRESS
IS AT PRINCES HOUSE, 95 GRESHAM STREET, LONDON EC2V 7LY, ENGLAND AS ITS
PROCESS AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN
ENGLAND IN ANY PROCEEDINGS WITH RESPECT TO THIS DEED;
(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 DEED SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
25.4 WAIVER OF IMMUNITY
TO THE EXTENT THAT THE COMPANY MAY NOW OR HEREAFTER BE ENTITLED, IN
ANY JURISDICTION IN WHICH PROCEEDINGS MAY AT ANY TIME BE COMMENCED WITH
RESPECT TO THIS DEED, TO CLAIM FOR ITSELF OR ANY OF ITS UNDERTAKINGS,
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 DEED AND/OR TO
THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED TO THE
COMPANY, ANY SUCH IMMUNITY (WHETHER OR NOT CLAIMED), THE COMPANY 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.
25.5 CONSENT TO ENFORCEMENT
THE COMPANY 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.
25.6 ARBITRATION
IF ANY DISPUTE ARISES IN RELATION TO THIS DEED, INCLUDING ANY QUESTION
AS TO EXISTENCE, VALIDITY OR TERMINATION, SUCH DISPUTE SHALL, AT THE OPTION
ONLY OF THE SECURITY TRUSTEE, 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
25.6. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND SHALL BE
CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY THE
COMPANY, ONE BY THE RELEVANT SECURITY TRUSTEE AND THE THIRD TO BE AGREED
BETWEEN THE TWO ARBITRATORS SO NOMINATED AND IN DEFAULT THE ARBITRATOR
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.
26. COUNTERPARTS
This Deed may be executed in any number of counterparts and by the
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the
parties hereto and is delivered on the date at the beginning of this Deed.
EXECUTED as a deed and delivered by
CHAPARRAL RESOURCES, INC. acting
by /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
Form of Notice of Assignment over Accounts
To: [The Account Bank]
From: Chaparral Resources, Inc.
Copy to: The Law Debenture Trust Corporation p.l.c. as Security Trustee.
2000
Dear Sirs,
Re: [Accounts] (the "Assigned Accounts")
We refer to [insert details of Assigned Accounts]. We enclose a copy
of an Accounts Assignment (the "Assignment") dated 7 February 2000 between
us and the Security Trustee. Terms defined in the Assignment have the same
respective meaning in this Notice.
We hereby give you notice of the Assignment and, for the purposes of
the Assignment, we irrevocably and unconditionally instruct you
(notwithstanding any previous instructions which we may have given you to
the contrary):
(i) until you receive notice from the Security Trustee that the
security created by the Assignment has been released:
(A) not to accept from us any instruction or direction with
respect to the disposition or dealing with the Assigned
Accounts or the Assigned Moneys unless you receive an
instruction from the Facility Agent;
(B) to send to the Facility Agent, and to the Security Trustee
upon request, copies of every statement or correspondence
regarding the Assigned Accounts which you receive in respect
of the Assigned Accounts immediately upon receipt or issue
thereof;
(C) to disclose to the Security Agent and the Facility Agent,
without reference to or any further authority from us and
without any enquiry by you as to the justification for such
disclosure, such information relating to the Assigned
Accounts and the Assigned Moneys as the Security Trustee and
the Facility Agent may, at any time and from time to time
request you to disclose to them;
(D) to comply with the terms of any written notice, statement or
instructions in any way relating to or purporting to relate
to the Assignment and/or the Assigned Accounts and/or the
Assigned Moneys which you may receive at any time and from
time to time from the Facility Agent without any reference
to or further authority from us and without any enquiry by
you as to the justification for such notice, statement or
instructions or the validity thereof; and
(ii) at any time after you have received notice from the Security
Trustee that the security constituted by the Assignment has
become enforceable:
(A) to pay any Assigned Moneys to the Security Trustee or its
order at such place as the Security Trustee may from time to
time direct; and
(B) to hold to the order of the Security Trustee, certificates
of deposit, deposit receipts or other instruments or
securities relating to the Assigned Moneys and to forward
the same to the Security Trustee or as it may direct.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 2 to the Assignment.
Yours faithfully,
Chaparral Resources, Inc.
SCHEDULE 2
Form of Acknowledgement
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Chaparral Resources, Inc.
[Date] 2000
Dear Sirs,
We acknowledge receipt of the letter dated ______ 2000 and addressed
to us by Chaparral Resources, Inc. (the "Company") (a copy of which is
attached) and accept the instructions and authorisations contained in the
letter and undertake to act in accordance and comply with the terms
thereof.
We represent and undertake that we:
(a) consent to the Assignment referred to in the letter;
(b) have received no notice of, and have not ourselves received, any prior
charge, assignment or encumbrance of the Assigned Assets;
(c) will transfer, pay or deliver any Assigned Moneys or deal with or
permit any dealing with the Assigned Accounts only pursuant to the
Accounts Agreement;
(d) will not in any way prejudice your rights, titles and interests to or
under the Assigned Assets;
(e) will neither claim to set-off to your prejudice any Assigned Moneys
against any claim we may have against the Company howsoever arising
nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Assigned Accounts;
(f) will procure that payments are made to you or as you may direct in
accordance with the authority and instruction contained in the
attached letter, upon notice from you that the Assignment has become
enforceable; and
(g) will send to the Facility Agent, at the address specified in the
letter, copies of every statement or correspondence regarding the
Assigned Accounts which we receive from or send to the Company
immediately upon the receipt or issue thereof.
We have made the representations and given the undertakings set out in
this letter in the knowledge that they are required by you in connection
with the security which has been granted by the Company in your favour
pursuant to an Accounts Assignment dated 7 February 2000 between you and
the Company (the "Assignment"). The expressions defined in the Assignment
have the same respective meanings in this letter. This letter shall be
governed by and construed in accordance with English law.
Yours faithfully,
[Name of Accounts Bank]
SCHEDULE 3
Form of Notice of Assignment
To: []
From: Chaparral Resources, Inc. (the "Company")
Copy to: The Law Debenture Trust Corporation p.l.c. (the "Security
Trustee").
Re: [insert details of Authorised Investments] (the "Relevant Investment")
We refer to the Accounts Assignment (the "Assignment") dated 7
February 2000 between us and the Security Trustee. Terms defined in the
Assignment have the same respective meaning in this Notice.
We refer to the Relevant Investment to be made from funds standing to
the credit of the following Assigned Account[s]:
[insert account details] (the "Relevant Account[s]").
[ ]
We give you notice that, by the Assignment the Company has assigned by
way of security with full title guarantee in favour of the Security
Trustee, all of the right, title and interest of the Company in and to,
inter alia, all investments (including the Relevant Investment), interest,
income, investment proceeds and other Rights from time to time accruing to
or arising in connection with amounts standing to the credit of the
Assigned Accounts.
The Company hereby irrevocably and unconditionally instructs and authorises
you:-
(a) to disclose to the Security Trustee or the Facility Agent, the
contact details of which are detailed in the Appendix to this notice,
together with a copy to the Company but without any reference to or further
authority from the Company and without any inquiry by you as to the
justification for such disclosure, such information relating to the
Relevant Investment as the Security Trustee or the Facility Agent (as the
case may be) may, at any time and from time to time, request you to
disclose to it;
(b) unless and until the Security Trustee gives you notice to the
contrary, the proceeds of any Relevant Investment (including any interest
or income accruing to or arising in connection therewith) shall be
deposited into the Relevant Account;
(b) to release all or any part of the Relevant Investment (including any
interest or income accruing to or arising in connection therewith) in
accordance with any written instructions received from the Security Trustee
at any time or times notwithstanding any instruction to the contrary from
us;
(c) to hold all certificates or other evidence of ownership or documents
of title of the Relevant Investment subject to the security created by the
Assignment;
(d) to comply with the terms of any written notice that you receive from
the Security Trustee at any time in any way relating to or purporting to
relate to the Assignment or the Relevant Investment, with a notice to the
Company but without any reference to or further authority from the Company
and without any inquiry by you as to the justification for or validity of
such notice or instructions.
The Security Trustee has agreed that the Company may instruct you to
acquire, hold and realise the Relevant Investment without any reference to
or further authority from the Security Trustee except to the extent that
the Security Trustee gives you notice to the contrary. Upon and after the
giving of any such notice, the Company shall cease to be entitled to give
such instructions or make any such withdrawal to the extent specified in
the notice until the revocation of that notice.
The Company confirms that:-
(a) in the event of any conflict between communications received from
the Company and from the Security Trustee, the communication from
the Security Trustee shall prevail; and
(b) none of the instructions, authorisations and confirmations in
this notice can be revoked or varied in any way except with the
Security Trustee's specific written consent.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 4 to the Assignment.
Yours faithfully,
Chaparral Resources, Inc.
APPENDIX
CONTACT DETAILS
THE FACILITY AGENT
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
THE SECURITY TRUSTEE
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
SCHEDULE 4
Form of Acknowledgement
From: []
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Chaparral Resources, Inc.
[Date]
Dear Sirs,
We acknowledge receipt of the letter dated _____ 2000 and addressed to
us by Chaparral Resources, Inc. (the "Company") and accept the instructions
and authorisations contained in the letter and undertake to act in
accordance and comply with the terms thereof. The expressions defined in
the letter have the same respective meanings in this acknowledgement.
We represent and undertake that:
(a) we consent to the Assignment referred to in the letter;
(b) we have received no notice of, and have not ourselves received, any
prior charge, assignment or encumbrance of the Relevant Investment;
(c) unless and until you give us notice to the contrary, the proceeds of
any Relevant Investment (including any interest or income accruing to
or arising in connection therewith) shall be deposited into the
Relevant Account;
(d) we will release all or any part of the Relevant Investment (including
any interest or income accruing to or arising in connection therewith)
in accordance with any written instructions received from you at any
time or times notwithstanding any instruction to the contrary from the
Company;
(e) we shall comply with the terms of any notice received by us from you
terminating the right of the Company to instruct us to acquire, hold
and realise the Relevant Investment to the extent specified in that
notice;
(f) we will not in any way prejudice your rights, titles and interests to
or under the Relevant Investment;
(g) will neither claim to set-off to your prejudice the Relevant
Investment against any claim we may have against the Company howsoever
arising nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Relevant Investment; and
(h) will send to you or the Facility Agent (as the case may be), at the
address specified in the letter, such information relating to the
Relevant Investment as you or the Facility Agent (as the case may be)
may, at any time and from time to time, request.
We have made the representations and given the undertakings set out in
this acknowledgement in the knowledge that they are required by you in
connection with the security which has been granted by the Company in your
favour pursuant to the Accounts Assignment dated 7 February 2000 between
you and the Company (the "Assignment"). This acknowledgement shall be
governed by and construed in accordance with English law.
Yours faithfully,
TABLE OF CONTENTS
Page
1. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Interpretation . . . . . . . . . . . . . . . . 2
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . . 3
2.1 Covenant to Pay . . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands . . . . . . . . . . . . . . . . . . 3
3. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Assignment. . . . . . . . . . . . . . . . . . . . . . . 3
3.2 No Obligations. . . . . . . . . . . . . . . . . . . . . 3
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS. . . . . . . . . . 4
4.1 No Dealing. . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Negative Pledge . . . . . . . . . . . . . . . . . . . . 4
4.3 Acknowledgement . . . . . . . . . . . . . . . . . . . . 4
5. INSTRUCTIONS TO ACCOUNTS BANK . . . . . . . . . . . . . . . . . 4
6. GENERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 4
7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 6
7.2 Repetition. . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Security Trustee's Reliance . . . . . . . . . . . . . . 7
8. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 8
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . 8
9. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.1 Security to Become Enforceable. . . . . . . . . . . . . 8
9.2 Appropriation of Assigned Moneys. . . . . . . . . . . . 8
9.3 Fixed Period. . . . . . . . . . . . . . . . . . . . . . 9
9.4 Section 101 of the Act. . . . . . . . . . . . . . . . . 9
9.5 Sections 93 and 103 of the Act. . . . . . . . . . . . . 9
10. APPOINTMENT OF RECEIVERS. . . . . . . . . . . . . . . . . . . . 9
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . 9
10.2 Scope of Appointment. . . . . . . . . . . . . . . . . . 9
11. RECEIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.1 Powers. . . . . . . . . . . . . . . . . . . . . . . . . 9
11.2 Conflict. . . . . . . . . . . . . . . . . . . . . . . . 10
11.3 Agent of Company. . . . . . . . . . . . . . . . . . . . 10
11.4 Remuneration. . . . . . . . . . . . . . . . . . . . . . 10
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES. . . . . 10
12.1 Rights of Receiver. . . . . . . . . . . . . . . . . . . 10
12.2 Suspense Account. . . . . . . . . . . . . . . . . . . . 10
12.3 Redemption of Prior Security. . . . . . . . . . . . . . 11
12.4 New Assigned Account. . . . . . . . . . . . . . . . . . 11
12.5 Delegation. . . . . . . . . . . . . . . . . . . . . . . 11
12.6 Right of Set-off. . . . . . . . . . . . . . . . . . . . 11
12.7 Security Trustee's Liability. . . . . . . . . . . . . . 11
12.8 Receiver's Liability. . . . . . . . . . . . . . . . . . 12
12.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . 12
13. CONTINUING SECURITY AND OTHER MATTERS . . . . . . . . . . . . . 12
13.1 Continuing and Independent Security . . . . . . . . . . 12
13.2 Primary Obligations . . . . . . . . . . . . . . . . . . 12
14. OTHER SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . 12
15. ASSIGNMENT NOT TO BE AFFECTED . . . . . . . . . . . . . . . . . 12
16. RELEASE OF ASSIGNED ASSETS. . . . . . . . . . . . . . . . . . . 13
16.1 Release of Assigned Assets. . . . . . . . . . . . . . . 13
16.2 Retention of Deed . . . . . . . . . . . . . . . . . . . 13
17. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . 14
17.1 Appointment . . . . . . . . . . . . . . . . . . . . . . 14
17.2 Ratification. . . . . . . . . . . . . . . . . . . . . . 14
18. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 14
19. CURRENCY INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . 14
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE . . . . . . . . . . . . . 15
21. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 15
21.1 Transaction Costs . . . . . . . . . . . . . . . . . . . 15
21.2 Preservation and Enforcement Costs. . . . . . . . . . . 15
21.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . 15
21.4 Security Trustee's Additional Costs . . . . . . . . . . 16
21.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22.1 Giving of Notices . . . . . . . . . . . . . . . . . . . 16
22.2 Addresses for Notices . . . . . . . . . . . . . . . . . 16
22.3 English Language. . . . . . . . . . . . . . . . . . . . 17
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY. . . . . . . . . . . . . 17
23.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . 17
23.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . 17
24. ASSIGNMENT OF RIGHTS. . . . . . . . . . . . . . . . . . . . . . 18
25. LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . 18
25.1 ENGLISH LAW . . . . . . . . . . . . . . . . . . . . . . 18
25.2 JURISDICTION. . . . . . . . . . . . . . . . . . . . . . 18
25.3 PROCESS AGENT . . . . . . . . . . . . . . . . . . . . . 18
25.4 WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . . . 19
25.5 CONSENT TO ENFORCEMENT. . . . . . . . . . . . . . . . . 19
25.6 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . 19
26. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SCHEDULE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
================================================================
CAP(G) ACCOUNTS ASSIGNMENT
between
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
as the Company
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
7 February 2000
================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS ACCOUNTS ASSIGNMENT dated 7 February 2000 is made as a deed (this
"Deed") between:
(1) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised and
existing under the laws of the state of Guernsey (the "COMPANY"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised and
existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "SECURITY
TRUSTEE").
W H E R E A S:
A. Pursuant to a loan agreement dated 1 November, 1999 (the "LOAN
AGREEMENT") between the Borrower, the Co-Obligors, Shell Capital
Services Limited, Shell Capital Limited and the Lenders (as such terms
are defined in the Loan Agreement), the Lenders have agreed, subject
to the terms and conditions of the Loan Agreement, to make available
to the Borrower a secured loan in an aggregate amount not exceeding
US$ 24,000,000 (the "LOAN").
B. At the request of the Facility Agent, the Security Trustee has agreed
to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
C. It is a condition precedent to the Lenders making the Loan available
to the Company that the Company shall have executed and delivered this
Deed to the Security Trustee.
NOW IT IS AGREED:
1. INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases used in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"ACT" means the Law of Property Act 1925.
"ADMINISTRATION" means administration under Part II of the Insolvency
Act 1986;
"ASSIGNED ACCOUNTS" means the CAP(G) Disbursement Account and the
CAP(G) Receipts Account;
"ASSIGNED ASSETS" means the Assigned Accounts and the Assigned Moneys;
"ASSIGNED MONEYS" means the aggregate of all sums from time to time
standing to the credit of any of the Assigned Accounts and all investments
(including Authorised Investments) interest, income, investment proceeds
and other Rights from time to time accruing to or arising in connection
with such sums;
"ASSIGNMENT" means all or any of the security created, or which may at
any time be created, by or pursuant to this Deed;
"ATTORNEY" means any person appointed as such by the Company pursuant
to Clause 17.1 (Appointment);
"AUTHORISED INVESTMENTS" means (i) cash deposits at a bank in London
having at the time of the deposit capital and surplus of at least
$1,000,000,000 (or the equivalent in any other currency) and having a long-
term debt rating of A or better by Standard & Poor's Rating Group or A2 or
better by Moody's Investors Service Limited, or A by Duff & Phelps Credit
Rating Co., provided that such deposit is in Dollars and is callable on not
more than one months' notice without penalty or otherwise matures on the
last Business Day of the succeeding calendar month and (ii) shares or units
in a money market investment fund company approved by the Facility Agent
with total assets under management of at least $500,000,000 (or the
equivalent in any other currency) and having a money market fund rating of
AAAm by Standard & Poor's Ratings Services or Aaa/MR1+ by Moody's Investor
Services Inc., provided that such shares are held in the Dollar fund of the
investment company and are redeemable within one Business Day;
"DISSOLUTION" means any of the bankruptcy, insolvency, liquidation,
amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of a person, any
equivalent or analogous proceeding by whatever name known and in whatever
jurisdiction or the presentation of a petition for the making of an
administration order (or any equivalent or analogous order) or the passing
of a resolution for or with a view to any of the foregoing;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"RECEIVER" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act;
"RELEVANT TRANSACTION" has the meaning given to it in Clause 16.2
(Retention of Deed);
"RIGHTS" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever);
"SECURED LIABILITIES" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement; (ii) this Deed; or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities; and
"TAX" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 RULES OF INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) headings are for convenience only and do not affect the
interpretation of this Deed;
(b) words importing the singular include the plural and vice versa;
(c) a reference to a Clause, Sub-Clause, party or Schedule is a
reference to that Clause, Sub-Clause, or that party or Schedule to,
this Deed;
(d) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any
amendment, supplement, replacement or novation made in breach of this
Deed; and
(e) a reference to a party to any document includes that party's
successors and permitted assigns.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Company covenants with the Security Trustee that it will on demand
pay and discharge all the Secured Liabilities at the time or times when
due, provided that the recourse of the Security Trustee to the Company
under this Deed shall be limited to the extent of the Assigned Assets.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or any Receiver under this Deed.
3. SECURITY
3.1 ASSIGNMENT
The Company, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties the Assigned
Accounts and the Assigned Moneys.
3.2 NO OBLIGATIONS
Notwithstanding this Deed or any contrary or inconsistent provision of
any Finance Document:
(a) the Company shall remain liable to perform all of its obligations
under or in respect of the Assigned Assets and the Security Trustee
shall be under no obligation of any kind whatsoever if the Company
fails to perform any of those obligations;
(b) the exercise by the Security Trustee of any of the rights,
benefits, interests or claims assigned by this Deed shall not release
the Company from any of its obligation towards the Security Trustee
(except for the application of funds in the discharge of any of the
Secured Liabilities and then only to the extent of such application);
and
(c) except to the extent expressly provided in this Deed the Security
Trustee shall not, by reason of or arising out of this Deed or
anything done under or in connection with it, have any obligation or
liability whatsoever to any person (including the Company) to:
(i) perform (whether as a result of the non-performance, or
mis-performance, of the Company or otherwise) any of the
obligations of the Company under or in respect of any of
the Assigned Assets; or
(ii) enforce payment or performance of any obligations of any
person party to any agreement forming part of the
Assigned Assets; or
(iii) make any enquiry as to the nature or sufficiency of any
payment received by it under or in respect of this Deed
or any of the Assigned Assets, or to make any claim or
take any other action to collect any moneys or to enforce
any rights and benefits assigned to the Security Trustee
or to which the Security Trustee may at any time be
entitled under this Deed.
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
4.1 NO DEALING
The Company shall not deal with the Assigned Moneys or operate the
Assigned Accounts except with the prior written consent of the Security
Trustee or otherwise than is permitted by the Accounts Agreement.
4.2 NEGATIVE PLEDGE
The Company shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interest on,
over, or with respect to, the Assigned Assets except for the Permitted
Security Interests.
4.3 ACKNOWLEDGEMENT
Without prejudice to Clause 4.1 (No Dealing), if the withdrawal of any
amount from an Assigned Account is permitted pursuant to the Accounts
Agreement then (other than in respect of transfers between accounts) on the
payment of the relevant amount to the permitted recipient, the relevant
amount shall be automatically released from the Assignment. When an amount
is transferred from one Assigned Account to another Assigned Account
pursuant to the Loan Agreement or the Accounts Agreement, the amount
transferred shall, upon deposit in the other Assigned Account, become
automatically subject to the Assignment over that other Assigned Account.
5. INSTRUCTIONS TO ACCOUNTS BANK
The Company irrevocably authorises the Security Trustee to give the
Accounts Banks all instructions and notices which the Security Trustee may
from time to time and in the Security Trustee's absolute discretion
consider necessary or appropriate in relation to any of the matters
contemplated by this Deed including, but without limitation, the
enforcement of the Assignment.
6. GENERAL COVENANTS
The Company undertakes:
(a) to take whatever actions the Security Trustee may require at the
Company's expense, for establishing or maintaining the Assignment and
facilitating the exercise of any right, power or discretion
exercisable by the Security Trustee in respect of this Deed including,
without limitation, to execute and deliver any and all such further
instruments and documents as the Security Trustee may deem desirable
to obtain the full benefit of this Deed and of the rights and powers
granted under it;
(b) to provide the Security Trustee with such information as the
Security Trustee may from time to time reasonably request with respect
to any of the Assigned Assets;
(c) to permit the Security Trustee, or its officers and agents, to
have access to and examine at all reasonable times minute books and
other corporate records, and books of account and financial records of
the Company in relation to the Assigned Assets;
(d) to defend the Assigned Assets against all claims and demands of
all persons at any time claiming the same or interest in them;
(e) except for the Assignment, not to grant directly or indirectly,
any other Security Interest in respect of, or otherwise dispose of,
all or any part of the Assigned Assets for as long as any of the
Secured Liabilities remains outstanding;
(f) to at all times maintain the balance of the Assigned Accounts in
accordance with the Accounts Agreement;
(g) to neither release, grant time or indulgence or compound with any
third party or suffer to arise any set-off or other adverse rights
against the Assigned Assets nor do or omit to do anything which may
delay or prejudice the right of the Security Trustee to receive
payment from the Assigned Accounts once it is entitled to such payment
under the terms of this Agreement;
(h) to deposit with the Security Trustee, or otherwise as the
Security Trustee may direct, all certificates of deposit, deposit
receipts, or other instruments or securities relating to the Assigned
Assets together, where appropriate, with such forms of transfer or
other instructions duly executed as the Security Trustee may from time
to time reasonably require;
(i) to forthwith inform the Security Trustee of any claim or notice
relating to the Assigned Assets received from any other party and of
all other matters relevant to that claim;
(j) to immediately, following execution of this Deed, give to the
Accounts Bank a notice in the form of Schedule 1 and procure that the
Accounts Bank promptly (and in any event within 7 days of receipt of
the notice) execute and deliver to the Security Trustee (with a copy
thereof to the Company) an acknowledgement substantially in the form
of Schedule 2;
(k) on the date an Authorised Investment is made, give a notice
substantially in the form of Schedule 3 to the person with whom the
Authorised Investment is made and procure that such person executes
and delivers to the Security Trustee an acknowledgement of that notice
as soon as possible (and in any event within 3 days of receipt of the
notice) substantially in the form of Schedule 4; and
(l) at the request of the Security Trustee and at the Company's cost
and expense, to execute in favour of the Security Trustee, or as it
may reasonably direct, such further or other legal assignments,
transfers, mortgages, charges, applications, notices or other
documents as in any such case the Security Trustee shall reasonably
stipulate over the Company's estate or interest in any of the Assigned
Assets:
(i) for perfecting, preserving, maintaining, establishing or
protecting any security intended to be created by or
pursuant to this Deed over the Assigned Assets; or
(ii) upon the occurrence and during the continuance of an Event
of Default when the Security Trustee has taken any step to
enforce the security created by this Deed, for facilitating
the realisation of any Assigned Asset or the exercise by the
Security Trustee or any of its delegates of any right, power
or discretion granted by this Deed or by law.
Without prejudice to the generality of this Sub-Clause (l), such
assignments, transfers, mortgages, charges, applications, notices or other
documents shall be in such form as shall be prepared on behalf of the
Security Trustee and may contain provisions such as are contained in this
Deed or provisions to the like effect and such other provisions of
whatsoever kind as the Security Trustee shall reasonably require for the
perfection of the security constituted by or pursuant to this Deed. The
obligations of the Company under this Sub-Clause (l) shall be in addition
to and not in substitution of the covenants or further assurances deemed to
be included in this Deed by applicable law.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Company represents and warrants to the Security Trustee,
as at the date of this Deed, that:
(a) it is and will be the sole legal and beneficial owner and holder
of the Assigned Accounts and Assigned Moneys;
(b) it has the corporate power to enter into, execute and deliver
this Deed and to perform its obligations under this Deed;
(c) all actions, conditions and things required to be taken,
fulfilled and done (including, without limitation, the obtaining of
necessary Consents) in order to (i) enable the Company lawfully to
enter into, perform and comply with its obligations under this Deed,
(ii) ensure that those obligations are valid and legally binding,
(iii) permit the creation of the Assignment and ensure that (subject
to all necessary registrations thereof being made) the Assignment is
valid, legally binding and enforceable and has and will have the
priority and ranking it is expressed to have and (iv) make this Deed
admissible in evidence in the courts of England, have been taken,
fulfilled and done;
(d) the Assigned Accounts are not the subject of a pledge or any
Security Interest to the benefit of persons other than the Finance
Parties and no demands or claims or any other encumbrances whatsoever
have been made by anyone with respect to all or any part of the
Assigned Accounts;
(e) the obligations of the Company under this Deed and the Assignment
are, and will be, until fully discharged, valid, legally binding and
enforceable and, in the case of the Assignment, has the ranking and
priority it is expressed to have;
(f) the execution and delivery and the performance of this Deed will
not violate any law or regulation, or any order or decree of any
court, or any provision of the charter of the Company, constitute a
default under any agreement or other instrument to which the Company
is a party or by which it is bound and will not result in the creation
or imposition of any Security Interest, upon any property of the
Company;
(g) it has not performed any acts which might prevent the Security
Trustee from enforcing any of the terms of this Deed or which would
limit the Security Trustee in any such enforcement; and
(h) upon the signing of this Deed by all the parties, and delivery of
the notice in the form of Schedule 1 to the Accounts Bank, and receipt
of the acknowledgement in the form of Schedule 2, this Deed shall
constitute valid and perfected Security Interests in the Assigned
Assets, enforceable against third parties, and the rights of the
Security Trustee in such Assigned Assets will be prior to all other
Security Interests and rights of others in such Assigned Assets.
7.2 REPETITION
The representations and warranties contained in Clause 7.1 shall be
made on the date of this Deed and shall be repeated thereafter on each
other day on which the representations and warranties set out in the Loan
Agreement are to be repeated and on each day on which an Advance is made by
reference to the facts and circumstances then existing.
7.3 SECURITY TRUSTEE'S RELIANCE
(a) The Company acknowledges that it makes the representations in
Clause 7.1 with the intention of inducing the Security Trustee to
enter into this Deed and the other Finance Documents and that the
Security Trustee enters into this Deed and the other Finance Documents
on the basis of, and in full reliance on, each of such
representations.
(b) The Company warrants to the Security Trustee that each of such
representations is true and correct in all material respects as of the
date of this Deed and that none of the omits any matter the omission
of which makes any of such representations misleading.
7.4 Notwithstanding anything contained herein:
(a) the Security Trustee shall be under no obligation or liability
under or in respect of any of the Assigned Assets or liable to make
any payment under or in respect of them;
(b) the Security Trustee shall not be obliged to take any steps
necessary to preserve the Assigned Assets, or to make any enquiries as
to the nature or sufficiency of any payment received by it; and
(c) the Company shall remain solely and fully liable under or in
respect of each Assigned Account to pay all losses, costs, expenses,
taxes and damages to or in connection with any of the Assigned
Accounts.
8. FURTHER ASSURANCES
8.1 GENERAL
The Company shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require:
(a) to ensure that the Assignment will be a legally valid and binding
assignment of the Assigned Assets;
(b) for perfecting, preserving or protecting the Assignment or the
priority of the Assignment; and
(c) for facilitating the appropriation of the Assigned Moneys in
accordance with Clause 9.2 (Appropriation of Assigned Moneys) or the
exercise of any Rights vested in the Security Trustee.
9. ENFORCEMENT
9.1 SECURITY TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Company shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by section 103 of the Act as to the giving of notice
or otherwise.
9.2 APPROPRIATION OF ASSIGNED MONEYS
Upon the occurrence of an Event of Default, the Security Trustee shall
be entitled, on the instructions of the Facility Agent, and is hereby
irrevocably and unconditionally authorised, without giving any other prior
notice to the Company or obtaining the consent of the Company but at the
cost of the Company, to require payment by the Accounts Bank to the
Security Trustee or as it may direct of the whole or any part of the
Assigned Moneys for application in the following order of priority (but
without prejudice to the right of the Security Trustee to recover any
shortfall from the Company):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Company.
9.3 FIXED PERIOD
Clause 9.2 (Appropriation of Assigned Moneys) shall apply
notwithstanding that the Assigned Money or any part of it may have been
made or deposited for a fixed period and that such period may not have
expired.
9.4 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.5 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Company, or
following the Dissolution of the Company, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Company or otherwise and in such manner and upon such terms
and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental
or conducive to any of the rights, powers or discretions conferred on
a Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of
exercising if the Receiver were the absolute beneficial owner of the
same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Company for all purposes and
the Company shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Company alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the security constituted by this Deed has become
enforceable, irrespective of whether the Security Trustee shall have taken
possession of the Assigned Assets or appointed a Receiver.
12.2 SUSPENSE ACCOUNT
For as long as any of the Secured Liabilities have not been paid or
discharged in full, the Security Trustee, acting upon the instructions of
the Facility Agent, may place and retain on an interest bearing suspense
account on deposit, for as long as it considers fit, any moneys received,
recovered or realised under or in connection with this Deed to the extent
of such Secured Liabilities without any obligation to apply the same in or
towards the discharge of such Secured Liabilities.
12.3 REDEMPTION OF PRIOR SECURITY
The Security Trustee may, at any time, redeem any Security Interest
over the Assigned Assets having priority to the Assignment or procure the
transfer thereof to the Security Trustee and may settle the accounts of
encumbrancers. Any accounts so settled shall, in the absence of manifest
error, be conclusive and binding on the Company. The Company shall, on
demand, pay to the Security Trustee all principal moneys, interest, costs,
charges, losses, liabilities and expenses of, and incidental to, any such
redemption or transfer.
12.4 NEW ASSIGNED ACCOUNT
At any time following (i) the Security Trustee's having received
notice (either actual or constructive) of any subsequent security affecting
the Assigned Assets (other than a Permitted Security Interest) or (ii) the
Dissolution of the Company, the Security Trustee may open a new account in
the name of the Company (whether or not it permits any existing account to
continue). If the Security Trustee does not open such a new account, it
shall nevertheless be treated as if it had done so at the time when the
notice was received or was deemed to have been received or, as the case may
be, the Dissolution commenced. Thereafter, all payments made by the Company
to the Security Trustee or received by the Security Trustee for the account
of the Company shall be credited or treated as having been credited to the
new account and shall not operate to reduce the amount secured by this Deed
at the time when the Security Trustee received or was deemed to have
received such notice or, as the case may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 RIGHT OF SET-OFF
The Security Trustee may, without notice to the Company and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Company,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the market
rate of exchange which may be obtained by the Security Trustee at the date
of set-off.
12.7 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Company or any other person for anything except
the Security Trustee's own actual receipts; or
(b) to the Company or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Assigned Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Assigned Assets.
12.8 RECEIVER'S LIABILITY
All the provisions of Clause 12.7 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
12.9 INDEMNITY
The Security Trustee and every delegate, Receiver, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective Rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Assigned Assets, and the
Security Trustee and any such delegate, attorney, manager, agent or other
person appointed by the Security Trustee hereunder may retain and pay all
sums in respect of the same out of any moneys received.
13. CONTINUING SECURITY AND OTHER MATTERS
13.1 CONTINUING AND INDEPENDENT SECURITY
The Assignment shall be continuing and independent security for the
Secured Liabilities and shall not be satisfied, discharged or affected by
any intermediate payment or settlement of account (whether or not any
Secured Liabilities remain outstanding thereafter) or any other matter or
thing whatsoever.
13.2 PRIMARY OBLIGATIONS
This Deed and the Assignment constitute original, independent and
absolute securities (and not secondary or collateral securities) for the
Secured Liabilities.
14. OTHER SECURITY
The Assignment shall be in addition to, and shall not be prejudiced
by, any other security or any guarantee or indemnity or other document
which the Security Trustee or any of the other Finance Parties may at any
time hold for the payment of the Secured Liabilities.
15. ASSIGNMENT NOT TO BE AFFECTED
Without prejudice to Clauses 13 (Continuing Security and Other
Matters) and 14 (Other Security), neither the Assignment nor the liability
of the Company for the Secured Liabilities shall be prejudiced or affected
by:
(a) any variation or amendment of, or waiver or release granted under
or in connection with, any other security or any guarantee or
indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee or any other Finance Party to the
Company or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other Finance Party or any other person of any
other security, or any guarantee or indemnity or document;
(d) the Dissolution of any Obligor or any other person;
(e) any arrangement or compromise entered into by the Security
Trustee or any other Finance Party with any Obligor or any other
person;
(f) any change in the constitution of any Obligor;
(g) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the
whole or any part of the assets of any Obligor to any other person;
(h) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(i) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee or any other Finance Party or any other person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee or any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of the any Obligor
for the Secured Liabilities.
16. RELEASE OF ASSIGNED ASSETS
16.1 RELEASE OF ASSIGNED ASSETS
If the Security Trustee, acting upon the instructions of the Facility
Agent, is satisfied that all the Secured Liabilities have been irrevocably
paid or discharged in full and the Security Trustee is satisfied that the
time period within which the payment or discharge of such Secured
Liabilities or such substitute security can be avoided, reduced or
invalidated by virtue of applicable law or for any other reason whatsoever
has expired, or that the payment, discharge or substitute security will not
be avoided, reduced or invalidated then, subject to Clause 16.2 (Retention
of Deed), the Security Trustee shall at the request and cost of the Company
execute such deeds and do all such acts and things as may be necessary to
release the Assigned Assets from the Assignment.
16.2 RETENTION OF DEED
If the Company requests the Security Trustee to release the Assigned
Assets from the Assignment following any payment or discharge of the
Secured Liabilities by a person other than the Company (a "RELEVANT
TRANSACTION"), the Security Trustee shall at the cost of the Company
execute such documents and deeds and do all such acts and things as may be
necessary to release the Assigned Assets from the Assignment provided the
Security Trustee is satisfied that the payment or discharge will not be
avoided, reduced or invalidated. If the Security Trustee is not so
satisfied, the Security Trustee shall be entitled to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment for
such further period as the Security Trustee may determine.
17. POWER OF ATTORNEY
17.1 APPOINTMENT
The Company appoints, irrevocably and by way of security, the Security
Trustee, every Receiver and every delegate severally to be the Attorney of
the Company (with full powers of substitution and delegation), on its
behalf and in its name or otherwise, at such time and in such manner as the
Attorney may think fit:
(a) to do anything which the Company is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or security over, the Assigned Assets;
(b) generally to exercise all or any of the Rights conferred on the
Security Trustee, every Receiver or every delegate in relation to the
Assigned Assets or under, or in connection with, this Deed, the Act or
the Insolvency Act.
17.2 RATIFICATION
The Company covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 17.1 (Appointment).
18. DEFAULT INTEREST
If the Company fails to pay any Secured Liabilities on the due date
for payment, the Company shall pay to the Security Trustee on demand
interest at the "default rate" (as such term is defined in the Clause 19.2
(Default Interest) of the Loan Agreement) from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 21 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liabilities became due,
until full payment and discharge of the relevant Secured Liabilities (both
before and after any judgment).
19. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the Company's
liability under this Deed or if that liability is converted into a claim,
proof, judgment or order in a currency other than Dollars:
(a) the Company shall indemnify the Security Trustee as an
independent obligation against any loss or liability arising out of or
as a result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business and
after expenses and commissions is less than the amount owed in
Dollars, the Company shall forthwith on demand pay to the Security
Trustee an amount in Dollars equal to the deficit; and
(c) the Company shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Company waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which it is
expressed to be payable.
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
of the Security Trustee as to the amount of any indebtedness comprised in
the Secured Liabilities or as to any applicable rate of interest shall, in
the absence of manifest error, be conclusive evidence against the Company
as to that amount or rate.
21. COSTS AND EXPENSES
21.1 TRANSACTION COSTS
The Company shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including, without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
21.2 PRESERVATION AND ENFORCEMENT COSTS
The Company shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including, without limitation, legal and
other fees 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 the Security
Trustee under this Deed.
21.3 STAMP TAXES
The Company shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
21.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Company shall, from time to time on demand of the Security Trustee
(and without prejudice to the provisions of Clause 21.1 (Transaction Costs)
and 21.2 (Preservation and Enforcement Costs) compensate the Security
Trustee at such daily and/or hourly rates as the Security Trustee shall
from time to time determine and on demand indemnify the Security Trustee
against all costs and expenses (including without limitation telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Security Trustee
or the other Finance Parties or any request by the Company in connection
with:
(a) the granting or proposed granting of any waiver or consent
requested by the Company under this Deed;
(b) any actual, potential or suspected breach by the Company of its
obligations under this Deed;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Company.
21.5 TAX
Any fee, cost or expense referred to in this Clause 21 (Costs and
Expenses) is exclusive of any Tax chargeable in connection with that cost
or expense. The Company shall pay any Tax so chargeable at the same time as
it pays the relevant fee, cost or expense.
22. NOTICES
22.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
22.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London, EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Company by not
less than five (5) Business Days' notice.
(b) The address and facsimile number of the Company are:
Central Asian Petroleum (Guernsey) Limited
c/o Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Company may notify to the Security Trustee by not
less than five (5) Business Days' notice.
22.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY
23.1 REMEDIES AND WAIVERS
Time is of the essence of the Company's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
23.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
24. ASSIGNMENT OF RIGHTS
The Security Trustee may at any time, without the consent of the
Company, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Company
may not assign its rights under this Deed.
25. LAW AND JURISDICTION
25.1 ENGLISH LAW
This Deed shall be governed by English law.
25.2 JURISDICTION
(a) For the exclusive benefit of the Security Trustee and the
Facility Agent, the Company 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 Deed and that accordingly any
suit, action or proceedings (together in this Clause 25 (Law and
Jurisdiction) 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 25.6 (Arbitration).
(b) The Company 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 25.2 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 the Company and may be
enforced in the courts of any other jurisdiction.
(c) Nothing contained in this Clause 25.2 shall limit the right of
the Security Trustee to take proceedings against the Company 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.
25.3 PROCESS AGENT
The Company hereby irrevocably and unconditionally:
(a) appoints Law Debenture Corporate Services Limited, whose address
is at Princes House, 95 Gresham Street, London EC2V 7LY, England as
its process agent to receive, for and on its behalf, service of
process in England in any proceedings with respect to this Deed;
(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 Deed shall affect the right to serve
process in any other manner permitted by law.
25.4 WAIVER OF IMMUNITY
To the extent that the Company may now or hereafter be entitled, in
any jurisdiction in which proceedings may at any time be commenced with
respect to this Deed, to claim for itself or any of its undertakings,
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 Deed and/or to
the extent that in any such jurisdiction there may be attributed to the
Company, any such immunity (whether or not claimed), the Company 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.
25.5 CONSENT TO ENFORCEMENT
The Company 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.
25.6 ARBITRATION
If any dispute arises in relation to this Deed, including any question
as to existence, validity or termination, such dispute shall, at the option
only of the Security Trustee, 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
25.6. Such arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be nominated by the
Company, one by the relevant Security Trustee and the third to be agreed
between the two arbitrators so nominated and in default the arbitrator
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.
26. COUNTERPARTS
This Deed may be executed in any number of counterparts and by the
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date at the beginning of this Deed.
EXECUTED as a deed and delivered by
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED acting
by /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
FORM OF NOTICE OF ASSIGNMENT OVER ACCOUNTS
To: [The Account Bank]
From: Central Asian Petroleum (Guernsey) Limited
Copy to: The Law Debenture Trust Corporation p.l.c. as Security Trustee
Re: [ACCOUNTS] (the "Assigned Accounts")
We refer to [INSERT DETAILS OF ASSIGNED ACCOUNTS]. We enclose a copy
of an Accounts Assignment (the "Assignment") dated 7 February 2000 between
us and the Security Trustee. Terms defined in the Assignment have the same
respective meaning in this Notice.
We hereby give you notice of the Assignment and, for the purposes of
the Assignment, we irrevocably and unconditionally instruct you
(notwithstanding any previous instructions which we may have given you to
the contrary):
(i) until you receive notice from the Security Trustee that the
security created by the Assignment has been released:-
(A) not to accept from us any instruction or direction with
respect to the disposition or dealing with the Assigned
Accounts or the Assigned Moneys unless you receive an
instruction from the Facility Agent;
(B) to send to the Facility Agent, and to the Security Trustee
upon request, copies of every statement or correspondence
regarding the Assigned Accounts which you receive in respect
of the Assigned Accounts immediately upon receipt or issue
thereof;
(C) to disclose to the Security Agent and the Facility Agent,
without reference to or any further authority from us and
without any enquiry by you as to the justification for such
disclosure, such information relating to the Assigned
Accounts and the Assigned Moneys as the Security Trustee and
the Facility Agent may, at any time and from time to time
request you to disclose to them;
(D) to comply with the terms of any written notice, statement or
instructions in any way relating to or purporting to relate
to the Assignment and/or the Assigned Accounts and/or the
Assigned Moneys which you may receive at any time and from
time to time from the Facility Agent without any reference
to or further authority from us and without any enquiry by
you as to the justification for such notice, statement or
instructions or the validity thereof; and
(ii) at any time after you have received notice from the Security
Trustee that the security constituted by the Assignment has
become enforceable:
(A) to pay any Assigned Moneys to the Security Trustee or its
order at such place as the Security Trustee may from time to
time direct; and
(B) to hold to the order of the Security Trustee, certificates
of deposit, deposit receipts or other instruments or
securities relating to the Assigned Moneys and to forward
the same to the Security Trustee or as it may direct.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 2 to the Assignment.
Yours faithfully,
Central Asian Petroleum (Guernsey) Limited
SCHEDULE 2
FORM OF ACKNOWLEDGEMENT
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Central Asian Petroleum (Guernsey) Limited
[Date]
Dear Sirs,
We acknowledge receipt of the letter dated [ ] and addressed to
us by Central Asian Petroleum (Guernsey) Limited (the "Company") (a copy of
which is attached) and accept the instructions and authorisations contained
in the letter and undertake to act in accordance and comply with the terms
thereof.
We represent and undertake that we:
(a) consent to the Assignment referred to in the letter;
(b) have received no notice of, and have not ourselves received, any prior
charge, assignment or encumbrance of the Assigned Assets;
(c) will transfer, pay or deliver any Assigned Moneys or deal with or
permit any dealing with the Assigned Accounts only pursuant to the
Accounts Agreement;
(d) will not in any way prejudice your rights, titles and interests to or
under the Assigned Assets;
(e) will neither claim to set-off to your prejudice any Assigned Moneys
against any claim we may have against the Company howsoever arising
nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Assigned Accounts;
(f) will procure that payments are made to you or as you may direct in
accordance with the authority and instruction contained in the
attached letter, upon notice from you that the Assignment has become
enforceable; and
(g) will send to the Facility Agent, at the address specified in the
letter, copies of every statement or correspondence regarding the
Assigned Accounts which we receive from or send to the Company
immediately upon the receipt or issue thereof.
We have made the representations and given the undertakings set out in
this letter in the knowledge that they are required by you in connection
with the security which has been granted by the Company in your favour
pursuant to an Accounts Assignment dated 7 February 2000 between you and
the Company (the "Assignment"). The expressions defined in the Assignment
have the same respective meanings in this letter. This letter shall be
governed by and construed in accordance with English law.
Yours faithfully,
[Name of Accounts Bank]
SCHEDULE 3
FORM OF NOTICE OF ASSIGNMENT
To: []
From: Central Asian Petroleum (Guernsey) Limited (the "Company")
Copy to: The Law Debenture Trust Corporation p.l.c. (the "Security
Trustee").
Re: [INSERT DETAILS OF AUTHORISED INVESTMENTS] (the "Relevant Investment")
We refer to the Accounts Assignment (the "Assignment") dated
2000 between us and the Security Trustee. Terms defined in the Assignment
have the same respective meaning in this Notice.
We refer to the Relevant Investment to be made from funds standing to
the credit of the following Assigned Account[s]:
[INSERT ACCOUNT DETAILS] (the "Relevant Account[s]").
[ ]
We give you notice that, by the Assignment the Company has assigned by
way of security with full title guarantee in favour of the Security
Trustee, all of the right, title and interest of the Company in and to,
INTER ALIA, all investments (including the Relevant Investment), interest,
income, investment proceeds and other Rights from time to time accruing to
or arising in connection with amounts standing to the credit of the
Assigned Accounts.
The Company hereby irrevocably and unconditionally instructs and
authorises you:-
(a) to disclose to the Security Trustee or the Facility Agent, the
contact details of which are detailed in the Appendix to this notice,
together with a copy to the Company but without any reference to or further
authority from the Company and without any inquiry by you as to the
justification for such disclosure, such information relating to the
Relevant Investment as the Security Trustee or the Facility Agent (as the
case may be) may, at any time and from time to time, request you to
disclose to it;
(b) unless and until the Security Trustee gives you notice to the
contrary, the proceeds of any Relevant Investment (including any interest
or income accruing to or arising in connection therewith) shall be
deposited into the Relevant Account;
(b) to release all or any part of the Relevant Investment (including any
interest or income accruing to or arising in connection therewith) in
accordance with any written instructions received from the Security Trustee
at any time or times notwithstanding any instruction to the contrary from
us;
(c) to hold all certificates or other evidence of ownership or documents
of title of the Relevant Investment subject to the security created by the
Assignment;
(d) to comply with the terms of any written notice that you receive from
the Security Trustee at any time in any way relating to or purporting to
relate to the Assignment or the Relevant Investment, with a notice to the
Company but without any reference to or further authority from the Company
and without any inquiry by you as to the justification for or validity of
such notice or instructions.
The Security Trustee has agreed that the Company may instruct you to
acquire, hold and realise the Relevant Investment without any reference to
or further authority from the Security Trustee except to the extent that
the Security Trustee gives you notice to the contrary. Upon and after the
giving of any such notice, the Company shall cease to be entitled to give
such instructions or make any such withdrawal to the extent specified in
the notice until the revocation of that notice.
The Company confirms that:-
(a) in the event of any conflict between communications received from
the Company and from the Security Trustee, the communication from
the Security Trustee shall prevail; and
(b) none of the instructions, authorisations and confirmations in
this notice can be revoked or varied in any way except with the
Security Trustee's specific written consent.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 4 to the Assignment.
Yours faithfully,
Central Asian Petroleum (Guernsey) Limited
APPENDIX
CONTACT DETAILS
THE FACILITY AGENT
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
THE SECURITY TRUSTEE
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
SCHEDULE 4
FORM OF ACKNOWLEDGEMENT
From: []
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Central Asian Petroleum (Guernsey) Limited
[Date]
Dear Sirs,
We acknowledge receipt of the letter dated [ ] and addressed to
us by Central Asian Petroleum (Guernsey) Limited (the "Company") and accept
the instructions and authorisations contained in the letter and undertake
to act in accordance and comply with the terms thereof. The expressions
defined in the letter have the same respective meanings in this
acknowledgement.
We represent and undertake that:
(a) we consent to the Assignment referred to in the letter;
(b) we have received no notice of, and have not ourselves received, any
prior charge, assignment or encumbrance of the Relevant Investment;
(c) unless and until you give us notice to the contrary, the proceeds of
any Relevant Investment (including any interest or income accruing to
or arising in connection therewith) shall be deposited into the
Relevant Account;
(d) we will release all or any part of the Relevant Investment (including
any interest or income accruing to or arising in connection therewith)
in accordance with any written instructions received from you at any
time or times notwithstanding any instruction to the contrary from the
Company;
(e) we shall comply with the terms of any notice received by us from you
terminating the right of the Company to instruct us to acquire, hold
and realise the Relevant Investment to the extent specified in that
notice;
(f) we will not in any way prejudice your rights, titles and interests to
or under the Relevant Investment;
(g) will neither claim to set-off to your prejudice the Relevant
Investment against any claim we may have against the Company howsoever
arising nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Relevant Investment; and
(h) will send to you or the Facility Agent (as the case may be), at the
address specified in the letter, such information relating to the
Relevant Investment as you or the Facility Agent (as the case may be)
may, at any time and from time to time, request.
We have made the representations and given the undertakings set out in
this acknowledgement in the knowledge that they are required by you in
connection with the security which has been granted by the Company in your
favour pursuant to the Accounts Assignment dated [ ] between you and the
Company (the "Assignment"). This acknowledgement shall be governed by and
construed in accordance with English law.
Yours faithfully,
TABLE OF CONTENTS
PAGE
1. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . 2
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . . 3
2.1 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands. . . . . . . . . . . . . . . . . . . 3
3. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 No Obligations . . . . . . . . . . . . . . . . . . . . . 3
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS. . . . . . . . . . 4
4.1 No Dealing . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Negative Pledge. . . . . . . . . . . . . . . . . . . . . 4
4.3 Acknowledgement. . . . . . . . . . . . . . . . . . . . . 4
5. INSTRUCTIONS TO ACCOUNTS BANK . . . . . . . . . . . . . . . . . 4
6. GENERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 4
7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 6
7.2 Repetition . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Security Trustee's Reliance. . . . . . . . . . . . . . . 7
8. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 8
8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . 8
9. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.1 Security to Become Enforceable . . . . . . . . . . . . . 8
9.2 Appropriation of Assigned Moneys . . . . . . . . . . . . 8
9.3 Fixed Period . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Section 101 of the Act . . . . . . . . . . . . . . . . . 9
9.5 Sections 93 and 103 of the Act . . . . . . . . . . . . . 9
10. APPOINTMENT OF RECEIVERS. . . . . . . . . . . . . . . . . . . . 9
10.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . 9
10.2 Scope of Appointment . . . . . . . . . . . . . . . . . . 9
11. RECEIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.2 Conflict . . . . . . . . . . . . . . . . . . . . . . . . 10
11.3 Agent of Company . . . . . . . . . . . . . . . . . . . . 10
11.4 Remuneration . . . . . . . . . . . . . . . . . . . . . . 10
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES. . . . . 10
12.1 Rights of Receiver . . . . . . . . . . . . . . . . . . . 10
12.2 Suspense Account . . . . . . . . . . . . . . . . . . . . 10
12.3 Redemption of Prior Security . . . . . . . . . . . . . . 11
12.4 New Assigned Account . . . . . . . . . . . . . . . . . . 11
12.5 Delegation . . . . . . . . . . . . . . . . . . . . . . . 11
12.6 Right of Set-off . . . . . . . . . . . . . . . . . . . . 11
12.7 Security Trustee's Liability . . . . . . . . . . . . . . 11
12.8 Receiver's Liability . . . . . . . . . . . . . . . . . . 12
12.9 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 12
13. CONTINUING SECURITY AND OTHER MATTERS . . . . . . . . . . . . . 12
13.1 Continuing and Independent Security. . . . . . . . . . . 12
13.2 Primary Obligations. . . . . . . . . . . . . . . . . . . 12
14. OTHER SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . 12
15. ASSIGNMENT NOT TO BE AFFECTED . . . . . . . . . . . . . . . . . 12
16. RELEASE OF ASSIGNED ASSETS. . . . . . . . . . . . . . . . . . . 13
16.1 Release of Assigned Assets . . . . . . . . . . . . . . . 13
16.2 Retention of Deed. . . . . . . . . . . . . . . . . . . . 13
17. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . 14
17.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . 14
17.2 Ratification . . . . . . . . . . . . . . . . . . . . . . 14
18. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 14
19. CURRENCY INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . 15
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE . . . . . . . . . . . . . 15
21. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 15
21.1 Transaction Costs. . . . . . . . . . . . . . . . . . . . 15
21.2 Preservation and Enforcement Costs . . . . . . . . . . . 15
21.3 Stamp Taxes. . . . . . . . . . . . . . . . . . . . . . . 15
21.4 Security Trustee's Additional Costs. . . . . . . . . . . 16
21.5 Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22.1 Giving of Notices. . . . . . . . . . . . . . . . . . . . 16
22.2 Addresses for Notices. . . . . . . . . . . . . . . . . . 17
22.3 English Language . . . . . . . . . . . . . . . . . . . . 17
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY . . . . . . . . . . . . 17
23.1 Remedies and Waivers . . . . . . . . . . . . . . . . . . 17
23.2 Partial Invalidity . . . . . . . . . . . . . . . . . . . 17
24. ASSIGNMENT OF RIGHTS. . . . . . . . . . . . . . . . . . . . . . 18
25. LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . 18
25.1 English Law. . . . . . . . . . . . . . . . . . . . . . . 18
25.2 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 18
25.3 Process Agent. . . . . . . . . . . . . . . . . . . . . . 18
25.4 Waiver of Immunity . . . . . . . . . . . . . . . . . . . 19
25.5 Consent to Enforcement . . . . . . . . . . . . . . . . . 19
25.6 Arbitration. . . . . . . . . . . . . . . . . . . . . . . 19
26. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 19
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
==========================================================================
KKM ACCOUNTS ASSIGNMENT
between
CLOSED TYPE JSC KARAKUDUKMUNAY
as the Company
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
7 February 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS ACCOUNTS ASSIGNMENT dated 7 February 2000 is made as a deed (this
"Deed") between:
(1) CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing under
the laws of the state of the Republic of Kazakhstan (the "COMPANY");
and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised and
existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "SECURITY
TRUSTEE").
W H E R E A S:
A. Pursuant to a loan agreement dated 1 November, 1999 (the "LOAN
AGREEMENT") between the Borrower, the Co-Obligors, Shell Capital
Services Limited, Shell Capital Limited and the Lenders (as such terms
are defined in the Loan Agreement), the Lenders have agreed, subject
to the terms and conditions of the Loan Agreement, to make available
to the Borrower a secured loan in an aggregate amount not exceeding
US$ 24,000,000 (the "LOAN").
B. At the request of the Facility Agent, the Security Trustee has agreed
to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
C. It is a condition precedent to the Lenders making the Loan available
to the Company that the Company shall have executed and delivered this
Deed to the Security Trustee.
NOW IT IS AGREED:
1. INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases used in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"ACT" means the Law of Property Act 1925.
"ADMINISTRATION" means administration under Part II of the Insolvency
Act 1986;
"ASSIGNED ACCOUNT" means the KKM Proceeds Account;
"ASSIGNED ASSETS" means the Assigned Account and the Assigned Moneys;
"ASSIGNED MONEYS" means the aggregate of all sums from time to time
standing to the credit of the Assigned Account and all investments
(including Authorised Investments), interest, income, investment proceeds
and other Rights from time to time accruing to or arising in connection
with such sums;
"ASSIGNMENT" means all or any of the security created, or which may at
any time be created, by or pursuant to this Deed;
"ATTORNEY" means any person appointed as such by the Company pursuant
to Clause 17.1 (Appointment);
"AUTHORISED INVESTMENTS" means (i) cash deposits at a bank in London
having at the time of the deposit capital and surplus of at least
$1,000,000,000 (or the equivalent in any other currency) and having a long-
term debt rating of A or better by Standard & Poor's Rating Group or A2 or
better by Moody's Investors Service Limited, or A by Duff & Phelps Credit
Rating Co., provided that such deposit is in Dollars and is callable on not
more than one months' notice without penalty or otherwise matures on the
last Business Day of the succeeding calendar month and (ii) shares or units
in a money market investment fund company approved by the Facility Agent
with total assets under management of at least $500,000,000 (or the
equivalent in any other currency) and having a money market fund rating of
AAAm by Standard & Poor's Ratings Services or Aaa/MR1+ by Moody's Investor
Services Inc., provided that such shares are held in the Dollar fund of the
investment company and are redeemable within one Business Day;
"DISSOLUTION" means any of the bankruptcy, insolvency, liquidation,
amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of a person, any
equivalent or analogous proceeding by whatever name known and in whatever
jurisdiction or the presentation of a petition for the making of an
administration order (or any equivalent or analogous order) or the passing
of a resolution for or with a view to any of the foregoing;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"RECEIVER" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act;
"RELEVANT TRANSACTION" has the meaning given to it in Clause 16.2
(Retention of Deed);
"RIGHTS" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever);
"SECURED LIABILITIES" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement; (ii) this Deed; or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities; and
"TAX" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 RULES OF INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) headings are for convenience only and do not affect the
interpretation of this Deed;
(b) words importing the singular include the plural and vice versa;
(c) a reference to a Clause, Sub-Clause, party or Schedule is a
reference to that Clause, Sub-Clause, or that party or Schedule to,
this Deed;
(d) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any
amendment, supplement, replacement or novation made in breach of this
Deed; and
(e) a reference to a party to any document includes that party's
successors and permitted assigns.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Company covenants with the Security Trustee that it will on demand
pay and discharge all the Secured Liabilities at the time or times when
due, provided that the recourse of the Security Trustee to the Company
under this Deed shall be limited to the extent of the Assigned Assets.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or any Receiver under this Deed.
3. SECURITY
3.1 ASSIGNMENT
The Company, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties the Assigned
Account and the Assigned Moneys.
3.2 NO OBLIGATIONS
Notwithstanding this Deed or any contrary or inconsistent provision of
any Finance Document:
(a) the Company shall remain liable to perform all of its obligations
under or in respect of the Assigned Assets and the Security Trustee
shall be under no obligation of any kind whatsoever if the Company
fails to perform any of those obligations;
(b) the exercise by the Security Trustee of any of the rights,
benefits, interests or claims assigned by this Deed shall not release
the Company from any of its obligation towards the Security Trustee
(except for the application of funds in the discharge of any of the
Secured Liabilities and then only to the extent of such application);
and
(c) except to the extent expressly provided in this Deed the Security
Trustee shall not, by reason of or arising out of this Deed or
anything done under or in connection with it, have any obligation or
liability whatsoever to any person (including the Company) to:
(i) perform (whether as a result of the non-performance, or
mis-performance, of the Company or otherwise) any of the
obligations of the Company under or in respect of any of the
Assigned Assets; or
(ii) enforce payment or performance of any obligations of any
person party to any agreement forming part of the Assigned
Assets; or
(iii) make any enquiry as to the nature or sufficiency of any
payment received by it under or in respect of this Deed or any of
the Assigned Assets, or to make any claim or take any other
action to collect any moneys or to enforce any rights and
benefits assigned to the Security Trustee or to which the
Security Trustee may at any time be entitled under this Deed.
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
4.1 NO DEALING
The Company shall not deal with the Assigned Money or operate the
Assigned Account except with the prior written consent of the Security
Trustee or otherwise than is permitted by the Accounts Agreement.
4.2 NEGATIVE PLEDGE
The Company shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interest on,
over, or with respect to, the Assigned Assets except for the Permitted
Security Interests.
4.3 ACKNOWLEDGEMENT
Without prejudice to Clause 4.1 (No Dealing), if the withdrawal of any
amount from the Assigned Account is permitted pursuant to the Accounts
Agreement then on the payment of the relevant amount to the permitted
recipient, the relevant amount shall be automatically released from the
Assignment.
5. INSTRUCTIONS TO ACCOUNTS BANK
The Company irrevocably authorises the Security Trustee to give the
Accounts Banks all instructions and notices which the Security Trustee may
from time to time and in the Security Trustee's absolute discretion
consider necessary or appropriate in relation to any of the matters
contemplated by this Deed including, but without limitation, the
enforcement of the Assignment.
6. GENERAL COVENANTS
The Company undertakes:
(a) to take whatever actions the Security Trustee may require at the
Company's expense, for establishing or maintaining the Assignment and
facilitating the exercise of any right, power or discretion
exercisable by the Security Trustee in respect of this Deed including,
without limitation, to execute and deliver any and all such further
instruments and documents as the Security Trustee may deem desirable
to obtain the full benefit of this Deed and of the rights and powers
granted under it;
(b) to provide the Security Trustee with such information as the
Security Trustee may from time to time request with respect to any of
the Assigned Assets;
(c) to permit the Security Trustee, or its officers and agents, to
have access to and examine at all reasonable times minute books and
other corporate records, and books of account and financial records of
the Company in relation to the Assigned Assets;
(d) to defend the Assigned Assets against all claims and demands of
all persons at any time claiming the same or interest in them;
(e) except for the Assignment, not to grant directly or indirectly,
any other Security Interest in respect of, or otherwise dispose of,
all or any part of the Assigned Assets for as long as any of the
Secured Liabilities remains outstanding;
(f) to at all times maintain the balance of the Assigned Account in
accordance with the Accounts Agreement;
(g) to neither release, grant time or indulgence or compound with any
third party or suffer to arise any set-off or other adverse rights
against the Assigned Assets nor do or omit to do anything which may
delay or prejudice the right of the Security Trustee to receive
payment from the Assigned Account once it is entitled to such payment
under the terms of this Agreement;
(h) to deposit with the Security Trustee, or otherwise as the
Security Trustee may direct, all certificates of deposit, deposit
receipts, or other instruments or securities relating to the Assigned
Assets together, where appropriate, with such forms of transfer or
other instructions duly executed as the Security Trustee may from time
to time reasonably require;
(i) to forthwith inform the Security Trustee of any claim or notice
relating to the Assigned Assets received from any other party and of
all other matters relevant to that claim;
(j) to immediately, following execution of this Deed, give to the
Accounts Bank a notice in the form of Schedule 1 and procure that the
Accounts Bank promptly (and in any event within 7 days of receipt of
the notice) execute and deliver to the Security Trustee (with a copy
thereof to the Company) an acknowledgement substantially in the form
of Schedule 2;
(k) on the date an Authorised Investment is made, give a notice
substantially in the form of Schedule 3 to the person with whom the
Authorised Investment is made and procure that such person executes
and delivers to the Security Trustee an acknowledgement of that notice
as soon as possible (and in any event within 3 days of receipt of the
notice) substantially in the form of Schedule 4; and
(l) at the request of the Security Trustee and at the Company's cost
and expense, to execute in favour of the Security Trustee, or as it
may reasonably direct, such further or other legal assignments,
transfers, mortgages, charges, applications, notices or other
documents as in any such case the Security Trustee shall reasonably
stipulate over the Company's estate or interest in any of the Assigned
Assets:
(i) for perfecting, preserving, maintaining, establishing or
protecting any security intended to be created by or pursuant to
this Deed over the Assigned Assets; or
(ii) upon the occurrence and during the continuance of an Event
of Default when the Security Trustee has taken any step to
enforce the security created by this Deed, for facilitating the
realisation of any Assigned Asset or the exercise by the Security
Trustee or any of its delegates of any right, power or discretion
granted by this Deed or by law.
Without prejudice to the generality of this Sub-Clause (l), such
assignments, transfers, mortgages, charges, applications, notices or other
documents shall be in such form as shall be prepared on behalf of the
Security Trustee and may contain provisions such as are contained in this
Deed or provisions to the like effect and such other provisions of
whatsoever kind as the Security Trustee shall reasonably require for the
perfection of the security constituted by or pursuant to this Deed. The
obligations of the Company under this Sub-Clause (l) shall be in addition
to and not in substitution of the covenants or further assurances deemed to
be included in this Deed by applicable law.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Company represents and warrants to the Security Trustee,
as at the date of this Deed, that:
(a) it is and will be the sole legal and beneficial owner and holder
of the Assigned Account and Assigned Moneys;
(b) it has the corporate power to enter into, execute and deliver
this Deed and to perform its obligations under this Deed;
(c) all actions, conditions and things required to be taken,
fulfilled and done (including, without limitation, the obtaining of
necessary Consents) in order to (i) enable the Company lawfully to
enter into, perform and comply with its obligations under this Deed,
(ii) ensure that those obligations are valid and legally binding,
(iii) permit the creation of the Assignment and ensure that (subject
to all necessary registrations thereof being made) the Assignment is
valid, legally binding and enforceable and has and will have the
priority and ranking it is expressed to have and (iv) make this Deed
admissible in evidence in the courts of England, have been taken,
fulfilled and done;
(d) the Assigned Account is not the subject of a pledge or any
Security Interest to the benefit of persons other than the Finance
Parties and no demands or claims or any other encumbrances whatsoever
have been made by anyone with respect to all or any part of the
Assigned Account;
(e) the obligations of the Company under this Deed and the Assignment
are, and will be, until fully discharged, valid, legally binding and
enforceable and, in the case of the Assignment, has the ranking and
priority it is expressed to have;
(f) the execution and delivery and the performance of this Deed will
not violate any law or regulation, or any order or decree of any
court, or any provision of the charter of the Company constitute a
default under any agreement or other instrument to which the Company
is a party or by which it is bound and will not result in the creation
or imposition of any Security Interest, upon any property of the
Company;
(g) it has not performed any acts which might prevent the Security
Trustee from enforcing any of the terms of this Deed or which would
limit the Security Trustee in any such enforcement; and
(h) upon the signing of this Deed by all the parties, and delivery of
the notice in the form of Schedule 1 to the Accounts Bank, and receipt
of the acknowledgement in the form of Schedule 2, this Deed shall
constitute valid and perfected Security Interests in the Assigned
Assets, enforceable against third parties, and the rights of the
Security Trustee in such Assigned Assets will be prior to all other
Security Interests and rights of others in such Assigned Assets.
7.2 REPETITION
The representations and warranties contained in Clause 7.1 shall be
made on the date of this Deed and shall be repeated thereafter on each
other day on which the representations and warranties set out in the Loan
Agreement are to be repeated and on each day on which an Advance is made by
reference to the facts and circumstances then existing.
7.3 SECURITY TRUSTEE'S RELIANCE
(a) The Company acknowledges that it makes the representations in
Clause 7.1 with the intention of inducing the Security Trustee to
enter into this Deed and the other Finance Documents and that the
Security Trustee enters into this Deed and the other Finance Documents
on the basis of, and in full reliance on, each of such
representations.
(b) The Company warrants to the Security Trustee that each of such
representations is true and correct in all material respects as of the
date of this Deed and that none of the omits any matter the omission
of which makes any of such representations misleading.
7.4 Notwithstanding anything contained herein:
(a) the Security Trustee shall be under no obligation or liability
under or in respect of any of the Assigned Assets or liable to make
any payment under or in respect of them;
(b) the Security Trustee shall not be obliged to take any steps
necessary to preserve the Assigned Assets, or to make any enquiries as
to the nature or sufficiency of any payment received by it; and
(c) the Company shall remain solely and fully liable under or in
respect of the Assigned Account to pay all losses, costs, expenses,
taxes and damages to or in connection with the Assigned Account.
8. FURTHER ASSURANCES
8.1 GENERAL
The Company shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require:
(a) to ensure that the Assignment will be a legally valid and binding
assignment of the Assigned Assets;
(b) for perfecting, preserving or protecting the Assignment or the
priority of the Assignment; and
(c) for facilitating the appropriation of the Assigned Moneys in
accordance with Clause 9.2 (Appropriation of Assigned Moneys) or the
exercise of any Rights vested in the Security Trustee.
9. ENFORCEMENT
9.1 SECURITY TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Company shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by section 103 of the Act as to the giving of notice
or otherwise.
9.2 APPROPRIATION OF ASSIGNED MONEYS
Upon the occurrence of an Event of Default, the Security Trustee shall
be entitled on the instructions of the Facility Agent, and is hereby
irrevocably and unconditionally authorised, without giving any other prior
notice to the Company or obtaining the consent of the Company but at the
cost of the Company, to require payment by the Accounts Bank to the
Security Trustee or as it may direct of the whole or any part of the
Assigned Moneys for application in the following order of priority (but
without prejudice to the right of the Security Trustee to recover any
shortfall from the Company):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Company.
9.3 FIXED PERIOD
Clause 9.2 (Appropriation of Assigned Moneys) shall apply
notwithstanding that the Assigned Money or any part of it may have been
made or deposited for a fixed period and that such period may not have
expired.
9.4 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.5 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Company, or
following the Dissolution of the Company, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Company or otherwise and in such manner and upon such terms
and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental
or conducive to any of the rights, powers or discretions conferred on
a Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of
exercising if the Receiver were the absolute beneficial owner of the
same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Company for all purposes and
the Company shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Company alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed may be exercised by the Security
Trustee after the security constituted by this Deed has become enforceable,
irrespective of whether the Security Trustee shall have taken possession of
the Assigned Assets or appointed a Receiver.
12.2 SUSPENSE ACCOUNT
For as long as any of the Secured Liabilities have not been paid or
discharged in full, the Security Trustee, acting upon the instructions of
the Facility Agent, may place and retain on an interest bearing suspense
account on deposit, for as long as it considers fit, any moneys received,
recovered or realised under or in connection with this Deed to the extent
of such Secured Liabilities without any obligation to apply the same in or
towards the discharge of such Secured Liabilities.
12.3 REDEMPTION OF PRIOR SECURITY
The Security Trustee may, at any time, redeem any Security Interest
over the Assigned Assets having priority to the Assignment or procure the
transfer thereof to the Security Trustee and may settle the accounts of
encumbrancers. Any accounts so settled shall, in the absence of manifest
error, be conclusive and binding on the Company. The Company shall, on
demand, pay to the Security Trustee all principal moneys, interest, costs,
charges, losses, liabilities and expenses of, and incidental to, any such
redemption or transfer.
12.4 NEW ASSIGNED ACCOUNT
At any time following (i) the Security Trustee's having received
notice (either actual or constructive) of any subsequent security affecting
the Assigned Assets (other than a Permitted Security Interest) or (ii) the
Dissolution of the Company, the Security Trustee may open a new account in
the name of the Company (whether or not it permits any existing account to
continue). If the Security Trustee does not open such a new account, it
shall nevertheless be treated as if it had done so at the time when the
notice was received or was deemed to have been received or, as the case may
be, the Dissolution commenced. Thereafter, all payments made by the Company
to the Security Trustee or received by the Security Trustee for the account
of the Company shall be credited or treated as having been credited to the
new account and shall not operate to reduce the amount secured by this Deed
at the time when the Security Trustee received or was deemed to have
received such notice or, as the case may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 RIGHT OF SET-OFF
The Security Trustee may, without notice to the Company and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Company,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the market
rate of exchange which may be obtained by the Security Trustee at the date
of set-off.
12.7 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Company or any other person for anything except
the Security Trustee's own actual receipts; or
(b) to the Company or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Assigned Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Assigned Assets.
12.8 RECEIVER'S LIABILITY
All the provisions of Clause 12.7 (SECURITY TRUSTEE'S LIABILITY) shall
apply, mutatis mutandis, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
12.9 INDEMNITY
The Security Trustee and every delegate, Receiver, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
reasonable purported execution of any of their respective Rights and
against all actions, proceedings, costs, claims and demands in respect of
any matter or thing done or omitted in any way relating to the Assigned
Assets, and the Security Trustee and any such delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder may
retain and pay all sums in respect of the same out of any moneys received
unless such liabilities and expenses were incurred as a result of the gross
negligence or wilful default of the Security Trustee, delegate, attorney,
manager, agent or other person appointed by the Security Trustee.
13. CONTINUING SECURITY AND OTHER MATTERS
13.1 CONTINUING AND INDEPENDENT SECURITY
The Assignment shall be continuing and independent security for the
Secured Liabilities and shall not be satisfied, discharged or affected by
any intermediate payment or settlement of account (whether or not any
Secured Liabilities remain outstanding thereafter) or any other matter or
thing whatsoever.
13.2 PRIMARY OBLIGATIONS
This Deed and the Assignment constitute original, independent and
absolute securities (and not secondary or collateral securities) for the
Secured Liabilities.
14. OTHER SECURITY
The Assignment shall be in addition to, and shall not be prejudiced
by, any other security or any guarantee or indemnity or other document
which the Security Trustee or any of the other Finance Parties may at any
time hold for the payment of the Secured Liabilities.
15. ASSIGNMENT NOT TO BE AFFECTED
Without prejudice to Clauses 13 (Continuing Security and Other
Matters) and 14 (Other Security), neither the Assignment nor the liability
of the Company for the Secured Liabilities shall be prejudiced or affected
by:
(a) any variation or amendment of, or waiver or release granted under
or in connection with, any other security or any guarantee or
indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee or any other Finance Party to the
Company or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other Finance Party or any other person of any
other security, or any guarantee or indemnity or document;
(d) the Dissolution of any Obligor or any other person;
(e) any arrangement or compromise entered into by the Security
Trustee or any other Finance Party with any Obligor or any other
person;
(f) any change in the constitution of any Obligor;
(g) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the
whole or any part of the assets of any Obligor to any other person;
(h) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(i) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee or any other Finance Party or any other person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee or any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of the any Obligor
for the Secured Liabilities.
16. RELEASE OF ASSIGNED ASSETS
16.1 RELEASE OF ASSIGNED ASSETS
If the Security Trustee, acting upon the instructions of the Facility
Agent, is satisfied that all the Secured Liabilities have been irrevocably
paid or discharged in full and the Security Trustee is satisfied that the
time period within which the payment or discharge of such Secured
Liabilities or such substitute security can be avoided, reduced or
invalidated by virtue of applicable law or for any other reason whatsoever
has expired, or that the payment, discharge or substitute security will not
be avoided, reduced or invalidated then, subject to Clause 16.2 (Retention
of Deed), the Security Trustee shall at the request and cost of the Company
execute such deeds and do all such acts and things as may be necessary to
release the Assigned Assets from the Assignment.
16.2 RETENTION OF DEED
If the Company requests the Security Trustee to release the Assigned
Assets from the Assignment following any payment or discharge of the
Secured Liabilities by a person other than the Company (a "RELEVANT
TRANSACTION"), the Security Trustee shall at the cost of the Company
execute such documents and deeds and do all such acts and things as may be
necessary to release the Assigned Assets from the Assignment provided the
Security Trustee is satisfied that the payment or discharge will not be
avoided, reduced or invalidated. If the Security Trustee is not so
satisfied, the Security Trustee shall be entitled to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to release the Assigned Assets from the Assignment for
such further period as the Security Trustee may determine.
17. POWER OF ATTORNEY
17.1 APPOINTMENT
The Company appoints, irrevocably and by way of security, the Security
Trustee, every Receiver and every delegate severally to be the Attorney of
the Company (with full powers of substitution and delegation), on its
behalf and in its name or otherwise, at such time and in such manner as the
Attorney may think fit:
(a) to do anything which the Company is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or security over, the Assigned Assets;
(b) generally to exercise all or any of the Rights conferred on the
Security Trustee, every Receiver or every delegate in relation to the
Assigned Assets or under, or in connection with, this Deed, the Act or
the Insolvency Act.
17.2 RATIFICATION
The Company covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 17.1 (Appointment).
18. DEFAULT INTEREST
If the Company fails to pay any Secured Liabilities on the due date
for payment, the Company shall pay to the Security Trustee on demand
interest at the "default rate" (as such term is defined in the Clause
19.2(a) (Default Interest) of the Loan Agreement) from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 21 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liabilities became due,
until full payment and discharge of the relevant Secured Liabilities (both
before and after any judgment).
19. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the Company's
liability under this Deed or if that liability is converted into a claim,
proof, judgment or order in a currency other than Dollars:
(a) the Company shall indemnify the Security Trustee as an
independent obligation against any loss or liability arising out of or
as a result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business and
after expenses and commissions is less than the amount owed in
Dollars, the Company shall forthwith on demand pay to the Security
Trustee an amount in Dollars equal to the deficit; and
(c) the Company shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Company waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which it is
expressed to be payable.
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
of the Security Trustee as to the amount of any indebtedness comprised in
the Secured Liabilities or as to any applicable rate of interest shall, in
the absence of manifest error, be conclusive evidence against the Company
as to that amount or rate.
21. COSTS AND EXPENSES
21.1 TRANSACTION COSTS
The Company shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
21.2 PRESERVATION AND ENFORCEMENT COSTS
The Company shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including, without limitation, legal and
other fees 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 the Security
Trustee under this Deed.
21.3 STAMP TAXES
The Company shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
21.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Company shall, from time to time on demand of the Security Trustee
(and without prejudice to the provisions of Clause 21.1 (Transaction Costs)
and 21.2 (Preservation and Enforcement Costs) compensate the Security
Trustee at such daily and/or hourly rates as the Security Trustee shall
from time to time determine and on demand indemnify the Security Trustee
against all costs and expenses (including without limitation telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Security Trustee
or the other Finance Parties or any request by the Company in connection
with:
(a) the granting or proposed granting of any waiver or consent
requested by the Company under this Deed;
(b) any actual, potential or suspected breach by the Company of its
obligations under this Deed;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Company.
21.5 TAX
Any fee, cost or expense referred to in this Clause 21 (Costs and
Expenses) is exclusive of any Tax chargeable in connection with that cost
or expense. The Company shall pay any Tax so chargeable at the same time as
it pays the relevant fee, cost or expense.
22. NOTICES
22.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission. Any
such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
22.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Company by not
less than five Business Days' notice.
(b) The address and facsimile number of the Company are:
Closed Type JSC KarakudukMunay
Microdistrict 3, Building 82
Aktau, Republic of Kazakshtan
Attention: Financial Director
Facsimile: (7-3292) 518 336
or such other as the Company may notify to the Security Trustee by not
less than five (5) Business Days' notice.
22.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY
23.1 REMEDIES AND WAIVERS
Time is of the essence of the Company's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
23.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
24. ASSIGNMENT OF RIGHTS
The Security Trustee may at any time, without the consent of the
Company, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Company
may not assign its rights under this Deed.
25. LAW AND JURISDICTION
25.1 ENGLISH LAW
This Deed shall be governed by English.
25.2 JURISDICTION
(a) For the exclusive benefit of the Security Trustee and the
Facility Agent, the Company 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 Deed and that accordingly any
suit, action or proceedings (together in this Clause 25 (Law and
Jurisdiction) 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 25.6 (Arbitration).
(b) The Company 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 25.2 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 the Company and may be
enforced in the courts of any other jurisdiction.
(c) Nothing contained in this Clause 25.2 shall limit the right of
the Security Trustee to take proceedings against the Company 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.
25.3 PROCESS AGENT
The Company hereby irrevocably and unconditionally:
(a) appoints Law Debenture Corporate Services Limited, whose address
is at Princes House, 95 Gresham Street, London EC2V 7LY, England as
its process agent to receive, for and on its behalf, service of
process in England in any proceedings with respect to this Deed;
(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 Deed shall affect the right to serve
process in any other manner permitted by law.
25.4 WAIVER OF IMMUNITY
To the extent that the Company may now or hereafter be entitled, in
any jurisdiction in which proceedings may at any time be commenced with
respect to this Deed, to claim for itself or any of its undertakings,
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 Deed and/or to
the extent that in any such jurisdiction there may be attributed to the
Company, any such immunity (whether or not claimed), the Company 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.
25.5 CONSENT TO ENFORCEMENT
The Company 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.
25.6 ARBITRATION
If any dispute arises in relation to this Deed, including any question
as to existence, validity or termination, such dispute shall, at the option
only of the Security Trustee, 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
25.6. Such arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be nominated by the
Company, one by the relevant Security Trustee and the third to be agreed
between the two arbitrators so nominated and in default the arbitrator
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.
26. COUNTERPARTS
This Deed may be executed in any number of counterparts and by the
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date at the beginning of this Deed.
EXECUTED as a deed and delivered by
CLOSED TYPE JSC KARAKUDUKMUNAY acting
by /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
FORM OF NOTICE OF ASSIGNMENT OVER ACCOUNTS
To: [The Account Bank]
From: Closed Type JSC Karakudukmunay
Copy to: The Law Debenture Trust Corporation p.l.c. as Security Trustee
Re: [ACCOUNTS] (the "Assigned Account")
We refer to [INSERT DETAILS OF ASSIGNED ACCOUNT]. We enclose a copy of
an Accounts Assignment (the "Assignment") dated [ ], 2000 between us and
the Security Trustee. Terms defined in the Assignment have the same
respective meaning in this Notice.
We hereby give you notice of the Assignment and, for the purposes of
the Assignment, we irrevocably and unconditionally instruct you
(notwithstanding any previous instructions which we may have given you to
the contrary):
(i) until you receive notice from the Security Trustee that the
security created by the Assignment has been released:
(A) not to accept from us any instruction or direction with
respect to the disposition or dealing with the Assigned
Account or the Assigned Moneys unless you receive an
instruction from the Facility Agent;
(B) to send to the Facility Agent, and to the Security Trustee
upon request, copies of every statement or correspondence
regarding the Assigned Account which you receive in respect
of the Assigned Account immediately upon receipt or issue
thereof;
(C) to disclose to the Security Agent and the Facility Agent,
without reference to or any further authority from us and
without any enquiry by you as to the justification for such
disclosure, such information relating to the Assigned
Account and the Assigned Moneys as the Security Trustee and
the Facility Agent may, at any time and from time to time
request you to disclose to them;
(D) to comply with the terms of any written notice, statement or
instructions in any way relating to or purporting to relate
to the Assignment and/or the Assigned Account and/or the
Assigned Moneys which you may receive at any time and from
time to time from the Facility Agent without any reference
to or further authority from us and without any enquiry by
you as to the justification for such notice, statement or
instructions or the validity thereof; and
(ii) at any time after you have received notice from the Security
Trustee that the security constituted by the Assignment has
become enforceable:
(A) to pay any Assigned Moneys to the Security Trustee or its
order at such place as the Security Trustee may from time to
time direct; and
(B) to hold to the order of the Security Trustee, certificates
of deposit, deposit receipts or other instruments or
securities relating to the Assigned Moneys and to forward
the same to the Security Trustee or as it may direct.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 2 to the Assignment.
Yours faithfully,
Closed Type JSC Karakudukmunay
SCHEDULE 2
FORM OF ACKNOWLEDGEMENT
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Closed Type JSC Karakudukmunay
[Date]
Dear Sirs,
We acknowledge receipt of the letter dated [ ] and addressed to
us by Closed Type JSC Karakudukmunay (the "Company") (a copy of which is
attached) and accept the instructions and authorisations contained in the
letter and undertake to act in accordance and comply with the terms
thereof.
We represent and undertake that we:
(a) consent to the Assignment referred to in the letter;
(b) have received no notice of, and have not ourselves received, any prior
charge, assignment or encumbrance of the Assigned Assets;
(c) will transfer, pay or deliver any Assigned Moneys or deal with or
permit any dealing with the Assigned Account only pursuant to the
Accounts Agreement;
(d) will not in any way prejudice your rights, titles and interests to or
under the Assigned Assets;
(e) will neither claim to set-off to your prejudice any Assigned Moneys
against any claim we may have against the Company howsoever arising
nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Assigned Account;
(f) will procure that payments are made to you or as you may direct in
accordance with the authority and instruction contained in the
attached letter, upon notice from you that the Assignment has become
enforceable; and
(g) will send to the Facility Agent, at the address specified in the
letter, copies of every statement or correspondence regarding the
Assigned Account which we receive from or send to the Company
immediately upon the receipt or issue thereof.
We have made the representations and given the undertakings set out in
this letter in the knowledge that they are required by you in connection
with the security which has been granted by the Company in your favour
pursuant to an Accounts Assignment dated [ ], 2000 between you and the
Company (the "ASSIGNMENT"). The expressions defined in the Assignment have
the same respective meanings in this letter. This letter shall be governed
by and construed in accordance with English law.
Yours faithfully,
[Name of Accounts Bank]
SCHEDULE 3
FORM OF NOTICE OF ASSIGNMENT
To: []
From: Closed Type JSC Karakudukmunay (the "Company")
Copy to: The Law Debenture Trust Corporation p.l.c. (the "Security
Trustee").
Re: [INSERT DETAILS OF AUTHORISED INVESTMENTS] (the "Relevant Investment")
We refer to the Accounts Assignment (the "Assignment") dated
2000 between us and the Security Trustee. Terms defined in the Assignment
have the same respective meaning in this Notice.
We refer to the Relevant Investment to be made from funds standing to
the credit of the following Assigned Account[s]:
[INSERT ACCOUNT DETAILS] (the "Relevant Account[s]").
[ ]
We give you notice that, by the Assignment the Company has assigned by
way of security with full title guarantee in favour of the Security
Trustee, all of the right, title and interest of the Company in and to,
INTER ALIA, all investments (including the Relevant Investment), interest,
income, investment proceeds and other Rights from time to time accruing to
or arising in connection with amounts standing to the credit of the
Assigned Accounts.
The Company hereby irrevocably and unconditionally instructs and
authorises you:-
(a) to disclose to the Security Trustee or the Facility Agent, the
contact details of which are detailed in the Appendix to this notice,
together with a copy to the Company but without any reference to or further
authority from the Company and without any inquiry by you as to the
justification for such disclosure, such information relating to the
Relevant Investment as the Security Trustee or the Facility Agent (as the
case may be) may, at any time and from time to time, request you to
disclose to it;
(b) unless and until the Security Trustee gives you notice to the
contrary, the proceeds of any Relevant Investment (including any interest
or income accruing to or arising in connection therewith) shall be
deposited into the Relevant Account;
(b) to release all or any part of the Relevant Investment (including any
interest or income accruing to or arising in connection therewith) in
accordance with any written instructions received from the Security Trustee
at any time or times notwithstanding any instruction to the contrary from
us;
(c) to hold all certificates or other evidence of ownership or documents
of title of the Relevant Investment subject to the security created by the
Assignment;
(d) to comply with the terms of any written notice that you receive from
the Security Trustee at any time in any way relating to or purporting to
relate to the Assignment or the Relevant Investment, with a notice to the
Company but without any reference to or further authority from the Company
and without any inquiry by you as to the justification for or validity of
such notice or instructions.
The Security Trustee has agreed that the Company may instruct you to
acquire, hold and realise the Relevant Investment without any reference to
or further authority from the Security Trustee except to the extent that
the Security Trustee gives you notice to the contrary. Upon and after the
giving of any such notice, the Company shall cease to be entitled to give
such instructions or make any such withdrawal to the extent specified in
the notice until the revocation of that notice.
The Company confirms that:-
(a) in the event of any conflict between communications received from
the Company and from the Security Trustee, the communication from
the Security Trustee shall prevail; and
(b) none of the instructions, authorisations and confirmations in
this notice can be revoked or varied in any way except with the
Security Trustee's specific written consent.
The instructions and authorisations which are contained in this letter
shall remain in full force and effect until the Security Trustee gives you
notice in writing revoking them. This letter shall be governed by and
construed in accordance with English law.
Would you please acknowledge receipt of this letter and your
acceptance of the instructions and authorisations contained in this letter
by sending a letter addressed to the Security Trustee and copied to us in
the form which is set out in Schedule 4 to the Assignment.
Yours faithfully,
CLOSED TYPE JSC KARAKUDUKMUNAY
APPENDIX
CONTACT DETAILS
THE FACILITY AGENT
Shell Capital Limited, Shell Centre, London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
THE SECURITY TRUSTEE
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
SCHEDULE 4
FORM OF ACKNOWLEDGEMENT
From: []
To: The Law Debenture Trust Corporation p.l.c.
Copy to: Closed Type JSC Karakudukmunay
[Date]
Dear Sirs,
We acknowledge receipt of the letter dated [ ] and addressed to
us by Closed Type JSC Karakudukmunay (the "Company") and accept the
instructions and authorisations contained in the letter and undertake to
act in accordance and comply with the terms thereof. The expressions
defined in the letter have the same respective meanings in this
acknowledgement.
We represent and undertake that:
(a) we consent to the Assignment referred to in the letter;
(b) we have received no notice of, and have not ourselves received, any
prior charge, assignment or encumbrance of the Relevant Investment;
(c) unless and until you give us notice to the contrary, the proceeds of
any Relevant Investment (including any interest or income accruing to
or arising in connection therewith) shall be deposited into the
Relevant Account;
(d) we will release all or any part of the Relevant Investment (including
any interest or income accruing to or arising in connection therewith)
in accordance with any written instructions received from you at any
time or times notwithstanding any instruction to the contrary from the
Company;
(e) we shall comply with the terms of any notice received by us from you
terminating the right of the Company to instruct us to acquire, hold
and realise the Relevant Investment to the extent specified in that
notice;
(f) we will not in any way prejudice your rights, titles and interests to
or under the Relevant Investment;
(g) will neither claim to set-off to your prejudice the Relevant
Investment against any claim we may have against the Company howsoever
arising nor exercise or attempt to exercise any right of set off or
consolidation or combination of accounts or similar right in respect
of or in relation to the Relevant Investment; and
(h) will send to you or the Facility Agent (as the case may be), at the
address specified in the letter, such information relating to the
Relevant Investment as you or the Facility Agent (as the case may be)
may, at any time and from time to time, request.
We have made the representations and given the undertakings set out in
this acknowledgement in the knowledge that they are required by you in
connection with the security which has been granted by the Company in your
favour pursuant to the Accounts Assignment dated [ ] between you and the
Company (the "Assignment"). This acknowledgement shall be governed by and
construed in accordance with English law.
Yours faithfully,
TABLE OF CONTENTS
PAGE
1. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . 2
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . . 3
2.1 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands. . . . . . . . . . . . . . . . . . . 3
3. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 No Obligations . . . . . . . . . . . . . . . . . . . . . 3
4. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS. . . . . . . . . . 4
4.1 No Dealing . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Negative Pledge. . . . . . . . . . . . . . . . . . . . . 4
4.3 Acknowledgement. . . . . . . . . . . . . . . . . . . . . 4
5. INSTRUCTIONS TO ACCOUNTS BANK . . . . . . . . . . . . . . . . . 4
6. GENERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 4
7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 6
7.2 Repetition . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Security Trustee's Reliance. . . . . . . . . . . . . . . 7
8. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.1 Security to Become Enforceable. . . . . . . . . . . . . . 8
9.2 Appropriation of Assigned Moneys. . . . . . . . . . . . . 8
9.3 Fixed Period. . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Section 101 of the Act. . . . . . . . . . . . . . . . . . 9
9.5 Sections 93 and 103 of the Act. . . . . . . . . . . . . . 9
10. APPOINTMENT OF RECEIVERS . . . . . . . . . . . . . . . . . . . . 9
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 9
10.2 Scope of Appointment. . . . . . . . . . . . . . . . . . . 9
11. RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.1 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.2 Conflict. . . . . . . . . . . . . . . . . . . . . . . . . 10
11.3 Agent of Company. . . . . . . . . . . . . . . . . . . . . 10
11.4 Remuneration. . . . . . . . . . . . . . . . . . . . . . . 10
12. RIGHTS OF THE SECURITY TRUSTEE, RECEIVER AND DELEGATES . . . . . 10
12.1 Rights of Receiver. . . . . . . . . . . . . . . . . . . . 10
12.2 Suspense Account. . . . . . . . . . . . . . . . . . . . . 10
12.3 Redemption of Prior Security. . . . . . . . . . . . . . . 10
12.4 New Assigned Account. . . . . . . . . . . . . . . . . . . 11
12.5 Delegation. . . . . . . . . . . . . . . . . . . . . . . . 11
12.6 Right of Set-off. . . . . . . . . . . . . . . . . . . . . 11
12.7 Security Trustee's Liability. . . . . . . . . . . . . . . 11
12.8 Receiver's Liability. . . . . . . . . . . . . . . . . . . 12
12.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 12
13. CONTINUING SECURITY AND OTHER MATTERS. . . . . . . . . . . . . . 12
13.1 Continuing and Independent Security. . . . . . . . . . . 12
13.2 Primary Obligations . . . . . . . . . . . . . . . . . . . 12
14. OTHER SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. ASSIGNMENT NOT TO BE AFFECTED. . . . . . . . . . . . . . . . . . 12
16. RELEASE OF ASSIGNED ASSETS . . . . . . . . . . . . . . . . . . . 13
16.1 Release of Assigned Assets. . . . . . . . . . . . . . . . 13
16.2 Retention of Deed . . . . . . . . . . . . . . . . . . . . 13
17. POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . 14
17.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 14
17.2 Ratification. . . . . . . . . . . . . . . . . . . . . . . 14
18. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 14
19. CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 14
20. CERTIFICATE TO BE CONCLUSIVE EVIDENCE. . . . . . . . . . . . . . 15
21. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 15
21.1 Transaction Costs . . . . . . . . . . . . . . . . . . . . 15
21.2 Preservation and Enforcement Costs. . . . . . . . . . . . 15
21.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . . 15
21.4 Security Trustee's Additional Costs . . . . . . . . . . . 15
21.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22.1 Giving of Notices . . . . . . . . . . . . . . . . . . . . 16
22.2 Addresses for Notices . . . . . . . . . . . . . . . . . . 16
22.3 English Language. . . . . . . . . . . . . . . . . . . . . 17
23. RIGHTS AND WAIVERS, PARTIAL INVALIDITY . . . . . . . . . . . . . 17
23.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . . 17
23.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 17
24. ASSIGNMENT OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 17
25. LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . 18
25.1 English Law . . . . . . . . . . . . . . . . . . . . . . . 18
25.2 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . 18
25.3 Process Agent . . . . . . . . . . . . . . . . . . . . . . 18
25.4 Waiver of Immunity. . . . . . . . . . . . . . . . . . . . 18
25.5 Consent to Enforcement. . . . . . . . . . . . . . . . . . 19
25.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . 19
26. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SCHEDULE 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
==========================================================================
CRI ASSIGNMENT
CHAPARRAL RESOURCES, INC.
as Assignor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 8 February 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS DEED OF ASSIGNMENT dated 8 February 2000 is made as a deed (this
"Deed") between:
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of Delaware (the "Assignor"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "Security
Trustee").
RECITALS
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Assignor, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Assignor secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to making the loans under the Loan
Agreement that the Assignor shall have executed and delivered this Deed to
the Security Trustee.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases defined in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"Acknowledgement of Notice of Assignment" means an acknowledgement of
assignment in the appropriate form set out in the attachment to Schedule 1,
with such amendments as may be approved by the Security Trustee.
"Act" means the Law of Property Act 1925.
"Administration" means administration under Part II of the Insolvency
Act.
"Approved Contracts" means:
(a) the Service Contract;
(b) the Hedging Agreement; and
(c) the CRI-CAP(G) Loan Agreement.
"Assigned Agreements" means all rights, titles, benefits and interests
(and any Hedging Receipts) of the Assignor whatsoever, present and future,
whether proprietary, contractual or otherwise under, or arising out of, or
evidenced by, the Approved Contracts with the full benefit of all
negotiable or non-negotiable instruments, guarantees, indemnities,
debentures and Security Interests in respect of them, including, but not
limited to, all claims for damages or other remedies in respect of any
breach thereof.
"Assigned Assets" means the Book Debts and the Assigned Agreements.
"Attorney" means any person so appointed by the Assignor pursuant to
Clause 19.1 (Appointment).
"Book Debts" means all book and other debts, revenues and claims both
present and future (including things in action) which may give rise to a
debt, revenue or claim due or owing or which may become due or owing to the
Assignor under, or by virtue of, the Assigned Agreements or in connection
with the rights of the Assignor evidenced by them (including, without
limitation, all claims in respect of any Hedging Receipts) and the present
and future rights, titles, benefits and interests of the Assignor to, or
in, them together with all rights and remedies relating to, or for
enforcing, the Assigned Agreements including but not limited to all
reservation of proprietary rights, rights of tracing and all other rights
and remedies of whatsoever nature now or hereafter held by the Assignor in
respect of all or any of the foregoing and all moneys from time to time
becoming due or owing thereunder or in connection therewith.
"CRI-CAP(G) Loan Agreement" means the CRI-CAP(G) Loan Agreement dated
the date of this Deed and entered into between the Assignor and CAP(G).
"Default Rate" has the meaning set out in clause 19.2(a) of the Loan
Agreement.
"Delegate" means a delegate or sub-delegate appointed pursuant to
Clause 12.5 (Delegation).
"Dissolution" of a person includes the bankruptcy, insolvency,
liquidation, amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of that person, and
any equivalent or analogous proceedings by whatever name known and in
whatever jurisdiction, and any step taken (including, but without
limitation, the presentation of a petition or the passing of a resolution)
for or with a view to any of the foregoing.
"Hedging Agreement" means the Hedging Agreement entered into or to be
entered into between the Assignor and Deutsche Bank, A.G., New York Branch
in respect of the Asian put for the hydrocarbons the subject of the Offtake
Agreement.
"Insolvency Act" means the Insolvency Act 1986.
"Notice of Assignment" means a notice of assignment in the appropriate
form set out in Schedule 1, with such amendments as may be approved by the
Security Trustee.
"Proceedings" shall have the meaning ascribed thereto in Clause 27.2
(Jurisdiction).
"Reassignment Deed" means a deed of reassignment in the form set out
in Schedule 2 with such amendments as made by the Security Trustee in its
sole discretion from time to time.
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act.
"Rights" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed, and (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
"Service Contract" means the Service Contract to be entered into
between the Assignor and KKM.
"Tax" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) references to Clauses and Schedules are to clauses of, and
schedules to, this Deed;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Deed;
(c) subject to Clause 11.1 (Powers), references to a statute shall be
construed as a reference to such statute as from time to time amended
or re-enacted;
(d) any reference to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall, in respect of a
jurisdiction other than England, be deemed to include that which most
nearly approximates in that jurisdiction to the English legal term;
(e) any reference to the "Assigned Assets" shall be a reference to
all the Assigned Assets and/or to each and every part of the Assigned
Assets and reference to any other defined term or noun in the plural
number or collective plural shall be interpreted MUTATIS MUTANDIS in
the same manner; and
(f) references in this Deed to this "Deed" or any other deed,
agreement or instrument including, without limitation, the Loan
Agreement are references to this Deed or, as the case may be, the
relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Deed or, as the case may be, the relevant deed,
agreement or instrument.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Assignor covenants with the Security Trustee that it will on
demand pay and discharge the Secured Liabilities at the time or times when
due.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or the Receiver under this Deed.
3. SECURITY INTERESTS AND ITS TERMINATION
3.1 ASSIGNMENT
The Assignor, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties the Assigned
Assets.
3.2 REASSIGNMENT
If the Security Trustee is satisfied, acting on the instructions of
the Facility Agent, that all the Secured Liabilities have been paid or
discharged in full and that none of the Finance Parties is under any
further obligation (contingent or otherwise) to provide any banking or
other accommodation to any Obligor under the Finance Documents then,
subject to Clause 3.3 (Retention of this Deed), the Security Trustee shall,
at the request and cost of the Assignor, reassign to the Assignor or its
nominee such interest as it may then have in the Assigned Assets (without
any warranty as to its title or interest in them) by executing and
delivering to the Assignor a Reassignment Deed covering the Assigned
Assets.
3.3 RETENTION OF THIS DEED
If the Assignor requests the Security Trustee to reassign the Assigned
Assets following any payment or discharge of the Secured Liabilities by a
person other than the Assignor (a "Relevant Transaction"), the Security
Trustee shall at the cost of the Assignor execute such documents and deeds
and do all such acts and things as may be necessary to reassign the
Assigned Assets provided the Security Trustee is satisfied that the payment
or discharge will not be avoided, reduced or invalidated. If the Security
Trustee is not so satisfied, the Security Trustee shall be entitled to
retain this Deed and shall not be obliged to reassign the Assigned Assets
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to reassign the Assigned Assets for such further
period as the Security Trustee may determine.
4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES
The Assignor represents and warrants to the Security Trustee that:
(a) each Approved Contract is, or when executed will be, in full
force and effect and constitutes, or when executed will constitute,
the legal, valid and binding obligation of the Assignor and, to the
knowledge of the Assignor, each of the other parties thereto
respectively, enforceable in accordance with its terms;
(b) each Assigned Agreement relating to each Approved Contract is in
full force and effect and constitutes the legal, valid and binding
obligation of the Assignor and, to the knowledge of the Assignor, each
of the other parties thereto respectively, enforceable in accordance
with the terms of such Assigned Agreement;
(c) this Deed constitutes the legal, valid and binding obligation of
the Assignor enforceable in accordance with the terms of this Deed;
(d) the Assignor is the sole legal and beneficial owner of all rights
and interests which each Approved Contract and each Assigned Agreement
creates in favour of the Assignor, subject only to the assignment
constituted by, and the other terms of, this Deed;
(e) the Assignor has the right, without requiring the concurrence,
consent or authority of any other person, to create, in respect of all
the Assigned Assets, the Security Interests which Clause 3 (Security
Interests and its Termination) purports to create;
(f) no third party has any Security Interests or any other right,
interest or claim over, in, or in relation to, the Assigned Assets;
(g) the copy of each Approved Contract and each Assigned Agreement
delivered to the Security Trustee in connection with this Deed is a
true and complete copy;
(h) the Assignor has not created or attempted to create or permitted
to subsist any Security Interests (other than Permitted Security
Interests) on, or over, the Assigned Assets or interest in them or
sold, assigned, discounted, factored or otherwise disposed of the
Assigned Assets or attempted or agreed so to do other than as provided
in this Deed and the other Finance Documents;
(i) to the knowledge of the Assignor, each other party to each
Approved Contract and each Assigned Agreement is in compliance with
its obligations thereunder; and
(j) all Consents required or advisable in connection with the
execution, delivery, performance, validity, admissibility in evidence
and enforceability of each Book Debt, each Approved Contract and each
Assigned Agreement or the payment of any sum to the Security Trustee
in accordance with Clause 6.8 (Payment of Monies Received in Respect
of Assigned Assets) or the instructions contained within any Notice of
Assignment have been obtained or effected (or, in the case of
registrations, will be effected within any applicable required period)
and (if obtained or effected) are in full force and effect; all fees
and registration and similar tax (if any) payable in connection with
them have been paid if due; and there has been no default in the
performance of any of their terms and conditions.
4.2 REPETITION
The representations and warranties contained in Clause 4.1
(Representations and Warranties) shall be made on the date of this Deed and
shall be repeated thereafter on each Interest Payment Date during the
continuance of the Security Interest constituted by this Deed by reference
to the facts and circumstances then existing.
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
5.1 NEGATIVE PLEDGE
The Assignor shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interests on,
over, or with respect to, the Assigned Assets except for the Permitted
Security Interests.
5.2 DISPOSAL OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee, sell, transfer, alienate or deal with the Assigned Assets
or any interest in the Assigned Assets or attempt or agree to do so.
6. COVENANTS RELATING TO ASSIGNED ASSETS
6.1 DURATION
The covenants contained in Clauses 5 (Restrictions on Dealing with
Assigned Assets) and in this Clause 6 (Covenants relating to Assigned
Assets) shall remain in full force and effect during the continuance of the
security constituted by this Deed.
6.2 NOTICE OF ASSIGNMENT AND ACKNOWLEDGEMENT THEREOF
The Assignor shall, immediately following execution of this Deed, or
if later, on the date such Approved Contract is executed, serve a Notice of
Assignment on each of the counterparties to the Service Contract, the
Hedging Agreement and the CRI-CAP(G) Loan Agreement substantially in the
form of Schedule 1, and the Assignor shall procure that each of those
counterparties promptly (and in any event within seven days of the receipt
of the Notice of Assignment) execute and deliver to the Security Trustee
(with a copy thereof to the Assignor) the corresponding Acknowledgement of
Notice of Assignment.
6.3 DEPOSIT OF ASSIGNED AGREEMENTS
The Assignor shall deposit with the Security Trustee copies of the
Approved Contracts and the Assigned Agreements and copies of all other
related documents including but not limited to all variations, extensions
or replacements from time to time made to the Approved Contracts or the
Assigned Agreements.
6.4 HOLDING IN TRUST
The Assignor shall hold in trust for the Security Trustee any of the
Approved Contracts or Assigned Agreements not from time to time deposited
with the Security Trustee and keep them safe and undefaced.
6.5 ACCESS TO ACCOUNTS
The Assignor shall, whenever so required, permit any officer of the
Security Trustee to have access to, and possession of, all books and
accounts relating to the Assigned Assets.
6.6 COMPLIANCE WITH APPROVED CONTRACTS AND ASSIGNED AGREEMENTS
The Assignor shall duly and punctually observe and perform all the
conditions and obligations assumed by it under the Approved Contracts and
the Assigned Agreements and, when required, produce to the Security Trustee
the receipts for payments made by it under the Approved Contracts and the
Assigned Agreements and generally do all things which may be necessary to
cause the moneys agreed to be paid to the Assignor thereunder to become
payable and, at its own cost, co-operate fully and use its best endeavours
to procure the prompt payment of those moneys to the Assignor and to
procure, whether by legal proceedings or otherwise, that all other relevant
parties to the Approved Contracts and the Assigned Agreements do likewise.
6.7 NO VARIATION OR RELEASE OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee:
(a) vary any of the Assigned Assets;
(b) release, waive, suspend, subordinate or permit to be lost or
impaired any interest or right forming part of, or relating to, any
Assigned Asset;
(c) waive any person's breach of the terms of any Assigned Asset;
(d) rescind or terminate any Assigned Asset or treat itself as
discharged or relieved from further performance of any of the
obligations or liabilities assured by it in relation to an Assigned
Asset;
(e) purport to vary or revoke any notice or instruction relating to
this Deed which it has given or may later give to any person; or
(f) grant time for payment or other indulgence, or compound with,
discharge, waive, release, or vary the liability of any other person
under an Assigned Asset or do or permit any set-off or other act or
thing whereby the recovery of any moneys payable under, or in respect
of, the Assigned Assets may be delayed or impeded.
6.8 PAYMENT OF MONIES RECEIVED IN RESPECT OF ASSIGNED ASSETS
Subject to the terms of the applicable Notice of Assignment, the
Assignor shall forthwith upon receipt by it (or by any person acting on its
behalf) pay over or transfer to the Security Trustee (or as the Security
Trustee may direct) any moneys or other property which the Assignor (or any
person acting on its behalf) may receive or recover in connection with an
Assigned Asset and all property which may, directly or indirectly,
represent, accrue on, or be derived from, any such moneys or property.
6.9 ACTION TO PROTECT VALIDITY OF ASSIGNED ASSETS
The Assignor shall:
(a) use its best endeavours to ensure that all interests and rights
conferred by each Assigned Asset remain valid and enforceable in all
respects and retain the priority which they were intended to have; and
(b) without prejudice to its obligations under paragraph (a) of this
Clause 6.9, take any action which the Security Trustee may specify
with a view to ensuring or protecting the validity, enforceability
and/or priority of any such interest or right.
6.10 ACTION TO ENFORCE ASSIGNED ASSETS
The Assignor shall take any action which the Security Trustee may
direct for the purpose of enforcing (through legal process, arbitration or
otherwise) any right which is part of, or which relates to, the Assigned
Assets.
6.11 PROVISION OF INFORMATION RELATING TO ASSIGNED ASSETS
The Assignor shall forthwith:
(a) inform the Security Trustee if any breach of an Assigned Asset
occurs or a serious risk of such a breach arises and of any other
claim, dispute, event or matter affecting an Assigned Asset which is
material to the Security Trustee;
(b) provide the Security Trustee, promptly after service, with copies
of all notices served on or by it under, or in connection with, the
Assigned Assets;
(c) provide the Security Trustee with any information which it
requests about any Assigned Asset or any matter relating to, or
affecting, the Assigned Assets; and
(d) generally provide the Security Trustee and its officers and
representatives with full and prompt co-operation and assistance
relating to the Assigned Assets.
6.12 NO ACTION TO JEOPARDISE SECURITY INTERESTS CONSTITUTED HEREBY
The Assignor shall not do or fail to do or cause or permit another
person to do or omit to do anything which is liable to jeopardise the
effectiveness or priority, in relation to any Assigned Asset, of any
security constituted by this Deed.
6.13 INDEMNITY
Without prejudice to the provisions of Clause 14.4 (Indemnity), the
Assignor shall keep the Security Trustee (and any Receiver appointed by the
Security Trustee) fully and effectively indemnified from and against all
actions, proceedings, costs, charges, claims, demands, expenses,
liabilities, legal and other professional fees (including any tax)
whatsoever in respect of any breach, non-observance or non-performance of
any covenants, obligations, warranties or undertakings on the part of the
Assignor contained in this Deed or the making good of any such breach, non-
observance or non-performance.
7. SECURITY TRUSTEE'S DISCRETION
7.1 SECURITY TRUSTEE MAY CURE BREACHES OF COVENANTS
In the event of the failure of the Assignor to observe or perform the
provisions of this Deed, the Security Trustee may do all such acts and
things as may be necessary to secure the observance or performance thereof
without thereby becoming liable as a mortgagee in possession.
7.2 EXPENSES SO INCURRED
The Assignor hereby agrees and acknowledges that all moneys expended
and all costs incurred by the Security Trustee in carrying out any of its
discretions or powers referred to in Clause 7.1 (Security Trustee May Cure
Breaches of Covenants) shall be considered to have been properly incurred
by the Security Trustee and shall be recoverable from the Assignor under
Clause 23 (Costs and Expenses).
8. FURTHER ASSURANCES
8.1 GENERAL ASSURANCE
The Assignor shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require for perfecting, preserving or protecting the security
constituted by this Deed or the priority thereof and for facilitating the
realisation of the Assigned Assets or the exercise of any Rights vested in
the Security Trustee or in any Receiver, and the Assignor shall, in
particular but without limitation, execute all such transfers, conveyances,
assignments and assurances of the Assigned Assets whether to the Security
Trustee or to its nominees or otherwise, and give all such notices, orders,
instructions and directions which the Security Trustee may consider
expedient.
8.2 ADDITIONAL SECURITY INTERESTS
Without prejudice to the generality of Clause 8.1 (General Assurance),
the Assignor shall, at its own cost, promptly execute and deliver to the
Security Trustee in such form as the Security Trustee may require such
other Security Interests over such of the Assigned Assets as shall be
required by the Security Trustee (whether generally or specifically, and
whether for the purpose of obtaining legal title to the relevant Assigned
Assets, creating Security Interests which is effective under the laws of a
foreign jurisdiction, or otherwise).
9. ENFORCEMENT
9.1 SECURITY INTERESTS TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Assignor shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by Section 103 of the Act as to the giving of notice
or otherwise.
9.2 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.3 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
9.4 STEP-IN RIGHTS
Without prejudice to the provisions of Clause 11 (Receivers) and
Clause 12 (Rights of Security Trustee):
(a) the Security Trustee may, upon this security becoming
enforceable, notify each of the other parties to each Approved
Contract and each Assigned Agreement that it shall be entitled (but
without accepting or assuming any obligation to that effect) to
perform, or procure through a third party the performance of, the
obligations assumed by the Assignor in respect of that Approved
Contract or Assigned Agreement, the costs and expenses so incurred by
the Security Trustee or third party being borne by the Assignor; and
(b) the Security Trustee may but shall not be obliged to:
(i) demand, sue for, collect or receive money or property at
any time due, payable or receivable in relation to that Approved
Contract or Assigned Asset;
(ii) compromise and settle with any person liable under that
Approved Contract or Assigned Asset; and
(iii) extend the time for payment or otherwise change the terms
of that Approved Contract or Assigned Asset as to any party
liable thereon,
without in any case incurring any responsibility or liability to the
Assignor.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable pursuant to Clause 9.1 (Security Interests to Become
Enforceable) (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Assignor, or
following the Dissolution of the Assignor, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under Section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Assignor or otherwise and in such manner and upon such
terms and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental
or conducive to any of the rights, powers or discretions conferred on
a Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of
exercising if the Receiver were the absolute beneficial owner of the
same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Assignor for all purposes and
the Assignor shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Assignor alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12 RIGHTS OF SECURITY TRUSTEE
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the security constituted by this Deed has become
enforceable, irrespective of whether the Security Trustee shall have taken
possession or appointed a Receiver.
12.2 REDEMPTION OF PRIOR SECURITY INTERESTS
The Security Trustee may, at any time, redeem any Security Interests
over the Assigned Assets having priority to the Security Interests
constituted by this Deed or procure the transfer thereof to the Security
Trustee and may settle the accounts of encumbrancers. Any accounts so
settled shall, in the absence of manifest error, be conclusive and binding
on the Assignor. The Assignor shall, on demand, pay to the Security Trustee
all principal moneys, interest, costs, charges, losses, liabilities and
expenses of, and incidental to, any such redemption by or transfer to the
Security Trustee.
12.3 SUSPENSE ACCOUNT
The Security Trustee may, for as long as the Secured Liabilities have
not been paid or discharged in full, at its sole discretion, place and
retain on an interest-bearing suspense account on deposit, for as long as
it considers fit, any moneys received, recovered or realised under, or in
connection with, this Deed to the extent of such Secured Liabilities
without any obligation to apply the same in or towards the discharge of
such Secured Liabilities.
12.4 NEW ACCOUNT
At any time after (i) the Security Trustee having received notice
(either actual or constructive) of any subsequent security affecting the
Assigned Assets or (ii) the Dissolution of the Assignor, the Security
Trustee may open a new account in the name of the Assignor (whether or not
it permits any existing account to continue). If the Security Trustee does
not open such a new account, it shall nevertheless be treated as if it had
done so at the time when the notice was received or was deemed to have been
received or, as the case may be, the Dissolution commenced. Thereafter, all
payments made by the Assignor to the Security Trustee or received by the
Security Trustee for the account of the Assignor shall be credited or
treated as having been credited to the new account and shall not operate to
reduce the amount secured by this Deed at the time when the Security
Trustee received or was deemed to have received such notice or, as the case
may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 SET-OFF
The Security Trustee may, without notice to the Assignor and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Assignor,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the market
rate of exchange which may be obtained by the Security Trustee on the date
of set-off.
13. APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Deed shall (except as may be otherwise required by applicable
law) be held and applied in the following order of priority (but without
prejudice to the right of the Security Trustee to recover any shortfall
from the Assignor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Assignor.
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES
14.1 POSSESSION
If the Security Trustee, any Receiver or any Delegate shall take
possession of the Assigned Assets such Security Trustee, Receiver or
Delegate may at any time relinquish such possession.
14.2 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Assignor or any other person for anything
except the Security Trustee's own actual receipts; or
(b) to the Assignor or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Assigned Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Assigned Assets.
14.3 RECEIVER'S LIABILITY
All the provisions of Clause 14.2 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
14.4 INDEMNITY
The Security Trustee and every Receiver, Delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective Rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Assigned Assets, and the
Security Trustee and any such Receiver, Delegate, attorney, manager, agent
or other person appointed by the Security Trustee hereunder may retain and
pay all sums in respect of the same out of any moneys received unless such
liabilities and expenses were incurred as a result of the gross negligence
or wilful default of the Security Trustee, Receiver, Delegate, attorney,
manager, agent or other person appointed by the Security Trustee.
15. PROTECTION OF THIRD PARTIES
15.1 CONTRACTUAL PROTECTION
No person dealing with the Security Trustee, any Receiver or any
Delegate shall be concerned to enquire:
(a) whether any event has happened upon which any of the Rights
conferred under or in connection with this Deed, the Act or the
Insolvency Act is or may be exercisable, or
(b) whether any consents, regulations, restrictions or directions
relating to such Rights have been obtained or complied with; or
(c) as to the propriety or regularity of acts purporting or intended
to be in exercise of any such Rights; or
(d) as to the application of any money borrowed or raised; or
(e) as to the application of the proceeds of enforcement.
15.2 STATUTORY PROTECTION
All the protections to purchasers contained in sections 104 and 107 of
the Act, section 42(3) of the Insolvency Act or in any other legislation
shall apply to any person purchasing from, or dealing with, the Security
Trustee, any Receiver or any Delegate.
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS
16.1 CONTINUING AND INDEPENDENT SECURITY INTERESTS
The Security Interests constituted by this Deed shall be continuing
and independent Security Interests for the Secured Liabilities and shall
not be satisfied, discharged or affected by any intermediate payment or
settlement of account (whether or not any Secured Liabilities remain
outstanding thereafter) or any other matter or thing whatsoever.
16.2 PRIMARY OBLIGATIONS
This Deed and the Security Interests constituted by this Deed
constitute original, independent and absolute securities (and not secondary
or collateral securities) for the Secured Liabilities.
17. OTHER SECURITY INTERESTS
The Security Interests constituted by this Deed shall be in addition
to, and shall not be prejudiced by, any other Security Interests or any
guarantee or indemnity or other document which any Finance Party may, at
any time, hold for the payment and discharge of the Secured Liabilities.
18. SECURITY INTERESTS NOT TO BE AFFECTED
Without prejudice to Clause 16 (Continuing Security Interests and
other Matters) and Clause 17 (Other Security Interests), neither the
Security Interests constituted by this Deed nor the liability of the
Assignor for the Secured Liabilities shall be prejudiced or affected by:
(a) any variation or amendment of, or waiver or release granted
under, or in connection with, any other Security Interests or any
guarantee or indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee to an Obligor or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other person of any other Security Interests,
or any guarantee or indemnity or other person or document;
(d) the Dissolution of any Obligor or any other person;
(e) any change in the constitution of the any Obligor;
(f) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the
whole or any part of the assets of any Obligor to any other person;
(g) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(h) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee or any other Finance Party or any other person; or
(i) any other thing done or omitted or neglected to be done by the
Security Trustee, any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of an Obligor for
the Secured Liabilities.
19. POWER OF ATTORNEY
19.1 APPOINTMENT
The Assignor appoints, irrevocably and by way of security, the
Security Trustee, every Receiver and every Delegate severally to be the
Attorney of the Assignor (with full powers of substitution and delegation),
on its behalf and in its name or otherwise, at such time and in such manner
as the Attorney may think fit:
(a) to do anything which the Assignor is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or security over, the Assigned Assets;
and
(b) generally to exercise the Rights conferred on the Security
Trustee, every Receiver or every Delegate in relation to the Assigned
Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
19.2 RATIFICATION
The Assignor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 19.1 (Appointment).
20. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the
Assignor's liability under this Deed or if that liability is converted into
a claim, proof, judgment or order in a currency other than Dollars:
(a) the Assignor shall as an independent obligation indemnify the
Security Trustee against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business is
less than the amount owed by the Assignor to the Security Trustee in
Dollars, the Assignor shall forthwith on demand pay to the Security
Trustee an amount in Dollars equal to the deficit; and
(c) the Assignor shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Assignor waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which it is
expressed to be payable.
21. DEFAULT INTEREST
If the Assignor fails to pay any Secured Liability on the due date for
payment, the Assignor shall pay to the Security Trustee on demand interest
at the Default Rate from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 23 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liability became due,
until full payment and discharge of the relevant Secured Liability (both
before and after any judgment).
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
signed by an officer of the Security Trustee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Assignor as to the amount or rate of such indebtedness
or rate of interest.
23. COSTS AND EXPENSES
23.1 TRANSACTION COSTS
The Assignor shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
23.2 PRESERVATION AND ENFORCEMENT COSTS
The Assignor shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including legal and other fees 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 the Security Trustee under this Deed.
23.3 STAMP TAXES
The Assignor shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
23.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Assignor shall, from time to time on demand of the Security
Trustee (and without prejudice to the provisions of Clause 23.1
(Transaction Costs) and 23.2 (Preservation and Enforcement Costs)
compensate the Security Trustee at such daily and/or hourly rates as the
Security Trustee shall from time to time determine and on demand indemnify
the Security Trustee against all costs and expenses (including telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Finance Parties
or any request by the Assignor in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Assignor under this Deed;
(b) any actual, potential or suspected breach by the Assignor of its
obligations under this Deed;
(c) the occurrence of an Event of Default or Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Assignor.
23.5 TAX
Any cost or expense referred to in this Clause 23 (Costs and Expenses)
is exclusive of any Tax chargeable in connection with that cost or expense.
The Assignor shall pay any Tax so chargeable at the same time as it pays
the relevant cost or expense.
24. NOTICES
24.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
24.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Assignor by
not less than five Business Days' notice.
(b) The address and facsimile number of the Assignor are:
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Assignor may notify to the Security Trustee by
not less than five Business Days' notice.
24.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
25.1 REMEDIES AND WAIVERS
Time is of the essence of the Assignor's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
25.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
26. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Assignor, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Assignor
may not assign, transfer, novate or dispose of or any interest in, its
rights or obligations under this Deed.
27. LAW AND JURISDICTION
27.1 ENGLISH LAW
THIS DEED SHALL BE GOVERNED BY ENGLISH LAW.
27.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE SECURITY TRUSTEE AND THE
FACILITY AGENT, THE ASSIGNOR 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 DEED AND THAT ACCORDINGLY ANY SUIT, ACTION OR
PROCEEDINGS (TOGETHER IN THIS CLAUSE 27 (LAW AND JURISDICTION) 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 27.6
(ARBITRATION).
(B) THE ASSIGNOR 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 27.2 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 THE ASSIGNOR AND MAY BE ENFORCED IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) NOTHING CONTAINED IN THIS CLAUSE 27.2 SHALL LIMIT THE RIGHT OF
THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE ASSIGNOR 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.
27.3 PROCESS AGENT
THE ASSIGNOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) APPOINTS LAW DEBENTURE CORPORATE SERVICES LIMITED, WHOSE ADDRESS
IS AT PRINCES HOUSE, 95 GRESHAM STREET, LONDON EC2V 7LY, ENGLAND AS ITS
PROCESS AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN
ENGLAND IN ANY PROCEEDINGS WITH RESPECT TO THIS DEED;
(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 DEED SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
27.4 WAIVER OF IMMUNITY
TO THE EXTENT THAT THE ASSIGNOR MAY NOW OR HEREAFTER BE ENTITLED, IN
ANY JURISDICTION IN WHICH PROCEEDINGS MAY AT ANY TIME BE COMMENCED WITH
RESPECT TO THIS DEED, TO CLAIM FOR ITSELF OR ITS UNDERTAKING, PROPERTY,
ASSETS OR REVENUE 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 DEED AND/OR TO THE EXTENT
THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED TO THE ASSIGNOR, ANY
SUCH IMMUNITY (WHETHER OR NOT CLAIMED), THE ASSIGNOR 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.
27.5 CONSENT TO ENFORCEMENT
THE ASSIGNOR 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.
27.6 ARBITRATION
IF ANY DISPUTE ARISES IN RELATION TO THIS DEED, INCLUDING ANY QUESTION
AS TO EXISTENCE, VALIDITY OR TERMINATION, SUCH DISPUTE SHALL, AT THE OPTION
ONLY OF THE SECURITY TRUSTEE, 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
27.6. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND SHALL BE
CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY THE
ASSIGNOR, ONE BY THE RELEVANT SECURITY TRUSTEE AND THE THIRD TO BE AGREED
BETWEEN THE TWO ARBITRATORS SO NOMINATED AND IN DEFAULT THE ARBITRATOR
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.
28. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date stated at the beginning of this Deed.
EXECUTED as a deed and delivered by
CHAPARRAL RESOURCES, INC. acting
by /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Co-Chairman
In the presence of:
/S/ MICHAEL B. YOUNG
-----------------------------
Witness
Name: Michael B. Young
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
was affixed hereunto in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
FORM OF NOTICE OF ASSIGNMENT FOR ASSIGNED AGREEMENTS
[HEADED NOTEPAPER OF THE ASSIGNOR]
_______ 2000
TO: [Name and address of Counterparty named in Assigned Agreement]
For the Attention of: _____________
COPY TO: The Law Debenture Trust Corporation p.l.c., as Security Trustee
Dear Sirs,
(1) We refer to a deed of assignment dated _____ 2000 (the "Deed")
and entered into by (1) ourselves and (2) the Security Trustee for the
other Finance Parties. Terms defined in the Deed shall have, when used in
this notice, the same meaning herein as therein unless the context
otherwise requires.
We hereby give you notice that, pursuant to, and in accordance with,
the Deed, and as continuing security for the payment and discharge of the
Secured Liabilities, we assigned to the Security Trustee absolutely with
full title guarantee:
(a) all our rights, titles, benefits and interests whatsoever
present and future whether proprietary, contractual or otherwise
under, or arising out of, [insert name of contract] (the "Agreement")
with the full benefit of all negotiable or non-negotiable instruments,
guarantees, indemnities, debentures and Security Interests in respect
of it including but not limited to all claims for damages or other
remedies in respect of any breach thereof; and
(b) all book and other debts, revenues and claims both present and
future (including things in action) which may give rise to a debt,
revenue or claim due or owing or which may become due or owing to us
under, or by virtue of, the Agreement or in connection with our rights
evidenced by the Agreement and our present and future rights, titles,
benefits and interests to, or in, the Agreement together with all
rights and remedies relating to, or for enforcing, the Agreement
including but not limited to all reservation of proprietary rights,
rights of tracing and all other rights and remedies of whatsoever
nature now or hereafter held by us in respect of all or any of the
foregoing and all moneys from time to time becoming due or owing
thereunder or in connection therewith (the "Book Debts").
(2) The Deed declares in Clause 6.6 that we remain liable to you to
perform all the obligations assumed by us under the Agreement, and the
Security Trustee has assumed no obligation of any kind whatsoever in
respect of the Agreement.
(3) We hereby irrevocably authorise and instruct you to pay to ABN
Amro Bank N.V., London Branch, 250 Bishopsgate, London, Account number
40061981, Sort Code 40-50-30, Swift Code ABNA GB2L (unless otherwise
instructed by the Security Trustee by written notice to you from time to
time) all moneys whatsoever now or at any time hereafter due or owing to us
under, or by virtue of, the Agreement (including, without limitation, the
Book Debts) or in connection with our rights evidenced thereby and to
procure that the Security Trustee receives all our rights, titles, benefits
and interest whatsoever present and future whether proprietary, contractual
or otherwise under, or arising out of, or evidenced by, the Agreement
including all claims against insurers in respect of the same and all moneys
from time to time becoming due or owing thereunder or in connection
therewith.
(4) Except as provided in paragraph (3) above, you may continue to
deal with us for all purposes in relation to the Agreement until such time
as you receive written notice from the Security Trustee to the contrary,
after which the Security Trustee may exercise all our rights and powers
under the Agreement.
Upon receipt of such written notice from the Security Trustee, the
Security Trustee shall be entitled (but without accepting or assuming any
obligation to that effect) to perform, or procure through a third party the
performance of, our obligations in respect of the Agreement, the costs and
expenses so incurred by the Security Trustee or third party to be for our
account.
In addition, the Security Trustee may but shall not be obliged to:
(a) demand, sue for, collect or receive money or property at any time
due, payable or receivable in relation to the Agreement;
(b) compromise and settle with any person liable under the Agreement;
and
(c) extend the time for payment or otherwise change the terms of the
Agreement.
(5) This authority and instruction is declared to be irrevocable and
may not be varied or amended without the prior written consent of the
Security Trustee.
Please will you sign, date and return to the Security Trustee at
Princes House, 95 Gresham Street, London, EC2V 7LY, England (together with
a copy to us for our records) the attached Acknowledgement of Notice of
Assignment as your acknowledgement of the assignment effected by the Deed
as soon as practicable and in any event within three days of the date of
this notice.
This notice shall be governed by the laws of England.
Yours faithfully
For and on behalf of
____________________
CHAPARRAL RESOURCES, INC.
ATTACHMENT TO
SCHEDULE 1
FORM OF ACKNOWLEDGEMENT OF NOTICE OF ASSIGNMENT
_______ 2000
TO: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
For the Attention of: The Manager, Trust Management
CC: Chaparral Resources, Inc.
Dear Sirs,
We hereby acknowledge receipt of a Notice of Assignment dated _______
(of which this is a duplicate) and of the particulars of the assets
assigned pursuant to, and in accordance with, the Deed. Terms defined in
the Notice of Assignment shall have, when used in this acknowledgement, the
same meaning herein as therein, unless the context otherwise requires.
In consideration of the Security Trustee and the other Finance Parties
entering into the Finance Documents and the Lenders making funds available
to the Assignor thereunder, we confirm and agree that:
(a) we consent to the assignment by way of security effected by the
Deed referred to in the Notice of Assignment;
(b) we have received no notice of any prior charge, deed, security,
assignment or disposition of any of the assets stated in the Deed to
be assigned to you;
(c) we will not, without your prior written consent, amend, modify,
vary, suspend, rescind, discharge or otherwise terminate the Agreement
or in any way prejudice the rights, titles, benefits and interests
assigned to you;
(d) we will not claim any set-off or counterclaim to your prejudice
in respect of any moneys payable under the Agreement (including,
without limitation, the Book Debts) whether in respect of any
transaction or matter which occurred prior to, or which occurs after,
our receipt of the Notice of Assignment;
(e) we will procure that payments are made to you in accordance with
the authority and instruction contained in the Notice of Assignment;
(f) we will give you notice in writing forthwith of any change of our
address or any default by us or Chaparral Resources, Inc. in
performing our or its obligations, as appropriate, under the Agreement
assigned to you pursuant to, and in accordance with, the Deed and of
any dispute between us in relation to such obligations; and
(g) we will not withhold consent to the assignment of the Agreement
(including, without limitation, the Book Debts) by you to another
person.
This acknowledgement is governed by the laws of England.
SIGNED by ____________________ )
duly authorised for and on behalf of _______ )
[RELEVANT COUNTERPARTY] ________ 2000
SCHEDULE 2
FORM OF REASSIGNMENT DEED
THIS DEED OF REASSIGNMENT is made on _____ 2000.
BETWEEN:
(1) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England (the "Security Trustee") acting as
security trustee for the Finance Parties under the Loan Agreement (as such
terms are defined herein); and
(2) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of Delaware.
1. DEFINITIONS
Terms and expressions defined in the Deed of Assignment (as defined
below) shall have, when used in this Deed, the same meaning herein as
therein unless the context otherwise requires.
2. REASSIGNMENT
The Security Trustee hereby assigns to the Assignor such right, title,
benefit and interest as it may have in, and to [insert name of assigned
document] which were assigned to the Security Trustee pursuant to Clause 3
of a deed of assignment by way of security entered into by the Security
Trustee and the Assignor and dated 8 February 2000 (the "Deed of
Assignment").
3. NO LIABILITY FOR THE SECURITY TRUSTEE
(a) The Security Trustee makes no representation, warranty,
undertaking or covenant whatsoever as to its title to the assets and
property referred to in Clause 2 of this Deed or to any other matter
relating to this Deed or the Deed of Assignment.
(b) Each of the Security Trustee and the Assignor agree that neither
the Security Trustee nor its managers, officers, agents or employees shall
be subject to any liability whatsoever whether arising under contract, tort
or otherwise in respect of the assets and property referred to in Clause 2
of this Deed or as to any other matter relating to this Deed.
4. COSTS AND EXPENSES
(a) The Assignor hereby covenants with the Security Trustee on demand
to pay all costs, charges and expenses incurred by the Security Trustee in
connection with, or relating to, this Deed or the assignment effected or
purported to be effected pursuant to this Deed on a full indemnity basis
with interest at the rates and on terms agreed from time to time with the
Security Trustee or, in the absence of agreement, at 2 per cent per annum
over the base rate of National Westminster Bank p.l.c. from time to time.
(b) The Assignor agrees and acknowledges that, notwithstanding the
assignment pursuant to Clause 2 of this Deed, the covenants and indemnities
contained in Clauses 5 and 6 of the Deed of Assignment shall remain in full
force and effect for the benefit of the Security Trustee for so long as the
Security Trustee may require.
5. JURISDICTION
This Agreement shall be governed by English law.
IN WITNESS WHEREOF this Deed has been executed as a deed by the
parties hereto and is delivered on the date stated at the beginning of this
Deed.
EXECUTED as a deed and delivered by
CHAPARRAL RESOURCES, INC. acting
by __________________________________
Name:
Title:
In the presence of:
__________________________________
Witness
Name:
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
P.L.C.
was hereunto affixed in the presence of:
_________________________________
Name:
Title: Director
_________________________________
Name:
Title: Authorised Signatory
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . 3
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . . 4
2.1 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . 4
2.2 Validity of Demands. . . . . . . . . . . . . . . . . . . 4
3. SECURITY INTERESTS AND ITS TERMINATION. . . . . . . . . . . . . 4
3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Reassignment . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Retention of this Deed . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 5
4.1 Representations and Warranties . . . . . . . . . . . . . 5
4.2 Repetition . . . . . . . . . . . . . . . . . . . . . . . 6
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS. . . . . . . . . . 6
5.1 Negative Pledge. . . . . . . . . . . . . . . . . . . . . 6
5.2 Disposal of Assigned Assets . . . . . . . . . . . . . . 6
6. COVENANTS RELATING TO ASSIGNED ASSETS. . . . . . . . . . . . . . 6
6.1 Duration. . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Notice of Assignment and Acknowledgement Thereof. . . . . 6
6.3 Deposit of Assigned Agreements. . . . . . . . . . . . . . 6
6.4 Holding in Trust. . . . . . . . . . . . . . . . . . . . . 7
6.5 Access to Accounts. . . . . . . . . . . . . . . . . . . . 7
6.6 Compliance with Approved Contracts and Assigned Agreements 7
6.7 No Variation or Release of Assigned Assets. . . . . . . . 7
6.8 Payment of Monies Received in Respect of Assigned Assets. 8
6.9 Action to Protect Validity of Assigned Assets . . . . . . 8
6.10 Action to Enforce Assigned Assets . . . . . . . . . . . . 8
6.11 Provision of Information Relating to Assigned Assets. . . 8
6.12 No Action to Jeopardise Security Interests Constituted
Hereby. . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 9
7. SECURITY TRUSTEE'S DISCRETION. . . . . . . . . . . . . . . . . . 9
7.1 Security Trustee May Cure Breaches of Covenants . . . . . 9
7.2 Expenses so Incurred. . . . . . . . . . . . . . . . . . . 9
8. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 9
8.1 General Assurance . . . . . . . . . . . . . . . . . . . . 9
8.2 Additional Security Interests . . . . . . . . . . . . . . 9
9. ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Security Interests to Become Enforceable. . . . . . . . . 10
9.2 Section 101 of the Act. . . . . . . . . . . . . . . . . . 10
9.3 Sections 93 and 103 of the Act. . . . . . . . . . . . . . 10
9.4 Step-in Rights. . . . . . . . . . . . . . . . . . . . . . 10
10. APPOINTMENT OF RECEIVERS . . . . . . . . . . . . . . . . . . . . 11
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Scope of Appointment. . . . . . . . . . . . . . . . . . . 11
11. RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Conflict. . . . . . . . . . . . . . . . . . . . . . . . . 12
11.3 Agent of Company. . . . . . . . . . . . . . . . . . . . . 12
11.4 Remuneration. . . . . . . . . . . . . . . . . . . . . . . 12
12 RIGHTS OF SECURITY TRUSTEE . . . . . . . . . . . . . . . . . . . 12
12.1 Rights of Receiver. . . . . . . . . . . . . . . . . . . . 12
12.2 Redemption of Prior Security Interests. . . . . . . . . . 12
12.3 Suspense Account. . . . . . . . . . . . . . . . . . . . . 12
12.4 New Account . . . . . . . . . . . . . . . . . . . . . . . 12
12.5 Delegation. . . . . . . . . . . . . . . . . . . . . . . . 13
12.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. APPLICATION OF MONEYS. . . . . . . . . . . . . . . . . . . . . . 13
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES . . . . . 13
14.1 Possession. . . . . . . . . . . . . . . . . . . . . . . . 13
14.2 Security Trustee's Liability. . . . . . . . . . . . . . . 14
14.3 Receiver's Liability. . . . . . . . . . . . . . . . . . . 14
14.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 14
15. PROTECTION OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . 14
15.1 Contractual Protection. . . . . . . . . . . . . . . . . . 14
15.2 Statutory Protection. . . . . . . . . . . . . . . . . . . 15
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS. . . . . . . . . 15
16.1 Continuing and Independent Security Interests . . . . . . 15
16.2 Primary Obligations . . . . . . . . . . . . . . . . . . . 15
17. OTHER SECURITY INTERESTS . . . . . . . . . . . . . . . . . . . . 15
18. SECURITY INTERESTS NOT TO BE AFFECTED. . . . . . . . . . . . . . 15
19. POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . 16
19.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 16
19.2 Ratification. . . . . . . . . . . . . . . . . . . . . . . 16
20. CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 16
21. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 17
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE . . . . . . . . . . . . . 17
23. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 17
23.1 Transaction Costs . . . . . . . . . . . . . . . . . . . . 17
23.2 Preservation and Enforcement Costs. . . . . . . . . . . . 18
23.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . . 18
23.4 Security Trustee's Additional Costs . . . . . . . . . . . 18
23.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24.1 Giving of Notices . . . . . . . . . . . . . . . . . . . . 18
24.2 Addresses for Notices . . . . . . . . . . . . . . . . . . 19
24.3 English Language. . . . . . . . . . . . . . . . . . . . . 19
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY . . . . . . . . . . . . 19
25.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . . 19
25.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 20
26. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
27. LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . 20
27.1 ENGLISH LAW . . . . . . . . . . . . . . . . . . . . . . . 20
27.2 JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . 20
27.3 PROCESS AGENT . . . . . . . . . . . . . . . . . . . . . . 21
27.4 WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . . . . 21
27.5 CONSENT TO ENFORCEMENT. . . . . . . . . . . . . . . . . . 21
27.6 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 22
28. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SCHEDULE 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Form of Notice of Assignment for Assigned Agreements . . . . . . 24
Form of Acknowledgement of Notice of Assignment. . . . . . . . . 26
Form of Reassignment Deed. . . . . . . . . . . . . . . . . . . . 28
==========================================================================
CAP(G) ASSIGNMENT
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
as Assignor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS DEED OF ASSIGNMENT dated 7 February 2000 is made as a deed (this
"Deed") between:
(1) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey (the "Assignor"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C. a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "Security
Trustee").
RECITALS
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Borrower secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to making the loans under the Loan
Agreement that the Assignor shall have executed and delivered this Deed to
the Security Trustee.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases defined in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"Acknowledgement of Notice of Assignment" means an acknowledgement of
assignment in the form set out in Schedule 2, with such amendments as may
be approved by the Security Trustee.
"Act" means the Law of Property Act 1925.
"Administration" means administration under Part II of the Insolvency
Act.
"Approved Contract" means the CAP(G)-KKM Loan Agreement.
"Assigned Agreements" means all rights, titles, benefits and interests
of the Assignor whatsoever, present and future, whether proprietary,
contractual or otherwise under, or arising out of, or evidenced by, the
Approved Contract with the full benefit of all negotiable or non-negotiable
instruments, guarantees, indemnities, debentures and Security Interests in
respect of the Approved Contract, including, but not limited to, all claims
for damages or other remedies in respect of any breach thereof.
"Assigned Assets" means the Book Debts and the Assigned Agreements.
"Attorney" means any person so appointed by the Assignor pursuant to
Clause 19.1 (Appointment).
"Book Debts" means all book and other debts, revenues and claims both
present and future (including things in action) which may give rise to a
debt, revenue or claim due or owing or which may become due or owing to the
Assignor under, or by virtue of, the Assigned Agreements or in connection
with the rights of the Assignor evidenced by them and the present and
future rights, titles, benefits and interests of the Assignor to, or in,
them together with all rights and remedies relating to, or for enforcing,
the Assigned Agreements including but not limited to all reservation of
proprietary rights, rights of tracing and all other rights and remedies of
whatsoever nature now or hereafter held by the Assignor in respect of all
or any of the foregoing and all moneys from time to time becoming due or
owing thereunder or in connection therewith.
"CAP(G)-KKM Loan Agreement" means the CAP(G)-KKM Loan Agreement dated
the date of this Deed and entered into between the Assignor and KKM.
"Default Rate" has the meaning set out in clause 19.2(a) of the Loan
Agreement.
"Delegate" means a delegate or sub-delegate appointed pursuant to
Clause 12.5 (Delegation).
"Dissolution" of a person includes the bankruptcy, insolvency,
liquidation, amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of that person, and
any equivalent or analogous proceedings by whatever name known and in
whatever jurisdiction, and any step taken (including, but without
limitation, the presentation of a petition or the passing of a resolution)
for or with a view to any of the foregoing.
"Insolvency Act" means the Insolvency Act 1986.
"Notice of Assignment" means a notice of assignment in the form set
out in Schedule 1, with such amendments as may be approved by the Security
Trustee.
"Proceedings" shall have the meaning ascribed thereto in Clause 27.2
(Jurisdiction).
"Reassignment Deed" means a deed of reassignment in the form set out
in Schedule 3 with such amendments as made by the Security Trustee in its
sole discretion from time to time.
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act.
"Rights" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed, and (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
"Tax" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) references to Clauses and Schedules are to clauses of, and
schedules to, this Deed;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Deed;
(c) subject to Clause 11.1 (Powers), references to a statute shall be
construed as a reference to such statute as from time to time amended
or re-enacted;
(d) any reference to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall, in respect of a
jurisdiction other than England, be deemed to include that which most
nearly approximates in that jurisdiction to the English legal term;
(e) any reference to the "Assigned Assets" shall be a reference to
all the Assigned Assets and/or to each and every part of the Assigned
Assets and reference to any other defined term or noun in the plural
number or collective plural shall be interpreted MUTATIS MUTANDIS in
the same manner; and
(f) references in this Deed to this "Deed" or any other deed,
agreement or instrument including, without limitation, the Loan
Agreement are references to this Deed or, as the case may be, the
relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Deed or, as the case may be, the relevant deed,
agreement or instrument.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Assignor covenants with the Security Trustee that it will on
demand pay and discharge the Secured Liabilities at the time or times when
due.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or the Receiver under this Deed.
3. SECURITY INTERESTS AND ITS TERMINATION
3.1 ASSIGNMENT
The Assignor, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties the Assigned
Assets.
3.2 REASSIGNMENT
If the Security Trustee is satisfied, acting on the instructions of
the Facility Agent, that all the Secured Liabilities have been paid or
discharged in full and that none of the Finance Parties is under any
further obligation (contingent or otherwise) to provide any banking or
other accommodation to any Obligor under the Finance Documents then,
subject to Clause 3.3 (Retention of This Deed), the Security Trustee shall,
at the request and cost of the Assignor, reassign to the Assignor or its
nominee such interest as it may then have in the Assigned Assets (without
any warranty as to its title or interest in them) by executing and
delivering to the Assignor a Reassignment Deed covering the Assigned
Assets.
3.3 RETENTION OF THIS DEED
If the Assignor requests the Security Trustee to reassign the Assigned
Assets following any payment or discharge of the Secured Liabilities by a
person other than the Assignor (a "Relevant Transaction"), the Security
Trustee shall at the cost of the Assignor execute such documents and deeds
and do all such acts and things as may be necessary to reassign the
Assigned Assets provided the Security Trustee is satisfied that the payment
or discharge will not be avoided, reduced or invalidated. If the Security
Trustee is not so satisfied, the Security Trustee shall be entitled to
retain this Deed and shall not be obliged to reassign the Assigned Assets
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to reassign the Assigned Assets for such further
period as the Security Trustee may determine.
4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES
The Assignor represents and warrants to the Security Trustee that:
(a) the Approved Contract is in full force and effect and constitutes
the legal, valid and binding obligation of the Assignor and, to the
knowledge of the Assignor, the other party thereto, enforceable in
accordance with its terms;
(b) each Assigned Agreement relating to the Approved Contract is in
full force and effect and constitutes the legal, valid and binding
obligation of the Assignor and, to the knowledge of the Assignor, each
of the other parties thereto respectively, enforceable in accordance
with its terms;
(c) this Deed constitutes the legal, valid and binding obligations of
the Assignor enforceable in accordance with the terms of this Deed;
(d) the Assignor is the sole legal and beneficial owner of all rights
and interests which the Approved Contract and each Assigned Agreement
creates in favour of the Assignor, subject only to the assignment
constituted by, and the other terms of, this Deed;
(e) the Assignor has the right, without requiring the concurrence,
consent or authority of any other person, to create, in respect of all
the Assigned Assets, the Security Interests which Clause 3 (Security
Interests and its Termination) purports to create;
(f) no third party has any Security Interests or any other right,
interest or claim over, in, or in relation to, the Assigned Assets;
(g) the copy of the Approved Contract and each Assigned Agreement
delivered to the Security Trustee in connection with this Deed is a
true and complete copy;
(h) the Assignor has not created or attempted to create or permitted
to subsist any Security Interests (other than Permitted Security
Interests) on, or over, the Assigned Assets or interest in them or
sold, assigned, discounted, factored or otherwise disposed of the
Assigned Assets or attempted or agreed so to do other than as provided
in this Deed and the other Finance Documents;
(i) to the knowledge of the Assignor, each other party to the
Approved Contract and each Assigned Agreement is in compliance with
its obligations thereunder; and
(j) all Consents required or advisable in connection with the
execution, delivery, performance, validity, admissibility in evidence
and enforceability of each Book Debt, the Approved Contract and each
Assigned Agreement or the payment of any sum to the Security Trustee
in accordance with Clause 6.8 (Payment of Monies Received in Respect
of Assigned Assets) or the instructions contained within any Notice of
Assignment have been obtained or effected (or, in the case of
registrations, will be effected within any applicable required period)
and (if obtained or effected) are in full force and effect; all fees
and registration and similar tax (if any) payable in connection with
them have been paid if due; and there has been no default in the
performance of any of their terms and conditions.
4.2 REPETITION
The representations and warranties contained in Clause 4.1
(Representations and Warranties) shall be made on the date of this Deed and
shall be repeated thereafter on each Interest Payment Date during the
continuance of the Security Interest constituted by this Deed by reference
to the facts and circumstances then existing.
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
5.1 NEGATIVE PLEDGE
The Assignor shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interests on,
over, or with respect to, the Assigned Assets, except for the Permitted
Security Interests .
5.2 DISPOSAL OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee, sell, transfer, alienate or deal with the Assigned Assets
or any interest in the Assigned Assets or attempt or agree to do so.
6. COVENANTS RELATING TO ASSIGNED ASSETS
6.1 DURATION
The covenants contained in Clause 5 (Restrictions on Dealing with
Assigned Assets) and in this Clause 6 (Covenants relating to Assigned
Assets) shall remain in full force and effect during the continuance of the
security constituted by this Deed.
6.2 NOTICE OF ASSIGNMENT AND ACKNOWLEDGEMENT THEREOF
The Assignor shall, immediately following execution of this Deed,
serve a Notice of Assignment on KKM and the Assignor shall procure that KKM
promptly (and in any event within seven days of the receipt of the Notice
of Assignment) executes and delivers to the Security Trustee (with a copy
thereof to the Assignor) an Acknowledgement of Notice of Assignment.
6.3 DEPOSIT OF ASSIGNED AGREEMENTS
The Assignor shall deposit with the Security Trustee a copy of the
Approved Contract and the Assigned Agreements and copies of all other
related documents including but not limited to all variations, extensions
or replacements from time to time made to the Approved Contract or the
Assigned Agreements.
6.4 HOLDING IN TRUST
The Assignor shall hold in trust for the Security Trustee the Approved
Contract or any Assigned Agreement not from time to time deposited with the
Security Trustee and keep them safe and undefaced.
6.5 ACCESS TO ACCOUNTS
The Assignor shall, whenever so required, permit any officer of the
Security Trustee to have access to, and possession of, all books and
accounts relating to the Assigned Assets.
6.6 COMPLIANCE WITH APPROVED CONTRACT AND ASSIGNED AGREEMENTS
The Assignor shall duly and punctually observe and perform all the
conditions and obligations assumed by it under the Approved Contract and
the Assigned Agreements and, when required, produce to the Security Trustee
the receipts for payments made by it under the Approved Contract and the
Assigned Agreements and generally do all things which may be necessary to
cause the moneys agreed to be paid to the Assignor thereunder to become
payable and, at its own cost, co-operate fully and use its best endeavours
to procure the prompt payment of those moneys to the Assignor and to
procure, whether by legal proceedings or otherwise, that all other relevant
parties to the Approved Contract and the Assigned Agreements do likewise.
6.7 NO VARIATION OR RELEASE OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee:
(a) vary any of the Assigned Assets;
(b) release, waive, suspend, subordinate or permit to be lost or
impaired any interest or right forming part of, or relating to, any
Assigned Asset;
(c) waive any person's breach of the terms of any Assigned Asset;
(d) rescind or terminate any Assigned Asset or treat itself as
discharged or relieved from further performance of any of the
obligations or liabilities assured by it in relation to an Assigned
Asset;
(e) purport to vary or revoke any notice or instruction relating to
this Deed which it has given or may later give to any person; or
(f) grant time for payment or other indulgence, or compound with,
discharge, waive, release, or vary the liability of any other person
under an Assigned Asset or do or permit any set-off or other act or
thing whereby the recovery of any moneys payable under, or in respect
of, the Assigned Assets may be delayed or impeded.
6.8 PAYMENT OF MONIES RECEIVED IN RESPECT OF ASSIGNED ASSETS
Subject to the terms of the Notice of Assignment, the Assignor shall
forthwith upon receipt by it (or by any person acting on its behalf) pay
over or transfer to the Security Trustee (or as the Security Trustee may
direct) any moneys or other property which the Assignor (or any person
acting on its behalf) may receive or recover in connection with an Assigned
Asset and all property which may, directly or indirectly, represent, accrue
on, or be derived from, any such moneys or property.
6.9 ACTION TO PROTECT VALIDITY OF ASSIGNED ASSETS
The Assignor shall:
(a) use its best endeavours to ensure that all interests and rights
conferred by each Assigned Asset remain valid and enforceable in all
respects and retain the priority which they were intended to have; and
(b) without prejudice to its obligations under paragraph (a) of this
Clause 6.9, take any action which the Security Trustee may specify
with a view to ensuring or protecting the validity, enforceability
and/or priority of any such interest or right.
6.10 ACTION TO ENFORCE ASSIGNED ASSETS
The Assignor shall take any action which the Security Trustee may
direct for the purpose of enforcing (through legal process, arbitration or
otherwise) any right which is part of, or which relates to, the Assigned
Assets.
6.11 PROVISION OF INFORMATION RELATING TO ASSIGNED ASSETS
The Assignor shall forthwith:
(a) inform the Security Trustee if any breach of an Assigned Asset
occurs or a serious risk of such a breach arises and of any other
claim, dispute, event or matter affecting an Assigned Asset which is
material to the Security Trustee;
(b) provide the Security Trustee, promptly after service, with copies
of all notices served on or by it under, or in connection with, the
Assigned Assets;
(c) provide the Security Trustee with any information which it
requests about any Assigned Asset or any matter relating to, or
affecting, the Assigned Assets; and
(d) generally provide the Security Trustee and its officers and
representatives with full and prompt co-operation and assistance
relating to the Assigned Assets.
6.12 NO ACTION TO JEOPARDISE SECURITY INTERESTS CONSTITUTED HEREBY
The Assignor shall not do or fail to do or cause or permit another
person to do or omit to do anything which is liable to jeopardise the
effectiveness or priority, in relation to any Assigned Asset, of any
security constituted by this Deed.
6.13 INDEMNITY
Without prejudice to the provisions of Clause 14.4 (Indemnity), the
Assignor shall keep the Security Trustee (and any Receiver appointed by the
Security Trustee) fully and effectively indemnified from and against all
actions, proceedings, costs, charges, claims, demands, expenses,
liabilities, legal and other professional fees (including any tax)
whatsoever in respect of any breach, non-observance or non-performance of
any covenants, obligations, warranties or undertakings on the part of the
Assignor contained in this Deed or the making good of any such breach, non-
observance or non-performance.
7. SECURITY TRUSTEE'S DISCRETION
7.1 SECURITY TRUSTEE MAY CURE BREACHES OF COVENANTS
In the event of the failure of the Assignor to observe or perform the
provisions of this Deed, the Security Trustee may do all such acts and
things as may be necessary to secure the observance or performance thereof
without thereby becoming liable as a mortgagee in possession.
7.2 EXPENSES SO INCURRED
The Assignor hereby agrees and acknowledges that all moneys expended
and all costs incurred by the Security Trustee in carrying out any of its
discretions or powers referred to in Clause 7.1 (Security Trustee May Cure
Breaches of Covenants) shall be considered to have been properly incurred
by the Security Trustee and shall be recoverable from the Assignor under
Clause 23 (Costs and Expenses).
8. FURTHER ASSURANCES
8.1 GENERAL ASSURANCE
The Assignor shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require for perfecting, preserving or protecting the security
constituted by this Deed or the priority thereof and for facilitating the
realisation of the Assigned Assets or the exercise of any Rights vested in
the Security Trustee or in any Receiver, and the Assignor shall, in
particular but without limitation, execute all such transfers, conveyances,
assignments and assurances of the Assigned Assets whether to the Security
Trustee or to its nominees or otherwise, and give all such notices, orders,
instructions and directions which the Security Trustee may consider
expedient.
8.2 ADDITIONAL SECURITY INTERESTS
Without prejudice to the generality of Clause 8.1 (General Assurance),
the Assignor shall, at its own cost, promptly execute and deliver to the
Security Trustee in such form as the Security Trustee may require such
other Security Interests over such of the Assigned Assets as shall be
required by the Security Trustee (whether generally or specifically, and
whether for the purpose of obtaining legal title to the relevant Assigned
Assets, creating Security Interests which is effective under the laws of a
foreign jurisdiction, or otherwise).
9. ENFORCEMENT
9.1 SECURITY INTERESTS TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Assignor shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by Section 103 of the Act as to the giving of notice
or otherwise.
9.2 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.3 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
9.4 STEP-IN RIGHTS
Without prejudice to the provisions of Clause 11 (Receivers) and
Clause 12 (Rights of Security Trustee):
(a) the Security Trustee may, upon this security becoming
enforceable, notify each of the other parties to the Approved Contract
and each Assigned Agreement that it shall be entitled (but without
accepting or assuming any obligation to that effect) to perform, or
procure through a third party the performance of, the obligations
assumed by the Assignor in respect of that Approved Contract or
Assigned Agreement, the costs and expenses so incurred by the Security
Trustee or third party being borne by the Assignor; and
(b) the Security Trustee may but shall not be obliged to:
(i) demand, sue for, collect or receive money or property at
any time due, payable or receivable in relation to that
Approved Contract or Assigned Assets;
(ii) compromise and settle with any person liable under that
Approved Contract or Assigned Assets; and
(iii) extend the time for payment or otherwise change the terms
of that Approved Contract or Assigned Assets as to any
party liable thereon,
without in any case incurring any responsibility or liability to the
Assignor.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable pursuant to Clause 9.1 (Security Interests to Become
Enforceable) (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Assignor, or
following the Dissolution of the Assignor, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under Section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Assignor or otherwise and in such manner and upon such
terms and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental
or conducive to any of the rights, powers or discretions conferred on
a Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of
exercising if the Receiver were the absolute beneficial owner of the
same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Assignor for all purposes and
the Assignor shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Assignor alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12 RIGHTS OF SECURITY TRUSTEE
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the security constituted by this Deed has become
enforceable, irrespective of whether the Security Trustee shall have taken
possession or appointed a Receiver.
12.2 REDEMPTION OF PRIOR SECURITY INTERESTS
The Security Trustee may, at any time, redeem any Security Interests
over the Assigned Assets having priority to the Security Interests
constituted by this Deed or procure the transfer thereof to the Security
Trustee and may settle the accounts of encumbrancers. Any accounts so
settled shall, in the absence of manifest error, be conclusive and binding
on the Assignor. The Assignor shall, on demand, pay to the Security Trustee
all principal moneys, interest, costs, charges, losses, liabilities and
expenses of, and incidental to, any such redemption by or transfer to the
Security Trustee.
12.3 SUSPENSE ACCOUNT
The Security Trustee may, for as long as the Secured Liabilities have
not been paid or discharged in full, at its sole discretion, place and
retain on an interest-bearing suspense account on deposit, for as long as
it considers fit, any moneys received, recovered or realised under, or in
connection with, this Deed to the extent of such Secured Liabilities
without any obligation to apply the same in or towards the discharge of
such Secured Liabilities.
12.4 NEW ACCOUNT
At any time after (i) the Security Trustee having received notice
(either actual or constructive) of any subsequent security affecting the
Assigned Assets or (ii) the Dissolution of the Assignor, the Security
Trustee may open a new account in the name of the Assignor (whether or not
it permits any existing account to continue). If the Security Trustee does
not open such a new account, it shall nevertheless be treated as if it had
done so at the time when the notice was received or was deemed to have been
received or, as the case may be, the Dissolution commenced. Thereafter, all
payments made by the Assignor to the Security Trustee or received by the
Security Trustee for the account of the Assignor shall be credited or
treated as having been credited to the new account and shall not operate to
reduce the amount secured by this Deed at the time when the Security
Trustee received or was deemed to have received such notice or, as the case
may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 SET-OFF
The Security Trustee may, without notice to the Assignor and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Assignor,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the market
rate of exchange which may be obtained by the Security Trustee on the date
of set-off.
13. APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Deed shall (except as may be otherwise required by applicable
law) be held and applied in the following order of priority (but without
prejudice to the right of the Security Trustee to recover any shortfall
from the Assignor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Assignor.
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES
14.1 POSSESSION
If the Security Trustee, any Receiver or any Delegate shall take
possession of the Assigned Assets such Security Trustee, Receiver or
Delegate may at any time relinquish such possession.
14.2 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Assignor or any other person for anything
except the Security Trustee's own actual receipts; or
(b) to the Assignor or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Assigned Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Assigned Assets.
14.3 RECEIVER'S LIABILITY
All the provisions of Clause 14.2 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
14.4 INDEMNITY
The Security Trustee and every Receiver, Delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective Rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Assigned Assets, and the
Security Trustee and any such Receiver, Delegate, attorney, manager, agent
or other person appointed by the Security Trustee hereunder may retain and
pay all sums in respect of the same out of any moneys received.
15. PROTECTION OF THIRD PARTIES
15.1 CONTRACTUAL PROTECTION
No person dealing with the Security Trustee, any Receiver or any
Delegate shall be concerned to enquire:
(a) whether any event has happened upon which any of the Rights
conferred under or in connection with this Deed, the Act or the
Insolvency Act is or may be exercisable, or
(b) whether any consents, regulations, restrictions or directions
relating to such Rights have been obtained or complied with; or
(c) as to the propriety or regularity of acts purporting or intended
to be in exercise of any such Rights; or
(d) as to the application of any money borrowed or raised; or
(e) as to the application of the proceeds of enforcement.
15.2 STATUTORY PROTECTION
All the protections to purchasers contained in sections 104 and 107 of
the Act, section 42(3) of the Insolvency Act or in any other legislation
shall apply to any person purchasing from, or dealing with, the Security
Trustee, any Receiver or any Delegate.
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS
16.1 CONTINUING AND INDEPENDENT SECURITY INTERESTS
The Security Interests constituted by this Deed shall be continuing
and independent Security Interests for the Secured Liabilities and shall
not be satisfied, discharged or affected by any intermediate payment or
settlement of account (whether or not any Secured Liabilities remain
outstanding thereafter) or any other matter or thing whatsoever.
16.2 PRIMARY OBLIGATIONS
This Deed and the Security Interests constituted by this Deed
constitute original, independent and absolute securities (and not secondary
or collateral securities) for the Secured Liabilities.
17. OTHER SECURITY INTERESTS
The Security Interests constituted by this Deed shall be in addition
to, and shall not be prejudiced by, any other Security Interests or any
guarantee or indemnity or other document which any Finance Party may, at
any time, hold for the payment and discharge of the Secured Liabilities.
18. SECURITY INTERESTS NOT TO BE AFFECTED
Without prejudice to Clause 16 (Continuing Security Interests and
other Matters) and Clause 17 (Other Security Interests), neither the
Security Interests constituted by this Deed nor the liability of the
Assignor for the Secured Liabilities shall be prejudiced or affected by:
(a) any variation or amendment of, or waiver or release granted
under, or in connection with, any other Security Interests or any
guarantee or indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee to an Obligor or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other person of any other Security Interests,
or any guarantee or indemnity or other person or document;
(d) the Dissolution of any Obligor or any other person;
(e) any change in the constitution of the any Obligor;
(f) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the
whole or any part of the assets of any Obligor to any other person;
(g) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(h) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee, any other Finance Party or any other person;
(i) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee or any other Finance Party or any other person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee, any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of an Obligor for
the Secured Liabilities.
19. POWER OF ATTORNEY
19.1 APPOINTMENT
The Assignor appoints, irrevocably and by way of security, the
Security Trustee, every Receiver and every Delegate severally to be the
Attorney of the Assignor (with full powers of substitution and delegation),
on its behalf and in its name or otherwise, at such time and in such manner
as the Attorney may think fit:
(a) to do anything which the Assignor is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or security over, the Assigned Assets;
and
(b) generally to exercise the Rights conferred on the Security
Trustee, every Receiver or every Delegate in relation to the Assigned
Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
19.2 RATIFICATION
The Assignor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 19.1 (Appointment).
20. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the
Assignor's liability under this Deed or if that liability is converted into
a claim, proof, judgment or order in a currency other than Dollars:
(a) the Assignor shall as an independent obligation indemnify the
Security Trustee against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business is
less than the amount owed by the Assignor to the Security Trustee in
Dollars, the Assignor shall forthwith on demand pay to the Security
Trustee an amount in Dollars equal to the deficit; and
(c) the Assignor shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Assignor waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which it is
expressed to be payable.
21. DEFAULT INTEREST
If the Assignor fails to pay any Secured Liability on the due date for
payment, the Assignor shall pay to the Security Trustee on demand interest
at the Default Rate from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 23 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liability became due,
until full payment and discharge of the relevant Secured Liability (both
before and after any judgment).
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
signed by an officer of the Security Trustee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Assignor as to the amount or rate of such indebtedness
or rate of interest.
23. COSTS AND EXPENSES
23.1 TRANSACTION COSTS
The Assignor shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
23.2 PRESERVATION AND ENFORCEMENT COSTS
The Assignor shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including legal and other fees 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 the Security Trustee under this Deed.
23.3 STAMP TAXES
The Assignor shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
23.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Assignor shall, from time to time on demand of the Security
Trustee (and without prejudice to the provisions of Clause 23.1
(Transaction Costs) and 23.2 (Preservation and Enforcement Costs)
compensate the Security Trustee at such daily and/or hourly rates as the
Security Trustee shall from time to time determine and on demand indemnify
the Security Trustee against all costs and expenses (including telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Finance Parties
or any request by the Assignor in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Assignor under this Deed;
(b) any actual, potential or suspected breach by the Assignor of its
obligations under this Deed;
(c) the occurrence of an Event of Default or Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Assignor.
23.5 TAX
Any cost or expense referred to in this Clause 23 (Costs and Expenses)
is exclusive of any Tax chargeable in connection with that cost or expense.
The Assignor shall pay any Tax so chargeable at the same time as it pays
the relevant cost or expense.
24. NOTICES
24.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
24.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Assignor by
not less than five Business Days' notice.
(b) The address and facsimile number of the Assignor are:
Central Asian Petroleum (Guernsey) Limited
c/o Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: Director
Facsimile: (281) 877 0985
or such other as the Assignor may notify to the Security Trustee by
not less than five Business Days' notice.
24.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
25.1 REMEDIES AND WAIVERS
Time is of the essence of the Assignor's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
25.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
26. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Assignor, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Assignor
may not assign, transfer, novate or dispose of or any interest in, its
rights or obligations under this Deed.
27. LAW AND JURISDICTION
27.1 ENGLISH LAW
This Deed shall be governed by English law.
27.2 JURISDICTION
(a) For the exclusive benefit of the Security Trustee and the
Facility Agent, the Assignor 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 Deed and that accordingly any
suit, action or proceedings (together in this Clause 27 (Law and
Jurisdiction) 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 27.6 (Arbitration).
(b) The Assignor 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 27.2 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 the Assignor and may be
enforced in the courts of any other jurisdiction.
(c) Nothing contained in this Clause 27.2 shall limit the right of
the Security Trustee to take proceedings against the Assignor 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.
27.3 PROCESS AGENT
The Assignor hereby irrevocably and unconditionally:
(a) appoints Law Debenture Corporate Services Limited, whose address
is at Princes House, 95 Gresham Street, London EC2V 7LY, England as
its process agent to receive, for and on its behalf, service of
process in England in any proceedings with respect to this Deed;
(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 Deed shall affect the right to serve
process in any other manner permitted by law.
27.4 WAIVER OF IMMUNITY
To the extent that the Assignor may now or hereafter be entitled, in
any jurisdiction in which proceedings may at any time be commenced with
respect to this Deed, to claim for itself or its undertaking, property,
assets or revenue 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 Deed and/or to the extent
that in any such jurisdiction there may be attributed to the Assignor, any
such immunity (whether or not claimed), the Assignor 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.
27.5 CONSENT TO ENFORCEMENT
The Assignor 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.
27.6 ARBITRATION
If any dispute arises in relation to this Deed, including any question
as to existence, validity or termination, such dispute shall, at the option
only of the Security Trustee, 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
27.6. Such arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be nominated by the
Assignor, one by the relevant Security Trustee and the third to be agreed
between the two arbitrators so nominated and in default the arbitrator
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.
28. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date stated at the beginning of this Deed.
EXECUTED as a deed and delivered by
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED acting
by /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c
was affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
FORM OF NOTICE OF ASSIGNMENT
[HEADED NOTEPAPER OF THE ASSIGNOR]
_______ 2000
TO: Closed Type JSC KarakudukMunay.
Microdistrict 3, Building 82
Aktau, Republic of Kazakhstan
For the Attention of: General Director
COPY TO: The Law Debenture Trust Corporation p.l.c. as Security Trustee
Dear Sirs,
(1) We refer to a deed of assignment dated _____ 2000 (the "Deed")
and entered into by (1) ourselves and (2) the Security Trustee for the
other Finance Parties. Terms defined in the Deed shall have, when used in
this notice, the same meaning herein as therein unless the context
otherwise requires.
We hereby give you notice that, pursuant to, and in accordance with,
the Deed, and as continuing security for the payment and discharge of the
Secured Liabilities, we assigned to the Security Trustee absolutely with
full title guarantee:
(a) all our rights, titles, benefits and interests whatsoever
present and future whether proprietary, contractual or otherwise
under, or arising out of, the CAP(G)-KKM Loan Agreement (the "Approved
Contract") with the full benefit of all negotiable or non-negotiable
instruments, guarantees, indemnities, debentures and Security
Interests in respect of it including but not limited to all claims for
damages or other remedies in respect of any breach thereof; and
(b) all book and other debts, revenues and claims both present and
future (including things in action) which may give rise to a debt,
revenue or claim due or owing or which may become due or owing to us
under, or by virtue of, the Approved Contract or in connection with
our rights evidenced by the Approved Contract and our present and
future rights, titles, benefits and interests to, or in, the Approved
Contract together with all rights and remedies relating to, or for
enforcing, the Approved Contract including but not limited to all
reservation of proprietary rights, rights of tracing and all other
rights and remedies of whatsoever nature now or hereafter held by us
in respect of all or any of the foregoing and all moneys from time to
time becoming due or owing thereunder or in connection therewith (the
"Book Debts").
(2) The Deed declares in Clause 6.6 that we remain liable to you to
perform all the obligations assumed by us under the Approved Contract, and
the Security Trustee has assumed no obligation of any kind whatsoever in
respect of the Approved Contract.
(3) We hereby irrevocably authorise and instruct you to pay to
[ACCOUNT NUMBER/ SORT CODE/ACCOUNT NAME/NAME AND ADDRESS OF THE BANK TO
WHICH PAYMENT IS TO BE MADE] (unless otherwise instructed by the Security
Trustee by written notice to you from time to time) all moneys whatsoever
now or at any time hereafter due or owing to us under, or by virtue of, the
Approved Contract (including, without limitation, the Book Debts) or in
connection with our rights evidenced thereby and to procure that the
Security Trustee receives all our rights, titles, benefits and interest
whatsoever present and future whether proprietary, contractual or otherwise
under, or arising out of, or evidenced by, the Approved Contract including
all claims against insurers in respect of the same and all moneys from time
to time becoming due or owing thereunder or in connection therewith.
(4) Except as provided in paragraph (3) above, you may continue to
deal with us for all purposes in relation to the Approved Contract until
such time as you receive written notice from the Security Trustee to the
contrary, after which the Security Trustee may exercise all our rights and
powers under the Approved Contract.
Upon receipt of such written notice from the Security Trustee, the
Security Trustee shall be entitled (but without accepting or assuming any
obligation to that effect) to perform, or procure through a third party the
performance of, our obligations in respect of the Approved Contract, the
costs and expenses so incurred by the Security Trustee or third party to be
for our account.
In addition, the Security Trustee may but shall not be obliged to:
(a) demand, sue for, collect or receive money or property at any
time due, payable or receivable in relation to the Approved
Contract;
(b) compromise and settle with any person liable under the
Approved Contract; and
(c) extend the time for payment or otherwise change the terms of
the Approved Contract.
(5) This authority and instruction is declared to be irrevocable and
may not be varied or amended without the prior written consent of the
Security Trustee.
Please will you sign, date and return to the Security Trustee at
Princes House, 95 Gresham Street, London EC2V 7LY, England (together with a
copy to us for our records) the attached Acknowledgement of Notice of
Assignment as your acknowledgement of the assignment effected by the Deed
as soon as practicable and in any event within five days after the date of
this notice.
This notice shall be governed by the laws of England.
Yours faithfully
For and on behalf of
____________________
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
SCHEDULE 2
FORM OF ACKNOWLEDGMENT OF NOTICE OF ASSIGNMENT
_______ 2000
TO: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
For the Attention of: The Manager, Trust Management
CC: Central Asian Petroleum (Guernsey) Limited
Dear Sirs,
We hereby acknowledge receipt of a Notice of Assignment dated _______
(of which this is a duplicate) and of the particulars of the assets
assigned pursuant to, and in accordance with, the Deed. Terms defined in
the Notice of Assignment shall have, when used in this acknowledgement, the
same meaning herein as therein, unless the context otherwise requires.
In consideration of the Security Trustee and the other Finance Parties
entering into the Finance Documents and the Lenders making funds available
to the Assignor thereunder, we confirm and agree that:
(a) we consent to the assignment by way of security effected by the
Deed referred to in the Notice of Assignment;
(b) we have received no notice of any prior charge, deed, security,
assignment or disposition of any of the assets stated in the Deed to
be assigned to you;
(c) we will not, without your prior written consent, amend, modify,
vary, suspend, rescind, discharge or otherwise terminate the Approved
Contract or in any way prejudice the rights, titles, benefits and
interests assigned to you;
(d) we will not claim any set-off or counterclaim to your prejudice
in respect of any moneys payable under the Approved Contract
(including, without limitation, the Book Debts) whether in respect of
any transaction or matter which occurred prior to, or which occurs
after, our receipt of the Notice of Assignment;
(e) we will procure that payments are made to you in accordance with
the authority and instruction contained in the Notice of Assignment;
(f) we will give you notice in writing forthwith of any change of our
address or any default by us or Central Asian Petroleum (Guernsey)
Limited in performing our or its obligations, as appropriate, under
the Approved Contract assigned to you pursuant to, and in accordance
with, the Deed and of any dispute between us in relation to such
obligations; and
(g) we will not withhold consent to the assignment of the Approved
Contract (including, without limitation, the Book Debts) by you to
another person.
This acknowledgement is governed by the laws of England.
SIGNED by ____________________ )
duly authorised for and on behalf of _______ )
Closed Type JSC Karadudukmunay ________ 2000
SCHEDULE 3
FORM OF REASSIGNMENT DEED
THIS DEED OF REASSIGNMENT (this "Deed") is made on _____ 2000.
BETWEEN:
(1) THE LAW DEBENTURE TRUST CORPORATION p.l.c., a company organised
and existing under the laws of England (the "Security Trustee") acting as
security trustee for the Finance Parties under the Loan Agreement (as such
terms are defined herein); and
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey.
1. DEFINITIONS
Terms and expressions defined in the Deed of Assignment (as defined
below) shall have, when used in this Deed, the same meaning herein as
therein unless the context otherwise requires.
2. REASSIGNMENT
The Security Trustee hereby assigns to the Assignor such right, title,
benefit and interest as it may have in, and to the CAP(G)-KKM Loan
Agreement which were assigned to the Security Trustee pursuant to Clause 3
of a deed of assignment by way of security entered into by the Security
Trustee and the Assignor and dated 7 February 2000 (the "Deed of
Assignment").
3. NO LIABILITY FOR THE SECURITY TRUSTEE
(a) The Security Trustee makes no representation, warranty,
undertaking or covenant whatsoever as to its title to the assets and
property referred to in Clause 2 of this Deed or to any other matter
relating to this Deed or the Deed of Assignment.
(b) Each of the Security Trustee and the Assignor agree that neither
the Security Trustee nor its managers, officers, agents or employees shall
be subject to any liability whatsoever whether arising under contract, tort
or otherwise in respect of the assets and property referred to in Clause 2
of this Deed or as to any other matter relating to this Deed other than in
respect of its or their fraud, gross negligence or wilful misconduct.
4. COSTS AND EXPENSES
(a) The Assignor hereby covenants with the Security Trustee on demand
to pay all costs, charges and expenses incurred by the Security Trustee in
connection with, or relating to, this Deed or the assignment effected or
purported to be effected pursuant to this Deed on a full indemnity basis
with interest at the rates and on terms agreed from time to time with the
Security Trustee or, in the absence of agreement, at 2 per cent per annum
over the base rate of National Westminster Bank p.l.c. from time to time.
(b) The Assignor agrees and acknowledges that, notwithstanding the
assignment pursuant to Clause 2 of this Deed, the covenants and indemnities
contained in Clauses 5 and 6 of the Deed of Assignment shall remain in full
force and effect for the benefit of the Security Trustee for so long as the
Security Trustee may require.
5. JURISDICTION
This Agreement shall be governed by English law.
IN WITNESS WHEREOF this Deed has been executed as a deed by the
parties hereto and is delivered on the date stated at the beginning of this
Deed.
EXECUTED as a deed and delivered by
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED acting
by _________________________________
Name:
Title:
In the presence of:
_________________________________
Witness
Name:
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
P.L.C.
was affixed in the presence of:
_________________________________
Name:
Title: Director
_________________________________
Name:
Title: Authorised Signatory
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . 3
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . 3
2.1 Covenant to Pay . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands . . . . . . . . . . . . . . . . . 4
3. SECURITY INTERESTS AND ITS TERMINATION. . . . . . . . . . . . 4
3.1 Assignment. . . . . . . . . . . . . . . . . . . . . . 4
3.2 Reassignment. . . . . . . . . . . . . . . . . . . . . 4
3.3 Retention of This Deed. . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 4
4.1 Representations and Warranties. . . . . . . . . . . . 4
4.2 Repetition. . . . . . . . . . . . . . . . . . . . . . 6
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS. . . . . . . . . 6
5.1 Negative Pledge . . . . . . . . . . . . . . . . . . . 6
5.2 Disposal of Assigned Assets. . . . . . . . . . . . . 6
6. COVENANTS RELATING TO ASSIGNED ASSETS . . . . . . . . . . . . 6
6.1 Duration. . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Notice of Assignment and Acknowledgement Thereof. . . 6
6.3 Deposit of Assigned Agreements. . . . . . . . . . . . 6
6.4 Holding in Trust. . . . . . . . . . . . . . . . . . . 6
6.5 Access to Accounts. . . . . . . . . . . . . . . . . . 7
6.6 Compliance with Approved Contract and Assigned 7
Agreements. . . . . . . . . . . . . . . . . . . . . .
6.7 No Variation or Release of Assigned Assets. . . . . . 7
6.8 Payment of Monies Received in Respect of Assigned 7
Assets. . . . . . . . . . . . . . . . . . . . . . . .
6.9 Action to Protect Validity of Assigned Assets . . . . 8
6.10 Action to Enforce Assigned Assets . . . . . . . . . . 8
6.11 Provision of Information Relating to Assigned Assets. 8
6.12 No Action to Jeopardise Security Interests 8
Constituted Hereby. . . . . . . . . . . . . . . . . .
6.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . 8
7. SECURITY TRUSTEE'S DISCRETION . . . . . . . . . . . . . . . . 9
7.1 Security Trustee May Cure Breaches of Covenants . . . 9
7.2 Expenses so Incurred. . . . . . . . . . . . . . . . . 9
8. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 9
8.1 General Assurance . . . . . . . . . . . . . . . . . . 9
8.2 Additional Security Interests . . . . . . . . . . . . 9
9. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Security Interests to Become Enforceable. . . . . . . 9
9.2 Section 101 of the Act. . . . . . . . . . . . . . . . 10
9.3 Sections 93 and 103 of the Act. . . . . . . . . . . . 10
9.4 Step-in Rights. . . . . . . . . . . . . . . . . . . . 10
10. APPOINTMENT OF RECEIVERS. . . . . . . . . . . . . . . . . . . 10
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . 10
10.2 Scope of Appointment. . . . . . . . . . . . . . . . . 11
11. RECEIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Powers. . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Conflict. . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Agent of Company. . . . . . . . . . . . . . . . . . . 11
11.4 Remuneration. . . . . . . . . . . . . . . . . . . . . 12
12 RIGHTS OF SECURITY TRUSTEE. . . . . . . . . . . . . . . . . . 12
12.1 Rights of Receiver. . . . . . . . . . . . . . . . . . 12
12.2 Redemption of Prior Security Interests. . . . . . . . 12
12.3 Suspense Account. . . . . . . . . . . . . . . . . . . 12
12.4 New Account . . . . . . . . . . . . . . . . . . . . . 12
12.5 Delegation. . . . . . . . . . . . . . . . . . . . . . 13
12.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . 13
13. APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 13
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES. . . . 13
14.1 Possession. . . . . . . . . . . . . . . . . . . . . . 13
14.2 Security Trustee's Liability. . . . . . . . . . . . . 13
14.3 Receiver's Liability. . . . . . . . . . . . . . . . . 14
14.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . 14
15. PROTECTION OF THIRD PARTIES . . . . . . . . . . . . . . . . . 14
15.1 Contractual Protection. . . . . . . . . . . . . . . . 14
15.2 Statutory Protection. . . . . . . . . . . . . . . . . 14
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS . . . . . . . 15
16.1 Continuing and Independent Security Interests . . . . 15
16.2 Primary Obligations . . . . . . . . . . . . . . . . . 15
17. OTHER SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . 15
18. SECURITY INTERESTS NOT TO BE AFFECTED . . . . . . . . . . . . 15
19. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 16
19.1 Appointment . . . . . . . . . . . . . . . . . . . . . 16
19.2 Ratification. . . . . . . . . . . . . . . . . . . . . 16
20. CURRENCY INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 16
21. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . . 17
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE. . . . . . . . . . . . 17
23. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . 17
23.1 Transaction Costs . . . . . . . . . . . . . . . . . . 17
23.2 Preservation and Enforcement Costs. . . . . . . . . . 17
23.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . . 18
23.4 Security Trustee's Additional Costs . . . . . . . . . 18
23.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24.1 Giving of Notices . . . . . . . . . . . . . . . . . . 18
24.2 Addresses for Notices . . . . . . . . . . . . . . . . 19
24.3 English Language. . . . . . . . . . . . . . . . . . . 19
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY. . . . . . . . . . . 19
25.1 Remedies and Waivers. . . . . . . . . . . . . . . . . 19
25.2 Partial Invalidity. . . . . . . . . . . . . . . . . . 19
26. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 20
27. LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . 20
27.1 English Law . . . . . . . . . . . . . . . . . . . . . 20
27.2 Jurisdiction. . . . . . . . . . . . . . . . . . . . . 20
27.3 Process Agent . . . . . . . . . . . . . . . . . . . . 20
27.4 Waiver of Immunity. . . . . . . . . . . . . . . . . . 21
27.5 Consent to Enforcement. . . . . . . . . . . . . . . . 21
27.6 Arbitration . . . . . . . . . . . . . . . . . . . . . 21
28. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Form of Notice of Assignment . . . . . . . . . . . . . . . . 23
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Form of Acknowledgment of Notice of Assignment . . . . . . . 25
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Form of Reassignment Deed. . . . . . . . . . . . . . . . . . 27
==========================================================================
KKM ASSIGNMENT
CLOSED TYPE JSC KARAKUDUKMUNAY
as Assignor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February, 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
THIS DEED OF ASSIGNMENT dated 7 February, 2000 is made as a deed
(this "Deed") between:
(1) CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing
under the laws of the Republic of Kazakhstan (the "Assignor"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C. a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined in the Loan Agreement) (the "Security
Trustee").
RECITALS
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Borrower secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to making the loans under the Loan
Agreement that the Assignor shall have executed and delivered this Deed to
the Security Trustee.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases defined in the Loan
Agreement shall have, when used in this Deed, the same meanings herein as
therein and, in addition, in this Deed the following terms have the meaning
given to them in this Clause 1.1:
"Acknowledgement of Notice of Assignment" means an acknowledgement of
assignment in the form set out in Schedule 2, with such amendments as may
be approved by the Security Trustee.
"Act" means the Law of Property Act 1925.
"Administration" means administration under Part II of the Insolvency
Act.
"Approved Contract" means the Offtake Agreement.
"Assigned Agreements" means all rights, titles, benefits and interests
of the Assignor whatsoever, present and future, whether proprietary,
contractual or otherwise under, or arising out of, or evidenced by, the
Approved Contract with the full benefit of all negotiable or non-negotiable
instruments, guarantees, indemnities, debentures and Security Interests in
respect of the Approved Contract, including, but not limited to, all claims
for damages or other remedies in respect of any breach thereof.
"Assigned Assets" means the Book Debts and the Assigned Agreements.
"Attorney" means any person so appointed by the Assignor pursuant to
Clause 19.1 (Appointment).
"Book Debts" means all book and other debts, revenues and claims both
present and future (including things in action) which may give rise to a
debt, revenue or claim due or owing or which may become due or owing to the
Assignor under, or by virtue of, the Assigned Agreements or in connection
with the rights of the Assignor evidenced by them and the present and
future rights, titles, benefits and interests of the Assignor to, or in,
them together with all rights and remedies relating to, or for enforcing,
the Assigned Agreements including but not limited to all reservation of
proprietary rights, rights of tracing and all other rights and remedies of
whatsoever nature now or hereafter held by the Assignor in respect of all
or any of the foregoing and all moneys from time to time becoming due or
owing thereunder or in connection therewith.
"Default Rate" has the meaning set out in Section 19.2(a) of the Loan
Agreement.
"Delegate" means a delegate or sub-delegate appointed pursuant to
Clause 12.5 (Delegation).
"Dissolution" of a person includes the bankruptcy, insolvency,
liquidation, amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of that person, and
any equivalent or analogous proceedings by whatever name known and in
whatever jurisdiction, and any step taken (including, but without
limitation, the presentation of a petition or the passing of a resolution)
for or with a view to any of the foregoing.
"Insolvency Act" means the Insolvency Act 1986.
"Notice of Assignment" means a notice of assignment in the form set
out in Schedule 1, with such amendments as may be approved by the Security
Trustee.
"Offtake Agreement" means the agreement dated 1 November 1999 entered
into between the Assignor and STASCO to offtake liquid hydrocarbons
produced by the Project as amended by an amendment agreement dated the date
of this Deed.
"Proceedings" shall have the meaning ascribed thereto in Clause 27.2
(Jurisdiction).
"Reassignment Deed" means a deed of reassignment in the form set out
in Schedule 3 with such amendments as made by the Security Trustee in its
sole discretion from time to time.
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Assigned Assets under this Deed or the Act.
"Rights" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed, and (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
"STASCO" means Shell International Trading and Shipping Company
Limited, a company organised under the laws of England.
"Tax" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) references to Clauses and Schedules are to clauses of, and
schedules to, this Deed;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Deed;
(c) subject to Clause 11.1 (Powers), references to a statute shall be
construed as a reference to such statute as from time to time amended
or re-enacted;
(d) any reference to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall, in respect of a
jurisdiction other than England, be deemed to include that which most
nearly approximates in that jurisdiction to the English legal term;
(e) any reference to the "Assigned Assets" shall be a reference to
all the Assigned Assets and/or to each and every part of the Assigned
Assets and reference to any other defined term or noun in the plural
number or collective plural shall be interpreted MUTATIS MUTANDIS in
the same manner; and
(f) references in this Deed to this "Deed" or any other deed,
agreement or instrument including, without limitation, the Loan
Agreement are references to this Deed or, as the case may be, the
relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Deed or, as the case may be, the relevant deed,
agreement or instrument.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Assignor covenants with the Security Trustee that it will on
demand pay and discharge the Secured Liabilities at the time or times when
due.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made by the
Security Trustee or the Receiver under this Deed.
3. SECURITY INTERESTS AND ITS TERMINATION
3.1 ASSIGNMENT
The Assignor, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, assigns absolutely to
the Security Trustee for the benefit of the Finance Parties the Assigned
Assets.
3.2 REASSIGNMENT
If the Security Trustee is satisfied, acting on the instructions of
the Facility Agent, that all the Secured Liabilities have been paid or
discharged in full and that none of the Finance Parties is under any
further obligation (contingent or otherwise) to provide any banking or
other accommodation to any Obligor under the Finance Documents then,
subject to Clause 3.3 (Retention of This Deed), the Security Trustee shall,
at the request and cost of the Assignor, reassign to the Assignor or its
nominee such interest as it may then have in the Assigned Assets (without
any warranty as to its title or interest in them) by executing and
delivering to the Assignor a Reassignment Deed covering the Assigned
Assets.
3.3 RETENTION OF THIS DEED
If the Assignor requests the Security Trustee to reassign the Assigned
Assets following any payment or discharge of the Secured Liabilities by a
person other than the Assignor (a "Relevant Transaction"), the Security
Trustee shall at the cost of the Assignor execute such documents and deeds
and do all such acts and things as may be necessary to reassign the
Assigned Assets provided the Security Trustee is satisfied that the payment
or discharge will not be avoided, reduced or invalidated. If the Security
Trustee is not so satisfied, the Security Trustee shall be entitled to
retain this Deed and shall not be obliged to reassign the Assigned Assets
until the expiry of the Retention Period (being the period which commences
on the date when that Relevant Transaction was made or given, and ends on
the date falling one month after the expiration of the maximum period
within which that Relevant Transaction can be avoided, reduced or
invalidated by virtue of any applicable law or for any other reason
whatsoever in relation to that Relevant Transaction). If at any time before
the expiry of that Retention Period the Dissolution of such other person
has commenced, the Security Trustee may continue to retain this Deed and
shall not be obliged to reassign the Assigned Assets for such further
period as the Security Trustee may determine.
4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES
The Assignor represents and warrants to the Security Trustee that:
(a) the Approved Contract is in full force and effect and constitutes
the legal, valid and binding obligation of the Assignor and, to the
knowledge of the Assignor, the other party thereto, enforceable in
accordance with its terms;
(b) each Assigned Agreement relating to the Approved Contract is in
full force and effect and constitutes the legal, valid and binding
obligation of the Assignor and, to the knowledge of the Assignor, each
of the other parties thereto respectively, enforceable in accordance
with the its terms;
(c) this Deed constitutes the legal, valid and binding obligation of
the Assignor enforceable in accordance with the terms of this Deed;
(d) the Assignor is the sole legal and beneficial owner of all rights
and interests which the Approved Contract and each Assigned Agreement
creates in favour of the Assignor, subject only to the assignment
constituted by, and the other terms of, this Deed;
(e) the Assignor has the right, without requiring the concurrence,
consent or authority of any other person, to create, in respect of all
the Assigned Assets, the Security Interests which Clause 3 (Security
Interests and its Termination) purports to create;
(f) no third party has any Security Interests or any other right,
interest or claim over, in, or in relation to, the Assigned Assets;
(g) the copy of the Approved Contract and each Assigned Agreement
delivered to the Security Trustee in connection with this Deed is a
true and complete copy;
(h) the Assignor has not created or attempted to create or permitted
to subsist any Security Interests (other than Permitted Security
Interests) on, or over, the Assigned Assets or interest in them or
sold, assigned, discounted, factored or otherwise disposed of the
Assigned Assets or attempted or agreed so to do other than as provided
in this Deed and the other Finance Documents;
(i) to the knowledge of the Assignor, each other party to the
Approved Contract and each Assigned Agreement is in compliance with
its obligations thereunder; and
(j) all Consents required or advisable in connection with the
execution, delivery, performance, validity, admissibility in evidence
and enforceability of each Book Debt, the Approved Contract and each
Assigned Agreement or the payment of any sum to the Security Trustee
in accordance with Clause 6.8 (Payment of Monies Received in Respect
of Assigned Assets) or the instructions contained within any Notice of
Assignment have been obtained or effected (or, in the case of
registrations, will be effected within any applicable required period)
and (if obtained or effected) are in full force and effect; all fees
and registration and similar tax (if any) payable in connection with
them have been paid if due; and there has been no default in the
performance of any of their terms and conditions.
4.2 REPETITION
The representations and warranties contained in Clause 4.1
(Representations and Warranties) shall be made on the date of this Deed and
shall be repeated thereafter on each Interest Payment Date during the
continuance of the Security Interest constituted by this Deed by reference
to the facts and circumstances then existing.
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS
5.1 NEGATIVE PLEDGE
The Assignor shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interests on,
over, or with respect to, the Assigned Assets except for the Permitted
Security Interests.
5.2 DISPOSAL OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee, sell, transfer, alienate or deal with the Assigned Assets
or any interest in the Assigned Assets or attempt or agree to do so.
6. COVENANTS RELATING TO ASSIGNED ASSETS
6.1 DURATION
The covenants contained in Clause 5 (Restrictions on Dealing with
Assigned Assets) and in this Clause 6 (Covenants relating to Assigned
Assets) shall remain in full force and effect during the continuance of the
security constituted by this Deed.
6.2 NOTICE OF ASSIGNMENT AND ACKNOWLEDGEMENT THEREOF
The Assignor shall, immediately following execution of this Deed,
serve a Notice of Assignment on STASCO and the Assignor shall procure
that STASCO promptly (and in any event within seven days of the receipt of
the Notice of Assignment) executes and delivers to the Security Trustee
(with a copy thereof to the Assignor) an Acknowledgement of Notice of
Assignment.
6.3 DEPOSIT OF ASSIGNED AGREEMENTS
The Assignor shall deposit with the Security Trustee a copy of the
Approved Contract and the Assigned Agreements and copies of all other
related documents including but not limited to all variations, extensions
or replacements from time to time made to the Approved Contract or the
Assigned Agreements.
6.4 HOLDING IN TRUST
The Assignor shall hold in trust for the Security Trustee the Approved
Contract or any Assigned Agreement not from time to time deposited with the
Security Trustee and keep them safe and undefaced.
6.5 ACCESS TO ACCOUNTS
The Assignor shall, whenever so required, permit any officer of the
Security Trustee to have access to, and possession of, all books and
accounts relating to the Assigned Assets.
6.6 COMPLIANCE WITH APPROVED CONTRACT AND ASSIGNED AGREEMENTS
The Assignor shall duly and punctually observe and perform all the
conditions and obligations assumed by it under the Approved Contract and
the Assigned Agreements and, when required, produce to the Security Trustee
the receipts for payments made by it under the Approved Contract and the
Assigned Agreements and generally do all things which may be necessary to
cause the moneys agreed to be paid to the Assignor thereunder to become
payable and, at its own cost, co-operate fully and use its best endeavours
to procure the prompt payment of those moneys to the Assignor and to
procure, whether by legal proceedings or otherwise, that all other relevant
parties to the Approved Contract and the Assigned Agreements do likewise.
6.7 NO VARIATION OR RELEASE OF ASSIGNED ASSETS
The Assignor shall not, without the prior written consent of the
Security Trustee:
(a) vary any of the Assigned Assets;
(b) release, waive, suspend, subordinate or permit to be lost or
impaired any interest or right forming part of, or relating to, any
Assigned Asset;
(c) waive any person's breach the terms of any Assigned Asset;
(d) rescind or terminate any Assigned Asset or treat itself as
discharged or relieved from further performance of any of the
obligations or liabilities assured by it in relation to an Assigned
Asset;
(e) purport to vary or revoke any notice or instruction relating to
this Deed which it has given or may later give to any person; or
(f) grant time for payment or other indulgence, or compound with,
discharge, waive, release, or vary the liability of any other person
under an Assigned Asset or do or permit any set-off or other act or
thing whereby the recovery of any moneys payable under, or in respect
of, the Assigned Assets may be delayed or impeded.
6.8 PAYMENT OF MONIES RECEIVED IN RESPECT OF ASSIGNED ASSETS
Subject to the terms of the Notice of Assignment, the Assignor shall
forthwith upon receipt by it (or by any person acting on its behalf) pay
over or transfer to the Security Trustee (or as the Security Trustee may
direct) any moneys or other property which the Assignor (or any person
acting on its behalf) may receive or recover in connection with an Assigned
Asset and all property which may, directly or indirectly, represent, accrue
on, or be derived from, any such moneys or property.
6.9 ACTION TO PROTECT VALIDITY OF ASSIGNED ASSETS
The Assignor shall:
(a) use its best endeavours to ensure that all interests and rights
conferred by each Assigned Asset remain valid and enforceable in all
respects and retain the priority which they were intended to have; and
(b) without prejudice to its obligations under paragraph (a) of this
Clause 6.9, take any action which the Security Trustee may specify
with a view to ensuring or protecting the validity, enforceability
and/or priority of any such interest or right.
6.10 ACTION TO ENFORCE ASSIGNED ASSETS
The Assignor shall take any action which the Security Trustee may
direct for the purpose of enforcing (through legal process, arbitration or
otherwise) any right which is part of, or which relates to, the Assigned
Assets.
6.11 PROVISION OF INFORMATION RELATING TO ASSIGNED ASSETS
The Assignor shall forthwith:
(a) inform the Security Trustee if any breach of an Assigned Asset
occurs or a serious risk of such a breach arises and of any other
claim, dispute, event or matter affecting an Assigned Asset which is
material to the Security Trustee;
(b) provide the Security Trustee, promptly after service, with copies
of all notices served on or by it under, or in connection with, the
Assigned Assets;
(c) provide the Security Trustee with any information which it
requests about any Assigned Asset or any matter relating to, or
affecting, the Assigned Assets; and
(d) generally provide the Security Trustee and its officers and
representatives with full and prompt co-operation and assistance
relating to the Assigned Assets.
6.12 NO ACTION TO JEOPARDISE SECURITY INTERESTS CONSTITUTED HEREBY
The Assignor shall not do or fail to do or cause or permit another
person to do or omit to do anything which is liable to jeopardise the
effectiveness or priority, in relation to any Assigned Asset, of any
security constituted by this Deed.
6.13 INDEMNITY
Without prejudice to the provisions of Clause 14.4 (Indemnity), the
Assignor shall keep the Security Trustee (and any Receiver appointed by the
Security Trustee) fully and effectively indemnified from and against all
actions, proceedings, costs, charges, claims, demands, expenses,
liabilities, legal and other professional fees (including any tax)
whatsoever in respect of any breach, non-observance or non-performance of
any covenants, obligations, warranties or undertakings on the part of the
Assignor contained in this Deed or the making good of any such breach, non-
observance or non-performance.
7. SECURITY TRUSTEE'S DISCRETION
7.1 SECURITY TRUSTEE MAY CURE BREACHES OF COVENANTS
In the event of the failure of the Assignor to observe or perform the
provisions of this Deed, the Security Trustee may do all such acts and
things as may be necessary to secure the observance or performance thereof
without thereby becoming liable as a mortgagee in possession.
7.2 EXPENSES SO INCURRED
The Assignor hereby agrees and acknowledges that all moneys expended and
all costs incurred by the Security Trustee in carrying out any of its
discretions or powers referred to in Clause 7.1 (Security Trustee May Cure
Breaches of Covenants) shall be considered to have been properly incurred
by the Security Trustee and shall be recoverable from the Assignor under
Clause 23 (Costs and Expenses).
8. FURTHER ASSURANCES
8.1 GENERAL ASSURANCE
The Assignor shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require for perfecting, preserving or protecting the security
constituted by this Deed or the priority thereof and for facilitating the
realisation of the Assigned Assets or the exercise of any Rights vested in
the Security Trustee or in any Receiver, and the Assignor shall, in
particular but without limitation, execute all such transfers, conveyances,
assignments and assurances of the Assigned Assets whether to the Security
Trustee or to its nominees or otherwise, and give all such notices, orders,
instructions and directions which the Security Trustee may consider
expedient.
8.2 ADDITIONAL SECURITY INTERESTS
Without prejudice to the generality of Clause 8.1 (General Assurance),
the Assignor shall, at its own cost, promptly execute and deliver to the
Security Trustee in such form as the Security Trustee may require such
other Security Interests over such of the Assigned Assets as shall be
required by the Security Trustee (whether generally or specifically, and
whether for the purpose of obtaining legal title to the relevant Assigned
Assets, creating Security Interests which is effective under the laws of a
foreign jurisdiction, or otherwise).
9. ENFORCEMENT
9.1 SECURITY INTERESTS TO BECOME ENFORCEABLE
The Security Interests constituted by this Deed shall become
enforceable at any time after the occurrence and during the continuance of
an Event of Default or if the Assignor shall fail to comply with any of the
obligations assumed by it in this Deed, and immediately thereafter the
powers conferred upon the Security Trustee by section 101 of the Act as
varied and extended by this Deed shall be exercisable without the
restrictions imposed by Section 103 of the Act as to the giving of notice
or otherwise.
9.2 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
9.3 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
9.4 STEP-IN RIGHTS
Without prejudice to the provisions of Clause 11 (Receivers) and
Clause 12 (Rights of Security Trustee):
(a) the Security Trustee may, upon this security becoming
enforceable, notify each of the other parties to the Approved Contract
and each Assigned Agreement that it shall be entitled (but without
accepting or assuming any obligation to that effect) to perform, or
procure through a third party the performance of, the obligations
assumed by the Assignor in respect of that Approved Contract or
Assigned Agreement, the costs and expenses so incurred by the Security
Trustee or third party being borne by the Assignor; and
(b) the Security Trustee may but shall not be obliged to:
(i) demand, sue for, collect or receive money or property at
any time due, payable or receivable in relation to that Approved
Contract or Assigned Asset;
(ii) compromise and settle with any person liable under that
Approved Contract or Assigned Asset; and
(iii) extend the time for payment or otherwise change the terms
of that Approved Contract or Assigned Asset as to any party
liable thereon,
without in any case incurring any responsibility or liability to the
Assignor.
10. APPOINTMENT OF RECEIVERS
10.1 APPOINTMENT
At any time after the security constituted by this Deed has become
enforceable pursuant to Clause 9.1 (Security Interests to Become
Enforceable) (whether or not the Security Trustee shall have taken
possession of the Assigned Assets), at the request of the Assignor, or
following the Dissolution of the Assignor, without any or further notice,
the Security Trustee may, by deed or writing signed by any officer or
manager of the Security Trustee or any person authorised for this purpose
by the Security Trustee, appoint any person to be Receiver, and may
similarly remove any Receiver whether or not it appoints any person in its
place. If the Security Trustee appoints more than one person as Receiver,
the Security Trustee may give the relevant persons power to act either
jointly or severally.
10.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Assigned
Assets or Receiver of such part of the Assigned Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 11 (Receivers) shall have effect as though every reference in
that Clause to the "Assigned Assets" were a reference to the part of the
Assigned Assets so specified or any part thereof.
11. RECEIVERS
11.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under Section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in its own name or in
the name of the Assignor or otherwise and in such manner and upon such
terms and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Assigned
Assets, to receive the consideration therefor in a lump sum or in
instalments and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Assigned Assets;
(c) to do all other acts and things which the Receiver may consider
desirable or necessary for realising the Assigned Assets or incidental
or conducive to any of the rights, powers or discretions conferred on
a Receiver under, or by virtue of, this Deed; and
(d) to exercise in relation to the Assigned Assets all the powers,
authorities and things which the Receiver would be capable of
exercising if the Receiver were the absolute beneficial owner of the
same.
11.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 11.1 (Powers), the powers conferred by Clause
11.1 (Powers) shall prevail.
11.3 AGENT OF COMPANY
Any Receiver shall be the agent of the Assignor for all purposes and
the Assignor shall be solely responsible for such Receiver's contracts,
engagements, acts, omissions, defaults and losses and for all liabilities
incurred by him.
11.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Assignor alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
12 RIGHTS OF SECURITY TRUSTEE
12.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the security constituted by this Deed has become
enforceable, irrespective of whether the Security Trustee shall have taken
possession or appointed a Receiver.
12.2 REDEMPTION OF PRIOR SECURITY INTERESTS
The Security Trustee may, at any time, redeem any Security Interests
over the Assigned Assets having priority to the Security Interests
constituted by this Deed or procure the transfer thereof to the Security
Trustee and may settle the accounts of encumbrancers. Any accounts so
settled shall, in the absence of manifest error, be conclusive and binding
on the Assignor. The Assignor shall, on demand, pay to the Security Trustee
all principal moneys, interest, costs, charges, losses, liabilities and
expenses of, and incidental to, any such redemption by or transfer to the
Security Trustee.
12.3 SUSPENSE ACCOUNT
The Security Trustee may, for as long as the Secured Liabilities have
not been paid or discharged in full, at its sole discretion, place and
retain on an interest-bearing suspense account on deposit, for as long as
it considers fit, any moneys received, recovered or realised under, or in
connection with, this Deed to the extent of such Secured Liabilities
without any obligation to apply the same in or towards the discharge of
such Secured Liabilities.
12.4 NEW ACCOUNT
At any time after (i) the Security Trustee having received notice
(either actual or constructive) of any subsequent security affecting the
Assigned Assets or (ii) the Dissolution of the Assignor, the Security
Trustee may open a new account in the name of the Assignor (whether or not
it permits any existing account to continue). If the Security Trustee does
not open such a new account, it shall nevertheless be treated as if it had
done so at the time when the notice was received or was deemed to have been
received or, as the case may be, the Dissolution commenced. Thereafter, all
payments made by the Assignor to the Security Trustee or received by the
Security Trustee for the account of the Assignor shall be credited or
treated as having been credited to the new account and shall not operate to
reduce the amount secured by this Deed at the time when the Security
Trustee received or was deemed to have received such notice or, as the case
may be, the Dissolution commenced.
12.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including power to sub-delegate) as the Security Trustee may
think fit.
12.6 SET-OFF
The Security Trustee may, without notice to the Assignor and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by the Security Trustee to the Assignor,
regardless of the place of payment or booking branch, and for that purpose
the Security Trustee may convert one currency into another at the rate of
exchange which may be obtained by the Security Trustee on the date of set-
off.
13. APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Deed shall (except as may be otherwise required by applicable
law) be held and applied in the following order of priority (but without
prejudice to the right of the Security Trustee to recover any shortfall
from the Assignor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Assignor.
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES
14.1 POSSESSION
If the Security Trustee, any Receiver or any Delegate shall take
possession of the Assigned Assets such Security Trustee, Receiver or
Delegate may at any time relinquish such possession.
14.2 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Assigned Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Assignor or any other person for anything
except the Security Trustee's own actual receipts; or
(b) to the Assignor or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Assigned Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Assigned Assets.
14.3 RECEIVER'S LIABILITY
All the provisions of Clause 14.2 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
14.4 INDEMNITY
The Security Trustee and every Receiver, Delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Assigned Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective Rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Assigned Assets, and the
Security Trustee and any such Receiver, Delegate, attorney, manager, agent
or other person appointed by the Security Trustee hereunder may retain and
pay all sums in respect of the same out of any moneys received unless such
liabilities and expenses were incurred as a result of the gross negligence
or wilful default of the Security Trustee, Receiver, Delegate, attorney,
manager, agent or other person appointed by the Security Trustee.
15. PROTECTION OF THIRD PARTIES
15.1 CONTRACTUAL PROTECTION
No person dealing with the Security Trustee, any Receiver or any
Delegate shall be concerned to enquire:
(a) whether any event has happened upon which any of the Rights
conferred under or in connection with this Deed, the Act or the
Insolvency Act is or may be exercisable, or
(b) whether any consents, regulations, restrictions or directions
relating to such Rights have been obtained or complied with; or
(c) as to the propriety or regularity of acts purporting or intended
to be in exercise of any such Rights; or
(d) as to the application of any money borrowed or raised; or
(e) as to the application of the proceeds of enforcement.
15.2 STATUTORY PROTECTION
All the protections to purchasers contained in sections 104 and 107 of
the Act, section 42(3) of the Insolvency Act or in any other legislation
shall apply to any person purchasing from, or dealing with, the Security
Trustee, any Receiver or any Delegate.
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS
16.1 CONTINUING AND INDEPENDENT SECURITY INTERESTS
The Security Interests constituted by this Deed shall be continuing
and independent Security Interests for the Secured Liabilities and shall
not be satisfied, discharged or affected by any intermediate payment or
settlement of account (whether or not any Secured Liabilities remain
outstanding thereafter) or any other matter or thing whatsoever.
16.2 PRIMARY OBLIGATIONS
This Deed and the Security Interests constituted by this Deed
constitute original, independent and absolute securities (and not secondary
or collateral securities) for the Secured Liabilities.
17. OTHER SECURITY INTERESTS
The Security Interests constituted by this Deed shall be in addition
to, and shall not be prejudiced by, any other Security Interests or any
guarantee or indemnity or other document which any Finance Party may, at
any time, hold for the payment and discharge of the Secured Liabilities.
18. SECURITY INTERESTS NOT TO BE AFFECTED
Without prejudice to Clause 16 (Continuing Security Interests and
other Matters) and Clause 17 (Other Security Interests), neither the
Security Interests constituted by this Deed nor the liability of the
Assignor for the Secured Liabilities shall be prejudiced or affected by:
(a) any variation or amendment of, or waiver or release granted
under, or in connection with, any other Security Interests or any
guarantee or indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee to an Obligor or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other person of any other Security Interests,
or any guarantee or indemnity or other person or document;
(d) the Dissolution of any Obligor or any other person;
(e) any change in the constitution of any Obligor;
(f) any amalgamation, merger or reconstruction that may be effected
by any Obligor with any other person or any sale or transfer of the
whole or any part of the assets of any Obligor to any other person;
(g) the existence of any claim, set-off or other right which any
Obligor may have at any time against the Finance Parties or any other
person;
(h) the making or absence of any demand for payment of any Secured
Liabilities on any Obligor or any other person, whether by the
Security Trustee, any other Finance Party or any other person; or
(i) any other thing done or omitted or neglected to be done by the
Security Trustee, any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of an Obligor for
the Secured Liabilities.
19. POWER OF ATTORNEY
19.1 APPOINTMENT
The Assignor appoints, irrevocably and by way of security, the
Security Trustee, every Receiver and every Delegate severally to be the
Attorney of the Assignor (with full powers of substitution and delegation),
on its behalf and in its name or otherwise, at such time and in such manner
as the Attorney may think fit:
(a) to do anything which the Assignor is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or security over, the Assigned Assets;
and
(b) generally to exercise the Rights conferred on the Security
Trustee, every Receiver or every Delegate in relation to the Assigned
Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
19.2 RATIFICATION
The Assignor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 19.1 (Appointment).
20. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the
Assignor's liability under this Deed or if that liability is converted into
a claim, proof, judgment or order in a currency other than Dollars:
(a) the Assignor shall as an independent obligation indemnify the
Security Trustee against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business is
less than the amount owed by the Assignor to the Security Trustee in
Dollars, the Assignor shall forthwith on demand pay to the Security
Trustee an amount in Dollars equal to the deficit; and
(c) the Assignor shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Assignor waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which such
amount is expressed to be payable.
21. DEFAULT INTEREST
If the Assignor fails to pay any Secured Liability on the due date for
payment, the Assignor shall pay to the Security Trustee on demand interest
at the Default Rate from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 23 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liability became due,
until full payment and discharge of the relevant Secured Liability (both
before and after any judgment).
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
signed by an officer of the Security Trustee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Assignor as to the amount or rate of such indebtedness
or rate of interest.
23. COSTS AND EXPENSES
23.1 TRANSACTION COSTS
The Assignor shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Deed, the completion of the transactions
contemplated in this Deed, any amendment of this Deed and any calculation,
approval, consent or waiver to be made or given by the Security Trustee
pursuant to, or in respect of any provision of, this Deed.
23.2 PRESERVATION AND ENFORCEMENT COSTS
The Assignor shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including legal and other fees 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 the Security Trustee under this Deed.
23.3 STAMP TAXES
The Assignor shall pay all stamp, registration and other taxes and
duties, and all notarial, registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
23.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Assignor shall, from time to time on demand of the Security
Trustee (and without prejudice to the provisions of Clause 23.1
(Transaction Costs) and 23.2 (Preservation and Enforcement Costs)
compensate the Security Trustee at such daily and/or hourly rates as the
Security Trustee shall from time to time determine and on demand indemnify
the Security Trustee against all costs and expenses (including telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Finance Parties
or any request by the Assignor in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Assignor under this Deed;
(b) any actual, potential or suspected breach by the Assignor of its
obligations under this Deed;
(c) the occurrence of an Event of Default or Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Assignor.
23.5 TAX
Any cost or expense referred to in this Clause 23 (Costs and Expenses)
is exclusive of any Tax chargeable in connection with that cost or expense.
The Assignor shall pay any Tax so chargeable at the same time as it pays
the relevant cost or expense.
24. NOTICES
24.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
24.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Assignor by
not less than five Business Days' notice.
(b) The address and facsimile number of the Assignor are:
Karakuduk-Munay Inc.
Microdistrict 3, Building 82,
Aktau, Republic of Kazakhstan
Attention: Financial Director
Facsimile: (7-3292) 518 336
or such other as the Assignor may notify to the Security Trustee by
not less than five Business Days' notice.
24.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
25.1 REMEDIES AND WAIVERS
Time is of the essence of the Assignor's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
25.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
26. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Assignor, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person. The Assignor
may not assign, transfer, novate or dispose of or any interest in, its
rights under this Deed.
27. LAW AND JURISDICTION
27.1 ENGLISH LAW
This Deed shall be governed by English law.
27.2 JURISDICTION
(a) For the exclusive benefit of the Security Trustee and the
Facility Agent, the Assignor 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 Deed and that accordingly any
suit, action or proceedings (together in this Clause 27 (Law and
Jurisdiction) 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 27.6 (Arbitration).
(b) The Assignor 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 27.2 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 the Assignor and may be
enforced in the courts of any other jurisdiction.
(c) Nothing contained in this Clause 27.2 shall limit the right of
the Security Trustee to take proceedings against the Assignor 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.
27.3 PROCESS AGENT
The Assignor hereby irrevocably and unconditionally:
(a) appoints Law Debenture Corporate Services Limited, whose address
is at Princes House, 95 Gresham Street, London EC2V 7LY, England as
its process agent to receive, for and on its behalf, service of
process in England in any proceedings with respect to this Deed;
(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 Deed shall affect the right to serve
process in any other manner permitted by law.
27.4 WAIVER OF IMMUNITY
To the extent that the Assignor may now or hereafter be entitled, in
any jurisdiction in which proceedings may at any time be commenced with
respect to this Deed, to claim for itself or its undertaking, property,
assets or revenue 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 Deed and/or to the extent
that in any such jurisdiction there may be attributed to the Assignor, any
such immunity (whether or not claimed), the Assignor 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.
27.5 CONSENT TO ENFORCEMENT
The Assignor 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.
27.6 ARBITRATION
If any dispute arises in relation to this Deed, including any question
as to existence, validity or termination, such dispute shall, at the option
only of the Security Trustee, 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
27.6. Such arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be nominated by the
Assignor, one by the relevant Security Trustee and the third to be agreed
between the two arbitrators so nominated and in default the arbitrator
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.
28. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date stated at the beginning of this Deed.
EXECUTED as a deed and delivered by
CLOSED TYPE JSC KARAKUDUKMUNAY acting
by /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
SCHEDULE 1
FORM OF NOTICE OF ASSIGNMENT
[HEADED NOTEPAPER OF THE ASSIGNOR]
_______ 2000
TO: [Name and Address of Counterparty]
For the Attention of: _____________
Copy to: The Law Debenture Trust Corporation p.l.c. as Security Trustee
Dear Sirs,
(1) We refer to a deed of assignment dated 7 February 2000 (the
"Deed") and entered into by (1) ourselves and (2) the Security Trustee for
the other Finance Parties. Terms defined in the Deed shall have, when used
in this notice, the same meaning herein as therein unless the context
otherwise requires.
We hereby give you notice that, pursuant to, and in accordance with,
the Deed, and as continuing security for the payment and discharge of the
Secured Liabilities, we assigned to the Security Trustee absolutely with
full title guarantee:
(a) all our rights, titles, benefits and interests whatsoever
present and future whether proprietary, contractual or otherwise
under, or arising out of, the Offtake Agreement dated 1 November, 1999
between yourselves and ourselves as amended pursuant to an amendment
agreement dated 31 January 2000 (the "Offtake Agreement") with the
full benefit of all negotiable or non-negotiable instruments,
guarantees, indemnities, debentures and Security Interests in respect
of it including but not limited to all claims for damages or other
remedies in respect of any breach thereof; and
(b) all book and other debts, revenues and claims both present and
future (including things in action) which may give rise to a debt,
revenue or claim due or owing or which may become due or owing to us
under, or by virtue of, the Offtake Agreement or in connection with
our rights evidenced by the Offtake Agreement and our present and
future rights, titles, benefits and interests to, or in, the Offtake
Agreement together with all rights and remedies relating to, or for
enforcing, the Offtake Agreement including but not limited to all
reservation of proprietary rights, rights of tracing and all other
rights and remedies of whatsoever nature now or hereafter held by us
in respect of all or any of the foregoing and all moneys from time to
time becoming due or owing thereunder or in connection therewith (the
"Book Debts").
(2) The Deed declares in Clause 6.6 that we remain liable to you to
perform all the obligations assumed by us under the Offtake Agreement, and
the Security Trustee has assumed no obligation of any kind whatsoever in
respect of the Offtake Agreement.
(3) We hereby irrevocably authorise and instruct you to pay to
[ACCOUNT NUMBER/SORT CODE/ACCOUNT NAME/NAME AND ADDRESS OF THE BANK TO
WHICH PAYMENT IS TO BE MADE] (unless otherwise instructed by the Security
Trustee by written notice to you from time to time) all moneys whatsoever
now or at any time hereafter due or owing to us under, or by virtue of, the
Offtake Agreement (including, without limitation, the Book Debts) or in
connection with our rights evidenced thereby and to procure that the
Security Trustee receives all our rights, titles, benefits and interest
whatsoever present and future whether proprietary, contractual or otherwise
under, or arising out of, or evidenced by, the Offtake Agreement including
all claims against insurers in respect of the same and all moneys from time
to time becoming due or owing thereunder or in connection therewith.
(4) Except as provided in paragraph (3) above, you may continue to
deal with us for all purposes in relation to the Offtake Agreement until
such time as you receive written notice from the Security Trustee to the
contrary, after which the Security Trustee may exercise all our rights and
powers under the Offtake Agreement.
Upon receipt of such written notice from the Security Trustee, the
Security Trustee shall be entitled (but without accepting or assuming any
obligation to that effect) to perform, or procure through a third party the
performance of, our obligations in respect of the Offtake Agreement, the
costs and expenses so incurred by the Security Trustee or third party to be
for our account.
In addition, the Security Trustee may but shall not be obliged to:
(a) demand, sue for, collect or receive money or property at any time
due, payable or receivable in relation to the Offtake Agreement;
(b) compromise and settle with any person liable under the Offtake
Agreement; and
(c) extend the time for payment or otherwise change the terms of the
Offtake Agreement.
(5) This authority and instruction is declared to be irrevocable and
may not be varied or amended without the prior written consent of the
Security Trustee.
Please will you sign, date and return to the Security Trustee at
Princes House, 95 Gresham Street, London, EC2V 7LY, England (together with
a copy to us for our records) the attached Acknowledgement of Notice of
Assignment as your acknowledgement of the assignment effected by the Deed
as soon as practicable and in any event within three days after the date of
this notice. This notice shall be governed by the laws of England.
Yours faithfully
For and on behalf of
____________________
CLOSED TYPE JSC KARAKUDUKMUNAY
SCHEDULE 2
FORM OF ACKNOWLEDGMENT OF NOTICE OF ASSIGNMENT
_______ 2000
TO: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
For the Attention of: The Manager, Trust Management
CC: Closed Type JSC Karakudukmunay
Dear Sirs,
We hereby acknowledge receipt of a Notice of Assignment dated _______
2000 (of which this is a duplicate) and of the particulars of the assets
assigned pursuant to, and in accordance with, the Deed. Terms defined in
the Notice of Assignment shall have, when used in this acknowledgement, the
same meaning herein as therein, unless the context otherwise requires.
In consideration of the Security Trustee and the other Finance Parties
entering into the Finance Documents and the Lenders making funds available
to the Assignor thereunder, we confirm and agree that:
(a) we consent to the assignment by way of security effected by the
Deed referred to in the Notice of Assignment;
(b) we are not aware of any prior charge, deed, security, assignment
or disposition of any of the assets stated in the Deed to be assigned
to you;
(c) we will procure that payments are made in accordance with the
authority and instruction contained in the Notice of Assignment; and
(d) we will give you notice in writing forthwith of any change of our
address or any material default by Closed Type JSC Karakudukmunay in
performing its obligations, as appropriate, under the Offtake
Agreement assigned to you pursuant to, and in accordance with, the
Deed which would give us the right to terminate the Offtake Agreement
and of any dispute between us in relation to such obligations.
This acknowledgement is governed by the laws of England.
SIGNED by ____________________ )
duly authorised for and on behalf of [NAME OF COUNTERPARTY])
SCHEDULE 3
FORM OF REASSIGNMENT DEED
THIS DEED OF REASSIGNMENT (this "Deed") is made on _____ 2000.
BETWEEN:
(1) THE LAW DEBENTURE TRUST CORPORATION p.l.c., a company organised
and existing under the laws of England (the "Security Trustee") acting as
security trustee for the Finance Parties under the Loan Agreement (as such
terms are defined herein); and
(2) CLOSED TYPE JSC KARAKUDUKMUNAY (the "Assignor"), a company
organised and existing under the laws of the Republic of Kazakhstan.
1. DEFINITIONS
Terms and expressions defined in the Deed of Assignment (as defined
below) shall have, when used in this Deed, the same meaning herein as
therein unless the context otherwise requires.
2. REASSIGNMENT
The Security Trustee hereby assigns to the Assignor such right, title,
benefit and interest as it may have in, and to [insert name of assigned
document] which were assigned to the Security Trustee pursuant to Clause 3
of a deed of assignment by way of security entered into by the Security
Trustee and the Assignor and dated 7 February 2000 (the "Deed of
Assignment").
3. NO LIABILITY FOR THE SECURITY TRUSTEE
(a) The Security Trustee makes no representation, warranty,
undertaking or covenant whatsoever as to its title to the assets and
property referred to in Clause 2 of this Deed or to any other matter
relating to this Deed or the Deed of Assignment.
(b) Each of the Security Trustee and the Assignor agree that neither
the Security Trustee nor its managers, officers, agents or employees shall
be subject to any liability whatsoever whether arising under contract, tort
or otherwise in respect of the assets and property referred to in Clause 2
of this Deed or as to any other matter relating to this Deed other than in
respect of its or their fraud, gross negligence or wilful misconduct.
4. COSTS AND EXPENSES
(a) The Assignor hereby covenants with the Security Trustee on demand
to pay all costs, charges and expenses incurred by the Security Trustee in
connection with, or relating to, this Deed or the assignment effected or
purported to be effected pursuant to this Deed on a full indemnity basis
with interest at the rates and on terms agreed from time to time with the
Security Trustee or, in the absence of agreement, at 2 per cent per annum
over the base rate of National Westminster Bank p.l.c. from time to time.
(b) The Assignor agrees and acknowledges that, notwithstanding the
assignment pursuant to Clause 2 of this Deed, the covenants and indemnities
contained in Clauses 5 and 6 of the Deed of Assignment shall remain in full
force and effect for the benefit of the Security Trustee for so long as the
Security Trustee may require.
5. JURISDICTION
This Agreement shall be governed by English law.
IN WITNESS WHEREOF this Deed has been executed as a deed by the
parties hereto and is delivered on the date stated at the beginning of this
Deed.
EXECUTED as a deed and delivered by
CLOSED TYPE JSC KARAKUDUKMUNAY acting
by _________________________________
Name:
Title:
by _________________________________
Name:
Title:
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
P.L.C.
was hereunto affixed in the presence of:
_________________________________
Name:
Title: Director
_________________________________
Name:
Title: Authorised Signatory
TABLE OF CONTENTS
Page
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . 3
2. COVENANT TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . . . . . 3
2.1 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands. . . . . . . . . . . . . . . . . . . . 4
3. SECURITY INTERESTS AND ITS TERMINATION . . . . . . . . . . . . . . 4
3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Reassignment . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Retention of This Deed . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 4
4.1 Representations and Warranties . . . . . . . . . . . . . . 4
4.2 Repetition . . . . . . . . . . . . . . . . . . . . . . . . 6
5. RESTRICTIONS ON DEALING WITH ASSIGNED ASSETS . . . . . . . . . . . 6
5.1 Negative Pledge. . . . . . . . . . . . . . . . . . . . . . 6
5.2 Disposal of Assigned Assets . . . . . . . . . . . . . . . 6
6. COVENANTS RELATING TO ASSIGNED ASSETS. . . . . . . . . . . . . . . 6
6.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Notice of Assignment and Acknowledgement Thereof . . . . . 6
6.3 Deposit of Assigned Agreements . . . . . . . . . . . . . . 6
6.4 Holding in Trust . . . . . . . . . . . . . . . . . . . . . 6
6.5 Access to Accounts . . . . . . . . . . . . . . . . . . . . 7
6.6 Compliance with Approved Contract and Assigned Agreements 7
6.7 No Variation or Release of Assigned Assets . . . . . . . . 7
6.8 Payment of Monies Received in Respect of Assigned Assets . 7
6.9 Action to Protect Validity of Assigned Assets. . . . . . . 8
6.10 Action to Enforce Assigned Assets. . . . . . . . . . . . . 8
6.11 Provision of Information Relating to Assigned Assets . . . 8
6.12 No Action to Jeopardise Security Interests Constituted
Hereby . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.13 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 8
7. SECURITY TRUSTEE'S DISCRETION. . . . . . . . . . . . . . . . . . 9
7.1 Security Trustee May Cure Breaches of Covenants . . . . . 9
7.2 Expenses so Incurred. . . . . . . . . . . . . . . . . . . 9
8. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 9
8.1 General Assurance . . . . . . . . . . . . . . . . . . . . 9
8.2 Additional Security Interests . . . . . . . . . . . . . . 9
9. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Security Interests to Become Enforceable . . . . . . . . . 9
9.3 Sections 93 and 103 of the Act . . . . . . . . . . . . . . 10
9.4 Step-in Rights . . . . . . . . . . . . . . . . . . . . . . 10
10. APPOINTMENT OF RECEIVERS. . . . . . . . . . . . . . . . . . . . . 10
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Scope of Appointment. . . . . . . . . . . . . . . . . . . 11
11. RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Conflict . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Agent of Company . . . . . . . . . . . . . . . . . . . . 11
11.4 Remuneration . . . . . . . . . . . . . . . . . . . . . . 12
12 RIGHTS OF SECURITY TRUSTEE . . . . . . . . . . . . . . . . . . . 12
12.1 Rights of Receiver . . . . . . . . . . . . . . . . . . . 12
12.2 Redemption of Prior Security Interests . . . . . . . . . 12
12.3 Suspense Account . . . . . . . . . . . . . . . . . . . . 12
12.4 New Account. . . . . . . . . . . . . . . . . . . . . . . 12
12.5 Delegation . . . . . . . . . . . . . . . . . . . . . . . 13
12.6 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . 13
13. APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . . 13
14. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES. . . . . 13
14.1 Possession. . . . . . . . . . . . . . . . . . . . . . . 13
14.2 Security Trustee's Liability. . . . . . . . . . . . . . 13
14.3 Receiver's Liability. . . . . . . . . . . . . . . . . . 14
14.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . 14
15. PROTECTION OF THIRD PARTIES. . . . . . . . . . . . . . . . . . 14
15.1 Contractual Protection . . . . . . . . . . . . . . . . . 14
15.2 Statutory Protection . . . . . . . . . . . . . . . . . 14
16. CONTINUING SECURITY INTERESTS AND OTHER MATTERS. . . . . . . . 15
16.1 Continuing and Independent Security Interests . . . . . 15
16.2 Primary Obligations . . . . . . . . . . . . . . . . . . 15
17. OTHER SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . . 15
18. SECURITY INTERESTS NOT TO BE AFFECTED . . . . . . . . . . . . . 15
19. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . 16
19.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . 16
19.2 Ratification . . . . . . . . . . . . . . . . . . . . . . 16
20. CURRENCY INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . 16
21. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 17
22. CERTIFICATES TO BE CONCLUSIVE EVIDENCE. . . . . . . . . . . . . 17
23. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 17
23.1 Transaction Costs . . . . . . . . . . . . . . . . . . . 17
23.2 Preservation and Enforcement Costs. . . . . . . . . . . 17
23.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . 17
23.4 Security Trustee's Additional Costs . . . . . . . . . . 18
23.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24.1 Giving of Notices . . . . . . . . . . . . . . . . . . . 18
24.2 Addresses for Notices . . . . . . . . . . . . . . . . . 19
24.3 English Language. . . . . . . . . . . . . . . . . . . . 19
25. REMEDIES AND WAIVERS, PARTIAL INVALIDITY. . . . . . . . . . . . 19
25.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . 19
25.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . 19
26. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
27. LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . 20
27.1 English Law. . . . . . . . . . . . . . . . . . . . . . . 20
27.2 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 20
27.3 Process Agent. . . . . . . . . . . . . . . . . . . . . . 20
27.4 Waiver of Immunity . . . . . . . . . . . . . . . . . . . 21
27.5 Consent to Enforcement . . . . . . . . . . . . . . . . . 21
27.6 Arbitration. . . . . . . . . . . . . . . . . . . . . . . 21
28. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Form of Notice of Assignment . . . . . . . . . . . . . . . . . 23
SCHEDULE 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Form of Acknowledgment of Notice of Assignment. . . . . . . . 25
SCHEDULE 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Form of Reassignment Deed . . . . . . . . . . . . . . . . . . 26
==========================================================================
ASSIGNMENT OF INSURANCE PROCEEDS
CHAPARRAL RESOURCES, INC.
as the Company
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
7 February 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
THIS ASSIGNMENT OF INSURANCE PROCEEDS is dated 7 February 2000 (this
"Agreement") BETWEEN
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of the State of Delaware (the "Company"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined below) (the "Security Trustee").
WHEREAS
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Company, the Co-Obligors, Shell Capital Services
Limited, Shell Capital Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Company secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to the first drawings under the Loan
Agreement that the Company and the Security Trustee have entered into this
Agreement.
IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Agreement, words and phrases defined in the
Loan Agreement shall have, when used in this Agreement (including the
recitals), the same meanings herein as therein and, in addition, in this
Agreement the following terms have the meanings given to them in this
Clause 1.1:
"Insurance Policy" means the contract of insurance dated 29 December,
1999 between Overseas Private Investment Corporation ("OPIC") and the
Company and the Amendment No.1 to OPIC Contract of Insurance No. F158 dated
3 February 2000, copies of which are annexed to this Agreement as Exhibit
1.
"Proceeds" has the meaning assigned to it in Clause 3.
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Agreement, or (iii) any
other Finance Document, together with all legal and other costs, charges
and expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
1.2 INTERPRETATION
In this Agreement, unless the context requires otherwise:
(a) references to Clauses, Schedules and Exhibits are to clauses of,
exhibits to and schedules to, this Agreement;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Agreement;
(c) references to a statute shall be construed as a reference to such
statute as from time to time amended or re-enacted;
(d) references in this Agreement to this "Agreement" or any other
agreement or instrument including, without limitation, the Loan
Agreement, are references to this Agreement or, as the case may be,
the relevant agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Agreement or, as the case may be, the relevant deed,
agreement or instrument.
2. SECURED LIABILITIES
This Agreement is for the benefit of the Security Trustee in its
capacity as trustee on behalf of the other Finance Parties, to secure the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) by the Company of the Secured
Liabilities.
3. ASSIGNMENT OF INSURANCE PROCEEDS
As security for the prompt and complete payment and performance when
due (whether at stated maturity, acceleration or otherwise) of the Secured
Liabilities, now existing or hereafter arising, the Company does hereby
assign, charge, convey, set over and grant and transfer unto the Security
Trustee, and does hereby grant to the Security Trustee for the benefit of
the Finance Parties, a continuing security interest of first priority in
all of the Company's right, title and interest (but not its obligations),
whether now owned or hereafter acquired, to any and all compensation and
any and all book and other debts, revenues and claims (including things in
action) which may give rise to compensation, a debt, revenue or claim due
or owing or which may become due or owing to the Company under or by virtue
of the Insurance Policy (all of the foregoing, collectively, the
"Proceeds"). The Security Trustee agrees that if it is satisfied, acting on
the instructions of the Facility Agent, that all the Secured Liabilities
have been unconditionally and irrevocably discharged in full, the Security
Trustee, upon the written request and at the expense of the Company, will
promptly execute and deliver to the Company the proper instruments (which
may include Uniform Commercial Code termination statements on Form UCC-3)
acknowledging the termination of all interests of the Security Trustee in
the Proceeds and will promptly assign, transfer and deliver to the Company
(without recourse and without any representation or warranty), free from
any interests of the Security Trustee or any Security Interest granted
hereunder, its interests in the Proceeds, together with such notices to
third parties as may be necessary to countermand any notices previously
sent to them pursuant hereto.
4. SCOPE OF THIS AGREEMENT
4.1 IRREVOCABLE OBLIGATIONS
The obligations of the Company under this Agreement shall be
irrevocable and shall remain in full force and effect without regard to,
and shall not be released, suspended, discharged, terminated or otherwise
affected by, any circumstance or occurrence whatsoever, including, without
limitation (i) any renewal, extension, amendment, notation or modification
of, or addition or supplement to or deletion from, any of the Finance
Documents or any other instrument or agreement referred to therein, or any
assignment or transfer of any thereof, (ii) any waiver, consent, extension,
indulgence or other action or inaction under or in respect of any such
instrument or agreement or this Agreement or any exercise or non-exercise
of any right, remedy, power or privilege under or in respect of this
Agreement or any other Finance Document, (iii) any furnishing of any
additional security to the Finance Parties or any acceptance thereof or any
sale, exchange, release, surrender or realization of or upon any security
by the Finance Parties, or (iv) to the extent permitted by applicable law,
any invalidity, irregularity or unenforceability of all or part of any of
the Secured Liabilities or of any other security therefor.
4.2 EXERCISE OF RIGHTS
This Agreement shall not be construed as limiting or in any way
precluding the exercise by the Finance Parties of any or all of their
rights for the full and timely payment of such amounts under any of the
Finance Documents or other rights as set forth in the applicable
legislation of the State of New York.
4.3 PURPOSE OF THIS AGREEMENT
The parties expressly agree that in the case of any invalidity or
unenforceability of all or part of this Agreement, any of the other Finance
Documents or any of the Secured Liabilities, this Agreement will be deemed
to have been entered into for the purpose of securing all repayment
obligations of the Company to the Finance Parties of all amounts due under
such invalid or unenforceable documents or obligations.
5. REPRESENTATIONS AND WARRANTIES.
The Company makes the representations and warranties set out in this
Clause 5 to the Security Agent.
5.1 NO OTHER ASSIGNMENTS
The Insurance Policy is in full force and effect and the Proceeds are
free and clear of any other Security Interests other than pursuant to this
Agreement.
5.2 EFFECTIVE ASSIGNMENT
The signing of this Agreement and the execution of the consent to
assignment will establish in favor of the Security Trustee a legal, valid,
binding and enforceable assignment over the Proceeds.
5.3 CONSENTS
No Consents are required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
5.4 NO VIOLATION
The execution and performance of this Agreement by the Company (a)
will not violate any provision of any applicable law or regulation or of
any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the Company's
constitutive documents, or of any securities issued by the Company or of
any indenture, lease, or other agreement, instrument or undertaking to
which the Company is a party or which purports to be binding upon the
Company or upon its property, assets or rights, and (b) will not result in
the creation or imposition of any right or encumbrance on any of the
property, assets or rights of the Company except as contemplated by this
Agreement.
6. COVENANTS OF THE COMPANY
6.1 RECORDS; RIGHT OF INSPECTION
The Company shall deliver to the Security Trustee copies of the
Insurance Policy certified by an authorised signatory of the Company as
being true and complete. The Company shall furnish to the Security Trustee
from time to time statements and schedules further identifying and
describing the Proceeds and such other reports in connection with the
Proceeds as the Security Trustee may reasonably request, all in reasonable
detail. The Security Trustee shall at all times have full and free
reasonable access during normal business hours to all the books,
correspondence and records of the Company, and the Security Trustee and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof. The Company agrees to render to the Security Trustee
such clerical and other assistance as may be requested with regard thereto.
6.2 CONSENT TO ASSIGNMENT
Immediately following execution of this Agreement (and in any event
within 7 days of the date of this Agreement), the Company shall execute and
shall procure that OPIC executes the consent to assignment substantially in
the form of Exhibit 2 (or in such form as the Security Trustee may agree).
6.3 PREMIUMS; PROCEEDS
The Company will pay when due all premiums payable under the Insurance
Policy and will otherwise fully comply with all of the terms and conditions
of the Insurance Policy and, in the event that any premium payable under
the Insurance Policy is paid by the Security Trustee, the Company shall
immediately on demand reimburse and indemnify the Security Trustee for such
payment. Notwithstanding anything contained herein to the contrary, the
Company shall remain liable under the Insurance Policy to observe and
perform all of the conditions and obligations therein provided to be
observed and performed by it. The Security Trustee is authorized to pay
premiums due under the Insurance Policy, it being understood that the
Security Trustee shall not have any obligation whatsoever to do so. The
Security Trustee shall not have any obligation or liability under the
Insurance Policy by reason of or arising out of this Agreement, or be
required or obligated in any manner to observe or perform any of the
conditions or obligations of the Company under or pursuant to the Insurance
Policy or to make any payment or to make any inquiry as to the nature or
sufficiency of any payment received by it or to present or make any claim
or to take any action to collect any moneys or enforce any rights and
benefits hereby assigned to the Security Trustee or to which it may at any
time be entitled under this Agreement.
6.4 RELEASE OF THE INSURANCE
The Company will not, without the prior written consent of the
Security Trustee acting on the instructions of the Facility Agent, agree to
release OPIC from any material obligation under or waive any material
breach of the Insurance Policy, or consent to any act or omission by OPIC
which would otherwise constitute such a breach, or settle or compromise any
material claim arising out of the Insurance Policy.
6.5 COMPLIANCE WITH LAWS
The Company shall comply with all legislation applicable to the
Insurance Policy or any part of it or to the operation of the Company's
business.
6.6 CONSENTS; REGISTRATION
The Company shall do and authorize and permit to be done each and
every act or thing and deliver each and every document or instrument which
may be deemed necessary by the Security Trustee in order to (a) obtain all
the required consents, acknowledgements and authorizations with respect to
the assignment of the Proceeds, and (b) register the assignment created by
this Agreement with any relevant governmental agency or authority.
6.7 FURTHER ASSURANCES
The Company agrees at any time and from time to time at the first
demand of the Security Trustee and at the sole expense of the Company to
promptly and duly sign and deliver any legally binding document or to
undertake legally binding actions which (a) the Security Trustee may direct
for the purposes of ensuring the validity and legality of the assignment or
to perfect and preserve the Security Trustee's Security Interest in the
Proceeds, or (b) the Security Trustee may direct and which are reasonably
necessary in the opinion of the Security Trustee in order to exercise any
of the rights and powers granted under this Agreement or to further assure
and confirm to the Security Trustee its rights, powers and remedies under
this Agreement.
6.8 SECURITY TRUSTEE APPOINTED ATTORNEY-IN-FACT
The Company hereby appoints the Security Trustee the attorney-in-fact
of the Company for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the
Security Trustee may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Security Trustee
shall have the right, upon the occurrence of an Event of Default (as
defined in the Loan Agreement), in the name and on behalf of the Company,
to make any claim under the Insurance Policy and to ask for, demand, sue
for, collect, receive and give acquittance for any and all moneys due under
and by virtue of the Insurance Policy, to endorse, checks, drafts, orders
and other instruments for the payment of money payable to the Company
representing payment in respect of any claim or right of the Company under
the Insurance Policy or any part thereof or on account thereof and to give
full discharge for the same, to settle, compromise, prosecute or defend any
action, claim or proceeding with respect thereto, and to sell, assign,
endorse, pledge, transfer and to make any agreement respecting, or
otherwise deal with, the same; provided that:
(i) if no such Event of Default has occurred and is continuing, the
Security Trustee shall only exercise its powers and rights under
this Clause 6.8 to take actions in the name and on behalf of the
Company that the Company is required to perform under this
Agreement and has not performed within three Business Days after
receipt by the Company of notice from the Security Trustee that
such actions be taken; and
(ii) nothing herein contained shall be construed as requiring or
obligating the Security Trustee to make any inquiry as to the
nature or sufficiency of any payment received by the Security
Trustee, or to present or file any claim or notice, or to take
any action with respect to the Insurance Policy or any part
thereof or the moneys due or to become due in respect thereof or
any property covered thereby.
The Security Trustee shall be accountable only for amounts actually
received as a result of the exercise of the powers granted to it herein,
and neither it nor its officers, directors, employees or agents shall be
responsible to the Company for any act or failure to act hereunder, except
for their own negligence or wilful misconduct.
7. EVENT OF DEFAULT; REMEDIES
(a) To the extent permitted by applicable law, the Security Trustee
may enforce or may request enforcement of any provision of this Agreement
and the rights granted hereunder without having first to exhaust any other
remedy or to enforce any other mortgage or pledge that the Security Trustee
may otherwise have against the Company. For the purposes hereof, and to
the extent permitted by applicable law, the Company hereby expressly waives
any requirement to receive from the Security Trustee or any third party any
presentment, demand, protest or other notice of any kind.
(b) The parties agree that the Proceeds shall be paid to, or on the
instructions of the Security Trustee (itself acting on the instructions of
the Facility Agent) only and such Proceeds may be retained by the Security
Trustee, held as security for the Secured Liabilities and applied by the
Security Trustee in the following order:
(i) FIRSTLY, in or towards payment of all costs, charges,
losses, liabilities and expenses of, and incidental to, the
exercise of the Security Trustee's rights;
(ii) SECONDLY, in or towards the payment and discharge of such
of the Secured Liabilities in such order as the Security Trustee
in its absolute discretion may from time to time determine; and
(iii) THIRDLY, after all the Secured Liabilities have been
paid or discharged in full, to the Company.
If the Company shall receive any such payments directly, the Company
shall receive such payments in a constructive trust for the benefit of the
Finance Parties, shall segregate such payments from the Company's other
funds, and shall forthwith transmit and deliver such payments to the
Security Trustee in the same form as so received (with any necessary
endorsements).
(c) The Security Trustee shall not bear responsibility for any loss,
causing of damage or harm which is the result of the exercise, or the
intention to exercise, or the failure to exercise, or the impossibility to
exercise, any of the respective rights and powers granted in this
Agreement.
8. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including without limitation any proceedings, a copy
of a certificate signed by an officer of the Security Trustee as to the
amount of any indebtedness comprised in the Secured Liabilities or as to
any applicable rate of interest shall, in the absence of manifest error, be
conclusive evidence against the Company as to the amount or rate thereof.
9. COSTS AND EXPENSES
9.1 TRANSACTION COSTS
The Company shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by it in connection with the negotiation,
preparation and execution of this Agreement, the completion of the
transactions contemplated in this Agreement, any amendment of this
Agreement and any calculation, approval, consent or waiver to be made or
given by the Security Trustee pursuant to or in respect of any provision of
this Agreement.
9.2 PRESERVATION AND ENFORCEMENT COSTS
The Company shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including, without limitation, legal and
other fees 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 the Security
Trustee under this Agreement.
9.3 TAXES AND FEES
The Company shall pay all stamp, registration and other taxes and
duties, and all notarial registration, recording and other like fees to
which this Agreement or any judgment given in connection with this
Agreement is, or at any time may be, subject and shall on demand indemnify
the Security Trustee 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.
9.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Company shall, from time to time on demand of the Security Trustee
and without prejudice to the provisions of Clause 9.1, 9.2, and 9.3
compensate the Security Trustee at such daily and/or hourly rates as the
Security Trustee shall from time to time determine and on demand indemnify
the Security Trustee against all costs and expenses (including, without
limitation, telephone, fax, copying, travel and personnel costs) properly
incurred by the Security Trustee in connection with its taking such action
as it may deem appropriate or in complying with any instructions from the
Finance Parties or any request by the Company in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Company under this Agreement;
(b) any actual, potential or suspected breach by the Company of its
obligations under this Agreement;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Agreement requested
by the Company.
9.5 VALUE ADDED TAX
Any cost or expense referred to in this Clause 9 is exclusive of any
value added tax or any other similar tax chargeable in connection with that
cost or expense. The Company shall pay any value added tax or other similar
tax so chargeable at the same time as it pays the relevant cost or expense.
10. NOTICES
10.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a notice by telex or
facsimile transmission. Any such notice shall be deemed to be given as
follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
10.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Company by not less
than five Business Days' notice.
(b) The address and facsimile number of the Company are:
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Company may notify to the Security Trustee by not less
than five Business Days' notice.
10.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Agreement 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.
11. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
11.1 REMEDIES AND WAIVERS
Time is of the essence of the Company's obligations under this
Agreement, but no failure on the part of the Security Trustee to exercise,
nor any delay in exercising 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. The Security Trustee may agree to any waiver of any of
its rights or remedies under this Agreement on such terms as it sees fit.
11.2 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.
12. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Company, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Agreement to any person. The
Company may not assign, transfer, novate or dispose of any of or any
interest in, its rights or obligations under this Agreement.
13. LAW AND JURISDICTION
13.1 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
13.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE SECURITY TRUSTEE, THE COMPANY
IRREVOCABLY AGREES THAT THE COURTS OF THE STATE OF NEW YORK 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 13 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 13.5.
(B) THE COMPANY 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 13.2 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 COURTS OF THE STATE OF NEW YORK SHALL BE
CONCLUSIVE AND BINDING UPON THE COMPANY AND MAY BE ENFORCED IN THE COURTS
OF ANY OTHER JURISDICTION.
(C) NOTHING CONTAINED IN THIS CLAUSE 13.2 SHALL LIMIT THE RIGHT OF
THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE COMPANY 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.
13.3 WAIVER OF IMMUNITY
TO THE EXTENT THAT THE COMPANY 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 UNDERTAKINGS,
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
AND/OR TO THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED
TO THE COMPANY, ANY SUCH IMMUNITY (WHETHER OR NOT CLAIMED), THE COMPANY
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.
13.4 CONSENT TO ENFORCEMENT
THE COMPANY 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.
13.5 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 THE SECURITY TRUSTEE, 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 13.5. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND
SHALL BE CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY
THE COMPANY, ONE BY THE SECURITY TRUSTEE 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 (ENGLAND) AND NO APPEAL MAY BE
MADE UNDER SECTION 69 OF THE SAID ACT.
14. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto on the date stated at the beginning of this Agreement.
CHAPARRAL RESOURCES, INC.
by /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
Exhibit 1 to
Assignment of Insurance Proceeds
COPY OF OPIC INSURANCE POLICY AND AMENDMENT NO.1
Exhibit 2 to
Assignment of Insurance Proceeds
CONSENT TO ASSIGNMENT OF AND SECURITY INTEREST IN THE
PROCEEDS PAYABLE UNDER THE OVERSEAS PRIVATE INVESTMENT
CORPORATION ("OPIC") CONTRACT OF INSURANCE NO. F158
Pursuant to the Assignment of Insurance Proceeds dated 7 February 2000,
Chaparral Resources, Inc. (the "Assignor") assigned Proceeds payable to it
as the party insured under OPIC Contract of Insurance No. F158 (the
"Contract") to The Law Debenture Trust Corporation p.l.c. (the "Assignee")
and granted a security interest in such Proceeds to the Assignee. Terms
defined in the Assignment of Insurance Proceeds shall have, when used in
this consent to assignment, the same meaning herein as therein unless the
context otherwise requires.
OPIC hereby consents to the Assignment of Insurance Proceeds and will pay
any such Proceeds to the Assignee. OPIC further consents to the grant by
the Assignor to the Assignee of a security interest in such Proceeds.
Notwithstanding such assignment, the Assignor shall continue to fulfill all
duties and obligations under the Contract, including, without limitation,
payment of premiums, submission of claims to OPIC, and co-operation with
OPIC in the event of a claim. OPIC shall have no obligation to deal with
any entity other than the Assignor, except for payment of any Proceeds to
the Assignee.
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: _____________________________
Name:
Title:
In the presence of:
______________________________
Witness
Name:
CHAPARRAL RESOURCES, INC.
By: _____________________________
Name:
Title:
In the presence of:
______________________________
Witness
Name:
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION P.L.C.
was hereunto affixed in the presence of:
_____________________________
Name:
Title: Director
_____________________________
Name:
Title: Authorised Signatory
TABLE OF CONTENTS
Page
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . 2
2. SECURED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 2
3. ASSIGNMENT OF INSURANCE PROCEEDS . . . . . . . . . . . . . . . . 2
4. SCOPE OF THIS AGREEMENT. . . . . . . . . . . . . . . . . . . . . 3
4.1 Irrevocable Obligations . . . . . . . . . . . . . . . . . 3
4.2 Exercise of Rights. . . . . . . . . . . . . . . . . . . . 3
4.3 Purpose of this Agreement . . . . . . . . . . . . . . . . 3
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 3
5.1 No other Assignments. . . . . . . . . . . . . . . . . . . 3
5.2 Effective Assignment. . . . . . . . . . . . . . . . . . . 3
5.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . 4
5.4 No Violation. . . . . . . . . . . . . . . . . . . . . . . 4
6. COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 4
6.1 Records; Right of Inspection. . . . . . . . . . . . . . . 4
6.2 Consent to Assignment . . . . . . . . . . . . . . . . . . 4
6.3 Premiums; Proceeds. . . . . . . . . . . . . . . . . . . . 4
6.4 Release of the Insurance. . . . . . . . . . . . . . . . . 5
6.5 Compliance with Laws. . . . . . . . . . . . . . . . . . . 5
6.6 Consents; Registration. . . . . . . . . . . . . . . . . . 5
6.7 Further Assurances. . . . . . . . . . . . . . . . . . . . 5
6.8 Security Trustee Appointed Attorney-in-Fact . . . . . . . 5
7. EVENT OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . 6
8. CERTIFICATES TO BE CONCLUSIVE EVIDENCE . . . . . . . . . . . . . 7
9. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 7
9.1 Transaction Costs . . . . . . . . . . . . . . . . . . . . 7
9.2 Preservation and Enforcement Costs. . . . . . . . . . . . 7
9.3 Taxes and Fees. . . . . . . . . . . . . . . . . . . . . . 8
9.4 Security Trustee's Additional Costs . . . . . . . . . . . 8
9.5 Value Added Tax . . . . . . . . . . . . . . . . . . . . . 8
10. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 Giving of Notices . . . . . . . . . . . . . . . . . . . . 8
10.2 Addresses for Notices . . . . . . . . . . . . . . . . . . 9
10.3 English Language. . . . . . . . . . . . . . . . . . . . . 9
11. REMEDIES AND WAIVERS, PARTIAL INVALIDITY . . . . . . . . . . . . 9
11.1 Remedies and Waivers. . . . . . . . . . . . . . . . . . . 9
11.2 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 10
12. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . 10
13.1 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 10
13.2 JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . 10
13.3 WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . . . . 11
13.4 CONSENT TO ENFORCEMENT. . . . . . . . . . . . . . . . . . 11
13.5 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 11
14. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
==========================================================================
KKM ASSIGNMENT OF INSURANCES
CLOSED TYPE JSC KARAKUDUKMUNAY
as Assignor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Assignee
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
THIS DEED OF ASSIGNMENT ("this Deed") has been signed on 7 February 2000
and is made between:
(1) CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing under
the laws of the Republic of Kazakhstan (the "ASSIGNOR"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised and
existing under the laws of England, acting as security trustee for the
Finance Parties (as defined below) (the "ASSIGNEE").
WHEREAS
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "LOAN
AGREEMENT") between the Borrower, the Co-Obligors, Shell Capital
Services Limited, Shell Capital Limited and the Lenders (as such terms
are defined in the Loan Agreement), the Lenders have agreed to make
available to the Borrower secured loan facilities in an aggregate
principal amount not exceeding US$24,000,000 on the terms and subject
to the conditions contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has agreed
to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to making the loans under the Loan
Agreement that the Assignor shall have executed and delivered this
Deed to the Assignee.
NOW THIS DEED OF ASSIGNMENT WITNESSETH as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Except as otherwise defined herein and except where the context
otherwise requires, all terms and expressions which are defined in
the Loan Agreement shall have the same respective meanings when
used herein.
1.2 In this Deed (including the Recitals hereof and the Schedule
hereto) the following expressions shall, except where the context
otherwise requires, have the following meanings:
"Act" means the Law of Property Act 1925;
"Attorney" means any person so appointed by the
Assignor pursuant to Clause 6;
"Insolvency Act" means the Insolvency Act 1986;
"Insurances" means any and all contracts and policies
of insurance effected and maintained
from time to time by the Assignor under
or in respect of the Project (including,
without limitation, those contracts
details of which are set out in Schedule
D) and all renewals of those contracts,
but excluding contracts of insurance
covering the Assignor's liability to
third parties;
"Secured Liabilities" means all moneys and liabilities
(whether actual or contingent) which are
now or may at any time and from time to
time hereafter be due, owing or payable
to any Finance Party from or by the
Obligors under or in connection with (i)
the Loan Agreement; (ii) this Deed; and
(iii) any other Finance Document,
together with all legal and other costs,
charges and expenses which any of the
Finance Parties may incur in enforcing
or obtaining, or attempting to enforce
or obtain, payment of any such moneys
and liabilities.
1.3 In this Deed, unless the context requires otherwise:
(a) headings are for convenience only and do not affect the
interpretation of this Deed;
(b) words importing the singular include the plural and vice
versa;
(c) a reference to a Clause, Sub-Clause, party or Schedule is a
reference to that Clause, Sub-Clause, or that party or
Schedule to, this Deed;
(d) a reference to a document includes an amendment or supplement
to, or replacement or novation of, that document but
disregarding any amendment, supplement, replacement or
novation made in breach of this Deed; and
(e) a reference to a party to any document includes that party's
successors and permitted assigns.
2. ASSIGNMENT
2.1 By way of continuing security for the Secured Liabilities the
Assignor hereby assigns and agrees to assign absolutely to the
Assignee all of its present and future right, title and interest in
and to (i) the Insurances, and (ii) all the benefits of all
policies, contracts and agreements in respect of the Insurances
(including all claims of whatsoever nature thereunder and returns
of premiums in respect thereof). The Assignor agrees that it will
hold the proceeds of any of the Insurances on trust for the
Assignee and shall pay such proceeds or other amounts to the
Assignee on demand.
2.2 Subject to the terms of this Deed, upon all of the Secured
Liabilities being discharged in full the property assigned pursuant
to Clause 2.1 shall be reassigned to the Assignor without recourse
to or warranty by the Assignee and the Assignee shall, at the cost
of the Assignor, execute such documents as the Assignor may
reasonably require to effect or confirm such reassignment.
3. REPRESENTATIONS AND WARRANTIES
The Assignor hereby represents and warrants to the Assignee that:
(i) the Assignor has full power, authority and legal right to
enter into, execute and perform, and has taken all necessary
action duly to authorise the entry into, execution,
performance and delivery of, this Deed, the creation of the
security hereunder and the carrying out of its obligations
hereunder;
(ii) this Deed has been duly executed as a deed and constitutes its
legal, valid and binding obligations enforceable in accordance
with its terms;
(iii) the execution and performance by it of this Deed, the creation
of the security hereunder and the performance and observance
by it of its obligations hereunder do not and will not:
(a) conflict with any law, rule or regulation or judicial,
administrative or governmental order, judgement,
injunction, determination or award applicable to it; or
(b) conflict with any provision of its constitutional
documents; or
(c) conflict with, or result in any breach of, any of the
terms or provisions of, or constitute a default under,
any mortgage, deed, agreement or other instrument,
arrangement, obligation or duty to which it is a party
or is subject or by which any of its assets is bound
which might reasonably be expected to have a material
adverse effect on its business or financial condition or
on its ability to carry out its obligations hereunder;
or
(d) cause the exceeding of any limitation (whether imposed
by law, statute, decree, rule, regulation, agreement,
its constitutional documents or otherwise howsoever) on
any of its powers or on the right or ability of its
directors to exercise such powers or cause the exceeding
of any other limit affecting it;
(iv) the Assignor has not created and there does not subsist any
Security Interest in or over the Insurances or any part
thereof nor has the Assignor agreed to create any such
Security Interest, other than Permitted Security Interests;
and
(v) the security hereby constituted is legal, valid and binding
and will constitute upon the service of the notice referred to
in Clause 4(a) of this Deed an absolute assignment by way of
first specific legal charge and ranks and will rank ahead of
any other Security Interest on or over the Insurances or any
part thereof.
The Assignor hereby covenants with the Assignee that each of the above
representations and warranties will be correct in all respects at all
times during the continuance of the security hereby constituted and as
long as any Secured Liabilities are outstanding as if repeated then by
reference to the then existing circumstances.
4. COVENANTS
The Assignor covenants that it shall:
(a) immediately following execution of this Deed give notice of
this Deed and the assignment herein contained to each
insurance broker through which any of the Insurances are from
time to time effected and maintained, and in addition promptly
after any change in any such insurance brokers, give such
notice to the new, replacement or additional brokers, each
such notice to be in the form set out in Part 1 of Schedule A
hereto, and shall procure and deliver to the Assignee an
acknowledgement of each such notice by the relevant insurance
or reinsurance brokers in the form of set out in Part 2 of
Schedule A hereto;
(b) not assign, pledge or charge, or create or permit to subsist
any Security Interest on or over, its right, title and
interest in and to the Insurances or any proceeds thereof
(other than Permitted Security Interests); and
(c) procure that:
(i) the insurer with which each of the Insurances is placed
or effected or each broker who effects or renews any of
the Insurances, as the case may be, delivers to the
Assignee a letter substantially in the form of Schedule
B; and
(ii) each insurance policy for the time being in force
contains, or has attached to it, endorsements and a
loss payable clause substantially in the form of
Schedule C.
5. FURTHER ASSURANCE
The Assignor covenants that it will from time to time at the request
of the Assignee do or execute any further things, assurances and
documents as may be required by law or as the Assignee may consider
necessary to establish, maintain and protect the rights of the
Assignee hereunder and generally to carry out the true intent of this
Deed.
6. POWER OF ATTORNEY
6.1 The Assignor hereby, by way of security for the performance of its
obligations hereunder, irrevocably appoints the Assignee as its
Attorney for and on its behalf and in its name or otherwise, at
such time and in such manner as the Attorney may think fit:
(i) to execute and do any assurance, act or thing which the
Assignor is required to do under this Deed; and/or
(ii) generally in its name and on its behalf to exercise all or
any of the rights conferred upon the Assignee under this
Deed, the Act or the Insolvency Act.
6.2 The Assignor hereby ratifies and confirms and agrees to ratify and
confirm whatever any such attorney shall do or purport to do in the
exercise or purported exercise of the power of attorney in Clause
6.1 except where such actions constitute gross negligence or wilful
misconduct.
7. APPLICATION OF INSURANCE PROCEEDS
All proceeds of any Insurances received by the Assignor or the
Assignee shall be dealt with and applied in the following order:
(i) firstly, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the exercise
of the Assignee's rights;
(ii) secondly, in or towards the payment and discharge of such of
the Secured Liabilities in such order as the Assignee in its
absolute discretion may from time to time determine; and
(iii) thirdly, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Assignor.
8. SUCCESSORS IN TITLE
The obligations on the part of the Assignor contained herein shall
bind it and its successors and permitted assigns and shall inure to
the benefit of the Assignee and its successors and assigns whether so
expressed or not.
9. CONTINUING AND INDEPENDENT SECURITY
9.1 This Deed and the security hereby constituted shall remain in full
force and effect by way of continuing security and shall not be
affected in any way by any settlement of account or by:
(i) any other security, guarantee or insurance now or
hereafter held by the Assignee or any other person in
respect of the Secured Liabilities, any of them or any
other liabilities; or
(ii) the release of or any amendment to any security, guarantee
or insurance (including, except to the extent of the
relevant release or amendment, the security hereby
constituted); or
(iii) the enforcement or absence of enforcement of any security,
guarantee or insurance (including the security hereby
constituted); or
(iv) any time, indulgence, waiver or consent given to the
Assignor or any other person whether by the Assignee or
any other person; or
(v) the making or absence of any demand for payment of any
liabilities made on the Assignor or any other person
whether by the Assignee or any other person; or
(vi) the bankruptcy, insolvency, administration or winding-up
of the Assignor, the Assignee or any other person; or
(vii) the illegality, invalidity or unenforceability of or any
defect in any provision of any documents relating to the
Secured Liabilities or any insurance or security or any
guarantee (including the security hereby constituted) or
any of the rights or obligations of any of the parties
under or in connection with any such document or any
insurance or any security or any guarantee (including the
security hereby constituted), whether on the grounds of
not having been duly executed or delivered by the Assignor
or any other party thereto or for any other reason
whatsoever; or
(viii) any agreement, security, guarantee, insurance, payment or
other transaction which is capable of being avoided under
or affected by any law relating to bankruptcy, insolvency,
administration or winding-up or any release, settlement or
discharge given or made by the Assignee on the faith of
any such agreement, security, guarantee, insurance,
payment or other transaction, and any such release,
settlement or discharge shall be deemed to be limited
accordingly.
9.2 The Assignee need not before exercising any of the rights, powers
or remedies conferred upon it by this Deed or by law (a) take
action or obtain judgement against the Assignor or any other person
in any court, (b) make or file claim or proof in a winding-up or
liquidation of the Assignor or any other person, or (c) enforce or
seek to enforce the recovery of the Secured Liabilities or of any
other security therefor.
9.3 The security created by this Deed shall not be in any way
discharged or impaired by reason of any other circumstance which
might (but for this provision) constitute a legal or equitable
discharge of such security.
9.4 Sections 93 and 103 of the Law of Property Act 1925 shall not apply
to this Deed.
9.5 The Assignee shall not be liable:
(i) by reason of the Assignee entering into possession of any of
the Insurances or of any payments thereunder, to account as
mortgagee in possession thereof for anything except actual
receipts; or
(ii) for any loss upon realisation or for any default or omission
for which a mortgagee in possession might be liable unless
such loss is caused by the fraud or gross negligence or
wilful misconduct of the Assignee.
10. COSTS AND EXPENSES
10.1 The Assignor shall, on written demand (accompanied by copies of the
invoices therefor), pay the Assignee all legal and other fees on a
full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-
pocket expenses) properly incurred by it in connection with the
negotiation, preparation and execution of this Deed, the completion
of the transactions contemplated in this Deed, any amendment of
this Deed and any calculation, approval, consent or waiver to be
made or given by the Assignee pursuant to or in respect of any
provision of this Deed.
10.2 The Assignor shall, from time to time on demand pay to the Assignee
all costs and expenses (including legal and other fees 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 the Assignee under this Deed.
10.3 The Assignor shall pay all stamp, registration and other taxes and
duties, and all notarial registration, recording and other like
fees to which this Deed or any judgment given in connection with
this Deed is, or at any time may be, subject and shall on demand
indemnify the Assignee 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.
10.4 The Assignor shall, from time to time on demand of the Assignee
(and without prejudice to the provisions of Clauses 10.1, 10.2 and
10.3) compensate the Assignee at such daily and/or hourly rates as
the Assignee shall from time to time determine and on demand
indemnify the Assignee against all costs and expenses (including
without limitation telephone, fax, copying, travel and personnel
costs) properly incurred by the Assignee in connection with its
taking such action as it may deem appropriate or in complying with
any instructions from the Finance Parties or any request by the
Assignor in connection with:
(i) the granting or proposed granting of any waiver or consent
requested by the Assignor under this Deed;
(ii) any actual, potential or suspected breach by the Assignor of
its obligations under this Deed;
(iii) the occurrence of an Event of Default or a Potential Event
of Default; or
(iv) any amendment or proposed amendment to this Deed requested
by the Assignor.
11. NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a notice by telex or
facsimile transmission. Any such notice shall be deemed to be given as
follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
11.1 The address and facsimile number of the Assignee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696/7606 0643
or such other as the Assignee may notify to the Assignor by not
less than five Business Days' notice.
11.2 The address and facsimile number of the Assignor are:
Closed Type JSC Karakudukmunay
Microdistrict 3, Building 82
Aktau
Republic of Kazakhstan
Attention: General Director
Facsimile: (7-3292) 518 336
11.3 Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
12. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any proceedings, a copy of a certificate
signed by an officer of the Assignee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any
applicable rate of interest shall, in the absence of manifest error,
be conclusive evidence against the Assignor as to the amount or rate
thereof.
13. REMEDIES AND WAIVERS
13.1 Time is of the essence of the Assignor's obligations under this
Deed but no failure to exercise, nor any delay in exercising, on
the part of the Assignee, any right or remedy under this Deed 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 Deed are cumulative and not
exclusive of any rights or remedies provided by law. The Assignee
may agree to any waiver of any of its rights or remedies under this
Deed on such terms as it sees fit.
13.2 If, at any time, any provision of this Deed 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 Deed under the law of that
jurisdiction nor the legality, validity or enforceability of that
or any other provision of this Deed 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.
14. ASSIGNMENT
The Assignee may at any time, without the consent of the Assignor,
assign or transfer the whole or, as the case may be, any part of
the Assignee's rights under this Deed to any person. The Assignor
may not assign, transfer, novate or dispose of or any interest in,
its rights or obligations under this Deed.
15. GOVERNING LAW AND JURISDICTION
15.1 This Deed shall be governed by English law.
15.2 (i) For the exclusive benefit of the Assignee and the
Facility Agent, the Assignor 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
Deed and that accordingly any suit, action or proceedings
(together in this Clause 15 referred to as "proceedings")
arising out of or in connection with this Deed may be
brought in such courts, subject to the option referred to in
Clause 15.6.
(ii) The Assignor 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 15.2 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 the Assignor and may be
enforced in the courts of any other jurisdiction.
(iii) Nothing contained in this Clause 15.2 shall limit the right
of the Assignee to take proceedings against the Assignor 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.
15.3 The Assignor hereby irrevocably and unconditionally:
(i) appoints Law Debenture Corporate Services Limited, whose
address is at Princes House, 95 Gresham Street, London EC2V
7LY, England as its process agent to receive, for and on its
behalf, service of process in England in any proceedings
with respect to this Deed;
(ii) 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
(iii) agrees that nothing in this Deed shall affect the right to
serve process in any other manner permitted by law.
15.4 To the extent that the Assignor may now or hereafter be entitled,
in any jurisdiction in which proceedings may at any time be
commenced with respect to this Deed, to claim for itself or its
undertaking, property, assets or revenue 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 Deed and/or to the extent
that in any such jurisdiction there may be attributed to the
Assignor, any such immunity (whether or not claimed), the Assignor
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.
15.5 The Assignor 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.
15.6 If any dispute arises in relation to this Deed, including any
question as to existence, validity or termination, such dispute
shall, at the option only of the Assignee, 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 15.6. Such arbitration shall take place
in London, England and shall be conducted by three arbitrators, one
of whom shall be nominated by the Assignor, one by the Assignee and
the third to be agreed between the two arbitrators so nominated and
in default the arbitrator 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.
16. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together
shall constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a deed by the parties
hereto and is delivered on the date stated at the beginning of this Deed.
EXECUTED as a deed and delivered by
CLOSED TYPE JSC KARAKUDUKMUNAY acting
by /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
Name: /S/ JULIAN MASON-JEBB
-----------------------------
Title: Director
Name: /S/ CLIVE RAKESTROW
-----------------------------
Title: Authorised Signatory
SCHEDULE A
PART 1
FORM OF NOTICE OF ASSIGNMENT OF INSURANCE POLICY
February, 2000
TO: McGriff, Seibels & Williams of Texas, Inc.
5333 Westheimer, Suite 600
Houston, Texas 77056
FROM: Closed Type JSC Karakudukmunay
CC: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
Dear Sirs,
We refer to a deed of assignment dated 7 February, 2000 (the "Deed")
and entered into by (1) ourselves and (2) The Law Debenture Trust
Corporation p.l.c. (the "Assignee"). Terms defined in the Deed shall have,
when used in this notice, the same meaning herein as therein unless the
context otherwise requires. This notice shall be governed by English law.
We hereby give you formal notification that, pursuant to the Deed, we
have assigned to the Assignee all our rights, interests and benefits under
insurance policy number PP990003/H issued by Kazakhinstrakh JSC (the
"Insurance Policy"). This notice is irrevocable unless and until the
Assignee issues to you a written notice that the Deed has been terminated.
We hereby irrevocably authorise and instruct you to pay to ABN AMRO
Bank N.V., London Branch, 250 Bishopsgate, London, Account Number: 40061949
Karakudukmunay JSC, Sorting Code 40-50-30, SWIFT code ABNAGB2L (unless
otherwise instructed by the Assignee by written notice to you from time to
time) all moneys whatsoever now or at any time hereafter due or owing to us
under, or by virtue of, the Insurance Policy or in connection with our
rights evidenced thereby and to procure that the Assignee receives all our
rights, titles, benefits and interest whatsoever present and future whether
proprietary, contractual or otherwise, under, or arising out of, or
evidenced by, the Insurance Policy.
All payments made by you in connection with the Insurance Policy after
notification by the Assignee of the occurrence of an Event of Default must
be made to the Assignee or otherwise in accordance with the instructions of
the Assignee, who alone will be authorised and empowered to issue you with
a valid receipt for moneys paid by you, and no further moneys should be
paid to the Assignor except on the instructions of the Assignee.
Please will you sign, date and return to the Assignee at Princes
House, 95 Gresham Street, London EC2V 7LY, England (together with a copy to
us for our records) the attached Acknowledgement of Notice of Assignment as
your acknowledgement of the assignment effected by the Deed by no later
than 5 days after the date of this Notice.
Yours faithfully
For and on behalf of
____________________
CLOSED TYPE JSC KARAKUDUKMUNAY
ATTACHMENT TO
SCHEDULE A
PART 2
FORM OF ACKNOWLEDGEMENT OF NOTICE OF ASSIGNMENT
February, 2000
TO: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
For the Attention of: The Manager, Trust Management
CC: Closed Type JSC Karakudukmunay
Dear Sirs,
We hereby acknowledge receipt of a Notice of Assignment dated
February, 2000 (of which this is a duplicate) and of the assignment by the
Assignor to the Assignee of all its rights, interests and benefits under
the Insurance Policy. Terms defined in the Notice of Assignment shall
have, when used in this acknowledgement, the same meaning herein as
therein, unless the context otherwise requires.
We confirm that we have not received any prior notice of any pledge,
assignment, lien, charge, encumbrance or other claim over the Insurance
Policy.
We hereby acknowledge and consent to the assignment and agree to make
payments under the Insurance Policy to ABN AMRO Bank N.V., London Branch,
250 Bishopsgate, London, Account Number: 40061949 Karakudukmunay JSC,
Sorting Code 40-50-30, SWIFT code ABNAGB2L (or such other account as is
notified to us from time to time) or, on receipt by us of a notice from you
to the contrary, to pay you, without any set off or deduction of any kind
or for any reason, any and all proceeds from the Insurance Policy except as
might be otherwise permitted in the relevant loss payable clauses. We
further agree that (a) we shall advise the Assignee immediately of the
termination, cancellation or alteration of the Insurance Policy or any
failure by the Assignor to pay premiums as and when due, (b) the Insurance
Policy shall not be terminated, cancelled or altered unless the Assignee
has been given at least 45 days' prior notice (or 10 business days' prior
notice in the case of cancellation due to non-payment of premium) thereof
by facsimile transmission or telex, (c) the Assignee shall not have any
obligation whatsoever to pay any premium or costs in respect of the
Insurance Policy but shall have the right to do so in the event of non-
payment by the Assignor, and (d) we shall promptly advise the Assignee of
any act or omission of which it is aware that might void the Insurance
Policy or make the Insurance Policy invalid or unenforceable in whole or in
part.
This acknowledgement is governed by the laws of England.
McGriff, Seibels & Williams of Texas, Inc.
By: ____________________
Name:
Title:
SCHEDULE B
LETTER OF UNDERTAKING
From: McGriff, Seibels & Williams of Texas, Inc.
5333 Westheimer, Suite 600
Houston, Texas 77056
To: The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
England
Attention: The Manager, Trust Management
Fax: +44 (0)20 7696 5261/7606 0643
Dated:
Dear Sirs:
We refer to the a deed of assignment dated 7 February, 2000 (the "DEED")
between Closed Type JSC Karakudukmunay (the "ASSIGNOR") and The Law
Debenture Trust Corporation p.l.c. (the "ASSIGNEE"). Capitalised terms in
this letter that are defined in the Deed (a conformed copy of which has
been provided to and reviewed by us) have the same meanings when used in
this letter. This letter is to be construed in accordance with, and is
governed by, English law.
We confirm that:
(a) all of the insurances described in the attachment to this letter
(the "INSURANCES") are in effect on and in respect of the risks
as set out in the attached cover notes;
(b) all premiums and other payments due on or before the date of this
letter in respect of the Insurances have been paid in full;
(c) we have received no prior notice of any Security Interests or
other claim over any of the Insurances;
(d) we have acknowledged and signed the notice of assignment
delivered to us pursuant to the Deed; and
(e) the relevant loss payable clauses and the endorsements set out in
Parts I and II of Schedule C to the Deed have been included in,
or issued in respect of, the Insurance.
Pursuant to instructions received from the Assignor, we hereby undertake,
in respect of the interests of the Assignor and the Assignee in the
Insurances:
(a) to have included in, or endorsed on, each and every Insurance (as
and when issued) loss payable clauses and endorsements in the
forms set out in Parts I and II of Schedule C to the Deed or in
such form as, to the satisfaction of the Assignee, achieves
substantially the same effect;
(b) to the acknowledgement of the notice of assignment to be
delivered to us pursuant to the Deed;
(c) to notify you:
(i) at least 45 calendar days before any cancellation or
suspension of any Insurances is to take effect, or if we
intend to cancel or suspend or to give notice of
cancellation or suspension of, any Insurances for any
reason, including non-payment of premium;
(ii) at least 45 calendar days before we effect any reduction
in limits or coverage, any increase in deductibles or any
termination before the original expiry date under the
Insurances;
(iii) promptly (and in any event within 5 calendar days) if the
Assignor has not renewed any of the Insurances at least
45 calendar days before their respective expiry dates;
(iv) of any act or omission or of any event of which we have
knowledge and which might invalidate or render
unenforceable in whole or in part any of the Insurances,
as soon as is reasonably practicable and in any event
within 5 calendar days of any such act, omission or
event; and
(v) at least 45 calendar days, to the extent we are aware of
the same, prior to any action or event which might make
any of the Insurances void or voidable.
(d) to pay to ABN AMRO Bank N.V., London Branch, 250 Bishopsgate,
London, Account Number: 40061949 Karakudukmunay JSC, Sorting Code
40-50-30, SWIFT code ABNAGB2L (or such other account as is
notified to us from time to time) or, on receipt by us of a
notice from you to the contrary, to pay you, without any set off
or deduction of any kind or for any reason, any and all proceeds
from the Insurances except as might be otherwise permitted in the
relevant loss payable clauses;
(e) to maintain adequate accounting procedures with respect to the
Insurances and keep adequate records of amounts due or received
from, and amounts due or paid to, the insured under the
Insurances and amounts due or received from, and amounts due or
paid to, the reinsurers in respect of their reinsurance of our
risk (or any part of it) under the Insurances; and
(f) to pay promptly to the reinsurers or the reinsurance brokers all
premiums and other amounts due and payable.
The above undertakings are given subject to our lien, if any, on the
Insurances for premiums due under the Insurances and subject to our right
of cancellation (if any) following default in excess of 45 calendar days in
payment of such premiums, provided, subject to our continuing to be the
insurers to the Assignor, we undertake to notify you as soon as practicable
if any such premiums are not paid to us by the due date and to give you a
reasonable opportunity of paying such outstanding premiums before
notification of cancellation.
McGriff, Seibels & Williams of Texas, Inc.
By: ____________________
Name:
Title:
SCHEDULE C
FORMS OF ENDORSEMENTS AND LOSS PAYABLE CLAUSES
PART I
ENDORSEMENTS
Each assigned insurance policy ("POLICY") shall contain the following
endorsements:
1. In this endorsement:
"ASSIGNEE" means The Law Debenture Trust Corporation p.l.c.
"ADDITIONAL INSUREDS" means the Facility Agent and the Assignee.
"COMPANY" means Closed Type JSC Karakudukmunay.
"FACILITY AGENT" means Shell Capital Services Limited in its capacity
as Facility Agent (as defined in the KKM Assignment of Inurances.
"KKM ASSIGNMENT OF INSURANCES" means the Deed of Assignment dated
February, 2000 between the Company and the Assignee.
"INSURED" means any person named as the insured in this Policy.
"INSURERS" means the insurance company or companies which has or have
issued this Policy.
2. The Insurers hereby waive all rights of subrogation and any similar
rights however arising which they may have or acquire against any of the
Company, the Assignee, the Facility Agent and their officers, directors,
employees and assigns, arising out of any occurrence in respect of which
any claim is admitted under this Policy.
3. All the provisions of this Policy (except those relating to limits of
liability) shall operate as if there were a separate Policy covering each
Insured. Accordingly, the liability of the Insurers under this Policy to
any Insured shall not be conditional upon the due observance and fulfilment
by any other Insured of the terms of this Policy, and of any duties imposed
upon such other Insured, and such liability shall not be affected by any
failure in such observance of fulfilment by any such other Insured.
4. Each of the Facility Agent and the Assignee is an Additional Insured
under this Policy. The Insurers waive all rights of contribution against
any other insurance effected by the Assignee.
5. The Insurers agree that none of the Insureds shall be penalised or
prejudiced in any way by an unintentional or inadvertent misrepresentation,
non-disclosure, want of due diligence or breach of any declaration,
condition or warranty contained in this policy, provided this shall not be
applicable in respect of a deliberate misrepresentation, deliberate non-
disclosure, deliberate want of due diligence or deliberate breach of
declaration, condition or warranty, insofar as any of the aforesaid relate
to a particular claim or relate to an event which may give rise to a
particular claim.
6. The Assignee is a loss payee under this Policy and will continue to be
a loss payee under this Policy upon its renewal.
7. Neither Additional Insured shall have any duty of disclosure.
8. The sums insured and risks covered under this Policy may not be
reduced without the prior written consent of the Additional Insureds.
9. Each Insurer agrees to advise the Assignee:
(a) at least 45 calendar days before any cancellation or suspension
is to take effect, if any such Insurer cancels or suspends or gives notice
of cancellation or suspension of this Policy for any reason including non-
payment of premium;
(b) at least 45 calendar days before any reduction in limits or
coverage, any increase in deductibles or any termination before the
original expiry date is to take effect under this Policy;
(c) promptly (and in any event within 5 calendar days) if the Company
has not renewed this Policy at least 45 calendar days before its expiry
date;
(d) of any act or omission or of any event of which the Insurer has
knowledge and which might invalidate or render unenforceable in whole or in
part this Policy, as soon as is reasonably practicable and in any event
within 5 calendar days of any such act, omission or event; and
(e) at least 45 calendar days, to the extent it is aware of the same,
prior to any action or event which might make the Policy void or voidable.
This Policy shall not be cancelled or the coverage so altered or affected
before the expiry of the notice periods referred to above.
10. Neither Additional Insured shall be liable for the payment of any
premium or other fees under this Policy or performance of any other
obligation owed to the Insurers, and there shall be no set-off for unpaid
premiums in relation to the Insured seeking protection under this Policy,
but this shall not relieve the Company from its obligations to pay any
premium or other fees due under this Policy.
11. All notices to be given by the Insurers to the Additional Insured
shall be sent to the following addresses and shall take effect when
delivered by either hand, fax, or established courier service:
THE ASSIGNEE
The Law Debenture Trust Corporation p.l.c., Princes House, 95 Gresham
Street, London EC2V 7LY, England
Attention: The Manager, Trust Management
Fax: +44 (0)20 7696 5261/7606 0643
THE FACILITY AGENT
Shell Capital Services Limited , Shell Centre, London SE1 7NA, England
Attention: The Financial Controller
Fax: +44 (0)20 934 7058
PART II
LOSS PAYABLE CLAUSES
By a deed of assignment dated February, 2000 (the "ASSIGNMENT")
between Closed Type JSC Karakudukmunay (the "COMPANY") and The Law
Debenture Trust Corporation p.l.c. as security trustee for and on behalf of
the Finance Parties (as defined therein) (the "ASSIGNEE") (as the same may
be amended, assigned, novated, restated or supplemented), the Company
assigned to the Assignee all of its present and future rights, benefits,
interests, and claims under and in respect of this insurance and all of its
proceeds (including all claims relating to it and returns of premiums in
respect of it).
Until the Assignee (the "LOSS PAYEE") notifies the Insurers otherwise
in writing, all claims and recoveries under this insurance shall be paid to
the following account: ABN AMRO Bank N.V., London Branch, 250 Bishopsgate,
London, Account Number: 40061949 Karakudukmunay JSC, Sorting Code 40-50-30,
SWIFT code ABNAGB2L or such other account as the Assignee shall from time
to time advise you.
SCHEDULE D
INSURANCE CONTRACTS
KAZAKHINSTRAKH JSC
POLICY NO. PP990003/H
TABLE OF CONTENTS
PAGE
1. Definitions and Interpretation . . . . . . . . . . . . . . . . . 2
2. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties . . . . . . . . . . . . . . . . . 4
4. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Further Assurance. . . . . . . . . . . . . . . . . . . . . . . . 5
6. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 5
7. Application of Insurance Proceeds. . . . . . . . . . . . . . . . 6
8. Successors in Title. . . . . . . . . . . . . . . . . . . . . . . 6
9. Continuing and Independent Security. . . . . . . . . . . . . . . 6
10. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . 7
11. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. Certificates to be Conclusive Evidence . . . . . . . . . . . . . 9
13. Remedies and Waivers . . . . . . . . . . . . . . . . . . . . . . 9
14. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . 10
16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SCHEDULE A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Form of Notice of Assignment of Insurance Policy . . . . . . . . 13
SCHEDULE B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Letter of Undertaking. . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULE C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Forms of Endorsements and Loss Payable Clauses . . . . . . . . . 20
SCHEDULE D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . 24
==========================================================================
ASSIGNMENT OF REINSURANCE
CLOSED TYPE JSC KARAKUDUKMUNAY
AND
THE PARTIES LISTED IN APPENDIX 1
AND
THE PARTIES LISTED IN APPENDIX 2
AND
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
DATED 8 FEBRUARY 2000
==========================================================================
White & Case
7-11 Moorgate
London EC2R 6HH
This ASSIGNMENT OF REINSURANCE dated 8 February 2000 (this "Agreement")
between CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing
under the laws of the Republic of Kazakhstan (the "ASSIGNOR"); the primary
Insurers listed in Appendix 1, each for its own interest but collectively
called the "ORIGINAL INSURERS"; the Reinsurers listed in Appendix 2 each
for its own interest but collectively called the "REINSURERS" and THE LAW
DEBENTURE TRUST CORPORATION P.L.C. a corporation organised under the laws
of England (the "SECURITY TRUSTEE") (the Security Trustee and the Assignor
together, the "INSUREDS").
WHEREAS:
(A) Pursuant to a loan agreement dated 1 November 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital
Services Limited, Shell Capital Limited and the Lenders (as such terms
are defined in the Loan Agreement), the Lenders have agreed to make
available to the Assignor secured loan facilities in an aggregate
principal amount not exceeding US$24,000,000 on the terms and subject
to the conditions contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has agreed
to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligor's under the
Security Documents on trust for the Finance Parties.
(C) The Assignor is required under the terms of the Loan Agreement to
procure and maintain insurance and reinsurance of certain risks.
(D) The Original Insurers (with the agreement of the Assignor and the
Finance Parties) wish to reinsure the risks insured by them with the
Reinsurers, and the Reinsurers are willing (with the agreement of the
Original Insurers evidenced by their participation in this Agreement)
to reinsure those risks for the benefit of the Insureds, to receive
premiums from the Original Insurers or the Assignor (as appropriate)
and to pay claims direct to the Insureds on their own behalf and on
behalf of the Original Insurers.
(E) In order to ensure compliance with the laws of the Republic of
Kazakhstan, the Original Insurers have agreed to provide insurance on
a direct basis. Having regard to the size of the risks thereby
assumed by them the Original Insurers wish to reinsure facultatively
95% of the risks that each of them has assumed, and to assign to the
Insureds the benefit of those Reinsurance Contracts (as defined below)
and of any reinsurance proceeds. The Original Insurers agree to the
Reinsurers dealing directly with the Insureds and to the other
arrangements recorded in this Agreement.
(F) It is a condition precedent to making the loan under the Loan
Agreement that the parties enter into this Assignment of Reinsurance.
IT IS AGREED AS FOLLOWS:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Terms defined in the Loan Agreement have the same meanings when used
in this Agreement, unless the context otherwise requires. In addition,
the following terms have the meanings specified opposite them:
"ACT" means the Law of Property Act 1925;
"ATTORNEY" means any person so appointed by the Assignor
pursuant to Clause 6.4;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"INSURANCE PROCEEDS" means all proceeds (of whatever kind and
however arising) of any of the Underlying
Insurances and all cash and other property at
any time and from time to time receivable or
distributable in respect of or in exchange
for the Underlying Insurances.
"REINSURANCE CONTRACTS" means those contracts of reinsurance under
which the Reinsurers reinsure the Original
Insurers in respect of the Underlying
Insurances, (including, without limitation,
those contracts details of which are set out
in Appendix 5) including (for the avoidance
of doubt) any renewals of those contracts.
"SECURED LIABILITIES" means all moneys and liabilities (whether
actual or contingent) which are now or may at
any time hereafter be due, owing or payable
to (a) any of the Finance Parties from or by
the Obligors under or in connection with (i)
the Loan Agreement, (ii) this Agreement, and
(iii) any other Finance Document, together
with all legal and other costs, charges and
expenses which any of the Finance Parties may
incur in enforcing or obtaining, or
attempting to enforce or obtain, payment of
any such moneys and liabilities.
"UNDERLYING INSURANCES" means any and all contracts of insurance
which is from time to time effected and
maintained by the Assignor in respect of the
Project (including without limitation those
contracts details of which are set out in
Appendix 4), and all renewals of those
contracts, but excluding contracts of
insurance covering the Assignor's liability
to third parties.
1.2 INTERPRETATION
In this Agreement, unless the context otherwise requires:
(a) headings are for convenience only and do not affect the interpretation
of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) a reference to a natural person includes any company, partnership,
trust, joint venture, association, corporation or other body corporate
and any governmental authority or agency;
(d) a reference to a Clause, Article, party, Exhibit, Annex or Schedule is
a reference to that Clause or Article of, or that party, Exhibit,
Annex or Schedule to, this Agreement;
(e) a reference to a document includes an amendment or supplement to, or
replacement or novation of, that document but disregarding any
amendment, supplement, replacement or novation made in breach of this
Agreement; and
(f) a reference to a party to any document includes that party's
successors and permitted assigns.
1.3 INCORPORATION OF POLICY TERMS
The Reinsurance Contracts and this Agreement shall be read and
construed as one agreement between the parties.
2 PREMIUM PAYMENT ARRANGEMENTS
2.1 The Original Insurers shall promptly pay to the Reinsurers any premium
payment received by them in respect of the Reinsurance Contracts. The
Original Insurers shall make such premium payments to the Reinsurers
in such amounts and at such frequency as specified in the Reinsurance
Contracts or as otherwise directed by the Security Trustee and agreed
by the Reinsurers.
2.2 At the discretion of and on the demand of the Security Trustee, the
premium payable to the Reinsurers for the insurance protection
afforded to the Original Insurers under the Reinsurance Contracts may
be paid on the direction of the Original Insurers by the Assignor on
behalf of the Original Insurers to the Reinsurers (less any agreed
broker commission).
2.3 Payment by the Assignor to the Reinsurers pursuant to Clause 2.2 shall
discharge the liability of the Assignor to pay any premium to the
Original Insurers to the extent of its payment to the Reinsurers, and
of the Original Insurers to pay any premium to the Reinsurers.
3 CLAIMS CONTROL AND PAYMENT ARRANGEMENTS
3.1 The Original Insurers hereby delegate to the Reinsurers their
responsibility for the investigation, handling, negotiation, agreement
and settlement of all claims against the Original Insurers in respect
of which the Original Insurers are reinsured under this Agreement.
The Insureds shall notify claims and all supporting information both
to the Original Insurers and the Reinsurers. The Reinsurers shall co-
operate with the Original Insurers and keep the Original Insurers
advised of the progress of their review of all claims notified, and of
all claims that they agree or dispute. Any agreement between the
Reinsurers and the Insureds that any payment is due under or in
respect of the Underlying Insurance, and as to the amount of that
payment (including an EX GRATIA payment) shall be binding on the
Original Insurers and shall constitute a sum due from the Original
Insurers to the Insureds.
3.2 If so required by the Insureds and on the basis set out in Clauses 4.1
and 4.2, the Reinsurers will on demand settle directly with the
Insureds in accordance with the policy terms and conditions any amount
that has become due to the Insureds from the Original Insurers under
or in respect of the Underlying Insurances to the extent that the
Reinsurers have reinsured the Original Insurers in respect of the
Underlying Insurances.
3.3 The Insureds will not pursue any claim against any of the Original
Insurers for more than its net proportion of any insurance (net
meaning the proportion not reinsured by it with the Reinsurers) unless
the Reinsurers have failed to meet their obligations under Clause 3.2
within 60 days of being requested in writing to do so.
4 EFFECT OF PAYMENT BY REINSURERS
4.1 Payment by the Reinsurers in accordance with Clauses 3.2 and 4.2 shall
discharge the liability (i) of the Original Insurers to the Insureds
to the extent of that payment, and (ii) of the Reinsurers to the
Original Insurers (if any) under the Reinsurance Contracts in respect
of the reinsured proportion of the liability to which that payment
relates.
4.2 All payments by the Reinsurers to the Insureds shall be made in
accordance with the payment provisions in the Underlying Insurances
and in accordance with Clause 6.6.
4.3 If, notwithstanding the parties' intentions, any Original Insurer
shall at any time and for any reason receive payment of any moneys
from the Reinsurers in respect of or relating to the reinsurance of
any Underlying Insurance, such Original Insurers shall receive such
payment as a trustee or fiduciary agent, and shall hold such payment
on trust or as a fiduciary agent for the Insureds and shall promptly
pay those moneys in accordance with Clause 6.6.
5 COVENANT TO PAY; ASSIGNMENT
5.1 The Assignor covenants with the Security Trustee that it will on
demand pay and discharge the Secured Liabilities when due, to the
Security Trustee.
5.2 To secure on a continuing basis the due and prompt payment in full of
all or any part of the moneys that may become due to the Insureds
under the Underlying Insurances, each of the Original Insurers assigns
absolutely in favour of the Insureds all of the Original Insurers'
present and future rights, title and interest in, to and in respect of
the Reinsurance Contracts and in any moneys whatsoever received or
receivable under or in respect of the Reinsurance Contracts with full
title guarantee. This assignment extends to (i) all future renewals
of policies and contracts of reinsurance of the Underlying Insurances,
including all moneys received or receivable under such policies and
contracts, (ii) return premiums becoming due under the Reinsurance
Contracts, and (iii) the benefit of this Agreement. The Assignor and
the Security Trustee hereby accept the assignment from the Original
Insurers.
5.3 To secure on a continuing basis the due and prompt payment in full of
its obligations under the Finance Documents, the Assignor assigns
absolutely in favour of the Security Trustee all of its present and
future rights, title to and interests under Clause 5.2 of this
Agreement with full title guarantee.
5.4 In the event that any of the Original Insurers has settled fully and
finally any claim under the Underlying Insurances and has paid fully
and finally all moneys due to the Insureds under such settlement, the
benefit of the right to reimbursement in respect of that claim from
the Reinsurers under the relevant Reinsurance Contracts shall be
reassigned by the Insureds to the Original Insurers.
5.5 The Original Insurers consent to the Assignor assigning or passing on
in whole or in part the benefit of all or any of the rights and powers
acquired by it under this Agreement to the Security Trustee in
accordance with Clause 5.3 of this Agreement and the other Finance
Documents.
5.6 Neither any assignment provided for or referred to in this Agreement,
nor the receipt by the Security Trustee of any payment pursuant to
this Agreement or to the Underlying Insurances or the Reinsurance
Contracts, shall cause the Security Trustee to be under any obligation
or liability to any other party to this Agreement or to be responsible
for any other party's failure to perform its obligations under this
Agreement or under the Underlying Insurances or the Reinsurance
Contracts.
6 AGREEMENTS AND UNDERTAKINGS WITH RESPECT TO THE REINSURANCE CONTRACTS
AND UNDERLYING INSURANCES
6.1 The Reinsurers acknowledge and consent to the assignment by each of
the Original Insurers of their rights to receivables from the
Reinsurers in favour of the Insureds.
6.2 The Original Insurers and the Reinsurers agree to ensure that each of
the Reinsurance Contracts shall be endorsed for the benefit of the
Security Trustee in the terms set out in Appendix 3.
6.3 Each of the Assignor and the Original Insurers agree at any time and
from time to time on the first demand of the Security Trustee and at
the sole expense of the Assignor or Original Insurer, as appropriate,
to promptly and duly sign and deliver any document and to undertake
any actions which (A) the Security Trustee may direct for the purposes
of ensuring the validity and legality of the assignment, or (B) the
Security Trustee may direct and which are necessary in the opinion of
the Security Trustee in order to exercise any of the rights and powers
granted to the Security Trustee under this Agreement.
6.4 The Assignor appoints, irrevocably and by way of security, the
Security Trustee to be the Attorney of the Assignor (with full powers
of substitution and delegation), on its behalf and in its name or
otherwise, at such time and in such manner as the Attorney may think
fit:
(a) to do anything which the Assignor is obliged to do (but has not
done) under this Agreement including, but without limitation, to
complete and execute any transfer of, or security over, the
Reinsurance Contracts; and
(b) generally to exercise the rights conferred on the Security
Trustee in relation to the Reinsurance Contracts or under, or in
connection with, this Agreement, the Act or the Insolvency Act.
The Assignor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 6.4.
6.5 The Assignor agrees that it will consult with and keep the Security
Trustee informed at all times when negotiating, either directly or
through an agent or broker, any further Underlying Insurances or
Reinsurance Contracts with any Original Insurer, Reinsurer or other
insurance company.
6.6 All Insurance Proceeds (whether payable by the Original Insurers or,
as provided in this Agreement, on their behalf by the Reinsurers)
shall be paid directly to the KKM Proceeds Account where they shall be
held as additional security for the payment of the Secured
Liabilities.
6.7. The Assignor shall take all such action required by the Security
Trustee and by the laws of any relevant jurisdiction to perfect and
maintain the security interests intended to be created by the Assignor
under this Agreement.
7 NOTICES
7.1. All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile
transmission. Any such notice shall be deemed to be given as
follows:
(a) if by personal delivery or letter, when delivered; and
(b) if by facsimile, when the answerback is received.
However, a notice given in accordance with the above but received on a
non-working day of after business hours in the place of receipt shall
only be deemed to be given on the next working day in that place.
7.2. The address and facsimile number of the parties to this Agreement are:
(a) For the Security Trustee
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
(b) For Closed Type JSC Karakudukmunay
Microdistrict 3, Building 82
Aktau
Republic of Kazakhstan
Attention: Financial Director
Facsimile: (7-3292) 518 336
(c) For the Original Insurers:
Kazakinstrakh JSC
69 Zhibek Zholy Street, 480004
Alnaty, Republic of Kazakstan
Attention: Erbolat Ospanov, Chairman
Facsimile: (3272) 50 74 37
(d) For the Reinsurers are:
Schwarzmeer Und Ostsee Insurance Company Limited (SOVAG) U.K.
37-39 Lime Street
London EC3M 7AY
England
Attention: Pierre Bou Mansoor, SeniorUnderwriter
Facsimile: (44) 171 628 8881
or such other as each party may notify to the other parties by not
less than five Business Days' notice.
7.3. Each communication and document made or delivered by one party to
another pursuant to this Agreement 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.
8 REMEDIES AND WAIVERS, PARTIAL INVALIDITY
8.1. Time is the essence of each of the Assignor's, the Original Insurer's
and the Reinsurer's obligations under this Agreement but no failure to
exercise, nor any delay in exercising, on the part, of the Security
Trustee, 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. The Security Trustee may agree to
any waiver of any of its rights or remedies under this Agreement on
such terms as it sees fit.
8.2. 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 agreement.
9 ASSIGNMENT
The Security Trustee may at any time, without the consent of any of
the Assignor, the Original Insurers or the Reinsurers, assign or
transfer the whole or, as the case may be, any part of the Security
Trustee's rights under this Agreement to any person. None of the
Assignor, the Original Insurers and the Reinsurers may assign,
transfer, novate or dispose of or any interest in, their rights or
obligations under this Agreement.
10 LAW AND JURISDICTION
10.1. This Agreement shall be governed by English law.
10.2. (a) For the exclusive benefit of the Security Trustee and the
Facility Agent, each of the Assignor, the Original Insurers and
the Reinsurers 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 10 (Law and
Jurisdiction) 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 10.6 (Arbitration).
(b) Each of the Assignor, the Original Insurers and the
Reinsurers 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 10.2 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 it and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Clause 10.2 shall limit the right
of the Security Trustee to take proceedings against each of the
Assignor, the Original Insurers and the Reinsurers 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.
10.3. Each of the Assignor, the Original Insurers and the Reinsurers
hereby irrevocably and unconditionally:
(a) appoints the parties specified in Appendix 6 as its process agent
to receive, for and on its behalf, service of process in England
in any proceedings with respect to this Agreement;
(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.
10.4. To the extent that any of the Assignor, the Original Insurers and
the Reinsurers 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 its
undertakings, property, assets or revenue 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 and/or to the extent that in any such jurisdiction there
may be attributed to each of the Assignor, the Original Insurers
and the Reinsurers, any such immunity (whether or not claimed),
each of the Assignor, the Original Insurers and the Reinsurers
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.
10.5. Each of the Assignor, the Original Insurers and the Reinsurers
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.
10.6. 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 the Security Trustee, 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 10.6. Such arbitration
shall take place in London, England and shall be conducted by
three arbitrators, one of whom shall be nominated by the Assignor,
the Original Insurers and the Reinsurers, one by the relevant
Security Trustee and the third to be agreed between the two
arbitrators so nominated and in default the arbitrator 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.
11 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together
shall constitute one instrument.
IN WITNESS WHEREOF this Agreement has been executed as a deed by the
parties hereto and is delivered on the date stated at the beginning of this
Deed.
EXECUTED as a deed and delivered by
CLOSED TYPE JSC KARAKUDUKMUNAY acting
by /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
EXECUTED as a deed and delivered by
KAZAKINSTRAKH JSC acting
by /S/ ERBOLAT S. OSPANOV
-----------------------------
Name: Erbolat S. Ospanov
Title: Chairman of the Board
by /S/ KAIRAT M. TUREGALIEV
-----------------------------
Name: Kairat M. Turegaliev
Title: Deputy Chairman of the Board
EXECUTED as a deed and delivered by
SCHWARZMEER UND OSTSEE INSURANCE CO.
LIMITED (SOVAG) U.K. acting
by
Name:
Title:
by
Name:
Title:
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
as Security Trustee
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
APPENDIX 1
KAZAKINSTRAKH JSC
APPENDIX 2
SCHWARZMEER UND OSTSEE INSURANCE CO. LIMITED (SOVAG) U.K.
APPENDIX 3
FORMS OF ENDORSEMENTS AND LOSS PAYABLE CLAUSES
PART I
ENDORSEMENTS
Each insurance policy ("POLICY") shall contain the following endorsements:
1. In this endorsement:
"ASSIGNEE" means The Law Debenture Trust Corporation p.l.c.
"ASSIGNMENT OF REINSURANCE" means the Assignment of Reinsurance dated
8 February 2000 between the Company, Assignee and the insurers and
reinsurers named therein.
"CO-INSUREDS" means the Facility Agent and the Assignee.
"COMPANY" means Closed Type JSC Karakudukmunay
"FACILITY AGENT" means Shell Capital Services Limited in its capacity
as Facility Agent (as defined in the KKM Assignment of Inurances).
"INSURED" means any person named as the insured in this Policy.
"REINSURERS" means the insurance company or companies which has or
have issued this Policy.
2. The Reinsurers hereby waive all rights of subrogation and any similar
rights however arising which they may have or acquire against any of the
Company, the Original Insurers, the Assignee, the Facility Agent and their
officers, directors, employees and assigns, arising out of any occurrence
in respect of which any claim is admitted under this Policy.
3. All the provisions of this Policy (except those relating to limits of
liability) shall operate as if there were a separate Policy covering each
Insured. Accordingly, the liability of the Insurers under this Policy to
any Insured shall not be conditional upon the due observance and
fulfillment by any other Insured of the terms of this Policy, and of any
duties imposed upon such other Insured, and such liability shall not be
affected by any failure in such observance of fulfillment by any such other
Insured.
4. The Assignee, the Facility Agent and the Company are additional
Insureds under this Policy. The Reinsurers waive all rights of contribution
against any other insurance effected by the Assignee, the Facility Agent or
the Company.
5. The Reinsurers agree that none of the Insureds shall be penalised or
prejudiced in any way by an unintentional or inadvertent misrepresentation,
non-disclosure, want of due diligence or breach of any declaration,
condition or warranty contained in this policy, provided this shall not be
applicable in respect of a deliberate misrepresentation, deliberate non-
disclosure, deliberate want of due diligence or deliberate breach of
declaration, condition or warranty, insofar as any of the aforesaid relate
to a particular claim or relate to an event which may give rise to a
particular claim.
6. The Assignee is a loss payee under this Policy and will continue to be
a loss payee under this Policy upon its renewal.
7. Neither of the Co-Insureds shall have any duty of disclosure.
8. The sums insured and risks covered under this Policy may not be
reduced without the prior written consent of the Assignee.
9. Each Reinsurer agrees to advise the Assignee:
(a) at least 45 calendar days before any cancellation or suspension
is to take effect, if any such Insurer cancels or suspends or gives notice
of cancellation or suspension of this Policy for any reason including non-
payment of premium;
(b) at least 45 calendar days before any reduction in limits or
coverage, any increase in deductibles or any termination before the
original expiry date is to take effect under this Policy;
(c) promptly (and in any event within 5 calendar days) if the Company
has not renewed this Policy at least 45 calendar days before its expiry
date;
(d) of any act or omission or of any event of which the Reinsurer has
knowledge and which might invalidate or render unenforceable in whole or in
part this Policy, as soon as is reasonably practicable and in any event
within 5 calendar days of any such act, omission or event; and
(e) at least 45 calendar days, to the extent it is aware of the same,
prior to any action or event which might make the Policy void or voidable.
This Policy shall not be cancelled or the coverage so altered or
affected before the expiry of the notice periods referred to above.
10. Neither of the Co-Insureds shall be liable for the payment of any
premium or other fees under this Policy or performance of any other
obligation owed to the Reinsurers, and there shall be no set-off for unpaid
premiums in relation to the Insured seeking protection under this Policy,
but this shall not relieve the Company from its obligations to pay any
premium or other fees due under this Policy.
11. All notices to be given by the Reinsurers to the Co-Insureds
shall be sent to the following addresses and shall take effect when
delivered by either hand, fax, or established courier service:
THE ASSIGNEE
The Law Debenture Trust Corporation p.l.c., Princes House, 95 Gresham
Street, London EC2V 7LY, England
Attention: The Manager, Trust Management
Fax: +44 (0)20 7696 5261/7606 0643
THE FACILITY AGENT
Shell Capital Services Limited , Shell Centre, London SE1 7NA, England
Attention: The Financial Controller
Fax: +44 (0)20 934 7058
PART II
LOSS PAYABLE CLAUSES
By an assignment of reinsurance dated 8 February 2000 (the
"ASSIGNMENT") between Closed Type JSC Karakudukmunay (the "COMPANY"), The
Law Debenture Trust Corporation p.l.c. as security trustee for and on
behalf of the Finance Parties, the Original Insurers and the Reinsurers (as
such terms are defined in the Assignment) (as the same may be amended,
assigned, novated, restated or supplemented), each the Original Insurers
and the Company assigned to the Assignee all of its present and future
rights, benefits, interests, and claims under and in respect of this
insurance and all of its proceeds (including all claims relating to it and
returns of premiums in respect of it).
Until the Assignee (the "LOSS PAYEE") notifies the Reinsurers
otherwise in writing, all claims and recoveries under this insurance shall
be paid to the following account: ABN AMRO Bank N.V., London Branch, 250
Bishopsgate, London, Account Number: 40061949 Karakudukmunay JSC, Sorting
Code 40-50-30, SWIFT code ABNAGV B2L or such other account as the Assignee
shall from time to time advise you.
APPENDIX 4
KAZAKINSTRAKH JSC INSURANCE POLICY NO. PP990003/H
APPENDIX 5
SCHWARZMEER UND OSTSEE
INSURANCE COMPANY LIMITED (SOVAG) U.K.
POLICY NO. YMR110D
APPENDIX 6
AGENTS FOR SERVICE OF PROCESS
PARTY AGENT FOR SERVICE OF PROCESS
1. Closed Type JSC Karakudukmunay Law Debenture Corporate Services
Limited
Princes House, 95 Gresham Street
London
EC2V 7LY
2. Kazakinstrakh JSC Heath Kazakhstan Limited
103 Furmanov Street, Suite 312
Almaty
Republic of Kazakhstan
3. Schwarzmeer und Ostsee Insurance Heath Aviation, Marine & Energy
Co. Limited., (SOVAG) U.K 133 Houndsditch
London EC3A 7AH
England
TABLE OF CONTENTS
PAGE
1 DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Incorporation of Policy Terms. . . . . . . . . . . . . . . . . 3
2 PREMIUM PAYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . 3
3 CLAIMS CONTROL AND PAYMENT ARRANGEMENTS . . . . . . . . . . . . . . 4
4 EFFECT OF PAYMENT BY REINSURERS . . . . . . . . . . . . . . . . . . 4
5 COVENANT TO PAY; ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 4
6 AGREEMENTS AND UNDERTAKINGS WITH RESPECT TO THE REINSURANCE CONTRACTS
AND UNDERLYING INSURANCES . . . . . . . . . . . . . . . . . . . . . 5
7 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8 REMEDIES AND WAIVERS, PARTIAL INVALIDITY. . . . . . . . . . . . . . 8
9 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10 LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . 8
11 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
APPENDIX 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
APPENDIX 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
APPENDIX 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
APPENDIX 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
APPENDIX 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
APPENDIX 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
==========================================================================
CRI-CAP(D) PLEDGE AGREEMENT
CHAPARRAL RESOURCES, INC.
as Pledgor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS PLEDGE AGREEMENT (this "Agreement") is dated as of 7 February 2000
and is made by CHAPARRAL RESOURCES, INC., a corporation organized and
existing under the laws of Delaware (the "Pledgor") and THE LAW DEBENTURE
TRUST CORPORATION P.L.C., a corporation organized and existing under the
laws of England, acting as security trustee for the Finance Parties (as
defined in the Loan Agreement) (the "Security Trustee"). Except as
otherwise defined herein, terms used herein and defined in the Loan
Agreement (as defined below) shall be used herein as so defined, and
references herein to Sections shall, unless defined, be to Sections of this
Agreement. References in this Agreement to this "Agreement" or any other
deed, agreement or instrument including, without limitation, the Loan
Agreement are references to this Agreement or, as the case may be, to the
relevant deed, agreement or instrument as amended, supplemented, replaced
or novated from time to time and include references to any document which
amends, supplements, replaces, novates or is entered into, made or given
pursuant to, or in accordance with, any of the terms of this Agreement or,
as the case may be, the relevant deed, agreement or instrument.
W I T N E S S E T H :
WHEREAS, the Pledgor, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders have entered into a Loan
Agreement, dated as of 1 November, 1999 (as modified, supplemented or
amended from time to time, the "Loan Agreement"), providing for the making
of Advances as contemplated therein;
WHEREAS, at the request of the Facility Agent, the Security
Trustee has agreed to act as trustee under the Security Trust Deed and to
hold the benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties;
WHEREAS, it is a condition precedent to the making of Advances
under the Loan Agreement that the Pledgor shall have executed and delivered
to the Security Trustee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the condition described in the preceding paragraph.
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the
Security Trustee and hereby covenants and agrees with the Security Trustee
as follows:
1. SECURITY. This Agreement is for the benefit of the
Security Trustee as trustee for and on behalf of the Finance Parties to
secure the payment by the Obligors of all moneys and liabilities (whether
actual or contingent) which are now or may at any time hereafter be due,
owing or payable to any of the Finance Parties from or by the Obligors
under or in connection with (i) the Loan Agreement, (ii) this Agreement, or
(iii) any other Finance Document, together with all legal and other costs,
charges and expenses which any of the Finance Parties may incur in
enforcing or obtaining or attempting to enforce and obtain, payment of any
such moneys and liabilities (collectively, the "Secured Liabilities").
2. DEFINITION OF STOCK. As used herein, the term "Stock" shall
mean all of the issued and outstanding shares of capital stock of Central
Asian Petroleum, Inc., a corporation organized and existing under the laws
of Delaware (the "Principal Corporation") at any time owned by the Pledgor.
The Pledgor represents and warrants that on the date hereof (a) the Stock
consists of the number and type of shares of the capital stock of the
Principal Corporation as described in Annex A and (b) such Stock
constitutes that percentage of the issued and outstanding capital stock of
the Principal Corporation as is set forth in Annex A.
3. PLEDGE OF STOCK, ETC.
3.1 PLEDGE. To secure the Secured Liabilities and for the
purposes set forth in Section 1, the Pledgor: (a) hereby grants to the
Security Trustee a security interest in all of the Collateral (as defined
in Section 3.4); (b) hereby pledges and deposits as security with the
Security Trustee (except as otherwise permitted below) the Stock owned by
the Pledgor on the date hereof and delivers to the Security Trustee
certificates therefor accompanied by stock powers duly executed in blank by
the Pledgor or such other instruments of transfer as are acceptable to the
Security Trustee; and (c) hereby assigns, transfers, hypothecates,
mortgages, charges and sets over to the Security Trustee all of the
Pledgor's right, title and interest in and to such Stock (and in and to the
certificates or instruments evidencing such Stock), to be held by the
Security Trustee upon the terms and conditions set forth in this Agreement.
3.2 SUBSEQUENTLY ACQUIRED STOCK. If the Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Stock at any time
or from time to time after the date hereof, the Pledgor will forthwith
pledge and deposit such Stock as security with the Security Trustee and
deliver to the Security Trustee certificates therefor accompanied by stock
powers duly executed in blank by the Pledgor or such other instruments of
transfer as are acceptable to the Security Trustee, and will promptly
thereafter deliver to the Security Trustee a certificate executed by any of
the President, any Vice President, or the Treasurer of the Pledgor
describing such Stock and certifying that the same has been duly pledged
with the Security Trustee hereunder.
3.3 UNCERTIFICATED STOCK. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Stock (whether now owned
or hereafter acquired) is evidenced by an uncertificated security, the
Pledgor shall promptly notify the Security Trustee thereof and shall
promptly take all actions required to perfect the security created hereby
in favour of the Security Trustee under applicable law. The Pledgor
further agrees to take such actions as the Security Trustee deems necessary
or desirable to effect the foregoing and to permit the Security Trustee to
exercise any of its rights and remedies hereunder, and agrees to provide an
opinion of counsel satisfactory to the Security Trustee with respect to any
such pledge of uncertificated Stock promptly upon request of the Security
Trustee.
3.4 DEFINITIONS OF PLEDGED STOCK AND COLLATERAL. All Stock
pledged hereunder is hereinafter called the "Pledged Stock," and the
Pledged Stock, together with all proceeds thereof, including any securities
and moneys received and at any time held by the Security Trustee hereunder,
is hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Security
Trustee shall have the right with the consent of the Majority Lenders to
appoint one or more sub-agents for the purpose of retaining physical
possession of the Pledged Stock, which may be held (at the discretion of
the Security Trustee) in the name of the Pledgor, endorsed or assigned in
blank or in favor of the Security Trustee or any nominee or nominees of the
Security Trustee or a sub-agent appointed by the Security Trustee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
an Event of Default shall have occurred and be continuing, the Pledgor
shall be entitled to vote any and all Pledged Stock and to give consents,
waivers or ratifications in respect thereof, provided that no vote shall be
cast or any consent, waiver or ratification given or any action taken which
would violate or be inconsistent with any of the terms of this Agreement,
any other Finance Document or any other instrument or agreement referred to
herein or therein, or which would have the effect of impairing the position
or interests of the Security Trustee or any other Finance Party. All such
rights of the Pledgor to vote and to give consents, waivers and
ratifications shall cease in case an Event of Default shall occur and be
continuing, and Section 7 shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until an
Event of Default shall have occurred and be continuing, all cash dividends
payable in respect of the Pledged Stock shall be paid to the Pledgor,
provided that all cash dividends payable in respect of the Pledged Stock
which are determined by the Security Trustee, in its absolute discretion,
to represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid to the Security Trustee and
retained by it as part of the Collateral. The Security Trustee shall also
be entitled to receive directly, and to retain as part of the Collateral:
(a) all other or additional stock or securities or property
(other than cash) paid or distributed by way of dividend in respect of the
Pledged Stock;
(b) all other or additional stock or other securities or
property (including cash) paid or distributed in respect of the Pledged
Stock by way of stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement; and
(c) all other or additional stock or other securities or
property which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of assets, liquidation
or similar corporate reorganization.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Security Trustee shall
be entitled to exercise all of the rights, powers and remedies (whether
vested in it by this Agreement or any other Finance Document or by law) for
the protection and enforcement of its rights in respect of the Collateral,
and the Security Trustee shall be entitled, without limitation, to exercise
the following rights, which the Pledgor hereby agrees to be commercially
reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 to the Pledgor;
(b) to transfer all or any part of the Pledged Stock into the
Security Trustee's name or the name of its nominee or nominees;
(c) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Security Trustee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner of the Collateral
(the Pledgor hereby irrevocably constituting and appointing the Security
Trustee the proxy and attorney-in-fact of the Pledgor, with full power of
substitution to do so); and
(d) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the Collateral,
or any interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by the Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Security
Trustee acting on the instructions of the Facility Agent may determine,
provided that at least 10 days' notice of the time and place of any such
sale shall be given to the Pledgor. The Pledgor hereby waives and releases
to the fullest extent permitted by law any right or equity of redemption
with respect to the Collateral, whether before or after sale hereunder, and
all rights, if any, of marshalling the Collateral and any other security
for the Secured Liabilities or otherwise. At any such sale, unless
prohibited by applicable law, the Security Trustee on behalf of the other
Finance Parties may bid for and purchase all or any part of the Collateral
so sold free from any such right or equity of redemption. Neither the
Security Trustee nor any of the Finance Parties shall be liable for failure
to collect or realize upon any or all of the Collateral or for any delay in
so doing nor shall any of them be under any obligation to take any action
whatsoever with regard thereto.
8. APPLICATION OF PROCEEDS. All moneys collected by the
Security Trustee upon any sale or other disposition of the Collateral,
together with all other moneys received by the Security Trustee hereunder,
shall be applied to the payment of all costs and expenses incurred by the
Security Trustee in connection with such sale, the delivery of the
Collateral or the collection of any such moneys (including, without
limitation, attorneys' fees and expenses), and the balance of such moneys
shall be applied by the Security Trustee to the Secured Liabilities in such
order as the Security Trustee may elect or as may otherwise be agreed by
the Finance Parties. Any amounts remaining after all the Secured
Liabilities have been paid or discharged in full, shall be paid to the
Pledgor.
9. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Security Trustee hereunder (whether by virtue of the power of sale
herein granted, pursuant to judicial process or otherwise), the receipt of
the Security Trustee or the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold, and
such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Security
Trustee or such officer or be answerable in any way for the misapplication
or nonapplication thereof.
10. INDEMNITY. The Security Trustee and every sub-agent,
nominee or nominees appointed by the Security Trustee hereunder shall be
entitled to be indemnified at all times out of the Collateral in respect of
all liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Collateral, and the
Security Trustee and any such sub-agent, nominee or nominees appointed by
the Security Trustee hereunder may retain and pay all sums in respect of
the same out of any moneys received.
11. FURTHER ASSURANCES. The Pledgor agrees that it
will join with the Security Trustee in executing and, at its own expense,
file and refile under the Uniform Commercial Code such financing
statements, continuation statements and other documents in such offices as
the Security Trustee may deem necessary or desirable and wherever required
or permitted by law in order to perfect and preserve the Security Trustee's
security in the Collateral and hereby authorizes the Security Trustee to
file financing statements and amendments thereto relative to all or any
part of the Collateral without the signature of the Pledgor where permitted
by law, and agrees to do such further acts and things and to execute and
deliver to the Security Trustee such additional conveyances, assignments,
agreements and instruments as the Security Trustee may require or deem
advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Security Trustee its rights, powers and
remedies hereunder.
12. THE SECURITY TRUSTEE AS AGENT. The Security Trustee
will hold in trust in accordance with this Agreement all items of the
Collateral at any time received under this Agreement. It is expressly
understood and agreed that the obligations of the Security Trustee as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement.
13. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or
otherwise dispose of, grant any option with respect to, or create, incur,
assume or suffer to exist any Security Interest on any portion of the
Collateral (except the Security Interest created by this Agreement).
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor represents and warrants that: (a) it is the legal, record and
beneficial owner of, and has good and marketable title to, the Stock
described in Section 2 hereof, subject to no Security Interest (except the
Security Interest created by this Agreement); (b) it has full power,
authority and legal right to pledge all such Stock pursuant to this
Agreement; (c) all the shares of such Stock have been duly and validly
issued, are fully paid and nonassessable; (d) this Agreement and the
delivery of the certificates evidencing the Stock to the Security Trustee
accompanied by stock powers duly executed in blank by the Pledgor creates,
as security for the Secured Liabilities, a valid and enforceable perfected
Security Interest on all of the Collateral, in favor of the Security
Trustee for the benefit of the Security Trustee, and the other Finance
Parties, subject to no Security Interest in favor of any other person; and
(e) no consent, filing, recording or registration is required to perfect
the Security Interest purported to be created by this Agreement. The
Pledgor covenants and agrees that it will defend the Security Trustee's
right, title and security in and to the Collateral against the claims and
demands of all persons; and the Pledgor covenants and agrees that it will
have like title to and right to pledge to the Security Trustee any other
property at any time hereafter pledged to the Security Trustee as
Collateral hereunder.
15. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (a)
any renewal, extension, amendment or modification of, or addition or
supplement to or deletion from, any of the Finance Documents or any other
instrument or agreement referred to therein, or any assignment or transfer
of any thereof; (b) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such instrument or agreement
or this Agreement or any exercise or non-exercise of any right, remedy,
power or privilege under or in respect of this Agreement or any other
Finance Document; (c) any furnishing of any additional security to the
Security Trustee or any acceptance thereof or any sale, exchange, release,
surrender or realization of or upon any security by the Security Trustee;
or (d) any invalidity, irregularity or unenforceability of all or part of
the Secured Liabilities or of any security therefor.
16. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the
Security Trustee a written request or requests that the Pledgor cause any
registration, qualification or compliance under any federal or state
securities law or laws to be effected with respect to the sale or transfer
of all or any part of the Pledged Stock, the Pledgor as soon as practicable
and at its expense will use its best efforts to cause such registration to
be effected (and be kept effective) and will use its best efforts to cause
such qualification and compliance to be effected (and be kept effective) as
may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933, as then in effect (or any
similar statute then in effect), appropriate qualifications under
applicable blue sky or other state securities laws and appropriate
compliance with any other government requirements, provided that the
Security Trustee shall furnish to the Pledgor such information regarding
the Security Trustee as the Pledgor may request in writing and as shall be
required in connection with any such registration, qualification or
compliance. The Pledgor will cause the Security Trustee to be kept advised
in writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Security
Trustee such number of prospectuses, offering circulars or other documents
incident thereto as the Security Trustee from time to time may reasonably
request, and will indemnify the Security Trustee and all others
participating in the distribution of such Pledged Stock against all losses,
liabilities, claims or damages caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like prepared and disseminated
by the Pledgor or the Principal Corporation) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like prepared and disseminated by the Pledgor or the
Principal Corporation) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
the same may have been caused by an untrue statement or omission based upon
information furnished in writing to the Pledgor by the Security Trustee
expressly for use therein.
(b) If at any time when the Security Trustee shall, acting on
the instructions of the Facility Agent, determine to exercise its right to
sell or transfer all or any part of the Pledged Stock pursuant to Section
7, and such Pledged Stock or the part thereof to be sold or transferred
shall not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933, as then in effect, the Security Trustee may, acting
on the instructions of the Facility Agent, sell or transfer such Pledged
Stock or part thereof by private sale in such manner and under such
circumstances as the Security Trustee may deem necessary or advisable in
order that such sale or transfer may legally be effected without such
registration, provided that at least 10 days' notice of the time and place
of any such sale shall be given to the Pledgor. Without limiting the
generality of the foregoing, in any such event the Security Trustee, acting
on the instructions of the Facility Agent (i) may proceed to make such
private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Stock or part thereof shall have been filed
under such Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale or transfer and (iii) may restrict
such sale or transfer to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Pledged Stock or part thereof. In
the event of any such sale or transfer, the Security Trustee shall incur no
responsibility or liability for selling or transferring all or any part of
the Pledged Stock at a price which the Security Trustee, acting on the
instructions of the Facility Agent, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale or transfer were deferred until
after registration as aforesaid.
17. TERMINATION AND RELEASE. After all the Secured Liabilities
have been paid in full and irrevocably discharged, this Agreement shall
terminate, and the Security Trustee, at the request and expense of the
Pledgor, will execute and deliver to the Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Security Trustee and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Security
Trustee hereunder.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAW OF THE STATE OF DELAWARE
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OF SUCH LAWS WHICH WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE.
19. JURISDICTION. (a) FOR THE EXCLUSIVE BENEFIT OF THE
SECURITY TRUSTEE, THE PLEDGOR IRREVOCABLY AGREES THAT THE COURTS OF THE
STATE OF DELAWARE 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 SECTION 19 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 SECTION 22.
(b) THE PLEDGOR 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 SECTION 19 AND
ANY CLAIM THAT ANY SUCH PROCEEDINGS HAVE BEEN BROUGHT IN AN INCONVENIENT OR
IN APPROPRIATE FORUM AND FURTHER IRREVOCABLY AGREES THAT A JUDGMENT IN ANY
PROCEEDINGS BROUGHT IN THE COURTS OF THE STATE OF DELAWARE SHALL BE
CONCLUSIVE AND BINDING UPON THE PLEDGOR AND MAY BE ENFORCED IN THE COURTS
OF ANY OTHER JURISDICTION.
(c) NOTHING CONTAINED IN THIS SECTION 19 SHALL LIMIT THE RIGHT
OF THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE PLEDGOR 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.
20. WAIVER OF IMMUNITY. TO THE EXTENT THAT THE PLEDGOR 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 UNDERTAKINGS, 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 AND/OR TO THE EXTENT THAT IN ANY SUCH
JURISDICTION THERE MAY BE ATTRIBUTED TO THE PLEDGOR, ANY SUCH IMMUNITY
(WHETHER OR NOT CLAIMED), THE PLEDGOR 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.
21. CONSENT TO ENFORCEMENT. THE PLEDGOR 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.
22. 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 THE SECURITY TRUSTEE ACTING ON
THE INSTRUCTIONS OF THE MAJORITY LENDERS, 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
SECTION 22. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND SHALL
BE CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY THE
PLEDGOR, ONE BY THE SECURITY TRUSTEE AND THE THIRD TO BE AGREED BETWEEN THE
TWO ARBITRATORS SO NOMINATED AND IN DEFAULT 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.
23. NOTICES. (a) All notices or other communications shall be
in writing addressed to the relevant party. A written notice includes a
facsimile transmission. Any such notice shall be deemed to be given as
follows:
(i) if by personal delivery or letter, when delivered; and
(ii) 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.
(b) The address and facsimile number of the Security Trustee
are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Pledgor by not less
than five Business Days' notice.
(c) The address and facsimile number of the Pledgor are:
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Pledgor may notify to the Security Trustee by not less
than five Business Days' notice.
(d) Each communication and document made or delivered by one party to
another pursuant to this Agreement 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.
24. MISCELLANEOUS. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Pledgor may not
assign or transfer any of its rights or obligations hereunder. This
Agreement may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. The headings of the
several sections and subsections in this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement. This Agreement may be
executed in any number of counterparts and by the different parties hereto
on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Pledgor and the Security Trustee have
caused this Agreement to be executed by their representatives duly
authorized as of the date first above written.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
ANNEX A to
CRI-CAP(D)
PLEDGE AGREEMENT
LIST OF STOCK
PERCENTAGE OF
OUTSTANDING
NUMBER OF SHARES OF
NAME OF ISSUING CORPORATION TYPE OF SHARES SHARES CAPITAL STOCK
--------------------------- --------------- --------- --------------
Common Stock,
Central Asian Petroleum, Inc. no par value 1500 100%
TABLE OF CONTENTS
PAGE
1. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITION OF STOCK. . . . . . . . . . . . . . . . . . . . . . . 2
3. PLEDGE OF STOCK, ETC. . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Subsequently Acquired Stock. . . . . . . . . . . . . . . . . 2
3.3 Uncertificated Stock. . . . . . . . . . . . . . . . . . . . 2
3.4 Definitions of Pledged Stock and Collateral. . . . . . . . . 2
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. . . . . . . . . . . 3
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. . . . . . . . . . . . . 3
6. DIVIDENDS AND OTHER DISTRIBUTIONS. . . . . . . . . . . . . . . . 3
7. REMEDIES IN CASE OF EVENT OF DEFAULT. . . . . . . . . . . . . . . 3
8. APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 4
9. PURCHASERS OF COLLATERAL. . . . . . . . . . . . . . . . . . . . . 4
10. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
11. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 5
12. THE SECURITY TRUSTEE AS AGENT. . . . . . . . . . . . . . . . . . 5
13. TRANSFER BY THE PLEDGOR. . . . . . . . . . . . . . . . . . . . . 5
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. . . . . 5
15. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. . . . . . . . . . . . . . . 6
16. REGISTRATION, ETC. . . . . . . . . . . . . . . . . . . . . . . . 6
17. TERMINATION AND RELEASE. . . . . . . . . . . . . . . . . . . . . 7
18. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 7
19. JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
20. WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . . . . . . . . 8
21. CONSENT TO ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . 8
22. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
23. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
24. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
==========================================================================
KKM PLEDGE AGREEMENT
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED
as Pledgor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Pledgeholder
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
THIS PLEDGE AGREEMENT (this "Agreement") is dated 7 February 2000 between:
THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised and
existing under the laws of England, acting as security trustee for the
Finance Parties (as defined below) (hereinafter the "PLEDGEHOLDER"),
and
CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised and
existing under the laws of Guernsey (hereinafter the "PLEDGOR"),
(together, the Pledgeholder and the Pledgor shall be referred to herein as
the "PARTIES"),
WHEREAS, pursuant to a loan agreement dated 1 November, 1999 (the "LOAN
AGREEMENT") made between the Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such term is
defined in the Loan Agreement) the Lenders agreed to make
available to the Chaparral Resources, Inc. secured loan
facilities in the aggregate principal amount not exceeding
US$24,000,000, on the terms and subject to the conditions
contained in the Loan Agreement.
WHEREAS, at the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to
hold the benefit of the security constituted by or pursuant to
the Security Documents and the covenants and obligations of the
Obligors under the Security Documents on trust for the Finance
Parties.
WHEREAS, it is a condition precedent to making any Advances (as defined in
the Loan Agreement) under the Loan Agreement that the Parties
shall have executed this Pledge Agreement.
Now, therefore, the Parties on this 7 February 2000 agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Pledge Agreement, terms used herein, unless
otherwise defined in this Pledge Agreement or the context otherwise
requires, shall have the meanings ascribed to them in the Loan Agreement.
In addition, the following terms shall have the meanings given to them in
this Article 1.
"COMPANY" shall mean Closed Type JSC Karakudukmunay, a company
established under Kazakhstan Laws with its principal place of business
located at Microdistrict 3, Building 82, Aktau, Republic of Kazakhstan;
"KAZAKHSTAN LAWS" shall mean all laws, edicts, decrees, regulations,
instructions, orders and other legal acts of the Republic of Kazakhstan or
of any State Agency of Kazakhstan, as well as international treaties,
applicable to the Republic of Kazakhstan;
"OBLIGORS" shall mean, together, Chaparral Resources, Inc., the
Pledgor, Central Asian Petroleum, Inc. and the Company, or any of them;
"PARTIES" shall mean the parties to this Pledge Agreement;
"REGISTRAR" shall mean the independent registrar which may be
appointed from time to time to maintain the shareholder register of the
Company in accordance with the requirements of Kazakhstan Laws;
"RIGHTS" shall mean rights, benefits, powers, privileges, authorities,
discretions and remedies (in each case, of any nature whatsoever);
"SECURED LIABILITIES" shall mean the liability of Chaparral Resources,
Inc., as borrower, and the Pledgor, as guarantor, to pay the principal
amount of US$24,000,000 and interest no later than 30 September, 2004 or
such other time as such payment shall become due pursuant to the Loan
Agreement and all other moneys and liabilities (whether actual or
contingent) which are now or may at any time hereafter be due and payable
to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Pledge Agreement, or
(iii) the other Finance Documents, together with all legal and other costs,
charges and expenses which any of the Finance Parties may incur in
enforcing or obtaining, or attempting to enforce or obtain, payment of any
such moneys and liabilities;
"SECURITY SHARES" shall mean the Shares of the Company and all other
securities, rights, assets or property accruing or offered at any time
(whether by way of redemption, preference, options rights or otherwise) to
or in respect of the Shares or otherwise derived from the Shares and all
dividends or other income payable after the date of this Pledge Agreement
on all or any of the Shares or other securities;
"SHARES" shall mean 50% of the total number of voting (common) shares
of the Company (being, at the date of this Agreement, 100,000 voting
(common) shares, par value of 75 Tenge per share) and all other shares
owned by the Pledgor in the Company from time to time; and
"STATE AGENCIES OF KAZAKHSTAN" shall mean organs of state power and
administration of the Republic of Kazakhstan, institutions, judicial
agencies and organizations as well as their state, administrative-
territorial or local subdivisions within the Republic of Kazakhstan.
1.2 INTERPRETATION
In this Agreement, unless the context requires otherwise:
(a) references to Articles and Schedules are to articles of, and
schedules to, this Agreement;
(b) headings to Articles are for convenience only and are to be
ignored in construing this Agreement;
(c) any reference to the "Security Shares" shall be a reference to
all the Security Shares and/or to each and every part of the Security
Shares and reference to any other defined term or noun in the plural
number or collective plural shall be interpreted MUTATIS MUTANDIS in
the same manner; and
(d) references in this Agreement to this "Agreement" or any other
deed, agreement or instrument including, without limitation, the Loan
Agreement, are references to this Agreement or, as the case may be,
the relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Agreement or, as the case may be, the relevant deed,
agreement or instrument.
2 CREATION OF PLEDGE AND SUBJECT OF PLEDGE AGREEMENT
2.1 The purpose of this Pledge Agreement is to secure the prompt and
complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Liabilities.
2.2 The Pledgor hereby pledges the Security Shares to the Pledgeholder
as security for the Secured Liabilities.
2.3 The Pledgor shall immediately (and in any event within three days
of the execution of this Pledge Agreement) provide the Pledgeholder
with an original extract from the register of shareholders of the
Company issued by the Registrar evidencing the Pledgeholder's
Rights to the Security Shares.
3 CONTINUING AND INDEPENDENT SECURITY
The security created by this Pledge Agreement shall be a continuing
and independent security and shall remain in full force and effect until
the Secured Liabilities have been paid in full, notwithstanding the
insolvency or liquidation or any incapacity or change in the constitution
or status of the Pledgor, the Pledgeholder or any other person or any
intermediate settlement of account or other matter whatsoever. This Pledge
Agreement is in addition to, and independent of, any charge, guarantee or
other security or right or remedy now or at any time hereafter held by or
available to the Pledgeholder.
4 FURTHER ASSURANCES
The Pledgor undertakes, from time to time and at all times, whether
before or after the security constituted hereunder shall have become
enforceable, to execute and do at its own expense all such deeds,
assurances, agreements, instruments, acts and things as the Pledgeholder
may reasonably require for perfecting and protecting the security hereby
constituted or facilitating the realization thereof or otherwise for
enforcing the same or exercising any of the Pledgeholder's rights hereunder
and in particular, but without limitation, the Pledgor shall execute all
transfers, conveyances, assignments and assurances whatsoever and give all
notices, orders, instructions and directions whatsoever which the
Pledgeholder may reasonably request from time to time.
5 PROTECTION OF PLEDGE
The Pledgeholder shall not be liable in respect of any loss or damage
which arises out of the exercise, or the attempted or purported exercise
of, or the failure to exercise any of its powers arising hereunder unless
such loss or damage is caused by its gross negligence or wilful misconduct.
6 SECURITY SHARES
6.1 The value of the Security Shares for the purposes of complying with
Article 307.1 of the Kazakhstan Civil Code as of the date hereof is
agreed to be US$40,000,000 provided that such valuation shall not
limit the liability of the Pledgor under this Pledge Agreement or
be binding on the Parties for any other purpose.
7 RIGHTS AND DUTIES OF PLEDGOR
7.1 Until the Security Interests constituted by this Pledge Agreement
shall become enforceable:
(a) all voting and other Rights relating to the Security Shares
may be exercised by the Pledgor, or shall be exercised in
accordance with its direction, for any purpose not
inconsistent with the terms of this Pledge Agreement; and
(b) all dividends paid in respect of the Security Shares shall be
paid to the CAP(G) Receipts Account.
Upon the occurrence and during the continuance of any Event of Default
the rights of the Pledgeholder under Article 8 shall become exercisable.
7.2 The Pledgor shall:
(a) immediately (and in any event within three days following the
execution of this Pledge Agreement) execute and deliver to
the Registrar documents necessary for the registration of the
pledge with respect to the Security Shares and effect such
other registration as may be required in accordance with
Kazakhstan Laws and any other relevant jurisdiction; and
(b) within three three days following the execution of this
Pledge Agreement, provide to the Pledgeholder a duly issued
original extract from the shareholder register of the Company
certifying the proper registration therein of the pledge with
respect to the Security Shares in accordance with Kazakhstan
Laws and maintain such registration at all times.
7.3 Throughout the continuance of this Pledge Agreement and for so long
as the Secured Liabilities or any part thereof remain owing, unless
the Pledgeholder otherwise agrees in writing, the Pledgor shall be
obliged:
(a) to ensure that no person holding any of the Security Shares
as its nominee for the time being does any of the acts
prohibited hereby and to procure compliance by any such
nominee with any undertakings imposed on the Pledgor
hereunder as if such nominee had given such undertakings
itself;
(b) at all times remain the legal and beneficial owner of the
Security Shares;
(c) do or permit to be done every act or thing which the
Pledgeholder may from time to time require for the purpose of
enforcing the rights of the Pledgeholder hereunder; and
(d) not to do any of the following:
(i) create or permit to subsist any Security Interest
(other than the Security Interest created pursuant to
this Agreement) on or over all or any part of the
Security Shares or the right to receive or be paid
the same or agree to do so;
(ii) sell, transfer or otherwise dispose of the whole or
any part of the Security Shares;
(iii) grant in favor of any other person any interest in or
any option or other rights in respect of the Security
Shares; and
(iv) do or cause or permit to be done anything which may
in any way depreciate, jeopardize or otherwise
prejudice the value of the Pledgeholder's security
hereunder.
7.3 The Pledgor shall, at its own expense and cost, defend its title
and Rights to the Security Shares for the benefit of the
Pledgeholder and the Pledgeholder's Rights to and interest in the
Security Shares against any and all claims of third parties. The
Pledgor shall give the Pledgeholder immediate written notice of any
written claim by any third party relating to the Security Shares.
8 GROUNDS FOR REALIZATION OF SECURITY SHARES
8.1 If the Security Interests constituted by this Pledge Agreement shall
become enforceable:
(a) the Pledgeholder shall be entitled to exercise or direct the
exercise of all voting and other Rights now or at any time relating
to the Security Shares;
(b) the Pledgor shall comply or procure the compliance with any
direction of the Pledgeholder in respect of the exercise of the
voting and other Rights referred to in Clause 8.1(a) and shall
deliver to the Pledgeholder such forms of proxy or other
appropriate forms of authorisation to enable the Pledgeholder to
exercise such voting and other Rights relating to the Security
Shares; and
(c) the Pledgeholder shall be entitled to receive all dividends
paid in respect of the Security Shares and apply them in or towards
payment or discharge of the Secured Liabilities.
8.2 The Security Interests constituted by this Pledge Agreement shall
become enforceable at any time after the occurrence and during the
continuance of an Event of Default or if the Pledgor shall fail to
comply with any of the obligations assumed under this Pledge
Agreement, and immediately thereafter the Security Shares may be
realized in whole or in part by the Pledgeholder in a compulsory
extra-judicial procedure in accordance with Kazakhstan Laws or
otherwise as may be permitted by Kazakhstan Laws or any other
applicable law and the proceeds of such realization shall be
applied by the Pledgeholder in accordance with Article 9.
9 APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Pledge Agreement shall (except as may be otherwise required by
applicable law) be held by the Pledgeholder and applied in the following
order of priority (but without prejudice to the right of the Pledgeholder
to recover any shortfall from the Pledgor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the exercise
of the Pledgeholder's Rights;
(b) SECONDLY, in or towards the payment and discharge of such of
the Secured Liabilities in such order as the Pledgeholder in
its absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Pledgor.
10 REPRESENTATIONS AND WARRANTIES
10.1 The Pledgor represents and warrants to the Pledgeholder on the date
hereof and on each other day on which the representations and
warranties set out in the Loan Agreement are to be repeated, as
follows:
(a) that there is nothing in the constitutional documents of the
Pledgor, and there is no law or regulation binding on the
Pledgor and no provision of any existing mortgage, trust
deed, contract or agreement binding or affecting the Pledgor
or the undertaking or assets of the Pledgor which is
contravened by the execution of this Pledge Agreement or the
creation of the security hereby constituted;
(b) that it is the sole, direct, unfettered, legal and beneficial
owner of the Security Shares;
(c) the Pledgor has taken all necessary corporate and other
action in order to enter into and to perform its obligations
under this Pledge Agreement;
(d) that the issuance of the Security Shares has been duly
authorized and that the Security Shares are free from any
Security Interest (other than Permitted Security Interests);
(e) that the Security Shares are and shall remain fully paid up
and fully paid for;
(f) that the Security Shares are issued in uncertificated form
only;
(g) that the Pledgor's constitutional documents do not contain a
prohibition on voting by proxy or otherwise at a general
meeting of shareholders nor any other provisions which might
adversely affect the execution and performance of this Pledge
Agreement by the Pledgeholder or the enforceability of this
Pledge Agreement by the Pledgeholder; and
10.2 As at the date of this Pledge Agreement, the Company has an issued
share capital of 200,000 common (voting) shares, par value 75 Tenge
per share.
11 INDEMNITY
The Pledgeholder and every agent or other person appointed by the
Pledgeholder hereunder shall be entitled to be indemnified out of the
Security Shares in respect of all liabilities and expenses incurred by any
of them in the execution or purported execution of any of their respective
Rights and against all actions, proceedings, costs, claims and demands in
respect of any matter or thing done or omitted in any way relating to the
Security Shares, and the Pledgeholder and any such agent or other person
appointed by the Pledgeholder hereunder may retain and pay all sums in
respect of the same out of any moneys received.
12 TERMINATION OF PLEDGE
12.1 The pledge granted to the Pledgeholder hereunder shall terminate:
(a) when the Secured Liabilities are irrevocably discharged in
full, with the Pledgeholder having notified the Pledgor of such
irrevocable discharge and the Pledgor having notified the Registrar
of such fact by presentation of documents certifying such
irrevocable and full discharge; or
(b) by the written agreement of the Parties acting on the
instructions of the Facility Agent.
12.2 On termination of the pledge, the Pledgeholder shall, at the
request of the Facility Agent and cost of the Pledgor, do such acts
and things as may be necessary (including, without limitation,
notifying the Registrar of the termination of the pledge) to
release the Secured Shares from this pledge.
13 JURISDICTION AND APPLICABLE LAW
13.1 This Pledge Agreement and the rights and obligations of the Parties
hereunder shall be construed and interpreted in accordance with
Kazakhstan Laws.
13.2 Subject to the option referred to in Article 13.3, the Pledgor
irrevocably agrees that the courts of the Republic of Kazakhstan
are to have jurisdiction to settle any disputes which may arise out
of or in connection with this Pledge Agreement and that accordingly
any suit, action or proceedings (together in this Article 13
referred to as "proceedings") arising out of or in connection with
this Pledge Agreement may, at the option of the Pledgeholder,
acting upon the instructions of the Facility Agent, be brought in
such courts.
13.3 Notwithstanding Article 13.2, if any dispute arises in relation to
this Pledge Agreement, including any question as to existence,
validity or termination, such dispute shall, at the option of the
Pledgeholder, acting upon the instructions of the Facility Agent,
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 Article 13.3.
Such arbitration shall take place in London, England, and shall be
conducted by three arbitrators, one of whom shall be nominated by
the Pledgor, one by the Pledgeholder 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.
13.4 The Pledgor 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
Article 13.2 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 courts of the Republic of Kazakhstan shall be conclusive and
binding upon the Pledgor and may be enforced in the courts of any
other jurisdiction.
13.5 Nothing contained in this Article 13 shall limit the right of the
Pledgeholder to take proceedings against the Pledgor 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.
13.6 To the extent that the Pledgor may now or hereafter be entitled, in
any jurisdiction in which proceedings may at any time be commenced
with respect to this Pledge Agreement, to claim for itself or any
of its undertakings, 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 Pledge Agreement
and/or to the extent that in any such jurisdiction there may be
attributed to the Pledgor, any such immunity (whether or not
claimed), the Pledgor 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.
13.7 The Pledgor 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.
14 NOTIFICATIONS
14.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
14.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Pledgeholder are:
The Law Debenture Trust Corporation p.l.c
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Pledgeholder may notify to the Pledgor by not
less than five Business Days' notice.
(b) The address and facsimile number of the Pledgor are:
Central Asian Petroleum (Guernsey) Limited
c/o Chaparral Resources, Inc.,
16945 Northchase Drive, Suite 1440,
Houston, Texas 77060, USA.
Attention: Director
Facsimile: (281) 877 0985
or such other as the Pledgor may notify to the Pledgeholder by not
less than five Business Days' notice.
15 GENERAL PROVISIONS
15.1 TRANSFER OF RIGHTS AND OBLIGATIONS AND THEIR PRESERVATION
The Pledgeholder may at any time, without the consent of the Pledgor,
assign or transfer the whole or, as the case may be, any part of the
Pledgholder's rights under this Pledge Agreement to any person. The
Pledgor may not assign, transfer, novate or dispose of any of or any
interest in, its rights under this Pledge Agreement.
15.2 CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any Proceedings, a copy of a certificate
signed by an officer of the Pledgeholder as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Pledgor as to the amount or rate thereof.
15.3 COSTS AND EXPENSES
15.3.1 TRANSACTION COSTS
The Pledgor shall, on written demand (accompanied by copies of the
invoices therefor), pay the Pledgeholder all legal and other fees
on a full indemnity basis (including without limitation, all
printing, translation, communication, advertising, travel and other
out-of-pocket expenses) properly incurred by it in connection with
the negotiation, preparation and execution of this Pledge
Agreement, the completion of the transactions contemplated in this
Pledge Agreement, any amendment of this Pledge Agreement and any
calculation, approval, consent or waiver to be made or given by the
Pledgeholder pursuant to or in respect of any provision of this
Pledge Agreement.
15.3.2 PRESERVATION AND ENFORCEMENT COSTS
The Pledgor shall, from time to time on demand pay to the
Pledgeholder all costs and expenses (including legal and other fees
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 the Pledgeholder under this Pledge Agreement.
15.3.3 STAMP TAXES
The Pledgor shall pay all stamp, registration and other taxes and
duties, and all notarial registration, recording and other like
fees to which this Pledge Agreement or any judgment given in
connection with this Pledge Agreement is, or at any time may be,
subject and shall on demand indemnify the Pledgeholder 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.
15.3.4 PLEDGEHOLDER'S ADDITIONAL COSTS
The Pledgor shall, from time to time on demand of the Pledgeholder
(and without prejudice to the provisions of Articles 15.3.1 and
15.3.2 compensate the Pledgeholder at such daily and/or hourly
rates as the Pledgeholder shall from time to time determine and on
demand indemnify the Pledgeholder against all costs and expenses
(including without limitation telephone, fax, copying, travel and
personnel costs) properly incurred by the Pledgeholder in
connection with its taking such action as it may deem appropriate
or in complying with any instructions from the Finance Parties or
any request by the Pledgor in connection with:
(a) the granting or proposed granting of any waiver or
consent requested by the Pledgor under this Pledge Agreement;
(b) any actual, potential or suspected breach by the Pledgor
of its obligations under this Pledge Agreement;
(c) the occurrence of an Event of Default or a Potential
Event of Default; or
(d) any amendment or proposed amendment to this Pledge
Agreement requested by the Pledgor.
15.3.5 VALUE ADDED TAX
Any fee, cost or expense referred to in this Clause 15 is exclusive
of any value added tax or any other similar tax chargeable in
connection with that fee, cost or expense. The Pledgor 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.
15.4 ENTIRE AGREEMENT
This Pledge Agreement constitutes the entire mutual understanding of
the Parties with respect to the subject matter of this Pledge Agreement and
replaces and supersedes all prior agreements and understandings entered
into between them, whether oral or written. All amendments, modifications
additions or supplements to this Pledge Agreement shall be effective only
if they are in writing and signed by the Parties.
15.5 PARTIAL INVALIDITY
If, at any time, any provision of this Pledge 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 Pledge Agreement under the law of that
jurisdiction nor the legality, validity or enforceability of that or any
other provision of this Pledge 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.
15.6 REMEDIES AND WAIVER
Time is of the essence of the Pledgor's obligations under this Pledge
Agreement but no failure to exercise, nor any delay in exercising, on the
part of the Pledgeholder, any right or remedy under this Pledge 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 Pledge Agreement are cumulative and not exclusive of any rights or
remedies provided by law. The Pledgeholder may agree to any waiver of any
of its rights or remedies under this Pledge Agreement on such terms as it
sees fit.
15.7 HEADINGS
The Articles and other headings contained in this Pledge Agreement are
for convenience only and shall not be deemed to limit, characterize, or
interpret any provisions thereof.
15.8 LANGUAGE
This Pledge Agreement shall be drawn up in the English language (2
copies), one copy for each Party. A Russian translation thereof shall be
made for the purpose of registering the Pledge in accordance with Article
7.2 hereof, however, in the event of discrepancies between the Russian text
and the English text of this Pledge Agreement, the English text shall
prevail.
15.9 COUNTERPARTS
This Pledge Agreement may be executed in any number of counterparts
and by different parties on separate counterparts which when taken together
shall constitute one instrument.
IN WITNESS WHEREOF, this Pledge Agreement has been signed by or on behalf
of each of the Parties as of the date first above written.
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED
By: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
TABLE OF CONTENTS
Page
1. Definitions and Interpretation . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . 2
2 Creation of Pledge and Subject of Pledge Agreement . . . . . . . 3
3 Continuing and Independent Security. . . . . . . . . . . . . . . 3
4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 3
5 Protection of Pledge . . . . . . . . . . . . . . . . . . . . . . 4
6 Security Shares. . . . . . . . . . . . . . . . . . . . . . . . . 4
7 Rights and Duties of Pledgor . . . . . . . . . . . . . . . . . . 4
8 Grounds for Realization of Security Shares . . . . . . . . . . . 5
9 Application of Moneys. . . . . . . . . . . . . . . . . . . . . . 6
10 Representations and Warranties . . . . . . . . . . . . . . . . . 6
11 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12 Termination of Pledge. . . . . . . . . . . . . . . . . . . . . . 7
13 Jurisdiction and Applicable Law. . . . . . . . . . . . . . . . . 7
14 Notifications. . . . . . . . . . . . . . . . . . . . . . . . . . 8
14.1 Giving of Notices . . . . . . . . . . . . . . . . . . . . 8
14.2 Addresses for Notices . . . . . . . . . . . . . . . . . . 9
15 General Provisions . . . . . . . . . . . . . . . . . . . . . . . 9
15.1 Transfer of Rights and Obligations and Their Preservation 9
15.2 Certificates to be conclusive evidence. . . . . . . . . . 9
15.3 Costs and Expenses. . . . . . . . . . . . . . . . . . . . 10
15.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 11
15.5 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 11
15.6 Remedies and Waiver . . . . . . . . . . . . . . . . . . . 11
15.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 11
15.8 Language. . . . . . . . . . . . . . . . . . . . . . . . . 11
15.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 12
CRI - CAP(G) LOAN AGREEMENT
THIS AGREEMENT (this "Agreement") is dated 7 February 2000 BETWEEN
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of Delaware ("CRI"); and
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey, ("CAP(G)").
RECITALS
(A) KazakOil, Korporatsiya Mangistau Terra International and CAP(G)
entered into a Foundation Agreement on June 12, 1997 (as the same may be
amended from time to time, the "Foundation Agreement") pursuant to which
CAP(G) has agreed to make certain investments in Closed Type JSC
Karakadukmunay, a company organised and existing under the laws of the
Republic of Kazakhstan ("KKM") for the purpose of funding the exploration,
development, production and sale of hydrocarbons from the Agreement Field
(as defined therein) (the "Project").
(B) Pursuant to the terms of the Foundation Agreement and the
Petroleum Agreement dated August 30, 1995 (as the same may be amended from
time to time, the "Petroleum Agreement") between KKM and the Ministry of
Oil and Gas Industries of the Republic of Kazakhstan, it has been agreed
that CAP(G) will be entitled to receive repayment of all such investments
by means of Investment Recovery as specified in the Petroleum Agreement.
(C) CAP(G) has made investments in KKM for the purposes of the
Project pursuant to the terms of the Foundation Agreement and the Petroleum
Agreement amounting in aggregate to $ 31,238,000 as at 1 January 2000 (the
"Existing Investments") and has made additional investments in KKM for the
purposes of the Project since 1 January, 2000 and intends to continue to
make such investments (such investment being the "Additional Investments").
(D) In order for CAP(G) to fund its Existing Investments in KKM, CRI
has made loans to CAP(G) amounting in aggregate to $31,025,000 as at 1
January 2000 (each an "Existing Loan" and collectively the "Existing
Loans").
(E) In order for CAP(G) to fund its Additional Investments in KKM,
CRI has made additional loans to CAP(G) for the purposes of the Project
since 1 January 2000 and intends to continue to make additional loans
available to CAP(G) subject to and in accordance with the terms of this
Agreement (each an "Additional Loan" and collectively the "Additional
Loans").
(F) CRI has made arrangements for financing certain of the Additional
Loans to CAP(G) under this Agreement by entering into a loan agreement
dated 1 November 1999 (the "Commercial Loan Agreement") with, inter alia,
Shell Capital Services Limited, as Arranger and the Lenders (as such term
is defined in the Commercial Loan Agreement), pursuant to which the Lenders
have agreed to make available loans to CRI in an aggregate principal amount
not exceeding $24,000,000 subject to the terms and conditions contained in
the Commercial Loan Agreement.
(G) CRI and CAP(G) have agreed to confirm in this Agreement the terms
and conditions upon which the Existing Loans and the Additional Loans are
made.
IT IS HEREBY AGREED as follows:
1. Definitions
In this Agreement, the following terms have the meanings given to them
in this Clause 1:
"Borrowing Rate" means, at any time, the aggregate of:
(i) the rate of interest per annum for a deposit in United
States dollars for one night offered in the London interbank market to
leading banks by Citibank N.A., London Branch on the fifteenth day of
each month at 11a.m. (London time) and published by the Financial
Times newspaper in London, provided that if such fifteenth day would
otherwise fall on a day which is not a Business Day, the immediately
succeeding Business Day shall be the date for determining such rate of
interest; and
(ii) 1 % per annum.
"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.
"CAP(G) Disbursement Account" means the account of CAP(G) with ABN
AMRO Bank N.V., London branch and designated as the "CAP(G) Disbursement
Account".
"CRI Receipts Account" means the account of CRI held with ABN AMRO
Bank N.V., London branch and designated as the "CRI Receipts Account".
"Existing Interest Amount" has the meaning assigned to it in Clause
2.2(b).
"Principal Loans" means, collectively, the Existing Loans and the
Additional Loans for the time being outstanding or, as the context so
requires, an Existing Loan or an Additional Loan for the time being
outstanding.
"Quarterly Date" means 31 March, 30 June, 30 September and 31
December in any year provided that if any such day is not a Business Day,
the Quarterly Date which would otherwise fall on that day shall fall on the
immediately succeeding Business Day.
"Total Interest Amount" has the meaning assigned to it in Clause
2.2(d).
2. Terms
CRI and CAP(G) confirm and agree as follows:
2.1 Disbursements
Any Additional Loans made by CRI to CAP(G) on or after the date of
this Agreement shall be deposited into CAP(G) Disbursement Account.
2.2 Interest
(a) Interest shall be deemed to have accrued from day to day on the
principal amount of each Principal Loan from the date made up to but not
including the date of this Agreement at the Borrowing Rate from time to
time.
(b) The aggregate amount of interest deemed to have accrued on the
Existing Loans up to and including 1 January 2000 equals $3,430,000 (the
"Existing Interest Amount").
(c) On and with effect from the date of this Agreement, interest
shall accrue from day to day on the principal amount of each Principal Loan
at the Borrowing Rate applicable from time to time in respect of the
Principal Loans and from the date made, in respect of any Additional Loan.
(d) Interest accrued under Clause 2.2(a) and (c) on and with effect
from 2 January 2000 shall be added to the Existing Interest Amount and such
aggregated amount (the "Total Interest Amount") shall be payable in
accordance with Clause 2.3.
2.3 Repayment of the Principal Loans
(a) CRI and CAP(G) jointly and severally acknowledges that as at 1
January 2000 (i) the Existing Loans amount in aggregate to $31,025,000 and
(ii) the Existing Interest Amount is $3,430,000.
(b) CRI shall be entitled to repayment of all or, at its sole
discretion, part of the Principal Loans, the Total Interest Amount and all
other amounts owing to CRI under or pursuant to the terms of this Agreement
on first demand of CRI from time to time whereupon the same shall
immediately become due and payable.
(c) All payments to CRI hereunder shall be made in United States
dollars for value on the due date without set off or counterclaim to the
CRI Receipts Account.
(d) The party making a payment to another party under this Agreement
shall promptly notify the other party that the payment has been made and
the other party shall, on receipt, promptly notify the paying party that
payment has been received.
(e) CRI shall maintain a record of the amounts from time to time
owing by CAP(G) under this Agreement. Such record shall be prima facie
evidence as to the existence and amounts owing by CAP(G) under this
Agreement. CRI shall deliver a statement to CAP(G) five Business Days
after each Reduction Date detailing the amounts owing to CRI under this
Agreement at that time.
3. Cross Acceleration
If a notice is served on CRI pursuant to clause 18.31 of the
Commercial Loan Agreement, the Principal Loans, the Total Interest Amount
and all other amounts owing to CRI under or pursuant to the terms of this
Agreement shall become immediately due and payable.
4. Tax Gross-up
(a) All sums payable by CAP(G) under this Agreement shall be paid in
full without 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 CAP(G) is required by any law to make any
such deduction or withholding, CAP(G) shall, together with the relevant
payment, pay such additional amount as will ensure that CRI 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.
(b) Without limiting Clause 4(a), if CRI is required by law to make
any payment on account of tax (not being, in the case of CRI, a tax imposed
on and calculated by reference to the overall net income paid to and
received by it in the jurisdiction in which it is incorporated or in which
it is, for the time being, situated) or otherwise on or in relation to any
sum received or receivable under this Agreement by CRI (including any sum
received or receivable under this Clause 4) or any liability in respect of
any such payment is asserted, imposed, levied or assessed against CRI,
CAP(G) shall, upon demand by CRI, promptly indemnify CRI against such
payment or liability, together with any interest, penalties, costs and
expenses payable or incurred in connection therewith.
(c) If, at any time, CAP(G) is required by any law to make any
deduction or withholding from any sum payable by it under this Agreement
(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 CRI
details of such requirement or change.
(d) If CAP(G) 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 CRI, 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 CRI's payment.
5. Binding Agreement
(a) This Agreement shall be binding upon and inure to the benefit of
each party to this Agreement and its successors and assigns.
(b) CAP(G) may not assign, transfer, novate or dispose of any of, or
any interest in, its rights or obligations under this Agreement.
(c) CRI may, at its own cost, transfer all or part of its rights or
obligations under this Agreement.
6. Remedies and Waivers
(a) Time is of the essence of each party's obligations under this
Agreement but no failure to exercise, nor any delay in exercising, on the
part of one party to this Agreement, 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. Either party may agree to any
waiver of any of its rights or remedies under this Agreement on such terms
as it sees fit.
(b) 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.
7. Notices
(a) All notices or other communications shall be given in writing or
by facsimile. Any such notice shall be deemed to be given, if in writing,
when delivered and if by facsimile, when 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.
(b) The address and facsimile number of CAP(G) is:
Central Asian Petroleum (Guernsey) Limited
c/o Chapparal Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: Director
Facsimile: (281) 877 0985
or such other as CAP(G) may notify to CRI by not less than five Business
Days' notice.
(ii) The address and facsimile number of CRI is:
Chapparal Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as CRI may notify to the CAP(G) by not less than five
Business Days' notice.
8. Amendment
No amendment, modification or waiver to this Agreement shall be valid
unless it is in writing and signed by CAP(G) and CRI.
9. Law and Jurisdiction
9.1 English Law
This Agreement shall be governed by English law.
9.2 Jurisdiction
(a) CAP(G) 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 9 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 9.6.
(b) CAP(G) 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 9.2 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 parties and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Clause 9.2 shall limit the right of CRI
to take proceedings against CAP(G) 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.
9.3 Process Agent
CAP(G) hereby irrevocably and unconditionally (a) appoints Law
Debenture Corporate Services Limited, whose address is at Princes House, 95
Gresham Street, London, EC2V 7LY England as its process agent to receive,
for and on its behalf, service of process in England in any proceedings
with respect to this Agreement, (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 agrees that nothing in
this Agreement shall affect the right of CRI to serve process in any other
manner permitted by law.
9.4 Waiver of Immunity
To the extent that CAP(G) 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
and/or to the extent that in any such jurisdiction there may be attributed
to CAP(G), any such immunity (whether or not claimed), CAP(G) 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.
9.5 Consent to Enforcement
CAP(G) 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.
9.6 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 CRI, 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 9.6. Such arbitration shall take
place in London, England and shall be conducted by three arbitrators, one
of whom shall be nominated by CAP(G), one by CRI 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.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto on the date stated at the beginning of this Agreement.
CHAPARRAL RESOURCES, INC.,
By: /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED,
By: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
==========================================================================
CRI-CAP(G) CHARGE OVER SHARES
CHAPARRAL RESOURCES, INC.
as Chargor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS CHARGE OVER SHARES (this "Deed") is dated 7 February, 2000 and is
made as a Deed between:
(1) CHAPARRAL RESOURCES, INC., a company organised and existing under
the laws of the State of Delaware (the "Chargor"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined below) (the "Security Trustee").
WHEREAS:
(A) Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Chargor, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Chargor secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to the first drawings under the Loan
Agreement that the Chargor and the Security Trustee have entered into this
Deed.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases defined in the Loan
Agreement shall have, when used in this Deed (including the recitals), the
same meanings herein as therein and, in addition, in this Deed the
following terms have the meanings given to them in this Clause 1.1:
"Act" means the Law of Property Act 1925.
"Administration" means administration under Part II of the Insolvency
Act.
"Attorney" means any person appointed as such by the Chargor pursuant
to Clause 21.1 (Appointment).
"Charge" means the Security Interests created by, or pursuant to, this
Deed.
"Charged Assets" means the Shares and Derivative Assets.
"Default Rate" has the meaning set out in section 19.2(a) of the Loan
Agreement.
"Delegate" means a delegate or sub-delegate appointed pursuant to
Clause 13.5 (Delegation).
"Derivative Assets" means:
(a) allotments, rights, money or property arising from the Shares by
way of conversion, exchange, redemption, bonus, preference,
option or otherwise;
(b) dividends, distributions, interest and other income from the
Shares; and
(c) stock, shares and securities offered in addition to, or in
substitution for, the Shares.
"Dissolution" of a person includes the bankruptcy, insolvency,
liquidation, amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of that person, and
any equivalent or analogous proceedings by whatever name known and in
whatever jurisdiction, and any step taken (including, but without
limitation, the presentation of a petition or the passing of a resolution)
for or with a view to any of the foregoing.
"Insolvency Act" means the Insolvency Act 1986.
"Original Shares" means the 400,000 shares of common stock, par value
US$1.00 per share, of the Principal Company owned by the Chargor on the
date of this Deed.
"Principal Company" means Central Asian Petroleum (Guernsey) Limited,
a company organised and existing under the laws of Guernsey.
"proceedings" shall have the meaning ascribed thereto in Clause 29.2
(Jurisdiction).
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Charged Assets under this Deed or the Act.
"Rights" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed, or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
"Shares" means the Original Shares and all other shares in the
Principal Company owned by the Chargor from time to time.
"Tax" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) references to Clauses and Schedules are to clauses of, and
schedules to, this Deed;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Deed;
(c) subject to Clause 12.1 (Powers), references to a statute shall be
construed as a reference to such statute as from time to time amended
or re-enacted;
(d) any reference to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall, in respect of a
jurisdiction other than England, be deemed to include that which most
nearly approximates in that jurisdiction to the English legal term;
(e) any reference to the "Charged Assets" shall be a reference to all
the Charged Assets and/or to each and every part of the Charged Assets
and reference to any other defined term or noun in the plural number
or collective plural shall be interpreted MUTATIS MUTANDIS in the same
manner; and
(f) references in this Deed to this "Deed" or any other deed,
agreement or instrument including, without limitation, the Loan
Agreement, are references to this Deed or, as the case may be, the
relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Deed or, as the case may be, the relevant deed,
agreement or instrument.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Chargor covenants with the Security Trustee that it will on demand
pay and discharge the Secured Liabilities at the time or times when due.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made under
this Deed.
3. SECURITY
3.1 CHARGING PROVISIONS
The Chargor, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, charges the Charged
Assets by way of first fixed charge in favour of the Security Trustee for
the benefit of the Finance Parties.
3.2 OBLIGATION TO DEPOSIT CERTIFICATES RELATING TO ORIGINAL SHARES
The Chargor shall promptly deposit with the Security Trustee on the
date hereof all certificates and documents of title (if any) relating to
the Charged Assets in certificated form together with undated share
transfer forms executed in blank by the Chargor and such other documents as
the Security Trustee may require to perfect title to the Charged Assets
(duly executed by the registered holder) or for vesting or enabling the
Security Trustee to vest the same in itself, its nominees or any purchaser.
The Security Trustee may at any time, without notice to the Chargor,
complete such transfers and present them for registration.
3.3 OBLIGATION TO DEPOSIT CERTIFICATES RELATING TO DERIVATIVE
ASSETS
Subject to Clause 7 (Voting Rights, Dividends, etc), the Chargor
shall, upon the accrual, offer, issue or receipt of any Derivative Assets,
deliver or pay to the Security Trustee or procure the delivery or payment
to the Security Trustee of all such Derivative Assets together with the
stock or share certificates or other documents of title to or representing
them and undated transfers executed in blank and such other documents as
the Security Trustee may require to perfect title to the Derivative Assets
(duly executed by the registered holder) or for vesting or enabling the
Security Trustee to vest the same in itself, its nominees or any purchaser.
The Security Trustee may, at any time, without notice to the Chargor,
complete such transfers and present them for registration.
4. RESTRICTIONS ON DEALING WITH CHARGED ASSETS
4.1 NEGATIVE PLEDGE
The Chargor shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interest on,
over, or with respect to, the Charged Assets except for the Permitted
Security Interests.
4.2 DISPOSAL OF CHARGED ASSETS
The Chargor shall not, without the prior written consent of the
Security Trustee, sell, transfer, alienate or deal with the Charged Assets
or any interest in the Charged Assets or attempt or agree to do so.
4.3 CHANGE IN CHARGED ASSETS
The Chargor shall not, without the prior written consent of the
Security Trustee, cause or permit the Charged Assets to be consolidated,
sub-divided or converted, and shall take such action as the Security
Trustee may direct in respect of any proposed compromise, arrangement,
capital reorganisation, conversion, exchange, repayment or takeover offer
affecting the Charged Assets or any proposal to vary or abrogate any rights
attaching to the Charged Assets.
5. GENERAL COVENANTS
5.1 OBLIGATIONS RELATING TO CHARGED ASSETS
The Chargor shall remain liable to observe and perform all conditions
and obligations assumed by it in respect of the Charged Assets, and shall
in particular duly and promptly pay and indemnify the Security Trustee (or
the Security Trustee's nominee) against all costs and other moneys which
may lawfully be required to be paid by the Security Trustee in respect of
the Charged Assets.
5.2 NOTICES RECEIVED RELATING TO CHARGED ASSETS
The Chargor shall, forthwith upon receipt by it or its nominee from
any third party of any notices, reports, accounts, circulars or other
matters whatsoever relating to or affecting or likely to affect the Charged
Assets, give full particulars thereof and (if required) produce the same to
the Security Trustee and, if appropriate, will, at the cost of the Chargor,
forthwith either comply with the same or will, at the request of the
Security Trustee and at the Chargor's cost, make or join with the Security
Trustee in making such objections or representations against, or in respect
of, any such notices, reports, accounts, circulars or other matters as
aforesaid as the Security Trustee shall deem expedient.
5.3 NOTATION IN STATUTORY BOOKS
The Chargor shall procure that, on the date hereof, particulars of the
Security Interests created hereby be registered in the appropriate register
maintained in the book of registered shareholders of the Principal Company
maintained by the Principal Company and the Chargor shall provide the
Security Trustee with a true copy of such book of registered shareholders.
5.4 INDEMNITY
Without prejudice to the provisions of Clause 5.1 (Obligations
Relating to Charged Assets), the Chargor shall keep the Security Trustee
(and any Receiver appointed by the Security Trustee) at all times fully and
effectively indemnified from and against all actions, proceedings, costs,
charges, claims, demands, expenses, liabilities, legal and other
professional fees (including, without prejudice to the generality of the
foregoing, any Tax) whatsoever in respect of any breach, non-observance or
non- performance of any covenants, obligations, warranties or undertakings
on the part of the Chargor contained in this Deed or the making good of any
such breach, non-observance or non-performance.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPEATED REPRESENTATIONS AND WARRANTIES
The Chargor represents and warrants to the Security Trustee, as at the
date of this Deed and on each other day on which the representations and
warranties set out in the Loan Agreement are to be repeated, that:
(a) it is and will be the sole, absolute and beneficial owner and the
registered holder of the Charged Assets free from Security Interests
other than Permitted Security Interests;
(b) the Shares are and will at all times be fully paid and there are
and will be no moneys or liabilities outstanding in respect of any of
the Shares;
(c) the Shares have each been duly authorised and validly issued and
are and will at all times be free from any restriction on transfer or
rights of pre-emption;
(d) it has the necessary corporate power and authorisation to enter
into and perform its obligations under this Deed and no further act on
the part of the Chargor is necessary to enable the Chargor to enter
into and to perform its obligations under this Deed;
(e) this Deed constitutes its legal, valid, binding and enforceable
obligation and is a first fixed charge over the Charged Assets
effective in accordance with the terms of this Deed;
(f) the Charge does not and will not conflict with, or result in any
breach of, or constitute a default under, any agreement, instrument or
obligation to which the Chargor is a party or by which it is, or the
Charged Assets are, bound; and
(g) all necessary authorisations and consents to enable or entitle it
to enter into this Deed have been obtained.
6.2 OTHER REPRESENTATIONS AND WARRANTIES
The Chargor represents and warrants to the Security Trustee that, as
at the date of this Deed, the Principal Company's issued and outstanding
capital stock consists of 500,000 shares of common stock, par value US$1.00
per share.
7. VOTING RIGHTS, DIVIDENDS, ETC.
7.1 BEFORE THE CHARGE BECOMES ENFORCEABLE
Until the Charge shall become enforceable:
(a) all voting and other Rights relating to the Charged Assets may be
exercised by the Chargor, or shall be exercised in accordance with its
direction, for any purpose not inconsistent with the terms of this
Deed; and
(b) all dividends, interest and other distributions paid to the
Chargor in respect of the Charged Assets shall be paid to the CRI
Receipts Account.
7.2 AFTER THE CHARGE BECOMES ENFORCEABLE
If the Charge shall become enforceable:
(a) the Security Trustee or, as the case may be, the Receiver shall
be entitled to exercise or direct the exercise of all voting and other
Rights now or at any time relating to the Charged Assets;
(b) the Chargor shall comply or procure the compliance with any
direction of the Security Trustee or, as the case may be, the Receiver
in respect of the exercise of the voting and other Rights referred to
in Clause 7.2(a) and shall deliver to the Security Trustee or, as the
case may be, the Receiver such forms of proxy or other appropriate
forms of authorisation to enable the Security Trustee or, as the case
may be, the Receiver to exercise such voting and other Rights relating
to the Charged Assets;
(c) the Security Trustee shall be entitled to receive and retain all
dividends, interest and other distributions paid in respect of the
Charged Assets and apply them in or towards the payment or discharge
of the Secured Liabilities; and
(d) all Derivative Assets shall, if received by the Chargor, be held
on trust for, and forthwith paid or transferred to, the Security
Trustee.
8. SECURITY TRUSTEE'S DISCRETION
8.1 SECURITY TRUSTEE MAY CURE BREACHES OF COVENANTS
In the event of the failure of the Chargor to observe or perform the
provisions of this Deed, the Security Trustee may do all such acts and
things as may be necessary to secure the observance or performance thereof
without thereby becoming liable as a mortgagee in possession.
8.2 EXPENSES SO INCURRED
The Chargor hereby agrees and acknowledges that all moneys expended
and all costs incurred by the Security Trustee in carrying out any of its
discretions or powers referred to in Clause 8.1 (Security Trustee May Cure
Breaches of Covenants) shall be considered to have been properly incurred
by the Security Trustee and shall be recoverable from the Chargor under
Clause 25 (Costs and Expenses).
9. FURTHER ASSURANCES
9.1 GENERAL ASSURANCE
The Chargor shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require for perfecting, preserving or protecting the Charge or
the priority thereof and for facilitating the realisation of the Charged
Assets or the exercise of any Rights vested in the Security Trustee or in
any Receiver, and the Chargor shall, in particular but without limitation,
execute all such transfers, conveyances, assignments and assurances of the
Charged Assets whether to the Security Trustee or to its nominees or
otherwise, and give all such notices, orders, instructions and directions
which the Security Trustee may consider expedient.
9.2 ADDITIONAL SECURITY INTERESTS
Without prejudice to the generality of Clause 9.1 (General Assurance),
the Chargor shall, at its own cost, promptly execute and deliver to the
Security Trustee in such form as the Security Trustee may require such
other Security Interests over such of the Charged Assets as shall be
required by the Security Trustee (whether generally or specifically, and
whether for the purpose of obtaining legal title to the relevant Charged
Assets, creating Security Interests which are effective under the laws of a
foreign jurisdiction, or otherwise).
10. ENFORCEMENT
10.1 CHARGE TO BECOME ENFORCEABLE
The Charge shall become enforceable at any time after the occurrence
and during the continuance of an Event of Default, and immediately
thereafter the powers conferred upon the Security Trustee by section 101 of
the Act as varied and extended by this Deed shall be exercisable without
the restrictions imposed by section 103 of the Act as to the giving of
notice or otherwise.
10.2 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
10.3 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
10.4 ADDITIONAL RIGHTS OF SECURED TRUSTEE ON ENFORCEMENT
At any time at which the Charge shall be enforceable, the Security
Trustee shall have the right without any notice to or consent of the
Chargor:
(a) to take possession of, collect and get in the Charged Assets, and
in particular, but without limitation, to take any steps necessary to
vest all or any of the Charged Assets in the name of the Security
Trustee or its nominee and to receive and retain any dividends
deriving from the Charged Assets;
(b) to sell, exchange, convert into money or otherwise dispose of or
realise the Charged Assets (whether by public offer or private
contract) to any person and for such consideration (whether comprising
cash, debentures or other obligations, shares or other valuable
consideration of any kind) and on such terms (whether payable or
deliverable in a lump sum or by instalments) as the Security Trustee
may think fit, and for this purpose to complete any transfers of the
Charged Assets;
(c) to settle, adjust, refer to arbitration, compromise and arrange
any claims, accounts, disputes, questions and demands relating in any
way to the Charged Assets;
(d) to bring, prosecute, enforce, defend and abandon actions, suits
and proceedings in relation to the Charged Assets; and
(e) to do all such other acts and things it may consider necessary or
expedient for the realisation of the Charged Assets or incidental to
the exercise of any Rights conferred on it under or in connection with
this Deed or the Act and to concur in the doing of anything which it
has the right to do and to do any such thing jointly with any other
person.
11. APPOINTMENT OF RECEIVERS
11.1 APPOINTMENT
At any time after the Charge has become enforceable (whether or not
the Security Trustee shall have taken possession of the Charged Assets), at
the request of the Chargor, or following the Dissolution of the Chargor,
without any or further notice, the Security Trustee may, by deed or writing
signed by any officer or manager of the Security Trustee or any person
authorised for this purpose by the Security Trustee, appoint any person to
be Receiver, and may similarly remove any Receiver whether or not it
appoints any person in his place. If the Security Trustee appoints more
than one person as Receiver, the Security Trustee may give the relevant
persons power to act either jointly or severally.
11.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Charged
Assets or Receiver of such part of the Charged Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 12 (Receivers) shall have effect as though every reference in
that Clause to the "Charged Assets" were a reference to the part of the
Charged Assets so specified or any part thereof.
12. RECEIVERS
12.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in his own name or in
the name of the Chargor or otherwise and in such manner and upon such terms
and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Charged Assets,
to receive the consideration therefor in a lump sum or in instalments
and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Charged Assets;
(c) to do all other acts and things which he may consider desirable
or necessary for realising the Charged Assets or incidental or
conducive to any of the rights, powers or discretions conferred on a
Receiver under or by virtue of this Deed; and
(d) to exercise in relation to the Charged Assets all the powers,
authorities and things which he would be capable of exercising if he
were the absolute beneficial owner of the same.
12.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 12.1 (Powers), the powers conferred by Clause
12.1 (Powers) shall prevail.
12.3 AGENT OF CHARGOR
Any Receiver shall be the agent of the Chargor for all purposes and
the Chargor shall be solely responsible for his contracts, engagements,
acts, omissions, defaults and losses and for all liabilities incurred by
him.
12.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Chargor alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
13. RIGHTS OF SECURITY TRUSTEE
13.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the Charge has become enforceable, irrespective
of whether the Security Trustee has taken possession of the Charged Assets
or appointed a Receiver.
13.2 REDEMPTION OF PRIOR SECURITY INTERESTS
The Security Trustee may, at any time, redeem any Security Interests
over the Charged Assets having priority to the Charge or procure the
transfer thereof to the Security Trustee and may settle the accounts of
encumbrancers. Any accounts so settled shall, in the absence of manifest
error, be conclusive and binding on the Chargor. The Chargor shall, on
demand, pay to the Security Trustee all principal moneys, interest, costs,
charges, losses, liabilities and expenses of, and incidental to, any such
redemption by or transfer to the Security Trustee.
13.3 SUSPENSE ACCOUNT
The Security Trustee may, for as long as the Secured Liabilities, for
which any other person may be liable as principal debtor or as co-surety
with the Chargor, have not been paid or discharged in full, acting on the
instructions of the Facility Agent, place and retain on an interest-bearing
suspense account, for as long as it considers fit, any moneys received,
recovered or realised under, or in connection with, this Deed to the extent
of such Secured Liabilities without any obligation on the part of the
Security Trustee to apply the same in or towards the discharge of such
Secured Liabilities.
13.4 NEW ACCOUNT
At any time following (i) the Security Trustee's having received
notice (either actual or constructive) of any subsequent Security Interests
affecting the Charged Assets or (ii) the Dissolution of the Chargor, the
Security Trustee may open a new account in the name of the Chargor (whether
or not it permits any existing account to continue). If the Security
Trustee does not open such a new account, it shall nevertheless be treated
as if it had done so at the time when the notice was received or was deemed
to have been received or, as the case may be, the Dissolution commenced.
Thereafter, all payments made by the Chargor to the Security Trustee or
received by the Security Trustee for the account of the Chargor shall be
credited or treated as having been credited to the new account and shall
not operate to reduce the amount secured by this Deed at the time when the
Security Trustee received or was deemed to have received such notice or, as
the case may be, the Dissolution commenced.
13.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including without limitation power to sub-delegate) as the
Security Trustee may think fit.
13.6 SET-OFF
The Security Trustee may, without notice to the Chargor and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by a Finance Party to the Chargor, regardless
of the place of payment or booking branch, and for that purpose that
Finance Party may convert one currency into another at the market rate of
exchange which may be obtained by that Finance Party in the usual course of
business of that Finance Party on the date of set-off.
14. APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Deed shall (except as may be otherwise required by applicable
law) be held and applied in the following order of priority (but without
prejudice to the right of the Security Trustee to recover any shortfall
from the Chargor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Chargor.
15. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES
15.1 POSSESSION
If the Security Trustee, any Receiver or any Delegate shall take
possession of the Charged Assets it or he may at any time relinquish such
possession.
15.2 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Charged Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Chargor or any other person for anything except
the Security Trustee's own actual receipts; or
(b) to the Chargor or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Charged Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Charged Assets.
15.3 RECEIVER'S LIABILITY
All the provisions of Clause 15.2 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
15.4 INDEMNITY
The Security Trustee and every Receiver, Delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Charged Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
purported execution of any of their respective Rights and against all
actions, proceedings, costs, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Charged Assets, and the
Security Trustee and any such Receiver, Delegate, attorney, manager, agent
or other person appointed by the Security Trustee hereunder may retain and
pay all sums in respect of the same out of any moneys received.
16. PROTECTION OF THIRD PARTIES
16.1 CONTRACTUAL PROTECTION
No person dealing with the Security Trustee, any Receiver or any
Delegate shall be concerned to enquire:
(a) whether any event has happened upon which any of the Rights
conferred under or in connection with this Deed, the Act or the
Insolvency Act is or may be exercisable, or
(b) whether any consents, regulations, restrictions or directions
relating to such Rights have been obtained or complied with; or
(c) as to the propriety or regularity of acts purporting or intended
to be in exercise of any such Rights; or
(d) as to the application of any money borrowed or raised; or
(e) as to the application of the proceeds of enforcement.
16.2 STATUTORY PROTECTION
All the protections to purchasers contained in sections 104 and 107 of
the Act, section 42(3) of the Insolvency Act or in any other applicable
legislation shall apply to any person purchasing from, or dealing with, the
Security Trustee, any Receiver or any Delegate.
17. CONTINUING SECURITY INTERESTS AND OTHER MATTERS
17.1 CONTINUING AND INDEPENDENT SECURITY INTEREST
The Charge shall be a continuing and independent Security Interest for
the Secured Liabilities and shall not be satisfied, discharged or affected
by any intermediate payment or settlement of account (whether or not any
Secured Liabilities remain outstanding thereafter) or any other matter or
thing whatsoever.
17.2 PRIMARY OBLIGATIONS
This Deed and the Charge constitute original, independent and absolute
securities (and not secondary or collateral securities) for the Secured
Liabilities.
18. ADDITIONAL SECURITY INTERESTS
The Charge shall be in addition to, and shall not be prejudiced by,
any other Security Interests or any guarantee or indemnity or other
document which any Finance Party may, at any time, hold for the payment and
discharge of the Secured Liabilities.
19. CHARGE NOT TO BE AFFECTED
Without prejudice to Clause 17 (Continuing Security Interests and
Other Matters) and Clause 18 (Additional Security Interests), neither the
Charge nor the liability of the Chargor for the Secured Liabilities shall
be prejudiced or affected by:
(a) any variation or amendment of, or waiver or release granted
under, or in connection with, any other Security Interests or any
guarantee or indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee to an Obligor or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other person of any other Security Interests,
or any guarantee or indemnity;
(d) the Dissolution of an Obligor or any other person;
(e) any change in the constitution of an Obligor;
(f) any amalgamation, merger or reconstruction that may be effected
by the Security Trustee with any other person or any sale or transfer
of the whole or any part of the assets of the Security Trustee to any
other person;
(g) the existence of any claim, set-off or other right which an
Obligor may have at any time against the Security Trustee, any other
Finance Party or any other person;
(h) the making or absence of any demand for payment of the Secured
Liabilities on an Obligor or any other person, whether by the Security
Trustee, any other Finance Party or any other person;
(i) any arrangement or compromise entered into by the Security
Trustee or any other Finance Party with an Obligor or any other
person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee, any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of an Obligor for
the Secured Liabilities.
20. RELEASE OF CHARGED ASSETS
20.1 RELEASE OF CHARGED ASSETS
If the Security Trustee is satisfied, acting upon the instructions of
the Facility Agent, that:
(a) all Secured Liabilities have been irrevocably paid or discharged
in full and that none of the Finance Parties is under any further
obligation (contingent or otherwise) to provide any banking or other
accommodation to any Obligor under the Finance Documents; or
(b) Security Interests or a guarantee for the Secured Liabilities, in
each case acceptable to the Security Trustee, has been provided in
substitution for this Deed,
then, subject to Clause 20.2 (Retention of This Deed), the Security Trustee
shall, at the request and cost of the Chargor, execute such deeds and do
all such acts and things as may be necessary to release the Charged Assets
from the Charge.
20.2 RETENTION OF THIS DEED
If the Chargor requests the Security Trustee to release the Charged
Assets from the Charge following any payment or discharge of the Secured
Liabilities by a person other than the Chargor (a "Relevant Transaction"),
the Security Trustee shall at the cost of the Chargor execute such
documents and deeds and do all such acts and things as may be necessary to
release the Charged Assets from the Charge provided the Security Trustee is
satisfied that the payment or discharge will not be avoided, reduced or
invalidated. If the Security Trustee is not so satisfied, the Security
Trustee shall be entitled to retain this Deed and shall not be obliged to
release the Charged Assets from the Charge until the expiry of the
Retention Period (being the period which commences on the date when that
Relevant Transaction was made or given, and ends on the date falling one
month after the expiration of the maximum period within which that Relevant
Transaction can be avoided, reduced or invalidated by virtue of any
applicable law or for any other reason whatsoever) in relation to that
Relevant Transaction. If, at any time before the expiry of that Retention
Period, the Dissolution of such other person shall have commenced, the
Security Trustee may continue to retain this Deed and shall not be obliged
to release the Charged Assets from the Charge for such further period as
the Security Trustee may determine.
21. POWER OF ATTORNEY
21.1 APPOINTMENT
The Chargor appoints, irrevocably and by way of security, the Security
Trustee, every Receiver and every Delegate severally to be the Attorney of
the Chargor (with full powers of substitution and delegation), on its
behalf and in its name or otherwise, at such time and in such manner as the
Attorney may think fit:
(a) to do anything which the Chargor is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or Security Interests over, the Charged
Assets; and
(b) generally to exercise the Rights conferred on the Security
Trustee, every Receiver or every Delegate in relation to the Charged
Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
21.2 RATIFICATION
The Chargor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 21.1 (Appointment).
22. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the Chargor's
liability under this Deed or if that liability is converted into a claim,
proof, judgment or order in a currency other than Dollars:
(a) the Chargor shall as an independent obligation indemnify the
Security Trustee against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business and
after expenses and commissions is less than the amount owed by the
Chargor to the Security Trustee in Dollars, the Chargor shall
forthwith on demand pay to the Security Trustee an amount in Dollars
equal to the deficit; and
(c) the Chargor shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Chargor waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which such
amount is expressed to be payable.
23. DEFAULT INTEREST
If the Chargor fails to pay any Secured Liability on the due date for
payment, the Chargor shall pay to the Security Trustee on demand interest
at the Default Rate from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 25 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liability became due,
until full payment and discharge of the relevant Secured Liability (both
before and after any judgment).
24. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any proceedings, a copy of a certificate
signed by an officer of the Security Trustee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Chargor as to the amount or rate of such indebtedness.
25. COSTS AND EXPENSES
25.1 TRANSACTION COSTS
The Chargor shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by the Security Trustee in connection with the
negotiation, preparation and execution of this Deed, the completion of the
transactions contemplated in this Deed, any amendment of this Deed and any
calculation, approval, consent or waiver to be made or given by the
Security Trustee pursuant to or in respect of any provision of this Deed.
25.2 PRESERVATION AND ENFORCEMENT COSTS
The Chargor shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including without limitation legal and
other fees 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 the Security
Trustee under this Deed.
25.3 STAMP TAXES
The Chargor shall pay all stamp, registration and other taxes and
duties, and all notarial registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
25.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Chargor shall, from time to time on demand of the Security Trustee
(and without prejudice to the provisions of Clause 25.1 (Transaction Costs)
and 25.2 (Preservation and Enforcement Costs) compensate the Security
Trustee at such daily and/or hourly rates as the Security Trustee shall
from time to time determine and on demand indemnify the Security Trustee
against all costs and expenses (including, without limitation, telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Finance Parties
or any request by the Chargor in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Chargor under this Deed;
(b) any actual, potential or suspected breach by the Chargor of its
obligations under this Deed;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Chargor.
25.5 TAX
Any fee, cost or expense referred to in this Clause 25 (Costs and
Expenses) is exclusive of any Tax chargeable in connection with that fee,
cost or expense. The Chargor shall pay any Tax so chargeable at the same
time as it pays the relevant fee, cost or expense.
26. NOTICES
26.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission. Any
such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
26.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Chargor by not
less than five Business Days' notice.
(b) The address and facsimile number of the Chargor are:
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Chargor may notify to the Security Trustee by not
less than five Business Days' notice.
26.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
27. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
27.1 REMEDIES AND WAIVERS
Time is of the essence of the Chargor's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
27.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
28. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Chargor, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person to whom the
whole or any part of the Security Trustee's Rights under the Loan Agreement
shall be assigned or transferred. The Chargor may not assign, transfer,
novate or dispose of any of or any interest in, its rights or obligations
under this Deed.
29. LAW AND JURISDICTION
29.1 ENGLISH LAW
THIS DEED SHALL BE GOVERNED BY ENGLISH LAW.
29.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE SECURITY TRUSTEE AND THE
FACILITY AGENT, THE CHARGOR 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 DEED AND THAT ACCORDINGLY ANY SUIT, ACTION OR
PROCEEDINGS (TOGETHER IN THIS CLAUSE 29 (LAW AND JURISDICTION) REFERRED TO
AS "PROCEEDINGS") ARISING OUT OF OR IN CONNECTION WITH THIS DEED MAY BE
BROUGHT IN SUCH COURTS, SUBJECT TO THE OPTION REFERRED TO IN CLAUSE 29.6
(ARBITRATION).
(B) THE CHARGOR 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 29.2 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 THE CHARGOR AND MAY BE ENFORCED IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) NOTHING CONTAINED IN THIS CLAUSE 29.2 SHALL LIMIT THE RIGHT OF
THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE CHARGOR 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.
29.3 PROCESS AGENT
THE CHARGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) APPOINTS LAW DEBENTURE CORPORATE SERVICES LIMITED, WHOSE ADDRESS
IS AT PRINCES HOUSE, 95 GRESHAM STREET, LONDON EC2V 7LY, ENGLAND AS ITS
PROCESS AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN
ENGLAND IN ANY PROCEEDINGS WITH RESPECT TO THIS DEED;
(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 DEED SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
29.4 WAIVER OF IMMUNITY
TO THE EXTENT THAT THE CHARGOR MAY NOW OR HEREAFTER BE ENTITLED, IN
ANY JURISDICTION IN WHICH PROCEEDINGS MAY AT ANY TIME BE COMMENCED WITH
RESPECT TO THIS DEED, TO CLAIM FOR ITSELF OR ANY OF ITS UNDERTAKINGS,
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 DEED AND/OR TO
THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED TO THE
CHARGOR, ANY SUCH IMMUNITY (WHETHER OR NOT CLAIMED), THE CHARGOR 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.
29.5 CONSENT TO ENFORCEMENT
THE CHARGOR 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.
29.6 ARBITRATION
IF ANY DISPUTE ARISES IN RELATION TO THIS DEED, INCLUDING ANY QUESTION
AS TO EXISTENCE, VALIDITY OR TERMINATION, SUCH DISPUTE SHALL, AT THE OPTION
ONLY OF THE SECURITY TRUSTEE, 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
29.6. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND SHALL BE
CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY THE
CHARGOR, ONE BY THE SECURITY TRUSTEE 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.
30. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a Deed by the
parties hereto and is delivered on the date stated at the beginning of this
Deed.
EXECUTED as a deed and delivered by
CHAPARRAL RESOURCES, INC. acting
by /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . 3
2. COVENANT TO DISCHARGE OBLIGATIONS. . . . . . . . . . . . . . . . 3
2.1 Covenant to Pay . . . . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands . . . . . . . . . . . . . . . . . . . 3
3. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Charging Provisions . . . . . . . . . . . . . . . . . . . 3
3.2 Obligation to Deposit Certificates relating to
Original Shares . . . . . . . . . . . . . . . . . . . . . 4
3.3 Obligation to deposit Certificates relating to
Derivative Assets . . . . . . . . . . . . . . . . . . . . 4
4. RESTRICTIONS ON DEALING WITH CHARGED ASSETS. . . . . . . . . . . 4
4.1 Negative Pledge . . . . . . . . . . . . . . . . . . . . . 4
4.2 Disposal of Charged Assets. . . . . . . . . . . . . . . . 4
4.3 Change in Charged Assets. . . . . . . . . . . . . . . . . 4
5. GENERAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Obligations Relating to Charged Assets. . . . . . . . . . 4
5.2 Notices Received Relating to Charged Assets . . . . . . . 5
5.3 Notation in Statutory Books . . . . . . . . . . . . . . . 5
5.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 5
6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 5
6.1 Repeated Representations and Warranties . . . . . . . . . 5
6.2 Other Representations and Warranties. . . . . . . . . . . 6
7. VOTING RIGHTS, DIVIDENDS, ETC. . . . . . . . . . . . . . . . . . 6
7.1 Before the Charge Becomes Enforceable . . . . . . . . . . 6
7.2 After the Charge Becomes Enforceable. . . . . . . . . . . 6
8. SECURITY TRUSTEE'S DISCRETION. . . . . . . . . . . . . . . . . . 7
8.1 Security Trustee May Cure Breaches of Covenants . . . . . 7
8.2 Expenses so Incurred. . . . . . . . . . . . . . . . . . . 7
9. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 7
9.1 General Assurance . . . . . . . . . . . . . . . . . . . . 7
9.2 Additional Security Interests . . . . . . . . . . . . . . 7
10. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 Charge to Become Enforceable . . . . . . . . . . . . . . . 8
10.2 Section 101 of the Act . . . . . . . . . . . . . . . . . . 8
10.3 Sections 93 and 103 of the Act . . . . . . . . . . . . . . 8
10.4 Additional Rights of Secured Trustee on Enforcement. . . . 8
11. APPOINTMENT OF RECEIVERS. . . . . . . . . . . . . . . . . . . . . 9
11.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . 9
11.2 Scope of Appointment . . . . . . . . . . . . . . . . . . . 9
12. RECEIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12.2 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 10
12.3 Agent of Chargor . . . . . . . . . . . . . . . . . . . . . 10
12.4 Remuneration . . . . . . . . . . . . . . . . . . . . . . . 10
13. RIGHTS OF SECURITY TRUSTEE. . . . . . . . . . . . . . . . . . . . 10
13.1 Rights of Receiver . . . . . . . . . . . . . . . . . . . . 10
13.2 Redemption of Prior Security Interests . . . . . . . . . . 10
13.3 Suspense Account . . . . . . . . . . . . . . . . . . . . . 10
13.4 New Account. . . . . . . . . . . . . . . . . . . . . . . . 10
13.5 Delegation . . . . . . . . . . . . . . . . . . . . . . . . 11
13.6 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . 11
14. APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . . . 11
15. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES. . . . . . 11
15.1 Possession . . . . . . . . . . . . . . . . . . . . . . . . 11
15.2 Security Trustee's Liability . . . . . . . . . . . . . . . 12
15.3 Receiver's Liability . . . . . . . . . . . . . . . . . . . 12
15.4 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 12
16. PROTECTION OF THIRD PARTIES . . . . . . . . . . . . . . . . . . . 12
16.1 Contractual Protection . . . . . . . . . . . . . . . . . . 12
16.2 Statutory Protection . . . . . . . . . . . . . . . . . . . 13
17. CONTINUING SECURITY INTERESTS AND OTHER MATTERS . . . . . . . . . 13
17.1 Continuing and Independent Security Interest . . . . . . . 13
17.2 Primary Obligations. . . . . . . . . . . . . . . . . . . . 13
18. ADDITIONAL SECURITY INTERESTS . . . . . . . . . . . . . . . . . . 13
19. CHARGE NOT TO BE AFFECTED . . . . . . . . . . . . . . . . . . . . 13
20. RELEASE OF CHARGED ASSETS . . . . . . . . . . . . . . . . . . . . 14
20.1 Release of Charged Assets. . . . . . . . . . . . . . . . . 14
20.2 Retention of This Deed . . . . . . . . . . . . . . . . . . 14
21. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . 15
21.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . 15
21.2 Ratification . . . . . . . . . . . . . . . . . . . . . . . 15
22. CURRENCY INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . 15
23. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . 15
24. CERTIFICATES TO BE CONCLUSIVE EVIDENCE. . . . . . . . . . . . . . 16
25. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 16
25.1 Transaction Costs. . . . . . . . . . . . . . . . . . . . . 16
25.2 Preservation and Enforcement Costs . . . . . . . . . . . . 16
25.3 Stamp Taxes. . . . . . . . . . . . . . . . . . . . . . . . 16
25.4 Security Trustee's Additional Costs. . . . . . . . . . . . 16
25.5 Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
26. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
26.1 Giving of Notices. . . . . . . . . . . . . . . . . . . . . 17
26.2 Addresses for Notices. . . . . . . . . . . . . . . . . . . 17
26.3 English Language . . . . . . . . . . . . . . . . . . . . . 18
27. REMEDIES AND WAIVERS, PARTIAL INVALIDITY. . . . . . . . . . . . . 18
27.1 Remedies and Waivers . . . . . . . . . . . . . . . . . . . 18
27.2 Partial Invalidity . . . . . . . . . . . . . . . . . . . . 18
28. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
29. LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . 19
29.1 ENGLISH LAW. . . . . . . . . . . . . . . . . . . . . . . . 19
29.2 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . 19
29.3 PROCESS AGENT. . . . . . . . . . . . . . . . . . . . . . . 19
29.4 WAIVER OF IMMUNITY . . . . . . . . . . . . . . . . . . . . 20
29.5 CONSENT TO ENFORCEMENT . . . . . . . . . . . . . . . . . . 20
29.6 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . 20
30. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
========================================================================
CAP(D)-CAP(G) CHARGE OVER SHARES
CENTRAL ASIAN PETROLEUM, INC.
as Chargor
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February 2000
========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
THIS CHARGE OVER SHARES (this "Deed") is dated 7 February 2000 and is
made as a Deed between:
(1) CENTRAL ASIAN PETROLEUM, INC., a company organised and existing
under the laws of the State of Delaware (the "Chargor"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, acting as security trustee for the
Finance Parties (as defined below) (the "Security Trustee").
WHEREAS
(A) Pursuant to a loan agreement dated 1 November 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as such terms are defined
in the Loan Agreement), the Lenders have agreed to make available to the
Borrower secured loan facilities in an aggregate principal amount not
exceeding US$24,000,000 on the terms and subject to the conditions
contained in the Loan Agreement.
(B) At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under the Security Trust Deed and to hold the
benefit of the security constituted by or pursuant to the Security
Documents and the covenants and obligations of the Obligors under the
Security Documents on trust for the Finance Parties.
(C) It is a condition precedent to the first drawings under the Loan
Agreement that the Chargor and the Security Trustee have entered into this
Deed.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Unless the context requires otherwise or a word or phrase is
differently defined in this Deed, words and phrases defined in the Loan
Agreement shall have, when used in this Deed (including the recitals), the
same meanings herein as therein and, in addition, in this Deed the
following terms have the meanings given to them in this Clause 1.1:
"Act" means the Law of Property Act 1925.
"Administration" means administration under Part II of the Insolvency
Act.
"Attorney" means any person appointed as such by the Chargor pursuant
to Clause 21.1 (Appointment).
"Charge" means the Security Interests created by, or pursuant to, this
Deed.
"Charged Assets" means the Shares and Derivative Assets.
"Default Rate" has the meaning set out in section 19.2(a) of the Loan
Agreement.
"Delegate" means a delegate or sub-delegate appointed pursuant to
Clause 13.5 (Delegation).
"Derivative Assets" means:
(a) allotments, rights, money or property arising from the Shares by
way of conversion, exchange, redemption, bonus, preference,
option or otherwise;
(b) dividends, distributions, interest and other income from the
Shares; and
(c) stock, shares and securities offered in addition to, or in
substitution for, the Shares.
"Dissolution" of a person includes the bankruptcy, insolvency,
liquidation, amalgamation, reconstruction, reorganisation, Administration,
administrative or other receivership, or dissolution of that person, and
any equivalent or analogous proceedings by whatever name known and in
whatever jurisdiction, and any step taken (including, but without
limitation, the presentation of a petition or the passing of a resolution)
for or with a view to any of the foregoing.
"Insolvency Act" means the Insolvency Act 1986.
"Original Shares" means the 100,000 shares of common stock, par value
US$1.00 per share, of the Principal Company owned by the Chargor on the
date of this Deed.
"Principal Company" means Central Asian Petroleum (Guernsey) Limited,
a company organised and existing under the laws of Guernsey.
"proceedings" shall have the meaning ascribed thereto in Clause 29.2
(Jurisdiction).
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Charged Assets under this Deed or the Act.
"Rights" means rights, benefits, powers, privileges, authorities,
discretions, remedies, easements, quasi-easements and appurtenances (in
each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed, or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, or attempting to enforce or obtain, payment of any such moneys
and liabilities.
"Shares" means the Original Shares and all other shares in the
Principal Company owned by the Chargor from time to time.
"Tax" includes any present or future tax (including value added tax),
levy, impost, duty, charge, fee, deduction or withholding of any nature,
and any interest or penalty in respect thereof.
1.2 INTERPRETATION
In this Deed, unless the context requires otherwise:
(a) references to Clauses and Schedules are to clauses of, and
schedules to, this Deed;
(b) headings to Clauses are for convenience only and are to be
ignored in construing this Deed;
(c) subject to Clause 12.1 (Powers), references to a statute shall be
construed as a reference to such statute as from time to time amended
or re-enacted;
(d) any reference to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall, in respect of a
jurisdiction other than England, be deemed to include that which most
nearly approximates in that jurisdiction to the English legal term;
(e) any reference to the "Charged Assets" shall be a reference to all
the Charged Assets and/or to each and every part of the Charged Assets
and reference to any other defined term or noun in the plural number
or collective plural shall be interpreted MUTATIS MUTANDIS in the same
manner; and
(f) references in this Deed to this "Deed" or any other deed,
agreement or instrument including, without limitation, the Loan
Agreement, are references to this Deed or, as the case may be, the
relevant deed, agreement or instrument as amended, supplemented,
replaced or novated from time to time and include references to any
document which amends, supplements, replaces, novates or is entered
into, made or given pursuant to, or in accordance with, any of the
terms of this Deed or, as the case may be, the relevant deed,
agreement or instrument.
2. COVENANT TO DISCHARGE OBLIGATIONS
2.1 COVENANT TO PAY
The Chargor covenants with the Security Trustee that it will on demand
pay and discharge the Secured Liabilities at the time or times when due,
provided that the recourse of the Security Trustee to the Chargor under
this Deed shall be limited to the extent of the assets the subject of this
Deed.
2.2 VALIDITY OF DEMANDS
Any person dealing with the Security Trustee or any Receiver shall not
be concerned to see or enquire as to the validity of any demand made under
this Deed.
3. SECURITY
3.1 CHARGING PROVISIONS
The Chargor, with full title guarantee and as continuing security for
the payment and discharge of the Secured Liabilities, charges the Charged
Assets by way of first fixed charge in favour of the Security Trustee for
the benefit of the Finance Parties.
3.2 OBLIGATION TO DEPOSIT CERTIFICATES RELATING TO ORIGINAL SHARES
The Chargor shall promptly deposit with the Security Trustee on the
date hereof all certificates and documents of title (if any) relating to
the Charged Assets in certificated form together with undated share
transfer forms executed in blank by the Chargor and such other documents as
the Security Trustee may require to perfect title to the Charged Assets
(duly executed by the registered holder) or for vesting or enabling the
Security Trustee to vest the same in itself, its nominees or any purchaser.
The Security Trustee may at any time, without notice to the Chargor,
complete such transfers and present them for registration.
3.3 OBLIGATION TO DEPOSIT CERTIFICATES RELATING TO DERIVATIVE
ASSETS
Subject to Clause 7 (Voting Rights, Dividends, etc), the Chargor
shall, upon the accrual, offer, issue or receipt of any Derivative Assets,
deliver or pay to the Security Trustee or procure the delivery or payment
to the Security Trustee of all such Derivative Assets together with the
stock or share certificates or other documents of title to or representing
them and undated transfers executed in blank and such other documents as
the Security Trustee may require to perfect title to the Derivative Assets
(duly executed by the registered holder) or for vesting or enabling the
Security Trustee to vest the same in itself, its nominees or any purchaser.
The Security Trustee may, at any time, without notice to the Chargor,
complete such transfers and present them for registration.
4. RESTRICTIONS ON DEALING WITH CHARGED ASSETS
4.1 NEGATIVE PLEDGE
The Chargor shall not, without the prior written consent of the
Security Trustee, create or permit to subsist any Security Interest on,
over, or with respect to, the Charged Assets except for the Permitted
Security Interests.
4.2 DISPOSAL OF CHARGED ASSETS
The Chargor shall not, without the prior written consent of the
Security Trustee, sell, transfer, alienate or deal with the Charged Assets
or any interest in the Charged Assets or attempt or agree to do so.
4.3 CHANGE IN CHARGED ASSETS
The Chargor shall not, without the prior written consent of the
Security Trustee, cause or permit the Charged Assets to be consolidated,
sub-divided or converted, and shall take such action as the Security
Trustee may direct in respect of any proposed compromise, arrangement,
capital reorganisation, conversion, exchange, repayment or takeover offer
affecting the Charged Assets or any proposal to vary or abrogate any rights
attaching to the Charged Assets.
5. GENERAL COVENANTS
5.1 OBLIGATIONS RELATING TO CHARGED ASSETS
The Chargor shall remain liable to observe and perform all conditions
and obligations assumed by it in respect of the Charged Assets, and shall
in particular duly and promptly pay and indemnify the Security Trustee (or
the Security Trustee's nominee) against all costs and other moneys which
may lawfully be required to be paid by the Security Trustee in respect of
the Charged Assets.
5.2 NOTICES RECEIVED RELATING TO CHARGED ASSETS
The Chargor shall, forthwith upon receipt by it or its nominee from
any third party of any notices, reports, accounts, circulars or other
matters whatsoever relating to or affecting or likely to affect the Charged
Assets, give full particulars thereof and (if required) produce the same to
the Security Trustee and, if appropriate, will, at the cost of the Chargor,
forthwith either comply with the same or will, at the request of the
Security Trustee and at the Chargor's cost, make or join with the Security
Trustee in making such objections or representations against, or in respect
of, any such notices, reports, accounts, circulars or other matters as
aforesaid as the Security Trustee shall deem expedient.
5.3 NOTATION IN STATUTORY BOOKS
The Chargor shall procure that, on the date hereof, particulars of the
Security Interests created hereby be registered in the appropriate register
maintained in the book of registered shareholders of the Principal Company
maintained by the Principal Company and the Chargor shall provide the
Security Trustee with a true copy of such book of registered shareholders.
5.4 INDEMNITY
Without prejudice to the provisions of Clause 5.1 (Obligations
Relating to Charged Assets), the Chargor shall keep the Security Trustee
(and any Receiver appointed by the Security Trustee) at all times fully and
effectively indemnified from and against all actions, proceedings, costs,
charges, claims, demands, expenses, liabilities, legal and other
professional fees (including, without prejudice to the generality of the
foregoing, any Tax) whatsoever in respect of any breach, non-observance or
non- performance of any covenants, obligations, warranties or undertakings
on the part of the Chargor contained in this Deed or the making good of any
such breach, non-observance or non-performance.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPEATED REPRESENTATIONS AND WARRANTIES
The Chargor represents and warrants to the Security Trustee, as at the
date of this Deed and on each other day on which the representations and
warranties set out in the Loan Agreement are to be repeated, that:
(a) it is and will be the sole, absolute and beneficial owner and the
registered holder of the Charged Assets free from Security Interests
other than Permitted Security Interests;
(b) the Shares are and will at all times be fully paid and there are
and will be no moneys or liabilities outstanding in respect of any of
the Shares;
(c) the Shares have each been duly authorised and validly issued and
are and will at all times be free from any restriction on transfer or
rights of pre-emption;
(d) it has the necessary corporate power and authorisation to enter
into and perform its obligations under this Deed and no further act on
the part of the Chargor is necessary to enable the Chargor to enter
into and to perform its obligations under this Deed;
(e) this Deed constitutes its legal, valid, binding and enforceable
obligation and is a first fixed charge over the Charged Assets
effective in accordance with the terms of this Deed;
(f) the Charge does not and will not conflict with, or result in any
breach of, or constitute a default under, any agreement, instrument or
obligation to which the Chargor is a party or by which it is, or the
Charged Assets are, bound; and
(g) all necessary authorisations and consents to enable or entitle it
to enter into this Deed have been obtained.
6.2 OTHER REPRESENTATIONS AND WARRANTIES
The Chargor represents and warrants to the Security Trustee that, as
at the date of this Deed, the Principal Company's issued and outstanding
capital stock consists of 500,000 shares of common stock, par value US$1.00
per share.
7. VOTING RIGHTS, DIVIDENDS, ETC.
7.1 BEFORE THE CHARGE BECOMES ENFORCEABLE
Until the Charge shall become enforceable:
(a) all voting and other Rights relating to the Charged Assets may be
exercised by the Chargor, or shall be exercised in accordance with its
direction, for any purpose not inconsistent with the terms of this
Deed; and
(b) all dividends, interest and other distributions paid to the
Chargor in respect of the Charged Assets shall be paid to the CRI
Receipts Account.
7.2 AFTER THE CHARGE BECOMES ENFORCEABLE
If the Charge shall become enforceable:
(a) the Security Trustee or, as the case may be, the Receiver shall
be entitled to exercise or direct the exercise of all voting and other
Rights now or at any time relating to the Charged Assets;
(b) the Chargor shall comply or procure the compliance with any
direction of the Security Trustee or, as the case may be, the Receiver
in respect of the exercise of the voting and other Rights referred to
in Clause 7.2(a) and shall deliver to the Security Trustee or, as the
case may be, the Receiver such forms of proxy or other appropriate
forms of authorisation to enable the Security Trustee or, as the case
may be, the Receiver to exercise such voting and other Rights relating
to the Charged Assets;
(c) the Security Trustee shall be entitled to receive and retain all
dividends, interest and other distributions paid in respect of the
Charged Assets and apply them in or towards the payment or discharge
of the Secured Liabilities; and
(d) all Derivative Assets shall, if received by the Chargor, be held
on trust for, and forthwith paid or transferred to, the Security
Trustee.
8. SECURITY TRUSTEE'S DISCRETION
8.1 SECURITY TRUSTEE MAY CURE BREACHES OF COVENANTS
In the event of the failure of the Chargor to observe or perform the
provisions of this Deed, the Security Trustee may do all such acts and
things as may be necessary to secure the observance or performance thereof
without thereby becoming liable as a mortgagee in possession.
8.2 EXPENSES SO INCURRED
The Chargor hereby agrees and acknowledges that all moneys expended
and all costs incurred by the Security Trustee in carrying out any of its
discretions or powers referred to in Clause 8.1 (Security Trustee May Cure
Breaches of Covenants) shall be considered to have been properly incurred
by the Security Trustee and shall be recoverable from the Chargor under
Clause 25 (Costs and Expenses).
9. FURTHER ASSURANCES
9.1 GENERAL ASSURANCE
The Chargor shall, at its own cost, promptly execute and do all such
assurances, acts and things in such form as the Security Trustee may from
time to time require for perfecting, preserving or protecting the Charge or
the priority thereof and for facilitating the realisation of the Charged
Assets or the exercise of any Rights vested in the Security Trustee or in
any Receiver, and the Chargor shall, in particular but without limitation,
execute all such transfers, conveyances, assignments and assurances of the
Charged Assets whether to the Security Trustee or to its nominees or
otherwise, and give all such notices, orders, instructions and directions
which the Security Trustee may consider expedient.
9.2 ADDITIONAL SECURITY INTERESTS
Without prejudice to the generality of Clause 9.1 (General Assurance),
the Chargor shall, at its own cost, promptly execute and deliver to the
Security Trustee in such form as the Security Trustee may require such
other Security Interests over such of the Charged Assets as shall be
required by the Security Trustee (whether generally or specifically, and
whether for the purpose of obtaining legal title to the relevant Charged
Assets, creating Security Interests which are effective under the laws of a
foreign jurisdiction, or otherwise).
10. ENFORCEMENT
10.1 CHARGE TO BECOME ENFORCEABLE
The Charge shall become enforceable at any time after the occurrence
and during the continuance of an Event of Default, and immediately
thereafter the powers conferred upon the Security Trustee by section 101 of
the Act as varied and extended by this Deed shall be exercisable without
the restrictions imposed by section 103 of the Act as to the giving of
notice or otherwise.
10.2 SECTION 101 OF THE ACT
The powers conferred by section 101 of the Act, as varied and extended
by this Deed, shall be deemed to have arisen immediately on the execution
of this Deed.
10.3 SECTIONS 93 AND 103 OF THE ACT
Sections 93 and 103 of the Act shall not apply to this Deed.
10.4 ADDITIONAL RIGHTS OF SECURED TRUSTEE ON ENFORCEMENT
At any time at which the Charge shall be enforceable, the Security
Trustee shall have the right without any notice to or consent of the
Chargor:
(a) to take possession of, collect and get in the Charged Assets, and
in particular, but without limitation, to take any steps necessary to
vest all or any of the Charged Assets in the name of the Security
Trustee or its nominee and to receive and retain any dividends
deriving from the Charged Assets;
(b) to sell, exchange, convert into money or otherwise dispose of or
realise the Charged Assets (whether by public offer or private
contract) to any person and for such consideration (whether comprising
cash, debentures or other obligations, shares or other valuable
consideration of any kind) and on such terms (whether payable or
deliverable in a lump sum or by instalments) as the Security Trustee
may think fit, and for this purpose to complete any transfers of the
Charged Assets;
(c) to settle, adjust, refer to arbitration, compromise and arrange
any claims, accounts, disputes, questions and demands relating in any
way to the Charged Assets;
(d) to bring, prosecute, enforce, defend and abandon actions, suits
and proceedings in relation to the Charged Assets; and
(e) to do all such other acts and things it may consider necessary or
expedient for the realisation of the Charged Assets or incidental to
the exercise of any Rights conferred on it under or in connection with
this Deed or the Act and to concur in the doing of anything which it
has the right to do and to do any such thing jointly with any other
person.
11. APPOINTMENT OF RECEIVERS
11.1 APPOINTMENT
At any time after the Charge has become enforceable (whether or not
the Security Trustee shall have taken possession of the Charged Assets), at
the request of the Chargor, or following the Dissolution of the Chargor,
without any or further notice, the Security Trustee may, by deed or writing
signed by any officer or manager of the Security Trustee or any person
authorised for this purpose by the Security Trustee and acting with the
consent of or on the instructions of the Facility Agent (as the case may
be), appoint any person to be Receiver, and may similarly remove any
Receiver whether or not it appoints any person in his place. If the
Security Trustee appoints more than one person as Receiver, the Security
Trustee may give the relevant persons power to act either jointly or
severally.
11.2 SCOPE OF APPOINTMENT
Any Receiver may be appointed either Receiver of all the Charged
Assets or Receiver of such part of the Charged Assets as may be specified
in the appointment. In the latter case, the Rights conferred on a Receiver
by Clause 12 (Receivers) shall have effect as though every reference in
that Clause to the "Charged Assets" were a reference to the part of the
Charged Assets so specified or any part thereof.
12. RECEIVERS
12.1 POWERS
Any Receiver appointed under this Deed shall (subject to any contrary
provision specified in his appointment) have the powers granted to a
receiver under section 109 of the Act (as in force at the date of this
Deed) and the powers which are granted to an administrative receiver as
listed in Schedule 1 to the Insolvency Act (as in force at the date of this
Deed) and, in addition shall have the right, either in his own name or in
the name of the Chargor or otherwise and in such manner and upon such terms
and conditions as the Receiver thinks fit:
(a) in connection with any sale or disposition of the Charged Assets,
to receive the consideration therefor in a lump sum or in instalments
and to receive shares by way of consideration;
(b) to grant options, licences or any other interest whatsoever in
relation to the Charged Assets;
(c) to do all other acts and things which he may consider desirable
or necessary for realising the Charged Assets or incidental or
conducive to any of the rights, powers or discretions conferred on a
Receiver under or by virtue of this Deed; and
(d) to exercise in relation to the Charged Assets all the powers,
authorities and things which he would be capable of exercising if he
were the absolute beneficial owner of the same.
12.2 CONFLICT
If there is any ambiguity or conflict between the powers conferred on
the Receiver by the Act or by Schedule 1 of the Insolvency Act and the
powers conferred by Clause 12.1 (Powers), the powers conferred by Clause
12.1 (Powers) shall prevail.
12.3 AGENT OF CHARGOR
Any Receiver shall be the agent of the Chargor for all purposes and
the Chargor shall be solely responsible for his contracts, engagements,
acts, omissions, defaults and losses and for all liabilities incurred by
him.
12.4 REMUNERATION
Subject to section 36 of the Insolvency Act, the Security Trustee may,
from time to time, determine the remuneration of any Receiver (without
being limited to the maximum rate specified in section 109(6) of the Act)
and may direct payment of such remuneration out of moneys accruing to him
as Receiver but the Chargor alone shall be liable for the payment of such
remuneration and for all other costs, charges and expenses of the Receiver.
13. RIGHTS OF SECURITY TRUSTEE
13.1 RIGHTS OF RECEIVER
Any Rights conferred by this Deed upon a Receiver may be exercised by
the Security Trustee after the Charge has become enforceable, irrespective
of whether the Security Trustee has taken possession of the Charged Assets
or appointed a Receiver.
13.2 REDEMPTION OF PRIOR SECURITY INTERESTS
The Security Trustee may, at any time, redeem any Security Interests
over the Charged Assets having priority to the Charge or procure the
transfer thereof to the Security Trustee and may settle the accounts of
encumbrancers. Any accounts so settled shall, in the absence of manifest
error, be conclusive and binding on the Chargor. The Chargor shall, on
demand, pay to the Security Trustee all principal moneys, interest, costs,
charges, losses, liabilities and expenses of, and incidental to, any such
redemption by or transfer to the Security Trustee.
13.3 SUSPENSE ACCOUNT
The Security Trustee may, for as long as the Secured Liabilities, for
which any other person may be liable as principal debtor or as co-surety
with the Chargor, have not been paid or discharged in full, acting on the
instructions of the Facility Agent, place and retain on an interest-bearing
suspense account, for as long as it considers fit, any moneys received,
recovered or realised under, or in connection with, this Deed to the extent
of such Secured Liabilities without any obligation on the part of the
Security Trustee to apply the same in or towards the discharge of such
Secured Liabilities.
13.4 NEW ACCOUNT
At any time following (i) the Security Trustee's having received
notice (either actual or constructive) of any subsequent Security Interests
affecting the Charged Assets or (ii) the Dissolution of the Chargor, the
Security Trustee may open a new account in the name of the Chargor (whether
or not it permits any existing account to continue). If the Security
Trustee does not open such a new account, it shall nevertheless be treated
as if it had done so at the time when the notice was received or was deemed
to have been received or, as the case may be, the Dissolution commenced.
Thereafter, all payments made by the Chargor to the Security Trustee or
received by the Security Trustee for the account of the Chargor shall be
credited or treated as having been credited to the new account and shall
not operate to reduce the amount secured by this Deed at the time when the
Security Trustee received or was deemed to have received such notice or, as
the case may be, the Dissolution commenced.
13.5 DELEGATION
The Security Trustee may delegate in any manner to any person any of
the Rights which is for the time being exercisable by the Security Trustee
under this Deed. Any such delegation may be made upon such terms and
conditions (including without limitation power to sub-delegate) as the
Security Trustee may think fit.
13.6 SET-OFF
The Security Trustee may, without notice to the Chargor and without
prejudice to any of the Security Trustee's other Rights, set off any
Secured Liabilities which are due and unpaid against any obligation
(whether or not matured) owed by a Finance Party to the Chargor, regardless
of the place of payment or booking branch, and for that purpose that
Finance Party may convert one currency into another at the market rate of
exchange which may be obtained by that Finance Party in the usual course of
business of that Finance Party on the date of set-off.
14. APPLICATION OF MONEYS
All moneys arising from the exercise of the powers of enforcement
under this Deed shall (except as may be otherwise required by applicable
law) be held and applied in the following order of priority (but without
prejudice to the right of the Security Trustee to recover any shortfall
from the Chargor):
(a) FIRSTLY, in or towards payment of all costs, charges, losses,
liabilities and expenses of, and incidental to, the appointment of any
Receiver and the exercise of its Rights including its remuneration and
all outgoings paid by it;
(b) SECONDLY, in or towards the payment and discharge of such of the
Secured Liabilities in such order as the Security Trustee in its
absolute discretion may from time to time determine; and
(c) THIRDLY, after all the Secured Liabilities have been paid or
discharged in full, in payment of any surplus to the Chargor.
15. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES
15.1 POSSESSION
If the Security Trustee, any Receiver or any Delegate shall take
possession of the Charged Assets it or he may at any time relinquish such
possession.
15.2 SECURITY TRUSTEE'S LIABILITY
The Security Trustee shall not, in any circumstances (whether by
reason of taking possession of the Charged Assets or for any other reason
whatsoever and whether as mortgagee in possession or on any other basis
whatsoever), be liable:
(a) to account to the Chargor or any other person for anything except
the Security Trustee's own actual receipts; or
(b) to the Chargor or any other person for any costs, charges,
losses, damages, liabilities or expenses arising from, or connected
with, any realisation of the Charged Assets or from any act, default,
omission or misconduct of the Security Trustee, its officers,
employees or agents in relation to the Charged Assets.
15.3 RECEIVER'S LIABILITY
All the provisions of Clause 15.2 (Security Trustee's Liability) shall
apply, MUTATIS MUTANDIS, in respect of the liability of any Receiver or
Delegate or any officer, employee or agent of the Security Trustee, any
Receiver or any Delegate.
15.4 INDEMNITY
The Security Trustee and every Receiver, Delegate, attorney, manager,
agent or other person appointed by the Security Trustee hereunder shall be
entitled to be indemnified out of the Charged Assets in respect of all
liabilities and expenses incurred by any of them in the execution or
reasonable purported execution of any of their respective Rights and
against all actions, proceedings, costs, claims and demands in respect of
any matter or thing done or omitted in any way relating to the Charged
Assets, and the Security Trustee and any such Receiver, Delegate, attorney,
manager, agent or other person appointed by the Security Trustee hereunder
may retain and pay all sums in respect of the same out of any moneys
received.
16. PROTECTION OF THIRD PARTIES
16.1 CONTRACTUAL PROTECTION
No person dealing with the Security Trustee, any Receiver or any
Delegate shall be concerned to enquire:
(a) whether any event has happened upon which any of the Rights
conferred under or in connection with this Deed, the Act or the
Insolvency Act is or may be exercisable, or
(b) whether any consents, regulations, restrictions or directions
relating to such Rights have been obtained or complied with; or
(c) as to the propriety or regularity of acts purporting or intended
to be in exercise of any such Rights; or
(d) as to the application of any money borrowed or raised; or
(e) as to the application of the proceeds of enforcement.
16.2 STATUTORY PROTECTION
All the protections to purchasers contained in sections 104 and 107 of
the Act, section 42(3) of the Insolvency Act or in any other applicable
legislation shall apply to any person purchasing from, or dealing with, the
Security Trustee, any Receiver or any Delegate.
17. CONTINUING SECURITY INTERESTS AND OTHER MATTERS
17.1 CONTINUING AND INDEPENDENT SECURITY INTEREST
The Charge shall be a continuing and independent Security Interest for
the Secured Liabilities and shall not be satisfied, discharged or affected
by any intermediate payment or settlement of account (whether or not any
Secured Liabilities remain outstanding thereafter) or any other matter or
thing whatsoever.
17.2 PRIMARY OBLIGATIONS
This Deed and the Charge constitute original, independent and absolute
securities (and not secondary or collateral securities) for the Secured
Liabilities.
18. ADDITIONAL SECURITY INTERESTS
The Charge shall be in addition to, and shall not be prejudiced by,
any other Security Interests or any guarantee or indemnity or other
document which any Finance Party may, at any time, hold for the payment and
discharge of the Secured Liabilities.
19. CHARGE NOT TO BE AFFECTED
Without prejudice to Clause 17 (Continuing Security Interests and
Other Matters) and Clause 18 (Additional Security Interests), neither the
Charge nor the liability of the Chargor for the Secured Liabilities shall
be prejudiced or affected by:
(a) any variation or amendment of, or waiver or release granted
under, or in connection with, any other Security Interests or any
guarantee or indemnity or other document;
(b) time being given, or any other indulgence or concession being
granted, by the Security Trustee to an Obligor or any other person;
(c) the taking, holding, failure to take or hold, varying,
realisation, non-enforcement, non-perfection or release by the
Security Trustee or any other person of any other Security Interests,
or any guarantee or indemnity;
(d) the Dissolution of an Obligor or any other person;
(e) any change in the constitution of an Obligor;
(f) any amalgamation, merger or reconstruction that may be effected
by the Security Trustee with any other person or any sale or transfer
of the whole or any part of the assets of the Security Trustee to any
other person;
(g) the existence of any claim, set-off or other right which an
Obligor may have at any time against the Security Trustee, any other
Finance Party or any other person;
(h) the making or absence of any demand for payment of the Secured
Liabilities on an Obligor or any other person, whether by the Security
Trustee, any other Finance Party or any other person;
(i) any arrangement or compromise entered into by the Security
Trustee or any other Finance Party with an Obligor or any other
person; or
(j) any other thing done or omitted or neglected to be done by the
Security Trustee, any other Finance Party or any other person or any
other dealing, fact, matter or thing which, but for this provision,
might operate to prejudice or affect the liability of an Obligor for
the Secured Liabilities.
20. RELEASE OF CHARGED ASSETS
20.1 RELEASE OF CHARGED ASSETS
If the Security Trustee is satisfied, acting upon the instructions of
the Facility Agent, that:
(a) all Secured Liabilities have been irrevocably paid or discharged
in full and that none of the Finance Parties is under any further
obligation (contingent or otherwise) to provide any banking or other
accommodation to any Obligor under the Finance Documents; or
(b) Security Interests or a guarantee for the Secured Liabilities, in
each case acceptable to the Security Trustee, has been provided in
substitution for this Deed,
then, subject to Clause 20.2 (Retention of This Deed), the Security Trustee
shall, at the request and cost of the Chargor, execute such deeds and do
all such acts and things as may be necessary to release the Charged Assets
from the Charge.
20.2 RETENTION OF THIS DEED
If the Chargor requests the Security Trustee to release the Charged
Assets from the Charge following any payment or discharge of the Secured
Liabilities by a person other than the Chargor (a "Relevant Transaction"),
the Security Trustee shall at the cost of the Chargor execute such
documents and deeds and do all such acts and things as may be necessary to
release the Charged Assets from the Charge provided the Security Trustee is
satisfied that the payment or discharge will not be avoided, reduced or
invalidated. If the Security Trustee is not so satisfied, the Security
Trustee shall be entitled to retain this Deed and shall not be obliged to
release the Charged Assets from the Charge until the expiry of the
Retention Period (being the period which commences on the date when that
Relevant Transaction was made or given, and ends on the date falling one
month after the expiration of the maximum period within which that Relevant
Transaction can be avoided, reduced or invalidated by virtue of any
applicable law or for any other reason whatsoever) in relation to that
Relevant Transaction. If, at any time before the expiry of that Retention
Period, the Dissolution of such other person shall have commenced, the
Security Trustee may continue to retain this Deed and shall not be obliged
to release the Charged Assets from the Charge for such further period as
the Security Trustee may determine.
21. POWER OF ATTORNEY
21.1 APPOINTMENT
The Chargor appoints, irrevocably and by way of security, the Security
Trustee, every Receiver and every Delegate severally to be the Attorney of
the Chargor (with full powers of substitution and delegation), on its
behalf and in its name or otherwise, at such time and in such manner as the
Attorney may think fit:
(a) to do anything which the Chargor is obliged to do (but has not
done) under this Deed including, but without limitation, to complete
and execute any transfer of, or Security Interests over, the Charged
Assets; and
(b) generally to exercise the Rights conferred on the Security
Trustee, every Receiver or every Delegate in relation to the Charged
Assets or under, or in connection with, this Deed, the Act or the
Insolvency Act.
21.2 RATIFICATION
The Chargor covenants to ratify and confirm whatever any Attorney
shall do or purport to do in the exercise or purported exercise of the
Power of Attorney in Clause 21.1 (Appointment).
22. CURRENCY INDEMNITY
If the Security Trustee receives an amount in respect of the Chargor's
liability under this Deed or if that liability is converted into a claim,
proof, judgment or order in a currency other than Dollars:
(a) the Chargor shall as an independent obligation indemnify the
Security Trustee against any loss or liability arising out of or as a
result of the conversion;
(b) if the amount received by the Security Trustee, when converted
into Dollars at a market rate in the usual course of its business and
after expenses and commissions is less than the amount owed by the
Chargor to the Security Trustee in Dollars, the Chargor shall
forthwith on demand pay to the Security Trustee an amount in Dollars
equal to the deficit; and
(c) the Chargor shall pay to the Security Trustee on demand any
exchange costs and taxes payable in connection with any such
conversion.
The Chargor waives any right it may have in any jurisdiction to pay
any amount under this Deed in a currency other than that in which such
amount is expressed to be payable.
23. DEFAULT INTEREST
If the Chargor fails to pay any Secured Liability on the due date for
payment, the Chargor shall pay to the Security Trustee on demand interest
at the Default Rate from:
(a) in the case of costs, charges, losses, liabilities, expenses and
other sums referred to in Clause 25 (Costs and Expenses), the date on
which the relevant cost, charge, loss, liability, expense or sum was
expended, paid or debited on account by the Security Trustee without
the necessity of any demand being made for payment thereof; or
(b) in any other case, the date on which the relevant Secured
Liability became due,
until full payment and discharge of the relevant Secured Liability (both
before and after any judgment).
24. CERTIFICATES TO BE CONCLUSIVE EVIDENCE
For all purposes, including any proceedings, a copy of a certificate
signed by an officer of the Security Trustee as to the amount of any
indebtedness comprised in the Secured Liabilities or as to any applicable
rate of interest shall, in the absence of manifest error, be conclusive
evidence against the Chargor as to the amount or rate of such indebtedness.
25. COSTS AND EXPENSES
25.1 TRANSACTION COSTS
The Chargor shall, on written demand (accompanied by copies of the
invoices therefor), pay to the Security Trustee all legal and other fees on
a full indemnity basis (including without limitation, all printing,
translation, communication, advertising, travel and other out-of-pocket
expenses) properly incurred by the Security Trustee in connection with the
negotiation, preparation and execution of this Deed, the completion of the
transactions contemplated in this Deed, any amendment of this Deed and any
calculation, approval, consent or waiver to be made or given by the
Security Trustee pursuant to or in respect of any provision of this Deed.
25.2 PRESERVATION AND ENFORCEMENT COSTS
The Chargor shall, from time to time on demand pay to the Security
Trustee all costs and expenses (including without limitation legal and
other fees 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 the Security
Trustee under this Deed.
25.3 STAMP TAXES
The Chargor shall pay all stamp, registration and other taxes and
duties, and all notarial registration, recording and other like fees to
which this Deed or any judgment given in connection with this Deed is, or
at any time may be, subject and shall on demand indemnify the Security
Trustee 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.
25.4 SECURITY TRUSTEE'S ADDITIONAL COSTS
The Chargor shall, from time to time on demand of the Security Trustee
(and without prejudice to the provisions of Clause 25.1 (Transaction Costs)
and 25.2 (Preservation and Enforcement Costs) compensate the Security
Trustee at such daily and/or hourly rates as the Security Trustee shall
from time to time determine and on demand indemnify the Security Trustee
against all costs and expenses (including, without limitation, telephone,
fax, copying, travel and personnel costs) properly incurred by the Security
Trustee in connection with its taking such action as it may deem
appropriate or in complying with any instructions from the Finance Parties
or any request by the Chargor in connection with:
(a) the granting or proposed granting of any waiver or consent
requested by the Chargor under this Deed;
(b) any actual, potential or suspected breach by the Chargor of its
obligations under this Deed;
(c) the occurrence of an Event of Default or a Potential Event of
Default; or
(d) any amendment or proposed amendment to this Deed requested by the
Chargor.
25.5 TAX
Any fee, cost or expense referred to in this Clause 25 (Costs and
Expenses) is exclusive of any Tax chargeable in connection with that fee,
cost or expense. The Chargor shall pay any Tax so chargeable at the same
time as it pays the relevant fee, cost or expense.
26. NOTICES
26.1 GIVING OF NOTICES
All notices or other communications shall be in writing addressed to
the relevant party. A written notice includes a facsimile transmission.
Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered; and
(b) 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.
26.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of the Security Trustee are:
The Law Debenture Trust Corporation p.l.c.
Princes House, 95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
or such other as the Security Trustee may notify to the Chargor by not
less than five Business Days' notice.
(b) The address and facsimile number of the Chargor are:
Central Asian Petroleum, Inc.
c/o Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
or such other as the Chargor may notify to the Security Trustee by not
less than five Business Days' notice.
26.3 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
27. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
27.1 REMEDIES AND WAIVERS
Time is of the essence of the Chargor's obligations under this Deed
but no failure to exercise, nor any delay in exercising, on the part of the
Security Trustee, any right or remedy under this Deed 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 Deed are
cumulative and not exclusive of any rights or remedies provided by law.
The Security Trustee may agree to any waiver of any of its rights or
remedies under this Deed on such terms as it sees fit.
27.2 PARTIAL INVALIDITY
If, at any time, any provision of this Deed 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 Deed under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other provision of this
Deed 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.
28. ASSIGNMENT
The Security Trustee may at any time, without the consent of the
Chargor, assign or transfer the whole or, as the case may be, any part of
the Security Trustee's Rights under this Deed to any person to whom the
whole or any part of the Security Trustee's Rights under the Loan Agreement
shall be assigned or transferred. The Chargor may not assign, transfer,
novate or dispose of any of or any interest in, its rights or obligations
under this Deed.
29. LAW AND JURISDICTION
29.1 ENGLISH LAW
THIS DEED SHALL BE GOVERNED BY ENGLISH LAW.
29.2 JURISDICTION
(A) FOR THE EXCLUSIVE BENEFIT OF THE SECURITY TRUSTEE AND THE
FACILITY AGENT, THE CHARGOR 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 DEED AND THAT ACCORDINGLY ANY SUIT, ACTION OR
PROCEEDINGS (TOGETHER IN THIS CLAUSE 29 (LAW AND JURISDICTION) REFERRED TO
AS "PROCEEDINGS") ARISING OUT OF OR IN CONNECTION WITH THIS DEED MAY BE
BROUGHT IN SUCH COURTS, SUBJECT TO THE OPTION REFERRED TO IN CLAUSE 29.6
(ARBITRATION).
(B) THE CHARGOR 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 29.2 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 THE CHARGOR AND MAY BE ENFORCED IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) NOTHING CONTAINED IN THIS CLAUSE 29.2 SHALL LIMIT THE RIGHT OF
THE SECURITY TRUSTEE TO TAKE PROCEEDINGS AGAINST THE CHARGOR 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.
29.3 PROCESS AGENT
THE CHARGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) APPOINTS LAW DEBENTURE CORPORATE SERVICES LIMITED, WHOSE ADDRESS
IS AT PRINCES HOUSE, 95 GRESHAM STREET, LONDON EC2V 7LY, ENGLAND AS ITS
PROCESS AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN
ENGLAND IN ANY PROCEEDINGS WITH RESPECT TO THIS DEED;
(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 DEED SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
29.4 WAIVER OF IMMUNITY
TO THE EXTENT THAT THE CHARGOR MAY NOW OR HEREAFTER BE ENTITLED, IN
ANY JURISDICTION IN WHICH PROCEEDINGS MAY AT ANY TIME BE COMMENCED WITH
RESPECT TO THIS DEED, TO CLAIM FOR ITSELF OR ANY OF ITS UNDERTAKINGS,
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 DEED AND/OR TO
THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED TO THE
CHARGOR, ANY SUCH IMMUNITY (WHETHER OR NOT CLAIMED), THE CHARGOR 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.
29.5 CONSENT TO ENFORCEMENT
THE CHARGOR 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.
29.6 ARBITRATION
IF ANY DISPUTE ARISES IN RELATION TO THIS DEED, INCLUDING ANY QUESTION
AS TO EXISTENCE, VALIDITY OR TERMINATION, SUCH DISPUTE SHALL, AT THE OPTION
ONLY OF THE SECURITY TRUSTEE, 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
29.6. SUCH ARBITRATION SHALL TAKE PLACE IN LONDON, ENGLAND AND SHALL BE
CONDUCTED BY THREE ARBITRATORS, ONE OF WHOM SHALL BE NOMINATED BY THE
CHARGOR, ONE BY THE SECURITY TRUSTEE 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.
30. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF this Deed has been executed as a Deed by the parties
hereto and is delivered on the date stated at the beginning of this Deed.
EXECUTED as a deed and delivered by
CENTRAL ASIAN PETROLEUM, INC. acting
by /S/ MICHAEL B. YOUNG
-----------------------------
Name: Michael B. Young
Title: Treasurer
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
The COMMON SEAL of
THE LAW DEBENTURE TRUST CORPORATION
p.l.c.
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . 3
2. COVENANT TO DISCHARGE OBLIGATIONS. . . . . . . . . . . . . . 3
2.1 Covenant to Pay . . . . . . . . . . . . . . . . . . 3
2.2 Validity of Demands . . . . . . . . . . . . . . . . 3
3. SECURITY 4
3.1 Charging Provisions . . . . . . . . . . . . . . . . 4
3.2 Obligation to Deposit Certificates relating to 4
Original Shares . . . . . . . . . . . . . . . . . .
3.3 Obligation to deposit Certificates relating to 4
Derivative Assets . . . . . . . . . . . . . . . . .
4. RESTRICTIONS ON DEALING WITH CHARGED ASSETS. . . . . . . . . 4
4.1 Negative Pledge . . . . . . . . . . . . . . . . . . 4
4.2 Disposal of Charged Assets. . . . . . . . . . . . . 4
4.3 Change in Charged Assets. . . . . . . . . . . . . . 4
5. GENERAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . 5
5.1 Obligations Relating to Charged Assets. . . . . . . 5
5.2 Notices Received Relating to Charged Assets . . . . 5
5.3 Notation in Statutory Books . . . . . . . . . . . . 5
5.4 Indemnity . . . . . . . . . . . . . . . . . . . . . 5
6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 5
6.1 Repeated Representations and Warranties . . . . . . 5
6.2 Other Representations and Warranties. . . . . . . . 6
7. VOTING RIGHTS, DIVIDENDS, ETC. . . . . . . . . . . . . . . . 6
7.1 Before the Charge Becomes Enforceable . . . . . . . 6
7.2 After the Charge Becomes Enforceable. . . . . . . . 6
8. SECURITY TRUSTEE'S DISCRETION. . . . . . . . . . . . . . . . 7
8.1 Security Trustee May Cure Breaches of Covenants . . 7
8.2 Expenses so Incurred. . . . . . . . . . . . . . . . 7
9. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 7
9.1 General Assurance . . . . . . . . . . . . . . . . . 7
9.2 Additional Security Interests . . . . . . . . . . . 8
10. ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 Charge to Become Enforceable. . . . . . . . . . . . 8
10.2 Section 101 of the Act. . . . . . . . . . . . . . . 8
10.3 Sections 93 and 103 of the Act. . . . . . . . . . . 8
10.4 Additional Rights of Secured Trustee on Enforcement 8
11. APPOINTMENT OF RECEIVERS . . . . . . . . . . . . . . . . . . 9
11.1 Appointment . . . . . . . . . . . . . . . . . . . . 9
11.2 Scope of Appointment. . . . . . . . . . . . . . . . 9
12. RECEIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
12.1 Powers. . . . . . . . . . . . . . . . . . . . . . . 9
12.2 Conflict. . . . . . . . . . . . . . . . . . . . . . 10
12.3 Agent of Chargor. . . . . . . . . . . . . . . . . . 10
12.4 Remuneration. . . . . . . . . . . . . . . . . . . . 10
13. RIGHTS OF SECURITY TRUSTEE . . . . . . . . . . . . . . . . . 10
13.1 Rights of Receiver. . . . . . . . . . . . . . . . . 10
13.2 Redemption of Prior Security Interests. . . . . . . 10
13.3 Suspense Account. . . . . . . . . . . . . . . . . . 10
13.4 New Account . . . . . . . . . . . . . . . . . . . . 11
13.5 Delegation. . . . . . . . . . . . . . . . . . . . . 11
13.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . 11
14. APPLICATION OF MONEYS. . . . . . . . . . . . . . . . . . . . 11
15. LIABILITY OF SECURITY TRUSTEE, RECEIVERS AND DELEGATES . . . 12
15.1 Possession. . . . . . . . . . . . . . . . . . . . . 12
15.2 Security Trustee's Liability. . . . . . . . . . . . 12
15.3 Receiver's Liability. . . . . . . . . . . . . . . . 12
15.4 Indemnity . . . . . . . . . . . . . . . . . . . . . 12
16. PROTECTION OF THIRD PARTIES. . . . . . . . . . . . . . . . . 12
16.1 Contractual Protection. . . . . . . . . . . . . . . 12
16.2 Statutory Protection. . . . . . . . . . . . . . . . 13
17. CONTINUING SECURITY INTERESTS AND OTHER MATTERS. . . . . . . 13
17.1 Continuing and Independent Security Interest. . . . 13
17.2 Primary Obligations . . . . . . . . . . . . . . . . 13
18. ADDITIONAL SECURITY INTERESTS. . . . . . . . . . . . . . . . 13
19. CHARGE NOT TO BE AFFECTED. . . . . . . . . . . . . . . . . . 13
20. RELEASE OF CHARGED ASSETS. . . . . . . . . . . . . . . . . . 14
20.1 Release of Charged Assets . . . . . . . . . . . . . 14
20.2 Retention of This Deed. . . . . . . . . . . . . . . 14
21. POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . 15
21.1 Appointment . . . . . . . . . . . . . . . . . . . . 15
21.2 Ratification. . . . . . . . . . . . . . . . . . . . 15
22. CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . . . . 15
23. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . 16
24. CERTIFICATES TO BE CONCLUSIVE EVIDENCE . . . . . . . . . . . 16
25. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . 16
25.1 Transaction Costs . . . . . . . . . . . . . . . . . 16
25.2 Preservation and Enforcement Costs. . . . . . . . . 16
25.3 Stamp Taxes . . . . . . . . . . . . . . . . . . . . 17
25.4 Security Trustee's Additional Costs . . . . . . . . 17
25.5 Tax . . . . . . . . . . . . . . . . . . . . . . . . 17
26. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
26.1 Giving of Notices . . . . . . . . . . . . . . . . . 17
26.2 Addresses for Notices . . . . . . . . . . . . . . . 18
26.3 English Language. . . . . . . . . . . . . . . . . . 18
27. REMEDIES AND WAIVERS, PARTIAL INVALIDITY . . . . . . . . . . 18
27.1 Remedies and Waivers. . . . . . . . . . . . . . . . 18
27.2 Partial Invalidity. . . . . . . . . . . . . . . . . 19
28. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 19
29. LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . 19
29.1 ENGLISH LAW . . . . . . . . . . . . . . . . . . . . 19
29.2 JURISDICTION. . . . . . . . . . . . . . . . . . . . 19
29.3 PROCESS AGENT . . . . . . . . . . . . . . . . . . . 20
29.4 WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . 20
29.5 CONSENT TO ENFORCEMENT. . . . . . . . . . . . . . . 20
29.6 ARBITRATION . . . . . . . . . . . . . . . . . . . . 21
30. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 21
CAP(G) - KKM LOAN AGREEMENT
THIS AGREEMENT (this "Agreement") is dated 7 February 2000 BETWEEN
(1) CLOSED TYPE JSC KARAKUDUKMUNAY, a company organised and existing
under the laws of the Republic of Kazakhstan, ("KKM"); and
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey, (the "Investor").
RECITALS
(A) KazakOil, Korporatsiya Mangistau Terra International and the
Investor entered into a Foundation Agreement on June 12, 1997 (as the same
may be amended from time to time, the "Foundation Agreement") pursuant to
which the Investor has agreed to make certain investments in KKM for the
purpose of funding the exploration, development, production and sale of
hydrocarbons from the Agreement Field (as defined therein) (the "Project").
(B) Pursuant to the terms of the Foundation Agreement and the
Petroleum Agreement dated August 30, 1995 (as the same may be amended from
time to time, the "Petroleum Agreement") between KKM and the Ministry of
Oil and Gas Industries of the Republic of Kazakhstan, it has been agreed
that the Investor will be entitled to receive repayment of all such
investments by means of Investment Recovery as specified in the Petroleum
Agreement.
(C) The Investor has made investments in KKM for the purposes of the
Project pursuant to the terms of the Foundation Agreement and the Petroleum
Agreement amounting in aggregate to $31,238,000 as of 1 January 2000 (each
an "Existing Investment" and collectively the "Existing Investments").
(D) The Investor has made additional investments in KKM for the
purposes of the Project since 1 January, 2000 and intends to continue to
make such investments (each such investment an "Additional Investment" and
collectively the "Additional Investments").
(E) The Investor and KKM have agreed to confirm in this Agreement
the terms and conditions upon which the Existing Investments and the
Additional Investments are made.
IT IS HEREBY AGREED as follows:
1. Definitions
In this Agreement, the following terms have the meanings given to them
in this Clause 1:
"Borrowing Rate" means, at any time, the aggregate of:
(i) the rate of interest per annum for a deposit in United
States dollars for one night offered in the London interbank market to
leading banks by Citibank N.A., London Branch on the fifteenth day of
each month at 11a.m. (London time) and published by the Financial
Times newspaper in London, provided that if such fifteenth day would
otherwise fall on a day which is not a Business Day, the immediately
succeeding Business Day shall be the date for determining such rate of
interest; and
(ii) 1 % per annum.
"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.
"CAP(G) Receipts Account" means the account of the Investor with ABN
AMRO Bank N.V., London branch and designated as the "CAP(G) Receipts
Account".
"Existing Interest Amount" has the meaning assigned to it in Clause
2.2(b).
"Gross Revenues" means all revenues, income, receipts or gains from
whatever source received by KKM other than the Principal Investments.
"Investor's Share" has the meaning assigned to it in Clause 2.3(b).
"KKM Proceeds Account" means the account of KKM held with ABN AMRO
Bank N.V., London branch and designated as the "KKM Proceeds Account".
"Principal Investments" means, collectively, the Existing Investments
and the Additional Investments for the time outstanding or, as the context
so requires, an Existing Investment or an Additional Investment for the
time being outstanding.
"Quarterly Date" means 31 March, 30 June, 30 September and 31
December in any year provided that if any such day is not a Business Day,
the Quarterly Date which would otherwise fall on that day shall fall on the
immediately succeeding Business Day.
"Total Interest Amount" has the meaning assigned to it in Clause
2.2(d).
2. Terms
KKM and the Investor confirm and agree as follows:
2.1 Disbursements
Any Additional Investments made on or after the date of this Agreement
by the Investor to KKM shall be deposited into KKM Proceeds Account.
2.2 Interest
(a) Interest shall be deemed to have accrued from day to day on the
principal amount of each Principal Investment from the date made up to but
not including the date of this Agreement at the Borrowing Rate from time to
time.
(b) The aggregate amount of interest deemed to have accrued on the
Existing Investments up to and including 1 January 2000 equals $3,450,000
(the "Existing Interest Amount").
(c) On and with effect from the date of this Agreement, interest
shall accrue from day to day on the principal amount of each Principal
Investment at the Borrowing Rate applicable from time to time in respect of
the Principal Investments and from the date made, in respect of any
Additional Investment.
(d) Interest accrued under Clause 2.2(a) and (c) on and with effect
from 2 January 2000 shall be added to the Existing Interest Amount and such
aggregated amount (the "Total Interest Amount") shall be payable in
accordance with Clause 2.3.
2.3 Investment Recovery
(a) Each of the Investor and KKM jointly and severally acknowledges
that as at 1 January, 2000 (i) the Existing Investments amount in aggregate
to $31,238,000 and (ii) the Existing Interest Amount is $3,450,000.
(b) Subject to Clause 2.3(c) and (g), until the Principal Investments
and Total Interest Amount have been irrevocably repaid and discharged in
full and all other amounts owing to the Investor under or pursuant to the
terms of this Agreement have been paid, KKM agrees that on each Quarterly
Date KKM shall pay to the Investor 59.8% of the Gross Revenues received by
KKM during the immediately preceding three month period ending on such
Quarterly Date (the "Investor's Share") which shall be applied by the
Investor, first, towards payment of the Total Interest Amount and second,
towards repayment of the Principal Investments and all other amounts owing
to the Investor under or pursuant to the terms of this Agreement.
(c) The Investor may, at its sole discretion, elect not to recover
from KKM some or all of the Investor's Share to which it is entitled on a
Quarterly Date. For the avoidance of doubt, the Principal Investments and
the Total Interest Amount shall not be reduced by the portion of the
Investor's Share which the Investor elects not to recover on any Quarterly
Date.
(d) All payments to the Investor hereunder shall be made in United
States dollars for value on the due date without set off or counterclaim to
the CAP(G) Receipts Account.
(e) The party making a payment to another party under this Agreement
shall promptly notify the other party that the payment has been made and
the other party shall, on receipt, promptly notify the paying party that
payment has been received.
(f) The Investor shall maintain a record of the amounts from time to
time owing by KKM under this Agreement. Such record shall be prima facie
evidence as to the existence and amounts owing by KKM under this Agreement.
The Investor shall deliver a statement to KKM five Business Days after each
Quarterly Date detailing the amounts owing to the Investor under this
Agreement at that time.
(g) If a notice is served on Chaparral Resources, Inc. pursuant to
clause 18.31 of the Loan Agreement dated 1 November 1999 between, inter
alia, Chaparral Resources, Inc., KKM, the Facility Agent and the Lenders
(as such terms are defined therein), the Principal Investments, the Total
Interest Amount and all other amounts owing to CAP(G) under or pursuant to
the terms of this Agreement shall become immediately due and payable.
3. Withholding of Fiscal Obligations
(a) All sums payable by KKM under this Agreement shall be paid in
full without any restriction or condition and, except to the extent
required by any law, free and clear of any deduction or withholding on
account of any Fiscal Obligation (as defined in the Petroleum Agreement) or
otherwise. If KKM is required by any law to make any such deduction or
withholding, KKM shall, together with the relevant payment, pay such
additional amount as will ensure that the Investor 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.
(b) Without limiting Clause 3(a), if the Investor is required by law
to make any payment on account of tax (not being, in the case of the
Investor, a tax imposed on and calculated by reference to the overall net
income paid to and received by it in the jurisdiction in which it is
incorporated or in which it is, for the time being, situated) or otherwise
on or in relation to any sum received or receivable under this Agreement by
the Investor (including any sum received or receivable under this Clause 3)
or any liability in respect of any such payment is asserted, imposed,
levied or assessed against the Investor, KKM shall, upon demand by the
Investor, promptly indemnify the Investor against such payment or
liability, together with any interest, penalties, costs and expenses
payable or incurred in connection therewith.
(c) If, at any time, KKM is required by any law to make any deduction
or withholding from any sum payable by it under this Agreement (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 Investor
details of such requirement or change.
(d) If KKM 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 Investor, 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 the Investor's payment.
4. Binding Agreement
(a) This Agreement shall be binding upon and inure to the benefit of
each party to this Agreement and its successors and assigns.
(b) KKM may not assign, transfer, novate or dispose of any of, or any
interest in, its rights or obligations under this Agreement.
(c) The Investor may, at its own cost, transfer all or part of its
rights or obligations under this Agreement.
5. Remedies and Waivers
(a) Time is of the essence of each party's obligations under this
Agreement but no failure to exercise, nor any delay in exercising, on the
part of one party to this Agreement, 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. Either party may agree to any
waiver of any of its rights or remedies under this Agreement on such terms
as it sees fit.
(b) 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.
6. Notices
(a) All notices or other communications shall be given in writing or
by facsimile. Any such notice shall be deemed to be given, if in writing,
when delivered and if by facsimile, when 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.
(b) The address and facsimile number of KKM is:
Closed Type JSC Karakudukmunay,
Micordistrict 3, Building 82 Aktau,
Republic of Kazakhstan
Attention: Financial Diretor
Facsimile: (7-3292) 518 336
or such other as KKM may notify to the Investor by not less than five
Business Days' notice.
(ii) The address and facsimile number of the Investor is:
Central Asian Petroleum (Guernsey) Limited
c/o Chapparal Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: Director
Facsimile: (281) 877 0985
or such other as the Investor may notify to the KKM by not less than five
Business Days' notice.
(b) Any notice or other communication given by or to KKM or the
Investor shall be copied to Chaparral Resources, Inc..
7. Amendment
No amendment, modification or waiver to this Agreement shall be valid
unless it is in writing and signed by KKM and the Investor.
8. Law and Jurisdiction
8.1 English Law
This Agreement shall be governed by English law.
8.2 Jurisdiction
(a) KKM 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 8 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 8.6.
(b) KKM 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 8.2 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 parties and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Clause 8.2 shall limit the right of the
Investor to take proceedings against KKM 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.
8.3 Process Agent
KKM hereby irrevocably and unconditionally (a) appoints Law Debenture
Corporate Services Limited, whose address is at Princes House, 95 Gresham
Street, London EC2V 7LY, England as its process agent to receive, for and
on its behalf, service of process in England in any proceedings with
respect to this Agreement, (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 agrees that nothing in
this Agreement shall affect the right of the Investor to serve process in
any other manner permitted by law.
8.4 Waiver of Immunity
To the extent that KKM 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
and/or to the extent that in any such jurisdiction there may be attributed
to KKM, any such immunity (whether or not claimed), KKM 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.
8.5 Consent to Enforcement
KKM 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.
8.6 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 the Investor, 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
8.6. Such arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be nominated by KKM, one
by the Investor 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.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto on the date stated at the beginning of this Agreement.
CLOSED TYPE JSC KARAKADUKMUNAY,
By: /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
By: /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
CENTRAL ASIAN PETROLEUM (GUERNSEY)
LIMITED,
By: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
==========================================================================
SECURITY TRUST DEED
between
CHAPARRAL RESOURCES, INC.,
CENTRAL ASIAN PETROLEUM (GUERNSEY) LTD,
CENTRAL ASIAN PETROLEUM, INC.
AND
CLOSED TYPE JSC KARAKUDUKMUNAY
as the Obligors
SHELL CAPITAL SERVICES LIMITED
as Facility Agent
and
THE LAW DEBENTURE TRUST CORPORATION P.L.C.
as Security Trustee
Dated 7 February 2000
==========================================================================
WHITE & CASE
7-11 MOORGATE
LONDON EC2R 6HH
This SECURITY TRUST DEED (this "Deed") is dated 7 February 2000 and is
made between:
(1) CHAPARRAL RESOURCES, INC. a company organised and existing under
the laws of Delaware (the "Borrower");
(2) CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED, a company organised
and existing under the laws of Guernsey, CLOSED TYPE JSC KARAKUDUKMUNAY, a
company organised and existing under the laws of the Republic of
Kazakhstan, and CENTRAL ASIAN PETROLEUM, INC., a company organised and
existing under the laws of the state of Delaware (each a "Co-Obligor" and,
together with the Borrower, the "Obligors");
(2) SHELL CAPITAL SERVICES LIMITED, a company organised and existing
under the laws of England, in its capacity as Facility Agent for the
Finance Parties (the "Facility Agent"); and
(3) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company organised
and existing under the laws of England, as security trustee for the Finance
Parties (the "Security Trustee").
R E C I T A L S:
A. Pursuant to a loan agreement dated 1 November, 1999 (the "Loan
Agreement") between the Borrower, the Co-Obligors, Shell Capital Limited,
Shell Capital Services Limited and the Lenders (as defined therein), the
Lenders have agreed to make available to the Borrower a secured loan
facility of up to US$ 24,000,000 on the terms and subject to the conditions
contained therein.
B. It is a condition precedent to any drawing under the Loan
Agreement that each of the Obligors enters into this Deed and the other
Finance Documents.
C. At the request of the Facility Agent, the Security Trustee has
agreed to act as trustee under this Deed and to hold the benefit of the
security constituted by or pursuant to the Security Documents and the
covenants and obligations of the Obligors under the Security Documents on
trust for the Finance Parties.
NOW THIS DEED WITNESSETH as follows:
1. INTERPRETATION
1.1 Definitions
In this Deed (including the recitals) words and expressions defined in
the Loan Agreement shall bear the same respective meanings when used herein
unless otherwise defined herein or the context otherwise requires. The
following words have, except where the context otherwise requires, the
meanings respectively shown opposite them:
"Collateral" means any right or interest in or to property of any kind
wherever situated over which a Security Interest is created pursuant to any
Security Document and any Rights of the Security Trustee under any Security
Document.
"Distribution Proceeds" means all moneys and other property held or
received by the Security Trustee under any of the Security Documents and
all proceeds of all or any part of the Trust Property realised:
(a) upon the exercise of remedies by the Security Trustee pursuant to
any of the Security Documents; or
(b) upon any distribution, winding up, liquidation or reorganisation
of the Obligors or any of them (whether in bankruptcy, insolvency,
receivership or similar proceedings or upon any assignment for the benefit
of creditors or otherwise); or
(c) in any other manner.
"Enforcement Action" means the exercise by the Security Trustee of
its Rights under any Security Document following the delivery of an
Enforcement Notice with a view to protecting, enforcing or realising the
Security Interests and other Rights under any Security Document.
"Enforcement Notice" means a notice given by the Facility Agent to
the Security Trustee in accordance with the Finance Documents directing the
Security Trustee to commence Enforcement Action.
"Indemnified Liabilities" has the meaning specified in Clause 14.2.
"Legal Proceedings" means the taking of any action (other than
pursuant to an Enforcement Notice) which consists of:
(a) filing or joining in the filing of a petition or commencing other
proceedings or seeking reorganisation, bankruptcy, receivership,
trusteeship, liquidation or insolvency of an Obligor or of all or a
substantial part of any such Obligor's assets or any proceeding under any
relevant law similar to the foregoing or having a similar effect which
arises out of the transactions contemplated by the Finance Documents; or
(b) commencing or pursuing any action against any Obligor for a
breach of any of the Finance Documents or for any remedy, including an
injunction or declaratory relief in respect of breach or potential breach
of any such Finance Documents.
"Receiver" means a receiver and manager or other receiver appointed in
respect of the Trust Property under all or any of the Security Documents or
the Law of Property Act 1925.
"Rights" means rights, benefits, authorities, discretions, remedies,
liberties and powers (in each case, of any nature whatsoever).
"Secured Liabilities" means all moneys and liabilities (whether actual
or contingent) which are now or may at any time hereafter be due, owing or
payable to any of the Finance Parties from or by the Obligors under or in
connection with (i) the Loan Agreement, (ii) this Deed or (iii) any other
Finance Document, together with all legal and other costs, charges and
expenses which any of the Finance Parties may incur in enforcing or
obtaining, attempting to enforce or obtain, payment of any such moneys and
liabilities.
"Security Documents" means :
(a) each of the following documents:
(i) the KKM Pledge Agreement dated the date of this Deed and entered
into between CAP(G) and the Security Trustee;
(ii) the CAP(D)-CAP(G) Charge over Shares dated the date of this Deed
and entered into between CAP(D) and the Security Trustee;
(iii) the CRI-CAP(G) Charge over Shares dated the date of this
Deed and entered into between the Borrower and the Security Trustee;
(iv) the CRI-CAP(D) Pledge Agreement dated the date of this Deed and
entered into between the Borrower and the Security Trustee;
(v) the Assignment of Insurance Proceeds dated the date of this Deed
and entered into between the Borrower and the Security Trustee;
(vi) the CRI Assignment dated the date of this Deed and entered into
between the Borrower and the Security Trustee;
(vii) the CAP(G) Assignment dated the date of this Deed and
entered into between CAP(G) and the Security Trustee;
(viii) the KKM Assignment dated the date of this Deed and entered
into between KKM and the Security Trustee;
(ix) the KKM Assignment of Insurance dated the date of this Deed and
entered into between KKM and the Security Trustee;
(x) the KKM Accounts Assignment dated the date of this Deed and
entered into between KKm and the Security Trustee;
(xi) the CRI Accounts Assignment dated the date of this Deed and
entered into between the Borrower and the Security Trustee;
(xii) the CAP(G) Accounts Assignment dated the date of this Deed
and entered into between CAP(G) and the Security Trustee;
(xiii) the Assignment of Reinsurance dated the date of this Deed
and entered into between KKM, the Security Trustee and the insurers and
reinsurers named therein; and
(b) any other document which the Borrower, the Security Trustee and
the Facility Agent agree to designate as a Security Document.
"Trust Property" means all Rights, covenants, undertakings, charges,
assignments, title and Security Interests of the Security Trustee now or in
future arising under or in respect of all or any of the Security Documents
(other than Rights held only for its own account) and all Distribution
Proceeds.
1.2 Construction
(a) headings are for convenience only and do not affect the
interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) a reference to a natural person includes any company,
partnership, trust, joint venture, association, corpora-tion or other body
corporate and any governmental authori-ty or agency;
(d) a reference to a Clause, party, or Schedule is a reference to
that Clause of, or that party, or Schedule to, this Agreement;
(e) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any
amendment, supplement, replacement or novation made in breach of this
Agreement; and
(f) a reference to a party to any document includes that party's
successors and permitted assigns.
2. DECLARATION OF TRUST
2.1 The Security Trustee undertakes to hold the Trust Property on
trust for itself, the Lenders and the other Finance Parties on the terms
and subject to the conditions of this Deed.
2.2 The trusts constituted by this Deed and the Security Documents
shall (subject to Clause 2.3) remain in full force and effect until the
Facility Agent certifies to the Security Trustee that the Final Termination
Date has occurred.
2.3 The perpetuity period applicable hereto under the rule against
perpetuities, if applicable to this Deed, shall be the period of 80 years
from the date of this Deed and every power, authority or discretion to
which the said rule applies which is conferred upon the Security Trustee or
any other person by this Deed shall only be exercisable during that period.
2.4 On the Final Termination Date:
(a) the trusts created in this Deed shall be wound up and each party
to this Deed shall be released from its respective obligations under
this Deed (save for those which shall have arisen prior to such
winding-up including, without limitation, any indemnity obligations
owed to the Security Trustee in this Deed); and
(b) the Security Trustee will, at the cost and expense of the
Obligors, release the security constituted by the Security Documents
and reassign to the Obligors or such other person as the Obligors may
direct or such other person as may be entitled thereto all of the
Trust Property.
2.5 Notwithstanding anything to the contrary in any Finance Document,
the Security Trustee shall be entitled to assume that the interests of each
of the Finance Parties hereunder are represented by the Facility Agent.
The Security Trustee shall not be obliged or required to act in accordance
with the directions or request of any Finance Party given pursuant to the
Finance Documents or any related document otherwise than through the
Facility Agent.
3. APPOINTMENT, RIGHTS AND DUTIES OF THE SECURITY TRUSTEE
3.1 The Facility Agent on behalf of itself and each of the other
Finance Parties hereby designates and appoints The Law Debenture Trust
Corporation p.l.c. to act as security trustee for and on behalf of the
Finance Parties as specified in this Deed and in the Security Documents and
The Law Debenture Trust Corporation p.l.c. accepts such designation and
appointment.
3.2 Subject to the terms and conditions of this Deed, The Law
Debenture Trust Corporation p.l.c. shall have all the Rights vested or to
be vested in the Security Trustee by the Security Documents (before as well
as after any Enforcement Action) and (to the extent not inconsistent with
this Deed and the Security Documents) all powers and discretions conferred
on trustees by the Trustee Act 1925 and in addition:
(a) the Security Trustee may, in relation to any of the provisions of
this Deed, the Security Documents and any other related documents,
engage and pay for the advice or services of and act (and shall not be
responsible for any loss occasioned by so acting) on the opinion or
advice of or any information obtained from any lawyer, accountant,
banker, broker, surveyor, valuer, engineer, insurance consultant or
other professional adviser or expert selected by the Security Trustee
in good faith and with reasonable care whose advice, services, opinion
or information the Security Trustee may deem necessary, expedient or
desirable;
(b) the Security Trustee shall not be liable for acting on any
instruction, notification, certification, consent or any other
communication given under this Deed or the Security Documents believed
by it to be genuine and correct and purported to be signed or sent by
or on behalf of the proper person, whether conveyed by letter, telex,
cable or facsimile transmission;
(c) the Security Trustee may place any instruments, documents or
agreements delivered to it pursuant to or in connection with this Deed
or any of the Security Documents for the time being in its possession
in any safe deposit, safe or similar receptacle selected by the
Security Trustee or with any bank, any company whose business includes
undertaking the safe custody of documents or any firm of lawyers and
the Security Trustee shall not be responsible for any loss, cost,
damages, expense or inconvenience thereby incurred; and
(d) save as otherwise expressly provided in this Deed or in any of
the Security Documents and unless directed to the contrary by the
Facility Agent, the Security Trustee shall, as regards all Rights
vested in it by this Deed or any of the Security Documents or by
operation of law, have absolute and uncontrolled discretion as to the
exercise or non-exercise thereof and as to the manner and time of any
such exercise thereof and shall be in no way responsible for any loss,
costs, damages, expenses or inconveniences resulting from the exercise
or non-exercise of such Rights.
3.3 The Security Trustee:
(a) shall have no duties or responsibilities except those expressly
stated in this Deed or (subject to the terms of this Deed) in any of
the other Security Documents to which it is a party and, for the
avoidance of doubt, the Security Trustee shall not be required or be
under any duty to investigate, verify or take any action to
independently satisfy itself of any matter;
(b) shall not be responsible for any loss, cost, damages, expense or
inconvenience which may result from any action taken or omitted to be
taken by it under or in connection with any Security Document or under
any other document or instrument referred to or provided for in any
Security Document (in any such case whether taken at its discretion
exercised in accordance with this Deed or on any instruction given in
accordance with this Deed), except as may arise as a result of its own
negligence, wilful misconduct or fraud;
(c) shall, at the cost of the Obligors, furnish to the Facility
Agent, promptly upon request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial
statements and other documents which are furnished to the Security
Trustee by any person under any of the Security Documents;
(d) shall not be bound to (and it is the intention that it shall not)
account to any person for any sum received by it for its own account
or the profit element of any such sum;
(e) shall not by virtue of this Deed or the Security Documents be
concerned with the interests of or owe any duty whatsoever to any
person other than the Facility Agent;
(f) shall be entitled, pending appropriation and distribution under
this Deed and the Security Documents, to place any sum received,
recovered or held by it representing or constituting Distribution
Proceeds in an interest bearing suspense account which it may maintain
for as long as it thinks fit;
(g) shall, notwithstanding any other provision of this Deed or any
Security Document, not be obliged to become a mortgagee in possession
under any Security Document;
(h) shall not be under any duty, and not be under any liability, to
any person for omitting to disclose to any party any confidential
information supplied to it or which comes to its knowledge through any
of its Affiliates, directors, employees, delegates or agents;
(i) shall execute each of the Security Documents to which it is
expressed to be a party in the form which has been approved by it;
(j) shall not be under any obligation to insure any of the Collateral
or any agreements or documents of title or other evidence in respect
of the Collateral and shall not be responsible for any loss which may
be suffered as a result of the lack of, or inadequacy of, any such
insurance;
(k) may after the Secured Liabilities become enforceable and without
any consent by the Finance Parties release, or concur with the
Obligors in releasing, any of the Collateral which legal advisers
reasonably satisfactory to the Security Trustee and/or the Facility
Agent advise may expose the Security Trustee to any liability (unless
the Security Trustee has been indemnified, secured or both to its
satisfaction against such liability);
(l) if it receives any document in a foreign language with a
translation into English attached thereto, shall be entitled to assume
that such translation is accurate and complete unless and until it
receives written notice to the contrary from any party hereto;
(m) may in acting as trustee in relation to any of the Security
Documents or this Deed (instead of acting personally) employ and pay
an agent whether being a lawyer or other person to transact or concur
in transacting any business and to do or concur in doing all acts
required to be done by the Security Trustee including the receipt and
payment of money and any security trustee in respect hereof being a
lawyer, accountant, banker, broker, valuer, auctioneer or other person
engaged in any profession or business shall be entitled to charge and
be paid all usual professional and other charges properly incurred for
business transacted and acts done by him or his firm in connection
with any of the Security Documents and also his charges in addition to
disbursements for all other work and business done and at all time
spent by him or his firm in connection with matters arising in
connection with any of the Security Documents including matters which
might or should have been attended to in person by a security trustee
not being engaged in any profession or business; and
(n) shall be entitled to invest moneys which in the opinion of the
Security Trustee may not be paid out promptly following receipt in the
name or under the control of the Security Trustee in any of the
investments for the time being authorised by law for the investment by
trustees of trust moneys or in any other investments whether similar
to the aforesaid or not which may be approved by the Facility Agent or
by placing the same on deposit in the name or under the control of the
Security Trustee with such bank or financial institution as the
Security Trustee may think fit and the Security Trustee may at any
time vary or transpose any such investments for or into any others of
a like nature and shall not be responsible for any loss due to
depreciation in value or otherwise of such investments.
3.4 The Security Trustee (or any of its directors, officers, agents
or employees):
(a) shall not be precluded by reason of its acting as Security
Trustee under this Deed or the Security Documents from underwriting,
guaranteeing the subscription of, or subscribing for or otherwise
acquiring, holding or dealing with any debentures, shares or
securities whatsoever of the Obligors or any of their Affiliates or in
which any of them may be interested or from entering into any contract
or financial or other transaction with, or from engaging in any other
business with, or from accepting or holding the trusteeship of any
other trust or agreement constituting or securing any securities
issued by or relating to, the Obligors or any of their Affiliates or
in which any of them may be interested and shall not be liable to
account for, and shall be at liberty to keep for its (or his) own
benefit any profit made or payment received by it thereby or in
connection therewith;
(b) may delegate to agents or attorneys-in-fact to carry out any of
the rights vested in it by any of the Security Documents and such
delegation may be made upon and subject to such terms and conditions
(including the power to sub-delegate) and regulations as the Security
Trustee may reasonably think fit;
(c) may call for a certification as to matters of fact within the
knowledge of the Obligors or any Finance Party and shall not be liable
for acting in relation to this Deed or any Security Document on any
such certificate or any other notice, request, instruction,
communication or other document purporting to emanate from the
Obligors or any Finance Party notwithstanding the fact that the same
shall include some error or omission or not be authentic, save for any
manifest error except to the extent caused by its negligence or wilful
misconduct or the negligence or wilful misconduct of any of its
officers, directors, agents or employees and the Security Trustee
shall not be bound to call for further evidence nor take steps to
verify any such certificate, notice, request, instruction,
communication or other document; and
(d) may, in the execution of all or any of the Rights vested in it by
any of the Security Documents, act by responsible officers or a
responsible officer for the time being of the Security Trustee.
4. NO LIABILITY OF THE SECURITY TRUSTEE
4.1 None of the Finance Parties is relying on the Security Trustee in
respect of, and the Security Trustee (or any of its officers, directors,
agents or employees) shall not be responsible to any Finance Party for:
(a) the financial condition, creditworthiness or affairs of any of
the Obligors or any of their Affiliates in connection with the
entering into of the transactions contemplated in connection with the
Finance Documents and the taking or not taking of any action in
connection with this Deed and the Security Documents;
(b) the title of any of the Obligors or any of their Affiliates to
any Collateral;
(c) the type, adequacy, scope and terms of any insurance maintained
or required to be maintained by any of the Obligors in relation to the
Collateral or the business or operations of any of the Obligors and
the form, scope, substance and adequacy of any report by any insurance
consultant or any other person in relation to the insurance relating
to the transactions contemplated by the Security Documents;
(d) any recitals, statements, representations or warranties of any
party (other than the Security Trustee) contained in any Finance
Document or in any certificate or other document referred to or
provided for in, or received by any Finance Party under, any Finance
Document;
(e) the value, validity, effectiveness, genuineness, enforceability
or sufficiency of any Finance Document or any other document referred
to or provided for in any Finance Document or any Collateral provided
under any Security Document; or
(f) any failure by the Obligors or any of their Affiliates or any
other person to perform any of its obligations under any Finance
Document.
4.2 The Security Trustee (or any of its officers, directors, agents
or employees) shall not be liable for any failure, omission or defect in
perfecting the security constituted pursuant to the Security Documents
including, without limitation:
(a) failure to obtain any licence, consent or other authority for the
execution of any of the Finance Documents (other than those required
for such execution by the Security Trustee);
(b) failure to register any of the Finance Documents or the Security
Interests created thereby, under the laws of any jurisdiction in
accordance with any of the documents of title of any of the Obligors
to the Collateral, or to make any related filings or recordings;
(c) failure to effect, protect or procure registration of or
otherwise protect any Security Interest created by or pursuant to the
Security Documents under the laws of any relevant jurisdiction; or
(d) failure by any Obligor or the Security Trustee to perfect its
title to all or any part of the Collateral.
4.3 Nothing in this Deed or any Security Document shall, in any case
in which the Security Trustee has failed to show the degree of care and
diligence required of it as trustee having regard to the provisions of this
Deed, any Finance Document or any applicable law, relieve the Security
Trustee from any liability for breach of trust or any liability which by
virtue of any rule of law would otherwise attach to it in respect of any
negligence, default, breach of duty or breach of trust of which it may be
guilty in relation to its duties under this Deed and the Security
Documents.
4.4 Each Obligor or the Facility Agent will, on request from the
Security Trustee, promptly give to the Security Trustee a written
certificate in such form as the Security Trustee may require (including
pursuant to Clause 3.4(c)) setting out all information available to it
requested by the Security Trustee to facilitate the performance by the
Security Trustee of its Rights, trusts, powers, authorities, discretions,
duties and obligations under this Deed and the Security Documents.
4.5 Each Obligor shall execute and do all such assurances, acts,
deeds and things as the Security Trustee may reasonably require for
protecting or perfecting the security over the Collateral and the exercise
of all powers, authorities and discretions vested in the Security Trustee
or in any Receiver and shall in particular execute all transfers,
conveyances, assignments, assurances and registrations of the Collateral,
whether to the Security Trustee or its nominees or purchasers or sub-
purchasers, and give all notices, orders and discretions which the Security
Trustee may think necessary or expedient. For the purposes of this Clause
4.5, a certificate in writing by the Security Trustee to the effect that
any assurance or thing required by it is reasonably required shall be
conclusive evidence of such fact in the absence of manifest error.
4.6 Notwithstanding any other provision of this Deed or any other
Security Document, the Security Trustee shall not be obliged to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties or provide any indemnity to, or in favour
of, any Receiver or any person performing a similar function.
4.7 Each Obligor acknowledges that, in acting under this Deed and the
Security Documents, the Security Trustee, save when given a discretion to
enable it to protect its own interests rather than those of the Finance
Parties, is acting only upon the instructions of the Facility Agent and
each provision of this Deed and the Security Documents requiring the
Security Trustee to act reasonably shall mean the Security Trustee acting
on instructions given by the Facility Agent pursuant to this Deed. The
Facility Agent shall, in giving such instructions, act reasonably whenever
the Security Trustee is required pursuant to the provisions of any of the
Security Documents to so act, and shall not unreasonably withhold or delay
in giving its consent to any relevant action or omission when the Security
Trustee is prohibited pursuant to any such provision from unreasonably
withholding or delaying in giving consent. No Obligor shall make any claim
or demand against the Security Trustee in respect of any alleged
unreasonableness in the performance of or exercise or failure to perform or
exercise any duty or right when it does so on the instructions of the
Facility Agent.
4.8 Nothing in this Clause 4 shall limit any rights of any of the
parties under any representations, warranties, covenants or indemnities
given by any of the parties to the Security Documents.
5. INSTRUCTIONS OF THE FACILITY AGENT
5.1 The Security Trustee shall in all instances take action in
accordance with the prior written instructions of the Facility Agent. No
Finance Party other than the Facility Agent shall be entitled to require
the Security Trustee to take any action or proceeding under any of the
Security Documents, whether to enforce the performance of any covenant or
obligation of any Obligor or otherwise.
5.2 The Security Trustee shall exercise and enforce such Rights under
the Security Documents or in respect of all or any part of the Collateral
as shall be specified in any Enforcement Notice given in accordance with
Clause 6.4. All Distribution Moneys arising from any such exercise or
Enforcement Action shall be applied in accordance with Clause 15.
6. TRUST PROPERTY AND POWERS OF ENFORCEMENT
6.1 The Security Interests created by the Security Documents shall be
held by the Security Trustee as a continuing security for the payment in
full of the Secured Liabilities notwithstanding any settlement of account
or any other act, event or matter whatsoever.
6.2 The Security Interests created by the Security Documents shall
not be satisfied by any intermediate payment or satisfaction of any amount
hereby or thereby secured and the security so created shall be in addition
to and shall not be prejudiced by any other security or guarantee now or
hereafter held by the Security Trustee or any other person for all or any
part of the Secured Liabilities hereby and thereby secured.
6.3 Every power and remedy given to the Security Trustee herein shall
be in addition to and not a limitation of any other power or remedy vested
in the Security Trustee under any of the Security Documents or by statute,
rule of law or otherwise and all such powers may be exercised from time to
time and as often as the Security Trustee deems expedient.
6.4 At any time after the Facility Agent delivers to the Security
Trustee a copy of any Enforcement Notice confirming that it has been
delivered to the Obligors and directs the Security Trustee to take
Enforcement Action in respect of an Event of Default, the Security Trustee
shall exercise and enforce such Rights under the Security Documents or in
respect of all or any part of the Collateral as shall be specified in such
notice but subject always to the provisions of this Deed. All Distribution
Proceeds arising from any such exercise or Enforcement Action shall be
applied in accordance with Clause 15.
7. RELIANCE
7.1 If the Security Trustee is unsure as to the application of any
provision of this Deed, any provision of the Security Documents or as to
any action to be taken by it under this Deed or the Security Documents, it
shall request instructions from the Facility Agent.
7.2 In the absence of written instructions following a request under
Clause 7.1, the Security Trustee may refuse to act until it receives such
written instructions from the Facility Agent.
7.3 Any instructions of the Facility Agent in accordance with this
Deed, and any action taken in accordance with such instructions shall be
binding on each of the parties to this Deed and the other Finance Parties.
The Security Trustee shall be entitled to rely upon any directions or any
instructions given or purported to be given by the Facility Agent,
notwithstanding any error in transmission or that such directions or
instructions prove not to be genuine, and such directions or instructions
shall be conclusively deemed to be valid directions or instructions from
the Facility Agent to the Security Trustee for the purposes of this Deed
provided that the Security Trustee may decline to act on any such
directions or instructions where in the opinion of the Security Trustee
they are insufficient, incomplete, inconsistent or not received by the
Security Trustee in sufficient time to act thereon in accordance therewith
and provided further that the Facility Agent shall be responsible for any
loss, claim or expense incurred by the Security Trustee for carrying out
such directions or instructions.
7.4 Each instruction given to the Security Trustee under this Deed
shall specify the Clause and applicable paragraph or sub-clause thereof
under which the instruction is being given.
7.5 The Security Trustee shall not be under any obligation:
(a) for any reason to advance its own funds for payment of any cost
or expense in order to carry out the instructions of the Facility
Agent; or
(b) otherwise to incur any liability in the performance of any of its
duties or in the exercise of any of its rights or powers under this
Deed or any other Security Document, if it has grounds for believing
that payment of its fees, costs and expenses, or repayment of such
funds or adequate indemnity against taking such action or against such
risk or liability is not assured to it.
7.6 The Security Trustee may refrain from taking any action under any
of the Security Documents if it determines that such action would be
contrary to the terms of any Security Document or any relevant law and may
do anything which is, in its absolute discretion, necessary to comply with
any relevant law or if it has not been indemnified to its satisfaction.
The Security Trustee shall make such determination as promptly as
practicable and upon making such determination shall notify the Facility
Agent of any such determination.
8. EVENTS OF DEFAULT
The Security Trustee shall not be deemed to have knowledge or notice
of the occurrence of a Potential Event of Default or an Event of Default,
and shall be entitled to (and it is its intent that it shall) assume
without enquiry that no Potential Event of Default or an Event of Default
has occurred and that each of the Obligors is duly performing and observing
all the covenants and provisions contained in the Finance Documents to be
performed or observed on its part, unless it has received a notice
specifying a Potential Event of Default or Event of Default has occurred
from an Obligor or from the Facility Agent.
9. THE COLLATERAL
9.1 Except as provided in this Deed, the Security Trustee shall not
have any power, right or authority to, and agrees that it will not manage,
control, use, sell, dispose of or otherwise deal with all or any part of
the Collateral or take any other action (including instituting or pursuing
any Legal Proceedings) under any of the Security Documents, except as
expressly provided by the terms of this Deed or as expressly provided in
instructions by the Facility Agent.
9.2 The Facility Agent irrevocably authorises and empowers the
Security Trustee at its direction to demand, sue and prove for, collect and
receive every payment or distribution provided for by any Security Document
and give acquittance therefor and to file claims and take such other
proceedings, in the Security Trustee's own name, the name of the Facility
Agent or otherwise, as the Security Trustee may deem necessary or advisable
for the enforcement of the provisions of the Security Documents or
otherwise to ensure the payment of debts in accordance with the priorities
set out in this Deed.
9.3 The Facility Agent will execute or procure the execution of and
deliver to the Security Trustee such powers of attorney, assignments or
other instruments as may be requested by the Security Trustee or as
otherwise provided in this Deed in order to enable the Security Trustee or
any Receiver to enforce any and all claims upon or with respect to the
Collateral or any part thereof and to collect and receive any and all
payments or distributions which may be payable or deliverable at any time
upon or with respect to the Collateral or any part thereof.
10. RETIREMENT OF SECURITY TRUSTEE
10.1 Subject to the appointment and acceptance of a successor to the
Security Trustee as provided below, the Security Trustee may (i) resign at
any time and for any reason by giving not less than three months' notice in
writing to the Facility Agent and the Obligors and (ii) be removed at any
time with or without cause by the Facility Agent. Upon any such resignation
or removal, a successor Security Trustee shall be appointed by the Facility
Agent and, unless a Potential Event of Default or Event of Default has
occurred, with the consent of the Obligors (which consent shall not be
unreasonably withheld or delayed). The Security Trustee shall not be
responsible for any cost caused by its resignation.
10.2 If no successor Security Trustee is so appointed and has accepted
such appointment within thirty days after the retiring Security Trustee's
notice of resignation or the removal of the Security Trustee, then the
Facility Agent may, on behalf of the Finance Parties, appoint a successor
Security Trustee and, unless a Potential Event of Default or Event of
Default has occurred, with the consent of the Obligors (which consent shall
not be unreasonably withheld or delayed). Such successor shall be a trust
corporation or commercial bank which is acceptable to the Facility Agent.
If the Facility Agent is unable to appoint a successor within 30 days after
the expiration of the 30-day period referred to in the preceding sentence,
the Security Trustee may apply to any court of competent jurisdiction to
appoint a successor Security Trustee to act until such time, if any, as a
successor Security Trustee is appointed by the Facility Agent. Until the
appointment of a successor Security Trustee, the retiring or removed
Security Trustee shall continue to act as Security Trustee.
10.3 Any successor Security Trustee appointed by such court shall
immediately and without further act be superseded by any successor Security
Trustee appointed by the Facility Agent.
10.4 Upon the acceptance of any appointment as Security Trustee by a
successor Security Trustee, such successor Security Trustee shall
immediately succeed to and become vested with all the Trust Property, the
Rights and duties of the retiring Security Trustee, and the retiring
Security Trustee shall be discharged from any further duties and
obligations under the Security Documents. Upon the written request of such
successor Security Trustee and subject to receipt of such indemnity as to
costs and expenses incurred as the retiring Security Trustee may reasonably
require, such retiring Security Trustee shall execute and deliver an
instrument transferring to such successor Security Trustee, subject to the
terms of the Security Documents, all the Rights and duties of such retiring
Security Trustee, and such retiring Security Trustee shall assign,
transfer, deliver and pay over to such successor Security Trustee any funds
or other property then held by such retiring Security Trustee under the
Security Documents. After any retiring Security Trustee's resignation or
removal in accordance with this Clause, the provisions of this Clause 10
shall continue in effect in respect of any actions taken or omitted to be
taken by it while it was acting as Security Trustee. No such resignation
or removal shall relieve it from any liability under this Deed in respect
of actions taken or omitted to be taken by it while acting as Security
Trustee.
11. APPOINTMENT OF ADDITIONAL SECURITY TRUSTEE
11.1 If at any time or from time to time:
(a) it is necessary in order to comply with any provision of the
Security Documents or any legal requirements, restrictions or
conditions of any jurisdiction in which all or any part of the
Collateral is located or for enforcing a judgment already obtained; or
(b) the Security Trustee considers, on the basis of advice by legal
advisers satisfactory to it, that it is necessary or prudent in the
interest of the Finance Parties; or
(c) the Facility Agent so requests in writing,
the Security Trustee shall on not less than 14 days' notice to the Facility
Agent and the Obligors (including copies of any documents received by the
Security Trustee pursuant to sub-paragraphs (a), (b) or (c) above) take
such action (including, to the extent required, the execution and delivery
of other instruments and agreements) as may be necessary or proper to
constitute another bank or trust company (or one or more other persons
approved by the Facility Agent) either to act as an additional security
trustee with respect to all or any of the Trust Property jointly with the
Security Trustee, or to act as separate security trustee with respect to
any such Trust Property (any such additional trustee or separate security
trustee being referred to in this Deed as an "ADDITIONAL SECURITY
TRUSTEE"). References herein to the Security Trustee shall be deemed to
include a reference to any Additional Security Trustee unless the context
otherwise requires. An Additional Security Trustee shall be a reputable
trust corporation or commercial bank. Any Additional Security Trustee
shall not be appointed if the Facility Agent notifies the Security Trustee
prior to the appointment of such person that it objects to such
appointment. Such reasonable remuneration as the Security Trustee may pay
to any such person, together with any attributable costs, charges and
expenses properly incurred by it in performing its function as such
Additional Security Trustee shall for the purposes of this Deed and the
Security Documents be treated as costs, charges and expenses incurred by
the Security Trustee.
11.2 Subject always to the provisions of the Security Documents, the
Additional Security Trustee shall have such powers as may be granted
pursuant to this Clause 11, and shall be vested with any property, title or
Right of the Security Trustee deemed necessary or advisable by the Security
Trustee, provided that:
(a) all Rights, duties and obligations conferred or imposed upon the
Security Trustee shall be conferred or imposed upon and exercised or
performed by the Security Trustee and such Additional Security Trustee
jointly, except to the extent that under any law of any relevant
jurisdiction in which any particular act or acts are to be performed,
the Security Trustee shall be incompetent or not qualified to perform
such act or acts, in which event such Rights, duties and obligations
shall be exercised and performed by such Additional Security Trustee
with the consent of the Security Trustee; and
(b) neither the Security Trustee nor any Additional Security Trustee
shall be personally liable by reason of any act or omission of the
other under this Deed or any Security Document.
11.3 If at any time the Security Trustee considers it appropriate or
has been requested to do so in writing by the Facility Agent, the Security
Trustee shall notify the Facility Agent and the Obligors of its intention
to remove the Additional Security Trustee. In the case of a proposed
removal considered appropriate by the Security Trustee, if the Facility
Agent does not object to such removal within 14 days of the date of such
notice, or within 14 days of the date of the request of the Facility Agent,
the Security Trustee shall execute and deliver an agreement supplemental to
this Deed and all other instruments and agreements necessary or proper to
remove any Additional Security Trustee. The Security Trustee shall remove
any Additional Security Trustee within 14 days after the written request of
the Facility Agent.
12. COMPENSATION
12.1 The Borrower will pay to the Security Trustee for its own account
a fee for acting as the Security Trustee under the Security Documents as
agreed in writing between the Security Trustee and the Borrower from time
to time.
12.2 Subject to Clause 12.3, if the Security Trustee enforces the
security constituted by the Security Documents or is requested to undertake
duties which the Security Trustee and the Obligors and the Facility Agent
agree to be of an exceptional nature or otherwise outside the scope of the
normal duties of the Security Trustee under the Security Documents or
hereunder the Obligors shall pay to the Security Trustee (on a joint and
several basis) such additional remuneration as shall be agreed between
them.
12.3 If any of the parties hereto fail to agree:
(a) (in a case to which Clause 12.1 applies) upon the amount of the
remuneration; or
(b) (in a case to which Clause 12.2 applies) upon whether such duties
shall be of an exceptional nature or otherwise outside the scope of
the normal duties of the Security Trustee under the Security Documents
or hereunder, or upon such additional remuneration,
such matters shall be determined by a merchant bank (deemed to be acting as
an expert and not as an arbitrator) selected by the Security Trustee and
approved by the Obligors and the Facility Agent or, failing such approval,
nominated (on the application of the Security Trustee) by the President for
the time being of the Law Society of England and Wales in England and Wales
(the expenses involved in such nomination and the fees of such merchant
bank being payable by the Obligors (on a joint and several basis) or if the
Obligors fail to pay such fees and expenses, the Facility Agent shall pay
them in accordance with Clause 14.9 and the determination of any such
merchant bank shall be final and binding upon the Security Trustee, the
Obligors and the Facility Agent. During the continuance of an Event of
Default or Potential Event of Default, the Security Trustee and the
Facility Agent shall not require the agreement or approval to the Obligors
in the circumstances described in this Clause 12 and the agreement of the
Facility Agent shall be binding on the Obligors.
12.4 The remuneration and any additional remuneration payable under
this Clause 12 shall be paid exclusive of value added tax and similar tax
which shall be added at the rate (if any) applicable and paid by the
Obligors (on a joint and several basis) or the Facility Agent, as the case
may be.
13. COSTS; INDEMNIFICATION OF THE SECURITY TRUSTEE
13.1 The Obligors shall pay to the Security Trustee (on a joint and
several basis) all costs, charges and expenses (including without
limitation, travelling expenses and legal fees) of the Security Trustee
properly incurred by the Security Trustee in connection with the
negotiation, preparation and execution of this Deed, any other Security
Document and any other documents relating to any of them, the exercise of
the Rights or the execution of the trusts vested in it by or pursuant to
any of the Security Documents or in the release of the security constituted
by any of the Security Documents (in each case including but not limited to
legal fees and stamp duty) and all value added tax and similar tax charged
or chargeable in respect of such documents.
13.2 The Obligors shall jointly and severally indemnify the Security
Trustee and keep it indemnified against all liabilities, costs, claims,
penalties, taxes (other than taxes imposed on the overall net income of
the Security Trustee by the jurisdiction of its incorporation or any of its
operations or in any political subdivision of any such jurisdiction by
reference to the net income, profits or gains of the Security Trustee world-
wide or such of its net income profits or gains which arise in, or relate
to, that jurisdiction on overall net income ("INCOME TAX")), proceedings,
fines, demands, charges and expenses (including in each case value added
tax and any similar tax charged or chargeable in respect of such costs,
charges and expenses) (the "INDEMNIFIED LIABILITIES"):
(a) to which the Security Trustee or any person appointed by it
becomes subject by reason of acting as Security Trustee or in the
execution of the Rights vested in it by this Deed or the Security
Documents; and
(b) in respect of any matter or thing done or omitted to be done,
including in connection with the enforcement of the security
constituted by or pursuant to this Deed or the Security Documents
except to the extent such liabilities, costs, claims, penalties, or
taxes are sustained or incurred as a result of the negligence, wilful
misconduct or fraud of the Security Trustee.
13.3 Notwithstanding anything else contained in this Deed or the
Security Documents, if the Security Trustee is required by law to make any
deduction or withholding from any distribution or payment made by it under
any of the Security Documents or if the Security Trustee is otherwise
charged to tax (other than Income Tax) as a consequence of performing its
duties under the Security Documents, then the Security Trustee shall be
entitled to make such deduction or withholding or (as the case may be) to
retain out of sums received by it an amount sufficient to discharge any
liability for such deduction, withholding or charge.
13.4 All sums payable under Clauses 13.1, 13.2 and 13.3 shall be
payable within seven days from the date of demand by the Security Trustee.
13.5 The Security Trustee shall be entitled, but not obliged, from
time to time to effect or obtain such insurances and indemnities as it may
properly think fit in relation to any liabilities which it may be or become
subject as Security Trustee under or in connection with any of the Security
Documents and the Obligors shall pay to the Security Trustee on demand (on
a joint and several basis) all such proper costs, charges and expenses
(including value added tax and any similar tax charged or chargeable in
respect thereof) incurred by the Security Trustee in effecting or
obtaining, renewing and maintaining any insurances as aforesaid (other than
in respect of liabilities of the Security Trustee to any one or more of the
Obligors and the Finance Parties under the Security Documents).
13.6 If an Obligor or Facility Agent fails to pay any amount payable
to the Security Trustee on the due date for payment in accordance with this
Deed or any Security Document, such sums shall (after as well as before
judgment) bear interest at the rate determined by the Security Trustee to
be 2% per annum above the base rate of National Westminster Bank plc from
time to time.
13.7 If at any time an Obligor is required to make any deduction or
withholding in respect of taxes (excluding tax on the overall net income
of the Security Trustee and any taxes or charges contested in good faith)
from any payment due to the Security Trustee or any other Finance Party
under this Deed or any Security Document the sum due from such Obligor in
respect of such payment shall be increased to the extent necessary to
ensure that, after the making of such deduction or withholding, the
Security Trustee and each other Finance Party receives (on the due date for
such payment and free from any liability in respect of such deduction or
withholding) a net sum equal to the sum which it would have received had no
such deduction or withholding been required to be made. The Obligors shall
jointly and severally indemnify the Security Trustee and each other Finance
Party against any losses or costs incurred by any of them by reason of any
failure of an Obligor to make any deduction or withholding or by reason of
any increased payment not being made on the due date for such payment. The
Obligors shall promptly deliver to the Security Trustee any receipts,
certificates or other proof evidencing the amounts (if any) paid or payable
in respect of any deduction or withholding as aforesaid.
13.8 If any sum due from an Obligor under this Deed or any order or
judgment given or made in relation to this Deed has to be converted from
the currency (the "FIRST CURRENCY") in which the same is payable under this
Deed or under such order or judgment into another currency (the "SECOND
CURRENCY") for the purpose of
(a) making or filing a claim or proof against any Obligor;
(b) obtaining an order or judgment in any court or other tribunal; or
(c) enforcing any order or judgment given or made in relation to this
Deed,
the Obligors shall jointly and severally indemnify and hold harmless the
Security Trustee from and against any loss suffered as a result of any
difference between (i) the rate of exchange used for such purpose to
convert the sum in question from the first currency into the second
currency and (ii) the rate or rates of exchange at which the Security
Trustee may in the ordinary course of business purchase the first currency
with the second currency upon receipt of a sum paid to it in satisfaction,
in whole or in part, of any such order, judgment, claim or proof. Any
amount due from an Obligor under this clause shall be due as a separate
debt and shall not be affected by judgment being obtained for any other
sums due under or in respect of this Deed and the term "rate of exchange"
includes any premium and costs of exchange payable in connection with the
purchase of the first currency with the second currency.
13.9 If an Obligor fails within 30 days of demand to make any payment
which it is obliged to discharge or to indemnify the Security Trustee in
accordance with this Deed or any other Security Document, the Facility
Agent shall indemnify the Security Trustee against any such failure.
13.10 If the Security Trustee receives any notice, demand, letter
or other document requiring any payment in respect of any claim from which
it appears that the Security Trustee may become entitled to indemnification
under this Clause 13, the Security Trustee shall promptly give notice in
writing to the Facility Agent following receipt of the relevant notice,
demand, letter or other document.
13.11 The Facility Agent shall be entitled to resist the claim in
the name of the Security Trustee at its own expense and to control the
conduct of any appeal, dispute, compromise or defence of the claim and any
incidental negotiations. The Facility Agent shall consult with the
Security Trustee in respect of such appeal, dispute, compromise or defence
or negotiations. The Security Trustee will give all reasonable
cooperation, access and assistance for the purposes of considering and
resisting such claim. If the Facility Agent subsequently reasonably
believes that it is not liable to indemnify the Security Trustee with
respect to such claim, then it shall:
(a) notify the Security Trustee to such effect; and
(b) upon the giving of such notice, cease to take action in the name
of the Security Trustee in respect of the relevant claim.
(c) To the extent that the Security Trustee is not entitled to be
indemnified by an Obligor for all of the liability arising out of the
act or omission which is the subject of the claim, no action shall be
taken by the Finance Party without the consent of the Security Trustee
which may increase the amount of any payment which the Security
Trustee may be required to make in respect of that part of the claim
which is not covered by the indemnity under this Deed.
(d) The Security Trustee shall be free to pay or settle any claim
referred to in Clause 13.10 on such terms as it may think fit (without
prejudice, however, to its other obligations under this Deed) if
within 14 days of the notice from the Security Trustee under Clause
13.10 the Facility Agent fails to notify the Security Trustee of its
intention to dispute the claim.
13.12 For the avoidance of doubt, the parties acknowledge that no
failure by the Security Trustee to deliver the notice referred to in Clause
13.10 (provided the Security Trustee has acted in accordance with its duty
of care under this Deed), and no provision of any of the Security
Documents, shall limit or restrict or be construed as limiting or
restricting the rights of the Security Trustee under this Clause 13.
13.13 The Obligors shall jointly and severally indemnify and hold
harmless the Facility Agent against, and pay to it within five Business
Days of demand by the Facility Agent, any liabilities, actions, proceedings
or demands or costs, losses, claims or expenses which it may suffer or
incur pursuant to this Deed (including, but not limited to, any sums paid
or payable by the Facility Agent under Clauses 12 and 13).
13.14 Unless otherwise specifically stated in any discharge of
this Deed the provisions of Clauses 12 and 13 shall continue in full force
and effect notwithstanding the discharge of this Deed or the resignation or
other removal of the Security Trustee.
14. DISTRIBUTION OF PROCEEDS
14.1 Subject to Clause 3.3(f), after the security constituted by the
Security Documents shall have become enforceable, the Security Trustee
shall appropriate and distribute all Distribution Proceeds (subject to the
payment of debts which by law have priority) in the following manner and
order (but so that in each case only if and to the extent that
appropriations and distributions of a higher priority have been made in
full):
(a) first, in or towards payment of all costs, charges, expenses and
liabilities (together with accrued interest thereon as provided in any
other Security Document) properly incurred by the Security Trustee or
any Receiver, attorney, agent, delegate or other person appointed by
the Security Trustee under any of the Security Documents in the
exercise or purported exercise of any Rights, powers, authorities or
discretions vested in it or him pursuant to any of the Security
Documents in respect of any Security Interest created by an Obligor or
any Security Document executed by an Obligor;
(b) second, to the extent Distribution Proceeds remain after the
application pursuant to paragraph (a) of this Clause 14.1, in or
towards payment of all fees, costs, charges and expenses (together
with accrued interest thereon as provided in any Finance Document)
properly incurred by any Finance Party in the exercise or purported
exercise of any powers, duties, obligations or discretions vested in
it or him pursuant to any of the Finance Documents;
(c) third, to the extent Distribution Proceeds remain after the
application pursuant to paragraphs (a) and (b) of this Clause 14.1, in
or towards payment pro rata of any interest due to the Lenders in
respect of the Secured Liabilities;
(d) fourth, to the extent Distribution Proceeds remain after the
application pursuant to the preceding paragraphs (a), (b) and (c) of
this Clause 14.1, in or towards payment pro rata of any principal due
to the Lenders in respect of the Secured Liabilities;
(e) fifth, to the extent Distribution Proceeds remain after the
application pursuant to the preceding paragraphs (a), (b), (c) and
(d), in or towards payment pro rata of all remaining sums or
liabilities due or owed to the Finance Parties in respect of the
Secured Liabilities; and
(f) the surplus (if any) after the payment in full of the Secured
Liabilities shall be paid to or to the order of the Borrower or to
such other person as the Borrower may notify to the Security Trustee,
or as otherwise required by any court of competent jurisdiction or the
laws of any relevant jurisdiction.
it being understood and agreed that each of the Obligors shall remain
jointly and severally liable to the extent of any deficiency between the
amount of the Distribution Proceeds and the aggregate amount of the sums
referred to in clauses (a), (b), (c), (d) and (e) of this Clause 14.1 with
respect to the Secured Liabilities.
14.2 Clause 14.1 is subject to:
(a) if, after discharge of the costs, charges, expenses and
liabilities (together with accrued interest thereon) referred to in
paragraphs (a) and (b) above, the Distribution Proceeds remaining are
insufficient to discharge in full any of the aggregate amounts
referred to in any of paragraphs (c), (d) or (e) above, as the case
may be, such remaining Distribution Proceeds shall be paid to the
Facility Agent to be distributed pari passu and rateably to the
Lenders in proportion to the respective portions of the Secured
Liabilities owing to each Lender;
(b) as between the Lenders, a Lender shall be deemed to have received
from the Security Trustee any amount which the Security Trustee is at
any time required by law to deduct or withhold on account of tax from
any distribution received by that Lender under this Deed, provided
that this shall not prejudice any right which that Lender may have
against an Obligor (whether under a grossing-up clause or otherwise)
but as between the Lenders, any such indebtedness shall rank after all
other sums due and owing in respect of the Secured Liabilities; and
(c) if any Distribution Proceeds shall be denominated in a currency
(the "relevant currency") other than that in which any Secured
Liability is expressed to be payable (the "contractual currency") the
Security Trustee shall convert the relevant Distribution Proceeds into
the contractual currency and apply the same in accordance with the
foregoing provisions, but so that no action taken by the Security
Trustee pursuant to this paragraph (c) shall in any way prejudice or
affect the rights or claims which any Finance Party may have pursuant
to the terms of the Finance Documents.
14.3 All payments required to be made hereunder or under any other
Security Document shall be made at such times as the Security Trustee in
its absolute discretion determines to be as soon as reasonably practical,
having regard to all relevant circumstances.
14.4 All payments required to be made hereunder or under any other
Security Document shall be made to the Facility Agent for the account of
the Finance Parties. An acknowledgement of receipt signed by the Facility
Agent or, as the case may be, the Obligors or its or their appointee, shall
be a good discharge of the Security Trustee.
14.5 For purposes of applying payments received in accordance with
this Clause 14, the Security Trustee shall be entitled to rely upon the
Facility Agent for a determination (which the Facility Agent agrees to
provide upon request of the Security Trustee) as to the amount, currency
and nature of the outstanding Secured Liabilities owed to any Finance
Party. The Security Trustee shall be entitled to rely on any such
certificate.
14.6 If and to the extent that any appropriation or distribution shall
at any time thereafter transpire to have been invalid or any sum so
distributed has to be refunded to any person under any law relating to
bankruptcy, insolvency or winding up or otherwise, the relevant
distribution shall be deemed never to have been made provided that any
benefit obtained by the person to whom the relevant distribution was
originally made from the use of the amount so distributed shall so long as
it is retained (free from liabilities) by such person, be deducted from
any interest which becomes payable in accordance herewith on such amount
from the date of such distribution to the date on which it is deemed never
to have been made (such resulting amount never however to be a negative
amount).
14.7 Any distribution or payment or transfer required to be made by
the Security Trustee under this Deed shall be made subject to any
applicable laws and regulations.
15. AMENDMENT AND WAIVER
15.1 No amendment, modification, supplement or waiver of any provision
of this Deed, nor consent to any departure by the Obligors herefrom or
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Security Trustee with the consent of the Facility
Agent and the Obligors and then such amendment, modification, supplement,
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
15.2 No course of dealing and no delay or failure of the Security
Trustee or any other Finance Party in exercising any Right or remedy under
this Deed or the other Finance Documents or any other agreements, documents
or instruments pursuant to or in connection herewith or therewith shall
affect any other or future exercise thereof or the exercise of any other
Right or remedy; nor shall any single or partial exercise of any such Right
or remedy, or any abandonment or discontinuance of steps to enforce the
same, preclude any further exercise thereof or of any other Right or
remedy.
15.3 The Security Trustee may (without prejudice to its rights in
respect of any subsequent breach) from time to time and at any time
authorise or waive, on such terms and conditions as it may specify, any
breach by the Obligors of any of the covenants or provisions contained in
any of the Security Documents, provided always that the Security Trustee
shall not exercise any powers conferred on it by this Clause unless it has
been directed to do so by the Facility Agent. No such direction shall
affect any authorisation or waiver previously given or made. Any such
waiver or authorisation shall be binding on all of the Finance Parties.
15.4 Time is of the essence of each of the Facility Agent's and each
Obligor's obligations under this Deed but no failure to exercise, nor any
delay in exercising, on the part, of the Security Trustee, any right or
remedy under this Deed 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 Deed are cumulative and not exclusive
of any rights or remedies provided by law. The Security Trustee may agree
to any waiver of any of its rights or remedies under this Deed on such
terms as it sees fit.
16. SEVERABILITY
If, at any time, any provision of this Deed is or becomes illegal,
invalid or unenforceable in any respect under the law of any relevant
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Deed under the law of that jurisdiction nor
the legality, validity or enforceability of that or any other provision of
this Deed under the law of any other relevant 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 original
agreement.
17. ASSIGNMENT
17.1 Neither the Security Trustee nor any Obligor may assign or
transfer its rights and obligations under this Deed without the prior
written consent of the Facility Agent. Such consent shall be deemed given
to any assignment made in accordance with Clause 10.
17.2 This Deed shall bind the parties hereto and each of their
respective successors, assignees and transferees and the parties to any
novation of the rights and obligations under this Deed.
18. NOTICES
18.1 All notices or other communications shall be in writing addressed
to the relevant party. A written notice includes a notice by facsimile
transmission. Any such notice shall be deemed to be given as follows:
(a) if by personal delivery or letter, when delivered;
(b) 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.
18.2 The address and facsimile number of the parties to this Agreement
are:
(a) For the Security Trustee:
The Law Debenture Trust Corporation p.l.c.
Princes House
95 Gresham Street
London EC2V 7LY
Attention: The Manager, Trust Management
Facsimile: 44 (0)20 7696 5261/7606 0643
(b) For an Obligor
c/o Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060, USA
Attention: President
Facsimile: (281) 877 0985
(c) For the Facility Agent:
Shell Capital Services Limited
Shell Centre
London SE1 7NA
Attention: The Financial Controller
Facsimile: 44 207 934 7058
or such other as each party may notify to the other parties by not less
than five Business Days' notice.
18.3 Each communication and document made or delivered by one party to
another pursuant to this Deed 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.
19. GOVERNING LAW
THIS DEED SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
ENGLISH LAW.
20. JURISDICTION
(A) EACH OF THE OBLIGORS IRREVOCABLY AGREES FOR THE BENEFIT OF THE
SECURITY TRUSTEE AND THE FACILITY AGENT THAT THE COURTS OF ENGLAND SHALL
HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY SUIT, ACTION OR
PROCEEDING, AND TO SETTLE ANY DISPUTES, WHICH MAY ARISE OUT OF OR IN
CONNECTION WITH THIS DEED AND, FOR SUCH PURPOSES, IRREVOCABLY SUBMITS TO
THE JURISDICTION OF SUCH COURTS.
(B) WITHOUT PREJUDICE TO ANY OTHER MODE OF SERVICE, THE BORROWER:
(I) AGREES THAT THE PROCESS BY WHICH ANY SUIT, ACTION OR
PROCEEDING IS BEGUN AND MAY BE SERVED ON IT IS BY DELIVERY IN
CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING IN ENGLAND, TO LAW
DEBENTURE TRUST CORPORATE SERVICES LIMITED WHOSE ADDRESS IS AT PRINCES
HOUSE, 95 GRESHAM STREET, LONDON EC2V 7LY;
(II) AGREES THAT THE FAILURE BY A PROCESS AGENT TO NOTIFY THE
BORROWER OF THE PROCESS WILL NOT INVALIDATE THE PROCEEDINGS CONCERNED;
AND
(III) CONSENTS TO THE SERVICE OF PROCESS RELATING TO ANY SUCH
PROCEEDINGS BY PREPAID POSTING OF A COPY OF THE PROCESS TO ITS ADDRESS
FOR THE TIME BEING APPLYING UNDER CLAUSE 18.2.
(C) EACH OF THE OBLIGORS WAIVES ANY OBJECTION TO THE ENGLISH COURTS
ON GROUNDS OF INCONVENIENT FORUM OR OTHERWISE AS REGARDS PROCEEDINGS IN
CONNECTION WITH THIS DEED AND AGREES THAT A JUDGMENT OR ORDER OF AN ENGLISH
COURT IN CONNECTION WITH THIS DEED IS CONCLUSIVE AND BINDING ON IT AND
MAY BE ENFORCED AGAINST IT IN THE COURTS OF ANY OTHER JURISDICTION.
(D) THE SUBMISSION TO THE JURISDICTION OF THE COURTS AND ENTITIES
REFERRED TO IN THIS CLAUSE 20 SHALL NOT (AND SHALL NOT BE CONSTRUED SO AS
TO) LIMIT THE RIGHTS OF THE SECURITY TRUSTEE OR THE FACILITY AGENT OR
EITHER OF THEM TO TAKE SUITS, ACTIONS OR PROCEEDINGS AGAINST AN OBLIGOR IN
ANY OTHER COURT OR ENTITY OF COMPETENT JURISDICTION WHERE SUCH OBLIGOR HAS
ASSETS NOR SHALL THE TAKING OF SUITS, ACTIONS OR PROCEEDINGS IN ANY ONE OR
MORE JURISDICTION PRECLUDE THE TAKING OF PROCEEDINGS IN ANY OTHER
JURISDICTION, WHETHER CONCURRENTLY OR NOT.
(E) TO THE EXTENT THAT AN OBLIGOR MAY IN ANY JURISDICTION CLAIM FOR
ITSELF OR ITS ASSETS OR REVENUES IMMUNITY FROM SUIT, EXECUTION, ATTACHMENT
(WHETHER IN AID OF EXECUTION, BEFORE JUDGMENT OR OTHERWISE) OR OTHER LEGAL
PROCESS, AND TO THE EXTENT THAT IN ANY SUCH JURISDICTION THERE MAY BE
ATTRIBUTED TO ITSELF OR ITS ASSETS OR REVENUES SUCH IMMUNITY (WHETHER OR
NOT CLAIMED), THE BORROWER AGREES NOT TO CLAIM AND IRREVOCABLY WAIVES SUCH
IMMUNITY TO THE FULL EXTENT PERMITTED BY THE LAWS OF SUCH JURISDICTION.
(F) EACH OF THE OBLIGORS HEREBY CONSENTS GENERALLY IN RESPECT OF ANY
LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS
DEED TO THE GIVING OF ANY RELIEF OR THE ISSUE OF ANY PROCESS IN CONNECTION
WITH SUCH SUIT, ACTION OR PROCEEDING, INCLUDING THE MAKING, ENFORCEMENT OR
EXECUTION AGAINST ANY PROPERTY WHATSOEVER (IRRESPECTIVE OF ITS USE OR
INTENDED USE) OF ANY JUDGMENT WHICH MAY BE MADE OR GIVEN IN SUCH SUIT,
ACTION OR PROCEEDING.
21. POWER OF ATTORNEY
21.1 Each of the Obligors by way of security irrevocably appoints the
Security Trustee and every Receiver of the Trust Property, each with full
power of substitution and each with full power to act alone, to be its
attorney and in its name and on its behalf to execute and as its act and
deed or otherwise to do all such assurances, acts or things which an
Obligor ought to do under the covenants and provisions contained in the
Security Documents, and generally in its name and on its behalf to exercise
all or any of the powers, authorities and discretions conferred by or
pursuant to the Security Documents on the Security Trustee or any Receiver
and (without prejudice to the generality of the foregoing):
(a) to execute, seal and deliver and otherwise perfect any deed,
assignment, transfer, assurance, agreement, instrument or act which
may, in the opinion of such attorney, be required or deemed necessary
for the purposes of giving effect to the Security Documents and for
the purpose of the exercise of any of the powers conferred on such
attorney pursuant to this Deed; and
(b) on and after the Security Trustee becoming bound to enforce the
security constituted by the Security Documents in accordance with
Clause 6 hereof, to ask, require, demand, receive, compound, give
acquittance for, settle and compromise any and all moneys and claims
for moneys due and become due under or arising out of the Security
Documents, to endorse any cheques or other instruments or order in
connection therewith, to file any claim, to take any action or
institute any proceedings which the Security Trustee may deem to be
necessary or advisable and to execute any documents and do anything
necessary or desirable under this Deed or any other Security Document
and with full power to delegate any of the rights and powers hereby
conferred upon it,
provided that the appointment hereby made shall cease to have any force or
effect when the provisions for release under Clause 2.4 have been
satisfied.
21.2 Each of the Obligors hereby ratifies and confirms and agrees to
ratify and confirm whatever any such attorney as is mentioned in Clause
21.1 shall do or purport to do in the exercise or purported exercise of
all or any of the powers, authorities and discretions referred to therein.
22. COUNTERPARTS
This Deed may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one instrument.
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Security Trust Deed as a deed on the date first above written.
THE OBLIGORS
SIGNED AS A DEED
and DELIVERED
on behalf of CHAPARRAL RESOURCES, INC.
by: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Co-Chairman
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
SIGNED AS A DEED
and DELIVERED
on behalf of CENTRAL ASIAN PETROLEUM
(GUERNSEY) LIMITED
by: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Director
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
SIGNED AS A DEED
and DELIVERED
on behalf of CLOSED TYPE JSC KARAKADUKMUNAY
by: /S/ NIKOLAI D. KLINCHEV
-----------------------------
Name: Nikolai D. Klinchev
Title: General Director
by: /S/ RICHARD J. MOORE
-----------------------------
Name: Richard J. Moore
Title: Finance Director
SIGNED AS A DEED
and DELIVERED
on behalf of CENTRAL ASIAN PETROLEUM, INC.
by: /S/ JAMES A. JEFFS
-----------------------------
Name: James A. Jeffs
Title: Chairman
In the presence of:
/S/ MARK S. CROFT
-----------------------------
Witness
Name: Mark S. Croft
THE FACILITY AGENT
SIGNED AS A DEED
and DELIVERED
on behalf of
SHELL CAPITAL SERVICES LIMITED
by: /S/ MARK L.G. TURNER
-----------------------------
Name: Mark L.G. Turner
Title:
In the presence of:
/S/ C. POYER
-----------------------------
Witness
Name: C. Poyer
THE SECURITY TRUSTEE
The COMMON SEAL of
THE LAW DEBENTURE TRUST
CORPORATION p.l.c
was hereunto affixed in the presence of:
/S/ JULIAN MASON-JEBB
-----------------------------
Name: Julian Mason-Jebb
Title: Director
/S/ CLIVE RAKESTROW
-----------------------------
Name: Clive Rakestrow
Title: Authorised Signatory
TABLE OF CONTENTS
Page
1. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . 4
3. Appointment, Rights and Duties of the Security Trustee . . . . . 5
4. No Liability of the Security Trustee . . . . . . . . . . . . . . 8
5. Instructions of the Facility Agent . . . . . . . . . . . . . . . 10
6. Trust Property and Powers of Enforcement . . . . . . . . . . . . 10
7. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 12
9. The Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Retirement of Security Trustee . . . . . . . . . . . . . . . . . 12
11. Appointment of Additional Security Trustee . . . . . . . . . . . 13
12. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Costs; Indemnification of the Security Trustee . . . . . . . . . 15
14. Distribution of Proceeds . . . . . . . . . . . . . . . . . . . . 18
15. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . 20
16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
19. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 24
22. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
==========================================================================
WARRANT AGREEMENT
BETWEEN
CHAPARRAL RESOURCES, INC.
AND
SHELL CAPITAL LIMITED
DATED AS OF FEBRUARY 8, 2000
==========================================================================
WHITE & CASE
7-11 Moorgate
London EC2R 6HH
WARRANT AGREEMENT (this "Agreement") dated as of February 8, 2000,
between CHAPARRAL RESOURCES, INC., a Delaware corporation (the "Company"),
and SHELL CAPITAL LIMITED a company organised and existing under the laws
of England (the "Purchaser") and its assignees or designees (the "Holder").
W I T N E S S E T H:
WHEREAS, the Company has entered into a Loan Agreement dated November
1, 1999 (the "Loan Agreement") between the Company, Central Asian Petroleum
(Guernsey) Limited, Central Asian Petroleum, Inc. and Closed Type JSC
Karakudukmunay, as the Co-Obligors, Shell Capital Limited ("Shell") as the
Facility Agent, Shell Capital Services Limited as the Arranger, Shell as
the Modeller and the Lenders (each such term as defined in the Loan
Agreement); and
WHEREAS, in order to induce Shell to enter into the Loan Agreement,
the Company has authorized the issuance of the warrants (the "Warrants")
which are exercisable, pursuant to their terms and conditions, for shares
of common stock par value $ .0001 per share of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereto agree as
follows:
1. DEFINITIONS.
"COMMENCEMENT DATE" means the earlier of
(a) the Project Completion Date; and
(b) September 30, 2001.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means
(a) the class of stock designated as common stock in the certificate
of incorporation of the Company as amended as of the date of this
Agreement; or
(b) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value or from no par value to par value.
"COMMON STOCK EXERCISE PRICE" has the meaning provided in Section 2.
"EMPLOYEE STOCK OPTIONS" means up to fifteen percent (15%) of the
Common Stock of the Company issuable or issued in connection with incentive
or non-qualified stock options or grants to directors, officers and
consultants of the Company or the Co-Obligors (as defined in the Loan
Agreement).
"EVENT OF DEFAULT" has the meaning provided in the Loan Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED WARRANTS" means the Warrants to acquire shares of the
Company held by each of Allen & Company Incorporated and Whittien Ventures,
L.L.C.
"EXPIRATION DATE" means the fifth anniversary of the Commencement
Date.
"HOLDER(S)" means the Purchaser (so long as it holds any Warrants or
Warrant Shares) and any other registered holder(s) of any of the Warrants
or Warrant Shares.
"INDEPENDENT FINANCIAL EXPERT" means a nationally recognized appraiser
or investment banking firm that does not (and whose affiliates do not) have
a direct or indirect financial interest in the Company, the Holder (other
than in its trading accounts or as a participating underwriter in an
offering of securities) or any of the shareholders of the Company, that has
not been, and at the time it is called upon to determine Market Price (or
any of the other valuations referred to in Section 11), is not (and none of
whose affiliates is) a promoter, director or officer of the Company or any
of its affiliates or the Holder or an underwriter with respect to any of
the securities of the Company, and that has not provided any advice or
opinions to the Company during the two years prior to the date it is called
upon to serve as Independent Financial Expert, except as an Independent
Financial Expert pursuant to this Agreement.
"LOAN AGREEMENT" has the meaning provided in the first Whereas clause.
"MAJORITY" means in excess of fifty percent (50%) of the then
outstanding Warrants or Warrant Shares that (i) are not held by the Company
or any of its affiliates, officers, creditors, employees, or agents or any
of their respective affiliates, members of their family, persons acting as
nominees or in conjunction with any of them or (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission
under the Securities Act.
"MARKET PRICE" means at any date, the last reported sale price, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
average closing sale price as furnished by the NASD through NASDAQ or
similar organization if NASDAQ is no longer reporting such information, or
if the Common Stock is not quoted on NASDAQ, the OTC Electronic Bulletin
Board, or as determined by an Independent Financial Expert selected by the
Holders holding a Majority of the Warrants or Warrant Shares, and
reasonably acceptable to the Company.
"NASDAQ" means The NASDAQ Stock Market Inc.
"PERSON" means an individual, a corporation, a limited liability
company, a company, a voluntary association, a general partnership, a
limited partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision of a
government.
"PROJECT COMPLETION DATE" has the meaning provided in the Loan
Agreement.
"REQUESTING HOLDERS" has the meaning provided in Section 9.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SURRENDER" has the meaning provided in Section 5.
"TRANSFER AGENT" has the meaning provided in Section 14.
"UNITED STATES DOLLARS" means the national currency of the United
States of America;
"WARRANT CERTIFICATES" means the certificates evidencing the Warrants.
"WARRANT SHARES" means all the shares of Common Stock issuable or
issued upon the exercise of the Warrants.
"WARRANTS" has the meaning provided in the second Whereas clause.
2. GRANT. Subject to the terms of this Agreement, the Holder will
have the right, which may be exercised at any time between the Commencement
Date and the Expiration Date, to purchase up to 146,693 shares of Common
Stock representing fifteen percent (15%) of the issued Common Stock of the
Company at the time of such purchase, par value $ .0001 per share, of the
Company. The price at which the Warrants are exercisable (subject to
adjustment as provided in Section 11) is $15.45 per share (the "Common
Stock Exercise Price"). Each Warrant not exercised by 5:00 p.m., Houston
time on the Expiration Date will become void and all rights under and in
respect of such Warrants under this Agreement will cease as of such time;
provided that the occurrence of the Expiration Date will not relieve the
Company of any obligation to the Holder which arose pursuant to the terms
of this Agreement prior to such date.
3. WARRANT CERTIFICATES. The Warrant Certificates delivered and to
be delivered pursuant to this Agreement are in the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions, and
other variations as required or permitted by this Agreement.
4. REGISTRATION OF WARRANT. The Warrants will be numbered and will
be registered on the books of the Company when issued.
5. EXERCISE OF WARRANT. A Warrant may be exercised, upon surrender
to the Company at its address set forth on the signature pages of this
Agreement, of the Warrant Certificate or Warrant Certificates to be
exercised with the annexed Purchase Form duly executed, together with
payment to the Company of the Common Stock Exercise Price for the number of
shares of Common Stock purchased (collectively, the "Surrender"). The
Holder will pay the aggregate Common Stock Exercise Price by wire transfer
to an account designated by the Company. Upon the Surrender, the Holder
will be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The rights represented by each Warrant
Certificate are exercisable at the option of the Holder in whole or in
part, provided that such exercise is in respect of at least five percent
(5%) of the Warrant Shares. In the case of the purchase of less than all
of the shares purchasable under any Warrant Certificate, the Company will
cancel that Warrant Certificate upon its surrender and will execute and
deliver a new Warrant Certificate of like tenor for the balance of the
shares of Common Stock which may be purchased pursuant to that Warrant
Certificate.
6. ISSUANCE OF CERTIFICATES. The issuance of certificates for
Common Stock underlying each Warrant will be made (and in any event within
ten (10) business days) after the exercise of the Warrant without charge to
the Holder including, without limitation, any tax or other governmental
charges (including all documentary stamp taxes, but excluding income taxes
payable by a Holder) which may be payable in respect of the issuance of
such certificates, and such certificates will (subject to the provisions of
Sections 7 and 9) be issued in the name of, or in such names as may be
directed by, the Holder; provided that the Company will not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of
the Holder and the Company will not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
of such certificates has paid to the Company the amount of such tax or has
established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Common
Stock issued upon exercise of the Warrants must be executed on behalf of
the Company by the manual or facsimile signature of a duly authorized
officer of the Company. Warrant Certificates will be dated the date of
execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
7. TRANSFER OF WARRANT. The Warrants are transferable only on the
books of the Company maintained at its principal office, where its
principal office may then be located, upon delivery of the Warrant
Certificate duly endorsed by the Holder or by its duly authorized attorney-
in-fact or representative accompanied by proper evidence of succession,
assignment or authority to transfer; provided, however, that the Purchaser
may only transfer Warrants to affiliates of such Purchaser or any successor
thereof. Upon any registration of transfer, the Company will execute and
deliver the new Warrant Certificate to the person entitled to it.
8. NOTICE OF EXPIRATION. The Company will, upon request of any
Holder as reflected in the books and records of the Company, give written
notice of the Expiration Date. Such notice must be delivered not less than
ten (10) days after such request is made.
9. REGISTRATION RIGHTS. Nothing contained in this Agreement shall
be construed as requiring the Holder(s) to exercise their Warrants prior to
the initial filing of any registration statement or its effectiveness.
9.1 RESTRICTIVE LEGENDS. Each Warrant Certificate and each
certificate representing the Warrant Shares will bear the following legend
unless (a) such Warrant or Warrant Shares are distributed to the public or
sold to underwriters for distribution to the public pursuant to this
Section 9 or otherwise pursuant to a registration statement filed under the
Securities Act, or (b) the Company has received an opinion of counsel, in
form and substance reasonably satisfactory to counsel for the Company, that
such legend is unnecessary for any such certificate:
THE SECURITES REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT
TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE ACT (OR ANY SIMILAR OR SUCCESSOR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT BETWEEN CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL
LIMITED DATED AS OF FEBRUARY 8, 2000, AS THE SAME MAY BE AMENDED,
MODIFIED OR SUPPLEMENTED FROM TIME TO TIME.
9.2 PIGGYBACK REGISTRATION. If the Company proposes to register
any of its securities under the Securities Act, it will give written
notice, at least thirty (30) days prior to the filing of a registration
statement pursuant to the Securities Act, to the Holders of its intention
to do so. If the Holders notify the Company within ten (10) business days
of receipt of any such notice of their desire to include any of their
Warrants and Warrant Shares in such proposed registration statement, the
Company shall afford the opportunity to have any of their Warrants and
Warrant Shares registered under such registration statement. In the event
that the managing underwriter for the said offering advises the Company in
writing that in its opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without causing a diminution in the offering price or otherwise
adversely affecting the offering, the Company will include in such
registration
(a) FIRST, the securities the Company proposes to sell; and
(b) SECOND, the Warrants, Warrant Shares and other securities of the
Company requested to be included in such registration which in the opinion
of such underwriter can be sold, pro rata among the holders on the basis of
the number of Warrants, Warrant Shares or other securities requested to be
registered by such holders.
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it has given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion
of any such securities has been made) to elect not to file any such
proposed registration statement or to withdraw the same after the filing
but prior to the effective date thereof.
9.3 DEMAND REGISTRATION.
(a) The Holders representing a Majority of the Warrants and Warrant
Shares shall have the right (which right is in addition to the registration
rights under Section 9.2), exercisable by written notice to the Company, to
have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as
may be necessary in the opinion of both counsel for the Company and counsel
for the Holders, in order to comply with the provisions of the Securities
Act, so as to permit a public offering and sale by such Holders and any
other Holders who notify the Company within fifteen (15) days after the
Company mails notice of such request pursuant to Section 9.3(b)
(collectively, the "Requesting Holders") of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrants and Warrant Shares requested to be registered
by the Requesting Holders. Registration and all costs incidental to such
registration shall be at the expense of the Company.
(b) The Company shall give written notice of any registration request
under this Section 9.3 by any Holder or Holders representing a Majority of
the Warrants and Warrant Shares to all other Holders of the Warrants and
the Warrant Shares within ten (10) days from the date of the receipt of any
such registration request.
(c) In addition to the registration rights under Section 9.2 and
subsection (a) of this Section 9.3, the Holders of a Majority of the
Warrants and Warrant Shares shall have the right on one occasion,
exercisable by written request to the Company, to have the Company prepare
and file with the Commission a registration statement so as to permit a
public offering and sale by such Holders of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrant Shares requested to be registered by such
Holders; provided, however, registration and all costs incidental to such
registration shall be shared equally between the Holder or Holders making
such request and the Company. If the Holders have exercised their rights
under Section 9.3(a) then the Holders may not exercise their rights under
this Section 9.3(c) for a period of six (6) months following the effective
date of any registration statement filed pursuant to Section 9.3(a).
(d) In addition to the registration rights under Section 9.2 and
subsections (a) and (c) of this Section 9.3, the Holders of a Majority of
the Warrants and Warrant Shares shall have the right on one occasion,
exercisable by written request to the Company, to have the Company prepare
and file with the Commission a registration statement so as to permit a
public offering and sale by such Holders of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrant Shares requested to be registered by such
Holders; provided, however, registration and all costs incidental to such
registration shall be at the expense of the Holder or Holders making such
request. If the Holders have exercised their rights under Section 9.3(a)
or Section 9.3(c) then the Holders may not exercise their rights under this
Section 9.3(d) for a period of six (6) months following the effective date
of any registration statement filed pursuant to Section 9.3(a) or 9.3(c).
(e) Notwithstanding anything to the contrary contained in this
Agreement, if the Company has not filed a registration statement for the
Warrants and Warrant Shares within the time period specified in Section
9.4(a) pursuant to the written notice specified in Section 9.3(a), 9.3(c)
or 9.3(d) of the Holders of a Majority of the Warrants and Warrant Shares,
the Company shall repurchase (i) any and all Warrant Shares at the higher
of the Market Price per share of Common Stock on (A) the date of the notice
sent pursuant to Section 9.3(a), 9.3(c) or 9.3(d), as the case may be, or
(B) the expiration of the period specified in Section 9.4(a) and (ii) any
and all Warrants at such Market Price less the Common Stock Exercise Price
of such Warrant. Such repurchase shall be in immediately available funds
and shall close within two (2) days after the later of (i) the expiration
of the period specified in Section 9.4(a) or (ii) the delivery of the
written notice of election specified in this Section 9.3(e).
9.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Sections 9.2 or 9.3, the Company
will:
(a) use its best efforts to file a registration statement within
sixty (60) days of receipt of any demand pursuant to Section 9.3, and to
have any registration statements declared effective at the earliest
possible time, and will furnish each Holder desiring to sell Warrant Shares
such number of prospectuses as shall reasonably be requested;
(b) pay all reasonable costs, fees and expenses (excluding: (i) fees
and expenses of Holder(s); and (ii) any underwriting or selling
commissions) in connection with all registration statements filed pursuant
to Sections 9.2, 9.3(a) and to the extent provided in 9.3(c), including,
without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses;
(c) take all action which may be required in qualifying or
registering the Warrant Shares included in a registration statement for
offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holder(s), provided that the Company shall
not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the
laws of any such jurisdiction;
(d) indemnify the Holder(s) of the Warrant Shares to be sold pursuant
to any registration statement and each person, if any, who controls such
Holders within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
arising from such registration statement;
(e) not permit the inclusion of any securities other than the
Warrants and Warrant Shares to be included in any registration statement
filed pursuant to Section 9.3, or permit any other registration statement
to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 9.3, without the prior written consent
of the Holders of a Majority of Warrants and Warrant Shares or as otherwise
required by the terms of any existing registration rights granted prior to
the date of this Agreement by the Company to the holders of any of the
Company's securities;
(f) furnish to each Holder participating in the offering and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included in the registration statement) and,
in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities;
(g) as soon as practicable after the effective date of the
registration statement, and in any event within 15 months thereafter, make
generally available to its security holders an earnings statement (within
the meaning of Rule 158 under the Securities Act)(which need not be
audited) complying with Section 11(a) of the Securities Act and covering a
period of at least 12 consecutive months beginning after the effective date
of the registration statement; and
(h) shall enter into an underwriting agreement with the managing
underwriters selected for such underwriting by Holders holding a Majority
of the Warrant Shares requested to be included in such underwriting. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other
terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may,
at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate
to such Holders and their intended methods of distribution.
9.5 INDEMNIFICATION WITH RESPECT TO REGISTRATION. The Holder(s) of
the Warrant Shares to be sold pursuant to a registration statement, and
their successors and assigns, will severally, and not jointly, indemnify
the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Securities Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such
Holders, or their successors or assigns, for specific inclusion in such
registration statement.
10. OBLIGATIONS OF HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 that
the Holders of the Warrant Shares to be sold pursuant to a registration
statement will:
(a) furnish to the Company such information regarding themselves, the
Warrant Shares held by them, the intended method of sale or other
disposition of such securities, the identity of and compensation to be paid
to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may be necessary to effect
the registration of their Warrant Shares; and
(b) notify the Company, at any time when a prospectus relating to the
Warrant Shares covered by a registration statement is required to be
delivered under the Securities Act, of the happening of any event with
respect to such selling Holder 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.
11. ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF
SECURITIES. The Common Stock Exercise Price in effect at any time and the
number and kind of securities purchased upon the exercise of the Warrants
will be subject to adjustment from time to time only upon the happening of
the following events:
11.1 ADJUSTMENT FOR CHANGES IN COMMON STOCK.
(a) (i) If at any time or from time to time the Company:
(A) pays a dividend or makes a distribution on its Common
Stock payable in shares of its Common Stock or other capital
stock or equity interests of the Company;
(B) subdivides any of its outstanding shares of Common
Stock into a larger number of shares of Common Stock;
(C) combines any of its outstanding shares of Common Stock
into a smaller number of shares of Common Stock; or
(D) increases or decreases the number of shares of Common
Stock outstanding by reclassification of its Common Stock,
then
(ii) the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event
will be adjusted to a number determined by:
(A) multiplying the number of shares of Common Stock that
such Holder would have owned or have been entitled to receive
upon exercise had such Warrants been exercised immediately prior
to the happening of the events described in paragraphs (i)(A)-
(i)(D) above (or, in the case of a dividend or distribution of
Common Stock or other shares of the Company's capital stock,
immediately prior to the record date therefor); by
(B) a fraction:
(I) the numerator of which will be the total number of
shares of Common Stock outstanding immediately after the
happening of the events described in paragraphs (i)(A)-
(i)(D) above; and
(II) the denominator of which will be the total number
of shares of Common Stock outstanding immediately prior to
the happening of the events described in paragraphs (i)(A)-
(i)(D) above.
(b) The Common Stock Exercise Price for each Warrant will be adjusted
to a number determined by dividing the Common Stock Exercise Price
immediately prior to such event by the fraction described in Section
11.1(a)(ii)(B).
(c) An adjustment made pursuant to this Section 11.1 will become
effective immediately after the effective date of such event, retroactive
to the record date for such event in the case of a dividend or distribution
in shares of Common Stock or other shares of the Company's capital stock.
11.2 ADJUSTMENT FOR CASH DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) (i) If at any time or from time to time, the Company distributes
to all holders of Common Stock:
(A) any dividend or other distribution of cash, evidences
of its indebtedness, or any other assets, properties or debt
securities; or
(B) any options, warrants or other rights to subscribe for
or purchase any additional shares of Common Stock (other than, in
each case, (x) any rights, options, warrants or securities
described in Section 11.3 and (y) any cash dividends or other
cash distributions from current or retained earnings),
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant will be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
issuable upon the exercise of such Warrant immediately prior to
the record date for any such dividend or distribution; by
(B) a fraction:
(I) the numerator of which will be the current Market
Price per share of Common Stock on the record date for such
dividend or distribution; and
(II) the denominator of which will be such current
Market Price per share of Common Stock on the record date
for such dividend or distribution less the sum of :
(X) the amount of cash, if any, distributed per
share of Common Stock; and
(Y) the fair value (as determined in good faith
by the Board, whose determination shall be evidenced by
a board resolution, a copy of which will be sent to
Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock,
consisting of evidences of indebtedness, shares of
stock, securities, other assets or property, warrants,
options or subscription or purchase rights;
(b) The Common Stock Exercise Price will be adjusted to a number
determined by dividing the Common Stock Exercise Price immediately prior to
such record date by the such fraction described in Section 11.2(a)(ii)(B).
Such adjustments will be made whenever any distribution is made and will
become effective as of the date of distribution, retroactive to the record
date for any such distribution; provided that the Company is not required
to make an adjustment pursuant to this Section 11.2 if at the time of such
distribution the Company makes the same distribution to Holders of Warrants
as it makes to holders of Common Stock pro rata based on the number of
shares of Common Stock for which such Warrants are exercisable (whether or
not currently exercisable).
(c) In the event that Holders of a Majority of the Warrants and
Warrant Shares disagree with the Company's determination of the fair value
of any evidences of indebtedness, shares of stock, securities, other assets
or property pursuant to this Section 11.2, then such fair value shall be
determined by an Independent Financial Expert selected by the Holders of a
Majority of the Warrants and Warrant Shares, and reasonably acceptable to
the Company. The Holders and the Company will share equally the costs of
the Independent Financial Expert.
(d) No adjustment will be made pursuant to this Section 11.2 which
has the effect of decreasing the number of shares of Common Stock issuable
upon exercise of each Warrant or increasing the Common Stock Exercise
Price.
11.3 ADJUSTMENT FOR RIGHTS ISSUED TO ALL HOLDERS OF COMMON STOCK.
(a) (i) Except for transactions by the Company contemplated by
section 17.17(a)(ii), (iii), (iv) and (vi) of the Loan Agreement, if at any
time or from time to time the Company issues to all holders of Common
Stock:
(A) any charge, rights, options or warrants entitling the
holders of such rights, options or warrants to subscribe for
additional shares of Common Stock at a price per share that is
lower at the record date for such issuance than the then current
Market Price per share of Common Stock; or
(B) securities convertible into or exchangeable or
exercisable for additional shares of Common Stock, entitling such
holders to subscribe for or purchase shares of Common Stock at a
price per share that is lower at the record date for such
issuance than the then current Market Price per share of Common
Stock,
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant; by
(B) a fraction:
(I) the numerator of which will be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or securities
plus the number of additional shares of Common Stock
subscribed for or purchased or into or for which such
subscribed for or purchased securities are convertible,
exchangeable or exercisable; and
(II) the denominator of which will be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or securities
plus the total number of shares of Common Stock which the
aggregate consideration received by the Company (assuming
the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then current
Market Price per share of Common Stock.
(b) In the event of any increase described in Section 11.3(a), the
Common Stock Exercise Price shall be adjusted to a number determined by
dividing:
(i) the Common Stock Exercise Price immediately prior to such
date of issuance; by
(ii) the fraction described in Section 11.3(a)(ii)(B).
Such adjustment will be made immediately after such rights, options or
warrants are issued and will become effective, retroactive to the record
date for the determination of stockholders entitled to receive such rights,
options, warrants or securities.
(c) No adjustment will be made pursuant to this Section 11.3 which
has the effect of decreasing the number of shares of Common Stock
purchasable upon exercise of each Warrant or of increasing the Common Stock
Exercise Price.
11.4 ADJUSTMENT FOR OTHER ISSUANCES OF COMMON STOCK OR RIGHTS.
(a) Except for transactions by the Company contemplated by section
17.17(a)(ii), (iii), (iv) and (vi) of the Loan Agreement and Employee Stock
Options and the Excluded Warrants, if at any time or from time to time the
Company issues:
(A) shares of Common Stock (subject to the provisions
below);
(B) rights, options or warrants entitling the Holder
thereof to subscribe for shares of Common Stock (provided,
however, that no adjustment shall be made upon the exercise of
such rights, options or warrants); or
(C) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no
adjustment shall be made upon the conversion, exchange or
exercise of such securities (other than issuances specified in
(i), (ii) or (iii) which are made as the result of anti-dilution
adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then current
Market Price per share of Common Stock as of such date,
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant will be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant; by
(B) a fraction:
(I) the numerator of which will be the number of
shares of Common Stock outstanding immediately prior to such
sale or issuance plus the number of additional shares of
Common Stock subscribed for or purchased or into or for
which such securities subscribed for or purchased that are
issued are convertible, exchangeable or exercisable; and
(II) the denominator of which will be the number of
shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common
Stock which the aggregate consideration received by the
Company (assuming the exercise or conversion of all such
rights, options, warrants or securities, if any) would
purchase at the then current Market Price per share of
Common Stock.
(b) The Common Stock Exercise Price will be adjusted to a number
determined by dividing the Common Stock Exercise Price immediately prior to
such date of issuance by the fraction described in Section 11.4(a)(ii)(B).
Such adjustments shall be made whenever such rights, options or warrants or
convertible securities are issued.
(c) No adjustment will be made pursuant to this Section 11.4 which
has the effect of decreasing the number of shares of Common Stock issuable
upon exercise of each warrant or of increasing the Common Stock Exercise
Price.
(d) For purposes of this Section 11.4 only, any issuance of Common
Stock, or rights, options or warrants to subscribe for, or other securities
convertible into or exercisable or exchangeable for, Common Stock, which
issuance (or agreement to issue) is:
(i) in exchange for or otherwise in connection with the
acquisition of the property (excluding any such exchange exclusively
for cash) of any Person; and
(ii) at a price per share equal to the current Market Price at
the time of signing a definitive agreement
shall be deemed to have been made at a price per share equal to the current
Market Price per share at the record date with respect to such issuance
(the time of closing or consummation of such exchange or acquisition) if
such definitive agreement is entered into within 90 days of the date of
such agreement in principle.
11.5 NO ADJUSTMENT. No adjustment in the number of shares of Common
Stock issuable upon the exercise of each Warrant shall be required under
this Agreement unless such adjustment would result in an increase or
decrease of at least one percent (1%) of the Common Stock Exercise Price;
provided, that any adjustments which by reason of this Section 11.5 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest one-
hundredth of a cent or to the nearest one-thousandth of a share, as the
case may be.
11.6 NOTICE OF ADJUSTMENT. Whenever the Common Stock Exercise Price
or the number of shares of Common Stock and other property, if any,
issuable upon exercise of the Warrants is adjusted, as provided in this
Agreement, the Company shall deliver to the Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, including a description of
the basis on which:
(a) it determined the fair value of any evidences of indebtedness,
other securities or property or warrants, options or other subscription or
purchase rights; and
(b) the current Market Price of the Common Stock was determined, if
either of such determinations were required), and specifying the Common
Stock Exercise Price and the number of shares of Common Stock issuable upon
exercise of Warrants after giving effect to such adjustment.
11.7 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the
Holder of each Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a
Holder of the number of shares of Common Stock for which such Warrant might
have been exercised immediately prior to such consolidation or merger.
Such supplemental warrant agreement shall provide for adjustments which
shall be identical to the adjustments provided in this Section 11. This
subsection shall similarly apply to successive consolidations or mergers.
12. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable, without expense, upon its surrender by the
Holder at the principal executive office of the Company for a new Warrant
Certificate of like tenor and date representing in the aggregate the right
to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation
of the Warrant, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu of such Warrant Certificate.
13. LIMITATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares upon exercise of the Warrants
or distribute Warrant Certificates that evidence fractional Warrant Shares.
In addition, in no event shall the Holder be required to make any payment
of a fraction of a cent. In lieu of fractional Warrant Shares, there shall
be paid to the holders of Warrant Certificates at the time the Warrants are
exercised an amount in cash equal to the same fraction of the current
Market Price per Warrant Share on the business day preceding the date the
Warrant Certificates evidencing such Warrants are surrendered for exercise.
Such payments shall be made by check or by wire transfer to an account
designated by such Holder. If any Holder surrenders for exercise more than
one Warrant Certificate, the number of Warrant Shares deliverable to such
Holder may, at the option of the Company, be computed on the basis of the
aggregate amount of all the Warrants exercised by such Holder.
14. RESERVATION AND LISTING OF SECURITIES. The Company will at all
times reserve and keep available shares of Common Stock, free from
preemptive rights, out of its authorized but unissued shares of Common
Stock, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants. Every transfer agent ("Transfer
Agent") for the Common Stock and other securities of the Company issuable
upon the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares of Common
Stock as shall be necessary for such purpose. The Company will supply
every such Transfer Agent with duly executed stock and other certificates,
as appropriate, for such purpose. Upon exercise of the Warrants and
payment of the Common Stock Exercise Price, all shares of Common Stock upon
such exercise will be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. Upon exercise
of the Warrants, the Company will use its best efforts to cause all shares
of Common Stock issued in connection with such exercise to be listed
(subject to official notice of issuance) on all securities exchanges on
which the Common Stock issued to the public in connection herewith may then
be listed and quoted on NASDAQ or the OTC Electronic Bulletin Board.
15. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as
having any rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the Expiration Date:
(a) the Company takes a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) a dissolution, liquidation or winding up of the Company, a
consolidation or merger, or sale of all or substantially all of its
property, assets and business as an entirety shall be proposed,
the Company will give written notice of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled to
such dividend, distribution, convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date
or the date of closing the transfer books, as the case may be. Failure to
give such notice or any defect therein shall not affect the validity of any
action taken in connection with the declaration or payment of any such
dividend, or any proposed dissolution, liquidation, winding up,
consolidation, merger or sale.
16. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have
been duly made and sent when delivered, or mailed by registered or
certified mail, return receipt requested:
(a) if to a Holder, to the address of such Holder as shown on the
books of the Company or to such other address as such Holder may designate
by notice to the Company; or
(b) if to the Company, to the address set forth on the signature
pages to this Agreement or to such other address as the Company may
designate by notice to the Holders.
17. SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT.
(a) Any provisions of this Agreement or the Warrants may be amended
or waived if, but only if, such amendment or waiver is in writing and
signed by the Company and the Holders of a Majority of the Warrants and
Warrant Shares.
(b) This Agreement (including the Loan Agreement to the extent
portions of it are referred to in this Agreement) constitutes the entire
obligations of the parties to this Agreement and supersedes, any previous
expressions of intent or understanding in respect of this transaction.
18. SUCCESSORS. All of the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company,
the Holders and their respective successors and assigns hereunder.
19. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED UNDER THIS AGREEMENT IS GOVERNED BY NEW YORK LAW.
20. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they
be construed as, a part of this Agreement and shall be given no substantive
effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
the Holders any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of
the Company and any Holders.
23. COUNTERPARTS. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
ADDRESS FOR NOTICES:
Chaparral Resources, Inc.
16945 Northcase Drive, Suite 1440
Houston, TX 77060 CHAPARRAL RESOURCES, INC.
Attn: President By: /S/ JAMES A. JEFFS
Telephone: 281-877-7100 ------------------------------
Fax: 281-877-0989 Name: James A. Jeffs
Title: Co-Chairman
Shell Capital Limited
Shell Centre
London SE1 7NA
England SHELL CAPITAL LIMITED
Attn: The Financial Controller By: /S/ MARK L.G. TURNER
Telephone: ------------------------------
Fax: 44-207-934-7058 Name: Mark L.G. Turner
Title: Attorney-in-Fact
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), (ii)
TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR OR
SUCCESSOR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT (THE
"WARRANT AGREEMENT") BETWEEN CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL
LIMITED DATED AS OF FEBRUARY 8, 2000, AS THE SAME MAY BE AMENDED, MODIFIED
OR SUPLEMENTED FROM TIME TO TIME.
Warrant No.
Issuable for
146,693 Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that Shell Capital Limited, or
registered assigns, is the Holder of Warrants and shall have the right,
which may be exercised at any time between the Commencement Date and the
Expiration Date, to purchase up to 146,693 shares of Common Stock, par
value $.0001 per share, of the Company (the "Common Stock"). The price at
which the Warrant shall be exercisable shall be $15.45 per share (the
"Common Stock Exercise Price").
A Warrant may be exercised upon surrender of this Warrant Certificate
and payment of the Common Stock Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the
Warrant Agreement. Payment of the Common Stock Exercise Price shall be
made by wire transfer to an account designated by the Company or by
certified or official bank check payable to the order of the Company in
United States Dollars.
No Warrant may be exercised after 5:00 p.m., Houston time, on the
Expiration Date, at which time all Warrants evidenced by this Certificate,
unless exercised prior to that time, shall be void.
The Warrant evidenced by this Warrant Certificate is part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is incorporated by reference in and made a part of
this Warrant Certificate and is referred to for a description of the
rights, limitation of rights, obligations, duties and immunities of the
Company and the holders of the Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Common Stock Exercise Price and the type and number of the
Company's securities issuable upon the occurrence of such events may,
subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the Holder, issue a new Warrant Certificate
evidencing the adjustment in the Common Stock Exercise Price and the number
and type of securities issuable upon the exercise of the Warrant; provided
that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter or otherwise impair, the rights of the
Holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of the Warrant evidenced by this Warrant
Certificate shall be issued to the transferees in exchange for this Warrant
Certificate, subject to the limitations provided in this Warrant
Certificate and in the Warrant Agreement, without any charge except for any
tax or other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrant evidenced by this
Warrant Certificate, the Company shall forthwith issue to the Holder a new
Warrant Certificate representing such unexercised Warrant.
The Company may deem and treat the Holder(s) of this Warrant
Certificate as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing made by anyone
on this Warrant Certificate), for the purpose of any exercise of the
Warrant, and of any distribution to the Holder(s) of this Warrant
Certificate, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Holder to any of the
rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of February 8, 2000.
CHAPARRAL RESOURCES, INC.
By: ________________________________
Name:
Title:
PURCHASE FORM
The undersigned irrevocably elects to exercise the right, represented
by this Warrant Certificate, to purchase __________ shares of Common Stock,
and makes payment for such securities by wire transfer to an account
designated by the Chaparral Resources, Inc. in the amount of $____________,
all in accordance with the terms of Section 5 of the Warrant Agreement
between the Company and Shell Capital Limited dated as of February 8, 2000.
The undersigned requests that a certificate for such securities be
registered in the name of _____________, whose address is
__________________________ and that such certificate to be delivered to
_______________ whose address is __________________, and if said number of
shares shall not be all the shares purchasable under this Warrant
Certificate, that a new Warrant Certificate for the balance of the shares
purchasable under the within Warrant Certificate be registered in the name
of the undersigned warrant Holder or his assignee as below indicated and
delivered to the address stated below.
Dated: _________________________
Signature: _____________________
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THIS WARRANT CERTIFICATE.)
FOR VALUE RECEIVED ________________ hereby sells, assigns and transfers
unto
Name ____________________________
Address _________________________
this Warrant Certificate, together with all right, title and interest in
the Warrant and does hereby irrevocably constitute and appoint
________________, attorney, to transfer the within Warrant Certificate on
the book of the within-named Company, with full power of substitution.
Dated: __________________________
Signature: ______________________
THIS SUPPLEMENTAL AGREEMENT (the "AGREEMENT") is made this 10th of February
2000 between:
1. SHELL CAPITAL LIMITED ("SCL");
2. SHELL CAPITAL SERVICES LIMITED ("SCSL");
3. CHAPARRAL RESOURCES, INC.;
4. CENTRAL ASIAN PETROLEUM (GUERNSEY) LIMITED;
5. CLOSED TYPE JSC KARAKUDUKMUNAY; and
6. CENTRAL ASIAN PETROLEUM, INC. (together, the "PARTIES").
RECITALS:
(A) Chaparral Resources, Inc., as Borrower, Closed Type JSC
Karakudukmunay, Central Asian Petroleum (Guernsey) Limited and Central
Asian Petroleum, Inc. as the Co-Obligors, Shell Capital Limited, as
Facility Agent and Modeller, Shell Capital Services Limited, as Arranger
and the Lenders (as such term is defined in the Loan Agreement) entered
into a loan agreement on 1 November 1999 (the "LOAN AGREEMENT").
(B) The Parties have agreed to supplement the Loan Agreement pursuant
to the terms of this Agreement.
NOW THEREFORE, the Parties agree as follows:
1. INTERPRETATION
(a) Terms defined in the Loan Agreement shall, unless the context
otherwise requires, have the same meaning in this Agreement.
(b) Clauses 1.2 (INTERPRETATION), 1.3 (CERTAIN REFERENCES), 21.6
(EXECUTION), 28 (REMEDIES, WAIVERS, PARTIAL INVALIDITY), 31.2
(JURISDICTION), 31.3 (PROCESS AGENT), 31.4 (WAIVER OF IMMUNITY), 31.5
(CONSENT TO ENFORCEMENT) and 31.6 (ARBITRATION) of the Loan Agreement shall
apply to this Agreement as though they were set out in full in this
Agreement and all references to "this Agreement" in such clauses were
references to this Agreement.
2. APPOINTMENT OF THE SUCCESSOR FACILITY AGENT
(a) Each of SCSL and SCL agrees that, with effect from 7 February 2000,
SCSL is substituted for SCL as the Facility Agent under the Loan Agreement
and all the right, title and interest of SCL in and to the Loan Agreement
in its capacity as the Facility Agent are transferred absolutely to SCSL
and the obligations and liabilities of SCL under the Loan Agreement in its
capacity as the Facility Agent are assumed absolutely by SCSL.
(b) Each of the Obligors, the Arranger, the Modeller and the Lenders
acknowledges and approves the appointment of SCSL as the successor Facility
Agent and releases and discharges SCL in its capacity as Facility Agent
from any and all liabilities and obligations under the Loan Agreement with
effect from 7 February 2000.
3. APPOINTMENT OF THE SUCCESSOR MODELLER
(a) Each of SCSL and SCL agrees that with effect from the date of this
Agreement SCSL is substituted for SCL as the Modeller under the Loan
Agreement and all the right, title and interest of SCL in and to the Loan
Agreement in its capacity as the Modeller are transferred absolutely to
SCSL and the obligations and liabilities of SCL under the Loan Agreement in
its capacity as the Modeller are assumed absolutely by SCSL.
(b) Each of the Obligors, the Facility Agent, the Arranger and the Lenders
acknowledges and approves the appointment of SCSL as the successor Modeller
and releases and discharges SCL in its capacity as Modeller from any and
all liabilities and obligations under the Loan Agreement with effect from
the date of this Agreement.
4. APPLICABLE INTEREST RATES
Subject to Clause 6(a) below and the terms of the Loan Agreement, for
the purposes of clause 6.5(a) (INTEREST DUE ON OR PRIOR TO THE PROJECT
COMPLETION DATE) of the Loan Agreement, on each Interest Payment Date
falling prior to the Project Completion Date, the Borrower will only be
obliged to pay that portion of interest accrued during the relevant
Interest Period on the amount outstanding under the Senior Facility which
is equal to the rate per annum determined by the Facility Agent to be the
sum of LIBOR for such Interest Period and 0.5% (the "REDUCED INTEREST
RATE"). The remaining accrued interest on each such Interest Payment Date
will be added to the principal amount outstanding under the Subordinated
Facility and shall itself bear interest in accordance with clause 6.5(b)
(INTEREST DUE ON OR PRIOR TO THE PROJECT COMPLETION DATE) of the Loan
Agreement and shall otherwise for all purposes form part of the
Subordinated Facility. In the event that interest cannot for any reason be
capitalised, in accordance with this Clause 4, the Borrower shall pay such
accrued interest when due in accordance with the terms of the Loan
Agreement.
5. BROKEN FUNDING COSTS
Notwithstanding the terms of clause 7.10 (BROKEN FUNDING COSTS) of the
Loan Agreement, LIBOR applicable on the first day of the relevant Interest
Period will be used for the purposes of calculating the additional interest
that would have been payable by the Borrower to such Lender on any amount
so received or recovered pursuant to paragraph (a) of clause 7.10 (BROKEN
FUNDING COSTS) of the Loan Agreement.
6. SYNDICATION
The Obligors acknowledge that SCSL, as the Arranger of the Facilities,
has reserved the right to syndicate all or any part of its Commitments or,
as the case may be, the Loans at any time at its sole discretion. It is
agreed by the Borrower and the Co-Obligors that:
(a) the Facility Agent will be entitled to increase the Reduced
Interest Rate by up to 3% at any time by notification of such increase
to the Borrower if the Arranger determines, in its sole opinion, that
such increase will facilitate the successful syndication of the
Facilities provided that the Applicable Margin for the Loans remain
unchanged;
(b) at the request of the Arranger, the Obligors shall make best
efforts to procure an amendment to Licence No. 60 For Opening An
Offshore Bank Account dated 30 December, 1999 issued by the National
Bank of the Republic of Kazakhstan which will permit the conversion by
KKM of its Tenge receipts into Dollars and the transfer of all KKM
Gross Revenues to the KKM Proceeds Account if the Arranger determines,
in its sole opinion, that such amendment will facilitate the
successful syndication of the Facilities; and
(c) at the request of the Arranger, the Obligors shall make best
efforts to procure the extension of the duration of the 1999 KTO
Contract (as defined in Clause 7(m) of this Agreement) (or any
replacement agreement entered into between Closed Joint Stock
KazTransOil and KKM) to match the duration of the Facilities if the
Arranger determines, in its sole opinion, that such amendment will
facilitate the successful syndication of the Facilities.
7. AMENDMENTS TO LOAN AGREEMENT
The Parties agree that the Loan Agreement is amended as follows:
(a) EQUITY SUPPORT
(i) Clause 16.22 (CRI LETTER OF CREDIT) of the Loan Agreement is
deleted in its entirety and the following new clause 16.22 (EQUITY
SUPPORT TRANSACTION) is inserted in its place:
"Clause 16.22 (EQUITY SUPPORT TRANSACTION)
The Borrower shall make best efforts to procure that the Rights
Offering is concluded on or prior to 30 June 2000 and that the
Principal Stockholders comply with and perform their obligations and
liabilities under the Equity Support Agreements. The Borrower shall
procure that the proceeds (if any) of any Rights Offering and the
payments (if any) made under any of the Equity Support Agreements are
paid directly into the CRI Disbursement Account.".
(ii) Clause 18.17(b) (FINANCE DOCUMENTS) of the Loan Agreement is
deleted in its entirety and the following new clause 18.17(b) (FINANCE
DOCUMENTS) is inserted in its place:
"(b) The Borrower does not receive into the CRI Disbursement
Account equity contributions from its stockholders in an amount at
least equal to $4,000,000 during the period between the First Drawdown
Date and 30 June 2000.
(c) Either of the Principal Stockholders fail to comply with or
perform any of its obligations or liabilities under any of the Equity
Support Agreements to which it is a party."
(iii) The definitions of "CRI Letter of Credit" and "Unpaid Equity
Contributions" in clause 1.1 (DEFINITIONS) of the Loan Agreement are
deleted in their entirety.
(iv) The CRI Letter of Credit is deleted from sub-paragraph (k) of the
definition of "Finance Documents" in clause 1.1 (DEFINITIONS) of the
Loan Agreement. The schedule to the Loan Agreement entitled "The
Sixth Schedule - Terms of CRI Letter of Credit" is deleted in its
entirety.
(v) Clause 18.20 (OWNERSHIP OF BORROWER) of the Loan Agreement is
deleted in its entirety and the following new clause 18.20 (CHANGE OF
CONTROL) is inserted in its place:
"(a) The Borrower consummates or agrees to consummate any transaction
or series of related transactions that would result in a Change of
Control except with the prior written approval of the Facility Agent
(acting on the instructions of the Majority Lenders).
(b) Either of the Principal Stockholders sells or otherwise transfers
any securities of the Borrower on or before 30 June, 2000.
(c) If at the close of business on 30 June 2000 the holdings of
either of the Principal Stockholders are less than 20% of the
outstanding shares of the Borrowers voting securities as a result of
the completion of the Rights Offering, the provisions of Clause
18.20(b) shall continue to apply to such Principal Stockholders;
provided, however, if at any time thereafter such Principal
Stockholder's holdings are 20% or more of the outstanding shares of
the Borrower's voting securities, the provisions of paragraph (b) of
the definition of Change of Control shall apply to such Principal
Stockholders."
(b) CRI SUBORDINATION AGREEMENT
(i) The definition of "CRI Subordination Agreement" in clause 1.1
(DEFINITIONS) of the Loan Agreement is deleted in its entirety and the
following new definition is inserted in its place:
""CRI Subordination Agreements" means each subordination agreement
entered into between the Borrower, the Facility Agent and a CRI Bridge
Noteholder.
(ii) The definitions of "CRI Bridge Notes" and "CRI Existing Notes"
in clause 1.1 (DEFINITIONS) of the Loan Agreement are deleted in their
entirety and the following new definitions are inserted in their
place:
""CRI Bridge Notes" means those 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 and provided to the
Facility Agent pursuant to Clause 3.1 (INITIAL CONDITIONS PRECEDENT)
on or prior to the delivery of the first Notice of Drawdown.
"CRI Existing Notes" means those notes issued to the CRI Existing
Note Holders in respect of the provision of subordinated financing to
the Borrower on or prior to the date of this Agreement and provided to
the Facility Agent pursuant to Clause 3.1 (INITIAL CONDITIONS
PRECEDENT) on or prior to the delivery of the first Notice of
Drawdown.".
(c) DIRECTORS' APPOINTMENT LETTERS
The following new paragraph (b) is inserted in clause 18.22 (OWNERSHIP
OF KKM) of the Loan Agreement:
"(b) The person from time to time designated by Shell Capital Services
Limited as its representative on the board of directors of each of the
Obligors is not appointed to such board as a director or is removed
from such board without the prior written consent of Shell Capital
Services Limited.".
(d) 1999 KTO CONTRACT
The following new paragraph (k) is inserted in clause 16.5 (PROJECT
DOCUMENTS) of the Loan Agreement:
"(k) prior to the expiration of the 1999 KTO Contract (or any
replacement agreement), procure the execution of a replacement
agreement between Closed Joint Stock KazTransOil and KKM on terms
substantially similar to the 1999 KTO Contract and with a duration of
at least one year from the date of such replacement agreement. Prior
to the execution and delivery of any such replacement agreement, the
Obligors shall provide the Facility Agent with the final draft of any
such proposed replacement agreement for its approval; if any such
proposed replacement agreement is approved by the Facility Agent it
will, on its execution, be deemed to be a Project Document for the
purposes of this Agreement and the other Finance Documents."
(e) UPDATED RESERVES REPORT
The words "by no later than 31 March 2000" where they appear in the
last line of clause 16.23 (THE UPDATED RESERVES REPORT) of the Loan
Agreement are deleted and are replaced with the words "by no later
than 15 April 2000".
(f) PROHIBITION ON TRANSFERS
The words "The Borrower may not" where they appear at the beginning of
clause 27.2 (THE BORROWER; PROHIBITION ON TRANSFERS ETC.) of the Loan
Agreement are deleted and are replaced with the words "No Obligor
shall".
(g) TRANSPORT RISK INSURANCE POLICY
(i) Clause 16.10(c) (INSURANCES) of the Loan Agreement is deleted in
its entirety and the following new clause 16.10(c) (INSURANCES) is
inserted in its place:
"(c) The Borrower shall procure that nothing is done by it or any of
the other Obligors (or that nothing is failed to be done by it or any
of the other Obligors, including making disclosures which should be
made prior to the issuance of the Transport Risk Insurance 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 the
Transport Risk Insurance Policy. No Obligor shall disclose the terms
of the Transport Risk Insurance Policy to any person. An Obligor
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.".
(ii) The words "and the Transport Risk Insurance Policy" shall be
deleted from the second and third lines of clause 16.12(b) (PROJECT
ACCOUNTS) of the Loan Agreement.
(iii) The words "the Transport Risk Insurance Policy," shall be
deleted from the fourth and fifth lines of clause 17.16(a) (DISPOSALS
BY THE BORROWER, CAP(G) AND CAP(D)) of the Loan Agreement.
(iv) Clause 18.30 (OPIC) of the Loan Agreement is deleted in its
entirety and the following new clause 18.30 (POLITICAL RISK INSURANCE
POLICIES) is inserted in its place:
"(a) 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.
(b) An event covered by the Transport Risk Insurance Policy occurs
which gives the Facility Agent the right to claim compensation from
the insurer pursuant to the terms of the Transport Risk Insurance
Policy."
(h) INDEPENDENT ENGINEER
(i) Clause 26.6(a) (INDEPENDENT ENGINEER) of the Loan Agreement is
deleted in its entirety and replaced with the following:
"(a) The Finance Parties hereby confirm the appointment of the
Independent Engineer, upon the terms and subject to the conditions
separately agreed between the Facility Agent and the Independent
Engineer and set out in a consultancy letter executed by the
Independent Engineer and acknowledged by the Borrower and a warranty
agreement executed by the Independent Engineer in favour of the
Facility Agent (the "Engagement Letter")."
(ii) The second sentence of clause 26.6(a) (INDEPENDENT ENGINEER) of
the Loan Agreement is deleted and replaced with the following:
"The terms of its appointment will be set out in the Engagement
Letter.".
(i) The text of clause 18.27 (PAYMENT OF SALARIES) of the Loan Agreement
is deleted in its entirety and replaced with the following:
"KKM fails to pay any salaries due to its employees on the due date
for payment unless the Facility Agent is satisfied that such failure
is due solely to a technical or administrative delay outside the
control of KKM and such amount is paid within three Business Days of
the due date for payment.".
(j) DEFINITION OF "PROJECT DOCUMENTS"
The definition of "Project Documents" in clause 1.1 (DEFINITIONS) of
the Loan Agreement is deleted in its entirety and the following new
definition is inserted in its place:
""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 Drilling Contracts;
(e) the Drilling/Wellbore Exploration Services Contract;
(f) the Offtake Agreement;
(g) the STASCO Service Agreement;
(h) the 1999 KTO Contract;
(i) the transportation contract dated January 31, 2000 entered
into between JSC NOC KazakhOil and KKM;
(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 general contract for geophysical operations between KKM
and Geotex JSC dated 21 November 1995;
(l) the Technical Services Agreements;
(m) the Service Contract;
(n) any other document material to the Project (other than a
Finance Document) entered into or to be entered into by an
Obligor in connection with the Project; and
(o) any other document which the Borrower and the Facility Agent
agree to designate as a Project Document.".
(k) DEFINITION OF "DRILLING CONTRACT"
The definition of "Drilling Contract" in clause 1.1 (DEFINITIONS) of
the Loan Agreement is deleted in its entirety and the following new
definition is inserted in its place:
""Drilling Contracts" means (i) the Daywork Drilling Contract-Land #
99/KKM/L-1003 dated October 10, 1999 between KKM and Drilling Service
Company "Kazakhoil Drilling" Ltd. and (ii) the Daywork Drilling
Contract-Land dated December 15, 1999 between Drilling Service Company
"Kazakhoil Drilling" Ltd. and Oil and Gas Exploration Company Cracow
Ltd. or either of them as the context so requires.".
(l) DEFINITION OF "DRILLING/WELLBORE EXPLORATION SERVICES CONTRACT"
The definition of "Drilling/Wellbore Exploration Services Contract" in
clause 1.1 (DEFINITIONS) of the Loan Agreement is deleted in its
entirety and the following new definition is inserted in its place:
""Drilling/Wellbore Exploration Services Contract" means agreement
no.99/006 for the supply of drilling/wellbore exploration services
dated 18 November, 1999 between Baker Hughes Services International,
Inc. Kazakhstan and KKM."
(m) ADDITIONAL DEFINITIONS
The following definitions will be inserted in clause 1.1 (DEFINITIONS)
of the Loan Agreement:
""Change of Control" shall mean the occurrence of any of the following
events:
(a) any person or entity, including a "group" as contemplated by
Section 13(d)(3) of the Securities Act 1934, as amended, acquires or
otherwise gains ownership or control (including, without limitation,
power to vote) of 20% or more of outstanding shares of the Borrower's
voting securities (based upon voting power); or
(b) the holdings of either of the Principal Stockholders of the
Borrower's voting securities on or after 30 June, 2000 are 20% or
less, after giving effect to the conversion of the CRI Bridge Notes in
accordance with their terms and the Equity Support Transaction.
For the avoidance of doubt, none of (i) the acquisition or control of
additional shares of the Borrower's voting securities by a Principal
Stockholder (other than from the Principal Stockholder), (ii) the
exercise of the warrant to purchase certain shares of common stock of
the Borrower by Shell Capital Limited pursuant to the CRI Warrant
Agreement; (iii) the conversion of Series A Preferred Stock of the
Borrower as specified in its constitutional documents as at 1 November
1999 which is issued and outstanding as at 1 November 1999; (iv) 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 consultants of any Obligor; (v) any sale, transfer or
other disposition by a Principal Stockholder to any Affiliate of such
Principal Stockholder provided such Affiliate makes no subsequent
sale, transfer or disposition of such securities other than to another
Affiliate of such Principal Stockholder, (vi) the Equity Support
Transaction or (vii) the conversion of the CRI Bridge Notes, shall be
deemed or shall cause a Change of Control for purposes of this
Agreement.
"Directors' Appointment Letters" means (i) the letters issued with
respect to the appointment of a representative of Shell Capital
Services Limited to the board of Directors of each of the Obligors by
each of CAP(G), as shareholder of 50% of the KKM Shares, CAP(D), as
shareholder of 20% of the CAP(G) shares, the Borrower as shareholder
of 80% of the CAP(G) Shares, the Borrower as 100% shareholder of the
CAP(D) Shares, and (ii) the undertakings with respect to the
appointment of a representative of Shell Capital Services Limited to
the Board of Directors given in the Equity Support Agreements by Allen
& Company Incorporated and Whittier as shareholders of certain of the
common stock of the Borrower.
"Equity Support Transaction" means the Rights Offering or the
transactions contemplated by the Equity Support Agreements, as the
case may be.
"Equity Support Agreements" means each of the letters issued by each
of the Principal Stockholders to the Facility Agent concerning (i)
the agreement of the Principal Stockholders to subscribe for and
purchase their full pro rata share of the Rights Offering and (ii) an
aggregate cash infusion of $4,000,000 in the Borrower if the Rights
Offering is not consummated by 30 June, 2000.
"KKM Assignment of Insurances" means the agreement entitled "KKM
Assignment of Insurances" dated February 7, 2000 and entered into
between KKM and the Security Trustee.
"1999 KTO Contract" means the agreement #018 on acceptance, storage
and transportation of oil between Closed Joint Stock KazTransOil and
KKM dated 15 December 1999.
"Principal Stockholders" means Allen & Company Incorporated and
Whittier.
"Reinsurance Assignment" means the agreement entitled "Assignment of
Reinsurance" dated February 8, 2000 and entered into between KKM, the
Security Trustee, the Original Insurers and the Reinsurers (as such
terms are defined therein).
"Rights Offering" means the issuance by the Borrower to its
stockholders of rights to acquire not less than $6 million of the
Borrower's common stock.
"Security Trust Deed" means the agreement entitled "Security Trust
Deed" dated February 7, 2000 and entered into between the Obligors,
the Security Trustee and the Facility Agent.
"Whittier" means together, Whittier Ventures, LLC and Whittier Energy
Company.".
(n) DEFINITION OF "SECURITY TRUSTEE"
The definition of "Security Trustee" in clause 1.1 (DEFINITIONS) of
the Loan Agreement is deleted and replaced with the following:
""Security Trustee" means The 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.".
(o) DEFINITION OF "SECURITY DOCUMENTS"
Sub-paragraphs (vi) and (viii) of the definition of "Security
Documents" in clause 1.1 (DEFINITIONS) of the Loan Agreement are
deleted and the following new sub-paragraphs (vi) and (viii) are
inserted in their place:
"(vi) first priority assignment by way of security by the Borrower
of its right, title and interest in and to (A) the Hedging Agreement
and the Hedging Receipts; (B) the CRI-CAP(G) Loan Agreement and its
proceeds; and (C) the Service Contract and its proceeds, in favour of
the Security Trustee;"; and
"(viii) first priority assignment by way of security by KKM of its
right, title and interest in and to the Offtake Agreement in favour of
the Security Trustee;".
8. MISCELLANEOUS
(a) Each of the following agreements is designated as a Security Document
pursuant to sub-paragraph (b) of the definition of "Security Documents" in
clause 1.1 (DEFINITIONS) of the Loan Agreement:
(i) The Reinsurance Assignment; and
(ii) The KKM Assignment of Insurances,
(as each such agreement is defined in Clause 7(m) above).
(b) Each of the following agreements is designated as a Finance Document
pursuant to sub-paragraph (m) of the definition of "Finance Documents" in
clause 1.1 (DEFINITIONS) of the Loan Agreement:
(i) the Security Trust Deed;
(ii) the Equity Support Agreements; and
(iii) the Directors' Appointment Letters,
(as each such agreement is defined in Clause 7(m) above).
(c) This Agreement shall be deemed to constitute a Finance Document for
the purpose of the Loan Agreement and any reference to a Finance Document
shall, unless the context clearly requires otherwise, include this
Agreement.
(d) This Agreement is supplemental to the Loan Agreement and any reference
in the Finance Documents to the Loan Agreement shall be to the Loan
Agreement as supplemented by this Agreement.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of England.
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.
CHAPARRAL RESOURCES, INC.
By: /S/ JAMES A. JEFFS
----------------------------
Name: James A. Jeffs
Title: Co-Chairman
By:
Name:
Title:
EXECUTED as a DEED and DELIVERED
by CENTRAL ASIAN PETROLEUM
(GUERNSEY) LIMITED acting by
By: /S/ JAMES A. JEFFS
----------------------------
Name: James A. Jeffs
Title: Director
By:
Name:
Title:
CENTRAL ASIAN PETROLEUM, INC.
By: /S/ JAMES A. JEFFS
----------------------------
Name: James A. Jeffs
Title: Chairman
By:
Name:
Title:
CLOSED TYPE JSC KARAKUDUKMUNAY
By: /S/ NIKOLAI D. KLINCHEV
----------------------------
Name: Nikolai D. Klinchev
Title: General Director
By: /S/ RICHARD J. MOORE
----------------------------
Name: Richard J. Moore
Title: Finance Director
SHELL CAPITAL LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title:
By:
Name:
Title:
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title:
By:
Name:
Title:
===========================================================================
TECHNICAL SERVICES AGREEMENT
between
SHELL CAPITAL SERVICES LIMITED
and
CLOSED TYPE JSC KARAKUDUKMUNAY
Dated 8 February 2000
===========================================================================
White & Case
7-11 Moorgate
London
EC2M 6HH
TECHNICAL SERVICES AGREEMENT
THIS AGREEMENT made this 8th day of February, 2000 between:
1. SHELL CAPITAL SERVICES LIMITED, a limited liability company organised
and existing under the laws of England, having its registered office
at Shell Capital Centre, London SE1 7 NA, England ("SHELL CAPITAL");
and
2. CLOSED TYPE JSC KARAKUDUKMUNAY, a joint-stock company organised under
the laws of the Republic of Kazakhstan having its registered office at
Microdistrict 3, Building 82, Aktau, Republic of Kazakhstan (the
"COMPANY").
PREAMBLE:
(A) KazakOil, Korporatsiya Mangistau Terra International and Central
Asian Petroleum (Guernsey) Limited ("CAP(G)") entered into a Foundation
Agreement on June 12, 1997 pursuant to which CAP(G) agreed to make certain
investments in the Company for the purpose of funding the exploration,
development, production and sale of hydrocarbons from the Agreement Field
(as defined therein) (the "PROJECT").
(B) CAP(G)'s parent company, Chaparral Resources, Inc. ("CRI"), has
agreed certain funding arrangements with Shell Capital pursuant to which
Shell Capital will arrange for loans to be made available to CRI in an
aggregate principal amount not exceeding $24,000,000 for investment in the
Company through CAP(G).
(C) As one of the conditions to the availability of such loans, the
Company has agreed to accept, and cooperate with Shell Capital in, the
provision of the Services (as herein defined) to the Company and the
Project which Shell Capital may at its sole discretion provide to the
Company and the Project from time to time.
NOW THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
1.1 The following terms shall have the meaning set out below, unless the
context otherwise requires:
"Agreement" means the subject agreement and any
agreement made by the parties in
furtherance thereof.
"Chaparral Group" means Chaparral Resources, Inc., Central
Asian Petroleum, Inc., Central Asian
Petroleum (Guernsey) Ltd., Road Runner
Services Company, Inc., Chaparral
Acquisition Corp. and the Company.
"Confidential Information" means any knowledge or data disclosed by
Shell Capital or any of its Consultants
to the Company under this Agreement
whether in writing, in drawings, in
computer programs or in any other way as
well as all data derived therefrom, to
the extent that at the time of such
disclosure the knowledge or data in
question is not:
(i) already in the unrestricted
possession of the Company, or
(ii) part of the public knowledge or
literature.
"Confidential Record" means any manual, report, letter, telex,
drawing, computer program or any other
material containing Confidential
Information.
"Conscious Recklessness" means wilful misconduct or wantonly
reckless disregard for avoidable and
harmful consequences which should have
been reasonably anticipated by a person
of ordinary prudence.
"Consultant" means any affiliate of Shell Capital or
any other person to whom Shell Capital
delegates the performance of any or all
of the Services to be provided to the
Company or the Project under this
Agreement from time to time.
"Dollar", "US$", "$" means the legal currency of the United
States of America.
"LIBOR" means
(i) the offered rate per annum for six-
month deposits in US Dollars which
appears on Telerate page 3750 (or
such other page as may replace that
page for the purpose of displaying
offered rates of lending banks for
London interbank deposits) at or
about 11:00 am London time, on the
first day on which the commercial
banking institutions in London,
England are open for business of
each month (other than a Saturday
or Sunday) ("Business Day"), or, if
more than one such rate appears on
such page on such day, the
arithmetic mean of such rates
(rounded upward to the nearest five
decimal places); or
(ii) if no such rate appears on Telerate
page 3750 (or any such replacement
page) the arithmetic mean (rounded
upward to the nearest five decimal
places) of the offered rates per
annum as quoted by the principal
London offices of Barclays Bank
PLC, Deutche Bank AG and Banque
Nationale de Paris (or their
successors in interest) at which
deposits in US Dollars for six
months are being offered by such
banks (or their successors in
interest) to prime banks in the
London interbank market at or about
11:00 am (London time) on the first
Business Day of each month; or
if none or only one of the banks
referred to in paragraph (ii) above are
offering rates for deposits on the terms
referred to in that paragraph, the rate
per annum quoted by such bank as the
Parties may select from time to time at
which deposits in US $ for six months
are being offered by such bank to prime
banks in the London Interbank market at
or about 11:00 am (London time) on the
first Business Day of each month.
"Loss or Damage" as used in Articles 8.3 and 8.5 and,
subject to the exclusion of any
consequential or indirect Loss or
Damage, as used in Article 8.2 and 8.6
means loss or damage of any nature
whatsoever, including injury or death
suffered by the Company, its personnel
or any other third party, howsoever
caused, including negligence on the part
of Shell Capital or any Consultant.
"Party" means any person party to this
Agreement.
"Project" has the meaning assigned to it in
Recital (A).
"Services" means such technical and other services
to the Company and the Project as Shell
Capital considers appropriate including
without limitation:
(i) the appraisal of development and
operational plans in connection
with the Project (this also
includes the study and preparation
of economic evaluations);
(ii) the study of the results of the
activities of the operator of the
Project and the furnishing of
appropriate comments and
recommendations;
(iii) the attendance at technical
and management committee meetings
of the Project (including the
preparation of these meetings);
(iv) information, computing and
laboratory services in relation to
the services described above;
(v) investigating the availability of,
and, if required, arranging for the
provision of, certain specialised
services by other parties; and
(vi) identification of suitable field
and management personnel from the
human resources database of Shell
Capital or any Consultant.
1.2 INTERPRETATION
Unless otherwise stated or unless the context otherwise requires, in
this Agreement:
(a) The titles or headings of the articles of this Agreement have
been included solely for ease of reference and shall not be
considered in the interpretation or construction of this
Agreement.
(b) References to the singular shall include the plural and vice
versa wherever the context so admits or requires.
(c) Where a word or phrase is defined, other parts of speech and
grammatical forms of that word or phrase shall have corresponding
meanings.
(d) References to the recitals, articles, sub-articles and Schedules
shall be references to the recitals, articles, sub-articles and
Schedules of this Agreement.
(e) References to this Agreement shall mean and include an
appropriate reference to the Schedules.
2. OBJECT AND SCOPE
The object of this Agreement is the provision by Shell Capital and its
Consultants of Services to the Company in support of the Company's
interests in the Project if Shell Capital determines, in its sole opinion,
that the Company or the Project requires such Services.
3. PERFORMANCE
3.1 If Shell Capital determines (in its sole opinion) from time to time
that the Company or the Project requires any Services, it shall notify the
Company of such determination, the Services that it considers are required
and the steps that it intends to take in the utilisation of such Services.
3.2 Shell Capital may perform any or all of such Services or, at its sole
discretion, delegate the performance of any or all of such Services to a
Consultant who shall perform such Services on behalf of Shell Capital.
3.3 The Company will co-ordinate and cooperate with Shell Capital and its
Consultants in respect of any Services so provided and the Company will
ensure that its personnel, consultants and advisers and other contractors
to the Project so cooperate with Shell Capital and its Consultants as and
to the extent so directed by Shell Capital.
3.4 It is understood and agreed that Shell Capital and its Consultants are
independent contractors and nothing in this Agreement shall be construed so
as to constitute Shell Capital or any of its Consultants as an agent,
partner or representative of the Company or any other member of the
Chaparral Group or make Shell Capital or its Consultants in any way
subordinate to or dependent upon the Company or any other member of the
Chaparral Group.
3.5 The provision of any Services by Shell Capital or its Consultants
shall, at Shell Capital's sole discretion, include the provision of all
equipment necessary for the performance of such Services.
3.6 Notwithstanding the provisions of this Agreement, neither Shell
Capital nor any of its Consultants shall at any time be obliged to perform
or arrange the performance of any such Services and any participation in
the performance or arrangement of such Services shall be entirely at the
sole discretion of Shell Capital and, as the case may be, its Consultants.
4. REMUNERATION
4.1 In respect of Services to be rendered by or on behalf of Shell
Capital, the Company agrees to pay or reimburse Shell Capital for all costs
and expenses incurred by it in connection with the performance of such
Services (including any fees, costs and expenses payable by Shell Capital
to its Consultants in respect of any such Services). Such fees, costs and
expenses shall be computed in accordance with the customary accounting
practices of Shell Capital and shall include without limitation:
(i) the salaries and related expenses for the staff of Shell Capital
directly involved in rendering any such Services, including overheads;
(ii) charges for other resources used (if any) of Shell Capital;
(iii) office rental, personnel, communication and travel expenses
including hotel expenses and living allowances (if any);
(iv) the fees, costs and expenses of any Consultant appointed by Shell
Capital to carry out such Services; and
(v) other third party charges (if any).
5. TERMS OF PAYMENT
5.1 Shell Capital shall invoice the Company from time to time for the
payments to be made by the Company under this Agreement.
5.2 Within 30 (thirty) days of receipt of each invoice, the Company shall
pay, in the currency denominated in such invoice, all amounts due in the
manner, at the place and into the account nominated by Shell Capital. The
Company shall be responsible for, and carry the risk of obtaining, all
necessary permits and approvals to enable the Company to make the required
payments under this Agreement.
5.3 Any overdue payment hereunder shall bear interest, from the date it
falls due until such time that Shell Capital has received the payment from
the Company, at a rate equal to LIBOR on the date the payments fall due, or
the previous business day if payments fall due on a non-business day, plus
four per cent.
5.4 Any taxes, levies or charges of whatsoever nature payable in
Kazakhstan which, during the currency of this Agreement or after its
termination, the Company may be required to withhold or Shell Capital or
the Company may be required to pay in respect of any amount due to Shell
Capital under this Agreement, or in respect of the execution of this
Agreement, shall be for the account of the Company and the Company shall
pay such a sum as to yield to Shell Capital a net amount equal to the
amount that, but for such taxes, levies or charges, would have been
received by Shell Capital.
5.5 In respect of payments made by Shell Capital in currencies other than
Dollars, the conversion of such other currencies into Dollars, shall be
made at the relevant selling rates of exchange quoted by a first class bank
in England on the date the Company's account is charged in Shell Capital's
books.
6. AUDIT CERTIFICATE
6.1 If the Company requires verification of the payments due under this
Agreement in any calendar year, Shell Capital shall, for the account of the
Company, furnish a certificate by Shell Capital's statutory auditors
confirming that the costs of the Services rendered have been calculated in
accordance with the provisions of this Agreement. Such certificate, absent
manifest error, shall be conclusive as to the amounts certified.
6.2 Any request for such verification shall be made not later than two
years after the year concerned.
7. CONFIDENTIALITY
7.1 The Company undertakes:
(a) to preserve and cause its personnel to preserve the secrecy of
any Confidential Information; and
(b) not to disclose to any third party any Confidential Information
except with Shell Capital's prior written consent (which shall not be
withheld unreasonably if such disclosure is necessary for the furtherance
of the Company's interests in the Project) in which event the Company shall
require from such third party an undertaking in writing that it shall abide
by stipulations equivalent to those contained in this Article 7.1.
The foregoing undertakings shall continue, both during the currency of
this Agreement and after its termination, in so far and for so long as the
Confidential Information in question has not:
(i) become part of the public knowledge or literature; or,
(ii) been disclosed to the Company without restriction on use or
disclosure by a third party (other than a Consultant) who could
lawfully do so and who did not derive such Confidential Information
from Shell Capital or a Consultant.
7.2 The copyright in any Confidential Record supplied by Shell Capital or
any Consultant under this Agreement, shall, in the absence of any express
provision to the contrary thereon, vest in Shell Capital or such
Consultant.
7.3 The Company shall be entitled to use any Confidential Information only
while this Agreement is in force. Upon termination of this Agreement, the
Company shall, if so requested by Shell Capital, return all Confidential
Records supplied by Shell Capital or, as the case may be, the Consultant
under this Agreement as well as any copies made thereof by the Company.
8. LIMITATION OF LIABILITY
8.1 Notwithstanding the ensuing provisions of this Article 8, the Company
may require Shell Capital to re-perform, at no extra cost to the Company, a
particular Service which proves deficient due to faulty work by Shell
Capital or any Consultant.
8.2 Except as stated in Article 8.1, Shell Capital shall not be liable in
contract or at law for any Loss or Damage arising out of or relating to
this Agreement except for direct Loss or Damage for which Shell Capital
shall be liable if and to the extent that the Company establishes that such
direct Loss or Damage has been caused by an act or an omission to act which
constitutes Conscious Recklessness on the part of directors or senior
supervisory staff of Shell Capital while acting within the course of their
function. Direct Loss or Damage as used in this Article 8.2 shall exclude
any consequential or indirect Loss or Damage such as, but not limited to,
loss of product, loss of production, loss of use, loss of revenues or
profit, loss of interest, cost of delays or any Loss or Damage resulting
therefrom.
8.3 Except for the obligations of Shell Capital pursuant to Article 8.1,
any and all liability of Shell Capital arising out of or relating to this
Agreement shall be limited in aggregate to 25 per cent of the aggregate
amount due to Shell Capital under Article 4 for the calendar year in which
such Loss or Damage becomes apparent (excluding the repayment by the
Company of any disbursements made by Shell Capital to any Consultant), or
in the event such Loss or Damage becomes apparent after the termination of
this Agreement, for the last full calendar year of the term of this
Agreement.
8.4 Any obligation or liability of Shell Capital for faulty work or for an
act (including an omission to act) which constitutes Conscious Recklessness
shall expire two years after the date on which such faulty work or act
occurred and no claim, demand, action or proceeding shall be brought or
instituted by the Company against Shell Capital thereafter.
8.5 The Company undertakes to hold Shell Capital harmless from and
indemnified against any demand, claim, action or proceeding brought or
instituted by any third party (including personnel of the Company and any
other member of the Chaparral Group) for any liability in contract or at
law for Loss or Damage arising out of or relating to this Agreement except
if and to the extent that the Company establishes Shell Capital's liability
therefor in accordance with the provisions of Articles 8.2 and 8.3.
8.6 Except as stated in Article 8.1, Shell Capital shall not be liable in
contract or at law for any Loss or Damage arising out of or relating to
this Agreement for which any of its Consultants may be liable.
8.7 For the purposes of Articles 8.2, 8.3, 8.4 and 8.5 the expression
Shell Capital shall be deemed to include and mean Shell Capital and any
Consultant and their respective directors and senior supervisory staff.
Such directors and staff shall not be liable in person and the Company
hereby waives any action whatsoever against them.
9. FORCE MAJEURE
9.1 Neither Shell Capital nor any of its Consultants shall be liable for
any failure to fulfil any obligation under this Agreement, if, and for so
long as, fulfilment has been interfered with, hindered, delayed or
prevented by any circumstances whatsoever which are not reasonably within
the control of Shell Capital or its Consultants.
9.2 Shell Capital shall promptly notify the Company of the circumstances
concerned and the effect on its performance.
10. ASSIGNMENT AND DELEGATION
The Company shall not transfer any or all of its rights or obligations
under this Agreement without the prior written consent of Shell Capital.
11. DURATION
11.1 Subject to Article 11.2, this Agreement shall be effective as from the
date of this Agreement and shall remain in force until the date upon which:
(i) the loans referred to in Recital (C) have been repaid in full; and (ii)
the Company and the other members of the Chaparral Group have discharged
all their obligations and liabilities (whether actual or contingent) to
Shell Capital and the syndicate of financial institutions under the terms
of the financing agreements relating to such loans.
11.2 Shell Capital may terminate this Agreement at any time with immediate
effect.
12. ARBITRATION AND APPLICABLE LAW
12.1 Any dispute between the parties, whether resulting from a claim in
contract or at law, which may arise out of or in connection with this
Agreement or its implementation (including but not by way of limitation,
the validity, breach or termination of this Agreement or any provision
thereof) shall be finally and exclusively settled by arbitration in The
Hague, the Netherlands, under the Uncitral Rules of Arbitration by three
arbitrators appointed in accordance with the said Rules. The appointing
authority shall be the ICC Court of Arbitration. The arbitration
proceedings shall be conducted in the English language.
12.2 The substantive law of this Agreement and the substantive law to be
applied in any dispute as referred to in Article 12.1 shall be English law.
13. SEVERABILITY
In the event that any one or more of the provisions contained in this
Agreement are held to be invalid, illegal or unenforceable, the Company and
Shell Capital shall negotiate an equitable adjustment in the provisions of
this Agreement with a view to achieving the purpose thereof, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
14. MISCELLANEOUS
14.1 RIGHTS CUMULATIVE
All rights granted to the Parties under this Agreement shall be
cumulative and no exercise by either Party of any right shall restrict or
prejudice the exercise at any time of any other right granted by this
Agreement or otherwise available to it.
14.2 AMENDMENTS
The provisions of this Agreement may be amended only by a written
instrument signed by each Party hereto and may be waived only by a written
instrument signed by the Party entitled to the benefit hereof.
14.3 WAIVER OF IMMUNITY
The Parties acknowledge and agree that the execution, delivery and
performance of this Agreement, and of all agreements ancillary and
subsidiary hereto, constitute the commercial acts of each of the Parties.
Each of the Parties hereby irrevocably agrees that, to the extent that it
or any of its respective assets has acquired or hereafter may acquire any
right of immunity related to or arising from the transactions contemplated
by this Agreement or any agreement ancillary or subsidiary hereto, whether
characterised as sovereign immunity or otherwise, from any legal
proceedings, whether in the Republic of Kazakhstan, England or elsewhere,
from enforcement of or collection upon any liability or obligation related
to or arising from the transactions contemplated hereby or thereby,
including, without limitation, immunity from service of process, immunity
from jurisdiction or judgment of any of its assets or property from
attachment prior to any entry of judgment, or from attachment in aid of
execution upon a judgment, it hereby expressly and irrevocably waives any
such immunity.
14.4 NOTICES
Any notice required to be given under this Agreement shall be given in
writing or by facsimile. Any such notice shall be deemed given if in
writing, when delivered and if by facsimile, when the answerback is
received. The address and facsimile number of the parties are as follow:
Shell Capital: Shell Capital Limited, Shell Centre
London, SE1 7NA
Attention: Financial Controller
Facsimile: 44 207 934 7058
The Company: Closed Type JSC KarakudukMunay
Microdistrict 3, Building 82
Aktau, Republic of Kazakhstan
Facsimile: (7-3292) 518 336
Such address or facsimile may be amended by a Party giving written
notice thereof to the other Party.
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed in
duplicate original by their duly authorised corporate officers, as follows:
SHELL CAPITAL SERVICES LIMITED
by: /S/ MARK L.G. TURNER
-------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
In the presence of:
/S/ ZURINA SABAN
-------------------------------
Witness:
Name: Zurina Saban
CLOSED TYPE JSC KARAKUDUKMUNAY
by: /S/ NIKOLAI D. KLINCHEV
-------------------------------
Name: Nikolai D. Klinchev
Title: General Director
by: /S/ RICHARD J. MOORE
-------------------------------
Name: Richard J. Moore
Title: Finance Director
TABLE OF CONTENTS
PAGE
1. DEFINITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. OBJECT AND SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . 4
3. PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REMUNERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 5
6. AUDIT CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . 6
7. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . 7
9. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. ASSIGNMENT AND DELEGATION . . . . . . . . . . . . . . . . . . . . 8
11. DURATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. ARBITRATION AND APPLICABLE LAW. . . . . . . . . . . . . . . . . . 8
13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Form 234 KGT 9-87A SP2
OPIC Contract of Insurance No. F158
OVERSEAS PRIVATE INVESTMENT CORPORATION
CONTRACT OF INSURANCE (the "Contract")
Against
Inconvertibility
Expropriation
Political Violence
Interference with Operations,
as defined below,
between the
Overseas Private Investment Corporation ("OPIC")
and
Chaparral Resources, Inc.
16945 Northchase Drive, Suite 1440
Houston, Texas 77060,
(the "Investor")
a corporation organized and existing under the laws of
the State of Delaware,
investing through its wholly-owed subsidiaries Central
Asia Petroleum, Inc ("CAPD"), a corporation organized
and existing under the laws of Delaware, and Central
Asia Petroleum (Guernsey) Limited ("CAPG"), a
corporation organized and existing under the laws of
the Isle of Guernsey
(CAPD and CAPG together, the "Intermediate Subsidiaries").
TABLE OF CONTENTS*
TITLE PAGE
- ----- ----
Table of Defined Terms iii
Article I - Subject of Insurance and Exchange of Promises
1.01 Subject I-1
1.02 Promises I-1
1.03 Maximum Aggregate Compensation Amount I-2
1.04 Full Faith and Credit I-2
1.05 Term I-2
1.06 Premiums and Coverage Elections I-2
1.07 Contingent Coverage Premium 1-3
Article II - Inconvertibility - Scope of Coverage
2.01 Inconvertibility II-1
2.02 Exclusions II-1
Article III - Inconvertibility - Amount of Compensation
3.01 Rate of Compensation for Inconvertibility III-1
3.02 Adjustments III-2
3.03 Limitations III-2
Article IV - Expropriation - Scope of Coverage
4.01 Total Expropriation IV-1
4.02 Partial Expropriation IV-2
4.03 Exclusions IV-3
Article V - Expropriation - Amount of Compensation
5.01 Total Expropriation V-1
5.02 Expropriation of Funds V-1
5.03 Expropriation of Covered Property V-1
5.04 Adjustments V-2
5.05 Limitations V-3
Article VI - Political Violence - Scope of Coverage
6.01 Loss Due to Political Violence VI-1
6.02 Exclusions VI-1
________________________
*/ This Table of Contents applies to all coverages offered by OPIC
whether or not all of those coverages are provided in this Contract.
Article VII - Political Violence - Amount of Compensation
7.01 Basis of Compensation VII-1
7.02 Adjustments VII-2
7.03 Limitations VII-3
7.04 Appraisal VII-3
7.05 Estimated Compensation VII-3
Article VIII - Interference with Operations - Scope of Coverage
8.01 Interference with Operations VIII-1
8.02 Resumption of Project Operations VIII-1
Article IX - Interference with Operations - Amount of Compensation
9.01 Basis of Compensation IX-1
9.02 Adjustments IX-1
9.03 Limitations IX-2
Article X - Procedures
10.01 Application for Compensation X-1
10.02 Assignment to OPIC X-1
10.03 Security X-2
10.04 Excess Salvage Value X-2
10.05 Arbitration X-3
10.06 Election of Covered Amount and Termination of Coverage X-3
10.07 Terminations X-3
10.08 Refund of Premiums X-3
10.09 Legal and Miscellaneous X-4
10.`0 Notices X-4
Article XI - Investor's Duties
11.01 Duties XI-1
11.02 Default XI-5
11.03 Non-Waiver XI-6
11.04 Cure XI-6
Article XII - Miscellaneous XII-1
TABLE OF DEFINED TERMS
(in alphabetical order)
TERM SECTION
- ---- -------
Book Value of the Investment 5.01
Book Value of the Loan 5.01
CAPG Cover Page
Claim Rescission Amount 8.02
Contract Cover Page
Co-venturer 2.02.4
Covered Amount 10.06
Covered Payment 2.01
Covered Property 4.02.2
Effective Date 1.05
Environmental Impact Assessment 11.01.18(b)
Expected Monetary Value of the Reserves 5.05.6
Foreign Currency 5.05.5
Foreign Enterprise 1.01.1
Foreign Governing Authority 1.01.3
Historical Cost 5.03.1(b)
Initial Contingency Period 1.07
Insured Portion 1.01.2
Intermediate Subsidiaries Cover Page
Investment 1.01.2
Investor Cover Page
Investor's Share 5.03.1(b)
KKM 1.01.1
Liability 5.01(a)
Loan 1.01.2(b)
Local Currency 2.01.2(a)(i)
Maximum Aggregate Compensation Amount 1.03
Offshore Account 2.01.1
Offshore Account License 2.01.1
Operative Date 1.07
OPIC Cover Page
Other Insurance 11.01.4
Petroleum 1.01.1
Political Violence 6.01
Premium Due Date 1.06.1
Project 1.01.1
Project Agreement 1.01.1
Project Country 1.01.1
Proved Reserves, Probable Reserves, and Possible 5.05.6
Reserves
Replacement Cost 7.01(b)
Second Contingency Period 1.07
Shares 1.01.2(a)
Subsequent Amendments 11.01.8
Waiting Period 2.01.2(a)
World Bank Guidelines 11.01.17
ARTICLE I - SUBJECT OF INSURANCE AND EXCHANGE OF PROMISES.
----------------------------------------------------------
1.01 SUBJECT.
1. PROJECT. The Investor, through a fifty percent (50%)
shareholding in Karakuduk-Munay, Inc. ("KKM" or the "Foreign Enterprise"),
a closed joint stock company organized and existing under the laws of the
Republic of Kazakhstan, has undertaken a project in the Republic of
Kazakhstan (the "Project Country"), consisting of the development and
production of hydrocarbons ("Petroleum") from the Karakuduk oil field as
described in the Karakaduk Field Development Study dated May 1999 (as so
described, the "Project"). The Project has been undertaken pursuant to an
agreement dated August 30, 1995, as amended by Amendment No. 1, dated
September 17, 1995, between the Ministry of Oil and Gas Industry and KKM,
entitled "Agreement for Exploration, Development and Production of Oil in
Karakuduk Oil Field in Mangistau Oblast of the Republic of Kazakhstan" (the
"Project Agreement"), to which CAPG is not a party, but in which CAPG is
named as the "Investor".
The Investor represents and warrants that it has provided OPIC with
true and complete copies of the Project Agreement and other related Project
documentation.
2. INVESTMENT. For the sole purpose of implementing the Project, the
Investor has contributed or will contribute, through the Intermediate
Subsidiaries, to KKM up to US$105,939,000, consisting of:
(a) US$100,000 in exchange for fifty percent (50%) (100,000
shares) (the "Shares") of the 200,000 shares of capital
stock, constituting the initial equity of KKM, and
(b) up to US$105,839,000 as a loan (the "Loan") to be made to
and repaid by KKM as provided in the Project Agreement
(such contributions together with all retained earnings on
the Shares hereinafter the "Investment").
Ninety percent (90%) (the "Insured Portion") of the Investment is insured
under this Contract.
3. FOREIGN GOVERNING AUTHORITY. The term "Foreign Governing
Authority" means the federal government of Kazakhstan and its agencies and
instrumentalities exercising governmental (as distinguished from
commercial) functions, local and municipal governments, and agencies and
instrumentalities through which governmental functions are exercised,
provided that the actions of such local and municipal governments and
agencies and instrumentalities thereof are attributable under principles of
international law to the federal government.
1.02 PROMISES.
1. OPIC promises that if acts occur during the term of this Contract
which satisfy the requirements for coverage in Articles II, IV, VI, or
VIII, OPIC will pay the Investor the amount of compensation provided in
Articles III, V, VII or IX in accordance with the procedures in Article X.
2. The Investor promises to follow the procedures in Article X and
comply with the duties in Article XI. If the Investor fails to follow the
procedures or perform any its obligations under this Contract, the Investor
may lose rights, including the right to compensation.
1.03 MAXIMUM AGGREGATE COMPENSATION AMOUNT.
OPIC will not pay compensation under this Contract in an aggregate
amount that exceeds $50,000,000 (the "Maximum Aggregate Compensation
Amount").
1.04 FULL FAITH AND CREDIT.
The full faith and credit of the United States is pledged to secure
the full payment by OPIC of its obligations under this Contract.
1.05 TERM.
This Contract shall enter into force on the date upon which it has
been signed by OPIC (the "Effective Date") and shall terminate 20 years
afterward.
1.06 PREMIUMS AND COVERAGE ELECTIONS.
1. TIMING AND RATES. The annual premium rate shall be 2.07% of the
Covered Amount (as defined herein). On or before the Operative Date (as
defined in Section 1.07), and thereafter on or before the first day of each
three-month anniversary of the Operative Date (the Operative Date and each
such anniversary, a "Premium Due Date") the Investor shall
(a) elect amounts of coverage (Section 10.06) and
(b) pay the greater of
(i) the premium due for the coverage period that commences
on such date, and
(ii) the contract administrative fee due for that period.
The contract administrative fee is 0.25% of the Investment (Section 1.01.2)
per annum.
Covered Amount means the U.S. dollar amount of coverage, which amount shall
be elected by the Investor in accordance with the provisions of Section
10.06.
2. INITIAL ELECTION. The Covered Amount and the premium due for the
first three-month period shall be:
Covered Amount $0
x Quarterly Premium Rate 0.5163%
===========
= Premium Due $0
1.07 CONTINGENT COVERAGE PREMIUM. Prior to the Operative Date (as
hereinafter defined), the Investor shall pay, on or before the Effective
Date of this Contract a contingent coverage premium in the amount of
$15,625 for the period from the Effective Date of this Contract through
December 31, 1999 (the "Initial Contingency Period"). The unearned portion
of the $15,625 commitment fee which was previously paid to OPIC by the
Investor for the period from October 1, 1999, through December 31, 1999,
shall be applied to the contingent coverage premium for the Initial
Contingency Period on a pro rata basis for the period from the Effective
Date of this Contract through December 31, 1999. If the Operative Date has
not occurred prior to December 31, 1999, the Investor shall pay an
additional $5,208 for the period from January 1, 2000, through January 30,
2000 (the "Second Contingency Period").
OPIC shall have no liability under this Contract until the Operative Date
which shall be the date, if any, upon which OPIC shall have received from
the Investor the Investor's election of the Covered Amount for the first
three-month coverage period (Section 1.06) which election shall be in
accordance with Section 10.06.
OPIC shall promptly acknowledge receipt of such notice and election of the
Coverage Amount from the Investor and shall notify the Investor of the
additional premium amount due for the first three-month coverage period
calculated by applying the premium rate set forth in Section 1.06.2 to the
Covered Amount elected by the Investor. Such amount shall be calculated
net of the pro rata portion of any unearned contingent coverage premium
paid and shall be payable within 30 days of the date of OPIC's notification
to the Investor of the additional premium due.
If the Investor fails to pay the additional premium due by such date or if
the Operative Date does not occur prior to January 30, 2000, this Contract
shall automatically terminate and be of no further force or effect.
ARTICLE II - INCONVERTIBILITY - SCOPE OF COVERAGE.
--------------------------------------------------
2.01 INCONVERTIBILITY. Subject to the exclusions (Section 2.02) and
limitations (Section 3.02), CAPG or the Foreign Enterprise shall be deemed
unable to make a payment in U.S. dollars of earnings on or returns of the
Investment (a "Covered Payment") and compensation shall be payable only if:
1. CAPG or the Foreign Enterprise is not permitted by the Foreign
Governing Authority to retain in U.S. dollars outside of the
Project Country in an account owned and controlled by CAPG or the
Foreign Enterprise (the "Offshore Account") in accordance with the
terms of License No. 51 for Opening an Offshore Bank Account
issued by the National Bank of the Republic of Kazakhstan, dated
September 28,1999 (the "Offshore Account License"), U.S. dollar
proceeds derived from the sale for export of Petroleum produced by
the Project ("Export Proceeds") from which Covered Payments may be
made; and
2. CAPG or the Foreign Enterprise:
(a) (i) is required by the Foreign Governing Authority to
convert Export Proceeds into the lawful currency of the
Project Country ("Local Currency") to be held in a Local
Currency account in the Project Country and (ii) during the
120 successive days following the date that either CAPG or
the Foreign Enterprise attempts to make a Covered Payment
(the "Waiting Period"), is unable to convert sufficient
Local Currency to make a Covered Payment in U.S. dollars
through any readily available legal channel, whether direct
or indirect (including a parallel market), except at rates
which are less favorable than the rate described under
Section 3.01.2; or
(b) (i) is required by the Foreign Governing Authority to hold
Export Proceeds in the Project Country and (ii) during the
Waiting Period, is unable legally to transfer to the United
States amounts in U.S. dollars as a Covered Payment.
2.02 EXCLUSIONS. No compensation under Section 2.01 shall be payable:
1. PRE-EXISTING RESTRICTIONS. If
(a) notwithstanding the provisions of Section 2.01, on the date
of this Contract a company or an investor, in circumstances
comparable to those of the Foreign Enterprise or the
Investor on said date, including a foreign enterprise or
investor holding a license substantially the same as the
Offshore Account License, would have been legally restricted
from receiving and maintaining in an offshore account Export
Proceeds or making a payment substantially the same as a
Covered Payment; and
(b) the Investor knew or should have known about the restriction.
2. INVESTOR DILIGENCE. Unless, prior to a final claim determination
by OPIC, the Investor and the Foreign Enterprise have made all
reasonable efforts to convert the Local Currency into U.S.
dollars or to transfer U.S. dollars through all customary legal
channels for payments substantially the same as a Covered
Payment;
3. RECONVERSIONS. If the Local Currency represents Export Proceeds
which were previously converted voluntarily by either the Foreign
Enterprise or CAPG into a currency other than the Local Currency;
4. PROVOCATION. If the preponderant cause of the inability to make
a Covered Payment is unreasonable action attributable to the
Investor, the Foreign Enterprise, or any other entity, other than
an entity of the Foreign Governing Authority, which has an equity
interest in the Project, including any successor to or assignee
thereof (each such entity being a "Co-venturer"), including
corrupt practices; or
5. USE RESTRICTED BY EXPROPRIATION. If the use of U.S. dollars or
Local Currency is restricted by an expropriatory action (Section
4.02.1). A claim for such loss may be made under Article IV.
6. OFFSHORE ACCOUNT LICENSE. If, notwithstanding any other
provision of this Article II, the claim arises out or by reason
of the fact that the Foreign Governing Authority fails to approve
or otherwise provide for the extension of the Offshore Account
License or the replacement thereof with a license affording the
Investor rights no less favorable than the rights provided by the
Offshore Account License.
ARTICLE III - INCONVERTIBILITY - AMOUNT OF COMPENSATION.
--------------------------------------------------------
3.01 RATE OF COMPENSATION FOR INCONVERTIBILITY.
1. ASSIGNMENT.
(a) If the requirements of Article II are satisfied, then,
subject to the limitations (Section 3.02), OPIC shall pay
compensation in U.S. dollars
(i) on delivery by the Investor of the inconvertible Local
Currency (Section 2.01.2(a)) or nontransferable U.S.
dollars (Section 2.01.2(b)) (in cash or, at OPIC's
option, by draft subject to collection) constituting
the Insured Portion of a Covered Payment, or
(ii) if the Investor is unable legally to deliver the
inconvertible Local Currency or nontransferable U.S.
dollars or, if OPIC so requests, on prior assignment of
the Investor's right to receive the Insured Portion of
a Covered Payment (or, if OPIC so chooses, a beneficial
interest in such right).
(b) If the Investor delivers Local Currency, compensation shall
be the U.S. dollar equivalent of the Local Currency at the
exchange rate (Section 3.01.2) in effect 120 days before
OPIC receives the completed application for compensation
(Section 10.01).
(c) If the Investor delivers non-transferable U.S. dollars or an
assignment, on terms satisfactory to OPIC, of the Investor's
right to receive the Insured Portion of the Covered Payment
or a beneficial interest in such right, compensation shall
be the amount of such U.S. dollars or the U.S. dollar amount
of the right so assigned, as the case may be.
2. EXCHANGE RATE.
(a) The exchange rate shall be the official exchange rate
applicable to a payment substantially the same as a Covered
Payment.
(b) If, however,
(1) U.S. dollars were not generally available at the
applicable official exchange rate; and
(2) exchanges of Local Currency for U.S. dollars to make
payments substantially the same as a Covered Payment were
effected legally and normally through another channel,
then the exchange rate shall be the effective rate obtained
through that channel.
(c) If on any date neither of the above methods of computation
yields a result, then the exchange rate shall be determined
by applying such methods on the first date thereafter on
which such methods of computation do yield a result.
(d) In any case, the applicable exchange rate shall be net of
all deductions ordinarily charged or levied by the Foreign
Governing Authority for the exchange of Local Currency for
U.S. dollars, such as taxes and commissions.
3.02 ADJUSTMENTS.
1. UNDERINSURANCE. If the Investor has elected a Covered Amount
that is less than $50,000,000, and
(a) if the lesser of (i) the Insured Portion of the Book Value
of the Investment (as defined in Section 5.01) and (ii) the
Investor's Share (as defined in 5.03.1(b)) of the Expected
Monetary Value of the Reserves (as defined in 5.05.6) is an
amount greater than $50,000,000, then the amount of OPIC's
compensation under Article III shall be reduced to an amount
calculated by multiplying the amount of compensation
otherwise due by a percentage equal to the quotient of the
Covered Amount elected by the Investor divided by
$50,000,000; or
(b) if the lesser of (i) the Insured Portion of the Book Value
of the Investment and (ii) the Investor's Share of the
Expected Monetary Value of the Reserves is an amount that is
less than $50,000,000, then the amount of OPIC's
compensation under Article III shall be reduced to an amount
calculated by multiplying the amount of compensation
otherwise due by a percentage equal to the quotient of the
Covered Amount elected by the Investor divided by the lesser
of (a) the Investor's Share of the Expected Monetary Value
of the Reserves and (b) the Insured Portion of the Book
Value of Investment, determined as of the date the Investor
first attempted but was unable to convert or transfer
(Section 2.01.2).
3.03 LIMITATIONS.
1. COVERED AMOUNT. Compensation under this Article II shall not
exceed the Covered Amount in effect 120 days before OPIC receives the
application for compensation.
2. QUARTERLY CLAIMS CAP. The Investor shall not file applications
for compensation hereunder, and OPIC shall have no liability for claims
under Inconvertibility coverage (Articles II and III), in excess of
$8,000,000 in any 91-day period.
3. MAXIMUM COMPENSATION. Aggregate compensation under this Contract
shall not exceed an amount equal to the lesser of (a) the Insured Portion
of the Book Value of the Investment and (b) the Investor's Share (as
defined in Section 5.03.1(b)) of the Expected Monetary Value of the
Reserves (as defined in Section 5.05.6).
ARTICLE IV - EXPROPRIATION - SCOPE OF COVERAGE.
-----------------------------------------------
4.01 TOTAL EXPROPRIATION. Subject to the exclusions (Section 4.03),
adjustments (Section 5.04), and limitations (Section 5.05), compensation is
payable for total expropriation (Section 5.01) if an act or series of acts
satisfies all of the following requirements:
1. the acts are attributable to a Foreign Governing Authority which
is in DE FACTO control of the part of the Project Country where the
Project is located;
2. the acts are
(a) violations of international law (without regard to the
availability of local remedies) or
(b) an abrogation, repudiation, or material breach of the
Project Agreement;
provided, however, that no compensation shall be payable for total
expropriation or expropriation of funds (Section 4.02) for acts that
are an abrogation, repudiation or material breach of Sections 4.1.16,
4.1.17, or the eighth paragraph of Section 4.1.20 of the Project
Agreement unless such acts are a violation of international law;
3. the acts directly prevent
(a) the Investor from receiving timely payment in the currency
specified of amounts owed to it by the Foreign Enterprise or from
disposing of the Investment or any rights accruing therefrom; or
(b) the Foreign Enterprise from receiving timely payment in the
currency specified of amounts owed to it in respect of the
Project, except for acts which are the subject of Section 4.02.1
below; or
(c) either the Investor or the Foreign Enterprise from
effectively exercising its fundamental rights or performing its
duties as set forth in the Project Agreement or with respect to
the Project; or
(d) the Foreign Enterprise from exercising effective control, to
the extent provided in the Project Agreement, over a substantial
portion of the Covered Property or from constructing or operating
the Project; or
(e) the Foreign Enterprise from disposing of its interest in the
Project Agreement in accordance with the terms of the Project
Agreement; and
4. the violations of law or abrogation, repudiation or material
breach of the Project Agreement are not remedied (Section 11.01.14)
and the expropriatory effect continues without interruption for six
months.
4.02 PARTIAL EXPROPRIATION. Subject to the exclusions (Section 4.03),
adjustments (Section 5.04), and limitations (Section 5.05);
1. EXPROPRIATION OF FUNDS. Compensation is payable for an
expropriation of Local Currency or U.S. dollars paid or payable to the
Investor which constitutes a Covered Payment if an act or series of acts
(a) satisfies the governmental action, illegality, and duration
requirements (Section 4.01.1, Section 4.01.2(a) and Section
4.01.4); and
(b) directly prevents the Investor or the Foreign Enterprise from
effectively controlling such currency or U.S. dollars in the
Project Country.
2. EXPROPRIATION OF COVERED PROPERTY. Compensation is payable for
the expropriation of Covered Property (as defined herein), if an act or
series of acts satisfies the government action, illegality, and duration
requirements (Section 4.01.1, Section 4.01.2 and Section 4.01.4).
Covered Property means tangible assets
(a) used, intended to be used or produced in connection with the
Project (excluding reserves of any kind);
(b) in which the Foreign Enterprise has an ownership interest;
and
(c) which are located in the Project Country at the time the
expropriation occurs.
4.03 EXCLUSIONS. No compensation for expropriation shall be payable:
1. PROVOCATION. If the preponderant cause of the expropriation is
unreasonable action attributable to the Investor, the Foreign Enterprise,
or a Co-venturer, including corrupt practices; or
2. GOVERNMENT ACTION. For any repudiation or breach by the Foreign
Governing Authority of any obligation to furnish funds or other property or
services of value to or in respect of the Project if the action is taken by
the Foreign Governing Authority in its capacity or through its powers as a
purchaser, supplier of goods or services, creditor, shareholder, director
or manager of the Foreign Enterprise; or
3. AGREEMENTS. For any action validly and legally taken by the
Foreign Governing Authority in accordance with any agreement voluntarily
made by the Investor, the Foreign Enterprise, or any Co-venturer acting
within the scope of its authority with respect to the Project.
4. EXCLUDED COVERED PROPERTY. For loss of the following Covered
Property:
(a) precious metals, gems, works of art, money, documents,
securities or evidence of property ownership; or
(b) any oil wells which a prudent operator would not continue to
drill, develop or operate for production purposes absent the
expropriation.
5. MINIMUM LOSS. If the amount of compensation otherwise payable
would be less than $50,000;
6. OFFSHORE ACCOUNT LICENSE. If, notwithstanding any other
provision of Section 4.02.1(a), the claim arises out or by reason of the
fact that the Foreign Governing Authority fails to approve or otherwise
provide for the extension of the Offshore Account License or the
replacement thereof with a license affording the Investor rights no less
favorable than the rights provided by the Offshore Account License.
ARTICLE V - EXPROPRIATION - AMOUNT OF COMPENSATION.
---------------------------------------------------
5.01 TOTAL EXPROPRIATION. Subject to the adjustments (Section 5.04) and
limitations (Section 5.05), for total expropriation (Section 4.01), OPIC
shall pay compensation in U.S. dollars in the amount of the Insured Portion
of the Book Value of the Investment (as defined herein). Compensation is
determined as of the date the expropriatory effect began (Section 4.01.3)
and is based on financial statements maintained by the Investor in
accordance with Section 11.01.11.
Book Value of the Investment means (i) the book value of the Shares plus
(ii) the Book Value of the Loan (as defined herein).
The book value of the Shares shall be determined from the financial
statements of the Foreign Enterprise (Section 11.01.11), maintained
utilizing the full cost method of accounting. In determining the book
value of the Shares, OPIC may audit and make adjustments to the financial
statements of the Foreign Enterprise to make the adjustments described in
Section 5.04.
The Book Value of the Loan means the lesser of
(a) the aggregate unpaid balance of the amount thereof actually
received by the Foreign Enterprise in accordance with the Project
Agreement, as evidenced by CAPG - KKM Loan Agreement, or other
documentation satisfactory to OPIC in the reasonable exercise of
its discretion, together with unpaid interest accrued thereon
(the "Liability"), reduced by the amount of any provision for
uncollectibility of the Liability on the books of the Investor,
and
(b) the amount of the Liability that would be recoverable by the
Investor as a liability of the Foreign Enterprise, in accordance
with the priority of the Liability among the creditors of the
Foreign Enterprise, if the assets of the Foreign Enterprise were
liquidated at book value, determined in accordance with U.S.
generally accepted accounting principles, immediately prior to
the date the expropriatory effect commences (Section 4.01), the
loss due to political violence (Section 6.01), or the
interference with operations (Section 8.01),
5.02 EXPROPRIATION OF FUNDS. Subject to the adjustments (Section 5.04)
and limitations (Section 5.05), for expropriation of funds (Section
4.02.1), OPIC shall pay compensation in the amount of the U.S. dollar
equivalent of the Insured Portion of the expropriated funds at the exchange
rate determined by Section 3.01.2, computed as of the date the
expropriation began.
5.03 EXPROPRIATION OF COVERED PROPERTY. Subject to the adjustments
(Section 5.04) and limitations (Section 5.05);
1. For the expropriation of Covered Property, other than produced
Petroleum, OPIC shall pay compensation in the amount of the lesser of
(a) the Insured Portion of the Book Value of the Investment, as
determined as of the date the expropriation began; and
(b) the Insured Portion of the Historical Cost (as defined
herein) of the Covered Property, determined as of the date
the expropriation began.
Historical Cost means the Investor's Share (as defined below) of
the least of
(i) the original cost;
(ii) fair market value; and
(iii) the reasonable cost to repair the Covered Property,
less anything of value received by the Investor on account of the
Covered Property lost, (excluding compensation payable under
other insurance policies except to the extent necessary to
prevent the Investor from recovering more than the amount of the
loss recognized under any of the policies under which
compensation is due, without regard to policy limits), and less
the Investor's Share (as defined below) of any such receipts by
the Foreign Enterprise.
Investor's Share means the percentage equal to the proportion of the
Book Value of the Investment to the total equity and debt of the
Foreign Enterprise.
2. For expropriation of produced Petroleum, OPIC shall pay
compensation in the amount of the U.S. dollar equivalent (Section 3.01.2 or
Section 5.05.5) of the value of such produced Petroleum, determined in
accordance with the terms of the Project Agreement governing the sale of
such produced Petroleum.
5.04 ADJUSTMENTS.
1. INVESTMENTS OF PROPERTY. Non-cash items contributed as part of
the Investment shall be adjusted to the original cost of the items
furnished (not to exceed fair market value in the United States at the time
of transfer to the Foreign Enterprise and adjusted, if necessary, to
reflect abnormal deterioration), plus freight and other reasonable direct
costs incurred in delivering the items to the Project.
2. NON-INSURED CONTRIBUTION. Any direct or indirect additional
amount contributed to the Foreign Enterprise by the Investor in excess of
the Investment shall reduce compensation payable by OPIC in the proportion
that such additional amount bears to the aggregate of the Investment and
any such additional amount.
3. SPECIAL ACCOUNTING RULES. Dealings among related parties shall be
adjusted to the standard of arm's length dealing, and forgiveness of
obligations shall be disregarded. Each entity shall be accounted for as if
it were a separate person for income tax purposes, and the effect of tax
shifting arrangements shall be disregarded. Obsolescence or permanent
reduction in recoverable values of assets shall be recognized by adjusting
the book value thereof to realizable value. OPIC may adjust financial
statements to reflect the effect of events of loss that occur before the
expropriation effect began, if such events of loss are later confirmed.
4. OTHER COMPENSATION, RETAINED PROPERTY, AND UNPAID OBLIGATIONS.
OPIC may reduce compensation for
(a) compensation or payments received from other sources on account
of the expropriation (excluding compensation payable under other
insurance policies, except to the extent necessary to prevent the
Investor from recovering more than the amount of the loss recognized
under any of the policies under which compensation is due, without
regard to policy limits);
(b) in the case of total expropriation (Section 5.01), the book value
of commercially valuable property which remains subject to the
Investor's effective disposition and control after the expropriation
begins (unless OPIC requires the Investor to assign the property
(Section 10.02)); and
(c) any obligation of which the Investor is relieved as a consequence
of the expropriation.
The reduction shall be proportionate to the extent that these items
are attributable to the Insured Portion of the Investment.
5. UNDERINSURANCE. If the Investor has elected a Covered Amount
that is less than $50,000,000, and
(a) if the lesser of (i) the Insured Portion of the Book Value of the
Investment and (ii) the Investor's Share (as defined in Section
5.03.1(b)) of the Expected Monetary Value of the Reserves (as
defined in Section 5.05.6) is an amount greater than $50,000,000,
then the amount of OPIC's compensation under Article V shall be
reduced to an amount calculated by multiplying the amount of
compensation otherwise due by a percentage equal to the quotient
of the Covered Amount elected by the Investor divided by
$50,000,000; or
(b) if lesser of (i) the Insured Portion of the Book Value of the
Investment and (ii) the Investor's Share of the Expected Monetary
Value of the Reserves is an amount that is less than $50,000,000,
then the amount of OPIC's compensation under Article V shall be
reduced to an amount calculated by multiplying the amount of
compensation otherwise due by a percentage equal to the quotient
of the Covered Amount elected by the Investor divided by the
lesser of (a) the Investor's Share of the Expected Monetary Value
of the Reserves and (b) Insured Portion of the Book Value of the
Investment, determined as of the time the expropriatory act or
acts (Section 4.01) began.
5.05 LIMITATIONS.
1. COVERED AMOUNT. Compensation shall not exceed the Covered Amount
(Section 10.06) on the date the expropriatory effect began;
2. INSOLVENCY. If the liabilities of the Foreign Enterprise exceed
its assets immediately prior to the date the expropriatory effect
commences, compensation shall not exceed the amount that the Investor would
have been entitled to receive in insolvency proceedings if the assets of
the Foreign Enterprise had been liquidated at book value on that date;
3. SELF-INSURANCE. Compensation shall not exceed the maximum amount
which could be received by the Investor from OPIC without breaching Section
11.01.3;
4. LOCAL CURRENCY PAYMENTS. In the event of a claim under Section
4.02.2, if Local Currency is tendered by the Foreign Governing Authority as
compensation for requisitioned produced Petroleum, compensation shall not
exceed the purchase price of the requisitioned produced Petroleum,
determined in accordance with the Project Agreement governing the sale of
such produced Petroleum and the U.S. dollar amount at which the amount of
the Local Currency is valued, the latter to be determined by converting
such Local Currency at the exchange rate (Section 3.01.2) in effect on the
date such Local Currency is tendered.
5. FOREIGN CURRENCY PAYMENTS. In the event of a claim under Section
4.02.2, if a currency other than Local Currency or U.S. dollars ("Foreign
Currency") is tendered by the Foreign Governing Authority as compensation
for requisitioned produced Petroleum, compensation shall not exceed the
U.S. dollar equivalent of the purchase price in Foreign Currency of the
requisitioned produced Petroleum determined in accordance with the Project
Agreement governing the sale of such produced Petroleum, the U.S. dollar
equivalent to be determined by converting such Foreign Currency at the
exchange rate determined by notionally converting the amount of such
Foreign Currency into U.S. dollars at the rate quoted by the Reuters WRLD
Screen for buying U.S. dollars with such Foreign Currency at 12 noon New
York time on the date such Foreign Currency is tendered. If the exchange
rate cannot be established from the source described above, the exchange
rate shall be the rate determined to be equitable for such transactions by
a third party acceptable to OPIC and the Investor.
6. MAXIMUM COMPENSATION. Aggregate compensation under this Contract
shall not exceed an amount equal to the lesser of (a) the Insured Portion
of the Book Value of the Investment and (b) the Investor's Share of the
Expected Monetary Value of the Reserves (as defined herein).
Expected Monetary Value of the Reserves means, on any date, the value of
the Petroleum reserves of the Project, which shall be calculated in U.S.
dollars, based upon the after-tax cash flow forecasts for each category of
reserves of Petroleum, including Proved, Probable and Possible Reserves (as
defined below), respectively, by utilizing the relevant prevailing
published oil and gas prices, without adjustment for future inflation and
discounted at rates equal to the yield to maturity of United States
Treasury securities for the term comparable to the estimated life of each
of the respective reserves. The cash flow forecasts shall be adjusted for
the probability of producing such reserves and account for all costs borne
by the Investor or the Foreign Enterprise, including but not limited to
storage, processing, freight, or insurance. The cash flow forecasts shall
be further adjusted for each of the respective categories of reserves of
Petroleum by applying the following probability factors:
CATEGORY PERCENT OF CASH FLOW FORECAST
Proved Reserves 90%
Probable Reserves 50%
Possible Reserves 10%
If OPIC determines it to be necessary, the Expected Monetary Value of the
Reserves shall be determined by a qualified, certified independent
petroleum engineer acceptable to OPIC in its sole discretion. The expense
of such determination shall be borne equally by the Insured and OPIC.
Proved Reserves, Probable Reserves, and Possible Reserves shall have the
meanings and definitions as published by the Society of Petroleum
Engineers.
ARTICLE VI - POLITICAL VIOLENCE - SCOPE OF COVERAGE.
----------------------------------------------------
6.01 LOSS DUE TO POLITICAL VIOLENCE. Subject to the exclusions (Section
6.02), adjustments (Section 7.02), and limitations (Section 7.03),
compensation is payable if political violence is the direct and immediate
cause of the permanent loss (including loss of value by damage or
destruction) of Covered Property. Political Violence means a violent act
undertaken with the primary intent of achieving a political objective, such
as declared or undeclared war, hostile action by national or international
armed forces, civil war, revolution, insurrection, civil strife, terrorism
or sabotage. However, acts undertaken primarily to achieve labor or
student objectives are not covered.
6.02 EXCLUSIONS. Regardless of any other provision of this Contract, no
compensation shall be payable for political violence if
1. EXCLUDED COVERED PROPERTY. The loss is of the following Covered
Property:
(a) precious metals, gems, works of art, money, documents,
securities or evidence of property ownership; or
(b) any oil wells which a prudent operator would not continue to
drill, develop or operate for production purposes absent the
political violence.
2. MINIMUM LOSS. The amount of compensation payable would be less
than $50,000;
3. REASONABLE PROTECTIVE MEASURES. The loss results from the
failure of the Investor, or the Foreign Enterprise, or any Co-venturer to
take reasonable measures to protect or preserve the property; or
4. PROVOCATION. The preponderant cause of the loss is the
unreasonable actions attributable to the Investor, the Foreign Enterprise,
or any Co-venturer, including corrupt practices.
ARTICLE VII - POLITICAL VIOLENCE - AMOUNT OF COMPENSATION.
----------------------------------------------------------
7.01 BASIS OF COMPENSATION. Subject to the adjustments (Section 7.02)
and limitations (Section 7.03), if the requirements of Article VI are
satisfied, OPIC shall pay compensation in U.S. dollars for any item of
Covered Property lost.
1. For the loss of Covered Property, other than produced Petroleum,
OPIC shall pay compensation in the amount of
(a) Historical Cost, or
(b) If the Investor elects to repair or replace the Covered
Property within three years of the loss, the reasonable cost
to repair any item of Covered Property lost or to replace it
with equivalent new property ("Replacement Cost"), less
anything of value received by the Investor or the Foreign
Enterprise on account of the Covered Property lost,
(excluding compensation payable under other insurance
policies except to the extent necessary to prevent the
Investor from recovering more than the amount of the loss
recognized under any of the policies under which
compensation is due, without regard to policy limits). Such
compensation shall not exceed 200% of the item's original
cost. This section Section 7.02 does not apply to oil or
gas wells which have been plugged and abandoned.
2. For the loss of produced Petroleum, OPIC shall pay compensation in
the amount of the U.S. dollar equivalent, determined in accordance with the
terms of the Project Agreement governing the sale of such produced
Petroleum.
7.02 ADJUSTMENTS.
1. INVESTMENTS OF PROPERTY. Non-cash items contributed as part of
the Investment shall be adjusted to the original cost of the items
furnished (not to exceed fair market value in the United States at the time
of transfer to the Foreign Enterprise and adjusted if necessary to reflect
abnormal deterioration), plus freight and other reasonable direct costs
incurred in delivering the items to the Project.
2. NON-INSURED CONTRIBUTION. Any direct or indirect additional
amount contributed to the Foreign Enterprise by the Investor in excess of
the Investment will reduce compensation payable by OPIC in the proportion
that such additional amount bears to the aggregate of the Investment and
any such additional amount.
3. SPECIAL ACCOUNTING RULES. Dealings among related parties shall
be adjusted to the standard of arm's length dealing, and forgiveness of
obligations shall be disregarded. Each entity shall be accounted for as if
it were a separate person for income tax purposes, and the effect of tax
shifting arrangements shall be disregarded. Obsolescence or permanent
reduction in recoverable values of assets shall be recognized by adjusting
the book value thereof to realizable value. OPIC may adjust financial
statements to reflect the effect of events that occur before the property
is lost, if such events of loss are later confirmed.
4. UNDERINSURANCE. If the Investor has elected a Covered Amount
that is less than $50,000,000, and
(a) if the lesser of (i) the Insured Portion of the Book Value
of the Investment and (ii) the Investor's Share of the
Expected Monetary Value of the Reserves is an amount greater
than $50,000,000, then the amount of OPIC's compensation
under Article VII shall be reduced to an amount calculated
by multiplying the amount of compensation otherwise due by a
percentage equal to the quotient of the Covered Amount
elected by the Investor divided by $50,000,000; or
(b) if the lesser of (i) the Insured Portion of the Book Value
of the Investment and (ii) the Investor's Share of the
Expected Monetary Value of the Reserves is an amount that is
less than $50,000,000, then the amount of OPIC's
compensation under Article VII shall be reduced to an amount
calculated by multiplying the amount of compensation
otherwise due by a percentage equal to the quotient of the
Covered Amount elected by the Investor divided by the lesser
of (a) the Investor's Share of the Expected Monetary Value
of the Reserves and (b) the Insured Portion of the Book
Value of the Investment, determined immediately before the
loss caused by political violence.
7.03 LIMITATIONS. Regardless of any other provision of this Contract,
the following limitations shall apply in computing compensation for
political violence:
1. COVERED AMOUNT. Compensation shall not exceed the Covered Amount
on the date of the loss.
2. INSOLVENCY. If the liabilities of the Foreign Enterprise exceed
its assets as of the date of the loss, compensation shall not exceed the
amount that the Investor would have been entitled to receive in insolvency
proceedings if the assets of the Foreign Enterprise had been liquidated at
book value on that date.
3. SELF-INSURANCE. Violation of the duty to be self-insured
(Section 11.01.3) shall result in a corresponding reduction of compensation
otherwise payable under this Contract.
4. AGGREGATE HISTORICAL COST COMPENSATION. Aggregate compensation
for Covered Property to be compensated at Historical Cost shall not exceed
the lesser of:
(a) the Insured Portion of the Book Value of the Investment, and
(b) the Investor's Share of the Expected Monetary Value of the
Reserves
at the time of loss.
5. REPLACEMENT COST LIMIT. Compensation for any item to be
compensated at Replacement Cost shall not exceed 200% of the Investor's
Share of the amount calculated under Section 7.01.1(b).
6. MAXIMUM COMPENSATION. Aggregate compensation under this Contract
for Covered Property to be compensated at Historical Cost shall not exceed
an amount equal to the lesser of (a) the Insured Portion of the Book Value
of the Investment and (b) the Investor's Share of the Expected Monetary
Value of the Reserves.
7.04 APPRAISAL. If OPIC determines that compensation is payable, but
OPIC and the Investor are unable to agree on a question of valuation,
either may demand the appointment of an impartial appraiser. If the
parties are unable to agree on the appraiser, the appointment shall be made
by the American Arbitration Association. The appraiser's itemized
appraisal shall be binding. Appraisal costs shall be borne equally by OPIC
and the Investor.
7.05 ESTIMATED COMPENSATION. If OPIC determines that compensation is
payable, but conditions in the Project Country preclude reasonable efforts
by OPIC to determine the precise amount due, OPIC may pay estimated
compensation based on the information then available. Upon determination
of the precise amount due, OPIC shall recover any excess amount paid or pay
any additional amount due.
ARTICLE VIII - INTERFERENCE WITH OPERATIONS - SCOPE OF COVERAGE.
----------------------------------------------------------------
8.01. INTERFERENCE WITH OPERATIONS. Subject to the adjustments (Section
9.02) and limitations (Section 9.03), OPIC shall pay compensation for
interference with operations if operation of the Project in accordance with
the terms of the Project Agreement is prevented for a period of six
consecutive months as a direct result of conditions created by political
violence (Section 6.01) in the Project Country which make it impossible or
unreasonably hazardous to carry on the operation of the Project. In
determining what conditions would make it impossible or unreasonably
hazardous to carry on the operation of the Project, OPIC will consider
whether it would be reasonable under the circumstances for the Foreign
Enterprise to continue the operation of the Project.
8.02. RESUMPTION OF PROJECT OPERATIONS. If, within 5 years from the date
on which the application for compensation based upon interference with
operations is submitted to OPIC, the operation of the Project under the
Project Agreement is, or could reasonably be, resumed by the Investor or
the Foreign Enterprise, the Investor may require that the claim settlement
be rescinded by reassignment to the Investor of all interests and claims
previously assigned by the Investor to OPIC (Section 10.02) and the
Investor shall pay to OPIC an amount equal to all of the compensation paid
by OPIC to the Investor for claim(s) under this Article VIII plus OPIC's
reasonable expenses incurred to maintain the Project (in the aggregate, the
"Claim Rescission Amount"). OPIC may, at any time, by notice to the
Investor, require the Investor to elect either to rescind the claim
settlement or to irrevocably waive the right to rescind the claim
settlement. If the Investor does not elect to rescind the claim settlement
within 90 days of receipt of OPIC's notice requesting that the claim
settlement be rescinded or fails to pay OPIC the Claim Rescission Amount
promptly following the exercise of the election to rescind the claim
settlement, then OPIC shall be free to sell the Project to any other party
and shall have no further obligation to the Investor and the Investor shall
have no further rights under this Section 8.02. If this Contract is in
effect at the time of such rescission, OPIC shall restore to the Maximum
Aggregate Compensation Amount, and Covered Amount all amounts subtracted
therefrom in connection with the interference with operations compensation
payment.
ARTICLE IX - INTERFERENCE WITH OPERATIONS - AMOUNT OF COMPENSATION.
-------------------------------------------------------------------
9.01 BASIS OF COMPENSATION. Subject to the adjustments (Section 9.02)
and limitations (Section 9.03), if the requirements of Article VIII are
satisfied, OPIC shall pay compensation as follows:
1. If the claim is based only on interference with operations, OPIC
shall pay compensation in U.S. dollars in the amount of the lesser of the
Insured Portion of the Book Value of the Investment and the Investor's
Share of the Expected Monetary Value;
2. If the event on which the claim is based also gives rise to a
valid political violence claim, OPIC shall pay compensation in the amount
described in Section 9.01.1, less the amount of compensation paid by OPIC
for the political violence loss.
Compensation shall be computed as of the date upon which the
interference with operations commences (Section 8.01) and based on
financial statements maintained by the Investor in accordance with Section
11.01.11. OPIC may, however, audit and make adjustments to the financial
statements (i) to conform them to principles of accounting generally
accepted in the United States; and (ii) to make the adjustments (Section
9.02).
9.02 ADJUSTMENTS.
1. INVESTMENTS OF PROPERTY. Non-cash items contributed as part of
the Investment shall be adjusted to the original cost of the items
furnished (not to exceed fair market value in the United States at the time
of transfer to the Foreign Enterprise and adjusted if necessary to reflect
abnormal deterioration), plus freight and other reasonable direct costs
incurred in delivering the items to the Project.
2. NON-INSURED CONTRIBUTION. Any direct or indirect additional
amount contributed to the Foreign Enterprise by the Investor in excess of
the Investment shall reduce compensation payable by OPIC in the proportion
that such additional amount bears to the aggregate of the Investment and
any such additional amount.
3. SPECIAL ACCOUNTING RULES. Dealings among related parties shall
be adjusted to the standard of arm's length dealing, and forgiveness of
obligations shall be disregarded. Each entity shall be accounted for as if
it were a separate person for income tax purposes, and the effect of tax
shifting arrangements shall be disregarded. Obsolescence or permanent
reduction in recoverable values of assets shall be recognized by adjusting
the book value to realizable value. OPIC may adjust financial statements
to reflect the effect of events of loss that occur before the interference
with operations begins, if such events of loss are later confirmed.
4. OTHER COMPENSATION, RETAINED PROPERTY AND UNPAID OBLIGATIONS.
OPIC may reduce compensation for
(a) compensation received from other sources on account of the
interference with operations (excluding compensation payable
under other insurance policies, except to the extent
necessary to prevent the Investor from recovering more than
the amount of the loss recognized under any of the policies
under which compensation is due, without regard to policy
limits);
(b) the book value of commercially valuable property which
remains subject to the Investor's effective disposition and
control after the interference with operations commences
(unless OPIC requires the Investor to assign the property
(Section 10.02)); and
(c) any obligation of which the Investor or the Foreign
Enterprise (to the extent of the Investor's Share of such
obligation) is relieved by virtue of the interference with
operations. The reduction shall be proportionate to the
extent that these items are attributable to the Insured
Portion of the Investment.
5. UNDERINSURANCE. If the Investor has elected a Covered Amount
that is less than $50,000,000, and
(a) if the lesser of (i) the Insured Portion of the Book Value
of the Investment and (ii) the Investor's Share of the
Expected Monetary Value of the Reserves is an amount greater
than $50,000,000, then the amount of OPIC's compensation
under Article IX shall be reduced to an amount calculated by
multiplying the amount of compensation otherwise due by a
percentage equal to the quotient of the Covered Amount
elected by the Investor divided by $50,000,000; or
(b) if the lesser of (i) the Insured Portion of the Book Value
of the Investment and (ii) the Investor's Share of the
Expected Monetary Value of the Reserves is an amount that is
less than $50,000,000, then the amount of OPIC's
compensation under Article IX shall be reduced to an amount
calculated by multiplying the amount of compensation
otherwise due by a percentage equal to the quotient of the
Covered Amount elected by the Investor divided by the lesser
of (a) the Investor's Share of the Expected Monetary Value
of the Reserves and (b) the Insured Portion of the Book
Value of the Investment, determined as of the date upon
which the interference with operations commences (Section
8.01).
9.03 LIMITATIONS.
1. COVERED AMOUNT. Compensation shall not exceed the Covered Amount
on the date the interference with operations began;
2. INSOLVENCY. If the liabilities of the Foreign Enterprise exceed
its assets as of the date the interference with operations began,
compensation shall not exceed the amount that the Investor would have been
entitled to receive in insolvency proceedings if the assets of the Foreign
Enterprise had been liquidated at book value on that date;
3. SELF-INSURANCE. Compensation shall not exceed the maximum amount
which could be received by the Investor from OPIC without breaching Section
11.01.3; or
4. MAXIMUM COMPENSATION. Aggregate compensation under this Contract
shall not exceed an amount equal to the lesser of (a) the Insured Portion
of the Book Value of the Investment and (b) the Investor's Share of the
Expected Monetary Value of the Reserves.
ARTICLE X - PROCEDURES.
-----------------------
10.01 APPLICATION FOR COMPENSATION. An application for compensation shall
demonstrate the Investor's right to compensation in the amount claimed.
The Investor shall provide such additional information as OPIC may
reasonably require to evaluate the application. The Investor may withdraw
an application for compensation, but the right to recover compensation will
be lost for any acts covered by that application.
(a) There is no time limit on application for inconvertibility
compensation (Article III); however, Section 3.03.1 provides that
compensation shall not exceed the Covered Amount in effect 120 days
before OPIC receives the application.
(b) An application for expropriation compensation (Article V) must be
filed within six months after the Investor has reason to believe that
all requirements of Article IV have been satisfied.
(c) A notice demonstrating the Investor's entitlement to political
violence compensation (Article VII) must be filed within six months of
the loss. The notice, together with proof of the amount of
compensation due, will be considered a completed application, which
must be filed within three years of the loss. The Investor may
request Historical Cost compensation and later amend the application
within three years of the loss to elect Replacement Cost compensation.
(d) An application for compensation for interference with operations
(Article IX) must be filed within six months after the Investor has
reason to believe that all requirements of Article VIII have been
satisfied.
(e) OPIC shall have a reasonable time within which to complete
processing of any application for compensation. In the event the
Investor files an application that is not complete, OPIC will use its
best efforts to inform the Investor as soon as possible (i) that the
application is incomplete and (ii) what action must be taken to
complete the application.
10.02 ASSIGNMENT TO OPIC. Within sixty days after OPIC notifies the
Investor of the amount of compensation which OPIC will pay under
expropriation, political violence or interference with operations coverage,
and, concurrently with such payment, the Investor shall transfer to OPIC:
1. With respect to a claim under Section 4.01 or Section 8.01, all
interests attributable to the Insured Portion of the Investment,
2. With respect to a claim under Section 4.02.1, all interests
attributable to the expropriated funds,
3. With respect to a claim under Section 4.02.2, all interests
attributable to the Insured Portion of the Covered Property,
4. With respect to a claim under Section 6.01, all claims arising
out of the loss due to political violence.
In the event of a transfer under Section 10.02.1, Section 10.02.2, or
Section 10.02.3, the interests to be transferred shall be determined as of
the date the related compensable event commenced and shall include, in the
case of an expropriation, claims arising out of the expropriation.
If OPIC, in connection with an assignment under section 10.02.1,
requires the Investor to transfer to OPIC a beneficial interest in the Loan
and related rights, in exchange for reimbursement of reasonable out-of-
pocket expenses, OPIC may require the Investor to take any action with
regard to such Loan and related rights as OPIC may reasonably direct,
provided that such action is unlikely to result in a substantial detriment
to the Investor's interests. In such event the Investor shall not consent
to any rescheduling of the Loan without OPIC's consent.
The Investor shall transfer the interests and claims free and clear
of, and shall indemnify OPIC against, all claims, defenses, counterclaims,
rights of setoff, and other encumbrances (except defenses relating to the
expropriation, political violence, and or interference with operations).
In connection with an inconvertibility claim, immediately upon receipt
of instructions from OPIC, the Investor shall deliver the Local Currency to
OPIC (in cash or, at OPIC's option, by draft subject to collection) or the
Investor's rights to receive or obtain U.S. dollars (Section 2.01).
OPIC may decline all or any portion of the Investor's interests or
claims. If OPIC so declines, the Investor's right to compensation shall be
affected only as provided in Section 5.04.4(b).
10.03 SECURITY. As a condition for the payment of compensation, OPIC may
require the Investor to provide reasonable security, satisfactory to OPIC,
for repaying compensation (as may be required, for example, by Section
7.05), except with respect to compensation payable under Article VIII.
10.04 EXCESS SALVAGE VALUE. With respect to compensated expropriation and
political violence claims, OPIC shall pay to the Investor any amounts OPIC
realizes in U.S. dollars from the rights transferred (Section 10.02) in
excess of
(a) the compensation paid by OPIC; plus
(b) reasonable interest; plus
(c) OPIC's out-of-pocket expenses incurred in maintaining and
realizing funds from the transferred property.
However, this provision shall not in any way restrict OPIC's discretion to
deal with the rights transferred. OPIC shall have no obligation to take
action with respect to the rights transferred and shall incur no liability
to the Investor for any actions taken or not taken after the transfer.
10.05 ARBITRATION. Any controversy relating to this Contract shall be
settled by arbitration in Washington, D.C. according to the then prevailing
Commercial Arbitration Rules of the American Arbitration Association.
Unless the Investor initiates arbitration, OPIC's liability shall expire
one year after OPIC notifies the Investor of its determination concerning
an application for compensation. A decision by arbitrators shall be final
and binding, and any court having jurisdiction may enter judgment on it.
10.06 ELECTION OF COVERED AMOUNT AND TERMINATION OF COVERAGE. By prior
notice to OPIC, effective as of the Premium Due Date (Section 1.06), the
Investor may increase or decrease the Covered Amount or decrease the
Maximum Aggregate Compensation Amount for the remainder of the Contract
term, subject to the following limitations:
1. The Covered Amount shall be the least of:
(i) the Insured Portion of the Book Value of the Investment,
(ii) the Maximum Aggregate Compensation Amount, and
(iii) the Investor's Share of the Expected Monetary Value of the
Reserves;
PROVIDED, however, that if the Investor wishes to elect a Covered
Amount that is lower than the least of (a) the Insured Portion of the
Book Value of the Investment, the Maximum Aggregate Compensation
Amount and (b) the Investor's Share of the Expected Monetary Value of
the Reserves, then the Maximum Aggregate Compensation Amount shall be
automatically reduced to such Covered Amount elected by the Investor
and the Investor may not subsequently elect a higher Maximum Aggregate
Compensation Amount or Covered Amount without OPIC's prior written
consent.
2. The Covered Amount shall not exceed the Maximum Aggregate
Compensation Amount or the Investor's Share of the Expected Monetary Value
of the Reserves, whichever is less.
3. The Maximum Aggregate Compensation Amount shall be reduced
automatically by compensation paid by OPIC; the Covered Amount shall also
be reduced by such compensation for the remainder of the election period.
10.07 TERMINATION. The Investor may terminate this Contract by notice to
OPIC effective as of any Premium Due Date unless the premium for the
Contract period commencing on such date has already been paid, in which
case the Contract will terminate on the next succeeding Premium Due Date.
However, if the Investor terminates this Contract within three years from
the Operative Date, the Investor shall pay to OPIC a termination fee equal
to $2,500,000 minus the sum of all premiums paid up to the date of
termination, except, if the Investor terminates this Contract prior to
January 30, 2000, the termination fee shall be not apply. Termination shall
not affect any rights or obligations of either party relating to prior
periods.
10.08 REFUND OF PREMIUMS. Upon timely request, OPIC will refund premiums
PRO RATA if
(a) excess coverage is maintained while a valid claim for
compensation is pending; or
(b) the Investor becomes ineligible for coverage or ceases to hold
all or a portion of the Investment.
10.09 LEGAL AND MISCELLANEOUS. This Contract shall be governed by the
laws of the District of Columbia, its conflict of laws rules excepted.
This Contract constitutes the complete agreement between the parties,
superseding any prior understandings. This Contract may be modified, or
its terms waived only in writing.
10.10 NOTICES. Notices must be in writing and shall be effective when
received. Notices shall be given to the Investor at the address on the
title page (unless changed in writing) with a copy to Shell Capital
Services Limited, Attn: The Controller, Shell Centre, London SE1 7NA,
provided, however, that the receipt of such copy shall not be a condition
to the effectiveness of notice, and to OPIC at
Overseas Private Investment Corporation
1100 New York Avenue, N.W.
Washington, D.C. 20527
ATTENTION Vice-President, Insurance
ARTICLE XI - INVESTOR'S DUTIES.
-------------------------------
11.01 DUTIES.
1. REPRESENTATIONS AND PROJECT EXECUTION.
(a) The Investor understands that OPIC has issued this Contract
based on statutory duties and policy goals (22 U.S.C.
Section 2191), as well as underwriting considerations. All
statements made by the Investor to OPIC in connection with
this Contract are true and complete, and the Investment in
the Foreign Enterprise and the Project shall be carried out
as described.
(b) The Investor represents and warrants that, as of the
Effective Date of this Contract, there are no outstanding or
incipient disputes among the Investor, the Foreign
Enterprise, or any Co-venturer and the Foreign Governing
Authority.
2. OWNERSHIP AND ELIGIBILITY. The Investor shall at all times
remain the beneficial owner of the Investment and shall remain eligible for
OPIC insurance as
(a) a citizen of the United States; or
(b) a corporation or other association created under the laws of
the United States, its states, or territories or the District of
Columbia, of which more than 50% of both the total interest and
of each class of shares is beneficially owned by citizens of the
United States; or
(c) a corporation created under foreign law which is 95% owned
by entities eligible under (a) or (b); or
(d) an entity created under foreign law which is wholly owned by
entities eligible under (a) or (b).
3. SELF-INSURANCE. The Investor shall continue to bear the risk of
loss of at least 10% of the Investment.
4. OTHER INSURANCE. The Investor has notified OPIC of any existing
arrangements for insurance from any other party covering the Investment
against the risks insured hereunder (`Other Insurance') and shall not
obtain additional Other Insurance without OPIC's prior written consent,
which consent shall not be withheld, provided OPIC obtains arrangements
satisfactory to it regarding sharing of salvage with such other insurer.
5. PRO RATA COMPENSATION. Should the Investor have Other Insurance
in effect at the time a claim arises hereunder, notwithstanding any
provision of this contract to the contrary, OPIC's obligation to pay
compensation in respect of any claim hereunder shall not exceed that
portion of the loss as recognized under any of the policies (without regard
to policy limits) that the active amount in effect for the coverage under
which compensation is sought from OPIC bears to the sum of such active
amount plus the equivalent compensation limit or limits in respect of the
coverage provided by such Other Insurance in respect of such risk.
6. CLAIMS COOPERATION AGREEMENT. The Investor consents to the
disclosure by OPIC to the providers of any Other Insurance with which OPIC
has entered into a claims cooperation agreement, and by the other parties
to any such agreement to OPIC, of any and all information that the Investor
has provided or may provide to any of them in connection with the
Investor's application for such insurance, the administration and
management thereof, the processing of any claim thereunder, or any salvage
efforts in connection therewith.
7. OTHER COMPENSATION. The Investor shall not enter into any
agreement with any Foreign Governing Authority with respect to compensation
for any acts that may fall within the scope of coverage (Articles II, IV,
VI or VIII) without OPIC's prior written consent.
8. CHANGES IN PROJECT AGREEMENT. The Investor shall not permit the
Foreign Enterprise to make any material changes in the Project Agreement or
to enter into any additional agreements with respect to the Project, which
changes or agreements may materially affect OPIC's rights or obligations
under this Contract ("Subsequent Amendments"), unless OPIC has given its
prior written consent. The Investor shall promptly notify OPIC in writing
of any proposed Subsequent Amendments. Subsequent Amendments shall
automatically invalidate or nullify the coverage provided by this Contract,
unless OPIC has notified the Investor in writing of its acceptance of such
proposed Subsequent Amendments within 60 days from the date OPIC receives
true and complete copies of the proposed Subsequent Amendments from the
Investor. OPIC reserves the right to modify the terms of coverage and
premium rates charged to provide coverage as a consequence of such proposed
Subsequent Amendments. If OPIC has accepted any Subsequent Amendments, the
Investor shall provide OPIC, within 90 days of execution, with executed
copies thereof.
9. ASSIGNMENT. The Investor shall not assign this Contract, or any
of its rights, without OPIC's written consent, which consent will not be
withheld unreasonably.
10. PREMIUMS. The Investor shall pay the premiums for this Contract
in accordance with Section 1.06. In the event that premiums are not paid
when due, the Investor shall be in default, but may cure this default
within sixty days by paying the premiums plus interest at a rate of 12% per
annum.
11. ACCOUNTING RECORDS.
(a) The Investor shall maintain in the United States the
accounting records necessary to compute and substantiate
compensation, including
(i) records documenting the Investment;
(ii) annual balance sheets of the Foreign Enterprise;
(iii) annual statements of income, retained earnings,
changes in financial position, and related
footnotes, of the Foreign Enterprise;
(b) Accounting records of the Foreign Enterprise shall be
maintained in U.S. dollars in accordance with principles of
accounting generally accepted in the United States (including
principles of currency translation), as modified by the special
accounting rules (Section 5.04.3, Section 7.02.3, and Section
9.02.2).
(c) The books of account and records of the Foreign Enterprise
shall be maintained using the full cost method of accounting.
(d) Except as provided in (c) above, and as otherwise provided
herein Section 5.04, Section 7.02, and Section 9.02, OPIC shall
be bound by the Investor's and the Foreign Enterprise's
application of generally accepted accounting principles, unless
such choice results in a substantial overstatement of the fair
market value of the Investment or the Foreign Enterprise as an
independent entity.
(e) The Investor shall retain all accounting records until
(i) the deadline for filing an application for
compensation has expired (Section 10.01); or
(ii) final action on an application for compensation has
been taken (including arbitration and judicial
appeals).
If compensation has been paid, however, the accounting records
shall be retained for six years after the Investor receives the
compensation.
12. REPORTS AND ACCESS TO INFORMATION. In order that OPIC may
perform its statutory duties, including settling claims and reporting to
the Congress (22 U.S.C. Section 2200a), the Investor shall furnish OPIC
with such information as OPIC may reasonably request, including
(a) making available for interviews any persons subject to the
Investor's practical control (including employees of the Investor
and the Foreign Enterprise and independent accountants);
(b) making available for inspection and copying all documents
and accounting records subject to the Investor's practical
control relating to the Project (including workpapers of
independent accountants);
(c) subject to the Investor's practical control, permitting OPIC
to inspect the Project; and
(d) furnishing available information concerning the effects of
the Project on the economy of the United States and the
environment and on the economic and social development of the
Project Country.
The Investor's duties under this paragraph shall continue for the
periods specified for retention of accounting records (Section
11.01.11(e)).
13. COMPULSORY NOTICES. The Investor shall notify OPIC promptly of
any act or threats to act in a manner which may cause the rescission of the
Offshore Account License or if it has reason to believe that CAPG or the
Foreign Enterprise would not be able to convert Local Currency or transfer
U.S. dollars to the United States to make a Covered Payment. The Investor
shall promptly notify OPIC of any acts or threats to act in a manner which
may come within the scope of the expropriation, political violence, or
interference with operations coverage (Articles II, IV, VI and VIII) and
shall keep OPIC informed as to all relevant developments relating thereto
of which it has knowledge.
14. PRESERVATION, TRANSFER AND CONTINUING COOPERATION. At OPIC's
request, the Investor shall promptly assign rights with respect to the
Investment, as required by Section 10.02. Prior to the assignment of
rights required by Section 10.02, the Investor shall use its best efforts
to ensure that KKM takes all reasonable measures to preserve property, to
pursue available administrative and judicial remedies, and to negotiate in
good faith with the Foreign Governing Authority and other potential sources
of compensation. After a transfer of rights or delivery of Local Currency,
in exchange for reimbursement of reasonable out-of-pocket expenses the
Investor shall take all actions reasonably requested by OPIC to assist OPIC
in preserving the property and rights transferred to OPIC and in
prosecuting related claims.
15. AGREEMENTS REGARDING INVESTMENT DISPUTES. If any rights
transferable to OPIC (Section 10.02) are subject to agreements providing
for arbitration in a forum limited to non-governmental parties (such as the
International Centre for Settlement of Investment Disputes), the Investor
shall act, and shall use its best efforts to cause the Foreign Enterprise
to act, as necessary to protect OPIC's interests in such manner as OPIC
reasonably directs.
16. LEGALITY. The Investor has implemented and shall implement the
Investment and the Project in compliance in all material respects with all
applicable and publicly available laws, decrees, regulations,
administrative determinations, and procedures of the Foreign Governing
Authority.
17. WORKER RIGHTS. The Investor shall not take actions to prevent
employees of the Foreign Enterprise from lawfully exercising their right of
association and their right to organize and bargain collectively. The
Investor shall, and shall cause the Foreign Enterprise, not to interfere
with or coerce an employee of the Foreign Enterprise on the basis of trade
union activities or membership. The Investor shall, and shall cause the
Foreign Enterprise, 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 the Foreign Enterprise, or by an officer,
agent or other representative thereof. The Investor shall cause the
Foreign Enterprise 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 ("World Bank Guidelines") (attached hereto
as Exhibit A). The Investor shall, and shall cause the Foreign Enterprise,
to allow employees of the Foreign Enterprise to avoid or remove themselves
from dangerous work situations without jeopardy to continued employment.
The Investor shall, and shall cause the Foreign Enterprise, 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 labor. Neither
the Investor nor the Foreign Enterprise is responsible under this paragraph
for the actions of a foreign government.
18. ENVIRONMENTAL COMPLIANCE. The Investor represents and warrants
that the Project shall be constructed and operated in compliance, in all
material respects, with the more stringent of the regulations of the
Foreign Governing Authority and the World Bank Guidelines. In addition,
the Investor shall:
(a) Deliver to OPIC, within 45 days following the end of the
annual fiscal period of the Foreign Enterprise, reports
summarizing the environmental performance of the Project over the
preceding year. Such reports shall provide OPIC with sufficient
information to monitor the performance of the Project with
respect to environmental protection and shall include summaries
of
(i) the results of environmental monitoring or sampling
activity,
(ii) accidents impacting the environment or resulting in
the loss of life, and
(iii) environmental deficiencies identified by the local
environmental regulatory authorities and any
remedial actions taken.
(b) Comply and cause all contractors and other authorized
persons occupying the Project to comply with and implement, in
all material respects, the wellfield practices and mitigation
measures specified in the "Environmental Impact Assessment",
dated October 30, 1995.
(c) Submit to OPIC any material environmental reports or
documents concerning the Project that are prepared under the
Investor's direction. The environmental reports submitted to
OPIC under this requirement shall include, but shall not be
limited to
(i) results of any environmental audits,
(ii) a final version of the Environmental Impact
Assessment,
(iii) a final version of the emergency response/spill
contingency plans, and
(iv) any supplemental environmental studies completed in
order to satisfy the regulatory requirements of the
Foreign Governing Authority.
11.02 DEFAULT. Material breach or misrepresentation by the Investor shall
constitute a default hereunder, and OPIC may
(a) refuse to make payments to the Investor;
(b) recover payments made; and
(c) terminate this Contract, effective as of the date of the
breach, by giving notice to the Investor.
11.03 NON-WAIVER. Neither OPIC's failure to invoke its rights nor its
acceptance of premiums shall constitute waiver of any of its rights, even
though OPIC knows of the Investor's breach.
11.04 CURE. OPIC may permit the Investor to cure a default in a manner
satisfactory to OPIC, but shall have no obligation to allow defaults to be
cured.
ARTICLE XII - MISCELLANEOUS
---------------------------
12.01 The issuance by OPIC of this Contract shall not constitute an
acknowledgment or assurance by OPIC of the validity of any agreement or
arrangement constituting or relating to the Investment under the laws of
the Project Country.
12.02 The Investor at all times shall be solely responsible for ensuring
that it can freely transfer rights as required by Section 10.02,
"ASSIGNMENT TO OPIC". If, in the event of claim under expropriation
(Section 4.01) or interference with operations coverage (Section 8.01), the
Investor is unable to effect the required transfer, no payment shall be
made under the Contract.
12.03 Notwithstanding any other provision of this Contract, OPIC shall
have no liability for any claim arising out or by reason of the fact that
the license, dated June 28, 1995, issued by the Ministry of Geology and
Protection of the Subsurface for KKM, entitled "License for the Right to
Use the Subsurface No. MG 249 Oil", makes reference only to that certain
agreement, dated July 1, 1993, between the Ministry of Energy and
Subsurface Resources and KKM, and not to the Project Agreement.
12.04 Notwithstanding any other provision of this Contract, OPIC shall
have no liability for any claim arising out or by reason of the fact that
the Investor, the Foreign Enterprise or the Foreign Governing Authority is
unable to export petroleum produced by the Project via pipelines or any
other transportation or marketing facilities outside of the Project
Country.
12.05 Notwithstanding any other provision of this Contract, OPIC shall
have no liability for any claim under Article II if the Investor or the
Foreign Enterprise has not obtained and complied with all approvals and
licenses necessary under the laws of the Project Country to make effective
the provisions of Sections 4.1.16, 4.1.17, and 4.1.20 of the Project
Agreement.
12.06 The Investor (i) represents and warrants that each of the Foreign
Enterprise and the Intermediate Subsidiaries has been established for the
sole purpose of undertaking the Project and (ii) covenants that each of
their operations shall remain so limited as long as this Contract is in
effect.
12.07 All references in Articles II through X of this Contract to
"Investor" (except those in this Section 12.06) shall be interpreted to
mean and include the Intermediate Subsidiaries as follows:
(i) All representations of the Investor shall be deemed to be made
on its own behalf and on behalf of the Intermediate
Subsidiaries, and any knowledge of the Intermediate
Subsidiaries shall be deemed to be knowledge of the Investor;
(ii) Any requirement that, as a condition to coverage or payment of
compensation, the Investor take an action, shall be deemed to
be a requirement that the Investor take such action or cause
the Intermediate Subsidiaries to take such action;
(iii) Any requirement that, as a condition to coverage or payment of
compensation, the Investor not take, or be unable to take, an
action, or be deprived of a right, shall be deemed to be a
requirement that neither the Investor nor the Intermediate
Subsidiaries shall have taken or be able to take such action
or retain such right;
(iv) Any adjustments to compensation for amounts received by the
Investor shall be determined based on the aggregate amounts
received by the Investor and the Intermediate Subsidiaries;
(v) The Investor must perform all duties, obligations and
procedures required of the Investor under this Contract
(including without limitation those set forth in Articles X
and XI) and must cause the Intermediate Subsidiaries to do so;
PROVIDED, however, that the Intermediate Subsidiaries shall
not have any payment obligation with respect to this Contract;
(vi) All rights of the Investor under this Contract (including
without limitation all rights to make coverage elections, to
receive notices, to make claims, and to receive payments) are
rights of the Investor alone, and the Intermediate
Subsidiaries shall not have or may not exercise any such
right; and
(vii) All references to rights of the Investor with respect to the
Foreign Enterprise or other parties shall be deemed to be
references to rights of the Investor or the Intermediate
Subsidiaries with respect to the Foreign Enterprise or such
other parties.
CHAPARRAL RESOURCES, INC.
By /S/ MICHAEL B. YOUNG Date December 29, 1999
-------------------- -----------------
Michael B. Young, Treasurer
- -------------------------------------------------
(Name and Title)
OVERSEAS PRIVATE INVESTMENT CORPORATION
By /S/ AUDRY A. ZUCK Date December 29, 1999
- -------------------- -----------------
Audry A. Zuck
- -------------------------------------------------
(Name and Title)
February 3, 2000
Mr. Michael B. Young
Treasurer & Controller
Chaparral Resources, Inc.
16945 Northcase Drive, Suite 1440
Houston, Texas 77060
Re: Amendment No. 1 to OPIC Contract of Insurance No. F158 (the
"Contract"<F1>)
Chaparral Resources, Inc. ("Chaparral"), has requested that OPIC modify the
Contract to include "Transfer Risk" (as defined herein).
In response to Chaparral's request OPIC proposes to amend the Contract as
follows:
(1) The "Table of Defined Terms" is deleted and replaced with the new
"Table of Defined Terms" attached hereto as Exhibit 1.
(2) Section 1.05, "TERM", is deleted and replaced with the following:
"1.05 TERM. This Contract shall become operative on January 31,
2000 (the `Effective Date') and shall terminate on December 31, 2020."
(3) Section 1.06.1, "PREMIUMS AND COVERAGE ELECTIONS", is deleted and
replaced with the following:
"1. TIMING AND RATES. The annual premium rate shall be 2.10% of the
Covered Amount (as defined herein). On or before the Effective Date,
and thereafter on or before the first day of each succeeding three-
month period following the Effective Date (the Effective Date and each
such succeeding first day, a `Premium Due Date'), the Investor shall
(a) elect amounts of coverage (Section 10.06) and
(b) pay the greater of
(i) the premium due for the coverage period that commences
on such date, and
(ii) the contract administrative fee due for that period.
The contract administrative fee is 0.25% of the Investment (Section
1.01.2) per annum.
________________
<F1> Capitalized terms used but not otherwise defined herein have the
meanings set forth in the Contract.
Covered Amount means the U.S. dollar amount of coverage, which amount
shall be elected by the Investor in accordance with the provisions of
Section 10.06."
(4) Section 1.06.2, "INITIAL ELECTION", is deleted and replaced with the
following:
"2. INITIAL ELECTION. The Covered Amount and the premium due for the
period from January 31, 2000, through April 30, 2000, shall be:
Covered Amount $30,000,000
x Quarterly Premium Rate 0.5250%
===========
= Premium Due $157,500"
(5) Section 1.07, "CONTINGENT COVERAGE PREMIUM", is deleted.
(6) Section 2.01, "INCONVERTIBILITY", is deleted and replaced with the
following:
"2.01 INCONVERTIBILITY. Subject to the exclusions (Section 2.02)
and limitations (Section 3.02), CAPG or the Foreign Enterprise shall
be deemed unable to make a payment in U.S. dollars of earnings on or
returns of the Investment (a `Covered Payment') and compensation shall
be payable:
1. only if
(a) CAPG or the Foreign Enterprise is not permitted by the
Foreign Governing Authority to retain in U.S. dollars
outside of the Project Country in an account owned and
controlled by CAPG or the Foreign Enterprise (the
`Offshore Account') in accordance with the terms of
License No. 60 for Opening an Offshore Bank Account
issued by the National Bank of the Republic of
Kazakhstan, dated December, 30 1999 (the `Offshore
Account License'), constituting proceeds from the sale
for export of Petroleum produced by the Project
(`Export Proceeds') from which Covered Payments may be
made; and
(b) CAPG or the Foreign Enterprise:
(i) (A) is required by the Foreign Governing Authority
to convert Export Proceeds into the lawful
currency of the Project Country (`Local Currency')
to be held in a Local Currency account in the
Project Country and (B) during the 120 successive
days following the date that either CAPG or the
Foreign Enterprise attempts to make a Covered
Payment (the `Waiting Period'), is unable to
convert sufficient Local Currency to make a
Covered Payment in U.S. dollars through any
readily available legal channel, whether direct or
indirect (including a parallel market), except at
rates which are less favorable than the rate
described under Section 3.01.2; or
(ii) (A) is required by the Foreign Governing Authority
to hold Export Proceeds in the Project Country and
(B) during the Waiting Period is unable legally to
transfer to the United States amounts in U.S.
dollars from such Export Proceeds to make such a
Covered Payment; or
2. If either CAPG or the Foreign Enterprise
(a) receives in Kazakhstan U.S. dollars constituting
proceeds from the sale of Petroleum produced by the
Project and sold for delivery in Kazakhstan (`Domestic
Proceeds'), and
(b) during the Waiting Period is unable legally to transfer
to the United States amounts in U.S. dollars from such
Domestic Proceeds to make a Covered Payment."
(7) Section 2.02.1, "PRE-EXISTING RESTRICTIONS", is deleted and replaced
with the following:
"1. PRE-EXISTING RESTRICTIONS. If
(a) notwithstanding the provisions of Section 2.01, on the
date of this Contract a company or an investor, in
circumstances comparable to those of the Foreign
Enterprise or CAPG on said date, including a company
or investor holding a license substantially the same as
the Offshore Account License, would have been legally
restricted from (i) receiving and maintaining Export
Proceeds in an offshore account, (ii) transferring U.S.
dollars to the United States, or (iii) making a payment
substantially the same as a Covered Payment; and
(b) the Investor knew or should have known about the
restriction.
(8) Section 10.02, "ASSIGNMENT TO OPIC", is amended by deleting paragraph
(e) thereof and replacing it with the following:
"In connection with an inconvertibility claim, immediately upon
receipt of instructions from OPIC, the Investor shall deliver the
Local Currency or U.S. dollars to OPIC (in cash or, at OPIC's option,
by draft subject to collection) or the Investor's rights to receive or
obtain U.S. dollars (Section 2.01)."
(9) Section 10.06, "ELECTION OF COVERED AMOUNT AND TERMINATION OF
COVERAGE", is amended by deleting subsection 1 thereof and replacing
it with the following:
"1. The Covered Amount shall be the least of:
(i) the Insured Portion of the Book Value of the Investment,
(ii) the Maximum Aggregate Compensation Amount, and
(iii) the Investor's Share of the Expected Monetary Value of
the Reserves;
PROVIDED, however, that if the Investor wishes to elect a Covered
Amount that is lower than the lesser of (a) the Insured Portion
of the Book Value of the Investment as of the day preceding each
Premium Due Date, the Maximum Aggregate Compensation Amount and
(b) the Investor's Share of the Expected Monetary Value of the
Reserves, then the Maximum Aggregate Compensation Amount shall be
automatically reduced to such Covered Amount elected by the
Investor and the Investor may not subsequently elect a higher
Maximum Aggregate Compensation Amount or Covered Amount without
OPIC's prior written consent. "
All other provisions of the Contract, as amended, shall remain unchanged.
If this Amendment No. 1 is acceptable to Chaparral, please deliver to OPIC
a duly executed counterpart of this letter agreement not later than
February 7, 2000 (delivery of such counterparts to OPIC by facsimile shall
constitute valid acceptance, provided an original executed counterpart is
received by OPIC not later than February 15, 2000). Upon such delivery,
this Amendment No. 1 and the Contract shall be effective as January 31,
2000.
If you have any questions, please contact Jim Williams at (202) 336-8575.
Sincerely,
/S/ JULIE A. MARTIN
Julie A. Martin
Vice President for Insurance
ACCEPTED AND AGREED as of this 4th day of February, 2000
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
---------------------------------
Name: Michael B. Young
Title: Treasurer
Exhibit 1 to Amendment No. 1 to Contract of Insurance No. F158
TABLE OF DEFINED TERMS
TERM SECTION
- ----- -------
Book Value of the Investment 5.01
Book Value of the Loan 5.01
CAPG Cover Page
Claim Rescission Amount 8.02
Contract Cover Page
Co-venturer 2.02.4
Covered Amount 10.06
Covered Payment 2.01
Covered Property 4.02.2
Domestic Proceeds 2.01.3
Effective Date 1.05
Environmental Impact Assessment 11.01.18(b)
Expected Monetary Value of the Reserves 5.05.6
Foreign Currency 5.05.5
Foreign Enterprise 1.01.1
Foreign Governing Authority 1.01.3
Historical Cost 5.03.1(b)
Insured Portion 1.01.2
Intermediate Subsidiaries Cover Page
Investment 1.01.2
Investor Cover Page
Investor's Share 5.03.1(b)
KKM 1.01.1
Liability 5.01(a)
Loan 1.01.2(b)
Local Currency 2.01.2(a)(i)
Maximum Aggregate Compensation Amount 1.03
Offshore Account 2.01.1
Offshore Account License 2.01.1
OPIC Cover Page
Other Insurance 11.01.4
Petroleum 1.01.1
Political Violence 6.01
Premium Due Date 1.06.1
Project 1.01.1
Project Agreement 1.01.1
Project Country 1.01.1
Proved Reserves, Probable Reserves, and Possible 5.05.6
Reserves
Replacement Cost 7.01(b)
Shares 1.01.2(a)
Subsequent Amendments 11.01.8
Waiting Period 2.01.2(a)
World Bank Guidelines 11.01.17
Deutsche Bank AG
Commodities
CHAPARRAL RESOURCES INC
16945 NORTHCHASE DRIVE
SUITE 1440
HOUSTON
TEXAS 77060
ATTN: MICHAEL B. YOUNG
TRADE CONFIRMATION - 2022 CHAP
A. This Confirmation (the "Confirmation") evidences a complete and
binding agreement between you and us as to the terms of the
transaction to which this Confirmation relates.
B. The Confirmation incorporates by reference all of the definitions,
terms, and conditions of the ISDA Master Agreement (Multicurrency-
Cross Border) (the "ISDA Form"), (as may be amended, modified or
supplemented from time to time, (the "Agreement"); provided, however,
in the event of an inconsistency or conflict between the Confirmation
and the ISDA Form, the Confirmation shall prevail over the ISDA Form.
C. The Confirmation, supplements, forms a part of, and is subject to, as
if we had executed the agreement on the Trade Date, with the Schedule
thereto (i) specifying that (a) the governing law is English law,
without reference to choice of law doctrine and (b) the Termination
Currency is U.S. Dollars and (ii) incorporating the addition to the
definition of "Indemnifiable Tax" contained in page 48 of the ISDA
User's Guide to the 1992 ISDA Master Agreements with the modifications
contained herein.
We confirm details of our trade with you as below:
TRADE DATE: February 11, 2000
BUYER: CHAPARRAL RESOURCES, INC
SELLER: DEUTSCHE BANK AG, NEW YORK
BRANCH ( "DBNY")
COMMODITY: Brent Crude - IPE
OPTION TYPE: Asian Put
STRIKE PRICE: Refer to table below
PREMIUM: USD 4,000,000.00
<TABLE>
CALCULATION PERIOD(S) AND OPTION QUANTITIES
<CAPTION>
CALCULATION OPTION
PERIOD QUANTITY STRIKE PRICE CALCULATION CALCULATION
NO. BARRELS (USD) START DATE END DATE
<S> <C> <C> <C> <C>
1 62,750 22.35 October 2nd, 2000 October
31st, 2000
2 62,750 22.05 November 1st, 2000 November
30th, 2000
3 62,750 21.65 December 1st, 2000 December
29th, 2000
4 62,750 21.15 January 2nd, 2001 January
31st, 2001
5 62,750 20.85 February 1st, 2001 February
28th, 2001
6 62,750 20.45 March 1st, 2001 March 30th,
2001
7 62,750 20.05 April 2nd, 2001 April 30th,
2001
8 62,750 19.65 May 1st, 2001 May 31st,
2001
9 62,750 19.45 June 1st, 2001 June 29th,
2001
10 62,750 19.25 July 2nd, 2001 July 31st,
2001
11 62,750 19.05 August 1st, 2001 August 31st,
2001
12 62,750 18.85 September 3rd, 2001 September
28th, 2001
13 62,750 18.75 October 1st, 2001 October
31st, 2001
14 62,750 18.55 November 1st, 2001 November
30th, 2001
15 62,750 18.45 December 3rd, 2001 December
31st, 2001
16 51,750 18.25 January 1st, 2002 January
31st, 2002
17 51,750 18.15 February 1st, 2002 February
28th, 2002
18 51,750 17.95 March 1st, 2002 March 29th,
2002
19 51,750 17.85 April 1st, 2002 April 30th,
2002
20 51,750 17.75 May 1st, 2002 May 31st,
2002
21 51,750 17.65 June 3rd, 2002 June 28th,
2002
22 51,750 17.55 July 1st, 2002 July 31st,
2002
23 51,750 17.55 August 1st, 2002 August 30th,
2002
24 51,750 17.45 September 2nd, 2002 September
30th, 2002
25 51,750 17.45 October 1st, 2002 October
31st, 2002
26 51,750 17.35 November 1st, 2002 November
29th, 2002
27 51,750 17.25 December 2nd, 2002 December
31st, 2002
</TABLE>
REFERENCE PRICE: The unweighted arithmetic average of the Component
Prices as traded on the International Petroleum
Exchange ("IPE"), during the relevant Calculation
Period and, as used herein;
(1) "Component Price" shall mean for any IPE Business
Day, the official IPE settlement price per barrel ,
quoted for such day by the IPE, of the Reference
Contract and;
(2) "Reference Contract" shall mean, for any IPE
Business Day, the first nearby IPE futures contract for
the specified commodity which expires on or after such
date , except that on the last trading day of the then
first nearby futures contract the price of the second
nearby futures contract shall be used instead and;
(3) "IPE" Business Day" shall mean, any day on which
the IPE would normally be open for business.
CASH SETTLEMENT
AMOUNT(S): In respect of each Calculation Period:
(Strike Price - Reference Price) X Option Quantity
If positive, the Seller shall make settlement to the
Buyer as instructed.
If negative, no settlement shall be due.
CASH PAYMENT DATE(S):
CALCULATION
PERIOD PAYMENT
NO. DATE(S)
1 November 7th, 2000
2 December 7th, 2000
3 January 5th, 2001
4 February 7th, 2001
5 March 7th, 2001
6 April 6th, 2001
7 May 7th, 2001
8 June 7th, 2001
9 July 6th, 2001
10 August 7th, 2001
11 September 7th, 2001
12 October 5th, 2001
13 November 7th, 2001
14 December 7th, 2001
15 January 7th, 2002
16 February 7th, 2002
17 March 7th, 2002
18 April 5th, 2002
19 May 7th, 2002
20 June 7th, 2002
21 July 5th, 2002
22 August 7th, 2002
23 September 6th, 2002
24 October 7th, 2002
25 November 7th, 2002
26 December 6th, 2002
27 January 7th, 2003
PARTICULAR
PROVISIONS:
CALCULATION
AGENT: DBNY shall make Reference Price calculations to 3
decimal places, and all cash settlements shall be
rounded to the nearest cent.
MARKET
DISRUPTION
EVENT: If either party determines in good faith that there has
been a suspension or material limitation in futures
trading in the Commodity (a "Market Disruption Event")
and that such Market Disruption Event is continuing on
any IPE Business Day during the Calculation Period,
then no Component Price for such day shall be included
in the determination of the Reference Price. If,
however, there have been at least five IPE Business
Days in the Calculation Period on which a Market
Disruption Event has occurred or is continuing, then a
Component Price shall be calculated for any subsequent
IPE Business Day during the Calculation Period on which
a Market Disruption Event has occurred or is
continuing, but in such case the Component Price shall
be the unweighted arithmetic average of the quotations
provided on such day by at least two but not more than
five leading dealers in the Commodity for delivery of
the Commodity in the month of expiration of the
relevant futures contract. The party making such
determination shall use all reasonable efforts to give
notice to the other party of any Market Disruption
Event.
GOVERNING LAW: This Trade Acknowledgement shall be governed by English
Law.
PREMIUM
PAYMENT
DATE: February 17th, 2000
PAYMENT
CURRENCY: USD
SETTLEMENT
INSTRUCTIONS: Settlement, due for our account if any, will be made
to:
Bankers Trust Company
1 BT Plaza
130 Liberty Street
New York, NY 10006
U.S.A.
ACCOUNT OF: Bankers Trust International PLC
ACCOUNT NUMBER: 04-025-168 ABA #021-001-033
ATTENTION: Commodities / BT Ref: 2022 CHAP
WE WILL PAY
YOU AT: We shall make any settlement due to you according to
your instructions to be forwarded to us as soon as
possible under separate cover, by letter or telex. We
shall make no such payment without such instructions.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by sending a FAX to such effect to the attention of Siri Wood,
Commodity Derivative Operations Department, facsimile No. INT'L 011+ 44-
171-545-4250 or telex No. 94015555 Printer 57 (please mark Attn.
Commodities Dept). If you have any queries, please call us on our UK TOLL
FREE No. 1-800- 564-1471
Please check this confirmation carefully and immediately upon receipt so
that errors and discrepancies can be promptly identified and rectified.
We are pleased to have concluded this transaction with you.
Best regards
Agreed,
FOR DEUTSCHE BANK AG - NEW YORK BRANCH
Authorised Signatory Authorised Signatory
Yours faithfully,
for and on behalf of
DEUTSCHE BANK AG NEW YORK
By: /s/ WILLIAM CHESNA By: /S/ JOHN MCMULLAN
------------------------- ----------------------
Name: William Chesna Name: John McMullan
Title: Vice President Title: Associate
CHAPARRAL RESOURCES INC
Authorised signatory
/s/ Michael B. Young
By _____________________________
Name: Michael B. Young
Title: Treasurer
Dept:
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Patrick McGee ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
----------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
PATRICK MCGEE
/S/ PATRICK MCGEE
----------------------------
Address: 3413 Hanover
Dallas, TX 75225
Telephone: 214-746-6544
Facsimile: 214-746-6505
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Whittier Ventures, LLC ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
----------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
WHITTIER VENTURES, LLC
By: /S/ JAMES A. JEFFS
----------------------------
Name: James A. Jeffs
Title: Vice President
Address: 1600 Huntington Drive
South Pasadena, CA 91030
Telephone: 625-441-5111
Facsimile: 625-799-1814
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Pecos Joint Venture ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered;
and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
-------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
-------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
PECOS JOINT VENTURE
By: /S/ DUNCAN E. BOECKMAN
-------------------------------
Name: Duncan E. Boeckman
Title: Joint Venture Manager
Address:
--------------------------
--------------------------
--------------------------
Telephone:
------------------------
Facsimile:
------------------------
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Thomas G. Murphy ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered;
and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
-------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
-------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
THOMAS G. MURPHY
By: /S/ THOMAS G. MURPHY
-------------------------------
Name: Thomas G. Murphy
Title:
Address: 19108 No. 93 Way
Scottsdale, AZ 85255
Telephone: 480-585-5311
Facsimile: 480-585-6086
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Duncan Lee ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
-------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
DUNCAN LEE
By: /S/ DUNCAN A. LEE
-------------------------------
Name: Duncan A. Lee
Title:
Address: La Mota Ranch
Box 420
Falfurrias, Texas 78355
--------------------------
Telephone:
------------------------
Facsimile:
------------------------
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Marathon Special Opportunity Fund ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
MARATHON SPECIAL OPPORTUNITY FUND
By: /S/ LOUIS T. HANOVER
-------------------------------
Name: Louis T. Hanover
Title: Director
Address: 230 Park Ave., 7th
NY, NY 10169
Telephone: 212-499-1350
Facsimile: 212-499-1365
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and William Keller ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
WILLIAM KELLER
By: /S/ WILLIAM G. KELLER
-------------------------------
Name: William G. Keller
Title: Shareholder
Address: 9350 Flair Drive, Suite 204
El Monte
Calif 91731
Telephone: 626-443-6633
Facsimile: 626-448-3101
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Global Undervalued Securities Fund, LP ("Junior
Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
GLOBAL UNDERVALUED SECURITIES FUND,
LP
By: /S/ JOHN KLEINHEINZ
-------------------------------
Name: John Kleinheinz
Title:
Address: 201 Main Street
Ste. 2001
Ft. Worth, TX 76102
Telephone: 817-348-8100
Facsimile: 817-348-8010
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered into on the
28th day of January 2000 among Chaparral Resources, Inc. ("Borrower"),
Shell Capital Services Limited (the "Facility Agent"), and Cord Family
Exempt Trust ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter alia, parties
to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement, the
Borrower, the Facility Agent and the Junior Entity must enter into this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of covenants herein contained,
the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1 November 1999
between Borrower, Central Asian Petroleum (Guernsey) Limited, Closed
Type JSC Karakudukmunay and Central Asian Petroleum, Inc., as Co-
Obligors, Shell Capital Limited, Shell Capital Services Limited and
the Lenders (as defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the Borrower, the Co-
Obligors, or any of them, to any of the Finance Parties whether now
existing or arising in the future and whether fixed, prospective or
contingent under or in respect of any of the Finance Documents whether
for principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior Entity to the
Borrower (including, without limitation, in respect of the CRI Bridge
Notes and the CRI Existing Notes) whether now existing or arising in
the future and whether fixed, prospective or contingent, whether for
principal outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used with the
meaning assigned to such term in the Loan Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to such
statute as from time to time amended or re-enacted;
(ii) a person includes its permitted successors and assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made subordinate
and subject in right of payment and in liquidation to the prior
payment in full of the Preferred Obligations.
3. Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof, the Borrower undertakes not to pay or repay and the Junior
Entity undertakes not to claim, recover, retain or receive (or seek to
claim, recover, retain or receive) any amount whatsoever in relation
to any Junior Obligation (including, without limitation, any recovery,
payment or repayment arising out of any claim under a guarantee) or to
any interest or other amount payable by the Borrower in respect
thereof, or to any other indebtedness of the Borrower to any Junior
Entity.
4. If:
(i) there is any distribution of all or any part of the assets of the
Borrower including, without limitation, by reason of the liquidation,
dissolution or other insolvency proceeding, or assignment for the
benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject to any
insolvency or rehabilitation proceeding, administration, or voluntary
arrangement,
then until the date of final irrevocable repayment in full of the
Preferred Obligations any payment or distribution of any kind or
character and all and any rights in respect thereof payable or
deliverable to the Junior Entity with respect to the Junior
Obligations or any part thereof by the liquidator, administrator,
administrative receiver or receiver (or the equivalent thereof) of the
Borrower will forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior Entity
will irrevocably authorise and empower the Facility Agent to demand,
sue and prove for, collect and receive every payment or distribution
referred to in Section 4 and give good discharge therefor and to file
claims and take such other proceedings, in the Facility Agent's name,
the name of the Junior Entity or otherwise, as the Facility Agent may
deem necessary or advisable for the enforcement of the payment of
debts in accordance with the priority set out in Section 2.
6. The Junior Entity will, at all times, following the occurrence of any
Event of Default, and for so long as such Event of Default is
continuing, execute or procure the execution of and deliver to the
Facility Agent such proxies, powers of attorney, assignments or other
instruments as may be requested by it in order to enable the Facility
Agent to vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect and
receive any and all payments or distributions which may be payable or
deliverable to the Facility Agent at any time upon or with respect to
the Junior Obligations or any part thereof.
7. A liquidator or other insolvency representative of the Borrower or the
Junior Entity will be authorised, to the maximum extent permitted by
applicable law, to apply any assets or moneys it receives in
accordance with the order of priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any person acting
on its behalf with respect to the Junior Obligations or any part
thereof whether in cash or in kind or by way of set-off, combination
of accounts or otherwise, the Junior Entity (or person acting on its
behalf as aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on trust for the
Facility Agent and shall forthwith be paid to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents and that any failure to make such payment
shall be a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the Junior Entity
will waive, and undertake that it will not seek to obtain payment of
any Junior Obligation, in whole or in part, by exercising any right of
set-off it may have with respect to any Junior Obligation, whether
created by contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof the Facility Agent may (subject to the provisions of the
Finance Documents), unless and until such moneys or distributions in
the aggregate are sufficient to bring about the irrevocable final
repayment, in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any moneys or
property received under this Agreement from the Borrower, the Junior
Entity or any other person against the Preferred Obligations in such
order as it thinks fit; and (ii) hold in a suspense account any moneys
or distributions received under this Agreement.
10. The Junior Entity will not be entitled without the consent of the
Facility Agent to accelerate any Junior Obligation (or any portion
thereof). The Facility Agent shall have complete discretion as to the
granting of such consent.
11. The Junior Entity will not under any circumstances, prior to the
irrevocable final repayment, in full, of the Preferred Obligations, be
subrogated to any of the rights of the Finance Parties or any security
arising under the Finance Documents.
12. This Agreement and the subordination provisions contained herein will
terminate on the date of irrevocable final repayment, in full, of the
Preferred Obligations, and termination of all commitments in respect
thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior Entity
undertakes not to commence, or join with any other creditor or
creditors of the Borrower in commencing, any bankruptcy, insolvency or
rehabilitation proceeding, administration or other voluntary
arrangement against or in respect of the Borrower prior to irrevocable
final repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the parties
and supersedes all prior oral or written agreements, understandings,
representations, warranties and course of conduct and dealings between
the parties on the subject matter hereof.
15. Time is of the essence of each party's obligations under this
Agreement but no failure to exercise, nor any delay in exercising, on
the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their respective
successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or otherwise
transfer any of its rights or obligations under this Agreement. The
Facility Agent is permitted to transfer its rights and/or obligations
under this Agreement.
19. (a) All notices or other communications to Borrower or the Facility
Agent shall be given in writing addressed to the relevant party at its
address specified in Clause 29.2 of the Loan Agreement. All notices
or other communications to the Junior Entity shall be given in writing
at its address set forth in the signature page of this Agreement. A
written notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation into English certified (by an officer of
the person making or delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in writing
signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each of the
Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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 Section 23 and any claim that any such proceedings
have been brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any proceedings brought
in the English courts shall be conclusive and binding upon each
Borrower and the Junior Entity and may be enforced in the courts of
any other jurisdiction.
(c) Nothing contained in this Section 23 shall limit the right of the
Facility Agent to take proceedings against the Borrower or the Junior
Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement, attachment
in aid of execution of a judgement, execution of a judgement or from
set-off, banker's lien, counterclaim or any other legal process or
remedy with respect to its obligations under this Agreement and to the
extent that in any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or not
claimed), each of the Borrower and the Junior Entity 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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be
made or given in such proceedings.
26. If any dispute arises in relation to this Agreement, including any
questions as to existence, validity or termination, such dispute
shall, at the option only of the Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all
of which, when taken together, will be deemed to constitute one and
the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
----------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
CORD FAMILY EXEMPT TRUST
By: Bessemer Trust, Trustee
----------------------------
Name: Robert Lidricks III
Title: Vice President
Address: 630 5th Ave.
39th Floor
New York, NY 10111
Telephone: 212-708-9213
Facsimile: 212-408-9619
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered into on the
28th day of January 2000 among Chaparral Resources, Inc. ("Borrower"),
Shell Capital Services Limited (the "Facility Agent"), and Cord Capital,
LLC ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter alia, parties
to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement, the
Borrower, the Facility Agent and the Junior Entity must enter into this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of covenants herein contained,
the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1 November 1999
between Borrower, Central Asian Petroleum (Guernsey) Limited, Closed
Type JSC Karakudukmunay and Central Asian Petroleum, Inc., as Co-
Obligors, Shell Capital Limited, Shell Capital Services Limited and
the Lenders (as defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the Borrower, the Co-
Obligors, or any of them, to any of the Finance Parties whether now
existing or arising in the future and whether fixed, prospective or
contingent under or in respect of any of the Finance Documents whether
for principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior Entity to the
Borrower (including, without limitation, in respect of the CRI Bridge
Notes and the CRI Existing Notes) whether now existing or arising in
the future and whether fixed, prospective or contingent, whether for
principal outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used with the
meaning assigned to such term in the Loan Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to such
statute as from time to time amended or re-enacted;
(ii) a person includes its permitted successors and assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made subordinate
and subject in right of payment and in liquidation to the prior
payment in full of the Preferred Obligations.
3. Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof, the Borrower undertakes not to pay or repay and the Junior
Entity undertakes not to claim, recover, retain or receive (or seek to
claim, recover, retain or receive) any amount whatsoever in relation
to any Junior Obligation (including, without limitation, any recovery,
payment or repayment arising out of any claim under a guarantee) or to
any interest or other amount payable by the Borrower in respect
thereof, or to any other indebtedness of the Borrower to any Junior
Entity.
4. If:
(i) there is any distribution of all or any part of the assets of the
Borrower including, without limitation, by reason of the liquidation,
dissolution or other insolvency proceeding, or assignment for the
benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject to any
insolvency or rehabilitation proceeding, administration, or voluntary
arrangement,
then until the date of final irrevocable repayment in full of the
Preferred Obligations any payment or distribution of any kind or
character and all and any rights in respect thereof payable or
deliverable to the Junior Entity with respect to the Junior
Obligations or any part thereof by the liquidator, administrator,
administrative receiver or receiver (or the equivalent thereof) of the
Borrower will forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior Entity
will irrevocably authorise and empower the Facility Agent to demand,
sue and prove for, collect and receive every payment or distribution
referred to in Section 4 and give good discharge therefor and to file
claims and take such other proceedings, in the Facility Agent's name,
the name of the Junior Entity or otherwise, as the Facility Agent may
deem necessary or advisable for the enforcement of the payment of
debts in accordance with the priority set out in Section 2.
6. The Junior Entity will, at all times, following the occurrence of any
Event of Default, and for so long as such Event of Default is
continuing, execute or procure the execution of and deliver to the
Facility Agent such proxies, powers of attorney, assignments or other
instruments as may be requested by it in order to enable the Facility
Agent to vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect and
receive any and all payments or distributions which may be payable or
deliverable to the Facility Agent at any time upon or with respect to
the Junior Obligations or any part thereof.
7. A liquidator or other insolvency representative of the Borrower or the
Junior Entity will be authorised, to the maximum extent permitted by
applicable law, to apply any assets or moneys it receives in
accordance with the order of priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any person acting
on its behalf with respect to the Junior Obligations or any part
thereof whether in cash or in kind or by way of set-off, combination
of accounts or otherwise, the Junior Entity (or person acting on its
behalf as aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on trust for the
Facility Agent and shall forthwith be paid to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents and that any failure to make such payment
shall be a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the Junior Entity
will waive, and undertake that it will not seek to obtain payment of
any Junior Obligation, in whole or in part, by exercising any right of
set-off it may have with respect to any Junior Obligation, whether
created by contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof the Facility Agent may (subject to the provisions of the
Finance Documents), unless and until such moneys or distributions in
the aggregate are sufficient to bring about the irrevocable final
repayment, in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any moneys or
property received under this Agreement from the Borrower, the Junior
Entity or any other person against the Preferred Obligations in such
order as it thinks fit; and (ii) hold in a suspense account any moneys
or distributions received under this Agreement.
10. The Junior Entity will not be entitled without the consent of the
Facility Agent to accelerate any Junior Obligation (or any portion
thereof). The Facility Agent shall have complete discretion as to the
granting of such consent.
11. The Junior Entity will not under any circumstances, prior to the
irrevocable final repayment, in full, of the Preferred Obligations, be
subrogated to any of the rights of the Finance Parties or any security
arising under the Finance Documents.
12. This Agreement and the subordination provisions contained herein will
terminate on the date of irrevocable final repayment, in full, of the
Preferred Obligations, and termination of all commitments in respect
thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior Entity
undertakes not to commence, or join with any other creditor or
creditors of the Borrower in commencing, any bankruptcy, insolvency or
rehabilitation proceeding, administration or other voluntary
arrangement against or in respect of the Borrower prior to irrevocable
final repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the parties
and supersedes all prior oral or written agreements, understandings,
representations, warranties and course of conduct and dealings between
the parties on the subject matter hereof.
15. Time is of the essence of each party's obligations under this
Agreement but no failure to exercise, nor any delay in exercising, on
the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their respective
successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or otherwise
transfer any of its rights or obligations under this Agreement. The
Facility Agent is permitted to transfer its rights and/or obligations
under this Agreement.
19. (a) All notices or other communications to Borrower or the Facility
Agent shall be given in writing addressed to the relevant party at its
address specified in Clause 29.2 of the Loan Agreement. All notices
or other communications to the Junior Entity shall be given in writing
at its address set forth in the signature page of this Agreement. A
written notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation into English certified (by an officer of
the person making or delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in writing
signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each of the
Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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 Section 23 and any claim that any such proceedings
have been brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any proceedings brought
in the English courts shall be conclusive and binding upon each
Borrower and the Junior Entity and may be enforced in the courts of
any other jurisdiction.
(c) Nothing contained in this Section 23 shall limit the right of the
Facility Agent to take proceedings against the Borrower or the Junior
Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement, attachment
in aid of execution of a judgement, execution of a judgement or from
set-off, banker's lien, counterclaim or any other legal process or
remedy with respect to its obligations under this Agreement and to the
extent that in any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or not
claimed), each of the Borrower and the Junior Entity 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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be
made or given in such proceedings.
26. If any dispute arises in relation to this Agreement, including any
questions as to existence, validity or termination, such dispute
shall, at the option only of the Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all
of which, when taken together, will be deemed to constitute one and
the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
----------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
CORD CAPITAL, LLC
By: /S/ C. CORD
----------------------------
Name: Charles E. Cord
Title: President
Address: 136 El Camino
Beverly Hills, CA 90212
Telephone: 310-278-2626
Facsimile: 310-859-9344
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered into on the
28th day of January 2000 among Chaparral Resources, Inc. ("Borrower"),
Shell Capital Services Limited (the "Facility Agent"), and Capco Energy,
Inc. ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter alia, parties
to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement, the
Borrower, the Facility Agent and the Junior Entity must enter into this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of covenants herein contained,
the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1 November 1999
between Borrower, Central Asian Petroleum (Guernsey) Limited, Closed
Type JSC Karakudukmunay and Central Asian Petroleum, Inc., as Co-
Obligors, Shell Capital Limited, Shell Capital Services Limited and
the Lenders (as defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the Borrower, the Co-
Obligors, or any of them, to any of the Finance Parties whether now
existing or arising in the future and whether fixed, prospective or
contingent under or in respect of any of the Finance Documents whether
for principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior Entity to the
Borrower (including, without limitation, in respect of the CRI Bridge
Notes and the CRI Existing Notes) whether now existing or arising in
the future and whether fixed, prospective or contingent, whether for
principal outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used with the
meaning assigned to such term in the Loan Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to such
statute as from time to time amended or re-enacted;
(ii) a person includes its permitted successors and assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made subordinate
and subject in right of payment and in liquidation to the prior
payment in full of the Preferred Obligations.
3. Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof, the Borrower undertakes not to pay or repay and the Junior
Entity undertakes not to claim, recover, retain or receive (or seek to
claim, recover, retain or receive) any amount whatsoever in relation
to any Junior Obligation (including, without limitation, any recovery,
payment or repayment arising out of any claim under a guarantee) or to
any interest or other amount payable by the Borrower in respect
thereof, or to any other indebtedness of the Borrower to any Junior
Entity.
4. If:
(i) there is any distribution of all or any part of the assets of the
Borrower including, without limitation, by reason of the liquidation,
dissolution or other insolvency proceeding, or assignment for the
benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject to any
insolvency or rehabilitation proceeding, administration, or voluntary
arrangement,
then until the date of final irrevocable repayment in full of the
Preferred Obligations any payment or distribution of any kind or
character and all and any rights in respect thereof payable or
deliverable to the Junior Entity with respect to the Junior
Obligations or any part thereof by the liquidator, administrator,
administrative receiver or receiver (or the equivalent thereof) of the
Borrower will forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior Entity
will irrevocably authorise and empower the Facility Agent to demand,
sue and prove for, collect and receive every payment or distribution
referred to in Section 4 and give good discharge therefor and to file
claims and take such other proceedings, in the Facility Agent's name,
the name of the Junior Entity or otherwise, as the Facility Agent may
deem necessary or advisable for the enforcement of the payment of
debts in accordance with the priority set out in Section 2.
6. The Junior Entity will, at all times, following the occurrence of any
Event of Default, and for so long as such Event of Default is
continuing, execute or procure the execution of and deliver to the
Facility Agent such proxies, powers of attorney, assignments or other
instruments as may be requested by it in order to enable the Facility
Agent to vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect and
receive any and all payments or distributions which may be payable or
deliverable to the Facility Agent at any time upon or with respect to
the Junior Obligations or any part thereof.
7. A liquidator or other insolvency representative of the Borrower or the
Junior Entity will be authorised, to the maximum extent permitted by
applicable law, to apply any assets or moneys it receives in
accordance with the order of priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any person acting
on its behalf with respect to the Junior Obligations or any part
thereof whether in cash or in kind or by way of set-off, combination
of accounts or otherwise, the Junior Entity (or person acting on its
behalf as aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on trust for the
Facility Agent and shall forthwith be paid to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents and that any failure to make such payment
shall be a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the Junior Entity
will waive, and undertake that it will not seek to obtain payment of
any Junior Obligation, in whole or in part, by exercising any right of
set-off it may have with respect to any Junior Obligation, whether
created by contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof the Facility Agent may (subject to the provisions of the
Finance Documents), unless and until such moneys or distributions in
the aggregate are sufficient to bring about the irrevocable final
repayment, in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any moneys or
property received under this Agreement from the Borrower, the Junior
Entity or any other person against the Preferred Obligations in such
order as it thinks fit; and (ii) hold in a suspense account any moneys
or distributions received under this Agreement.
10. The Junior Entity will not be entitled without the consent of the
Facility Agent to accelerate any Junior Obligation (or any portion
thereof). The Facility Agent shall have complete discretion as to the
granting of such consent.
11. The Junior Entity will not under any circumstances, prior to the
irrevocable final repayment, in full, of the Preferred Obligations, be
subrogated to any of the rights of the Finance Parties or any security
arising under the Finance Documents.
12. This Agreement and the subordination provisions contained herein will
terminate on the date of irrevocable final repayment, in full, of the
Preferred Obligations, and termination of all commitments in respect
thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior Entity
undertakes not to commence, or join with any other creditor or
creditors of the Borrower in commencing, any bankruptcy, insolvency or
rehabilitation proceeding, administration or other voluntary
arrangement against or in respect of the Borrower prior to irrevocable
final repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the parties
and supersedes all prior oral or written agreements, understandings,
representations, warranties and course of conduct and dealings between
the parties on the subject matter hereof.
15. Time is of the essence of each party's obligations under this
Agreement but no failure to exercise, nor any delay in exercising, on
the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their respective
successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or otherwise
transfer any of its rights or obligations under this Agreement. The
Facility Agent is permitted to transfer its rights and/or obligations
under this Agreement.
19. (a) All notices or other communications to Borrower or the Facility
Agent shall be given in writing addressed to the relevant party at its
address specified in Clause 29.2 of the Loan Agreement. All notices
or other communications to the Junior Entity shall be given in writing
at its address set forth in the signature page of this Agreement. A
written notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation into English certified (by an officer of
the person making or delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in writing
signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each of the
Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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 Section 23 and any claim that any such proceedings
have been brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any proceedings brought
in the English courts shall be conclusive and binding upon each
Borrower and the Junior Entity and may be enforced in the courts of
any other jurisdiction.
(c) Nothing contained in this Section 23 shall limit the right of the
Facility Agent to take proceedings against the Borrower or the Junior
Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement, attachment
in aid of execution of a judgement, execution of a judgement or from
set-off, banker's lien, counterclaim or any other legal process or
remedy with respect to its obligations under this Agreement and to the
extent that in any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or not
claimed), each of the Borrower and the Junior Entity 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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be
made or given in such proceedings.
26. If any dispute arises in relation to this Agreement, including any
questions as to existence, validity or termination, such dispute
shall, at the option only of the Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all
of which, when taken together, will be deemed to constitute one and
the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
----------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
----------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
CAPCO ENERGY, INC.
By: /S/ ILYAS CHAUDHARY
----------------------------
Name: Ilyas Chaudhary
Title: President
Address: -----------------------
-----------------------
-----------------------
-----------------------
Telephone:
-----------------------
Facsimile:
-----------------------
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Rose Dosti IRA UTA Charles Schwab Inc. Contributory
DTD ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
ROSE DOSTI IRA UTA CHARLES SCHWAB
INC. CONTRIBUTORY DTD
By: /S/ ROSE DOSTI
-------------------------------
Name: Rose Dosti
Title:
Address: Rose Dosti
514 No. Las Palmas Ave.
Los Angeles, CA 90004
Telephone: 323-464-2189
Facsimile: 323-465-3684
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and John G. McMillian ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
JOHN G. MCMILLIAN
By: /S/ JOHN G. MCMILLIAN
-------------------------------
Name: John G. McMillian
Title: Chairman
Address:
--------------------------
--------------------------
--------------------------
Telephone:
------------------------
Facsimile:
------------------------
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Akin, Gump, Strauss, Hauer & Feld, L.L.P. ("Junior
Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter
alia, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
---------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
---------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
AKIN, GUMP, STRAUSS, HAUER & FELD,
L.L.P.
By: /S/ L. TODD GREMILLION
---------------------------
Name: L. Todd Gremillion
Title:
Address:
------------------------
------------------------
------------------------
Telephone:
-------------------
Facsimile:
-------------------
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Helen Jacobs Strauss Trust ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when delivered;
and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
-------------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
-------------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
HELEN JACOBS STRAUSS TRUST
By: /S/ ROBERT S. STRAUSS
-------------------------------
Name: Robert S. Strauss
Title: Co-Trustee
Address: c/o J.A. Candy
3116 Live Oak St.
Dallas, TX 75204
Telephone: 214/826-6660
Facsimile: 214/826-3754
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January, 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Allen & Company Incorporated ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter
alia, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement, the
Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) 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
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, sue and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, 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.
16. 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.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) 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.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity 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 Section 23 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 Section 26.
(b) Each of the Borrower and the Junior Entity 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
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity 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.
24. To the extent that the Borrower or the Junior Entity 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 judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
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.
25. Each of the Borrower and the Junior Entity 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 judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, 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 Section 26. 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 Facility Agent 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 that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ MICHAEL B. YOUNG
---------------------------
Name: Michael B. Young
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ MARK L.G. TURNER
---------------------------
Name: Mark L.G. Turner
Title: Attorney-in-Fact
ALLEN & COMPANY INCORPORATED
By: /S/ KIM M. WIELAND
---------------------------
Name: Kim M. Wieland
Title: Managing Director and
Chief Financial Officer
Address:
------------------------
------------------------
------------------------
Telephone:
-----------------------
Facsimile:
-----------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
December 10, 1999 US$150,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Cord Family Exempt Trust, a
trust organized under the laws of Nevada ("Payee"), in lawful money of the
United States of America, the principal amount (the "Principal Amount") of
ONE HUNDRED FIFTY THOUSAND DOLLARS (US$150,000.00), 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(b)
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 Robert L.
Ludricks, III, Bessemer Trust Company, 630 Fifth Avenue, 39th Floor, New
York, New York 10111, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
--------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
December 10, 1999 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Cord Capital, LLC, a limited
liability company organized under the laws of Wyoming ("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(b)
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 136 El Camino,
Beverly Hills, California 90212, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
-------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
December 15, 1999 US$500,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Capco Energy, Inc., a
corporation organized under the laws of Colorado ("Payee"), in lawful money
of the United States of America, the principal amount (the "Principal
Amount") FIVE HUNDRED THOUSAND DOLLARS (US$500,000.00), 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(b)
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 Chapman Energy,
Inc., 2292 Chapman Avenue, Suite 202, Orange, CA 92869, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
--------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 7, 2000 US$150,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Rose Dosti IRA UTA Charles
Schwab Inc. Contributory DTD ("Payee"), in lawful money of the United
States of America, the principal amount (the "Principal Amount") ONE
HUNDRED FIFTY THOUSAND DOLLARS (US$150,000.00), 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(b)
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 514 North Las
Palmas, Los Angeles, California, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
---------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 14, 2000 US$250,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Capco Energy, Inc., a
corporation organized under the laws of Colorado ("Payee"), in lawful money
of the United States of America, the principal amount (the "Principal
Amount") 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(b)
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 Chapman Energy,
Inc., 2292 Chapman Avenue, Suite 202, Orange, CA 92869, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
--------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 19, 2000 US$250,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of John G. McMillian ("Payee"), in
lawful money of the United States of America, the principal amount (the
"Principal Amount") 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(b)
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 322 Centennial
Circle, Park City, UT 84060, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
-----------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 19, 2000 US$200,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Akin, Gump, Strauss, Hauer &
Feld ("Payee"), in lawful money of the United States of America, the
principal amount (the "Principal Amount") 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(b)
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 Louisiana,
Suite 1900, Houston, Texas 77002, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
--------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 21, 2000 US$250,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Helen Jacobs Strauss Trust
("Payee"), in lawful money of the United States of America, the principal
amount (the "Principal Amount") 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(b)
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 Jerry A.
Candy, 3116 Live Oak Street, Dallas, Texas 75204, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
-------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
January 27, 2000 US$750,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Allen & Company Incorporated, a
corporation organized under the laws of New York ("Payee"), in lawful money
of the United States of America, the principal amount (the "Principal
Amount") of SEVEN HUNDRED FIFTY THOUSAND DOLLARS (US$750,000.00), 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(b)
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 by delivering such shares to Payee at 711 Fifth
Avenue, New York, NY 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 1.2(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 note 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.
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 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 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.
(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 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.
(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, 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.
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: /S/ JAMES A. JEFFS
-------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
February 9, 2000 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of EcoTels International Limited
("Payee"), in lawful money of the United States of America, the principal
amount (the "Principal Amount") 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(b)
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 Georgina
Revill, Paget-Brown and Co., Ltd., West Wind Bldg., Grand Cayman, Cayman
Islands B.W.I., 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ MICHAEL B. YOUNG
---------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
February 9, 2000 US$100,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Helen Jacobs Strauss Trust
("Payee"), in lawful money of the United States of America, the principal
amount (the "Principal Amount") 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(b)
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 Jerry A.
Candy, 3116 Live Oak Street, Dallas, Texas 75204, 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 1.2(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.
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 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 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.
(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 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.
(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, 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.
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: /S/ MICHAEL B. YOUNG
------------------------
8.0% NON-NEGOTIABLE CONVERTIBLE SUBORDINATED PROMISSORY NOTE
February 10, 2000 US$1,250,000.00
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation
("Maker"), promises to pay to the order of Allen & Company Incorporated, a
corporation organized under the laws of New York ("Payee"), in lawful money
of the United States of America, the principal amount (the "Principal
Amount") of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
(US$1,250,000.00), 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(b)
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 by delivering such shares to Payee at 711 Fifth
Avenue, New York, NY 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 1.2(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 note 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.
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 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 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.
(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 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.
(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, 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.
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: MICHAEL B. YOUNG
-------------------------
CHAPARRAL
CHAPARRAL RESOURCES, INC.
NEWS RELEASE
***FOR IMMEDIATE RELEASE***
FOR FURTHER INFORMATION:
Natalie S. Hairston
Director of Corporate Affairs
281-877-7100
CHAPARRAL RESOURCES, INC. ANNOUNCES COMPLETION OF DEBT RESTRUCTURING AND
FIRST DRAWDOWN OF FUNDS UNDER ITS LOAN AGREEMENT
HOUSTON, TEXAS, FEBRUARY 14, 2000 -- Chaparral Resources, Inc. (Nasdaq:
CHAR) announced today the finalization and first drawdown of $8.3 million
under its $24.0 million loan agreement, as amended, with Shell Capital
Services Limited ("Shell"). Subsequent drawdowns by the Company under the
loan agreement must be at least $2.0 million. The loan bears interest at
LIBOR plus 17.75% prior to completion of the development of the Karakuduk
Field and at LIBOR plus 12.75% after completion. For purposes of the loan
agreement, completion of the development of the Karakuduk Field will occur
when (i) an independent engineer certifies that the proven developed
reserves of the Karakuduk Field are at least 30 million barrels, (ii)
average daily oil production from the Karakuduk Field is at least 13,000
barrels, (iii) daily water injection at the Karakuduk Field is at least
15,000 barrels, and (iv) successful implementation of a gas lift system for
one well over a 24-hour period. Project completion must occur on or before
September 30, 2001. The loan agreement requires that the Company comply
with a number of covenants during the term of the loan, including the
maintenance of certain financial ratios. The loan must be repaid on
scheduled quarterly reduction dates beginning on the earlier of three
months after the completion of the development of the Karakuduk Field or
December 31, 2001. The Company can voluntarily repay the loan at any time
upon payment of a fee. The loan matures on September 30, 2004.
In connection with the loan agreement, the Company issued to Shell a
warrant to purchase up to 15% of the Company's outstanding common stock, or
146,693 shares, with an exercise price of $15.45 per share. The Shell
warrant is not exercisable until approximately 18 months after the date of
its issuance and expires five years after the earliest of completion of the
development of the Karakuduk Field or June 30, 2001.
Since January 1999, the Company issued $13,339,769 of its 8% Non-Negotiable
Convertible Subordinated Promissory Notes (the "Notes") to partially
satisfy the equity infusion requirements of the loan agreement and
facilitate first drawdown under the loan agreement. All of the Notes are
identical, including the right to convert the outstanding principal balance
of the Notes, together with interest thereon, into common stock of the
Company at the conversion price of $1.86 per share. The Notes also contain
anti-dilution and registration rights provisions. In order to comply with
Nasdaq's marketplace rules, the conversion provisions of the Notes are
required to be approved by the Company's stockholders. Upon approval of the
conversion provision of the Notes by the stockholders, the Company will
issue to the holders of the Notes 7,171,919 shares of common stock of the
Company, representing 88% of the Company's outstanding common stock.
The board of directors of the Company has authorized a rights offering of
$6 to $10 million, or 3,225,806 to 5,376,344 shares of common stock of the
Company, to its stockholders. The rights will be issued on a pro rata basis
to the holders of the Company's common stock and will be exercisable at
$1.86 per share. Other matters relating to the rights offering have not
been finalized as of today, including the expiration date of the rights. To
fulfill a condition of the loan agreement with Shell, two of the Company's
largest stockholders have undertaken to subscribe for and purchase their
full pro rata portion of the rights offering. 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 United States Securities and
Exchange Commission.
The board of directors has authorized the Company to ask its stockholders
to consider a proposal to approve (i) the conversion terms of the Notes and
(ii) the terms of the proposed rights offering, including the setting of
the record date for stockholders entitled to participate in the rights
offering to a date after the date of conversion of the Notes. If the
stockholders fail to approve the proposal, the interest rate on the Notes
will, in accordance with their terms, increase to the lesser of 25% per
annum or the maximum rate allowed by applicable law and the rights offering
will most likely be abandoned. To avoid the Company being in default of the
loan agreement, two stockholders of the Company have agreed to purchase $4
million of the Company's common stock at $1.86 per share if the rights
offering is not completed by June 30, 2000.
The Company has instituted a stock option plan for its directors, employees
and consultants. The Company has reserved 15% of its outstanding common
stock, or 146,693 shares, for issuance under the stock option plan, a
portion of which will be issued at $1.86 per share of common stock. The
granting of stock options with an exercise price below the current market
price of the Company's common stock will result in a charge to the
Company's earnings for the period covering the granting of such options as
compensation expense.
The Shell warrant and the Company's stock option plan contain anti-dilution
provisions. Consequently, if the Company's stockholders approve the
conversion provision of the Notes and a $10 million rights offering, the
Shell warrant will represent the right to purchase up to 2,028,933 shares
of the common stock of the Company and 2,028,933 shares of common stock of
the Company will be reserved for issuance with the stock option plan.
Stockholders that are not holders of the Notes will suffer significant
dilution from 72.55%, as of today, to 7.31%, on a fully-diluted basis,
assuming (i) the Notes are converted, (ii) all outstanding options and
warrants, including the Shell warrant are fully exercised, (iii) the
Company grants the maximum number of options permitted by the stock option
plan and such options are fully exercised by the holders, and (iv) the
conversion of the Company's outstanding Series A Convertible Preferred
Stock, which contain anti-dilution provisions.
The foregoing summary description of the loan agreement, the Shell warrant
and the Notes is qualified in its entirety by the documents relating
thereto filed by the Company with the United States Securities and Exchange
Commission.
The Company is engaged in the business of international oil and gas
exploration and production. The Company participates in the development of
the Karakuduk Field through Karakuduk Munay JSC ("KKM") of which the
Company is the operator. The Company owns a 50% beneficial ownership
interest in KKM with the other 50% ownership interests being held by Kazakh
investors, including KazakhOil, the government-owned oil company.
CERTAIN 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
###
16945 Northchase, Suite 1440; Houston, Texas 77060
281/877-7100 -- Facsimile: 281/877-0985
BACK TO PRESS RELEASE INDEX
Copyright (COPYRIGHT) 2000 Chaparral Resources Inc.
