EXHIBIT F
AGREEMENT OF XXXXX &
COMPANY INCORPORATED
May 7, 2002
Chaparral Resources, Inc.
00000 Xxxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Gentlemen:
We understand that Chaparral Resources Inc. ("Company") has entered
into a Master Agreement with Central Asian Industrial Holdings, NV ("CAIH")
("Master Agreement") relating to an investment by CAIH (or a wholly owned
subsidiary of CAIH) in the Company consisting of a subscription for shares of
the Company's common stock which when issued will represent 60% of the Company's
issued and outstanding common stock and the issuance of a loan note following
the refinancing of the Company and certain of its affiliated entities. We
understand that the Company will be making certain changes to its Certificate of
Incorporation and Bylaws. We also understand that as a condition precedent to
closing of the transactions contemplated by the Master Agreement as described
below that the Principal Shareholders of the Company are required to execute
this letter.
TRANSACTIONS CONTEMPLATED BY THE MASTER AGREEMENT ("TRANSACTIONS")
1. CAIH will purchase 22,925,701 newly issued shares of the Company's
common stock (or such larger number which in the aggregate will
represent no less than 60% of the Company's issued and outstanding
stock after completion of the Transactions) for US$8.0 million.
2. CAIH will purchase a US$4.0 million 12% note ("Note") to be issued by
the Company (and its subsidiary Central Asian Petroleum (Guernsey)
Limited.
3. Contemporaneously with the purchase of the Note, the Company will grant
CAIH a five year warrant to purchase 3,076,923 shares of the Company's
common stock (subject to adjustment as provided in the warrant) at a
price of US1.30 per share.
4. CAIH will arrange for Open Joint Stock Company Kazkommertsbank to grant
a credit facility to Closed Joint Stock Company Karakudukmunai ("KKM")
in the aggregate amount of approximately US$33 million at an interest
rate of 14% per annum consisting of a US$28 million refinancing loan
("Refinancing Loan") and a US$5 million working capital facility
("Working Capital Facility"). CAIH will purchase the Company's
outstanding loan from Shell Capital, Inc. ("Shell Capital Loan") for a
total of $30.45 million in accordance with the Shell Loan Sale and
Purchase Agreement dated May 3, 2002 ("Shell Loan Sale and Purchase
Agreement"). The total purchase price of $30.45 million will consist of
$28 million in payments made by the Company directly to Shell Capital,
reducing the Shell Capital Loan, and $2.45 million transferred directly
to Shell Capital by CAIH. The Refinancing Loan is to be used to fund
the Company's $28 million payment to Shell Capital. Mechanically, KKM
will repay existing debt to CAP-G and CAP-G will in turn use such funds
to repay existing debt to the Company which in turn will pay such US$28
million to Shell Capital per the terms of the Shell Loan Sale and
Purchase Agreement.
5. Following the closing of the Shell Loan Sale and Purchase Agreement,
the outstanding balance of the Shell Loan will be approximately
US$11,000,000. Upon the closing of the Master Agreement, the remaining
balance of the Shell Loan will be written down to $2.45 million, the
existing Shell Capital Warrant will be canceled, and the 40% net
profits interest in KKM (represented by the Class B preferred stock of
CAP-G issued to Shell Capital on September 30, 2001) will be reacquired
by CAP-G for a nominal amount and cancelled. All other agreements with
Shell Capital or its affiliates are to be terminated, including KKM's
crude oil sales agreement with STASCO and the technical services
agreement with Shell Global Solutions.
6. The Company will acquire all of the issued and outstanding stock of
Korporatsiya Mangistau Terra International ("MTI") which holds a ten
percent (10%) interest in KKM for no more than US$1.2 million in cash
and 1,000,000 shares of the Company's common stock.
7. The Company will re-purchase the 50,000 shares of the Company's Series
A Preferred stock held by the Exeter Finance Group, Inc. for no more
than US$2.3 million dollars.
8. CAIH will receive a US$1.788 million refinancing fee upon closing the
Transactions.
9. Effective on closing the Transactions, CAIH will not object to the
Company's OPIC political risk insurance and transportation risk
insurance policies being cancelled.
10. Effective on closing of the Transactions, the Company's Board of
Directors will be restructured to seven (7) members, five (5) of whom
are to be appointed by CAIH and the remaining two (2) are to be
designated by the existing Company directors provided that these two
(2) nominees must be acceptable to CAIH.
11. As soon as practicable following closing of the Transactions, the
Company's Certificate of Incorporation and Bylaws will be amended as
provided in Schedule 5 to the Master Agreement and attached hereto.
CONSENT TO THE TRANSACTIONS
We understand that it is a condition precedent to the completion of the
Transactions that the Principal Stockholders of the Company holding in the
aggregate not less than 51% of the outstanding shares of the Company, consent to
the Transactions.
Accordingly, for good and valuable consideration the sufficiency of
which is acknowledged, and in order to induce CAIH to complete the Transactions,
the undersigned
hereby consents to the Transactions but without making any representations with
respect thereto and agrees that in the event that any one or more of the
Transactions are submitted to the shareholders of the Company for approval
substantially as described herein, it will vote all of the shares of the
Company's common stock owned or controlled by it in favor of the Transactions
(which term shall be deemed to include, without limitation, the matters set
forth in paragraphs 10 and 11 above) and will take such other necessary or
desirable actions within its control, including, without limitation, attendance
at all shareholder meetings in person or by proxy, voting against any action or
agreement that would result in the non-performance of, or that would otherwise
impede, interfere with, delay, postpone or attempt to discourage, the
Transactions and exercising its written consent as set out above in lieu of
voting at any meeting to effectuate the approval of the Transactions.
Very truly yours,
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
Managing Director & CFO
Xxxxx & Company Incorporated
