EXHIBIT 10.7
EXECUTION COPY
OPERATION NUMBER 478
AGREEMENT
DATED 23RD SEPTEMBER, 2002
BETWEEN
LIMITED LIABILITY COMPANY
"GEOILBENT"
AND
EUROPEAN BANK
FOR RECONSTRUCTION AND DEVELOPMENT
AMENDING AND RESTATING
THE CREDIT AGREEMENT
DATED 21ST NOVEMBER, 1996
INDEX
SECTION PAGE
1. Interpretation................................................................................3
2. Amendment and Re-Statement....................................................................4
3. Conditions Precedent..........................................................................4
4. Representations and Warranties................................................................8
5. Fees, Costs and Expenses......................................................................9
6. Governing Law.................................................................................9
7. Rights of Third Parties......................................................................10
SCHEDULE
Amended and Amended and Restated Credit Agreement...................................................11
THIS
AGREEMENT is dated 23rd September, 2002 between LIMITED LIABILITY COMPANY
"GEOILBENT", a limited liability company organised and existing under the laws
of the Russian Federation (the "BORROWER"), and EUROPEAN BANK FOR RECONSTRUCTION
AND DEVELOPMENT (the "BANK").
WHEREAS:-
(A) By an
agreement dated 21st November, 1996 between the Borrower and the
Bank (as amended prior to the date hereof, the "ORIGINAL CREDIT
AGREEMENT"), the Bank has agreed, subject to the terms and conditions
of the Original Credit
Agreement, to make a loan to the Borrower on a
revolving basis in an amount not to exceed US$55,000,000 (the "ORIGINAL
LOAN FACILITY").
(B) The Parties have agreed to amend the Original Credit
Agreement as
provided in this
Agreement. For convenience, the parties have agreed to
hereby specify the provisions of the Original Credit
Agreement, as so
amended by this Agreement in restated form as set out in the Schedule
hereto.
(C) The amendments to the Original Credit Agreement to be made pursuant to
this Agreement shall be effective from the Effective Date (as defined
below) and the Original Credit Agreement remains in full force and
effect except, from the Effective Date, as amended pursuant to this
Agreement.
IT IS AGREED AS FOLLOWS:-
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement:-
"EFFECTIVE DATE" means the date on which the Bank notifies the Borrower
that the Bank has received (in form and substance satisfactory to the
Bank), or has waived receipt (on such terms as the Bank may specify),
each of the documents and other evidence specified in Clause 3.1
(Conditions Precedent) other than the notice referred to in Section
3.1(t) below.
"PARTIES" means the Borrower and the Bank and "PARTY" means either one
of the Parties.
"AMENDED AND RESTATED CREDIT AGREEMENT" means the Original Credit
Agreement, as amended and restated by this Agreement, in the form set
out in the Schedule (Amended and Restated Credit Agreement).
1.2 INTERPRETATION
Unless otherwise defined in this Agreement, capitalised terms used in
this Agreement (but not the Schedule) shall have the meaning given to
them in the Original Credit Agreement.
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1.3 INCORPORATION
The provisions of Section 1.02 (Interpretation), Section 8.03
(Notices), Section 8.04 (English Language), Section 8.13 (Severability)
and Section 8.14 (Counterparts) of the Original Credit Agreement shall
apply to this Agreement (but not to the Schedule) as if the same had
been set out in full herein.
2. AMENDMENT AND RE-STATEMENT
2.1 EFFECTIVE DATE
With effect on and from the Effective Date, the Original Credit
Agreement shall be deemed to be amended such that the provisions of the
Original Credit Agreement, as so amended, will be as set forth in the
Schedule to this Agreement.
2.2 ACKNOWLEDGEMENT
The Bank and the Borrower acknowledge that the principal outstanding
amount of the Loan as at the date of and prior to the amendments to be
made by this Agreement is $22,000,000.
2.3 CONFIRMATION
Each Party confirms that, except as expressly provided by this
Agreement or as provided for in the documents referred to in Clause 3.1
(Conditions Precedent), each Financing Agreement and Project Agreement
remains in full force and effect.
2.4 LONG-STOP
If the Effective Date has not occurred on or prior to 31 December,
2002, this Agreement shall be deemed to be terminated on such date and
the Parties shall continue to be bound by the provisions of the
Original Credit Agreement as if this Agreement had not been entered
into.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT
The documents and other evidence referred to in the definition of
Effective Date are as follows:-
(a) FINANCING AGREEMENTS. Duly executed originals of each of the
following documents:
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(1) an agreement amending the Shareholders Support
Agreement;
(2) an agreement terminating the Security Sharing
Agreement; and
(3) an agreement amending and restating the Russian Bank
Account Agreements.
(b) PROJECT AGREEMENTS. Certified copies of the following
agreements, as in force as at the date of this Agreement:
(1) the License (including the License Agreement);
(2) the Marketing Agreements;
(3) the Services Agreement;
(4) the Transportation Agreement;
(5) the Supply Agreements;
(6) the Independent Engineer Agreement; and
a copy of a duly executed agreement amending:
(7) the Offshore Bank Account Agreement.
(c) SECURITY. Duly executed originals of agreements amending each
of the following Security Documents together with any
document, recording, filing, notification, registration,
notarisation or other evidence required, in the opinion of the
Bank, for the creation, validity, perfection or priority of
the Liens of the Bank in or under such Security Documents
(other than, in the case of the Immovable Property Mortgage
Agreement, notarisation and registration of such Security
Document):
(1) the Contracts Assignment Agreement;
(2) the Equipment Pledge Agreement;
(3) the Expropriation Compensation Assignment Agreement;
(4) the Immovable Property Mortgage Agreement;
(5) the Insurance Assignment Agreement;
(6) the Offshore Account Assignment Agreement;
(7) the Russian Account Pledge Agreement;
(8) the Russian Bank Account Agreements; and
(9) the Share Pledges.
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(d) CHARTERS. Certified copies of the Charters (and, if relevant,
certificates of registration and good standing) of the
Borrower, the Shareholders and, at the reasonable request of
the Bank, any other parties to the Financing Agreements and
Project Agreements, each as amended as at the date of this
Agreement.
(e) CORPORATE AUTHORISATIONS. Certified copies of all corporate
(including, if required, shareholder) authorisations and
approvals necessary for the due execution, delivery and
performance of this Agreement and each agreement as referred
to in paragraphs (a) - (c) above inclusive and any other
documents in implementation thereof, by the Borrower, the
Shareholders and, at the reasonable request of the Bank, any
other parties thereto and for the transactions contemplated
thereby, including the authorisations of the persons signing
such agreements to sign such documents and to bind the
respective parties thereby.
(f) SPECIMEN SIGNATURES.
(1) A certificate of incumbency and authority of the
Borrower substantially in the form of Exhibit B to
the Amended and Restated Credit Agreement; and
(2) a certificate of an appropriate officer of each
Shareholder and, at the reasonable request of the
Bank, any other party to the Financing Agreements and
Project Agreements certifying the specimen signature
of each person authorised to sign, on behalf of such
party, the Financing Agreements and Project
Agreements or the amendments thereto and/or
terminations thereof to be entered into and performed
by such party.
(g) GOVERNMENTAL AND OTHER APPROVALS. Certified copies of all
governmental, creditors' and other licenses, approvals,
consents, filings and registrations necessary for the
execution, delivery and performance of this Agreement, the
Financing Agreements and Project Agreements by the Borrower,
the Shareholders and, at the request of the Bank, any other
parties thereto and for the transactions contemplated thereby,
including, without limitation:
(1) the borrowing by the Borrower under the Amended and
Restated Credit Agreement;
(2) the creation, amendment and/or novation of the
Security;
(3) the carrying out of the Project and the Financing
Plan;
(4) the remittance to the Bank of all monies payable in
respect of the Amended and Restated Credit Agreement
and the Security; and
6
(5) the carrying on of the business of the Borrower as it
is presently carried on and is contemplated to be
carried on under the Development Plan.
(h) INSURANCE. Original insurance certificates from the Borrower's
insurer or insurance broker showing that all insurance
policies and endorsements required pursuant to Section 5.04 of
the Original Credit Agreement are in full force and effect and
certified copies of such insurance policies and endorsements.
(i) AUDITORS LETTER. A copy of a letter to the Auditors from the
Borrower substantially in the form of Exhibit C to the Amended
and Restated Credit Agreement.
(j) EXISTING FINANCIAL DEBT. Evidence satisfactory to the Bank
that all Financial Debt of the Borrower (other than Financial
Debt set out in Section 6.04 of the text of the Amended and
Restated Credit Agreement), and all Liens on any property,
revenues or other assets of the Borrower (other than Permitted
Liens) have been discharged in full.
(k) BANK ACCOUNTS. Evidence satisfactory to the Bank that the
Offshore Bank Accounts and the Russian Bank Accounts are duly
established.
(l) INDEPENDENT ENGINEER. Evidence satisfactory to the Bank that
the Borrower has appointed the Independent Engineer in a
manner satisfactory to the Bank to perform its functions as
provided for in the Financing Agreements.
(m) SURFACE RIGHTS. Evidence satisfactory to the Bank that the
Borrower has all appurtenant surface land rights required for
the Project.
(n) DEVELOPMENT PLAN. A copy of the Development Plan, in form and
substance satisfactory to the Bank and the Independent
Engineer.
(o) REVISED BANKING CASE. A copy of a revised banking case
prepared by the Borrower in accordance with Section 8.05(c) of
the Original Credit Agreement to be delivered not more than 60
days prior to the Effective Date.
(p) AUDITED FINANCIAL STATEMENTS.
(1) The Financial Statements of the Borrower for the
Financial Year ending on 30 September, 2001 and, to
the extent available, the unaudited quarterly
Financial Statements for the Financial Year
2001/2002; and
(2) in the case of the Financial Statements for the
Financial Year ending on 30 September, 2001, the
balance sheet and the related income statement and
statement of changes in financial position of the
Borrower for the Financial Year ending on that date,
and
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the notes thereon, certified by the Auditors, which
shall be satisfactory to the Bank in its sole
discretion.
(q) PROCESS AGENT APPOINTMENTS. Written confirmation from the
agents for service of process appointed by the Borrower and
the Shareholders pursuant to the Financing Agreements of their
acceptances of such appointments in connection with the entry
by the Borrower into the Amended and Restated Credit Agreement
and any documents related thereto.
(r) LEGAL OPINIONS.
(1) the opinion of Fulbright & Xxxxxxxx;
(2) the opinion of special counsel to Minley acceptable
to the Bank;
(3) the opinion of Xxxxx & XxXxxxxx, special Russian
counsel to the Borrower;
(4) the opinion of Xxxxx & Overy Legal Services, special
Russian counsel to the Bank; and
(5) the opinion of Xxxxx & Xxxxx Legal Services, special
English counsel to the Bank;
in each case regarding such matters incident to the
transactions contemplated by this Agreement, the Amended and
Restated Credit Agreement and any document related thereto
(including Financing Agreements and Project Agreements to be
amended as referred to in this Clause 3.1 (Conditions
Precedent) as the Bank shall reasonably request.
(s) Evidence satisfactory to the Bank that the Borrower has paid
to the Bank an appraisal fee in the amount of USD 225,000.
(t) Notice from the Bank to the Borrower that the Bank has
received (in form and substance satisfactory to the Bank) or
has waived receipt (on such terms as the Bank may specify),
all the documents and other evidence specified in this Clause
3.1 above.
4. REPRESENTATIONS AND WARRANTIES
(a) The Borrower shall be deemed to make the representations and warranties
in the same terms as set out in Sections 2.01, 2.02 and 2.03 of the
text of the Amended and Restated Credit Agreement appended in the
Schedule hereto on the date of this Agreement and on the Effective
Date.
(b) The Borrower acknowledges that it has made the representations and
warranties contained in paragraph (a) of this Section 4 above with the
intention of inducing the Bank to enter into this Agreement and that
the Bank has entered into this Agreement on the basis of, and in full
reliance on, each of such representations
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and warranties. The Borrower has no knowledge of any additional facts
or matters which would or might reasonably be expected to affect the
judgement of a prospective lender regarding lending to the Borrower.
The Borrower warrants to the Bank that each of such representations and
warranties is true and correct and that none of them omits any matter
the omission of which makes any of such representations and warranties
misleading.
(c) The Borrower represents that as of the date of this Agreement it has
opened the following banks accounts: (a) the four Offshore Bank
Accounts with Citibank N.A. (London Branch): the Disbursement Account
No. 00008283400, the Export Sales Account No. 00008283419, the Debt
Service Account No. 00008283427 and the Cash Collateral Account No.
00008283435, and (b) six Russian Bank Accounts with the International
Moscow Bank: the Rouble settlement account No. 40702810500010003818,
the Rouble drawdown account No. 40702810800010003819, the USD current
account No. 40702840400010003823, the USD Current drawdown account No.
40702840400010048464, the USD transit account No. 40702840700010003824,
the USD special transit account No. 40702840200010109891.
5. FEES, COSTS AND EXPENSES
The Borrower shall, whether or not the Effective Date occurs, forthwith
on demand pay the Bank the amount of all costs and expenses (including,
without limitation legal fees) incurred by it in connection with the
negotiation, preparation, printing and execution of this Agreement, the
Amended and Restated Credit Agreement and all other documents
contemplated hereby and thereby, and the completion of the transactions
contemplated herein and therein.
6. GOVERNING LAW
This Agreement is governed by English law. The provisions of Section
8.09 (Arbitration and Jurisdiction), Section 8.10 (Privileges and
Immunities of the Bank), Section 8.11 (Waiver of Sovereign Immunity) of
the Original Credit Agreement shall apply to this Agreement (but not to
the Schedule) as if the same had been set out in full herein.
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7. RIGHTS OF THIRD PARTIES
Except as provided in the Amended and Restated Credit Agreement, none
of the terms of this Agreement are intended to be enforceable by any
third party and the Contracts (Rights of Third Parties) Act 1999 shall
not apply to this Agreement.
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorised
representatives, have caused this Agreement to be signed in their respective
names as of the date first above written.
LIMITED LIABILITY COMPANY
"GEOILBENT"
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
[Seal]
EUROPEAN BANK
FOR RECONSTRUCTION AND DEVELOPMENT
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
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SCHEDULE
AMENDED AND RESTATED CREDIT AGREEMENT
CREDIT AGREEMENT
DATED 21ST NOVEMBER, 1996
AS AMENDED AND RESTATED
PURSUANT TO AN AGREEMENT DATED 23RD SEPTEMBER, 2002
between
LIMITED LIABILITY COMPANY
"GEOILBENT"
and
EUROPEAN BANK
FOR RECONSTRUCTION AND DEVELOPMENT
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TABLE OF CONTENTS
ARTICLE I - DEFINITIONS..............................................................................15
Section 1.01. Definitions................................................................15
Section 1.02. Interpretation.............................................................30
ARTICLE II - REPRESENTATIONS AND WARRANTIES..........................................................30
Section 2.01. Representations Regarding the Project......................................30
Section 2.02. Representations Regarding the Borrower.....................................32
Section 2.03. Representations Regarding the Agreements...................................35
Section 2.04. Acknowledgement and Warranty...............................................36
ARTICLE III - LOAN...................................................................................36
Section 3.01. Amount and Currency........................................................36
Section 3.02. Disbursements..............................................................37
Section 3.03. Suspension and Cancellation................................................37
Section 3.04. Charges, Commissions and Fees..............................................38
Section 3.05. Interest...................................................................39
Section 3.06. Default Interest...........................................................39
Section 3.07. Repayment..................................................................40
Section 3.08. Voluntary and Mandatory Prepayment.........................................40
Section 3.09. Payments...................................................................41
Section 3.10. Insufficient Payments......................................................42
Section 3.11. Taxes......................................................................42
Section 3.12. Unwinding Costs............................................................43
Section 3.13. Increased Costs............................................................43
Section 3.14. Illegality.................................................................44
Section 3.15. Loan Account...............................................................44
ARTICLE IV - CONDITIONS PRECEDENT....................................................................44
Section 4.01. Conditions of First Disbursement...........................................44
Section 4.02. Conditions for Certain Disbursements.......................................48
Section 4.03. Conditions for Any Disbursement............................................49
ARTICLE V - AFFIRMATIVE COVENANTS....................................................................50
Section 5.01. Project Implementation.....................................................50
Section 5.02. Maintenance and Continuity of Business.....................................51
Section 5.03. Environment, Health and Safety.............................................51
Section 5.04. Insurance..................................................................51
Section 5.05. Accounting.................................................................51
Section 5.06. Continuing Governmental and Other Approvals................................52
Section 5.07. Security...................................................................52
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Section 5.08. Compliance with Other Obligations..........................................52
Section 5.09. Taxes......................................................................53
Section 5.10. Project Agreements.........................................................53
Section 5.11. Offshore Bank Accounts.....................................................54
Section 5.12. Russian Bank Accounts......................................................56
Section 5.13. Cash Waterfall.............................................................57
Section 5.14. Further Documents..........................................................58
Section 5.15. Costs and Expenses.........................................................58
Section 5.16. Furnishing of Information..................................................59
ARTICLE VI - NEGATIVE COVENANTS......................................................................62
Section 6.01. Dividends..................................................................62
Section 6.02. Capital Expenditures.......................................................63
Section 6.03. Leases.....................................................................63
Section 6.04. Financial Debt.............................................................63
Section 6.05. Liens......................................................................64
Section 6.06. Derivative Transactions....................................................64
Section 6.07. Arm's Length Transactions..................................................64
Section 6.08. Profit-sharing and Management Arrangements.................................65
Section 6.09. Investments................................................................65
Section 6.10. Project Agreements.........................................................65
Section 6.11. Changes in Business, Capital and Charter...................................65
Section 6.12. Prepayment of Long-term Debt...............................................66
Section 6.13. Sale of Assets; Merger.....................................................66
ARTICLE VII - EVENTS OF DEFAULT......................................................................66
Section 7.01. Events of Default..........................................................66
Section 7.02. Consequences of Default....................................................69
Section 7.03. Automatic Acceleration.....................................................69
ARTICLE VIII - MISCELLANEOUS.........................................................................69
Section 8.01. Term of Agreement..........................................................69
Section 8.02. Entire Agreement; Amendment and Waiver.....................................69
Section 8.03. Notices....................................................................70
Section 8.04. English Language...........................................................71
Section 8.05. Financial Calculations and Development Plan................................71
Section 8.06. Rights, Remedies and Waivers...............................................72
Section 8.07. Indemnification............................................................73
Section 8.08. Governing Law..............................................................74
Section 8.09. Arbitration and Jurisdiction...............................................74
Section 8.10. Privileges and Immunities of the Bank......................................75
Section 8.11. Waiver of Sovereign Immunity...............................................75
Section 8.12. Successors and Assigns.....................................................75
Section 8.13. Severability...............................................................76
Section 8.14. Counterparts...............................................................76
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Schedule 1 - Commitment..............................................................................77
Schedule 2 - Development Plan and Banking Case Procedures............................................78
Schedule 3 - Security Perfection Requirements........................................................80
Schedule 4 - Milestones..............................................................................83
Schedule 5 - Veksels.................................................................................84
EXHIBITS
Exhibit A - Form of Disbursement Application
Exhibit B - Form of Certificate of Incumbency and Authority
Exhibit C - Form of Letter to Auditors
14
AGREEMENT, dated 21st November, 1996 as amended and restated by an agreement
dated 23rd September, 2002 between LIMITED LIABILITY COMPANY "GEOILBENT", a
limited liability company organised and existing under the laws of the Russian
Federation (the "Borrower"), and EUROPEAN BANK FOR RECONSTRUCTION AND
DEVELOPMENT (the "Bank").
ARTICLE I - DEFINITIONS
SECTION 1.01. DEFINITIONS
Wherever used in this Agreement, including the Schedules and Exhibits hereto,
unless the context otherwise requires, the following terms have the following
meanings:
"Affiliate" means, with respect to any person, any other
person, directly or indirectly, controlling,
controlled by, or under common control with,
such person. For the purposes of this
definition, "control" (including, with
correlative meanings, the terms "controlled
by" and "under common control with"), as
used with respect to any person, means the
possession, directly or indirectly, of the
power to direct or cause the direction of
the management and policies of such person,
whether through the ownership of voting
shares or by contract or otherwise.
"Amending Agreement" means the agreement dated 23rd September,
2002 pursuant to which the parties to this
Agreement agreed to amend and restate this
Agreement.
"Approved Budget" means the total expenditures budget for the
period approved by the general meeting of
the Shareholders of the Borrower authorising
a certain amount of total expenditures for
the period, comprising Operating Costs and
Project Costs.
"Auditors" means such firm of independent accountants
as the Borrower may from time to time
appoint as its auditors in accordance with
Section 5.05.
"Available Amount" means, as of any date, an amount determined
by the Bank to be:
(a) the lesser of:
(1) the Commitment as of such
date; and
15
(2) the Borrowing Base as
calculated in accordance
with the latest banking
case prepared pursuant to
Section 8.05(c);
less:
(b) the aggregate principal amount of the
Loan outstanding on such date (but not
including the amount of any Disbursement
made on such date).
"Borrowing Base" means, as of any date, the lesser of:
(a) one-half of the net present value,
discounted at the Discount Rate, of all
Future Net Cash Flow for the period from
such date to the Reserve Tail Date; and
(b) four-sevenths of the net present value,
discounted at the Discount Rate, of all
Future Net Cash Flow for the period from
such date to 27 July 2006 or, if earlier,
the Reserve Tail Date.
"Borrowing Base Reserves" means, at any time, 100% of the proven
developed reserves and 20% of the proven
undeveloped reserves in the Fields, as set
forth in the then current Development Plan.
"Business Day" means a day on which commercial banks and
foreign exchange markets are open for the
transaction of business in the Loan Currency
interbank market in London,
England and on
which commercial banks and foreign exchange
markets settle payments in the Loan Currency
in New York, New York.
"Cash Collateral Account" means the Offshore Bank Account designated
as such in accordance with Section 5.11(e).
"Charter" means, in respect of any company,
corporation, partnership, enterprise,
governmental agency or other entity, its
founding act, articles of incorporation and
bylaws, memorandum and articles of
association, statutes or similar instrument.
"Commitment" means, for each period set forth in Schedule
1, the amount set forth in Schedule 1
opposite such period to the extent that such
amount has not been cancelled pursuant to
Section 3.03, which amount is the maximum
principal amount of the Loan during such
period hereunder.
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"Commitment Period" means the period commencing on 21 November
1996 and terminating on the earliest of (a)
27 July 2006, (b) the Reserve Tail Date, and
(c) the date the obligation of the Bank to
make Disbursements hereunder terminates in
accordance with the terms of this Agreement.
"Contracts Assignment
Agreement" means the instrument pursuant to which the
Borrower assigns to the Bank all of its
rights, interests and benefits under the
Marketing Agreements, the Transportation
Agreement, the Services Agreement and the
Supply Agreements, and all performance
bonds, warranties, guarantees and
undertakings issued thereunder, together
with the notices and acknowledgements and
consents in the forms attached thereto,
dated 9 April/23 June 1997 as from time to
time amended and/or supplemented in form and
substance satisfactory to the Bank.
"Current Assets" means the aggregate (as of the date of
calculation) of the Borrower's cash,
marketable securities, trade and other
receivables realisable within one year,
inventories and prepaid expenses which are
to be charged to income within one year, but
excluding any receivables past due more than
60 days or doubtful receivables and any
funds temporarily on hand pending
application to property, plant and equipment
included in the Project.
"Current Liabilities" means the aggregate (as of the date of
calculation) of all liabilities of the
Borrower falling due on demand or within one
year, including the portion of Long-term
Debt falling due within one year, but
excluding liabilities for property, plant
and equipment to the extent of the amount of
funds therefore excluded from the
calculation of Current Assets.
"Current Ratio" means the result obtained by dividing
Current Assets by Current Liabilities. For
the purpose of the calculation of the
Current Ratio, the Subordinated Shareholder
Loans shall not be included among the
Current Liabilities, but only provided that
the agreements under which such Subordinated
Shareholder Loans are provided are in form
and substance satisfactory to the Bank.
"Debt" means, with respect to any person, all
obligations of such person for the payment
or repayment of money including, without
limitation:
(a) any amounts payable by such person under
leases or similar arrangements over their
respective periods;
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(b) any credit to such person from a
supplier of goods or under any instalment
purchase or other similar arrangement; and
(c) any liabilities and obligations of third
parties to the extent that they are
guaranteed by such person or such person has
otherwise assumed or become liable for the
payment of such liabilities or obligations
or to the extent that they are secured by
any Lien upon property owned by such person
whether or not such person has assumed or
become liable for the payment of such
liabilities or obligations.
"Debt Service Account" means the Offshore Bank Account designated
as such in accordance with Section 5.11(d).
"Default Interest Period" means, with respect to any amount overdue
under this Agreement, a period commencing on
the Business Day on which such payment
becomes due or, as the case may be, on the
last Business Day of the previous Default
Interest Period, and ending on a Business
Day selected by the Bank.
"Development Plan" means the development plan for the Project
approved by the Bank in accordance with
Section 8.05(b), as such development plan
may be updated from time to time by the
Borrower in accordance with the provisions
of Section 8.05(c).
"Disbursement" means the disbursement of any portion of the
Loan from time to time pursuant to Section
3.02 or, as the context may require, the
principal amount thereof from time to time
outstanding.
"Disbursement Account" means the Offshore Bank Account designated
as such in accordance with Section 5.11(b).
"Discount Rate" means, for any period, the weighted average
(expressed as a rate per annum) of all
interest charges which are projected (on the
basis of the Financial Model) to be
applicable to all amounts of the Loan
outstanding from time to time during such
period (but without taking into account the
Interest Premium).
"Dollars" or "$" means the lawful currency of the United
States of America.
"Environmental Action Plan" means the plan of nature protection measures
for the Project approved by the Bank in
accordance with Section
18
5.03(b), as such plan may be amended from
time to time with the prior written consent
of the Bank.
"Equipment Pledge
Agreement" means the instrument pursuant to which the
Borrower grants to the Bank a first ranking
security interest in all of the Borrower's
present and future equipment and other
tangible movable assets, dated 9 April/23
June 1997 as from time to time amended
and/or supplemented in form and substance
satisfactory to the Bank.
"Event of Default" means any one of the events specified in
Section 7.01.
"Export Sales Account" means the Offshore Bank Account designated
as such in accordance with Section 5.11(c).
"Expropriation
Compensation Assignment
Agreement" means the instrument pursuant to which the
Borrower and the Shareholders grant to the
Bank a valid security interest of first
priority in all of their rights to claim and
receive compensation in the event of
nationalisation, expropriation, requisition
or confiscation of any of their property in
the Russian Federation relating to the
Borrower or its business or assets, dated 9
April/23 June, 1997 as from time to time
amended and/or supplemented in form and
substance satisfactory to the Bank.
"Field Life Debt Service
Coverage Ratio" means, on any date, (a) the net present
value, discounted at the Discount Rate, of
all Future Net Cash Flow for the period from
such date to the Reserve Tail Date, divided
by (b) the aggregate principal amount of the
Loan outstanding on such date.
"Fields" means the North Gubkinskoye, the
Prisklonovoye and the South Tarassovskoye
oil fields located 60 kilometres west of
Tarko-Sale in the Purovsky District,
Yamal-Nenets Autonomous Region, Tyumen
Province of the Russian Federation, as
specified in the License and the mining
allotment attached thereto.
"Financial Debt" means, with respect to any person, all Debt
of such person:
(a) for or in consideration of borrowed
money or arising out of any credit facility;
(b) for the deferred purchase price of
assets or services (other than trade
payables arising in the ordinary course of
business);
19
(c) arising under any lease which would be
capitalised on the balance sheet of the
lessee in accordance with Generally Accepted
Accounting Principles or which is otherwise
in substance a financing lease; or
(d) arising under any other transaction
which, in accordance with Generally Accepted
Accounting Principles, has the commercial
effect of borrowing.
"Financial Model" means the financial model agreed by the Bank
and used by the Borrower to prepare the
financial projections for the Project, as
amended from time to time pursuant to
Schedule 2.
"Financial Statements" means the consolidated financial statements
(including a balance sheet, income statement
and statement of changes in financial
position, and notes thereon) of the Borrower
and its Subsidiaries prepared in accordance
with Generally Accepted Accounting
Principles in the United States and,
separately, in accordance with Generally
Accepted Accounting Principles in the
Russian Federation.
"Financial Year" means the period commencing each year on 1
October and ending on the following 30
September, or such other period as the
Borrower may, with the Bank's consent, from
time to time designate as the accounting
year of the Borrower.
"Financing Agreements" means this Agreement, the Shareholders
Support Agreement, the agreement terminating
the Security Sharing Agreement, the
agreement amending and restating the Russian
Bank Account Agreements, the Security
Documents, the letter agreement related to
the front-end commission referred to in
Section 3.04(b), the Disbursement
applications referred to in Section 3.02,
the direct warranty of the Independent
Engineer referred to in Section 4.01(a)(3)
and any other agreements entered into
between the Borrower or any other party and
the Bank and notices, certificates and
applications issued by the Borrower or any
other party to the Bank in connection with
this Agreement or the transactions
contemplated by this Agreement in each case
as amended, varied or supplemented from time
to time, and, in the singular, means any one
of such documents.
"Financing Plan" means the plan for financing the Project as
set forth in Section 2.01(c).
"Future Net Cash Flow" means, for any period, the gross revenues
which are projected to be realised by the
Borrower from the
20
production and sale of oil and gas from the
Fields during such period taking into
account the Borrowing Base Reserves only,
less the sum of Project Costs which are
projected to be incurred during such period
in the production of the Borrowing Base
Reserves and the Operating Costs which are
projected to be incurred during such period,
all in accordance with the Financial Model.
"Generally Accepted
Accounting Principles" means accounting principles generally
accepted in the United States or the Russian
Federation, as the case may be, and
consistently applied.
"Harvest" means
Harvest Natural Resources Inc., a
corporation organised and existing under the
laws of the State of Delaware in the United
States of America.
"Immovable Property
Mortgage Agreement" means the instrument pursuant to which the
Borrower grants to the Bank a first ranking
mortgage over all of the Borrower's present
and future immovable property, dated 9
April/23 June 1997 as from time to time
amended and/or supplemented in form and
substance satisfactory to the Bank.
"Immovable Property
Mortgage Agreement No 1" means the instrument pursuant to which the
Borrower grants to the Bank a first ranking
mortgage over certain of the Borrower's
immovable property identified by the Bank in
its sole discretion which instrument shall
be in form and substance satisfactory to the
Bank.
"Immovable Property
Mortgage Agreement No 2" means the instrument pursuant to which the
Borrower grants to the Bank a first ranking
mortgage over all of the Borrower's present
and future immovable property except for the
property covered by the Immovable Property
Mortgage Agreement No 1, which instrument
shall be in form and substance satisfactory
to the Bank.
"Independent Engineer" means Xxxxx Xxxxx Company or such other firm
of engineers as may be selected from time to
time by the Borrower with the prior written
approval of the Bank.
"Independent Engineer
Agreement" means the consultancy agreement to be
entered into between the Borrower and the
Independent Engineer, which agreement shall
be in form and substance satisfactory to the
Bank.
21
"Insurance Assignment
Agreement" means the instrument pursuant to which the
Borrower assigns to the Bank all of its
rights, interests and benefits under all
insurance now or hereafter maintained by the
Borrower and all other insurance relating to
the Project, together with the notices and
acknowledgements and consents in the forms
attached thereto, dated 11 July, 1997 as
from time to time amended and/or
supplemented in form and substance
satisfactory to the Bank.
"Interbank Rate" means, for each Interest Period, the offered
rate which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on the relevant
Interest Determination Date for the period
which is closest to the duration of such
Interest Period (or, if two periods are
equally close to the duration of such
Interest Period, the average of the two
relevant rates); provided that:
(a) if, for any reason, the Interbank Rate
cannot be determined at such time by
reference to Telerate Page 3750, the
Interbank Rate for such Interest Period
shall be the rate which the Bank determines
to be the arithmetic mean (rounded upward,
if necessary, to nearest 1/16%) of the
offered rates for deposits in the Loan
Currency in an amount comparable to the
portion of the Loan scheduled to be
outstanding during such Interest Period for
a period equal to such Interest Period which
are advised to the Bank by three major banks
active in the London interbank market
selected by the Bank; and
(b) if the Bank determines that deposits in
the Loan Currency are not being offered in
the London interbank market in such amounts
or for such period, the Interbank Rate for
such Interest Period shall be the cost to
the Bank of funding the portion of the Loan
scheduled to be outstanding during such
Interest Period from whatever sources it
selects.
"Interest
Determination Date" means, for any Interest Period, the date two
Business Days prior to the first day of such
Interest Period.
"Interest Payment Date" means any day which is 27 January or 27 July
in any year; provided, however, that, if any
Interest Payment Date would otherwise fall
on a day which is not a Business Day, such
Interest Payment Date shall be changed to
the next succeeding Business Day.
"Interest Period" means each period of six months commencing
on an Interest Payment Date and ending on
the next Interest
22
Payment Date, except that, in the case of
the first Interest Period applicable to each
Disbursement:
(a) if such Disbursement is made at least 15
Business Days prior to the next Interest
Payment Date, such Interest Period shall
commence on the date of such Disbursement
and end on the next Interest Payment Date;
and
(b) if such Disbursement is made less than
15 Business Days prior to the next Interest
Payment Date, such Interest Period shall
commence on the date of such Disbursement
and end on the Interest Payment Date
following the next Interest Payment Date.
"Interest Premium" means an interest rate based on the amount
of the Borrower's audited net profits
calculated in accordance with Generally
Accepted Accounting Principles accepted in
the United States for a Financial Year to be
applied to the Interest Period commencing on
the next Interest Payment Date to occur
after the end of such Financial Year and the
next succeeding Interest Period and
determined as follows:
Audited net profits Interest Premium
($) (basis points)
less than 8,000,000
between 8,000,000 and 12,000,000 1%
between 12,000,000 and 16,000,000 2%
greater than 16,000,000 3%
"License" means the license to use natural resources
issued to the Borrower and signed on 2 April
1993 by the Committee of the Russian
Federation for Geology and Use of
Underground Resources and on 18 June 1993 by
the Administration of the Yamal-Nenets
Autonomous Region, as amended by an
amendment dated 30 July 1996 and as further
replaced by the License No. CLX 10867 HP
registered by the Russian Federal Geological
Fund on 17 March 2000 and License No. CLX
11053 HP registered by the Russian Federal
Geological Fund on 10 October 2001 as
further amended or replaced from time to
time in accordance with the provisions of
this Agreement.
"License Agreement" means the agreement dated 11 February 2000
among the Ministry of Natural Resources of
the Russian Federation for Geology and Use
of Underground Resources, the
23
Administration of the Yamal-Nenets
Autonomous Region and the Borrower on the
right to use the underground resources of
the North Gubkinskoye and Prisklonovoye
Fields (as amended from time to time) and
the agreement (undated) among the Ministry
of Natural Resources of the Russian
Federation, the Administration of the
Yamal-Nenets Autonomous Region and the
Borrower (as amended from time to time) on
the right to use underground resources of
the South Tarassovskoye Field, which are
supplements to the License.
"Lien" means any mortgage, pledge, charge,
privilege, priority, hypothecation,
encumbrance, assignment, lien, attachment,
set-off or other security interest of any
kind upon or with respect to, or any
segregation of or other preferential
arrangement with respect to, any present or
future assets, revenues or rights,
including, without limitation, any
designation of loss payees or beneficiaries
or any similar arrangement under any
insurance policy.
"Loan" means the loan provided for in Section 3.01
or, as the context may require, the
principal amount thereof from time to time
outstanding.
"Loan Currency" means the currency in which the Commitment
is denominated as set forth in Schedule 1.
"Loan Life Debt Service
Coverage Ratio" means, on any date, (a) the net present
value, discounted at the Discount Rate, of
all Future Net Cash Flow for the period from
such date to 27 July 2006 or, if earlier,
the Reserve Tail Date, divided by (b) the
aggregate principal amount of the Loan
outstanding on such date.
"Long-term Debt" means, with respect to any person, any Debt
of such person which falls due or the final
payment of which is due more than one year
after the date of determination.
"Management Information
System" means an accounting and management
information system which enables planning
and monitoring of individual projects and
detailed plans of running activities in the
form of a budget proposal necessary for
implementing strategies and achieving the
Borrower's long-term goals, and enabling the
Borrower to achieve an optimal
organisational structure.
"Margin" means 4.75% per annum.
"Marketing Agreements" means:
24
(a) commission agreement no. KM-2002-07
dated 25 December 2001 between Open Joint
Stock Company " Severoimpeks" and the
Borrower;
(b) commission agreement no. 2001-04/04
dated 5 December 2001 between Closed Joint
Stock Company "Rosneftegazeksport" and the
Borrower;
(c) agreement on sale of oil on the domestic
market no. 02-03-02 dated 21 February 2002
between Joint Stock Company "Xxxxxx Respekt"
and the Borrower; and
(d) contract no. 643/12495774/00017 dated 30
August 2001 between the Borrower and Naftex
Oil Trading Ltd;
and all other agreements now or hereafter
entered into by the Borrower in accordance
with the terms of this Agreement for the
marketing or sale of the Borrower's
products, which agreements shall be in form
and substance satisfactory to the Bank, and,
in the singular, means any one of such
agreements.
"Minley" means OJSC "Minley", an open joint stock
company organised and existing under the
laws of the Russian Federation.
"Offshore Account
Assignment Agreement" means the instrument pursuant to which the
Borrower assigns to the Bank the Borrower's
right, title and interest in and to the
Offshore Bank Accounts, together with the
notices and acknowledgements and consents in
the forms attached thereto, dated 30th
September, 1997 as from time to time amended
and/or supplemented in form and substance
satisfactory to the Bank.
"Offshore Bank Accounts" has the meaning given to it in Section
5.11(a).
"Offshore Bank Account
Agreement" means the accounts agreement to be entered
into among the Borrower, Citibank, N.A.,
London Branch, and Moscow Narodny Bank
Limited relating to the Offshore Bank
Accounts, dated 30th September, 1997 as from
time to time amended and/or supplemented in
form and substance satisfactory to the Bank.
"Operating Costs" means all costs and expenses properly
incurred by the Borrower in accordance with
the Financing Agreements, the Project
Agreements and the Development Plan in
operating and maintaining the Project,
including:
25
(a) all costs and expenses incurred by the
Borrower in operating, maintaining,
repairing, protecting, treating and
servicing the xxxxx and associated
production facilities in the Fields and in
producing, transporting, storing, treating,
disposing of, processing and marketing oil
and gas, waste water and other substances
produced from the Fields;
(b) all license fees and royalties paid by
the Borrower under the License;
(c) insurance premiums paid by the Borrower
in maintaining any of the insurance required
by this Agreement;
(d) administrative overhead expenses
incurred by the Borrower from time to time,
including engineering, data processing,
accounting, legal and purchasing costs and
charges, but excluding any such amount in
respect of which the Borrower is entitled to
be reimbursed by any person (until such
amount is converted on the accounts of the
Borrower to a loss following non-payment);
(e) any fees payable by the Borrower to the
banks at which the Offshore Bank Accounts
and the Russian Bank Accounts are located
and to any security trustee with respect to
such accounts;
(f) any fees, commissions, charges, costs
and expenses due and payable pursuant to
this Agreement and the other Financing
Agreements to the Bank, including the fees
and expenses of the Independent Engineer and
the Bank's outside counsel and insurance,
environmental and other consultants; and
(g) all taxes, rates, charges, assessments,
duties and tariffs which at any time are
imposed or assessed on the Borrower or its
income, profits or revenues, imports of
goods or services for the Project or
production, or the sale or export of
production, from the Fields;
but excluding, for the avoidance of doubt,
depreciation, amortisation and other
non-cash items, capital expenditures other
than for maintenance, repairs and
replacements essential to the operation of
the Project, costs met from insurance
proceeds not required to be reflected in the
Borrower's financial accounts under
Generally Accepted Accounting Principles in
the United States and principal and interest
due and payable under this Agreement.
26
"Participant" means a person from whom the Bank receives a
formal commitment to acquire a participation
in the Loan or, as the case may be, any
successor or assignee of such person.
"Participation" means the investment of a Participant in the
Loan or, as the context may require, in a
Disbursement.
"Permitted Liens" means the Liens referred to in Sections
6.05.
"Potential Event of Default" means any event which, with the giving of
notice, the passage of time or the making of
any determination, or any combination
thereof, would become an Event of Default.
"Project" means the commercial development of the
Fields estimated to contain reserves of
297,000,000 barrels of recoverable crude
oil, including the drilling of at least 275
additional xxxxx and the expansion of
production facilities and infrastructure, to
provide for a maximum production of 75,000
barrels of crude oil per day.
"Project Agreements" means the Borrower's Charter, the License
(including the Licence Agreement), the
Marketing Agreements, the Services
Agreement, the Transportation Agreement, the
Offshore Bank Account Agreement and the
Independent Engineer Agreement, and, in the
singular, means any one of such agreements.
"Project Costs" means costs properly incurred by the
Borrower in connection with the development
of the Project, as such costs are estimated
in Section 2.01(b) and described in the
Development Plan, but excluding, for the
avoidance of doubt, any costs incurred in
exploring for oil and gas in the Fields or
elsewhere and any Operating Costs.
"Reserve Tail Date" means the date on which 30% of the Borrowing
Base Reserves are projected, in the
Development Plan as updated from time to
time in accordance with Section 8.05(c), to
remain to be produced.
"Revenues" means, for any period, the Borrower's gross
revenues from all sources during such
period, including, without limitation, all
revenues from the production and sale of oil
and gas, the proceeds of any insurance or
other claim (other than insurance proceeds
used to meet costs not required to be
reflected in the Borrower's financial
accounts under Generally Accepted Accounting
Principles in the United States), any
refunds of taxes, any investment income and
any payments received by the Borrower under
the Marketing Agreements, the Transportation
Agreement and the other Project Agreements.
27
"Roubles" or "Rb." means the lawful currency of the Russian
Federation.
"Russian Account
Pledge Agreement" means the instrument pursuant to which the
Borrower grants to the Bank a security
interest in the Borrower's right, title and
interest in and to the Russian Bank
Accounts, together with the notices and
acknowledgements and consents in the forms
attached thereto, dated 11 July 1997 as from
time to time amended and/or supplemented in
form and substance satisfactory to the Bank.
"Russian Bank Accounts" has the meaning given to it in Section 5.12.
"Russian Bank Account
Agreements" means the account agreements relating to the
Russian Bank Accounts entered into between
the Borrower, the Bank and the banks at
which the Russian Bank Accounts are located,
dated 11th June, 1997 as from time to time
amended and/or supplemented in form and
substance satisfactory to the Bank.
"Russian Disbursement
Accounts" means the Russian Bank Accounts designated
as such in accordance with Section 5.12(b).
"Security" means the security created pursuant to the
Security Documents to secure all amounts
owing to the Bank under the Financing
Agreements.
"Security Documents" means the Contracts Assignment Agreement,
the Equipment Pledge Agreement, the
Expropriation Compensation Assignment
Agreement, the Immovable Property Mortgage
Agreement, the Insurance Assignment
Agreement, the Offshore Account Assignment
Agreement, the Russian Account Pledge
Agreement and the Share Pledges, and, in the
singular, means any one of such documents.
"Security Sharing
Agreement" means the security sharing agreement entered
into between International Moscow Bank and
the Bank providing for, inter alia, sharing
of the Security and any other security
interest created in favour of either
International Moscow Bank and the Bank to
secure any amounts owing by the Borrower,
dated 28 May, 1997 as from time to time
amended and/or supplemented in form and
substance satisfactory to the Bank.
28
"Services Agreement" means the services agreement dated 1 January
1999 and the secondment agreement dated 1
June 2002 between the Borrower and Harvest
or any other services agreement to be
entered into between Harvest (or an
Affiliate thereof) and the Borrower with the
same subject matter.
"Share Pledges" means the instruments pursuant to which
Harvest and Minley pledge in favour of the
Bank all of the participation interests in
the Borrower owned by Harvest and Minley,
respectively, respectively dated 9 April/23
June 1997 as from time to time amended
and/or supplemented.
"Shareholders" means Minley and Harvest.
"Shareholders Support
Agreement" means the performance, subordination and
share retention agreement dated 9 April 1997
entered into among the Borrower, the Bank
and certain other parties as amended,
novated, supplemented or varied from time to
time.
"Short-term Debt" means, with respect to any person, any Debt
of such person other than Long-term Debt.
"Subordinated
Shareholder Loans" means Debt of the Borrower owing to any
Shareholder and which is subordinated,
pursuant to the Shareholders Support
Agreement, to the payment of all amounts
payable to the Bank under the Financing
Agreements.
"Subsidiary" means, with respect to any entity, any other
entity over 50% of whose capital is owned,
directly or indirectly, by such entity or
which is otherwise effectively controlled by
such entity.
"Supply Agreements" means, collectively, the major agreements
now or hereafter entered into by the
Borrower in accordance with the terms of
this Agreement for the supply of services,
equipment or materials for the Project as
set forth in the Development Plan, which
agreements shall be in form and substance
satisfactory to the Bank, and, in the
singular, means any one of such agreements.
"Telerate Page 3750" means the display of London interbank
offered rates of major banks for deposits in
the Loan Currency designated as page 3750 on
the Dow Xxxxx Telerate Service (or such
other page as may replace page 3750 on the
Dow Xxxxx Telerate Service for the purpose
of displaying London interbank offered rates
for deposits in the Loan Currency).
29
"Transportation Agreement" means agreement no. 0002120 on
transportation of crude oil dated 1 February
2002 between Transneft Joint Stock Company
and the Borrower or any other agreement
hereafter entered into between the Borrower
and the Transneft Joint Stock Company or any
other pipeline operator in accordance with
the terms of this Agreement for the
transportation of the Borrower's products,
which agreement shall be in form and
substance satisfactory to the Bank.
SECTION 1.02. INTERPRETATION
(a) In this Agreement, unless the context otherwise requires, words denoting the
singular include the plural and vice versa, and words denoting persons include
corporations, partnerships and other legal persons.
(b) In this Agreement, references to a specified Article, Section, Schedule or
Exhibit shall be construed as a reference to that specified Article or Section
of, or Schedule or Exhibit to, this Agreement.
(c) The headings and the Table of Contents are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
(d) In this Agreement, references to any person includes its respective
permitted successors, transferees and assigns.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.01. REPRESENTATIONS REGARDING THE PROJECT
The Borrower represents and warrants as follows:
(a) DEVELOPMENT PLAN. The Project conforms in all material respects with the
detailed description thereof contained in the Development Plan. As of the date
of the Amending Agreement, the information contained in the Development Plan is
true, complete and correct in all material respects, contains no untrue or
misleading statement and does not omit any material fact necessary to make the
statements therein not untrue or misleading. To the extent that any information
contained in the Development Plan relates to forecasts or projections of future
events, such forecasts and projections have been prepared in good faith
utilising due and careful consideration and based on assumptions that were
reasonable at the time that such forecasts and projections were prepared and
there has been nothing since the date of the Development Plan that would make
such forecasts and projections unreasonable.
(b) ESTIMATED PROJECT COSTS. As of the date of the Amending Agreement, the total
estimated cost of the Project is approximately $482,005,000 as follows:
30
ITEM DOLLARS
INITIAL PROJECT COSTS
Drilling and completion 296,600,000
Pads and connecting roads 19,300,000
Gathering systems 6,200,000
Power systems 9,800,000
Oil processing equipment 10,800,000
Offices, housing and field camps 2,600,000
Miscellaneous valves and fittings 7,400,000
Main roads 12,200,000
Engineering and design 3,300,000
Environmental restoration 4,400,000
Water pumps and injection systems 31,200,000
Pipeline 7,300,000
Financing costs 1,105,000
TOTAL INITIAL PROJECT COSTS 412,205,000
ADDITIONAL PROJECT COSTS FOR SOUTH TARASSOVSKOYE FIELD
Drilling and completion 45,300,000
Pads and connecting roads 3,300,000
Gathering lines 3,700,000
Power systems 1,400,000
Water pumps and injection systems 2,700,000
Other costs 13,400,000
TOTAL ADDITIONAL PROJECT COSTS 69,800,000
TOTAL PROJECT COST 482,005,000
31
(c) FINANCING PLAN. The proposed sources of financing the Project are as
follows:
INITIAL FINANCING PLAN
INITIAL EQUITY DOLLARS
Harvest 25,700,000
Minley 50,000,000
TOTAL INITIAL EQUITY 75,700,000
INITIAL PROJECT-GENERATED CASH 271,505,000
INITIAL LONG-TERM DEBT
EBRD 55,000,000
International Moscow Bank 10,000,000
TOTAL INITIAL LONG-TERM DEBT 65,000,000
TOTAL INITIAL FINANCING
412,205,000
ADDITIONAL FINANCING PLAN FOR SOUTH TARASSOVSKOYE FIELD
SUBORDINATED DEBT
Harvest 2,500,000
Minley 5,000,000
TOTAL SUBORDINATED DEBT 7,500,000
PROJECT-GENERATED CASH
34,300,000
ADDITIONAL LONG-TERM DEBT
EBRD 28,000,000
TOTAL ADDITIONAL LONG-TERM DEBT 28,000,000
TOTAL ADDITIONAL FINANCING
69,800,000
TOTAL FINANCING 482,005,000
SECTION 2.02. REPRESENTATIONS REGARDING THE BORROWER
The Borrower represents and warrants as follows:
32
(a) INCORPORATION. The Borrower is a limited liability company, duly organised
and validly existing under the laws of the Russian Federation and registered
with all relevant registration bodies in the Russian Federation, and has full
power to own the properties which it owns and proposes to own for the purposes
of the Project and to carry out the business which it carries out and proposes
to carry out for the purposes of the Project.
(b) SUBSIDIARIES. The Borrower has no Subsidiaries.
(c) CHARTER CAPITAL. The Borrower has a charter capital of Rb. 62,957,763. The
following is a list of all participants in the Borrower, with their respective
percentage participation interests in the Borrower, as of the date of the
Amending Agreement:
PARTICIPANT PERCENTAGE
Harvest 34
Minley 66
TOTAL 100
Of the charter capital referred to above, the equivalent in Roubles of
$75,700,000 has been fully paid and all in-kind capital contributions in respect
of such participation interests have been made for full commercial value. There
are no options, warrants or instruments convertible into participation interests
or other agreements relating to the existing capital of the Borrower or for the
issuance of additional participation interests of any class or description of
the Borrower. No person has any right (other than as a shareholder) to share in
the profits of the Borrower.
(d) DIRECTORS AND OFFICERS. As of the date of the Amending Agreement, the Acting
General Director of the Borrower is Mr. Ye. Grebenshikov, the Deputy General
Directors of the Borrower are Mr. I. Ryaskov and Xx. X. Xxxx, the Finance
Director of the Borrower is Xx. X. Xxxxx and the Chief Accountant of the
Borrower is Xxx. X. Xxxxxxx. As of the date of the Amending Agreement, Xx. X.
Xxxxxxxxx is the representative of Minley in his capacity as President and Xx.
X. Xxxx is the representative of Harvest in his capacity as the President and
Chief Executive Officer.
(e) FINANCIAL STATEMENTS. The balance sheet of the Borrower as at 30 September
2001 and the related income statement and statement of changes in financial
position of the Borrower for the Financial Year ending on that date, and the
notes thereon, certified by the Auditors, will present a true and fair view of
the financial condition of the Borrower as of the date of such balance sheet and
for the period covered by such income statement and statement of changes in
financial position and will be prepared in accordance with Generally Accepted
Accounting Principles in the United States and, separately, in accordance with
Generally Accepted Accounting Principles in the Russian Federation. The Borrower
had, as of the date of such balance sheet, no material contingent obligations,
liabilities for taxes or unusual forward or long term commitments which will not
be disclosed by, or reserved against in, such balance sheet or the notes
thereto. Since the date of such balance sheet, the Borrower has not suffered any
material adverse change in its business prospects or financial condition,
incurred any substantial or unusual loss or liability or undertaken or agreed to
undertake
33
any substantial or unusual obligation except under the Financing Agreements and
Project Agreements.
(f) TITLE TO ASSETS. The Borrower owns and has good and marketable title to all
of the assets (other than the Fields), the ownership of which will be reflected
in its most recent balance sheet referred to in Section 2.02(e) or which are
referred to in the Security Documents. Pursuant to the License, the Borrower has
the exclusive right to use the Fields until 19 September 2018 or 19 March 2023,
depending on the Field, for the purpose of exploration and production of crude
oil, gas and condensate, has or will have good and marketable title to all of
the crude oil, gas and condensate produced from the Fields, free and clear of
all Liens other than the Security, and has the right to transport, market and
sell all of the crude oil, gas and condensate produced from the Fields. The
Borrower's assets, including without limitation its rights to the crude oil, gas
and condensate produced from the Fields and the proceeds from the sale thereof,
are not subject to any Lien, and the Borrower is not subject to any contract,
arrangement or law, whether conditional or unconditional, pursuant to which any
such Lien may be created, except for Permitted Liens. The Borrower's assets are
insured against such risks and in such amounts as are customary internationally
for businesses of a like nature.
(g) MATERIAL CONTRACTS. As of the date of the Amending Agreement, the Borrower
is not a party to, or committed to enter into, any agreement, other than the
Financing Agreements, the Project Agreements and the Supply Agreements:
(1) that involves the payment of more than $500,000 (or the equivalent
thereof in other currencies) per year or in the aggregate more than
$1,500,000 (or the equivalent thereof in other currencies) over the
term of such agreement;
(2) that relates to the Project; or
(3) that would or might affect the judgement of a prospective lender in
considering whether to provide financing to the Borrower.
(h) COMPLIANCE WITH LAW. The Borrower is not in violation of any law presently
in effect. To the best of the Borrower's knowledge, no law has been proposed or
is expected which may have a material adverse effect on its business prospects
or financial condition or its ability to perform any of its obligations under
the Financing Agreements or Project Agreements. All tax returns and reports of
the Borrower required by law to be filed have been duly filed and all tax
assessments, fees and other governmental charges upon the Borrower, its
properties and its income, which are due and payable, have been paid, other than
those currently payable without penalty or interest. Neither the Borrower nor
any of its officers, directors or authorised employees, agents or
representatives has paid, promised to pay or offered to pay, or authorised the
payment of, any commission, bribe, pay-off or kickback related to the Project
that violates any applicable law or entered into any agreement pursuant to which
any such commission, bribe, pay-off or kickback may or will at any time be paid.
(i) NO DEFAULT. The Borrower is not in default under any agreement, obligation
or duty to which it is a party or by which it or any of its properties or assets
is bound and there exists no Event of Default and no Potential Event of Default.
34
(j) ENVIRONMENTAL COMPLIANCE. The Borrower and its businesses, operations,
assets, equipment, property, leaseholds and other facilities are in compliance
with the provisions of all applicable environmental, health and safety laws. The
Borrower has been issued all required permits, licenses, certificates and
approvals relating to, and has received no complaint, order, directive, claim,
citation or notice from any governmental authority or other person with respect
to, air emissions, discharges to surface water or ground water, noise emissions,
solid or liquid waste disposal, the use, generation, storage, transportation or
disposal of toxic or hazardous substances or wastes or other environmental,
health or safety matters.
(k) LITIGATION. The Borrower is not engaged in, or, to the best of its
knowledge, threatened by, any litigation, arbitration or administrative
proceeding, the outcome of which might have a material adverse effect on its
business prospects or financial condition.
SECTION 2.03. REPRESENTATIONS REGARDING THE AGREEMENTS
The Borrower represents and warrants as follows:
(a) CORPORATE POWER. The Borrower has the corporate power to enter into and
perform the Financing Agreements and Project Agreements to which it is a party.
(b) DUE AUTHORISATION; ENFORCEABILITY; NO CONFLICT. The Financing Agreements and
Project Agreements to which the Borrower is a party have been duly authorised by
the Borrower. This Agreement has been duly executed by the Borrower and this
Agreement constitutes, and the other Financing Agreements and Project Agreements
to which the Borrower is a party, when executed and delivered, will constitute,
valid and legally binding obligations of the Borrower, enforceable in accordance
with their respective terms. The making of the Financing Agreements and Project
Agreements and the compliance with the terms thereof:
(1) will not result in violation of the Borrower's Charter or any
provision contained in any law applicable to the Borrower;
(2) will not conflict with or result in the breach of any provision of,
or require any consent under, or result in the imposition of any Lien
under, any agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its assets is bound; and
(3) will not constitute a default or an event which, with the giving of
notice, the passage of time or the making of any determination, or any
combination thereof, would constitute a default under any such
agreement or instrument.
(c) GOVERNMENTAL APPROVALS. No governmental licenses, approvals, consents,
filings or registrations are required for the due execution, delivery or
performance by the Borrower of any Financing Agreement or Project Agreement, or
the validity or enforceability thereof, except for (1) the authorisation of the
Central Bank of Russia for the incurrence and repayment of the indebtedness
incurred under this Agreement and the establishment and operation of the
Offshore Bank Accounts as contemplated herein, (2)
35
those required for the validity, perfection and priority of the Security as
listed in Schedule 3, and (3) the construction, environmental and operating
permits and approvals listed in the Development Plan.
(d) RANKING. This Agreement constitutes a direct, unconditional and secured
general obligation of the Borrower and the indebtedness incurred by the Borrower
hereunder ranks and will rank in priority of payment at least equal with all
other present and future indebtedness of the Borrower.
(e) SECURITY. Each Security Document will, when executed and delivered and when
the documents, recordings, filings, notifications and registrations listed in
Schedule 3 have been executed or made, constitute a valid and perfected security
interest in, and a Lien of first priority on, the collateral covered by such
Security Document, securing payment of all principal, interest and other amounts
payable to the Bank under the Financing Agreements and ranking senior to all
other Liens on such collateral. The Borrower is not a party to any other
security agreement or instrument creating or purporting to create a Lien on such
collateral.
(f) PROJECT AGREEMENTS. Each of the License, the Services Agreement, the
Marketing Agreements and the Transportation Agreement is in full force and
effect without modification from the form referred to in Section 1.01. There has
occurred no breach, and no event which with the giving of notice, the passage of
time or the making of any determination, or any combination thereof, would
constitute a breach, of any such Project Agreement.
SECTION 2.04. ACKNOWLEDGEMENT AND WARRANTY
The Borrower acknowledges that it has made the representations and
warranties contained in Sections 2.01, 2.02 and 2.03 with the intention of
inducing the Bank to enter into this Agreement and that the Bank has entered
into this Agreement on the basis of, and in full reliance on, each of such
representations and warranties. The Borrower has no knowledge of any additional
facts or matters which would or might reasonably be expected to affect the
judgement of a prospective lender regarding lending to the Borrower. The
Borrower warrants to the Bank that each of such representations and warranties
is true and correct and that none of them omits any matter the omission of which
makes any of such representations and warranties misleading.
ARTICLE III - LOAN
SECTION 3.01. AMOUNT AND CURRENCY
Subject to the terms and conditions of this Agreement, the Bank agrees
to lend to the Borrower, on a revolving basis during the Commitment Period, a
maximum aggregate principal amount not to exceed the Commitment.
36
SECTION 3.02. DISBURSEMENTS
(a) The Borrower may borrow and reborrow the Commitment on any Business Day
during the Commitment Period in one or more Disbursements as requested by the
Borrower. The Borrower may request a Disbursement by submitting to the Bank an
original application for such Disbursement, in the form of Exhibit A and in
substance satisfactory to the Bank, at least 10 Business Days prior to the
proposed date of such Disbursement. Such application shall, unless the Bank
otherwise agrees, be irrevocable and binding on the Borrower.
(b) Each Disbursement shall be:
(1) in an amount not to exceed the Available Amount as of the date of
such Disbursement;
(2) in an amount not less than $2,000,000 or, if less, such Available
Amount; and
(3) in integral multiples of $1,000,000 or such Available Amount.
SECTION 3.03. SUSPENSION AND CANCELLATION
(a) From time to time while the Loan is being disbursed, the Bank may, by notice
to the Borrower, suspend or cancel the right of the Borrower to further
Disbursements:
(1) if the first Disbursement after the date of the Amending Agreement
has not been made by the date six months after the date thereof or such
other date as may be agreed by the parties hereto;
(2) if an Event of Default or Potential Event of Default has occurred
and is continuing; or
(3) if the Board of Governors of the Bank has decided in accordance
with Article 8, paragraph 3, of the Agreement Establishing the Bank
that access by the Russian Federation to Bank resources should be
suspended or otherwise modified.
Upon the giving of such notice, the right of the Borrower to further
Disbursements shall be suspended or cancelled as indicated in the notice. The
exercise by the Bank of the right of suspension shall not preclude the Bank from
exercising its right of cancellation as provided in this Section 3.03, either
for the same or another reason, and shall not limit any other provision of this
Agreement.
(b) The Borrower shall have the right at any time, on not less than 30 days'
prior notice to the Bank, to cancel in whole or in part the then unutilised
portion of the Commitment, provided that:
(1) in the case of a partial cancellation of the Commitment:
(A) such cancellation shall be in an amount of not less than
$1,000,000 and in integral multiples of $1,000,000;
37
(B) the Commitment for the then current period set forth in
Schedule 1 shall be reduced by the amount of such
cancellation; and
(C) if the Commitment for such then current period is thereby
reduced to an amount which is less than the Commitment for any
subsequent period set forth in Schedule 1, the Commitment for
each such subsequent period shall be reduced to the Commitment
for such then current period as so reduced;
(2) the Borrower shall pay to the Bank on the date of cancellation:
(A) all accrued commitment charge on the cancelled portion of
the Commitment and all other amounts due hereunder; and
(B) a cancellation fee equal to the following percentage of
the amount of the Commitment to be cancelled:
DATE OF CANCELLATION PERCENTAGE
On or prior to 18 months from the date of the Amending 2.50
Agreement
After 18 months and on or prior to 30 months from the 1.50
date of the Amending Agreement
After 30 months and on or prior to 42 months from the 0.75
date of the Amending Agreement
After 42 months from the date of the Amending Agreement 0
Any such notice of cancellation by the Borrower shall be irrevocable and binding
on the Borrower. No portion of the Commitment which is cancelled by the Borrower
may be reinstated.
SECTION 3.04. CHARGES, COMMISSIONS AND FEES
(a) The Borrower shall pay to the Bank during the Commitment Period a commitment
charge at the rate of 0.5% per annum on so much of the Commitment as is not,
from time to time, disbursed and outstanding or cancelled. The commitment charge
shall accrue from day to day from the date which is 30 days after 21 November
1996 and shall be calculated on the basis of the actual number of days elapsed
in the relevant period and a 360-day year. The commitment charge shall be due
and payable in arrears on each Interest Payment Date (even though no interest
may be payable on such date). The Bank acknowledges receipt of the commitment
charge accrued until 27 July, 2002.
(b) The Borrower shall pay to the Bank a front-end commission in an amount and
on the dates as separately agreed between the Borrower and the Bank pursuant to
a letter agreement dated 21 November 1996. The Bank acknowledges receipt of this
front-end commission.
38
(c) The Borrower shall pay to the Bank during the term of this Agreement an
annual loan administration fee in the amount of $5,000 per annum. Such loan
administration fee shall be due and payable in advance, for the initial year,
within 30 days after 21 November 1996 and, for each subsequent year, on each
anniversary thereof. In the event that a Participant hereafter acquires a
Participation, the Borrower shall pay to the Bank during the term of this
Agreement an additional annual loan administration fee in the amount of $5,000
per annum for each such Participant. Such additional loan administration fee
shall be due and payable in advance, for the initial year, within 30 days after
receipt by the Borrower of notice from the Bank that such Participant has
acquired such Participation and, for each subsequent year, on each anniversary
of the date on which such Participant acquired such Participation.
SECTION 3.05. INTEREST
(a) Except as provided in Section 3.06, the Borrower shall pay interest on the
principal amount of the Loan from time to time outstanding (or, in the case of
the first Interest Period for each Disbursement, the principal amount of such
Disbursement from time to time outstanding):
(1) until the first repayment installment date set forth in Section
3.07 or, if earlier, the first date on which the outstanding principal
amount of the Loan equals $55,000,000, at a rate equal to the sum of
the Margin and the Interbank Rate for such Interest Period; and
(2) thereafter, the sum of the Margin, the Interest Premium, and the
Interbank Rate for such Interest Period.
(b) Interest shall:
(1) accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest Period;
(2) be calculated on the basis of the actual number of days elapsed and
a 360-day year; and
(3) interest shall be due and payable on the Interest Payment Date
which is the last day of the relevant Interest Period.
(c) On each Interest Determination Date, the Bank shall determine the interest
rate applicable during the relevant Interest Period and promptly give notice
thereof to the Borrower. Each determination by the Bank of the interest rate
applicable to any portion of the Loan shall be final, conclusive and binding
upon the Borrower unless shown by the Borrower to the satisfaction of the Bank
that any such determination has involved clerical error.
SECTION 3.06. DEFAULT INTEREST
(a) If the Borrower fails to pay when due any amount payable by it under this
Agreement, the overdue amount shall bear interest at a rate equal to the sum of:
39
(1) 2.0% per annum;
(2) the Margin; and
(3) the rate of interest offered in the London interbank market for a
deposit in the Loan Currency of an amount comparable to the overdue
amount for a period equal to the relevant Default Interest Period or,
if the Bank determines that deposits in the Loan Currency are not being
offered in the London interbank market in such amounts or for such
period, the cost of funds to the Bank from whatever sources it selects.
(b) Default interest shall:
(1) accrue from day to day from the due date to the date of actual
payment, after as well as before judgement, if any;
(2) be calculated on the basis of the actual number of days elapsed and
a 360-day year;
(3) be compounded at the end of each Default Interest Period; and
(4) be due and payable forthwith upon demand.
(c) Each determination by the Bank of the interest rates applicable to amounts
in default and of Default Interest Periods shall be final, conclusive and
binding upon the Borrower unless shown by the Borrower to the satisfaction of
the Bank that any such determination has involved clerical error.
SECTION 3.07. REPAYMENT
(a) The Borrower shall repay the Loan in instalments on each of 27 January 2000,
27 July 2000, 27 January 2001, 27 July 2001, 27 January 2002, 27 July 2002, 27
January 2004, 27 July 2004, 27 January 2005, 27 July 2005, 27 January 2006 and
27 July 2006. On each such date, the Borrower shall repay such amount of the
Loan as is necessary to ensure that, after such repayment, the outstanding
principal amount of the Loan does not exceed the Commitment for the period
commencing on such date.
(b) The dates for payment of principal of the Loan are intended to coincide with
Interest Payment Dates. If any Interest Payment Date is affected by the proviso
to the definition of "Interest Payment Date", then the corresponding date for
payment of principal shall be changed to coincide with such Interest Payment
Date.
SECTION 3.08. VOLUNTARY AND MANDATORY PREPAYMENT
(a) The Borrower shall have the right at any time, on not less than 30 days'
prior notice to the Bank, to prepay on any Interest Payment Date all or a part
of the principal amount of the Loan then outstanding; provided that:
40
(1) the Borrower furnishes the Bank with evidence satisfactory to the
Bank that there will be sufficient funds in the Debt Service Account
and the Russian Bank Accounts (other than the Russian Disbursement
Accounts) to enable such prepayment to be made in accordance with
Section 5.13(a);
(2) the Borrower shall pay to the Bank at the same time all accrued
interest and other amounts payable on the principal amount of the Loan
to be prepaid and all other amounts due hereunder; and
(3) in the case of partial prepayment, such prepayment shall be in an
amount of not less than $1,000,000 and in integral multiples of
$1,000,000.
Any such notice of prepayment by the Borrower shall be irrevocable and binding
on the Borrower and, upon delivery of such notice, the Borrower shall be
obligated to prepay the Loan in accordance with the terms thereof.
(b) In the event that, at any time, the outstanding principal amount of the Loan
exceeds the Borrowing Base as calculated in accordance with the most recent
banking case prepared pursuant to Section 8.05(c), the Borrower shall, on the
next Interest Payment Date, prepay such amount of the Loan as is necessary to
ensure that, after such prepayment, the outstanding principal amount of the Loan
equals the Borrowing Base.
(c) Amounts of the Loan prepaid by the Borrower under Section 3.08(a) or 3.08(b)
may be reborrowed by the Borrower in accordance with the provisions of Section
3.02.
SECTION 3.09. PAYMENTS
(a) Payments of principal, interest, charges, commissions, fees, expenses and
any other amounts due to the Bank under this Agreement shall be made in the Loan
Currency, for value on the due date, to such bank or banks, and in such place or
places, as the Bank may from time to time designate by notice to the Borrower.
(b) The sums to be disbursed by the Bank to the Borrower hereunder shall be
payable in the Loan Currency in New York, New York for value, unless otherwise
agreed by the Borrower and the Bank, on the value date requested by the Borrower
in its Disbursement application, to the account of the Bank for the benefit of
the Borrower. The Borrower hereby irrevocably authorises and instructs the Bank,
at the Borrower's expenses, to transfer such sums to the Disbursement Account.
(c) If any date for any payment under this Agreement would otherwise fall on a
day which is not a Business Day, then such payment shall be made on the next
succeeding Business Day.
(d) The Bank shall have the right, to the fullest extent permitted by law, to
apply any amount on deposit or account with the Bank to or for the credit of the
Borrower in any currency and whether or not matured, in reduction of amounts due
and payable hereunder, whether or not the Bank has demanded payment hereunder.
The Bank may, to the fullest extent permitted by law, deduct from the proceeds
of any Disbursement any charges, commissions, fees, expenses and other amounts
then due and payable by
41
the Borrower to the Bank under any Financing Agreement and the credit advice of
the Bank shall reflect such deduction. The Bank will give notice to the Borrower
of any such application and/or deduction promptly after having made same.
SECTION 3.10. INSUFFICIENT PAYMENTS
(a) Notwithstanding any other provision of this Agreement, if the Bank at any
time receives less than the full amount then due and payable to it under this
Agreement, the Bank shall have the right to allocate and apply such payment in
any way or manner and for such purpose or purposes under this Agreement as the
Bank in its sole discretion determines, notwithstanding any instruction that the
Borrower may give to the contrary.
(b) The obligation of the Borrower to make payments in accordance with Section
3.09(a) shall not be deemed to have been novated, discharged or satisfied by any
tender of, or recovery under a judgement expressed in, any currency other than
the Loan Currency or by any tender or recovery in any place other than the place
specified in Section 3.09(a), except to the extent to which such tender or
recovery results in the effective payment, in the Loan Currency and at the place
specified in Section 3.09(a), of the full amount due to the Bank hereunder. The
amount, if any, by which such tender or recovery falls short of such amount
shall be and remain due to the Bank as a separate obligation, unaffected by
judgement having been obtained (if such is the case) for any other amounts due
under or in respect of this Agreement.
SECTION 3.11. TAXES
(a) The Borrower shall pay or cause to be paid all present and future taxes,
duties, fees and other charges of whatsoever nature, together with any interest
thereon and penalties with respect thereto, now or at any time hereafter levied
or imposed by the Russian Federation or the Government of the Russian
Federation, or by any department, agency, political subdivision or taxing or
other authority thereof or therein, or by any organisation of which the Russian
Federation is a member, or by any jurisdiction out of which or through which
payments hereunder are made, on or in connection with the payment of any amounts
due to the Bank under this Agreement.
(b) All payments of principal, interest and other amounts due to the Bank under
this Agreement shall be made without set-off or counterclaim and free and clear
of, and without deduction or withholding for or on account of, any such taxes,
duties, fees or charges; provided, however, that, in the event that the Borrower
is prevented by operation of law or otherwise from paying or causing to be paid
such taxes, duties, fees or other charges, the principal, interest or other
amount (as the case may be) due under this Agreement shall be increased to such
amount as may be necessary to yield and remit to the Bank the full amount it
would have received had such payment been made without deduction of such taxes,
duties, fees or other charges.
(c) The provisions of Sections 3.11(a) and 3.11(b) shall not apply to taxes,
duties, fees or other charges to the extent that such taxes, duties, fees or
other charges arise as a direct consequence of a Participation having been
acquired by a Participant whose
42
principal office is located in the Russian Federation or by the permanent office
or establishment in the Russian Federation of a Participant.
SECTION 3.12. UNWINDING COSTS
(a) If, for any reason (including, without limitation, an acceleration pursuant
to Section 7.02 or 7.03), any portion of the Loan becomes due and payable on a
date other than the last day of an Interest Period, the Borrower shall pay to
the Bank on demand the amount, if any, by which:
(1) the interest which would have accrued on such portion of the Loan
from the date on which such portion of the Loan has become due and
payable to the last day of the then current Interest Period at a rate
equal to the Interbank Rate for such Interest Period;
exceeds:
(2) the interest which the Bank would be able to obtain if it were to
place an amount equal to such portion of the Loan on deposit with a
leading bank in the London interbank market for the period commencing
on the date on which such portion of the Loan has become due and
payable and ending on the last day of the then current Interest Period.
(b) If any overdue amount is paid on a date other than the last day of a Default
Interest Period, the Borrower shall pay to the Bank on demand the amount, if
any, by which:
(1) the interest which would have accrued on such overdue amount from
the date of receipt of such overdue amount to the last day of the then
current Default Interest Period at a rate equal to the rate specified
in Section 3.06(a)(3) for such Default Interest Period;
exceeds:
(2) the interest which the Bank would be able to obtain if it were to
place an amount equal to such overdue amount on deposit with a leading
bank in the London interbank market for the period commencing on the
date of receipt of such overdue amount and ending on the last day of
the then current Default Interest Period.
(c) A certificate of the Bank as to any amount payable under this Section 3.12
shall be final, conclusive and binding on the Borrower unless shown by the
Borrower to the satisfaction of the Bank to contain manifest error.
SECTION 3.13. INCREASED COSTS
The Borrower shall, from time to time on demand of the Bank, reimburse
the Bank for any net incremental costs to the Bank of making or maintaining the
Loan or to any Participant of acquiring or maintaining its Participation which
result from any
43
change in applicable law or in the interpretation thereof by any governmental or
regulatory authority charged with the administration thereof subsequent to 21
November 1996. A certificate of the Bank or such Participant as to the amount of
such net incremental costs shall be final, conclusive and binding on the
Borrower unless shown by the Borrower to the satisfaction of the Bank to contain
clerical error.
SECTION 3.14. ILLEGALITY
Notwithstanding anything in this Agreement, if, subsequent to 21
November 1996, any change made in any applicable law or the interpretation or
application thereof by any governmental authority charged with the
administration thereof makes it unlawful for the Bank or any Participant to
continue to maintain or to fund the Loan or its Participation, as the case may
be, then:
(1) upon request by the Bank, the Borrower shall, on the next Interest
Payment Date or such earlier date as the Bank may specify, prepay that
portion of the principal amount of the Loan which the Bank notifies to
the Borrower as being affected by such change, together with all
accrued interest and other amounts payable thereon; and
(2) upon notice from the Bank, the right of the Borrower to
disbursement of any portion of the Loan which the Bank notifies to the
Borrower as being affected by such change and which has not theretofore
been disbursed shall terminate immediately.
SECTION 3.15. LOAN ACCOUNT
The Bank shall open and maintain on its books an account in the
Borrower's name showing the Disbursements and repayments thereof and the
computation and payment of interest, charges, commissions, fees and other
amounts due and sums paid hereunder. Such account shall be final, conclusive and
binding on the Borrower as to the amount at any time due from the Borrower
hereunder unless shown by the Borrower to the satisfaction of the Bank to
contain clerical error.
ARTICLE IV - CONDITIONS PRECEDENT
SECTION 4.01. CONDITIONS OF FIRST DISBURSEMENT
The Bank and the Borrower hereby acknowledge that the obligation of the
Bank to make the first Disbursement was subject to the prior fulfilment, in form
and substance satisfactory to the Bank, of the following conditions precedent
and that such conditions precedent were fulfilled or waived prior to the first
Disbursement under this Agreement:
(a) FINANCING AGREEMENTS. The Bank shall have received duly executed originals
of the following agreements, each in form and substance satisfactory to the
Bank:
(1) the Shareholders Support Agreement;
44
(2) the Russian Bank Account Agreements; and
(3) a direct warranty by the Independent Engineer in favour of the
Bank.
(b) PROJECT AGREEMENTS. The Bank shall have received certified copies of the
following agreements, each in form and substance satisfactory to the Bank:
(1) the License (including the License Agreement);
(2) the Marketing Agreements;
(3) the Services Agreement;
(4) the Transportation Agreement;
(5) the Supply Agreements;
(6) the Offshore Bank Account Agreement; and
(7) the Independent Engineer Agreement.
(c) SECURITY. The Security (other than the Immovable Property Mortgage
Agreement) shall have been validly created and perfected in a manner
satisfactory to the Bank and the Bank shall have received duly executed
originals of the following Security Documents, each in form and substance
satisfactory to the Bank, together with any document, recording, filing,
notification, registration, notarisation or other evidence required, in the
opinion of the Bank, for the creation, validity, perfection or priority of the
Liens of the Bank in or under such Security Documents (other than, in the case
of the Immovable Property Mortgage Agreement, notarisation and registration of
such Security Document):
(1) the Contracts Assignment Agreement;
(2) the Equipment Pledge Agreement;
(3) the Expropriation Compensation Assignment Agreement;
(4) an Immovable Property Mortgage Agreement covering all of the
Borrower's present immovable property;
(5) the Insurance Assignment Agreement;
(6) the Offshore Account Assignment Agreement;
(7) the Russian Account Pledge Agreement; and
(8) the Share Pledges.
(d) CHARTERS. The Bank shall have received certified copies of the Charters
(and, if relevant, certificates of registration and good standing) of the
Borrower, the
45
Shareholders and, at the reasonable request of the Bank, any other parties to
the Financing Agreements and Project Agreements, each as amended to date.
(e) CORPORATE AUTHORISATIONS. The Bank shall have received certified copies of
all corporate (including, if required, shareholder) authorisations and approvals
necessary for the due execution, delivery and performance of the Financing
Agreements and Project Agreements, and any other documents in implementation
thereof, by the Borrower, the Shareholders and for the transactions contemplated
thereby, including the authorisations of the persons signing the Financing
Agreements and Project Agreements on behalf of the Borrower and the Shareholders
to sign such documents and to bind the respective parties thereby.
(f) SPECIMEN SIGNATURES. The Bank shall have received:
(1) a certificate of incumbency and authority of the Borrower
substantially in the form of Exhibit B; and
(2) a certificate of an appropriate officer of each Shareholder
certifying the specimen signature of each person authorised to sign, on
behalf of such party, the Financing Agreements and Project Agreements
to be entered into and performed by such party.
(g) GOVERNMENTAL AND OTHER APPROVALS. The Bank shall have received certified
copies of all governmental, creditors' and other licenses, approvals, consents,
filings and registrations necessary for the execution, delivery and performance
of the Financing Agreements and Project Agreements by the Borrower, the
Shareholders and, at the request of the Bank, any other parties thereto and for
the transactions contemplated thereby, including, without limitation:
(1) the borrowing by the Borrower under this Agreement;
(2) the creation of the Security;
(3) the carrying out of the Project and the Financing Plan;
(4) the remittance to the Bank of all monies payable in respect of this
Agreement and the Security; and
(5) the carrying on of the business of the Borrower as it is presently
carried on and is contemplated to be carried on.
(h) INSURANCE. The Bank shall have received an original insurance certificate
from the Borrower's insurer or insurance broker showing that all insurance
policies and endorsements required pursuant to Section 5.04 are in full force
and effect and certified copies of such insurance policies and endorsements.
(i) AUDITORS LETTER. The Bank shall have received a copy of a letter to the
Auditors from the Borrower substantially in the form of Exhibit C.
(j) EQUITY. The Bank shall have received evidence satisfactory to the Bank that
the Shareholders have contributed, in a manner satisfactory to the Bank, at
least
46
$75,700,000 (or the equivalent thereof in other currencies at then current rates
of exchange) in paid-in capital to the Borrower and the Borrower has expended
such paid-in capital on the Project.
(k) EXISTING FINANCIAL DEBT. The Bank shall have received evidence satisfactory
to the Bank that all Financial Debt of the Borrower (other than Financial Debt
permitted under Section 6.04) and all Liens on any property, revenues or other
assets of the Borrower (other than Permitted Liens) have been discharged in
full.
(l) BANK ACCOUNTS. The Bank shall have received evidence satisfactory to the
Bank that the Offshore Bank Accounts and the Russian Bank Accounts have been
duly established.
(m) INDEPENDENT ENGINEER. The Borrower shall have appointed the Independent
Engineer in a manner satisfactory to the Bank to perform its functions as
provided for in the Financing Agreements.
(n) SURFACE RIGHTS. The Bank shall have received evidence satisfactory to the
Bank that the Borrower has all appurtenant surface land rights required for the
Project.
(o) DEVELOPMENT PLAN. The Bank shall have received the Development Plan, in form
and substance satisfactory to the Bank and the Independent Engineer.
(p) INITIAL BANKING CASE. The Bank shall have received the initial banking case
prepared by the Borrower in accordance with Section 8.05(c) not more than 45
days prior to such Disbursement and such banking case (including the assumptions
and estimates contained therein) shall be in form and substance satisfactory to
the Bank.
(q) AUDITED FINANCIAL STATEMENTS. The Bank shall have received the balance sheet
of the Borrower as at 31 December 1995 and the related income statement and
statement of changes in financial position of the Borrower for the Financial
Year ending on that date, and the notes thereon, certified by the Auditors, and
such balance sheet, income statement and statement of changes in financial
position and notes thereon shall be satisfactory to the Bank in its sole
discretion.
(r) ENVIRONMENTAL ACTION PLAN. The Bank shall have received the Environmental
Action Plan, in form and substance satisfactory to the Bank.
(s) PROCESS AGENT APPOINTMENTS. The Bank shall have received written
confirmation from the agents for service of process appointed by the Borrower
and the Shareholders pursuant to the Financing Agreements of their acceptances
of such appointments.
(t) LEGAL OPINIONS. The Bank shall have received:
(1) the opinion of Emens, Kegler, Xxxxx, Xxxx & Xxxxxx, special counsel
to Xxxxxx Oil and Gas Company;
(2) the opinion of Xxxxx & XxXxxxxx, special Russian counsel to the
Borrower;
47
(3) the opinion of Xxxxx & Overy, special Russian counsel to the Bank;
(4) the opinion of Xxxxx & XxXxxxxx, special English counsel to the
Borrower; and
(5) the opinion of Xxxxx & Overy, special English counsel to the Bank;
in each case regarding such matters incident to the transactions contemplated by
the Financing Agreements and Project Agreements as the Bank shall reasonably
request, which opinions shall be in form and substance satisfactory to the Bank.
SECTION 4.02. CONDITIONS FOR CERTAIN DISBURSEMENTS
(a) If, immediately after any Disbursement requested by the Borrower under this
Agreement, the outstanding principal amount of the Loan would exceed
$30,000,000, then the obligation of the Bank to make such Disbursement shall be
subject to the Bank having received (in addition to any other condition
precedent to making of a Disbursement), together with the application for such
Disbursement:
(A) evidence satisfactory to the Bank that the Shareholders have
jointly provided (by way of equity or subordinated shareholder loans)
$7,500,000 in additional funds to the Borrower and that these funds
have been applied exclusively towards a reduction of the accounts
payable and other Current Liabilities of the Borrower; and
(B) evidence satisfactory to the Bank that no less than $8,000,000 from
Disbursements which shall have been effected after the date of the
Amending Agreement and prior to the requested Disbursement date have
been applied exclusively towards a reduction of the accounts payable
and other Current Liabilities of the Borrower.
(b) If, immediately after any Disbursement requested by the Borrower under this
Agreement, the outstanding principal amount of the Loan would exceed
$40,000,000, the obligation of the Bank to make such Disbursement shall be
subject to the fulfilment, in form and substance satisfactory to the Bank of the
following condition precedent on or prior to the date of the application for
such Disbursement:
(A) the Bank shall have approved of the identity of and the terms of
engagement for the hiring of a consultant to develop the Management
Information System to be installed by the Borrower and shall have been
provided with evidence to its satisfaction as to the engagement of that
consultant on such terms prior to any such disbursement.
(c) If, immediately after any Disbursement requested by the Borrower under this
Agreement, the outstanding principal amount of the Loan would exceed
$45,000,000, the obligation of the Bank to make such Disbursement shall be
subject to the Bank having received (in addition to any other condition
precedent to making of a Disbursement) together with the application for such
Disbursement:
48
(A) a certification of technical and operational completion signed by
the Independent Engineer of the Management Information System to be
installed by the Borrower, the scope of which shall have been agreed
with the Bank in advance, confirming, among other things, that the
Borrower has (1) prepared a FIT-GAP analysis report defining the
Borrower's requirements for an effective and efficient Management
Information System; (2) acquired suitable tools (as identified in the
FIT-GAP analysis report) for creating the Management Information
System; and (3) performed an initial training (as identified in the
FIT-GAP analysis report) of the relevant employees in use of the
Management Information System;
(B) duly executed original of an agreement terminating the Immovable
Property Mortgage Agreement;
(C) duly executed original of the Immovable Property Mortgage Agreement
No 1 together with (1) evidence satisfactory to the Bank as to the due
notarisation and registration of the Immovable Property Mortgage
Agreement No 1 and (2) an opinion of Xxxxx & Xxxxx, special Russian
counsel to the Bank in form and substance to its satisfaction in
respect of same;
(D) duly executed original of the Immovable Property Mortgage Agreement
No 2.
SECTION 4.03. CONDITIONS FOR ANY DISBURSEMENT
The obligation of the Bank to make any Disbursement shall also be
subject to the fulfilment, in form and substance satisfactory to the Bank, of
the conditions that, on the date of the Borrower's application for such
Disbursement and on the date of such Disbursement:
(a) CONTINUING VALIDITY OF DOCUMENTS. All agreements, documents and instruments
delivered to the Bank (A) pursuant to Section 4.01 and 4.02, if applicable, and
(B) as conditions precedent to the effectiveness of the Amending Agreement,
shall be in full force and effect and unconditional.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties made or
confirmed by the Borrower and the Shareholders in the Financing Agreements and
Project Agreements shall be true on and as of such dates with the same effect as
though such representations and warranties had been made on and as of such
dates.
(c) NO DEFAULT. No Event of Default or Potential Event of Default shall have
occurred and be continuing or shall, in the reasonable opinion of the Bank, be
imminent and the Borrower shall not, as a result of such Disbursement, be in
violation of its Charter, any provision contained in any agreement or instrument
to which the Borrower is a party (including this Agreement) or by which the
Borrower is bound or any law applicable to the Borrower.
(d) NO MATERIAL ADVERSE CHANGE. Nothing shall have occurred which, in the
reasonable opinion of the Bank, might have a material adverse effect on the
carrying out
49
of the Project, the Borrower's business prospects or financial condition or the
ability of the Borrower to perform any of its obligations under any Financing
Agreement or Project Agreement.
(e) USE OF PROCEEDS. The proceeds of such Disbursement shall be needed by the
Borrower for the purposes of the Project and the Bank shall have received such
evidence as to the proposed utilisation of the proceeds of such Disbursement and
the utilisation of the proceeds of any prior Disbursement as the Bank reasonably
requests.
(f) DISBURSEMENT APPLICATION. The Bank shall have received an original of the
Borrower's timely application for such Disbursement substantially in the form of
Exhibit A.
(g) MILESTONES. If such Disbursement is made prior to the date 54 months from
the date of the first Disbursement, the Bank shall have received written
confirmation from the Independent Engineer that the Borrower has produced from
the Fields, on average during the six-month period ending on the last six-month
anniversary of the first Disbursement occurring prior to the date of such
Disbursement, not less than the minimum level of daily production of crude oil
set forth in Schedule 4 for such period.
(h) CASH COLLATERAL ACCOUNT. The balance of the Cash Collateral Account shall be
not less than the minimum amount which is required pursuant to Section 5.11(e)
after taking into account such Disbursement and such balance shall have been
generated by Project revenues.
(i) OTHER. The Bank shall have received such other documents and legal opinions
as the Bank may reasonably request.
ARTICLE V - AFFIRMATIVE COVENANTS
Unless the Bank otherwise agrees in writing:
SECTION 5.01. PROJECT IMPLEMENTATION
(a) The Borrower shall carry out the Project in accordance with the Development
Plan and cause the financing specified in the Financing Plan to be applied
exclusively to the Project. The proceeds of the Disbursements to be effected
after the date of the Amending Agreement in the aggregate amount of $8,000,000
shall be applied exclusively towards a reduction of the accounts payable and
other Current Liabilities of the Borrower.
(b) The Borrower shall, at its own expense, retain the Independent Engineer
pursuant to the Independent Engineer Agreement to perform the functions
specified in the Financing Agreements. The Independent Engineer shall, at the
Bank's direction and at the Borrower's expense, visit the Fields once in each
calendar year for the purpose of confirming proven producing and proven
non-producing reserves.
50
SECTION 5.02. MAINTENANCE AND CONTINUITY OF BUSINESS
The Borrower shall maintain its corporate existence in compliance with
all applicable laws. The Borrower shall conduct its business and carry out the
Project in accordance with internationally accepted practices in the oil and gas
industry and in compliance with all applicable laws.
SECTION 5.03. ENVIRONMENT, HEALTH AND SAFETY
(a) The Borrower shall conduct its business with due regard to the environment,
health and safety. The Borrower shall carry out the Project in accordance with
environmental standards in effect from time to time in the jurisdiction in which
the Project is located and with environmental standards existing in the European
Union on the date of the Amended and Restated Agreement (or, in the event that
such standards do not exist in the European Union, as set forth in the World
Bank Group's Pollution Prevention and Abatement Handbook). Without limiting the
foregoing, the Borrower shall diligently implement and adhere to the
Environmental Action Plan.
(b) Not later than 30 days prior to the date of the first Disbursement, the
Borrower shall submit to the Bank for approval the proposed plan of
environmental protection measures for the Project, including, without
limitation, detailed environmental performance criteria, standards, practices
and procedures. Upon approval of such plan by the Bank, such plan shall
constitute the Environmental Action Plan for purposes of this Agreement.
(c) The Borrower shall observe all applicable laws relating to the minimum age
of employment of children, minimum wages, hours of work and occupational health
and safety, not take any action to prevent employees from lawfully exercising
their rights of association and to organise and bargain collectively and not
utilise forced labour.
(d) The Borrower shall consult with the Bank's Environmental Department
regarding environmental measures to be adopted in respect to the expansion of
its operations, including but without limitation, an expansion to other portions
of the area covered by the Borrower's License and that were not notified to the
Bank by the Borrower as being under development at 21 November 1996.
SECTION 5.04. INSURANCE
The Borrower shall maintain insurance against loss, damage and
liability in a manner and with insurers satisfactory to the Bank. The Bank shall
be named as a loss payee (except with respect to liability insurance) and
additional insured under the relevant insurance policies and the interests of
the Bank shall be noted thereon.
SECTION 5.05. ACCOUNTING
(a) The Borrower shall promptly and diligently install, and thereafter maintain,
an accounting and cost control system satisfactory to the Bank. The Bank shall
have received the certification referred to in Section 4.02(c)(A) by not later
than 1 May 2003
51
and from the date of such certification the Borrower shall maintain the
Management Information System in a manner satisfactory to the Bank, including
without limitation, organisation of semi-annual training sessions for its
employees in use of the Management Information System.
(b) The Borrower shall maintain books of account and other records adequate to
present a true and fair view of the consolidated financial condition of the
Borrower and its Subsidiaries and the results of its operations (including the
progress of the Project) in conformity with Generally Accepted Accounting
Principles.
(c) The Borrower shall maintain as auditors of the Borrower a firm of
independent accountants acceptable to the Bank. The Borrower shall authorise, by
a letter substantially in the form of Exhibit C, the Auditors to communicate
directly with the Bank at any time regarding the Borrower's accounts and
operations.
SECTION 5.06. CONTINUING GOVERNMENTAL AND OTHER APPROVALS
The Borrower shall obtain and maintain in force (or, where appropriate,
renew) all governmental, corporate, creditors', shareholders' and other
necessary licenses, approvals, consents, filings and registrations required for
the purposes described in Sections 4.01(e) and 4.01(g) hereof and Sections
3.1(e) and (g) of the Amending Agreement. The Borrower shall perform and observe
all the conditions and restrictions contained in, or imposed on the Borrower by,
such licenses, approvals, consents, filings and registrations.
SECTION 5.07. SECURITY
(a) The Borrower shall, at its own cost, create, perfect, maintain and, where
appropriate, renew the Security in a manner satisfactory to the Bank and take
all actions requested by the Bank which are necessary to ensure that the Liens
created by the Security Documents (including, for the avoidance of doubt, the
Immovable Property Mortgage Agreement) constitute valid and perfected Liens of
first priority over the collateral purported to be covered thereby, securing
payment of all obligations of the Borrower under the Financing Agreements and
ranking senior to the claims of all third parties other than claims secured by
Permitted Liens.
(b) The Bank shall have received the documents referred to in Section
4.02(c)(B), 4.02(c)(C) and 4.02(c)(D) by not later than 31 December 2002.
SECTION 5.08. COMPLIANCE WITH OTHER OBLIGATIONS
The Borrower shall comply with all agreements to which it is a party or
by which it or any of its properties or assets is bound.
52
SECTION 5.09. TAXES
(a) The Borrower shall pay when due all of its taxes, rates, charges and
assessments, including without limitation any taxes, rates, charges and
assessments against any of its properties, other than taxes, rates, charges or
assessments which are being contested in good faith and by proper proceedings
and as to which adequate reserves have been set aside for the payment thereof.
The Borrower shall make timely filings of all tax returns and governmental
reports required to be filed or submitted under any applicable law or
regulation.
(b) The Borrower shall pay all taxes (including stamp taxes), duties, fees or
other charges payable on, or in connection with, the execution, issue, delivery,
registration or notarisation of any Financing Agreement, any Project Agreement
or any other document related to this Agreement. Upon notice from the Bank, the
Borrower shall pay to the Bank, or reimburse the Bank for, an amount equal to
any such taxes, duties, fees or other charges levied on or paid by the Bank.
SECTION 5.10. PROJECT AGREEMENTS
(a) The Borrower shall, except as contemplated by Section 5.10(b) and 5.10(c),
maintain all Project Agreements to which the Borrower is a party in full force
and effect without modification and perform its obligations under, and not
commit any breach of or default under, any such Project Agreement.
(b) If the Transportation Agreement or the Services Agreement expires in
accordance with its terms, the Borrower shall, not later than the date of such
expiration, enter into a new Transportation Agreement or Services Agreement with
the same party and on terms which are substantially the same as those of the
expiring agreement or with such other party and on such other terms as may be
approved by the Bank in writing.
(c) The Borrower shall at all times maintain at least one Marketing Agreement in
effect. If a Marketing Agreement expires in accordance with its terms, the
Borrower may (but shall not be required to) enter into a new Marketing Agreement
with the same party and on terms which are substantially the same as those of
the expiring agreement. All other Marketing Agreements entered into by the
Borrower shall be with such parties and on such terms as may be approved by the
Bank in writing. The Borrower shall use reasonable efforts to ensure that all
Marketing Agreements provide for payments in respect of the sale of the
Borrower's oil and gas production to be made by the purchaser directly to the
Export Sales Account or one of the Russian Bank Accounts (other than the Russian
Disbursement Accounts).
(d) The Borrower shall promptly deliver to the Bank a certified copy of:
(1) each Marketing Agreement and Transportation Agreement entered into
by the Borrower after the date hereof in accordance with Section
5.10(b) or 5.10(c);
(2) each Supply Agreement entered into by the Borrower after the date
hereof; and
53
(3) each agreement entered into by the Borrower after the date hereof
that involves the payment of more than $500,000 (or the equivalent
thereof in other currencies) per year or in the aggregate more than
$1,500,000 (or the equivalent thereof in other currencies) over the
term of such agreement.
Promptly upon entering into any such agreement, the Borrower shall take all
actions necessary to ensure that a valid first ranking security interest is
granted in favour of the Bank in all of its rights, interests and benefits under
such agreement pursuant to the Contracts Assignment Agreement.
(e) In the event that the Borrower sells any or all of its production on the
domestic market, it shall sell such production on terms that provide for payment
to be received by the Borrower in one of the Russian Bank Accounts (other than
the Russian Disbursement Accounts) prior to delivery.
SECTION 5.11. OFFSHORE BANK ACCOUNTS
(a) The Borrower shall establish and maintain four bank accounts denominated in
Dollars at the principal London branch of Citibank, N.A. (such four accounts the
"OFFSHORE BANK ACCOUNTS"), which accounts shall be pledged to the Bank, as
security for all amounts payable by the Borrower under the Financing Agreements.
(b) The Borrower shall designate one of the Offshore Bank Accounts as the
Disbursement Account. All Disbursements under this Agreement shall be deposited
into the Disbursement Account. The Borrower may withdraw amounts from the
Disbursement Account only for the purpose of paying Project Costs in accordance
with the Development Plan or transferring such amounts to one of the Russian
Disbursement Accounts. The Borrower shall not withdraw amounts from the
Disbursement Account for any other purpose without the prior written consent of
the Bank.
(c) The Borrower shall designate one of the Offshore Bank Accounts as the Export
Sales Account. The Borrower shall ensure that all amounts paid to the Borrower
in respect of the sale of oil and gas outside of the Russian Federation and all
other export revenues of the Borrower are, except as provided in Section 5.12,
deposited into the Export Sales Account. If any such amounts are received by the
Borrower in any other account or place, it shall immediately transfer such
amounts to the Export Sales Account. As long as no Event of Default or Potential
Event of Default has occurred and is continuing, the Borrower may withdraw
amounts from the Export Sales Account only for the purposes of:
(1) transferring such amounts to one of the Russian Bank Accounts
(other than the Russian Disbursement Accounts) to the extent (and only
to the extent) that such amounts are subject, in accordance with then
applicable law, to mandatory conversion into Roubles and transferring
to the Russian Federation;
(2) transferring such amounts to the Debt Service Account at least to
the extent required by Section 5.11(d) below;
(3) paying Operating Costs in accordance with the Development Plan; and
54
(4) if and only if the balance of the Disbursement Account and each
Russian Disbursement Account is zero and the Available Amount is zero,
paying Project Costs then due and payable in accordance with the
Development Plan.
The Borrower shall not withdraw amounts from the Export Sales Account
for any other purpose without the prior written consent of the Bank. If
an Event of Default or Potential Event of Default has occurred and is
continuing, the Borrower shall not withdraw any amounts from the Export
Sales Account for any purpose without the prior written consent of the
Bank.
(d) The Borrower shall designate one of the Offshore Bank Accounts as the Debt
Service Account. At least 30% of all Revenues received, whether in the Export
Sales Account, the Russian Bank Accounts or otherwise shall be transferred to
(in the case of the Export Sales Account and in the case of the Russian Bank
Accounts from such accounts) or in any other case shall be deposited into the
Debt Service Account. As long as no Event of Default or Potential Event of
Default has occurred and is continuing, the Borrower may withdraw amounts from
the Debt Service Account pursuant to payment instructions issued in accordance
with the Offshore Account Assignment Agreement only for the purposes of making
payments in accordance with the provisions of Section 5.13.
The Bank may from time to time and in its sole discretion agree with the
Borrower on a different minimum percentage to be transferred to/deposited in the
Debt Service Account.
The Borrower shall not make any other withdrawals amounts from the Debt Service
Account without the prior written consent of the Bank. If an Event of Default or
Potential Event of Default has occurred and is continuing, the Borrower shall
not withdraw any amounts from the Debt Service Account without the prior written
consent of the Bank.
(e) The Borrower shall designate one of the Offshore Bank Accounts as the Cash
Collateral Account. At all times, the Borrower shall maintain a balance in the
Cash Collateral Account equal to not less than:
(1) until 27 July 2003, 30% of the aggregate amount of interest which
is due and payable on the Loan on the next Interest Payment Date; and
(2) thereafter, an amount equal to 30% of the aggregate of the amount
of principal and interest which is due and payable on the Loan on the
next Interest Payment Date.
The Borrower may withdraw amounts from the Cash Collateral Account only for the
purpose of paying principal and interest under this Agreement in the event that
the aggregate balances of the Export Sales Account, the Debt Service Account and
the Russian Bank Accounts (other than the Russian Disbursement Accounts) are
insufficient to pay all amounts specified in Sections 5.13(a)(1) through
5.13(a)(4) or for the purpose of transferring any amount to the extent (and only
to the extent) required by the authorisation issued by the Central Bank of
Russia for the establishment and operation
55
of the Offshore Bank Accounts. The Borrower shall not withdraw amounts from the
Cash Collateral Account for any other purpose without the prior written consent
of the Bank.
SECTION 5.12. RUSSIAN BANK ACCOUNTS
(a) The Borrower shall establish and maintain one or more bank accounts at such
banks located in the Russian Federation as may be proposed by the Borrower and
approved by the Bank (the "RUSSIAN BANK ACCOUNTS"), which accounts shall be
pledged to the Bank as security for all amounts payable by the Borrower under
the Financing Agreements.
(b) The Borrower shall designate two of the Russian Bank Accounts (one
denominated in Roubles and one denominated in Dollars) as the Russian
Disbursement Accounts. The Borrower may withdraw amounts from the Russian
Disbursement Accounts only for the purpose of paying Project Costs in accordance
with the Development Plan. The Borrower shall not withdraw amounts from the
Russian Disbursement Accounts for any other purpose without the prior written
consent of the Bank.
(c) The Borrower shall ensure that all Revenues and any other payments made to
the Borrower which, in either case, are received in Roubles or which the
Borrower is required by applicable law to convert into Roubles or remit to or
retain in the Russian Federation, including without limitation any payments made
to the Borrower in Roubles under the Marketing Agreements, the Transportation
Agreement and the other Project Agreements, are deposited into one of the
Russian Bank Accounts (other than one of the Russian Disbursement Accounts). As
long as no Event of Default or Potential Event of Default has occurred and is
continuing, the Borrower may withdraw amounts from the Russian Bank Accounts
(other than the Russian Disbursement Accounts) only for the purposes of:
(1) converting such amounts into Dollars and transferring such amounts
to the Debt Service Account at least to the extent required by Section
5.11(d) above;
(2) paying Operating Costs in accordance with the Development Plan; and
(3) if and only if the balance of the Disbursement Account and each
Russian Disbursement Account is zero and the Available Amount is zero,
paying Project Costs then due and payable in accordance with the
Development Plan.
The Borrower shall not withdraw amounts from the Russian Bank Accounts (other
than the Russian Disbursement Accounts) for any other purpose without the prior
written consent of the Bank. If an Event of Default or Potential Event of
Default has occurred and is continuing, the Borrower shall not withdraw any
amounts from the Russian Bank Accounts for any purpose without the prior written
consent of the Bank.
56
SECTION 5.13. CASH WATERFALL
(a) As long as no Event of Default or Potential Event of Default has occurred
and is continuing, the Borrower may withdraw amounts from the Debt Service
Account only on each Interest Payment Date and on each such date shall do so for
the purpose of making the following payments in the following order:
(1) this sub-section has been left intentionally blank;
(2) mandatory prepayment of principal of the Loan as required by
Section 3.08(b);
(3) interest due and payable on the Loan on such Interest Payment Date
to the extent accrued at the rate specified in Section 3.05(a)(1) or
3.05(a)(2), as applicable;
(4) scheduled repayment instalments of principal of the Loan due and
payable on such Interest Payment Date under Section 3.07(a);
(5) transfers to the Cash Collateral Account until the balance of the
Cash Collateral Account equals the minimum balance specified in Section
5.11(e);
(6) if and only if the balance of the Disbursement Account and each
Russian Disbursement Account is zero and the Available Amount is zero,
Project Costs then due and payable in accordance with the Development
Plan; and
(7) this sub-section has been left intentionally blank;
(8) voluntary prepayment of principal of the Loan in accordance with
Section 3.08(a) and payments and other distributions to Shareholders or
Affiliates of Shareholders to the extent permitted by Section 6.01;
provided that payments may be made under this category only to the
extent that the Bank is satisfied that, after all payments are made on
such Interest Payment Date under this Section 5.13, sufficient funds
will be available in the Offshore Bank Accounts and the Russian Bank
Accounts for the purpose of paying when incurred all Project Costs and
Operating Costs projected under the Development Plan.
In addition (and notwithstanding Section 5.11 and 5.12) the Borrower may make
the payments referred to in Sections 5.13(a)(2), (3) and (4) above from any of
the Export Sales Account and the Russian Bank Accounts (other than the Russian
Disbursement Account) in the event that the balance of the Debt Service Account
is insufficient to pay in full all such amounts.
(b) The amounts of the payments to be made by the Borrower out of the Debt
Service Account on each Interest Payment Date shall be calculated by the
Borrower and notified to the Bank on the date two Business Days prior to such
Interest Payment Date and payments shall be made by the Borrower out of the Debt
Service Account on such Interest Payment Date only in accordance with the
amounts as so calculated. The Borrower shall pay each category listed in Section
5.13(a) in the order in which it is
57
listed there (starting with (2) and ending with (8)) in full before making any
payment to the next category in the list.
(c) Notwithstanding Section 5.13(a), as long as no Event of Default or Potential
Event of Default has occurred and is continuing the Borrower may at any time
withdraw amounts from the Debt Service Account for the purposes of making the
following payments in the following order:
(1) Operating Costs then due and payable in accordance with the
Development Plan;
(2) transfers to the Cash Collateral Account until the balance of the
Cash Collateral Account equals the minimum balance specified in Section
5.11(e); and
(3) if and only if the balance of the Disbursement Account and each
Russian Disbursement Account is zero and the Available Amount is zero,
Project Costs then due and payable in accordance with the Development
Plan.
provided that the Borrower shall only be permitted to make such payments if it
first furnishes the Bank with evidence satisfactory to the Bank that, following
any such payment, the amount standing to the credit of the Debt Service Account
shall at no times decrease below the sum of the amounts described under Sections
5.13(a)(2), 5.13(a)(3) and 5.13(a)(4) payable on the next Interest Payment Date.
SECTION 5.14. FURTHER DOCUMENTS
The Borrower shall execute all such other documents and instruments and
do all such other acts and things as the Bank may reasonably determine are
necessary or desirable to give effect to the provisions of the Financing
Agreements and to cause the Financing Agreements to be duly registered,
notarised and stamped in any applicable jurisdiction. The Borrower hereby
irrevocably appoints and constitutes the Bank as the Borrower's true and lawful
attorney with right of substitution (in the name of the Borrower or otherwise)
to execute such documents and instruments and to do such acts and things in the
name of and on behalf of the Borrower in order to carry out the provisions
hereof.
SECTION 5.15. COSTS AND EXPENSES
(a) The Borrower shall, whether or not any Disbursement is made, pay to the Bank
or as the Bank may direct, within 30 days of the Bank furnishing to the Borrower
the invoice therefor (but, in any event, on or prior to the first Disbursement
after the date of this Agreement in the case of costs and expenses incurred
prior to the date of such Disbursement), all reasonable out-of-pocket costs and
expenses (including, without limitation, travel expenses and the fees and
expenses of outside counsel to the Bank and all other financial, accounting,
engineering, environmental, insurance and other consulting fees and expenses)
incurred by the Bank in connection with:
(1) the assessment, preparation and arrangement of the Loan by the
Bank;
58
(2) the preparation, execution and, where appropriate, registration and
notarisation of any Financing Agreement, any Project Agreement, the
Security and any other documents related to this Agreement;
(3) the giving of any legal opinions hereunder; and
(4) the administration of the Financing Agreements.
(b) The Borrower shall pay to the Bank or as the Bank may direct, on demand, all
fees, costs and expenses (including, without limitation, legal fees and
expenses) incurred by the Bank:
(1) in the determination of whether there has occurred an Event of
Default or Potential Event of Default;
(2) in respect of the preservation or enforcement of any of its rights
under any Financing Agreement and the collection of any amount owing to
the Bank; and
(3) in connection with the assessment, preparation, review, execution
and, where appropriate, registration and notarisation of any amendment
of or waiver to any Financing Agreement, any Project Agreement or any
other document related to this Agreement.
SECTION 5.16. FURNISHING OF INFORMATION
(a) As soon as available but, in any event, within 45 days after the end of each
quarter of each Financial Year, the Borrower shall furnish to the Bank:
(1) two copies of the Borrower's complete Financial Statements for such
quarter in form satisfactory to the Bank and, if requested by the Bank,
certified by an officer of the Borrower, including the breakdown by
maturity and counterparty of accounts payable, taxes payable, and
accounts receivable, in a form satisfactory to the Bank;
(2) (i) a management discussion and analysis of results for such
quarter, including a report on any factors materially affecting or
which might materially affect the Borrower's business and operations or
its financial condition or a statement that there are no such factors;
and (ii) a report detailing any variance, positive or negative, between
the quarterly Approved Budget versus the actual total Project Costs and
Operating Costs for the quarter in excess of 5% of the quarterly
Approved Budget, which report to be provided after the end of the last
quarter of each Financial Year shall also contain an analysis on any
variance between the Approved Budget for the Financial Year versus the
actual total Project Costs and Operating Costs for the same Financial
Year;
(3) a report, in a form satisfactory to the Bank, on the implementation
and progress of the Project, including a report on any factors
materially affecting or
59
which might materially affect, the carrying out of the Project or the
implementation of the Financing Plan or a statement that there are no
such factors;
(4) a statement of all transactions and transfers between the Borrower
and each of its Affiliates and Shareholders during such quarter with a
value in excess of $25,000 or the equivalent thereof in other
currencies at then current rates of exchange or a statement that there
were no such transactions; and
(5) a report by the Borrower's reservoir engineer, which report shall
be approved by the Independent Engineer, to address both well and
reservoir performance (the "RESERVOIR REPORT"). The Reservoir Report
shall address available reservoir pressure data, injection volumes by
well and by reservoir, production response to injection and/or
premature water break through. Well performance shall, in particular,
address large changes in production rates (or xxxxx going off
production), reason for change (reservoir or mechanical), plans to
address any problem in the existing reservoir or plans to re-complete
to a different reservoir and in subsequent reports, results of
implementation of any such plan.
(b) As soon as available but, in any event, within 120 days after the end of
each Financial Year, the Borrower shall furnish to the Bank:
(1) two copies of its complete Financial Statements for such Financial
Year, together with a report of the Auditors thereon, all in form
satisfactory to the Bank;
(2) a management letter from the Auditors commenting on, among other
matters, the adequacy of the Borrower's financial control procedures
and accounting systems, together with a copy of any other communication
sent by the Auditors to the Borrower or to its management in relation
to the Borrower's financial, accounting and other systems, management
and accounts;
(3) a report by the Auditors certifying that the Borrower was in
compliance with the financial covenants contained in Sections 6.01,
6.04, 6.05, 6.06 and 6.13 as of the end of such Financial Year or, as
the case may be, detailing any non-compliance; and
(4) a report on compliance by the Borrower with applicable
environmental, health and safety standards, implementation of the
Environmental Action Plan and worker health and safety initiatives
(including training programmes) undertaken by the Borrower during such
Financial Year and any other environmental, health and safety issues
arising in relation to the Borrower or the Project during such
Financial Year, including any violations of applicable environmental,
health and safety standards and fines and remedial action relating
thereto, public complaints and environmental emergencies.
(c) Prior to the first Disbursement and, thereafter, within 30 days after the
effective or renewal date of any insurance policy, the Borrower shall furnish to
the Bank an original certificate from the Borrower's insurer or insurance
broker, indicating the properties insured, amounts and risks covered, names of
the loss payees, beneficiaries and assignees, name of the insurer and any
special features of the new or renewed insurance policy.
60
(d) The Borrower shall, not later than 15 days after the end of each calendar
quarter furnish to the Bank quarterly statements or, in the event that the most
recent banking case prepared in accordance with Section 8.05(c) shows a Field
Life Debt Service Coverage Ratio of less than 2.0 or a Loan Life Debt Service
Coverage Ratio of less than 1.75, not later than 15 days after the end of each
calendar month, furnish to the Bank monthly statements of all transactions in
relation to the Offshore Bank Accounts and the Russian Bank Accounts during each
calendar month.
(e) The Borrower shall promptly inform the Bank of any proposed change in the
nature or scope of the Project or the Development Plan or the business or
operations of the Borrower and of any event or condition (including, without
limitation, any pending or threatened litigation or arbitration) which might
have a material adverse effect on the carrying out of the Project, the carrying
on of the Borrower's business or operations or the ability of the Borrower to
perform any of its obligations under any Financing Agreement or Project
Agreement.
(f) Immediately upon the occurrence of any Event of Default or Potential Event
of Default, the Borrower shall give the Bank notice thereof by facsimile
transmission or telex specifying the nature of such Event of Default or
Potential Event of Default and any steps the Borrower is taking to remedy the
same.
(g) At least once every three years during the term hereof, the Borrower shall
engage a reputable environmental consulting firm of international standing
acceptable to the Bank to conduct an environmental audit of the Project in a
manner satisfactory to the Bank. Promptly after completion of each such audit,
the Borrower shall furnish the results thereof to the Bank.
(h) Forthwith upon the occurrence of any incident or accident relating to the
Borrower or the Project, including but not limited to any such incident or
accident likely to have a material adverse effect on the environment or worker
health or safety, the Borrower shall give the Bank notice thereof by facsimile
transmission or telex specifying the nature of such incident or accident and any
steps the Borrower is taking to remedy the same. Without limiting the generality
of the foregoing, an incident or accident is likely to have a material adverse
effect on the environment or worker health or safety if any applicable law
requires notification of such incident or accident to the authorities, such
incident or accident involves worker fatality or multiple serious injuries
requiring hospitalisation or such incident or accident has become public
knowledge whether through media coverage or otherwise.
(i) The Borrower shall furnish promptly to the Bank two copies of all notices,
reports and other communications of the Borrower to its shareholders with
respect to any matter which may materially impact on the Project and/or on the
ability of the Borrower to perform its obligations under any of the Financing
Agreements and/or the Project Agreements and the minutes of all shareholders'
meetings. Without limiting the foregoing, the Borrower shall, on or before the
date that it gives official notice to its shareholders of any shareholders'
meeting, furnish the Bank, by facsimile transmission or telex, with notice of
such meeting and the agenda thereof. The Borrower shall permit a representative
of the Bank to attend as an observer, at the Borrower's expense, the annual and
extraordinary Shareholders' meetings of the Borrower and any meetings of
61
the representatives of the Shareholders of the Borrower (as such representatives
are described in Section 2.02(d) or any replacements thereof), provided that the
observer shall not be present while any confidential matter to which a lender
should not be privy under applicable principles of good corporate governance
and/or as required by applicable law is to be discussed.
(j) The Borrower shall furnish promptly to the Bank and any consultants engaged
by the Bank, and shall instruct the Independent Engineer to furnish promptly to
the Bank and any consultants engaged by the Bank, such other information as the
Bank or such consultants may from time to time reasonably request. The Borrower
shall permit representatives of the Bank (including, without limitation, any
consultants engaged by the Bank) to visit the Project or any of the other
premises where the business of the Borrower is conducted or where the Project is
being carried out and to have access to the books of account and records of the
Borrower.
(k) The Borrower shall furnish to the Bank within 20 Business Days of the
completion referred to below and in any event on or before 28 February 2003 a
report signed by the independent engineer acceptable to the Bank certifying the
completion of the front-end engineering and design phase of the Borrower's
proposed gas processing plant.
ARTICLE VI - NEGATIVE COVENANTS
Unless the Bank otherwise agrees in writing:
SECTION 6.01. DIVIDENDS
(a) Except as otherwise expressly provided in Section 6.01(b), the Borrower
shall not declare or pay any dividend, make any distribution on its charter
capital, purchase, redeem or otherwise acquire any shares of charter capital of
the Borrower or any option over the same, make any payment of principal or
interest on any Subordinated Shareholder Loan or make any other payment or
distribution to any Shareholder or any Affiliate of any Shareholder (including,
without limitation, to Harvest under the Services Agreement, but excluding (1)
reimbursement to Harvest at cost for goods and services (including without
limitation services of consultants) procured by Harvest on behalf of the
Borrower from unaffiliated entities on an arm's length basis, (2) an amount, as
set forth in detail in the Development Plan, not to exceed $2,000,000 (or the
equivalent thereof in other currencies at then current rates of exchange) per
year to Minley for services provided on an arm's length basis by Minley to the
Borrower, (3) an amount not to exceed $1,000,000 (or the equivalent thereof in
other currencies at then current rates of exchange) per year for the salaries
and expenses of employees seconded to the Borrower by Harvest, and (4)
reimbursement to Harvest of amounts paid by Harvest on behalf of the Borrower of
front-end commission and fees and expenses of the Bank's outside counsel due
under this Agreement and fees and expenses of the Borrower's outside counsel).
(b) Notwithstanding the foregoing, the Borrower may take any such action on or
after the first repayment installment date set forth in Section 3.07(a) or, if
earlier, the
62
first date on which the outstanding principal amount of the Loan equals
$55,000,000, but only if:
(1) no Event of Default or Potential Event of Default has occurred and
is continuing;
(2) the Borrower gives the Bank not less than 30 days' prior written
notice of such payment;
(3) such payment is made only on an Interest Payment Date pursuant to
Section 5.13(a)(9); and
(4) the most recent banking case prepared in accordance with Section
8.05(c) shows a Field Life Debt Service Coverage Ratio of not less than
2.0 and a Loan Life Debt Service Coverage Ratio of not less than 1.75.
SECTION 6.02. CAPITAL EXPENDITURES
The Borrower shall not incur expenditures or commitments for
expenditures for fixed and other non-current assets, other than expenditures
required for carrying out the Project in accordance with the Development Plan or
for maintenance, repairs or replacements essential to the operation of the
Project in accordance with the Development Plan, in an aggregate amount in
excess of $1,000,000 (or the equivalent thereof in other currencies at then
current rates of exchange) in any Financial Year.
SECTION 6.03. LEASES
The Borrower shall not enter into any agreement or arrangement to
acquire by lease the use of any property or equipment of any kind, except in the
ordinary course of business in connection with the Project as set forth in the
Development Plan and to the extent that the aggregate payments by the Borrower
in respect of such leases will not exceed $200,000 (or the equivalent thereof in
other currencies at then current rates of exchange) in any Financial Year.
SECTION 6.04. FINANCIAL DEBT
(a) The Borrower shall not incur, assume or permit to exist any Financial Debt
except:
(1) the Loan;
(2) Subordinated Shareholder Loans; and
(3) veksels in the total amount of RUR48,500,000 as specified in
Schedule 5, which will be repaid on maturity dates set forth in column
5 of Schedule 5 (Maturity Date) and which shall not be renewed or
reissued.
63
(b) The Borrower shall not enter into any agreement or arrangement to guarantee
or, in any way or under any condition, to become obligated for all or any part
of any financial or other obligation of another person, other than guarantees,
as specified in the Development Plan, of trade payables arising in the ordinary
course of business which are related to the Project and have maturities not to
exceed 90 days. For the avoidance of doubt, the Borrower shall not enter into
any forward sales agreement for sales of crude with a time difference in excess
of one month between the receipt of payment and delivery of crude.
SECTION 6.05. LIENS
The Borrower shall not create or permit to exist any Lien on any
property, revenues or other assets, present or future, of the Borrower, except:
(1) any Lien constituted or evidenced by the Security Documents; and/or
(2) any tax or other non-consensual Lien arising by operation of law or
other statutory Lien arising in the ordinary course of business,
provided that such Lien (other than a Lien for a sum which is not yet
delinquent) is discharged within 60 days after the date it is created
or, if the validity or amount of such Lien or the sum secured by such
Lien is being contested in good faith and by proper proceedings and
adequate reserves have been set aside for the payment of such sum,
within 60 days after final adjudication; and/or
(3) any Lien subsisting at the date of the Amending Agreement and
agreed to in writing by the Bank; and/or
(4) any Lien arising out of title retention provisions in a supplier's
standard conditions of supply in respect of goods acquired in the
ordinary course of the Borrower's operations; and/or
(5) any other Lien created or outstanding with the prior written
consent of the Bank.
6.06. DERIVATIVE TRANSACTIONS
The Borrower shall not enter into any interest rate or currency swap,
interest rate cap or collar, forward rate agreement or other interest rate,
currency or commodity hedge or similar derivative transaction; provided that the
Borrower may enter into commodity xxxxxx for up to 20% of its annual oil
production and for a term not to exceed two years. For the avoidance of doubt,
the Borrower shall not enter into any forward sales agreement for sales of crude
with a time difference in excess of one month between the receipt of payment and
delivery of crude.
SECTION 6.07. ARM'S LENGTH TRANSACTIONS
The Borrower shall not enter into any transaction with any person
except in the ordinary course of business, on ordinary commercial terms and on
the basis of arm's-
64
length arrangements, or enter into any transaction whereby the Borrower would
pay more than the ordinary commercial price for any purchase or would receive
less than the full ex-works commercial price (subject to normal trade discounts)
for its products or services.
SECTION 6.08. PROFIT-SHARING AND MANAGEMENT ARRANGEMENTS
(a) The Borrower shall not enter into any partnership, profit-sharing or royalty
agreement or other similar arrangement whereby the Borrower's income or profits
are, or might be, shared with any other person.
(b) The Borrower shall not enter into any management contract or similar
arrangement whereby its business or operations are managed by any other person.
SECTION 6.09. INVESTMENTS
The Borrower shall not form or have any Subsidiary, or make or permit
to exist loans or advances to, or deposits (other than deposits in the Offshore
Bank Accounts or the Russian Bank Accounts) with, other persons or investments
in any person or enterprise; provided, however, that funds deposited in the
Offshore Bank Accounts and the Russian Bank Accounts may be invested by the
banks at which they are located in short-term investment grade marketable
securities. Without limiting the foregoing, the Borrower shall not open or
maintain any bank accounts other than the Offshore Bank Accounts and the Russian
Bank Accounts.
SECTION 6.10. PROJECT AGREEMENTS
The Borrower shall not terminate, amend or grant any waiver in respect
of any provision of any of the Project Agreements to which it is a party or
consent to any assignment of any Project Agreement by any other party thereto.
SECTION 6.11. CHANGES IN BUSINESS, CAPITAL AND CHARTER
(a) The Borrower shall not make changes, or permit changes to be made, to the
nature of its contemplated business or operations. The Borrower shall not make
any material changes to the nature or scope of the Project or (except in
accordance with Section 8.05(c)) the Development Plan, including without
limitation any such change that would involve an increase in Project Costs of
more than 5%. Except as provided in the Development Plan, the Borrower shall not
carry out any business or activity other than businesses or activities
substantially related to the Project.
(b) The Borrower shall not make changes, or permit changes to be made, to its
capital except in accordance with the Financing Plan and the Shareholders
Support Agreement. Except to the extent permitted by the Shareholders Support
Agreement, the Borrower shall not permit any change in the equity interest of,
or any transfer of any shares held in its registered charter capital by, any
Shareholder.
65
(c) The Borrower shall not make changes, or permit changes to be made, to its
Charter in any manner which would be inconsistent with the provisions of any
Financing Agreement.
SECTION 6.12. PREPAYMENT OF LONG-TERM DEBT
The Borrower shall not (whether voluntarily or involuntarily) make any
prepayment, repurchase or early redemption of any Long-term Debt or make any
repayment of any Long-term Debt pursuant to any provision of any agreement or
note which provides directly or indirectly for acceleration of repayment in time
or amount, unless in any such case it shall, if the Bank so requires,
contemporaneously make a proportionate prepayment of the principal amount then
outstanding of the Loan in accordance with the provisions of Section 3.08(a).
SECTION 6.13. SALE OF ASSETS; MERGER
(a) Except as contemplated by the Development Plan, the Borrower shall not sell,
transfer, lease or otherwise dispose of (whether in a single transaction or in a
series of transactions, related or otherwise) any of its capital assets with an
aggregate book value in excess of $350,000 (or the equivalent thereof in other
currencies at then current rates of exchange) in any Financial Year.
(b) The Borrower shall not undertake or permit any merger, consolidation or
reorganisation.
ARTICLE VII - EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT
Each of the following events and occurrences shall constitute an Event
of Default under this Agreement:
(a) PAYMENTS. The Borrower fails to pay when due any principal of, or interest
on, the Loan as required by this Agreement.
(b) COVENANTS. The Borrower or any other party (other than the Bank) fails to
perform in a timely manner any of its obligations under any Financing Agreement
or any other agreement between the Borrower and the Bank, the failure to perform
such obligation is not referred to elsewhere in this Section 7.01 and, if
capable of remedy, such failure to perform has continued for a period of 30 days
after notice thereof has been given to the Borrower by the Bank.
(c) PROJECT AGREEMENTS. Any party (other than the Bank) fails to perform in a
timely manner any of its obligations under any Project Agreement, the failure to
perform such obligation is not referred to elsewhere in this Section 7.01 and,
if capable of remedy, such failure to perform has continued for a period of 30
days after notice thereof has been given to the Borrower by the Bank.
66
(d) REPRESENTATIONS. Any representation or warranty made or confirmed by the
Borrower or any Shareholder in any Financing Agreement or Project Agreement was
false or misleading when made or confirmed.
(e) NATIONALISATION. (i) any government or governmental authority condemns,
nationalises, seizes or otherwise expropriates all or any substantial part of
the property or other assets of the Borrower, or assumes custody or control of
such property or other assets or of the business or operations of the Borrower,
or takes any action for the dissolution or disestablishment of the Borrower or
any action that would prevent the Borrower or its officers from carrying on its
business or operations or a substantial part thereof and/or (ii) any government
or governmental authority condemns, nationalises, seizes or otherwise
expropriates, or assumes custody or control of all or any substantial part of
the charter capital of the Borrower and the Bank shall be satisfied that any
such action with respect to the charter capital of the Borrower would have a
material adverse effect on the Project or on the ability of the Borrower to
perform its obligations under the Financing Agreements and the Project
Agreements.
(f) BANKRUPTCY. There has been entered against the Borrower or any Shareholder a
decree or order by a court adjudging the Borrower or such Shareholder bankrupt
or insolvent, or approving as properly filed a petition seeking reorganisation,
administration, arrangement, adjustment, composition or liquidation of or in
respect of the Borrower or such Shareholder under any applicable law, or
appointing a receiver, administrator, liquidator, assignee, trustee,
sequestrator or other similar official of the Borrower or such Shareholder or of
any substantial part of its property or assets, or ordering the winding up or
liquidation of its affairs; or the Borrower or any Shareholder institutes
proceedings to be adjudicated bankrupt or insolvent, or consents to the
institution of bankruptcy or insolvency proceedings against it, or files a
petition or answer or consent seeking reorganisation, administration, relief or
liquidation under any applicable law, or consents to the filing of any such
petition or to the appointment of a receiver, administrator, liquidator,
assignee, trustee, sequestrator or other similar official of the Borrower or
such Shareholder or of any substantial part of its property, or makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts generally as they become due; or any other event occurs which
under any applicable law would have an effect analogous to any of the events
listed in this section.
(g) FINANCIAL DEBT. A default of any nature occurs with respect to any Financial
Debt of the Borrower (other than the Loan) or of any Shareholder under any
agreement pursuant to which there is outstanding any such Financial Debt, and
such default continues beyond any applicable period of grace.
(h) ABANDONMENT. The Borrower ceases to carry on its business; or the Project or
any material part of the Project is abandoned by the Borrower; or the operation
of the Project is interrupted for a period in excess of 60 consecutive days or
any periods in the aggregate in excess of 90 days during any period of 12
consecutive months.
(i) PHYSICAL LOSS. Any portion of the Project facilities or the Russian oil
pipeline system is damaged or destroyed and, in the opinion of the Bank, such
event is likely to prevent the Borrower from transporting or selling all or any
material portion of its
67
production of crude oil or gas; or the assets comprising the Project or any
material part of the Project become an actual, constructive, compromised or
arranged total loss.
(j) TERMINATION OF AGREEMENT. Except as contemplated by Section 5.10(b) or
5.10(c), any Financing Agreement or Project Agreement is terminated, rescinded
or cancelled for any reason or is or becomes void or unenforceable, or is
claimed to be so by any party thereto (other than the Bank).
(k) LITIGATION. A final judgment, order or arbitral award for the payment of
money is rendered against the Borrower or any of its properties and such
judgment, order or arbitral award continues to be unsatisfied for a period of 30
consecutive days; or any legal, arbitral or administrative proceeding is
instituted which, if adversely determined, might, in the reasonable opinion of
the Bank, have a material adverse effect on the Project, the Borrower or the
ability of the Borrower to perform any of its obligations under any Financing
Agreement or Project Agreement.
(l) SECURITY. Any Security Document for any reason (other than an act or
omission of the Bank) ceases to constitute a valid and perfected first priority
security interest in and Lien on any of the collateral purported to be covered
thereby.
(m) APPROVALS. Any license, approval, consent, filing or registration now or
hereafter required for the execution, delivery or performance by any party of
any Financing Agreement or Project Agreement or to construct, own, operate or
maintain the Project is modified, revoked, withdrawn or withheld or ceases to
remain in full force and effect, and, in the case of a Project Agreement, such
occurrence might, in the reasonable opinion of the Bank, have a material adverse
effect on the Project, the Borrower or the ability of the Borrower to perform
any of its obligations under any Financing Agreement or Project Agreement.
(n) SHAREHOLDING. Any change occurs in the Borrower's shareholders or the
percentages of their respective shareholdings in the Borrower, except as
permitted by the Shareholders Support Agreement.
(o) FINANCIAL RATIOS. Two consecutive quarterly Financial Statements furnished
pursuant to Section 5.16(a), except for the quarterly Financial Statements for
the 2nd and 3rd calendar quarters of the year 2002, show a Current Ratio on the
dates of such Financial Statements of less than 1.1; or the most recent banking
case prepared in accordance with Section 8.05(c) shows a Field Life Debt Service
Coverage Ratio of less than 1.5 and the Field Life Debt Service Coverage Ratio
is not restored to 1.5 or above within three months; or the most recent banking
case prepared in accordance with Section 8.05(c) shows a Loan Life Debt Service
Coverage Ratio of less than 1.25 and the Loan Life Debt Service Coverage Ratio
is not restored to 1.25 or above within three months.
(p) ADVERSE CHANGE. Any circumstance or event occurs which, in the reasonable
opinion of the Bank, might have a material adverse effect on the Project, the
Borrower or the ability of the Borrower to perform any of its obligations under
any Financing Agreement or Project Agreement.
68
SECTION 7.02. CONSEQUENCES OF DEFAULT
If an Event of Default occurs and is continuing, then the Bank may at
its option, by notice to the Borrower, declare all or any portion of the
principal of, and accrued interest on, the Loan (together with any other amounts
accrued or payable under this Agreement) to be, and the same shall thereupon
become (anything in this Agreement to the contrary notwithstanding), either:
(1) due and payable on demand; or
(2) immediately due and payable without any further notice and without
any presentment, demand or protest of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 7.03. AUTOMATIC ACCELERATION
If the Borrower becomes voluntarily or involuntarily dissolved or
bankrupt (however such bankruptcy may be evidenced), the principal of, and all
accrued interest on, the Loan (together with any other amounts accrued or
payable under this Agreement) shall thereupon become immediately due and payable
(anything in this Agreement to the contrary notwithstanding) without any
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VIII - MISCELLANEOUS
SECTION 8.01. TERM OF AGREEMENT
This Agreement shall continue in force until the date that the
obligation of the Bank to make Disbursements hereunder has terminated in
accordance with the terms hereof or, if later, until all moneys payable
hereunder have been fully paid in accordance with the provisions hereof;
provided that the indemnities and warranties of the Borrower shall survive
repayment of the Loan and termination of this Agreement.
SECTION 8.02. ENTIRE AGREEMENT; AMENDMENT AND WAIVER
This Agreement and the documents referred to herein constitute the
entire obligation of the parties hereto with respect to the subject matter
hereof and shall supersede any prior expressions of intent or understandings
with respect to this transaction. Any amendment to, waiver by the Bank of any of
the terms or conditions of, or consent given by the Bank under, this Agreement
(including, without limitation, this Section 8.02) shall be in writing, signed
by the Bank and, in the case of an amendment, the Borrower. In the event that
the Bank waives a condition to any Disbursement, the Borrower shall, by
accepting such Disbursement, be deemed to have agreed to all of the terms and
conditions of such waiver.
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SECTION 8.03. NOTICES
Any notice, application, approval, agreement or other communication to
be given or made under this Agreement by or to the Bank or by or to the Borrower
shall be in writing. Except as otherwise provided herein, such notice,
application or other communication shall be deemed to have been duly given or
made when it is delivered by hand, airmail, telex or facsimile transmission to
the party to which it is required or permitted to be given or made at such
party's address specified below or at such other address as such party
designates by notice to the party giving or making such notice, application or
other communication.
For the Borrower:
Limited Liability Company "Geoilbent"
626729 Gubkinsky Settlement
X.X. Xxx 00
Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxxxx
Russian Federation
Attention: General Director
Fax: (7) (34536) 31357
with a courtesy copy to:
Harvest Natural Resources Inc.
00000 Xxxx Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
U.S.A.
Attention: Chief Financial Officer
Fax: (1) (000) 0000000
and
Open Joint Stock Company "Minley"
Tarko Sale Settlement
00-X Xxxxxx Xxxxxx
000000 Yamalo-Nenetsky Autonomous District
Purovsky District
Russian Federation
Moscow Representative Office:
B.Polyanka 7/10, building 3
Attention: General Director
Fax: (7) (095) 7212229
70
provided that no failure by the Bank to deliver, or Harvest or Minley
to receive, a copy of any such notice, application or other
communication shall in any manner affect the effectiveness thereof as
against the Borrower or give rise to any claim or right against the
Bank.
For the Bank:
European Bank for Reconstruction and Development
Xxx Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: Operation Administration Unit
Telex: 8812161
Answerback: EBRD L G
Fax: (44) (000) 000-0000
SECTION 8.04. ENGLISH LANGUAGE
All documents to be furnished or communications to be given or made
under this Agreement shall be in the English language or, if in another
language, shall be accompanied by a translation into English certified by the
Borrower, which translation shall be the governing version between the Borrower
and the Bank.
SECTION 8.05. FINANCIAL CALCULATIONS AND DEVELOPMENT PLAN
(a) All financial calculations to be made under, or for the purposes of, this
Agreement shall be made in accordance with Generally Accepted Accounting
Principles in the United States and, except as otherwise required to conform to
the definitions contained in Article I or any other provisions of this
Agreement, shall be made using the then most recently issued quarterly Financial
Statements which the Borrower is required to furnish to the Bank from time to
time under Section 5.16(a) and, if applicable, on the basis of the then current
Development Plan and most recent banking case prepared in accordance with
Section 8.05(c); provided, however, that:
(1) if the relevant quarterly Financial Statements should be in respect
of the last quarter of a Financial Year then, at the Bank's option,
such calculations may instead be made from the audited Financial
Statements for the relevant Financial Year; and
(2) if there should occur any material adverse change in the financial
condition of the Borrower after the end of the period covered by the
relevant Financial Statements, then such material adverse change shall
also be taken into account in calculating the relevant figures.
(b) Not later than 30 days prior to the date of the first Disbursement, the
Borrower shall submit to the Bank for approval the proposed development plan for
the Project
71
containing detailed technical plans and specifications, a financing plan,
estimated drilling, production and construction schedules and budgets, operating
plans and procedures, transportation and marketing arrangements, assumptions
regarding future taxes, operating expenses, capital expenditures, inflation and
proven, probable and possible reserve levels, working capital requirements, a
list of the Supply Agreements (including details of Supply Agreements entered
into with Shareholders) and a list of required construction, environmental and
operating permits and approvals. Upon approval of such plan by the Bank, such
plan shall constitute the Development Plan for purposes of this Agreement.
(c) The Borrower shall, in consultation with the Bank and in accordance with the
procedures set forth in Schedule 2, update the Development Plan and prepare
banking cases on the basis of the Financial Model. The Borrower shall update the
Development Plan and prepare a banking case prior to each Interest Payment Date
and, if the Bank believes that the minimum Current Ratio, Field Life Debt
Service Coverage Ratio or Loan Life Debt Service Coverage Ratio specified in
Section 7.01(o) might not be satisfied or that any assumptions used in updating
the Development Plan and preparing the most recent banking case have
subsequently become incorrect or inappropriate, at any other time upon the
request of the Bank. The Borrower may update the Development Plan and prepare a
banking case at any other time if the Borrower believes that any assumptions
used in preparing the then current Development Plan and most recent banking case
have subsequently become incorrect or inappropriate.
SECTION 8.06. RIGHTS, REMEDIES AND WAIVERS
(a) The rights and remedies of the Bank in relation to any misrepresentations or
breach of warranty on the part of the Borrower shall not be prejudiced by any
investigation by or on behalf of the Bank into the affairs of the Borrower, by
the execution or the performance of this Agreement or by any other act or thing
which may be done by or on behalf of the Bank in connection with this Agreement
and which might, apart from this Section, prejudice such rights or remedies.
(b) No course of dealing or waiver by the Bank in connection with any condition
of Disbursement under this Agreement shall impair any right, power or remedy of
the Bank with respect to any other condition of Disbursement or be construed to
be a waiver thereof.
(c) No action of the Bank in respect of any Disbursement shall affect or impair
any right, power or remedy of the Bank in respect of any other Disbursement.
Without limiting the foregoing, the right of the Bank to require compliance with
any condition under this Agreement which may be waived by the Bank in respect of
any Disbursement is, unless otherwise notified to the Borrower by the Bank,
expressly preserved for the purposes of any subsequent Disbursement.
(d) No course of dealing and no delay in exercising, or omission to exercise,
any right, power or remedy accruing to the Bank upon any default under this
Agreement or any other agreement shall impair any such right, power or remedy or
be construed to be a waiver thereof or an acquiescence therein. No action of the
Bank in respect of any
72
such default, or acquiescence by it therein, shall affect or impair any right,
power or remedy of the Bank in respect of any other default.
(e) The rights and remedies provided in this Agreement and the other Financing
Agreements are cumulative and not exclusive of any rights or remedies provided
by applicable law.
SECTION 8.07. INDEMNIFICATION
(a) The Borrower assumes full liability for, and agrees to and shall indemnify
and hold harmless the Bank and its officers, directors, employees, agents and
servants against and from any and all liabilities, obligations, losses, damages
(compensatory, punitive or otherwise), penalties, claims, actions, taxes,
duties, suits, costs and expenses (including, without limitation, reasonable
legal counsel's fees and expenses and costs of investigation) of whatsoever kind
and nature, including, without prejudice to the generality of the foregoing,
those arising in contract or tort (including, without limitation, negligence) or
by strict liability or otherwise, which are imposed on, incurred by or asserted
against the Bank or any of its officers, directors, employees, agents or
servants (whether or not also indemnified by any other person under any other
document) and which in any way relate to or arise out of, whether directly or
indirectly:
(1) any of the transactions contemplated by any Financing Agreement or
Project Agreement or the execution, delivery or performance thereof;
(2) the operation or maintenance of the Borrower's facilities or the
ownership, control or possession thereof by the Borrower; or
(3) the exercise by the Bank of any of its rights and remedies under
any of the Security Documents or any of the other Financing Agreements;
provided that the Bank shall not have any right to be indemnified hereunder for
its own recklessness or willful misconduct.
(b) Without limiting the generality of the foregoing, the Borrower agrees to and
shall indemnify and hold harmless the Bank and its officers, directors,
employees, agents and servants against and from any such liabilities,
obligations, losses, damages, penalties, claims, actions, taxes, duties, suits,
costs or expenses arising under any environmental law or other applicable law as
a result of the past, present or future operations of the Borrower (or any
predecessor or successor in interest to the Borrower), or the past, present or
future condition of any site or facility owned, operated or leased by the
Borrower (or any such predecessor or successor in interest), or any release or
use or threatened release of any pollutants or hazardous materials at any such
site or facility, including any such release or use or threatened release which
occurs during any period when the Bank is in possession of any such site or
facility following the exercise by the Bank of any of its rights and remedies
under any Financing Agreement.
(c) Any third party referred to in paragraphs (a) and (b) above may enjoy the
benefit and enforce the terms of such paragraphs in accordance with the
provisions of the Contracts (Rights of Third Parties) Xxx 0000.
73
(d) The Borrower acknowledges that the Bank is entering into this Agreement, and
has acted, solely as a lender, and not as an advisor, to the Borrower. The
Borrower represents and warrants that, in entering into the Financing
Agreements, it has engaged, and relied upon advice given to it by, its own
legal, financial and other professional advisors and it has not relied on and
will not hereafter rely on any advice given to it by the Bank.
SECTION 8.08. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of
England.
SECTION 8.09. ARBITRATION AND JURISDICTION
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement or any other Financing Agreement, or the breach, termination or
invalidity hereof or thereof, shall be settled by arbitration in accordance with
the UNCITRAL Arbitration Rules as at present in force. There shall be one
arbitrator and the appointing authority shall be the London Court of
International Arbitration. Where the UNCITRAL Arbitration Rules do not provide
for a particular situation, the arbitral tribunal shall, in its absolute
discretion, determine what course of action should be followed and the arbitral
tribunal's decision shall be final. The seat and place of arbitration shall be
London,
England and the English language shall be used throughout the arbitral
proceedings. Except as provided in Section 8.09(b), the parties waive their
right to any form of appeal from, or recourse in respect of, such arbitral
proceedings to a court of law or other judicial authority. The arbitral tribunal
shall not be authorised to take or provide, and the Borrower shall not be
authorised to seek from any judicial authority, any interim measures of
protection or pre-award relief against the Bank, any provisions of UNCITRAL
Arbitration Rules notwithstanding. The arbitral tribunal shall have authority to
consider and include in any proceeding, decision or award any dispute properly
brought before it by the Bank (but no other party) insofar as such dispute
arises out of any Financing Agreement, but, subject to the foregoing, no other
parties or other disputes shall be included in, or consolidated with, the
arbitral proceedings. In any arbitral proceeding, the certificate of the Bank as
to any amount due to the Bank under any Financing Agreement shall be prima facie
evidence of such amount.
(b) Notwithstanding Section 8.09(a), this Agreement and the other Financing
Agreements, and any rights of the Bank arising out of or relating to this
Agreement or any other Financing Agreement, may, at the option of the Bank, be
enforced by the Bank in the courts of the Russian Federation or
England or in
any other courts having jurisdiction. The Borrower hereby irrevocably submits to
the jurisdiction of the courts of
England with respect to any dispute,
controversy or claim arising out of or relating to this Agreement or any other
Financing Agreement, or the breach, termination or invalidity hereof or thereof.
The Borrower hereby irrevocably designates, appoints and empowers The Law
Debenture Corporate Service Limited at its registered office (being 5th floor,
000 Xxxx Xxxxxx, XX0X 0XX, Xxxxxx, Xxxxxxx) to act as its authorised agent to
receive service of process and any other legal summons in
England for purposes
of any such action or proceeding. The Borrower hereby irrevocably consents to
the service
74
of process or any other legal summons out of such courts by mailing copies
thereof by registered airmail postage prepaid to its address specified herein.
The Borrower covenants and agrees that, so long as it has any obligations under
this Agreement, it shall maintain a duly appointed agent to receive service of
process and any other legal summons in any legal action or proceeding brought by
the Bank in
England in respect of any Financing Agreement and shall keep the
Bank advised of the identity and location of such agent. Nothing herein shall
affect the right of the Bank to serve process upon the Borrower in any manner
authorised by the laws of any relevant jurisdiction.
SECTION 8.10. PRIVILEGES AND IMMUNITIES OF THE BANK
Nothing in this Agreement shall be construed as a waiver, renunciation
or other modification of any privileges, immunities or exemptions of the Bank
accorded under the Agreement Establishing the European Bank for Reconstruction
and Development, international convention or any applicable law.
SECTION 8.11. WAIVER OF SOVEREIGN IMMUNITY
The Borrower represents and warrants that this Agreement and the
incurring by the Borrower of the Loan are commercial rather than public or
governmental acts and that the Borrower is not entitled to claim immunity from
legal proceedings with respect to itself or any of its assets on the grounds of
sovereignty or otherwise under any law or in any jurisdiction where an action
may be brought for the enforcement of any of the obligations arising under or
relating to this Agreement. To the extent that the Borrower or any of its assets
has or hereafter may acquire any right to immunity from set-off, legal
proceedings, attachment prior to judgement, other attachment or execution of
judgement on the grounds of sovereignty or otherwise, the Borrower hereby
irrevocably waives such rights to immunity in respect of its obligations arising
under or relating to this Agreement.
SECTION 8.12. SUCCESSORS AND ASSIGNS
(a) This Agreement shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, except that the Borrower may not
assign or otherwise transfer all or any part of its rights or obligations under
this Agreement without the prior written consent of the Bank.
(b) After an Event of Default has occurred and is continuing the Bank may sell,
transfer, assign or otherwise dispose of all or part of its rights or
obligations under this Agreement and the other Financing Agreements (including,
without limitation, by granting of Participations) without the consent of the
Borrower. Prior to the occurrence of an Event of Default the Bank shall not
sell, transfer, assign or otherwise dispose of all or part of its rights or
obligations under this Agreement and the other Financing Agreements (including,
without limitation, by granting of Participations) without the Borrower's
consent.
75
(c) Except as provided in Section 8.07(c) of this Agreement, none of the terms
of this Agreement are intended to be enforceable by any third party and the
Contracts (Rights of Third Parties) Act 1999 shall not apply to this Agreement.
(d) Notwithstanding any provision of this Agreement, the parties hereto do not
require the consent of any third party to rescind or vary this Agreement at any
time.
SECTION 8.13. SEVERABILITY
If any provision of this Agreement is prohibited or unenforceable in
any jurisdiction, such prohibition or unenforceability shall not invalidate the
remaining provisions hereof or affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 8.14. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorised
representatives, have caused this Agreement to be signed in their respective
names as of the date first above written.
LIMITED LIABILITY COMPANY
"GEOILBENT"
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
EUROPEAN BANK
FOR RECONSTRUCTION AND DEVELOPMENT
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
76
SCHEDULE 1 - COMMITMENT
PERIOD COMMITMENT
From 21 November 1996 to 27 January 2000 $55,000,000
From 27 January 2000 to 27 July 2000 $49,500,000
From 27 July 2000 to 27 January 2001 $44,000,000
From 27 January 2001 to 27 July 2001 $38,500,000
From 27 July 2001 to 27 January 2002 $33,000,000
From 27 January 2002 to 27 July 2002 $27,500,000
From 27 July 2002 to the date of the Amending Agreement $22,000,000
From the date of the Amending Agreement and until 27 January 2004 $50,000,000
From 27 January 2004 to 27 July 2004 $41,666,667
From 27 July 2004 to 27 January 2005 $33,333,333
From 27 January 2005 to 27 July 2005 $25,000,000
From 27 July 2005 to 27 January 2006 $16,666,667
From 27 January 2006 to 27 July 2006 $ 8,333,333
From 27 July 2006 on Nil
77
SCHEDULE 2 - DEVELOPMENT PLAN AND BANKING CASE PROCEDURES
1. ASSUMPTIONS USED IN DEVELOPMENT PLAN AND FINANCIAL MODEL
In updating the Development Plan and preparing each banking case, the
Borrower shall incorporate the following assumptions into the Development Plan
and the Financial Model:
(a) Model assumptions regarding fiscal and accounting practices of the Borrower.
(b) Technical assumptions consisting of forecasts of Project Costs (including
contingencies), Operating Costs (including general and administrative expenses,
taxes and royalties), proven producing, proven non-producing, probable and
possible reserves and rates of production from such reserves.
(c) Macroeconomic assumptions consisting of long-term forecasts of international
inflation and inflation in the Russian Federation for the elements comprising
Project Costs and Operating Costs, interest rates for loans in the Loan
Currency, rates of exchange of the Loan Currency into Roubles and oil and gas
prices.
2. BASIS FOR DETERMINING ASSUMPTIONS
The assumptions referred to in paragraph 1 above shall be determined on
the basis of the following:
(a) The model assumptions referred to in paragraph 1(a) above shall be
determined on the basis of the then existing fiscal and accounting practices of
the Borrower and the written advice of the Auditors regarding such assumptions
and any changes to such assumptions.
(b) The technical assumptions referred to in paragraph 1(b) above shall, subject
to paragraph 3(c) below, be determined on the basis of the Borrower's
projections as confirmed by the Independent Engineer.
(c) The macroeconomic assumptions referred to in paragraph 1(c) above shall be
determined on the basis of the Bank's projections from the latest available
relevant publications and forecasts from official and other
internationally-recognised sources and forecasts prepared by the Bank. Forecasts
of floating interest rates for the Loan Currency will take into account, if
available, the rates for floating/fixed interest rate swaps for the Loan
Currency of comparable maturities and amortisations.
3. UPDATING OF DEVELOPMENT PLAN AND PREPARATION OF BANKING CASE
(a) Not less than 45 days prior to the date on which the updated Development
Plan is to take effect and the banking case is to be prepared, the Borrower
shall incorporate the assumptions referred to in paragraph 1 above into the
Development Plan and the Financial Model, prepare a banking case based on such
assumptions and forward to the Bank and the Independent Engineer, in a form
satisfactory to the Bank, the updated
78
Development Plan and results of such banking case (including a calculation of
the Field Life Debt Service Coverage Ratio, the Loan Life Debt Service Coverage
Ratio and the Borrowing Base), together with the assumptions used by the
Borrower in preparing such updated Development Plan and such banking case.
(b) Within 30 days after receipt of such updated Development Plan and such
banking case, the Bank shall either:
(1) confirm to the Borrower its agreement to such updated Development
Plan and such banking case, including the assumptions used in preparing
such updated Development Plan and such banking case; or
(2) notify the Borrower that it disagrees with such updated Development
Plan and such banking case and of the reasons for such disagreement,
including any assumptions with which it disagrees.
In case of any such disagreement, the Bank, the Borrower and the Independent
Engineer shall consult during the next 15 days regarding such disagreement.
(c) In the event that agreement on such updated Development Plan and such
banking case is not reached between the Bank and the Borrower during such
consultation period, the determination by the Bank of the updated Development
Plan and the banking case, including the assumptions used in preparing the
updated Development Plan and the banking case, shall be final and binding on the
Borrower.
(d) Except for updating the assumptions in accordance with this Schedule, the
Borrower shall not make any material change to the Financial Model except with
the prior written consent of the Bank.
79
SCHEDULE 3 - SECURITY PERFECTION REQUIREMENTS
CONTRACTS ASSIGNMENT AGREEMENT
1. Delivery of notices of the Contracts Assignment Agreement to Transneft Joint
Stock Company, the contracting parties to the Marketing Agreements and Supply
Agreements, Harvest and all other contracting parties.
2. Receipt of acknowledgements and, if relevant, consents to the Contracts
Assignment Agreement from Transneft Joint Stock Company, the contracting parties
to the Marketing Agreements and Supply Agreements, Harvest and all other
contracting parties.
3. Recording of the Contracts Assignment Agreement in the Borrower's security
records.
EQUIPMENT PLEDGE AGREEMENT
1. Recording of the Equipment Pledge Agreement in the Borrower's security
records.
2. Placing of metal plates containing a Notice of Pledge on all of the pledged
property in accordance with the Equipment Pledge Agreement.
3. If the equipment is of a type which is subject to state registration,
registration of the Equipment Mortgage with the relevant registry.
EXPROPRIATION COMPENSATION ASSIGNMENT AGREEMENT
1. Recording of the Expropriation Compensation Assignment Agreement in the
Borrower's security records.
2. Notice to the Russian Government through the State Registration Chamber
attached to the Ministry of the Economy of the Russian Federation.
IMMOVABLE PROPERTY MORTGAGE AGREEMENT
1. Recording of the Immovable Property Mortgage Agreement in the Borrower's
security records.
2. Notarisation of the Immovable Property Mortgage Agreement by a Russian
notary.
3. Registration of the Immovable Property Mortgage Agreement with the local land
registry and the municipal department that registers buildings.
4. Amendments to the Borrower's Charter providing for the hypothecation of the
Borrower's immovable property.
80
5. Registration of the amendments to the Borrower's Charter with the Local
Registration Chamber and the State Registration Chamber attached to the Ministry
of the Economy of the Russian Federation.
INSURANCE ASSIGNMENT AGREEMENT
1. Delivery of notice of the Insurance Assignment Agreement to each insurer.
2. Receipt of consent to the Insurance Assignment Agreement from each insurer.
3. Receipt by the Bank of originals of each insurance policy.
4. Recording of the Insurance Assignment Agreement in the Borrower's security
records.
OFFSHORE ACCOUNT ASSIGNMENT AGREEMENT
1. Delivery of notice of the Offshore Account Assignment Agreement to Citibank,
N.A., London Branch.
2. Receipt of an acknowledgement of the Offshore Account Assignment Agreement
from Citibank, N.A., London Branch.
3. Recording of the Offshore Account Assignment Agreement in the Borrower's
security records.
4. Registration of the charge created by the Offshore Account Assignment
Agreement with the Registrar of Companies in
England.
RUSSIAN ACCOUNT PLEDGE AGREEMENT
1. Delivery of notice of the Russian Account Pledge Agreement to each bank at
which a Russian Bank Account is held.
2. Receipt of consent to the Russian Account Pledge Agreement from each bank at
which a Russian Bank Account is held.
3. Recording of the Russian Account Pledge Agreement in the Borrower's security
records.
SHARE PLEDGES
1. Receipt by the Bank of instruments of transfer in respect of all outstanding
participation interests in the Borrower owned by Harvest and Minley, duly
executed in blank by each of Harvest and Minley.
2. Delivery of notice of the Share Pledges to the Borrower and acknowledgement
of receipt of such notice by the Borrower.
81
3. Recording of the Share Pledges in the Borrower's register of participation
interests and receipt by the Bank of the Borrower's register of participation
interests.
4. Recording of the Share Pledges in the security records of Minley.
5. Receipt by the Bank of undated resignations of the officers and directors of
the Borrower.
82
SCHEDULE 4 - MILESTONES
PRODUCTION
SIX-MONTH PERIOD ENDING ON: DATE (BARRELS PER DAY)
the date of the first Disbursement (15.10.97) 7,000
the date six months after the first Disbursement (15.04.98) 7,200
the date 12 months after the first Disbursement (15.10.98) 9,300
the date 18 months after the first Disbursement (15.04.99) 10,200
the date 24 months after the first Disbursement (15.10.99) 12,100
the date 30 months after the first Disbursement (15.04.2000) 14,400
the date 36 months after the first Disbursement (15.10.2000) 17,400
the date 42 months after the first Disbursement (15.04.2001) 21,000
the date 48 months after the first Disbursement (15.10.2001) 24,200
83
SCHEDULE 5 - VEKSELS
VEKSELS PAID
VEKSEL DATE OF FACE-VALUE, NO. OF AS OF
NO. NUMBER DRAWING UP IN RUB. MATURITY DATE RECIPIENT OF VEKSEL AGREEMENT 20.09.02
--- ------ ---------- ----------- ------------- ------------------- --------- ------------
Upon presentation,
but not earlier
1 1859497 April 12, 2002 1,000,000.00 than October 18, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
2 1859498 April 12, 2002 1,000,000.00 than October 18, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
3 1859499 April 12, 2002 1,000,000.00 than October 18, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
4 1859500 April 12, 2002 1,000,000.00 than October 18, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
5 1859501 April 12, 2002 1,000,000.00 than October 18, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
6 1859502 April 12, 2002 1,000,000.00 than November 19, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
7 1859503 April 12, 2002 1,000,000.00 than November 19, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
8 1859504 April 12, 2002 1,000,000.00 than November 19, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
9 1859505 April 12, 2002 1,000,000.00 than November 19, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
10 1859506 April 12, 2002 1,000,000.00 than November 19, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
11 1859507 April 12, 2002 1,000,000.00 than December 17, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
12 1859508 April 12, 2002 1,000,000.00 than December 17, 2002 JSC "Purnefteotdacha" 1
Upon presentation,
but not earlier
13 1859513 April 12, 2002 2,000,000.00 than October 21, 2002 LLC "Noyabrskdorstroy" 2
Upon presentation,
but not earlier
14 1859514 April 12, 2002 2,000,000.00 than October 10, 2002 LLC "Noyabrskdorstroy" 2
Upon presentation,
but not earlier
15 1859525 April 23, 2002 500,000.00 than November 27, 2002 LLC "Spetstransservice" 3
Upon presentation,
but not earlier
16 1859526 April 23, 2002 500,000.00 than November 27, 2002 LLC "Spetstransservice" 3
Upon presentation,
but not earlier
17 1859523 April 23, 2002 1,000,000.00 than December 26, 2002 ZAO "Stroytransservice" 4
84
Upon presentation,
but not earlier
18 3159465 April 25, 2002 1,000,000.00 than November 27, 2002 FGUP SUSS 6
Upon presentation,
but not earlier
19 3159471 April 26, 2002 2,000,000.00 than October 29, 2002 NO ASPO 7
Upon presentation,
but not earlier
20 3159474 April 26, 2002 2,000,000.00 than November 27, 2002 NO ASPO 7
Upon presentation,
but not earlier
21 3159468 April 26, 2002 1,000,000.00 than January 29, 2003 OOO KMK 8
Upon presentation,
but not earlier
22 3159469 April 26, 2002 1,000,000.00 than November 27, 2002 III EIE 8
Upon presentation,
but not earlier
23 3159480 April 27, 2002 3,000,000.00 than March 27, 2003 LLC "SibMontazhComplex" 9
Upon presentation,
but not earlier
24 3159481 April 27, 2002 2,000,000.00 than December 26, 2002 LLC "SibMontazhComplex" 9
Upon presentation,
but not earlier
25 3159482 April 27, 2002 1,000,000.00 than October 29, 2002 LLC "SibMontazhComplex" 9
Upon presentation,
but not earlier
26 3159475 April 27, 2002 2,000,000.00 than February 26, 2003 LLC "Spetsmontazh" 10
Upon presentation,
but not earlier
27 3159476 April 27, 2002 1,000,000.00 than December 26, 2002 LLC "Spetsmontazh" 10
Upon presentation,
but not earlier
28 3159477 April 27, 2002 1,000,000.00 than November 27, 2002 LLC "Spetsmontazh" 10
Upon presentation,
but not earlier
29 3159478 April 27, 2002 2,000,000.00 than October 29, 2002 LLC "Spetsmontazh" 10
Upon presentation,
but not earlier
30 3159512 May 15, 2002 500,000.00 than October 29, 2002 ZAO "Company Xxxxxxxxx" 00
Upon presentation,
but not earlier
31 3159555 June 13, 2002 2,000,000.00 than December 25, 2002 LLC "Purnefteotdacha" 39
Upon presentation,
but not earlier
32 3159558 June 19, 2002 4,000,000.00 than November 19, 2002 AVS-stroy 40
Upon presentation,
but not earlier
33 3159559 June 19, 2002 5,000,000.00 than December 17, 2002 AVS-stroy 40
TOTAL: 48,500,000.00 --
85
EXHIBIT A - FORM OF DISBURSEMENT APPLICATION
[To Be Typed on Letterhead of the Borrower]
[Date]
European Bank for Reconstruction and Development
Xxx Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: Operation Administration Unit
Subject: Operation No. 478
Disbursement Application No. _____(1)
Sir/Madam:
1. Please refer to the credit agreement dated __________ 1996 (as amended and
restated as at [ ], 2002, the "Credit Agreement") between Limited Liability
Company "Geoilbent" (the "Borrower") and European Bank for Reconstruction and
Development (the "Bank").
2. Expressions defined in the Credit Agreement shall bear the same meanings
herein.
3. We hereby request the following Disbursement in accordance with the
provisions of the Credit Agreement:
Currency required: Dollars
Amount (in figures and words):
----------------------------------------
----------------------------------------
Value Date:
------------------------------
4. For the purposes of Section 4.03 of the Credit Agreement, we hereby represent
and warrant that:
(a) all agreements, documents and instruments delivered to the Bank (A) pursuant
to Section 4.01 [and 4.02] of the Credit Agreement and (B) as conditions
precedent to the effectiveness of the Amending Agreement are in full force and
effect and unconditional;
(b) the representations and warranties made by the Borrower in the Financing
Agreements and Project Agreements are true on and as of the date hereof with the
same effect as though such representations and warranties had been made on and
as of the date hereof;
----------
(1) Each application must be numbered in series.
A-1
(c) no Event of Default or Potential Event of Default has occurred and is
continuing or is imminent;
(d) the Borrower will not, as a result of such Disbursement, be in violation of
its Charter, any provision contained in any agreement or instrument to which the
Borrower is a party (including the Credit Agreement) or by which the Borrower is
bound or any law applicable to the Borrower;
(e) nothing has occurred which might materially and adversely affect the
carrying out of the Project or the Borrower's business prospects or financial
condition or which makes it unlikely that the Borrower will be able to perform
any obligation under the Credit Agreement or any other Financing Agreement;
(f) the proceeds of such Disbursement are needed by the Borrower for the
purposes of the Project;
(g) the Borrowing Base as of the date of such Disbursement will be $__________
and the amount of such Disbursement will not exceed the Available Amount as of
the date of such Disbursement; and
(h) if relevant, the conditions specified in Section 4.02 and 4.03 have been
satisfied.
5. The representations and warranties made in paragraph 4 above will continue to
be true on and as of the date of such Disbursement with the same effect as
though such representations and warranties had been made on and as of the date
of such Disbursement. If any such representation or warranty is no longer true
on or prior to or as of the date of such Disbursement, we shall immediately
notify the Bank and shall, upon demand by the Bank, repay any amount which has
been or is disbursed by the Bank in respect of such Disbursement.
Yours faithfully,
LIMITED LIABILITY COMPANY
"GEOILBENT"
By:
------------------------------
Authorised Representative(2)
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(2) As named in the Certificate of Incumbency and Authority.
A-2
EXHIBIT B - FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY
[To Be Typed on Letterhead of the Borrower]
[Date]
European Bank for Reconstruction and Development
Xxx Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: Operation Administration Unit
Subject: Operation No. 478
Certificate of Incumbency and Authority(3)
Sir/Madam:
With reference to the credit agreement dated __________ 1996 (as amended and
restated as at [ ], 2002, the "Credit Agreement") between Limited Liability
Company "Geoilbent" (the "Borrower") and European Bank for Reconstruction and
Development (the "Bank"), I, the undersigned [General Director] of the Borrower,
duly authorised by its the Shareholders, hereby certify that the following are
the names, offices and true specimen signatures of the persons, any one of whom
is and will continue to be (until the Bank has received actual written notice
from the Borrower that they or any of them no longer continue to be) authorised,
on behalf of the Borrower, individually:
(1) to sign the Amending Agreement, any Disbursement applications,
certifications, letters or other documents to be provided under the
Credit Agreement and any other agreements to which the Bank and the
Borrower may be party in connection therewith; and
(2) to take any other action required or permitted to be taken by the
Borrower under the Credit Agreement or any other agreement to which the
Bank and the Borrower may be party in connection therewith:
----------
(3) Designation may be changed by the Borrower at any time by providing a
new Certificate of Incumbency and Authority to the Bank.
B-1
NAME OFFICE SPECIMEN SIGNATURE
--------------- --------------- -------------------------
--------------- --------------- -------------------------
--------------- --------------- -------------------------
--------------- --------------- -------------------------
IN WITNESS WHEREOF, I have signed my name on the date first above written.
Yours faithfully,
LIMITED LIABILITY COMPANY
"GEOILBENT"
By:
-------------------------------
Name:
Title: General Director
B-2
EXHIBIT C - FORM OF LETTER TO AUDITORS
[To Be Typed on Letterhead of the Borrower]
[Date]
[Name of Auditors]
[Address]
Sir/Madam:
We hereby authorise and request you to give to European Bank for Reconstruction
and Development (the "Bank") all such information as it may reasonably request
with regard to our Financial Statements, both audited and unaudited, which we
have agreed to supply under the terms of the credit agreement dated [ ], 1996
(as amended and restated as at [ ], 2002, the "Credit Agreement") between
ourselves and the Bank. For your information, we enclose a copy of the Credit
Agreement.
We authorise you to send our audited accounts to the Bank to enable us to
satisfy the reporting requirements set forth in Section 5.16 of the Credit
Agreement. When submitting the same to the Bank, you are also requested to send,
at the same time, a copy of your full report on such accounts in a form
acceptable to the Bank.
For our records, please ensure that you send to us a copy of every letter which
you receive from the Bank immediately upon receipt and a copy of each reply made
by you immediately upon the issue thereof.
Yours faithfully,
LIMITED LIABILITY COMPANY
"GEOILBENT"
By:
-------------------------------
Authorised Representative
Enclosure: Amended and Restated Credit Agreement
cc: European Bank for Reconstruction and Development
Xxx Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: Operation Administration Unit
Subject: Operation No. 478
C-1
