EXHIBIT B
NOTE
The security represented by this instrument was originally issued
on May 10, 2002 and has not been registered under the Securities
Act of 1933, as amended. The transfer of such security is subject
to the conditions specified in the Master Agreement dated as of
May 9, 2002 between the issuers (the "Companies") and a certain
investor. The Companies reserve the right to refuse the transfer of
the security represented by this instrument until such conditions
have been fulfilled with respect to the transfer. Upon written
request, a copy of such conditions will be furnished by the
Companies to the holder hereof without charge.
PROMISSORY NOTE
May 10, 2002 U.S. $ 4,000,000
Chaparral Resources, Inc., a Delaware corporation ("Chaparral"), and
Central Asian Petroleum (Guernsey) Limited, a Guernsey corporation ("CAP-G"),
hereby jointly and severally promise to pay to the order of Central Asian
Industrial Holdings N.V. and its successors and assigns (the "Holder") the
principal amount of U.S. $4,000,000, together with interest thereon calculated
from the date hereof in accordance with the provisions of this Note.
This Note was issued pursuant to a Master Agreement dated as of May 9,
2002 (the "Master Agreement") between the Chaparral and Central Asian Industrial
Holdings N.V. This Note is the "Note" referred to in the Master Agreement. The
Master Agreement contains terms governing the rights of the Holder with respect
to this Note, and all provisions of the Master Agreement are hereby incorporated
herein in full by reference.
Chaparral and CAP-G are referred to herein collectively as the
"Companies" and each individually as a "Company." Certain other capitalized
terms used in this Note are defined in Section 5. Unless otherwise indicated
herein, capitalized terms used in this Note have the same meanings set forth in
the Master Agreement.
Section 1. Payment of Interest. Except as otherwise provided in Section
3.2(a), interest will accrue at the rate of 12 percent per annum on the unpaid
principal amount of this Note outstanding from time to time or, if less, at the
highest rate then permitted under applicable law. The Companies will pay to the
holder of this Note all accrued interest on the last day of each March, June,
September and December, beginning first quarter-end after the Completion Date,
2002 (the "Interest Payment Dates"). Unless prohibited under applicable law, any
accrued interest which is not paid on the date on which it is payable will bear
interest at the same rate at which interest is then accruing on the principal
amount of this Note. Any accrued interest which for any reason has not
theretofore been paid will be paid in full on the date on which the final
principal payment on this Note is paid. Interest will accrue on any principal
payment due under this Note and, to the extent permitted by applicable law, on
any interest which has not been paid on the date on which it is payable until
such time as payment therefor is actually delivered to the Holder.
Section 2. Payment of Principal.
2.1 Scheduled Payment. The Companies will pay the outstanding principal
amount of this Note to the Holder on the third anniversary of the Completion
Date, being May 10, 2005.
2.2 Prepayments. The Companies may, at any time and from time to time
without premium or penalty, prepay all or any portion (in whole number multiples
of $100,000 only) of the outstanding principal amount of this Note on any
Interest Payment Date. A prepayment of less than all of the outstanding
principal amount of this Note will not relieve the Companies of their obligation
to pay the principal amount of this Note on the scheduled payment date provided
in Section 2.1.
Section 3. Events of Default.
3.1 Definition. For purposes of this Note, an Event of Default will be
deemed to have occurred if:
(a) the Companies fail to pay when due the full amount of
interest then accrued on this Note or the full amount of any principal
payment on this Note;
(b) either Company fails to perform or observe any other
provision contained in this Note or in the Master Agreement;
(c) any representation, warranty or information contained in
the Master Agreement or required to be furnished to the Holder pursuant
to the Master Agreement, is false or misleading in any material respect
on the date made or furnished;
(d) either Company or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is
entered adjudicating either Company or any Subsidiary bankrupt or
insolvent; or any order for relief with respect to either Company or
any Subsidiary is entered under the United States Bankruptcy Code; or
either Company or any Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of
such Company or any Subsidiary, or of any substantial part of the
assets of such Company or any Subsidiary, or commences any proceeding
(other than a proceeding for the voluntary liquidation and dissolution
of any Subsidiary) relating to such Company or any Subsidiary under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against either Company or any Subsidiary and either (i) such Company or
any such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (ii) such petition, application or
proceeding is not dismissed within 60 days;
(e) a judgment in excess of U.S. $100,000 is rendered against
either Company or any Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged; or
(f) either Company or any Subsidiary defaults in the
performance of any obligation if the effect of such default is to cause
an amount exceeding U.S. $100,000 to become due prior
to its stated maturity or to permit the holder or holders of such
obligation to cause an amount exceeding U.S. $100,000 to become due
prior to its stated maturity.
3.2 Consequences of Events of Default.
(a) If an Event of Default of the type described in Section
3.1(a) or (b) has occurred and continued for 15 days or any other Event
of Default has occurred, the interest rate on this Note will increase
immediately by an increment of two percentage points to the extent
permitted by law. Thereafter, until such time as no Event of Default
exists, the interest rate on this Note will increase automatically at
the end of each succeeding fiscal quarter by an additional increment of
one percentage points to the extent permitted by law (but in no event
will the interest rate exceed 18 percent per annum). Any increase of
the interest rate resulting from the operation of this Section 3.2(a)
will terminate as of the close of business on the date on which no
Events of Default exist (subject to subsequent increases pursuant to
this Section).
(b) If an Event of Default of the type described in Section
3.1(d) has occurred, the principal amount of this Note (together with
all accrued interest thereon and all other amounts payable in
connection therewith) will become immediately due and payable without
any action on the part of the Holder, and the Companies will
immediately pay to the Holder all amounts due and payable with respect
to this Note.
(c) If an Event of Default of the type described in Section
3.1(a) or (b) has occurred and continued for 15 days and if an Event of
Default of the type described in Section 3.1(b) has occurred and
continued for 30 days, or any other Event of Default (other than under
Section 3.1(d)) has occurred, the Holder may declare all or any portion
of the outstanding principal amount of this Note (together with all
accrued interest thereon and all other amounts due in connection
therewith) due and payable and demand immediate payment of all or any
portion of such amount. If the Holder demands immediate payment and all
or any portion of the amounts due under this Note, the Companies will
immediately pay to the Holder all amounts demanded to be paid with
respect to this Note.
(d) The Holder will also have any other rights which it may
have been afforded under any contract or agreement at any time and any
other rights which the Holder may have pursuant to applicable law.
(e) Each Company hereby waives diligence, presentment, protest
and demand and notice of protest and demand, dishonor and nonpayment of
this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the Holder may
accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Companies hereunder.
Section 4. Amendment and Waiver. The provisions of this Note may be
amended and the Companies may take any action herein prohibited, or omit to
perform any act herein required to be performed by them, only if the Companies
have obtained the prior written consent of the Holder. No other course of
dealing between the Companies and the Holder or any delay in exercising any
rights hereunder will operate as a waiver of any rights of the Holder.
Section 5. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiary" means any corporation, partnership, limited liability
company, association, joint stock company, trust or other business entity of
which (a) a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors is at the time owned or controlled, directly or indirectly, by
Chaparral, one or more Subsidiaries of Chaparral or a combination thereof or (b)
a majority of the partnership, membership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by
Chaparral, one or more Subsidiaries of Chaparral or a combination thereof. For
purposes of this Note, a Person will be deemed to have a majority ownership
interest in a partnership, limited liability company, association, trust or
other business entity if such Person is allocated a majority of partnership,
membership, association, trust or other business entity gains or losses or
controls the general partner, managing member, trustee or other controlling
Person of such partnership, limited liability company, association, trust or
other business entity.
Section 6. Cancellation. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note will be surrendered
to the Companies for cancellation and will not be reissued.
Section 7. Place of Payment. Payments of principal and interest are to
be delivered to the Holder at the following address:
Xxxxxxxxxxx 00, Xxxxxxx, Xxx Xxxxxxxxxxx Antilles
or to such other address or to the attention of such other Person as
specified by prior written notice to the Companies.
Section 8. Costs of Enforcement. In addition to the other amounts
provided in this Note, the Holder will be entitled to recover all costs and
expenses (including reasonable attorney's fees and expenses) incurred by the
Holder in connection with the enforcement of this Note against the Companies.
Section 9. Usury Laws. It is the intention of the Companies and the
Holder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note will be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the Holder resulting from an Event of Default,
voluntary prepayment by the Companies or otherwise, then earned interest may
never include more than the maximum amount permitted by law, computed from the
date hereof until payment, and any interest in excess of the maximum amount
permitted by law will be canceled automatically and, if theretofore paid, will
at the option of the Holder either be rebated to the Companies or credited on
the principal amount of this Note, or if this Note has been paid, then the
excess will be rebated to the Companies. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable or receivable under this Note will under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it will be deemed a mistake and such excess will be canceled automatically and,
if theretofore paid, rebated to the Companies credited on the principal amount
of this Note, or if this Note has been repaid, then such excess will be rebated
to the Companies.
Section 10. Joint and Several Liability. Each of the Companies will be
jointly and severally liable for all of the obligations to the Holder arising
pursuant to the Master Agreement and this Note. The Holder will be entitled to
enforce all of such obligations against the Companies jointly, or against either
of the Companies separately, as may be determined by the Holder in its sole
discretion. The enforcement of such obligations against either Company
separately will not constitute an election of remedies by the Holder and will
not give rise to any defense in any subsequent action or proceeding brought by
the Holder to enforce this Note against the other Company.
Section 11. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS NOTE WILL BE GOVERNED BY THE INTERNAL LAW,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
Section 12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE. EACH OF THE PARTIES AGREES
THAT ALL MATTERS OF LAW AND FACT IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING WILL BE HEARD AND DECIDED SOLELY BY THE COURT BEFORE WHICH SUCH
ACTION OR PROCEEDING IS BROUGHT IN ACCORDANCE WITH SECTION 13
Section 13. Submission to Jurisdiction. The Companies and the Holder
each hereby submit to the exclusive jurisdiction of any state or federal court
sitting in Wilmington, Delaware, in any action or proceeding arising out of or
relating to this Note, agree that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agree not to bring
any action or proceeding arising out of or relating to this Note in any other
court. The Companies and the Holder each hereby waive any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waive any bond, surety or other security that might be required of any other
party with respect thereto. The Companies and the Holder each agree that a final
judgment in any action or proceeding so brought will be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law.
* * * * *
IN WITNESS WHEREOF, the Companies have each executed and
delivered this Note on May 10, 2002.
CHAPARRAL RESOURCES, INC.
By: /s/ Xxxxx X. Xxxxx
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Its: Co-Chairman
CENTRAL ASIAN PETROLEUM
(GUERNSEY) LIMITED
By: /s/ Xxxxx X. Xxxxx
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Its: Director