SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered
into on the 28th day of January 2000 among Chaparral Resources,
Inc. ("Borrower"), Shell Capital Services Limited (the "Facility
Agent"), and Whittier Ventures, LLC ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, INTER
ALIA, parties to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement,
the Borrower, the Facility Agent and the Junior Entity must enter
into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of covenants
herein contained, the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1
November 1999 between Borrower, Central Asian Petroleum
(Guernsey) Limited, Closed Type JSC Karakudukmunay and
Central Asian Petroleum, Inc., as Co-Obligors, Shell Capital
Limited, Shell Capital Services Limited and the Lenders (as
defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the
Borrower, the Co-Obligors, or any of them, to any of the
Finance Parties whether now existing or arising in the
future and whether fixed, prospective or contingent under or
in respect of any of the Finance Documents whether for
principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior
Entity to the Borrower (including, without limitation, in
respect of the CRI Bridge Notes and the CRI Existing Notes)
whether now existing or arising in the future and whether
fixed, prospective or contingent, whether for principal
outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used
with the meaning assigned to such term in the Loan
Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to
such statute as from time to time amended or re-
enacted;
(ii) a person includes its permitted successors and
assigns;
(iii) a Finance Document or any other agreement or
document shall be construed as a reference to that
Finance Document or, as the case may be, such other
agreement or document, as the same may have been, or
may from time to time be, amended, novated or
supplemented; and
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made
subordinate and subject in right of payment and in
liquidation to the prior payment in full of the Preferred
Obligations.
3. Until the date of irrevocable final repayment, in full, of
the Preferred Obligations and termination of all commitments
in respect thereof, the Borrower undertakes not to pay or
repay and the Junior Entity undertakes not to claim,
recover, retain or receive (or seek to claim, recover,
retain or receive) any amount whatsoever in relation to any
Junior Obligation (including, without limitation, any
recovery, payment or repayment arising out of any claim
under a guarantee) or to any interest or other amount
payable by the Borrower in respect thereof, or to any other
indebtedness of the Borrower to any Junior Entity.
4. If:
(i) there is any distribution of all or any part of the
assets of the Borrower including, without limitation, by
reason of the liquidation, dissolution or other insolvency
proceeding, or assignment for the benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject
to any insolvency or rehabilitation proceeding,
administration, or voluntary arrangement,
then until the date of final irrevocable repayment in full
of the Preferred Obligations any payment or distribution of
any kind or character and all and any rights in respect
thereof payable or deliverable to the Junior Entity with
respect to the Junior Obligations or any part thereof by the
liquidator, administrator, administrative receiver or
receiver (or the equivalent thereof) of the Borrower will
forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with
the terms of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior
Entity will irrevocably authorise and empower the Facility
Agent to demand, xxx and prove for, collect and receive
every payment or distribution referred to in Section 4 and
give good discharge therefor and to file claims and take
such other proceedings, in the Facility Agent's name, the
name of the Junior Entity or otherwise, as the Facility
Agent may deem necessary or advisable for the enforcement of
the payment of debts in accordance with the priority set out
in Section 2.
6. The Junior Entity will, at all times, following the
occurrence of any Event of Default, and for so long as such
Event of Default is continuing, execute or procure the
execution of and deliver to the Facility Agent such proxies,
powers of attorney, assignments or other instruments as may
be requested by it in order to enable the Facility Agent to
vote and/or enforce any and all claims upon or with respect
to the Junior Obligations or any part thereof and to collect
and receive any and all payments or distributions which may
be payable or deliverable to the Facility Agent at any time
upon or with respect to the Junior Obligations or any part
thereof.
7. A liquidator or other insolvency representative of the
Borrower or the Junior Entity will be authorised, to the
maximum extent permitted by applicable law, to apply any
assets or moneys it receives in accordance with the order of
priority referred to in Section 2.
8. If any amounts are received by the Junior Entity or any
person acting on its behalf with respect to the Junior
Obligations or any part thereof whether in cash or in kind
or by way of set-off, combination of accounts or otherwise,
the Junior Entity (or person acting on its behalf as
aforesaid) agrees that an amount equal to the amount so
received by the relevant Junior Entity shall be held on
trust for the Facility Agent and shall forthwith be paid to
the Facility Agent for application to the Preferred
Obligations in accordance with the terms of the Finance
Documents and that any failure to make such payment shall be
a breach of its obligations under this Agreement.
9. (a) Unless otherwise agreed by the Facility Agent, the
Junior Entity will waive, and undertake that it will not
seek to obtain payment of any Junior Obligation, in whole or
in part, by exercising any right of set-off it may have with
respect to any Junior Obligation, whether created by
contract, statute or otherwise.
(b) Until the date of irrevocable final repayment, in full,
of the Preferred Obligations and termination of all
commitments in respect thereof the Facility Agent may
(subject to the provisions of the Finance Documents), unless
and until such moneys or distributions in the aggregate are
sufficient to bring about the irrevocable final repayment,
in full, of the Preferred Obligations (if applied to
repayment of the Preferred Obligations), (i) apply any
moneys or property received under this Agreement from the
Borrower, the Junior Entity or any other person against the
Preferred Obligations in such order as it thinks fit; and
(ii) hold in a suspense account any moneys or distributions
received under this Agreement.
10. The Junior Entity will not be entitled without the consent
of the Facility Agent to accelerate any Junior Obligation
(or any portion thereof). The Facility Agent shall have
complete discretion as to the granting of such consent.
11. The Junior Entity will not under any circumstances, prior to
the irrevocable final repayment, in full, of the Preferred
Obligations, be subrogated to any of the rights of the
Finance Parties or any security arising under the Finance
Documents.
12. This Agreement and the subordination provisions contained
herein will terminate on the date of irrevocable final
repayment, in full, of the Preferred Obligations, and
termination of all commitments in respect thereof.
13. Unless otherwise agreed by the Facility Agent, the Junior
Entity undertakes not to commence, or join with any other
creditor or creditors of the Borrower in commencing, any
bankruptcy, insolvency or rehabilitation proceeding,
administration or other voluntary arrangement against or in
respect of the Borrower prior to irrevocable final
repayment, in full, of the Preferred Obligations.
14. This Agreement constitutes the entire agreement between the
parties and supersedes all prior oral or written agreements,
understandings, representations, warranties and course of
conduct and dealings between the parties on the subject
matter hereof.
15. Time is of the essence of each party's obligations under
this Agreement but no failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, any right or
remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any
right or remedy prevent any further or other exercise
thereof or the exercise of any other right or remedy. The
rights and remedies contained in this Agreement are
cumulative and not exclusive of any rights or remedies
provided by law.
16. If, at any time, any provision of this Agreement is or
becomes illegal, invalid or unenforceable in any respect
under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of
this Agreement under the law of that jurisdiction nor the
legality, validity or enforceability of that or any other
provision of this Agreement under the law of any other
jurisdiction shall in any way be affected or impaired
thereby unless the effect of the foregoing would be
substantially to alter the rights and obligations of the
parties originally agreed.
17. This Agreement shall bind the parties and each of their
respective successors and assignees.
18. Neither the Borrower nor the Junior Entity will assign or
otherwise transfer any of its rights or obligations under
this Agreement. The Facility Agent is permitted to transfer
its rights and/or obligations under this Agreement.
19. (a) All notices or other communications to Borrower or the
Facility Agent shall be given in writing addressed to the
relevant party at its address specified in Clause 29.2 of
the Loan Agreement. All notices or other communications to
the Junior Entity shall be given in writing at its address
set forth in the signature page of this Agreement. A written
notice includes a notice by facsimile transmission
(b) Any such notice shall be deemed to be given:
(i) if by personal delivery or letter, when
delivered; and
(iii) if by facsimile, when the answerback is
received.
(c) However, a notice given in accordance with the above
but received on a non-working day or after business hours in
the place of receipt shall only be deemed to be given on the
next working day in that place.
20. Each communication and document made or delivered by one
party to another pursuant to this Agreement shall be in the
English language or accompanied by a translation into
English certified (by an officer of the person making or
delivering the same) as being a true and accurate
translation thereof.
21. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
22. This Agreement shall be governed by English law.
23. (a) For the exclusive benefit of the Facility Agent, each
of the Borrower and the Junior Entity irrevocably agrees
that the courts of England are to have jurisdiction to
settle any disputes which may arise out of or in connection
with this Agreement and that accordingly any suit, action or
proceedings (together in this Section 23 referred to as
"proceedings") arising out of or in connection with this
Agreement may be brought in such courts, subject to the
option referred to in Section 26.
(b) Each of the Borrower and the Junior Entity irrevocably
waives and agrees not to raise any objection which it may
have now or hereafter to the laying of the venue of any
proceedings in any such court as is referred to in this
Section 23 and any claim that any such proceedings have been
brought in an inconvenient or inappropriate forum and
further irrevocably agrees that a judgement in any
proceedings brought in the English courts shall be
conclusive and binding upon each Borrower and the Junior
Entity and may be enforced in the courts of any other
jurisdiction.
(c) Nothing contained in this Section 23 shall limit the
right of the Facility Agent to take proceedings against the
Borrower or the Junior Entity in any other court of
competent jurisdiction, nor shall the taking of proceedings
in one or more jurisdictions preclude the taking of
proceedings in any other jurisdiction, whether concurrently
or not.
24. To the extent that the Borrower or the Junior Entity may now
or hereafter be entitled, in any jurisdiction in which
proceedings may at any time be commenced with respect to
this Agreement, to claim for itself or any of its
undertaking, properties, assets or revenues present or
future any immunity (sovereign or otherwise) from suit,
jurisdiction of any court, attachment prior to judgement,
attachment in aid of execution of a judgement, execution of
a judgement or from set-off, banker's lien, counterclaim or
any other legal process or remedy with respect to its
obligations under this Agreement and to the extent that in
any such jurisdiction there may be attributed to the
Borrower or the Junior Entity any such immunity (whether or
not claimed), each of the Borrower and the Junior Entity
hereby to the fullest extent permitted by applicable law
irrevocably agrees not to claim, and hereby to the fullest
extent permitted by applicable law waives, any such
immunity.
25. Each of the Borrower and the Junior Entity consents
generally in respect of any proceedings to the giving of any
relief or the issue of any process in connection with such
proceedings including the making, enforcement or execution
against any property whatsoever (irrespective of its use or
intended use) of any order or judgement which may be made or
given in such proceedings.
26. If any dispute arises in relation to this Agreement,
including any questions as to existence, validity or
termination, such dispute shall, at the option only of the
Facility Agent, be referred to and finally resolved by
arbitration under the rules of the London Court of
International Arbitration which are applicable at the time
of reference to the arbitration and are deemed to be
incorporated by reference into this Section 26. Such
arbitration shall take place in London, England and shall be
conducted by three arbitrators, one of whom shall be
nominated by the Borrower, one by the Facility Agent and the
third to be agreed between the two arbitrators so nominated
and in default he shall be nominated by the President of the
London Court of International Arbitration. The language in
which such arbitration shall be conducted shall be English.
Any award rendered shall be final and binding on the parties
thereto and may be entered into any court having
jurisdiction or application may be made to such court for an
order of enforcement as the case may require. No party may
appeal to any court from any award or decision of the
arbitral tribunal and, in particular, but without
limitation, no applications may be made under section 45 of
the Arbitration Xxx 0000 and no appeal may be made under
section 69 of that Act.
27. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CHAPARRAL RESOURCES, INC.
By: /S/ XXXXXXX X. XXXXX
----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Treasurer
SHELL CAPITAL SERVICES LIMITED
By: /S/ XXXX X.X. XXXXXX
----------------------------
Name: Xxxx X.X. Xxxxxx
Title: Attorney-in-Fact
WHITTIER VENTURES, LLC
By: /S/ XXXXX X. XXXXX
----------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
Address: 0000 Xxxxxxxxxx Xxxxx
Xxxxx Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
