SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered into on the
28th day of January 2000 among Chaparral Resources, Inc. ("Borrower"),
Shell Capital Services Limited (the "Facility Agent"), and Cord Capital,
LLC ("Junior Entity").
RECITALS:
WHEREAS, the Borrower and the Facility Agent are, inter alia, parties
to the Loan Agreement (as defined herein); and
WHEREAS, as a condition to funding under the Loan Agreement, the
Borrower, the Facility Agent and the Junior Entity must enter into this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of covenants herein contained,
the parties agree as follows:
1. Definitions and Interpretation.
(a) "Loan Agreement" means the loan agreement dated 1 November 1999
between Borrower, Central Asian Petroleum (Guernsey) Limited, Closed
Type JSC Karakudukmunay and Central Asian Petroleum, Inc., as Co-
Obligors, Shell Capital Limited, Shell Capital Services Limited and
the Lenders (as defined in the Loan Agreement).
"Preferred Obligations" means all obligations of the Borrower, the Co-
Obligors, or any of them, to any of the Finance Parties whether now
existing or arising in the future and whether fixed, prospective or
contingent under or in respect of any of the Finance Documents whether
for principal outstanding, interest, fees, costs, expenses,
indemnities or otherwise.
"Junior Obligations" means all obligations of the Junior Entity to the
Borrower (including, without limitation, in respect of the CRI Bridge
Notes and the CRI Existing Notes) whether now existing or arising in
the future and whether fixed, prospective or contingent, whether for
principal outstanding, interest, fees, costs, expenses, indemnities or
otherwise.
(b) Capitalized terms used and not defined herein are used with the
meaning assigned to such term in the Loan Agreement.
(c) Any reference in this Agreement to:
(i) a statute shall be construed as a reference to such
statute as from time to time amended or re-enacted;
(ii) a person includes its permitted successors and assigns;
(iii) a Finance Document or any other agreement or document
shall be construed as a reference to that Finance
Document or, as the case may be, such other agreement or
document, as the same may have been, or may from time to
time be, amended, novated or supplemented; and
(iv) the singular includes the plural and vice versa.
2. The payment of the Junior Obligations is expressly made subordinate
and subject in right of payment and in liquidation to the prior
payment in full of the Preferred Obligations.
3. Until the date of irrevocable final repayment, in full, of the
Preferred Obligations and termination of all commitments in respect
thereof, the Borrower undertakes not to pay or repay and the Junior
Entity undertakes not to claim, recover, retain or receive (or seek to
claim, recover, retain or receive) any amount whatsoever in relation
to any Junior Obligation (including, without limitation, any recovery,
payment or repayment arising out of any claim under a guarantee) or to
any interest or other amount payable by the Borrower in respect
thereof, or to any other indebtedness of the Borrower to any Junior
Entity.
4. If:
(i) there is any distribution of all or any part of the assets of the
Borrower including, without limitation, by reason of the liquidation,
dissolution or other insolvency proceeding, or assignment for the
benefit of creditors; or
(ii) the Borrower goes into liquidation or becomes subject to any
insolvency or rehabilitation proceeding, administration, or voluntary
arrangement,
then until the date of final irrevocable repayment in full of the
Preferred Obligations any payment or distribution of any kind or
character and all and any rights in respect thereof payable or
deliverable to the Junior Entity with respect to the Junior
Obligations or any part thereof by the liquidator, administrator,
administrative receiver or receiver (or the equivalent thereof) of the
Borrower will forthwith be paid or delivered to the Facility Agent for
application to the Preferred Obligations in accordance with the terms
of the Finance Documents.
5. Following the occurrence of any Event of Default, the Junior Entity
will irrevocably authorise and empower the Facility Agent to demand,
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
CORD CAPITAL, LLC
By: /S/ C. CORD
----------------------------
Name: Xxxxxxx X. Cord
Title: President
Address: 000 Xx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000