PURCHASE AGREEMENT
This purchase agreement ("Purchase Agreement"), is effective January 12, 1996
("Effective Date") and is by and between Chaparral Resources Inc. ("Chaparral")
and Guntekin Koksal ("Shareholder") for the purchase by Chaparral of certain
shares of Central Asian Petroleum (Guernsey) Limited ["CAP(G)"] stock owned by
Shareholder as described below.
1. Purchase of 75,000 shares ("Stock A")
Chaparral shall purchase all of Shareholder's right, title and interest in and
to 75,000 shares of CAP(G) stock ("Stock A") in return for (i) U.S. $1,975,000,
plus (ii) 900,000 shares of restricted common stock of Chaparral. The purchase
price shall be paid as follows:
a. Chaparral shall deposit U.S. $150,000.00 ("Escrow Funds") with the
escrow agent pursuant to the escrow agreement ("Escrow Agreement")
(attached hereto and incorporated by this reference as Exhibit A to
this Purchase Agreement) in cash or other immediately available funds
on or before January 19, 1996. Such amount shall be paid to Shareholder
upon "Closing A" (the closing to occur on or before March 11, 1996 and
as further described in this Purchase Agreement), or shall be otherwise
disposed of under the terms of the Escrow Agreement. Should Chaparral
fail to Close for reasons other than (i) the failure of Shareholder to
Close, (ii) the material failure of any of Shareholder's
representations herein to be true and accurate or the material breach
by Shareholder of its warranties hereunder, or (iii) the discovery of
any material adverse effects during Chaparral's due diligence review
under Clause 3(b) below, then the escrowed funds shall be paid to
Shareholder as Shareholder's full and exclusive remedy for Chaparral's
failure to Close;
b. Chaparral shall pay U.S. $600,000.00 to the Shareholder, and deliver
900,000 shares of restricted common stock of Chaparral to Shareholder
as directed in writing by the Shareholder, at Closing A; and
c. Provided that Closing A has occurred, Chaparral shall pay U.S.
$1,225,000 to Shareholder in four payments of $306,250 each on or
before: June 11, 1996, September 11, 1996, December 11, 1996 and March
11, 1997, respectively (each such payment referred to here as
"Installment Payment"). In such case Chaparral shall either:
(i) Put in place a bank guarantee, performance bond or bank
letter of credit ("Security") acceptable to Shareholder (and
Shareholder may not unreasonably withhold such acceptance) for
the benefit of Shareholder for the purpose of securing
Shareholder's right to receive such U.S. $1,225,000 pursuant
to the payment schedule described above (which Security shall
provide for subject amount to decline in accordance with
payments made according to such payment schedule); or
(ii) Not provide Security, in which case Shareholder shall
have a lien on Stock A, and Clause 1(d) shall become
applicable.
d. If Chaparral has not put in place Security pursuant to Clause
1(c)(i), and if Chaparral also fails to pay any one of the Installment
Payments pursuant to the payment schedule described in Clause 1(c)
above, then the ownership of Stock A shall be deemed to have reverted
to Shareholder, and Chaparral shall take all steps necessary to
immediately deliver Stock A to Shareholder. In such a case, Chaparral
shall also become obligated to pay Shareholder interest on the amount
associated with such missed installment payment, and the amount of any
of the Installment Payments which subsequently may become due
(beginning on the respective due date of any such Installment Payment)
compounded on a monthly basis, at the rate per annum equal to the one
(1) month term, LIBOR rate for U.S. dollar deposits, as published by
The Wall Street Journal or if not published, then by the Financial
Times of London, plus five percent, applicable on the first Business
Day prior to the due date of such unpaid Installment Payment, and
thereafter on the first Business Day of each succeeding one (1) month
term ("Agreed Interest Rate"). Chaparral shall have the right to
mitigate such interest by making payments to Shareholder at any time.
During such 180 day period Chaparral shall have the right to
participate in the marketing of Stock A, at Chaparral's sole cost.
Shareholder shall sell Stock A, subject to the rights of the other
CAP(G) Members [including Chaparral and CAP(D)] to purchase such Stock
A pursuant to the CAP(G) Articles of Association, to any buyer which
Chaparral may designate [including either Chaparral or CAP(D)] and
pursuant to terms as Chaparral may designate, provided that such terms
provide for full payment to be completed within such 180 day period.
The proceeds of any such sale of Stock A shall be allocated:
(i) first to Shareholder in satisfaction of any unpaid
Installment Payments (inclusive of any Installment Payments
not yet due), plus applicable interest (less any amounts paid
by Chaparral in order to mitigate interest); and
(ii) second, should there be any surplus, to Chaparral.
In the event that there continues to be, upon the conclusion of any
such sale, any amount owing by Chaparral to Shareholder as provided
above, then Shareholder may take advantage of all remedies available to
it in order to recover any such deficiency.
e. If, at the end of such 180 day period, no sale has been made as
described in Clause l(d) above, then Chaparral, at Chaparral's sole
cost, shall provide for an auction (to occur on or before the date 45
days after the end of such 180 day period) wherein Shareholder shall
sell Stock A to the highest cash bidder [including either Chaparral or
CAP(D)] without any obligation to obtain the approval of Chaparral,
subject to the rights of the other CAP(G) Members [including Chaparral
and CAP(D)] to purchase such Stock A pursuant to the CAP(G) Articles of
Association. The proceeds of any such sale of Stock A shall be
allocated:
(i) first to Shareholder in satisfaction of any unpaid
Installment Payments (inclusive of any Installment Payments
not yet due), plus applicable interest (less any amounts paid
by Chaparral in order to mitigate interest); and
(ii) second, should there be any surplus, to Chaparral.
In the event that there continues to be, upon the conclusion of any
such sale, any amount owing by Chaparral to Shareholder as provided
above, then Shareholder may take advantage of all remedies available to
it in order to recover any such deficiency.
2. Option for 50.000 shares ("Stock B")
a. Upon Closing A having occurred, and Chaparral having discharged any
obligations as may have accrued pursuant to 1(c) above, Chaparral shall
have the option ("Option"), until the earliest of either:
(i) December 11, 1997; or
(ii) any share assignment pursuant to Paragraph 9 of that
certain September 16, 1994 Protocol among the Members of
CAP(G);
to purchase, and take delivery of (in accordance with Chaparral's
written instructions), all of Shareholder's right, title and interest
in and to 50,000 shares of CAP(G) ("Stock B") in return for U.S.
$1,625,000 and 200,000 of restricted common stock of Chaparral, and any
such exercise of option shall be referred to as "Closing B". On the
date of Closing B Chaparral shall transfer such 200,000 shares of
restricted common stock of Chaparral to Shareholder (in accordance with
Shareholder's written instructions).
Chaparral shall also have the obligation to either:
(iii) pay such U.S. $1,625,000 to Shareholder at Closing B; or
(iv) at any time prior to December 11, 1997, pay Shareholder
such U.S.$1,625,000 with interest at the Agreed Interest Rate
beginning on the date of Closing B.
In the event that Chaparral opts to pay Shareholder pursuant to (iv)
above, then Chaparral shall have the option to either:
(v) Provide for Security acceptable to Shareholder (and
Shareholder may not unreasonably withhold such acceptance) for
the benefit of Shareholder for the purpose of securing
Shareholder's right to receive such U.S. $1,625,000 plus
applicable interest on or before December 11, 1997, or
(vi) Not provide such Security, in which case Shareholder
shall have a lien on Stock B, and Clause 2(b) shall become
applicable.
b. If Chaparral has not put in place Security pursuant to Clause
2(a)(v), and if Chaparral also fails to pay such U.S.
$1,625,000 plus applicable interest on or before December 11, 1997,
then the ownership of Stock B shall be deemed to have reverted to
Shareholder, and Chaparral shall take all steps necessary to
immediately deliver Stock B to Shareholder. Chaparral shall have the
right to mitigate applicable interest by making payments to
Shareholder at any time. During such 180 day period Chaparral shall
have the right to participate in the marketing of Stock B, at
Chaparral's sole cost. Shareholder shall sell Stock B, subject to the
rights of the other CAP(G) Members [including Chaparral and CAP(D)] to
purchase such Stock B pursuant to the CAP(G) Articles of Association,
to any buyer which Chaparral may designate [including either Chaparral
or CAP(D)] and pursuant to terms as Chaparral may designate, provided
that such terms provide for full payment to be completed within such
180 day period. The proceeds of any such sale of Stock B shall be
allocated:
(i) first to Shareholder in satisfaction of the unpaid U.S. $1,625,000
plus applicable interest (less any amounts paid by Chaparral in order
to mitigate interest); and
(ii) second, should there be any surplus, to Chaparral.
In the event that there continues to be, upon the conclusion of any
such sale, any amount owing by Chaparral to Shareholder as provided
above, then Shareholder may take advantage of all remedies available to
it in order to recover any such deficiency.
c. If, at the end of such 180 day period, no sale has been made as
described in Clause 2(b) above, then Chaparral, at Chaparral's sole
cost, shall provide for an auction (to occur on or before the date 45
days after the end of such 180 day period) wherein Shareholder shall
sell Stock B to the highest cash bidder [including either Chaparral or
CAP(D)] (without any obligation to obtain the approval of Chaparral),
subject to the rights of the other CAP(G) Members [including Chaparral
and CAP(D)] to purchase such Stock B pursuant to the CAP(G) Articles of
Association. The proceeds of any such sale of Stock B shall be
allocated:
(i) first to Shareholder in satisfaction of the unpaid
U.S. $1,625,000 plus applicable interest (less any
amounts paid by Chaparral in order to mitigate
interest), and
(ii) second, should there be any surplus, to Chaparral.
In the event that there continues to be, upon the conclusion of any
such sale, any amount owing by Chaparral to Shareholder as provided
above, then Shareholder may take advantage of all remedies available to
it in order to recover any such deficiency.
3. Conditions
a. Shareholder shall be entitled to all the benefits and receipts and
shall be liable for all costs, charges, expenses, liabilities and
obligations in respect of the Stock A and/or Stock B, respectively
(other than those which may be specifically excluded from Shareholder's
representations and warranties), which accrue or relate to any period
before Closing A or Closing B, respectively. Shareholder shall
reimburse and indemnify Chaparral against any such costs, charges,
expenses, liabilities and obligations which are paid by Chaparral.
Chaparral shall be entitled to all the benefits and receipts and shall
be liable for all costs, charges, expenses, liabilities and obligations
in respect of Stock A and/or Stock B, respectively (other than those
which Shareholder have represented and warranted against by virtue of
this Purchase Agreement) which accrue or relate to any period after
Closing A and/or Closing B, respectively. Chaparral shall reimburse and
indemnify Shareholder against any such costs, charges, expenses,
liabilities and obligations which are paid by Shareholder.
b. Chaparral shall conduct a due diligence review to confirm the
accuracy of the representations contained herein, and to verify the
accuracy of the information and data supplied and to be supplied by
Shareholder to Chaparral, and to determine the existence of any adverse
conditions or circumstances pertaining to Stock A and Stock B, as
applicable. Shareholder agrees that it shall give Chaparral reasonable
access to the records and files of Shareholder as required to complete
its due diligence review before Closing A and/or Closing B, as
applicable. Chaparral agrees to keep all information provided by
Shareholder regarding Stock A and Stock B confidential.
c. Should there be, at the time of Closing A, in the reasonable
discretion of Chaparral, a material inconsistency or breach in respect
of the representations or warranties given by Shareholder in or
pursuant to this Purchase Agreement, or a material adverse condition
pertaining to Stock A and/or Stock B, then, at Chaparral's option: (i)
this Purchase Agreement and the Escrow Agreement may be terminated and
the parties shall have no further obligations to one another, or (ii)
the parties shall nevertheless proceed to Closing A. Notwithstanding
the foregoing, however, if there are material inconsistencies or
breaches due to the intentional or reckless acts or omissions of
Shareholder, then Chaparral may seek whatever remedies and compensation
from Shareholder that may be available to it regardless of whether or
not Chaparral elects to proceed to Closing A.
4. Representations and Warranties
Shareholder represents and warrants to Chaparral as follows, which
representations and warranties shall be deemed repeated at Closing A and Closing
B, respectively, and which shall survive Closing A and Closing B, respectively:
a. Shareholder has good and marketable title to Stock A and Stock B,
free and clear of all liens, encumbrances and adverse claims of any
nature; and there are no facts known to Shareholder which are likely to
prejudice or endanger Stock A or Stock B.
b. Shareholder have the full power and authority to enter into and
perform the transactions hereunder, and do not require the consent of
any other persons, firms or entities, and no person, firm or entity has
any preferential purchase right with respect to any portion of Stock A
and/or Stock B, nor is any portion of Stock A or Stock B subject to any
pending or existing agreement to sell to any party.
c. Shareholder has the sole legal and beneficial ownership of Stock A
and Stock B, as applicable, in the aggregate representing twenty five
percent (25%) of the outstanding stock of CAP(G), and Shareholder has
no obligations to any third party with respect to any such stock.
d. Shareholder shall ensure that the representations and warranties
above shall be true and accurate. However, if notwithstanding the
efforts of Shareholder, any matter or thing occurs of which any
Shareholder is aware and which would be inconsistent with or in breach
of any of those representations and warranties then that Shareholder
shall promptly notify Chaparral thereof in writing.
5. Closing A
At Closing A:
a. Chaparral shall direct the "Escrow Agent" (as that term is defined
in the Escrow Agreement) to deliver the Escrow Funds to Shareholder,
b. Chaparral shall pay U.S. $600,000 to Shareholder in immediately
available funds,
c. Chaparral shall deliver 900,000 shares of restricted common
stock in Chaparral to the Shareholder in accordance with Shareholder's
written instructions; and
d. Shareholder shall deliver all certificates representing Stock A to
Chaparral, together with executed stock powers and such other
instruments as may be required to vest complete ownership of Stock A in
Chaparral.
6. Closing B
At Closing B:
a. Shareholder shall deliver all certificates representing Stock B to
Chaparral, together with executed stock powers and such other
instruments as may be required to vest complete ownership of Stock B in
Chaparral.
b. Chaparral shall deliver 200,000 shares of restricted common stock in
Chaparral to the Shareholder in accordance with Shareholder's written
instructions (Chaparral shall pay U.S. $1,625,00.00 to Shareholder in
accordance with Clause 2 above).
7. Undertaking by Chaparral and Central Asian Petroleum (Delaware) Guernsey
Chaparral, and Chaparral's wholly-owned subsidiary, Central Asian Petroleum
(Delaware) Guernsey ["CAP(D)] covenant that during the period of the Option they
shall not exercise their respective votes as Members of CAP(G) to cause any
assignment of CAP(G) shares to Chaparral or any Affiliate of Chaparral pursuant
to Paragraph 9 of that certain September 16, 1994 Protocol among the Members of
CAP(G). For this purpose "Affiliate" means a legal entity that:
(i) controls;
(ii) is controlled by; or
(iii) is controlled by an entity which controls, Chaparral.
For this purpose "Control" means the right to exercise,
directly or indirectly, at least 50% of the voting rights in a
legal entity.
8. Shareholder's Undertakings
a. Shareholder shall not solicit, directly or indirectly, any other
party, nor negotiate with any other party, for the sale of any portion
of Stock A or Stock B until the failure of Closing A and/or Closing B,
as applicable.
b. Shareholder shall immediately notify Chaparral of any information
Shareholder may obtain regarding third parties which may be interested
in purchasing CAP(G) stock.
9. Appointment of Alternate Director
a. Shareholder has executed and delivered the Appointment of Alternate
Director of CAP(G) (appointing ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) attached hereto and
incorporated by reference as Exhibit B, contemporaneously with this
Purchase Agreement, and Shareholder also hereby covenants that he shall
not:
i. attend any future meetings of the CAP(G) Board as a member
of the CAP(G) Board of Directors, or in any way exercise his
vote as a Director of CAP(G);
ii. remove ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as the case may be, from office
as alternate Director;
iii. appoint any other alternate Director; or
iv. resign as Director
before March 11, 1996, or at all should Closing A occur.
10. CAP(G) Board
Chaparral and Shareholder undertake that they shall not participate in any
CAP(G) Members' meeting, vote or agreement of any kind in conjunction with a
change of the CAP(G) Directors until March 12, 1996, or Closing A, whichever
comes first.
11. KKM Board
After Closing A Chaparral and CAP(D) shall initiate a CAP(G) Board meeting or
agreement wherein they shall vote to cause Guntekin Koksal to become a CAP(G)
appointed KKM board member, subject to Chaparral's and CAP(D)'s right
subsequently to exercise their CAP(G) Board authority, according to their
complete discretion to change the composition of the CAP(G) appointed KKM board
members.
12. Confidentiality
a. Seller shall keep all information regarding this Purchase Agreement
confidential for a period of three (3) years from the Effective Date
and shall not disclose any such information to any person or entity not
a Party to this Purchase Agreement, except:
(1) to an affiliate of Shareholder, provided such Shareholder
maintains confidentiality as provided in this Clause 10;
(2) to the extent such information is required to be furnished
in compliance with any applicable laws or regulations, or
pursuant to any legal proceedings or because of any order of
any court binding upon Shareholder;
(3) to the extent such information must be disclosed pursuant
to any rules or requirements of any government or stock
exchange having jurisdiction over Shareholder, or any of its
affiliates;
(4) to its employees, subject to taking customary precautions
to ensure such data and information is kept confidential;
(5) any such information which, through no fault of a Party,
becomes a part of the public domain.
(b) Disclosure pursuant to Clause 11 (a)(1) and Clause 11 (a)(4) shall
not be made unless prior to such disclosure the disclosing Party has
obtained a written undertaking from the recipient party to keep the
data and information strictly confidential.
13. Applicable Law And Dispute Settlement
a. This Agreement shall be governed by, construed, interpreted and
enforced in accordance with the substantive laws of Switzerland, to the
exclusion of any conflicts of law rules which would refer the matter to
the laws of another jurisdiction.
b. Any dispute, controversy or claim arising out of or in relation to
or in connection with this Agreement or the operations carried out
under this Agreement, including without limitation any dispute as to
the existence, construction, validity, interpretation, enforceability,
termination or breach of this Agreement, shall be exclusively and
finally settled by international arbitration, and any Party may submit
such a dispute, controversy or claim to international arbitration.
c. A single arbitrator shall be appointed by unanimous consent of the
Parties. If the Parties, however, cannot reach agreement on an
arbitrator within 15 days of the submission of a notice of arbitration,
then the appointing authority for the implementation of such procedure
shall be the International Chamber of Commerce's International Court of
Arbitration, who shall appoint an independent arbitrator who does not
have any financial interest in the dispute, controversy or claim.
d. Unless otherwise expressly agreed in writing by the Parties to the
arbitration proceedings:
(1) The arbitration proceedings shall be held in Geneva,
Switzerland.
(2) The arbitration proceedings shall be conducted in the
English language and the arbitrator(s) shall be fluent in
the English language;
(3) The arbitrator shall be and remain at all times wholly
independent and impartial;
(4) The arbitration proceedings shall be conducted in
accordance with the Arbitration Rules of UNCITRAL ("Rules"),
in effect on the Effective Date, which Rules are deemed
incorporated by reference into this clause.
(5) The costs of the arbitration proceedings (including
attorneys' fees and costs) shall be borne in the manner
determined by the arbitrator;
(6) The decision of the sole arbitrator shall be: reduced to
writing and state the reasons upon which it is based; final
and binding without the right of appeal; the sole and
exclusive remedy regarding any claims, counterclaims, issues
or accounting presented to the arbitrator; carried out without
delay and without recourse to any judicial proceedings in any
jurisdiction whatsoever seeking annulment, setting aside,
modification or any diminution or impairment of its
terms or effect; any cash awards shall be made and promptly
paid in U.S. dollars free of any deduction or offset; any
costs or fees incident to enforcing the award, shall to the
maximum extent permitted by law, be charged against the Party
resisting such enforcement;
(7) The arbitrator shall neither have nor exercise any power
to act as amicable compositeur or ex aequo et ▇▇▇▇; or to
award special, indirect, consequential, punitive or other
similar damages; provided, however, that the award may include
appropriate punitive damages where a Party has engaged in
delaying and dilatory actions; the arbitrator may also award
interim relief and grant specific performance.
(8) Any cash award shall include interest from the date of any
breach or violation of this Agreement, as determined by the
arbitral award, and from the date of the award until paid in
full, with interest at commercial rates to be determined by
the arbitrator.
(9) Any Party to this Covenant which is not initially a Party
to an arbitration commenced pursuant to this Paragraph 8
consents to being made a party thereto following such
commencement at the instance of any party to such arbitration,
and is itself entitled to become a party thereto at its own
instance. Every Part,v to this Covenant shall be bound by an
award issued in any arbitration pursuant to this Paragraph 8
regardless of whether or not it participated in such
arbitration, so long as it was duly notified of such
arbitration.
(10) Judgment upon the award may be entered in any court
having jurisdiction over the person or the assets of the Party
owing the judgment or application may be made to such court
for a judicial acceptance of the award and an order of
enforcement, as the case may be, and
(11) The arbitrator shall not be of the same nationality as
any of the Parties or their ultimate parent entities.
14. Severance of Invalid Provisions
If and as for so long as any provision of this Purchase Agreement shall be
deemed to be judged invalid for any reason whatsoever, such invalidity shall not
affect the validity or operation of any other provision of this Purchase
Agreement except only so far as shall be necessary to give effect to the
construction of such invalidity, and any such invalid provision shall be deemed
severed from this Purchase Agreement without affecting the validity of the
balance of this Purchase Agreement.
15. Entire Agreement
This Agreement is the entire agreement of the Parties and supersedes all prior
agreements, rights and/or obligations, understandings and/or negotiations of the
Parties regarding Stock A and/or Stock B.
CHAPARRAL RESOURCES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
By ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
CENTRAL ASIAN PETROLEUM (DELAWARE) LIMITED (for the purpose of Clauses 3, 12 and
13 only)
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
By ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ Guntekin Koksal
------------------------
Guntekin Koksal