Exhibit 10.7
AGREEMENT FOR
THE PLEDGE OF THE PARTICIPATORY INTEREST
IN
OOO ZAURALNEFTEGAZ
DATED 9th November, 2005
BETWEEN
CASPIAN FINANCE LIMITED
AND
ZAURALNEFTEGAZ LIMITED
AGREEMENT FOR THE PLEDGE OF THE PARTICIPATORY INTEREST
9th November 2005
[London]
ZAURALNEFTEGAZ LIMITED, a company incorporated in England and Wales under
company number 5525360 and whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (hereinafter referred to as the "PLEDGOR"), and
CASPIAN FINANCE LIMITED, a company incorporated in England and Wales under
company number 05530897 and whose registered office is at 3rd Floor, Millennium
Bridge House, 2 ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (hereinafter
referred to as the "PLEDGEE"),
the Pledgor and the Pledgee may hereinafter be collectively referred to as the
"Parties", or individually as a "Party"
R E C I T A L
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WHEREAS pursuant to the Loan Agreement the Pledgee has agreed to make a loan
facility in the amount of up to 6,859,395 (Six Million Eight Hundred Fifty-Nine
Thousand Three Hundred Ninety-Five) US Dollars as the Commitment, available to
and for the benefit of the Company;
WHEREAS as of the date hereof, the Pledgor is the lawful owner of the
Participatory Interest, as these terms are defined in Article 1 below;
WHEREAS pursuant to a Guarantee of even date herewith (the "GUARANTEE") given by
the Pledgor to the Pledgee, the Pledgor has agreed to guarantee the Company's
obligations to the Pledgee under the Loan Agreement; and
WHEREAS The Pledgor has agreed to enter into this Agreement to secure its
obligations to the Pledgee under the Guarantee.
NOW THEREFORE the Parties have entered into this Agreement on the terms and
conditions that follow.
ARTICLE 1. DEFINITIONS AND INTERPRETATIONS
1.1 Wherever used in this Agreement, unless otherwise defined, capitalized
terms used herein shall have the meanings assigned to them in the Loan
Agreement.
1.2 In this Agreement:
"AGREEMENT" shall mean this Agreement for the pledge of the Participatory
Interest and all amendments and annexes hereto which form an integral part
hereof;
"APPLICABLE LAW" shall mean the current legislation of the Russian Federation,
including without limitation ordinances and statutes enacted pursuant thereto,
as well as any and all applicable laws of the subject states and municipalities
of the Russian Federation;
"BUSINESS DAY" shall mean any day except Saturdays, Sundays and state or public
holidays of the Russian Federation and the United Kingdom;
"COMPANY" means OOO Zauralneftegaz, a limited liability company incorporated
under the laws of the Russian Federation under the main state registration
number (ORGN) 1024500513950, located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
Oblast, Russian Federation;
"DOLLARS" or "USD" shall mean the lawful currency of the United States of
America;
"ENCUMBRANCE" shall mean any pledge, agreement or arrangement for security of
any kind or rights of third parties in relation to the Participatory Interest,
except for the Pledge hereunder;
"EVENT OF DEFAULT" shall mean any event of default in regard of the Obligations
under the Loan Agreement;
"LOAN AGREEMENT" shall mean the Loan Agreement entered into between the Pledgor
and the Company of even date herewith for the amount of up to 6,859,395 (Six
Million Eight Hundred Fifty-Nine Thousand Three Hundred Ninety-Five) US Dollars
for a term period and at an interest rate set forth therein;
"OBLIGATIONS" means any type of indebtedness or other obligations of the Pledgor
and/or the Company vis-a-vis the Pledgee arising out of and/or in connection
with the Loan Agreement, the Guarantee and this Agreement, as more specifically
described in this Agreement;
"PARTICIPATORY INTEREST" shall mean the 100% participatory interest in the
charter capital of the Company with its nominal value of 10,000 Russian rubles
owned by the Pledgor;
"PLEDGE" means the pledge of the Participatory Interest on the terms and
conditions set forth in this Agreement;
"RUBLES" OR "RUR" shall mean the lawful currency of the Russian Federation; and
"SECURITY PERIOD" shall mean the period commencing from the date of entry into
force of this Agreement and terminating on the date when all the Obligations are
fully and unconditionally discharged to the satisfaction of the Pledgee in
accordance with the provisions of this Agreement and the Loan Agreement.
ARTICLE 2. CREATION OF PLEDGE AND RIGHT OF PLEDGE
2.1. The Pledgor hereby transfers the Participatory Interest into the Pledge in
favour of the Pledgee in order to secure the timely, full and unconditional
discharge of the Obligations.
2.2 The Pledge of the Participatory Interest; applies to (i) the Participatory
Interest; (ii) any proceeds, dividends, distributions or income (including,
profit) deriving from the Participatory Interest; and (iii) any compensation,
whether monetary or in-kind, deriving from the Participatory Interest, received
due to the liquidation or reorganization of the Company, or for any other
reason, and likewise any compensation received as the result of any alienation
of the Participatory Interest, regardless of whether such alienation conforms to
this Agreement.
2.3. The Pledgee shall have the right of pledge of the Participatory Interest
from the execution of this Agreement.
2.4. The Pledge of the Participatory Interest under this Agreement shall remain
in full force until the expiration of the Security Period.
ARTICLE 3. THE NATURE, AMOUNT AND TERM OF THE OBLIGATIONS SECURED BY THE PLEDGE
3.1 The Pledge created pursuant to this Agreement shall secure the discharge
by the Pledgor of the following Obligations:
(a) discharge in full of the Pledgor's obligations under the Guarantee (as
the same may be amended and supplemented from time to time) which includes
the guarantee of the Company's obligations to the Pledgee under the Loan
Agreement, including (i) repayment in full of the principal amount of
6,859,395 (Six Million Eight Hundred Fifty-Nine Thousand Three Hundred
Ninety-Five) US Dollars; (ii) payment of the interest accrued thereon in
the amount specified in the Loan Agreement; and (iii) other amounts that
may become due and payable, including without limitation, further advances
made thereunder, arrangement, refusal, early repayment and other fees,
amounts owing to the Lender pursuant to the Loan Agreement;
(b) discharge in full of all obligations and liabilities owed by the
Pledgor to the Pledgee that may arise under or in connection with this
Agreement in accordance with the Applicable Law; and
(c) payment of any expenses (including without limitation attorney's fees,
taxes (including any and all transfer taxes), stamp duties) incurred by the
Pledgee or any person appointed by the Pledgee in exercising any of the
Pledgee's rights hereunder and under the Loan Agreement.
3.2. The Obligations must be fulfilled in the manner, within the terms and in
the amount set out in the Guarantee and the Loan Agreement.
ARTICLE 4. PLEDGED PROPERTY, POSSESSION AND USE OF THE PLEDGED PROPERTY.
4.1 The pledged property hereunder is the Participatory Interest, as defined in
Article 1 above.
4.2 Except in the event that a levy of execution is sought against the
Participatory Interest, the Participatory Interest shall remain in the Pledgor's
possession and use.
4.3 The voting right as provided by Applicable Law in regard to the
Participatory Interest shall be exercised by the Pledgor.
4.4 For so long as no Event of Default has occurred the Pledgee will hold all
dividends, interest and other income deriving from and received by it in respect
of the Participatory Interest for the account of the Pledgor and will pay such
dividends, interest and other income to the Pledgor on request by the Pledgor.
ARTICLE 5. VALUATION AND LOCATION OF PLEDGED PROPERTY
5.1 In order to comply with the requirements of article 339 of the Russian
Federation Civil Code, the value of the Participatory Interest is valued by the
Parties in the amount of 7,705,079 (Seven Million Seven Hundred Five Thousand
Seventy-Nine) US Dollars which is the equivalent of an amount in Rubles at the
Central Bank of Russia exchange rate as of the date when a public auction is
held. The Loan and other amounts payable under the Loan Agreement must be repaid
to the Lender in arrears and in any event be repaid not later than 14th October
2011.
5.2. The Parties hereby acknowledge that (a) the value of the Participatory
Interest may vary over time; (b) the Participatory Interest should secure in
full the performance of the Obligations; and (c) in the event of the performance
being levied against the Participatory Interest in accordance with the terms of
this Agreement, the Pledgee shall be entitled to recover the full value of the
Obligations and will not be restricted to the stated value of the Participatory
Interest given in Article 5.1 above.
5.3. In order to comply with the requirements of article 339 of the Russian
Federation Civil Code, the Participatory Interest is held by the Pledgee and the
Participatory Interest is located in the Russian Federation.
ARTICLE 6. REGISTRATION OF THE PLEDGE
6.1. On the date of execution of this Agreement the Pledgor shall record the
Pledge created under this Agreement in the register of pledges of the Pledgor
and shall provide a certified extract of such entry to the Pledgee. The Pledgor
shall maintain the register of pledges during the entire Security Period, and
shall be obliged to provide immediate access of the Pledgee to the original of
the register of pledges for its examination by the Pledgee.
ARTICLE 7. COVENANTS OF THE PLEDGOR
7.1 For the duration of the Security Period, the Pledgor hereby covenants:
(a) to retain the Participatory Interest and title of ownership to the
Participatory Interest unencumbered, except for Encumbrances established by
the Pledge;
(b) to protect the Participatory Interest from the claims of third parties;
(c) to notify the Pledgee of the submission by any third party of any
claim of ownership or other rights to the Participatory Interest, of any
claim to withdraw, arrest or seize the Participatory Interest, of any claim
of any Encumbrance over the Participatory Interest, or of any other claim
the satisfaction of which may give rise to a diminution of the value of,
deterioration or on loss of the Pledgor's title to or control over the
Participatory Interest; and
(d) to exercise the rights and obligations as the -ompany's sole
participant in such a way that will not lead the Company to bankruptcy and
(or) liquidation.
7.2 For the duration of the Security Period, the Pledgor covenants that it
shall not, without the prior written consent of the Pledgee:
(a) create or permit to exist any subsequent Encumbrance over the
Participatory Interest, including subsequent pledge; and
(b) sell, assign, transfer, or otherwise dispose in any manner all or any
part of the Participatory Interest or enter into any agreement to sell or
otherwise transfer such Participatory Interest or rights thereto, including
voting rights, or enter into any agreement granting a right to purchase the
Participatory Interest.
7.3. Prior to the entry into force of this Agreement the Pledgor shall obtain
all approvals and authorisations required by the Applicable Law and the
foundation documents of the Pledgor for the conclusion of the Agreement.
ARTICLE 8. LEVY OF EXECUTION OVER THE PLEDGED PROPERTY
8.1 Upon the occurrence of any Event of Default, the Pledgee shall be entitled,
without recourse to court, to levy execution over the Participatory Interest by
written notification to the Pledgor pursuant to Article 13 below of its breach
of the Obligations or any other obligation secured by the Pledge and provided by
this Agreement and the Applicable Law which gives rise to the right to levy
execution over the pledged property (a "GROUND FOR LEVY OF EXECUTION").
8.2 Notwithstanding the provision of Article 8.1 above, if the Ground for the
Levy of Execution is triggered, the Pledgee shall be entitled, at its full
discretion and at any time to initiate legal or arbitration proceedings for the
purposes of levying execution over the pledged Participatory Interest.
8.3 In the event of the levy of execution over the pledged Participatory
Interest without recourse to court, the Pledgee shall hold a public auction for
the sale of the pledged Participatory Interest in accordance with the procedure
set forth in Exhibit 3 /b hereto, and such auction may be held, at the full
discretion of the Pledgee, either with or without recourse to court. The
Pledgor shall render any support and assistance to the Pledgee if a public
auction is held.
8.4 In the event execution is levied against the pledged Participatory
Interest, the proceeds of any such sale at a public auction shall be applied,
subject to the Applicable Law, in the following order of priority:
(a) for payment of all expenses incurred by the Pledgee;
(b) for the discharge of the Obligations (less the expenses incurred by
the Pledgee); and
(c) for payment of the surplus (if any) to the Pledgor or other person
entitled to it pursuant to the Applicable Law.
8.5 The Obligations shall be deemed discharged by payment of the funds received
from the sale of the pledged Participatory Interest from and upon crediting of
the full amount of the Obligations to the account of the Pledgee or a person
appointed by the Pledgee for that purpose.
ARTICLE 9. WARRANTIES AND REPRESENTATIONS
9.1 The Pledgor represents and warrants to the Pledgee that:
(a) the Pledgor is a legal entity duly incorporated, registered and
lawfully existing under the laws of the United Kingdom;
(b) the Pledgor and the representatives acting on its behalf have the
requisite corporate and other powers and authority to execute, deliver and
perform this Agreement, in which regard all the necessary corporate and
other actions of the Pledgor have been taken to authorize the execution,
delivery and performance of this Agreement. All consents, registrations,
and authorizations required for the validity of this Agreement have been
obtained and are in full force and effect, and this Agreement constitutes a
legal, valid and binding obligation of the Pledgor enforceable against the
Pledgor in accordance with its terms;
(c) the conclusion and performance of this Agreement: (i) do not
contradict the Applicable Law; (ii) do not contradict the provisions of any
agreement or other document to which the Pledgor is a party or by which it
or any of its property is bound; (iii) do not contradict or violate any
provision of the Pledgor's foundation documents;
(d) The Pledgor is the sole full-scope lawful owner of pledged
Participatory Interest, which was not assigned, transferred, or pledged, or
otherwise encumbered by the Pledgor in favour of anybody except the
Pledgee, and the Pledge over the Participatory Interest hereunder is the
sole existing Encumbrance thereon;
(e) the Participatory Interest in pledge may be pledged in accordance with
Applicable Law;
(f) all information provided to the Pledgee in connection with the present
Agreement is true, accurate, and complete;
(g) the Pledgor is not a party to any judicial or other proceedings
against the pledged Participatory Interest and, as far as the Pledgor is
aware, there are no such proceedings threatened against it; and
(h) no consent of any individual or entity and no authorization, approval
or other action by, and no notice to or registration with, any government
or other authority is required for (i) the grant by the Pledgor of the
Pledge or for the execution, delivery or performance of the Agreement; (ii)
for the maintenance of the Pledge; and (iii) for the exercise by the
Pledgee of its rights and remedies (save as may be required under Russian
law in order to transfer the Participatory Interest through recourse to a
Ground for Levy of Execution hereunder).
9.2 The representations and warranties set forth in Article 9.1 above shall be
effective upon and after entry into force of the Agreement shall remain in full
effect, until all Obligations have been fulfilled in their entirety.
ARTICLE 10. SEVERABILITY
10.1 If, as the result of a change in the Applicable Law or its interpretation
by competent bodies, individual provisions of this Agreement become illegal or
invalid, this shall not signify the illegality or invalidity of other provisions
hereof and the Parties shall amend this Agreement accordingly.
ARTICLE 11. AMENDMENTS
All amendments and supplements to this Agreement shall be valid only if executed
in writing and signed by authorized representatives of the Parties.
ARTICLE 12. ASSIGNMENT
The Pledgee shall have the right to assign all its rights under this Agreement
to a third party together with the assignment to the same third party of its
rights under the Loan Agreement and the claims therefrom against the Pledgor.
ARTICLE 13. NOTIFICATIONS
13.1 All notifications hereunder shall be made in writing and transmitted by
fax or delivered by courier. Any communication, demand, inquiry, or other
information shall be considered transmitted or delivered upon its receipt by the
addressee or, in the case of transmission by fax, upon receipt of an automatic
confirmation of receipt.
13.2 Any communication, demand, inquiry, or other information relating to the
Agreement shall be delivered to the following addresses or to such other
addresses as the Parties may designate by notice:
TO THE PLEDGOR:
Attn: Company Secretary
Fax: ▇▇▇ (▇) ▇▇ ▇▇▇▇ ▇▇▇▇
TO THE PLEDGEE:
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: ▇▇▇ (▇) ▇▇ ▇▇▇▇ ▇▇▇▇
ARTICLE 14. APPLICABLE LAW AND DISPUTE RESOLUTION
14.1 This Agreement shall be governed by and construed in accordance with the
Applicable Law without giving effect to the conflict of laws rules.
14.2 Any dispute, controversy or claim arising out of or in connection with this
Agreement, including those in regard to its performance, breach, termination or
invalidity, shall be resolved by way of negotiations.
14.3 In case such dispute, controversy or claim are not resolved by way of
negotiations within 30 days from the day of notification of one Party by the
other Party, such dispute, controversy or claim shall be referred to the
Arbitration Court of Moscow city in accordance with the Arbitral Procedural Code
of the Russian Federation. The place of arbitration shall be Moscow, Russia, and
the Russian language shall be used throughout the arbitral proceedings.
ARTICLE 15. ENTRY INTO FORCE AND TERMINATION
This Agreement shall enter into force upon its execution and shall remain in
force until full discharge of the Obligations as defined hereunder.
IN WITNESS WHEREOF, the Parties hereto, acting through their duly authorized
representatives, have this Agreement signed in two (2) originals both in English
and Russian (one (1) original for each Party), as of the date first above
written. In the event of any discrepancies between the English and Russian
texts, the English version shall prevail.
PLEDGOR PLEDGEE
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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SIGNATURE SIGNATURE
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NAME NAME
Director Director
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TITLE TITLE
EXHIBIT1(A).
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PROCEDURE FOR RECOVERY AGAINST THE PARTICIPATORY INTEREST
1.1. Pursuant to Article 8.3. of the Agreement, the Participatory Interest
or any of its part may be sold by the Pledgee's choice at public auction,
in one or several sales, to be organized by the Pledgee in the manner
prescribed by Applicable Law, (i) with an opening bid price of seventy-
five percent (75%) of the value indicated in Article 5.1. of the Agreement,
at the first public auction; and (ii) fifty percent (50%) of the value
indicated in Article 5.1. of the Agreement, at the second public auction.
1.2. The Pledgee shall be entitled to take any of the following actions at
its own discretion, either on its own or with the consent and participation
of the Pledgor:
1.2.1. (a) set the date, time and place of the public auction;
(b) establish the procedure for conducting the public auction;
(c) take all actions necessary to conduct the public auction,
including but not limited to advertising as the Pledgee deems
appropriate;
(d) verify the results of the public auctions and report them to
the Pledgor and other interested parties;
(e) engage an agent to assist the Pledgee in exercising the
powers listed in items (a) through (d) above;
(f) hire professional consultants, including appraisers, lawyers and
accountants in connection with conducting the public auctions
or exercising other rights of the Pledgee; and
(g) incur and pay costs and expenses to hold auctions, as well
as the costs and expenses incurred by the Pledgee's agents and
consultants hired in accordance with items (e) and (f) above, as
well as notary, registration, and other costs and expenses
associated with the transfer of ownership of the Participatory
Interest to a buyer or to the Pledgee.
1.2.2. The Pledgee shall not be entitled to open bidding to sell the
Participatory Interest at a price lower than the starting price indicated
in Article 1.1 of this Exhibit.
1.2.3. All costs and expenses of the Pledgee (including but not limited to
all costs and expenses incurred in connection with the Pledge, the public
auctions and transfer of ownership right to the Participatory Interest,
shall be included in the amount of the Obligations.
1.2.4. All proceeds from the sale of the Participatory Interest shall be
applied towards discharge of the Obligations.
1.2.5. The Pledgee shall be entitled, acting independently as the Pledgee
on behalf of the Pledgor, to transfer to any buyer lawful right of
ownership to the Participatory Interest, free and clear of any proprietary
or other rights of the Pledgee or the Pledgor and to verify any buyer's
payment of the purchase price, for which purpose the signature of an
officer of the Pledgee shall suffice.
1.2.6. In the event that the fixed minimum opening bid is not met at the
first public auction, or non-receipt by the Pledgee of the full purchase
price for the Participatory Interest within three (3) Business Days
following the date of the first public auction, the Pledgee shall have the
right to:
(i) purchase the Participatory Interest or its part for a price equal
to the opening bid price and set-off its claims secured by the Pledge
against the purchase price; and/or
(ii) Organize a second public auction for the remaining Participatory
Interest.
1.2.7. In the event that the fixed minimum opening bid is not met at the
second public auction, or non-receipt by the Pledgee of the full purchase
price for the Participatory Interest within three (3) Business Days
following the date of the second public auction, the Pledgee shall have the
right to retain the Participatory Interest with its valuation equal to the
opening bid price set for the second public auction, less a discount of 10%
(ten percent) and set-off its claims secured by the Pledge against such
price.
1.2.8. Transfer of the Participatory Interest into possession of the buyer
and (or) the Pledgee shall be reflected in the foundation documents of the
Company by way of amending the charter and the foundation documents of the
Company, if so required in accordance with the Applicable Law.
PLEDGOR PLEDGEE
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SIGNATURE SIGNATURE
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NAME NAME
Director Director
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TITLE TITLE