Exhibit 10.5
PLEDGE AND SECURITY AGREEMENT
DATED AS OF 28 APRIL 2005
BETWEEN
SIBERIAN ENERGY GROUP INC.
AS GRANTOR
AND
BALTIC PETROLEUM LIMITED
AS SECURED PARTY
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS 1
SECTION 2. GRANT OF SECURITY 4
SECTION 3. SECURITY FOR OBLIGATIONS 6
SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS 6
SECTION 5. DIVIDENDS, DISTRIBUTIONS AND VOTING 10
SECTION 6. FURTHER ASSURANCES 11
SECTION 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT, IRREVOCABLE
POWER OF ATTORNEY 12
SECTION 8. REMEDIES 12
SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED
OBLIGATIONS 17
SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM 17
SECTION 11. INDEMNITY AND EXPENSES 17
SECTION 12. MISCELLANEOUS 18
SCHEDULE I - GENERAL INFORMATION
SCHEDULE II - PLEDGED INTEREST
SCHEDULE III - PROCEDURES FOR LEVY OF EXECUTION
This PLEDGE AND SECURITY AGREEMENT, dated as of _____ April 2005 (this
"AGREEMENT"), is made between Siberian Energy Group Inc., a corporation
organized under the laws of the State of Nevada in the United States of America
(the "GRANTOR"), and Baltic Petroleum Limited, an English company with
registered number 05303991 (the "SECURED PARTY"; together with the Grantor, the
"PARTIES").
RECITALS:
WHEREAS, reference is made to (i) that certain Guarantee, dated as of the date
hereof and issued by the Grantor to the Secured Party to guarantee the
obligations of the Company (as defined below) to the Secured Party under the
Loan Agreement (as defined below) (as such guarantee may be amended, restated,
supplemented or otherwise modified from time to time, the "GUARANTEE"), by and
between the Grantor and the Secured Party and (ii) that certain option agreement
as of the date hereof (as it may be amended, restated, supplemented or otherwise
modified from time to time, the "OPTION AGREEMENT") between the Grantor and the
Secured Party relating to a joint venture transaction concerning the Company (as
defined below); and
WHEREAS, in consideration of the provision of credit to the Credit Parties as
set forth in the Finance Documents, the Grantor has agreed to secure the
Obligations of the Credit Parties under the Finance Documents, including the
Obligations of the Grantor under the Guarantee;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, the Grantor and the Secured Party, intending to
be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
(a) General Definitions. In this Agreement, the following terms shall have the
following meanings:
"AGREEMENT" has the meaning set forth in the preamble.
"AUTHENTICATE" means "authenticate" as defined in Article 9 of the UCC.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"CASH PROCEEDS" means all proceeds of any Collateral consisting of cash,
checks and other near-cash items.
"CERTIFICATES" means all certificates and instruments evidencing,
documenting or representing the Pledged Interest, if any.
"COLLATERAL" has the meaning set forth in Section 2(a) hereof.
"COLLATERAL DOCUMENTS" means this Agreement and all other instruments,
documents and agreements delivered by any of the parties to the Finance
Documents pursuant to this Agreement or any other Finance Document in order
to grant, perfect and/or establish or maintain the priority of a security
interest in favor of the Secured Party on any real, personal or mixed
property of such party as security for the Secured Obligations or the
obligations under the Finance Documents of any other party to the Finance
Documents to the Secured Party.
"COLLATERAL RECORDS" means books, records, ledger cards, files,
correspondence, customer lists, blueprints, technical specifications,
manuals, computer software, computer printouts, tapes, disks and other
electronic storage media and related data processing software and similar
items that at any time evidence or contain information relating to any of
the Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon.
"COLLATERAL SUPPORT" means all property (real or personal) assigned,
hypothecated or otherwise securing any Collateral and shall include any
security agreement or other agreement granting a lien or security interest
in such real or personal property.
"COMPANY" means OOO Zauralneftegaz, a Russian limited liability company.
"CREDIT PARTIES" means the Company and the Grantor, together or singly.
"DISTRIBUTION" means:
(1) the payment or setting aside for payment of any distribution on or in
respect of any of the Pledged Interest; and
(2) the redemption, retraction, purchase, retirement or other acquisition,
in whole or in part, of any of the Pledged Interest;
in each case whether in cash, shares, units, membership interests, options,
warrants, rights or any other securities and equity interests, or money or
property, received or receivable on or in respect of the Pledged Interest
and the right to receive, use and enjoy any of the foregoing.
"EVENT OF DEFAULT" means, as applicable, any one of:
(1) an Event of Default under and as defined in the Finance Documents;
and/or
(2) if:
(i) the Grantor does not pay on the due date any amount payable by it
pursuant to the Guarantee or this Agreement at the place and in
the currency in which it is expressed to be payable unless:
(A) in the case of principal, its failure to pay is caused by
administrative technical error and payment is made within
five (5) days of the due date therefor; and
(B) in the case of amounts other than principal, payment is made
within ten (10) days of the due date therefor; or
(ii) the Grantor does not comply with any provision of the Guarantee
or this Agreement other than as referred to in paragraph (i)
above unless that failure to comply is capable of remedy and is
remedied within thirty (30) days of the earlier of the Secured
Party giving notice to the Grantor or the Grantor becoming aware
of the failure to comply; or
(iii) any representation or warranty made or deemed to be made by the
Grantor in this Agreement or the Guarantee is or proves to be
incorrect or misleading in any material respect when made or
deemed to be made unless:
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(A) in the reasonable opinion of the Secured Party any loss
incurred as a result of that misrepresentation is capable of
being remedied within thirty (30) days; and
(B) that loss is remedied to the Secured Party's reasonable
satisfaction within that period.
"FINANCE DOCUMENTS" means that certain loan agreement, of even date
herewith, between the Secured Party and the Company, the Guarantee, the
Collateral Documents, and all agreements, instruments and other documents
delivered under any of the foregoing or in connection therewith.
"GRANTOR" has the meaning set forth in the preamble.
"GUARANTEE" has the meaning set forth in the recitals.
"INDEMNITEE" means the Secured Party and its affiliates, officers,
partners, directors, trustees, employees and agents.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, and
any lease in the nature thereof) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing.
"LOAN AGREEMENT" has the meaning set forth in section 2(c)(1).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Grantor and its subsidiaries taken as a
whole; (ii) the ability of the Grantor to fully and timely perform its
Secured Obligations; (iii) the legality, validity, binding effect or
enforceability against the Grantor of this Agreement or the Guarantee; or
(iv) the rights, remedies and benefits available to, or conferred upon, any
agent and Secured Party under any Secured Obligation.
"OPTION AGREEMENT" has the meaning set forth in the recitals.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governmental authorities.
"PLEDGED INTEREST" means all of the following (regardless of whether
classified as investment property under the UCC): (i) the Grantor's 100%
participatory interest in the Company with a nominal value of 10,000
Russian rubles that the Grantor now has or holds or hereafter has, holds,
acquires, possesses or becomes entitled to, including, without limitation,
those limited liability company interests as specified in Schedule II in
more detail; (ii) all Certificates; (iii) all securities issued in
substitution or replacement for or in addition to any of the foregoing, and
any certificates representing or evidencing such securities; and (iv) all
book-entries and securities entitlements relating to any of the foregoing.
"PROCEEDS" means: (i) all "proceeds", as defined in Article 9 of the UCC,
with respect to any Pledged Interest; (ii) payments made with respect to
any Pledged Interest; (iii) all Distributions; and (iv) whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary
or involuntary.
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"SECURED OBLIGATIONS" means, collectively and at any time and from time to
time:
(1) all of the obligations, indebtedness and liabilities (present or
future, absolute or contingent, matured or not) of the Grantor to the
Secured Party under the Guarantee and the Option Agreement, whether or
not any such obligations, indebtedness and liabilities are from time
to time reduced or entirely extinguished; and
(2) any and all expenses and charges, legal or otherwise, suffered or
incurred by the Secured Party in collecting or enforcing any of such
obligations, indebtedness or liabilities or in realizing on or
protecting or preserving any security therefor, including the Lien and
security interest granted by this Agreement.
"SECURED PARTY" has the meaning set forth in the preamble.
"SUPPORTING OBLIGATION" shall mean all "supporting obligations" as defined
in the UCC.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of Nevada in the United States of America.
(b) Definitions; Interpretation. All capitalized terms used herein (including
the preamble and recitals hereto) and not otherwise defined herein shall
have the meanings ascribed thereto in the Collateral Trust Deed or, if not
defined therein, in the UCC. With respect to terms defined in more than one
article of the UCC, unless otherwise specified such terms shall have the
meaning specified in Article 9 of the UCC. References to "Sections,"
"Exhibits" "Annexes" and "Schedules" shall be to Sections, Exhibits,
Annexes and Schedules, as the case may be, of this Agreement (as such
Sections, Exhibits, Annexes and Schedules may be amended or supplemented
from time to time in accordance with the terms of this Agreement), unless
otherwise specifically provided. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose or be given any substantive
effect. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the
reference. The use herein of the word "include" or "including", when
following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set
forth immediately following such word or to similar items or matters,
whether or not nonlimiting language (such as "without limitation" or "but
not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or
matter. If any conflict or inconsistency exists between this Agreement and
the Collateral Trust Deed, the Collateral Trust Deed shall govern. All
references herein to provisions of the UCC shall include all successor
provisions under any subsequent version or amendment to any Article of the
UCC.
SECTION 2. GRANT OF SECURITY
(a) Grant of Security. As a continuing security for the performance and
discharge of the Secured Obligations, the Grantor hereby unconditionally
and irrevocably grants to the Secured Party a first-ranking, non-possessory
pledge, security interest and continuing lien on all of such Grantor's
right, title and interest in, to and under the following personal property
of the Grantor, in each case whether now owned or existing or hereafter
acquired or arising and wherever located (all of which being hereinafter
collectively referred to as the "Collateral"):
(1) the Pledged Interest;
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(2) all other rights, benefits and privileges incident to the Grantor's
interest in any of the foregoing;
(3) to the extent not otherwise included above, all Collateral Records,
Collateral Support and Supporting Obligations relating to any of the
foregoing; and
(4) to the extent not otherwise included above, all Proceeds in respect of
any of the foregoing, including without limitation all cash and
non-cash proceeds in respect of the foregoing, in whatever form, and
all rights and interests of the Grantor in respect thereof or
evidenced thereby including all money received or receivable from time
to time by the Grantor in connection with the sale of any of the
foregoing (including all proceeds received or receivable in connection
with the redemption, retraction, retirement or purchase for
cancellation or otherwise of any of the foregoing).
(b) Subsequently Acquired Certificates. Any additional Certificates at any time
or from time to time after the date hereof issued and registered in the
name of or otherwise held by the Grantor (by purchase, Distribution or
otherwise) shall form part of the Collateral and the Grantor will:
(1) forthwith deliver those Certificates to the Secured Party endorsed for
transfer in blank and/or accompanied by transfer documents duly
executed in blank by the Grantor; and
(2) ensure that any other actions required to perfect the security
interest therein of the Secured Party under any requirement of law
(including under the UCC or other applicable law) are promptly taken.
(c) Term of the Secured Obligations. The Secured Obligations shall be fulfilled
on the dates and in the amounts set forth in the Guarantee and in this
Agreement. In particular:
(1) The Guarantee is a guarantee of the obligations owed by the Company
under a separate loan facility agreement entered into on ___ April
2005 between the Secured Party and the Company (the "LOAN AGREEMENT")
pursuant to which the Secured Party has agreed to provide certain loan
facilities to the Company for a principal amount of US$1,267,860 (the
"LOAN").
(2) The Grantor hereby confirms that it has received an executed version
of the Loan Agreement and agrees to cover the Secured Obligations
given the terms and conditions of the Loan Agreement, which provide,
inter alia, for the following:
(i) subject to the conditions precedent set forth in clause 10 of the
Loan Agreement, the principal amount of the Loan shall be
disbursed in the amounts, and applied in respect of the purposes,
specifically detailed in section 8 of the Loan Agreement;
(ii) the term of the Loan shall expire on 31 July 2005, following
which the outstanding principal of the Loan together with
interest and any other outstanding amounts (howsoever described)
due by the Company to the Secured Party under or in connection
with the Loan Agreement shall be payable by the Company to the
Secured Party;
(iii) the interest rate for the Loan is 12% per annum and is payable
on repayment of the Loan; and
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(iv) the Company is required to pay all costs or expenses (including
but not limited to legal fees) incurred by the Secured Party in
the preparation or enforcement (or in seeking to enforce) of the
Loan Agreement or in protecting or preserving (or attempting to
protect or preserve) any of its rights thereunder.
SECTION 3. SECURITY FOR OBLIGATIONS.
(a) Security for Obligations. This Agreement secures, and the Collateral is
collateral security for, the prompt and complete payment or performance in
full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of
amounts that would become due but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Sec.362(a) (and any
successor provision thereof)), of all Secured Obligations.
(b) Continuing Liability under Collateral. Notwithstanding anything herein to
the contrary, (i) the Grantor shall remain liable for all obligations under
the Collateral and nothing contained herein is intended or shall be a
delegation of duties to the Secured Party; (ii) the Grantor shall remain
liable under each of the agreements included in the Collateral to perform
all of the obligations undertaken by it thereunder all in accordance with
and pursuant to the terms and provisions thereof and the Secured Party
shall not have any obligation or liability under any of such agreements by
reason of or arising out of this Agreement or any other document related
thereto nor shall the Secured Party have any obligation to make any inquiry
as to the nature or sufficiency of any payment received by it or have any
obligation to take any action to collect or enforce any rights under any
agreement included in the Collateral; and (iii) the exercise by the Secured
Party of any of its rights hereunder shall not release the Grantor from any
of its duties or obligations under the contracts and agreements included in
the Collateral.
(c) The Value of the Pledged Interest. The Parties agree that, as of the date
hereof, the estimated value of the Pledged Interest in the Company is equal
to the Russian ▇▇▇▇▇ equivalent of US$2,717,860.
SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
(a) Generally.
(1) Representations and Warranties. The Grantor hereby represents and
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warrants that:
(i) it owns the Collateral and, as to all Collateral whether now
existing or hereafter acquired, will continue to own each item of
the Collateral, in each case free and clear of any and all Liens,
rights or claims of all other Persons;
(ii) it has been duly organized as a corporation solely under the laws
of the State of Nevada in the United States of America and
remains duly existing as such. Such Grantor has not filed any
certificates of domestication, transfer or continuance in any
other jurisdiction;
(iii) the execution and delivery of this Agreement by such Grantor and
the performance by it of its obligations under this Agreement are
within its corporate or other powers and have been duly
authorized by all necessary corporate or other action;
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(iv) upon the filing of UCC financing statements naming the Grantor as
debtor and the Secured Party as secured party and describing the
Collateral in the filing offices set forth opposite such
Grantor's name on Schedule I(E) hereof (as such Schedule may be
amended or supplemented from time to time), the security
interests granted to the Secured Party hereunder will constitute
valid and perfected first priority Liens;
(v) other than the financing statements filed in favor of the Secured
Party, no effective UCC financing statement, or other instrument
similar in effect under any applicable law, covering all or any
part of the Collateral is on file in any filing or recording
office;
(vi) no authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is
required for either (i) the pledge or grant by the Grantor of the
Liens purported to be created in favor of the Secured Party
hereunder or (ii) the exercise by Secured Party of any rights or
remedies in respect of any Collateral (whether specifically
granted or created hereunder or created or provided for by
applicable law), except (A) for the filings contemplated by
clause (iv) above and (B) as may be required, in connection with
the disposition of any Pledged Interest, by laws generally
affecting the offering and sale of securities;
(vii) all actions and consents, including all filings, notices,
registrations and recordings necessary or desirable for the
exercise by the Secured Party of the voting or other rights
provided for in this Agreement or the exercise of remedies in
respect of the Collateral have been made or obtained;
(viii) it has indicated on Schedule I(A) hereto (as such Schedule may
be amended or supplemented from time to time): (w) the type of
organization of such Grantor, (x) the jurisdiction of
organization of such Grantor, (y) its organizational
identification number, if any, and (z) the jurisdiction where the
chief executive office or its sole place of business is, and for
the one-year period preceding the date hereof has been, located;
(ix) the full legal name of such Grantor is as set forth on Schedule
I(A) and it has not done in the last five (5) years, and does not
do, business under any other name (including any trade-name or
fictitious business name) except for those names set forth on
Schedule I(B) (as such Schedule may be amended or supplemented
from time to time);
(x) except as provided on Schedule I(C), it has not changed its name,
jurisdiction of organization, chief executive office or sole
place of business or its corporate structure in any way (e.g. by
merger, consolidation, change in corporate form or otherwise)
within the past five (5) years;
(xi) such Grantor has not within the last five (5) years become bound
(whether as a result of merger or otherwise) as debtor under a
security agreement entered into by another Person, which has not
heretofore been terminated; and
(xii) all information supplied by the Grantor with respect to any of
the Collateral (in each case taken as a whole with respect to any
particular Collateral) is accurate and complete in all material
respects.
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(2) Covenants and Agreements. The Grantor hereby covenants and agrees that:
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(i) except for the security interest created by this Agreement, it shall
not create or suffer to exist any Lien upon or with respect to any of
the Collateral, and such Grantor shall defend the Collateral against
all Persons at any time claiming any interest therein;
(ii) without limiting any prohibitions or restrictions on mergers in the
Finance Documents, it shall not change such Grantor's name, identity,
corporate structure (e.g. by merger, consolidation, change in
corporate form or otherwise), sole place of business, chief executive
office, type of organization or jurisdiction of organization or
establish any trade names without the prior written consent of the
Secured Party;
(iii) it shall pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims against, the Collateral, except to the extent the validity
thereof is being contested in good faith; provided, such Grantor shall
in any event pay such taxes, assessments, charges, levies or claims
not later than five (5) days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed
against such Grantor or any of the Collateral as a result of the
failure to make such payment;
(iv) upon such Grantor or any officer of such Grantor obtaining knowledge
thereof, it shall promptly notify the Secured Party in writing of any
event that may materially and adversely affect the value of the
Collateral or any portion thereof, the ability of the Grantor or the
Secured Party to dispose of the Collateral or any portion thereof, or
the rights and remedies of the Secured Party in relation thereto,
including, without limitation, the levy of any legal process against
the Collateral or any portion thereof;
(v) it shall not take or permit any action which could impair the Secured
Party's rights in the Collateral;
(vi) it shall not sell, transfer or assign (by operation of law or
otherwise) any Collateral; and
(vii) it shall create and maintain a corporate pledge book as required by
the Russian Federation Federal Law # 2872-I (1992) within 10 days from
the date hereof and issue an extract from the said corporate pledge
book certifying that the Pledged Interest is pledged in favor of the
Secured Party and forthwith on demand produce such certificates during
the validity hereof.
(b) Pledged Interest
(1) Representations and Warranties. The Grantor hereby represents and
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warrants that:
(i) Schedule II hereto (as such Schedule may be amended or
supplemented from time to time) sets forth under the heading
"Pledged Interest" all of the Pledged Interest owned by the
Grantor;
(ii) Grantor's grant of a security interest in the Pledged Interest as
contemplated hereby, and the exercise by Secured Party of any or
all of its rights hereunder in respect of the Collateral, will
not constitute or give rise to a breach or violation of (A) any
of the terms or provisions of the organic documents of the
Company, including the operating agreement of the Company and any
other agreement, instrument or document governing the rights and
obligations of the members of the Company and their rights and
obligations with respect to their interests in the Company or (B)
the provisions of any law, rule or regulation pursuant to which
the Company is organized or to which the Company is subject;
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(iii) all of such Pledged Interest has been duly authorized,
authenticated or issued, and delivered and is the legal, valid
and binding obligation of the Company;
(iv) the Company has not opted to characterize its membership or
limited liability interests as "securities" for purposes of
Article 8 of the UCC; and
(v) the Pledged Interest constitutes a "general intangible" for
purposes of Articles 8 and 9 of the UCC and neither the Company
nor the Grantor has taken any action, or failed to take any
action, that could cause the Pledged Interest to be characterized
otherwise for purposes of the UCC.
(2) Covenants and Agreements. The Grantor hereby covenants and agrees
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that:
(i) without the prior written consent of the Secured Party, it shall
not vote to enable or take any other action to waive any default
under or breach of any terms of any agreement governing the terms
of any Pledged Interest;
(ii) without the prior written consent of the Secured Party, it shall
not vote in favor of or otherwise authorize any action on the
part of the Company that would cause the Pledged Interest to be
characterized other than as a "general intangible" for purposes
of the UCC;
(iii) it shall enforce all of its rights with respect to any Pledged
Interest;
(iv) it shall notify the Secured Party of any default under any
Pledged Interest; and
(v) in the event it acquires rights in any Pledged Interest after the
date hereof, it shall promptly deliver to the Secured Party
notice thereof. It is understood and agreed that the security
interest of the Secured Party shall attach to all Pledged
Interest immediately upon the Grantor's acquisition of rights
therein.
(3) Delivery and Control. The Grantor agrees that with respect to any
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Pledged Interest in which it currently has rights it shall comply with
the provisions of this subsection (3) on or before the date hereof and
with respect to any Pledged Interest hereafter acquired by such
Grantor it shall comply with the provisions of this subsection (3)
immediately upon acquiring rights therein, in each case in form and
substance satisfactory to the Secured Party. With respect to any
Pledged Interest that is represented by a certificate or that is an
"instrument", it shall cause such certificate or instrument to be
delivered to the Secured Party, indorsed in blank by an "effective
indorsement" (as defined in Section 8-107 of the UCC), regardless of
whether such certificate constitutes a "certificated security" for
purposes of the UCC. With respect to any Pledged Interest that is an
"uncertificated security" for purposes of the UCC, it shall cause the
issuer of such uncertificated security to either (i) register the
Secured Party as the registered owner thereof on the books and records
of the issuer or (ii) execute an agreement, in form and substance
satisfactory to the Secured Party, pursuant to which such issuer
agrees to comply with the Secured Party's instructions with respect to
such uncertificated security without further consent by such Grantor.
If any issuer of any Pledged Interest is located in a jurisdiction
outside of the United States of America, the Grantor shall take such
additional actions, including, without limitation, causing the issuer
to register the pledge on its books and records or making such filings
or recordings, in each case as may be necessary or advisable, under
the laws of such issuer's jurisdiction, to ensure the validity,
perfection and priority of the security interest of the Secured Party.
Upon the occurrence of an Event of Default, the Secured Party shall
have the right, without notice to the Grantor, to transfer all or any
portion of Pledged Interest to its name or the name of its nominee or
agent. In addition, the Secured Party shall have the right at any
time, without notice to the Grantor, to exchange any certificates or
instruments representing any Pledged Interest for certificates or
instruments of smaller or larger denominations.
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(c) Representations and Warranties Deemed Repeated. The representations and
warranties set out in Sections 4(a)(1) and 4(b)(1) are made on the date of
this Agreement and are deemed to be repeated on each date on which any of
the representations and warranties set out in any of the Finance Documents
are repeated, with reference to the facts and circumstances then existing.
SECTION 5. DIVIDENDS, DISTRIBUTIONS AND VOTING
(a) Distributions.
(1) Prior to the occurrence of an Event of Default or any event or
circumstance that with the giving of notice or lapse of time or both
would be an Event of Default, any Distribution payable on the Pledged
Interest shall be paid to and held by the Secured Party as part of the
Collateral.
(2) During the continuance of an Event of Default or any event or
circumstance that with the giving of notice or the lapse of time or
both would be an Event of Default that has not been waived or
remedied, any Distribution payable on the Pledged Interest shall be
paid exclusively to the Secured Party, which shall apply the same in
accordance with the Finance Documents.
(b) Voting.
(1) So long as no Event of Default shall have occurred and be continuing:
(i) except as otherwise provided under the covenants and agreements
relating to Pledged Interest in this Agreement or elsewhere
herein or in the Guarantee or any Finance Document, the Grantor
shall be entitled to exercise or refrain from exercising any and
all voting and other consensual rights pertaining to the Pledged
Interest or any part thereof for any purpose not inconsistent
with the terms of this Agreement or the Guarantee or the Finance
Documents; provided, the Grantor shall not exercise or refrain
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from exercising any such right if the Secured Party shall have
notified such Grantor that, in the Secured Party's reasonable
judgment, such action would have a Material Adverse Effect on the
value of the Pledged Interest or any part thereof; and provided
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further, such Grantor shall give the Secured Party at least ten
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(10) days prior written notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any
such right; and provided further that, unless agreed otherwise by
----------------
the Secured Party, the Grantor shall cast its votes arising in
respect of the Pledged Interest at any members meeting of the
Company against any proposal which is liable to result in a
dilution of the rights attaching to the Pledged Interest or any
adverse change to the terms of any of the Pledged Interest; and
10
(ii) the Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to the Grantor all proxies and other
instruments as such Grantor may from time to time reasonably
request for the purpose of enabling such Grantor to exercise the
voting and other consensual rights when and to the extent which
it is entitled to exercise pursuant to clause (i) above.
(2) Upon the occurrence and during the continuation of an Event of Default:
(i) all rights of the Grantor to exercise or refrain from exercising the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant hereto shall cease and all such rights
shall thereupon become vested in the Secured Party who shall thereupon
have the sole right to exercise such voting and other consensual
rights; and
(ii) in order to permit the Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant hereto
and to receive all dividends and other distributions which it may be
entitled to receive hereunder: (1) the Grantor shall promptly execute
and deliver (or cause to be executed and delivered) to the Secured
Party all proxies, dividend payment orders and other instruments as
the Secured Party may from time to time reasonably request and (2) the
Grantor acknowledges that the Secured Party may utilize the power of
attorney set forth in Section 7.
SECTION 6. FURTHER ASSURANCES.
(a) The Grantor agrees that from time to time, at the expense of such Grantor,
that it shall promptly Authenticate, execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may reasonably request,
in order to create and/or maintain the validity, perfection or priority of
and protect any security interest granted or purported to be granted hereby
or to enable the Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor shall:
(1) file such financing or continuation statements, or amendments thereto,
and execute and deliver such other agreements, instruments,
endorsements, powers of attorney or notices, as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to
perfect and preserve the security interests granted or purported to be
granted hereby;
(2) at any reasonable time, upon request by the Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by the Secured
Party, or persons designated by the Secured Party for the purpose of
inspecting the same, observing its use or otherwise protecting its
interests therein; and
(3) at the Secured Party's request, appear in and defend any action or
proceeding that may affect such Grantor's title to, or the Secured
Party's security interest in, all or any part of the Collateral.
(b) The Grantor hereby authorizes the filing of any financing statements or
continuation statements, and amendments to financing statements, or any
similar document in any jurisdictions and with any filing offices as the
Secured Party may determine, in its sole discretion, are necessary or
advisable to perfect or otherwise protect the security interest granted to
the Secured Party herein. Such financing statements may describe the
Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as the Secured Party may determine, in its sole discretion, is
necessary, advisable or prudent to ensure the perfection of the security
interest in the Collateral granted to the Secured Party herein. The Grantor
shall furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail.
11
SECTION 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT, IRREVOCABLE POWER OF
ATTORNEY.
The Grantor hereby irrevocably appoints the Secured Party (such appointment
being coupled with an interest) as such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, the Secured Party or otherwise, from time to time in the Secured
Party's discretion to take any action and to execute any instrument that the
Secured Party may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, the following:
(a) upon the occurrence and during the continuance of any Event of Default, to
ask for, demand, collect, ▇▇▇ for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) upon the occurrence and during the continuance of any Event of Default, to
receive, endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (a) above;
(c) upon the occurrence and during the continuance of any Event of Default, to
file any claims or take any action or institute any proceedings that the
Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Secured Party with
respect to any of the Collateral;
(d) to take or cause to be taken all actions necessary to perform or comply or
cause performance or compliance with the terms of this Agreement,
including, without limitation, access to pay or discharge taxes or Liens
levied or placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by the Secured Party in its sole discretion, any such payments
made by the Secured Party to become obligations of such Grantor to the
Secured Party, due and payable immediately without demand; and
(e) upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
the Secured Party were the absolute owner thereof for all purposes, and to
do, at the Secured Party's option and such Grantor's expense, at any time
or from time to time, all acts and things that the Secured Party deems
reasonably necessary to protect, preserve or realize upon the Collateral
and the Secured Party's security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
SECTION 8. REMEDIES.
(a) Generally.
(1) If any Event of Default shall have occurred and be continuing, the
Secured Party may exercise in respect of the whole Collateral or any
part thereof, as provided in this Sections 8 (a) to (f), in addition
to all other rights and remedies provided for herein or otherwise
available to it at law or in equity, all the rights and remedies of
the Secured Party on default under the UCC (whether or not the UCC
applies to the affected Collateral) to collect, enforce or satisfy any
Secured Obligations then owing, whether by acceleration or otherwise,
and also may pursue any of the following separately, successively or
simultaneously:
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(i) require the Grantor to, and the Grantor hereby agrees that it
shall at its expense and promptly upon request of the Secured
Party forthwith, assemble all or part of the Collateral as
directed by the Secured Party and make it available to the
Secured Party at a place to be designated by the Secured Party
that is reasonably convenient to both parties;
(ii) enter onto the property where any Collateral is located and take
possession thereof with or without judicial process;
(iii) without notice except as specified below or under the UCC, sell,
assign, lease, license (on an exclusive or nonexclusive basis) or
otherwise dispose of the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Secured
Party's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and
upon such other terms as the Secured Party may deem commercially
reasonable; and
(2) The Secured Party may be the purchaser of any or all of the Collateral
at any public or private (to the extent that the portion of the
Collateral being privately sold is of a kind that is customarily sold
on a recognized market or the subject of widely distributed standard
price quotations) sale in accordance with the UCC and the Secured
Party shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such sale made in accordance with the UCC,
to use and apply any of the Secured Obligations as a credit on account
of the purchase price for any Collateral payable by the Secured Party
at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of the
Grantor, and the Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which
it now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted. The Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten
(10) days notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. The Grantor agrees that
it would not be commercially unreasonable for the Secured Party to
dispose of the Collateral or any portion thereof by using Internet
sites that provide for the auction of assets of the types included in
the Collateral or that have the reasonable capability of doing so, or
that match buyers and sellers of assets. Notwithstanding any other
provision hereof to the contrary, if the Event of Default that has
occurred is an event of default under the Bond Indenture, the Secured
Party will accept reasonable instructions from the Grantor regarding
the exercise of remedies hereunder in that event to maximize the value
of, and amounts realized from, the Pledged Interest. The Grantor
hereby waives any claims against the Secured Party arising by reason
of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been
obtained at a public sale, even if the Secured Party accepts the first
offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, the
Grantor shall (to the extent permitted by applicable law) be liable
for the deficiency and the fees of any attorneys employed by the
Secured Party to collect such deficiency. The Grantor further agrees
that a breach of any of the covenants contained in this Section will
cause irreparable injury to the Secured Party, that the Secured Party
has no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section
shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that no default has occurred giving rise to the Secured Obligations
becoming due and payable prior to their stated maturities. Nothing in
this Section shall in any way alter the rights of the Secured Party
hereunder.
14
(3) The Secured Party may in the exercise of its remedies under this
Section 8 sell the Collateral without giving any warranties as to the
Collateral. The Secured Party may specifically disclaim or modify any
warranties of title or the like. This procedure will not be considered
to adversely effect the commercial reasonableness of any sale of the
Collateral.
(4) Secured Party shall not be under any obligation to marshal any assets
in favor of the Grantor or any other Person or against or in payment
of any or all of the Secured Obligations.
(5) The Secured Party shall in the exercise of its remedies under this
Section 8 have the right to notify, or require the Grantor to notify,
any obligors with respect to amounts due or to become due to such
Grantor in respect of the Collateral of the existence of the security
interest created herein, to direct such obligors to make payment of
all such amounts directly to the Secured Party, and, upon such
notification and at the expense of such Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such
Grantor might have done;
(i) all amounts and proceeds (including checks and other instruments)
received by the Grantor in respect of amounts due to such Grantor
in respect of the Collateral or any portion thereof shall be
received in trust for the benefit of the Secured Party hereunder,
shall be segregated from other funds of such Grantor and shall be
forthwith paid over or delivered to the Secured Party in the same
form as so received (with any necessary endorsement) to be held
as cash Collateral and applied as provided by the Section in this
Agreement relating to Cash Proceeds (Section 8(d) hereof); and
(ii) the Grantor shall not adjust, settle or compromise the amount or
payment of any such amount or release wholly or partly any
obligor with respect thereto or allow any credit or discount
thereon.
(b) Application of Proceeds. Except as expressly provided elsewhere in this
Agreement, all proceeds received by the Secured Party in respect of any
sale, any collection from, or other realization upon all or any part of the
Collateral shall be applied in full or in part by the Secured Party against
the Secured Obligations in the following order of priority: first, to the
-----
payment of all costs and expenses of such sale, collection or other
realization, including reasonable compensation to the Secured Party and its
agents and counsel, and all other expenses, liabilities and advances made
or incurred by the Secured Party in connection therewith, and all amounts
for which the Secured Party is entitled to indemnification hereunder (in
its capacity as the Secured Party) and all advances made by the Secured
Party hereunder for the account of the applicable Grantor, and to the
payment of all costs and expenses paid or incurred by the Secured Party in
connection with the exercise of any right or remedy hereunder or under the
Guarantee or any Finance Document, all in accordance with the terms hereof
or thereof; second, to the extent of any excess of such proceeds, to the
------
payment of all other Secured Obligations; and third, to the extent of any
-----
excess of such proceeds, to the payment to or upon the order of such
Grantor or to whosoever may be lawfully entitled to receive the same or as
a court of competent jurisdiction may direct.
14
(c) Sales on Credit. If Secured Party sells any of the Collateral upon credit,
the Grantor will be credited only with payments actually made by purchaser
and received by Secured Party and applied to indebtedness of the Purchaser.
In the event the purchaser fails to pay for the Collateral, Secured Party
may resell the Collateral and the Grantor shall be credited with proceeds
of the sale.
(d) Cash and Cash Proceeds. If an Event of Default shall have occurred and be
continuing all cash received by the Grantor in respect of the Collateral
and Cash Proceeds shall be held by such Grantor in trust for the Secured
Party, segregated from other funds of such Grantor, and shall, forthwith
upon receipt by such Grantor, be turned over to the Secured Party in the
exact form received by such Grantor (duly indorsed by such Grantor to the
Secured Party, if required) and held by the Secured Party. All such cash
and Cash Proceeds or any other money held by the Secured Party may, in the
sole discretion of the Secured Party, (i) be held by the Secured Party as
collateral security for the Secured Obligations (whether matured or
unmatured) and/or (ii) then or at any time thereafter may be applied by the
Secured Party against the Secured Obligations then due and owing.
(e) Pledged Interest. In addition to the rights and remedies specified above,
the following provisions shall also be applicable to Pledged Interest. The
Grantor recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933 and applicable state securities laws, the Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Interest conducted without prior registration or qualification of
such Pledged Interest under the Securities Act and/or such state securities
laws, to limit purchasers to those who will agree, among other things, to
acquire the Pledged Interest for their own account, for investment and not
with a view to the distribution or resale thereof. The Grantor acknowledges
that any such private sale may be at prices and on terms less favorable
than those obtainable through a public sale without such restrictions
(including a public offering made pursuant to a registration statement
under the Securities Act) and, notwithstanding such circumstances, the
Grantor agrees that any such private sale shall be deemed to have been made
in a commercially reasonable manner and that the Secured Party shall have
no obligation to engage in public sales and no obligation to delay the sale
of any Pledged Interest for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities
laws, even if such issuer would, or should, agree to so register it. If the
Secured Party determines to exercise its right to sell any or all of the
Pledged Interest, upon written request, the Grantor shall and shall cause
each issuer of any Pledged Interest to be sold hereunder from time to time
to furnish to the Secured Party all such information as the Secured Party
may request in order to determine the number and nature of instruments
included in the Pledged Interest which may be sold by the Secured Party in
exempt transactions under the Securities Act and the rules and regulations
of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect.
(f) Levy of Execution. In addition to the rights and remedies specified above,
the following provisions shall also be applicable to any of the Collateral
situated in the Russian Federation, including the Pledged Interest:
15
(1) At the choice of the Secured Party, the Secured Obligations may be
satisfied from the value of the Pledged Interest without resort to the
court. The Secured Party may (but will not be obliged to) levy
execution on the Pledged Interest without any requirement to initiate
any court or other proceedings or to obtain any court or other order
or judgment, and may exercise its rights and powers under this
Agreement cumulatively with all rights and powers permitted by
applicable law and/or by this Agreement.
(2) The Secured Party may (but will not be obliged to) levy execution on
the Pledged Interest and in such case the Secured Party shall give a
notice to such party that indicating that it has elected to effect the
sale of the Pledged Interest and shall be entitled:
(i) to sell all or any part of the Pledged Interest pursuant to the
procedures set forth in SCHEDULE 3 or in any other manner
permitted by applicable law;
(ii) to set-off any and all of the Pledged Interest against any and
all Secured Obligations;
(iii) to bring or defend claims before any authority, submit to
arbitration, conduct negotiations and terminate, withdraw and
settle any suits, claims, disputes and other matters whether
before any authority, arbitrator, or otherwise in respect of all
or any of the Pledged Interest in the Grantor's name or
otherwise;
(iv) to collect, recover or compromise and to give a good discharge
for any monies payable to the Grantor in respect of all or any
portion of the Pledged Interest;
(v) to require an assignment or other effective transfer by the
Grantor of its rights to all or any portion of the Pledged
Interest; and
(vi) to the extent necessary to enforce the rights of the Secured
Party under this Agreement, give all consents, waivers and
ratifications in respect of the Pledged Interest, do all acts and
things and execute all documents which the Grantor could itself
do in relation to any of the Pledged Interest.
(3) The Grantor hereby agrees that the Secured Party (or any trustee,
agent or other person acting on its behalf) shall be entitled to
proceed against or enforce any other rights or security or claim for
payment from any person before proceeding to enforce its rights
hereunder.
(4) Notwithstanding anything in this Agreement to the contrary, if the
Secured Party elects, in its sole discretion, not to levy execution on
the Pledged Interest as provided for above, then the Grantor hereby
agrees and covenants with the Secured Party that, upon the request of
the Secured Party, the Grantor shall enter into an agreement or
agreements, including in the form of a novation, set-off, assignment
or accord and satisfaction agreement, with the Secured Party or any
person designated by the Secured Party for the purpose of transferring
or otherwise disposing of the Pledged Interest (or a specified portion
thereof), and any such agreement shall be in form and substance
satisfactory to the Secured Party, provided that, for the purpose of
-------------
such arrangements, the value of the Pledged Interest shall be equal to
the starting price determined pursuant to the procedure set forth in
SCHEDULE 3 (unless the parties hereto agree in writing otherwise).
16
SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS
This Agreement shall create a continuing security interest in the Collateral and
shall remain in full force and effect until the payment in full of all Secured
Obligations, the cancellation or termination of the commitments and any other
contingent obligation included in the Secured Obligations, be binding upon the
Grantor, its successors and assigns, and inure, together with the rights and
remedies of the Secured Party hereunder, to the benefit of the Secured Party and
its successors, transferees and assigns. Without limiting the generality of the
foregoing, but subject to the terms of the Guarantee and the other Finance
Documents, the Secured Party may assign or otherwise transfer any Secured
Obligations held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to the
Secured Party herein or otherwise. Subject to the terms of the Guarantee and
the Finance Documents, upon the payment in full of all Secured Obligations, the
cancellation or termination of the commitments and any other contingent
obligation included in the Secured Obligations, the security interest granted
hereby shall terminate hereunder and of record and all rights to the Collateral
shall revert to the Grantor. Upon any such termination the Secured Party shall,
at the Grantor's expense, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination.
SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.
The powers conferred on the Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. The Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Secured Party accords its own property.
Neither the Secured Party nor any of its directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Grantor or otherwise. If the Grantor fails to perform any agreement
contained herein, the Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of the Secured Party incurred in connection
therewith shall be payable by the Grantor and pending such payment shall be
included in the obligations secured hereby.
SECTION 11. INDEMNITY AND EXPENSES.
(a) The Grantor agrees:
(1) to defend (subject to the Indemnitees' selection of counsel),
indemnify, pay and hold harmless each Indemnitee, from and against any
and all claims, losses and liabilities in any way relating to, growing
out of or resulting from this Agreement and the transactions
contemplated hereby (including without limitation enforcement of this
Agreement), except to the extent such claims, losses or liabilities
result from such Indemnitee's gross negligence or willful misconduct;
and
(2) to pay to the Secured Party promptly following written demand the
amount of any and all reasonable costs and reasonable expenses,
including the reasonable fees and expenses of its counsel and of any
experts and agents in accordance with the terms and conditions of the
Guarantee and any other Finance Document.
17
(b) Expenses. The Grantor agrees to pay promptly all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of
Secured Party including search, filing and recording fees, expenses
and taxes, stamp or documentary taxes, search fees, title insurance
premiums and reasonable fees, expenses and disbursements of counsel to
Secured Party and of counsel providing any opinions that Secured Party
may request in respect of the Collateral or the Liens created pursuant
to the Collateral Documents; all the actual costs and reasonable fees,
expenses and disbursements of any auditors, accountants, consultants
or appraisers; all the actual costs and reasonable expenses (including
the reasonable fees, expenses and disbursements of any appraisers,
consultants, advisors and agents employed or retained by Secured Party
and its counsel) in connection with the custody or preservation of any
of the Collateral; and after the occurrence of a Default or an Event
of Default, all costs and expenses, including reasonable attorneys'
fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Secured Party in enforcing any Secured
Obligations of or in collecting any payments due from the Grantor
hereunder or under the Guarantee or any other Finance Document by
reason of such Default or Event of Default (including in connection
with the sale of, collection from, or other realization upon any of
the Collateral) or in connection with any refinancing or restructuring
of the credit arrangements provided hereunder in the nature of a
"work-out" or pursuant to any insolvency or bankruptcy cases or
proceedings.
(c) The obligations of the Grantor in this Section 11 shall survive the
termination of this Agreement and the discharge of such Grantor's
other obligations under this Agreement, the Guarantee or any other
Finance Document.
SECTION 12. MISCELLANEOUS.
(a) Notices. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given to a Grantor or
Secured Party, shall be sent to the following addresses:
If to the Grantor, to it at:
Siberian Energy Group Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10016
United States of America
Attention: Chairman & Chief Executive Officer
Telecopier No.: ▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
If to the Secured Party, to it at:
Baltic Petroleum Limited
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
Each notice hereunder shall be in writing and may be personally served, telexed
or sent by telefacsimile or mail or courier service and shall be deemed to have
been given when delivered in person or by courier service and signed for against
receipt thereof, upon receipt of telefacsimile or telex, or seven (7) days after
depositing it in the mail with postage prepaid and properly addressed; provided,
no notice to Secured Party shall be effective until received by Secured Party.
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(b) Amendments and Waivers.
(1) Secured Party's Consent. No amendment, modification, termination or
----------------------
waiver of any provision of this Agreement, or consent to any departure
by the Grantor therefrom, shall in any event be effective without the
written concurrence of the Secured Party.
(2) No Waiver; Remedies Cumulative. No failure or delay on the part of the
------------------------------
Secured Party in the exercise of any power, right or privilege
hereunder or under the Guarantee or any other Finance Document shall
impair such power, right or privilege or be construed to be a waiver
of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other power, right or privilege.
All rights, powers and remedies existing under this Agreement, the
Guarantee and the other Finance Documents are cumulative, and not
exclusive of any rights or remedies otherwise available. Any
forbearance or failure to exercise, and any delay in exercising, any
right, power or remedy hereunder shall not impair any such right,
power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
(c) Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns including all persons
who become bound as debtor to this Agreement. The Grantor shall not,
without the prior written consent of the Secured Party, assign any right,
duty or obligation hereunder.
(d) Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by
an exception to, or would otherwise be within the limitations of, another
covenant shall not avoid the occurrence of a Default or an Event of Default
if such action is taken or condition exists.
(e) Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof. Notwithstanding anything herein or implied
by law to the contrary, the agreements of the Grantor set forth in Sections
11 and 12 shall survive the payment of the Secured Obligations and the
termination hereof.
(f) Severability. In case any provision in or obligation hereunder shall be
invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
(g) Headings. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose
or be given any substantive effect.
(h) APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA IN THE UNITED
STATES OF AMERICA.
(i) JURISDICTION. ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, VALIDITY OR
TERMINATION, OR THE LEGAL RELATIONSHIPS ESTABLISHED BY THIS AGREEMENT,
SHALL BE REFERRED TO AND FINALLY RESOLVED BY ARBITRATION UNDER THE RULES OF
THE LONDON COURT OF INTERNATIONAL ARBITRATION, WHICH RULES ARE DEEMED TO BE
INCORPORATED BY REFERENCE INTO THIS CLAUSE. ALL ARBITRATION PROCEEDINGS
SHALL BE CONDUCTED IN ENGLISH BEFORE A SINGLE ARBITRATOR IN LONDON.
JUDGMENT ON ANY RESULTING AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION OVER THE AFFECTED PARTY, AND MAY BE EXECUTED AGAINST THE
ASSETS OF THE AFFECTED PARTY IN ANY JURISDICTION. THE ARBITRATOR SHALL HAVE
JURISDICTION TO AWARD, AND SHALL AWARD, THE PREVAILING PARTY ITS REASONABLE
ATTORNEYS FEES, COSTS AND EXPENSES.
19
(j) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING HEREUNDER OR UNDER THE GUARANTEE OR ANY OTHER FINANCE
DOCUMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH
PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY
ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN
BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 12(j) AND
EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
(k) Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument.
(l) Effectiveness. This Agreement shall become effective upon the execution of
a counterpart hereof by each of the parties hereto and receipt by the
Grantor and the Secured Party of written or telephonic notification of such
execution and authorization of delivery thereof.
(m) Entire Agreement. This Agreement, the Guarantee and the other Finance
Documents embody the entire agreement and understanding between the Grantor
and the Secured Party and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, the Guarantee and the other Finance Documents may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between
the parties.
20
IN WITNESS WHEREOF, the Grantor and the Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SIBERIAN ENERGY GROUP INC.,
as Grantor
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman & CEO
BALTIC PETROLEUM LIMITED,
as Secured Party
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
SCHEDULE I
TO PLEDGE AND SECURITY AGREEMENT
GENERAL INFORMATION
(a) Full Legal Name, Type of Organization, Jurisdiction of
Organization, Chief Executive Office/Sole Place of Business and
Organizational Identification Number of Grantor:
GRANTOR ISSUER ISSUE DATE NOMINAL VALUE PERCENTAGE
Siberian Energy OOO November 10, 10,000 Russian OWNERSHIP
Group Inc. Zauralneftegaz 2001 rubles 100 %
(a Russian limited
liability company)
(b) Other Names (including any Trade-Name or Fictitious Business
Name) under which each Grantor has conducted business for the
past five (5) years:
Name of Grantor Other name forms
--------------- ----------------
Siberian Energy Group Inc. SEG
(c) Changes in Name, Jurisdiction of Organization, Chief Executive
Office or Sole Place of Business and Corporate Structure within
past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name
--------------- --------------------------------------
Siberian Energy Group Inc. See below
NAME CHANGES:
The Company was incorporated in the State of Nevada on August 13, 1997, as
ADVANCED REHAB TECHNOLOGY CORPORATION, and previously provided comprehensive
outpatient rehabilitation services. All activities related to the Company's
previous business ventures were essentially discontinued prior to January 1,
2000. Subsequently, on March 9, 2001, the Company changed its name to TALKING
CARDS, INC.; on February 12, 2002, the Company changed its name to OYSTERKING
INCORPORATED; on December 3, 2002, the Company changed its name to 17388
CORPORATION INC., at which point the controlling interest of the Company was
sold and a new board of directors was appointed; on May 5, 2003, the Company
changed its name to TRANS ENERGY GROUP INC.; and on December 3, 2003, the
Company changed its name to SIBERIAN ENERGY GROUP INC.
JURISDICTION OF ORGANIZATION:
The jurisdiction of organization remains in the state of Nevada.
S-I-1
CHIEF EXECUTIVE OFFICES:
1997-2003 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
2003 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
2004-2005 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇
(d) Agreements pursuant to which any Grantor is found as debtor
within past five (5) years:
All activities related to the Company's business were essentially
discontinued prior to January 1, 2000. No debts were left over from previous
business, except for immaterial amounts (approximately $40,000) payable to the
stockholders. These liabilities were partly discharged on purchase of ZNG,
partly are present in the current balance sheet of SEG (aprx $20,000).
No loan agreements have been signed by SEG within past 5 years.
(e) Financing Statements:
Name of Grantor Filing Jurisdiction(s)
--------------- ----------------------
None None
S-I-2
SCHEDULE II
TO PLEDGE AND SECURITY AGREEMENT
PLEDGED INTEREST
Pledged Interest:
GRANTOR ISSUER ISSUE DATE NOMINAL VALUE PERCENTAGE
OWNERSHIP
=============== ============== ============ ============== ==========
Siberian Energy OOO November 10, 10,000 Russian 100%
Group Inc. Zauralneftegaz 2001 rubles
(a Russian limited
liability company)
B-1
SCHEDULE III
TO PLEDGE AND SECURITY AGREEMENT
PROCEDURES FOR LEVY OF EXECUTION
1. The Secured Party may (as specified in Section 8(f)) sell all or any part
of the Pledged Interest at public auctions organised by the Secured Party
or by an organisation that specializes in coordinating such auctions (a
"SPECIALISED ORGANISATION") in accordance with applicable law. In the event
that all of the Pledged Interest is not sold at the first such auction, the
Secured Party may in its sole discretion enter into an agreement with the
Grantor to acquire the Pledged Interest or initiate a second auction.
2. The Secured Party or the Specialised Organisation, upon prior approval of
the Secured Party, shall be entitled (in such manner as the Secured Party
may in its absolute discretion see fit, subject to applicable law):
(a) to determine the date, time and place of each public auction;
(b) to establish the procedure for the holding of each public auction;
(c) to make all arrangements for the holding of each public auction,
including, without limitation, such arrangements as the Secured Party
or the Specialised Organisation consider appropriate for advertising
with a view to obtaining the best price reasonably achievable for the
Pledged Interest;
(d) to approve the results of the public auction(s) and notify the Grantor
and any other interested persons of the same;
(e) to appoint a pledge manager to assist the Secured Party in exercising
the powers contained in (a) to (d) above and delegate its powers to
such pledge manager;
(f) to engage professional advisers, including valuers, lawyers and
accountants in connection with the auction(s) and the exercise of the
Secured Party's rights; and
(g) to incur and pay the costs and expenses of holding the auction(s) and
of its advisers engaged pursuant to (e) and (f) above, together with
notarisation, registration and other costs and expenses in relation to
the transfer of the Pledged Interest to the purchaser or the Secured
Party.
3. For the purpose of compliance with Article 350(3) of the Civil Code of the
Russian Federation, the Grantor and Secured Party shall promptly, following
an appropriate Secured Party's request to the Grantor, agree on a starting
price for the first and any subsequent public auction which shall be
determined on the basis of prevailing market conditions. In the event the
Grantor and the Secured Party fail to reach an agreement with respect to
such starting price within a reasonable time, the Secured Party shall
determine a starting price for the first and any subsequent public auction
based on prevailing market conditions.
4. The Secured Party or the Specialised Organisation may sell the Pledged
Interest at either public auction for less than the price specified in
Section 3 (c) of the Agreement. The Secured Party or the Specialised
Organisation shall not be obliged to delay either auction in order to
receive a better price.
B-2
5. The Secured Party or the Specialised Organisation shall be entitled in its
own name as a representative for and on behalf of the Grantor to transfer
the Pledged Interest to any purchaser free and clear of all rights and
interests of the Secured Party and the Grantor, and to give valid discharge
to any purchaser for payment of the purchase price, and the minutes of the
results of the public auction signed by the Secured Party or the
Specialised Organisation shall suffice for such purposes. Such purchaser
shall be entitled to register its title to the Pledged Interest with all
relevant authorities by evidencing to the authorities the Agreement
together with the minutes of the results of the public auction signed by
the Secured Party or the Specialised Organisation stating that such
purchaser has become the owner of the Pledged Interest. The Grantor shall
ensure that the title of such purchaser to the Pledged Interest is duly
documented.
6. The Secured Party may in its sole discretion either (i) enter into an
agreement with the Grantor to acquire the Pledged Interest; or (ii)
initiate a second auction if the Secured Party or the Specialised
Organisation (each in its absolute discretion) consider the first public
auction to have failed.
7. If the Secured Party or the Specialised Organisation (each in their
absolute discretion) consider the second public auction to have failed, the
Secured Party or the Specialised Organisation shall be entitled, by notice
to the Grantor, to declare the public auction to have failed, and the
Secured Party shall assume ownership of the Pledged Interest and upon
service of that notice shall have good title to the Pledged Interest free
and clear of all rights and interests of the Grantor without any additional
agreements. The Secured Party shall be entitled to register its title to
the Pledged Interest with all relevant authorities by evidencing to the
authorities the Agreement together with the minutes of the results of the
public auction signed by the Secured Party or the Specialised Organisation
stating that the first and the second public auction have failed and that
the Secured Party has assumed ownership of the Pledged Interest. The
Grantor shall use its reasonable endeavour to ensure that the title of the
Secured Party to the Pledged Interest is duly documented.
B-3