EXHIBIT 10.2
JUNE 14, 2002
LIMITED LIABILITY COMPANY "GEOILBENT"
AS BORROWER
- AND -
HARVEST NATURAL RESOURCES, INC.
AS LENDER
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SUBORDINATED LOAN AGREEMENT
US$2,500,000
LONG-TERM CREDIT FACILITY
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CONTENTS
Clause Clause Heading Page
------ -------------- ----
1. INTERPRETATION..........................................................................................2
2. REPRESENTATIONS AND WARRANTIES..........................................................................4
3. THE LOAN................................................................................................6
4. INTEREST................................................................................................7
5. REPAYMENT, PREPAYMENT AND CANCELLATION..................................................................8
6. CONDITIONS PRECEDENT....................................................................................9
7. MARKET DISRUPTION.......................................................................................9
8. CHANGE OF LAW OR CIRCUMSTANCES.........................................................................10
9. TAXES AND OTHER DEDUCTIONS.............................................................................11
10. FEES AND EXPENSES......................................................................................11
11. PAYMENTS AND EVIDENCE OF DEBT..........................................................................12
12. UNDERTAKINGS...........................................................................................12
13. EVENTS OF DEFAULT......................................................................................13
14. INDEMNITIES............................................................................................15
15. AMENDMENT AND WAIVER...................................................................................16
16. ASSIGNMENT.............................................................................................16
17. MISCELLANEOUS..........................................................................................16
18. NOTICES................................................................................................17
19. GOVERNING LAW AND JURISDICTION.........................................................................17
SCHEDULE L. FORM OF NOTICE OF DRAWING......................................................................19
THIS AGREEMENT is made on the ___ day of June 2002
BETWEEN:
(1) HARVEST NATURAL RESOURCES, INC., a company incorporated under the laws
of the State of Delaware, United States of America and having its
principal place of business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ as lender (the "Lender"); and
(2) LIMITED LIABILITY COMPANY "GEOILBENT", a legal entity organized and
existing under the laws of the Russian Federation with its registered
address at Russia, Tyumen oblast, Yamalo-Nenetskiy Autonomous District,
Purovsk region, Purpe Settlement as borrower (the "BORROWER").
WHEREAS:
(i) the Borrower has entered into a credit agreement with the European Bank
for Reconstruction and Development ("EBRD") dated November 21, 1996, as
amended (the "EBRD Credit Agreement"), pursuant to which EBRD has
agreed, subject to the terms and conditions of the EBRD Credit
Agreement, to lend to the Borrower on a revolving basis an amount not
to exceed US$55,000,000;
(ii) the Borrower has entered into a credit agreement with International
Moscow Bank ("IMB") dated April 9, 1997 (the "IMB CREDIT AGREEMENT"),
pursuant to which IMB has agreed, subject to the terms and conditions
of the IMB Credit Agreement, to lend to the Borrower on a revolving
basis an amount not to exceed US$10,000,000;
(iii) the Borrower, EBRD and IMB have entered into a security agreement dated
May 28, 1997 (the "Security Sharing Agreement"), pursuant to which the
Borrower, subject to the terms and conditions of the Security Sharing
Agreement, secured the amounts owing under the EBRD Credit Agreement
and under the IMB Credit Agreement;
(iv) the Lender, the Borrower, EBRD, IMB, Open Joint Stock Company
"Purneftegazgeologia" ("PGG") and Open Joint Stock Company "Rosneft -
Purneftegaz" ("PNG") have entered into the performance, subordination
and share retention agreement dated April 9, 1997 (the "Shareholders
Support Agreement"), which was amended on January 3, 2002 to replace
PGG and PNG with Open Joint Stock Company "MINLEY";
(v) the Borrower intends to obtain credit facilities in the amount of
US $2,500,000 and the Lender agrees to extend to the Borrower credit
facilities in the amount of US$2,500,000; and
(vi) the Borrower and the Lender acknowledge and agree that the credit
facilities extended hereunder shall constitute the Subordinated
Shareholder Loan, as defined in the EBRD Credit Agreement and in the
IMB Credit Agreement, and the Junior Indebtedness, as defined in the
Shareholders Support Agreement,
IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 Definitions. Wherever used in this Agreement or the schedules hereto,
unless the context requires otherwise, terms defined in the Recitals
shall have the meaning assigned to them in such Recitals, terms defined
in the EBRD Credit Agreement, the IMB Credit Agreement, the
Shareholders Support Agreement and the Security Sharing Agreement shall
have the same meaning in this Agreement and the following terms shall
have the following meaning:
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
banks and foreign exchange markets are generally open for business in
Moscow, Russia, and Houston,
Texas, the United States of America, and,
if on that day a payment is to be made under this Agreement, in New
York City, the United States of America and, if on the date for which
LIBOR is to be determined under this Agreement, in London, England;
"EBRD LOAN" means the Loan extended to the Borrower by EBRD under the
EBRD Credit Agreement;
"EVENT OF DEFAULT" means any event or circumstance specified as such in
Clause 13.1 and "POTENTIAL EVENT OF DEFAULT" means any event or
circumstance which, with the giving of notice and/or the passage of
time and/or the satisfaction of any applicable condition (or any
combination of them) may become an Event of Default;
"FINANCING AGREEMENTS" means the EBRD Credit Agreement, the IMB Credit
Agreement, the Security Sharing Agreement and the Shareholders Support
Agreement;
"IMB LOAN" means the loan extended to the borrower by IMB under the IMB
Credit Agreement;
"INTEREST PAYMENT DATE" means the last day of an Interest Period,
however, any such date shall not be earlier than January 15, 2004;
"INTEREST PERIOD" means, in relation to the Loan an interest period
ascertained in accordance with Clause 4;
"LIBOR" means the rate per annum (rounded upwards, if necessary, to the
nearest integral multiple of 1/16%) reported on the date two Business
Days prior to the day on which the Loan was extended in the Money Rates
section of the Wall Street Journal for U.S. Dollar deposits having a
term of six months;
"LOAN" means the aggregate principal amount extended to the Borrower
under this Agreement;
"NOTICE OF DRAWING" means a notice substantially in the form set out in
Schedule 1;
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"REPAYMENT DATE" means January 6, 2004 or the last Business Day of
each subsequent sixth months period as provided in Clause 13.4 (a);
"RUSSIAN BANK ACCOUNT" means US Dollars bank account of the Borrower
No. 40702840400010003823 (605162 USD 4010 02), opened and maintained
with IMB;
"SENIOR LENDERS" means EBRD and IMB; and
"US DOLLARS" and "USS" mean the lawful currency of the United States of
America.
1.2 Construction. In this Agreement, unless the context requires otherwise,
any reference to:
"ASSET" includes any asset, revenue, property or right and includes
uncalled capital;
"AUTHORIZATION" includes any approval, consent, license, permit,
franchise, permission, registration, resolution, direction, declaration
or exemption;
"INCLUDING" or "includes" means including or includes without
limitation;
"INDEBTEDNESS" includes any obligation for the payment or repayment of
money, whether present or future, actual or contingent;
"LAW" and/or "regulation" includes any constitutional provision,
treaty, convention, law or subordinate legislation;
"ORDER" includes any judgment, injunction, decree, determination or
award of any court or arbitration tribunal;
"PERSON" includes any individual, company, body corporate or
unincorporated or other juridical person, partnership, firm, joint
venture or trust or any federation, state or subdivision thereof or any
government or agency of any of the foregoing;
"TAX" includes any tax, levy, duty, charge, value added tax, impost,
fee, deduction or withholding of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any taxing or other
authority and includes any interest, penalty or other charge payable or
claimed in respect thereof, and "taxation" shall be construed
accordingly; and
"WINDING-UP" includes any winding-up, liquidation, dissolution or
comparable process in any jurisdiction.
1.3 Successors and Assigns. The expressions "BORROWER" and "LENDER" shall,
where the context permits, include their respective successors and
permitted assigns and any persons deriving title under them.
1.4 Miscellaneous. In this Agreement, unless the context requires
otherwise:
(a) Statutes: references to statutory provisions shall be
construed as references to 4, those provisions as amended,
modified, re-enacted or replaced from time to time;
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(b) Construction: words importing the singular include the plural
and vice versa and words importing a gender include every
gender;
(c) Finance Documents: references to this Agreement, the EBRD
Credit Agreement, the IMB Credit Agreement, the Security
Sharing Agreement or the Shareholders Support Agreement shall
be construed as references to such agreement as the same may
be amended, supplemented or novated from time to time;
(d) Clauses, Etc.: references to Clauses and Schedules are to
clauses of and schedules to this Agreement and references to
this Agreement include its Schedules; and
(e) Headings: clause headings are inserted for reference only and
shall be ignored in construing this Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Borrower represents and warrants to
the Lender that:
(a) No Consent Required: the Borrower is entitled to enter into
this Agreement without consent of any other party, except as
provided under Clause 6;
(b) No Breach of Obligation: the Borrower's entering into this
Agreement does not violate any of the Borrower's undertakings,
covenants and other obligations under the Financing
Agreements;
(c) No Effect on Repayment of Loans: the Borrower's entering into
this Agreement will have no material adverse effect on the
repayment of the EBRD Loan and the IMB Loan;
(d) Corporate Existence: the Borrower is duly organized as a
limited liability company and validly existing under the laws
of the Russian Federation, and has full power, authority and
legal right to own its assets and to carry on its business;
(e) Capacity: the Borrower has full power, authority and legal
right, and all necessary corporate action has been taken in
order to authorize the Borrower, to enter into and to exercise
its rights and perform its obligations under this Agreement;
(f) Documents Valid and Enforceable: this Agreement constitutes
legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms;
(g) Authorizations: all authorizations required from any
governmental or other authority or required to be obtained by
the Borrower from any of its participants or creditors or any
other person for or in connection with the execution,
validity, performance and enforceability of this Agreement
have been obtained and are in full force and effect at any
time during the term of this Agreement;
(h) Obligations Permitted: the execution by the Borrower of this
Agreement and/or the performance by the Borrower of any of its
obligations and/or the exercise by the Borrower of any of its
rights under this Agreement will not:
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(i) conflict with or result in a breach of any law,
regulation, judgment, order, authorization, agreement
or obligation applicable to it; or
(ii) cause any limitation placed on it or the powers of
its directors to be exceeded; or
(iii) result in the creation of or oblige the Borrower to
create an encumbrance over any of its assets;
(i) Litigation: no litigation, arbitration or administrative
proceeding or other dispute is currently taking place or
pending or threatened against the Borrower or any of its
assets which, in any single case or taken together, could have
a material adverse effect on the business or financial
condition or prospects of the Borrower or on the ability of
the Borrower to perform its obligations under this Agreement;
(j) No Breach of Law: the Borrower is not in default under any
law, regulation, judgment, order, authorization, agreement or
obligation applicable to it or any of its assets, the
consequences of which default could have a material adverse
effect on:
(i) the business or financial condition or prospects of
the Borrower; or
(ii) the ability of the Borrower to perform its
obligations under this Agreement;
(k) Default: no Event of Default or potential Event of Default has
occurred and is continuing;
(l) Financial Statements: the most recent financial statements of
the Borrower for the time being were prepared both in
accordance with applicable laws and regulations of Russia and,
separately in accordance with generally accepted accounting
principles in the United States of America and policies
consistently applied and show a true and fair view of the
financial position of the Borrower as at the end of, and the
results of its operations for, the financial period to which
they relate; and there has been no material adverse change in
the business or financial condition or prospects of the
Borrower since the date of such financial statements;
(m) Information: all information supplied by or on behalf of the
Borrower to the Lender in connection with the Loan is true and
accurate in all respects and all forecasts and projections
contained therein were arrived at after due and careful
consideration on the part of the Borrower and were, in its
considered opinion, fair and reasonable when made; the
Borrower is not aware of any fact which has not been disclosed
in writing to the Lender which might have a material effect on
any such information, forecasts or projections or which might
reasonably be expected to affect the willingness of the Lender
to lend upon the terms of this Agreement; and
(n) No Immunity: the Borrower is generally subject to civil law
and to legal proceedings and neither the Borrower nor any of
its assets is entitled to any immunity or privilege from any
set-off, judgment, execution, attachment or other legal
process.
2.2 Continuing Representation and Warranty. The Borrower undertakes with
the Lender that the representations and warranties set out in Clause
2.1 will be true and accurate, and the Borrower shall be deemed to
repeat such representations and warranties on each day throughout the
continuation of this Agreement.
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2.3 Acknowledgement of Reliance. The Borrower acknowledges that the Lender
has entered into this Agreement in reliance upon the representations
and warranties contained in this Clause 2 which inter alia present a
security to the Lender for the due repayment of the Loan.
3. THE LOAN
3.1 Amount. Subject to the provisions of this Agreement, the aggregate
principal amount of the Loan available to the Borrower is US$2,500,000
(two million five hundred thousand).
3.2 Delivery. Subject to the provisions of this Agreement, the Loan shall
be extended to the Borrower in a lump sum.
3.3 Purpose. The Borrower shall use the proceeds of the Loan for the
purpose of payment of outstanding taxes payable, salaries payable and
trade accounts payable.
3.4 Extension of the Loan. The Lender shall extend the Loan to the Russian
Bank Account on or before the 10th Business Day after signing this
Agreement, provided that:
(a) Notice of Drawing: not later than 4:00 p.m. (Moscow time) on
the second Business Day before the date on which the Loan is
to be extended (or at such later time as the Lender may
approve), the Lender shall have received a duly completed and
signed Notice of Drawing (being an original or a fax or a
telex);
(b) Conditions Precedent: all conditions precedent described in
Clause 6 of this Agreement shall have been fulfilled;
(c) No Default: no Event of Default or potential Event of Default
shall have occurred or would occur as a result of the Loan
being extended; and
(d) Representations Correct: all representations and warranties
made by the Borrower in or in connection with this Agreement
shall be true and correct as at the date on which the Loan is
to be extended with reference to the facts and circumstances
then existing.
3.5 Notice of Drawing. The Notice of Drawing, once given, shall be binding
on the Borrower. If for any reason the Borrower fails to draw the Loan
in accordance with the Notice of Drawing, then the Borrower shall on
demand pay to the Lender such amount as the Lender, acting in good
faith, may certify to be necessary to compensate it for any loss or
expense incurred in liquidating or redeploying funds acquired or
arranged to fund the Loan or in terminating any such arrangement.
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4. INTEREST
4.1 Interest. The Borrower shall pay interest on the Loan in accordance
with the provisions of this Clause 4.
4.2 Interest Periods. Interest periods applicable to the Loan shall be
periods of 3 (three) months (each an "Interest Period") provided that:
(a) First Interest Period: the first Interest Period in relation
to the Loan shall commence on the date of extension of the
Loan and shall end on January 6, 2004; and
(b) Subsequent Interest Periods: each Interest Period after the
first Interest Period shall commence on the last Business Day
of the preceding Interest Period and shall end on the last
Business Day of the third calendar month calculated from such
date.
4.3 Interest Rate. The interest applicable to the Loan shall be at a rate
equal to:
(a) First Interest Rate: for the period from the extension of the
Loan until January 6, 2004 the Interest rate shall be equal to
LIBOR;
(b) Second Interest Rate: for the period from January 7, 2004
until December 31, 2004 the Interest rate shall be equal to
8%;
(c) Third Interest Rate: for the period from January 1, 2005 until
the date on which the Loan will be repaid in full the Interest
rate shall be equal to 12%.
4.4 Calculation of Interest. The rate of interest applicable to the Loan or
the relevant part thereof for each Interest Period shall be the rate
per annum determined by the pursuant to Clause 4.3 for the Interest
Period. Interest shall be calculated on the basis of the actual number
of days elapsed, including the first day of the period during which it
accrues but excluding the last day. Interest shall accrue from day to
day and shall be paid in arrears on each Interest Payment Date. The
Lender shall notify the Borrower of each interest rate determined under
this Clause.
4.5 Payment of Interest. The Borrower shall pay interest on the Loan only
after receipt of the written consent of the Senior Lenders on such
payment if and when such consent is required pursuant to the Financing
Agreements, unless otherwise provided by the Financing Agreements. If
the consent of the Senior Lenders is not required for such interest
payment, then the Borrower need not obtain such consent before payment
of interest on the Loan. If the consent of the Senior Lenders is
required and the Senior Lenders do not give a written consent, the
payment of interest on the Loan shall be transferred to the following
Interest Payment Date. If the payment of interest on the Loan is
transferred to the following Interest Payment Date, then the Borrower
must again seek the consent of the Senior Lenders, if so required by
the Financing Agreements. This Clause 4.5 shall cease to be applicable
to the extent that the EBRD Loan and the IMB Loan are no longer
outstanding.
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5. REPAYMENT, PREPAYMENT AND CANCELLATION
5.1 Repayment. The Borrower shall repay the Loan in a lump sum on the
Repayment Date. Any prepayment pursuant to Clause 5.2 shall reduce the
amount of the remaining Loan to be repaid.
5.2 Prepayment. The Borrower may prepay all or part of the Loan on the last
Business Day of any Interest Period provided that:
(a) Permission: the Senior Lenders have permitted such prepayment
if and when such permission is required pursuant to the
Financing Agreements, unless otherwise provided in the
Financing Agreements; if the Financing Agreements do not
require the consent of the Senior Lenders, then the permission
of the Senior Lenders is not required; (this Clause 5.2 (a)
shall cease to be applicable to the extent that the EBRD Loan
and the IMB Loan are no longer outstanding);
(b) Notice: the Borrower shall have given to the Lender not less
than 30 days' prior written notice specifying the amount to be
prepaid and the date of prepayment;
(c) Procedure: prepayment shall be effected in compliance with the
procedures of the Financing Agreements;
(d) Amount: the amount of any partial prepayment shall be at least
US$250,000 (two hundred fifty thousand) and an integral
multiple of US$50,000 (fifty thousand);
(e) Payments Current: all other sums then due and payable under
this Agreement shall have been paid; and
(f) Commission: at the time of prepayment the Borrower shall pay
to the Lender a prepayment fee equal to one half of one
percent (0.5%) of the amount prepaid.
5.3 Provisions Applicable to Prepayments. Any notice of prepayment given by
the Borrower under any provision of this Agreement shall be binding on
the Borrower. If for any reason the Borrower fails to make a prepayment
in accordance with such notice, then the Borrower shall on demand pay
to the Lender such amount as the Lender, acting in good faith, may
certify to be necessary to compensate it for any loss or expense
incurred as a consequence of such failure.
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6. CONDITIONS PRECEDENT
6.1 General: The Lender shall not be obliged to extend the Loan to the
Borrower, and the Borrower shall not give a Notice of Drawing, unless
and until:
(i) Corporate Actions: the Borrower has fulfilled all corporate
actions and obtained all corporate approvals required for
entering into this Agreement, including, but not limited to,
approval of the Borrower's general participants meeting of
this Agreement as an interested party transaction;
(ii) Currency Control: the Borrower has fulfilled all Russian
currency control requirements, including, but not limited to
filing official documents with respect to this Agreement to
IMB as Russian currency control agent; and
(iii) Notification: the Borrower has notified the Senior Lenders
about the Borrower's intention to draw down on the Loan and
the Senior Lenders have consented in writing to the Borrower
entering into this Agreement and drawing down the Loan.
6.2 Notice: The Lender shall notify the Borrower when it has received all
the documents and evidence referred to in Clause 6.1 and has found them
to be satisfactory in form and substance.
7. MARKET DISRUPTION
7.1 Market Disruption. If in relation to any Interest Period the Lender
determines (which determination shall be conclusive and binding) that:
(a) Interbank Market: by reason of circumstances affecting the
London interbank market generally, adequate and fair means do
not exist for ascertaining LIBOR for that Interest Period; or
(b) Deposits: deposits in US Dollars in the amount required for
that Interest Period are not available to the Lender in the
London interbank market; or
(c) LIBOR: that LIBOR does not adequately reflect the cost to the
Lender of obtaining funds for that Interest Period,
the Lender shall promptly notify the Borrower accordingly, and an
alternative basis shall be agreed in accordance with Clause 7.2.
7.2 Alternative Basis by Agreement. As soon as practicable after such
notification, the Borrower and the Lender shall negotiate in good faith
with a view to agreeing upon an alternative basis for funding the Loan
and determining the applicable interest rate. If an alternative basis
is agreed in writing within a period of 30 days after such notification
or such longer period for negotiation as the parties may agree, the
alternative basis shall take effect in accordance with its terms.
7.3 Failure to Agree. If an alternative basis is not agreed pursuant to
Clause 7.2:
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(a) Loan Undrawn: if the Loan has not previously been extended,
the Loan shall be cancelled and the Borrower shall pay all
sums accrued or owing under this Agreement at the end of the
period for negotiation referred to in Clause 7.2; or
(b) Loan Outstanding: if the Loan has previously been extended:
(i) the Borrower shall pay interest on the Loan for the
relevant Interest Period at the rate from time to
time determined by the Lender to be the aggregate of
(1) the respective interest rate as established in
Clause 4.3 and (2) the rate per annum representing
the cost to the Lender of funding or maintaining the
Loan during the relevant Interest Period from such
sources and otherwise on such basis as the Lender may
reasonably select; and
(ii) the Borrower may, by giving written notice to the
Lender, elect to prepay the Loan in full. Such notice
shall specify a prepayment date, which is not less
than 30 days after the notice is given. The
prepayment shall be effected only upon the written
consent of the Senior Lenders, unless otherwise
provided by the Financing Agreements. On the
specified date the Borrower shall prepay the Loan in
full together with interest thereon from the
beginning of the relevant Interest Period to the date
of prepayment calculated in accordance with paragraph
(i) above. (Unless and until such notice is given,
the parties shall from time to time review whether or
not the relevant circumstances referred to in Clause
7.1 still apply, with a view to reverting to the
application of Clause 4 as soon as practicable.)
8. CHANGE OF LAW OR CIRCUMSTANCES
8.1 Unlawfulness. If it becomes unlawful or contrary to any requirement of
any governmental, fiscal, monetary or other authority (whether or not
having the force of law) for the Lender to give effect to its
obligations under this Agreement or to fund the Loan or any part
thereof, the Borrower shall forthwith prepay the Loan in full together
with all interest accrued thereon and other sums outstanding under this
Agreement. The prepayment shall be effected only upon the written
consent of the Senior Lenders, unless otherwise provided by the
Financing Agreements.
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9. TAXES AND OTHER DEDUCTIONS
9.1 No Deductions or Withholdings. All sums payable by the Borrower under
this Agreement shall be paid in full without set-off or counterclaim or
any restriction or condition and, except to the extent required by any
law of the Russian Federation or regulation, free and clear of any
deduction or withholding on account of tax or otherwise. If the
Borrower or any other person is required by any law or regulation to
make any such deduction or withholding, the Borrower shall, together
with the relevant payment, pay such additional amount as will ensure
that the Lender receives and is entitled to retain, free and clear of
any such deduction or withholding, the full amount which it would have
received if no such deduction or withholding had been required.
9.2 Tax Treaties. The Lender shall notify the Borrower of any tax treaty
exemptions from withholding tax that may be available to the Lender in
connection with any sum payable under this Agreement and submit to the
Borrower the necessary documents for purposes of confirming such
exemption.
9.3 Receipts. The Borrower shall, within the required time period, pay or
cause to be paid over to the relevant taxation or other authority the
full amount of any deduction or withholding as referred to in Clause
9.1, and shall promptly forward to the Lender copies of official
receipts or other evidence satisfactory to the Lender showing that such
payment has been made.
9.4 Notification. If at any time the Borrower becomes aware that any
deduction or withholding as referred to in Clause 9.1 is or will be
required or that the basis for calculation thereof has been or will be
changed, it shall promptly notify the Lender and supply details of such
requirement or change.
10. FEES AND EXPENSES
10.1 Enforcement Costs. The Borrower shall within 30 days after written
demand pay or reimburse to the Lender all reasonable costs, charges and
expenses (including legal and other fees on a full indemnity basis and
all other out-of-pocket expenses and any applicable value added tax or
similar tax) incurred by the Lender:
(a) Rights and Remedies: in exercising any of its rights or powers
under this Agreement or in suing for or seeking to recover any
sums due or otherwise preserving or enforcing its rights,
powers and remedies under this Agreement, except claims in
which the Lender's gross negligence, wilful misconduct or
breach of this Agreement is proven; and
(b) Defense of Claims: in defending any claims brought against it
in respect of this Agreement.
10.2 Consent of the Senior Lenders. Any sum provided for in this Clause 10
shall be paid by the Borrower only upon receipt of a written consent
of the Senior Lenders on the respective payment, if and when such
consent is required pursuant to the Financing Agreements, unless
otherwise provided in the Financing Agreements. If the consent of the
Senior Lenders is not required for such payment, then the Borrower need
not obtain such consent before payment. If the consent of the Senior
Lenders is required and the Senior Lenders do not give a written
consent, the payment of the respective sum shall be effected as soon as
either the Senior Lenders give a written consent on payment of this sum
or the consent of the Senior Lenders is no longer
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required, then the payment shall be effected immediately. This Clause
10.2 shall cease to be applicable to the extent that the EBRP Loan and
the IMB Loan are no longer outstanding.
11. PAYMENTS AND EVIDENCE OF DEBT
11.1 Delivery. The Lender shall transfer the Loan to the Russian Bank
Account.
11.2 Payments by Borrower. All payments by the Borrower under this Agreement
shall be made to the Lender, in US Dollars not later than 15:00 (Moscow
time) on the relevant due Business Day in same day funds to the account
designated by the Lender.
11.3 Allocation of Receipts. If any amount received by the Lender in respect
of sums due from the Borrower hereunder is less than the full amount
due, the Lender shall have the right to allocate the amount received
towards principal, interest, expenses and/or other sums owing under
this Agreement as it considers appropriate.
11.4 Business Days. If any sum would otherwise become due for payment
hereunder on a day which is not a Business Day, that sum shall become
due on the next following Business Day, except that if any payment
would then become due in another calendar month such payment shall
become due on the immediately preceding Business Day. Interest shall be
adjusted accordingly.
11.5 Evidence of Debt. The Lender shall maintain accounts recording the
amounts from time to time owing by the Borrower hereunder. In any legal
proceeding and otherwise for the purposes of this Agreement the entries
made in such accounts shall, in the absence of manifest error, be
conclusive and binding on the Borrower as to the existence and amount
of the obligations of the Borrower recorded therein.
11.6 Certificate Conclusive and Binding. Where any provision of this
Agreement provides that the Lender may certify or determine an amount
or rate payable by the Borrower, a certificate by the Lender as to such
amount or rate shall be conclusive and binding on the Borrower in the
absence of manifest error.
12. UNDERTAKINGS
12.1 General Undertakings. The Borrower undertakes to the Lender that so
long as any sum is or may become payable under this Agreement the
Borrower will, unless the Lender otherwise agrees in writing:
(a) Notification: promptly inform the Lender of:
(i) the occurrence of any Event of Default or potential
Event of Default;
(ii) any significant litigation, arbitration or
administrative proceeding or other dispute;
(iii) any other event or circumstance which could have a
material adverse effect on the business or financial
condition or prospects of the Borrower or on the
ability of the Borrower to perform its obligations
under this Agreement;
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(b) Loan Proceeds: use the proceeds of the Loan exclusively for
the purposes specified in Clause 3.3.
13. EVENTS OF DEFAULT
13.1 Events of Default. The following events and circumstances shall be an
Event of Default:
(a) Failure to Pay: the Borrower fails to pay any sum payable
under this Agreement within three Business Days of the date on
which it is due and otherwise in accordance with the
provisions hereof, except as provided in Clause 13.4;
(b) Event of Default under other Agreements: an event of default
under the EBRD Credit Agreement and the IMB Credit Agreement
occurred;
(c) Performance of Other Obligations: the Borrower fails duly to
perform or comply with any of its obligations or undertakings
under this Agreement and in the case only of a failure which
in the reasonable opinion of the Lender is capable of remedy
and which is not a failure to pay money, the Borrower does not
remedy that failure to the Lender's satisfaction within 14
days (or such longer period as the Lender may approve), after
receipt of written notice from the Lender requiring it to do
so;
(d) Representations and Warranties: any representation or warranty
made or deemed to be made by the Borrower in or in connection
with this Agreement proves to have been incorrect or
misleading in any material respect;
(e) Insolvency Proceedings: the Borrower applies for or consents
to the appointment of any external manager, liquidator,
receiver, trustee or administrator for all or a substantial
part of its assets, or any external manager, liquidator,
receiver, trustee or administrator is appointed for the
Borrower; or the Borrower institutes (by petition,
application, answer, consent or otherwise) any proceeding for
the winding-up, insolvency, bankruptcy, administration,
reorganization, or reconstruction of the Borrower or any such
proceeding shall be instituted against the Borrower and shall
remain undismissed, undischarged or unstayed for a period of
60 days;
(f) Analogous Proceedings: any event occurs in any jurisdiction
which in the reasonable opinion of the Lender has an effect
analogous to any of the events described in paragraph (e)
above;
(g) Borrower's Business: the Borrower ceases to carry on the
business of development, ownership and operation of an oil and
gas business;
(h) Expropriation: any governmental or other authority (whether de
jure or de facto) nationalizes, compulsorily acquires,
expropriates or seizes all or any substantial part of the
business or assets of the Borrower;
(i) Enforceability of Obligations:
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(i) any law, regulation or order, or any change in any
law or regulation, does or purports to vary, suspend,
terminate or excuse performance by the Borrower of
any of its obligations under this Agreement;
(ii) this Agreement or any provision hereof ceases for any
reason to be in full force and effect or becomes
unenforceable;
(iii) the Borrower disputes the validity or enforceability
of or purports to terminate or repudiates this
Agreement;
(iv) it becomes unlawful or impossible for the Borrower to
perform any of its obligations under this Agreement
or for the Lender to exercise all or any of its
rights, powers and remedies hereunder or thereunder;
(j) Material Adverse Change: any situation occurs which gives
grounds to believe that the ability of the Borrower to perform
its obligations under this Agreement has been or will be
materially and adversely affected;
13.2 Declarations. If an Event of Default has occurred and is continuing the
Lender may, by written notice to the Borrower:
(a) Acceleration: declare the Loan, accrued interest and all other
sums payable hereunder to be, whereupon they shall become:
(i) immediately due and payable without further demand,
notice or other legal formality of any kind; or
(ii) payable immediately upon demand, which may be made by
the Lender at any time thereafter; and/or
(b) Termination: if the Loan has not been extended, declare the
Loan terminated, whereupon the obligations of the Lender shall
immediately cease.
13.3 Senior Lenders Consent. Any accelerated repayment under Clause 13.2 may
be effected only upon a prior consent of the Senior Lenders if and when
such consent is required under the Financing Agreements, unless
otherwise provided by the Financing Agreements. This Clause 13.3 shall
cease to be applicable to the extent that the EBRD Loan and the IMB
Loan are no longer outstanding.
13.4 Senior Lenders Refusal. If the Event, described in Clause 13.1 (a)
occurred because of the Senior Lenders' refusal to give a written
consent to the Borrower on repayment of the respective sum, if such
consent of the Senior Lenders was required pursuant to the Financing
Agreements, such event shall not be regarded as an Event of Default and
the following consequences will apply:
(a) The Loan: if the Borrower fails to repay the Loan, the
Repayment Date shall be postponed for an additional six
months;
(b) Interest: if the Borrower fails to repay interest on the Loan,
the payment of the respective interest shall be transferred to
the nearest Interest Payment Date; and
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(c) Other Sum: if the Borrower fails to repay any other sum under
this Agreement, the payment of such sum shall be effected as
soon as either the Senior Lenders give a written consent on
repayment of this sum or the consent of the Senior Lenders is
no longer required, then the payment shall be effected
immediately.
13.5 Non-repayment of the Loan. Non-repayment of the Loan or any part of the
Loan on January 6, 2004 shall not result in any penalties to the
Borrower.
14. INDEMNITIES
14.1 General Indemnity. The Borrower shall indemnify the Lender against all
losses, liabilities, damages, costs and expenses which the Lender may
incur as a consequence of any Event of Default or any other breach by
the Borrower of any of its obligations under this Agreement or
otherwise in connection with this Agreement (including any loss or
expense incurred in liquidating or redeploying funds acquired or
arranged to fund or maintain the Loan or any unpaid sum or in
terminating any such arrangement or any hedging arrangement in respect
of this Agreement, and any interest or fees incurred in funding any
unpaid sum).
14.2 Currency Indemnity. US Dollars shall be the currency of account and of
payment in respect of sums payable by the Borrower under this
Agreement. If an amount is received in another currency, the Borrower's
obligations under this Agreement shall be discharged only to the extent
that upon receipt of such amount the Lender may purchase US Dollars
with such other currency in accordance with normal banking procedures
by applying the Lenders' official exchange rate on the date of
conversion. If the amount in US Dollars, which may be so purchased,
after deducting any costs of exchange and any other related costs, is
less than the relevant sum payable under this Agreement, the Borrower
shall indemnify the Lender on demand against the shortfall. This
indemnity shall be an obligation of the Borrower independent of and in
addition to its other obligations under this Agreement.
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15. AMENDMENT AND WAIVER
15.1 Amendment. Any amendment of any provision of this Agreement shall only
be effective if made in writing and signed by the Lender and the
Borrower, and any waiver of any default under this Agreement shall only
be effective if made in writing and signed by the Lender. The Borrower
and the Lender hereby agree to do their best efforts to amend this
Agreement in the following instances:
(a) Invalidity to Repay the Loan: if it becomes obvious in the
course of executing this Agreement that the Borrower due to
its financial standing will be unable to repay the Loan on the
Repayment Date or such repayment will have a material adverse
effect on repayment of the EBRD Loan and the IMB Loan, the
Borrower and the Lender upon their mutual consent shall amend
this Agreement so that the Repayment Date shall be
respectively extended;
(b) Amendment of the Financing Agreements: if the Financing
Agreements shall be amended in such manner that the amended
provisions will have some material adverse effect on the
provisions of this Agreement, the Borrower and the Lender upon
their mutual consent shall respectively amend this Agreement.
15.2 Waiver. Time is of the essence of the Borrower's obligations under this
Agreement but no failure or delay by the Lender in exercising any
right, power or remedy hereunder shall impair such right, power or
remedy or operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or remedy preclude any further exercise
thereof or the exercise of any other right, power or remedy. The
rights, powers and remedies provided in this Agreement are cumulative
and do not exclude any other rights, powers and remedies provided by
law.
16. ASSIGNMENT
16.1 Assignment. The Lender shall have the unilateral right to assign its
rights under this Agreement to an affiliated entity without the prior
consent of the Borrower.
17. MISCELLANEOUS
17.1 Execution. This Agreement shall be effective as from the date of this
Agreement. This Agreement shall be executed in four originals, one
English and one Russian original for each party.
17.2 Language of Agreement. This Agreement shall be executed in English and
in Russian, with both texts having equal effect, provided, however,
that in the event of any inconsistencies between the English and the
Russian texts of the Agreement the English language version shall
prevail.
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18. NOTICES.
18.1 Delivery. Each notice, demand or other communication to be given or
made under this Agreement shall be in writing and delivered by hand, by
internationally recognized express mail courier or by fax to the
relevant party at its address or fax number set out below (or such
other address or fax number as the addressee has by not less than 7
days' prior written notice specified to the other party):
To the Lender: Harvest Natural Resources, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Houston,
Texas, 77084
United States of America
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
To the Borrower: Limited Liability Company "Geoilbent"
Post Box # 46, Gubkinsky City,
Yamal-Nenetz Autonomous
Region, 629830, Russian Federation
Fax Number: (34536) 51137
Attention: General Director
18.2 Deemed Delivery. Any notice, demand or other communication addressed to
any relevant party in accordance with Clause 17.1 shall be deemed to
have been delivered:
(a) Letter: if given or made by letter, when actually delivered to
the relevant address; and
(b) Fax: if given or made by fax, when dispatched with a fax
transmission report showing that the entire communication was
received,
provided that a communication which is received after 5:00 p.m. on a working day
or on a day which is not a full working day in the place of receipt shall be
deemed to be delivered on the next full working day in that place.
18.3 Language. Each notice or other communication under this Agreement shall
be in Russian or in English, provided, however, that in the event of
any inconsistencies between the English and the Russian texts of the
notice or other communication the English language version shall
prevail.
19. GOVERNING LAW AND JURISDICTION
19.1 Law: This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the
laws of the State of
Texas, United States of America.
19.2 Jurisdiction. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American
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Arbitration Association under its Commercial Arbitration Rules, and
judgment upon the award rendered by the Arbitrator(s) may be entered in
any Court having jurisdiction thereof. The number of arbitrators shall
be one (1). The language of the arbitration shall be the English
language. The place of arbitration shall be Houston,
Texas, United
States of America.
IN WITNESS whereof this Agreement has been executed by the parties to it on the
date stated at the beginning of this Agreement.
THE LENDER THE BORROWER
---------- ------------
SIGNED for and on behalf of SIGNED for and on behalf of
Harvest Natural Resources, Inc. Limited Liability Company "Geoilbent"
-------------------------------- --------------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------- -------------------------
-------------------------------- --------------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------- -------------------------
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SCHEDULE 1. FORM OF NOTICE OF DRAWING
From: LIMITED LIABILITY COMPANY "GEOILBENT"
To: HARVEST NATURAL RESOURCES, INC.
[DATE]
Dear Sirs,
US$2,500,000 CREDIT FACILITY: LOAN AGREEMENT DATED JUNE , 2002
We refer to the above Loan Agreement, and hereby give notice that we wish to
draw the Loan on ________ in the amount of US$2,500,000 (two million five
hundred thousand).
The Loan should be disbursed in accordance with Clause 11.1 of the Loan
Agreement.
We confirm that:
(a) the representations and warranties set out in the Loan
Agreement repeated with reference to the facts and
circumstances existing on the date of this notice, remain true
and correct;
(b) no Event of Default or potential Event of Default has occurred
which remains unwaived or unremedied or would result from the
extension of the Loan; and
(c) the proceeds of the Loan shall be used exclusively for the
purpose specified in Clause 3.3 of the Loan Agreement.
Terms defined in the Loan Agreement have the same meaning when used in this
notice.
For and on behalf of
Limited Liability Company "Geoilbent"
------------------------------------
Name:
------------------------------
Title:
-----------------------------
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Name:
------------------------------
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