Exhibit 10.6
Agreed terms document under the joint
venture shareholders' agreement dated 14
October 2005 among Baltic Petroleum
(E&P) Limited, Siberian Energy Group Inc.
and Zauralneftegaz Limited
DATED 9th November 2005
(1) ZAURALNEFTEGAZ
LIMITED
in favour of
(2) CASPIAN FINANCE
LIMITED
DEBENTURE
COVINGTON & BURLING
REGISTERED FOREIGN LAWYERS AND SOLICITORS - LONDON
LONDON WC2R 1BH
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND
INTERPRETATION
2
2. COVENANT TO PAY
5
3. GRANT OF
SECURITY
5
4. COLLECTING
RECEIVABLES
8
5. NEGATIVE PLEDGE
AND OTHER RESTRICTIONS
8
6. FURTHER
ASSURANCE
9
7. CONTINUING
SECURITY
9
8. INSURANCE
9
9. PROPERTY
OBLIGATIONS
9
10. LEASES,
POSSESSION, CONSOLIDATION OF MORTGAGES
10
11. POWERS OF SALE,
LEASING AND ACCEPTING SURRENDERS
10
12. APPOINTMENT OF A
RECEIVER OR AN ADMINISTRATOR
10
13. POWER OF
ATTORNEY
14
14. COSTS, CHARGES
AND LIABILITIES
14
15. SET-OFF
15
16. FOREIGN
CURRENCIES
15
17. TRANSFER AND
DISCLOSURE
15
18. FORBEARANCE AND
SEVERANCE
15
19. COMMUNICATIONS
16
20. LAW AND
JURISDICTION
16
21. CONTRACTS
(RIGHTS OF THIRD PARTIES) ACT 1999
17
22. COUNTERPARTS AND
COMMENCEMENT
17
<PAGE>
THIS DEBENTURE is dated 9th November 2005
BETWEEN:
(1) ZAURALNEFTEGAZ LIMITED, a company incorporated in England and Wales
under
company number 5525360 and whose registered office is at c/o
Gilchrist
Solicitors,
18b Charles Street, London W1J 5DU,
United Kingdom
(the "CHARGOR");
and
(2) CASPIAN FINANCE LIMITED, a company incorporated in England and Wales
under
company number 5530897
and whose registered office is at c/o Salans,
Millennium
Bridge House, 2 Lambeth Hill, London EC4V 2AJ,
United Kingdom
(the
"LENDER").
BACKGROUND
(A) Pursuant to a loan agreement of even date herewith (the "LOAN
AGREEMENT") made
between the Lender and the Borrower, the Lender has agreed
to make a loan
facility available to and for the benefit of the Borrower.
(B) Pursuant to a Guarantee of even date herewith (the "GUARANTEE")
given
by the Chargor to the Lender, the Chargor has agreed to
guarantee the
Borrower's
obligations to the Lender under the Loan Agreement.
(C) The Chargor has agreed to enter into this deed to secure its
obligations to
the Lender under the Guarantee.
1. DEFINITIONS AND INTERPRETATION
1.1 In this deed, unless the context
otherwise requires:
"ASSETS"
means all of the Chargor's undertaking, property, assets,
rights
and revenues, whatever and wherever in the world, present and
future, and
includes each or any of them;
"BORROWER"
means OOO Zauralneftegaz, a limited liability company
incorporated
under the laws of the
Russian Federation under the main state
registration
number (ORGN) 1024500513950, located at 27 Lenin Street,
Kurgan, 64000,
Kurgan Oblast, Russian Federation;
"BORROWER
INTERESTS"
means all of the following: (i) the 100 per
cent.
participatory
interest of the
Chargor in the Borrower with a nominal value
of 10,000 Russian rubles that the Chargor 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
2 in more detail; (ii) all Certificates; (iii) all
agreements
entered
into in substitution or replacement for or
in addition to any of
the foregoing, and any agreement representing or evidencing such
participatory
interests;
and (iv) all book-entries and entitlements
relating to any
of the foregoing;
"BUSINESS
DAY" means a day which is not a Saturday or Sunday
or a bank
or public
holiday in England and Wales;
<PAGE>
"CERTIFICATES"
means
all certificates and instruments evidencing,
documenting or
representing the Borrower Interests, if any;
"DEFAULT
RATE" means the 2% per annum above the cost to the Lender
as
certified
by the Lender of funding the relevant amount on the London
Interbank
Market for such period or consecutive periods
as the Lender in
its sole
discretion may select;
"ENFORCEMENT
EVENT" means any event set out in clause 12.1;
"FINANCE
DOCUMENTS"
means the Loan Agreement, the Guarantee, the
Joint
Venture
Agreement,
this deed and all agreements, instruments and
other
documents delivered under
any of the foregoing or in connection therewith;
"FLOATING
CHARGE ASSETS" means those of the Chargor's Assets that are
for the time being comprised in the floating charge created by
clause
3.1(c), but only
insofar as concerns that floating charge;
"GROUP"
means the Chargor and each company which is now or in the
future
a subsidiary undertaking of the Chargor or the Chargor's
parent
undertaking (as
defined by section 258 of the Companies Act 1985);
"GUARANTEE"
means the guarantee of even date herewith given by the
Chargor
to the Lender in respect of the
Borrower's obligations under the
Loan
Agreement;
"INTELLECTUAL
PROPERTY" means all patents (including supplementary
protection
certificates), utility models, registered and unregistered
trade
marks (including
service marks), rights in passing off, copyright, database
rights,
registered
and unregistered rights in designs (including in
relation
to semi conductor products) and in
each case, any extensions and
renewals of, and
any applications for, these rights;
"INTELLECTUAL
PROPERTY RIGHTS" means the Chargor's Intellectual
Property
and all other intellectual property rights and other rights,
causes of
action, interests and assets comprised in clause 3.1(b)(vi);
"JOINT
VENTURE AGREEMENT" means the joint venture shareholders'
agreement dated
October 2005 among Baltic Petroleum (E&P) Limited, Siberian
Energy Group
Inc. and the Chargor;
"LAND"
includes freehold and leasehold, and any other estate in land
and (outside England and Wales) immovable property and in
each case all
buildings and structures upon and all things affixed to Land
(including
trade and
tenant's fixtures);
"LOAN
AGREEMENT"
means the loan agreement of even date herewith
entered into
between the Borrower and the Lender;
"PERMITTED
SECURITY" any lien arising in the ordinary course of
trading,
any retention of title rights in favour of a
supplier or other
third
party arising in the ordinary course of
business, any rights of set
off arising in the ordinary course of business
and any security interests
over
any assets acquired after the date hereof in
the ordinary course of
business
where such security
interest existed over such asset prior to its
acquisition
by the Chargor and was not created in contemplation
of the
acquisition
of that asset by the
Chargor;
"RECEIVABLES"
means, all sums of money receivable by the Chargor now
or in the future consisting of or
payable under or derived from any Assets
referred;
<PAGE>
"RECEIVER"
means every person the Lender may appoint as a receiver
and
manager under
clause 12, including any substituted receiver and manager;
"RELATED
RIGHTS" means, in relation to any Securities, all assets
deriving from
such Securities including all allotments, accretions, rights,
dividends,
interest or other property whether of a capital or income
nature,
accruing, offered, issued or deriving at any time by way of
dividend,
bonus, preference,
redemption, exchange, purchase, substitution,
conversion,
consolidation,
subdivision,
preference,
option or
otherwise
attributable
to any Securities or
incidental to any such Securities or any
Related Rights
previously described;
"SECURED
LIABILITIES"
means
all monies obligations and liabilities
whatsoever
whether for principal interest or otherwise in whatever
currency
which
may now or at any time
in the future be due owing or incurred by the
Chargor
to the Lender under or
in connection with the Finance Documents or
otherwise,
whether actual or contingent and whether alone,
severally or
jointly
as principal, guarantor, surety or
otherwise and in whatever name
or style and
whether on any current or other account or in any other manner
whatsoever;
and
"SECURITIES"
means
all shares, stocks, debentures, debenture stock,
bonds,
warrants, options, coupons or other securities and
investments of
any kind whatsoever owned by the Chargor,
including, for the avoidance of
doubts, the
Borrower Interests, (including rights to subscribe for, convert
into
or otherwise acquire the same) whether
marketable or otherwise, and
all other interests (including loan
capital) now or in the future owned by
the Chargor from time to time in any company, firm,
consortium or entity
wherever
situate.
1.2 References to clauses and schedules are to the clauses and schedules
to this
deed.
1.3 Clause headings are inserted for ease of reference only and are not
to
affect the
interpretation of this deed.
1.4 Except to the extent the context otherwise requires any reference in
this
document to "THIS DEED" and any other document referred to in
it
includes any
document expressed to be supplemental to or collateral with or
which
is entered into pursuant to or in accordance
herewith or therewith
and shall be deemed to include any instruments amending, varying,
supplementing,
novating or replacing the terms of any such
documents from
time to
time.
1.5 References to a person are to be construed to include corporations,
firms,
companies,
partnerships,
individuals,
associations,
states and
administrative
and governmental and other entities whether or not a
separate legal
entity.
1.6 References to any person are to be construed to include references
to
that
person's successors, transferees and assigns whether direct or
indirect.
1.7 References to any statutory provision are to be construed as
references
to that statutory
provision as amended supplemented, re-enacted
or replaced from time to time (whether before or after
the date of this
deed)
and are to include any orders, regulations,
instruments or other
subordinated
legislation
made under or deriving validity from that
statutory
provision.
<PAGE>
1.8 The words "OTHER" and "OTHERWISE" are not to be construed ejusdem
generis with any
foregoing words where a wider construction is possible.
1.9 The words "INCLUDING" and "IN PARTICULAR" are to be construed as
being
by way of
illustration or emphasis only and are not to be construed as,
nor
shall they take
effect as, limiting the generality of any foregoing words.
1.10 In construing this deed general words introduced by the word "OTHER"
shall
not be given a restrictive meaning by
reason of the fact that they
are preceded by words indicating a particular class of
acts, matters or
things and
general words shall not be given a restrictive meaning by
reason
of the fact that they are followed by
particular examples intended to be
embraced by the
general words.
1.11 The perpetuity period applicable to the trusts created by this deed
is
80 years.
2. COVENANT TO PAY
2.1 The Chargor hereby unconditionally and irrevocably, as primary
obligor
and not merely as surety, covenants
with the Lender that it will on demand
pay and/or
discharge the Secured Liabilities when due to the Lender.
2.2 The Chargor shall pay interest to the date of payment or discharge
(notwithstanding
any demand or any judgment obtained by
the Lender or the
liquation
or administration of or any arrangement or composition
with
creditors
by the Chargor) at the rate or rates applicable under the
agreements
or arrangements giving rise to the relevant obligations or
liabilities or,
if no such rate or rates are specified, at the Default Rate
upon
such days and upon such terms as the Lender may from
time to time
determine.
Such interest shall be compounded in
the event of it not being
punctually
paid in accordance with the usual practice of the
Lender but
without
prejudice to the right of the Lender or require
payment of such
interest.
2.3 All sums payable by the Chargor under this deed shall be paid
without
any set-off, counterclaim, withholding or deduction whatsoever unless
required
by law in which event
the Chargor will simultaneously with making
the relevant payment under this deed pay to the Lender such
additional
amount as will
result in the receipt by the Lender of the full amount which
would
otherwise have been receivable and will supply
the Lender promptly
with
evidence satisfactory
to the Lender that the Chargor has accounted to
the relevant
authority for the sum withheld or deducted.
3. GRANT OF SECURITY
3.1 By executing this deed the Chargor charges to the Lender with full
title
guarantee and as a continuing security for
the payment, performance
and discharge of all the Secured Liabilities the
following assets, both
present
and future, from time to time to the
extent owned by it or to the
extent in which
it has an interest:
(a) by way of first equitable mortgage, all of its Securities
and, if
and to the extent not
effectively assigned by clause 3.2, all Related
Rights relating to all its Securities;
<PAGE>
(b) by way of fixed charge:
(i) all Land which is now, or in the future becomes, the
property of the Chargor;
(ii) all plant
and machinery now or in the future attached to
any
Land;
(iii) all rental
and other income and all debts and claims which
are due or owing to
the Chargor now or in the future under or in
connection with any lease, agreement or licence relating to
Land;
(iv) all insurance
and assurance contracts and policies now or in
the future held by or otherwise benefiting the Chargor:
(a) which relate to Assets themselves subject to a fixed
charge in favour of the Lender; or
(b) which are now or in the future deposited by the
Chargor
with the Lender; together with all such rights and interests
as the Chargor may have in these contracts and
policies
(including the
benefit of all claims
arising and all money
payable under them);
(v) all the goodwill of the Chargor and uncalled share capital
for the time being;
(vi) all Intellectual
Property Rights present and future,
including any
Intellectual Property
to which the Chargor is not
absolutely entitled
or to which the
Chargor is jointly entitled
together with others;
(vii) the benefit
of all agreements and licences now or in the
future entered into or enjoyed by the Chargor relating to the
use
or exploitation
of any Intellectual
Property in any part of the
world;
(viii) all trade
secrets, confidential information and know how
owned or enjoyed by
the Chargor now or in the future in any part
of the world;
(ix) all of
its rights (including against third parties) and
benefits
in and to the Receivables, to the extent
that they do
not fall within any other paragraph of this clause 3.1;
(x) all other debts now or in the future owing to the Chargor
save for those arising on fluctuating accounts
with associates
(as defined in section 53(3) of the Companies Act 1989);
(xi) the benefit
of all instruments, guarantees, charges, pledges
and other rights now or in the future available to the Chargor
as
security in respect of any Asset itself subject to a fixed
charge
in favour of the Lender;
<PAGE>
(c) by way of floating charge all Assets which are not effectively
charged by
the fixed charges
detailed above, but so that the Chargor
shall not without the Lender's prior written consent:
(i) take any step referred to in clause 5.1 with respect to any
of the Floating Charge Assets; or
(ii) sell, transfer,
part with or dispose of any of the Floating
Charge Assets
except by way of sale in the ordinary course
of
business.
3.2 The Chargor with full title guarantee and as a continuing
security for
the payment, performance and discharge of the Secured
Liabilities hereby
assigns
absolutely
(in each case to the fullest extent capable of
assignment)
by way of security to
the Lender all of its present and future
rights,
title and interest in and to (to the extent that the
Chargor is
interested
therein) the Related Rights (including any rights,
title and
interest that
relate to the Borrower Interests) and all monies which at any
time
may be or become payable to it
pursuant to the terms of any contract
or licence and the proceeds of any claims,
awards and judgments which may
at any time be
receivable or received by it pursuant thereto.
3.3 The Lender may at any time crystallise any floating charge
created in
clause
3.1(c) into a fixed charge, or subsequently reconvert
it into a
floating
charge, by notice in writing given at any
time by the Lender to
the Chargor in
relation to any or all Floating Charge Assets, as the Lender
may specify in
the notice.
3.4 Subject to the rights of any prior
mortgagee, the Chargor must:
(a) deposit with the Lender for retention by it, all title deeds and
documents relating to
all Assets charged by way of fixed charge under
clause 3.1, including
insurance and assurance policies; and
(b) execute and deliver to the Lender such documents and
transfers as
the Lender
may require at any time to constitute or perfect an
equitable or
legal charge or a pledge (at the option
of the Lender)
over the Securities, including
uncertificated Securities, within any
clearing, transfer,
settlement and/or depositary system, and give any
instructions and
take any actions the Lender may require
to achieve
this.
3.5 Unless and until this deed becomes enforceable:
(a) the Chargor may continue to exercise all voting and other rights
attaching
to Securities as long
as it remains their registered owner;
and
(b) if Securities are registered in the name of the Lender's
nominee,
all voting and other
rights attached to them will be exercised by the
nominee in
accordance
with the instructions
that the Chargor issues
from time to time. In the absence of
instructions, the nominee will
refrain from exercising any of these rights.
<PAGE>
3.6 Any mortgage, fixed charge or other fixed security which the Chargor
creates in
favour of the Lender will have priority over the floating
charge
created by
clause 3.1(c) unless the Lender states otherwise on or after
its
creation.
3.7 Any debentures, mortgages or charges (fixed or floating) which the
Chargor
creates in the future
(except those in favour of the Lender) shall
be expressed to
be subject to this deed and shall rank in order of priority
behind the
charges created by this deed.
4. COLLECTING RECEIVABLES
4.1 The Chargor must collect and realise all its Receivables in the
ordinary
course of business and
immediately on receipt pay all money which
it receives in respect of them into
its Lender account with the Lender, or
into any other
account designated by the Lender, in each case on such terms
as the Lender may direct. Pending that
payment, the Chargor will hold all
money
so received upon trust for the
Lender. The Chargor may, without the
prior
written consent of the Lender, charge, factor, discount,
assign,
postpone,
subordinate
or waive its rights in
respect of any Receivable in
favour of any
other person or purport to do so.
4.2 If a credit balance on any account held by the Chargor
with the Lender
includes
proceeds of Receivables credited or
transferred to that account
the Lender shall
have an absolute discretion whether to permit or refuse to
permit
the Chargor to utilise or withdraw that credit balance and
the
Lender
may in its sole discretion at any time
transfer all or any part of
that
credit balance to any other account held by the Chargor with
the
Lender or to an
account in the Lender's own name.
4.3 If the Lender releases, waives or postpones its rights in respect of
any Receivables
for the purpose of enabling the Chargor to factor, discount
or otherwise sell them to the Lender or to a third party, the
charges
created
by this deed will in all other respects
remain in full force and
effect.
In particular, all amounts due to the Chargor
from the Lender or
the third party
and any Receivables re-assigned or due to be re-assigned to
the Chargor will
be subject to the relevant fixed charge detailed in clause
3.1(b) subject
only to any defences or rights of retention or set-off which
the Lender or
the third party may have against the Chargor.
5. NEGATIVE PLEDGE AND OTHER RESTRICTIONS
The Chargor may not, except with the prior written consent of the
Lender:
5.1 create or attempt to create any fixed or floating security of
any kind
or any trust over any of its A
