Guarantee Agreement between Siberian Energy Group Inc. and Baltic Petroleum Limited (April 28, 2005)

Summary

Siberian Energy Group Inc. (SEG), a Nevada corporation, guarantees the obligations of its Russian subsidiary, OOO Zauralneftegaz (ZNG), to Baltic Petroleum Limited (BP) under a separate loan agreement. If ZNG fails to meet its payment or other obligations, SEG must pay BP on demand and indemnify BP for any losses. The guarantee is continuing, applies regardless of changes to the loan or parties, and is governed by English law. SEG waives certain defenses and rights until all obligations are fully paid. Notices and legal proceedings are subject to the jurisdiction of English courts.

EX-10.4 5 doc5.txt Exhibit 10.4 GUARANTEE THIS GUARANTEE is made by deed on the 28 day of April 2005 BY: SIBERIAN ENERGY GROUP INC., a corporation incorporated under the laws of the - ----------------------------- State of Nevada, United States and whose principal place of business is at 275 Madison Avenue, 6th floor, New York, NY 10016 ("SEG"); IN FAVOUR OF: BALTIC PETROLEUM LIMITED, a company incorporated in England and Wales under - -------------------------- company number 05303991 and whose registered office is at 18b Charles Street London W1J 5DU, United Kingdom ( "BP"); WHEREAS: (A) By separate loan facility agreement between Lender and OOO Zauralneftegaz ("ZNG"), a Russian limited liability company and wholly owned subsidiary of SEG, of even date herewith, BP has agreed to provide certain loan facilities to ZNG (the "LOAN AGREEMENT"); and (B) SEG has agreed to guarantee the obligations of ZNG to BP under the Loan Agreement pursuant to the terms of this Guarantee. NOW THIS DEED WITNESSES and SEG hereby agrees as follows: 1. GUARANTEE AND INDEMNITY SEG irrevocably and unconditionally: 1.1 guarantees to BP punctual performance by ZNG of all its obligations under the Loan Agreement; 1.2 undertakes with BP that whenever ZNG does not pay any amount when due under or in connection with the Loan Agreement, SEG shall immediately on demand pay that amount as if it was the principal obligor; and 1.3 indemnifies BP immediately on demand against any cost, loss or liability suffered by BP if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which BP would otherwise have been entitled to recover. 2. CONTINUING GUARANTEE This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by ZNG under the Loan Agreement, regardless of any intermediate payment or discharge in whole or in part. 3. REINSTATEMENT If any payment by ZNG or any discharge given by BP (whether in respect of the obligations of ZNG or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event: (a) the liability of ZNG shall continue as if the payment, discharge, avoidance or reduction had not occurred; and (b) BP shall be entitled to recover the value or amount of that security or payment from ZNG, as if the payment, discharge, avoidance or reduction had not occurred. 4. WAIVER OF DEFENCES The obligations of SEG under this Guarantee will not be affected by an act, omission, matter or thing which, but for this clause, would reduce, release or prejudice any of its obligations under this Guarantee (without limitation and whether or not known to BP) including: (a) any time, waiver or consent granted to, or composition with, ZNG or any other person; (b) the release of ZNG or any other person under the terms of any composition or arrangement with any of its creditors or members; (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, ZNG or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of ZNG or any other person; (e) any amendment (however fundamental) or replacement of the Loan Agreement or any other document or security; (f) any unenforceability, illegality or invalidity of any obligation of any person under the Loan Agreement or any other document or security; or (g) any insolvency or similar proceedings. 5. IMMEDIATE RECOURSE SEG waives any right it may have of first requiring BP (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from SEG under this Guarantee. This waiver applies irrespective of any law or any provision of the Loan Agreement to the contrary. 6. APPROPRIATIONS Until all amounts which may be or become payable by ZNG under or in connection with the Loan Agreement have been irrevocably paid in full, BP (or any trustee or agent on its behalf) may: (a) refrain from applying or enforcing any other moneys, security or rights held or received by BP (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and SEG shall be entitled to the benefit of the same; and (b) hold in an interest-bearing suspense account any moneys received from SEG or on account of SEG's liability under this Guarantee. 7. DEFERRAL OF GUARANTORS' RIGHTS Until all amounts which may be or become payable by ZNG under or in connection with the Loan Agreement have been irrevocably paid in full, SEG shall not exercise any rights which it may have by reason of performance by it of its obligations under the Guarantee: (a) to be indemnified by ZNG; (b) to claim any contribution from any other guarantor of any of ZNG's obligations under the Loan Agreement; and/or (c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights it may have under the Loan Agreement or of any other guarantee or security taken pursuant to, or in connection with, the Loan Agreement. 8. ADDITIONAL SECURITY This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by BP. 9. NOTICES Any notice to be given pursuant to the terms of this Agreement shall be given in writing to the party due to receive such notice at the address set out below or such other address as may have been notified to the other parties in accordance with this clause. Notice shall be delivered personally or sent by first class pre-paid recorded delivery or registered post (air mail if overseas) or by facsimile transmission to the numbers and parties detailed below and shall be deemed to be given in the case of delivery personally on delivery and in the case of posting (in the absence of evidence of earlier receipt) 48 hours after posting (six days if sent by air mail) and in the case of facsimile transmission on completion of the transmission provided that the sender shall have received printed confirmation of transmission. SEG Attn: Fax: 275 Madison Avenue David Zaikin ###-###-#### 6th floor New York, NY 10016 USA BP Attn: Fax: 18b Charles Street Simon Escott +44 20 7667 6471 London W1J 5DU United Kingdom 10. THIRD PARTIES No term of this agreement shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by a third party. 11. LAW AND JURISDICTION This Guarantee shall be governed by and construed in accordance with the laws of England. Each party irrevocably agrees to submit to the exclusive jurisdiction of the courts of England and Wales over any claim or matter arising under or in connection with this Agreement. IN WITNESS whereof this Guarantee has been duly executed and delivered as a deed the day and year first above written EXECUTED AS A DEED by ) SIBERIAN ENERGY GROUP INC.: ) /s/ David Zaikin ) --------------------------- Authorised signatory David Zaikin --------------------------- Name