Document:

Exhibit 10.7

                              ON THE LETTERHEAD OF
                                 KAZKOMMERTSBANK

# 7179                                                                   046735
                                                                         ------
August 16, 2002

                                                           Mr. N. D. Klinchev
                                                           General Director
                                                           Karakudukmunay JSC

                                                           Mr. U. B. Khairov
                                                           Executive Director
                                                           Karakudukmunay JSC

                                                           Mr. Jonathan Wood
                                                           Financial Coordinator
                                                           Karakudukmunay JSC

                                   Gentlemen,

     Further to a telephone conversation between Ms. D. Nurmagambetova with Mr.
Jonathan Wood on August 13, 2002, and a meeting with Mr. Richard Moore on August
14, 2002, in which your company asked for confirmation and clarification on the
pledge provided as a security for its obligations to Kazkommertsbank OJSC under
the Agreement for establishing a credit line No. 250 dated May 6, 2002, please
be advised of the following:

     On May 2, 2002, the Commercial Management of Kazkommertsbank OJSC made a
resolution to finance your project to the total amount of 33,000,000 (thirty
three million) US dollars on the following terms:

o    Total financing limit amount - 33,000,000 US dollars;

o    Revolving part of the credit line - 3,000,000 US dollars;

o    Non-revolving part of the credit line - 30,000,000 US dollars;

o    Term of the credit line:

     -    on the revolving part of the credit line - 4 years, including: period
          of availability on the revolving part of the credit line - 3 years,
          term of each facility - not more that 1 year;

     -    on the non-revolving part of the credit line - 3 years, with an option
          of a prolongation for 2 years upon a mutual written agreement of the
          parties (KKM and KKB), period of availability - 1 month;

o    Interest rate on the credit line - 14% per annum;

o    Purpose of financing - refinancing of debt to Central Asian Petroleum
     (Guernsey);

o    Terms of repayment:

     -    on the revolving part of the credit line, repayment of the interest
          and the principal debt shall be effected at the expiry of each
          facility;

     -    on the non-revolving part of the Credit line, repayment of the
          interest and the principal debt shall be effected quarterly under the
          established schedule subject to the grace period on payment of the
          interest - 9 months from the date of signing the Agreement for
          establishing a credit line, and on repayment of the principal debt -
          12 months from the date of signing the Agreement for establishing a
          credit line;

<PAGE>

o    Security for the credit line:

     -    guarantee of Chaparral Resources Inc., term of execution of the
          guarantee shall be within 30 days of the date of signing the Agreement
          for establishing a credit line;

     -    shares of Karakudukmunay JSC belonging to Central Asian Petroleum
          (Guernsey) Limited, term of execution shall be within 30 days of the
          date of signing the Agreement for establishing a credit line.

          As to your written inquiry regarding prolongation of the credit line,
     with the total term of both revolving and non-revolving part of the credit
     line being 5 years. This issue has been resolved positively; the altered
     terms of the credit line will be formulated in an additional agreement to
     the Agreement for establishing a credit line No. 250 of May 6, 2002, and
     executed within the next week. Please find the altered terms below:

     -    term of the revolving part of the credit line shall be 5 years, period
          of availability - 4 years, term of each facility - not more that 1
          year;

     -    term of the non-revolving part of the credit line shall be 5 years,
          first four repayments of the principal debt of 1,000,000 US dollars
          each, the remaining ones of 2,000,000 US dollars each (to be paid
          quarterly as before);

     the other terms of the credit line remain unchanged.

          We look forward to our further fruitful cooperation and wish you and
     your company success and prosperity!

     Best regards,

     First Deputy
     Chairman of the Board                           N. A. ZhusupovaTHE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.  UNITED STATES AND U.S. PERSON ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT. 

 

CONVERTIBLE GRID PROMISSORY NOTE

(the "Note")

April 4, 2002

WHEREAS:

A.Fairchild International Corporation ("Fairchild") has entered into an agreement (the "Farm-in Agreement") with Olympic Resources (Arizona) Ltd. dated April 5, 2002 wherein Fairchild has been granted the right to earn an assignment of an interest (the "Interest") in certain oil and gas wells (the "Wells") to be drilled in California;

B.Patch Energy Inc. ("Patch") has agreed to loan to Fairchild up to US$70,000 (the "Loan") in order to fund Fairchild's obligations under the Farm-in Agreement on the terms and conditions set forth herein;

FOR VALUE RECEIVED, Fairchild hereby promises to pay to the order of Patch at 100 - 856 Homer Street, Vancouver, B.C. or at such other address as Patch may in writing advise Fairchild, the unpaid principal balance of all advances made by Patch to Fairchild under the Loan as recorded by Patch on the grid or grids attached hereto (the "Grid"), together with interest at the rate of 8% per annum calculated monthly.

The outstanding amount of the Loan together with all interest accrued thereon shall be due and payable as follows:
(a)on demand at any time following the drilling of the Wells in circumstances where Fairchild does not earn the Interest; or

(b)in circumstances where Fairchild does earn the Interest, Fairchild shall effect repayment by forwarding to Patch, as and when received, 75% of all revenues received by Fairchild from the operations of the Wells until such time as the Loan and all accrued interest is paid in full.

In circumstances where Fairchild earns the Interest, Fairchild shall, as further consideration for the making of the Loan:
(a)assign to Patch a 20% working interest in the Interest (the "20% Interest") and in this regard Fairchild shall use its reasonable best efforts to cause the 20% Interest to be transferred directly to Patch provided that, until such transfer is effected, Fairchild shall be deemed to hold the 20% Interest in trust for Patch; and

(b)grant to Patch a right of first refusal to participate as to 50% of Fairchild's interest in respect of any oil and gas exploration or production opportunities Fairchild may participate in in the future.

1.Conclusiveness of Grid.  The Grid shall, in the absence of manifest error, constitute conclusive proof of the amounts and dates of all advances and repayment of principal in respect of the Loan. 

2.Waiver.  Fairchild hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and assent to extensions of the time of payment or forbearance or other indulgence without notice.  No delay or omission of Patch in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy.  Acceptance by Patch of any payment after demand shall not be deemed a waiver of such demand.  A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.

3.Conversion.  At the election of Patch (in Patch's sole discretion) upon delivery to Fairchild of written notice (a "Conversion Notice"), all of the outstanding principal amount of this Note shall be converted into common shares in the capital of Fairchild at the lesser of: (i) US$0.04 per share; or (ii) the closing bid price of Fairchild's common shares on the OTCBB on the trading day immediately preceding the date of the Conversion Notice, less a 20% discount.

4.Delivery of Share Certificates Upon Conversion.  In the event that Patch elects to convert the outstanding principal as provided above, Fairchild shall deliver to Patch the common shares into which such amount is convertible hereunder within fourteen (14) days from the date of the applicable Conversion Notice.

5.Prepayment by Maker.  Fairchild may, only, prepay all or any part of the amount owing hereunder with notice to, and the consent of, Patch.

6.Agreements of Patch.  In the event that Patch elects to convert the outstanding principal as provided above, Patch agrees to execute such mutually acceptable documents, including a subscription agreement, as Fairchild shall reasonably request to ensure compliance with applicable laws, including U.S. federal, state and applicable Canadian securities laws.  The obligations of Fairchild to issue securities to Patch hereunder shall be contingent upon Patch's execution of such documents.

7.Applicable Law.  The provisions of this Note shall be governed by, and construed and enforced in accordance with, the substantive laws of the Province of British Columbia, excluding the body of law relating to choice of laws.

8.Time.  Time is of the essence of this Note.

IN WITNESS WHEREOF, the undersigned has executed this Note on the date written above.

FAIRCHILD INTERNATIONAL CORPORATION

/s/ Robert Grace

Per:

Authorized Signatory

GRID OF LOANS AND PAYMENTS

	

Date
	
Amount of

Advance
	
Amount of

Principal

Payment
	
Unpaid Principal

Balance
	
Entry

Made By

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