Exhibit 10(II)
LIMITED CONSENT AND SECOND AMENDMENT
TO NOTE PURCHASE AND LOAN AGREEMENT
THIS LIMITED CONSENT AND SECOND AMENDMENT TO LOAN AGREEMENT is made
effective the 30th day of October, 2002, between SEVEN SEAS PETROLEUM INC., a
Cayman Islands exempted company limited by shares (the "Corporation"), and all
of the Subsidiaries of the Corporation (the "Subsidiaries") and CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Corporation has failed to make the escrow deposit required
pursuant to paragraph 7.9 of the Note Purchase and Loan Agreement between the
Corporation and the Lender dated as of July 9, 2001, as amended (the
"Agreement"), which deposit was due on October 10, 2002 (the "October Interest
Escrow Deposit");
WHEREAS, all amounts held in the interest escrow account have been pledged
to the Lender as Collateral Agent to secure the CEC Note and the Series A Notes;
WHEREAS, the failure to make the October Interest Escrow Deposit, if not
cured by October 31, 2002, would cause a Default to occur under the Agreement
giving the Lender as Collateral Agent the right to exercise its rights and
remedies under the Agreement and the Related Agreements including, without
limitation, the right to immediately receive all funds held in the interest
escrow account for application in accordance with the Collateral Sharing and
Agency Agreement; and
WHEREAS, the Corporation and the Subsidiaries have requested that the
Lender consent to the Corporation not making the October Interest Escrow Deposit
and future escrow deposits required under paragraph 7.9 of the Agreement (the
"Future Interest Escrow Deposits"), which the Lender is willing to do, subject
to the terms and conditions of this Limited Consent and Second Amendment to Note
Purchase and Loan Agreement (the "Amendment").
NOW, THEREFORE, in consideration of the mutual covenants among the parties
hereto, the funds previously advanced to the Corporation by the Lender and the
benefits realized therefrom by the Corporation and the Subsidiaries, the
Corporation, the Subsidiaries and the Lender hereby agree as follows:
1. Defined Terms. Except as otherwise defined herein, all terms defined in the
Agreement will have the same meaning herein as such terms are defined in the
Agreement. All terms defined in the recitals hereto will have the defined
meanings in this Amendment and in the Agreement as amended hereby.
2. Limited Consent. Subject to the conditions and limitations set forth in this
Amendment, the Lender hereby consents to the Corporation not making the October
Interest Escrow Deposit or the Future Interest Escrow Deposits, provided that:
(a) simultaneously with the execution hereof, the Corporation and the Lender
will issue joint instructions to the Escrow Agent to: (i) terminate the escrow
account established pursuant to the Escrow Agreement (Existing Indenture
Interest) among the Corporation, the Lender and the Escrow Agent (the "Interest
Escrow") and (ii) disburse to the Lender as Collateral Agent all funds in the
Interest Escrow; (b) the Corporation and the Subsidiaries will have commenced,
to the satisfaction of the Lender, taking all actions necessary to suspend
operations on the Sub-Thrust Test Well; (c) the Lender will have received budget
and cash sources and uses information as the Lender has reasonably requested.
Without limitation of the foregoing, the consents and agreements set forth
herein are limited precisely to the extent set forth herein and shall not be
deemed to (i) be a consent or agreement to, or waiver or modification of, any
other term or condition of the Agreement or any of the documents referred to
therein, or (ii) except as expressly set forth herein, prejudice any right or
rights which the Lender may now have or may have in the future under or in
connection with the Agreement or any of the documents referred to therein.
3. Amendment of Paragraph 7.9. Paragraph 7.9 of the Agreement is hereby deleted
in its entirety and the following paragraph 7.9 is hereby substituted therefor:
"7.9 Deposit Control Accounts. On or before November 15, 2002: (a) the
Corporation and the Subsidiaries will consolidate all their respective
deposit accounts into the deposit accounts listed on Schedule "7.9"
attached hereto (the "Deposit Control Accounts"); (b) all other
depository accounts will be closed; (c) the deposit account control
agreements covering the Deposit Control Accounts will be amended to
the extent reasonably required by the Lender; and (d) the Lender will
have received, reviewed and approved the budget of the Corporation and
the Subsidiaries for all operations and business of the Corporation
and the Subsidiaries for the four (4) month period commencing November
1, 2002, including, without limitation, an itemized estimate of all
cash sources and uses during such period (the "Operating Budget"). All
revenues and funds received by the Corporation or the Subsidiaries
from every source will be deposited into a Deposit Control Account and
all funds deposited in any of the Colombian Deposit Control Accounts
(in excess of amounts necessary to pay ongoing expenses for a period
of two (2) weeks as set forth in the Operating Budget and any
additional amounts reasonably approved by the Lender or legally
required to be maintained in Colombia) will be immediately wire
transferred to a Deposit Control Account designated in writing by the
Lender which will be the primary Deposit Control Account (the "Primary
Account"). Unless the Lender otherwise consents in writing, neither
the Corporation nor the Subsidiaries will make any disbursements or
pay any costs, expenses or other items not included in the Operating
Budget. The Corporation and each of the Subsidiaries will provide the
Lender weekly reports, commencing November 8, 2002, of: (i) all cash
receipts, cash transfers, cash disbursements and all disbursements
planned for the succeeding seven (7) days; and (ii) a comparison of
all actual receipts and disbursements to the Operating Budget."
4. Amendment of Paragraph 11.1. Paragraph 11.1 of the Agreement is hereby
deleted in its entirety and the following paragraph 11.1 is hereby substituted
therefor:
"11.1 Nonpayment; Budget Noncompliance. A default in payment when due of
any interest on or principal of the CEC Note or a default in payment
when due of any other amount payable to the Lender under the terms of
this Agreement or the Related Agreements or any payment or advances of
any material amount not included in the Operating Budget or previously
approved in writing by the Lender; or"
5. Representations, Warranties and Covenants. In order to induce the Lender to
enter into this Amendment to modify the Agreement and grant the limited consent
set forth herein, the Corporation and the Subsidiaries hereby jointly and
severally represent, warrant and covenant that:
5.1 No Default. Neither the Corporation nor any of the Subsidiaries is
materially out of compliance with any of the covenants set forth in
the Agreement or the Related Agreements and no event of Default has
occurred or is continuing.
5.2 Obligations. The Lender has fully complied with all of the Lender's
obligations under the Related Agreements. Neither the Corporation nor
any of the Subsidiaries has any claims, actions, defenses or set-offs
of any kind against the Lender.
5.3 Liens. Other than the liens, transfers and security interests created
by the Related Agreements, there are no liens, mortgages or
encumbrances in existence which affect any of the collateral pledged
to the Lender or any of the assets of any of the Subsidiaries, except
liens for current taxes not yet due and minor liens and encumbrances
which do not materially impair the operations of the Corporation and
the Subsidiaries.
5.4 Authorization. The Corporation and each of the Subsidiaries are duly
authorized to execute and deliver this Amendment and are and will
continue to be duly authorized to perform their respective obligations
under the Agreement and the Related Agreements. The Corporation and
each of the Subsidiaries have duly taken all corporate action
necessary to authorize the execution and delivery of this Amendment
and to authorize the performance of the obligations of Corporation and
each of the Subsidiaries hereunder.
5.5 No Conflicts. The execution and delivery by the Corporation and the
Subsidiaries of this Amendment, the performance by Corporation and the
Subsidiaries of their respective obligations hereunder and under the
Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby do not and will not conflict with any
provision of law, statute, rule or regulation or the articles of
incorporation and bylaws of the Corporation or the Subsidiaries, or of
any material agreement, judgment, license, order or permit applicable
to or binding upon the Corporation or the Subsidiaries, or result in
the creation of any lien, charge or encumbrance upon any assets or
properties of the Corporation or the Subsidiaries. Except for those
which have been obtained, no consent, approval, authorization or order
of any court or governmental authority or third party is required in
connection with the execution and delivery by the Corporation or any
of the Subsidiaries of this Amendment or to consummate the
transactions contemplated hereby.
5.6 Binding Effect. When duly executed and delivered, this Amendment and
the Agreement will each be a legal and binding obligation of the
Corporation and each of the Subsidiaries, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency or similar
laws of general application relating to the enforcement of creditors'
rights and by equitable principles of general application.
5.7 Deposit Control Accounts. Neither the Corporation nor any of the
Subsidiaries will hereafter create or establish any depository,
investment, savings or other similar accounts other than the Deposit
Control Accounts.
5.8 Other Agreements. The Corporation and the Subsidiaries will diligently
pursue: (a) the separation of the Operating Subsidiaries' ownership of
the oil and gas producing assets and Concession Agreements covering
such assets from the ownership of the interests, rights and
liabilities of the Operating Subsidiaries under the remaining
Concession Agreements (the "Deep Rights"); (b) the sale and
disposition of all of the capital stock of the Operating Subsidiaries
which own all of the existing producing assets on terms and conditions
acceptable to the Lender; and (c) the sale and/or farm out of the
rights, interests and liabilities of the Subsidiaries in the Deep
Rights on terms and conditions acceptable to the Lender. The
separation of the Deep Rights from the producing assets as
contemplated pursuant to this paragraph will be accomplished through
an assignment, contribution and/or sale of the Deep Rights by the
Operating Subsidiaries to one or more other Subsidiaries or through
the "spin off" of such Deep Rights to one or more other Subsidiaries
in a manner that will not impair the Lender's collateral position and
as required by Colombian law to preserve the net operating losses
relating to the Deep Rights in such other Subsidiaries, to the extent
practicable. As used in this Amendment, "Operating Subsidiaries" means
Petrolinson S.A., GHK Company Colombia and Seven Seas Petroleum
Colombia Inc.
5.9 Sub-Thrust Test Well. The Corporation and the Subsidiaries will take
all actions necessary to immediately suspend operations on the
Sub-Thrust Test Well so that operations with respect thereto will be
fully suspended and the Sub-Thrust Test Well secured on or before
November 10, 2002.
6. Conditions of Extension and Amendment. The obligation of the Lender to
perform this Amendment is subject to the continued performance by the
Corporation and the Subsidiaries of the following conditions precedent:
6.1 Related Agreements. This Amendment will have been duly executed,
acknowledged (where appropriate) and delivered to the Lender by the
Corporation and the Subsidiaries, all in form and substance
satisfactory to the Lender.
6.2 Prohibitive Orders. No order, writ or injunction of any court or
administrative agency is in effect or is being sought prohibiting the
transactions contemplated by this Amendment or the Related Agreements.
6.3 Authority. The Lender will have received certificates of corporate
resolutions and other documents reasonably required to authorize the
execution, delivery and performance of this Amendment by the
Corporation all in form and substance satisfactory to the Lender.
6.4 Information and Consents. The Corporation and the Subsidiaries will
have furnished to the Lender such financial statements, budgets and
other information as the Lender will have requested, and any consents
of third parties to the transactions contemplated by this Amendment
which may be required under any other agreements binding on the
Corporation or any of the Subsidiaries.
6.5 No Default. The representations, warranties and covenants set forth in
paragraph 5 of this Amendment will be true and correct on and as of
the date hereof and no Default will have occurred and be continuing.
7. Lender Agreements. In connection with the representations and agreements of
the Corporation and the Subsidiaries set forth herein, the Lender hereby agrees
that: (a) the Lender will apply the funds paid to the Lender from the Interest
Escrow in accordance with the Collateral Sharing Agreement; (b) the Lender will,
subject to satisfaction that its collateral position is unimpaired, approve the
spin off of the Deep Rights to separate Subsidiaries other than the Operating
Subsidiaries; and (c) subject to the Lender's obligations under the Collateral
Sharing Agreement and the other Related Agreements, the Lender will cooperate
with the Corporation in the establishment and compliance with the Corporation's
obligations as outlined in the Operating Budget.
8. Release. On execution of this Amendment, the Corporation and each of the
Subsidiaries hereby unconditionally and irrevocably release, acquit, waive and
forever discharge the Lender and its participants, subsidiaries, affiliates,
directors, officers, shareholders, employees, agents, attorneys, representatives
and each of their respective heirs, legal representatives, executors,
administrators, successors and assigns (the "Released Parties") from any and all
duties, obligations, representations, claims, actions, suits, causes of action,
demands, liabilities, losses, damages, contracts, agreements, obligations,
accounts, defenses and offsets of any kind or character whatsoever, known or
unknown, suspected or unsuspected, in contract or in tort, at law or in equity,
asserted or assertable, now existing or hereafter to accrue which the
Corporation or the Subsidiaries ever had, now have or may hereafter have against
the Released Parties, jointly or severally, for or by any reason or matter,
cause or thing whatsoever occurring prior to the date of this Amendment,
including without limitation such claims and defenses as fraud, mistake, duress
and usury which relate, in whole or in part, directly or indirectly, to (a) the
any of the transactions contemplated by the Agreement or this Amendment, (b) the
Agreement, this Amendment or any of the Related Agreements, the loan
transactions evidenced thereby or any agreements or commitments in connection
therewith, or (c) any past or present relationship of the Corporation, the
Subsidiaries or any of their affiliates with the Lender. In addition, the
Corporation and the Subsidiaries agree not to sue any of the Released Parties
regarding any of the foregoing matters.
9. Supersession. It is agreed and understood between the Corporation, the
Subsidiaries and the Lender that: (a) except to the extent the Agreement and the
Related Agreements are amended by this Amendment, the Agreement and the Related
Agreements will remain in full force and effect and unabated; (b) the Agreement
together with all amendments thereto and all Related Agreements are incorporated
herein by reference and made a part of this Amendment and the Corporation and
the Subsidiaries hereby adopt, confirm and reaffirm each and every covenant and
obligation set forth in the Agreement and each of the Related Agreements as
fully as if each of such matters were restated and set forth in this Amendment;
(c) the Agreement and the Related Agreements, as amended by this Amendment,
supersede any and all prior agreements entered into between the Corporation, the
Subsidiaries and the Lender; (d) subject to the satisfactory performance of the
terms and conditions stated in the Agreement and the Related Agreements unless
otherwise stated herein, this Amendment will be effective as of the date hereof
but will be binding on the Lender only after execution hereof by all parties
hereto; (e) the execution of this Amendment will not discharge, interrupt,
impair, abate or otherwise modify the priority or the validity of any lien or
security interest securing payment of the indebtedness evidenced and secured by
the Agreement and the Related Agreements; and (f) this Amendment is a "Related
Agreement" and all provisions of the Agreement and any of the Related Agreements
pertaining to Related Agreements apply hereto.
10. Default. The Corporation, the Subsidiaries and the Lender agree that any
breach by the Corporation of any of the terms or conditions of the Agreement as
amended by this Amendment will constitute an event of Default under the
Agreement and the Related Agreements.
11. Miscellaneous. It is further agreed as follows:
11.1 Counterparts. This Amendment may be executed in multiple counterparts,
each of which will be an original instrument, but all of which will
constitute one agreement.
11.2 Governing Law. This Amendment will be governed by and construed in
accordance the laws of the State of Oklahoma and any applicable laws
of the United States of America in all respects, including
construction, validity and performance.
11.3 Cumulative Remedies. No failure on the part of the Lender to exercise
and no delay in exercising any right hereunder or under any of the
Related Agreements will operate as a waiver thereof, nor will any
single or partial exercise by the Lender of any right hereunder
preclude any other or further right of exercise thereof or the
exercise of any other right.
11.4 No Third Party Beneficiaries. Nothing in this Amendment, the Agreement
or any of the Related Agreements, express or implied, is intended to
confer upon any person, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by
reason of this Amendment, the Agreement or any of the Related
Agreements or to constitute such person a third party beneficiary of
this Amendment, the Agreement or any of the Related Agreements.
11.5 Time. Time is of the essence of this Amendment, the Agreement and each
provision of the Related Agreements.
11.6 FINAL AGREEMENT. THIS AMENDMENT, THE AGREEMENT AND THE RELATED
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND 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.
IN WITNESS WHEREOF, the Corporation, the Subsidiaries and the Lender have
executed this Agreement as of the date first above written.
SEVEN SEAS PETROLEUM INC., a Cayman Islands
exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
(the "Corporation")
SEVEN SEAS PETROLEUM HOLDINGS INC., a
Cayman Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM TURKEY INC., a British
Columbia corporation
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS RESOURCES AUSTRALIA INC., a
British Columbia corporation
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM USA INC., a Delaware
corporation
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM AUSTRALIA INC., a
Cayman Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM PNG INC., a Cayman
Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM ARGENTINA INC., a
Cayman Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM MEDITERRANEAN
INC., a Cayman Islands exempted company limited by
shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM TURKEY, INC., a
Cayman Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
SEVEN SEAS PETROLEUM COLOMBIA INC., a
Cayman Islands exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
PETROLINSON S.A., a Panamanian corporation
By LARRY A. RAY
Larry A. Ray, President
GHK COMPANY COLOMBIA, an Oklahoma
corporation
By LARRY A. RAY
Larry A. Ray, President
GUADUAS PIPELINE COMPANY, a Cayman Islands
exempted company limited by shares
By LARRY A. RAY
Larry A. Ray, President
(the "Subsidiaries")
CHESAPEAKE ENERGY CORPORATION,
an Oklahoma corporation
By MARCUS C. ROWLAND
Marcus C. Rowland, Exective Vice President and
Chief Financial Officer
(the "Lender")