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EXHIBIT 10.a
EXPLORATION AGREEMENT
DINDAL BLOCK
SUB-THRUST
This Exploration Agreement ("Agreement") is hereby entered into on this the 25th
day of January, 2001, by and between GHK Company Colombia ("GHK"), Seven Seas
Petroleum Colombia, Inc. and Petrolinson S.A. (hereinafter referred to
collectively as "Farmees") and Sociedad Internacional Petrolera S.A.
("Sipetrol") and Cimarrona L.L.C. ("Cimarrona") (Sipetrol and Cimarrona are
hereinafter referred to together as "Farmors") The Farmees and the Farmors are
hereinafter sometimes referred to collectively as the "Parties" or individually
as "Party."
RECITALS
Whereas, Empresa Colombiana de Petroleos ("Ecopetrol"), Farmees and Farmors are
the current parties to the Contract covering the Dindal Block in Colombia and,
Whereas, the Parties have jointly sought the On-Top Contract relative to the
Deep Rights underlying the Dindal Block and,
Whereas, the Parties wish to see the Test Well drilled in 2001 and to otherwise
comply with obligations under the On-Top Contract, if granted, and to test the
Deep Rights and,
Whereas, the Parties realize that if the terms of the On-Top Contract are not
met, the Deep Rights could be partially relinquished to Ecopetrol, denying the
Parties any interest in such relinquished Deep Rights and,
Whereas, to preserve such Deep Rights, Farmors are granted an option to elect to
reverse the arrangement with Farmees and assume one hundred percent (100%) of
the Farmees' rights under the On-Top Contract with regard to the Deep Rights, in
exchange for an Overriding Royalty Interest in accordance with the terms stated
herein and,
Whereas, the On-Top Contract may not be granted and the Farmees may proceed to
drill a Test Well, pursuant to the terms hereof and,
Whereas, if the Farmees drill a Test Well as a Producing Well, in accordance
with the terms of this Agreement, Farmees will earn, (A) as to Sipetrol, either
(1) fifty percent (50%) of Sipetrol's
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Participating Interest in the Deep Rights or, at Sipetrol's election, (2) one
hundred percent (100%) of Sipetrol's Participating Interest in the Deep Rights,
less and except an Overriding Royalty Interest, in accordance with the terms as
stated herein and, (B) as to Cimarrona, one hundred percent (100%) of
Cimarrona's Entitlement applicable to the Test Well and the Test Well only,
until the satisfaction of the Contract Penalty applicable thereto and,
Whereas, if the Farmees fail to earn an interest as described above and Farmors
so elect, Farmees will grant the Farmors a reciprocal farmout arrangement in
accordance with the terms as stated herein.
Now, therefore, in consideration of the mutual benefits to both Farmors and
Farmees, the Parties agree as follows:
1.0 DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings given to them below:
1.1 "Agreement" shall mean this Exploration Agreement.
1.2 "Affiliate" shall mean a company, partnership or other legal entity
which controls, or is controlled by an entity which controls a Party.
"Control" in this context means the legal or beneficial ownership
directly or indirectly of fifty percent (50%) or more of the shares
conferring upon the holder the right to vote for or appoint the
directors or officers of such company, partnership or legal entity.
1.3 "Assignment" shall mean, the assignments attached hereto as Exhibits
"B1," "B2," "C," "D," "H," "I," "N," "O," and "P." Each such Assignment
shall contain language addressing the depths to be assigned in
accordance with the Earning Obligations and the other provisions
hereof. The Parties agree to use their best efforts and to perform all
reasonable endeavors and required acts in order to obtain Assignment
Approval. Each Assignor, under any of the Assignments, shall except and
reserve to itself all rights of usage, ingress and egress reasonable,
necessary or convenient for the full enjoyment of all rights reserved
or retained. Should an Assignment be fully executed by the
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appropriate parties, but not approved by Ecopetrol, the executing
parties shall treat the Assignment as effective, as among themselves,
notwithstanding Ecopetrol's refusal to approve such Assignment and the
executing parties shall replicate investments, costs, deductions,
revenue sharing, profits, taxes, etc. as if Ecopetrol approved such
Assignment.
1.4 "Assignment Approval" shall mean any and all necessary or useful formal
Assignment approvals or authorizations given by the Government.
1.5 "Cambao Fault" shall mean that certain fault believed to underlie the
Contract Area below the stratigraphic equivalent of the deepest
producing formation in the Guaduas Field.
1.6 "Confidential Information" shall mean any and all information acquired,
owned, or held, under the terms of the Operating Agreement.
1.7 "Contract" shall mean the Dindal Association Contract for petroleum
exploration, dated January 22, 1993, as amended.
1.8 "Contract Area" shall mean the area and the Deep Rights covered under
the Contract and/or the On-Top Contract.
1.9 "Contract Penalty" shall mean with respect to the Obligatory Well(s)
(being the Test Well and the second Obligatory Well) the penalty
provided for an Exploration Well in the Operating Agreement, except the
one hundred percent (100%) penalty in Article 7.5(A)(5) shall be
increased to five hundred percent (500%) and the totality of the
penalties associated with each such operation(s) shall be satisfied
from the revenues attributable to that specific well bore for which the
penalty or penalties apply. (For the avoidance of doubt, only revenues
generated from the Test Well and the Test Well only shall be applied to
satisfy the penalty associated with the drilling of the Test Well.
Similarly, only the revenues from the second Obligatory Well and the
second Obligatory Well only shall be applied to satisfy the penalty
associated with the drilling of the Second Obligatory Well.) Operations
which are not associated with the Obligatory Well(s) shall be conducted
in accordance with the Operating Agreement.
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1.10. "Deep Rights" shall mean all depths found below the stratigraphic
equivalent of the deepest producing depth in the Guaduas Field
underlying the Contract and/or the On-Top Contract.
1.11 "Dindal Block" shall mean the lands and depths covered by the Contract.
1.12 "Earning Obligations" shall mean Farmees' (or in the event of a
reciprocal election by the Farmors, shall mean the Farmors') payment of
any and all costs associated with the drilling, logging, testing, and
abandonment (in the event that the Test Well is not a Producing Well)
of the Test Well. Such costs shall include, without limitation, all
pre-spud preparatory operations, planning, permitting, environmental
surveys and studies, site preparation, security, mobilization, and
demobilization of the drilling rig and ancillary equipment, drilling,
sidetracking, fishing, suspending, testing, coring and electric
wireline operations, standby rig costs incurred while the decision to
test the well is being made, or plugging and abandoning. Farmees (or in
the event of a reciprocal election by the Farmors, shall mean Farmors)
must: (i) spud and complete the Test Well as set forth in Section 2.3
hereof; (ii) either (a) drill and complete the Test Well as a Producing
Well at a depth which is at least as deep as the shallower of fifteen
thousand (15,000) feet or a depth of three thousand (3,000) feet below
the Cambao Fault, to earn an Assignment of those depths below the
stratigraphic equivalent of the deepest producing depth in the Guaduas
Field down to the deepest depth covered in the Contract or On-Top
Contract, or (b) drill and complete the Test Well as a Producing Well
at a depth which is below the stratigraphic equivalent of the deepest
producing formation in the Guaduas Field, but shallower than either
fifteen thousand (15,000) or three thousand (3,000) feet below the
Cambao Fault, to earn an Assignment of only such depths below the
stratigraphic equivalent of the deepest producing depth in the Guaduas
Field down to the stratigraphic equivalent of one hundred (100) feet
below the deepest producing perforation in such Test Well; and (iii)
furnish Farmors with all data and information required by Exhibit "F."
In addition, earning requires strict adherence to the other terms and
conditions of this Agreement.
1.13 "Effective Date" shall mean the date first written above.
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1.14 "Government" shall mean, according to the relevant context, the
government of the Republic of Colombia and Empresa Colombiana de
Petroleos, also known as "Ecopetrol", as well as any instrumentality
thereof or enterprise controlled by either of them.
1.15 "Objective Depth" shall, subject to Section 1.12(ii) hereof, mean the
drilling of a Test Well to the shallower of fifteen thousand (15,000)
feet or a depth of three thousand (3,000) feet below the Cambao Fault.
1.16 "Obligatory Well(s)" shall mean the obligatory well(s) under the
On-Top Contract.
1.17 "On-Top Assignment" shall mean the transfer from the Farmees to
Sipetrol of its Overriding Royalty Interest, and to Cimarrona of a
working interest subject to the Contract Penalty for production from
the Test Well and the Test Well only, each as described in Exhibits "B1
and B2," attached hereto and by reference thereto made a part hereof.
In the event Sipetrol exercises its right to convert its Overriding
Royalty Interest into a Participating Interest as provided herein,
Sipetrol and Farmees shall use Exhibit "A" to Exhibit "B1" for such
purpose. Should Farmees fail to satisfy any of the Earning Obligations,
the Assignments described in Exhibits "N" and "O," attached hereto and
by reference thereto and made a part hereof, shall be applicable.
Should Farmors fail to satisfy any of the Earning Obligations, the
Assignment described in Exhibit "P," attached thereto and made a part
hereof, shall be applicable.
1.18 "On-Top Contract" shall mean an Association Contract to be entered into
between the Farmees and Ecopetrol. This Association Contract shall at a
minimum cover the Deep Rights under the area covered by the Dindal
Contract. This Association Contract is further described as the "Deep
Exploration Association Contract" in the attached Exhibit "A."
1.19 "On-Top Contract Area" shall mean the contract area covered by the
On-Top Contract.
1.20 "Operating Agreement" shall mean the Dindal Joint Operating Agreement
dated August 1, 1994, as amended by the terms hereof.
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1.21 "Overriding Royalty Interest" shall mean, if Sipetrol is the recipient,
a four point eight six one one five percent (4.86115%) of 8/8ths
overriding royalty interest in all Hydrocarbons, as defined in the
Contract or the On-Top Contract, produced from the Contract Area or the
On-top Contract Area, as applicable. If Farmees are the recipient, the
Overriding Royalty Interest percentage shall be eight point five two
five four one percent (8.52541%). Any such Overriding Royalty Interest
shall not be proportionately reduced for any reason whatsoever, except
by a Government right to back-in, convert or assume a Participation
Interest or working interest, pursuant to the Contract or On-Top
Contract, as applicable.
1.22 "Participating Interest" shall mean, as applicable, the undivided
working interest in the rights and obligations of a Party in and under
the Contract, the Contract Area and the Operating Agreement or, as the
context requires, under the On-Top Contract and the On-Top Contact
Area, expressed as a percentage.
1.23 "Producing Well" shall mean a Test Well that proves to be capable,
during testing operations, of producing at least that amount of
Hydrocarbons sufficient to generate one thousand one hundred and
seventy five U.S. dollars ($1,175) per day of revenue.
1.24 "Test Well" shall mean an exploratory well (or permitted substitute
well(s)) that is designed to be drilled to the Objective Depth. The
Test Well may be drilled in a legal location selected by the Farmees
(or in the event of a reciprocal election by the Farmors, the Farmors).
"Test Well" shall also include any substitute well drilled pursuant to
Section 3.6.
All terms which are used in this Agreement and which are also defined in the
Contract or the Operating Agreement shall have the same meaning as expressed in
the Contract or Operating Agreement unless otherwise defined herein.
2.0 ISSUANCE OF THE ON TOP CONTRACT
2.1 The Parties shall, upon the execution of this Agreement, execute and
transmit to Ecopetrol the letter attached hereto as Exhibit "A,"
requesting that the On-Top Contract be granted solely in the name of
Farmees. Farmees shall have the exclusive authority to
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negotiate the terms of and execute the On-Top Contract, assuming all
costs, expenses, obligations, and liabilities associated therewith;
provided that the terms of the On-Top Contract do not materially vary
from the terms set forth in Exhibit "M," attached hereto, except that
the On-Top Contract shall not (1) name Sipetrol or Cimarrona as
parties, (2) shall not impose any liabilities on Sipetrol or Cimarrona
whatsoever and (3) contain any bonding or security requirement. Any
other material variance between the On-Top Contract and the terms of
Exhibit "M" shall require the approval of the Farmors prior to the
execution of the On-Top Contract.
2.2 In the event the On-Top Contract becomes effective, then Farmees shall,
simultaneously with the execution of the On-Top Contract, execute and
deliver to Sipetrol its On-Top Assignment using Exhibit "B1" and shall,
upon the Farmees completing the Earning Obligations, execute and
deliver to Cimarrona its On-Top Assignment using Exhibit "B2".
2.3 Farmees shall have twelve (12) months from the effective date of the
On-Top Contract to spud the Test Well and up until September 30, 2002
to complete the Earning Obligations.
2.4 Should the Farmees timely complete the Earning Obligations, Sipetrol
shall have the right to convert its Overriding Royalty Interest into a
Participation Interest equal to one half of its original Participation
Interest (an undivided Participation Interest of sixteen point four
five percent (16.45%). Sipetrol shall have the option to exercise this
conversion right within thirty (30) days after it is in possession of
all data and information described in Exhibit "F" and the conversion
shall be effective the first (1st) day of the month in which Sipetrol
exercises such conversion right. The exercise of such option shall
constitute Sipetrol's agreement to pay its proportionate part of all
completion costs (except perforation, rig and other costs associated
with actual testing, if a production test is utilized for the purpose
of determining if the well is a Producing Well), equipping costs, and
other costs associated with producing the well. Farmees shall send a
notice to Farmors informing Farmors that all information described in
Exhibit "F" has been sent to Farmees.
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2.5 Failure to Earn by the Farmees
(A) In the event that the On-Top Contract is issued and Farmees fail to
spud the Test Well under the On-Top Contract in a timely manner or fail
to complete the Earning Obligations by September 30, 2002, then
Farmors, at their exclusive election and as the sole consequence of
such failure, may exercise an option to (i) in the case of Sipetrol,
terminate its Overriding Royalty Interest and (ii) in the case of
Cimarrona, accept an assignment of a Participating Interest, in
exchange for one hundred percent (100%) of the Participating Interest
under the On-Top Contract being transferred to the Farmors, subject to
Farmees' Overriding Royalty Interest. In the event the Farmors so
elect, the parties shall use the form of assignment attached hereto as
Exhibit "H" to make this transfer effective and shall execute such
assignment within two (2) days of being requested to do so. Such
assignment shall be submitted to the Government for approval. Farmors
shall thereafter assume all costs, expenses, obligations and
liabilities associated with the On-Top Contract.
(B) In the event that the Farmors elect to receive the assignments as
provided in paragraph 2.5(A) above, the Farmors shall appoint a new
operator to assume operations, under the On-Top Contract only,
notwithstanding any provision contrary thereto contained in the
Operating Agreement. The transfer of operations shall be subject to
Government approval. Should such Government approval not be granted,
all operations shall be subcontracted to the operator designed by the
Farmors and the subcontracted operator shall assume all operations,
under the On-Top Contract only, without any involvement or interference
by the Farmees, except as necessary to comply with the requirements of
the On-Top Contract. In addition, Farmors shall be entitled to seek an
appropriate extension of the term of the On-Top Contract and such
requested extension shall be supported by Farmees.
(C) Should the Farmors exercise the option as described in paragraph
2.5(A) above and satisfy the Earning Obligations of this Agreement,
Farmees shall have an option to convert their Overriding Royalty
Interest into one half of their original Participating Interest, or
into an undivided Participating Interest of a twenty eight point eight
(28.85%)
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Participating Interest in the On-Top Contract, as described in Exhibit
"I." Farmees shall have the option to exercise this conversion right
within thirty (30) days after they are in possession of all data and
information described in Exhibit "F" and the conversion shall be
effective the first (1st ) day of the month in which Farmees exercise
such conversion right. Farmors shall send a notice to Farmees informing
Farmees that all information described in Exhibit "F" has been sent to
Farmees.
(D) In the event that the Farmees drill the Test Well, but fail to
complete any of the Earning Obligations in a timely manner, then, as an
alternative to the assignment described in Section 2.5 (A) above, the
Farmors shall be entitled to, at their election, to the Assignments
described in Exhibits "N" and "O." Likewise, if the Farmors drill the
Test Well as described in Section 2.5 (A) above, but fail to complete
any of the Earning Obligations, then, as an alternative to the
assignment described in Section 2.5 (A) and (C) above, the Farmees
shall be entitled to, at their election, to the Assignment described in
Exhibit "P."
2.6 The Second Obligatory Well
In the event any of the Parties owning or entitled to own a
Participating Interest in the Deep Rights elects to enter into the
second phase of the On-Top Contract and a second Obligatory Well is
required, then each other Party shall elect whether or not such other
Party will participate in the said second well. Such election must be
made within the earlier of thirty (30) days prior to the commencement
of the second phase of the On-Top Contract or thirty (30) days from
such Party's receipt of all the information listed under Exhibit "F."
In the event all information listed under Exhibit "F" has not been
received prior to the commencement of the second phase of the On-Top
Contract, Farmees shall seek an extension from Ecopetrol for the
commencement of the second phase. If a Party fails to make the election
in a timely manner, then it shall be deemed to have elected not to
participate in the second Obligatory Well. Any Party that elects not to
participate in the second Obligatory Well shall be subject to the
Contract Penalty. Any Party electing to participate in the second
Obligatory Well and the second phase of the On-Top Contract (and not
yet owning a Participating Interest in the Deep Rights) must take the
necessary
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steps under this Agreement to convert its Overriding Royalty Interest
to a Participating Interest.
2.7 Undertaking
Each Party undertakes that neither it nor any of its Affiliates shall
submit any offers covering lands to third parties within the original
Dindal Contract Area (as described on Exhibit "E") either alone or with
any third parties, except pursuant to the terms of this Agreement. No
Party or any of its Affiliates shall enter into any other agreement
with any third party pursuant to which such Party or Affiliate may
acquire from such third party any such interest in the original Dindal
Contract Area. Subject to acceptance by the other Parties and without
prejudice to any other remedies which aggrieved Parties may have, if
any Party or its Affiliates acquires such an interest in violation of
this undertaking, such Party shall forthwith notify the other Parties
and, upon request, assign or cause to be assigned on a pro rata basis
all of the interest so acquired to the other Parties for the same
consideration paid by such Party or its Affiliate to the entity from
whom such interest was acquired. This undertaking shall remain binding
upon all Parties notwithstanding such termination, assignment, or
withdrawal for a period of three (3) years after execution of this
Agreement.
3.0 FAILURE TO SECURE AN ON-TOP CONTRACT
In the event the On-Top Contract is not granted, Farmees shall have the
right to earn certain of Farmors' Participating Interests in the Deep
Rights, pursuant to the following terms and conditions:
3.1 Farmees shall have the right to commence, prior to January 1, 2002, the
drilling of the Test Well as provided herein, even though the On-Top
Contract is not granted. Subject to and after performance of the other
terms and conditions of this Agreement, including without limitation,
Farmees' performance of and payment for all Earning Obligations Farmors
agree to execute the assignment attached hereto as Exhibit "C," under
which (A) Cimarrona shall assign to Farmees all of its Entitlement (as
that term is defined in the Operating Agreement) produced from the Test
Well, and such Test Well only, until the
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Contract Penalty has been recovered by Farmees, (after the Contract
Penalty has been recovered by the Farmees, Cimarrona shall receive its
full Entitlement as if it had participated in said Test Well) and (B)
Sipetrol shall assign to Farmees either, at Sipetrol's sole election,
(i) an undivided fifty percent (50%) of all of its Participating
Interest in the Deep Rights, or (ii) all of its Participating Interest
in the Deep Rights subject to its Overriding Royalty Interest therein.
For the avoidance of doubt, except as expressly provided herein, the
Parties agree that Article 7 of the Operating Agreement shall not apply
to the drilling and completing of the Test Well and the second
Obligatory Well, as defined in Section 2.6, or any Substitute Well(s).
3.2 The Assignment shall be made thirty (30) days after Farmors are in
possession of all data and information described in Exhibit "F."
Farmors shall make a formal request necessary in order to obtain
Assignment Approval. The exercise of such option shall constitute
Sipetrol's agreement to pay its proportionate part of all completion
costs (except perforation, rig and other costs associated with actual
testing, if a production test is utilized for the purpose of
determining if the well is a Producing Well), equipping costs, and
other costs associated with producing the well. Farmors shall not be
obligated to make any Assignment hereunder unless the Earning
Obligations have been fully satisfied.
3.3 Should Farmees fail to timely spud the Test Well or complete the
Earning Obligations by September 30, 2002, Farmees shall, as the sole
consequence of such failure, lose all rights to earn any interest in
Farmors' Participation Interest, under this Agreement, and Section 3.4
shall be applicable.
3.4 Reciprocal Earning Rights
Should Farmees fail to timely spud the Test Well or complete the
Earning Obligations by September 30, 2002, Farmors shall have the right
to acquire a reciprocal farmout arrangement. If the Earning Obligations
are fulfilled by Farmors, Farmees shall execute the Assignment attached
hereto as Exhibit "D." In the event that the Farmors elect to exercise
such right to acquire such reciprocal farm-in right, the Farmors shall
appoint a new operator to assume operations under the Contract for all
Deep Right operations, notwithstanding any provision contrary thereto
contained in the Operating Agreement.
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The transfer of operatorship shall be subject to Government approval.
Should such Government approval not be granted, GHK (or the current
operator at the time) shall subcontract all operations to the operator
designed by the Farmors and the subcontracted operator shall assume all
operations under the Contract without any involvement or interference
by the Farmees, except as necessary to comply with the requirements of
the Contract.
3.5 Operating Agreement
The existing operating agreement between the parties (as amended by the
terms hereof) shall cover and be applicable to the Contract Area.
3.6 Substitute Wells
If (1) the Test Well is drilled to Objective Depth, in accordance with
the terms hereof and is completed as a dry hole, or (2) prior to or
after reaching Objective Depth in the Test Well, Farmee experiences
mechanical failure resulting in the permanent loss of hole at the point
where the mechanical failure occurs or Farmee is otherwise unable to
complete the Test Well, or (3) prior to reaching Objective Depth in the
Test Well, Farmee encounters heaving shale, domal formations,
excessively high pressure water sands, cavity or other similar
formations where returns are lost or other impenetrable formations
through which Farmee is unable to drill after diligent effort by
appropriate and customary methods, or (4) the Test Well is completed at
a depth shallower than the Objective Depth, then in any of such events,
Farmee may drill successive substitute wells, in lieu of the Test Well,
at locations of Farmee's choice upon the same terms and conditions as
for the applicable well, provided that the first such substitute well
shall be commenced within ninety (90) days after ceasing operation in
the applicable well and each successive substitute well shall be
commenced within ninety (90) days after ceasing operation in the
preceding substitute well. Unless otherwise specifically provided for
herein, the term "Test Well" as used in this Agreement shall also
include a well drilled pursuant to this clause. Should the Farmors
exercise their reciprocal farm-in rights, the Farmees shall have the
full benefit of this paragraph.
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4.0 WELL INFORMATION
While conducting operations upon the Contract Area, Farmee shall comply
with all the drilling, testing, and completion requirements and
promptly furnish all the information listed on Exhibit "F" attached
hereto and by reference made a part hereof. Should the Farmors exercise
their reciprocal farm-in rights, the Farmees shall have the full
benefit of this paragraph.
5.0 CONDUCT OF OPERATIONS
5.1 All operations by reason of this Agreement, (all such operations being
hereinafter called "operations hereunder"), shall be at the sole cost,
risk, liability and expense and under the exclusive control of the
acting party.
5.2 In the conduct of operations hereunder, the acting party shall employ
such practices as are consistent with prudent and effective geological
and engineering principles and oil field safety in accordance with the
standards of a reasonably prudent operator acting under the same and
similar circumstances.
5.3 The acting party shall obtain and pay for all permits and licenses, if
any, required for conducting operations hereunder, and shall strictly
comply with all applicable laws and ordinances and all applicable
governmental rules, regulations and orders in connection with
qualifying for and conducting operations hereunder, including without
limitation those pertaining to ecology and the environment (as all of
same have been or may hereafter be amended).
5.4 The acting party agrees to obtain all necessary authorizations from the
surface owner(s) and other interest owners, if any, for ingress to and
egress from the well location prior to conducting any operations on
said leases. The acting party agrees to settle surface damages and
clean up and restore the premises as nearly as possible to its original
condition.
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5.5 In the event any well is completed as a dry hole, the acting party
shall comply with all applicable laws, rules and regulations and the
provisions of the Contract and the On-Top Contract concerning plugging
and abandoning of well(s).
6.0 REPRESENTATIONS
Each of the Parties hereby represents to each other that:
6.1 Each Party is a corporate entity which has been duly formed and
currently exists with the full power and authority to execute and
deliver this Agreement and the Assignments; and
6.2 The transactions contemplated by this Agreement will not violate or be
in conflict with: (i) any provision of its charter, articles of
incorporation, or other organizational agreement (as the case may be);
(ii) any present law, agreement, indenture, contract, or instrument by
which it or its Affiliates are bound; and(iii) any present judgment,
order or decree applicable to it or its Affiliates; and
6.3 The Contract is valid and in full force and effect and, to the extent
subject to transfer to another Party hereunder, its Participating
Interest and the Hydrocarbons derived therefrom will not upon such
transfer be subject to any contractual obligations to third parties,
liens, pledges, burdens or encumbrances other than those contained in
or created under the Contract; and
6.4 To the best of its knowledge, all the obligations contained in the
Contract requiring performance on or before the Effective Date have
been fully performed; and
6.5 The Participating Interest of Farmors in the Contract immediately prior
to the Effective Date is thirty-two point nine percent (32.9%) for
Sociedad Internacional Petrolera and nine point four percent (9.4%) for
Cimarrona L.L.C.; and the Participating Interest of Farmees in the
Contract immediately prior to the Effective Date is ten point four nine
four four percent (10.944%) for GHK Company Colombia, forty point seven
five six percent (40.756%) for Seven Seas Petroleum Colombia, Inc. and
six percent (6%) for Petrolinson S.A.; and
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6.6 To the best of its knowledge, there has been no claim, judgement or
award given or made by any court, tribunal or governmental agency which
relates to its Participating Interest, or connected with the conduct of
operations and which would materially affect its Participating
Interest.
7.0 INDEMNITY
IN CONNECTION WITH THEIR RESPECTIVE OPERATIONS PERFORMED HEREUNDER,
FARMEES AND FARMORS AGREE TO DEFEND, INDEMNIFY AND HOLD THE OTHERS,
THEIR SUBSIDIARIES AND AFFILIATE COMPANIES, THEIR AGENTS, EMPLOYEES,
DIRECTORS, OFFICERS, SERVANTS AND INSURERS, HARMLESS FROM AND AGAINST
ANY AND ALL LOSSES, CLAIMS, DEMANDS, LIABILITIES OR CAUSES OF ACTION OF
EVERY KIND AND CHARACTER, INCLUDING BUT NOT LIMITED TO GOVERNMENTAL
AND/OR ENVIRONMENTAL CLAIMS, INCURRED OR ARISING FROM OR AS A RESULT OF
THEIR RESPECTIVE OPERATIONS HEREUNDER INCLUDING ANY LOSS, CLAIM, DEMAND
OR LIABILITY OR CAUSES OF ACTION IN FAVOR OF ANY PERSON OR PARTY, FOR
INJURY TO OR ILLNESS OR DEATH OF ANY OF THEIR RESPECTIVE EMPLOYEES OR
ANY EMPLOYEE OF THEIR RESPECTIVE SUBCONTRACTORS, SERVICE COMPANIES, OR
ANY OTHER PERSON HIRED BY THEM, WHICH INJURY, ILLNESS OR DEATH ARISES
OUT OF OR IS INCIDENT TO THEIR RESPECTIVE OPERATIONS HEREUNDER, AND
REGARDLESS OF THE CAUSE OF SUCH INJURY, ILLNESS OR DEATH, EVEN CAUSED
IN WHOLE OR IN PART BY A PRE-EXISTING DEFECT. EACH SHALL FULLY DEFEND
ANY SUCH CLAIM, DEMAND OR SUIT AT THEIR SOLE EXPENSE, EVEN IF THE SAME
IS GROUNDLESS.
8.0 INSURANCE
Farmees agree to carry and maintain or will cause to be carried and
maintained with an insurance company or companies authorized to do
business in all areas of operation of this Agreement insurance coverage
for its operations as set forth on Exhibit "G" hereto. Within thirty
(30) days prior to the spudding of the Test Well, Farmees shall provide
EXPLORATION AGREEMENT -- Page 15 of 22
16
Farmors with a certificate of insurance, shall update the certificate
of insurance when requested to do so by Farmors and shall name the
Farmors as additional named co-insured. Should the Farmors exercise
their reciprocal farm-in rights, the Farmees shall have the full
benefit of this paragraph.
9.0 FORCE MAJEURE
If Farmees are rendered unable, wholly or in part, by force majeure to
carry out its obligations under this Agreement, other than any
obligation to make money payments, Farmees shall give to Farmors prompt
written notice of the force majeure with reasonably full particulars
concerning it; thereupon, Farmees' obligations, so far as they are
affected by the force majeure, shall be suspended only after the
existence of the condition of force majeure has been accepted by
Ecopetrol under the Contract or the On Top Contract, as may be
applicable. Such suspension shall last as long as Ecopetrol continues
to accept the existence of the force majeure conditions under the
Contract or On Top Contract, as applicable. Farmees shall promptly
commence and continue diligent efforts to remedy such force majeure
with all reasonable dispatch as quickly as possible. The requirement
that any force majeure shall be remedied with all reasonable dispatch
shall not require the settlement of strikes, lockouts, or other labor
difficulty by Farmees, contrary to Farmees' wishes; how all such
difficulties shall be handled shall be entirely within Farmees'
discretion. The term "force majeure" as here employed shall have the
same meaning as that term is defined in the Contract or the On Top
Contract as may be applicable. Should the Farmors exercise their
reciprocal farm-in rights, the Farmors shall have the full benefit of
the rights granted to Farmees under this paragraph and the Farmees
shall have the full benefit of the rights granted to the Farmors in the
preceding sentences of this paragraph.
10.0 RELATIONSHIP OF THE PARTIES
In the conduct of operations hereunder Farmees act at their own risk.
Farmees are not acting as Farmors' agent, representative, contractor,
or partner, nor are operations hereunder a joint enterprise or mining
partnership between Farmees or Farmors, but Farmees shall conduct all
operations hereunder as an independent contractor, and
EXPLORATION AGREEMENT -- Page 16 of 22
17
Farmors shall not be liable in any way for any expenses, debts, demands
or claims incurred by or against Farmees in connection with operations
hereunder. The duties, obligations and liabilities of the parties
hereto shall be several and not joint or collective, and nothing
contained in this Agreement or any assignment resulting therefrom shall
be construed as creating an association, trust, partnership or joint
venture of any kind. Should the Farmors exercise their reciprocal
farm-in rights, the Farmees shall have the full benefit of this
paragraph.
11.0 PROHIBITION AGAINST ASSIGNMENT
Neither Farmees nor Farmors shall assign or otherwise transfer or
dispose of all or any portion of their rights, titles or interests
under relating to this Agreement without first securing the written
consent of the other, which consent shall not be unreasonably withheld.
12.0 CONFIDENTIALITY
Confidential Information shall be subject to the terms stated in
Article 15 of the Operating Agreement which are incorporated herein by
reference.
13.0 AMENDMENTS TO THE OPERATING AGREEMENTS
Simultaneous with the execution of this Agreement, the Parties shall
enter into the Amendment to the Operating Agreements attached hereto as
Exhibit "J."
14.0 LA DORADA PIPELINE PROJECT
Simultaneous with the execution of this Agreement, the Parties shall
enter into the Agreement for the La Dorada Pipeline and Guaduas Field
Production Facilities attached hereto as Exhibit "K" for the purposes
of governing their relationship relating to the construction thereof.
In addition, each party shall demonstrate to the reasonable
satisfaction of all other parties that it has fully created and funded
its respective Escrow Agreement attached to the said Exhibit "K."
EXPLORATION AGREEMENT -- Page 17 of 22
18
15.0 STILLWATER BANK LOAN COMMITMENT
Simultaneous with the execution of this Agreement, Farmees have
furnished to the Farmors the loan commitment attached hereto as Exhibit
"L," together with the written approval by the appropriate Board of
Directors. In addition, Farmees have furnished to Farmors proof
satisfactory to Farmors that the said loan commitment has been publicly
disclosed prior to the execution of this Agreement.
16.0 ACCOUNTING PROCEDURE FOR THE CONTRACT PENALTY
The terms of the Article 7 of the Operating Agreement and the
Accounting Procedure attached to the Operating Agreement shall be used
for the purpose of tracking and determining the point in time when the
Farmees have recovered the Contract Penalty. When calculating expenses
under this Clause, only reasonable and necessary expenses shall be
included in determining the amount of the Contract Penalty to be
recovered. For the avoidance of doubt, interest charges related to
expenses and liabilities incurred for the Test Well and/or the Earning
Obligations shall not be included in the calculation for the payout of
the Contract Penalty. After production has commenced from the Test
Well, the Operator shall send to each Party which is subject to a
Contract Penalty a summary of the payout status of these accounts on a
quarterly basis.
17.0 GOVERNING LAW AND ARBITRATION
17.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, USA without regard to any conflict of
laws rules or principles which would apply the law of another
jurisdiction.
17.2 Any and all disputes, controversies, claims or differences between the
Parties in connection with this Agreement, or relating to this
Agreement, or the existence, construction, validity, interpretation or
meaning, performance, non-performance, enforcement, operation, breach,
continuance or termination of this Agreement which cannot be resolved
amicably by the Parties through prompt good faith negotiations, shall
be submitted to and finally resolved through an arbitration proceeding
in Houston, Texas but otherwise in accordance with the Arbitration
Provision of the Operating Agreement.
EXPLORATION AGREEMENT -- Page 18 of 22
19
18.0 NOTICES
Except as otherwise specifically provided, all notices authorized or
required between the Parties by any of the provisions of this
Agreement, shall be in writing, in English and delivered in person or
by courier service or by any electronic means of transmitting written
communications and addressed to such Parties as designated below. Oral
communication does not constitute notice for purposes of this
Agreement, and telephone numbers for the Parties are listed below as a
matter of convenience only. The originating notice given under any
provision of this Agreement shall be deemed delivered only when
received by the Party to whom such notice is directed, and the time for
such Party to deliver any notice in response to such originating notice
shall run from the date the originating notice is received. The second
or any responsive notice shall be deemed delivered when received.
"Received" for purposes of this Article 18 shall mean actual delivery
of the notice to a responsible individual at the address of the Party
to be notified as provided herein. Each Party shall have the right to
change its address at any time and/or designate that copies of all such
notices be directed to another person at another address, by giving
written notice thereof to all other Parties.
FOR FARMORS
Sociedad Internacional Petrolera S.A. Cimarrona L.L.C.
Attention: Rodolfo Cortes Attention: Robert L. Cox Jr.
Email: rcortes@sipetrol.com.com Email: bcox@mtvassociates.com
Fax: 57 (1) 621-6988 Fax: (405) 329-5595
Calle 93 B, No. 17-25/49 3600 West Main, Suite 150
Oficina 410, Chico Norman, OK 73073-4636
Santafe de Bogota, D.C.
Colombia
FOR FARMEES
GHK Company Colombia
Seven Seas Petroleum Colombia Inc.
Petrolinson S.A.
Attention: Larry A. Ray
Email: lray@GHKc.com.co
Fax: 57 (1) 629-1764
Telephone: 57 (1) 629-1580
Calle 93, No. 17-25/49
Oficina 410, Chico
Santafe de Bogota, D.C.
Colombia
EXPLORATION AGREEMENT -- Page 19 of 22
20
19.0 TERM
This Agreement shall continue in effect until all of rights of the
Parties have been extinguished and obligations of the Parties have
been fulfilled and discharged. Notwithstanding the foregoing, Articles
2, 6, 7, 12, 17 and 18 shall survive the termination of this Agreement
and remain in effect for a period of three (3) years thereafter.
20.0 MISCELLANEOUS
20.1 The captions and headings for the Articles of this Agreement are made
for convenience only and shall not be interpreted or construed so as to
limit or in any way change the substantive provisions of any part of
this Agreement.
20.2 None of the rights, requirements or provisions of this Agreement shall
be deemed to have been waived by any Party by reason of such Party's
failure to enforce any right or remedy granted it hereunder or to take
advantage of any default, and each Party shall at all times hereunder
have the right to require the strict compliance of the other Parties
with the provisions of this Agreement.
20.3 It is understood that time is of the essence in this Agreement and that
upon execution of this Agreement no provisions of this Agreement shall
be modified, altered or waived except by prior written consent of the
Parties. This Agreement shall be binding upon the successors and
assigns of the Parties hereto.
20.4 This Agreement (together with the On-Top Contract, the Contract and the
Operating Agreement) constitutes the entire understanding of the
Parties with respect to the specific subject matter hereof and
supersedes all prior negotiations and agreements pertaining to the
specific subject matter hereof, whether oral or written, of the
Parties.
EXPLORATION AGREEMENT -- Page 20 of 22
21
20.5 As between the Parties, in the case of a conflict, express or implied,
between the provisions of this Agreement and any other related contract
or agreement, this Agreement shall control.
20.6 No amendments, changes or modifications to this Agreement shall be
valid unless they are in writing and signed by a duly authorized
representative of each of the Parties.
20.7 This Agreement may be executed in counterpart and when executed by all
parties shall be effective as though all Parties had signed the same
document.
(The remainder of this page is intentionally left blank).
EXPLORATION AGREEMENT -- Page 21 of 22
22
This Exploration Agreement shall be effective as of January 25, 2001.
FARMORS FARMEES
SOCIEDAD INTERNACIONAL PETROLERA S.A. GHK COMPANY COLOMBIA
/s/ ALBERTO HARAMBOUR /s/ LARRY A. RAY
- ------------------------- -------------------------
Authorized Agent Authorized Agent
Alberto Harambour Larry A. Ray
- ------------------------- -------------------------
Print or Type Name Print or Type Name
Attorney in Fact President
- ------------------------- -------------------------
Title Title
JANUARY 25, 2001 JANUARY 25, 2001
CIMARRONA L.L.C. BY MTV SEVEN SEAS PETROLEUM COLOMBIA, INC.
INVESTMENTS LIMITED PARTNERSHIP,
SOLE MEMBER BY MTV ASSOCIATES, INC.,
MANAGING GENERAL PARTNER P. MARK /s/ LARRY A. RAY
MOORE, PRESIDENT -------------------------
Authorized Agent
/s/ P. MARK MOORE Larry A. Ray
- ------------------------- -------------------------
Authorized Agent Print or Type Name
P. Mark Moore President
- ------------------------- -------------------------
Print or Type Name Title
President
- ------------------------- JANUARY 25, 2001
Title
JANUARY 25, 2001 PETROLINSON S. A.
/s/ LARRY A. RAY
-------------------------
Authorized Agent
Larry A. Ray
-------------------------
Print or Type Name
President
-------------------------
Title
JANUARY 25, 2001
EXPLORATION AGREEMENT -- Page 22 of 22
23
EXHIBIT "A" to that certain Exploration Agreement dated the 25th day of January
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A, and Cimarrona L.L.C.
VPJ-335-00
Bogota, D.C., January 25, 2001
Mr. Alberto Calderon Zuleta
President
Mr. Victor Eduardo Perez
Exploration and Asociate Operations Vicepresident
Empresa Colombiana de Petroleos
Bogota
Dear Sirs:
GHK Company Colombia, as operator for the DINDAL Association Contract, acting on
its own behalf and representing the companies that make up the ASSOCIATE,
namely: GHK Company Colombia, Seven Seas Petroleum Colombia Inc., Sociedad
Internacional Petrolera S.A., Cimarrona Limited Liability Company and
Petrolinson S.A., ratifies its interest in the proposal submitted by all of us
last September 21st, in order to negotiate a new Association Contract applied to
the formations below the stratigraphic equivalent of the deepest producing
formation in the Guaduas Field underlying the current Dindal Contract Area.
We wish to advise Ecopetrol about the results of an internal negotiation between
the companies making up the Associate, in connection with the new contract.
Firstly, we have decided that the operator for the new Deep Exploration
Association Contract shall be the same company operating the current DINDAL
Contract Area. Consequently, the operator for the deep and shallow contracts
shall be GHK Company Colombia, thus complying also with Ecopetrol's interest of
having the same operator for both contracts.
All the companies have agreed that GHK Company Colombia and its affiliates shall
be solely responsible for the costs and risks related to the first exploratory
phase of the new Deep Exploration Association Contract. The companies that have
agreed to assume the cost and risk for the first exploratory phase in the new
Deep Exploration Association Contract are three, namely: Seven Seas, Petrolinson
and GHK Company Colombia.
Therefore, Sipetrol and Cimarrona, voluntarily state to Ecopetrol that they
expressly waive being parties to the new Deep Exploration Association Contract
and kindly request Ecopetrol to enter the contract with the three remaining
companies mentioned and that make up the Associate. Internal agreements,
including an Exploration Agreement, are in place between all the companies
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comprising the Associate. The Exploration Agreement allows and foresees the
conditions for Sipetrol and Cimarrona to become parties to the new Deep
Exploration Association Contract in the future, once the first exploratory phase
of the contract is over.
Consequently, we kindly request Ecopetrol to receive the information on the
internal decision by the partners and to enter the new Deep Exploration
Association Contract with Seven Seas Petroleum Colombia Inc., Petrolinson S.A.
and GHK Company Colombia, and the latter shall act as the Operator.
Sincerely,
- --------------------------
GHK COMPANY COLOMBIA
Legal Representative
- ---------------------------------
PETROLINSON S.A.
Legal Representative
- ----------------------------------------
SEVEN SEAS PETROLEUM COLOMBIA INC.
Legal Representative
- ---------------------------------------------------------------
SOCIEDAD INTERNACIONAL PETROLERA, S.A., Legal Representative
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- ------------------------------------------
CIMARRONA LIMITED LIABILITY COMPANY
Legal Representative
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EXHIBIT "B1" to that certain Exploration Agreement dated the 25th day of
January, 2001, by and between GHK Company Colombia, Seven Seas Petroleum
Colombia, Inc., Petrolinson S. A., and Sociedad Internacional Petrolera S.A.
(Form of Assignment to be used to transfer a convertible Overriding Royalty
Interest to Sipetrol if Farmees sign the On Top Contract, and satisfy the
Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors," and
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile (hereinafter called "Assignee").
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors,
Assignee and Cimarrona L.L.C. severed the exploration and production rights and
obligations below the stratigraphic equivalent of the base of the deepest
producing formation in the Guaduas Field from the Contract Area under the Dindal
Association Contract. Such severed rights and obligations are hereinafter
referred to as "Deep Rights," and,
WHEREAS, Assignee, Assignors, and Cimarrona L.L.C. entered into that
certain Exploration Agreement dated January 25, 2001, covering the Deep Rights
(hereinafter to as the "Exploration Agreement"); and,
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WHEREAS, Assignors and Ecopetrol entered into a new Association
Contract effective on _____________, 2001 ("Contract") covering, among other
things, the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract; and
WHEREAS, Assignors and Assignee have agreed that Assignee is entitled
to an Overriding Royalty Interest equal to four point eight six one one five
percent (4.86115%) of 8/8ths of all the Hydrocarbons produced from the Contract
Area under the Contract, without reduction for any purpose, except said interest
shall be proportionately reduced by, any Government right to back-in, convert,
or assume a Participating Interest or working interest, which is exercised by
the Government pursuant to the Contract (the "Assigned Interests").
NOW, THEREFORE:
1. Assignors hereby assign to Assignee the Assigned Interests.
2. Assignee shall have the option to convert the Assigned
Interests into an undivided equity or working interest, as
provided in the Exploration Agreement. In the event that
Assignee elects to so convert the Assigned Interests, Sipetrol
shall be assigned an undivided sixteen point four five percent
(16.45%) of 8/8ths of the Associates' rights, obligations,
duties and interests in and under the Contract, thereby
vesting in Sipetrol sixteen point four five percent (16.45%)
of 8/8ths of the Associates' rights, obligations, duties and
interests in and under the Contract. In the event of such
election, Assignors and Sipetrol shall enter into the form of
Assignment attached hereto as Exhibit "A" in order to give
effect to the conversion.
3. Assignors warrant to Assignees the title to the
above-described Assigned Interests against any person or
entity claiming by, through, or under Assignors, but not
otherwise.
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4. Assignees hereby accept and assume their respective shares of
the Assigned Interests.
5. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the relevant Association
Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be
executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ___________________________ By: __________________________
Name: ________________________ Name: _______________________
Title: __________________________ Title: ________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: ___________________________ By: __________________________
Name: ________________________ Name: _______________________
Title: __________________________ Title: ________________________
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Exhibit "A" to the Assignment dated _________, _______ between GHK Company
Colombia, Seven Seas Petroleum Colombia, Inc., and Petrolinson S. A. as
Assignors and Sociedad Internacional Petrolera S.A. as Assignee.
ASSIGNMENT TO CONVERT AN OVERRIDING ROYALTY INTEREST
(This form is to be used to assign an equity interest to Sipetrol if
Farmees have satisfied the Earning Obligations and Sipetrol elects to
convert the Overriding Royalty Interest into an equity interest)
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are herein collectively referred to as
"Assignors," and,
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile, (hereinafter called "Assignee").
WHEREAS, Empressa Colombiana de Petroleos ("Ecopetrol"), Assignors,
Assignee and Cimarrona L.L.C. severed the exploration and production rights and
obligations below the stratigraphic equivalent of the base of the deepest
producing formation in the Guaduas Field from the Contract Area under the Dindal
Association Contract. Such severed rights and obligations are hereinafter
referred to as "Deep Rights," and,
30
WHEREAS, Assignee and Assignors entered into that certain Exploration
Agreement dated January 25, 2001, covering the Deep Rights (hereinafter to as
the "Exploration Agreement"); and,
WHEREAS, Assignors and Ecopetrol entered into a new Association
Contract dated _____________, 2001 ("Contract") covering, among other things,
the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract, less and except the Overriding Royalty
Interest held by Assignee and a certain interest held by or dedicated to
Cimarrona L.L.C.;
WHEREAS, Assignors assigned to Assignee an Overriding Royalty Interest
equal to four point eight six one one five percent (4.86115%) of 8/8ths of all
the Hydrocarbons produced from the Contract Area under the Contract, without
reduction for any purpose, except that said interests shall be proportionately
reduced by, any Government right to back-in, convert, or assume a Participating
Interest or working interest, which is exercised by the Government pursuant to
the Contract. Said Overriding Royalty Interest is convertible by the Assignees
into an equity interest, as set forth in said assignment; and
WHEREAS, Assignors and Assignees have agreed that Assignors have
satisfied the Earning Obligations and Assignee, under the previous Assignment
and holder of the said Overriding Royalty Interest, has elected to convert the
said interests into an equity or working interest equal to an undivided sixteen
point four five percent (16.45%) of 8/8ths of all the rights, obligations,
duties and interests of the Associates under the Contract ("Assigned Interest").
NOW, THEREFORE:
1. Assignors hereby assign to Assignee the Assigned Interest in
exchange for Assignee's election, hereby given, to convert
(and extinguish) the Overriding Royalty Interest into and in
favor of the said Assigned Interest.
2. Assignors warrant to Assignee the title to the above-described
Assigned Interest against any person or entity claiming by,
through, or under Assignors, but not otherwise.
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3. Assignee hereby accepts and assumes the Assigned Interest.
4. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the relevant Association
Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be
executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ____________________________ By: ___________________________
Name: __________________________ Name: _________________________
Title: __________________________ Title: ________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: ____________________________ By: ___________________________
Name: __________________________ Name: _________________________
Title: __________________________ Title: ________________________
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EXHIBIT "B2" to that certain Exploration Agreement dated the 25th day of
January, 2001, by and between GHK Company Colombia, Seven Seas Petroleum
Colombia, Inc., Petrolinson S. A., and Cimarrona L.L.C.
(Form of Assignment to be used to transfer an interest to Cimarrona if Farmees
sign the On-Top Contract and satisfy the Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors", and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma,
U.S.A. (hereinafter called "Assignee").
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors,
Assignee, and Sociedad Internacional Petrolera S.A. severed the exploration and
production rights and obligations below the stratigraphic equivalent of the base
of the deepest producing formation in the Guaduas Field from the Contract Area
under the Dindal Association Contract. Such severed rights and obligations are
hereinafter referred to as "Deep Rights," and,
WHEREAS, Assignee, Assignors, and Sociedad Internacional Petrolera S.A.
entered into that certain Exploration Agreement dated January 25, 2001, covering
the Deep Rights (hereinafter to as the "Exploration Agreement"); and,
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WHEREAS, Assignors and Ecopetrol entered into a new Association
Contract effective on _____________, 2001 ("Contract") covering, among other
things, the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract, less an interest held by or dedicated
to Sipetrol S.A.; and
WHEREAS, Assignors and Assignee have agreed that Assignors have
completed the Earning Obligations and Cimarrona is entitled to an undivided nine
point four percent (9.4%) of 8/8ths of all the rights, obligations, duties and
interests of the Associates under the Contract, (the "Assigned Interests"). The
Assigned Interests are subject to Assignor's right to recover the Contract
Penalty from the Assignee's Entitlement produced from the Test Well and the Test
Well only, as those terms are defined in the Operating Agreement and the
Exploration Agreement respectively.
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests,
subject to Assignor's right to recover the Contract Penalty
from the Assignee's Entitlement produced from the Test Well
and the Test Well only, as those terms are defined in the
Operating Agreement and the Exploration Agreement
respectively.
2. Assignors warrant to Assignees the title to the
above-described Assigned Interests against any person or
entity claiming by, through, or under Assignors, but not
otherwise.
3. Assignees hereby accept and assume their respective shares of
the Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the relevant Association
Contract, as applicable.
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IN WITNESS WHEREOF, the Parties have caused this Assignment to be
executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Petrolinson S. A. Cimarrona L.L.C.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
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EXHIBIT "C" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
(Form of Assignment to be used if Farmees do not sign the On-Top Contract
and Farmees satisfy the Earning Obligations )
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile (hereinafter called "Sipetrol"), and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma,
U.S.A. (hereinafter called "Cimarrona").
Sipetrol and Cimarrona are hereinafter referred to as "Assignors."
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignees."
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors, and
Assignees are the current parties under that certain Dindal Association Contract
dated January 22, 1993, as amended (the "Contract"), which covered the
exploration and production rights and obligations under the Dindal Association
Contract Area, and,
WHEREAS, Assignees and Assignors entered into that certain Exploration
Agreement dated January 25, 2001, covering the "Deep Rights," as defined
therein; and,
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36
WHEREAS, Assignees have drilled the "Test Well' under the Exploration
Agreement and have earned and are willing to accept an assignment of certain of
Assignor's interests in the Deep Rights under the Dindal Association Contract;
and
WHEREAS, (A) Sipetrol desires to assign to Assignees [Sipetrol will
elect one of the following choices which will remain in the Assignment and the
other choice not elected will be deleted](i) all of its Participating Interest
subject to an Overriding Royalty Interest equal to four point eight six one one
five percent (4.86115%) of 8/8ths of all the Hydrocarbons produced from the Deep
Rights, without reduction for any purpose, except said interest shall be
proportionately reduced by, any Government right to back-in, convert, or assume
a Participating Interest or working interest, which is exercised by the
Government pursuant to the Contract, or (ii) an undivided fifty percent (50%) of
its Participating Interest in the Deep Rights under the Contract, and (B)
Cimarrona desires to assign its Entitlement (as that term is defined in the
Operating Agreement) in the Deep Rights applicable to the Test Well, and the
Test Well only, until the Assignees, as a group, have recovered the Contact
Penalty, at which time Cimarrona's Entitlement shall revert back to Cimarrona
(together, the "Assigned Interests").
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests.
Said Assigned Interests shall be held by the Assignees as
follows:
GHK 18.967% of the Assigned Interests
Seven Seas 70.634% of the Assigned Interests
Petrolinson 10.399% of the Assigned Interests
2. Assignors warrant to Assignees the title to the
above-described Assigned Interests against any person or
entity claiming by, through, or under Assignors, but not
otherwise.
3. Assignees hereby accept and assume their respective shares of
the Assigned Interests.
2
37
4. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be
executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Cimarrona L.L.C.
By: ___________________________
Name: _________________________
Title: ________________________
3
38
EXHIBIT "D" to that certain Exploration Agreement dated January 25, 2001, by and
between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc., Petrolinson
S.A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
(Form of Assignment to be used if Farmees do not sign the On-Top Contract
and Farmors satisfy the Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors."
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile (hereinafter called "Sipetrol"), and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma,
U.S.A. (hereinafter called "Cimarrona").
Sipetrol and Cimarrona are hereinafter referred to as "Assignees."
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors, and
Assignees are the current parties under that certain Dindal Association Contract
dated January 22, 1993, as amended (the "Contract"), which covered the
exploration and production rights and obligations under the Dindal Association
Contract Area, and,
1
39
WHEREAS, Assignees and Assignors entered into that certain Exploration
Agreement dated January 25, 2001, covering the "Deep Rights," as defined
therein; and,
WHEREAS, Assignees have drilled the "Test Well' under the Exploration
Agreement and have earned and are willing to accept an assignment of certain of
Assignor's interests in the Deep Rights under the Dindal Association Contract;
and
WHEREAS, (A) Assignors desire to assign to Assignees [Assignors as a
group will elect one of the following choices which will remain in the
Assignment and the other choice not elected will be deleted](i) all of its
Participating Interest subject to an Overriding Royalty Interest equal to eight
point five two five four one percent (8.52541%) of 8/8ths of all the
Hydrocarbons produced from the Deep Rights, without reduction for any purpose,
except said interest shall be proportionately reduced by any Government right to
back-in, convert, or assume a Participating Interest or working interest, which
is exercised by the Government pursuant to the Contract, or (ii) an undivided
fifty percent (50%) of its Participating Interest in the Deep Rights under the
Contract, (the "Assigned Interests").
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests.
Said Assigned Interests shall be held by the Assignees as
follows:
Sipetrol 77.778% of the Assigned Interests
Cimarrona 22.222% of the Assigned Interests
If the Assignors retain an Overriding Royalty Interest, then
such retained Overriding Royalty Interest shall be owned by
the Assignors in the following manner:
GHK 18.967% of the Overriding Royalty Interest
Seven Seas 70.634% of the Overriding Royalty Interest
Petrolinson 10.399% of the Overriding Royalty Interest
2
40
2. Assignors warrant to Assignees the title to the
above-described Assigned Interests against any person or
entity claiming by, through, or under Assignors, but not
otherwise.
3. Assignees hereby accept and assume their respective shares of
the Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be
executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Cimarrona L.L.C.
By: ___________________________
Name: _________________________
Title: ________________________
3
41
EXHIBIT "E" to that certain Exploration Agreement dated January 25, 2001, by
and between GHK Company Columbia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S.A., Sipetrol Colombia S. A., and Cimarrona L.L.C.
[MAP]
DINDAL ASSOCIATION
CONTRACT
BLOCK COORDINATES
42
EXHIBIT "F" to that certain Exploration Agreement dated the 25th day of January
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
EXHIBIT "F"
WELL REQUIREMENTS
WELL NAME: Los Libros
OPERATOR: GHK Company Colombia
Sub-thrusted and repeated Hoyon & Cimarrona
LOCATION: New Dindal Association Contract or On-Top Contract
Cundinamarca Department
Colombia, S.A.
DAILY DRILLING REPORTS FAXED or E-MAILED TO:
Cimarrona L.L.C.
Attn: Robert L. Cox Jr.
3600 West Main, Suite 150
Norman, OK 73072-4636
Fax #: 405/329-5595
E-Mail: bcox@mtvassociates.com
Sociedad Internacional Petrolera S.A.
Attn: Rodolfo Cortes
Calle 93 B No. 17-25/49
Oficina 410, Chico
Bogota, Colombia
Fax: (571) 621-6988
E-Mail: rcortes@sipetrol.com.co
And such other parties with Sipetrol as may be
hereinafter designated
PARTIES TO BE NOTIFIED IN ADVANCE OF TESTING, CORING, LOGGING, OR
ABANDONMENT OF WELL:
Robert L. Cox Jr.
Business Phone: 405/419-5104
Residence Phone: 405/341-8186
Cellular Phone: 405/590-6354
Fax Phone: 405/329-5595
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43
Rodolfo Cortes
Business Phone: (57-1) 621-4900
Residence Phone: (57-1) 624-2821
Cellular Phone: (57-3) 263-2529
Fax Phone: (57-1) 621-6988
PLEASE MAIL THE ITEMS LISTED BELOW TO:
MTV Oil & Gas, Limited Partnership
Attn: Robert L. Cox Jr.
3600 West Main, Suite 150
Norman, OK 73072-4636
Sipetrol - Colombia
Attn: Rodolfo Cortes
Calle 93 B No. 17-25/49
Oficina 410, Chico
Bogota, Colombia
NO. OF COPIES:
2 Electric Logs (field prints)
2 Electric Logs (final prints)
1 Daily Mud Logging and Final Report
1 DST, Wireline Tests, Core Analysis
1 Directional Surveys
1 Oil, Gas and Water Analysis
1 Bottom Hole Pressure Tests
1 Production Tests
1 All Forms filed with Governmental Agencies
1 Surveyed Location Plots
Note: All the above information in Digital Format
And one copy of such other geological data, of any kind or nature, which the
operator deems necessary and expedient for the evaluation of the test well.
Farmors reserve the right to make recommendations to the operator regarding
additional data to be acquired during the drilling of the proposed test well,
however, the operator shall be under no obligation to accept such
recommendations.
2
44
EXHIBIT "G" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
EXHIBIT "G"
INSURANCE
Operator shall carry or provide for the benefit of the Joint Account for the
Parties the type and amounts of Insurance as are shown below:
(1) Workman's Compensation Insurance of not less than $1,000,000 per
employee, as well as any benefits equal to those required by law in
Colombia.
(2) Comprehensive General Liability Insurance of not less than $3,000,000
covering liability to third parties.
(3) Excess General Liability of not less than $20,000,000 covering
liability to third parties.
(4) Well Control / Blow out coverage of not less than $25,000,000 covering
liability for regaining control of a well, plus full replacement value
of the well.
(5) Environmental and pollution coverage of not less than $25,000,000
(6) All risk property / equipment insurance - full replacement value.
Operator shall procure and maintain or cause to be procured and maintained all
insurance in the types and amounts required by the Dindal Association Contract
or On-Top Contract and applicable laws, rules and regulations of Colombia.
Additional or other insurance will be governed in accordance with the provisions
of the Operating Agreement covering the Dindal Association Contract or On-Top
Contract and the Farmors' and Farmee's interest therein.
Page 1 of 1
45
EXHIBIT "H" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
(Form of Assignment to be used if Farmees sign the On-Top Contract, but fail to
satisfy the Earning Obligations and Farmors elect to exchange their
Interests for 100% of the Participating Interest)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of Oklahoma,
U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the laws
of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors".
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile (hereinafter called "Sipetrol"), and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma, U.S.A.
(hereinafter called "Cimarrona").
Sipetrol and Cimarrona are hereinafter referred to as "Assignees", and,
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol") and Assignorsare the
current parties to the On-Top Contract (as defined in the Exploration
Agreement), and,
1
46
WHEREAS, Assignees and Assignors entered into that certain Exploration
Agreement ("Exploration Agreement") dated January 25, 2001, covering, inter
alia, the exploration rights and obligations of the Associate under the On-Top
Contract, and,
WHEREAS, Assignors have failed to drill the Test Well defined in the
Exploration Agreement and the Parties hereto are willing to terminate Sipetrol's
Overriding Royalty Interest and Cimarrona's Contract Penalty in exchange for an
assignment of one hundred percent (100%) of Assignors interests in the On-Top
Contract, less and except an Overriding Royalty Interest equal to eight point
five two five four one percent (8.52541%) of 8/8ths of all the Hydrocarbons
produced under the On-Top Contract, without reduction for any purpose, except
said interest shall be proportionately reduced by any Government right to
back-in, convert, or assume a Participating Interest or working interest, which
is exercised by the Government pursuant to the On-Top Contract ("Assigned
Interests").
NOW, THEREFORE:
1. Assignors hereby assign to Assignees one hundred percent (100%) of
Assignors interests in the On-Top Contract, less and except the
Overriding Royalty Interest equal to eight point five two five four
one percent (8.52541%) of 8/8ths of all the Hydrocarbons produced from
the On-Top Contract Area, without reduction for any purpose, except
said interest shall be proportionately reduced by any Government right
to back-in, convert, or assume a Participating Interest or working
interest, which is exercised by the Government pursuant to the
Contract, Said reserved Overriding Royalty Interests shall be held by
the Assignors as follows:
GHK 18.967% of the Overriding Royalty Interests
Seven Seas 70.634% of the Overriding Royalty Interests
Petrolinson 10.399% of the Overriding Royalty Interests
2
47
The Assigned Interests shall be shared by Assignors in the following
manner:
Sipetrol 77.778% of the Assigned Interests
Cimarrona 22.222% of the Assigned Interests
The parties hereto hereby terminate Sipetrol's Overriding Royalty
Interest and Cimarrona's Contract Penalty previously conveyed to
Assignees by Assignors under that certain assignment dated the ____
day of __________, 2001.
2. Assignors warrant to Assignees the title to the above-described
Assigned Interests against any person or entity claiming by, through,
or under Assignors, but not otherwise.
3. Assignees hereby accept and assume their respective shares of the
Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein shall have
the meaning given to them in the Exploration Agreement or the relevant
Association Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be executed
by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
3
48
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
Cimarrona L.L.C.
By: _____________________________
Name: ___________________________
Title: __________________________
4
49
Exhibit "I" to the Exploration Agreement dated January 25, 2001 between GHK
Company Colombia, Seven Seas Petroleum Colombia, Inc., and Petrolinson S. A. as
Farmees and Sociedad Internacional Petrolera S.A. and Cimarrona as Farmors.
ASSIGNMENT TO CONVERT AN OVERRIDING ROYALTY INTEREST
(This form is to be used to assign an equity interest to GHK, Seven Seas, and
Petrolinson if said companies elect to convert the Overriding Royalty Interest
into equity interests after the Farmors have satisfied the Earning Obligations)
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2000, by and between:
Sociedad Internacional Petrolera S.A., a company incorporated under the laws
of Chile (hereinafter called "Sipetrol"), and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma, U.S.A.
(hereinafter called "Cimarrona").
Sipetrol and Cimarrona are hereinafter referred to as "Assignors", and,
GHK Company Colombia, a company incorporated under the laws of Oklahoma,
U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the laws of
the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as "Assignees".
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol") and Assignors are
the current parties to the On-Top Contract (as defined in the Exploration
Agreement), and,
WHEREAS, Assignees and Assignors entered into that certain Exploration
Agreement ("Exploration Agreement") dated January 25, 2001, covering, inter
alia, the exploration rights and obligations of the Associate under the On-Top
Contract, and,
1
50
WHEREAS, Assignors have drilled the Test Well defined in the Exploration
Agreement and Assignees are willing to terminate their Overriding Royalty
Interests in exchange for an assignment of an undivided twenty eight point eight
five percent (28.85%) of the Associate's rights, obligations, liabilities, and
interests in and to the On-Top Contract and an undivided twenty eight point
eight five percent (28.85%) Participating Interest (as that term is defined in
the JOA) under the JOA ("Assigned Interests"), and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract, and,
WHEREAS, Assignees under the previous Assignment and holder of the said
Overriding Royalty Interests, have elected to convert the said interests into
the Assigned Interests.
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interest in exchange for
Assignees election to convert the Overriding Royalty Interests into the
said Assigned Interests. After the transfer of the Assigned Interests
hereunder the rights and interests under the On-Top Contract and the JOA
shall be held by the Assignors and Assignees in the following manner:
Sipetrol 55.339% of 8/8ths of all the rights, obligations,
liabilities, and interests of the Associate under the
Contract and the JOA
Cimarrona 15.811% of 8/8ths of all the rights, obligations,
liabilities, and interests of the Associate under the
Contract and the JOA
GHK 5.472% of 8/8ths of all the rights, obligations,
liabilities, and interests of the Associate under the
Contract and the JOA
Seven Seas 20.378% of 8/8ths of all the rights, obligations,
liabilities, and interests of the Associate under the
Contract and the JOA
Petrolinson 3.000% of 8/8ths of all the rights, obligations,
liabilities, and interests of the Associate under the
Contract and the JOA
Assignees hereby terminate the Overriding Royalty Interests previously
reserved by Assignees under that certain assignment dated the ____ day of
__________, 200_.
2
51
2. Assignors warrant to Assignees the title to the above-described Assigned
Interest against any person or entity claiming by through, or under
Assignors, but not otherwise.
3. Assignees hereby accept and assume the Assigned Interest.
4. Terms capitalized in this Assignment and not defined herein shall have the
meaning given to them in the Exploration Agreement and the exhibits
attached thereto or the relevant Association Contract, as applicable.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be executed
by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: _____________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
Cimarrona L.L.C.
By: _____________________________
Name: ___________________________
Title: __________________________
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52
EXHIBIT "L" TO THAT CERTAIN
EXPLORATION AGREEMENT DATED
JANUARY 25, 2001, BY AND
BETWEEN GHK COMPANY COLOMBIA,
SEVEN SEAS PETROLEUM COLOMBIA, INC.
PETROLINSON S.A.,
SIPETROL COLOMBIA., AND
CIMARRONA L.L.C
53
LOAN AGREEMENT
BETWEEN
SEVEN SEAS PETROLEUM INC.
AND
STILLWATER NATIONAL BANK
AND TRUST COMPANY, N.A.
DECEMBER 20, 2000
SELF, GIDDENS & LEES, INC.
ATTORNEYS AND COUNSELORS
2725 OKLAHOMA TOWER o 210 PARK AVENUE o OKLAHOMA CITY, OKLAHOMA 73102-5604
TELEPHONE (405) 232-3001 o TELECOPIER (405) 232-5553
54
TABLE OF CONTENTS
Page
----
1. Definition of Terms ....................................................... 1
1.1 Change of Control ................................................ 1
1.2 Closing Date ..................................................... 2
1.3 Collateral ....................................................... 2
1.4 Default .......................................................... 2
1.5 Guarantees ....................................................... 2
1.6 Guarantor Collateral ............................................. 2
1.7 Guarantors ....................................................... 2
1.8 Guarantor Security Agreement ..................................... 2
1.9 Loan ............................................................. 3
1.10 Loan Documents ................................................... 3
1.11 Note ............................................................. 3
1.12 Obligations ...................................................... 3
1.13 Person ........................................................... 3
1.14 Pledged Stock .................................................... 3
1.15 Reference Rate ................................................... 4
1.16 Stock Pledge Agreement ........................................... 4
1.17 Subsidiaries ..................................................... 4
2. Lending Agreement ......................................................... 4
3. Loan ...................................................................... 4
3.1 Term ............................................................. 5
3.2 Interest ......................................................... 5
3.3 Payments ......................................................... 5
3.4 Voluntary Prepayment ............................................. 5
4. Advances; Payments ........................................................ 5
4.1 Use of Proceeds .................................................. 5
4.2 Request for Advance .............................................. 5
4.3 Place of Advances and Payments ................................... 5
5. Collateral Security ....................................................... 6
6. Conditions of Lending ..................................................... 6
6.1 Loan Documents ................................................... 6
6.2 Authority ........................................................ 6
6.3 No Default ....................................................... 6
6.4 Opinion of Counsel ............................................... 6
6.5 Arrangement Fee .................................................. 6
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55
6.6 Other Information ................................................ 6
6.7 Prohibitive Orders ............................................... 7
6.8 Information and Consents ......................................... 7
6.9 Assignments ...................................................... 7
7. Representations ........................................................... 7
7.1 Existence ........................................................ 7
7.2 Authorized Capital Stock ......................................... 7
7.3 Financial Condition .............................................. 7
7.4 Liabilities ...................................................... 8
7.5 Ownership ........................................................ 8
7.6 Permits .......................................................... 8
7.7 Taxes ............................................................ 8
7.8 Litigation ....................................................... 8
7.9 No Default ....................................................... 9
7.10 Full Disclosure .................................................. 9
7.11 Survival of Representations ...................................... 9
7.12 Solvency ......................................................... 9
8. Affirmative Covenants ..................................................... 9
8.1 Performance of Obligations ....................................... 9
8.2 Notifications .................................................... 9
8.3 Records Inspections ..............................................10
8.4 Financial Information ............................................10
8.4.1 Financial Statements .......................................10
8.4.2 Other Information ..........................................10
8.5 Accounts .........................................................11
8.6 Additional Documents .............................................11
8.7 Governmental Approvals ...........................................11
8.8 Taxes ............................................................11
8.9 Access ...........................................................11
8.10 Operation ........................................................11
8.11 Qualification; Licenses ..........................................11
8.12 Insurance ........................................................11
8.13 Operation, Title, Pledge .........................................12
8.14 Compliance with Applicable Law ...................................12
8.15 Legal Existence ..................................................12
9. Negative Covenants ........................................................12
9.1 Creation of Liens ................................................12
9.2 Liquidation, Merger or Sale of Assets ............................12
9.3 Creation of Debt .................................................12
9.4 Loans and Guaranties .............................................13
9.5 Transfers ........................................................13
9.6 Other Agreements .................................................13
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56
9.7 Limitation on Distributions and Redemptions ......................13
9.8 Transactions with Affiliates .....................................13
9.9 Subsidiaries .....................................................13
10. Default ...................................................................13
10.1 Nonpayment of Note ...............................................14
10.2 Other Nonpayment .................................................14
10.3 Breach of Agreement ..............................................14
10.4 Lien Filings .....................................................14
10.5 Other Agreements .................................................14
10.6 Representations ..................................................14
10.7 Bankruptcy .......................................................14
10.8 Judgment .........................................................14
10.9 Maturity of Other Debt ...........................................14
10.10 Failure of Liens .................................................15
10.11 Indenture ........................................................15
10.12 Change of Control ................................................15
10.13 Opportunity to Cure ..............................................15
11. Remedies ..................................................................15
11.1 Acceleration of Note .............................................15
11.2 Selective Enforcement ............................................15
11.3 Performance by Bank ..............................................15
11.4 Waiver of Default ................................................16
11.5 Deposits; Setoff .................................................16
12. Miscellaneous .............................................................16
12.1 Participating Banks ..............................................16
12.2 Cumulative Remedies ..............................................16
12.3 Survival of Representations ......................................16
12.4 Expenses .........................................................17
12.5 Notices ..........................................................17
12.6 Construction .....................................................17
12.7 Binding Effect ...................................................18
12.8 No Third Party Beneficiaries .....................................18
12.9 Assignment .......................................................18
12.10 Time .............................................................18
12.11 Severability .....................................................18
12.12 Verbal Change ....................................................18
12.13 No Waiver ........................................................18
12.14 Acknowledgments and Admissions ...................................18
12.15 JOINT ACKNOWLEDGMENT .............................................19
12.16 INDEMNITY ........................................................19
12.17 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. .....................20
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57
Schedule "1.5" - Guaranty Agreement
Schedule "1.8" - Guarantor Security Agreement
Schedule "1.11" - Promissory Note
Schedule "1.14" - Subsidiaries and Pledged Stock
Schedule "1.16" - Stock Pledge Agreement
Schedule "9.9" - Other Subsidiaries
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58
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made effective the 20th day
of December, 2000, between SEVEN SEAS PETROLEUM INC., a Yukon Territory, Canada
corporation (the "Borrower"), and STILLWATER NATIONAL BANK AND TRUST COMPANY,
N.A. (the "Bank").
WITNESSETH:
WHEREAS, the Borrower has requested that the Bank loan the Borrower
funds to provide a working capital line of credit, which the Bank is willing to
do subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the funds to be advanced by the Bank under the Note (as
hereinafter defined) and other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged, the Borrower and the Bank
hereby agree as follows:
1. Definition of Terms. All terms defined in this Agreement will have the
defined meaning when used in any of the Loan Documents (as hereinafter defined)
unless the context otherwise requires. Each accounting term not defined herein,
and each accounting term partly defined herein to the extent not defined, will
have the meaning given to it under generally accepted accounting principles. As
used in this Agreement, the following terms will have the meanings indicated:
1.1 Change of Control . The occurrence of any of the following events: (a)
any Person other than the Borrower or one of the Borrower's
wholly-owned Subsidiaries acquires or holds any legal or beneficial
ownership of any Subsidiary; (b) any Person or two or more Persons
acting as a group acquires beneficial ownership (within the meaning of
Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as
amended, and including holding proxies to vote for the election of
directors other than proxies held by the Borrower's management or
their designees to be voted in favor of Persons nominated by the
Borrower's Board of Directors) of fifty percent (50%) or more of the
outstanding voting securities of the Borrower, measured by voting
power (including both common stock and any preferred stock or other
equity securities entitling the holders thereof to vote with the
holders of common stock in elections for directors of the Borrower);
(c) one-third or more of the directors of the Borrower consists of
Persons not nominated by the Borrower's Board of Directors (not
including as Board nominees any directors which the Board is obligated
to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements); or (d) the merger or
consolidation of the Borrower with or into another Person or the
merger or consolidation of another Person into the Borrower, or the
sale of all or substantially all of the assets of the Borrower and the
Subsidiaries to another Person (other than a Person that is controlled
by the Borrower or one or more of
59
the Subsidiaries), and, in the case of any such merger or
consolidation, the securities of the Borrower that are outstanding
immediately prior to such transaction and which represent one hundred
percent (100%) of the aggregate voting power of the voting stock of
the Borrower are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are
changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately
after such transaction, at least a majority of the aggregate voting
power of the voting stock of the surviving corporation.
1.2 Closing Date. The date upon which the Loan Documents are signed by
the Borrower and the Guarantors and accepted by the Bank at the Bank's
office in Oklahoma City, Oklahoma, all in form and substance
satisfactory to the Bank.
1.3 Collateral. All of the Borrower's and the Guarantors' right, title
and interest in and to the property described in the Loan Documents
whether now owned or hereafter acquired including without limitation:
(a) the Guarantor Collateral; (b) the Pledged Stock; and (c) all
additions and accessions to, replacements of, substitutions for,
dividends on and proceeds from any of the items listed in the
foregoing parts (a) and (b).
1.4 Default. The occurrence of any of the events specified in paragraph
10 of this Agreement.
1.5 Guarantees. The agreement to be executed by the Guarantors in favor
of the Bank in substantially the form of Schedule "1.5" attached
hereto as a part hereof, whereby the Guarantors unconditionally
guarantee to the Bank payment of all Obligations now or hereafter
owing to the Bank by the Borrower in connection with the Loan
Documents and the full and complete performance by the Borrower of the
Loan Documents.
1.6 Guarantor Collateral. The certificates of deposit or government
securities in form and substance satisfactory to the Bank owned by one
or more of the Guarantors and pledged to the Bank to secure payment of
the Obligations.
1.7 Guarantors. The joint and several reference to (a) Robert A. Hefner
III, an individual ("Hefner"), (b) The GHK Company L.L.C., an Oklahoma
limited liability company ("GHK"), and (c) Ramiiilaj A Limited
Partnership, a Texas limited partnership ("Ramiiilaj").
1.8 Guarantor Security Agreement . The instrument and all extensions,
renewals and modifications thereof, executed and delivered to the Bank
by the Guarantors granting to the Bank a first perfected security
interest in and to the Guarantor Collateral in substantially the form
of Schedule "1.8" attached hereto as a part hereof.
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1.9 Loan. The loan by the Bank to the Borrower evidenced by the Note in
the principal amount not to exceed TEN MILLION DOLLARS
($10,000,000.00).
1.10 Loan Documents. This Agreement, the Guarantees, the Guarantor
Security Agreement, the Note, the Stock Pledge Agreement and all other
instruments executed and delivered by the Borrower, the Guarantors or
any other Person or entity in connection with the Loan contemplated by
this Agreement, all instruments issued pursuant to the foregoing
documents and all extensions, renewals, modifications and amendments
thereof.
1.11 Note. The promissory note and all extensions, renewals,
modifications, consolidations and increases thereof executed by the
Borrower and delivered to the Bank pursuant to this Agreement to
evidence the Loan and advances thereunder contemplated by this
Agreement in the principal amount of TEN MILLION DOLLARS
($10,000,000.00). The Note will be payable on the terms stated in
paragraph 3 of this Agreement and will be in substantially the form of
Schedule "1.11" attached hereto as a part hereof.
1.12 Obligations. The obligation of the Borrower to: (a) pay the principal
of and interest on the Note in accordance with the terms thereof and
to satisfy all of the Borrower's other liabilities to the Bank,
whether under this Agreement or otherwise, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, joint
or several, including any extensions, modifications, renewals, or
increases thereof and substitutions therefor; (b) repay to the Bank
all amounts advanced by the Bank under this Agreement or otherwise on
behalf of the Borrower including, without limitation, overdrafts and
advances for principal or interest payments to other secured parties,
mortgagees, lessors or lienors, or for taxes, levies, insurance, rent,
repairs to or maintenance or storage of any of the Collateral; (c)
reimburse the Bank, on demand, for all of the Bank's expenses and
costs including reasonable fees and expenses of the Bank's counsel in
connection with the preparation, negotiation, amendment, modification,
or enforcement of this Agreement and the Loan Documents including,
without limitation, any proceeding brought or threatened to enforce
payment of any of the obligations referred to in this paragraph 1.12;
and (d) perform all other obligations of the Borrower under the Loan
Documents.
1.13 Person. An individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint
venture, tribunal, or any other legally recognizable entity.
1.14 Pledged Stock. All of the issued and outstanding capital stock of the
Subsidiaries owned by the Borrower and certain of the Borrower's
Subsidiaries as set forth at Schedule "1.14" attached hereto as a part
hereof.
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1.15 Reference Rate. The national prime fluctuating rate of interest
published from time to time in The Wall Street Journal (whether or not
charged or published by the Bank). It is a rate recognized by the Bank
based on various factors, including the Bank's costs and desired
return, general economic conditions and other factors and is used as a
reference point by the Bank for pricing some loans. The Bank may price
loans at, above or below the Reference Rate. Any change in the
Reference Rate will take effect, without notice (which notice is
hereby waived), on the day such change is published in The Wall Street
Journal.
1.16 Stock Pledge Agreement. The instrument and all extensions, renewals
and modifications thereof, executed and delivered to the Bank by the
Borrower and certain of the Borrower's Subsidiaries granting to the
Bank a first perfected security interest in and to the Pledged Stock
in substantially the form of Schedule "1.16" attached hereto as a part
hereof.
1.17 Subsidiaries. The wholly owned subsidiaries of the Borrower listed at
Schedule "1.14" attached hereto as a part hereof.
2. Lending Agreement. Subject to the terms and conditions of this Agreement, the
Bank agrees to lend to the Borrower and the Borrower agrees to borrow from the
Bank up to the principal amount of the Note which represents the total amount of
the Loan. Notwithstanding any other provision of the Loan Documents, any advance
herein provided for will not be required to be made by the Bank if since the
Closing Date and up to the date of such requested advance: (a) any event of
Default, or any event which, with notice or passage of time, would constitute an
event of Default, has occurred and has not been cured by the Borrower or waived
by the Bank; (b) Hefner has died or has been judicially declared incompetent;
(c) the Borrower's right to do business has been suspended by Yukon Territory,
Canada, and has not been continued in the Cayman Islands; (d) the Borrower
requests such additional advance for any purpose other than the purposes set
forth at paragraph 4.1 of this Agreement; (e) there has been, in the reasonable
opinion of the Bank, a material adverse change in the financial condition of any
Guarantor from that shown by the financial statements referenced in this
Agreement; (f) any litigation or governmental proceeding has been instituted
involving the Collateral which, in the opinion of the Bank will, to a material
extent, adversely affect the value of the Collateral; or (g) if, since the date
of this Agreement and up to the date of the advance request, any liens, claims
or encumbrances against the Collateral have been made or filed and have not been
removed or settled to the satisfaction of the Bank. On the Bank's request, prior
to the making of any such advance, the Borrower will furnish to the Bank a
certificate dated the requested date of such advance and signed by the Borrower
to the effect that no change or event referred to in clauses (a), (b), (c), (d),
(e), (f) and (g) of this paragraph has occurred.
3. Loan. The Borrower and the Bank specifically agree that the aggregate of
advances made during the term of the Note may exceed the face amount thereof,
but the unpaid principal balance at any time will not exceed such face amount.
The Loan will be evidenced by the Note and will be payable as follows:
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3.1 Term. The term of the Note will be for the period commencing on the
Closing Date and ending on December 31, 2001 (the "Maturity Date").
3.2 Interest. Prior to Default, advances under the Note will bear
interest from the date of advance at the per annum rate equal to the
Reference Rate plus 75/100 percent (.75%). After Default, all amounts
due under the Note will bear interest at the greater of: (a) fifteen
percent (15%) per annum; or (b) the Reference Rate plus five percent
(5%) per annum. All interest will be computed for the actual number of
days elapsed at a per diem charge based on a year consisting of three
hundred sixty (360) days.
3.3 Payments. Provided that no event of Default has occurred or is
continuing under any of the Loan Documents, there will be no required
principal payments on the Note until the Maturity Date. Commencing on
January 31, 2001, and on the last day of each successive month
thereafter until the Note is paid in full, the Borrower will pay to
the Bank all accrued unpaid interest on the Note. The entire unpaid
principal balance of the Note plus all accrued and unpaid interest
thereon will be due and payable on the Maturity Date.
3.4 Voluntary Prepayment. The Borrower will have the right at any time to
prepay the Note in whole or in part, without premium or penalty, but
with interest accrued to the date of prepayment.
4. Advances; Payments. Advances under the Note will be made by the Bank for the
following purposes and subject to the following limitations:
4.1 Use of Proceeds. All proceeds of each advance under the Note will be
used solely for: (a) working capital purposes; and (b) payment of
costs incurred by the Borrower or the Bank in connection with the
preparation, administration and enforcement of the Loan Documents.
4.2 Request for Advance. Not later than 11:00 a.m. on the date of
advance, the Borrower will notify the Bank in writing of the total
amount of the requested advance under the Note.
4.3 Place of Advances and Payments. Advances under the Note will be made
at the Bank's office or by wire transfer of immediately available
funds to a bank account designated by the Borrower in the advance
request. All payments and prepayments of principal or interest on the
Note will be made to the Bank in collected and freely transferable
funds at or before 11:00 a.m. Oklahoma City, Oklahoma time on the date
due at the Bank's office at 6305 Waterford Boulevard, Suite 205,
Oklahoma City, Oklahoma. All payments will be paid in full without set
off or counterclaim and without reduction for, and free from, any and
all taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by any
government or any political subdivision
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63
or taxing authority thereof. If any payment under the Note or this
Agreement becomes due and payable on a day other than a business day,
the maturity thereof will be extended to the next succeeding business
day and such extension of time will in such case be included in the
computation of payments of interest.
5. Collateral Security. Payment and performance of the Obligations will be
secured by the Guarantees, all of the Collateral and such other or additional
property as is agreed to by the Borrower and the Bank.
6. Conditions of Lending. The obligation of the Bank to perform this Agreement
to make the initial or any future advances under the Note is subject to the
satisfaction and continued performance by the Borrower and the Guarantors of the
following conditions precedent:
6.1 Loan Documents. The execution, acknowledgment (where appropriate) and
delivery by the appropriate parties of the Loan Documents, all in form
and substance satisfactory to the Bank, and delivery of possession to
the Bank of any Collateral the possession of which is necessary to
perfect the Bank's security interest including, without limitation,
any certificates evidencing the Pledged Stock.
6.2 Authority. The Bank will have received: (a) certified copies of the
instruments creating the Borrower, GHK and Ramiiilaj and/or governing
the operation of the Borrower, GHK and Ramiiilaj, complete with all
amendments thereto and certificates to be filed in connection
therewith; and (b) certified copies of resolutions and other documents
reasonably required to authorize the execution, delivery and
performance of the Loan Documents, all in form and substance
satisfactory to the Bank.
6.3 No Default. The representations and warranties set forth in paragraph
7 of this Agreement will be true and correct on and as of the date of
the initial advance of funds under the Note and each additional
advance with the same effect as if such representations and warranties
had been made on and as of such date and there will have occurred and
be continuing no Default.
6.4 Opinion of Counsel. The Bank will have received the opinion or
opinions of the Borrower's and the Guarantors' counsel in form and
substance reasonably acceptable to the Bank and the Bank's counsel.
6.5 Arrangement Fee. The Bank will have received a non-refundable
arrangement fee from the Borrower in the amount of Twelve Thousand
Five Hundred Dollars ($12,500.00) as reimbursement to the Bank for
processing the Loan.
6.6 Other Information. The Bank will have received current financial
statements for the Borrower and the Guarantors and such other
information, documents and
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instruments concerning the Borrower, the Subsidiaries, the Guarantors
and the Collateral, as the Bank reasonably requests.
6.7 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 Agreement or the other Loan
Documents.
6.8 Information and Consents. The Borrower and the Guarantors will have
furnished to the Bank any consents of third parties to the
transactions contemplated by this Agreement which may be required
under any other agreements binding on the Borrower, any of the
Subsidiaries or the Guarantors.
6.9 Assignments. With respect to any secured indebtedness being paid off
out of an advance under the Note, the Bank will have received an
assignment, in form and substance satisfactory to the Bank, of all
liens, encumbrances and security interests securing such indebtedness.
7. Representations. The Borrower represents and warrants to the Bank that the
following circumstances exist on the date of this Agreement and will continually
exist throughout the term of the Loan:
7.1 Existence. The Borrower is and will continue to be a corporation duly
organized and validly existing under the laws of Yukon Territory,
Canada until such corporate existence is duly and validly continued in
the Cayman Islands. Each of the Subsidiaries is and will continue to
be a corporation duly organized and validly existing under the laws of
the jurisdiction under which such Subsidiary was formed. GHK is and
will continue to be a limited liability company duly organized and
validly existing under the laws of the State of Oklahoma. Ramiiilaj is
and will continue to be a limited partnership duly organized and
validly existing under the laws of the State of Texas. The Borrower,
GHK and Ramiiilaj and have adequate power, authority and legal right
to enter into and carry out the provisions of the Loan Documents, to
borrow money and to give security for borrowings as required by this
Agreement and to consummate the transactions hereby contemplated. The
Loan Documents, upon their execution and delivery, will constitute
valid, legal and binding obligations of the Borrower and the
Guarantors, enforceable in accordance with their terms, subject only
to applicable bankruptcy, insolvency or similar laws generally
affecting the enforcement of creditor's rights.
7.2 Authorized Capital Stock. The authorized capital stock and
outstanding capital stock of each of the Subsidiaries is as set forth
at Schedule "1.14" attached hereto as a part hereof and there are no
outstanding options, warrants or other convertible securities issued
or outstanding with respect to any of the Subsidiaries.
7.3 Financial Condition. The Borrower's consolidated financial statements
dated as of September 30, 2000, and the Guarantors' financial
statements dated as of June
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30,2000, copies of which have been furnished to the Bank, are correct
and complete and fairly reflect the financial condition of the
Borrower, the Subsidiaries and the Guarantors as of the date thereof
and have been prepared in conformity with accounting principles
applied on a basis consistent with that of preceding periods. There
has occurred no material adverse change in the financial condition of
the Borrower, any of the Subsidiaries or the Guarantors from the date
of such financial statements to the date of execution of this
Agreement.
7.4 Liabilities. Neither the Borrower, any of the Subsidiaries nor any
Guarantor has any material liabilities, direct or contingent, except
those disclosed in the financial statements referred to in paragraph
7.3 of this Agreement.
7.5 Ownership. The Borrower has good and marketable title to the Pledged
Stock, free and clear of all liens, security interest, claims or
encumbrances, except for liens and security interests in favor of the
Bank. The Guarantors have good and marketable title to the Guarantor
Collateral, free and clear of all liens, security interest, claims or
encumbrances, except for liens and security interests in favor of the
Bank
7.6 Permits. The Borrower and each of the Subsidiaries has, or will
obtain, all governmental and private permits, certificates, consents
and franchises which are material to the business, property, assets,
operations or condition, financial or otherwise, of the Borrower or
the Subsidiaries, to carry on their respective businesses as now being
conducted and to own or lease and operate their respective properties
as now owned or leased. All such governmental and private permits,
certificates, consents and franchises are, or will be, valid and
subsisting, and, to the best knowledge of the Borrower and the
Guarantors, there is no existing violation thereof.
7.7 Taxes. The Borrower, each of the Subsidiaries and the Guarantors have
filed all Canadian, foreign, federal, state and local tax returns
which are required to be filed and has paid or made provisions for
payment of all taxes which have or may become due pursuant to said
returns or pursuant to any assessment, except such taxes as are being
contested in good faith and as to which adequate reserves have been
provided. Neither the Borrower nor the Guarantors know of any basis
for the assessment of any deficiency taxes.
7.8 Litigation. There is no action, suit, proceeding or investigation
pending, or, to their knowledge, threatened against the Borrower, any
of the Subsidiaries, any Guarantor or the Collateral which will: (a)
materially and adversely affect the Borrower, the Guarantors or the
Collateral; (b) impair the ability of the Borrower or the Subsidiaries
to carry on their respective businesses as presently contemplated; or
(c) result in any substantial liability not adequately covered by
insurance.
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7.9 No Default. The execution, delivery and performance by the Borrower
and the Guarantors of this Agreement and the Loan Documents will not
violate any provision or constitute a default under any indenture,
agreement or instrument to which the Borrower, any of the Subsidiaries
or any Guarantor is a party or by which the Borrower, any of the
Subsidiaries, any Guarantor or the Collateral is bound or affected.
7.10 Full Disclosure. Neither this Agreement nor any statement or
instrument referred to herein nor any other information, report or
statement delivered to the Bank by the Borrower or the Guarantors
contains any untrue statement or omits to state a material fact
necessary to make the statements herein or therein not misleading.
7.11 Survival of Representations. All representations and warranties made
by the Borrower and the Guarantors herein will survive the delivery of
the Loan Documents and the making of the Loan evidenced thereby, and
any investigation at any time made by or on behalf of the Bank will
not diminish the Bank's right to rely thereon. All statements
contained in any certificate or other instrument delivered by or on
behalf of the Borrower or the Guarantors under or pursuant to this
Agreement or in connection with the transactions contemplated hereby
will constitute representations and warranties made by the Borrower
and the Guarantors hereunder.
7.12 Solvency. Upon giving effect to the issuance of the Note, the
execution of the Loan Documents by the Borrower and the Guarantors and
the consummation of the transactions contemplated hereby, the Borrower
and the Guarantors will be solvent (as such term is used in applicable
bankruptcy, liquidation, receivership, insolvency or similar laws).
8. Affirmative Covenants. Until the expiration of the Bank's obligation to
advance funds under this Agreement and the payment in full of the Obligations,
unless the Bank otherwise consents in writing, the Borrower agrees to perform or
cause to be performed the following:
8.1 Performance of Obligations. The Borrower will pay and perform all
Obligations under the Loan Documents. The Borrower and the
Subsidiaries will perform all obligations under all material contracts
and agreements relating to their respective businesses, and will
enforce the performance of the obligations of the other parties
thereto.
8.2 Notifications. The Borrower will give prompt written notice to the
Bank of: (a) any event of Default; (b) any change of management of the
Borrower; (c) all material litigation affecting the Borrower, the
Subsidiaries, the Guarantors or the Collateral; and (d) any other
matter which has resulted in, or might result in (i) a material
adverse change in the consolidated financial condition of the
Borrower, the Subsidiaries or the Guarantors or (ii) a material
adverse change in the ability
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of the Borrower to perform the Obligations, warranties, covenants and
conditions of the Loan Documents.
8.3 Records Inspections. The Borrower and the Subsidiaries will maintain
full and accurate accounts and records of operations on a basis
consistent with prior periods. The Borrower will permit the Bank and
the Bank's designated representatives to have access to the records
and accounts of the Borrower and the Subsidiaries at all reasonable
times to perform such inspections, audits and examinations as the Bank
might reasonably request from time to time.
8.4 Financial Information. The Borrower and the Guarantors will furnish to
the Bank:
8.4.1 Financial Statements. Accurate books and records of account
will be kept by the Borrower and the Guarantors in accordance
with accounting principles consistently applied. The Bank will
have the right to examine and copy such books and records and
the Canadian, foreign, federal and state income tax returns of
the Borrower and the Guarantors, to discuss the affairs,
finances and accounts of the Borrower and the Guarantors, and
to be informed as to the same at such times and intervals as
the Bank might reasonably request. The Borrower will furnish
to the Bank no later than ninety (90) days after the close of
the Borrower's fiscal year, year end annual audited
consolidated financial statements of the Borrower. The annual
audited financial statements of the Borrower will be prepared
by an independent certified public accounting firm selected by
the Borrower and approved by the Bank, will be prepared in
accordance with generally accepted accounting principles
consistently applied and will be certified to the Bank. The
Guarantors will furnish to the Bank annual year end financial
statements. The financial statements of the Guarantors will be
certified to the Bank, will be prepared in accordance with
generally accepted accounting principles consistently applied
and will be in form and substance satisfactory to the Bank.
Within thirty (30) days after request by the Bank, the
Borrower and the Guarantors will furnish to the Bank complete
copies of all Canadian, foreign, federal and state income tax
returns for the preceding year with all schedules attached.
8.4.2 Other Information. At the Bank's request from time to time,
the Borrower and the Guarantors will provide the Bank with
such other information as the Bank may reasonably request
regarding the business affairs and financial condition of the
Borrower, the Subsidiaries and the Guarantors and the Borrower
and the Guarantors will provide access to the Bank at all
reasonable times to all documents and information relating to
the Collateral.
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8.5 Accounts. The Borrower will maintain the Borrower's primary accounts
on deposit with a financial institution approved by the Bank which
approval will not be unreasonably withheld.
8.6 Additional Documents. The Borrower and the Guarantors will promptly,
on demand by the Bank, perform or cause to be performed such actions
and execute or cause to be executed all such additional agreements,
contracts, indentures, documents and instruments as might be
reasonably requested by the Bank to satisfy the requirements of this
Agreement and the disbursement of funds hereunder.
8.7 Governmental Approvals. The Borrower will obtain and continuously
maintain and will cause each of the Subsidiaries to obtain and
continuously maintain all permits, licenses, easements, rights-of-way
and governmental authorities necessary for the proper operation of
their respective businesses.
8.8 Taxes. All taxes, assessments, governmental charges and levies
imposed on the Borrower, the Subsidiaries or the Guarantors or the
assets, income or profits of the Borrower, the Subsidiaries or the
Guarantors, will be paid prior to the date on which penalties attach
thereto, provided that neither the Borrower, the Subsidiaries nor the
Guarantors will be required to pay any such charge which is being
contested in good faith by proper proceedings and for which adequate
reserves have been established under generally accepted accounting
principles.
8.9 Access. Any representative of the Bank will have reasonable access to
the Collateral and any other business property owned by the Borrower
or the Guarantors.
8.10 Operation. The Borrower agrees to operate its business and to cause
each of the Subsidiaries to operate their respective businesses in a
prudent and efficient manner consistent with normal industry
practices.
8.11 Qualification; Licenses. The Borrower will take such actions or cause
such actions to be taken as might be required to maintain the
existence of the Borrower and each of the Subsidiaries and all
governmental and private permits, licenses and authorities of the
Borrower and the Subsidiaries necessary or desirable to the
continuation of their respective businesses and will comply with all
statutes and governmental regulations.
8.12 Insurance. Policies of insurance will be maintained by the Borrower
and the Subsidiaries with companies, in amounts, and against
reasonable risks satisfactory to the Bank. The Borrower and the
Guarantors will furnish the Bank with a schedule of all insurance
policies in effect and, upon request of the Bank, evidence of payment
of the premium for each insurance policy.
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8.13 Operation, Title, Pledge. The Borrower agrees to grant to the Bank
first perfected security interests covering all of the Collateral and
to promptly deliver to the Bank such security documents and other
instruments as might be required by the Bank to subject the Collateral
to liens in favor of the Bank. The Borrower will maintain and defend
good and marketable title to the Collateral free and clear of all
claims, liens or encumbrances except those in favor of the Bank.
8.14 Compliance with Applicable Law. The Borrower and the Guarantors will
continuously comply with all applicable regulations, rules, ordinances
or orders of the United States of America, any state, or any other
jurisdiction, or of any agency of federal state and local taxing
authority or other agency which might materially and adversely affect
the business, operations or financial condition of the Borrower.
8.15 Legal Existence. The Borrower will take such actions or cause such
actions to be taken as might be required to maintain the legal
existence of the Borrower and each of the Subsidiaries and the right
to conduct their respective businesses in those countries and states
in which the nature of the business requires qualification to do
business therein, will comply with and will cause each of the
Subsidiaries to comply with all valid and applicable statutes, rules
and regulations and will continue to conduct the respective businesses
of the Borrower and the Subsidiaries in substantially the same manner
and field as such businesses are now conducted.
9. Negative Covenants. The Borrower agrees that until the expiration of the
obligation of the Bank to advance funds under this Agreement and payment in full
of the Obligations, unless the Bank waives compliance in writing:
9.1 Creation of Liens. Neither the Borrower, any of the Subsidiaries nor
the Guarantors will create, assume or suffer to exist any pledge,
security interest, encumbrance or other lien (including the lien of an
attachment, judgment or execution) securing a charge or obligation
affecting any or all of the Collateral, excluding only the liens
granted to the Bank.
9.2 Liquidation, Merger or Sale of Assets. Neither the Borrower nor any
of the Subsidiaries will liquidate, dissolve or convey, sell, assign
or otherwise dispose of any substantial part of their respective
assets, except for sales in the ordinary course of business. None of
the Subsidiaries will enter into any consolidation, merger,
partnership, syndicate, pool or other combination, except with the
Borrower or another Subsidiary.
9.3 Creation of Debt. The Borrower will not incur, create or suffer to
exist any indebtedness for borrowed money, or issue, discount or sell
any obligation of the Borrower, excluding only: (a) the indebtedness
to the Bank contemplated by this Agreement; (b) current accounts
payable arising in the ordinary course of the Borrower's business; (c)
indebtedness outstanding as of the Closing Date; and (d)
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other indebtedness of the Borrower and the Subsidiaries not to exceed
Twenty-five Million Dollars ($25,000,000.00) in the aggregate.
9.4 Loans and Guaranties. The Borrower will not make any loans, advances
or extensions of credit to any Person, firm or corporation nor become
a guarantor or surety directly or indirectly, except loans, advances
and extensions of credit to or among the Borrower and the Subsidiaries
and loans to employees relating to their employment.
9.5 Transfers. The Borrower will not transfer or permit to be transferred
voluntarily or by operation of law any interest in the Collateral and
the Borrower will not sell, transfer or otherwise dispose of or
create, assume or suffer to exist any pledge, lien, security interest,
charge or encumbrance on any interest in any of the Subsidiaries owned
by the Borrower.
9.6 Other Agreements. The Borrower will not enter into any agreement that
limits or restricts the ability of the Borrower to comply with the
terms of the Loan Documents.
9.7 Limitation on Distributions and Redemptions. The Borrower will not:
(a) declare, pay or make any dividends or other distributions in
respect of any class of capital stock or other interest in the
Borrower; or (b) enter into any management agreement with any
affiliate or other Person except in the ordinary course of business.
Excluding any such items by, between or among the Borrower and the
Subsidiaries, neither the Borrower nor any of the Subsidiaries will
directly or indirectly make any capital contribution to or purchase,
redeem, acquire or retire any of the capital stock of the Borrower or
the Subsidiaries (whether such capital stock is now or hereafter
issued, outstanding or created).
9.8 Transactions with Affiliates. The Borrower will not engage in any
material transaction with any affiliate of the Borrower on terms which
are less favorable to the Borrower than those which would have been
obtainable at the time in arm's-length dealing with Persons other than
such affiliates.
9.9 Subsidiaries. The Borrower will not create or own any subsidiaries
other than the Subsidiaries and subsidiaries listed on Schedule "9.9"
attached hereto as a part hereof. The Borrower will not permit any of
the Subsidiaries to issue any additional capital stock of any class or
series or incur any secured indebtedness without the Bank's written
consent.
10. Default. The Bank may terminate all obligations of the Bank to make further
disbursements under the Note and the Bank may declare the Note and all other
indebtedness and Obligations of the Borrower owing to the Bank to be due and
payable if any of the following events occur and are not remedied by the
Borrower or waived by the Bank in writing:
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10.1 Nonpayment of Note. A default in payment when due of any interest on
or principal of the Note; or
10.2 Other Nonpayment. A default in payment when due of any other amount
payable to the Bank under the terms of any of the Loan Documents; or
10.3 Breach of Agreement. A default by the Borrower or the Guarantors in
the performance or observance of any agreement contained in the Loan
Documents, or under the terms of any other instrument delivered to
the Bank in connection with this Agreement; or
10.4 Lien Filings. The existence of any lien on the Collateral without
indemnification therefor satisfactory to the Bank; or
10.5 Other Agreements. The rescission, abandonment, disclaimer or breach
of the Guarantees or other agreement affecting any part of the
Collateral or the Guarantees; or
10.6 Representations. Any representation, statement, certificate,
schedule or report made or furnished to the Bank by the Borrower or
the Guarantors proves to be false or erroneous in any material
respect at the time of the making thereof or any representation or
warranty ceases to be complied with in any material respect; or
10.7 Bankruptcy. The Borrower, any of the Subsidiaries or any Guarantor
becomes bankrupt or makes a general assignment for the benefit of
creditors; or the Borrower, any of the Subsidiaries or any Guarantor
applies for, or consents to, the appointment of a trustee, receiver
or liquidator or authorizes such application or consent, or if
proceedings seeking such appointment are commenced against the
Borrower, any of the Subsidiaries or any Guarantor and remain
undismissed and unstayed for ninety (90) days; or the Borrower, any
of the Subsidiaries or any Guarantor authorizes or files a voluntary
petition in bankruptcy or applies for or consents to the application
of any bankruptcy, reorganization, readjustment of debt, insolvency,
dissolution, liquidation or other similar law of any jurisdiction;
or
10.8 Judgment. Entry by any court of judgment against the Borrower, any
of the Subsidiaries or any Guarantor in excess of One Million
Dollars ($1,000,000.00) which is not adequately covered by insurance
or secured by a supersedes bond, or any attachment of any material
portion of the assets of the Borrower, any of the Subsidiaries or
any Guarantor which is not discharged to the satisfaction of the
Bank within thirty (30) days thereof; or
10.9 Maturity of Other Debt. The occurrence of an event of default under
or the acceleration of the maturity of the indebtedness of the
Borrower or any Guarantor
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to any other Person in an amount in excess of One Million Dollars
($1,000,000.00); or
10.10 Failure of Liens. Failure of the Bank's liens and security interests
covering the Collateral to constitute a first and prior lien on any
material portion of the Collateral; or
10.11 Indenture. The occurrence of an event of default under the
Borrower's Indenture covering the Borrower's $110,000,000 12.5%
Senior Notes due 2005 or any action by the holders of such Senior
Notes to amend the Borrower's Indenture; or
10.12 Change of Control. Any Change of Control occurs.
10.13 Opportunity to Cure. In the event the Borrower cures or causes to be
cured such Default within thirty (30) days after receipt of written
notice thereof, the parties will be restored to their respective
rights and obligations under this Agreement as if no Default had
occurred, except that no right to cure or notice of Default will be
given as to events of Default in paragraphs 10.1, 10.4, 10.5, 10.7,
10.8, 10.10, 10.11 or 10.12. The Borrower's opportunity to cure will
be applicable as herein set forth notwithstanding any contrary
provisions contained in any of the other Loan Documents.
11. Remedies. In the event of Default, the Bank will have the following
remedies:
11.1 Acceleration of Note. The Bank may, at the Bank's option, declare
the Note and all other Obligations to be immediately due and
payable, and the Bank will be entitled to proceed to selectively and
successively enforce the Bank's rights under the Loan Documents or
any one or more of them.
11.2 Selective Enforcement. In the event the Bank elects to selectively
and successively enforce the Bank's rights under any one or more of
the instruments securing payment of the Obligations, such action
will not be deemed a waiver or discharge of any other lien or
encumbrance securing payment of the Obligations until such time as
the Bank has been paid in full all sums owing to the Bank.
11.3 Performance by Bank. In the event the Borrower fails to cure any
Default in the time provided, the Bank will at any time thereafter
have the right (but not the obligation) to: (a) take possession of
the Collateral and dispose of the Collateral in such manner as the
Bank determines in the Bank's sole discretion (subject to the Bank's
obligations to make a rights offering); (b) make such payments and
perform such acts as might be determined by the Bank to be necessary
or appropriate to perform or to cure any default in performance by
the Borrower under all agreements affecting the Collateral; and (c)
make advances under the Note without the consent of the Borrower to
pay interest accrued thereon and all costs of such operation. If the
Bank exercises such option, all costs will be paid
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to the Bank by the Borrower. The Borrower and the Guarantors hereby
authorize the Bank to increase the indebtedness owing by the
Borrower to the Bank by such costs and agrees that the Loan
Documents will evidence and secure payment of such costs whether or
not the total funds advanced exceed the face amount of the Loan
Documents.
11.4 Waiver of Default. The Bank may, by an instrument in writing signed
by the Bank, waive any Default which has occurred and any of the
consequences of such Default, and in such event, the Bank, the
Borrower and the Guarantors will be restored to their respective
former positions, rights and obligations hereunder. Any Default so
waived will, for the purposes of this Agreement, be deemed to have
been cured and not to be continuing; but no such waiver will extend
to any subsequent or other Default or impair any consequence of such
subsequent or other Default.
11.5 Deposits; Setoff. Regardless of the adequacy of any other collateral
security held by the Bank, any deposits or other sums credited by or
due from the Bank to the Borrower or the Guarantors (excluding any
funds held in escrow by the Bank pursuant to a written escrow
agreement) will at all times constitute collateral security for all
indebtedness and obligations of the Borrower and the Guarantors to
the Bank and may be set off against any and all liabilities of the
Borrower and the Guarantors to the Bank. The rights granted by this
paragraph are in addition to the rights of the Bank under any
statutory banker's lien now or hereafter in effect.
12. Miscellaneous. It is further agreed as follows:
12.1 Participating Banks. The Borrower and the Guarantors agree that
although the Loan Documents name the Bank as the holder thereof, the
Bank is authorized to sell participation interests in the Loan to
other financial institutions (a "Participating Bank") and the
Borrower and the Guarantors agree that, subject to the terms of the
agreements of participation, each Participating Bank will be
entitled to rely on the terms of the Loan Documents as if the
Participating Bank had been named as an original party to the Loan
Documents.
12.2 Cumulative Remedies. No failure on the part of the Bank to exercise
and no delay in exercising any right hereunder will operate as a
waiver thereof, nor will any single or partial exercise by the Bank
of any right hereunder preclude any other or further right of
exercise thereof or the exercise of any other right.
12.3 Survival of Representations. All representations and warranties made
herein will survive the making of the Loan hereunder and the
delivery of the Loan Documents.
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12.4 Expenses. On the Closing Date, the Borrower will (except where
prohibited by applicable law) pay all reasonable fees, costs,
expenses (including legal expenses and attorneys' fees) and
disbursements of the Bank incident to: (a) the preparation,
negotiation, amendment, modification, or enforcement of this
Agreement and the Loan Documents or the protection of the rights of
the Bank in connection with the Loan Documents and the transactions
contemplated thereby; and (b) the collection or enforcement of the
Loan Documents whether by judicial proceedings, proceedings under
Chapter 7 or 11 of the Bankruptcy Code or any successor statute
thereto, or otherwise.
12.5 Notices. Any notice, demand or communication required or permitted
to be given by any provision of this Agreement will be in writing
and will be deemed to have been given and received when delivered
personally or by telefacsimile to the party designated to receive
such notice, or on the date following the day sent by overnight
courier, or on the third (3rd) business day after the same is sent
by certified mail, postage and charges prepaid, directed to the
following addresses or to such other or additional addresses as any
party might designate by written notice to the other parties:
The Bank: Stillwater National Bank and Trust Company, N.A.
Attention: Mr. G.P. Johnson Hightower
6305 Waterford Blvd., Suite 205
Oklahoma City, Oklahoma 73118
with copy to: C. Ray Lees, Esquire
Self, Giddens & Lees, Inc.
210 Park Avenue, Suite 2725
Oklahoma City, Oklahoma 73102
The Borrower: Seven Seas Petroleum Inc.
Attention: Larry A. Ray, President
5555 San Felipe, Suite 1700
Houston, Texas 77056
with copy to: Gary F. Fuller, Esquire
McAfee & Taft
211 North Robinson, 10th Floor
Oklahoma City, Oklahoma 73102
12.6 Construction. The Loan Documents are intended to constitute
contracts made under the laws of the State of Oklahoma and to be
construed in accordance with the internal laws of said state.
Nothing in this Agreement will be construed to constitute the Bank
as a joint venturer with the Borrower or to constitute a
partnership. The descriptive headings of the paragraphs of this
Agreement (except the terms defined at paragraph hereof) are for
convenience only and are not to
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be used in the construction of the content of this Agreement. This
Agreement may be executed in multiple counterparts, each of which
will constitute one agreement.
12.7 Binding Effect. This Agreement will be binding on and will inure to
the benefit of the Bank, the Borrower and their respective heirs,
successors and assigns.
12.8 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer upon any Person, other than the
parties hereto and their respective heirs, successors and assigns,
any rights or remedies under or by reason of this Agreement or to
constitute such Person a third party beneficiary of this Agreement.
12.9 Assignment. Neither this Agreement, the Loan Documents nor the
proceeds from the Loan will be assigned without the Bank's prior
written consent, and without such consent, there will be no right to
designate a payee of the proceeds from the Loan.
12.10 Time. Time is of the essence of this Agreement and each provision of
the other Loan Documents.
12.11 Severability. In case any one or more of the provisions contained in
the Loan Documents should be invalid, illegal or unenforceable in
any respect in any jurisdiction, the validity, legality and
enforceability of such provision or provisions will not in any way
be affected or impaired thereby in any other jurisdiction; and the
validity, legality and enforceability of the remaining provisions
contained herein and therein will not in any way be affected or
impaired thereby.
12.12 Verbal Change. The Loan Documents may not be amended, altered,
modified or changed verbally, but only by an agreement in writing
signed by the party against whom enforcement of any amendment,
waiver, change, modification or discharge is sought.
12.13 No Waiver. No advance of the proceeds from the Loan under any of the
Loan Documents will constitute a waiver of any of the
representations, warranties, conditions or covenants of the Borrower
or the Guarantors under the Loan Documents. In the event the
Borrower or any Guarantor is unable to satisfy any warranty,
condition or covenant contained in the Loan Documents, no advance of
the proceeds from the Loan will preclude the Bank from thereafter
declaring such inability to be an event of Default.
12.14 Acknowledgments and Admissions. The Borrower and the Guarantors
hereby represent, warrant, acknowledge and admit that: (a) each of
them has made an independent decision to enter into this Agreement
and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant
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or undertaking by the Bank, whether written, oral or implicit, other
than as expressly set out in this Agreement or in another Loan
Document delivered on or after the date hereof; (b) there are no
representations, warranties, covenants, undertakings or agreements
by the Bank as to the Loan Documents except as expressly set out in
this Agreement or in another Loan Document delivered on or after the
date hereof; (c) the Bank has no fiduciary obligation toward the
Borrower or the Guarantors with respect to any Loan Document or the
transactions contemplated thereby; (d) the relationship pursuant to
the Loan Documents between the Borrower and the Guarantors, on the
one hand, and the Bank, on the other hand, is and will be solely
that of debtor and creditor, respectively; (e) no partnership or
joint venture exists with respect to the Loan Documents between the
Borrower or the Guarantors and the Bank; (f) should a Default occur
or exist, the Bank will determine in its sole discretion and for its
own reasons what remedies and actions it will or will not exercise
or take at the time; (g) without limiting any of the foregoing,
neither the Borrower nor any Guarantor is relying upon any
representation or covenant by the Bank, or any representative
thereof, and no such representation or covenant has been made, that
the Bank will, at the time of an event of Default, or at any other
time, waive, negotiate, discuss or take or refrain from taking any
action permitted under the Loan Documents with respect to any such
event of Default or any other provision of the Loan Documents; and
(h) the Bank has relied upon the truthfulness of the acknowledgments
in this paragraph in deciding to execute and deliver this Agreement
and to become obligated hereunder.
12.15 JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS 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.
12.16 INDEMNITY. THE BORROWER AND THE GUARANTORS AGREE TO INDEMNIFY THE
BANK, UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS,
JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS
(INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND
ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS PARAGRAPH
COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN
WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE BANK GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY
ASSOCIATED WITH THE COLLATERAL, THE LOAN DOCUMENTS AND THE
TRANSACTIONS AND EVENTS
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(INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF) AT ANY TIME
ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN
CONTRACT OR TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR
NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY THE BORROWER, THE
GUARANTORS OR THE BANK OR ANY LIABILITIES OR DUTIES OF THE BORROWER,
THE GUARANTORS OR THE BANK WITH RESPECT TO HAZARDOUS MATERIALS FOUND
IN OR RELEASED INTO THE ENVIRONMENT).
THE FOREGOING INDEMNIFICATION WILL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE
OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY
KIND BY THE BANK, PROVIDED ONLY THAT THE BANK WILL NOT BE ENTITLED
UNDER THIS PARAGRAPH TO RECEIVE INDEMNIFICATION FOR THAT PORTION, IF
ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS
OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED
IN A FINAL JUDGMENT OR WHICH RELATES TO ACTIONS TAKEN BY THE BANK
AFTER THE BANK HAS TAKEN TITLE TO THE COLLATERAL. IF ANY PERSON
(INCLUDING THE BORROWER, ANY OF ITS AFFILIATES OR ANY GUARANTOR)
EVER ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY THE
BANK, THE INDEMNIFICATION PROVIDED FOR IN THIS PARAGRAPH WILL
NONETHELESS BE PAID UPON DEMAND, SUBJECT TO LATER ADJUSTMENT OR
REIMBURSEMENT, UNTIL SUCH TIME AS A COURT OF COMPETENT JURISDICTION
ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF THE ALLEGED
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. AS USED IN THIS PARAGRAPH
THE TERM "BANK" WILL REFER NOT ONLY TO THE PERSON DESIGNATED AS SUCH
BUT ALSO TO EACH DIRECTOR, OFFICER, AGENT, ATTORNEY, EMPLOYEE,
PARTICIPATING BANK, REPRESENTATIVE AND AFFILIATE OF THE BANK.
12.17 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF THE BORROWER,
THE GUARANTORS AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY A JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT
ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR
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ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE
OR AFTER MATURITY, (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (C) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
AS USED IN THIS PARAGRAPH, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (REGARDLESS OF HOW
NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY
HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY
HERETO.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective the date first above written.
SEVEN SEAS PETROLEUM INC., a Yukon
Territory, Canada corporation
By /s/ LARRY A. RAY
---------------------------------------
Larry A. Ray, President
(the "Borrower")
STILLWATER NATIONAL BANK AND TRUST COMPANY, N.A.
By /s/ G.P. JOHNSON HIGHTOWER
---------------------------------------
G.P. Johnson Hightower, Senior Vice President
(the "Bank")
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made effective the 20th day of December,
2000, by ROBERT A. HEFNER III, an individual, THE GHK COMPANY L.L.C., an
Oklahoma limited liability company, and RAMIIILAJ A LIMITED PARTNERSHIP, a Texas
limited partnership (jointly and severally referred to herein as the
"Guarantors"), each having a mailing address at c/o The GHK Company L.L.C., 6305
Waterford Boulevard, Suite 470, Oklahoma City, Oklahoma 73118, in favor of
STILLWATER NATIONAL BANK AND TRUST COMPANY, N.A. (the "Lender"), having a
mailing address at 6305 Waterford Boulevard, Suite 205, Oklahoma City, Oklahoma
73118.
WITNESSETH:
WHEREAS, Seven Seas Petroleum Inc., a Yukon Territory, Canada
corporation (the "Borrower"), and the Lender have entered into that certain Loan
Agreement of even date herewith (the "Loan Agreement"), pursuant to which the
Lender has agreed to extend certain credit (the "Loan") to the Borrower
evidenced by that certain Promissory Note of even date herewith in the principal
amount of Ten Million Dollars ($10,000,000.00); and
WHEREAS, this Agreement is executed by the Guarantors and delivered to
the Lender to induce the Lender to make the Loan and in satisfaction of a
material condition precedent to such extension of credit by the Lender.
NOW, THEREFORE, in consideration of the Loan by the Lender to the
Borrower and the benefits to be derived by the Guarantors therefrom, it is
agreed as follows:
1. Definitions. Except as otherwise defined herein, all terms defined in the
Loan Agreement will have the same meanings herein as therein defined unless the
context otherwise requires. All references herein to any Loan Document, or other
document or instrument refer to the same as from time to time amended,
supplemented or restated. As used in this Agreement, "Obligors" means, jointly
and severally, the Borrower, the Guarantors and any other endorsers, guarantors
or obligors, primary or secondary, of any or all of the Obligations.
2. Guaranty. The Guarantors jointly and severally irrevocably and
unconditionally guarantee to the Lender the payment of the Obligations of the
Borrower contained in the Loan Documents including, without implied limitation,
the payment of all principal, interest, attorneys' fees, expenses of collection
and other sums now or hereafter owing by the Borrower to the Lender thereunder.
The obligation of the Guarantors hereunder is an absolute, unconditional,
irrevocable and continuing guaranty of payment and performance and will not
terminate until the Borrower has paid in full all amounts owing to the Lender
under the Loan Documents and has performed all of the Borrower's Obligations
under the Loan Documents. Without limiting the generality of the foregoing, each
Guarantor's liability hereunder will extend to and include all post-petition
interest, expenses and other duties and liabilities of the Borrower described
above in this paragraph which would be owed by the Borrower but for the fact
that such Obligations are unenforceable or not allowable due to the existence of
a bankruptcy, reorganization, or similar proceeding involving the Borrower. If
the Borrower for any reason fails to pay any Obligation,
80
as and when such Obligation will become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
the Guarantors will, upon demand by the Lender, pay such Obligation in full to
the Lender. If the Borrower for any reason fails to perform promptly any
Obligation, the Guarantors will, upon demand by the Lender, cause such
Obligation to be performed or, if specified by the Lender, provide sufficient
funds, in such amount and manner as the Lender determines in good faith, for the
prompt, full and faithful performance of such Obligation by the Lender or such
other Person as the Lender designates. As between each of the Guarantors and the
Lender, this Agreement will be considered a primary and liquidated liability of
each Guarantor.
3. Unconditional Guaranty. No action which the Lender may take or omit to take
in connection with any of the Loan Documents, any of the Obligations (or any
other indebtedness owing by the Borrower to the Lender), or any Collateral, and
no course of dealing of the Lender with any Obligor or any other Person, will
release or diminish any Guarantor's obligations, liabilities, agreements or
duties hereunder, affect this Agreement in any way, or afford any Guarantor any
recourse against the Lender, regardless of whether any such action or inaction
may increase any risks to or liabilities of the Lender or any Obligor or
increase any risk to or diminish any safeguard of any Collateral. Without
limiting the foregoing, each of the Guarantors hereby expressly agrees that the
Lender may, from time to time, without notice to or the consent of such
Guarantor, do any or all of the following: (a) amend, change or modify, in whole
or in part, any one or more of the Loan Documents and give or refuse to give any
waivers or other indulgences with respect thereto; (b) neglect, delay, fail, or
refuse to take or prosecute any action for the collection or enforcement of any
of the Obligations, to foreclose or take or prosecute any action in connection
with any Collateral or Loan Document, to bring suit against any Obligor or any
other Person, or to take any other action concerning the Obligations or the Loan
Documents; (c) accelerate, change, rearrange, extend or renew the time, rate,
terms or manner for payment or performance of any one or more of the Obligations
(whether for principal, interest, fees, expenses, indemnifications, affirmative
or negative covenants, or otherwise); (d) compromise or settle any unpaid or
unperformed Obligation or any other obligation or amount due or owing, or
claimed to be due or owing, under any one or more of the Loan Documents; (e)
take, exchange, amend, eliminate, surrender, release, or subordinate any or all
Collateral for any or all of the Obligations, accept additional or substituted
Collateral therefor, and perfect or fail to perfect the Lender's rights in any
or all Collateral; (f) discharge, release, substitute or add Obligors; or (g)
apply all monies received from Obligors or others, or from any Collateral for
any of the Obligations, as the Lender may determine to be in the Lender's best
interest, without in any way being required to marshall Collateral or assets or
to apply all or any part of such monies upon any particular Obligations. No
action or inaction of any Obligor or any other Person, and no change of law or
circumstances, will release or diminish any Guarantor's obligations,
liabilities, agreements or duties hereunder, affect this Agreement in any way,
or afford any Guarantor any recourse against the Lender.
4. No Release. The Guarantors agree that the Guarantors' liability hereunder
will not be released, reduced, impaired or affected by the occurrence of any one
or more of the following events: (a) the Lender obtaining collateral from the
Borrower or any other Obligor to secure payment or performance under the Loan
Documents; (b) the assumption of liability by any other Person (whether as
guarantor or otherwise) for payment or performance under the Loan Documents; (c)
the release, surrender, exchange, loss, termination, waiver or other discharge
of
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any collateral securing payment or performance under the Loan Documents; (d)
the subordination, relinquishment or discharge of the Lender's rights relating
to the Loan Documents or any collateral described therein; (e) the dissolution,
insolvency, bankruptcy, reorganization or disability of the Borrower, any other
Obligor or any other Person now or hereafter liable for payment or performance
under the Loan Documents; (f) the increase, renewal, consolidation, extension,
modification, rearrangement or amendment from time to time of the Loan or of the
terms of any one or more of the Loan Documents; (g) the sale, encumbrance,
transfer or other modification of the ownership of the Borrower or the
Borrower=s assets or the change in the financial condition or management of the
Borrower; (h) the invalidity, unenforceability or insufficiency of any one or
more of the Loan Documents or any collateral securing payment or performance
thereunder; or (i) the release of any Person from any personal liability with
respect to all or part of the guaranteed Obligations.
5. Enforcement. The Lender may invoke the benefits of this Agreement and any
Collateral pledged by the Guarantors before pursuing any remedies against any
Obligor or any other Person and before proceeding against any other Collateral
now or hereafter existing for the payment or performance of any of the
Obligations. The Lender may maintain an action against any Guarantor on this
Agreement or the Guarantor Security Agreement without joining any other Obligor
therein and without bringing a separate action against any other Obligor. If any
payment to the Lender by any Obligor is held to constitute a preference or a
voidable transfer under applicable state or federal laws, or if for any other
reason the Lender is required to refund such payment to the payor thereof or to
pay the amount thereof to any other Person, such payment to the Lender will not
constitute a release of any Guarantor from any liability hereunder, and each
Guarantor agrees to pay such amount to the Lender on demand and agrees and
acknowledges that this Agreement will continue to be effective or will be
reinstated, as the case may be, to the extent of any such payment or payments.
Any transfer by subrogation which is made as contemplated in this Agreement
prior to any such payment or payments will (regardless of the terms of such
transfer) be automatically voided upon the making of any such payment or
payments, and all rights so transferred will thereupon revert to and be vested
in the Lender. This is a continuing guaranty and will apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
6. Waiver of Rights. The Guarantors waive notice of the incurrence of any
Obligation by the Borrower, and notice of any kind concerning the assets,
liabilities, financial condition, creditworthiness, businesses, prospects, or
other affairs of the Borrower (it being understood and agreed that: (a) each
Guarantor will take full responsibility for informing itself of such matters,
(b) the Lender will not have any responsibility of any kind to inform any
Guarantor of such matters, and (c) the Lender is hereby authorized to assume
that each Guarantor, by virtue of its relationships with the Borrower which are
independent of this Agreement, has full and complete knowledge of such matters
whenever the Lender extends credit to the Borrower or take any other action
which may change or increase such Guarantor's liabilities or losses hereunder).
The Guarantors waive diligence, presentment, protest, notice of dishonor, notice
of acceptance of this Agreement and all other notices of any nature except as
provided in the Loan Documents or this Agreement. Performance by the Guarantors
hereunder will not entitle the Guarantors to any payment by the Borrower or any
other Obligor of the Obligations of the Borrower whether under the Loan
Documents or otherwise by reason of any claim for contribution, indemnification,
reimbursement, subrogation or otherwise, until such time as the Borrower and any
other Obligor
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of the Obligations of the Borrower under the Loan Documents have paid in full
all amounts owing to the Lender and have performed all of the Borrower's
Obligations under the Loan Documents. Notwithstanding anything herein to the
contrary, except as specifically provided herein, the Guarantors hereby waive
all rights of subrogation, contribution, reimbursement or indemnity against the
Borrower (but not against any other party). If any Guarantor makes payment to
the Lender of all or any portion of the Obligations and if all of the
Obligations will be finally paid in full, the Lender will, at such Guarantor's
request and expense, execute and deliver to such Guarantor (without recourse,
representation or warranty) appropriate documents necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Obligations
resulting from such payment by such Guarantor; provided that such transfer will
be subject to the provisions of this Agreement and the rights of any other
Obligor (excluding the Borrower) paying a portion of the Obligations.
7. Expenses of Collection. The Guarantors agree that in any action brought to
enforce this Agreement, the Guarantors will pay to the Lender the reasonable
attorneys' fees, court costs and other litigation expenses incurred by the
Lender.
8. Cumulative Remedies. On the occurrence of any event of Default under the Loan
Documents or this Agreement, the Lender will be entitled to selectively and
successively enforce any one or more of the rights held by the Lender, and such
action will not be deemed a waiver of any other right held by the Lender. Except
as provided herein or in the Loan Documents, all of the remedies of the Lender
under this Agreement and the Loan Documents are cumulative and not alternative.
Each Guarantor will be liable to the Lender hereunder for any deficiency
resulting from the exercise by the Lender of any rights or remedies even though
any rights which the Guarantors may have against the Borrower or others may be
destroyed or diminished by exercise of any such right or remedy. No failure on
the part of the Lender to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document will operate as a waiver thereof; nor
will any single or partial exercise of any right preclude any other or further
exercise thereof or the exercise of any other right. The rights, powers and
remedies of the Lender provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any other rights,
powers or remedies provided by law or in equity. The rights of the Lender
hereunder are not conditional or contingent on any attempt by the Lender to
exercise any of its rights under any other Loan Document against any Obligor or
any other Person.
9. Successors and Assigns. No Guarantor's rights or obligations hereunder may be
assigned or delegated, but this Agreement and such obligations will pass to and
be fully binding upon the successors of each Guarantor, as well as each
Guarantor. This Agreement will apply to and inure to the benefit of the Lender
and the Lender's successors or assigns. Without limiting the generality of the
immediately preceding sentence, the Lender may assign, grant a participation in,
or otherwise transfer any Obligation held by it or any portion thereof, and the
Lender may assign or otherwise transfer its rights or any portion thereof under
any Loan Document, to any other Person, and such other Person will thereupon
become vested with all of the benefits in respect thereof granted to the Lender
hereunder unless otherwise expressly provided by the Lender in connection with
such assignment or transfer.
10. Subordination. Each Guarantor hereby subordinates and makes inferior to the
Obligations any and all indebtedness now or at any time hereafter owed by the
Borrower to any
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Guarantor except for services actually rendered by the Guarantors, or any of
them, to the Borrower or reimbursement of expenses Lender actually paid by the
Guarantors, or any of them. Each Guarantor agrees that after the occurrence of
any event of Default such Guarantor will neither permit the Borrower to repay
such indebtedness or any part thereof nor accept payment from the Borrower of
such indebtedness or any part thereof without the prior written consent of the
Lender. If any Guarantor receives any such payment without the prior written
consent of the Lender, the amount so paid will be held in trust for the benefit
of the Lender, will be segregated from the other funds of such Guarantor, and
will forthwith be paid over to the Lender to be held by the Lender as collateral
for, or then or at any time thereafter applied in whole or in part by the Lender
against, all or any portions of the Obligations, whether matured or unmatured,
in such order as the Lender elects.
11. Representations and Warranties. Each Guarantor hereby represents and
warrants to the Lender as follows: (a) the recitals at the beginning of this
Agreement are true and correct in all respects; (b) each Guarantor which is not
a natural Person is a limited partnership, limited liability company or
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization or incorporation and such Guarantor has all
requisite partnership, limited liability company or corporate power and
authority to execute, deliver and perform this Agreement and pledge the
Guarantor Collateral; (c) the execution, delivery and performance by each
Guarantor of this Agreement have been duly authorized by all necessary
partnership, limited liability company or corporate action and do not and will
not contravene its certificate of limited partnership or limited partnership
agreement, articles of organization or operating agreement or certificate or
articles of incorporation or bylaws; (d) the execution, delivery and performance
by each Guarantor of this Agreement do not and will not contravene any law or
governmental regulation or any contractual restriction binding on or affecting
such Guarantor, or any of its affiliates or properties including, without
limitation, the Guarantor Collateral, and do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to the Guarantor Collateral or any other
properties; (e) no authorization or approval or other action by, and no notice
to or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by any
Guarantor of this Agreement or the Guarantor Security Agreement; (f) this
Agreement is a legal, valid and binding obligation of each Guarantor,
enforceable against such Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights; (g) there is no action, suit
or proceeding pending or, to the knowledge of any Guarantor, threatened against
or otherwise affecting any Guarantor or any of the Guarantor Collateral before
any court, arbitrator or governmental department, commission, board, bureau,
agency or instrumentality which may materially and adversely affect any
Guarantor's financial condition or its ability to perform its obligations
hereunder; (h) the direct or indirect value of the consideration received and to
be received by each Guarantor in connection herewith and the incurrence of such
liability and obligations in return for such consideration may reasonably be
expected to benefit such Guarantor, directly or indirectly; (i) no Guarantor is
"insolvent" on the date hereof (that is, the sum of such Guarantor's absolute
and contingent liabilities, including the Obligations, does not exceed the fair
market value of such Guarantor's assets), each Guarantor's capital is adequate
for the businesses in which such Guarantor is engaged and intends to be engaged
and no Guarantor has incurred (whether hereby or otherwise), nor does any
Guarantor intend to incur or believe that it will incur, debts which will be
beyond its ability to pay as such
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debts mature; and (j) all balance sheets, earning statements, financial data and
other information concerning the Guarantors which have been furnished to the
Lender to induce the Lender to accept this Agreement (or otherwise furnished to
the Lender in connection with the transactions contemplated hereby or associated
herewith) fairly represent the financial condition of each Guarantor as of the
dates and the results of such Guarantor's operations for the periods for which
the same are furnished. None of such balance sheets, earnings and cash flow
statements, financial data and other information contains any untrue statement
of a material fact or omits to state any material fact which is necessary to
make any statements contained therein not misleading.
12. Loan Agreement Provisions. Each of the Guarantors hereby represents,
warrants, acknowledges and agrees that: (a) such Guarantor has reviewed and is
familiar with all of the terms and conditions of the Loan Agreement and all of
the other Loan Documents; (b) all of the representations and warranties set
forth in the Loan Agreement pertaining to the Guarantors are true and correct;
(c) the Loan Agreement contains covenants and conditions relating to the
Guarantors and binding on the Guarantors; and (d) such Guarantor will comply
with all of the terms, covenants, conditions and agreements set forth in the
Loan Agreement applicable to such Guarantor in the same manner and to the same
extent as if such Guarantor was an original party to the Loan Agreement.
13. Acknowledgments and Admissions. The Guarantors hereby represent, warrant,
acknowledge and admit that: (a) each of them has made an independent decision to
enter into this Agreement and the other Loan Documents to which it is a party,
without reliance on any representation, warranty, covenant or undertaking by the
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof; (b) there are no representations, warranties, covenants, undertakings or
agreements by the Lender as to the Loan Documents except as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof; (c) the Lender has no fiduciary obligation toward the Borrower or the
Guarantors with respect to any Loan Document or the transactions contemplated
thereby; (d) the relationship pursuant to the Loan Documents between the
Borrower and the Guarantors, on the one hand, and the Lender, on the other hand,
is and will be solely that of debtor and creditor, respectively; (e) no
partnership or joint venture exists with respect to the Loan Documents between
the Borrower or the Guarantors and the Lender; (f) should a Default occur or
exist, the Lender will determine in its sole discretion and for its own reasons
what remedies and actions it will or will not exercise or take at the time; (g)
without limiting any of the foregoing, no Guarantor is relying upon any
representation or covenant by the Lender, or any representative thereof, and no
such representation or covenant has been made, that the Lender will, at the time
of an event of Default, or at any other time, waive, negotiate, discuss or take
or refrain from taking any action permitted under the Loan Documents with
respect to any such event of Default or any other provision of the Loan
Documents; and (h) the Lender has relied upon the truthfulness of the
acknowledgments in this paragraph in deciding to execute and deliver the Loan
Documents and to become obligated hereunder.
14. JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR,
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CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15. INDEMNITY. THE GUARANTORS AGREE TO INDEMNIFY THE LENDER, UPON DEMAND, FROM
AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES,
PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR
DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND
ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS PARAGRAPH COLLECTIVELY
CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE LENDER GROWING OUT OF,
RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH THE COLLATERAL, THE LOAN
DOCUMENTS AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE
THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER
ARISING IN CONTRACT OR TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR
NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY THE BORROWER, THE GUARANTORS OR THE
LENDER OR ANY LIABILITIES OR DUTIES OF THE BORROWER, THE GUARANTORS OR THE
LENDER WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE
ENVIRONMENT).
THE FOREGOING INDEMNIFICATION WILL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY THE LENDER, PROVIDED ONLY THAT THE
LENDER WILL NOT BE ENTITLED UNDER THIS PARAGRAPH TO RECEIVE INDEMNIFICATION FOR
THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED
BY ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A
FINAL JUDGMENT OR WHICH RELATES TO ACTIONS TAKEN BY THE LENDER AFTER THE LENDER
HAS TAKEN TITLE TO THE COLLATERAL. IF ANY PERSON (INCLUDING THE BORROWER, ANY OF
ITS AFFILIATES OR ANY GUARANTOR) EVER ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT BY THE LENDER, THE INDEMNIFICATION PROVIDED FOR IN THIS PARAGRAPH
WILL NONETHELESS BE PAID UPON DEMAND, SUBJECT TO LATER ADJUSTMENT OR
REIMBURSEMENT, UNTIL SUCH TIME AS A COURT OF COMPETENT JURISDICTION ENTERS A
FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF THE ALLEGED GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. AS USED IN THIS PARAGRAPH THE TERM "LENDER" WILL REFER NOT
ONLY TO THE PERSON DESIGNATED AS SUCH BUT ALSO TO EACH DIRECTOR, OFFICER, AGENT,
ATTORNEY, EMPLOYEE, PARTICIPATING LENDER, REPRESENTATIVE AND AFFILIATE OF THE
LENDER.
16. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF THE GUARANTORS AND THE
LENDER HEREBY KNOWINGLY, VOLUNTARILY,
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INTENTIONALLY AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY, (B) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (C) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
AS USED IN THIS PARAGRAPH, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES
NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED
TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
17. Miscellaneous. This Agreement has been negotiated, executed and delivered in
Oklahoma City, Oklahoma County, Oklahoma, and is intended to be construed in
accordance with the laws of the State of Oklahoma. All actions relating to or
arising under this Agreement, whether filed by the Lender or the Guarantors,
will be instituted only in a state court sitting in Oklahoma County, Oklahoma,
or a federal court sitting in Oklahoma City, Oklahoma. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect or
application for any reason, such invalidity, illegality or unenforceability will
not affect any other provisions herein contained and such other provisions will
remain in full force and effect. This Agreement cannot be amended except by an
agreement in writing signed by the Guarantors and the Lender.
IN WITNESS WHEREOF, the Guarantors and the Lender have
executed this Agreement effective the date first above written.
--------------------------------------
ROBERT A. HEFNER III, individually
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THE GHK COMPANY L.L.C., an Oklahoma
limited liability company
By
----------------------------------------
Robert A. Hefner III, Manager
RAMIIILAJ A LIMITED PARTNERSHIP, a Texas
limited partnership
By Hefner Investment Company, a Texas
corporation, its General Partner
By
-------------------------------------
Robert A. Hefner III, President
(the "Guarantors")
STILLWATER NATIONAL BANK AND TRUST
COMPANY, N.A.
By
----------------------------------------
G.P. Johnson Hightower, Senior Vice
President
(the "Lender")
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STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is executed effective the 20th day of
December, 2000, by SEVEN SEAS PETROLEUM INC., a Yukon Territory, Canada
corporation (the "Borrower"), SEVEN SEAS PETROLEUM HOLDINGS INC., a Cayman
Islands corporation ("SSPH"), and SEVEN SEAS PETROLEUM COLUMBIA INC., a Cayman
Islands corporation ("SSPC" and jointly and severally with the Borrower and
SSPH, the "Debtors"), each having a notice address at 5555 San Felipe, Suite
1700, Houston, Texas 77056, in favor of STILLWATER NATIONAL BANK AND TRUST
COMPANY, N.A. (the "Secured Party"), having a notice address at 6305 Waterford
Boulevard, Suite 205, Oklahoma City, Oklahoma 73118.
WITNESSETH:
WHEREAS, the Borrower is liable to the Secured Party under that certain
Promissory Note of even date herewith in the principal amount of Ten Million
Dollars ($10,000,000.00) (the "Note"), in connection with that certain Loan
Agreement of even date herewith between the Borrower and the Secured Party (the
"Loan Agreement"); and
WHEREAS, each of SSPH and SSPC is a direct or indirect wholly owned
subsidiary of the Borrower and the Debtors have agreed to secure payment of the
Note and all other Obligations of the Borrower to the Secured Party by granting
the Secured Party a lien, security interest and pledge covering certain assets
of the Debtors.
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged, the Debtors hereby agree
with the Secured Party as follows:
1. Definitions. Unless otherwise defined herein, all terms used herein which are
defined in the Loan Agreement will have the same meanings herein unless the
context otherwise requires and all terms used herein which are defined in the
Oklahoma Uniform Commercial Code (the "UCC") will have the same meanings herein
unless the context otherwise requires.
2. Security Interest. Each of the Debtors hereby grants to the Secured Party a
first and prior security interest in the stock currently owned by the Debtors
described in Schedule "A" attached hereto as a part hereof (the "Pledged
Stock"), together with all additions and substitutions of shares of the Pledged
Stock or certificates, all of the Debtors' interest and rights in the Pledged
Stock, whether now owned or hereafter acquired, all cash and stock dividends
attributable to the Pledged Stock, all increases relating to the Pledged Stock
as a result of stock splits, mergers or any other reorganization, all monies and
claims for monies due and to become due to the Debtors as dividends or arising
under accounts, contracts, agreements and general intangibles relating to the
Pledged Stock and all proceeds and products thereof (the Pledged Stock and the
foregoing items are hereafter called the "Collateral"). This Agreement is
intended for security only and is to secure the Obligations of the Debtors owing
to the Secured Party as herein described. It is understood that the Secured
Party does not hereby assume any of the obligations of the Debtors in connection
with the Collateral.
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2.1 Voting Rights. Absent an event of Default (as hereinafter defined)
under this Agreement or the other Loan Documents, the Debtors will
retain all voting rights with respect to the Pledged Stock. On or
after the occurrence of an event of Default and without further notice
to the Debtors, the Secured Party will have the right to exercise all
voting rights, all conversion, exchange, subscription and other rights
pertaining to the Pledged Stock, whether or not the Pledged Stock has
been registered in the Secured Party's name. Each of the Debtors
hereby appoints the Secured Party as such Debtor's lawful
attorney-in-fact and proxy to exercise the foregoing rights after the
occurrence of an event of default. Each of the Debtors agrees that the
foregoing proxy is coupled with an interest and is irrevocable.
2.2 Cash Dividends. Absent an event of Default, the Debtors will have the
right to receive and retain for the Debtors' use all cash dividends
paid on the Pledged Stock. On or after the occurrence of an event of
Default and without further notice to the Debtors, the Secured Party
will have the right to receive such cash dividends and to apply the
same toward satisfaction of the Secured Indebtedness (as hereinafter
defined) or hold the same as part of the Collateral under this
Agreement.
2.3 Stock Dividends. In the event any stock dividends are paid on the
Pledged Stock, or if any stock or other securities are delivered to
the Debtors in connection with any stock split, merger or
reorganization affecting the Pledged Stock, the Debtors will
immediately deliver to the Secured Party the certificates representing
such stock dividends, other stock or securities, together with
executed endorsements or appropriate powers. Any such stock dividend,
other stock or securities will be held by the Secured Party as part of
the Collateral under the terms of this Agreement.
3. Secured Indebtedness. The security interest granted hereby in the Pledged
Stock is given to secure the Borrower's payment of: (a) the Note together with
interest thereon; (b) any and all other or additional Obligations of the
Borrower to the Secured Party; (c) all extensions, renewals, amendments,
modifications, substitutions and changes in form to the Note; (d) all costs and
expenses incurred in connection with the collection of the Note and any other
Obligations and enforcement of the Loan Documents and the Secured Party's rights
under this Agreement and all other Loan Documents including, without limitation,
the collection or enforcement of the Loan Documents whether by judicial
proceedings, proceedings under Chapter 7 or 11 of the Bankruptcy Code or any
successor statute thereto, or otherwise, and including attorneys' fees and
expenses; (e) all advances made by the Secured Party to protect the security
hereof, including advances made for or on account of levies, taxes and for
maintenance or recovery of the Pledged Stock, together with interest thereon at
the Default rate specified in the Note; (f) all future advances and any and all
other indebtedness, liabilities and obligations of the Borrower to the Secured
Party (whether primary, secondary, direct or indirect, absolute or contingent,
sole, joint, or several) whether now owing or hereafter incurred; and (g)
performance of the agreements herein set forth (the foregoing items (a) through
(g) are collectively referred to herein as the "Secured Indebtedness").
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4. Debtors' Agreements. Until payment in full of the Secured Indebtedness, the
Debtors jointly and severally will perform or cause to be performed the
following agreements:
4.1 Possession of Collateral. The Debtors agree to deliver the Pledged
Stock to the Secured Party, appropriately endorsed to the Secured
Party or with stock powers in form and substance satisfactory to the
Secured Party in favor of the Secured Party. The Debtors will provide
the name and address of the stock transfer agent to the Secured Party.
Regardless of the form of any endorsement to the Secured Party, the
Debtors waive presentment, demand, notice of dishonor, protest, notice
of protest and all other notices with respect thereto.
4.2 Additional Documents. The Debtors agree to execute and deliver any
documents which are necessary in the judgment of the Secured Party to
obtain, maintain and perfect a security interest under this Agreement
and to enable the Secured Party to comply with any foreign, federal or
state law to obtain or perfect the Secured Party's security interest
in the Collateral or otherwise applicable to the Secured Party.
4.3 Creation of Liens. The Debtors will not create, assume or suffer to
exist any claim, pledge, security interest, encumbrance or other lien
(including the lien of an attachment, judgment or execution) affecting
any or all of the Collateral, excluding only liens held by the Secured
Party.
5. Debtors' Representations and Covenants. The Debtors jointly and severally
hereby warrant, represent and agree as follows:
5.1 Principal Place of Business. The principal place of business in the
United States of each of the Debtors is 5555 San Felipe, Suite 1700,
Houston, Texas 77056.
5.2 Title. Each of the Debtors has absolute title to the Pledged Stock
owned by such Debtor free and clear of all liens, encumbrances and
security interests except for the security interest hereby granted to
the Secured Party and such other rights, if any, of the Secured Party,
and each of the Debtors warrants and will defend the same unto the
Secured Party against the claims and demands of all persons and
parties whomsoever. The Debtors are not in default in the performance
of any obligation or the payment of any sum owing with respect to the
Pledged Stock. The Debtors will take all steps necessary to cause or
permit the Secured Party to cause the Pledged Stock to be registered
in the name of the Secured Party and new share certificates to be
issued.
6. Default. As used herein "Default" means the occurrence of any event of
Default under the Loan Agreement or the failure by any of the Debtors to keep,
observe, comply with and perform all of the obligations and undertakings under
this Agreement or any of the other Loan Documents or failure to pay any
principal or interest on the Note when due and, in any such event, the Secured
Party may, at its option and without notice to any party, declare all or any
portion of the Secured Indebtedness to be immediately due and payable and may
proceed to
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enforce payment of the same, to exercise any or all rights and remedies provided
herein, in the other Loan Documents, and by the UCC and otherwise available at
law or in equity. All remedies hereunder are cumulative, and any indulgence or
waiver by the Secured Party will not be construed as an abandonment of any other
right hereunder or of the power to enforce the same or another right at a later
time.
7. Remedies. On the occurrence of an event of Default, the Secured Party may
take the following actions:
7.1 Remedy. The Secured Party may (a) exercise in respect of the
Collateral or any portion thereof all of the rights and remedies of a
secured party under the UCC, or (b) at any time and from time to time
sell, resell, assign and deliver, in the Secured Party's discretion,
all or any part of the Collateral, in one or more parcels at the same
or different times, and all right, title and interest, claim and
demand therein and right of redemption thereof, at public or private
sale on commercially reasonable terms. In connection therewith, the
Secured Party may bid on such Collateral for its own account and each
of the Debtors hereby waives and releases any and all equity or right
of redemption. To effect any sale, transfer or other disposal of any
of the Collateral, the Secured Party has the right, for and in the
name, place and stead of the Debtors, to execute endorsements,
assignments or other instruments of conveyance or transfer with
respect to all or any of the Collateral.
7.2 Sale Procedure. Except as expressly provided for herein, no demand or
advertisement, all of which are hereby expressly waived by the
Debtors, will be required in connection with any sale or other
disposition of any part of the Collateral which threatens to decline
speedily in value or which is of a type customarily sold on a
recognized market. In all other events, the Secured Party will give
the Debtors, at least ten (10) days prior notice of the time and place
of any public sale and of the time after which any private sale or
other disposition is to be made, which notice the Debtors agree is
reasonable, all other demands and advertisements being hereby waived.
The Secured Party will not be obligated to make any sale of
Collateral, regardless of the fact that notice of sale may have been
given. The Secured Party may adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at
the time and place fixed for sale, and such sale may be made at the
time and place to which the same was so adjourned. Upon each public or
private sale of Collateral, the Secured Party or any holder of the
Note, or any of their respective affiliates, may purchase all or any
of the Collateral being sold, free from any equity or right of
redemption, which is hereby waived and released by the Debtors, and
may make payment therefor in cash or, at the Secured Party's or such
holder's option (by endorsement without recourse), by tendering or
releasing principal or accrued and unpaid interest on the Note, in
lieu of cash, in a face amount equal to the amount of the purchase
price. The Debtors agree to pay all reasonable costs and expenses of
every kind for sale or delivery, including brokers' and attorneys'
fees, and after deducting such costs and expenses from the proceeds of
sale, the Secured Party will apply any residue to the payment of the
Secured Indebtedness and the Debtors will continue to be liable for
any deficiency in accordance with the Loan
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92
Documents. The balance, if any, remaining after payment in full of all
of the Secured Indebtedness will be paid to the Debtors or as
otherwise directed by any court having appropriate jurisdiction.
7.3 Private Sales. The Debtors recognize that the Secured Party may be
unable to effect a public sale of all or part of the Collateral by
reason of certain prohibitions contained in the Securities Act of
1933, as amended, as now or hereafter in effect, or in applicable blue
sky or other state securities laws, as now or hereafter in effect, but
may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
The Debtors agree that private sales so made may be at prices and
other terms less favorable to the Debtors than if such Collateral were
sold at public sales, and that the Secured Party has no obligation to
delay sale of any such Collateral for the period of time necessary to
permit the issuer of such Collateral, even if such issuer would agree,
to register such Collateral for public sale under such applicable
securities laws. The Debtors agree that private sales, absent other
adverse circumstances, will not be deemed to have been made in a
commercially unreasonable manner. In connection with the foregoing,
the Secured Party may, at the Debtors' expense, consult with counsel
to determine whether a public or private sale of Collateral is
necessary or appropriate.
8. Miscellaneous. It is further agreed as follows:
8.1 Time. Time is of the essence of this Agreement and each provision of
this Agreement.
8.2 Notices. Any notice required or permitted to be given by this
Agreement will be deemed to have been given on the date such notice is
delivered personally or by telefacsimile to the party designated to
receive such notice, on the date sent by overnight courier or on the
date deposited in the United States mail, postage prepaid, and
directed to the notice address specified in the initial paragraph of
this Agreement, the Loan Agreement or otherwise provided to the
Secured Party in writing.
8.3 Cumulative Remedies. No failure on the part of the Secured Party to
exercise, and no delay in exercising any right under this Agreement
will operate as a waiver thereof, nor will any single or partial
exercise by the Secured Party of any right under this Agreement
preclude any other or further right of exercise thereof or the
exercise of any other right except as provided in the Loan Documents.
8.4 Construction. This Agreement is to be construed according to the
internal laws of the State of Oklahoma. All actions with respect to
this Agreement may be instituted in the Courts of the State of
Oklahoma or the United States District Court sitting in Oklahoma
County, Oklahoma and each of the Debtors hereby consents to the
jurisdiction and venue of any such courts.
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93
8.5 Amendment. Neither this Agreement nor any of the provisions hereof can
be changed, waived, discharged or terminated, except by an instrument
in writing signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
8.6 Severability. The provisions of this Agreement are severable, and if
any clause or provision is held invalid, illegal or unenforceable in
any respect in any jurisdiction, the validity, legality and
enforceability of the remaining provisions contained herein will not
be in any way affected or impaired thereby.
8.7 Binding Effect. This Agreement will be binding on the Debtors and the
Debtors' successors and permitted assigns, and will inure to the
benefit of the Secured Party and the Secured Party's successors and
assigns.
8.8 Continuing Agreement. This is a continuing Agreement and the grant of
a security interest hereunder will remain in full force and effect and
all the rights, powers and remedies of the Secured Party hereunder
will continue to exist until all of the Secured Indebtedness is paid
in full as the same becomes due and payable and until the Secured
Party, upon request of the Debtors, has executed a written termination
statement, reassigned to the Debtors, without recourse, the Collateral
and all rights conveyed hereby and returned possession of any
Collateral in the Secured Party's possession to the Debtors.
IN WITNESS WHEREOF, the Debtors and the Secured Party have executed
and delivered this Agreement effective the date first above written.
SEVEN SEAS PETROLEUM INC., a Yukon
Territory, Canada corporation
By
-----------------------------------------
Larry A. Ray, President
SEVEN SEAS PETROLEUM HOLDINGS INC., a
Cayman Islands corporation
By
-----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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SEVEN SEAS PETROLEUM COLOMBIA INC., a
Cayman Islands corporation
By
---------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
(jointly and severally, the "Debtors")
STILLWATER NATIONAL BANK AND TRUST COMPANY, N.A.
By
----------------------------------------------
G.P. Johnson Hightower, Senior Vice President
(the "Secured Party")
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PROMISSORY NOTE
$10,000,000.00 Oklahoma City, Oklahoma
December 20, 2000
FOR VALUE RECEIVED, the undersigned, SEVEN SEAS PETROLEUM INC., a Yukon
Territory, Canada corporation (the "Borrower"), promises to pay to the order of
STILLWATER NATIONAL BANK AND TRUST COMPANY, N.A. (the payee, its successors and
assigns are hereinafter called the "Lender"), at 6305 Waterford Boulevard, Suite
205, Oklahoma City, Oklahoma 73118, or at such other place as may be designated
in writing by the Lender, the principal sum of TEN MILLION DOLLARS
($10,000,000.00), or so much thereof as is disbursed hereunder, together with
interest thereon at the rates hereinafter stated:
Prior to Default, advances under this Note will bear interest from the
date of advance at the per annum rate equal to the Reference Rate plus
75/100 percent (.75%). All interest will be computed for the actual
number of days elapsed at a per diem charge based on a year consisting
of three hundred sixty (360) days.
Provided that no event of Default has occurred or is continuing under
any of the Loan Documents, there will be no required principal payments
on this Note until December 31, 2001. Commencing on January 31, 2001,
and on the last day of each successive month thereafter until this Note
is paid in full, the Borrower will pay to the Bank all accrued unpaid
interest on this Note. The entire unpaid principal balance of this Note
plus all accrued and unpaid interest thereon will be due and payable on
December 31, 2001.
Unless otherwise defined herein, all terms defined or referenced in
that certain Loan Agreement of even date herewith between the Borrower and the
Lender (the "Loan Agreement") will have the same meanings herein as therein.
This Note is executed and delivered in connection with the Loan
Agreement. Advances and payments hereunder may, at the option of the Lender, be
recorded on this Note or on the books and records of the Lender and will be
prima facie evidence of said advances, payments and unpaid balance of this Note.
It is specifically agreed that the aggregate of advances made during the term of
this Note may exceed the face amount hereof, but the unpaid principal balance
outstanding at any time will not exceed such face amount. All payments will
first be applied to the payment of accrued interest and the balance will be
applied in reduction of the principal balance hereof provided that no payment
will be applied to this Note until received
96
by the Lender in collected funds. All advances made or to be made under this
Note will be made subject to the terms and conditions stated in the Loan
Agreement.
The Borrower will have the right at any time to prepay this Note in
whole or in part, without premium or penalty, but with interest accrued to the
date of prepayment.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection or to defend or enforce any of the
Lender's rights hereunder or under any instrument securing payment of this Note,
the Borrower will pay the Lender's reasonable attorneys' fees, all court costs
and all other expenses incurred by the Lender in connection therewith.
Any sum not paid when due, by acceleration or otherwise, will bear
interest at the per annum rate equal to the greater of (a) fifteen percent
(15%), or (b) the Reference Rate plus five percent (5%), and such interest which
has accrued will be paid at the time of and as a condition precedent to curing
any Default hereunder. During the existence of any such Default, the Lender may
apply any payments received on any amount due hereunder or under the terms of
any instrument now or hereafter evidencing or securing this indebtedness as the
Lender determines from time to time.
This Note is issued by the Borrower and accepted by the Lender pursuant
to a lending transaction negotiated, consummated and to be performed in Oklahoma
City, Oklahoma. Payment of this Note is secured by and subject to the terms and
conditions of the Loan Documents. This Note is to be construed according to the
internal laws of the State of Oklahoma. All actions with respect to this Note,
the Loan Documents or any other instrument securing payment of this Note may be
instituted in the courts of the State of Oklahoma sitting in Oklahoma County,
Oklahoma, or the United States District Court sitting in Oklahoma City,
Oklahoma, as the Lender may elect, and by execution and delivery of this Note,
the Borrower irrevocably and unconditionally submits to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waives: (a) any objection the Borrower might now or hereafter
have to the venue in any such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
On the occurrence of an event of Default or the breach of any provision
of this Note, any of the Loan Documents or any other instrument securing payment
of this Note, at the option of the Lender, the entire indebtedness evidenced by
this Note will become immediately due, payable and collectible then or
thereafter as the Lender might elect, regardless of the date of maturity hereof.
Failure by the Lender to exercise such option will not constitute a waiver of
the right to exercise the same in the event of any subsequent Default.
The makers, endorsers, sureties, guarantors and all other persons who
may become liable for all or any part of this obligation severally waive
presentment for payment, protest and notice of nonpayment. Said parties consent
to any extension of time (whether one or more) of payment hereof, release of all
or any part of the security for the payment hereof or release of any party
liable for the payment of this obligation. Any such extension or release may be
made without notice to any such party and without discharging such party's
liability hereunder.
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97
IN WITNESS WHEREOF, the Borrower has executed this instrument effective
the date first above written.
SEVEN SEAS PETROLEUM INC., a Yukon
Territory, Canada corporation
By
-------------------------------------------
Larry A. Ray, President
(the "Borrower")
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GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY AGREEMENT is executed effective the 20th day of
December, 2000, among ROBERT A. HEFNER III, an individual ("Hefner"), THE GHK
COMPANY L.L.C., an Oklahoma limited liability company ("GHK"), RAMIIILAJ A
LIMITED PARTNERSHIP, a Texas limited partnership ("Ramiiilaj" and jointly and
severally with Hefner and GHK, the "Debtors"), each having a notice address at
c/o The GHK Company L.L.C., 6305 Waterford Boulevard, Suite 470, Oklahoma City,
Oklahoma 73118, and STILLWATER NATIONAL BANK AND TRUST COMPANY, N.A. (the
"Secured Party"), having a notice address at 6305 Waterford Boulevard, Suite
205, Oklahoma City, Oklahoma 73118.
WITNESSETH:
WHEREAS, Seven Seas Petroleum Inc., a Yukon Territory, Canada
corporation (the "Borrower"), is liable to the Secured Party under that certain
Promissory Note of even date herewith in the principal amount of Ten Million
Dollars ($10,000,000.00) (the "Note") in connection with that certain Loan
Agreement of even date herewith (the "Loan Agreement") between the Borrower and
the Secured Party which Note is unconditionally guaranteed by the Debtors
pursuant to that certain Guaranty Agreement of even date herewith; and
WHEREAS, as a material condition precedent to the Secured Party
entering into the Loan Agreement, the Debtors have agreed to secure payment of
the Note and all other Obligations of the Borrower to the Secured Party by
granting the Secured Party a lien, security interest and pledge covering certain
assets of the Debtors.
NOW, THEREFORE, (i) in order to comply with the terms and conditions of
the Loan Agreement; (ii) for and in consideration of the premises and the
agreements herein contained; and (iii) for other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the Debtors hereby agree with the Secured Party as follows:
1. Definitions. Unless otherwise defined herein, all terms which are defined in
the Loan Agreement will have the same meanings herein as therein unless the
context otherwise requires, and all terms used herein which are defined in the
Oklahoma Uniform Commercial Code (the "UCC") will have the same meanings herein
unless the context otherwise requires.
2. Security Interest. The Debtors hereby grant to the Secured Party a security
interest in, an assignment of, a general lien upon and a right of set-off
against the following described property (the "Property"):
2.1 all of the Debtors' right, title and interest in and to the
certificates of deposit and government securities described in
Schedule "A" attached hereto as a part hereof and all additions and
accessions to, replacements of, substitutions for, dividends on and
proceeds therefrom and any other deposits, certificated or
uncertificated securities, treasury notes, bonds or other similar
items;
99
2.2 any additional assets or property from time to time delivered to or
deposited with the Secured Party as security for the Obligations or
otherwise pursuant to the terms of this Agreement; and
2.3 all proceeds, products, additions to, replacements of, substitutions
for and accessions of any and all Property described in subparagraphs
2.1 and 2.2 in this paragraph 2.
3. Secured Indebtedness. The security interest granted hereby in the Property is
given to secure the Borrower's payment of: (a) the Note together with interest
thereon; (b) any and all other or additional Obligations of the Borrower to the
Secured Party; (c) all extensions, renewals, amendments, modifications,
substitutions and changes in form to the Note; (d) all costs and expenses
incurred in connection with the collection of the Note and any other Obligations
and enforcement of the Loan Documents and the Secured Party's rights under this
Agreement and all other Loan Documents including, without limitation, the
collection or enforcement of the Loan Documents whether by judicial proceedings,
proceedings under Chapter 7 or 11 of the Bankruptcy Code or any successor
statute thereto, or otherwise, and including attorneys' fees and expenses; (e)
all advances made by the Secured Party to protect the security hereof, including
advances made for or on account of levies, insurance, repairs, taxes and for
maintenance or recovery of the Property, together with interest thereon at the
Default rate specified in the Note; (f) any and all other indebtedness,
liabilities and obligations of the Borrower to the Secured Party whether now
owing or hereafter incurred; and (g) performance of the agreements herein set
forth (the foregoing items (a) through (g) are collectively referred to herein
as the "Secured Indebtedness").
4. Debtors' Representations and Covenants. The Debtors hereby warrant, represent
and agree as follows:
4.1 Principal Place of Business. Hefner and GHK's principal place of
business is in the State of Oklahoma. Ramiiilaj's principal place of
business is in the State of Texas.
4.2 Title. The Debtors have absolute title to the Property free and clear
of all liens, encumbrances and security interests except the security
interest hereby granted to the Secured Party and such other rights, if
any, of the Secured Party, and the Debtors warrant and will defend the
same unto the Secured Party against the claims and demands of all
persons and parties whomsoever.
4.3 Transfers. Without the prior written consent of the Secured Party, the
Debtors agree that the Debtors will not: (a) sell, exchange, lease or
in any manner dispose of any of the Property or any interest therein;
or (b) permit any lien, encumbrance or security interest to attach
thereto except those contemplated herein.
4.4 Value of Property. The Debtors will not, in any event, permit anything
to be done that may impair the value of the Property or the security
intended to be afforded by this Agreement.
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4.5 Secured Party's Security Interest. This Agreement creates a valid and
binding security interest in the Property securing the Secured
Indebtedness. All filings and other actions necessary or appropriate
(other than notation on any certificate of title or title
registration) to perfect or protect such security interest will be or
have been duly taken. No further or subsequent filing, recording,
registration or other public notice of such security interest (other
than notation on any certificate of title or title registration) is
necessary in any office or jurisdiction in order to perfect such
security interest or to continue, preserve or protect such security
interest except for continuation statements.
4.6 Inspection of Records. The Secured Party may from time to time, upon
request, inspect all of the Debtors' records concerning the Property.
4.7 Further Assurances. The Debtors will from time to time: (a) sign,
execute, deliver and file, alone or with the Secured Party, any
financing statements, security agreements or other documents; (b)
procure any instruments or documents as may be reasonably requested by
the Secured Party; and (c) take all further action that may be
necessary or desirable, or that the Secured Party may request, to
confirm, perfect, preserve and protect the security interests intended
to be granted hereby. In addition, the Debtors hereby authorize the
Secured Party to execute and deliver on behalf of the Debtors and file
such financing statements, security agreements and other documents
without the signature of the Debtors either in the Secured Party's
name or in the name of the Debtors and as agent and attorney-in-fact
for the Debtors. The Debtors will do all such additional and further
acts or things, give such assurances and execute such documents or
instruments as the Secured Party requires to vest more completely in
and assure to the Secured Party its rights under this Agreement
including, without limiting the generality of the foregoing, marking
conspicuously each of its records pertaining to the Property with a
legend, in form and substance satisfactory to the Secured Party,
indicating that such Property is subject to the security interest
granted by this Agreement.
4.8 Filing Reproductions. At the option of the Secured Party, a carbon,
photographic or other reproduction of this Agreement or of a financing
statement covering the Property will be sufficient as a financing
statement and may be filed as a financing statement.
4.9 Financing Statement Filings; Notifications. The Debtors will
immediately notify the Secured Party of any condition or event that
may change the proper location for the filing of any financing
statements or other public notice or recordings for the purpose of
perfecting a security interest in the Property. Without limiting the
generality of the foregoing, the Debtors will: (a) immediately notify
the Secured Party of any change to a jurisdiction other than the
States of Oklahoma or Texas in the location of the Debtors' principal
place of business; (b) notify the Secured Party monthly of any change
in the location any of the Property to another state; and (c)
immediately notify the Secured Party of any change in any Debtor's
name or identity. In any notice furnished pursuant to this paragraph
4.9, the Debtors will expressly state that the notice is required by
this Agreement and contains
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facts that will or may require additional filings of financing
statements or other notices for the purpose of continuing perfection
of the Secured Party's security interest in the Property.
50 Secured Party's Expenditures. If the Debtors fail to make any expenditure or
pay any sum necessary to discharge any lien, encumbrance, levy, security
interest or other charge on the Property, the Secured Party may but will not be
required to make any expenditure for such purpose or purposes and all sums so
expended will be payable on demand, will bear interest at the rate specified in
the Note and all such sums and interest will additionally be secured hereby. The
Debtors will pay all costs of filing any financing, continuation or termination
statements with respect to the security interest granted hereby in the Property.
60 Default; Remedies. On the occurrence of any event of Default or if the
Borrower or the Debtors fail to keep, observe, comply with and perform all of
the obligations and undertakings under this Agreement or any of the other Loan
Documents or fail to pay any principal or interest on the Note when due, then,
and in any such event, the Secured Party may, at its option and without notice
to any party, declare all or any portion of the Secured Indebtedness to be
immediately due and payable and may proceed to enforce payment of the same, to
exercise any or all rights and remedies provided herein, in the other Loan
Documents, and by the UCC and otherwise available at law or in equity. The
Secured Party may at any time and from time to time sell, resell, assign and
deliver, in the Secured Party's discretion, all or any part of the Property, in
one or more parcels at the same or different times, and all right, title and
interest, claim and demand therein and right of redemption thereof, at public or
private sale. Whenever an event of Default exists, the Debtors on demand by the
Secured Party, will assemble any part of the Property in the Debtors' control
and make it available to the Secured Party at a place reasonably convenient to
the parties hereto. All remedies hereunder are cumulative, and any indulgence or
waiver by the Secured Party will not be construed as an abandonment of any other
right hereunder or of the power to enforce the same or another right at a later
time. Whether the Secured Party elects to exercise any other rights or remedies
under this Agreement or applicable law, the Secured Party will be entitled to
have a receiver appointed to take possession of any part of the Property in the
Debtors' control without notice, which notice the Debtors hereby waive,
notwithstanding anything contained in this Agreement or any law heretofore or
hereafter enacted.
70 Power of Attorney. The Secured Party is hereby fully authorized and empowered
(without the necessity of any further consent or authorization from the Debtors)
and the right is expressly granted to the Secured Party, and the Debtors hereby
constitute, appoint and make the Secured Party as the Debtors' true and lawful
attorney-in-fact and agent for the Debtors and in the Debtors' name, place and
stead with full power of substitution, in the Secured Party's name or the
Debtors' name or otherwise, for the Secured Party's sole use and benefit, but at
the Debtors' cost and expense, to exercise, without notice, all or any of the
following powers at any time with respect to all or any of the Property after
the occurrence of any Default under this Agreement or any of the other Loan
Documents: (a) to liquidate all of the Property and collect, receive and give
acquittance for any and all monies due or to become due by virtue thereof and
otherwise deal with proceeds; (b) to receive, take, endorse, assign and deliver
any and all checks, notes, drafts, documents and other negotiable and
non-negotiable instruments and chattel paper taken or received by the Secured
Party in connection therewith; (c) to sell, transfer, assign or
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102
otherwise deal in or with the Property or the proceeds or avails thereof, as
fully and effectively as if the Secured Party were the absolute owner thereof;
and (d) to exercise any and all rights and remedies available to the Secured
Party under the Loan Documents and applicable law and apply all collected
proceeds from the Property to the Secured Indebtedness in such order and amounts
as the Secured Party determines in the Secured Party's sole discretion;
provided, however, the Secured Party will be under no obligation or duty to
exercise any of the powers hereby conferred upon it and will be without
liability for any act or failure to act in connection with the collection of, or
the preservation of any rights under, any Property.
80 Sale Procedure. Except as expressly provided for herein, no demand or
advertisement, all of which are hereby expressly waived by the Debtors, will be
required in connection with any sale or other disposition of any part of the
Property which threatens to decline speedily in value or which is of a type
customarily sold on a recognized market. In all other events, the Secured Party
will give the Debtors, at least ten (10) days prior notice of the time and place
of any public sale and of the time after which any private sale or other
disposition is to be made, which notice the Debtors agree is reasonable, all
other demands and advertisements being hereby waived. The Secured Party will not
be obligated to make any sale of Property, regardless of the fact that notice of
sale may have been given. The Secured Party may adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may be made at the time and place
to which the same was so adjourned. Upon each public or private sale of
Property, the Secured Party or any holder of the Note, or any of their
respective affiliates, may purchase all or any of the Property being sold, free
from any equity or right of redemption, which is hereby waived and released by
the Debtors, and may make payment therefor in cash or, at the Secured Party's or
such holder's option (by endorsement without recourse), by tendering or
releasing principal or accrued and unpaid interest on the Note, in lieu of cash,
in a face amount equal to the amount of the purchase price. The Debtors agree to
pay all reasonable costs and expenses of every kind for sale or delivery,
including brokers' and attorneys' fees, and after deducting such costs and
expenses from the proceeds of sale, the Secured Party will apply any residue to
the payment of the Secured Indebtedness and the Debtors will continue to be
liable for any deficiency in accordance with the Loan Documents. The balance, if
any, remaining after payment in full of all of the Secured Indebtedness will be
paid to the Debtors or as otherwise directed by any court having appropriate
jurisdiction.
90 Secured Party's Duties. The powers conferred upon the Secured Party by this
Agreement are solely to protect its interest in the Property and will not impose
any duty upon the Secured Party to exercise any such powers. The Secured Party
will be under no duty whatsoever to make or give any presentment, demand for
performance, notice of nonperformance, protest, notice of protest, notice of
dishonor, or other notice or demand in connection with any of the Property or
the Secured Indebtedness, or to take any steps necessary to preserve any rights
against other parties. The Secured Party will not be liable for failure to
collect or realize upon any or all of the Secured Indebtedness or Property, or
for any delay in so doing, nor will the Secured Party be under any duty to take
any action whatsoever with regard thereto.
100 Continuing Agreement. This is a continuing agreement and the grant of a
security interest hereunder will remain in full force and effect and all the
rights, powers and remedies of the Secured Party hereunder will continue to
exist until all of the Secured Indebtedness is paid in full as the same becomes
due and payable and until the Secured Party, upon written request of
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103
the Debtors, has executed a written termination statement, reassigned to the
Debtors, without recourse, the Property and all rights conveyed hereby and
returned possession of any Property in the Secured Party's possession to the
Debtors.
110 Preservation of Liability. Neither this Agreement nor the exercise by the
Secured Party of (or the failure to so exercise) any right, power or remedy
conferred herein or by law will be construed as relieving any person liable on
the Secured Indebtedness from liability on the Secured Indebtedness and for any
deficiency thereon.
120 Notices. Any notice or demand under this Agreement or in connection with
this Agreement may be given at the addresses set forth in the initial paragraph
of this Agreement or by telefacsimile, but actual notice, however given or
received, will always be effective.
130 Successors and Assigns. The covenants and agreements herein contained by or
on behalf of the Debtors will bind the Debtors, and the Debtors' legal
representatives, successors and assigns and will inure to the benefit of the
Secured Party and the Secured Party's successors and assigns.
140 Invalidity. If any provision hereof will for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability will not affect
any other provision hereof.
150 Construction. This Agreement will be construed and interpreted in accordance
with the laws of the State of Oklahoma.
IN WITNESS WHEREOF, this Agreement is executed effective the date first
above written.
---------------------------------------
ROBERT A. HEFNER III, individually
THE GHK COMPANY L.L.C., an Oklahoma
limited liability company
By
-------------------------------------
Robert A. Hefner III, Manager
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RAMIIILAJ A LIMITED PARTNERSHIP, a
Texas limited partnership
By Hefner Investment Company, a Texas
corporation, its General Partner
By
---------------------------------
Robert A. Hefner III, President
(jointly and severally, the "Debtors")
STILLWATER NATIONAL BANK AND TRUST
COMPANY, N.A.
By
-------------------------------------
G.P. Johnson Hightower, Senior Vice
President
(the "Secured Party")
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105
EXHIBIT "N" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A. and Cimarrona L.L.C.
(Form of Assignment to be used to transfer an interest to Cimarrona if Farmees
sign the On-Top Contract, drill the Test Well, but fail to satisfy any of the
Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors", and
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma,
U.S.A. (hereinafter called "Assignee").
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors,
Assignee, and Sociedad Internacional Petrolera S.A. severed the exploration and
production rights and obligations below the stratigraphic equivalent of the base
of the deepest producing formation in the Guaduas Field from the Contract Area
under the Dindal Association Contract. Such severed rights and obligations are
hereinafter referred to as "Deep Rights", and,
WHEREAS, Assignee, Assignors, and Sociedad Internacional Petrolera S.A.
entered into that certain Exploration Agreement dated January 25, 2001, covering
the Deep Rights (hereinafter to as the "Exploration Agreement"); and,
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WHEREAS, Assignors and Ecopetrol entered into a new Association
Contract effective on _____________, 2001 ("Contract") covering, among other
things, the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract, less an interest held by or dedicated
to Sipetrol Columbia S.A.; and
WHEREAS, Assignors and Assignee have agreed that Assignors have drilled
the Test Well, but have failed to satisfy the Earning Obligations under the
Exploration Agreement in a timely manner, and,
WHEREAS, Assignee has elected to receive and is entitled to an
undivided nine point four percent (9.4%) of 8/8ths of all the rights,
obligations, duties and interests of the Associates under the Contract (the
"Assigned Interests"), pursuant to Section 2.5 (D) of the Exploration Agreement.
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests.
2. Assignors warrant to Assignees the title to the
above-described Assigned Interests against any person or
entity claiming by, through, or under Assignors, but not
otherwise.
3. Assignees hereby accept and assume their respective shares of
the Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein
shall have the meaning given to them in the Exploration
Agreement and its exhibits or the relevant Association
Contract, as applicable.
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IN WITNESS WHEREOF, the Assignors and Assignees have caused this
Assignment to be executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
Petrolinson S. A. Cimarrona L.L.C.
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: ________________________ Title: ________________________
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EXHIBIT "O" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
(Form of Assignment to be used to transfer an interest to Sipetrol if Farmees
sign the On Top Contract, drill the Test Well, but fail to satisfy any of the
Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as
"Assignors", and
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Chile, (hereinafter called "Assignee").
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors,
Assignee, and Cimarrona L.L.C. severed the exploration and production rights and
obligations below the stratigraphic equivalent of the base of the deepest
producing formation in the Guaduas Field from the Contract Area under the Dindal
Association Contract. Such severed rights and obligations are hereinafter
referred to as "Deep Rights", and,
WHEREAS, Assignee, Assignors, and Cimarrona L.L.C. entered into that
certain Exploration Agreement dated January 25, 2001, covering the Deep Rights
(hereinafter to as the "Exploration Agreement"); and,
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WHEREAS, Assignors and Ecopetrol entered into a new Association
Contract effective on _____________, 2001 ("Contract") covering, among other
things, the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors own one hundred percent (100%) of the Associate's
rights and interests under the Contract, less an interest held by or dedicated
to Cimarrona L.L.C.; and
WHEREAS, Assignors and Assignee have agreed that Assignors have drilled
the Test Well, but have failed to satisfy the Earning Obligations under the
Exploration Agreement in a timely manner, and,
WHEREAS, Assignee is entitled to an undivided thirty-two point nine
percent (32.9%) of 8/8ths of all the rights, obligations, duties and interests
of the Associates under the Contract (the "Assigned Interests"), pursuant to
Section 2.5 (D) of the Exploration Agreement, and,
WHEREAS, Assignee agrees to terminate the Overriding Royalty Interest
previously conveyed to it by Assignors in that certain assignment dated the ____
day of ____________, 2001.
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests.
2. Assignors warrant to Assignees the title to the above-described
Assigned Interests against any person or entity claiming by,
through, or under Assignors, but not otherwise.
3. Assignees hereby accept and assume their respective shares of the
Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein shall
have the meaning given to them in the Exploration Agreement and
its exhibits or the relevant Association Contract, as applicable.
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IN WITNESS WHEREOF, the Assignors and Assignees have caused this
Assignment to be executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: ____________________________ By: ___________________________
Name: __________________________ Name: _________________________
Title: __________________________ Title: ________________________
Petrolinson S.A. Sociedad Internacional Petrolera S.A.
By: ____________________________ By: ___________________________
Name: __________________________ Name: _________________________
Title: __________________________ Title: ________________________
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EXHIBIT "P" to that certain Exploration Agreement dated the 25th day of January,
2001, by and between GHK Company Colombia, Seven Seas Petroleum Colombia, Inc.,
Petrolinson S. A., Sociedad Internacional Petrolera S.A., and Cimarrona L.L.C.
(Form of Assignment to be used to transfer an interest to GHK, Seven Seas, and
Pertolinson if Farmors drill the Test Well under the On-Top Contract, but fail
to satisfy any of the Earning Obligations)
ASSIGNMENT
THIS ASSIGNMENT is made and entered effective as of the _____ day of
___________, 2001, by and between:
Sociedad Internacional Petrolera S.A., a company incorporated under the
laws of Colombia, (hereinafter called, individually, "Sipetrol"), and,
Cimarrona L.L.C., a company incorporated under the laws of Oklahoma,
U.S.A., (hereinafter called, individually, "Cimarrona").
Both Sipetrol and Cimarrona shall hereinafter collectively be called
"Assignees", and,
GHK Company Colombia, a company incorporated under the laws of
Oklahoma, U.S.A., (hereinafter called "GHK"), and,
Seven Seas Petroleum Colombia, Inc., a company incorporated under the
laws of the Cayman Islands, (hereinafter called "Seven Seas"), and,
Petrolinson S. A., a company incorporated under the laws of Panama
(hereinafter called "Petrolinson").
GHK, Seven Seas, and Petrolinson are hereinafter referred to as "Assignees".
WHEREAS, Empresa Colombiana de Petroleos ("Ecopetrol"), Assignors, and
Assignees severed the exploration and production rights and obligations below
the stratigraphic equivalent of the base of the deepest producing formation in
the Guaduas Field from the Contract Area under the Dindal Association Contract.
Such severed rights and obligations are hereinafter referred to as "Deep
Rights", and,
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WHEREAS, Assignees and Assignors entered into that certain Exploration
Agreement dated January 25, 2001, covering the Deep Rights (hereinafter to as
the "Exploration Agreement"); and,
WHEREAS, Assignees and Ecopetrol entered into a new Association
Contract effective on _____________, 2001 ("Contract") covering, among other
things, the exploration and production rights related to the Deep Rights, and,
WHEREAS, Assignors now own one hundred percent (100%) of the
Associate's rights and interests under the Contract, less an interest held by or
dedicated to the Assignees; and
WHEREAS, Assignors and Assignees have agreed that Assignors have
drilled the Test Well, but have failed to satisfy any of the Earning Obligations
under the Exploration Agreement, and,
WHEREAS, Assignees are entitled to an undivided fifty-seven point seven
percent (57.7%) of 8/8ths of all the rights, obligations, duties and interests
of the Associates under the Contract (the "Assigned Interests"), pursuant to
Section 2.5 (D) of the Exploration Agreement, and,
WHEREAS, the Assignees agree to terminate the Overriding Royalty
Interest previously conveyed to it by Assignors in that certain assignment dated
the ____ day of ____________, 200_.
NOW, THEREFORE:
1. Assignors hereby assign to Assignees the Assigned Interests in the
following manner:
GHK 18.967% of the Assigned Interests
Seven Seas 70.634% of the Assigned Interests
Petrolinson 10.399% of the Assigned Interests
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2. Assignors warrant to Assignees the title to the above-described
Assigned Interests against any person or entity claiming by,
through, or under Assignors, but not otherwise.
3. Assignees hereby accept and assume their respective shares of the
Assigned Interests.
4. Terms capitalized in this Assignment and not defined herein shall
have the meaning given to them in the Exploration Agreement and
its exhibits or the relevant Association Contract, as applicable.
IN WITNESS WHEREOF, the Assignors and Assignees have caused this
Assignment to be executed by their respective duly authorized representatives.
GHK Company Colombia Seven Seas Petroleum Colombia, Inc.
By: _____________________________ By: ____________________________
Name: ___________________________ Name: __________________________
Title: __________________________ Title: _________________________
Petrolinson S. A. Sociedad Internacional Petrolera S.A.
By: _____________________________ By: ___________________________
Name: ___________________________ Name: _________________________
Title: __________________________ Title: ________________________
Cimarrona L.L.C.
By: _____________________________
Name: ___________________________
Title: __________________________
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