Exhibit 2.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
IN RE: |
|
SEVEN SEAS PETROLEUM, INC. | CASE NO. 02-45206-H2-11
| (CHAPTER 11)
DEBTOR |
CHAPTER 11 TRUSTEE'S
SECOND AMENDED PLAN OF REORGANIZATION
FOR SEVEN SEAS PETROLEUM, INC.
Dated: August 2, 2003 Randall A. Rios
Houston, Texas Thomas S. Henderson
FLOYD, ISGUR, RIOS & WAHRLICH, P.C.
700 Louisiana, Suite 4600
Houston, Texas 77002-2732
Telephone: (713) 222-1470
Facsimile: (713) 222-1475
ATTORNEYS FOR BEN B. FLOYD,
CHAPTER 11 TRUSTEE
Ben B. Floyd, Trustee (the "Trustee"), as Chapter 11 Trustee for Seven
Seas Petroleum, Inc., the debtor in the above-referenced Chapter 11 case,
proposes the following Second Amended Plan of Reorganization for the Debtor
under Chapter 11 of the Bankruptcy Code.
ARTICLE 1
DEFINITIONS, CONSTRUCTION, AND INTERPRETATION
1.1. Definitions.
The capitalized terms used herein shall have the respective meanings set
forth below:
a. "A&K" means Andrews & Kurth LLP, special litigation counsel to
the Trustee.
b. "Administrative Expense" means any cost or expense of
administration of the Chapter 11 Case incurred on or before the Effective
Date entitled to priority under Section 507(a)(1) and allowed under
Section 503(b) of the Bankruptcy Code, including all allowances of
compensation or reimbursement of expenses to the extent allowed by the
Bankruptcy Court under the Bankruptcy Code.
c. "Allowed" when used with respect to any Claim means (i) such
Claim to the extent it is not a Contested Claim; (ii) such Claim to the
extent allowed in the Plan; (iii) such Claim to the extent it may be set
forth pursuant to any stipulation or agreement that has been approved by
Final Order; or (iv) a Contested Claim, proof of which was filed timely
with the Bankruptcy Court and (a) as to which no objection was filed by
the Objection Deadline, unless such Claim is to be determined in a forum
other than the Bankruptcy Court, in which case such Claim shall not become
Allowed until determined by Final Order of such other forum and Allowed by
Final Order of the Bankruptcy Court; or (b) as to which an objection was
filed by the Objection Deadline, to the extent Allowed by Final Order.
d. "Avoidance Actions" means any and all rights, claims and causes
of action arising under any provision of chapter 5 of the Bankruptcy Code.
e. "Ballot" means the Ballot to be used by creditors to cast their
votes to accept or reject the Plan.
f. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, and codified at title 11 of the United States Code.
g. "Bankruptcy Court" means the Bankruptcy Court unit of the United
States District Court for the Southern District of Texas, Houston
Division, or such other court having jurisdiction over the Chapter 11
Case.
h. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure, as prescribed by the United States Supreme Court pursuant to
section 2075 of title 28 of the United States Code.
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i. "Bar Date" means the final date for the filing of proofs of Claim
set by the Bankruptcy Court or such other date as may apply to a
particular Claim pursuant to a duly entered order of the Bankruptcy Court.
j. "Business Day" means any day on which commercial banks are open
for business in Houston, Texas.
k. "Case" means the case commenced under Chapter 11 of the
Bankruptcy Code on the Petition Date.
l. "Cash" means legal tender of the United States of America or Cash
equivalents.
m. "Claim" shall have the meaning set out in section 101(5) of the
Bankruptcy Code.
n. "Chesapeake" means Chesapeake Energy Corporation.
o. "Chesapeake Adversary" means the adversary proceeding filed by
the Trustee in the Bankruptcy Court on March 31, 2003 against the Secured
Lenders, the Secured Indenture Trustee and the Collateral Agent under Adv.
No. 03-3532, and styled Ben B. Floyd, Chapter 11 Trustee for Seven Seas
Petroleum, Inc. v. Chesapeake Energy Corp., et al.
p. "Chesapeake Note" means the 12% Senior Secured Note due in 2004
in the stated principal amount of $22,500,000 purchased by Chesapeake from
the Debtor pursuant to that certain Note Purchase and Loan Agreement dated
as of July 9, 2001.
q. "Claimant" or "Creditor" means the holder of a Claim.
r. "Collateral" means any property of the Debtor subject to a valid
and enforceable lien to secure the payment of a Claim.
s. "Collateral Agent" means Chesapeake, in its capacity as
collateral agent for the Secured Lenders under the Collateral Sharing and
Agency Agreement.
t. "Collateral Sharing and Agency Agreement" means that certain
Collateral Sharing and Agency Agreement dated effective as of July 24,
2001 among Chesapeake, the Secured Indenture Trustee and the Collateral
Agent, as amended from time to time.
u. "Committee" means the Official Committee of Unsecured Creditors
appointed by the office of the United States Trustee.
v. "Confirmation Date" means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.
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w. "Confirmation Hearing" means the hearing held by the Bankruptcy
Court pursuant to Section 1128 of the Bankruptcy Code, as it may be
continued from time to time, on confirmation of the Plan.
x. "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan in accordance with Section 1129 of the Bankruptcy
Code.
y. "Contested," when used with respect to a Claim, means a Claim
against the Debtor (i) that is listed in the Debtor's Schedules as
disputed, contingent or unliquidated regardless of whether a proof of
claim has been filed or not; (ii) that is listed in the Debtor's Schedules
as undisputed, liquidated and not contingent and as to which a proof of
Claim has been filed with the Bankruptcy Court, to the extent the proof of
Claim amount exceeds the scheduled amount; (iii) that is not listed in the
Debtor's Schedules, but as to which a proof of Claim has been filed with
the Bankruptcy Court; or (iv) as to which an objection has been filed.
Notwithstanding the foregoing, after the Objection Deadline, including any
extensions thereto, only Claims to which an Objection has been filed shall
be deemed Contested Claims with respect to claims for which a proof of
claim has been filed.
z. "Contingent Assets" means all recoveries by the Debtor or any of
its Subsidiaries (other than the Initial Payment, Expense Savings,
Contingent Expense Savings or Holdback Proceeds), including, without
limitation, any tax refunds, any proceeds from the sale of tax losses or
attributes, any proceeds from the sale, farmout or development of the Deep
Rights, the Rosablanca property or any other oil and gas properties of the
Debtor or the Subsidiaries after the Effective Date and any proceeds from
Litigation Claims.
aa. "Court" means the Bankruptcy Court.
bb. "Debtor" means Seven Seas Petroleum, Inc., a Cayman Islands
holding company.
cc. "Deep Rights" means all rights of the Debtor or any of the
Subsidiaries with respect to their interests, including working interests
and rights under applicable operating agreements, in the Deep Dindal
association agreement, including the Escuela 2 well.
dd. "Disallowed," when used with respect to a Claim, means a Claim
that has been disallowed by Final Order.
ee. "Effective Date" means the first Business Day which is ten (10)
days (calculated in accordance with Bankruptcy Rule 9006(a)) after the
Confirmation Date on which the Confirmation Order is not stayed.
ff. "Estate" means the bankruptcy estate of the Debtor within the
meaning of Section 541 of the Bankruptcy Code.
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gg. "Equity Interest" means the interest represented by an "equity
security," as defined in Section 101 of the Bankruptcy Code, including all
preferred, common stock and warrants to purchase common stock in the
Debtor.
hh. "Escuela 2" means the deep oil well drilled in the Deep Dindal
prospect area of Colombia, South America, in which the Debtor, through the
Subsidiaries, has a significant interest, which well is presently
untested.
ii. "Expense Savings" means all unexpended cash remaining on hand on
the Effective Date after paying (or reserving for the full payment of) (i)
the Initial Payment, (ii) the Holdback Proceeds, (iii) the actual expenses
of the Debtor and the Case, including the post-confirmation administration
of the Estate, (iv) the expenses of the Subsidiaries, and (v) the
establishment of a contingency reserve in the amount of $350,000.
jj. "Fee Application" means an application of a Professional Person
under Sections 330 or 503 of the Bankruptcy Code for allowance of
compensation and reimbursement of expenses in the Chapter 11 Cases.
kk. "Fee Claim" means a Claim under Sections 330 or 503 of the
Bankruptcy Code for allowance of compensation and reimbursement of
expenses in the Chapter 11 Case.
ll. "Final Order" means an order or judgment which has not been
reversed, stayed or superseded, modified, or amended and as to which (a)
any appeal, other review or stay that has been filed has been finally
determined or dismissed, or (b) the time for appeal has expired and no
notice of appeal has been timely filed.
mm. "GHK Colombia" means GHK Company Colombia, an Oklahoma
corporation and one of the Debtor's Subsidiaries.
nn. "Holdback Proceeds" means the funds in the amount of $3,090,389
recovered from the sale proceeds held back by Sipetrol from its purchase
from the Debtor (and the Subsidiaries) of their respective interests in
the shallow Guaduas Oil Field and the associated Guaduas-La Dorada
Pipeline, all of which are located in Colombia, South America, which funds
are to be distributed on the Effective Date to the Collateral Agent for
the benefit of the Secured Lenders and the Plan Designees in accordance
with the applicable Holdback Proceeds Sharing Ratios.
oo. "Initial Payment" means the payment in the amount of
$8,750,000.00 to be made to the Collateral Agent for the benefit of the
Secured Lenders on the Effective Date.
pp. "Involuntary Petition" means the involuntary petition under
Chapter 7 of the Bankruptcy Code filed against the Debtor by certain
unsecured creditors of the Debtor on the Petition Date.
qq. "Leases" means all "leases" and "executory contracts" as such
terms are used within Section 365 of the Bankruptcy Code to which the
Debtor was a party as of the Petition Date.
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rr. "Litigation Claims" means all claims or causes of action held by
the Debtor and its Subsidiaries, including any Avoidance Actions.
ss. "Operating Subsidiaries" means SSPC, Petrolinson and GHK
Colombia.
tt. "Order for Relief" means the order for relief under chapter 11
of the Bankruptcy Code, to which the Debtor consented on January 13, 2003.
uu. "Petition Date" means December 20, 2002, the date the
Involuntary Petition was filed against the Debtor.
vv. "Petrolinson" means Petrolinson S.A., a Panamanian corporation,
and one of the Debtor's Subsidiaries.
ww. "Plan" or "Plan of Reorganization" means this First Amended Plan
of Reorganization, either in its present form or as it may hereafter be
altered, amended or modified from time to time.
xx. "Plan Designees" means the holders of Allowed Administrative
Claims, Allowed Priority Claims, Allowed Unsecured Claims and the holders
of Equity Interests in the Debtor.
yy. "Plan Documents" means the documents that aid in effectuating
the Plan as specifically identified as such herein, which will be
substantially in the form filed by the Debtor with the Bankruptcy Court
prior to the conclusion of the hearing on approval of the Disclosure
Statement.
zz. Plan Rate: Seven percent (7%) annual interest rate, compounded
annually on the first day of the month following the Effective Date if the
interest payable to the holder of an Allowed Claim would be subject to
federal taxation to such holder; and a five percent (5%) annual interest
rate, compounded annually on the first day of the month following the
Effective Date if the interest payable to the holder of an Allowed Claim
would not be subject to federal taxation to such holder.
aaa. "Priority Claim" means any Claim (other than an Administrative
Expense) to the extent entitled to priority in payment under Section
507(a) of the Bankruptcy Code.
bbb. "Priority Non-Tax Claim" means any Priority Claim accorded
priority in right of payment under Section 507(a)(3), (4), (5), (6), (7)
or (9) of the Bankruptcy Code.
ccc. "Priority Tax Claim" means a Priority Claim of a governmental
unit of the kind specified in Section 507(a)(8) of the Bankruptcy Code.
ddd. "Professional Person" means a person retained or to be
compensated pursuant to Section 327, 328, 330, 503(b) or 1103 of the
Bankruptcy Code.
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eee. "Pro Rata Share" means the proportion that the amount of an
Allowed Claim in a particular class of Claims bears to the aggregate
amount of all Claims in such class of Claims, including Contested Claims,
but not including Disallowed Claims.
fff. "Reorganized Debtor" means as of the Effective Date of the
Plan, the Debtor as reorganized under the terms of this Plan.
ggg. "Representatives" means any officer, director, financial
advisor, attorney, law firm, accounting firm, financial advising firm, and
other Professional Person.
hhh. "Schedules" means the schedules of assets and liabilities and
the statements of financial affairs filed by the Debtor as required by
Section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, as such
schedules and statements have been or may be supplemented or amended.
iii. "Secured Claim" means a Claim secured by a lien on property of
the Debtor, which lien is valid, perfected and enforceable under
applicable law, is not subject to avoidance under the Bankruptcy Code or
other applicable non-bankruptcy law and which is duly established in the
Case, but only to the extent of the value of the Collateral that secures
payment of such Claim; provided, however, the foregoing limitation on the
amount of a Secured Claim to the value of the Collateral will in no event
apply to any liens or Allowed Claims of the Secured Lenders.
jjj. "Secured Indenture" means the Amended and Restated Indenture
dated as of July 23, 2001 pursuant to which The Bank of New York Trust
Company of Florida, N.A., as successor to U.S. Trust Company of Texas,
N.A., serves as trustee for the holders of the Senior Notes.
kkk. "Secured Indenture Trustee" means The Bank of New York Trust
Company of Florida, N.A., as successor to U.S. Trust Company of Texas,
N.A., as trustee for the holders of the Senior Notes, and U.S. Trust
Company of Texas, N.A. as predecessor trustee for the holders of the
Senior Notes.
lll. "Secured Lenders" means (a) Chesapeake, as the holder of the
Chesapeake Note, and (b) the holders of the Senior Notes.
mmm. "Senior Notes" means the Debtor's 12% Senior Secured Series A
Notes in the stated principal amount of $22,500,000.
nnn. "Sipetrol" means Sociedad International Petrolera S.A., the
international exploration and production subsidiary of the Chilean
national oil company, the purchaser of certain interests from the Debtor
and/or its Subsidiaries pursuant to an order of the Court entered on
February 3, 2003.
ooo. "Specified Percentage" shall have the meaning set forth in the
Collateral Sharing and Agency Agreement.
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ppp. "Stay Motion" means the Motion for Relief from Stay filed by
the Collateral Agent on January 29, 2003, requesting that the Court grant
relief from the automatic stay to allow the Collateral Agent and the
Secured Lenders to pursue their rights and remedies with respect to the
Collateral held by the Debtor's Estate.
qqq. "SSPC" means Seven Seas Petroleum Colombia, Inc., a Cayman
Island corporation and one of the Debtor's Subsidiaries.
rrr. "Subsidiaries" means all subsidiaries of the Debtor, including
the Operating Subsidiaries, Seven Seas Petroleum USA, Inc., a Delaware
corporation and the employer of the Debtor's U.S. corporate employees, and
a number of dormant corporate entities.1
sss. "Tax Liens" means any statutory liens securing any Allowed
Priority Tax Claims.
ttt. "Trustee" means Ben B. Floyd, Chapter 11 Trustee.
uuu. "Unsecured Indenture" means that certain agreement dated as of
May 7, 1998 pursuant to which The Bank of Nova Scotia Trust Company of New
York serves as trustee for the holders of the Unsecured Notes.
vvv. "Unsecured Indenture Trustee" means The Bank of Nova Scotia
Trust Company of New York, as trustee for the holders of the Unsecured
Notes.
www. "Unsecured Notes" means the Debtor's 12 1/2% Series A Unsecured
Notes due in 2005 in the aggregate principal amount of $110,000,000.
xxx. "Unsecured Noteholders" means the holders of the Unsecured
Notes.
yyy. "Voting Record Date" means that date set by the Bankruptcy
Court for determining the holders of Claims entitled to vote to accept or
reject the Plan.
1.2. Interpretation.
Unless otherwise specified, all section, article and exhibit references in
the Plan are to the respective section in, article of or exhibit to the Plan, as
the same may be amended, waived or modified from time to time. The headings and
table of contents in the Plan are for convenience of reference only and shall
not limit or otherwise affect the provisions of the Plan. Words denoting the
singular number shall include the plural number and vice versa and words
denoting one gender shall include the other gender. All exhibits and schedules
attached to the Plan are incorporated herein by such attachment.
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1 The dormant entities (and their respective chartering jurisdictions) include
Seven Seas Petroleum Holdings, Inc. (Cayman Islands), Seven Seas Resources
Australia Inc. (British Columbia), Seven Seas Petroleum Turkey Inc. (British
Columbia), Seven Seas Resources Australia Inc. (Cayman Islands), Seven Seas
Petroleum PNG Inc. (Cayman Islands), Seven Seas Petroleum Argentina Inc. (Cayman
Islands), Seven Seas Petroleum Mediterranean Inc. (Cayman Islands), Seven Seas
Petroleum Turkey (Cayman Islands) and Guaduas Pipeline Company (Cayman Islands).
Page 8
1.3. Application of Definitions and Rules of Construction Contained in the
Bankruptcy Code.
Words and terms defined in Section 101 of the Bankruptcy Code shall have
the same meaning when used in the Plan, unless a different definition is given
in the Plan. The rules of construction contained in Section 102 of the
Bankruptcy Code shall apply to the construction of the Plan.
1.4. Other Terms.
The words "herein," "hereof," "hereto," "hereunder" and others of similar
import refer to the Plan as a whole and not to any particular section,
subsection or clause contained in the Plan. A term used herein that is not
defined herein shall have the meaning ascribed to that term, if any, in the
Bankruptcy Code.
1.5. Integration Clause.
This Plan is a complete, whole, and integrated statement of the binding
agreement among the Debtor, creditors, Equity Interest Holders and the
parties-in-interest upon the matters herein. Parol evidence shall not be
admissible in an action regarding this Plan or any of its provisions.
1.6. Plan Documents.
The Plan Documents are incorporated into and are a part of the Plan as if
set forth in full herein.
ARTICLE 2
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
2.1. Claims and Equity Interests Classified.
For purposes of organization, voting and all confirmation matters, all
Claims (except for Administrative Expenses and Priority Tax Claims) and all
Equity Interests shall be classified as set forth in this Article 2 of the Plan.
This Plan shall only provide distributions to Allowed Claims; unless otherwise
provided herein with respect to Class 2 Allowed Secured Claims and the Class 3
Allowed Unsecured Claim of the Unsecured Indenture Trustee, as trustee for the
Unsecured Noteholders, nothing within this Plan shall provide for the Allowance
of any Claim.
2.2. Administrative Expenses and Priority Tax Claims.
As provided in Section 1123(a)(1) of the Bankruptcy Code, Administrative
Expenses and Priority Tax Claims against the Debtor shall not be classified for
purposes of voting or receiving distributions under the Plan. Rather, all such
Claims shall be treated separately as unclassified Claims on the terms set forth
in Article 5 of the Plan.
2.3. Claims and Equity Interests.
The Plan classifies the Claims against and Equity Interests in the Debtor
as follows:
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2.3.1 Class 1: Allowed Priority Non-Tax Claims.
2.3.2 Class 2: Allowed Secured Claims.
2.3.3 Class 3: Allowed Unsecured Claims.
2.3.4 Class 4: Equity Interests.
ARTICLE 3
IDENTIFICATION OF IMPAIRED CLASSES; ACCEPTANCE OR
REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE
OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS
3.1. Impaired Classes of Claims and Equity Interests.
Claims in Classes 2 and 3 and Equity Interests in Class 4 are impaired
under the Plan. Claims in Class 1 are unimpaired.
3.2. Impairment Controversies.
If a controversy arises as to whether any Claim or Equity Interest or any
class of Claims or class of Equity Interests is impaired under the Plan, the
Court shall, upon notice and a hearing, determine such controversy.
3.3. Classes Entitled to Vote.
Claimants, if any, in Class 1, which are unimpaired, are conclusively
deemed to accept the Plan and cannot vote. Classes 2, 3 and 4 may vote to accept
or reject the Plan.
3.4. Class Acceptance Requirement.
A class of Claims shall have accepted the Plan if it is accepted by at
least two-thirds in amount and more than one-half in number of the holders of
Allowed Claims in such class that have voted on the Plan.
3.5. Cramdown.
If any class of Claims or Equity Interests shall fail to accept the Plan
in accordance with Section 1126(c) of the Bankruptcy Code, the Bankruptcy Court
may still confirm the Plan in accordance with Section 1129(b) of the Bankruptcy
Code. The Debtor will seek confirmation of the Plan pursuant to Section 1129(b)
with respect to any non-accepting class.
3.6. Disallowance of Claims Subject To Avoidance Actions.
Any otherwise Allowed Claim, subject to Avoidance Actions as described in
the Disclosure Statement under Section 547 of the Bankruptcy Code, shall be
disallowed pursuant to Section 502(d) of the Bankruptcy Code until such time as
the avoidable transfers are returned to the Estate or the Trustee and such
holder of a Claim subject to an Avoidance Action shall not be
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entitled to vote to accept or reject this Plan; provided, however, this Section
3.6 of the Plan shall not apply to the holders of the Allowed Class 2 Secured
Claims notwithstanding the pendency of the Chesapeake Adversary.
ARTICLE 4
PROVISIONS FOR TREATMENT OF CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN
The classes of Claims against and Equity Interests in the Debtor shall be
treated under the Plan as follows:
4.1. Class 1 -- Allowed Priority Non-Tax Claims.
On the Effective Date, each Allowed Priority Non-Tax Claim shall be paid
in full in Cash, or upon such other less favorable terms as may be agreed upon
in writing by and between the holder of such Claim and the Reorganized Debtor.
Any Priority Non-Tax Claims that are not Allowed as of the Effective Date shall
be paid in Cash in full upon Allowance by the Reorganized Debtor. The
distributions to Allowed Priority Non-Tax Claims shall only be made from Cash
reserved by the Debtor for the payment of the Debtor's expenses as of the
Effective Date, and thereafter from funds designated and available for Plan
Designees.
4.2. Class 2 -- Allowed Secured Claims.
Class 2 shall be comprised solely of the Allowed Secured Claims of the
Collateral Agent and the Secured Lenders which shall be Allowed in their full
amount of $45 million in principal plus accrued and accruing interest, fees and
expenses, including fees and expenses of counsel, but paid pursuant to the
following terms. In accordance with the compromise and settlement set forth in
Article 8, the holders of Class 2 Allowed Secured Claims shall receive, in
satisfaction of their Allowed Secured Claims, distributions as follows:
4.2.1 On the Effective Date, the holders of the Class 2 Allowed
Secured Claims shall receive a Pro Rata Share of Cash from (i)
the Initial Payment; (ii) the Expense Savings to be
distributed pursuant to the Expense Savings Sharing Ratio; and
(iii) the Holdback Proceeds to be distributed pursuant to the
Holdback Proceeds Sharing Ratio, all of which distributions
shall be made by the Debtor to the Collateral Agent.
4.2.2 Within five (5) business days after receipt of such Cash by
the Reorganized Debtor, the holders of the Class 2 Allowed
Secured Claims shall receive a Pro Rata Share of Cash from the
Contingent Expense Savings to be distributed pursuant to the
Expense Savings Sharing Ratio, until the Allowed Secured
Claims (including interest at the contractual, nondefault rate
of 12% per annum compounded quarterly, which accrual shall
only be determined and paid as part of the Allowed Secured
Claim in the event funds for payment thereof become available)
are paid in full. Distributions of Cash from the Contingent
Expense Savings shall be made by the Reorganized Debtor to the
Collateral Agent.
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4.2.3 Within five (5) business days after receipt of such Cash by the
Reorganized Debtor, the holders of the Class 2 Allowed Secured
Claims shall also receive a Pro Rata Share of Cash from the
Contingent Assets to be distributed pursuant to the applicable
Contingent Assets Sharing Ratios, until the Allowed Secured Claims
(including interest at the contractual, nondefault rate of 12% per
annum compounded quarterly, which accrual shall only be determined
and paid as part of the Allowed Secured Claim in the event funds for
payment thereof become available) are paid in full. Distributions of
Cash from the Contingent Assets shall be made by the Reorganized
Debtor to the Collateral Agent.
4.2.4 Distributions received by the Collateral Agent under Sections 4.2.1,
4.2.2 and 4.2.3 will be distributed to the Secured Lenders in
accordance with the terms of the Collateral Sharing and Agency
Agreement. Distributions to the holders of the Senior Notes will be
diluted to the extent of their Specified Percentage of the fees and
expenses incurred by the Collateral Agent under the Collateral
Sharing and Agency Agreement and the fees and expenses incurred by
the Secured Indenture Trustee under the Secured Indenture and in
connection with the Case, including the fees and expenses of its
counsel, pursuant to the terms of the Secured Indenture, the Secured
Indenture Trustee's lien on distributions and applicable law.
4.2.5 Any warrants to purchase common stock of the Debtor held by any of
the Secured Lenders shall be treated as Class 3 Equity Interests.
Holders of the Class 2 Allowed Secured Claims shall not receive any
distributions as Class 3 Unsecured Claimants. As a result of the foregoing, the
Allowed Secured Claims of the Secured Lenders will not be reduced or subject to
other action in favor of the Trustee, the Estate, the Subsidiaries, the
Committee or any Creditor of the Debtor or the Subsidiaries. The amounts
designated as payable to the Secured Lenders or the Collateral Agent under the
Plan shall only be paid in accordance with this Section 4.2 and may not be used
to pay any Plan Designee or other Claims.
4.3. Class 3 -- Allowed Unsecured Claims.
Allowed Claims in Class 3 shall be treated as follows in full satisfaction
of any and all Claims as hereinafter provided. In accordance with the compromise
and settlement set forth in Article 8, the holders of Allowed Unsecured Claims
shall receive, in satisfaction of their Allowed Unsecured Claims, distributions
from funds designated and available for Plan Designees as follows:
4.3.1 On the earlier of: (ii) the Effective Date; or (ii) within five (5)
business days after receipt of such Cash by the Reorganized Debtor,
as applicable in each case, the holders of the Class 3 Allowed
Unsecured Claims shall receive a Pro Rata Share of Cash from: (i)
the Expense Savings and the Contingent Expense Savings to be
distributed pursuant to the Expense Savings Sharing Ratio; and (ii)
the Holdback Proceeds to be distributed pursuant to the Holdback
Proceeds Sharing Ratio, until the Allowed Unsecured Claims
(including interest at the contractual, nondefault
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rate, which accrual shall only be determined and paid as part of the
Allowed Unsecured Claim in the event funds for payment thereof
become available) are paid in full. Distributions of Cash from the
Expense Savings the Contingent Expense Savings and the Holdback
Proceeds shall be made to the Plan Designees.
4.3.2 Within five (5) business days after receipt of such Cash by the
Reorganized Debtor, the holders of the Class 3 Allowed Unsecured
Claims shall also receive a Pro Rata Share of Cash from the
Contingent Assets to be distributed pursuant to the applicable
Contingent Assets Sharing Ratios, until the Allowed Unsecured Claims
(including interest at the contractual, nondefault rate, which
accrual shall only be determined and paid as part of the Allowed
Unsecured Claim in the event funds for payment thereof become
available) are paid in full. Distributions of Cash from the
Contingent Assets shall be made to the Plan Designees.
4.3.3 The Unsecured Indenture Trustee, as trustee for the Unsecured
Noteholders, will be deemed to have an Allowed Unsecured Class 3
Claim of $118,216,400.56 as of the Petition Date. If holders of
Allowed Class 3 Claims become entitled to post-petition interest,
cost and attorneys fees, then the Unsecured Noteholders shall also
be allowed such post-petition interest, cost and attorneys fees,
with any post-petition interest on the Unsecured Notes calculated at
the contract amount of 12.5% per annum. The Trustee and the
Unsecured Indenture Trustee each reserve the right to object to any
proof of claim filed by or on behalf of an Unsecured Noteholders
(except for the proof of claim filed by the Unsecured Indenture
Trustee on May 16, 2003) if the Claim asserted therein, in whole or
in part, duplicates the Claim asserted by the Unsecured Indenture
Trustee, provided that no such objection shall impair or delay any
distribution the claimant is entitled to receive from the Unsecured
Indenture Trustee. On the Effective Date, except as otherwise
provided for herein, (i) the Unsecured Notes shall be canceled, and
(ii) the obligations of the Debtor under the Unsecured Indenture
shall be discharged; provided however that the foregoing shall not
effect the right of the Unsecured Indenture Trustee to (a) receive
and make the distributions to be made on account of Class 3 Claims
of the Unsecured Noteholders as provided in Article 4.3.3 hereof,
and (b) permit the Unsecured Indenture Trustee to maintain all
rights and liens it has for fees, costs and expenses under the
Unsecured Indenture, provided however, that such fees, costs and
expenses are approved by the Bankruptcy Court as reasonable.
4.3.4 Distributions for the benefit of the Unsecured Noteholders shall be
made to the Unsecured Indenture Trustee, who in turn shall make
distributions to the Unsecured Noteholders in accordance with the
terms of the Unsecured Indenture. Additionally, distributions to the
Unsecured Noteholders will be diluted to the extent of the Unsecured
Indenture Trustee's fees and expenses incurred under the Unsecured
Indenture and in connection with the Case, including the fees and
expenses of its counsel, pursuant to the terms of the Unsecured
Indenture, the Unsecured Indenture Trustee's lien on distributions
and applicable law.
Page 13
4.4. Class 4 -- Equity Interests.
The holders of Equity Interests in the Debtor shall retain their ownership
interests in the Reorganized Debtor, together with all entitlements related
thereto, subject to the provisions regarding post-confirmation corporate
governance in Article 10 herein, only to the extent that all Allowed Claims are
paid in full. The distributions to holders of Equity Interests shall only be
made from funds designated and available for Plan Designees.
ARTICLE 5
PROVISIONS FOR TREATMENT OF
UNCLASSIFIED CLAIMS UNDER THE PLAN
All Administrative Expenses and Priority Tax Claims against the Debtor
shall be treated as follows:
5.1. Treatment of Allowed Administrative Expenses.
On the Effective Date, each Allowed Administrative Claim allowed by
interim or final order of the Bankruptcy Court shall be paid in full in Cash,
after netting (with permission of the Bankruptcy Court) the amount of any cash
retainers held by the holder of such Claim, or upon such other less favorable
terms as may be agreed upon in writing by and between the holder of such Claim
and the Reorganized Debtor. Any Administrative Claims that are not Allowed as of
the Effective Date shall be paid by the Reorganized Debtor in Cash in full upon
allowance by the Court as provided in Section 5.3 hereof after request for
allowance as provided in Section 5.2 hereof. The distributions to holders of
Allowed Administrative Claims shall only be made from Cash reserved by the
Debtor for the payment of the Debtor's expenses as of the Effective Date, and
thereafter from funds designated and available for Plan Designees.
5.2. Time for Filing Administrative Expenses.
Any and all requests for allowance of an Administrative Claim, including
any fee applications to be submitted by Professionals in the case, shall be
filed with the Bankruptcy Court within sixty (60) days following the Effective
Date. Any Administrative Claims not filed within such time period will be
forever barred and will not be entitled to receive any distribution or payment
under the Plan.
5.3. Allowance of Administrative Expenses.
An Administrative Expense Claim, whether asserted by notice filed pursuant
to Section 5.1(a) of the Plan or under a Fee Application with respect to a Fee
Claim, shall become an Allowed Administrative Expense only to the extent Allowed
by Final Order.
5.4. Treatment of Priority Tax Claims.
Beginning on the first day of the calendar quarter next following the
later to occur of the Effective Date or the date on which the Claim becomes
Allowed, the Reorganized Debtor will commence the payment of quarterly
installments in satisfaction of the Allowed Priority Tax Claims. (At the option
of the Reorganized Debtor, the payment may be made in full on such
Page 14
date.) Pending payment in full, the subject property, or, if sold pursuant to
Order of the Court, the proceeds thereof, shall remain subject to any applicable
Tax Lien. Those payments, which will include interest thereon at the Plan Rate
(accrued from and after the Effective Date), will be made over a period ending
on the sixth anniversary of the date of assessment of the subject tax. However,
to the extent the property related such claim has been transferred to, or such
claim has been assumed by another party, the holder of such claim shall look
solely to that party for payment and shall receive nothing from the Debtor, the
Reorganized Debtor or this Estate. The distributions to holders of Allowed
Priority Tax Claims shall only be made from Cash reserved by the Debtor for the
payment of Allowed Administrative Claims as of the Effective Date, and
thereafter from funds designated and available for Plan Designees.
ARTICLE 6
CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
6.1. Conditions Precedent to Confirmation of the Plan.
Confirmation of the Plan is subject, in addition to the requirements
provided in Section 1129 of the Bankruptcy Code, to satisfaction of the
following conditions precedent:
a. The Confirmation Order is in a form reasonably acceptable to the
Trustee and the Collateral Agent; and
b. The Plan Documents are in a form reasonably acceptable to the
Trustee and the Collateral Agent.
6.2. Conditions Precedent to Confirmation May Be Waived.
The Trustee and the Collateral Agent may mutually waive the conditions to
the Confirmation set forth in Section 6.1(a) and 6.1(b), in whole or in part, at
any time, without notice, an order of the Bankruptcy Court or any further action
other than proceeding to confirmation of the Plan.
ARTICLE 7
CONDITIONS PRECEDENT TO THE EFFECTIVE DATE OF THE PLAN
7.1. Conditions Precedent to the Effective Date.
The Effective Date of the Plan is subject to satisfaction of the following
conditions precedent:
a. The Confirmation Order is not subject to a stay; and
b. All Plan Documents have been executed and delivered by the
parties thereto, and all conditions to the effectiveness of such documents
shall have been satisfied or waived as provided therein.
Page 15
7.2. Conditions May Be Waived.
The Trustee and the Collateral Agent may mutually waive the conditions
precedent to the Effective Date set forth in 7.1(b), in whole or in part, at any
time, without notice, an order of the Bankruptcy Court or any further action
other than proceeding to consummation of the Plan.
ARTICLE 8
SETTLEMENT AND COMPROMISE WITH COLLATERAL AGENT
AND SECURED LENDERS
8.1. Plan as Motion to Compromise and Settle.
The Plan shall constitute a motion, as permitted pursuant to section
1123(a)(5)(E) and (b)(3)(A) of the Bankruptcy Code and Rule 9019 of the
Bankruptcy Rules, for the approval of a proposed compromise and settlement among
the Collateral Agent and the Secured Lenders, on the one hand, and the Trustee
on behalf of the Estate and the Subsidiaries, on the other hand.
8.2. Terms of Compromise and Settlement.
The terms of the compromise and settlement are as follows:
a. Initial Payment: The Collateral Agent shall receive for the
benefit of the Secured Lenders the Initial Payment from the Estate in the
amount of $8,750,000 on the Effective Date.
b. Allowed Secured Claims: The Secured Lenders shall have Allowed
Secured Claims in an aggregate amount of $45.0 million in principal plus
accrued and accruing interest, fees and expenses, including fees and
expenses of counsel. The Secured Lenders shall retain their existing liens
and security interests in their Collateral to secure the Allowed Secured
Claims together with all rights and provisions of the documents covered by
the Collateral Sharing and Agency Agreement or currently securing the
obligations to the Secured Lenders. The Allowed Secured Claims of the
Secured Lenders shall not be subject to objection, subordination,
recharacterization, setoff, recoupment, avoidance or reduction.
c. Distributions to Collateral Agent: The Initial Payment and all
other distributions received by the Collateral Agent shall be applied pro
rata to the Secured Lenders' Allowed Secured Claim in accordance with the
Collateral Agency and Sharing Agreement. No provision of the Plan shall
ever be construed to provide for distributions that exceed the amount of
the Secured Lenders' Allowed Secured Claim, plus accrued interest as
provided in Section 4.2.3 of the Plan.
d. Expenses: All Cash remaining after the Initial Payment (exclusive
of cash received from the Holdback Proceeds or the Contingent Assets) will
remain in accounts of the Reorganized Debtor and the Subsidiaries and will
be utilized to fund the actual expenses of the Reorganized Debtor and the
Subsidiaries.
e. Expense Savings: On the Effective Date, the Expense Savings shall
be distributed pursuant to the expense savings sharing ratio of ninety
percent (90%) to the Collateral Agent for the benefit of the Secured
Lenders and ten percent (10%) to the Plan
Page 16
Designees (the "Expense Savings Sharing Ratio"). All distributions to the
Plan Designees shall be made in the order of absolute priority in
accordance with the applicable provisions of the Bankruptcy Code.
f. Contingent Expense Savings: Contingent Expense Savings means the
amount, if any, by which the Debtor's expenditures after the Effective
Date by the Estate or the Subsidiaries are less than the amounts set forth
in the Trustee's budget attached as EXHIBIT A hereto (decreased for
amounts expended before the Effective Date but included in the Trustee's
budget). The calculation of the Contingent Expense Savings will be made on
a line item basis on the date all such amounts included in the line of the
Trustee's budget have been incurred or are reasonably expected not to be
incurred. The Contingent Expense Savings shall be distributed to the
Collateral Agent for the benefit of the Secured Lenders and the Plan
Designees in accordance with the Expense Savings Sharing Ratio within five
(5) business days after such Contingent Expense Savings are realized or
determined with respect to each line item on the Trustee's budget as
provided herein. Contingent Expense Savings expressly include, but are not
limited to: (i) the amount by which the actual plugging expenses for the
Escuela 2 are less than the amount projected by the Trustee; (ii) the
amount by which the contingent liability related to the Debtor's
Rosablanca property is less than the amount projected by the Trustee; and
(iii) the amount by which professional fees are less than the amount
projected by the Trustee.
g. Holdback Proceeds: On the Effective Date, all Holdback Proceeds
shall be distributed pursuant to the holdback proceeds sharing ratio of
seventy-five (75%) to the Collateral Agent for the benefit of the Secured
Lenders and twenty-five percent (25%) to the Plan Designees (the "Holdback
Proceeds Sharing Ratio").
h. Contingent Assets: The Contingent Assets shall be monetized and
distributed in accordance with certain ratios (the "Contingent Assets
Sharing Ratios") as follows:
The First $5,000,000: Shall be distributed ninety (90%) to the
Collateral Agent for the benefit of the Secured Lenders and ten
percent (10%) to the Plan Designees.
The Next $1,000,000: Shall be distributed fifty percent (50%)
to the Collateral Agent for the benefit of the Secured Lenders and
fifty percent (50%) to the Plan Designees.
The Next $ 4,000,000: Shall be distributed seventy-five
percent (75%) to the Collateral Agent for the benefit of the Secured
Lenders and twenty-five percent (25%) to the Plan Designees.
All Amounts Received Thereafter Until the Class 2 Allowed
Secured Claims are Paid in Full: Shall be distributed ninety percent
(90%) to the Collateral Agent for the benefit of the Secured Lenders
and 10% to the Plan Designees.
All Amounts Received Thereafter Until Class 3 Allowed
Unsecured Claims are Paid in Full: Shall be paid to the Plan
Designees.
Page 17
All Amounts Received Thereafter: Shall be the unencumbered
property of the Reorganized Debtor which shall continue to be owned
by the holders of Equity Interests.
i. Trustee's Compensation: The Trustee shall have an Allowed
Administrative Claim for Trustee's compensation equal to (a) $300,000;
plus, in his capacity as Sole Officer of the Reorganized Debtor,
compensation in the amount of (b) 1.5% of the amounts distributed from
recoveries from any tax refunds and from the sale of tax losses or
attributes received by or attributable to the Debtor or the Subsidiaries,
plus, (c) 3.0% of the amounts distributed from recoveries received by or
attributable to the Debtor or the Subsidiaries from the sale, farmout or
development of the Deep Rights, the Rosablanca property or any other oil
and gas properties of the Debtor or the Subsidiaries after the Effective
Date and any proceeds from Litigation Claims received by or attributable
to the Debtor or the Subsidiaries. The total amount of the Trustee's
Allowed Administration Claim and/or compensation shall not exceed 3% of
the total distributions to the creditors of the Debtor and the Estate.
j. A&K Contingent Fee: In accordance with the terms of the Court's
Order approving the Trustee's contingent fee agreement, A&K shall be
granted an Allowed Administrative Claim in the amount of 38% of the gross
value of the recovery to the Plan Designees (which includes A&K). In light
of the uncertainties regarding the timing and amount of recoveries to the
Estate, A&K has agreed to accept payment of its contingent fee in a manner
other than as required by the agreement. Instead, A&K shall be compensated
as follows:
1. A&K shall be granted an Allowed Administrative Claim in the
amount of $364,548.60 (relating to services provided from January 13
- May 31, 2003, as described in A&K's February - June 2003
invoices). The Trustee has previously paid A&K $66,751.11 of this
amount. The remaining $297,797.49 shall be paid in cash on the
Effective Date.
2. A&K shall be granted an additional Allowed Administrative
Claim, which shall be paid in cash on the Effective Date, in the
amount of $87,144.67 relating to the filing and prosecution of the
involuntary proceeding.
3. A&K shall be granted an additional Allowed Administrative
Claim in the amount of $90,000 (relating to amounts A&K would
otherwise be immediately entitled to under its contingency fee
agreement). A&K shall be paid $45,000 of this Allowed Administrative
Claim paid in cash on the Effective Date. The remainder of the Claim
($45,000) shall be paid in cash from amounts available for
distribution to Plan Designees.
4. A&K shall retain all amounts previously paid to A&K by the
Trustee ($66,751.11) for services performed since the Petition Date.
5. A&K shall be granted an additional Allowed Administrative
Claim and shall receive the following recoveries from distributions
made to Plan Designees of the proceeds from the sale, farmout or
development of the Deep Rights, the Rosablanca property or any other
oil and gas properties of the Debtor or the Subsidiaries after the
Effective Date:
Page 18
a. 0% of the Plan Designees' recovery from the first $10
million in proceeds received by the Debtor or the Subsidiaries on
account of the Deep Rights, the Rosablanca property or any other oil
and gas properties of the Debtor or the Subsidiaries after the
Effective Date; plus
b. 5% of the Plan Designees' recovery from the next $20
million in proceeds received by the Debtor or the Subsidiaries on
account of the Deep Rights, the Rosablanca property or any other oil
and gas properties of the Debtor or the Subsidiaries after the
Effective Date; plus
c. 0% of the Plan Designees' recovery from the next $10
million in proceeds received by the Debtor or the Subsidiaries on
account of the Deep Rights, the Rosablanca property or any other oil
and gas properties of the Debtor or the Subsidiaries after the
Effective Date; plus
d. 19% of the Plan Designees' recovery from all additional
proceeds received by the Debtor or the Subsidiaries on account of
the Deep Rights, the Rosablanca property or any other oil and gas
properties of the Debtor or the Subsidiaries after the Effective
Date, until the holders of the Unsecured Notes are paid in full
(i.e., principal plus accrued interest); plus
e. 100% of all subsequent distributions to the Plan Designees
(net of the Sole Officer's compensation and of other Allowed
Administrative Claims) until such time as A&K has received an amount
equal to 38% of x, where x equals the total amount of proceeds that
were made available to the Plan Designees [such that A&K will have
received 38% and the other Plan Designees will have received 62%, as
contemplated by the original contingent fee agreement]; plus 38% of
all subsequent such proceeds.
6. A&K shall be compensated on an hourly-fee basis for services
rendered from June 1, 2003 through the Effective Date and thereafter for
non-litigation services and for services related to litigation or
investigation of claims against Chesapeake. Other work, including the
analysis and prosecution of claims against parties other than Chesapeake
shall continue to be governed by the terms of A&K's contingent fee
agreement with the Trustee which gives A&K 38% of all other litigation
recoveries, including but not limited to, recoveries from former officers
and directors and professionals advising Seven Seas. A&K will be entitled
to this 38% regardless of which parties receive the remaining 62% of such
recoveries and regardless of the timing of such recoveries. A&K's
hourly-fee compensation for post-June 1, 2003 shall be subject to review
and objection, as provided by the Bankruptcy Code, the Bankruptcy Rules
and the Local Rules. The payments to A&K described in paragraphs 1 - 5
above shall not be subject to objection, but shall be allowed and paid in
the amounts provided.
7. A&K's contingent fee agreement previously approved by the Court
shall remain in effect, unmodified, as to all other claims of the Trustee
or the Debtor.
Page 19
k. Dismissal of Chesapeake Adversary: Upon the Effective Date, the
Collateral Agent, the Secured Indenture Trustee and the Secured Lenders
shall be deemed dismissed, with prejudice, from the Chesapeake Adversary
and the Trustee and the Collateral Agent shall take all actions necessary
to evidence such dismissal; provided, however, and only to the extent they
are actually named as Defendants in the Chesapeake Adversary prior to the
Effective Date, Robert Hefner, Larry R. Ray, Ronald Lefaive, Randolph
Devening, Brian E. Eglof, Robert Panero, Gary Fuller, James R.
Schlesinger, Brian Sanchez, Ramiiilaj, A Limited Partnership, Petroleum
Properties Management Company LLC, Fuller Family Investments, A Limited
Partnership and CIBC World Markets and/or any other CIBC entity named as a
Defendant shall not be dismissed from the Chesapeake Adversary and the
rights of the Trustee, the Debtor, and the Reorganized Debtor to bring
claims against these individuals and entities who are not being dismissed
shall be preserved.
l. Mutual Release:
(A) Except as provided in Section 8.2.l.C below, upon the
Effective Date, the Trustee, on behalf of the Estate and the Subsidiaries,
shall be deemed to have compromised and settled with, and fully released
and forever discharged the Collateral Agent, the Secured Indenture Trustee
and the Secured Lenders and their respective Representatives, successors,
predecessors, partners, parents, subsidiaries or affiliated companies, and
sureties from any and all past, present, or future claims, offsets,
counterclaims, demands, actions, causes of action, costs, judgments,
expenses, attorney's fees, damages, and all liabilities whatsoever, at law
or in equity, including, without limitation, all causes of action, whether
known or unknown which the Estate or the Subsidiaries now have, claims to
have, have ever had, or would but for this release, have had in the future
arising from, related to or on account of the Chesapeake Adversary, the
Stay Motion or the Case and all matters raised or which could have been
raised in the Chesapeake Adversary, the Stay Motion (including but not
limited to, any claim or cause of action under Chapter 5 of the Bankruptcy
Code, or any claim or cause of action for equitable subordination,
recharacterization or other similar claim), or the Case, SAVE AND EXCEPT
FOR ALL OBLIGATIONS ARISING UNDER OR RELATED TO THE PLAN OR THIS RELEASE.
(B) Upon the Effective Date and the receipt by the Collateral
Agent of the Initial Payment, the amount payable to the Collateral Agent
under the Expense Savings Sharing Ratio from the Expense Savings, and
amount payable to the Collateral Agent under the Holdback Sharing Ratio
from the Holdback Proceeds, the Collateral Agent, the Secured Indenture
Trustee and the Secured Lenders shall be deemed to have compromised and
settled with, and fully released and forever discharged the Trustee, on
behalf of the Estate and the Subsidiaries and their respective
Representatives, successors, predecessors, partners, parents, subsidiaries
or affiliated companies, and sureties from any and all past, present, or
future claims, offsets, counterclaims, demands, actions, causes of action,
costs, judgments, expenses, attorney's fees, damages, and all liabilities
whatsoever, at law or in equity, including, without limitation, all causes
of action, whether known or unknown which the Collateral Agent, the
Secured Indenture Trustee or any of the Secured Lenders now has, claims to
have, has ever had, or would but for this release, have had in the future
arising from, related to or on account of the Chesapeake
Page 20
Adversary, the Stay Motion or the Case and all matters raised or which
could have been raised in the Chesapeake Adversary, the Stay Motion or the
Case, SAVE AND EXCEPT FOR ALL OBLIGATIONS, CLAIMS AND LIABILITIES ARISING
IN OR RELATED TO OR IN CONNECTION WITH: (A) THE ALLOWED SECURED CLAIMS,
(B) THE PLAN, (C) THIS RELEASE OR (D) THE SALE OF ANY OF THE SENIOR NOTES
BY ANY PERSON OR ENTITY OTHER THAN THE DEBTOR.
(C) Nothing contained in this Mutual Release shall be deemed
to release Robert Hefner, Larry R. Ray, Ronald Lefaive, Randolph Devening,
Brian E. Eglof, Robert Panero, Gary Fuller, James R. Schlesinger, Brian
Sanchez, Ramiiilaj, A Limited Partnership, Petroleum Properties Management
Company LLC, Fuller Family Investments, A Limited Partnership or their
insurance carriers, and CIBC World Markets and/or any CIBC entities named
as Defendants in the Chesapeake Adversary prior to the Effective Date, for
any pre-petition acts or omissions.
ARTICLE 9
MEANS FOR IMPLEMENTATION OF THE PLAN
9.1. Vesting of Assets.
On the Effective Date, upon making the Initial Payment, the payments from
the Expense Savings and the Holdback Proceeds, and the other Effective Date
disbursements provided for under the Plan, all assets of the Estate shall vest
in the Reorganized Debtor subject only to the liens of the Collateral Agent
thereon securing the claims of the Secured Lenders, and any surviving Tax Liens.
9.2. Initial Corporate Authority.
All actions and transactions contemplated under the Plan shall be
authorized by the Debtor and the Subsidiaries upon confirmation of the Plan
without the need of further board or stockholder resolutions, approval, notice
or meetings, other than the notice provided by serving this Plan on all known
creditors of the Debtor, the holders of all Equity Interests, and all current
directors of the Debtor and the Subsidiaries. The Confirmation Order shall
include provisions dispensing with the need of further board or stockholder
resolutions, approval, notice or meetings and authorizing and directing the
President and Secretary of the Debtor and the Subsidiaries to execute such
documents necessary to effectuate the Plan, which documents shall be binding on
the Debtor, the Subsidiaries, the Debtor's creditors and all of the holders of
the Equity Interests.
9.3. Distribution of Initial Payments and Other Effective Date Payments.
The Trustee shall be responsible for making the Initial Payment, the
payments from the Expense Savings and the Holdback Proceeds, and the other
payments to be made on the Effective Date to parties then entitled thereto.
Subsequent distributions to the holders of Allowed Claims shall be made by the
Reorganized Debtor. All distributions received by the Collateral Agent shall be
distributed to Chesapeake and the Secured Indenture Trustee pursuant to their
respective Specified Percentages. All distributions to the holders of the Senior
Notes shall be made by and through the Secured Indenture Trustee.
Page 21
9.4. Discharge of the Trustee and Appointment of Trustee as Sole Officer
of Reorganized Debtor.
On the Effective Date, upon the payment of the Initial Payment and the
other disbursements to parties then entitled thereto, the Trustee shall be
discharged from his duties and responsibilities herein. The Trustee shall then
become Sole Officer of the Reorganized Debtor, having the exclusive executive
authority for the Reorganized Debtor.
ARTICLE 10
CORPORATE GOVERNANCE OF THE REORGANIZED DEBTOR
AND RELATED MATTERS
10.1. Appointment of Sole Officer of the Reorganized Debtor.
As provided in Article 9.4 above, on making the required distributions on
the Effective Date, the Trustee shall become Sole Officer (the "Sole Officer")
of the Reorganized Debtor.
10.2. Term of Office of Sole Officer.
The Sole Officer shall retain that position until the earlier to occur of
his (i) resignation, (ii) death, or (iii) removal for cause by order of the
Bankruptcy Court, which shall retain jurisdiction for such purposes.
10.3. Compensation of Sole Officer.
The Sole Officer shall only receive the compensation provided in Article
8.2(i) above.
10.4. Appointment of Board of Directors of the Reorganized Debtor.
The Reorganized Debtor shall have an initial board of directors (the
"Board") composed of (i) the Sole Officer, who shall serve as Chairman of the
Board of Directors, (ii) three directors designated by the Secured Lenders
holding 66-2/3% of the aggregate amount of the Chesapeake Note and the Senior
Notes and (iii) one director designated by the majority vote of the Committee.
Such designations shall be made prior to the conclusion of the Confirmation
Hearing. If, as and when the Secured Lenders have been repaid an amount equal to
75% of their Allowed Claims, the Board shall be reconstituted to consist of (i)
the Sole Officer, who shall serve as Chairman of the Board of Directors, (ii)
two directors designated by the Secured Lenders holding 66-2/3% of the aggregate
amount of the Chesapeake Note and the Senior Notes and (iii) the director then
serving as designated by majority vote of the Committee and one director
designated by the Unsecured Noteholders holding 66-2/3% of the aggregate amount
of the Unsecured Notes. If, as and when the Secured Lenders have been repaid an
amount equal to 100% of their Allowed Claims, the Board members designated by
the Secured Lenders shall tender their resignations, and the Board shall be
reconstituted such that it will be composed of (i) the Sole Officer and (ii) the
Board members then serving as the representatives of the unsecured creditors.
PAGE 22
10.5. Term of Office of the Directors; Replacement of Directors.
Subject to the provisions of Article 10.8 below, the directors shall serve
until the earlier of their (i) resignation, (ii) death, or (iii) removal for
cause by order of the Bankruptcy Court. In the event of a vacancy on the Board
of a director appointed by the Secured Lenders, the vacancy shall be filled by
designation of the Secured Lenders holding 66-2/3% of the aggregate amount of
the Chesapeake Note and the Senior Notes or failing such by order of the
Bankruptcy Court, which shall retain jurisdiction therefore. In the event of a
vacancy on the Board of a director appointed by the Committee, the vacancy shall
be filled by designation of the Unsecured Noteholders holding 66-2/3% of the
aggregate amount of the Unsecured Notes, or failing such designation, by order
of the Bankruptcy Court which shall retain jurisdiction therefore. In the event
of a vacancy in the office of the Chairman/Sole Officer, the vacancy shall be
filled by order of the Bankruptcy Court, which shall retain jurisdiction
therefore.
10.6. Compensation of Directors.
The Chairman/Sole Officer shall receive no compensation for his service as
director other than that provided in Article 8.2(i) above. The remaining
directors shall receive no fixed compensation for their service as directors,
but shall be entitled to a payment in the amount of $2,500 for each meeting of
the Board attended. All directors, including the Chairman/Sole Director, shall
be entitled to reimbursement of their reasonable out-of-pocket expenses incurred
in the course of their duties as directors.
10.7. Amendment of Articles of Incorporation and Bylaws.
The Articles of Incorporation and the Bylaws of the Reorganized Debtor
shall be deemed amended by the occurrence of the Effective Date to (i) implement
the foregoing structure for corporate governance and (ii) prohibit the issuance
of nonvoting securities by the Reorganized Debtor. The Sole Officer shall be
authorized by the Confirmation Order to file such amendments with the applicable
chartering jurisdictions.
10.8. Removal of Board on Payment of Claims.
In the event of the payment in full, pursuant to the terms of the Plan, of
the claims in classes 1 through 3, on making such payments the Board shall
tender their resignations, effective at the time of the appointment of their
successors, and the Chairman shall call a meeting of the holders of the Equity
Interests for the purpose of electing a replacement Board. On the election of
the replacement Board, the prior Board shall be deemed discharged and relieved
of further duties and responsibilities in that capacity.
10.9. Indemnification and Protection of Sole Officer and Directors.
The Sole Officer and all directors (or any successors), acting in his or
her capacity as such or in any other capacity contemplated by this Plan,
together with his or her representatives, attorneys, financial advisors and
agents (collectively, the "Advisors"), shall not be personally liable in
connection with the affairs of the Reorganized Debtor or to any Person except
for acts or omissions as shall constitute fraud, willful misconduct or gross
negligence. The Sole Officer or any director's or Advisors' failure to obtain,
or election to not seek, a hearing to obtain court
PAGE 23
approval to take any action under this Plan shall not constitute either willful
misconduct or gross negligence. Neither the Sole Officer nor any director or
Advisor shall be personally liable to the Reorganized Debtor for acts or
omissions of an employee or agent of the Reorganized Debtor unless such Sole
Officer, director or Advisor committed fraud or acted with gross negligence or
willful misconduct in the selection, retention or supervision of such employee
or agent of the Reorganized Debtor. Except in those situations in which the Sole
Officer, director or Advisor is not exonerated of personal liability as
aforesaid, the Sole Officer, director or Advisor (including each predecessor
Sole Officer and director) and Advisor shall be indemnified by the Reorganized
Debtor against, and held harmless by the Reorganized Debtor from, any losses,
claims, damages, liabilities or expenses (including, without limitation,
reasonable attorneys' fees, disbursements and related expenses) to which such
Sole Officer, director or Advisor may become subject in connection with any
action, suit, proceeding or investigation brought or threatened against such
Sole Officer, director or Advisor in their respective capacities as officer,
director, or Advisor, or in any other capacity contemplated by, or in connection
with, any matter arising out of, or related to, the Plan, regardless of whether
the action, proceeding or investigation alleges that such Sole Officer, director
or Advisor has acted with intent to defraud, have acted with gross negligence or
has committed willful misconduct. If such Sole Officer, director or Advisor
becomes involved in any action, proceeding or investigation in connection with
any matter arising out of or in connection with the Plan or the affairs of the
Reorganized Debtor, the Reorganized Debtor shall periodically advance or
otherwise reimburse on demand the Sole Officer, director or Advisor his or her
reasonable expenses (including, without limitation, attorneys' fees,
disbursements and related expenses) incurred in connection therewith; provided,
however, that the Sole Officer, director or Advisor shall be required promptly
to repay to the Reorganized Debtor the amount of any such advanced or reimbursed
expenses paid to him or her pursuant to the foregoing clause to the extent that
it shall be ultimately determined by Final Order of the Bankruptcy Court that
such Sole Officer, director or Advisor engaged in fraud, willful misconduct or
gross negligence in connection with such matter. Nothing in this provision shall
be interpreted to release the Debtor's former and current officers and directors
for pre-petition acts or omissions or shall be interpreted to allow a right of
indemnity for such pre-petition acts or omissions and any rights of indemnity
possessed by the Debtor's current and former officers and directors is limited
to that of available insurance proceeds from the Debtor's insurance coverage.
10.10. Directors' and Officers' Insurance.
The Sole Officer is authorized to obtain, if available, directors' and
officers' insurance coverage for the matters for which the Sole Officer and the
Board are hereinabove indemnified and the Board is authorized to expend the
funds necessary to maintain the insurance policies for the Debtor and/or the
Reorganized Debtor.
ARTICLE 11
PROVISIONS GOVERNING DISTRIBUTIONS
11.1. Distributions To Be Pro Rata Within Class.
All distributions constituting of a partial payment to a class of Allowed
Claims shall be made on a Pro Rata Share to the holders of Allowed Claims in
such class.
PAGE 24
11.2. Federal Tax Identification Number.
The Trustee or Reorganized Debtor may suspend distribution to any Creditor
that has not provided the Trustee or the Reorganized Debtor with its Federal Tax
Identification number or social security number, as the case may be.
11.3. Means of Cash Payment.
Cash payments made pursuant to the Plan shall be in U.S. funds, by check
drawn on a domestic bank, or, at the Trustee's or Reorganized Debtor's option,
by wire transfer from a domestic bank, except that payments made to foreign
creditors holding Allowed Claims may be in such funds and by such means as are
customary or as may be necessary in a particular foreign jurisdiction.
11.4. Delivery of Distributions.
Subject to Bankruptcy Rule 9010 and the provisions of the Plan, and except
with respect to the Secured Lenders and the holders of the Unsecured Notes,
distributions to holders of Allowed Claims shall be made at the address of each
such holder as set forth on the proofs of Claim filed by such holders (or at the
last known addresses of such a holder if no proof of Claim or proof of Equity
Interest is filed or if the Trustee or Reorganized Debtor has been notified in
writing of a change of address), except as provided below. If any holder's
distribution is returned as undeliverable, no further distributions to such
holder shall be made unless and until the Trustee or Reorganized Debtor is
notified of such holder's then current address, at which time all missed
distributions shall be made to such holder without interest. Amounts in respect
of undeliverable distributions shall be returned to the Trustee or Reorganized
Debtor until such distributions are claimed. All claims for undeliverable
distributions shall be made on or before the second anniversary of the Effective
Date. After such date, all unclaimed property shall revert to the Reorganized
Debtor, and the claim of any holder with respect to such property shall be
discharged and forever barred.
11.5. Time Bar to Cash Payments.
Checks issued by the Trustee or the Reorganized Debtor in respect of
Allowed Claims shall be null and void if not negotiated within six months after
the date of issuance thereof. Requests for reissuance of any check shall be made
directly to the Reorganized Debtor by the holder of the Allowed Claim with
respect to which such check originally was issued. Any claim in respect of such
a voided check shall be made on or before the later of (a) the first anniversary
of the Effective Date or (b) ninety (90) days after the date of reissuance of
such check. After such date, all Claims in respect of void checks shall be
discharged and forever barred.
11.6. No Distributions Pending Allowance.
Notwithstanding any other provision of the Plan, no payment or
distribution shall be made with respect to (a) any Claim to the extent it is a
Contested Claim unless and until such Contested Claim becomes an Allowed Claim,
(b) Claimants who are defendants in Avoidance Actions (save and except to
Claimants who are defendants in the Chesapeake Adversary, which adversary will
be dismissed on the Effective Date) and other parties subject to the application
of
PAGE 25
Section 502(d) of the Bankruptcy Code, and (c) reclamation claims pursuant to
Section 546(c)(2)(A) of the Bankruptcy Code which are not Allowed Claims.
11.7. Withholding of Distribution on Account of Contested Claims.
Except as limited herein, the Trustee or Reorganized Debtor shall withhold
from any distribution an amount sufficient to be distributed on account of the
full amount of Contested Claims (the "Withheld Distribution Amount"). To the
extent requested by the Reorganized Debtor, the Bankruptcy Court may estimate
the amount to be withheld on account of any Contested Claim, which amount need
not be the full amount of the asserted Claim.
11.8. Distributions After Allowance.
Payments and distributions to each holder of a Contested Claim, to the
extent that such Claim ultimately becomes an Allowed Claim, shall be made in
accordance with the provisions of the Plan governing the class of Claims to
which such Allowed Claim belongs. With respect to any Claim that is a Contested
Claim on the Effective Date, as soon as practicable after the date that the
order or judgment of the Bankruptcy Court allowing such Contested Claim becomes
a Final Order the Debtor or, if following 30 days after the Effective Date or a
shorter period if the Debtor so decides, the Trustee shall distribute to the
holders of such Claim from the Contested Claims Escrow any distribution that
would have been distributed to such holder if the Claim had been Allowed on the
Effective Date, without interest on such Claim or distribution, unless interest
is required upon an Allowed Secured Claim pursuant to Bankruptcy Code section
506 or another provision of this Plan.
11.9. Distributions After Disallowance.
Any Cash reserved for a Contested Claim after any and each objection to a
Contested Claim has been resolved by Order of the Bankruptcy Court shall be
distributed in accordance with the provisions of the Plan. The Trustee or the
Reorganized Debtor in all things can and shall rely on an order of the
Bankruptcy Court fixing the amount of a Claim or disallowing a Claim; the
Trustee or the Reorganized Debtor shall make no further reserve on account of a
Claim that has been disallowed or reduced by the Bankruptcy Court, unless the
affected claimant obtains a stay pending appeal that requires that the Trustee
or Reorganized Debtor reserve on account of such Claim. In no event shall the
reversal or modification on appeal or reconsideration of a Bankruptcy Court
order disallowing a Claim affect the validity or require the disgorgement of any
distributions having already been made pursuant to the Plan, if such claimant
did not obtain a stay pending reconsideration or appeal which required a further
reserve.
11.10. Exculpation and Immunity Regarding Distributions.
The Debtor, the Trustee, and their respective Representatives are hereby
exculpated by all persons, holders of Claims and Equity Interests, entities and
parties-in-interest receiving distributions under the Plan from any and all
claims, causes of action and other assertions of liability arising out of the
Debtor's and/or Trustee's discharge of the powers and duties conferred upon it
by the Plan or any order of the Bankruptcy Court entered pursuant to or in
furtherance of the Plan or applicable law, except solely for actions or
omissions arising out of willful misconduct or gross negligence. No current
holder of a Claim or an Equity Interest; and no
PAGE 26
representative thereof, shall have or pursue any claim or cause of action
against the Reorganized Debtor and/or Trustee for making payments or taking any
action in accordance with the Plan or for implementing the provisions of the
Plan or against any holder of a Claim for receiving or retaining payments or
other distributions as provided for by the Plan. Nothing contained herein shall
be deemed to release the Debtor's current and former officers and directors for
pre-petition acts or omissions.
ARTICLE 12
PROCEDURES FOR RESOLVING AND TREATING
CONTESTED AND DISPUTED CLAIMS UNDER THE PLAN
12.1. Objection Deadline.
As soon as practicable, but in no event later than six months after the
Effective Date, unless extended by order of the Bankruptcy Court, objections to
Claims shall be filed with the Bankruptcy Court and served upon the holders of
each of the Claims to which objections are made; provided, however, no
objections shall be made to the Allowed Secured Claims of the Secured Lenders or
the Allowed Unsecured Claim of the Unsecured Indenture Trustee, as trustee for
the Unsecured Noteholders.
12.2. Prosecution of Objections and Claims.
On and after the Effective Date, except as the Bankruptcy Court may
otherwise order, the filing, litigation, settlement or withdrawal of all
objections to claims may be made by the Reorganized Debtor and the Reorganized
Debtor shall have all the power of the Trustee to prosecute claims, including
the power to prosecute all claims and causes of action that the Chapter 11
Trustee could have asserted, and the Reorganized Debtor may bring suit or defend
actions on behalf of, and in the name of, the Chapter 11 Trustee as well as
itself.
ARTICLE 13
PROVISIONS GOVERNING EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN
13.1. Leases.
The Plan constitutes and incorporates a motion by the Debtor to reject, as
of the Confirmation Date, all Leases, which were not specifically assumed or
assumed and assigned prior to the Effective Date or which are not designated in
a listing to be filed by the Trustee prior the commencement of the Confirmation
Hearing. Provided, however, all insurance policies and indemnity agreements in
which the Debtor or the Debtor's property are insured and/or indemnified against
loss (whether for potential liability or for costs of defense) which were not
previously assigned are hereby assumed and assigned to the Reorganized Debtor.
13.2. Bar to Rejection Damages.
If the rejection of a Lease by the Debtor results in purported damages to
the other party or parties to such Lease, a Claim for such damages, if not
heretofore evidenced by a filed proof of Claim, shall be forever barred and
shall not be enforceable against the Debtor, the Reorganized
PAGE 27
Debtor or their respective properties or their agents, successors or assigns,
unless a proof of Claim is filed with the Bankruptcy Court and served upon the
Reorganized Debtor and counsel for the Reorganized Debtor on or before thirty
(30) days after the Effective Date.
ARTICLE 14
RETENTION OF JURISDICTION
14.1. Scope of Jurisdiction.
Pursuant to Sections 1334 and 157 of title 28 of the United States Code,
the Bankruptcy Court shall retain and have jurisdiction over all matters arising
in, arising under and related to the Chapter 11 case and the Plan pursuant to,
and for the purposes of Sections 105(a) and 1142 of the Bankruptcy Code and for,
among other things, the following purposes to:
a. hear and determine pending applications for the assumption or
rejection of Leases and the allowance of Claims resulting therefrom;
b. hear and determine any and all adversary proceedings,
applications and contested matters, including any remands of appeals;
c. ensure that distributions to holders of Allowed Claims are
accomplished as provided herein;
d. hear and determine any timely objections to or applications
concerning Claims or the allowance, classification, priority, estimation
or payment of any Claim or Equity Interest;
e. enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified,
reversed or vacated;
f. enter and implement such orders as may be necessary or
appropriate to execute, interpret, implement, consummate or enforce the
Plan and the transactions contemplated thereunder;
g. consider any modification of the Plan pursuant to Section 1127 of
the Bankruptcy Code, to cure any defect or omission or to reconcile any
inconsistency in any order of the Bankruptcy Court, including, without
limitation, the Confirmation Order;
h. hear and determine all Fee Applications and Fee Claims;
i. hear and determine disputes arising in connection with the
execution, interpretation, implementation, consummation or enforcement of
the Plan;
j. enter and implement orders or take such other actions as may be
necessary or appropriate to restrain interference by any entity with the
consummation or implementation of the Plan, including, without limitation,
to issue, administer and enforce injunctions provided for in the Plan and
the Confirmation Order;
PAGE 28
k. recover all assets of the Debtor and property of the estate,
wherever located;
l. hear and determine matters concerning state, local and federal
taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy
Code;
m. hear and determine any other matter not inconsistent with the
Bankruptcy Code and title 28 of the United States Code that may arise in
connection with or related to the Plan;
n. enter a final decree closing the Chapter 11 case; and
o. hear and determine all matters involving or related to the
insurance policies of the Debtor.
14.2. Failure of the Bankruptcy Court to Exercise Jurisdiction.
If the Bankruptcy Court abstains from exercising, or declines to exercise,
jurisdiction or is otherwise without jurisdiction over any matter arising in,
arising under or related to the Chapter 11 case, including the matters set forth
in Section 13.1 of the Plan, this Article 13 shall have no effect upon and shall
not control, prohibit or limit the exercise of jurisdiction by any other court
having jurisdiction with respect to such matter.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1. Termination of Creditors' Committee.
On the Effective Date, the Committee shall be terminated and professionals
retained by the Committee shall be prohibited from seeking compensation for
services rendered or reimbursement for expenses incurred after the Effective
Date.
15.2. Post-Confirmation Injunction.
The Confirmation Order shall include a permanent injunction prohibiting
the collection of Claims in any manner other than as provided for in the Plan.
All holders of Claims shall be prohibited from asserting against the Debtor or
the Reorganized Debtor, or any of their respective assets or properties, any
other or further Claim based upon any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Confirmation Date,
whether or not such holder filed a proof of Claim. Such prohibition shall apply
whether or not (a) a proof of Claim based upon such debt is filed or deemed
filed under Section 501 of the Bankruptcy Code; (b) a Claim based upon such debt
is allowed under Section 502 of the Bankruptcy Code; or (c) the holder of a
Claim based upon such debt has accepted the Plan.
15.3. Preservation of Setoff and Other Rights.
In the event that the Debtor has a claim of any nature whatsoever against
the holder of a Claim, the Debtor or the Reorganized Debtor may, but is not
required to, setoff against the Claim (and any payments or other distributions
to be made in respect of such Claim hereunder), subject
PAGE 29
to the provisions of Section 553 of the Bankruptcy Code. Neither the failure to
setoff nor the allowance of any Claim under the Plan shall constitute a waiver
or release by the Debtor of any claim that the Debtor has against the holder of
a Claim; provided, however, this provision shall be inapplicable to the Allowed
Secured Claims of the Secured Lenders.
Neither this provision nor the injunctive provision of the Confirmation
Order shall impair the existence of any right of setoff or recoupment that may
be held by a Claimant herein; provided that the exercise of such right shall not
be permitted unless the Claimant provides the Trustee or the Reorganized Debtor
with written notice of the intent to effect such setoff or recoupment. If the
Trustee or the Reorganized Debtor, as applicable, objects in writing within ten
(10) business days following the receipt of such notice, such exercise shall
only be allowed upon order of the Bankruptcy Court. In the absence of timely
objection, the Claimant may implement the proposed setoff or recoupment against
the Claim held by the Estate.
15.4. Insurance.
Confirmation and consummation of the Plan shall have no effect on
insurance policies of the Debtor in which the Debtor or any of the Debtor's
Representatives (whether current or former officers or directors of the Debtor)
is or was the insured party; the Reorganized Debtor shall become the insured
party under any such policies without the need of further documentation other
than the Plan and entry of the Confirmation Order. Each insurance company is
prohibited from, and the Confirmation Order shall include an injunction against,
denying, refusing, altering or delaying coverage on any basis regarding or
related to the Debtor's bankruptcy, the Plan or any provision within the Plan.
15.5. Exculpation.
Neither the Debtor, the Reorganized Debtor, the Trustee, the Committee,
the Secured Indenture Trustee, the Collateral Agent or the Unsecured Indenture
Trustee, or any of their respective Representatives, shall have or incur any
liability to any holder of a Claim or Equity Interest for any act, event or
omission in connection with, or arising out of, the Chapter 11 Case, the
confirmation of the Plan, the consummation of the Plan or the administration of
the Plan or the property to be distributed under the Plan, except for willful
misconduct and gross negligence. This provision shall not be interpreted to
release the Debtor's officers or directors from liability related to prepetition
acts or omissions, and the Debtor's current and former officers and directors
shall not be released for pre-petition acts and omissions unless specifically
provided in this Plan.
15.6. De Minimis Distributions.
No distribution of less than $25.00 shall be required to be made to any
holder of an Allowed Claim. Such undistributed amount may be retained by the
Reorganized Debtor.
15.7. Payment of Statutory Fees.
The Debtor shall timely pay on the Effective Date all pre-confirmation
fees owed to the United States Trustee pursuant to 28 U.S.C. Section 1930(a)(6).
After the Effective Date, the Reorganized Debtor shall timely pay
post-confirmation fees owed to the United States Trustee
PAGE 30
and assessed pursuant to 28 U.S.C. Section 1930(a)(6) until such time as the
Bankruptcy Court enters a final decree closing the Case, or enters an order
either converting the Case to chapter 7 or dismissing the Case. After the
Effective Date, the Reorganized Debtor, on or before the last day of the month
after each calendar quarter, shall file with the Bankruptcy Court and shall
transmit to the United States Trustee a true and correct statement, in a format
prescribed by the United States Trustee, of all disbursements made by the
Reorganized Debtor for each quarter, or portion thereof, that the Case remains
open.
15.8. Bankruptcy Restrictions.
From and after the Effective Date, the Debtor and, after the Effective
Date, the Reorganized Debtor shall no longer be subject to the restrictions and
controls provided by the Bankruptcy Code or Rules (e.g., section 363, section
364, rule 9019), the Bankruptcy Court, or the United States Trustee's
guidelines. The Reorganized Debtor may compromise claims and controversies
post-Effective Date without the need of notice or Bankruptcy Court approval. The
Reorganized Debtor may operate the Debtor's business in such manner as is
consistent with companies not in bankruptcy without the need of seeking
Bankruptcy Court approval with regard to any aspect of the Reorganized Debtor's
business. No monthly operating reports will be filed after the Effective Date;
however, the Reorganized Debtor shall provide the U.S. Trustee such financial
reports as the U.S. Trustee may reasonably request until the entry of a final
decree.
15.9. Binding Effect.
The Plan shall be binding upon and inure to the benefit of the Debtor, the
holders of Claims, and the holders of Equity Interests, and all of their
respective successors and assigns; provided, however, that if the Plan is not
confirmed, the Plan shall be deemed null and void and nothing contained herein
shall be deemed (a) to constitute a waiver or release of any Claims by the
Debtor, the Trustee or any other person, (b) to prejudice in any manner the
rights of the Debtor, the Trustee or any other person or (c) to constitute any
admission by the Debtor, the Trustee or any other person.
15.10. Governing Law.
Unless a rule of law or procedure is supplied by federal law (including
the Bankruptcy Code and Bankruptcy Rules) or the law of the jurisdiction of
organization of any entity, the internal laws of the State of Texas shall govern
the construction and implementation of the Plan and any agreements, documents
and instruments executed in connection with the Plan or the Chapter 11 cases,
including the documents executed pursuant to the Plan.
15.11. Modification of Plan.
The Trustee may propose modifications of the Plan in writing at any time
before the Confirmation Date, provided that (a) the Plan, as modified, meets the
requirements of Sections 1122 and 1123 of the Bankruptcy Code and (b) the
Trustee shall have complied with Section 1125 of the Bankruptcy Code. The Plan
may be modified at any time after the Confirmation Date and before substantial
consummation by the Proponent, provided that (i) the Plan, as modified, meets
the requirements of Sections 1122 and 1123 of the Bankruptcy Code, (ii) the
Bankruptcy Court, after notice and a hearing, confirms the Plan as modified,
under Section 1129
PAGE 31
of the Bankruptcy Code and (iii) the circumstances warrant such modifications. A
holder of a Claim or Equity Interest that has accepted or rejected the Plan
shall be deemed to have accepted or rejected, as the case may be, such Plan as
modified, unless, within the time fixed by the Bankruptcy Court, such holder
changes its previous acceptance or rejection.
15.12. Severability.
Should the Bankruptcy Court determine that any provision of the plan is
unenforceable either on its face or as applied to any Claim or Equity Interest
or transaction, the Trustee may modify the Plan in accordance with Section 15.12
of the Plan so that such provision shall not be applicable to the holder of any
Claim or Equity Interest. Such a determination of unenforceability shall not (a)
limit or affect the enforceability and operative effect of any other provision
of the Plan or (b) require the resolicitation of any acceptance or rejection of
the Plan.
15.13. Closing the Case.
Upon the Plan being substantially consummated and, upon motion by the
Reorganized Debtor, a final decree entered containing such provisions as may be
equitable, the Court may close the Case, but retain jurisdiction to hear and
decide any and all pending adversary proceedings, applications and contested
matters, including any remands of appeals; any and all pending objections to
Claims or the allowance, including with respect to the classification, priority,
estimation or payment of any Claim; any and all pending Fee Applications or
other matters as so designated in the Plan.
DATED: August 2, 2003
Houston, Texas
/s/ Ben B. Floyd
-------------------------------------
Ben B. Floyd, Trustee
OF COUNSEL:
Randall A. Rios
Thomas S. Henderson
Floyd, Isgur, Rios & Wahrlich, P.C.
700 Louisiana, Suite 4600
Houston, Texas 77002-2732
Tel: 713-222-1470
Fax: 713-222-1475
ATTORNEYS FOR BEN B. FLOYD, TRUSTEE
PAGE 32
EXHIBIT A TO SECOND AMENDED PLAN
OF REORGANIZATION
EXHIBIT A
SEVEN SEAS PETROLEUM
UPDATED JUNE 5, 2003
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES AS OF APPROVAL 2003
3-JUN 6-JUN - 15-JUL 15-JUL 31-JUL AUG-SEPT 30 OCT-DEC (Q4) SUMMARY
Columbian Peso Accounts A. 416 416
Balance of all USD Accounts B. 12,391 12,391
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL BEGINNING BALANCE* 12,807 12,807
- ------------------------------------------------------------------------------------------------------------------------------------
Total G&A (HOU and BOG) C. (306) (176) (172) (18) (672)
Remaining E-2 Payables (213) (211)
E-2 P&A Costs E. (1,249) (1,249)
War Tax F. (192) (192)
Estate Professional and US
Trustee Fees G. (456) (260) (30) (10) (756)
Trustee Fees I. (300) (300)
Payment to Andrews and Kurth J. (45) (45)
Payment to CHK (8,750) (8,750)
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED END OF MONTH CASH BALANCE 21,807 12,098 2,847 1,162 660 632 632
- ------------------------------------------------------------------------------------------------------------------------------------
Rosablanca Contingent
Liability K. (164) (164)
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD CASH BALANCE 12,643 11,934 2,683 998 496 468 468
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
A. Peso balances will be liquidated to cover Colombian payables before July 15.
Balance estimate is based on 6/4 actual, minus outstanding checks
B. Includes all USD accounts: Sterling Bank Accounts, all amounts net of
outstanding checks as of May 15
C. G&A includes Houston and Bogota. See Houston and Bogota Budgets for details.
Assumes all employees maintained at current compensation until Jul 31 in
Houston, August 31 in Bogota
E. See schedule 6 of the Bogota budget, E-2 P&A costs, for details
F. Estimated fourth and final installment on the Colombian war tax due in June
2003
G. Estate professional fees are based on actual invoices for Feb and March
($369K), and are assumed to be paid when the global settlement is reached.
April, June, and July are estimates based on information previously provided
from Trustee and Counsel. Andrews and Kurth is entitled to contingency fees
as approved by the Bankruptcy Court although it remains undetermined if they
have a priority claim
I. $300K Trustee fee payable on emergence from bankruptcy on Sept. 30, 2003
J. Agreed upon payment to Andrews and Kurth per Draft Global Settlement
Agreement
K. Estimated contingent liability for failure to drill the Rosablanca Prospect.
Liability has been reduced by $304K to account for A&Ks $250K payment and
increased legal/professional estimates based on invoices on hand as of May
15th and maintain EOY balance at $350K.
EXHIBIT A ASSUMPTIONS
Houston employees are assumed to stay on at base pay through Jul 31, 2003.
Six Bogota employees are assumed to stay on at base pay through August 31,
2003, all other BOG staff will be released on 5/31
Marcela Vaca will move into a consulting role effective 6/1/03
Colombian peso balances will be liquidated by 7/15
Houston/Bogota G&A assumes that all payables are paid at end of month. Only
mid-month G&A outflow is Houston Payroll
Costs beyond 12/31/03 have not been included in the budget and will represent a
reduction to the contingency reserve
Contested Estate Professional Fees of $369K, CHK payment of $8,750K, and A&K
payment of $45K will be paid on effective date of Global Settlement