1
July 23, 2001
SEVEN SEAS PETROLEUM INC
(as Mortgagor)
CHESAPEAKE ENERGY CORPORATION
(as Mortgagee)
------------------------------------
LEGAL MORTGAGE OVER SHARES
2
THIS DEED OF MORTGAGE ("Deed of Mortgage") is made as of July 23, 2001
BETWEEN
(1) SEVEN SEAS PETROLEUM INC., a Cayman Islands exempted company limited by
shares, the registered office of which is at ▇▇▇▇▇▇ House, ▇▇▇▇ Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands (the "Mortgagor"); and
(2) CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation, whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Mortgagee") as Collateral Agent under the
Collateral Sharing Agreement (as hereinafter defined) for itself and
United States Trust Company of New York, ("Trustee") under that certain
Indenture dated July 23, 2001 (the "Indenture"), pursuant to which the
Trustee is trustee for the holders of the Mortgagor's 12% Senior
Secured Series A Notes (the "Series A Notes") and the Mortgagor's 12%
Senior Secured Series B Notes (the "Series B Notes").
WHEREAS
(A) Pursuant to a Note Purchase and Loan Agreement dated as of July 9, 2001
(the "Note Purchase and Loan Agreement") the Mortgagee agreed to
advance to the Mortgagor the sum of ▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$22,500,000.00), evidenced by a 12%
Senior Secured Note due 2004 in the principal amount of TWENTY-TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($22,500,000.00) (the "CEC Note")
subject to the terms and conditions stated in: (a) the Note Purchase
and Loan Agreement; (b) the CEC Note; (c) the detachable Warrants to
purchase twelve million six hundred twelve thousand one hundred forty
(12,612,140) shares of the Mortgagor's ordinary shares (the
"Warrants"); (d) the Shareholder's Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Shareholder's
Agreement"); (e) the Registration Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Registration Agreement");
(f) the Security Agreement dated July 23, 2001 between the Mortgagor
and the Mortgagee as Collateral Agent for itself and the Trustee (the
"Security Agreement"); (g) certain other Deeds of Mortgage Over Shares
of the subsidiaries of the Mortgagor other than the Companies (as
hereinafter defined) dated July 23, 2001 (the "Other Deeds of
Mortgage"); (h) the Collateral Sharing and Agency Agreement dated as of
July 23, 2001 between the Mortgagee and the Trustee pursuant to which
the Mortgagee agrees to act as collateral agent for itself and the
Trustee (the "Collateral Sharing Agreement"); and (i) any and all other
documents and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement, the Indenture and any of the other
documents executed in connection with the Note Purchase and Loan
Agreement or the Indenture.
Upon satisfaction of certain conditions set forth in the Note Purchase and
Loan Agreement, the CEC Note, the Warrants, and the other Related
Agreements, the CEC Note issued under the Note Purchase and Loan
Agreement may be exchanged by the Mortgagee in part for ordinary shares
of the Mortgagor.
3
The Note Purchase and Loan Agreement was executed on the agreement that the
Mortgagor shall enter into this mortgage over shares in the capital of
Seven Seas Petroleum Australia Inc., a company organized under the laws
of British Colombia and Seven Seas Petroleum Turkey Inc., a company
organized under the laws of British Colombia.
The Mortgagor has agreed to secure the Secured Amounts (as defined below)
by entering into this Deed of Mortgage, as well as the other Financing
Documents (as defined below).
IT IS AGREED as follows
1. INTERPRETATION
1.1 Except where the context otherwise requires, words and
expressions defined in the Note Purchase and Loan Agreement or
the recitals above shall have the same meaning where used
herein and the further words and expressions set out below
shall have the following meanings;
ACTIVE SUBSIDIARIES means Seven Seas Petroleum USA Inc., a
Delaware corporation, Seven Seas Petroleum Colombia Inc., a
Cayman Islands company, Petrolinson SA, a Panamanian
corporation, and GHK Company Colombia, an Oklahoma
corporation.
COLLATERAL AGENT means the Mortgagee as collateral agent under
the certain Collateral Sharing Agreement;
COMPANIES means the companies specified in Schedule 1;
ENFORCEMENT NOTICE means an enforcement notice served by the
Mortgagee on the Mortgagor pursuant to the terms of this Deed
of Mortgage;
FINANCING DOCUMENTS means the Note Purchase and Loan
Agreement, the Indenture, the CEC Note, the Series A Notes,
the Series B Notes, the Security Agreement, the Other Deeds of
Mortgage, this Deed of Mortgage, the Related Agreements, the
Collateral Sharing Agreement and any and all other documents
and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement or the Indenture.
INACTIVE SUBSIDIARIES means Seven Seas Petroleum Holdings
Inc., a Cayman Islands company, Seven Seas Petroleum Turkey
Inc., a British Colombia corporation, Seven Seas Resources
Australia Inc., a British Colombia corporation, Seven Seas
Petroleum Australia Inc., a Cayman Islands company, Seven Seas
Petroleum PNG Inc., a Cayman Islands company, Seven Seas
Petroleum Argentina, a Cayman Islands company, Seven Seas
Mediterranean Inc., a Cayman Islands company, Seven Seas
Petroleum Turkey Inc., a Cayman Islands company, and Guaduas
Pipeline Company, a Cayman Islands company.
4
INDENTURE means the Indenture for the Series A Notes and the
Series B Notes as referred to in paragraph (2) above.
MORTGAGED PROPERTY means the Original Securities and all and
any other shares, securities, rights, moneys and property for
the time being mortgaged or charged to the Mortgagee pursuant
to Clause 2;
NOTE PURCHASE AND LOAN AGREEMENT means the facility referred
to in recital A;
ORIGINAL SECURITIES means the securities listed in Schedule 1
which are all registered in the name of the Mortgagor and
following execution of this Deed of Mortgage will be
transferred into the name of the Mortgagee or its nominee as
Collateral Agent;
OTHER DEEDS OF MORTGAGE means each Legal Mortgage Over Shares
between Mortgagor and Mortgagee delivered concurrently
herewith or hereafter delivered;
RELATED AGREEMENTS means the Warrants, the warrants granted to
the holders of the Series A Notes, the Shareholder's
Agreement, the Registration Agreement and any other documents
or instruments executed in connection with any of the
foregoing;
SECURED AMOUNTS means all and any amounts of any kind now or
in the future, actual or contingent, due and payable by the
Mortgagor to the Mortgagee under the CEC Note or to the
Trustee for the benefit of the holders of the Series A Notes
or the Series B Notes or under or in connection with this Deed
of Mortgage or the other Financing Documents and references to
the Secured Amounts include references to any part of them;
and
SECURITY INTEREST means any mortgage, charge, pledge, lien,
encumbrance, right of set off or any security interest,
howsoever created or arising.
1.2 In this Deed of Mortgage:
(a) references to the Mortgagor or the Mortgagee include
references to any person for the time being deriving
title under each of them respectively;
(b) references to this Deed of Mortgage and the Financing
Documents are references to the same as from time to
time varied, supplemented or amended in any manner or
respect whatsoever;
(c) references to the Original Securities or to the
Mortgaged Property include references to any property
included in such term;
(d) "mortgage" includes a transfer or assignment by way
of mortgage;
(e) Unless the context otherwise indicates, words
importing the singular shall include the plural and
vice versa, and the use of the neuter, masculine, or
5
feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine or
feminine gender; and
(f) Clause headings are for ease of reference only.
2. COVENANT TO PAY SECURED AMOUNTS AND CHARGE
2.1 The Mortgagor covenants with the Mortgagee for the benefit of
the Mortgagee and the Trustee that it shall, whether or not
the Mortgagor shall have received an Enforcement Notice in
accordance with this Deed of Mortgage or notice of demand in
respect of the Secured Amounts, pay and discharge any moneys
and liabilities in respect of the Secured Amounts whatsoever
which are now or at any time hereafter may be due, owing or
payable by the Mortgagor in any currency, actually or
contingently, solely and/or jointly and/or severally with
another or others, as principal or surety on any account
whatsoever pursuant to this Deed of Mortgage or the other
Financing Documents or as a consequence of any breach,
non-performance, disclaimer or repudiation by the Mortgagor of
any of its obligations, covenants, representations or
warranties under this Deed of Mortgage, the other Financing
Documents or otherwise.
2.2 The Mortgagor hereby transfers absolutely by way of mortgage
to the Mortgagee as a continuing security for the payment and
discharge of the Secured Amounts, all its rights, title,
interest and benefit, present and future in, to and under:
(a) the Original Securities; and
(b) all other securities and all rights, monies
(including, without limitation, dividends) and
property whatsoever which may from time to time at
any time be derived from, accrued on or be offered in
respect of the Original Shares whether by way of
redemption, exchange, conversion, rights, bonus,
capital reorganisation or otherwise howsoever.
3. CONTINUING AND PRIMARY SECURITY
3.1 This Deed of Mortgage shall be a continuing security, and
shall be in addition to and shall not affect any continuing
liens or other Security Interests to which the Mortgagee is or
will be otherwise entitled over the Mortgaged Property, which
liens and other Security Interests shall remain in force
independently of this Deed of Mortgage.
3.2 The Original Securities and other Mortgaged Property are
hereby mortgaged to the Mortgagee as primary and not as
collateral security.
3.3 The Mortgagor's liability hereunder shall not be discharged or
impaired by:
(a) the existence or validity of any other security taken
by the Mortgagee in relation to the Financing
Documents or any enforcement of or failure to enforce
or the release of any such security;
6
(b) any amendment to or variation of the Financing
Documents or any security relating to the Financing
Documents or any assignment thereof or hereof;
(c) any release of or granting of time or any other
indulgence to the Mortgagor or any third party;
(d) any invalidity, irregularity, unenforceability,
imperfection or avoidance of or any defect in any
security granted by, or any obligations of, the
Mortgagor or any other person hereunder or under the
Financing Documents or any amendment to or variation
thereof or of any other document or security
comprised therein;
(e) the insolvency, liquidation, bankruptcy or
dissolution (or proceedings analogous thereto) of the
Mortgagor, the Companies or any other person or the
appointment of a receiver or administrative receiver
or administrator (whether by administration order or
otherwise) or trustee or similar officer of any of
the assets of the Mortgagor, the Companies or any
other person or the occurrence of any circumstances
whatsoever affecting the Mortgagor, or any other
person's liability to discharge its obligations under
the Financing Documents;
(f) any release, renewal, exchange or realisation of any
security or obligation provided under or by virtue of
this Deed of Mortgage or the other Financing
Documents or the provision of any further security to
the Mortgagee at any other time; or
(g) any other act, event, neglect or omission which would
or might but for this clause operate to impair or
discharge the Mortgagor's liability hereunder.
3.4 Any release, compromise or discharge of the obligations of the
Mortgagor shall be deemed to be made subject to the condition
that it will be void if any payment or security which the
Mortgagee may receive or have received is set aside or proves
invalid for whatever reason.
3.5 Rights may be exercised and demands may be made under this
Deed of Mortgage from time to time, and the liabilities and
obligations of the Mortgagor and the rights and security or
other consideration contained in this Deed of Mortgage may be
exercised and enforced, irrespective of
(a) whether any demands, steps or proceedings are being
or have been taken against the Mortgagor or any third
party; or
(b) whether or in what order any security to which the
Mortgagee may be entitled in respect of the Secured
Amounts is enforced.
7
4. WARRANTIES AND UNDERTAKING
4.1 The Mortgagor represents and warrants to the Mortgagee and
undertakes that:
(a) it is the absolute legal and beneficial owner of all
of the Original Securities free of all Security
Interests, encumbrances, trusts, equities, proxies
and claims whatsoever (save under this Deed of
Mortgage or the other Financing Documents) and that
all of the Original Securities are fully paid up and
are non-assessable;
(b) except as limited by the Financing Documents,
Mortgagor has the full legal and unlimited right to
vote the Original Securities in its sole discretion;
(c) the Original Securities of each of the Companies
constitute 100% of the issued and outstanding equity
capital of each of the Companies and are all
currently registered in the name of the Mortgagor
(subject to the registration of the Original
Securities in the name of the Mortgagee as Collateral
Agent concurrently with the execution and delivery of
this Deed of Mortgage);
(d) each of the Mortgagor and the Companies are duly
incorporated and in good standing under the
respective laws of the jurisdiction in which each of
them is incorporated and the Mortgagor has and will
at all times have the necessary power to enter into
and perform its obligations under this Deed of
Mortgage and has duly authorized the execution and
delivery of this Deed of Mortgage;
(e) neither this Deed of Mortgage or the transfer of the
Original Securities to the Mortgagee is subject to
any stamp or other tax under the laws of the Cayman
Islands or British Colombia, and this Deed of
Mortgage is capable of being enforced without being
subject to any stamp or other tax under the laws of
the Cayman Islands or British Colombia;
(f) the Companies have no contractual or other business
relationship with any Inactive Subsidiary;
(g) No Inactive Subsidiary has any operations, assets or
liabilities, direct, indirect or contingent;
(h) the Mortgagor holds no rights or Security Interests
with respect to present or future revenues and
assets, tangible or intangible, relating to the
exploration, development, production, transportation
and sale of petroleum in and from the Republic of
Colombia, directly, by assignment, or otherwise,
except as a shareholder of companies whose shares are
pledged to Mortgagee pursuant to the Financing
Documents;
8
(i) this Deed of Mortgage constitutes its legal, valid,
binding and enforceable obligation and is a first
priority security interest over the Mortgaged Shares
effective in accordance with its terms;
(j) the execution, delivery, observance and performance
by the Mortgagor of this Deed of Mortgage will not
require the Mortgagor to obtain any licenses,
consents or approvals and will not result in any
violation to the best of the Mortgagor's knowledge,
of any law, statute, ordinance, rule or regulation
applicable to it or any other agreements;
(k) the Companies are not a party or otherwise bound to
any employment, management or other agreement, the
effect of which would be to limit the ability of the
Mortgagee to manage the Companies upon an event of
Default under the Financing Documents or give rise to
any payment or penalty to terminate any such
arrangement;
(l) it has obtained all the necessary authorizations and
consents to enable it to enter into this Mortgage and
the necessary authorizations and consents will remain
in full force and effect at all times during the
existence of the security constituted by this Deed of
Mortgage;
(m) the execution, delivery, observance and performance
by the Mortgagor of the Deed of Mortgage will not
constitute an event of default or trigger any
enforcement under any Security Interest in the
Mortgagor's assets nor will it result in the creation
of any Security Interest over or in respect of the
present or future assets of the Companies;
(n) the Mortgagor has fully disclosed in writing to the
Mortgagee all facts relating to the Mortgagor and the
Companies which the Mortgagor knows or should
reasonably know and which are material for disclosure
to the Mortgagee in the context of the Financing
Documents; and
(o) no agreement to which the Mortgagor or the Companies
are a party, or law, decree or regulation to which
either is subject requires the consent of any such
person to the execution, delivery or performance of
this Deed of Mortgage and the other Financing
Documents and each obligation and covenant contained
herein and therein.
4.2 The Mortgagor undertakes that, for so long as any Secured
Amounts remain outstanding:
(a) the Mortgagor shall pay to the Mortgagee, upon
demand, the amount of all reasonable expenses which
the Mortgagee may incur in, about or with a view to
perfecting or enforcing this security or otherwise in
connection with this security;
(b) the Mortgagor shall promptly pay (and shall indemnify
the Mortgagee on demand against) all calls,
installments and other payments which may be
9
made or become due in respect of the Mortgaged
Property and so that, in the event of default by the
Mortgagor, the Mortgagee may do so on behalf of the
Mortgagor and clause 4.2(a) shall apply accordingly;
(c) to the extent any Mortgaged Property is at any time
not vested in the Mortgagee or its nominee as
Collateral Agent the Mortgagor shall forthwith and
from time to time deposit with the Mortgagee all
certificates and other documents of title relating to
the Mortgaged Property and signed share transfer
forms;
(d) the Mortgagor will maintain the Companies in good
standing under the laws of their respective
jurisdictions and will not do anything that would
cause the completion of transactions or enforcement
actions contemplated hereunder to incur any stamp or
other tax under the laws of the Cayman Islands or
British Colombia;
(e) the Mortgagor will not permit the Company to enter
into or become bound by any employment, management or
other agreement, the effect of which would be to
limit the ability of the Mortgagee to manage the
Company upon an event of Default under the Financing
Documents or give rise to any payment or penalty to
terminate any such arrangement;
(f) the Mortgagor will not permit any Inactive Subsidiary
to conduct operations or own any asset or incur any
liability, direct, indirect or contingent;
(g) Mortgagor will not permit the Company to engage in
any transaction, contractual or otherwise, with any
affiliate of Mortgagor except with Mortgagor and
Active Subsidiaries and as may otherwise be permitted
by the Financing Documents; provided however, that in
no event shall the Company engage in any transaction,
contractual or otherwise, with an Inactive
Subsidiary;
(h) the Mortgagor shall deliver to the Mortgagee undated
letters of resignation executed by all persons now or
hereafter serving as Directors of the Companies from
time to time, which letters the Mortgagee shall be
entitled to date and cause to be given immediate
effect as of the date of an Enforcement Notice;
(i) the Mortgagor shall forthwith sign, seal, deliver and
complete all transfers, renunciations, proxies
(including irrevocable proxies if the Mortgagee so
requests) mandates, assignments, deeds and documents
and do all acts and things which the Mortgagee may,
in its absolute discretion, at any time and from time
to time specify for enabling or assisting the
Mortgagee:
(i) to perfect or improve its title to and security over the Mortgaged Property
including, without limitation, obtaining such approvals or consents to the
rights and
10
remedies granted to the Mortgagee herein as the Mortgagee requests in the
Mortgagee's sole discretion;
(ii) to vest the Mortgaged Property (including without limitation the
registration thereof in the applicable share registry) in the Mortgagee or its
nominee or nominees as Collateral Agent as of the date of execution of this Deed
of Mortgage;
(iii) to exercise (or enable its nominee or nominees to exercise) any rights or
powers attaching to the Mortgaged Property;
(iv) after the service of an Enforcement Notice to sell or dispose of the
Mortgaged Property; or
(v) otherwise to enforce any of the rights of the Mortgagee under or in
connection with this Deed of Mortgage;
(j) the Mortgagor shall not (without the written consent
of the Mortgagee):
(i) create or permit to exist over all or part of the Mortgaged Property (or any
interest therein) any Security Interest (other than created or expressly
permitted to be created under this Deed of Mortgage or under other Financing
Documents) whether ranking prior to, pari passu with or behind the security
contained in this Deed of Mortgage;
(ii) sell, transfer or otherwise dispose of the Mortgaged Property or any
interest therein or attempt or agree to so dispose;
(iii) permit any person other than the Mortgagee or its nominee to be registered
as or become the holder of the Mortgaged Property as Collateral Agent; or
(iv) vote in favour of a resolution or amend, modify or change the certificate
of incorporation, memorandum or articles of incorporation of either of the
Companies or authorize the issuance by any of the Companies of any shares or any
other equity security.
(v) except as otherwise permitted by the Financing Documents permit the
Companies to transfer, assign, dispose of or encumber any rights or interests of
the Companies, direct or indirect, with respect to petroleum exploration,
development, production, transportation, sale or other disposition or with
respect to any association or other contract under which the Companies have such
rights or interests;
(vi) permit the Companies to grant any Security Interest in, or otherwise
encumber, any of its assets, tangible or intangible, except as may be expressly
permitted by the Financing Documents;
(vii) permit the Companies to make any distribution or payment to or for the
benefit of Mortgagor, whether directly or otherwise, if the effect of that
distribution or payment is to render the Companies insolvent or unable to pay
its obligations as they mature; or
11
(viii) take any other action that would have as its effect a breach of a
Financing Document.
(k) to the extent received by the Mortgagor, it shall
forward to the Mortgagee all notices, reports,
accounts and other documents relating to the
Mortgaged Property or which are sent to the holders
of any of the Mortgaged Property as soon as they are
received;
(l) no further shares or equity securities of any kind in
the Companies (or any options or other rights with
respect thereto) will be issued and the authorized
shares shall at no time exceed the issued shares;
(m) at any time after the service of an Enforcement
Notice, it shall exercise all voting and other rights
and powers which may at any time be exercisable by
the holder of the Mortgaged Property as the Mortgagee
may in its absolute discretion direct, it being
understood that the Mortgagee has reserved the right
to exercise all such voting rights directly for any
proper purpose, including without limitation the
immediate removal of Directors of the Companies and
their replacement;
(n) the Mortgagor shall not take or accept any Security
Interest from the Companies or, in relation to the
Secured Amounts, from any third party, without first
obtaining the Mortgagee's written consent or permit
any Security Interest to be granted by the Companies
to any third party, except as may be expressly
permitted by the Financing Documents;
(o) the Mortgagor shall not prove in a liquidation or
winding up of the Companies in competition with the
Mortgagee for any amount whatsoever owing to the
Mortgagee by the Mortgagor on any account whatsoever;
and
(p) the Mortgagor shall not claim payment whether
directly or by set-off, lien, counterclaim or
otherwise of any amount which may be or has become
due to the Mortgagor by the Companies.
5. POWER OF ATTORNEY
5.1 The Mortgagor hereby irrevocably and by way of security for
the payment by it of the Secured Amounts and the performance
of its obligations under this Deed of Mortgage appoints the
Mortgagee as its true and lawful attorney (with full power to
appoint substitutes and to subdelegate) on behalf of the
Mortgagor and in the Mortgagor's own name or otherwise, at any
time and from time to time, to sign, seal, deliver and
complete all transfers, renunciations, proxies, mandates,
assignments, deeds and documents and do all acts and things
which the Mortgagee may, in its sole and absolute discretion,
consider to be necessary or advisable to perfect or improve
its security over the Mortgaged Property or to give proper
effect to the intent and purposes of this Deed of Mortgage or,
after delivery of an Enforcement Notice to enable or assist in
any way in the exercise
12
of any power of sale of the Mortgaged Property (whether
arising under this Deed of Mortgage or implied by statute or
otherwise).
6. ENFORCEMENT
6.1 The Mortgagee may at any time after the occurrence of an event
of Default (as defined in the Note Purchase and Loan
Agreement) which has not been timely cured but including,
without limitation, the breach of any representation, warranty
or covenant contained in this Deed of Mortgage and the other
Financing Documents) serve an Enforcement Notice on the
Mortgagor. Unless and until the Mortgagee shall have served an
Enforcement Notice, but not thereafter:
(a) Mortgagee agrees to the fullest extent permitted by
applicable law that the Mortgagor has the right to
receive payments distributed in respect of the
Original Securities and all other securities which
may from time to time at any time be derived from the
Original Securities; and
(b) Appoints Mortgagor as Mortgagee's agent and proxy to
vote all of the securities described in clause (a)
above and exercise all rights and privileges
attributable to such securities as permitted under
applicable law. Prior to default, if the Mortgagee
shall receive any dividend or money described in
clause (a) above, the Mortgagee shall receive the
same as agent for Mortgagor and upon receipt shall
promptly pay or remit the same, without reduction, to
Mortgagor. At the request of Mortgagor, Mortgagee
shall give such reasonable assurances, confirmations
and advice to any third party as may be necessary for
Mortgagor to enjoy the full benefit of the rights and
privileges described in clauses (a) and (b) above
6.2 If the Mortgagee shall serve an Enforcement Notice, the
Mortgagee shall, without prejudice to any other right or
remedy available hereunder or under applicable law, forthwith
become entitled:
(a) solely and exclusively to exercise all voting rights
attaching to the Mortgaged Property or any thereof
and shall exercise such rights in such manner as the
Mortgagee may in its absolute discretion determine;
and/or
(b) solely and exclusively to exercise any and all other
rights and/or powers and/or discretions of the
Mortgagor in, to and under the Mortgaged Property
pursuant to the constitutional documents of the
Company; and/or
(c) to receive and retain all dividends and other
distributions made on or in respect of the Mortgaged
Property or any thereof and any such dividends and
other distributions received by the Mortgagor after
such time shall be held in trust by the Mortgagor for
the Mortgagee and be paid or transferred to the
Mortgagee on demand; and/or
13
(d) without notice to, or further consent or concurrence
by, the Mortgagor to sell the Mortgaged Property or
any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise
any and all rights attaching to the Mortgaged
Property as the Mortgagee in its discretion may
determine and without being answerable for any loss
occasioned by such sale or resulting from
postponement thereof or the exercise of such rights;
upon any sale of the Mortgaged Property or any part
thereof the purchaser thereof shall not be bound to
see or enquire whether the power of sale of the
Mortgagee has arisen in the manner herein provided
and the sale shall be deemed to be within the power
of the Mortgagee and the receipt of the Mortgagee for
the purchase money shall effectively discharge the
purchaser of the Mortgaged Property, or any part
thereof, who shall not be concerned or be in any way
answerable therefor; and/or
(e) to appoint a receiver in respect of the Mortgaged
Property and the provisions of Clause 7 shall apply
thereto.
6.3 The Mortgagee shall not be liable for any loss or damage
occasioned by any sale or disposal of the Mortgaged Property
(or interest therein) or arising out of the exercise of or
failure to exercise any of its powers under this Deed of
Mortgage or for any neglect or default to pay any instalment
or accept any offer or notify the Mortgagor of any such matter
or for any other loss of any nature whatsoever in connection
with the Mortgaged Property.
7. MORTGAGEE'S RIGHTS AS TO MORTGAGED PROPERTY
If the Mortgagee shall serve an Enforcement Notice, the Mortgagee
shall, without prejudice to any other right or remedy available
hereunder or under applicable law, forthwith become entitled:
7.1 solely and exclusively to exercise all voting rights attaching
to the Mortgaged Property or any thereof and shall exercise
such rights in such manner as the Mortgagee may in its
absolute discretion determine; and/or
7.2 solely and exclusively to exercise all other rights and/or
powers and/or discretions of the Mortgagor in, to and under
the Mortgaged Property pursuant to the memorandum and articles
of association of the Company; and/or
7.3 to receive and retain all dividends and other distributions
made on or in respect of the Mortgaged Property or any thereof
and any such dividends and other distributions received by the
Mortgagor after such time shall be held in trust by the
Mortgagor for the Mortgagee and be paid or transferred to the
Mortgagee on demand to be applied towards the discharge of the
Secured Obligations; and/or
7.4 without notice to, or further consent or concurrence by, the
Mortgagor to sell or otherwise dispose of the Mortgaged
Property or any part thereof by such method,
14
at such place and upon such terms as the Mortgagee may in its
absolute discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise any and
all rights attaching to the Mortgaged Property as the
Mortgagee in its absolute discretion may determine and without
being answerable for any loss occasioned by such sale or
resulting from postponement thereof or the exercise of such
rights; and/or
7.5 to date and deliver the documents delivered to it pursuant to
this Mortgage as it considers appropriate and to take all
steps not already taken to register the Mortgaged Property in
the name of the Mortgagee or its nominee or nominees as
Collateral Agent and to assume control as registered owner of
the Mortgaged Property.
8. OTHER SECURITY
8.1 This security is in addition to and shall not affect or be
merged in any bills, notes, guarantees, indemnities,
undertakings, Security Interests, or other security whatsoever
which the Mortgagee may hold now or hereafter in connection
with the Financing Documents or the obligations of any other
person liable for any of the Secured Amounts.
9. FURTHER PROVISIONS
9.1 (a) This security is in addition to, and shall
neither be merged in, nor in any way exclude or
prejudice, any other Security Interest or right of
recourse or other right whatsoever which the
Mortgagee may now or at any time hereafter hold or
have (or would apart from this security hold or have)
as regards the Mortgagor or any other, person in
respect of the Secured Amounts.
(b) The powers which this Deed of Mortgage confer on the
Mortgagee are cumulative, without prejudice to its
powers under the general law, and may be exercised as
often as the Mortgagee thinks appropriate; the
Mortgagee may, in connection with the exercise of its
powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and
the Mortgagor acknowledges that the respective powers
of the Mortgagee shall in no circumstances whatsoever
be suspended, waived or otherwise prejudiced by
anything other than an express waiver or variation in
writing.
(c) The rights of the Mortgagee in relation to the
Mortgaged Property and the recovery of the Secured
Amounts (whether arising under this Deed of Mortgage,
the other Financing Documents or under the general
law) shall not be capable of being waived or varied
otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or
any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other
such right; any defective or partial exercise
15
of any such right shall not preclude any other or
further exercise of that or any other such right; and
no act or course of conduct or negotiation on its
part or on its behalf shall in any way preclude it
from exercising any such right or constitute a
suspension or any variation of any such right.
(d) If any of the provisions of this Deed of Mortgage
becomes invalid, illegal or unenforceable in any
respect under any law, the validity, legality and
enforceability of the remaining provisions shall not
in any way be affected or impaired.
(e) In any proceedings relating to this Deed of Mortgage
a statement as to any amount due to the Mortgagee or
the Trustee under the Financing Documents which is
certified as being correct by an officer or agent of
the Mortgagee shall, save in the case of manifest
error, be conclusive evidence that such amount is in
fact due and payable.
9.2 Assignment
9.2.1 This Deed of Mortgage shall be binding upon and inure
to the benefit of each party hereto and its
successors in title and permitted assigns.
9.2.2 The Mortgagor shall not be entitled to assign or
transfer any of its rights, benefits or obligations
hereunder without the prior written consent of the
Mortgagee.
9.2.3 The Mortgagee may assign or transfer all or any part
of its rights, benefits or obligations under this
Deed of Mortgage to any other person which is its
successor under the Financing Documents. Where the
Mortgagee assigns or transfers its obligations or any
part thereof, the Mortgagor shall execute such
documents as the Mortgagee may specify to release the
Mortgagee to the extent of the assignment or transfer
or with a view to perfecting such assignment or
transfer, or where necessary, shall execute further
security documentation in favour of the assignee or
transferee in like form to this Deed of Mortgage.
9.3 Release of Security
Upon final and unconditional repayment of the Secured Amounts
in full and provided that no event of Default has occurred,
the Mortgagee shall promptly assign the Mortgaged Property to
the Mortgagor free of all Security Interests, encumbrances,
trusts, equities and claims whatsoever imposed by the
Mortgagee and the Mortgagee shall forthwith sign, seal,
deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and
things which the Mortgagor may reasonably specify to vest all
of the Mortgaged Property in the name of the Mortgagor or its
nominee.
9.4 This Deed of Mortgage is governed by, and shall be construed
in accordance with, the laws of the Cayman Islands.
16
9.5 (a) The parties agree that the courts of the Cayman
Islands are to have exclusive jurisdiction to settle
any disputes which may arise in connection with the
legal relationships established by this Deed of
Mortgage (including, without limitation, claims for
set-off or counterclaim) or otherwise arising in
connection with this Deed of Mortgage.
(b) The parties irrevocably waive any objections on the
grounds of venue of forum non conveniens or any
similar grounds.
The parties irrevocably consent to service of process by mail
or in any other manner permitted by the relevant law.
10. NOTICES, ENGLISH LANGUAGE
(a) Each notice or other communication to be given or
made hereunder shall be in the English language and
shall, unless otherwise stated be made in writing as
provided below.
Any notice or other communication or document to be made or
delivered by one person to another pursuant to this Deed of
Mortgage shall (unless that other person has by fifteen days'
written notice to the other specified another address and/or
fax or telex number) be made or delivered to that other person
at the following address, fax or telex number:
The Mortgagor:
SEVEN SEAS PETROLEUM INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The Mortgagee:
CHESAPEAKE ENERGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
and shall be deemed to have been made or delivered when such
communication or document has been dispatched and the
appropriate answer back received (in the case of any
communication made by telex) or sent by fax to the fax number
of the party set out herein and when receipt is confirmed by
facsimile or telephone (in the case of any communication by
fax) or (in the case of any communication
17
made by letter) when left at that address or, as the case may
be, three days after being deposited in the post first class
postage prepaid in an envelope addressed to it at that
address; Provided that any communication or document to be
made or delivered to the Mortgagee shall be effective only
when received by the Mortgagee.
11. COUNTERPARTS
This Deed of Mortgage may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF this Deed of Mortgage has been executed and delivered as a
Deed the day and year first above written.
EXECUTED AS A DEED by )
the duly authorised representative )
of SEVEN SEAS PETROLEUM INC., )/s/ ▇▇▇▇▇ ▇. ▇▇▇
in the presence of: )
EXECUTED AS A DEED by )
the duly authorised representative )
of CHESAPEAKE ENERGY CORPORATION )/s/ ▇▇▇ ▇. ▇▇▇▇
as Collateral Agent )
in the presence of: )
18
SCHEDULE 1
ORIGINAL SECURITIES
Amount or number of
Company Original Securities Description of Original Securities
------- ------------------- ----------------------------------
Seven Seas Petroleum Turkey Inc., 1 Shares no par value
a company organized under
the laws of British Colombia
Seven Seas Resources Australia Inc. 1 Shares no par value
a company organized under
the laws of British Colombia
19
THIS DEED OF MORTGAGE ("Deed of Mortgage") is made as of July 23, 2001
BETWEEN
(1)
SEVEN SEAS PETROLEUM INC., a Cayman Islands exempted company limited by
shares, the registered office of which is at ▇▇▇▇▇▇ House, ▇▇▇▇ Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands (the "Mortgagor"); and
(2) CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation, whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Mortgagee") as Collateral Agent under the
Collateral Sharing Agreement (as hereinafter defined) for itself and
United States Trust Company of New York, ("Trustee") under that certain
Indenture dated July 23, 2001 (the "Indenture"), pursuant to which the
Trustee is trustee for the holders of the Mortgagor's 12% Senior
Secured Series A Notes (the "Series A Notes") and the Mortgagor's 12%
Senior Secured Series B Notes (the "Series B Notes").
WHEREAS
(A) Pursuant to a Note Purchase and Loan Agreement dated as of July 9, 2001
(the "Note Purchase and Loan Agreement") the Mortgagee agreed to
advance to the Mortgagor the sum of ▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$22,500,000.00), evidenced by a 12%
Senior Secured Note due 2004 in the principal amount of TWENTY-TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($22,500,000.00) (the "CEC Note")
subject to the terms and conditions stated in: (a) the Note Purchase
and Loan Agreement; (b) the CEC Note; (c) the detachable Warrants to
purchase twelve million six hundred twelve thousand one hundred forty
(12,612,140) shares of the Mortgagor's ordinary shares (the
"Warrants"); (d) the Shareholder's Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Shareholder's
Agreement"); (e) the Registration Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Registration Agreement");
(f) the Security Agreement dated July 23, 2001 between the Mortgagor
and the Mortgagee as Collateral Agent for itself and the Trustee (the
"Security Agreement"); (g) certain other Deeds of Mortgage Over Shares
of the subsidiaries of the Mortgagor other than the Companies (as
hereinafter defined) dated July 23, 2001 (the "Other Deeds of
Mortgage"); (h) the Collateral Sharing and Agency Agreement dated as of
July 23, 2001 between the Mortgagee and the Trustee pursuant to which
the Mortgagee agrees to act as collateral agent for itself and the
Trustee (the "Collateral Sharing Agreement"); and (i) any and all other
documents and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement, the Indenture and any of the other
documents executed in connection with the Note Purchase and Loan
Agreement or the Indenture.
Upon satisfaction of certain conditions set forth in the Note Purchase and
Loan Agreement, the CEC Note, the Warrants, and the other Related
Agreements, the CEC Note issued under the Note Purchase and Loan
Agreement may be exchanged by the Mortgagee in part for ordinary shares
of the Mortgagor.
20
The Note Purchase and Loan Agreement was executed on the agreement that the
Mortgagor shall enter into this mortgage over shares in the capital of
the Companies (as hereinafter defined).
The Mortgagor has agreed to secure the Secured Amounts (as defined below)
by entering into this Deed of Mortgage, as well as the other Financing
Documents (as defined below).
IT IS AGREED as follows
1. INTERPRETATION
1.1 Except where the context otherwise requires, words and
expressions defined in the Note Purchase and Loan Agreement or
the recitals above shall have the same meaning where used
herein and the further words and expressions set out below
shall have the following meanings;
ACTIVE SUBSIDIARIES means Seven Seas Petroleum USA Inc., a
Delaware corporation, Seven Seas Petroleum Colombia Inc., a
Cayman Islands company, Petrolinson SA, a Panamanian
corporation, and GHK Company Colombia, an Oklahoma
corporation.
COLLATERAL AGENT means the Mortgagee as collateral agent under
the certain Collateral Sharing Agreement;
COMPANIES means the companies specified in Schedule 1;
ENFORCEMENT NOTICE means an enforcement notice served by the
Mortgagee on the Mortgagor pursuant to the terms of this Deed
of Mortgage;
FINANCING DOCUMENTS means the Note Purchase and Loan
Agreement, the Indenture, the CEC Note, the Series A Notes,
the Series B Notes, the Security Agreement, the Other Deeds of
Mortgage, this Deed of Mortgage, the Related Agreements, the
Collateral Sharing Agreement and any and all other documents
and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement or the Indenture.
INACTIVE SUBSIDIARIES means Seven Seas Petroleum Holdings
Inc., a Cayman Islands company, Seven Seas Petroleum Turkey
Inc., a British Colombia corporation, Seven Seas Resources
Australia Inc., a British Colombia corporation, Seven Seas
Petroleum Australia Inc., a Cayman Islands company, Seven Seas
Petroleum PNG Inc., a Cayman Islands company, Seven Seas
Petroleum Argentina, a Cayman Islands company, Seven Seas
Mediterranean Inc., a Cayman Islands company, Seven Seas
Petroleum Turkey Inc., a Cayman Islands company, and Guaduas
Pipeline Company, a Cayman Islands company.
21
INDENTURE means the Indenture for the Series A Notes and the
Series B Notes as referred to in paragraph (2) above.
MORTGAGED PROPERTY means the Original Securities and all and
any other shares, securities, rights, moneys and property for
the time being mortgaged or charged to the Mortgagee pursuant
to Clause 2;
NOTE PURCHASE AND LOAN AGREEMENT means the facility referred
to in recital A;
ORIGINAL SECURITIES means the securities listed in Schedule 1
which are all registered in the name of the Mortgagor and
following execution of this Deed of Mortgage will be
transferred into the name of the Mortgagee or its nominee as
Collateral Agent;
OTHER DEEDS OF MORTGAGE means each
Legal Mortgage Over Shares
between Mortgagor and Mortgagee delivered concurrently
herewith or hereafter delivered;
RELATED AGREEMENTS means the Warrants, the warrants granted to
the holders of the Series A Notes, the Shareholder's
Agreement, the Registration Agreement and any other documents
or instruments executed in connection with any of the
foregoing;
SECURED AMOUNTS means all and any amounts of any kind now or
in the future, actual or contingent, due and payable by the
Mortgagor to the Mortgagee under the CEC Note or to the
Trustee for the benefit of the holders of the Series A Notes
or the Series B Notes or under or in connection with this Deed
of Mortgage or the other Financing Documents and references to
the Secured Amounts include references to any part of them;
and
SECURITY INTEREST means any mortgage, charge, pledge, lien,
encumbrance, right of set off or any security interest,
howsoever created or arising.
1.2 In this Deed of Mortgage:
(a) references to the Mortgagor or the Mortgagee include
references to any person for the time being deriving
title under each of them respectively;
(b) references to this Deed of Mortgage and the Financing
Documents are references to the same as from time to
time varied, supplemented or amended in any manner or
respect whatsoever;
(c) references to the Original Securities or to the
Mortgaged Property include references to any property
included in such term;
(d) "mortgage" includes a transfer or assignment by way
of mortgage;
(e) Unless the context otherwise indicates, words
importing the singular shall include the plural and
vice versa, and the use of the neuter, masculine, or
22
feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine or
feminine gender; and
(f) Clause headings are for ease of reference only.
2. COVENANT TO PAY SECURED AMOUNTS AND CHARGE
2.1 The Mortgagor covenants with the Mortgagee for the benefit of
the Mortgagee and the Trustee that it shall, whether or not
the Mortgagor shall have received an Enforcement Notice in
accordance with this Deed of Mortgage or notice of demand in
respect of the Secured Amounts, pay and discharge any moneys
and liabilities in respect of the Secured Amounts whatsoever
which are now or at any time hereafter may be due, owing or
payable by the Mortgagor in any currency, actually or
contingently, solely and/or jointly and/or severally with
another or others, as principal or surety on any account
whatsoever pursuant to this Deed of Mortgage or the other
Financing Documents or as a consequence of any breach,
non-performance, disclaimer or repudiation by the Mortgagor of
any of its obligations, covenants, representations or
warranties under this Deed of Mortgage, the other Financing
Documents or otherwise.
2.2 The Mortgagor hereby transfers absolutely by way of mortgage
to the Mortgagee as a continuing security for the payment and
discharge of the Secured Amounts, all its rights, title,
interest and benefit, present and future in, to and under:
(a) the Original Securities; and
(b) all other securities and all rights, monies
(including, without limitation, dividends) and
property whatsoever which may from time to time at
any time be derived from, accrued on or be offered in
respect of the Original Shares whether by way of
redemption, exchange, conversion, rights, bonus,
capital reorganisation or otherwise howsoever.
3. CONTINUING AND PRIMARY SECURITY
3.1 This Deed of Mortgage shall be a continuing security, and
shall be in addition to and shall not affect any continuing
liens or other Security Interests to which the Mortgagee is or
will be otherwise entitled over the Mortgaged Property, which
liens and other Security Interests shall remain in force
independently of this Deed of Mortgage.
3.2 The Original Securities and other Mortgaged Property are
hereby mortgaged to the Mortgagee as primary and not as
collateral security.
3.3 The Mortgagor's liability hereunder shall not be discharged or
impaired by:
(a) the existence or validity of any other security taken
by the Mortgagee in relation to the Financing
Documents or any enforcement of or failure to enforce
or the release of any such security;
23
(b) any amendment to or variation of the Financing
Documents or any security relating to the Financing
Documents or any assignment thereof or hereof;
(c) any release of or granting of time or any other
indulgence to the Mortgagor or any third party;
(d) any invalidity, irregularity, unenforceability,
imperfection or avoidance of or any defect in any
security granted by, or any obligations of, the
Mortgagor or any other person hereunder or under the
Financing Documents or any amendment to or variation
thereof or of any other document or security
comprised therein;
(e) the insolvency, liquidation, bankruptcy or
dissolution (or proceedings analogous thereto) of the
Mortgagor, the Companies or any other person or the
appointment of a receiver or administrative receiver
or administrator (whether by administration order or
otherwise) or trustee or similar officer of any of
the assets of the Mortgagor, the Companies or any
other person or the occurrence of any circumstances
whatsoever affecting the Mortgagor, or any other
person's liability to discharge its obligations under
the Financing Documents;
(f) any release, renewal, exchange or realisation of any
security or obligation provided under or by virtue of
this Deed of Mortgage or the other Financing
Documents or the provision of any further security to
the Mortgagee at any other time; or
(g) any other act, event, neglect or omission which would
or might but for this clause operate to impair or
discharge the Mortgagor's liability hereunder.
3.4 Any release, compromise or discharge of the obligations of the
Mortgagor shall be deemed to be made subject to the condition
that it will be void if any payment or security which the
Mortgagee may receive or have received is set aside or proves
invalid for whatever reason.
3.5 Rights may be exercised and demands may be made under this
Deed of Mortgage from time to time, and the liabilities and
obligations of the Mortgagor and the rights and security or
other consideration contained in this Deed of Mortgage may be
exercised and enforced, irrespective of
(a) whether any demands, steps or proceedings are being
or have been taken against the Mortgagor or any third
party; or
(b) whether or in what order any security to which the
Mortgagee may be entitled in respect of the Secured
Amounts is enforced.
24
4. WARRANTIES AND UNDERTAKING
4.1 The Mortgagor represents and warrants to the Mortgagee and
undertakes that:
(a) it is the absolute legal and beneficial owner of all
of the Original Securities free of all Security
Interests, encumbrances, trusts, equities, proxies
and claims whatsoever (save under this Deed of
Mortgage or the other Financing Documents) and that
all of the Original Securities are fully paid up and
are non-assessable;
(b) except as limited by the Financing Documents,
Mortgagor has the full legal and unlimited right to
vote the Original Securities in its sole discretion;
(c) the Original Securities of each of the Companies
constitute 100% of the issued and outstanding equity
capital of each of the Companies and are all
currently registered in the name of the Mortgagor
(subject to the registration of the Original
Securities in the name of the Mortgagee as Collateral
Agent concurrently with the execution and delivery of
this Deed of Mortgage);
(d) each of the Mortgagor and the Companies are duly
incorporated and in good standing under the
respective laws of the jurisdiction in which each of
them is incorporated and the Mortgagor has and will
at all times have the necessary power to enter into
and perform its obligations under this Deed of
Mortgage and has duly authorized the execution and
delivery of this Deed of Mortgage;
(e) the Companies are each exempted companies under the
laws of the Cayman Islands and neither this Deed of
Mortgage or the transfer of the Original Securities
to the Mortgagee is subject to any stamp or other tax
under the laws of the Cayman Islands, as the case may
be, and this Deed of Mortgage is capable of being
enforced without being subject to any stamp or other
tax under the laws of the Cayman Islands;
(f) the Companies have no contractual or other business
relationship with any Inactive Subsidiary;
(g) No Inactive Subsidiary has any operations, assets or
liabilities, direct, indirect or contingent;
(h) the Mortgagor holds no rights or Security Interests
with respect to present or future revenues and
assets, tangible or intangible, relating to the
exploration, development, production, transportation
and sale of petroleum in and from the Republic of
Colombia, directly, by assignment, or otherwise,
except as a shareholder of companies whose shares are
pledged to Mortgagee pursuant to the Financing
Documents;
25
(i) this Deed of Mortgage constitutes its legal, valid,
binding and enforceable obligation and is a first
priority security interest over the Mortgaged Shares
effective in accordance with its terms;
(j) the execution, delivery, observance and performance
by the Mortgagor of this Deed of Mortgage will not
require the Mortgagor to obtain any licenses,
consents or approvals and will not result in any
violation to the best of the Mortgagor's knowledge,
of any law, statute, ordinance, rule or regulation
applicable to it or any other agreements;
(k) the Companies are not a party or otherwise bound to
any employment, management or other agreement, the
effect of which would be to limit the ability of the
Mortgagee to manage the Companies upon an event of
Default under the Financing Documents or give rise to
any payment or penalty to terminate any such
arrangement;
(l) it has obtained all the necessary authorizations and
consents to enable it to enter into this Mortgage and
the necessary authorizations and consents will remain
in full force and effect at all times during the
existence of the security constituted by this Deed of
Mortgage;
(m) the execution, delivery, observance and performance
by the Mortgagor of the Deed of Mortgage will not
constitute an event of default or trigger any
enforcement under any Security Interest in the
Mortgagor's assets nor will it result in the creation
of any Security Interest over or in respect of the
present or future assets of the Companies;
(n) the Mortgagor has fully disclosed in writing to the
Mortgagee all facts relating to the Mortgagor and the
Companies which the Mortgagor knows or should
reasonably know and which are material for disclosure
to the Mortgagee in the context of the Financing
Documents; and
(o) no agreement to which the Mortgagor or the Companies
are a party, or law, decree or regulation to which
either is subject requires the consent of any such
person to the execution, delivery or performance of
this Deed of Mortgage and the other Financing
Documents and each obligation and covenant contained
herein and therein.
4.2 The Mortgagor undertakes that, for so long as any Secured
Amounts remain outstanding:
(a) the Mortgagor shall pay to the Mortgagee, upon
demand, the amount of all reasonable expenses which
the Mortgagee may incur in, about or with a view to
perfecting or enforcing this security or otherwise in
connection with this security;
(b) the Mortgagor shall promptly pay (and shall indemnify
the Mortgagee on demand against) all calls,
installments and other payments which may be
26
made or become due in respect of the Mortgaged
Property and so that, in the event of default by the
Mortgagor, the Mortgagee may do so on behalf of the
Mortgagor and clause 4.2(a) shall apply accordingly;
(c) to the extent any Mortgaged Property is at any time
not vested in the Mortgagee or its nominee as
Collateral Agent the Mortgagor shall forthwith and
from time to time deposit with the Mortgagee all
certificates and other documents of title relating to
the Mortgaged Property and signed share transfer
forms;
(d) the Mortgagor will maintain the Companies as exempted
companies under the laws of the Cayman Islands so
that the transactions or enforcement actions
contemplated hereunder will be capable of being
completed without incurrence of any stamp or other
tax under the laws of the Cayman Islands;
(e) the Mortgagor will not permit the Company to enter
into or become bound by any employment, management or
other agreement, the effect of which would be to
limit the ability of the Mortgagee to manage the
Company upon an event of Default under the Financing
Documents or give rise to any payment or penalty to
terminate any such arrangement;
(f) the Mortgagor will not permit any Inactive Subsidiary
to conduct operations or own any asset or incur any
liability, direct, indirect or contingent;
(g) Mortgagor will not permit the Company to engage in
any transaction, contractual or otherwise, with any
affiliate of Mortgagor except with Mortgagor and
Active Subsidiaries and as may otherwise be permitted
by the Financing Documents; provided however, that in
no event shall the Company engage in any transaction,
contractual or otherwise, with an Inactive
Subsidiary;
(h) the Mortgagor shall deliver to the Mortgagee undated
letters of resignation executed by all persons now or
hereafter serving as Directors of the Companies from
time to time, which letters the Mortgagee shall be
entitled to date and cause to be given immediate
effect as of the date of an Enforcement Notice;
(i) the Mortgagor shall forthwith sign, seal, deliver and
complete all transfers, renunciations, proxies
(including irrevocable proxies if the Mortgagee so
requests) mandates, assignments, deeds and documents
and do all acts and things which the Mortgagee may,
in its absolute discretion, at any time and from time
to time specify for enabling or assisting the
Mortgagee:
(i) to perfect or improve its title to and security over the Mortgaged Property
including, without limitation, obtaining such approvals or consents to the
rights and
27
remedies granted to the Mortgagee herein as the Mortgagee requests in the
Mortgagee's sole discretion;
(ii) to vest the Mortgaged Property (including without limitation the
registration thereof in the applicable share registry) in the Mortgagee or its
nominee or nominees as Collateral Agent as of the date of execution of this Deed
of Mortgage;
(iii) to exercise (or enable its nominee or nominees to exercise) any rights or
powers attaching to the Mortgaged Property;
(iv) after the service of an Enforcement Notice to sell or dispose of the
Mortgaged Property; or
(v) otherwise to enforce any of the rights of the Mortgagee under or in
connection with this Deed of Mortgage;
(j) the Mortgagor shall not (without the written consent
of the Mortgagee):
(i) create or permit to exist over all or part of the Mortgaged Property (or any
interest therein) any Security Interest (other than created or expressly
permitted to be created under this Deed of Mortgage or under other Financing
Documents) whether ranking prior to, pari passu with or behind the security
contained in this Deed of Mortgage;
(ii) sell, transfer or otherwise dispose of the Mortgaged Property or any
interest therein or attempt or agree to so dispose;
(iii) permit any person other than the Mortgagee or its nominee to be registered
as or become the holder of the Mortgaged Property as Collateral Agent; or
(iv) vote in favour of a resolution or amend, modify or change the memorandum
and articles of association of the Companies or authorize the issuance by any of
the Companies of any shares or any other equity security.
(v) except as otherwise permitted by the Financing Documents permit the
Companies to transfer, assign, dispose of or encumber any rights or interests of
the Companies, direct or indirect, with respect to petroleum exploration,
development, production, transportation, sale or other disposition or with
respect to any association or other contract under which the Companies have such
rights or interests;
(vi) permit the Companies to grant any Security Interest in, or otherwise
encumber, any of its assets, tangible or intangible, except as may be expressly
permitted by the Financing Documents;
(vii) permit the Companies to make any distribution or payment to or for the
benefit of Mortgagor, whether directly or otherwise, if the effect of that
distribution or payment is to render the Companies insolvent or unable to pay
its obligations as they mature; or
28
(viii) take any other action that would have as its effect a breach of a
Financing Document.
(k) to the extent received by the Mortgagor, it shall
forward to the Mortgagee all notices, reports,
accounts and other documents relating to the
Mortgaged Property or which are sent to the holders
of any of the Mortgaged Property as soon as they are
received;
(l) no further shares or equity securities of any kind in
the Companies (or any options or other rights with
respect thereto) will be issued and the authorized
shares shall at no time exceed the issued shares;
(m) at any time after the service of an Enforcement
Notice, it shall exercise all voting and other rights
and powers which may at any time be exercisable by
the holder of the Mortgaged Property as the Mortgagee
may in its absolute discretion direct, it being
understood that the Mortgagee has reserved the right
to exercise all such voting rights directly for any
proper purpose, including without limitation the
immediate removal of Directors of the Companies and
their replacement;
(n) the Mortgagor shall not take or accept any Security
Interest from the Companies or, in relation to the
Secured Amounts, from any third party, without first
obtaining the Mortgagee's written consent or permit
any Security Interest to be granted by the Companies
to any third party, except as may be expressly
permitted by the Financing Documents;
(o) the Mortgagor shall not prove in a liquidation or
winding up of the Companies in competition with the
Mortgagee for any amount whatsoever owing to the
Mortgagee by the Mortgagor on any account whatsoever;
and
(p) the Mortgagor shall not claim payment whether
directly or by set-off, lien, counterclaim or
otherwise of any amount which may be or has become
due to the Mortgagor by the Companies.
5. POWER OF ATTORNEY
5.1 The Mortgagor hereby irrevocably and by way of security for
the payment by it of the Secured Amounts and the performance
of its obligations under this Deed of Mortgage appoints the
Mortgagee as its true and lawful attorney (with full power to
appoint substitutes and to subdelegate) on behalf of the
Mortgagor and in the Mortgagor's own name or otherwise, at any
time and from time to time, to sign, seal, deliver and
complete all transfers, renunciations, proxies, mandates,
assignments, deeds and documents and do all acts and things
which the Mortgagee may, in its sole and absolute discretion,
consider to be necessary or advisable to perfect or improve
its security over the Mortgaged Property or to give proper
effect to the intent and purposes of this Deed of Mortgage or,
after delivery of an Enforcement Notice to enable or assist in
any way in the exercise
29
of any power of sale of the Mortgaged Property (whether
arising under this Deed of Mortgage or implied by statute or
otherwise).
6. ENFORCEMENT
6.1 The Mortgagee may at any time after the occurrence of an event
of Default (as defined in the Note Purchase and Loan
Agreement) which has not been timely cured but including,
without limitation, the breach of any representation, warranty
or covenant contained in this Deed of Mortgage and the other
Financing Documents) serve an Enforcement Notice on the
Mortgagor. Unless and until the Mortgagee shall have served an
Enforcement Notice, but not thereafter:
(a) Mortgagee agrees to the fullest extent permitted by
applicable law that the Mortgagor has the right to
receive payments distributed in respect of the
Original Securities and all other securities which
may from time to time at any time be derived from the
Original Securities; and
(b) Appoints Mortgagor as Mortgagee's agent and proxy to
vote all of the securities described in clause (a)
above and exercise all rights and privileges
attributable to such securities as permitted under
applicable law. Prior to default, if the Mortgagee
shall receive any dividend or money described in
clause (a) above, the Mortgagee shall receive the
same as agent for Mortgagor and upon receipt shall
promptly pay or remit the same, without reduction, to
Mortgagor. At the request of Mortgagor, Mortgagee
shall give such reasonable assurances, confirmations
and advice to any third party as may be necessary for
Mortgagor to enjoy the full benefit of the rights and
privileges described in clauses (a) and (b) above
6.2 If the Mortgagee shall serve an Enforcement Notice, the
Mortgagee shall, without prejudice to any other right or
remedy available hereunder or under applicable law, forthwith
become entitled:
(a) solely and exclusively to exercise all voting rights
attaching to the Mortgaged Property or any thereof
and shall exercise such rights in such manner as the
Mortgagee may in its absolute discretion determine;
and/or
(b) solely and exclusively to exercise any and all other
rights and/or powers and/or discretions of the
Mortgagor in, to and under the Mortgaged Property
pursuant to the constitutional documents of the
Company; and/or
(c) to receive and retain all dividends and other
distributions made on or in respect of the Mortgaged
Property or any thereof and any such dividends and
other distributions received by the Mortgagor after
such time shall be held in trust by the Mortgagor for
the Mortgagee and be paid or transferred to the
Mortgagee on demand; and/or
30
(d) without notice to, or further consent or concurrence
by, the Mortgagor to sell the Mortgaged Property or
any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise
any and all rights attaching to the Mortgaged
Property as the Mortgagee in its discretion may
determine and without being answerable for any loss
occasioned by such sale or resulting from
postponement thereof or the exercise of such rights;
upon any sale of the Mortgaged Property or any part
thereof the purchaser thereof shall not be bound to
see or enquire whether the power of sale of the
Mortgagee has arisen in the manner herein provided
and the sale shall be deemed to be within the power
of the Mortgagee and the receipt of the Mortgagee for
the purchase money shall effectively discharge the
purchaser of the Mortgaged Property, or any part
thereof, who shall not be concerned or be in any way
answerable therefor; and/or
(e) to appoint a receiver in respect of the Mortgaged
Property and the provisions of Clause 7 shall apply
thereto.
6.3 The Mortgagee shall not be liable for any loss or damage
occasioned by any sale or disposal of the Mortgaged Property
(or interest therein) or arising out of the exercise of or
failure to exercise any of its powers under this Deed of
Mortgage or for any neglect or default to pay any instalment
or accept any offer or notify the Mortgagor of any such matter
or for any other loss of any nature whatsoever in connection
with the Mortgaged Property.
7. MORTGAGEE'S RIGHTS AS TO MORTGAGED PROPERTY
If the Mortgagee shall serve an Enforcement Notice, the Mortgagee
shall, without prejudice to any other right or remedy available
hereunder or under applicable law, forthwith become entitled:
7.1 solely and exclusively to exercise all voting rights attaching
to the Mortgaged Property or any thereof and shall exercise
such rights in such manner as the Mortgagee may in its
absolute discretion determine; and/or
7.2 solely and exclusively to exercise all other rights and/or
powers and/or discretions of the Mortgagor in, to and under
the Mortgaged Property pursuant to the memorandum and articles
of association of the Company; and/or
7.3 to receive and retain all dividends and other distributions
made on or in respect of the Mortgaged Property or any thereof
and any such dividends and other distributions received by the
Mortgagor after such time shall be held in trust by the
Mortgagor for the Mortgagee and be paid or transferred to the
Mortgagee on demand to be applied towards the discharge of the
Secured Obligations; and/or
7.4 without notice to, or further consent or concurrence by, the
Mortgagor to sell or otherwise dispose of the Mortgaged
Property or any part thereof by such method,
31
at such place and upon such terms as the Mortgagee may in its
absolute discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise any and
all rights attaching to the Mortgaged Property as the
Mortgagee in its absolute discretion may determine and without
being answerable for any loss occasioned by such sale or
resulting from postponement thereof or the exercise of such
rights; and/or
7.5 to date and deliver the documents delivered to it pursuant to
this Mortgage as it considers appropriate and to take all
steps not already taken to register the Mortgaged Property in
the name of the Mortgagee or its nominee or nominees as
Collateral Agent and to assume control as registered owner of
the Mortgaged Property.
8. OTHER SECURITY
8.1 This security is in addition to and shall not affect or be
merged in any bills, notes, guarantees, indemnities,
undertakings, Security Interests, or other security whatsoever
which the Mortgagee may hold now or hereafter in connection
with the Financing Documents or the obligations of any other
person liable for any of the Secured Amounts.
9. FURTHER PROVISIONS
9.1 (a) This security is in addition to, and shall
neither be merged in, nor in any way exclude or
prejudice, any other Security Interest or right of
recourse or other right whatsoever which the
Mortgagee may now or at any time hereafter hold or
have (or would apart from this security hold or have)
as regards the Mortgagor or any other, person in
respect of the Secured Amounts.
(b) The powers which this Deed of Mortgage confer on the
Mortgagee are cumulative, without prejudice to its
powers under the general law, and may be exercised as
often as the Mortgagee thinks appropriate; the
Mortgagee may, in connection with the exercise of its
powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and
the Mortgagor acknowledges that the respective powers
of the Mortgagee shall in no circumstances whatsoever
be suspended, waived or otherwise prejudiced by
anything other than an express waiver or variation in
writing.
(c) The rights of the Mortgagee in relation to the
Mortgaged Property and the recovery of the Secured
Amounts (whether arising under this Deed of Mortgage,
the other Financing Documents or under the general
law) shall not be capable of being waived or varied
otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or
any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other
such right; any defective or partial exercise
32
of any such right shall not preclude any other or
further exercise of that or any other such right; and
no act or course of conduct or negotiation on its
part or on its behalf shall in any way preclude it
from exercising any such right or constitute a
suspension or any variation of any such right.
(d) If any of the provisions of this Deed of Mortgage
becomes invalid, illegal or unenforceable in any
respect under any law, the validity, legality and
enforceability of the remaining provisions shall not
in any way be affected or impaired.
(e) In any proceedings relating to this Deed of Mortgage
a statement as to any amount due to the Mortgagee or
the Trustee under the Financing Documents which is
certified as being correct by an officer or agent of
the Mortgagee shall, save in the case of manifest
error, be conclusive evidence that such amount is in
fact due and payable.
9.2 Assignment
9.2.1 This Deed of Mortgage shall be binding upon and inure
to the benefit of each party hereto and its
successors in title and permitted assigns.
9.2.2 The Mortgagor shall not be entitled to assign or
transfer any of its rights, benefits or obligations
hereunder without the prior written consent of the
Mortgagee.
9.2.3 The Mortgagee may assign or transfer all or any part
of its rights, benefits or obligations under this
Deed of Mortgage to any other person which is its
successor under the Financing Documents. Where the
Mortgagee assigns or transfers its obligations or any
part thereof, the Mortgagor shall execute such
documents as the Mortgagee may specify to release the
Mortgagee to the extent of the assignment or transfer
or with a view to perfecting such assignment or
transfer, or where necessary, shall execute further
security documentation in favour of the assignee or
transferee in like form to this Deed of Mortgage.
9.3 Release of Security
Upon final and unconditional repayment of the Secured Amounts
in full and provided that no event of Default has occurred,
the Mortgagee shall promptly assign the Mortgaged Property to
the Mortgagor free of all Security Interests, encumbrances,
trusts, equities and claims whatsoever imposed by the
Mortgagee and the Mortgagee shall forthwith sign, seal,
deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and
things which the Mortgagor may reasonably specify to vest all
of the Mortgaged Property in the name of the Mortgagor or its
nominee.
9.4 This Deed of Mortgage is governed by, and shall be construed
in accordance with, the laws of the Cayman Islands.
33
9.5 (a) The parties agree that the courts of the Cayman
Islands are to have exclusive jurisdiction to settle
any disputes which may arise in connection with the
legal relationships established by this Deed of
Mortgage (including, without limitation, claims for
set-off or counterclaim) or otherwise arising in
connection with this Deed of Mortgage.
(b) The parties irrevocably waive any objections on the
grounds of venue of forum non conveniens or any
similar grounds.
The parties irrevocably consent to service of process by mail
or in any other manner permitted by the relevant law.
10. NOTICES, ENGLISH LANGUAGE
(a) Each notice or other communication to be given or
made hereunder shall be in the English language and
shall, unless otherwise stated be made in writing as
provided below.
Any notice or other communication or document to be made or
delivered by one person to another pursuant to this Deed of
Mortgage shall (unless that other person has by fifteen days'
written notice to the other specified another address and/or
fax or telex number) be made or delivered to that other person
at the following address, fax or telex number:
The Mortgagor:
SEVEN SEAS PETROLEUM INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The Mortgagee:
CHESAPEAKE ENERGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
and shall be deemed to have been made or delivered when such
communication or document has been dispatched and the
appropriate answer back received (in the case of any
communication made by telex) or sent by fax to the fax number
of the party set out herein and when receipt is confirmed by
facsimile or telephone (in the case of any communication by
fax) or (in the case of any communication
34
made by letter) when left at that address or, as the case may
be, three days after being deposited in the post first class
postage prepaid in an envelope addressed to it at that
address; Provided that any communication or document to be
made or delivered to the Mortgagee shall be effective only
when received by the Mortgagee.
11. COUNTERPARTS
This Deed of Mortgage may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF this Deed of Mortgage has been executed and delivered as a
Deed the day and year first above written.
EXECUTED AS A DEED by )
the duly authorised representative )/s/ ▇▇▇▇▇ ▇. ▇▇▇
of
SEVEN SEAS PETROLEUM INC., )
in the presence of: )
EXECUTED AS A DEED by )
the duly authorised representative )
of CHESAPEAKE ENERGY CORPORATION )/s/ ▇▇▇ ▇. ▇▇▇▇
as Collateral Agent )
in the presence of: )
35
SCHEDULE 1
ORIGINAL SECURITIES
Amount or number of
Company Original Securities Description of Original Securities
------- ------------------- ----------------------------------
Seven Seas Petroleum Holdings Inc., with 1 Shares of US$1.00 each
its registered office at Caribbean -------------------
Management Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇ Wind Building, ▇▇▇▇▇▇ Town,
Grand Cayman
Seven Seas Petroleum Australia Inc., with 1 Shares of US$1.00 each
its registered office at Caribbean -------------------
Management Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇ Wind Building, ▇▇▇▇▇▇ Town,
Grand Cayman
Seven Seas Petroleum PNG Inc., with its 1 Shares of US$1.00 each
registered office at Caribbean Management -------------------
Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇
Wind Building, ▇▇▇▇▇▇ Town, Grand Cayman
Seven Seas Petroleum Argentina Inc., with 1 Shares of US$1.00 each
its registered office at Caribbean -------------------
Management Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇ Wind Building, ▇▇▇▇▇▇ Town,
Grand Cayman
Guadas Pipeline Company, with its 1 Shares of US$1.00 each
registered office at International -------------------
Corporation Services Ltd., One Regis
Place, Fort and ▇▇▇▇ Streets, P.O. Box 472
Seven Seas Petroleum Turkey Inc., with its 1 Shares of US$1.00 each
registered office at Caribbean Management -------------------
Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Town, Grand Cayman
36
Seven Seas Petroleum Mediterranean Inc., 1 Shares of US$1.00 each
with its registered office at Caribbean -------------------
Management Ltd. of ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇ Wind Building, ▇▇▇▇▇▇ Town,
Grand Cayman
37
July 23, 2001
SEVEN SEAS PETROLEUM INC
(as Mortgagor)
CHESAPEAKE ENERGY CORPORATION
(as Mortgagee)
---------------------------------------
LEGAL MORTGAGE OVER SHARES
38
THIS DEED OF MORTGAGE ("Deed of Mortgage") is made as of July 23, 2001
BETWEEN
(1)
SEVEN SEAS PETROLEUM INC., a Cayman Islands exempted company limited by
shares, the registered office of which is at ▇▇▇▇▇▇ House, ▇▇▇▇ Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands (the "Mortgagor"); and
(2) CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation, whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Mortgagee") as Collateral Agent under the
Collateral Sharing Agreement (as hereinafter defined) for itself and
United States Trust Company of New York, ("Trustee") under that certain
Indenture dated July 23, 2001 (the "Indenture"), pursuant to which the
Trustee is trustee for the holders of the Mortgagor's 12% Senior
Secured Series A Notes (the "Series A Notes") and the Mortgagor's 12%
Senior Secured Series B Notes (the "Series B Notes").
WHEREAS
(A) Pursuant to a Note Purchase and Loan Agreement dated as of July 9, 2001
(the "Note Purchase and Loan Agreement") the Mortgagee agreed to
advance to the Mortgagor the sum of ▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$22,500,000.00), evidenced by a 12%
Senior Secured Note due 2004 in the principal amount of TWENTY-TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($22,500,000.00) (the "CEC Note")
subject to the terms and conditions stated in: (a) the Note Purchase
and Loan Agreement; (b) the CEC Note; (c) the detachable Warrants to
purchase twelve million six hundred twelve thousand one hundred forty
(12,612,140) shares of the Mortgagor's ordinary shares (the
"Warrants"); (d) the Shareholder's Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Shareholder's
Agreement"); (e) the Registration Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Registration Agreement");
(f) the Security Agreement dated July 23, 2001 between the Mortgagor
and the Mortgagee as Collateral Agent for itself and the Trustee (the
"Security Agreement"); (g) certain other Deeds of Mortgage Over Shares
of the subsidiaries of the Mortgagor other than the Company (as
hereinafter defined) dated July 23, 2001 (the "Other Deeds of
Mortgage"); (h) the Collateral Sharing and Agency Agreement dated as of
July 23, 2001 between the Mortgagee and the Trustee pursuant to which
the Mortgagee agrees to act as collateral agent for itself and the
Trustee (the "Collateral Sharing Agreement"); and (i) any and all other
documents and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement, the Indenture and any of the other
documents executed in connection with the Note Purchase and Loan
Agreement or the Indenture.
Upon satisfaction of certain conditions set forth in the Note Purchase and
Loan Agreement, the CEC Note, the Warrants, and the other Related
Agreements, the CEC Note issued under the Note Purchase and Loan
Agreement may be exchanged by the Mortgagee in part for ordinary shares
of the Mortgagor.
39
The Note Purchase and Loan Agreement was executed on the agreement that the
Mortgagor shall enter into this mortgage over shares in the capital of
the Company, a Cayman Islands company, the registered office of which
is at Caribbean Management Ltd., of P.O. Box 1044, 3rd Floor, West Wind
Building, ▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands.
The Mortgagor has agreed to secure the Secured Amounts (as defined below)
by entering into this Deed of Mortgage, as well as the other Financing
Documents (as defined below).
IT IS AGREED as follows
1. INTERPRETATION
1.1 Except where the context otherwise requires, words and
expressions defined in the Note Purchase and Loan Agreement or
the recitals above shall have the same meaning where used
herein and the further words and expressions set out below
shall have the following meanings;
ACTIVE SUBSIDIARIES means Seven Seas Petroleum USA Inc., a
Delaware corporation, Seven Seas Petroleum Colombia Inc., a
Cayman Islands company, Petrolinson SA, a Panamanian
corporation, and GHK Company Colombia, an Oklahoma
corporation.
COLLATERAL AGENT means the Mortgagee as collateral agent under
the certain Collateral Sharing Agreement;
COMPANY means the company specified in Schedule 1;
ENFORCEMENT NOTICE means an enforcement notice served by the
Mortgagee on the Mortgagor pursuant to the terms of this Deed
of Mortgage;
FINANCING DOCUMENTS means the Note Purchase and Loan
Agreement, the Indenture, the CEC Note, the Series A Notes,
the Series B Notes, the Security Agreement, the Other Deeds of
Mortgage, this Deed of Mortgage, the Related Agreements, the
Collateral Sharing Agreement and any and all other documents
and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement or the Indenture.
INACTIVE SUBSIDIARIES means Seven Seas Petroleum Holdings
Inc., a Cayman Islands company, Seven Seas Petroleum Turkey
Inc., a British Colombia corporation, Seven Seas Resources
Australia Inc., a British Colombia corporation, Seven Seas
Petroleum Australia Inc., a Cayman Islands company, Seven Seas
Petroleum PNG Inc., a Cayman Islands company, Seven Seas
Petroleum Argentina, a Cayman Islands company, Seven Seas
Mediterranean Inc., a Cayman Islands company, Seven Seas
Petroleum Turkey Inc., a Cayman Islands company, and Guaduas
Pipeline Company, a Cayman Islands company.
2
40
INDENTURE means the Indenture for the Series A Notes and the
Series B Notes as referred to in paragraph (2) above.
MORTGAGED PROPERTY means the Original Securities and all and
any other shares, securities, rights, moneys and property for
the time being mortgaged or charged to the Mortgagee pursuant
to Clause 2;
NOTE PURCHASE AND LOAN AGREEMENT means the facility referred
to in recital A;
ORIGINAL SECURITIES means the securities listed in Schedule 1
which are all registered in the name of the Mortgagor and
following execution of this Deed of Mortgage will be
transferred into the name of the Mortgagee or its nominee as
Collateral Agent;
OTHER DEEDS OF MORTGAGE means each
Legal Mortgage Over Shares
between Mortgagor and Mortgagee delivered concurrently
herewith or hereafter delivered;
RELATED AGREEMENTS means the Warrants, the warrants granted to
the holders of the Series A Notes, the Shareholder's
Agreement, the Registration Agreement and any other documents
or instruments executed in connection with any of the
foregoing;
SECURED AMOUNTS means all and any amounts of any kind now or
in the future, actual or contingent, due and payable by the
Mortgagor to the Mortgagee under the CEC Note or to the
Trustee for the benefit of the holders of the Series A Notes
or the Series B Notes or under or in connection with this Deed
of Mortgage or the other Financing Documents and references to
the Secured Amounts include references to any part of them;
and
SECURITY INTEREST means any mortgage, charge, pledge, lien,
encumbrance, right of set off or any security interest,
howsoever created or arising.
1.2 In this Deed of Mortgage:
(a) references to the Mortgagor or the Mortgagee include
references to any person for the time being deriving
title under each of them respectively;
(b) references to this Deed of Mortgage and the Financing
Documents are references to the same as from time to
time varied, supplemented or amended in any manner or
respect whatsoever;
(c) references to the Original Securities or to the
Mortgaged Property include references to any property
included in such term;
(d) "mortgage" includes a transfer or assignment by way
of mortgage;
(e) Unless the context otherwise indicates, words
importing the singular shall include the plural and
vice versa, and the use of the neuter, masculine, or
3
41
feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine or
feminine gender; and
(f) Clause headings are for ease of reference only.
2. COVENANT TO PAY SECURED AMOUNTS AND CHARGE
2.1 The Mortgagor covenants with the Mortgagee for the benefit of
the Mortgagee and the Trustee that it shall, whether or not
the Mortgagor shall have received an Enforcement Notice in
accordance with this Deed of Mortgage or notice of demand in
respect of the Secured Amounts, pay and discharge any moneys
and liabilities in respect of the Secured Amounts whatsoever
which are now or at any time hereafter may be due, owing or
payable by the Mortgagor in any currency, actually or
contingently, solely and/or jointly and/or severally with
another or others, as principal or surety on any account
whatsoever pursuant to this Deed of Mortgage or the other
Financing Documents or as a consequence of any breach,
non-performance, disclaimer or repudiation by the Mortgagor of
any of its obligations, covenants, representations or
warranties under this Deed of Mortgage, the other Financing
Documents or otherwise.
2.2 The Mortgagor hereby transfers absolutely by way of mortgage
to the Mortgagee as a continuing security for the payment and
discharge of the Secured Amounts, all its rights, title,
interest and benefit, present and future in, to and under:
(a) the Original Securities; and
(b) all other securities and all rights, monies
(including, without limitation, dividends) and
property whatsoever which may from time to time at
any time be derived from, accrued on or be offered in
respect of the Original Shares whether by way of
redemption, exchange, conversion, rights, bonus,
capital reorganisation or otherwise howsoever.
3. CONTINUING AND PRIMARY SECURITY
3.1 This Deed of Mortgage shall be a continuing security, and
shall be in addition to and shall not affect any continuing
liens or other Security Interests to which the Mortgagee is or
will be otherwise entitled over the Mortgaged Property, which
liens and other Security Interests shall remain in force
independently of this Deed of Mortgage.
3.2 The Original Securities and other Mortgaged Property are
hereby mortgaged to the Mortgagee as primary and not as
collateral security.
3.3 The Mortgagor's liability hereunder shall not be discharged or
impaired by:
(a) the existence or validity of any other security taken
by the Mortgagee in relation to the Financing
Documents or any enforcement of or failure to enforce
or the release of any such security;
4
42
(b) any amendment to or variation of the Financing
Documents or any security relating to the Financing
Documents or any assignment thereof or hereof;
(c) any release of or granting of time or any other
indulgence to the Mortgagor or any third party;
(d) any invalidity, irregularity, unenforceability,
imperfection or avoidance of or any defect in any
security granted by, or any obligations of, the
Mortgagor or any other person hereunder or under the
Financing Documents or any amendment to or variation
thereof or of any other document or security
comprised therein;
(e) the insolvency, liquidation, bankruptcy or
dissolution (or proceedings analogous thereto) of the
Mortgagor, the Company or any other person or the
appointment of a receiver or administrative receiver
or administrator (whether by administration order or
otherwise) or trustee or similar officer of any of
the assets of the Mortgagor, the Company or any other
person or the occurrence of any circumstances
whatsoever affecting the Mortgagor, or any other
person's liability to discharge its obligations under
the Financing Documents;
(f) any release, renewal, exchange or realisation of any
security or obligation provided under or by virtue of
this Deed of Mortgage or the other Financing
Documents or the provision of any further security to
the Mortgagee at any other time; or
(g) any other act, event, neglect or omission which would
or might but for this clause operate to impair or
discharge the Mortgagor's liability hereunder.
3.4 Any release, compromise or discharge of the obligations of the
Mortgagor shall be deemed to be made subject to the condition
that it will be void if any payment or security which the
Mortgagee may receive or have received is set aside or proves
invalid for whatever reason.
3.5 Rights may be exercised and demands may be made under this
Deed of Mortgage from time to time, and the liabilities and
obligations of the Mortgagor and the rights and security or
other consideration contained in this Deed of Mortgage may be
exercised and enforced, irrespective of
(a) whether any demands, steps or proceedings are being
or have been taken against the Mortgagor or any third
party; or
(b) whether or in what order any security to which the
Mortgagee may be entitled in respect of the Secured
Amounts is enforced.
5
43
4. WARRANTIES AND UNDERTAKING
4.1 The Mortgagor represents and warrants to the Mortgagee and
undertakes that:
(a) it is the absolute legal and beneficial owner of all
of the Original Securities free of all Security
Interests, encumbrances, trusts, equities, proxies
and claims whatsoever (save under this Deed of
Mortgage or the other Financing Documents) and that
all of the Original Securities are fully paid up and
are non-assessable;
(b) except as limited by the Financing Documents,
Mortgagor has the full legal and unlimited right to
vote the Original Securities in its sole discretion;
(c) the Original Securities constitute 100% of the issued
and outstanding equity capital of the Company and are
all currently registered in the name of the Mortgagor
(subject to the registration of the Original
Securities in the name of the Mortgagee as Collateral
Agent concurrently with the execution and delivery of
this Deed of Mortgage);
(d) the Mortgagor and the Company are duly incorporated
and in good standing under the respective laws of the
jurisdiction in which each of them is incorporated
and the Mortgagor has and will at all times have the
necessary power to enter into and perform its
obligations under this Deed of Mortgage and has duly
authorized the execution and delivery of this Deed of
Mortgage;
(e) the Company is an exempted company under the laws of
the Cayman Islands and neither this Deed of Mortgage
or the transfer of the Original Securities to the
Mortgagee is subject to any stamp or other tax under
the laws of the Cayman Islands and this Deed of
Mortgage is capable of being enforced without being
subject to any stamp or other tax under the laws of
the Cayman Islands;
(f) pursuant to amendments to the articles of association
within 45 days after the date of this Agreement, the
Company will not be permitted to issue any equity
capital other than the Original Securities;
(g) the Company has no contractual or other business
relationship with any Inactive Subsidiary;
(h) No Inactive Subsidiary has any operations, assets or
liabilities, direct, indirect or contingent;
(i) the Mortgagor holds no rights or Security Interests
with respect to present or future revenues and
assets, tangible or intangible, relating to the
exploration, development, production, transportation
and sale of petroleum in and from the Republic of
Colombia, directly, by assignment, or
6
44
otherwise, except as a shareholder of companies whose
shares are pledged to Mortgagee pursuant to the
Financing Documents;
(j) this Deed of Mortgage constitutes its legal, valid,
binding and enforceable obligation and is a first
priority security interest over the Mortgaged Shares
effective in accordance with its terms;
(k) the execution, delivery, observance and performance
by the Mortgagor of this Deed of Mortgage will not
require the Mortgagor to obtain any licenses,
consents or approvals and will not result in any
violation to the best of the Mortgagor's knowledge,
of any law, statute, ordinance, rule or regulation
applicable to it or any other agreements;
(l) the Company is not a party or otherwise bound to any
employment, management or other agreement, the effect
of which would be to limit the ability of the
Mortgagee to manage the Company upon an event of
Default under the Financing Documents or give rise to
any payment or penalty to terminate any such
arrangement;
(m) it has obtained all the necessary authorizations and
consents to enable it to enter into this Mortgage and
the necessary authorizations and consents will remain
in full force and effect at all times during the
existence of the security constituted by this Deed of
Mortgage;
(n) the execution, delivery, observance and performance
by the Mortgagor of the Deed of Mortgage will not
constitute an event of default or trigger any
enforcement under any Security Interest in the
Mortgagor's assets nor will it result in the creation
of any Security Interest over or in respect of the
present or future assets of the Company;
(o) the Mortgagor has fully disclosed in writing to the
Mortgagee all facts relating to the Mortgagor and the
Company which the Mortgagor knows or should
reasonably know and which are material for disclosure
to the Mortgagee in the context of the Financing
Documents; and
(p) no agreement to which the Mortgagor or the Company or
its Colombian branch is a party, or law, decree or
regulation to which either is subject, including
without limitation any agreement with Empresa
Colombiana de Petroleos or imposition by the Ministro
de Minas y Energia de Colombia or any other
instrumentality of the Republic of Colombia requires
the consent of any such person to the execution,
delivery or performance of this Deed of Mortgage and
the other Financing Documents and each obligation and
covenant contained herein and therein.
4.2 The Mortgagor undertakes that, for so long as any Secured
Amounts remain outstanding:
7
45
(a) the Mortgagor shall pay to the Mortgagee, upon
demand, the amount of all reasonable expenses which
the Mortgagee may incur in, about or with a view to
perfecting or enforcing this security or otherwise in
connection with this security;
(b) the Mortgagor shall promptly pay (and shall indemnify
the Mortgagee on demand against) all calls,
installments and other payments which may be made or
become due in respect of the Mortgaged Property and
so that, in the event of default by the Mortgagor,
the Mortgagee may do so on behalf of the Mortgagor
and clause 4.2(a) shall apply accordingly;
(c) to the extent any Mortgaged Property is at any time
not vested in the Mortgagee or its nominee as
Collateral Agent the Mortgagor shall forthwith and
from time to time deposit with the Mortgagee all
certificates and other documents of title relating to
the Mortgaged Property and signed share transfer
forms;
(d) the Mortgagor will maintain the Company as an
exempted company under the laws of the Cayman Islands
so that the transactions or enforcement actions
contemplated hereunder will be capable of being
completed without incurrence of any stamp or other
tax under the laws of the Cayman Islands;
(e) the Mortgagor will not permit the Company to enter
into or become bound by any employment, management or
other agreement, the effect of which would be to
limit the ability of the Mortgagee to manage the
Company upon an event of Default under the Financing
Documents or give rise to any payment or penalty to
terminate any such arrangement;
(f) the Mortgagor will not permit any Inactive Subsidiary
to conduct operations or own any asset or incur any
liability, direct, indirect or contingent;
(g) Mortgagor will not permit the Company to engage in
any transaction, contractual or otherwise, with any
affiliate of Mortgagor except with Mortgagor and
Active Subsidiaries and as may otherwise be permitted
by the Financing Documents; provided however, that in
no event shall the Company engage in any transaction,
contractual or otherwise, with an Inactive
Subsidiary;
(h) the Mortgagor shall deliver to the Mortgagee undated
letters of resignation executed by all persons now or
hereafter serving as Directors of the Company from
time to time, which letters the Mortgagee shall be
entitled to date and cause to be given immediate
effect as of the date of an Enforcement Notice;
(i) the Mortgagor shall forthwith sign, seal, deliver and
complete all transfers, renunciations, proxies
(including irrevocable proxies if the Mortgagee so
8
46
requests) mandates, assignments, deeds and documents
and do all acts and things which the Mortgagee may,
in its absolute discretion, at any time and from time
to time specify for enabling or assisting the
Mortgagee:
(i) to perfect or improve its title to and security over the Mortgaged Property
including, without limitation, obtaining such approvals or consents to the
rights and remedies granted to the Mortgagee herein as the Mortgagee requests in
the Mortgagee's sole discretion;
(ii) to vest the Mortgaged Property (including without limitation the
registration thereof in the applicable share registry) in the Mortgagee or its
nominee or nominees as Collateral Agent as of the date of execution of this Deed
of Mortgage;
(iii) to exercise (or enable its nominee or nominees to exercise) any rights or
powers attaching to the Mortgaged Property;
(iv) after the service of an Enforcement Notice to sell or dispose of the
Mortgaged Property; or
(v) otherwise to enforce any of the rights of the Mortgagee under or in
connection with this Deed of Mortgage;
(j) the Mortgagor shall not (without the written consent
of the Mortgagee):
(i) create or permit to exist over all or part of the Mortgaged Property (or any
interest therein) any Security Interest (other than created or expressly
permitted to be created under this Deed of Mortgage or under other Financing
Documents) whether ranking prior to, pari passu with or behind the security
contained in this Deed of Mortgage;
(ii) sell, transfer or otherwise dispose of the Mortgaged Property or any
interest therein or attempt or agree to so dispose;
(iii) permit any person other than the Mortgagee or its nominee to be registered
as or become the holder of the Mortgaged Property as Collateral Agent; or
(iv) vote in favour of a resolution or amend, modify or change the memorandum
and articles of association of the Company or authorize the issuance by the
Company of any shares or any other equity security.
(v) except as otherwise permitted by the Financing Documents permit the Company
to transfer, assign, dispose of or encumber any rights or interests of the
Company, direct or indirect, with respect to petroleum exploration, development,
production, transportation, sale or other disposition or with respect to any
association or other contract under which the Company has such rights or
interests;
(vi) permit the Company to grant any Security Interest in, or otherwise
encumber, any of its assets, tangible or intangible, except as may be expressly
permitted by the Financing Documents;
9
47
(vii) permit the Company to make any distribution or payment to or for the
benefit of Mortgagor, whether directly or otherwise, if the effect of that
distribution or payment is to render the Company insolvent or unable to pay its
obligations as they mature; or
(viii) take any other action that would have as its effect a breach of a
Financing Document.
(k) to the extent received by the Mortgagor, it shall
forward to the Mortgagee all notices, reports,
accounts and other documents relating to the
Mortgaged Property or which are sent to the holders
of any of the Mortgaged Property as soon as they are
received;
(l) no further shares or equity securities of any kind in
the Company (or any options or other rights with
respect thereto) will be issued and the authorized
shares shall at no time exceed the issued shares;
(m) at any time after the service of an Enforcement
Notice, it shall exercise all voting and other rights
and powers which may at any time be exercisable by
the holder of the Mortgaged Property as the Mortgagee
may in its absolute discretion direct, it being
understood that the Mortgagee has reserved the right
to exercise all such voting rights directly for any
proper purpose, including without limitation the
immediate removal of Directors of the Company and
their replacement;
(n) the Mortgagor shall not take or accept any Security
Interest from the Company or, in relation to the
Secured Amounts, from any third party, without first
obtaining the Mortgagee's written consent or permit
any Security Interest to be granted by the Company to
any third party, except as may be expressly permitted
by the Financing Documents;
(o) the Mortgagor shall not prove in a liquidation or
winding up of the Company in competition with the
Mortgagee for any amount whatsoever owing to the
Mortgagee by the Mortgagor on any account whatsoever;
and
(p) the Mortgagor shall not claim payment whether
directly or by set-off, lien, counterclaim or
otherwise of any amount which may be or has become
due to the Mortgagor by the Company.
5. POWER OF ATTORNEY
5.1 The Mortgagor hereby irrevocably and by way of security for
the payment by it of the Secured Amounts and the performance
of its obligations under this Deed of Mortgage appoints the
Mortgagee as its true and lawful attorney (with full power to
appoint substitutes and to subdelegate) on behalf of the
Mortgagor and in the Mortgagor's own name or otherwise, at any
time and from time to time, to sign, seal, deliver and
complete all transfers, renunciations, proxies, mandates,
assignments, deeds and documents and do all acts and things
which the Mortgagee may, in its sole and absolute discretion,
consider to be necessary or
10
48
advisable to perfect or improve its security over the
Mortgaged Property or to give proper effect to the intent and
purposes of this Deed of Mortgage or, after delivery of an
Enforcement Notice to enable or assist in any way in the
exercise of any power of sale of the Mortgaged Property
(whether arising under this Deed of Mortgage or implied by
statute or otherwise).
6. ENFORCEMENT
6.1 The Mortgagee may at any time after the occurrence of an event
of Default (as defined in the Note Purchase and Loan
Agreement) which has not been timely cured but including,
without limitation, the breach of any representation, warranty
or covenant contained in this Deed of Mortgage and the other
Financing Documents) serve an Enforcement Notice on the
Mortgagor. Unless and until the Mortgagee shall have served an
Enforcement Notice, but not thereafter:
(a) Mortgagee agrees to the fullest extent permitted by
applicable law that the Mortgagor has the right to
receive payments distributed in respect of the
Original Securities and all other securities which
may from time to time at any time be derived from the
Original Securities; and
(b) Appoints Mortgagor as Mortgagee's agent and proxy to
vote all of the securities described in clause (a)
above and exercise all rights and privileges
attributable to such securities as permitted under
applicable law. Prior to default, if the Mortgagee
shall receive any dividend or money described in
clause (a) above, the Mortgagee shall receive the
same as agent for Mortgagor and upon receipt shall
promptly pay or remit the same, without reduction, to
Mortgagor. At the request of Mortgagor, Mortgagee
shall give such reasonable assurances, confirmations
and advice to any third party as may be necessary for
Mortgagor to enjoy the full benefit of the rights and
privileges described in clauses (a) and (b) above
6.2 If the Mortgagee shall serve an Enforcement Notice, the
Mortgagee shall, without prejudice to any other right or
remedy available hereunder or under applicable law, forthwith
become entitled:
(a) solely and exclusively to exercise all voting rights
attaching to the Mortgaged Property or any thereof
and shall exercise such rights in such manner as the
Mortgagee may in its absolute discretion determine;
and/or
(b) solely and exclusively to exercise any and all other
rights and/or powers and/or discretions of the
Mortgagor in, to and under the Mortgaged Property
pursuant to the constitutional documents of the
Company; and/or
(c) to receive and retain all dividends and other
distributions made on or in respect of the Mortgaged
Property or any thereof and any such dividends and
other distributions received by the Mortgagor after
such time shall be
11
49
held in trust by the Mortgagor for the Mortgagee and
be paid or transferred to the Mortgagee on demand;
and/or
(d) without notice to, or further consent or concurrence
by, the Mortgagor to sell the Mortgaged Property or
any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise
any and all rights attaching to the Mortgaged
Property as the Mortgagee in its discretion may
determine and without being answerable for any loss
occasioned by such sale or resulting from
postponement thereof or the exercise of such rights;
upon any sale of the Mortgaged Property or any part
thereof the purchaser thereof shall not be bound to
see or enquire whether the power of sale of the
Mortgagee has arisen in the manner herein provided
and the sale shall be deemed to be within the power
of the Mortgagee and the receipt of the Mortgagee for
the purchase money shall effectively discharge the
purchaser of the Mortgaged Property, or any part
thereof, who shall not be concerned or be in any way
answerable therefor; and/or
(e) to appoint a receiver in respect of the Mortgaged
Property and the provisions of Clause 7 shall apply
thereto.
6.3 The Mortgagee shall not be liable for any loss or damage
occasioned by any sale or disposal of the Mortgaged Property
(or interest therein) or arising out of the exercise of or
failure to exercise any of its powers under this Deed of
Mortgage or for any neglect or default to pay any instalment
or accept any offer or notify the Mortgagor of any such matter
or for any other loss of any nature whatsoever in connection
with the Mortgaged Property.
7. MORTGAGEE'S RIGHTS AS TO MORTGAGED PROPERTY
If the Mortgagee shall serve an Enforcement Notice, the Mortgagee
shall, without prejudice to any other right or remedy available
hereunder or under applicable law, forthwith become entitled:
7.1 solely and exclusively to exercise all voting rights attaching
to the Mortgaged Property or any thereof and shall exercise
such rights in such manner as the Mortgagee may in its
absolute discretion determine; and/or
7.2 solely and exclusively to exercise all other rights and/or
powers and/or discretions of the Mortgagor in, to and under
the Mortgaged Property pursuant to the memorandum and articles
of association of the Company; and/or
7.3 to receive and retain all dividends and other distributions
made on or in respect of the Mortgaged Property or any thereof
and any such dividends and other distributions received by the
Mortgagor after such time shall be held in trust by the
Mortgagor for the Mortgagee and be paid or transferred to the
Mortgagee on demand to be applied towards the discharge of the
Secured Obligations; and/or
12
50
7.4 without notice to, or further consent or concurrence by, the
Mortgagor to sell or otherwise dispose of the Mortgaged
Property or any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such sale and
in any such case the Mortgagee may exercise any and all rights
attaching to the Mortgaged Property as the Mortgagee in its
absolute discretion may determine and without being answerable
for any loss occasioned by such sale or resulting from
postponement thereof or the exercise of such rights; and/or
7.5 to date and deliver the documents delivered to it pursuant to
this Mortgage as it considers appropriate and to take all
steps not already taken to register the Mortgaged Property in
the name of the Mortgagee or its nominee or nominees as
Collateral Agent and to assume control as registered owner of
the Mortgaged Property.
8. OTHER SECURITY
8.1 This security is in addition to and shall not affect or be
merged in any bills, notes, guarantees, indemnities,
undertakings, Security Interests, or other security whatsoever
which the Mortgagee may hold now or hereafter in connection
with the Financing Documents or the obligations of any other
person liable for any of the Secured Amounts.
9. FURTHER PROVISIONS
9.1 (a) This security is in addition to, and shall
neither be merged in, nor in any way exclude or
prejudice, any other Security Interest or right of
recourse or other right whatsoever which the
Mortgagee may now or at any time hereafter hold or
have (or would apart from this security hold or have)
as regards the Mortgagor or any other, person in
respect of the Secured Amounts.
(b) The powers which this Deed of Mortgage confer on the
Mortgagee are cumulative, without prejudice to its
powers under the general law, and may be exercised as
often as the Mortgagee thinks appropriate; the
Mortgagee may, in connection with the exercise of its
powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and
the Mortgagor acknowledges that the respective powers
of the Mortgagee shall in no circumstances whatsoever
be suspended, waived or otherwise prejudiced by
anything other than an express waiver or variation in
writing.
(c) The rights of the Mortgagee in relation to the
Mortgaged Property and the recovery of the Secured
Amounts (whether arising under this Deed of Mortgage,
the other Financing Documents or under the general
law) shall not be capable of being waived or varied
otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or
13
51
any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other
such right; any defective or partial exercise of any
such right shall not preclude any other or further
exercise of that or any other such right; and no act
or course of conduct or negotiation on its part or on
its behalf shall in any way preclude it from
exercising any such right or constitute a suspension
or any variation of any such right.
(d) If any of the provisions of this Deed of Mortgage
becomes invalid, illegal or unenforceable in any
respect under any law, the validity, legality and
enforceability of the remaining provisions shall not
in any way be affected or impaired.
(e) In any proceedings relating to this Deed of Mortgage
a statement as to any amount due to the Mortgagee or
the Trustee under the Financing Documents which is
certified as being correct by an officer or agent of
the Mortgagee shall, save in the case of manifest
error, be conclusive evidence that such amount is in
fact due and payable.
9.2 Assignment
9.2.1 This Deed of Mortgage shall be binding upon and inure
to the benefit of each party hereto and its
successors in title and permitted assigns.
9.2.2 The Mortgagor shall not be entitled to assign or
transfer any of its rights, benefits or obligations
hereunder without the prior written consent of the
Mortgagee.
9.2.3 The Mortgagee may assign or transfer all or any part
of its rights, benefits or obligations under this
Deed of Mortgage to any other person which is its
successor under the Financing Documents. Where the
Mortgagee assigns or transfers its obligations or any
part thereof, the Mortgagor shall execute such
documents as the Mortgagee may specify to release the
Mortgagee to the extent of the assignment or transfer
or with a view to perfecting such assignment or
transfer, or where necessary, shall execute further
security documentation in favour of the assignee or
transferee in like form to this Deed of Mortgage.
9.3 Release of Security
Upon final and unconditional repayment of the Secured Amounts
in full and provided that no event of Default has occurred,
the Mortgagee shall promptly assign the Mortgaged Property to
the Mortgagor free of all Security Interests, encumbrances,
trusts, equities and claims whatsoever imposed by the
Mortgagee and the Mortgagee shall forthwith sign, seal,
deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and
things which the Mortgagor may reasonably specify to vest all
of the Mortgaged Property in the name of the Mortgagor or its
nominee.
14
52
9.4 This Deed of Mortgage is governed by, and shall be construed
in accordance with, the laws of the Cayman Islands.
9.5 (a) The parties agree that the courts of the Cayman
Islands are to have exclusive jurisdiction to settle
any disputes which may arise in connection with the
legal relationships established by this Deed of
Mortgage (including, without limitation, claims for
set-off or counterclaim) or otherwise arising in
connection with this Deed of Mortgage.
(b) The parties irrevocably waive any objections on the
grounds of venue of forum non conveniens or any
similar grounds.
The parties irrevocably consent to service of process by mail
or in any other manner permitted by the relevant law.
10. NOTICES, ENGLISH LANGUAGE
(a) Each notice or other communication to be given or
made hereunder shall be in the English language and
shall, unless otherwise stated be made in writing as
provided below.
Any notice or other communication or document to be made or
delivered by one person to another pursuant to this Deed of
Mortgage shall (unless that other person has by fifteen days'
written notice to the other specified another address and/or
fax or telex number) be made or delivered to that other person
at the following address, fax or telex number:
The Mortgagor:
SEVEN SEAS PETROLEUM INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The Mortgagee:
CHESAPEAKE ENERGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
and shall be deemed to have been made or delivered when such
communication or document has been dispatched and the
appropriate answer back received (in the
15
53
case of any communication made by telex) or sent by fax to the
fax number of the party set out herein and when receipt is
confirmed by facsimile or telephone (in the case of any
communication by fax) or (in the case of any communication
made by letter) when left at that address or, as the case may
be, three days after being deposited in the post first class
postage prepaid in an envelope addressed to it at that
address; Provided that any communication or document to be
made or delivered to the Mortgagee shall be effective only
when received by the Mortgagee.
11. COUNTERPARTS
This Deed of Mortgage may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF this Deed of Mortgage has been executed and delivered as a
Deed the day and year first above written.
EXECUTED AS A DEED by )
the duly authorised representative )/s/ ▇▇▇▇▇ ▇. ▇▇▇
of SEVEN SEAS PETROLEUM INC., )
in the presence of: )
EXECUTED AS A DEED by )
the duly authorised representative )
of CHESAPEAKE ENERGY CORPORATION )/s/ ▇▇▇ ▇. ▇▇▇▇
as Collateral Agent )
in the presence of: )
16
54
SCHEDULE 1
ORIGINAL SECURITIES
Company: Seven Seas Petroleum Colombia Inc., a Cayman Islands company with its
registered office at: Caribbean Management Ltd., P.O. Box 1044, 3rd Floor, West
Wind Building, ▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands.
Amount or number of
Original Securities Description of Original Securities
------------------- ----------------------------------
1 Shares of US$1.00 par value
55
July 23, 2001
SEVEN SEAS PETROLEUM INC
(as Mortgagor)
CHESAPEAKE ENERGY CORPORATION
(as Mortgagee)
-----------------------------------------------
LEGAL MORTGAGE OVER SHARES
56
THIS DEED OF MORTGAGE ("Deed of Mortgage") is made as of July 23, 2001
BETWEEN
(1) SEVEN SEAS PETROLEUM INC., a Cayman Islands exempted company limited by
shares, the registered office of which is at ▇▇▇▇▇▇ House, ▇▇▇▇ Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands (the "Mortgagor"); and
(2) CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation, whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Mortgagee") as Collateral Agent under the
Collateral Sharing Agreement (as hereinafter defined) for itself and
United States Trust Company of New York, ("Trustee") under that certain
Indenture dated July 23, 2001 (the "Indenture"), pursuant to which the
Trustee is trustee for the holders of the Mortgagor's 12% Senior
Secured Series A Notes (the "Series A Notes") and the Mortgagor's 12%
Senior Secured Series B Notes (the "Series B Notes").
WHEREAS
(A) Pursuant to a Note Purchase and Loan Agreement dated as of July 9, 2001
(the "Note Purchase and Loan Agreement") the Mortgagee agreed to
advance to the Mortgagor the sum of ▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$22,500,000.00), evidenced by a 12%
Senior Secured Note due 2004 in the principal amount of TWENTY-TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($22,500,000.00) (the "CEC Note")
subject to the terms and conditions stated in: (a) the Note Purchase
and Loan Agreement; (b) the CEC Note; (c) the detachable Warrants to
purchase twelve million six hundred twelve thousand one hundred forty
(12,612,140) shares of the Mortgagor's ordinary shares (the
"Warrants"); (d) the Shareholder's Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Shareholder's
Agreement"); (e) the Registration Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Registration Agreement");
(f) the Security Agreement dated July 23, 2001 between the Mortgagor
and the Mortgagee as Collateral Agent for itself and the Trustee (the
"Security Agreement"); (g) certain other Deeds of Mortgage Over Shares
of the subsidiaries of the Mortgagor other than the Companies (as
hereinafter defined) dated July 23, 2001 (the "Other Deeds of
Mortgage"); (h) the Collateral Sharing and Agency Agreement dated as of
July 23, 2001 between the Mortgagee and the Trustee pursuant to which
the Mortgagee agrees to act as collateral agent for itself and the
Trustee (the "Collateral Sharing Agreement"); and (i) any and all other
documents and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement, the Indenture and any of the other
documents executed in connection with the Note Purchase and Loan
Agreement or the Indenture.
Upon satisfaction of certain conditions set forth in the Note Purchase and Loan
Agreement, the CEC Note, the Warrants, and the other Related Agreements,
the CEC Note issued under the Note Purchase and Loan Agreement may be
exchanged by the Mortgagee in part for ordinary shares of the Mortgagor.
57
The Note Purchase and Loan Agreement was executed on the agreement that the
Mortgagor shall enter into this mortgage over shares in the capital of GHK
Company Colombia, an Oklahoma corporation and Seven Seas Petroleum USA
Inc., a Delaware corporation.
The Mortgagor has agreed to secure the Secured Amounts (as defined below) by
entering into this Deed of Mortgage, as well as the other Financing
Documents (as defined below).
IT IS AGREED as follows
1. INTERPRETATION
1.1 Except where the context otherwise requires, words and
expressions defined in the Note Purchase and Loan Agreement or
the recitals above shall have the same meaning where used
herein and the further words and expressions set out below
shall have the following meanings;
ACTIVE SUBSIDIARIES means Seven Seas Petroleum USA Inc., a
Delaware corporation, Seven Seas Petroleum Colombia Inc., a
Cayman Islands company, Petrolinson SA, a Panamanian
corporation, and GHK Company Colombia, an Oklahoma
corporation.
COLLATERAL AGENT means the Mortgagee as collateral agent under
the certain Collateral Sharing Agreement;
COMPANIES means the companies specified in Schedule 1;
ENFORCEMENT NOTICE means an enforcement notice served by the
Mortgagee on the Mortgagor pursuant to the terms of this Deed
of Mortgage;
FINANCING DOCUMENTS means the Note Purchase and Loan
Agreement, the Indenture, the CEC Note, the Series A Notes,
the Series B Notes, the Security Agreement, the Other Deeds of
Mortgage, this Deed of Mortgage, the Related Agreements, the
Collateral Sharing Agreement and any and all other documents
and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement or the Indenture.
INACTIVE SUBSIDIARIES means Seven Seas Petroleum Holdings
Inc., a Cayman Islands company, Seven Seas Petroleum Turkey
Inc., a British Colombia corporation, Seven Seas Resources
Australia Inc., a British Colombia corporation, Seven Seas
Petroleum Australia Inc., a Cayman Islands company, Seven Seas
Petroleum PNG Inc., a Cayman Islands company, Seven Seas
Petroleum Argentina, a Cayman Islands company, Seven Seas
Mediterranean Inc., a Cayman Islands company, Seven Seas
Petroleum Turkey Inc., a Cayman Islands company, and Guaduas
Pipeline Company, a Cayman Islands company.
58
INDENTURE means the Indenture for the Series A Notes and the
Series B Notes as referred to in paragraph (2) above.
MORTGAGED PROPERTY means the Original Securities and all and
any other shares, securities, rights, moneys and property for
the time being mortgaged or charged to the Mortgagee pursuant
to Clause 2;
NOTE PURCHASE AND LOAN AGREEMENT means the facility referred
to in recital A;
ORIGINAL SECURITIES means the securities listed in Schedule 1
which are all registered in the name of the Mortgagor and
following execution of this Deed of Mortgage will be
transferred into the name of the Mortgagee or its nominee as
Collateral Agent;
OTHER DEEDS OF MORTGAGE means each
Legal Mortgage Over Shares
between Mortgagor and Mortgagee delivered concurrently
herewith or hereafter delivered;
RELATED AGREEMENTS means the Warrants, the warrants granted to
the holders of the Series A Notes, the Shareholder's
Agreement, the Registration Agreement and any other documents
or instruments executed in connection with any of the
foregoing;
SECURED AMOUNTS means all and any amounts of any kind now or
in the future, actual or contingent, due and payable by the
Mortgagor to the Mortgagee under the CEC Note or to the
Trustee for the benefit of the holders of the Series A Notes
or the Series B Notes or under or in connection with this Deed
of Mortgage or the other Financing Documents and references to
the Secured Amounts include references to any part of them;
and
SECURITY INTEREST means any mortgage, charge, pledge, lien,
encumbrance, right of set off or any security interest,
howsoever created or arising.
1.2 In this Deed of Mortgage:
(a) references to the Mortgagor or the Mortgagee include
references to any person for the time being deriving
title under each of them respectively;
(b) references to this Deed of Mortgage and the Financing
Documents are references to the same as from time to
time varied, supplemented or amended in any manner or
respect whatsoever;
(c) references to the Original Securities or to the
Mortgaged Property include references to any property
included in such term;
(d) "mortgage" includes a transfer or assignment by way
of mortgage;
(e) Unless the context otherwise indicates, words
importing the singular shall include the plural and
vice versa, and the use of the neuter, masculine, or
59
feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine or
feminine gender; and
(f) Clause headings are for ease of reference only.
2. COVENANT TO PAY SECURED AMOUNTS AND CHARGE
2.1 The Mortgagor covenants with the Mortgagee for the benefit of
the Mortgagee and the Trustee that it shall, whether or not
the Mortgagor shall have received an Enforcement Notice in
accordance with this Deed of Mortgage or notice of demand in
respect of the Secured Amounts, pay and discharge any moneys
and liabilities in respect of the Secured Amounts whatsoever
which are now or at any time hereafter may be due, owing or
payable by the Mortgagor in any currency, actually or
contingently, solely and/or jointly and/or severally with
another or others, as principal or surety on any account
whatsoever pursuant to this Deed of Mortgage or the other
Financing Documents or as a consequence of any breach,
non-performance, disclaimer or repudiation by the Mortgagor of
any of its obligations, covenants, representations or
warranties under this Deed of Mortgage, the other Financing
Documents or otherwise.
2.2 The Mortgagor hereby transfers absolutely by way of mortgage
to the Mortgagee as a continuing security for the payment and
discharge of the Secured Amounts, all its rights, title,
interest and benefit, present and future in, to and under:
(a) the Original Securities; and
(b) all other securities and all rights, monies
(including, without limitation, dividends) and
property whatsoever which may from time to time at
any time be derived from, accrued on or be offered in
respect of the Original Shares whether by way of
redemption, exchange, conversion, rights, bonus,
capital reorganisation or otherwise howsoever.
3. CONTINUING AND PRIMARY SECURITY
3.1 This Deed of Mortgage shall be a continuing security, and
shall be in addition to and shall not affect any continuing
liens or other Security Interests to which the Mortgagee is or
will be otherwise entitled over the Mortgaged Property, which
liens and other Security Interests shall remain in force
independently of this Deed of Mortgage.
3.2 The Original Securities and other Mortgaged Property are
hereby mortgaged to the Mortgagee as primary and not as
collateral security.
3.3 The Mortgagor's liability hereunder shall not be discharged or
impaired by:
(a) the existence or validity of any other security taken
by the Mortgagee in relation to the Financing
Documents or any enforcement of or failure to enforce
or the release of any such security;
60
(b) any amendment to or variation of the Financing
Documents or any security relating to the Financing
Documents or any assignment thereof or hereof;
(c) any release of or granting of time or any other
indulgence to the Mortgagor or any third party;
(d) any invalidity, irregularity, unenforceability,
imperfection or avoidance of or any defect in any
security granted by, or any obligations of, the
Mortgagor or any other person hereunder or under the
Financing Documents or any amendment to or variation
thereof or of any other document or security
comprised therein;
(e) the insolvency, liquidation, bankruptcy or
dissolution (or proceedings analogous thereto) of the
Mortgagor, the Companies or any other person or the
appointment of a receiver or administrative receiver
or administrator (whether by administration order or
otherwise) or trustee or similar officer of any of
the assets of the Mortgagor, the Companies or any
other person or the occurrence of any circumstances
whatsoever affecting the Mortgagor, or any other
person's liability to discharge its obligations under
the Financing Documents;
(f) any release, renewal, exchange or realisation of any
security or obligation provided under or by virtue of
this Deed of Mortgage or the other Financing
Documents or the provision of any further security to
the Mortgagee at any other time; or
(g) any other act, event, neglect or omission which would
or might but for this clause operate to impair or
discharge the Mortgagor's liability hereunder.
3.4 Any release, compromise or discharge of the obligations of the
Mortgagor shall be deemed to be made subject to the condition
that it will be void if any payment or security which the
Mortgagee may receive or have received is set aside or proves
invalid for whatever reason.
3.5 Rights may be exercised and demands may be made under this
Deed of Mortgage from time to time, and the liabilities and
obligations of the Mortgagor and the rights and security or
other consideration contained in this Deed of Mortgage may be
exercised and enforced, irrespective of
(a) whether any demands, steps or proceedings are being
or have been taken against the Mortgagor or any third
party; or
(b) whether or in what order any security to which the
Mortgagee may be entitled in respect of the Secured
Amounts is enforced.
61
4. WARRANTIES AND UNDERTAKING
4.1 The Mortgagor represents and warrants to the Mortgagee and
undertakes that:
(a) it is the absolute legal and beneficial owner of all
of the Original Securities free of all Security
Interests, encumbrances, trusts, equities, proxies
and claims whatsoever (save under this Deed of
Mortgage or the other Financing Documents) and that
all of the Original Securities are fully paid up and
are non-assessable;
(b) except as limited by the Financing Documents,
Mortgagor has the full legal and unlimited right to
vote the Original Securities in its sole discretion;
(c) the Original Securities of each of the Companies
constitute 100% of the issued and outstanding equity
capital of each of the Companies and are all
currently registered in the name of the Mortgagor
(subject to the registration of the Original
Securities in the name of the Mortgagee as Collateral
Agent concurrently with the execution and delivery of
this Deed of Mortgage);
(d) each of the Mortgagor and the Companies are duly
incorporated and in good standing under the
respective laws of the jurisdiction in which each of
them is incorporated and the Mortgagor has and will
at all times have the necessary power to enter into
and perform its obligations under this Deed of
Mortgage and has duly authorized the execution and
delivery of this Deed of Mortgage;
(e) neither this Deed of Mortgage or the transfer of the
Original Securities to the Mortgagee is subject to
any stamp or other tax under the laws of the State of
Oklahoma, the State of Delaware or the Cayman
Islands, as the case may be, and this Deed of
Mortgage is capable of being enforced without being
subject to any stamp or other tax under the laws of
the State of Oklahoma, the State of Delaware or the
Cayman Islands;
(f) pursuant to amendments to the articles of
incorporation of each of the Companies within 45 days
after the date of this Agreement, the Companies will
not be permitted to issue any equity capital other
than the Original Securities;
(g) the Companies have no contractual or other business
relationship with any Inactive Subsidiary;
(h) No Inactive Subsidiary has any operations, assets or
liabilities, direct, indirect or contingent;
(i) the Mortgagor holds no rights or Security Interests
with respect to present or future revenues and
assets, tangible or intangible, relating to the
62
exploration, development, production, transportation
and sale of petroleum in and from the Republic of
Colombia, directly, by assignment, or otherwise,
except as a shareholder of companies whose shares are
pledged to Mortgagee pursuant to the Financing
Documents;
(j) this Deed of Mortgage constitutes its legal, valid,
binding and enforceable obligation and is a first
priority security interest over the Mortgaged Shares
effective in accordance with its terms;
(k) the execution, delivery, observance and performance
by the Mortgagor of this Deed of Mortgage will not
require the Mortgagor to obtain any licenses,
consents or approvals and will not result in any
violation to the best of the Mortgagor's knowledge,
of any law, statute, ordinance, rule or regulation
applicable to it or any other agreements;
(l) the Companies are not a party or otherwise bound to
any employment, management or other agreement, the
effect of which would be to limit the ability of the
Mortgagee to manage the Companies upon an event of
Default under the Financing Documents or give rise to
any payment or penalty to terminate any such
arrangement;
(m) it has obtained all the necessary authorizations and
consents to enable it to enter into this Mortgage and
the necessary authorizations and consents will remain
in full force and effect at all times during the
existence of the security constituted by this Deed of
Mortgage;
(n) the execution, delivery, observance and performance
by the Mortgagor of the Deed of Mortgage will not
constitute an event of default or trigger any
enforcement under any Security Interest in the
Mortgagor's assets nor will it result in the creation
of any Security Interest over or in respect of the
present or future assets of the Companies;
(o) the Mortgagor has fully disclosed in writing to the
Mortgagee all facts relating to the Mortgagor and the
Companies which the Mortgagor knows or should
reasonably know and which are material for disclosure
to the Mortgagee in the context of the Financing
Documents; and
(p) no agreement to which the Mortgagor or the Companies
or its Colombian branch, as the case may be, is a
party, or law, decree or regulation to which either
is subject, including without limitation any
agreement with Empresa Colombiana de Petroleos or
imposition by the Ministro de Minas y Energia de
Colombia or any other instrumentality of the Republic
of Colombia requires the consent of any such person
to the execution, delivery or performance of this
Deed of Mortgage and the other Financing Documents
and each obligation and covenant contained herein and
therein.
63
4.2 The Mortgagor undertakes that, for so long as any Secured Amounts
remain outstanding:
(a) the Mortgagor shall pay to the Mortgagee, upon demand, the
amount of all reasonable expenses which the Mortgagee may
incur in, about or with a view to perfecting or enforcing this
security or otherwise in connection with this security;
(b) the Mortgagor shall promptly pay (and shall indemnify the
Mortgagee on demand against) all calls, installments and other
payments which may be made or become due in respect of the
Mortgaged Property and so that, in the event of default by the
Mortgagor, the Mortgagee may do so on behalf of the Mortgagor
and clause 4.2(a) shall apply accordingly;
(c) to the extent any Mortgaged Property is at any time not vested
in the Mortgagee or its nominee as Collateral Agent the
Mortgagor shall forthwith and from time to time deposit with
the Mortgagee all certificates and other documents of title
relating to the Mortgaged Property and signed share transfer
forms;
(d) the Mortgagor will maintain the Companies in good standing
under the laws of their respective jurisdictions and will not
do anything that would cause the completion of transactions or
enforcement actions contemplated hereunder to incur any stamp
or other tax under the laws of the Cayman Islands, the State
of Oklahoma or the State of Delaware;
(e) the Mortgagor will not permit the Company to enter into or
become bound by any employment, management or other agreement,
the effect of which would be to limit the ability of the
Mortgagee to manage the Company upon an event of Default under
the Financing Documents or give rise to any payment or penalty
to terminate any such arrangement;
(f) the Mortgagor will not permit any Inactive Subsidiary to
conduct operations or own any asset or incur any liability,
direct, indirect or contingent;
(g) Mortgagor will not permit the Company to engage in any
transaction, contractual or otherwise, with any affiliate of
Mortgagor except with Mortgagor and Active Subsidiaries and as
may otherwise be permitted by the Financing Documents;
provided however, that in no event shall the Company engage in
any transaction, contractual or otherwise, with an Inactive
Subsidiary;
(h) the Mortgagor shall deliver to the Mortgagee undated letters
of resignation executed by all persons now or hereafter
serving as Directors of the Companies from time to time, which
letters the Mortgagee shall be entitled to date and cause to
be given immediate effect as of the date of an Enforcement
Notice;
64
(i) the Mortgagor shall forthwith sign, seal, deliver and complete
all transfers, renunciations, proxies (including irrevocable
proxies if the Mortgagee so requests) mandates, assignments,
deeds and documents and do all acts and things which the
Mortgagee may, in its absolute discretion, at any time and
from time to time specify for enabling or assisting the
Mortgagee:
(i) to perfect or improve its title to and security over the Mortgaged Property
including, without limitation, obtaining such approvals or consents to the
rights and remedies granted to the Mortgagee herein as the Mortgagee requests in
the Mortgagee's sole discretion;
(ii) to vest the Mortgaged Property (including without limitation the
registration thereof in the applicable share registry) in the Mortgagee or its
nominee or nominees as Collateral Agent as of the date of execution of this Deed
of Mortgage;
(iii) to exercise (or enable its nominee or nominees to exercise) any rights or
powers attaching to the Mortgaged Property;
(iv) after the service of an Enforcement Notice to sell or dispose of the
Mortgaged Property; or
(v) otherwise to enforce any of the rights of the Mortgagee under or in
connection with this Deed of Mortgage;
(j) the Mortgagor shall not (without the written consent of the
Mortgagee):
(i) create or permit to exist over all or part of the Mortgaged Property (or any
interest therein) any Security Interest (other than created or expressly
permitted to be created under this Deed of Mortgage or under other Financing
Documents) whether ranking prior to, pari passu with or behind the security
contained in this Deed of Mortgage;
(ii) sell, transfer or otherwise dispose of the Mortgaged Property or any
interest therein or attempt or agree to so dispose;
(iii) permit any person other than the Mortgagee or its nominee to be registered
as or become the holder of the Mortgaged Property as Collateral Agent; or
(iv) vote in favour of a resolution or amend, modify or change the articles of
incorporation or bylaws of either of the Companies or authorize the issuance by
any of the Companies of any shares or any other equity security.
(v) except as otherwise permitted by the Financing Documents permit the
Companies to transfer, assign, dispose of or encumber any rights or interests of
the Companies, direct or indirect, with respect to petroleum exploration,
development, production, transportation, sale or other disposition or with
respect to any association or other contract under which the Companies have such
rights or interests;
65
(vi) permit the Companies to grant any Security Interest in, or otherwise
encumber, any of its assets, tangible or intangible, except as may be expressly
permitted by the Financing Documents;
(vii) permit the Companies to make any distribution or payment to or for the
benefit of Mortgagor, whether directly or otherwise, if the effect of that
distribution or payment is to render the Companies insolvent or unable to pay
its obligations as they mature; or
(viii) take any other action that would have as its effect a breach of a
Financing Document.
(k) to the extent received by the Mortgagor, it shall
forward to the Mortgagee all notices, reports,
accounts and other documents relating to the
Mortgaged Property or which are sent to the holders
of any of the Mortgaged Property as soon as they are
received;
(l) no further shares or equity securities of any kind in
the Companies (or any options or other rights with
respect thereto) will be issued and the authorized
shares shall at no time exceed the issued shares;
(m) at any time after the service of an Enforcement
Notice, it shall exercise all voting and other rights
and powers which may at any time be exercisable by
the holder of the Mortgaged Property as the Mortgagee
may in its absolute discretion direct, it being
understood that the Mortgagee has reserved the right
to exercise all such voting rights directly for any
proper purpose, including without limitation the
immediate removal of Directors of the Companies and
their replacement;
(n) the Mortgagor shall not take or accept any Security
Interest from the Companies or, in relation to the
Secured Amounts, from any third party, without first
obtaining the Mortgagee's written consent or permit
any Security Interest to be granted by the Companies
to any third party, except as may be expressly
permitted by the Financing Documents;
(o) the Mortgagor shall not prove in a liquidation or
winding up of the Companies in competition with the
Mortgagee for any amount whatsoever owing to the
Mortgagee by the Mortgagor on any account whatsoever;
and
(p) the Mortgagor shall not claim payment whether
directly or by set-off, lien, counterclaim or
otherwise of any amount which may be or has become
due to the Mortgagor by the Companies.
5. POWER OF ATTORNEY
5.1 The Mortgagor hereby irrevocably and by way of security for
the payment by it of the Secured Amounts and the performance
of its obligations under this Deed of Mortgage appoints the
Mortgagee as its true and lawful attorney (with full power to
appoint substitutes and to subdelegate) on behalf of the
Mortgagor and in the
66
Mortgagor's own name or otherwise, at any time and from time
to time, to sign, seal, deliver and complete all transfers,
renunciations, proxies, mandates, assignments, deeds and
documents and do all acts and things which the Mortgagee may,
in its sole and absolute discretion, consider to be necessary
or advisable to perfect or improve its security over the
Mortgaged Property or to give proper effect to the intent and
purposes of this Deed of Mortgage or, after delivery of an
Enforcement Notice to enable or assist in any way in the
exercise of any power of sale of the Mortgaged Property
(whether arising under this Deed of Mortgage or implied by
statute or otherwise).
6. ENFORCEMENT
6.1 The Mortgagee may at any time after the occurrence of an event
of Default (as defined in the Note Purchase and Loan
Agreement) which has not been timely cured but including,
without limitation, the breach of any representation, warranty
or covenant contained in this Deed of Mortgage and the other
Financing Documents) serve an Enforcement Notice on the
Mortgagor. Unless and until the Mortgagee shall have served an
Enforcement Notice, but not thereafter:
(a) Mortgagee agrees to the fullest extent permitted by
applicable law that the Mortgagor has the right to
receive payments distributed in respect of the
Original Securities and all other securities which
may from time to time at any time be derived from the
Original Securities; and
(b) Appoints Mortgagor as Mortgagee's agent and proxy to
vote all of the securities described in clause (a)
above and exercise all rights and privileges
attributable to such securities as permitted under
applicable law. Prior to default, if the Mortgagee
shall receive any dividend or money described in
clause (a) above, the Mortgagee shall receive the
same as agent for Mortgagor and upon receipt shall
promptly pay or remit the same, without reduction, to
Mortgagor. At the request of Mortgagor, Mortgagee
shall give such reasonable assurances, confirmations
and advice to any third party as may be necessary for
Mortgagor to enjoy the full benefit of the rights and
privileges described in clauses (a) and (b) above
6.2 If the Mortgagee shall serve an Enforcement Notice, the
Mortgagee shall, without prejudice to any other right or
remedy available hereunder or under applicable law, forthwith
become entitled:
(a) solely and exclusively to exercise all voting rights
attaching to the Mortgaged Property or any thereof
and shall exercise such rights in such manner as the
Mortgagee may in its absolute discretion determine;
and/or
(b) solely and exclusively to exercise any and all other
rights and/or powers and/or discretions of the
Mortgagor in, to and under the Mortgaged Property
pursuant to the constitutional documents of the
Company; and/or
67
(c) to receive and retain all dividends and other
distributions made on or in respect of the Mortgaged
Property or any thereof and any such dividends and
other distributions received by the Mortgagor after
such time shall be held in trust by the Mortgagor for
the Mortgagee and be paid or transferred to the
Mortgagee on demand; and/or
(d) without notice to, or further consent or concurrence
by, the Mortgagor to sell the Mortgaged Property or
any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise
any and all rights attaching to the Mortgaged
Property as the Mortgagee in its discretion may
determine and without being answerable for any loss
occasioned by such sale or resulting from
postponement thereof or the exercise of such rights;
upon any sale of the Mortgaged Property or any part
thereof the purchaser thereof shall not be bound to
see or enquire whether the power of sale of the
Mortgagee has arisen in the manner herein provided
and the sale shall be deemed to be within the power
of the Mortgagee and the receipt of the Mortgagee for
the purchase money shall effectively discharge the
purchaser of the Mortgaged Property, or any part
thereof, who shall not be concerned or be in any way
answerable therefor; and/or
(e) to appoint a receiver in respect of the Mortgaged
Property and the provisions of Clause 7 shall apply
thereto.
6.3 The Mortgagee shall not be liable for any loss or damage
occasioned by any sale or disposal of the Mortgaged Property
(or interest therein) or arising out of the exercise of or
failure to exercise any of its powers under this Deed of
Mortgage or for any neglect or default to pay any instalment
or accept any offer or notify the Mortgagor of any such matter
or for any other loss of any nature whatsoever in connection
with the Mortgaged Property.
7. MORTGAGEE'S RIGHTS AS TO MORTGAGED PROPERTY
If the Mortgagee shall serve an Enforcement Notice, the Mortgagee
shall, without prejudice to any other right or remedy available
hereunder or under applicable law, forthwith become entitled:
7.1 solely and exclusively to exercise all voting rights attaching
to the Mortgaged Property or any thereof and shall exercise
such rights in such manner as the Mortgagee may in its
absolute discretion determine; and/or
7.2 solely and exclusively to exercise all other rights and/or
powers and/or discretions of the Mortgagor in, to and under
the Mortgaged Property pursuant to the memorandum and articles
of association of the Company; and/or
7.3 to receive and retain all dividends and other distributions
made on or in respect of the Mortgaged Property or any thereof
and any such dividends and other
68
distributions received by the Mortgagor after such time shall
be held in trust by the Mortgagor for the Mortgagee and be
paid or transferred to the Mortgagee on demand to be applied
towards the discharge of the Secured Obligations; and/or
7.4 without notice to, or further consent or concurrence by, the
Mortgagor to sell or otherwise dispose of the Mortgaged
Property or any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such sale and
in any such case the Mortgagee may exercise any and all rights
attaching to the Mortgaged Property as the Mortgagee in its
absolute discretion may determine and without being answerable
for any loss occasioned by such sale or resulting from
postponement thereof or the exercise of such rights; and/or
7.5 to date and deliver the documents delivered to it pursuant to
this Mortgage as it considers appropriate and to take all
steps not already taken to register the Mortgaged Property in
the name of the Mortgagee or its nominee or nominees as
Collateral Agent and to assume control as registered owner of
the Mortgaged Property.
8. OTHER SECURITY
8.1 This security is in addition to and shall not affect or be
merged in any bills, notes, guarantees, indemnities,
undertakings, Security Interests, or other security whatsoever
which the Mortgagee may hold now or hereafter in connection
with the Financing Documents or the obligations of any other
person liable for any of the Secured Amounts.
9. FURTHER PROVISIONS
9.1 (a) This security is in addition to, and shall neither be merged
in, nor in any way exclude or prejudice, any other Security
Interest or right of recourse or other right whatsoever which
the Mortgagee may now or at any time hereafter hold or have
(or would apart from this security hold or have) as regards
the Mortgagor or any other, person in respect of the Secured
Amounts.
(b) The powers which this Deed of Mortgage confer on the Mortgagee
are cumulative, without prejudice to its powers under the
general law, and may be exercised as often as the Mortgagee
thinks appropriate; the Mortgagee may, in connection with the
exercise of its powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and the
Mortgagor acknowledges that the respective powers of the
Mortgagee shall in no circumstances whatsoever be suspended,
waived or otherwise prejudiced by anything other than an
express waiver or variation in writing.
(c) The rights of the Mortgagee in relation to the Mortgaged
Property and the recovery of the Secured Amounts (whether
arising under this Deed of
69
Mortgage, the other Financing Documents or under the general
law) shall not be capable of being waived or varied otherwise
than by an express waiver or variation in writing; and in
particular any failure to exercise or any delay in exercising
any of such rights shall not operate as a waiver or variation
of that or any other such right; any defective or partial
exercise of any such right shall not preclude any other or
further exercise of that or any other such right; and no act
or course of conduct or negotiation on its part or on its
behalf shall in any way preclude it from exercising any such
right or constitute a suspension or any variation of any such
right.
(d) If any of the provisions of this Deed of Mortgage becomes
invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or
impaired.
(e) In any proceedings relating to this Deed of Mortgage a
statement as to any amount due to the Mortgagee or the Trustee
under the Financing Documents which is certified as being
correct by an officer or agent of the Mortgagee shall, save in
the case of manifest error, be conclusive evidence that such
amount is in fact due and payable.
9.2 Assignment
9.2.1 This Deed of Mortgage shall be binding upon and inure to the
benefit of each party hereto and its successors in title and
permitted assigns.
9.2.2 The Mortgagor shall not be entitled to assign or transfer any
of its rights, benefits or obligations hereunder without the
prior written consent of the Mortgagee.
9.2.3 The Mortgagee may assign or transfer all or any part of its
rights, benefits or obligations under this Deed of Mortgage to
any other person which is its successor under the Financing
Documents. Where the Mortgagee assigns or transfers its
obligations or any part thereof, the Mortgagor shall execute
such documents as the Mortgagee may specify to release the
Mortgagee to the extent of the assignment or transfer or with
a view to perfecting such assignment or transfer, or where
necessary, shall execute further security documentation in
favour of the assignee or transferee in like form to this Deed
of Mortgage.
9.3 Release of Security
Upon final and unconditional repayment of the Secured Amounts in full
and provided that no event of Default has occurred, the Mortgagee shall
promptly assign the Mortgaged Property to the Mortgagor free of all
Security Interests, encumbrances, trusts, equities and claims
whatsoever imposed by the Mortgagee and the Mortgagee shall forthwith
sign, seal, deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all
70
acts and things which the Mortgagor may reasonably specify to vest all
of the Mortgaged Property in the name of the Mortgagor or its nominee.
9.4 This Deed of Mortgage is governed by, and shall be construed in
accordance with, the laws of the Cayman Islands.
9.5 (a) The parties agree that the courts of the Cayman Islands are to have
exclusive jurisdiction to settle any disputes which may arise in
connection with the legal relationships established by this Deed of
Mortgage (including, without limitation, claims for set-off or
counterclaim) or otherwise arising in connection with this Deed of
Mortgage.
(b) The parties irrevocably waive any objections on the grounds of
venue of forum non conveniens or any similar grounds. The parties
irrevocably consent to service of process by mail or in any other
manner permitted by the relevant law.
10. NOTICES, ENGLISH LANGUAGE
(a) Each notice or other communication to be given or made hereunder
shall be in the English language and shall, unless otherwise stated
be made in writing as provided below.
Any notice or other communication or document to be made or delivered
by one person to another pursuant to this Deed of Mortgage shall
(unless that other person has by fifteen days' written notice to the
other specified another address and/or fax or telex number) be made or
delivered to that other person at the following address, fax or telex
number:
The Mortgagor:
-------------
SEVEN SEAS PETROLEUM INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The Mortgagee:
-------------
CHESAPEAKE ENERGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
71
and shall be deemed to have been made or delivered when such
communication or document has been dispatched and the
appropriate answer back received (in the case of any
communication made by telex) or sent by fax to the fax number
of the party set out herein and when receipt is confirmed by
facsimile or telephone (in the case of any communication by
fax) or (in the case of any communication made by letter) when
left at that address or, as the case may be, three days after
being deposited in the post first class postage prepaid in an
envelope addressed to it at that address; Provided that any
communication or document to be made or delivered to the
Mortgagee shall be effective only when received by the
Mortgagee.
11. COUNTERPARTS
This Deed of Mortgage may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF this Deed of Mortgage has been executed and delivered as a
Deed the day and year first above written.
EXECUTED AS A DEED by )
the duly authorised representative )/s/ ▇▇▇▇▇ ▇. ▇▇▇
of SEVEN SEAS PETROLEUM INC., )
in the presence of: )
EXECUTED AS A DEED by )
the duly authorised representative )
of CHESAPEAKE ENERGY CORPORATION )/s/ ▇▇▇ ▇. ▇▇▇▇
as Collateral Agent )
in the presence of: )
72
SCHEDULE 1
ORIGINAL SECURITIES
Amount or number of
Company Original Securities Description of Original Securities
------- ------------------- ----------------------------------
Seven Seas Petroleum USA Inc., 100 Common Shares
a Delaware corporation
GHK Company Columbia, an 1000 Common Shares
Oklahoma corporation
73
July 23, 2001
SEVEN SEAS PETROLEUM INC
(as Mortgagor)
CHESAPEAKE ENERGY CORPORATION
(as Mortgagee)
-------------------------------------
LEGAL MORTGAGE OVER SHARES
74
THIS DEED OF MORTGAGE ("Deed of Mortgage") is made as of July 23, 2001
BETWEEN
(1) SEVEN SEAS PETROLEUM INC., a Cayman Islands exempted company limited by
shares, the registered office of which is at ▇▇▇▇▇▇ House, ▇▇▇▇ Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands (the "Mortgagor"); and
(2) CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation, whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Mortgagee") as Collateral Agent under the
Collateral Sharing Agreement (as hereinafter defined) for itself and
United States Trust Company of New York, ("Trustee") under that certain
Indenture dated July 23, 2001 (the "Indenture"), pursuant to which the
Trustee is trustee for the holders of the Mortgagor's 12% Senior
Secured Series A Notes (the "Series A Notes") and the Mortgagor's 12%
Senior Secured Series B Notes (the "Series B Notes").
WHEREAS
(A) Pursuant to a Note Purchase and Loan Agreement dated as of July 9, 2001
(the "Note Purchase and Loan Agreement") the Mortgagee agreed to
advance to the Mortgagor the sum of ▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$22,500,000.00), evidenced by a 12%
Senior Secured Note due 2004 in the principal amount of TWENTY-TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($22,500,000.00) (the "CEC Note")
subject to the terms and conditions stated in: (a) the Note Purchase
and Loan Agreement; (b) the CEC Note; (c) the detachable Warrants to
purchase twelve million six hundred twelve thousand one hundred forty
(12,612,140) shares of the Mortgagor's ordinary shares (the
"Warrants"); (d) the Shareholder's Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Shareholder's
Agreement"); (e) the Registration Rights Agreement dated July 23, 2001
between the Mortgagor and the Mortgagee (the "Registration Agreement");
(f) the Security Agreement dated July 23, 2001 between the Mortgagor
and the Mortgagee as Collateral Agent for itself and the Trustee (the
"Security Agreement"); (g) certain other Deeds of Mortgage Over Shares
of the subsidiaries of the Mortgagor other than the Company (as
hereinafter defined) dated July 23, 2001 (the "Other Deeds of
Mortgage"); (h) the Collateral Sharing and Agency Agreement dated as of
July 23, 2001 between the Mortgagee and the Trustee pursuant to which
the Mortgagee agrees to act as collateral agent for itself and the
Trustee (the "Collateral Sharing Agreement"); and (i) any and all other
documents and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement, the Indenture and any of the other
documents executed in connection with the Note Purchase and Loan
Agreement or the Indenture.
Upon satisfaction of certain conditions set forth in the Note Purchase and
Loan Agreement, the CEC Note, the Warrants, and the other Related
Agreements, the CEC Note issued under the Note Purchase and Loan
Agreement may be exchanged by the Mortgagee in part for ordinary shares
of the Mortgagor.
75
The Note Purchase and Loan Agreement was executed on the agreement that the
Mortgagor shall enter into this mortgage over shares in the capital of
Petrolinson S.A., a company organized under the laws of Panama.
The Mortgagor has agreed to secure the Secured Amounts (as defined below)
by entering into this Deed of Mortgage, as well as the other Financing
Documents (as defined below).
IT IS AGREED as follows
1. INTERPRETATION
1.1 Except where the context otherwise requires, words and
expressions defined in the Note Purchase and Loan Agreement or
the recitals above shall have the same meaning where used
herein and the further words and expressions set out below
shall have the following meanings;
ACTIVE SUBSIDIARIES means Seven Seas Petroleum USA Inc., a
Delaware corporation, Seven Seas Petroleum Colombia Inc., a
Cayman Islands company, Petrolinson SA, a Panamanian
corporation, and GHK Company Colombia, an Oklahoma
corporation.
COLLATERAL AGENT means the Mortgagee as collateral agent under
the certain Collateral Sharing Agreement;
COMPANY means the company specified in Schedule 1;
ENFORCEMENT NOTICE means an enforcement notice served by the
Mortgagee on the Mortgagor pursuant to the terms of this Deed
of Mortgage;
FINANCING DOCUMENTS means the Note Purchase and Loan
Agreement, the Indenture, the CEC Note, the Series A Notes,
the Series B Notes, the Security Agreement, the Other Deeds of
Mortgage, this Deed of Mortgage, the Related Agreements, the
Collateral Sharing Agreement and any and all other documents
and instruments executed and delivered in connection with the
Note Purchase and Loan Agreement or the Indenture.
INACTIVE SUBSIDIARIES means Seven Seas Petroleum Holdings
Inc., a Cayman Islands company, Seven Seas Petroleum Turkey
Inc., a British Colombia corporation, Seven Seas Resources
Australia Inc., a British Colombia corporation, Seven Seas
Petroleum Australia Inc., a Cayman Islands company, Seven Seas
Petroleum PNG Inc., a Cayman Islands company, Seven Seas
Petroleum Argentina, a Cayman Islands company, Seven Seas
Mediterranean Inc., a Cayman Islands company, Seven Seas
Petroleum Turkey Inc., a Cayman Islands company, and Guaduas
Pipeline Company, a Cayman Islands company.
2
76
INDENTURE means the Indenture for the Series A Notes and the
Series B Notes as referred to in paragraph (2) above.
MORTGAGED PROPERTY means the Original Securities and all and
any other shares, securities, rights, moneys and property for
the time being mortgaged or charged to the Mortgagee pursuant
to Clause 2;
NOTE PURCHASE AND LOAN AGREEMENT means the facility referred
to in recital A;
ORIGINAL SECURITIES means the securities listed in Schedule 1
which are all registered in the name of the Mortgagor and
following execution of this Deed of Mortgage will be
transferred into the name of the Mortgagee or its nominee as
Collateral Agent;
OTHER DEEDS OF MORTGAGE means each
Legal Mortgage Over Shares
between Mortgagor and Mortgagee delivered concurrently
herewith or hereafter delivered;
RELATED AGREEMENTS means the Warrants, the warrants granted to
the holders of the Series A Notes, the Shareholder's
Agreement, the Registration Agreement and any other documents
or instruments executed in connection with any of the
foregoing;
SECURED AMOUNTS means all and any amounts of any kind now or
in the future, actual or contingent, due and payable by the
Mortgagor to the Mortgagee under the CEC Note or to the
Trustee for the benefit of the holders of the Series A Notes
or the Series B Notes or under or in connection with this Deed
of Mortgage or the other Financing Documents and references to
the Secured Amounts include references to any part of them;
and
SECURITY INTEREST means any mortgage, charge, pledge, lien,
encumbrance, right of set off or any security interest,
howsoever created or arising.
1.2 In this Deed of Mortgage:
(a) references to the Mortgagor or the Mortgagee include
references to any person for the time being deriving
title under each of them respectively;
(b) references to this Deed of Mortgage and the Financing
Documents are references to the same as from time to
time varied, supplemented or amended in any manner or
respect whatsoever;
(c) references to the Original Securities or to the
Mortgaged Property include references to any property
included in such term;
(d) "mortgage" includes a transfer or assignment by way
of mortgage;
(e) Unless the context otherwise indicates, words
importing the singular shall include the plural and
vice versa, and the use of the neuter, masculine, or
3
77
feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine or
feminine gender; and
(f) Clause headings are for ease of reference only.
2. COVENANT TO PAY SECURED AMOUNTS AND CHARGE
2.1 The Mortgagor covenants with the Mortgagee for the benefit of
the Mortgagee and the Trustee that it shall, whether or not
the Mortgagor shall have received an Enforcement Notice in
accordance with this Deed of Mortgage or notice of demand in
respect of the Secured Amounts, pay and discharge any moneys
and liabilities in respect of the Secured Amounts whatsoever
which are now or at any time hereafter may be due, owing or
payable by the Mortgagor in any currency, actually or
contingently, solely and/or jointly and/or severally with
another or others, as principal or surety on any account
whatsoever pursuant to this Deed of Mortgage or the other
Financing Documents or as a consequence of any breach,
non-performance, disclaimer or repudiation by the Mortgagor of
any of its obligations, covenants, representations or
warranties under this Deed of Mortgage, the other Financing
Documents or otherwise.
2.2 The Mortgagor hereby transfers absolutely by way of mortgage
to the Mortgagee as a continuing security for the payment and
discharge of the Secured Amounts, all its rights, title,
interest and benefit, present and future in, to and under:
(a) the Original Securities; and
(b) all other securities and all rights, monies
(including, without limitation, dividends) and
property whatsoever which may from time to time at
any time be derived from, accrued on or be offered in
respect of the Original Shares whether by way of
redemption, exchange, conversion, rights, bonus,
capital reorganisation or otherwise howsoever.
3. CONTINUING AND PRIMARY SECURITY
3.1 This Deed of Mortgage shall be a continuing security, and
shall be in addition to and shall not affect any continuing
liens or other Security Interests to which the Mortgagee is or
will be otherwise entitled over the Mortgaged Property, which
liens and other Security Interests shall remain in force
independently of this Deed of Mortgage.
3.2 The Original Securities and other Mortgaged Property are
hereby mortgaged to the Mortgagee as primary and not as
collateral security.
3.3 The Mortgagor's liability hereunder shall not be discharged or
impaired by:
(a) the existence or validity of any other security taken
by the Mortgagee in relation to the Financing
Documents or any enforcement of or failure to enforce
or the release of any such security;
4
78
(b) any amendment to or variation of the Financing
Documents or any security relating to the Financing
Documents or any assignment thereof or hereof;
(c) any release of or granting of time or any other
indulgence to the Mortgagor or any third party;
(d) any invalidity, irregularity, unenforceability,
imperfection or avoidance of or any defect in any
security granted by, or any obligations of, the
Mortgagor or any other person hereunder or under the
Financing Documents or any amendment to or variation
thereof or of any other document or security
comprised therein;
(e) the insolvency, liquidation, bankruptcy or
dissolution (or proceedings analogous thereto) of the
Mortgagor, the Company or any other person or the
appointment of a receiver or administrative receiver
or administrator (whether by administration order or
otherwise) or trustee or similar officer of any of
the assets of the Mortgagor, the Company or any other
person or the occurrence of any circumstances
whatsoever affecting the Mortgagor, or any other
person's liability to discharge its obligations under
the Financing Documents;
(f) any release, renewal, exchange or realisation of any
security or obligation provided under or by virtue of
this Deed of Mortgage or the other Financing
Documents or the provision of any further security to
the Mortgagee at any other time; or
(g) any other act, event, neglect or omission which would
or might but for this clause operate to impair or
discharge the Mortgagor's liability hereunder.
3.4 Any release, compromise or discharge of the obligations of the
Mortgagor shall be deemed to be made subject to the condition
that it will be void if any payment or security which the
Mortgagee may receive or have received is set aside or proves
invalid for whatever reason.
3.5 Rights may be exercised and demands may be made under this
Deed of Mortgage from time to time, and the liabilities and
obligations of the Mortgagor and the rights and security or
other consideration contained in this Deed of Mortgage may be
exercised and enforced, irrespective of
(a) whether any demands, steps or proceedings are being
or have been taken against the Mortgagor or any third
party; or
(b) whether or in what order any security to which the
Mortgagee may be entitled in respect of the Secured
Amounts is enforced.
5
79
4. WARRANTIES AND UNDERTAKING
4.1 The Mortgagor represents and warrants to the Mortgagee and
undertakes that:
(a) it is the absolute legal and beneficial owner of all
of the Original Securities free of all Security
Interests, encumbrances, trusts, equities, proxies
and claims whatsoever (save under this Deed of
Mortgage or the other Financing Documents) and that
all of the Original Securities are fully paid up and
are non-assessable;
(b) except as limited by the Financing Documents,
Mortgagor has the full legal and unlimited right to
vote the Original Securities in its sole discretion;
(c) the Original Securities constitute 100% of the issued
and outstanding equity capital of the Company and are
all currently registered in the name of the Mortgagor
(subject to the registration of the Original
Securities in the name of the Mortgagee as Collateral
Agent concurrently with the execution and delivery of
this Deed of Mortgage);
(d) the Mortgagor and the Company are duly incorporated
and in good standing under the respective laws of the
jurisdiction in which each of them is incorporated
and the Mortgagor has and will at all times have the
necessary power to enter into and perform its
obligations under this Deed of Mortgage and has duly
authorized the execution and delivery of this Deed of
Mortgage;
(e) neither this Deed of Mortgage or the transfer of the
Original Securities to the Mortgagee is subject to
any stamp or other tax under the laws of Panama or
the Cayman Islands and this Deed of Mortgage is
capable of being enforced without being subject to
any stamp or other tax under the laws of Panama or
the Cayman Islands;
(f) pursuant to amendments to the organization documents
within 45 days after the date of this Agreement, the
Company will not be permitted to issue any equity
capital other than the Original Securities;
(g) the Company has no contractual or other business
relationship with any Inactive Subsidiary;
(h) No Inactive Subsidiary has any operations, assets or
liabilities, direct, indirect or contingent;
(i) the Mortgagor holds no rights or Security Interests
with respect to present or future revenues and
assets, tangible or intangible, relating to the
exploration, development, production, transportation
and sale of petroleum in and from the Republic of
Colombia, directly, by assignment, or
6
80
otherwise, except as a shareholder of companies whose
shares are pledged to Mortgagee pursuant to the
Financing Documents;
(j) this Deed of Mortgage constitutes its legal, valid,
binding and enforceable obligation and is a first
priority security interest over the Mortgaged Shares
effective in accordance with its terms;
(k) the execution, delivery, observance and performance
by the Mortgagor of this Deed of Mortgage will not
require the Mortgagor to obtain any licenses,
consents or approvals and will not result in any
violation to the best of the Mortgagor's knowledge,
of any law, statute, ordinance, rule or regulation
applicable to it or any other agreements;
(l) the Company is not a party or otherwise bound to any
employment, management or other agreement, the effect
of which would be to limit the ability of the
Mortgagee to manage the Company upon an event of
Default under the Financing Documents or give rise to
any payment or penalty to terminate any such
arrangement;
(m) it has obtained all the necessary authorizations and
consents to enable it to enter into this Mortgage and
the necessary authorizations and consents will remain
in full force and effect at all times during the
existence of the security constituted by this Deed of
Mortgage;
(n) the execution, delivery, observance and performance
by the Mortgagor of the Deed of Mortgage will not
constitute an event of default or trigger any
enforcement under any Security Interest in the
Mortgagor's assets nor will it result in the creation
of any Security Interest over or in respect of the
present or future assets of the Company;
(o) the Mortgagor has fully disclosed in writing to the
Mortgagee all facts relating to the Mortgagor and the
Company which the Mortgagor knows or should
reasonably know and which are material for disclosure
to the Mortgagee in the context of the Financing
Documents; and
(p) no agreement to which the Mortgagor or the Company or
its Colombian branch is a party, or law, decree or
regulation to which either is subject, including
without limitation any agreement with Empresa
Colombiana de Petroleos or imposition by the Ministro
de Minas y Energia de Colombia or any other
instrumentality of the Republic of Colombia requires
the consent of any such person to the execution,
delivery or performance of this Deed of Mortgage and
the other Financing Documents and each obligation and
covenant contained herein and therein.
4.2 The Mortgagor undertakes that, for so long as any Secured
Amounts remain outstanding:
7
81
(a) the Mortgagor shall pay to the Mortgagee, upon
demand, the amount of all reasonable expenses which
the Mortgagee may incur in, about or with a view to
perfecting or enforcing this security or otherwise in
connection with this security;
(b) the Mortgagor shall promptly pay (and shall indemnify
the Mortgagee on demand against) all calls,
installments and other payments which may be made or
become due in respect of the Mortgaged Property and
so that, in the event of default by the Mortgagor,
the Mortgagee may do so on behalf of the Mortgagor
and clause 4.2(a) shall apply accordingly;
(c) to the extent any Mortgaged Property is at any time
not vested in the Mortgagee or its nominee as
Collateral Agent the Mortgagor shall forthwith and
from time to time deposit with the Mortgagee all
certificates and other documents of title relating to
the Mortgaged Property and signed share transfer
forms;
(d) the Mortgagor will maintain the Company in good
standing under the laws of Panama and will not do
anything that would cause the completion of
transactions or enforcement actions contemplated
hereunder to incur any stamp or other tax under the
laws of Panama or the Cayman Islands;
(e) the Mortgagor will not permit the Company to enter
into or become bound by any employment, management or
other agreement, the effect of which would be to
limit the ability of the Mortgagee to manage the
Company upon an event of Default under the Financing
Documents or give rise to any payment or penalty to
terminate any such arrangement;
(f) the Mortgagor will not permit any Inactive Subsidiary
to conduct operations or own any asset or incur any
liability, direct, indirect or contingent;
(g) Mortgagor will not permit the Company to engage in
any transaction, contractual or otherwise, with any
affiliate of Mortgagor except with Mortgagor and
Active Subsidiaries and as may otherwise be permitted
by the Financing Documents; provided however, that in
no event shall the Company engage in any transaction,
contractual or otherwise, with an Inactive
Subsidiary;
(h) the Mortgagor shall deliver to the Mortgagee undated
letters of resignation executed by all persons now or
hereafter serving as Directors of the Company from
time to time, which letters the Mortgagee shall be
entitled to date and cause to be given immediate
effect as of the date of an Enforcement Notice;
(i) the Mortgagor shall forthwith sign, seal, deliver and
complete all transfers, renunciations, proxies
(including irrevocable proxies if the Mortgagee so
requests) mandates, assignments, deeds and documents
and do all acts and
8
82
things which the Mortgagee may, in its absolute
discretion, at any time and from time to time specify
for enabling or assisting the Mortgagee:
(i) to perfect or improve its title to and security over the Mortgaged Property
including, without limitation, obtaining such approvals or consents to the
rights and remedies granted to the Mortgagee herein as the Mortgagee requests in
the Mortgagee's sole discretion;
(ii) to vest the Mortgaged Property (including without limitation the
registration thereof in the applicable share registry) in the Mortgagee or its
nominee or nominees as Collateral Agent as of the date of execution of this Deed
of Mortgage;
(iii) to exercise (or enable its nominee or nominees to exercise) any rights or
powers attaching to the Mortgaged Property;
(iv) after the service of an Enforcement Notice to sell or dispose of the
Mortgaged Property; or
(v) otherwise to enforce any of the rights of the Mortgagee under or in
connection with this Deed of Mortgage;
(j) the Mortgagor shall not (without the written consent
of the Mortgagee):
(i) create or permit to exist over all or part of the Mortgaged Property (or any
interest therein) any Security Interest (other than created or expressly
permitted to be created under this Deed of Mortgage or under other Financing
Documents) whether ranking prior to, pari passu with or behind the security
contained in this Deed of Mortgage;
(ii) sell, transfer or otherwise dispose of the Mortgaged Property or any
interest therein or attempt or agree to so dispose;
(iii) permit any person other than the Mortgagee or its nominee to be registered
as or become the holder of the Mortgaged Property as Collateral Agent; or
(iv) vote in favour of a resolution or amend, modify or change organization
documents of the Company or authorize the issuance by the Company of any shares
or any other equity security.
(v) except as otherwise permitted by the Financing Documents permit the Company
to transfer, assign, dispose of or encumber any rights or interests of the
Company, direct or indirect, with respect to petroleum exploration, development,
production, transportation, sale or other disposition or with respect to any
association or other contract under which the Company has such rights or
interests;
(vi) permit the Company to grant any Security Interest in, or otherwise
encumber, any of its assets, tangible or intangible, except as may be expressly
permitted by the Financing Documents;
9
83
(vii) permit the Company to make any distribution or payment to or for the
benefit of Mortgagor, whether directly or otherwise, if the effect of that
distribution or payment is to render the Company insolvent or unable to pay its
obligations as they mature; or
(viii) take any other action that would have as its effect a breach of a
Financing Document.
(k) to the extent received by the Mortgagor, it shall
forward to the Mortgagee all notices, reports,
accounts and other documents relating to the
Mortgaged Property or which are sent to the holders
of any of the Mortgaged Property as soon as they are
received;
(l) no further shares or equity securities of any kind in
the Company (or any options or other rights with
respect thereto) will be issued and the authorized
shares shall at no time exceed the issued shares;
(m) at any time after the service of an Enforcement
Notice, it shall exercise all voting and other rights
and powers which may at any time be exercisable by
the holder of the Mortgaged Property as the Mortgagee
may in its absolute discretion direct, it being
understood that the Mortgagee has reserved the right
to exercise all such voting rights directly for any
proper purpose, including without limitation the
immediate removal of Directors of the Company and
their replacement;
(n) the Mortgagor shall not take or accept any Security
Interest from the Company or, in relation to the
Secured Amounts, from any third party, without first
obtaining the Mortgagee's written consent or permit
any Security Interest to be granted by the Company to
any third party, except as may be expressly permitted
by the Financing Documents;
(o) the Mortgagor shall not prove in a liquidation or
winding up of the Company in competition with the
Mortgagee for any amount whatsoever owing to the
Mortgagee by the Mortgagor on any account whatsoever;
and
(p) the Mortgagor shall not claim payment whether
directly or by set-off, lien, counterclaim or
otherwise of any amount which may be or has become
due to the Mortgagor by the Company.
5. POWER OF ATTORNEY
5.1 The Mortgagor hereby irrevocably and by way of security for
the payment by it of the Secured Amounts and the performance
of its obligations under this Deed of Mortgage appoints the
Mortgagee as its true and lawful attorney (with full power to
appoint substitutes and to subdelegate) on behalf of the
Mortgagor and in the Mortgagor's own name or otherwise, at any
time and from time to time, to sign, seal, deliver and
complete all transfers, renunciations, proxies, mandates,
assignments, deeds and documents and do all acts and things
which the Mortgagee may, in its sole and absolute discretion,
consider to be necessary or
10
84
advisable to perfect or improve its security over the
Mortgaged Property or to give proper effect to the intent and
purposes of this Deed of Mortgage or, after delivery of an
Enforcement Notice to enable or assist in any way in the
exercise of any power of sale of the Mortgaged Property
(whether arising under this Deed of Mortgage or implied by
statute or otherwise).
6. ENFORCEMENT
6.1 The Mortgagee may at any time after the occurrence of an event
of Default (as defined in the Note Purchase and Loan
Agreement) which has not been timely cured but including,
without limitation, the breach of any representation, warranty
or covenant contained in this Deed of Mortgage and the other
Financing Documents) serve an Enforcement Notice on the
Mortgagor. Unless and until the Mortgagee shall have served an
Enforcement Notice, but not thereafter:
(a) Mortgagee agrees to the fullest extent permitted by
applicable law that the Mortgagor has the right to
receive payments distributed in respect of the
Original Securities and all other securities which
may from time to time at any time be derived from the
Original Securities; and
(b) Appoints Mortgagor as Mortgagee's agent and proxy to
vote all of the securities described in clause (a)
above and exercise all rights and privileges
attributable to such securities as permitted under
applicable law. Prior to default, if the Mortgagee
shall receive any dividend or money described in
clause (a) above, the Mortgagee shall receive the
same as agent for Mortgagor and upon receipt shall
promptly pay or remit the same, without reduction, to
Mortgagor. At the request of Mortgagor, Mortgagee
shall give such reasonable assurances, confirmations
and advice to any third party as may be necessary for
Mortgagor to enjoy the full benefit of the rights and
privileges described in clauses (a) and (b) above
6.2 If the Mortgagee shall serve an Enforcement Notice, the
Mortgagee shall, without prejudice to any other right or
remedy available hereunder or under applicable law, forthwith
become entitled:
(a) solely and exclusively to exercise all voting rights
attaching to the Mortgaged Property or any thereof
and shall exercise such rights in such manner as the
Mortgagee may in its absolute discretion determine;
and/or
(b) solely and exclusively to exercise any and all other
rights and/or powers and/or discretions of the
Mortgagor in, to and under the Mortgaged Property
pursuant to the constitutional documents of the
Company; and/or
(c) to receive and retain all dividends and other
distributions made on or in respect of the Mortgaged
Property or any thereof and any such dividends and
other distributions received by the Mortgagor after
such time shall be
11
85
held in trust by the Mortgagor for the Mortgagee and
be paid or transferred to the Mortgagee on demand;
and/or
(d) without notice to, or further consent or concurrence
by, the Mortgagor to sell the Mortgaged Property or
any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such
sale and in any such case the Mortgagee may exercise
any and all rights attaching to the Mortgaged
Property as the Mortgagee in its discretion may
determine and without being answerable for any loss
occasioned by such sale or resulting from
postponement thereof or the exercise of such rights;
upon any sale of the Mortgaged Property or any part
thereof the purchaser thereof shall not be bound to
see or enquire whether the power of sale of the
Mortgagee has arisen in the manner herein provided
and the sale shall be deemed to be within the power
of the Mortgagee and the receipt of the Mortgagee for
the purchase money shall effectively discharge the
purchaser of the Mortgaged Property, or any part
thereof, who shall not be concerned or be in any way
answerable therefor; and/or
(e) to appoint a receiver in respect of the Mortgaged
Property and the provisions of Clause 7 shall apply
thereto.
6.3 The Mortgagee shall not be liable for any loss or damage
occasioned by any sale or disposal of the Mortgaged Property
(or interest therein) or arising out of the exercise of or
failure to exercise any of its powers under this Deed of
Mortgage or for any neglect or default to pay any instalment
or accept any offer or notify the Mortgagor of any such matter
or for any other loss of any nature whatsoever in connection
with the Mortgaged Property.
7. MORTGAGEE'S RIGHTS AS TO MORTGAGED PROPERTY
If the Mortgagee shall serve an Enforcement Notice, the Mortgagee
shall, without prejudice to any other right or remedy available
hereunder or under applicable law, forthwith become entitled:
7.1 solely and exclusively to exercise all voting rights attaching
to the Mortgaged Property or any thereof and shall exercise
such rights in such manner as the Mortgagee may in its
absolute discretion determine; and/or
7.2 solely and exclusively to exercise all other rights and/or
powers and/or discretions of the Mortgagor in, to and under
the Mortgaged Property pursuant to the memorandum and articles
of association of the Company; and/or
7.3 to receive and retain all dividends and other distributions
made on or in respect of the Mortgaged Property or any thereof
and any such dividends and other distributions received by the
Mortgagor after such time shall be held in trust by the
Mortgagor for the Mortgagee and be paid or transferred to the
Mortgagee on demand to be applied towards the discharge of the
Secured Obligations; and/or
12
86
7.4 without notice to, or further consent or concurrence by, the
Mortgagor to sell or otherwise dispose of the Mortgaged
Property or any part thereof by such method, at such place and
upon such terms as the Mortgagee may in its absolute
discretion determine, with power to postpone any such sale and
in any such case the Mortgagee may exercise any and all rights
attaching to the Mortgaged Property as the Mortgagee in its
absolute discretion may determine and without being answerable
for any loss occasioned by such sale or resulting from
postponement thereof or the exercise of such rights; and/or
7.5 to date and deliver the documents delivered to it pursuant to
this Mortgage as it considers appropriate and to take all
steps not already taken to register the Mortgaged Property in
the name of the Mortgagee or its nominee or nominees as
Collateral Agent and to assume control as registered owner of
the Mortgaged Property.
8. OTHER SECURITY
8.1 This security is in addition to and shall not affect or be
merged in any bills, notes, guarantees, indemnities,
undertakings, Security Interests, or other security whatsoever
which the Mortgagee may hold now or hereafter in connection
with the Financing Documents or the obligations of any other
person liable for any of the Secured Amounts.
9. FURTHER PROVISIONS
9.1 (a) This security is in addition to, and shall
neither be merged in, nor in any way exclude or
prejudice, any other Security Interest or right of
recourse or other right whatsoever which the
Mortgagee may now or at any time hereafter hold or
have (or would apart from this security hold or have)
as regards the Mortgagor or any other, person in
respect of the Secured Amounts.
(b) The powers which this Deed of Mortgage confer on the
Mortgagee are cumulative, without prejudice to its
powers under the general law, and may be exercised as
often as the Mortgagee thinks appropriate; the
Mortgagee may, in connection with the exercise of its
powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and
the Mortgagor acknowledges that the respective powers
of the Mortgagee shall in no circumstances whatsoever
be suspended, waived or otherwise prejudiced by
anything other than an express waiver or variation in
writing.
(c) The rights of the Mortgagee in relation to the
Mortgaged Property and the recovery of the Secured
Amounts (whether arising under this Deed of Mortgage,
the other Financing Documents or under the general
law) shall not be capable of being waived or varied
otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or
13
87
any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other
such right; any defective or partial exercise of any
such right shall not preclude any other or further
exercise of that or any other such right; and no act
or course of conduct or negotiation on its part or on
its behalf shall in any way preclude it from
exercising any such right or constitute a suspension
or any variation of any such right.
(d) If any of the provisions of this Deed of Mortgage
becomes invalid, illegal or unenforceable in any
respect under any law, the validity, legality and
enforceability of the remaining provisions shall not
in any way be affected or impaired.
(e) In any proceedings relating to this Deed of Mortgage
a statement as to any amount due to the Mortgagee or
the Trustee under the Financing Documents which is
certified as being correct by an officer or agent of
the Mortgagee shall, save in the case of manifest
error, be conclusive evidence that such amount is in
fact due and payable.
9.2 Assignment
9.2.1 This Deed of Mortgage shall be binding upon and inure
to the benefit of each party hereto and its
successors in title and permitted assigns.
9.2.2 The Mortgagor shall not be entitled to assign or
transfer any of its rights, benefits or obligations
hereunder without the prior written consent of the
Mortgagee.
9.2.3 The Mortgagee may assign or transfer all or any part
of its rights, benefits or obligations under this
Deed of Mortgage to any other person which is its
successor under the Financing Documents. Where the
Mortgagee assigns or transfers its obligations or any
part thereof, the Mortgagor shall execute such
documents as the Mortgagee may specify to release the
Mortgagee to the extent of the assignment or transfer
or with a view to perfecting such assignment or
transfer, or where necessary, shall execute further
security documentation in favour of the assignee or
transferee in like form to this Deed of Mortgage.
9.3 Release of Security
Upon final and unconditional repayment of the Secured Amounts
in full and provided that no event of Default has occurred,
the Mortgagee shall promptly assign the Mortgaged Property to
the Mortgagor free of all Security Interests, encumbrances,
trusts, equities and claims whatsoever imposed by the
Mortgagee and the Mortgagee shall forthwith sign, seal,
deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and
things which the Mortgagor may reasonably specify to vest all
of the Mortgaged Property in the name of the Mortgagor or its
nominee.
14
88
9.4 This Deed of Mortgage is governed by, and shall be construed
in accordance with, the laws of the Cayman Islands.
9.5 (a) The parties agree that the courts of the Cayman
Islands are to have exclusive jurisdiction to settle
any disputes which may arise in connection with the
legal relationships established by this Deed of
Mortgage (including, without limitation, claims for
set-off or counterclaim) or otherwise arising in
connection with this Deed of Mortgage.
(b) The parties irrevocably waive any objections on the
grounds of venue of forum non conveniens or any
similar grounds.
The parties irrevocably consent to service of process by mail
or in any other manner permitted by the relevant law.
10. NOTICES, ENGLISH LANGUAGE
(a) Each notice or other communication to be given or
made hereunder shall be in the English language and
shall, unless otherwise stated be made in writing as
provided below.
Any notice or other communication or document to be made or
delivered by one person to another pursuant to this Deed of
Mortgage shall (unless that other person has by fifteen days'
written notice to the other specified another address and/or
fax or telex number) be made or delivered to that other person
at the following address, fax or telex number:
The Mortgagor:
SEVEN SEAS PETROLEUM INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The Mortgagee:
CHESAPEAKE ENERGY CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
and shall be deemed to have been made or delivered when such
communication or document has been dispatched and the
appropriate answer back received (in the
15
89
case of any communication made by telex) or sent by fax to the
fax number of the party set out herein and when receipt is
confirmed by facsimile or telephone (in the case of any
communication by fax) or (in the case of any communication
made by letter) when left at that address or, as the case may
be, three days after being deposited in the post first class
postage prepaid in an envelope addressed to it at that
address; Provided that any communication or document to be
made or delivered to the Mortgagee shall be effective only
when received by the Mortgagee.
11. COUNTERPARTS
This Deed of Mortgage may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF this Deed of Mortgage has been executed and delivered as a
Deed the day and year first above written.
EXECUTED AS A DEED by )
the duly authorised representative )/s/ ▇▇▇▇▇ ▇. ▇▇▇
of SEVEN SEAS PETROLEUM INC., )
in the presence of: )
EXECUTED AS A DEED by )
the duly authorised representative )
of CHESAPEAKE ENERGY CORPORATION )/s/ ▇▇▇ ▇. ▇▇▇▇
as Collateral Agent )
in the presence of: )
16
90
SCHEDULE 1
ORIGINAL SECURITIES
Company: Petrolinson S.A., a company organized under the laws of Panama.
Amount or number of
Original Securities Description of Original Securities
------------------- ----------------------------------
5000 Common Shares of 10 Balboas or Dollars
par value
