EXHIBIT 10(HH)
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made this 29th day of August, 2001, by and
between Xxxxx X. XxXxxx, Xxxxxxx Xxxxxx, Xxxxxx X. Xxxxxxxxx and Xxxx Xxxxxxx
(collectively "Plaintiffs") and Seven Seas Petroleum, Inc. ("Seven Seas") and
Xxxxxx X. Xxxxxx, III ("Xxxxxx") (collectively "Defendants").
I. Purpose of Settlement
Plaintiffs and Defendants enter into this Settlement Agreement for the
purpose of settling and resolving for all time and all purposes all claims,
causes of action, business disputes and other disagreements of Plaintiffs and
Defendants arising from:
(a) any dealings or relationships of Plaintiffs and Defendants existing as
relating to the matters involved in the litigation described in paragraph 1(b),
below;
(b) the litigation pending in the District Court of Xxxxxx County, State of
Texas, styled XxXxxx, et al. v. Seven Seas, et al., Case No. 2000-50498 (the
"Litigation"); and
(c) any and all other claims or contentions arising from any other alleged
act or omission of Plaintiffs and/or Defendants as to the other.
II. Background
On May 20, 1997, a change of control of Seven Seas' Board of Directors
occurred, the result of which was that Xxxxxx became Chairman of the Board of
Directors and Chief Executive Officer of Seven Seas, plaintiffs Xxxxxxxxx and
Xxxxxx resigned from Seven Seas, and plaintiffs XxXxxx and Xxxxxxx remained
employed by Seven Seas. On May 20, 1997, plaintiff Xxxxxxxxx executed a
Consulting Agreement with Seven Seas, while plaintiff Xxxxxx executed a
Settlement Agreement with Seven Seas. In September, 1997, plaintiff Xxxxxxx
separated employment with Seven Seas. Plaintiff Xxxxxxx and Seven Seas entered
into a Settlement Agreement. In December, 1997, plaintiff XxXxxx voluntarily
terminated his employment with Seven Seas pursuant to the terms of his
Employment Agreement with Seven Seas.
In October, 2000, Plaintiffs sued Defendants (and others who have since
been dismissed from the Litigation), alleging that Seven Seas breached the
agreements identified above, and that both Defendants committed fraud.
Defendants denied the allegations contained in the several Petitions filed in
the Litigation by Plaintiffs, and filed a Counterclaim against plaintiffs
Xxxxxxxxx and Xxxxxx alleging that they breached their fiduciary obligations to
Seven Seas during the time of their employment with Seven Seas. Plaintiffs
Xxxxxxxxx and Xxxxxx denied the allegations contained in the Counterclaim.
III. Terms of Settlement
In consideration of the mutual promises set forth herein, and to accomplish
the purposes stated above, the parties agree as follows:
(a) The parties will release all claims and causes of action against one
another as set forth more fully below.
(b) The parties will file a Dismissal in the form attached hereto as
Exhibit "A" in which the parties will dismiss with prejudice all claims and
counterclaims pending in the Litigation.
(c) Seven Seas will pay to Plaintiffs' counsel, Shellist, Lore & Xxxxxx,
LTD, L.L.P., on behalf of Plaintiffs, a sum totaling $1,000,000.00 within five
(5) business days of the execution of this Agreement.
(d) A rights offering (the "Rights Offering") is to be made to the common
stockholders of Seven Seas pursuant to which Seven Seas' shareholders will be
granted the right to purchase an approximate pro rata share of Seven Seas'
Series A senior secured notes due 2004 in the aggregate principal amount of
$22,500,000.00 coupled with detachable warrants. Xxxxxx agrees to transfer by
appropriate assignment to Plaintiffs and, at their request, their counsel as set
forth below in part (e) upon receipt at the closing of the Rights Offering
warrants to purchase 200,000 common shares of Seven Seas' stock at the
approximate price of $1.78 per share. Xxxxxx has the authority to transfer to
Plaintiffs and their counsel by appropriate assignment of warrants that he may
receive at the closing of the Rights Offering.
(e) Plaintiffs and their counsel will receive the following warrants:
Plaintiffs:
35,160 to Plaintiff Xxxxxxxxx
18,600 to Plaintiff Xxxxxxx
14,160 to Plaintiff XxXxxx
52,080 to Plaintiff Xxxxxx
Plaintiffs' counsel:
26,668 to Xxxxxx Xxxxxxxx
26,666 to Xxxxxxx Xxxx
26,666 to Xxxx Xxxxxx
XX. Plaintiffs' and Their Counsels' Representations in Connection
With the Warrants
By accepting the warrants in connection with this Settlement Agreement,
Plaintiffs and their counsel hereby represent and warrant to Defendants as
follows:
(a) Plaintiffs and their counsel understand that Seven Seas is subject to
the informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files annual, quarterly and current reports, proxy
statements and other information with the SEC. Plaintiffs and their counsel also
understand that Seven Seas has filed a registration statement with respect to
the Rights Offering, under the Securities Act of 1933. Plaintiffs and their
counsel acknowledge that they have had the opportunity to review all such
documents and have had the
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opportunity to ask questions and receive answers concerning the information and
to obtain any additional information which Seven Seas possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of the information furnished.
(b) Each Plaintiff and each of Plaintiffs' counsel represents that either
he is an accredited investor within the meaning of Regulation D under the
Securities Act or has, either alone or with his purchaser representative (as
defined in Regulation D), such knowledge and experience in business matters that
he is capable of evaluating the merits and risks of the investment.
(c) Plaintiffs and their counsel understand that the warrants to be
transferred by Xxxxxx are "restricted securities" as defined in Rule 144(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(d) Plaintiffs and their counsel are accepting the warrants as part of this
Settlement Agreement for investment purposes only, for Plaintiffs' and their
counsels' own accounts and not with a view to, or for sale in connection with,
the distribution thereof.
(e) Plaintiffs and their counsel understand that the warrants may not be
sold for one year from the date of this Settlement Agreement unless the warrants
are registered under the Securities Act or sold pursuant to an exemption
therein; and
(f) Plaintiffs and their counsel understand that the warrants as
"restricted securities" shall bear the following legend:
THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE WARRANTS HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS (i) THEY SHALL HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACTS, OR (ii)
THE COMPANY SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL, WHICH
OPINION IS SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACTS.
V. No Admission of Liability
The payment to Plaintiffs and the assignment of the warrants to Plaintiffs
and their counsel are being made to resolve disputed claims. Defendants
specifically deny any wrongdoing toward Plaintiffs, and specifically deny that
they have any liability to Plaintiffs as a result of the allegations made in
Plaintiffs' several Petitions filed in the Litigation. Plaintiffs Xxxxxxxxx and
Xxxxxx specifically deny any wrongdoing toward Seven Seas and specifically deny
any liability to Seven Seas as a result of the allegations made in Seven Seas'
Counterclaim.
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VI. Mutual Release
Plaintiffs, for themselves, their heirs, agents, assigns and successors,
hereby release and discharge Seven Seas and its current, former and future
successors, affiliates, subsidiaries, business units, parent companies, agents,
employees, directors, officers, and assigns (collectively "Seven Seas" for
purposes of this Part VI) from all claims, liabilities, demands, causes of
action, and damages, of whatever kind or nature, which Plaintiffs had, have, or
claim to have or had, either individually or jointly, against Seven Seas in
connection with the Litigation or any other subject matter. This release extends
and applies to all other unknown, unforeseen, unanticipated, and unsuspected
injuries, damages, losses, and liabilities, and the consequences thereof, as
well as those now disclosed and known to exist.
Plaintiffs, for themselves, their heirs, agents, assigns and successors,
hereby release and discharge Xxxxxx and his current, former and future heirs,
agents, assigns, successors, and any and all businesses and entities in which
Xxxxxx owns an interest and their current, former and future successors,
affiliates, subsidiaries, business units, parent companies, agents, employees,
directors, officers, and assigns (collectively "Xxxxxx" for purposes of this
Part VI) from all claims, liabilities, demands, causes of action, and damages,
of whatever kind or nature, which Plaintiffs had, have, or claim to have or had,
either individually or jointly, against Xxxxxx in connection with the Litigation
or any other subject matter. This release extends and applies to all other
unknown, unforeseen, unanticipated, and unsuspected injuries, damages, losses,
and liabilities, and the consequences thereof, as well as those now disclosed
and known to exist.
Defendants hereby release and discharge Plaintiffs and their heirs, agents,
assigns and successors (collectively "Plaintiffs" for purposes of this Part VI)
from all claims, liabilities, demands, causes of action, and damages, of
whatever kind or nature, which Defendants had, have, or claim to have or had,
against Plaintiffs in connection with the Litigation or any other subject
matter. This release extends and applies to all unknown, unforeseen,
unanticipated, and unsuspected injuries, damages, losses, and liabilities, and
the consequences thereof, as well as those now disclosed and known to exist.
VII. Binding Effect of Settlement Agreement
The parties agree that this Settlement Agreement is binding on and shall
inure to the benefit of the parties hereto and their respective legal
representatives, successors, heirs and assigns.
The parties warrant that they have the authority to enter into this
Settlement Agreement and the representatives executing this Settlement Agreement
have authority to bind the entity on whose behalf they sign. The parties further
acknowledge that they each have been represented by counsel in the negotiation
and execution of this Settlement Agreement and their executing representatives
have read and fully understand this Settlement Agreement's terms.
VIII. Confidentiality
The parties and their attorneys acknowledge that confidentiality is of the
essence and, except as set forth below, they agree to keep confidential and
secret the terms of this Agreement and to make no statement or take any other
action, direct or indirect whatsoever, which might
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result in the disclosure or any publicity to any third party concerning the
terms of this Agreement, including, but not limited to, the payment terms and
amount of warrants Plaintiffs are to receive. The parties shall only be entitled
to disclose the terms of this Settlement Agreement in the event they are
required to do so by order of a court of competent jurisdiction, or to the
extent disclosure is required by rule or regulation of a governmental authority,
but shall be entitled to disclose the payment terms of and amount of warrants to
be transferred under this Settlement Agreement to their accountants and
attorneys to the extent necessary to receive professional advice. This Part VIII
shall not apply to matters that are made public by Defendants or contained in
documents that are available to the general public.
IX. Texas Law Controls Construction
The parties agree that Texas law governs the construction of this
Settlement Agreement, and the rights and obligations of the parties. Any action
brought to enforce a term of this Settlement Agreement or for a breach of this
Settlement Agreement shall be brought in the District Court of Xxxxxx County,
State of Texas.
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxx X. XxXxxx
----------------------------------- ------------------------------------
Xxxxxx Xxxxxxxx Xxxxx X. XxXxxx
/s/ Xxxxxxx Xxxx /s/ Xxxxxxx Xxxxxx
----------------------------------- ------------------------------------
Xxxxxxx Xxxx Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxx /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------- ------------------------------------
Xxxx Xxxxxx Xxxxxx X.Xxxxxxxxx
/s/ Xxxx Xxxxxxx
------------------------------------
Xxxx Xxxxxxx
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SEVEN SEAS PETROLEUM, INC.
By /s/ Xxxxx X. Xxx
---------------------------------
Xxxxx X. Xxx, President
/s/ Xxxxxx X. Xxxxxx, III
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Xxxxxx X. Xxxxxx, III
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