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TRANSATLANTIC PETROLEUM (USA) CORP.
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1900 West Loop South, Suite 900
Houston TX 77027 USA
Telephone 713 626-9373 Facsimile 713 626-9374
August 24, 2000
Global Marine Inc.
777 N. Eldridge Parkway
Houston, TX 77079-4493
Attention: Matt Rawls
Senior Vice President, Chief Financial Officer and Treasurer
RE: Settlement of Outstanding Indebtedness on Promissory Note from
Tarpon-Benin S.A. to Global Marine Integrated Services - International Inc.
dated March 31, 1998 in the original principal amount of $3,071,059.85 (the
"Tarpon Note")
Gentlemen:
For settlement purposes only, TransAtlantic Petroleum Corp. hereby sets out a
proposal to satisfy the outstanding indebtedness on the Tarpon Note.
BACKGROUND
Tarpon-Benin S. A. ("Tarpon") engaged Global Marine Integrated Services
-International Inc., a wholly owned subsidiary of Global Marine Inc., to
provide certain drilling services. Global Marine Inc., Global Marine
Integrated Services - International Inc. and all of the other subsidiaries of
Global Marine Inc. are hereinafter referred to as "Global".
When Tarpon was unable to pay for all of the services rendered, the parties
agreed to a payout of Tarpon's obligations to Global pursuant to the Tarpon
Note. The indirect majority owner of Tarpon, Profco Resources Ltd., now
TransAtlantic Petroleum Corp. ("TransAtlantic"), guaranteed the Tarpon Note
(the "Guarantee").
Although some payments have been made against the Tarpon Note, Tarpon failed
to pay the Tarpon Note in accordance with the terms of the Tarpon Note;
accordingly, the Tarpon Note is now in default.
As of December 31, 1999, the amount due on the Tarpon Note equaled
$2,908,813. This amount together with accrued interest (at the rate set forth
in the Tarpon Note) to the Expiration Date (defined below) is hereafter
referred to as the "Note Amount".
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Proposal to Global Marine
8/24/00
PROPOSAL
To satisfy the Tarpon Note, TransAtlantic proposes the following:
1. In full satisfaction of the Tarpon Note, Global will accept the sum of
$1.5 million dollars payable in cash (the "Settlement Amount"), on the
terms and conditions set forth below.
2. TransAtlantic shall have ninety (90) days from the date of acceptance
of this proposal by Global to pay the Settlement Amount to Global.
3. In the event TransAtlantic has not paid the Settlement Amount to Global
within ninety (90) days from the date of acceptance of this proposal by
Global (the "Expiration Date"), the parties agree that the Tarpon Note
shall be automatically converted into long term debt payable in
accordance with the following terms:
A. A "Convertible Debenture" of TransAtlantic shall
evidence the debt. The amount of Convertible
Debenture shall equal the Note Amount;
B. Upon acceptance of this proposal by Global,
TransAtlantic will seek the approval of the Toronto
Stock Exchange ("TSE") of the terms of the
Convertible Debenture. The issuance of the
Convertible Debenture is subject to approval by the
TSE. In its application to the TSE, TransAtlantic
will seek to have the hold period (anticipated to be
4 to 6 months) for the shares issuable upon
conversion commence on the Expiration Date such that
if TransAtlantic defaults after the hold period and
Global exercises its right of conversion, the common
shares issued would be freely tradable in Canada upon
issuance.
C. Interest shall accrue at 12% per annum on the
Convertible Debenture commencing as of the Expiration
Date.
D. A monthly installment of $75,000 per month shall be
paid until the Convertible Debenture is fully paid,
to be applied first to accrued interest and then to
principal. The monthly installment shall be payable
on the last day of each month with the first payment
due the last day of the month in which the Expiration
Date occurs.
E. The Convertible Debenture shall provide that in the
event TransAtlantic defaults under the terms of the
Convertible Debenture, that is, it fails to timely
pay any installment, or is otherwise in material
default (i.e., any payment default), Global shall
have the option, in its sole discretion, to elect to
convert the outstanding indebtedness as of the date
of default into shares of common stock of
TransAtlantic. The
FOR SETTLEMENT PURPOSES ONLY PAGE 2 OF 5
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Proposal to Global Marine
8/24/00
price per share for the conversion shall be at a
discount of 15% to the average closing price for
TransAtlantic common shares for the ten (10) days
prior to the date of default. This remedy shall be
in addition to all other rights at law, or in
equity, which Global may have regarding the
Convertible Debenture; provided if Global elects to
convert to shares, that will fully satisfy the
Debenture debt.
F. The Convertible Debenture shall contain an early
payment option. TransAtlantic will have the right,
anytime within 12 months of the Expiration Date to
pay off the Convertible Debenture by payment of $2
million less any principal reductions (under
Paragraph 3.D above) made prior to that date pursuant
to the payment terms of the Convertible Debenture.
G. From and after the Expiration Date, if TransAtlantic
raises money in a debt or equity financing, within
ten (10) days of receipt of the funds, TransAtlantic
must pay 50% of the net proceeds it receives to
Global Marine as a payment on the Convertible
Debenture. A failure to do so shall constitute a
default under the terms of the Convertible Debenture.
Global shall have the same rights upon default as are
set out in Paragraph 3.E. above, provided, however,
the price per share for the conversion shall be at a
discount of 25%, not 15%, to the average closing
price for TransAtlantic common shares for the ten
(10) days prior to the date of default.
H. Upon delivery to Global of the Settlement Amount, or
in lieu thereof, the Convertible Debenture, on or
before the Expiration Date, Global shall mark the
Tarpon Note "Cancelled" and deliver it to
TransAtlantic. Until delivery of the Settlement
Amount or the Convertible Debenture, the Tarpon Note
and the Guarantee will remain in full force and
effect.
4. Global agrees that so long as TransAtlantic fully complies with the
terms of this proposal, Global will not seek to enforce the Tarpon Note
against TransAtlantic nor will it initiate or cause to be initiated any
legal or equitable proceeding against TransAtlantic with regard to the
Tarpon Note or the Guarantee. If TransAtlantic (i) fails to pay Global
the Settlement Amount, or (ii) in lieu thereof, fails to deliver to
Global the Convertible Debenture by the Expiration Date, or (iii) if
the TSE does not approve the terms of the Convertible Debenture as
described herein, or (iv) defaults in paying the Convertible Debenture
and Global Marine does not convert the Convertible Debenture to common
shares of TransAtlantic pursuant to the terms of the Convertible
Debenture, then Global shall have the complete and unfettered right to
pursue any and all legal and equitable remedies it has or may have
against TransAtlantic.
FOR SETTLEMENT PURPOSES ONLY PAGE 3 OF 5
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Proposal to Global Marine
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5. Global Representations:
A. Global is the sole owner of the Tarpon Note;
B. Global has not assigned, pledged or otherwise granted any
interest or power regarding the Note; and
C. As of the Expiration Date, Global will be the sole owner of
the Tarpon Note, free and clear of any liens, claims or
encumbrances.
6. TransAtlantic Representations:
A. TransAtlantic is a corporation incorporated under the Business
Corporations Act (Alberta), has not been discontinued or
dissolved under that Act and is good standing with respect to
annual returns under that Act;
B. This agreement has been, and all instruments issued and
delivered hereunder will have been, duly authorized by all
necessary action of the Borrower and each constitutes or will
constitute a legal, valid and binding obligation of
TransAtlantic enforceable in accordance with its terms,
subject, however, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
the rights and remedies of creditors, and to general
principles of equity; and
C. The execution and delivery of this agreement and all
instruments issued incident hereto, and the performance of the
terms hereof will not be, or result in, a violation or breach
of, or default under, any law, agreement or instrument to
which TransAtlantic is a party or to which it is bound.
7. Upon receipt of the Settlement Amount, or upon receipt of final payment
pursuant to the terms of the Convertible Debenture, whichever earlier
occurs, Global shall release TransAtlantic, its successors and assigns,
and its officers, directors, employees, attorneys and agents from all
claims, actions or causes of actions relating to the Tarpon Note and
the Guaranty.
8. Miscellaneous:
A. This agreement is the entire agreement between the parties
with respect to the subject matter addressed herein.
B. The parties will each bear their own expenses and attorney
fees relating to this matter; provided, however, nothing
herein shall limit Global's right to collect attorney fees and
costs if TransAtlantic fails to comply with this proposal as
specified in paragraph 4 above.
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Proposal to Global Marine
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C. The parties covenant they will execute such other and further
instruments and documents as are necessary or appropriate to
effectuate this agreement.
D. This agreement shall be construed under and in accordance with
the laws of the State of Texas.
Sincerely,
"SCOTT C. LARSEN"
Scott C. Larsen
Acting CFO
TransAtlantic Petroleum Corp.
Agreed and Accepted this 24th day of August, 2000.
Global Marine, Inc. Global Marine Integrated
Services - International Inc.
"W. MATT RAWLS" "W. MATT RAWLS"
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By: W. Matt Rawls By: W. Matt Rawls
Its: Senior Vice President, Its: Vice President and
Chief Financial Officer and Treasurer
Treasurer
FOR SETTLEMENT PURPOSES ONLY PAGE 5 OF 5
