Seabird Explorat — Proxy Solicitation & Information Statement 2011

Jan 28, 2011

NORSK TILLITSMANN ASA
www.trustee.no

Denne melding til obligasjonseierne er kun utarbeidet på engelsk. For informasjon vennligst kontakt Norsk Tillitsmann ASA

To the bondholders in:

ISIN: NO 001 035391.5 - FRN SeaBird Exploration Ltd Callable Bond Issue 2007/2012

Oslo, 28 January 2011

Summons to Bondholders’ Meeting – Amendment to Loan Agreement

Norsk Tillitsmann ASA (the “Bond Trustee”) is appointed as trustee for the above mentioned Bond Issue with ISIN NO001035391.5 (the “Loan”) where SeaBird Exploration PLC is the Borrower (the “Borrower” or the “Company”).

All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the agreement for the Loan (the “Loan Agreement”).

The information in this summons regarding the legal, operational and financial status of the Borrower is provided by the Borrower, and the Bond Trustee expressly disclaims all liability whatsoever related to such information.

The Borrower has engaged ABG Sundal Collier Norge ASA (“ABGSC”) as its financial advisor in connection with the Restructuring Proposal as defined below. Bondholders may accordingly contact Nicolay Friis (tel.: +47 2201 6145 or e-mail: nicolay.friis@abgsc.no) for further information. ABGSC acts solely for the Borrower and no one else in connection with the Restructuring Proposal. No due diligence investigations have been carried out by ABGSC with respect to the Borrower, and ABGSC expressly disclaim any and all liabilities whatsoever in connection with the Restructuring Proposal.

1. BACKGROUND INFORMATION

Reference is made to the stock exchange announcements by the Company on 27 January 2011. The Company has entered into an agreement for a strategic cooperation to further develop Ocean Bottom Node operations (the “Cooperation Agreement”) together with Petroleum Geo-Services ASA (“PGS”). In relation to the Cooperation Agreement, the Company will issue a five year convertible loan of NOK 240 million directed towards PGS (the “PGS Convertible”). The PGS Convertible will have an annual interest of 9.0% that can be paid in cash or in kind. The Loan can at any time be converted into ordinary shares at a conversion price of 3.35 NOK per share until the maturity date. In addition to the Cooperation Agreement it has been important for the Company to establish a solid financial platform going forward, with a more balanced debt amortization profile. Consequently, the Company has informed the Bond Trustee that it has entered into an agreement with Bondholders representing 60% of the outstanding Bond Issue, where they commit to vote in favour of the Restructuring Proposal in a Bondholders’ meeting.

2. THE PROPOSED RESTRUCTURING

The Company proposes the following resolution to be passed by the Bondholders (the “Restructuring Proposal”):

MAILING ADDRESS @ P.O.BOX 1470 VIKA, N-0116 OSLO LOCATION @ HAAKON VII GATE 1, OSLO, NORWAY
phone @ +47 22 87 94 00 fax @ +47 22 87 94 10 org.nr @ no 963 342 624 MVA e-mail @ mail@trustee.no

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(i) to extend the maturity date of the Loan with two years from 14 February 2012 to 14 February 2014;

(ii) to increase the interest rate from NIBOR plus 4.50 percentage points payable in cash to NIBOR plus 6.50 percentage points payable in cash and an additional plus 2.00 percentage points payable in cash or in the form of additional bonds at the discretion of the Company (the “PIK Interest”);

(iii) to amend the existing dividend restriction of the Loan Agreement so as to not allow dividends or other distributions as defined therein until maturity of the Bonds;

(iv) to include new call options for the Borrower at 106% of par value at the interest payment date in February 2012 and at 103% of par value at the interest payment date in February 2013; and

(v) to split the bonds so that 1 Bond of NOK 500,000 denomination shall be converted to 500,000 Bonds of NOK 1.0 denomination to facilitate the PIK Interest. The change in nominal value from NOK 500,000 to NOK 1.00 will be carried out through a split of each Bond with a nominal value of NOK 500,000 into 500,000 Bonds with a nominal value of NOK 1.00.

The Restructuring Proposal shall be subject to the following conditions precedent to be effective:

a) an approval from BN Bank, as agent, to extend the maturity of the Company’s current secured facility (USD 46.9 million outstanding per Q3 2010) with no less than two years;

b) an approval from Perestroika AS to extend the maturity of the Company’s NOK 120 million convertible loan with Perestroika AS with no less than one year;

c) an agreement with PGS concerning the PGS Convertible;

d) an approval from the Company’s extraordinary general meeting, to be held as soon as possible, approving the Cooperation Agreement and the PGS Convertible; and

e) conditions precedent a) to d) shall be lifted and the Restructuring Proposal effected no later than 15 March 2011.

4. EVALUATION OF THE PROPOSAL

4.1 THE BORROWER’S EVALUATION

The Company sees significant strategic benefits from the Cooperation Agreement with PGS that will, among others, provide the Company with better fleet utilization, increased efficiency for clients and foundation for expansion, all contributing to an enhanced revenue potential going forward. The PGS Convertible will take care of short-term debt maturities, including repayment of SBX01 at maturity date in July 2011, and also significantly improve the Company’s liquidity profile.

The Company acknowledges that significant concessions are required from the Bondholders, however firmly believes that the Restructuring Proposal represents a balanced proposal.

The Borrower has informed the Bond Trustee, that Bondholders representing 60% of the outstanding Bond Issue have granted their pre-approval to the Restructuring Proposal and have committed to vote in favor of the Proposal in the Bondholders’ meeting.

4.2 THE BOND TRUSTEE’S EVALUATION

As a matter of policy, the Bond Trustee puts the requests forward to the Bondholders without further evaluation or recommendation, and amplifies that each Bondholder cast its vote on the Bondholders’ meeting based on its own judgment. The Bond Trustee urges each Bondholder to seek counsel in order to evaluate the Restructuring Proposal.

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5. SUMMONS TO BONDHOLDERS, MEETING

To enable the Borrower to conduct the proposed change of the Loan Agreement, the Borrower has requested the Bond Trustee to summon a Bondholders’ meeting to consider the approval of the Proposal.

Bondholders are hereby summoned to a Bondholders’ meeting:

Time: 8 February 2011 at 14:00 hours (Oslo time),
Place: The premises of Norsk Tillitsmann ASA,
Haakon VIIIs gt 1, 01061 Oslo - 5th floor

Agenda:

1. Approval of the summons.
2. Approval of the agenda.
3. Election of two persons to co-sign the minutes together with the chairman.
4. Consent to the Proposal

It is proposed that the Bondholders’ meeting resolve the following:

1) Restructuring Proposal

a) The definition of Maturity Date in Clause 1 shall be amended and restated in its entirety to read as follows: “Maturity Date: 14 February 2014”.

b) Clause 9.1 (“Interest”), first paragraph, shall be amended and restated in its entirety to read as follows: “Interest accrues from and including Disbursement Date to but not including the Interest Payment Date in February 2011 based on NIBOR plus 4.50 percentage points. From and including the Interest Payment Date in February 2011 interest accrues based on NIBOR plus 8.50 percentage points. The interest rate is set on the first Interest Determination Date. Should NIBOR not be available, the interest rate will be set based on NIBOR Reference Banks plus 4.50 percentage points for the period to the Interest Payment Date in February 2011 and based on NIBOR Reference Banks plus 8.50 percentage points from and including the Interest Payment Date in February 2011. The Borrower may at its own discretion pay 2.00 percentage points of the 8.50 percentage points in the form of additional Bonds, based on the total number of Bonds at each relevant Interest Payment Date, rounded down to the nearest NOK (“Payment in Kind”). The Borrowers option to make Payment in Kind will be allowed from and including the Interest Payment date in May 2011. If Payment in Kind takes place, the Borrower shall inform the Bondholders via the Security Depository, the Loan Trustee and the paying agent at least 30 – thirty – Banking Days prior to the relevant Interest Payment Date. The paying agent shall carry the Payment in Kind into effect at the relevant Interest Payment Date. The additional Bonds issued upon payment of interest shall have the same rights as the other Bonds as of the registration of the increased amount of the Loan in the Security Depository. For the avoidance of doubt, additional Bonds issued in connection with Payment in Kind will rank pari passu with Bonds already issued.”

c) Clause 9.2, first paragraph, shall be amended and restated in its entirety to read as follows: “The interest rate on the Loan is reset with effect from each Interest Payment Date. The new interest rate is reset on the Interest Determination Date based on NIBOR plus 4.50 percentage points the on the Interest Determination Dates up until and including the Interest Determination Date in November 2010, and NIBOR plus 8.50 percentage points on the Interest Determination Dates from and including the Interest Determination Date in February 2011. Should NIBOR not be available, the interest rate will be reset based on NIBOR Reference Banks plus 4.50 percentage points on the Interest Determination Dates up until and including the Interest Determination Date in November 2010, and NIBOR Reference Banks plus 8.50 percentage points on the Interest Determination Dates from and including the Interest Determination Date in February 2011”.

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d) Clause 13.2 (e) shall be amended and restated in its entirety to read as follows: “not pay or declare any payment of dividend or reduction of share capital, declare or make any repurchase of its shares or declare or make any other distribution to its shareholders.”

e) Clause 10.2 shall be amended to include two additional sub-bullets as follows: “(iii) any Interest Payment Date in February 2012 at 106% of par plus accrued interests on redeemed amount; and (iv) any Interest Payment Date in February 2013 at 103% of par plus accrued interests on redeemed amount.”

f) Clause 2.1, third paragraph, shall be amended to read “The Bonds will be in denominations of NOK 1.00 each and rank pari passu.”

2) Conditions for the Restructuring Proposal to take effect

a) The receipt by the Bond Trustee by 15 March 2011 of an officer’s certificate from the Company confirming:

(i) approval from certain lenders to extend the maturity of the Company’s current secured facility (USD 46.9 million outstanding per Q3 2010) with no less than two years;

(ii) approval from Perestroika AS to extend the maturity of the Company’s NOK 120 million convertible loan with Perestroika AS with no less than one year;

(iii) agreement with PGS concerning the PGS Convertible; and

(iv) approval from the Borrower’s extraordinary general meeting, to be held as soon as possible, approving the increase of shares the Borrower is authorised to issue as required under the PGS Convertible.

3) Power of attorney

The Bond Trustee is hereby authorised to complete the negotiation of form, terms, conditions and timing in relation to the Restructuring Proposal, without any obligation to notify the Bondholders as provided for in Clause 16.2 of the Loan Agreement. Further, the Bond Trustee is given power of attorney to enter into the necessary agreements in connection with documenting the decisions made by the Bondholders’ meeting as well as to carry out the necessary completion work, including making amendments to the Loan Agreement.

To approve the above resolution, Bondholders representing at least 2/3 of the Bonds represented in person or by proxy at the meeting must vote in favour of the resolution. In order to have a quorum, at least 5/10 of the voting Bonds must be represented at the meeting. If the proposal is not adopted, the Bond Agreement will remain unchanged.

Please find attached a Bondholder’s Form from the Securities Depository (VPS), indicating your bondholding at the printing date. The Bondholder’s Form will serve as proof of ownership of the Bonds and of the voting rights at the Bondholders’ meeting. (If the bonds are held in custody - i.e. the owner is not registered directly in the VPS - the custodian must confirm; (i) the owner of the Bonds, (ii) the aggregate nominal amount of the Bonds and (iii) the account number in VPS on which the Bonds are registered.)

The individual bondholder may authorise the Norsk Tillitsmann to vote on its behalf, in which case the Bondholder’s Form also serves as a proxy. A duly signed Bondholder’s Form, authorising Norsk Tillitsmann to vote, must then be returned to Norsk Tillitsmann in due time before the meeting is scheduled (by scanned e-mail, telefax or post – please see the first page of this letter for further details).

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In the event that Bonds have been transferred to a new owner after the Bondholder's Form was made, the new Bondholder must bring to the Bondholders' meeting or enclose with the proxy, as the case may be, evidence which the Bond Trustee accepts as sufficient proof of the ownership of the Bonds.

For practical purposes, we request those who intend to attend the bondholders' meeting, either in person or by proxy other than to Norsk Tillitsmann, to notify Norsk Tillitsmann by telephone or by e-mail (at set out at the first page of this letter) within 16:00 hours (4 pm) (Oslo time) the Banking Day before the meeting takes place.

Yours sincerely
Norsk Tillitsmann ASA

Fredrik Lundberg

Enclosure:
- VPS Statement /Power of attorney form.

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