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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-13729
R&B FALCON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0544217
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
901 Threadneedle, Houston, Texas 77079
(Address of principal executive offices)(Zip Code)
(281) 496-5000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes _X_ No___
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK
AT AUGUST 1, 1998 : 166,226,374
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Forward-Looking Statements and Assumptions
This Quarterly Report on Form 10-Q may contain or incorporate by
reference certain forward-looking statements, including by way of
illustration and not of limitation, statements relating to liquidity,
revenues, expenses, margins and contract rates and terms. The Company
strongly encourages readers to note that some or all of the assumptions,
upon which such forward-looking statements are based, are beyond the
Company's ability to control or estimate precisely, and may in some cases
be subject to rapid and material changes. Such assumptions include the
contract status of the Company's offshore units, general market conditions
prevailing in the marine drilling industry (including daily rates and
utilization) and various other trends affecting the marine drilling
industry, including world oil and gas prices, the exploration and
development programs of the Company's customers, the actions of the
Company's competitors and economic conditions generally.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company or Group of Companies for Which Report is Filed:
R&B Falcon Corporation and Subsidiaries
The financial statements for the three and six month periods ended June 30,
1998 and 1997, include, in the opinion of the Company, all adjustments
(which only consist of normal recurring adjustments) necessary to present
fairly the financial position and results of operations for such periods.
The financial data for the three and six month periods ended June 30, 1998
included herein have been reviewed in accordance with standards established
by the American Institute of Certified Public Accountants by Arthur
Andersen LLP, the registrant's independent public accountants, whose report
is included herein. Results of operations for the three and six month
periods ended June 30, 1998 are not necessarily indicative of results of
operations which will be realized for the year ending December 31, 1998.
The financial statements should be read in conjunction with the Company's
Form 10-K for the year ended December 31, 1997.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
JUNE 30, DECEMBER 31,
1998 1997
--------- ---------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 69.5 $ 55.5
Short-term investments 63.1 45.4
Accounts receivable:
Trade, net 220.0 165.1
Other 29.0 22.3
Materials and supplies inventory 21.1 15.1
Other current assets 18.7 13.1
--------- ---------
Total current assets 421.4 316.5
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 2,395.6 1,925.9
Other 122.6 81.1
--------- ---------
Total property and equipment 2,518.2 2,007.0
Accumulated depreciation (466.0) (426.3)
--------- ---------
Net property and equipment 2,052.2 1,580.7
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 38.6 31.2
--------- ---------
NET ASSETS OF DISCONTINUED OPERATIONS 19.0 -
--------- ---------
TOTAL ASSETS $ 2,531.2 $ 1,928.4
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations $ 96.7 $ -
Long-term obligations due within one year 32.3 135.2
Accounts payable - trade 37.9 51.5
Accrued liabilities 106.1 144.7
--------- ---------
Total current liabilities 273.0 331.4
LONG-TERM OBLIGATIONS 1,172.9 692.2
OTHER NONCURRENT LIABILITIES 36.2 38.6
DEFERRED INCOME TAXES 129.9 76.8
NET LIABILITIES OF DISCONTINUED OPERATIONS - 5.8
--------- ---------
Total liabilities 1,612.0 1,144.8
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 56.7 55.6
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value 1.7 1.6
Capital in excess of par value 677.2 631.4
Retained earnings 204.5 96.3
Other (20.9) (1.3)
--------- ---------
Total stockholders' equity 862.5 728.0
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,531.2 $ 1,928.4
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
OPERATING REVENUES:
Deepwater $ 97.4 $ 80.7 $ 197.2 $ 160.6
Shallow water 110.2 78.9 217.2 146.8
Inland water 73.4 62.6 146.0 117.9
------- ------- ------- -------
Total operating revenues 281.0 222.2 560.4 425.3
------- ------- ------- -------
COSTS AND EXPENSES:
Deepwater 45.6 27.3 87.1 61.3
Shallow water 40.2 40.0 79.4 75.3
Inland water 46.1 34.1 85.4 68.3
Depreciation 22.6 19.2 43.5 37.7
General and administrative 14.6 10.3 28.1 21.6
Merger expenses - - (1.0) -
------- ------- ------- -------
Total costs and expenses 169.1 130.9 322.5 264.2
------- ------- ------- -------
OPERATING INCOME 111.9 91.3 237.9 161.1
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense, net of
capitalized interest (15.2) (11.3) (29.1) (21.4)
Interest income 2.9 1.5 4.4 3.1
Other, net (.3) (.7) (.4) (1.0)
------- ------- ------- -------
Total other income (expense) (12.6) (10.5) (25.1) (19.3)
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE, MINORITY
INTEREST AND EXTRAORDINARY LOSS 99.3 80.8 212.8 141.8
------- ------- ------- -------
INCOME TAX EXPENSE:
Current 5.6 11.1 12.4 19.4
Deferred 30.5 7.9 65.1 12.6
------- ------- ------- -------
Total income tax expense 36.1 19.0 77.5 32.0
------- ------- ------- -------
MINORITY INTEREST (2.8) (1.1) (5.1) (4.4)
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY LOSS 60.4 60.7 130.2 105.4
LOSS FROM DISCONTINUED OPERATIONS - (16.7) - (22.5)
EXTRAORDINARY LOSS,
NET OF TAX BENEFIT (22.0) - (22.0) -
------- ------- ------- -------
NET INCOME $ 38.4 $ 44.0 $ 108.2 $ 82.9
======= ======= ======= =======
NET INCOME PER COMMON SHARE:
Basic:
Continuing operations $ .37 $ .37 $ .79 $ .64
Discontinued operations - (.10) - (.13)
Extraordinary loss (.13) - (.13) -
------- ------- ------- -------
Net income $ .24 $ .27 $ .66 $ .51
======= ======= ======= =======
Diluted:
Continuing operations $ .37 $ .37 $ .78 $ .64
Discontinued operations - (.10) - (.14)
Extraordinary loss (.13) - (.13) -
------- ------- ------- -------
Net income $ .24 $ .27 $ .65 $ .50
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 165.3 163.9 165.1 163.8
======= ======= ======= =======
Diluted 167.6 167.1 166.5 165.9
======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 108.2 $ 82.9
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 43.5 37.7
Deferred income taxes 64.9 27.6
Gain on dispositions of property and equipment (2.2) (1.5)
Recognition of deferred expenses 5.9 4.0
Deferred compensation .4 3.8
Minority interest in income of
consolidated subsidiaries 5.1 4.4
Loss from discontinued operations - 22.5
Extraordinary loss, net of tax benefit 22.0 -
Changes in assets and liabilities:
Accounts receivable, net (62.1) (40.6)
Materials and supplies inventory (6.8) (.2)
Deferred charges and other assets (23.6) (5.6)
Accounts payable - trade (24.8) (5.8)
Accrued liabilities (22.5) .3
Accrued interest 4.0 3.3
Income taxes (18.5) 1.7
Other, net (2.0) (1.3)
------- -------
Net cash provided by operating activities 91.5 133.2
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 3.1 1.5
Purchases of property and equipment (483.4) (186.1)
Purchase of short-term investments (17.7) (31.9)
Increase in investments in and advances to
unconsolidated investees - (42.4)
------- -------
Net cash used in investing activities (498.0) (258.9)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments on) proceeds from
revolving credit facilities (432.0) 60.0
Increase in short-term borrowings 96.7 -
Proceeds from long-term obligations 1,094.0 43.0
Principal payments on long-term obligations (285.5) (14.3)
Premium paid on debt extinguishment (25.1) -
Distribution to minority shareholders
of consolidated subsidiaries (4.0) -
Other 1.2 3.0
------- -------
Net cash provided by financing activities 445.3 91.7
------- -------
CASH USED IN DISCONTINUED OPERATIONS (24.8) (38.3)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14.0 (72.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 55.5 127.8
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 69.5 $ 55.5
======= =======
Supplemental Cash Flow Disclosures:
Interest paid $ 39.0 $ 21.2
Income taxes paid $ 27.6 $ 3.8
Purchase of property and equipment
in exchange for debt or equity $ 35.5 $ 8.0
The accompanying notes are an intregral part of the consolidated financial
statements.
R&B FALCON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A) SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT - In the first quarter of 1998, the
Company had an independent appraiser evaluate the expected useful
lives of its marine units and, based on such appraisal, the Company
extended the useful lives of its marine units effective January 1,
1998. Such change in estimate resulted in an approximate $10.4
million reduction in depreciation expense for the six months ended
June 30, 1998.
NEWLY ISSUED ACCOUNTING STANDARDS - In June 1997, Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("SFAS 130") was issued. SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in a full set
of general purpose financial statements. Comprehensive income is the
total of net income and all other non-owner changes in equity. The
Company had no non-owner changes in equity during the three and six
month periods ended June 30, 1998 and 1997 and therefore, no reporting
and display of comprehensive income was required.
In June 1998, Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133") was issued. SFAS 133 establishes accounting and reporting
standards requiring that every derivative instrument be measured at
its fair value, recorded in the balance sheet as either an asset or
liability and that changes in the derivative's fair value be
recognized currently in earnings. SFAS 133 is effective for fiscal
years beginning after June 15, 1999. The Company has not yet
quantified the impacts of adopting SFAS 133 on its financial
statements nor has it determined the timing of its adoption.
CAPITALIZED INTEREST - The Company capitalizes interest
applicable to the construction and significant upgrades of its marine
equipment as a cost of such assets. Interest capitalized for the
three months ended June 30, 1998 and 1997 was $9.1 million and $2.3
million, respectively and for the six months ended June 30, 1998 and
1997 was $15.3 million and $4.5 million, respectively. Interest
capitalized is shown net of interest expense in the Consolidated
Statement of Operations.
EXTRAORDINARY LOSS - In the second quarter of 1998, the Company
incurred an extraordinary loss of $22.0 million, after a tax benefit
of $11.9 million, due to the premium payments required for the early
extinguishment of debt obligations and the expense of related deferred
debt issuance costs (see Note C).
B) SHORT-TERM OBLIGATIONS
In February 1998, a subsidiary of the Company entered into a
$150.0 million short-term credit facility for the construction of
Drillship III, recently named the "DEEPWATER MILLENIUM" and repayment
of that facility was guaranteed by a number of other subsidiaries.
The facility bears interest at the London Interbank Offered Rate
("LIBOR") plus .6% and is due in December 1998. In April 1998, the
facility was amended to substitute the Company as the sole guarantor
and to increase the interest rate margin to .75%.
C) LONG-TERM OBLIGATIONS
(in millions)
Debt obligations at December 31, 1997 $ 827.4
Proceeds from debt offering (1) 1,094.0
Proceeds from new credit facility (2) 50.0
Net payments on retired credit facilities (2) (482.0)
Payments on debt obligations other
than credit facilities (3) (285.5)
Other 1.3
---------
Debt obligations at June 30, 1998 1,205.2
Less long-term obligations due within one year (32.3)
---------
Long-term obligations at June 30, 1998 $ 1,172.9
=========
(1) In April 1998, the Company issued four series of senior notes
with an aggregate principal amount of $1.1 billion (the "New Senior
Notes"). As a result, the Company received net proceeds of
approximately $1,082.0 million after deducting estimated offering
related expenses. The New Senior Notes bear interest at varying
rates from 6.5% to 7.375%, are payable semiannually on April 15 and
October 15, and mature at varying times from 2003 to 2018. The New
Senior Notes are unsecured obligations of the Company, ranking pari
passu in right of payment with all other existing and future senior
unsecured indebtedness of the Company. The Company used the
proceeds to repay existing indebtedness of $874.4 million and the
remainder will be used for planned capital expenditures, working
capital and other general corporate purposes. As a result of the
repayment of existing indebtedness, the Company incurred an
extraordinary loss of $22.0 million, net of tax, in the second
quarter of 1998.
(2) In April 1998, the Company retired two existing bank group credit
facilities aggregating $615.0 million (of which $600.0 million had
been drawn), and entered into a new $500.0 million unsecured
revolving credit facility agreement with a syndicate of banks. The
new facility matures April 24, 2002, bears interest at LIBOR plus
.75%, and ranks pari passu in right of payment with the New Senior
Notes.
(3) On March 23, 1998, the Company offered to redeem its 9 3/4 % Senior
Notes due 2001, its 8 7/8 % Senior Notes due 2003 and its 12 1/2 %
Subordinated Notes due 2005 (collectively the "Old Notes"). The
aggregate principal amount of the outstanding Old Notes was $280.0
million and on April 20, 1998, $274.4 million in principal amount
of Old Notes was repaid from proceeds from the sale of the New
Senior Notes.
D) DISCONTINUED OPERATIONS
In March 1998, the Company decided to divest its oil and gas
segment, and expects such divestiture to occur by March 1999. The
Company's oil and gas segment has been accounted for as a discontinued
operation.
Oil and gas assets held for sale at June 30, 1998 were $93.0
million and related liabilities totaled $74.0 million, including a
$70.0 million reserve for losses on ultimate disposal and operations
until disposal. There were no revenues from the discontinued
operations during the three and six month periods ended June 30, 1998
and 1997. Expenses incurred from the discontinued operations during
the three months ended June 30, 1998 and 1997 were $.5 million and
$16.7 million, respectively and for the six months ended June 30, 1998
and 1997 were $8.8 million and $22.5 million, respectively. Such
expenses for 1998 were applied against the reserve set up in
connection with the discontinuance of the oil and gas segment.
In the first quarter of 1998, the Company entered into a letter
of intent to perform development operations to earn an interest in oil
and gas properties owned by a third party. The cost of such
development operations is estimated at $29.0 million.
E) EARNINGS PER SHARE
The following table reconciles the numerators and denominators of
the basic and diluted per share computations for income from
continuing operations before extraordinary loss for the three and six
month periods ended June 30, 1998 and 1997 as follows (in millions
except per share amounts):
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1998 1997 1998 1997
------ ------ ------ ------
Numerator:
Income from continuing operations
before extraordinary loss - basic $ 60.4 $ 60.7 $130.2 $105.4
Interest expense on convertible debentures 1.1 1.0 - -
------ ------ ------ ------
Income from continuing operations
before extraordinary loss - diluted $ 61.5 $ 61.7 $130.2 $105.4
====== ====== ====== ======
Denominator:
Weighted average common shares
outstanding - basic 165.3 163.9 165.1 163.8
Outstanding stock options 1.4 2.2 1.4 2.1
Convertible debentures .9 1.0 - -
------ ------ ------ ------
Weighted average common shares
outstanding - diluted 167.6 167.1 166.5 165.9
====== ====== ====== ======
Earnings per share:
Income from continuing operations
before extraordinary loss:
Basic $ .37 $ .37 $ .79 $ .64
Diluted $ .37 $ .37 $ .78 $ .64
F) SUBSEQUENT EVENT
On August 10, 1998, the Company announced the signing of a letter
of intent to merge with Cliffs Drilling Company. In the merger, each
share of common stock, par value $0.01 per share, of Cliffs Drilling
Company will be exchanged for 1.7 shares of common stock, par value
$0.01 per share, of the Company. The merger is contemplated to be a
tax-free reorganization and will be accounted for as a purchase. The
transaction is subject to, among other things, execution and delivery
of a definitive agreement and certain regulatory, third party and
shareholder approvals. The offering to Cliffs Drilling Company
shareholders will be made only by means of a prospectus.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
R&B Falcon Corporation
We have reviewed the accompanying consolidated balance sheet of R&B
Falcon Corporation (a Delaware corporation) and Subsidiaries as of June 30,
1998, and the related consolidated statements of operations and cash flow
for the three and six month periods ended June 30, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based upon our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for them
to be in conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Houston, Texas
July 28, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Changes In Financial Condition
The Company incurred capital expenditures of $483.4 million in the
first six months of 1998. The most significant expenditures were as
follows:
1) The Company incurred $334.0 million of capital expenditures related to
its significant construction projects, equipment acquisitions and
capital upgrades to the fleet to fulfill obligations under existing
contracts or to improve the marketability of certain of the Company's
marine units.
2) The Company issued 204,900 shares of its common stock in partial
consideration for the acquisition of all of the outstanding shares of
stock of a corporation owning six workover rigs.
3) The Company paid $1.5 million in cash and issued 517,184 shares of its
common stock in partial consideration for the acquisition of all of the
outstanding shares of stock of three corporations owning eight tugs and
five ocean going barges.
4) The Company paid $10.7 million in cash for the acquisition of the
previously leased jackup "FALRIG 82".
5) The Company paid $5.8 million in cash for the acquisition of a two story,
86,000 square foot office building in Houston, Texas that serves as its
corporate headquarters.
See "Liquidity And Capital Resources" for discussions on the repayment
and issuance of debt obligations.
The Company has from time to time in the past engaged in, and
currently continues to engage in, preliminary discussions with other
industry participants with respect to business combinations that would
potentially strengthen its competitive position in the offshore drilling
industry. The Company also continues to consider the selective
construction, acquisition and/or upgrade of marine units.
Results of Operations
SIX MONTHS ENDED JUNE 30, 1998 COMPARED
TO SIX MONTHS ENDED JUNE 30, 1997
The Company's net income for the six months ended June 30, 1998 was
$108.2 million ($.65 per diluted share) compared with net income of $82.9
million ($.50 per diluted share) for the same period of 1997. Included in
the results for the six months ended June 30, 1998 was an extraordinary
loss of $22.0 million due to the extinguishment of debt obligations.
Included in the results for the six months ended June 30, 1997 were losses
related to discontinued operations of $22.5 million.
Operating revenues are primarily a function of dayrates and
utilization. The increase in operating revenues for the six months ended
June 30, 1998 over the same period in 1997 is primarily due to (i)
increased dayrates fleetwide, with the shallow water fleet accounting for
the largest part of the increase, and (ii) an increase in the number of
offshore and inland marine vessels available for service which resulted
from acquisitions, reactivations or conversions.
Operating expenses do not necessarily fluctuate in proportion to
changes in operating revenues due to the continuation of personnel on board
and equipment maintenance when the Company's units are stacked. It is only
during prolonged stacked periods that the Company is able to significantly
reduce labor costs and equipment maintenance expense. Additionally, labor
costs fluctuate due to the geographic diversification of the Company's
units and the mix of labor between expatriates and nationals as stipulated
in the contracts. In general, labor costs increase primarily due to higher
salary levels and inflation. Equipment maintenance expenses fluctuate
depending upon the type of activity the unit is performing and the age and
condition of the equipment. Scheduled maintenance and overhauls of
equipment are performed on the basis of number of hours operated in
accordance with the Company's preventive maintenance program. Operating
expenses for a unit are typically deferred or capitalized as appropriate
during periods of mobilization, contract preparation, major upgrades or
conversions unless corresponding revenue is recognized, in which case such
operating expenses are expensed as incurred.
The increase in operating expenses for the six months ended June 30,
1998 as compared to the same period in 1997 is primarily due to an increase
in the number of offshore and inland marine vessels available for service
which resulted from acquisitions, reactivations or conversions.
Depreciation expense increased for the six months ended June 30, 1998
as compared to the same period in 1997 despite the reduction in
depreciation expense in 1998 of approximately $10.4 million due to the
extension of the expected useful lives of the Company's marine units
effective January 1, 1998. Such increase is primarily due to the purchase
and/or significant upgrades of offshore and inland marine vessels during
1997 and early 1998.
General & administrative expense increased for the six months ended
June 30, 1998 as compared to the same period in 1997 primarily due to
increases in payroll and related expenses associated with increased
staffing through new hires, and acquisitions within the inland water
segment.
Interest expense increased for the six months ended June 30, 1998 as
compared to the same period in 1997 primarily due to an increased average
debt balance outstanding, partially offset by increased capitalized
interest related to significant upgrade and new build projects.
Income tax expense increased for the six months ended June 30, 1998 as
compared to the same period in 1997 due to the increase in the Company's
pretax income and the Company providing for taxes at the full statutory
rate.
Loss from discontinued operations decreased for the six months ended
June 30, 1998 as compared to the same period in 1997 as the losses for 1998
were reserved for in connection with the discontinuance of the oil and gas
segment (see Note D of Notes to Consolidated Financial Statements).
Extraordinary loss, net of tax, for the six months ended June 30, 1998
is due to the extinguishment of debt obligations in connection with the
issuance of new debt obligations (see Note C of Notes to Consolidated
Financial Statements).
THREE MONTHS ENDED JUNE 30, 1998 COMPARED
TO THREE MONTHS ENDED JUNE 30, 1997
The Company's net income for the three months ended June 30, 1998 was
$38.4 million ($.24 per diluted share) compared with net income of $44.0
million ($.27 per diluted share) for the same period of 1997. Included in
the results for the three months ended June 30, 1998 was an extraordinary
loss of $22.0 million due to the extinguishment of debt obligations.
Included in the results for the three months ended June 30, 1997 were
losses related to discontinued operations of $16.7 million.
Operating revenues are primarily a function of dayrates and
utilization. The increase in operating revenues for the three months ended
June 30, 1998 over the same period in 1997 is primarily due to (i)
increased dayrates fleetwide, with the shallow water fleet accounting for
the largest part of the increase, and (ii) an increase in the number of
offshore and inland marine vessels available for service which resulted
from acquisitions, reactivations or conversions.
Operating expenses do not necessarily fluctuate in proportion to
changes in operating revenues due to the continuation of personnel on board
and equipment maintenance when the Company's units are stacked. It is only
during prolonged stacked periods that the Company is able to significantly
reduce labor costs and equipment maintenance expense. Additionally, labor
costs fluctuate due to the geographic diversification of the Company's
units and the mix of labor between expatriates and nationals as stipulated
in the contracts. In general, labor costs increase primarily due to higher
salary levels and inflation. Equipment maintenance expenses fluctuate
depending upon the type of activity the unit is performing and the age and
condition of the equipment. Scheduled maintenance and overhauls of
equipment are performed on the basis of number of hours operated in
accordance with the Company's preventive maintenance program. Operating
expenses for a unit are typically deferred or capitalized as appropriate
during periods of mobilization, contract preparation, major upgrades or
conversions unless corresponding revenue is recognized, in which case such
operating expenses are expensed as incurred.
The increase in operating expenses for the three months ended June 30,
1998 as compared to the same period in 1997 is primarily due to an increase
in the number of offshore and inland marine vessels available for service
which resulted from acquisitions, reactivations or conversions.
Depreciation expense increased for the three months ended June 30,
1998 as compared to the same period in 1997 despite the reduction in
depreciation expense in 1998 of approximately $5.2 million due to the
extension of the expected useful lives of the Company's marine units
effective January 1, 1998. Such increase is primarily due to the purchase
and/or significant upgrades of offshore and inland marine vessels during
1997 and early 1998.
General & administrative expense increased for the three months ended
June 30, 1998 as compared to the same period in 1997 primarily due to
increases in payroll and related expenses associated with increased
staffing through new hires, and acquisitions within the inland water
segment.
Interest expense increased for the three months ended June 30, 1998 as
compared to the same period in 1997 primarily due to an increased average
debt balance outstanding, partially offset by increased capitalized
interest related to significant upgrade and new build projects.
Income tax expense increased for the three months ended June 30, 1998
as compared to the same period in 1997 due to the increase in the Company's
pretax income and the Company providing for taxes at the full statutory
rate.
Loss from discontinued operations decreased for the three months ended
June 30, 1998 as compared to the same period in 1997 as the losses for 1998
were reserved for in connection with the discontinuance of the oil and gas
segment (see Note D of Notes to Consolidated Financial Statements).
Extraordinary loss, net of tax, for the three months ended June 30,
1998 is due to the extinguishment of debt obligations in connection with
the issuance of new debt obligations (see Note C of Notes to Consolidated
Financial Statements).
Liquidity And Capital Resources
General. Net cash provided by operating activities was $91.5 million
for the six months ended June 30, 1998, compared to $133.2 million for the
same period in 1997. This represents a decrease of $41.7 million despite
the improved operating results from continuing operations. The decrease is
primarily due to the change in the components of working capital.
Net cash used in investing activities was $498.0 million for the six
months ended June 30, 1998 compared to $258.9 million for the same period
in 1997. The increase is due to increasing levels of capital expenditures,
primarily related to the significant capital projects involving the
construction or upgrade of drilling units.
Net cash provided by financing activities was $445.3 million for the six
months ended June 30, 1998 compared to $91.7 million for the same period in
1997. The increase in net cash provided by financing activities is due to
proceeds received from the $1.1 billion debt offering (see below) and short-
term borrowings related to the construction of Drillship III, recently
named the "DEEPWATER MILLENIUM", offset by the repayment of existing debt
obligations (see below).
The Company has numerous projects under way involving the construction
or upgrade of drilling units. The following is a list of such projects:
Estimated Estimated
Delivery Cost
Vessel Date (in millions)
-------------------- ---------------- -------------
DEEPWATER PATHFINDER 4th quarter 1998 $ 260.0
DEEPWATER FRONTIER 1st quarter 1999 $ 250.0
DEEPWATER MILLENIUM 3rd quarter 1999 $ 260.0
PEREGRINE IV 1st quarter 1999 $ 187.0
PEREGRINE VI 3rd quarter 1999 $ 300.0
PEREGRINE VII 1st quarter 1999 $ 197.0
PEREGRINE VIII 4th quarter 1999 $ 305.0
FALCON 100 1st quarter 1999 $ 93.0
RBS6 1st quarter 2000 $ 292.0
The Company's construction and upgrade projects are subject to the risks
of delay and cost overruns inherent in any large construction project,
including shortages of equipment, unforeseen engineering problems, work
stoppages, weather interference, unanticipated cost increases and shortages
of materials or skilled labor. Significant cost overruns or delays would
adversely affect the Company's liquidity, financial condition, and results
of operations. Delays could also result in penalties under, or the
termination of, the long-term contracts under which the Company plans to
operate these rigs. The currently scheduled delivery dates for the
"PEREGRINE IV", "PEREGRINE VI", "PEREGRINE VII", "PEREGRINE VIII" and
"FALCON 100" are later than the commencement date under the initial
drilling contracts for such drillships.
Based upon the currently estimated delivery dates for the "PEREGRINE
IV", "PEREGRINE VIII" and "FALCON 100", the Company may be subject to late
delivery penalties under the applicable drilling contracts (approximately
$41,500 per day for the "PEREGRINE IV", $3,000 per day for the "PEREGRINE
VIII", and $26,500 per day for the "FALCON 100"). Based upon the currently
expected delivery date for the "PEREGRINE VI", the applicable drilling
contract for that unit will be terminated on January 1, 1999. The Company
is negotiating with the operators to extend the contract.
Liquidity of the Company should also be considered in light of the
significant fluctuations in demand that may be experienced by drilling
contractors as changes in oil and gas producers' expectations and budgets
occur, primarily in response to declines in prices for oil and gas. These
fluctuations can rapidly impact the Company's liquidity as supply and
demand factors directly affect utilization and dayrates, which are the
primary determinants of cash flow from the Company's operations. The recent
decline in oil and gas prices started to demonstrably impact the Company's
performance in the second quarter of 1998, particularly in the shallow
water U.S. Gulf market. Utilization for the shallow water and inland water
fleets was 94% and 70%, respectively for the second quarter of 1998 versus
97% and 79%, respectively for the first quarter of 1998. Any prolonged
depression in oil and gas prices could have a material adverse effect on
the Company.
The Company's management currently expects that its cash flow from
operations, in combination with cash on hand, funds available under its
existing credit facility and other sources, including new debt, new equity,
asset disposals and/or by proper scheduling of its planned capital or other
expenditures, will be sufficient to satisfy the Company's short-term and
long-term working capital needs, planned investments, capital expenditures,
debt, lease and other payment obligations.
Tender Offer. On March 23, 1998, the Company offered to redeem its 9
3/4 % Senior Notes due 2001, its 8 7/8 % Senior Notes due 2003 and its 12
1/2 % Subordinated Notes due 2005 (collectively the "Old Notes"). The
aggregate principal amount of the outstanding Old Notes was $280.0 million
and on April 20, 1998, $274.4 million in principal amount of Old Notes was
repaid from proceeds from the sale of the New Senior Notes (see below).
Debt Offering. In April 1998, the Company issued four series of senior
notes with an aggregate principal amount of $1.1 billion (the "New Senior
Notes"). As a result, the Company received net proceeds of $1,082.0 million
after deducting estimated offering related expenses. The New Senior Notes
bear interest at varying rates from 6.5% to 7.375%, are payable
semiannually on April 15 and October 15, and mature at varying times from
2003 to 2018. The New Senior Notes are unsecured obligations of the
Company, ranking pari passu in right of payment with all other existing and
future senior unsecured indebtedness of the Company. The Company used the
proceeds to repay existing indebtedness of $874.4 million and the remainder
will be used for planned capital expenditures, working capital and other
general corporate purposes. As a result of the repayment of existing
indebtedness, the Company incurred an extraordinary loss of $22.0 million,
net of tax, in the second quarter of 1998.
Credit Facility. In April 1998, the Company retired two existing bank
group credit facilities aggregating $615.0 million (of which $600.0 million
had been drawn), and entered into a new $500.0 million unsecured revolving
credit facility agreement with a syndicate of banks. The new facility
matures April 24, 2002, bears interest at LIBOR plus .75%, and ranks pari
passu in right of payment with the New Senior Notes.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions arising in the
normal course of business. After taking into consideration the evaluation
of such actions by counsel for the Company, management is of the opinion
that outcome of all known and potential claims and litigation will not have
a material adverse effect on the Company's business or consolidated
financial position or results of operations.
Item 4. Results of Votes of Security Holders
At the annual meeting of stockholders of R&B Falcon Corporation, held
on May 19, 1998, three Class I directors were elected by a vote of common
stock shareholders, as outlined in the Company's Proxy Statement relating
to the annual meeting. Proxies for the annual meeting were solicited
pursuant to Regulation 14 under the Securities and Exchange Act of 1934,
there was no solicitation in opposition to the management's nominees as
listed in the Proxy Statement and all of such nominees were elected, with
119,003,905, 119,005,712 and 119,003,523 votes for each of Mr. Hamilton,
Mr. Porter and Mr. Sandmeyer, respectively, and 2,590,601, 2,588,796 and
2,590,985 votes withheld from each of such nominees, respectively. In
addition three proposals were voted upon: (i) a proposal to approve the
Company's 1998 Long-Term Incentive Plan, with 115,836,373 votes for the
proposal, 5,300,140 votes against the proposal and 350,605 abstentions,
(ii) a proposal to approve the Company's 1998 Director Long-Term Incentive
Plan, with 111,586,004 votes for the proposal, 9,608,460 votes against the
proposal and 400,041 abstentions and (iii) a proposal to ratify and approve
the appointment of Arthur Andersen LLP as independent public accountants
for the Company for its fiscal year 1998, with 121,267,947 votes for the
proposal, 147,793 votes against the proposal and 178,764 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Credit Agreement, dated February 24, 1998, among
Reading & Bates Corporation, Reading & Bates Drilling
Co., various subsidiaries of Reading & Bates Drilling
Co., RB Deepwater Exploration III, Inc., various
lending institutions, Credit Lyonnais New York Branch
and Christiania Bank OG Kreditkasse, New York Branch.
Exhibit 10.2 - First Amendment to Credit Agreement, dated April 24,
1998, among R&B Falcon Corporation, R&B Falcon
Drilling (International & Deepwater) Inc., Reading &
Bates Drilling Co., RB Deepwater Exploration III,
Credit Lyonnais New York Branch and Christiania Bank
OG Kreditkasse, New York Branch, amending Credit
Agreement dated February 24, 1998 relating to a $150
million facility.
Exhibit 10.3 - First Amendment to Letter of Credit Agreement, dated
April 24, 1998, among R&B Falcon Corporation, R&B
Falcon Drilling (International & Deepwater) Inc.,
Reading & Bates Drilling Co. and Christiania Bank OG
Kreditkasse, New York Branch, amending Letter of
Credit Agreement dated December 30, 1996.
Exhibit 15 - Letter regarding unaudited interim financial
information.
Exhibit 27 - Financial Data Schedule.(Exhibit 27 is being submitted
as an exhibit only in the electronic format of this
Quarterly Report on Form 10-Q being submitted to
the Securities and Exchange Commission.)
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the three
months ended June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R&B FALCON CORPORATION
Date: August 14, 1998 By /s/T. W. Nagle
-------------------------
T. W. Nagle
Executive Vice President
(Chief Accounting Officer)
EXHIBIT 10.1
============================================================================
CREDIT AGREEMENT
among
READING & BATES CORPORATION,
READING & BATES DRILLING CO.,
VARIOUS SUBSIDIARIES OF READING & BATES DRILLING CO.,
RB DEEPWATER EXPLORATION III INC.,
VARIOUS LENDING INSTITUTIONS,
CREDIT LYONNAIS NEW YORK BRANCH,
as SYNDICATION AGENT
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as ADMINISTRATIVE AGENT
_______________________________________
Dated as of February 24, 1998
_______________________________________
============================================================================
TABLE OF CONTENTS
SECTION 1. Amount and Terms of Credit
1.01 Commitment
1.02 Minimum Borrowing Amounts, etc.
1.03 Notice of Borrowing
1.04 Disbursement of Funds
1.05 Notes
1.06 Conversions
1.07 Pro Rata Borrowings
1.08 Interest
1.09 Interest Periods
1.10 Increased Costs, Illegality, etc.
1.11 Compensation
1.12 Change of Lending Office; Limitation on Indemnities
1.13 Replacement of Banks
SECTION 2. Fees; Commitments
2.01 Fees
2.02 Voluntary Reduction of Commitments
2.03 Mandatory Adjustments of Commitments, etc.
SECTION 3. Payments
3.01 Voluntary Prepayments
3.02 Mandatory Prepayments
3.03 Method and Place of Payment
3.04 Net Payments
SECTION 4. Conditions Precedent
4.01 Execution of Agreement; Notes
4.02 No Default; Representations and Warranties
4.03 Officer's Certificate
4.04 Opinions of Counsel
4.05 Corporate Proceedings
4.06 Adverse Change, etc.
4.07 Litigation
4.08 Approvals
4.09 Fees
4.10 Security Agreement
4.11 Subsidiary Guaranty
4.12 Construction Contract; Refundment Guaranty; Drilling
Contract; Budget
4.13 Compliance Certificate; Rig Valuation Report
4.14 Notice of Borrowing
SECTION 5. Representations, Warranties and Agreements
5.01 Corporate Status
5.02 Corporate Power and Authority
5.03 No Violation
5.04 Litigation
5.05 Use of Proceeds; Margin Regulations
5.06 Governmental Approvals
5.07 Investment Company Act
5.08 Public Utility Holding Company Act
5.09 True and Complete Disclosure
5.10 Financial Condition; Financial Statements
5.11 Security Interests
5.12 Tax Returns and Payments
5.13 Compliance with ERISA
5.14 Subsidiaries
5.15 Patents, etc.
5.16 Pollution and Other Regulations
5.17 Properties
5.18 Labor Relations
5.19 Existing Indebtedness
5.20 Citizenship
5.21 Rig Classification
SECTION 6. Affirmative Covenants
6.01 Information Covenants
6.02 Books, Records and Inspections
6.03 Insurance
6.04 Payment of Taxes
6.05 Consolidated Corporate Franchises
6.06 Compliance with Statutes, etc.
6.07 Good Repair
6.08 End of Fiscal Years; Fiscal Quarters
6.09 Use of Proceeds
6.10 Additional Rig Valuations
6.11 Further Assurance
SECTION 7. Negative Covenants
7.01 Changes in Business
7.02 Consolidation, Merger or Sale of Assets, etc.
7.03 Liens on Assets
7.04 Indebtedness of Arcade
7.05 Dividends; Restrictions on Subsidiaries, etc.
7.06 Transactions with Affiliates
7.07 Vessel Management
7.08 Coverage Ratio
7.09 Working Capital
7.10 Leverage Ratio
7.11 Fleet Market Value
7.12 Restrictions on Amendments to Other Agreements;
Certain Prepayments of Other Indebtedness
SECTION 8. Events of Default
8.01 Payments
8.02 Representations, etc.
8.03 Covenants
8.04 Default Under Other Agreements
8.05 Bankruptcy, etc.
8.06 Security Agreement
8.07 Guaranty
8.08 Judgments
8.09 Employee Benefit Plans
8.10 Change of Control
SECTION 9. Definitions
SECTION 10. The Administrative Agent
10.01 Appointment of the Administrative Agent
10.02 Nature of Duties
10.03 Lack of Reliance on the Administrative Agent
10.04 Certain Rights of the Administrative Agent
10.05 Reliance
10.06 Indemnification
10.07 The Administrative Agent in Its Individual Capacity
10.08 Holders
10.09 Resignation by the Administrative Agent
SECTION 11. Miscellaneous
11.01 Payment of Expenses, etc.
11.02 Right of Setoff
11.03 Notices
11.04 Benefit of Agreement
11.05 No Waiver; Remedies Cumulative
11.06 Payments Pro Rata
11.07 Calculations; Computations
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL
11.09 Counterparts
11.10 Effectiveness
11.11 Headings Descriptive
11.12 Amendment or Waiver
11.13 Survival
11.14 Domicile of Loans
11.15 Confidentiality
11.16 Registry
SECTION 12. Parent Guaranty
12.01 The Guaranty
12.02 Bankruptcy
12.03 Nature of Liability
12.04 Independent Obligation
12.05 Authorization
12.06 Reliance
12.07 Subordination
12.08 Waiver
12.09 Nature of Liability
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Subsidiaries
ANNEX IV -- Existing Indebtedness
ANNEX V -- Existing Liens
ANNEX VI -- Approved Shipbrokers
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Section 3.04(b)(ii) Certificate
EXHIBIT D-1 -- Form of Opinion of Wayne Hillin, Esq.
EXHIBIT D-2 -- Form of Opinion of White & Case
EXHIBIT E -- Form of Officers' Certificate
EXHIBIT F -- Form of Security Agreement
EXHIBIT G -- Form of Subsidiary Guaranty
EXHIBIT H -- Form of Compliance Certificate
EXHIBIT I -- Form of Assignment and Assumption Agreement
CREDIT AGREEMENT, dated as of February 24, 1998, among READING &
BATES CORPORATION ("Holdings"), a Delaware corporation, READING & BATES
DRILLING CO. ("Parent"), an Oklahoma corporation, RB DEEPWATER EXPLORATION
III INC. (the "Borrower"), a Nevada corporation, the lending institutions
listed from time to time on Annex I hereto (each a "Bank" and, collec
tively, the "Banks"), CREDIT LYONNAIS NEW YORK BRANCH as syndication agent
(the "Syndication Agent") and CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, as administrative agent (the "Administrative Agent"). Unless other
wise defined herein, all capitalized terms used herein and defined in
Section 10 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each
a "Loan" and, collectively, the "Loans") under the Facility to the
Borrower, which Loans (i) shall be made on any Drawdown Date, (ii) shall be
made in a principal amount not to exceed the applicable Drawdown Amount,
(iii) except as hereinafter provided, may, at the option of the Borrower,
be incurred and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans, provided that all Loans made as part of the same
Borrowing shall, unless otherwise specifically provided herein, consist of
Loans of the same Type, (iv) may be repaid and reborrowed in accordance
with the provisions hereof, (v) shall not exceed in the aggregate for all
Banks at any time outstanding, the Total Commitment and (vi) shall not
exceed for any Bank at any time outstanding that aggregate principal amount
which, when combined with the aggregate outstanding principal amount of all
other Loans of such Bank at such time, equals (1) if such Bank is a Non-
Defaulting Bank, the Adjusted Commitment of such Bank at such time and (2)
if such Bank is a Defaulting Bank, the Commitment of such Bank at such
time.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing
Amount for the Loans constituting such Borrowing. More than one Borrowing
may be incurred on any day, provided that at no time shall there be
outstanding more than eight Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. Whenever the Borrower desires to
incur Loans under the Facility, it shall give the Administrative Agent at
its Notice Office, prior to 12:00 Noon (New York time), at least three
Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Eurodollar Loans and at least
one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Base Rate Loans to be made
hereunder. Each such notice (each a "Notice of Borrowing") shall be in the
form of Exhibit A, shall be signed by an Authorized Officer, shall be
irrevocable and shall specify (i) the aggregate principal amount of the
Loans to be made pursuant to such Borrowing, (ii) the date of Borrowing
(which shall be a Business Day), (iii) whether the respective Borrowing
shall consist of Base Rate Loans or (to the extent permitted) Eurodollar
Loans and, if Eurodollar Loans, the Interest Period to be initially
applicable thereto, (iv) disbursement instructions and (v) a description in
reasonable detail of the use to which such Loan proceeds are to be applied
in respect of the construction of the Drillship. The Administrative Agent
shall promptly give each Bank written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Bank's propor
tionate share thereof and of the other matters covered by the Notice of
Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing, each Bank
will make available its pro rata share of each Borrowing requested to be
made on such date in the manner provided below. All such amounts shall be
made available to the Administrative Agent in U.S. Dollars and immediately
available funds at the Payment Office and the Administrative Agent promptly
will make available to the Borrower by depositing to its account at the Pay
ment Office (or in accordance with any other disbursement instructions
given by the Borrower) the aggregate of the amounts so made available in
U.S. Dollars and immediately available funds. Unless the Administrative
Agent shall have been notified by any Bank prior to the date of Borrowing
that such Bank does not intend to make available to the Administrative
Agent its portion of the Borrowing or Borrowings to be made on such date,
the Administrative Agent may assume that such Bank has made such amount
available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Bank and the
Administrative Agent has made available same to the Borrower, the
Administrative Agent shall be entitled to recover such corresponding amount
from such Bank. If such Bank does not pay such corresponding amount forth
with upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly (and in any event within two Business Days from the
date the Administrative Agent made such funds available to the Borrower)
notify the Borrower, and the Borrower shall (within two Business Days of
receiving such demand) pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to recover on
demand from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such
Bank, the overnight Federal Funds Effective Rate or (y) if paid by the Bor
rower, the then applicable rate of interest, calculated in accordance with
Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by
such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made to it by each Bank shall be evidenced
by a promissory note substantially in the form of Exhibit B with blanks
appropriately completed in conformity herewith (each a "Note" and,
collectively, the "Notes").
(b) The Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the
Commitment of such Bank on such date and be payable in the principal amount
of the Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 3.02
and (vii) be entitled to the benefits of and subject to this Agreement and
the other Credit Documents.
(c) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to
any transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make
any such notation shall not affect the Borrower's obligations in respect of
such Loans.
1.06 Conversions. The Borrower shall have the option to convert
on any Business Day all or a portion at least equal to the applicable
Minimum Borrowing Amount of the outstanding principal amount of the Loans
owing pursuant to the Facility into a Borrowing or Borrowings pursuant to
the Facility of another Type of Loan, provided that (i) except as otherwise
provided in Section 1.10(b), Eurodollar Loans may be converted into Base
Rate Loans only on the last day of an Interest Period applicable thereto
and no partial conversion of a Borrowing of Eurodollar Loans shall reduce
the outstanding principal amount of the Eurodollar Loans made pursuant to
such Borrowing to less than the Minimum Borrowing Amount applicable
thereto, (ii) no Base Rate Loans may be converted into Eurodollar Loans at
any time when a Default or Event of Default is in existence on the date of
the conversion if the Administrative Agent or the Required Banks have
determined that such a conversion would be disadvantageous to the Banks and
(iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall
be limited in number as provided in Section 1.02. Each such conversion
shall be effected by the Borrower giving the Administrative Agent at its
Notice Office, prior to 12:00 Noon (New York time), at least three Business
Days' (or one Business Day's, in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each a "Notice of Conversion") specifying the Loans to be so
converted, the Type of Loans to be converted into and, if to be converted
into a Borrowing of Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall give each Bank prompt
notice of any such proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be made by the Banks pro rata on the basis of their Commitments. It is
understood that no Bank shall be responsible for any default by any other
Bank in its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder, regardless
of the failure of any other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which
shall at all times be the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum which shall at
all times be the Eurodollar Margin plus the applicable Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall bear interest at a rate per annum equal to the Base
Rate in effect from time to time plus 2%, provided that no Loan shall bear
interest after maturity (whether by acceleration or otherwise) at a rate
per annum less than 2% plus the rate of interest applicable thereto at
maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the
first day of each January, April, July and October, (ii) in respect of each
Eurodollar Loan, on the last day of each Interest Period applicable thereto
and, in the case of an Interest Period in excess of three months, on the
date occurring three months after the first day of such Interest Period and
(iii) in respect of each Loan, on any prepayment or conversion (other than
the prepayment and conversion of Base Rate Loans) (on the amount prepaid or
converted), at maturity (whether by acceleration or otherwise) and, after
such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(f) The Administrative Agent, upon determining the interest rate
for any Borrowing of Loans for any Interest Period, shall promptly notify
the Borrower and the Banks thereof.
1.09 Interest Periods. (a) At the time the Borrower gives a
Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the
initial Interest Period applicable thereto) or prior to 12:00 Noon (New
York time) on the third Business Day prior to the expiration of an Interest
Period applicable to a Borrowing of Eurodollar Loans, it shall have the
right to elect by giving the Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) of the Interest Period
applicable to such Borrowing, which Interest Period shall, at the option of
the Borrower, be a one, three or six month period. Notwithstanding
anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding Interest Period
expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business
Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period shall extend beyond the Maturity Date;
(v) no Interest Period may be elected at any time when a Default
or Event of Default is then in existence if the Administrative Agent
or the Required Banks have determined that such an election at such
time would be disadvantageous to the Banks; and
(vi) no more than four Interest Periods of one month may be
selected by the Borrower in any calendar year.
(b) If upon the expiration of any Interest Period, the Borrower
has failed to (or may not) elect a new Interest Period to be applicable to
the respective Borrowing of Eurodollar Loans as provided above, the
Borrower shall be deemed to have elected a one month Interest Period for
such Borrowing, provided that if the Borrower may not elect such a one
month Interest Period, the Borrower will be deemed to have elected to
convert such Borrowing into a Borrowing of Base Rate Loans effective as of
the expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the
case of clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate;
or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
imposition of or a change in the rate or basis of taxes or similar
charges) because of (x) any change since the date of this Agreement in
any applicable law, governmental rule, regulation, guideline or order
(or in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guide
line or order) (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation
of the Eurodollar Rate) and/or (y) other circumstances occurring after
the date of this Agreement and affecting the interbank Eurodollar
market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Bank in good faith with
any law, governmental rule, regulation, guideline (or would conflict
with any such governmental rule, regulation, guideline or order not
having the force of law but with which such Bank customarily complies
even though the failure to comply therewith would not be unlawful);
then, and in any such event, such Bank (or the Administrative Agent in the
case of clause (i) above) shall (x) on such date and (y) within ten
Business Days of the date on which such event no longer exists, give notice
(by telephone confirmed in writing) to the Borrower and to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x)
in the case of clause (i) above, Eurodollar Loans shall no longer be
available until such time as the Administrative Agent notifies the Borrower
and the Banks that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of Borrowing or Notice
of Conversion given by the Borrower with respect to Eurodollar Loans which
have not yet been incurred shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above, the Borrower shall, subject to Section
1.12(b) (to the extent applicable), pay to such Bank, upon written demand
therefor, such additional amounts (in the form of an increased rate of, or
a different method of calculating, interest or otherwise as such Bank in
its sole discretion shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts receivable here
under (a written notice as to the additional amounts owed to such Bank,
showing the basis for the calculation thereof, submitted to the Borrower by
such Bank shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) and (z) in the case of clause (iii) above, the Bor
rower shall take one of the actions specified in Section 1.10(b) as
promptly as possible and, in any event, within the time period required by
law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may
(and in the case of a Eurodollar Loan affected pursuant to Section
1.10(a)(iii), the Borrower shall) either (i) if the affected Eurodollar
Loan is then being made pursuant to a Borrowing, cancel said Borrowing by
giving the Administrative Agent telephonic notice (confirmed promptly in
writing) thereof on the same date that the Borrower was notified by a Bank
pursuant to Section 1.10(a)(ii) or (iii), or (ii) if the affected
Eurodollar Loan is then outstanding, upon at least three Business Days'
notice to the Administrative Agent, require the affected Bank to convert
each such Eurodollar Loan into a Base Rate Loan, provided that if more than
one Bank is affected at any time, then all affected Banks must be treated
the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date of
this Agreement, the adoption or effectiveness of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpre
tation or administration thereof, or compliance by such Bank with any
request or directive regarding capital adequacy (whether or not having the
force of law but with which such Bank customarily complies even though the
failure to comply therewith would not be unlawful) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on such Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy), then from time to time, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower shall,
subject to Section 1.12(b) (to the extent applicable), pay to such Bank
such additional amount or amounts as will compensate such Bank for such
reduction. Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth the
basis of the calculation of such additional amounts, although the failure
to give any such notice shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 1.10(c) upon
the subsequent receipt of such notice.
1.11 Compensation. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other
funds required by such Bank to fund its Eurodollar Loans but excluding in
any event the loss of anticipated profits) which such Bank may sustain:
(i) if for any reason (other than a default by such Bank or the
Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any prepayment, repayment or conversion of any of
its Eurodollar Loans (including as a result of Section 1.10 or the last
paragraph of Section 8) occurs on a date which is not the last day of an
Interest Period applicable thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by the
terms of this Agreement or (y) an election made pursuant to Section
1.10(b).
1.12 Change of Lending Office; Limitation on Indemnities. (a)
Each Bank agrees that, upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), 1.10(c) or 3.04 with respect to
such Bank, it will, if requested by the Borrower, use reasonable efforts
(subject to overall policy considerations of such Bank) to designate
another lending office for any Loan or Commitments affected by such event,
provided that such designation is made on such terms that such Bank and its
lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the
operation of any such Section. Nothing in this Section 1.12 shall affect
or postpone any of the obligations of the Borrower or the right of any Bank
provided in Section 1.10 or 3.04.
(b) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice required by Section 1.10 or 3.04 is given by any
Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the
additional costs of the type described in such Section, such Bank shall not
be entitled to compensation under Section 1.10 or 3.04 for any amounts
incurred or accruing prior to the giving of such notice to the Borrower.
1.13 Replacement of Banks. (x) Upon the occurrence of any
event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c)
or 3.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by the
other Banks or such Bank becoming incapable of making Eurodollar Loans, (y)
if a Bank becomes a Defaulting Bank and/or (z) as provided in Section
11.12(b), in the case of a refusal by a Bank to consent to a proposed
change, waiver, discharge or termination with respect to this Agreement
which has been approved by the Required Banks, the Borrower shall have the
right, if no Default or Event of Default then exists, to replace such Bank
(the "Replaced Bank") with one or more other Eligible Transferee or
Transferees reasonably acceptable to the Administrative Agent, none of
which Transferees shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank"), provided that (i) at
the time of any replacement pursuant to this Section 1.13, the Replacement
Bank shall enter into one or more Assignment and Assumption Agreements
pursuant to Section 11.04(b) (and with all fees payable pursuant to said
Section 11.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire all of the Commitments and outstanding Loans
of the Replaced Bank and, in connection therewith, shall pay to the
Replaced Bank in respect thereof an amount equal to the principal of, and
all accrued interest on, all outstanding Loans of the Replaced Bank and
(ii) all obligations of the Borrower owing to the Replaced Bank (other than
those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall
be paid in full to such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements,
the payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of a
Note executed by the Borrower, the Replacement Bank shall become a Bank
hereunder and the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions applicable to the
Replaced Bank under this Agreement, which shall survive as to such Replaced
Bank as described herein.
SECTION 2. Fees; Commitments.
2.01 Fees. (a) The Borrower agrees to pay to the Administrative
Agent a commitment commission ("Commitment Commission") pro rata for the
account of each Non-Defaulting Bank for the period from and including the
Effective Date to, but not including, the date the Total Commitment has
been terminated, which Commitment Commission shall be equal to 0.20% per
annum, computed at such rate for each day, on the daily amount of such
Bank's Unutilized Commitment. Such Commitment Commission shall be due and
payable in arrears on the first day of each January, April, July and
October and on the date upon which the Total Commitment is terminated.
(b) The Borrower shall pay to the Administrative Agent (x) on
the Effective Date for its own account and/or for distribution to the Banks
such Fees as heretofore agreed in writing by the Borrower and the
Administrative Agent and (y) for its own account such other fees as agreed
to in writing between the Borrower and the Administrative Agent, when and
as due.
(c) All computations of Fees shall be made in accordance with
Section 11.07(b).
2.02 Voluntary Reduction of Commitments. Upon at least thirty
Days' prior written notice (or telephonic notice confirmed in writing) to
the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the
Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Commitment, provided that (w) any
such termination shall apply to proportionately and permanently reduce the
Commitment of each Bank, (x) no such reduction shall reduce any Non-
Defaulting Bank's Commitment to an amount that is less than the outstanding
Loans of such Bank and (y) any partial reduction pursuant to this Section
2.02 shall be in the amount of at least $5,000,000.
2.03 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate on the earlier of (i) the Maturity Date, (ii)
February 28, 1998, unless the Effective Date has occurred on or before such
date, (iii) unless the Required Banks otherwise consent, the date on which
any Change of Control occurs and (iv) the date upon which long term
financing for the Drillship is obtained.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 2.03, the Total Commitment shall terminate on the
date upon which any of the Construction Contract, the Drilling Contract or
the Refundment Guaranty is either terminated or the terms thereof are
materially changed in a manner adverse to the interests of the Banks.
(c) Notwithstanding anything to the contrary contained herein,
and in addition to any other mandatory commitment reductions pursuant to
this Section 2.03, the Total Commitment shall terminate on the date of any
Collateral Disposition.
(d) Each reduction of the Total Commitment pursuant to this
Section 2.03 shall apply proportionately to the Commitment of each Bank.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part, without premium or penalty, from time
to time on the following terms and conditions: (i) the Borrower shall give
the Administrative Agent at the Payment Office written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay
the Loans, the amount of such prepayment and (in the case of Eurodollar
Loans) the specific Borrowing or Borrowings pursuant to which made, which
notice shall be given by the Borrower at least five Business Days prior to
the date of such prepayment of Loans, which notice shall promptly be
transmitted by the Administrative Agent to each of the Banks; (ii) each
partial prepayment of any Borrowing shall be in an aggregate principal
amount of at least $1,000,000 and, if greater, in an integral multiple of
$100,000, provided that no partial prepayment of Eurodollar Loans made pur
suant to a Borrowing shall reduce the aggregate principal amount of the
Loans outstanding pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount; (iii) Eurodollar Loans may only be prepaid
pursuant to this Section 3.01 on the last day of the Interest Period
applicable thereto; and (iv) each prepayment in respect of any Loans made
pursuant to a Borrowing shall be applied pro rata among the Banks which
made such Loans, provided that at the Borrower's election in connection
with any prepayment of Loans pursuant to this Section 3.01, such prepayment
shall not be applied to any Loans of a Defaulting Bank.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) (i) If on any date the sum of the aggregate outstanding
principal amount of Loans made by Non-Defaulting Banks exceeds the Adjusted
Total Commitment as then in effect, the Borrower shall repay on such date
the principal of Loans of Non-Defaulting Banks, in an aggregate amount
equal to such excess.
(ii) If on any date the aggregate outstanding principal amount
of the Loans made by a Defaulting Bank exceeds the Commitment of such
Defaulting Bank, the Borrower shall repay the principal of Loans of such
Defaulting Bank in an amount equal to such excess.
(b) Notwithstanding anything to the contrary contained elsewhere
in this Agreement, all then outstanding Loans shall be repaid in full on
the Maturity Date.
(c) On the date on which any Change of Control occurs, unless
otherwise agreed by the Required Banks, the outstanding principal amount of
the Loans, if any, shall become due and payable in full.
(B) Application:
With respect to each prepayment of Loans required by Section
3.02, the Borrower may designate the Types of Loans which are to be prepaid
and the specific Borrowing or Borrowings pursuant to which made, provided
that (i) Eurodollar Loans may only be repaid if no Base Rate Loans of Non-
Defaulting Banks remain outstanding; (ii) if any prepayment of Eurodollar
Loans made pursuant to a single Borrowing shall reduce the outstanding
Loans made pursuant to such Borrowing to an amount less than the Minimum
Borrowing Amount for such Borrowing, such Borrowing shall be immediately
converted into Base Rate Loans; and (iii) each prepayment of any Loans made
by Non-Defaulting Banks pursuant to a Borrowing shall be applied pro rata
among the Non-Defaulting Banks which made such Loans. In the absence of a
designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage
costs owing under Section 1.11. Notwithstanding the foregoing provisions
of this Section 3.02(B), if at any time the mandatory prepayment of Loans
pursuant to Section 3.02(A) above would result, after giving effect to the
procedures set forth above, in the Borrower incurring breakage costs under
Section 1.11 as a result of Eurodollar Loans being prepaid other than on
the last day of an Interest Period applicable thereto (the "Affected
Eurodollar Loans"), then the Borrower may in its sole discretion initially
deposit a portion (up to 100%) of the amounts that otherwise would have
been paid in respect of the Affected Eurodollar Loans with the
Administrative Agent (which deposit must be equal in amount to the amount
of the Affected Eurodollar Loans not immediately prepaid) to be held as
security for the obligations of the Borrower hereunder pursuant to a cash
collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent and shall provide for investments
satisfactory to the Administrative Agent and the Borrower, with such cash
collateral to be directly applied upon the first occurrence (or
occurrences) thereafter of the last day of an Interest Period applicable to
the relevant Loans that are Eurodollar Loans (or such earlier date or dates
as shall be requested by the Borrower), to repay an aggregate principal
amount of such Loans equal to the Affected Eurodollar Loans not initially
prepaid pursuant to this sentence. Notwithstanding anything to the con
trary contained in the immediately preceding sentence, all amounts
deposited as cash collateral pursuant to the immediately preceding sentence
shall be held for the sole benefit of the Banks whose Loans would otherwise
have been immediately prepaid with the amounts deposited and upon the
taking of any action by the Administrative Agent or the Banks pursuant to
the remedial provisions of Section 8, any amounts held as cash collateral
pursuant to this Section 3.02(B) shall, subject to the requirements of
applicable law, be immediately applied to the Loans.
3.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be
made to the Administrative Agent for the ratable (based on its pro rata
share) account of the Banks entitled thereto, not later than 1:00 P.M. (New
York time) on the date when due and shall be made in immediately available
funds and in lawful money of the United States of America at the Payment
Office, it being understood that written notice by the Borrower to the
Administrative Agent to make a payment from the funds in the Borrower's
account at the Payment Office shall constitute the making of such payment
to the extent of such funds held in such account. Any payments under this
Agreement which are made later than 1:00 P.M. (New York time) shall be
deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in
effect immediately prior to such extension.
3.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or
other defense. Except as provided in Section 3.04(b), all such payments
will be made free and clear of, and without deduction or withholding for,
any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdic
tion or by any political subdivision or taxing authority thereof or therein
with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax imposed on or measured by the net
income or net profits of a Bank pursuant to the laws of the jurisdiction in
which it is organized or managed and controlled or the jurisdiction in
which the principal office or applicable lending office of such Bank is
located or any subdivision thereof or therein) and all interest, penalties
or similar liabilities with respect thereto (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred
to collectively as "Taxes"). If any Taxes are so levied or imposed, the
Borrower agrees to pay the full amount of such Taxes, and such additional
amounts, if any, as may be necessary so that every payment of all amounts
due under this Agreement or under any Note, after withholding or deduction
for or on account of any Taxes, will not be less than the amount provided
for herein or in such Note. If any amounts are payable by the Borrower in
respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes
imposed on or measured by the net income or net profits of such Bank pur
suant to the laws of the jurisdiction in which the principal office or
applicable lending office of such Bank is located or under the laws of any
political subdivision or taxing authority of any such jurisdiction in which
the principal office or applicable lending office of such Bank is located
and for any withholding of taxes as such Bank shall determine are payable
by, or withheld from, such Bank in respect of such amounts so paid to or on
behalf of such Bank pursuant to the preceding sentence and in respect of
any amounts paid to or on behalf of such Bank pursuant to this sentence.
The Borrower will furnish to the Administrative Agent within 45 days after
the date the payment of any Taxes is due pursuant to applicable law certi
fied copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse
such Bank upon its written request, for the amount of any Taxes so levied
or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Administrative Agent on or prior to the date of this
Agreement, or in the case of a Bank that is an assignee or transferee of an
interest under this Agreement pursuant to Section 1.13 or 11.04 (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such
Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this Agreement and under any
Note, or (ii) if the Bank is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
3.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying
to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Note. In addition, each Bank agrees that from time
to time after the date of this Agreement, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in
any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies
of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
3.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall
immediately notify the Borrower and the Administrative Agent of its inabil
ity to deliver any such Form or Certificate, in which case such Bank shall
not be required to deliver such Form or Certificate. Notwithstanding
anything to the contrary contained in Section 3.04(a), but subject to
Section 11.04(b) and the immediately succeeding sentence, (x) the Borrower
shall be entitled, to the extent it is required to do so by law, to deduct
or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from inter
est, fees or other amounts payable hereunder for the account of any Bank
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent
that such Bank has not provided to the Borrower U.S. Internal Revenue
Service Forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to Section
3.04(a) hereof to gross-up payments to be made to a Bank in respect of
income or similar taxes imposed by the United States if (I) such Bank has
not provided to the Borrower the Internal Revenue Service Forms required to
be provided to the Borrower pursuant to this Section 3.04(b) or (II) in the
case of a payment, other than interest, to a Bank described in clause (ii)
above, to the extent that such Forms do not establish a complete exemption
from withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 3.04 and
except as set forth in Section 11.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in
Section 3.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted
or withheld by it as described in the immediately preceding sentence as a
result of any changes after the date of this Agreement in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of income
or similar Taxes, provided such Bank shall provide to the Borrower and the
Administrative Agent any reasonably available applicable IRS tax form (rea
sonably similar in its simplicity and lack of detail to IRS Form 1001)
necessary or appropriate for the exemption or reduction in the rate of such
U.S. federal withholding tax.
(c) The provisions of this Section 3.04 shall be subject to
Section 1.12(b) (to the extent applicable).
SECTION 4. Conditions Precedent. The obligation of the Banks to
make each Loan hereunder is subject, at the time of each such Credit Event
(except as otherwise hereinafter indicated), to the satisfaction of each of
the following conditions:
4.01 Execution of Agreement; Notes. The Effective Date shall
have occurred as provided in Section 11.10 and there shall have been
delivered to the Administrative Agent for the account of each Bank the
appropriate Note executed by the Borrower, and in the amount, maturity and
as otherwise provided herein.
4.02 No Default; Representations and Warranties. At the time of
each Credit Event and also after giving effect thereto, (i) there shall
exist no Default or Event of Default and (ii) all representations and
warranties contained herein or in the other Credit Documents in effect at
such time shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and
as of the date of such Credit Event (except to the extent that such
representations and warranties expressly relate to an earlier date, in
which case they shall be true and correct in all material respects as of
such earlier date).
4.03 Officer's Certificate. On the Effective Date, the
Administrative Agent shall have received a certificate dated such date
signed by the President or any Vice President of the Borrower stating that
there has been no Material Adverse Change in the financial condition of the
Borrower or of Holdings and its Subsidiaries taken as a whole since the
date of the last audited financial statements provided by Holdings or the
Borrower to the Administrative Agent and that all of the applicable
conditions set forth in Sections 4.02, 4.06, 4.07(a) and 4.08 exist as of
such date.
4.04 Opinions of Counsel. On the Effective Date, the
Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Banks and dated the Effective Date,
from (i) Wayne Hillin, Esq., Counsel to the Credit Parties, which opinion
shall cover the matters contained in Exhibit D-1, (ii) White & Case,
special counsel to the Administrative Agent, which opinion shall cover the
matters contained in Exhibit D-2 and (iii) from local counsel satisfactory
to the Administrative Agent as the Administrative Agent may request, which
opinions shall cover the perfection of the security interests granted pursu
ant to the Security Documents and such other matters incident to the
transactions contemplated herein as the Administrative Agent may reasonably
request and shall be in form and substance satisfactory to the
Administrative Agent.
4.05 Corporate Proceedings. (a) On the Effective Date, the
Administrative Agent shall have received from each Credit Party a
certificate, dated the Effective Date, signed by the President or any Vice-
President or other appropriate representative of such Credit Party in the
form of Exhibit E with appropriate insertions and deletions, together with
copies of the certificate of formation, the by-laws, or other organ
izational documents of such Credit Party and the resolutions, or such other
administrative approval, of such Credit Party referred to in such
certificate and all of the foregoing (including each such certificate of
formation, certificate of incorporation and by-laws) shall be reasonably
satisfactory to the Administrative Agent.
(b) On the Effective Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions con
templated by this Agreement and the other Credit Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received all information and copies
of all certificates, documents and papers, including good standing certi
ficates and any other records of corporate proceedings and governmental
approvals, if any, which the Administrative Agent may have reasonably
requested in connection therewith, such documents and papers, where appro
priate, to be certified by proper corporate or governmental authorities.
4.06 Adverse Change, etc. From December 31, 1996 to the
Effective Date, nothing shall have occurred (and neither the Banks nor the
Administrative Agent shall have become aware of any facts or conditions not
previously known) which the Administrative Agent or the Required Banks
shall determine (a) has, or is reasonably likely to have, a material
adverse effect on the rights or remedies of the Banks or the Administrative
Agent, or on the ability of Holdings, the Borrower or any Subsidiary
Guarantor to perform their respective obligations to them, or (b) has, or
is reasonably likely to have, a Material Adverse Effect.
4.07 Litigation. On the Effective Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Credit Document or the transactions
contemplated hereby or thereby or (b) which the Administrative Agent or the
Required Banks shall determine is reasonably likely to (i) have a Material
Adverse Effect or (ii) have a material adverse effect on the rights or
remedies of the Banks hereunder or under any other Credit Document or on
the ability of Holdings, the Borrower or any Subsidiary Guarantor to per
form their respective obligations to the Banks hereunder or under any other
Credit Document.
4.08 Approvals. On the Effective Date, all material necessary
governmental and third party approvals in connection with the transactions
contemplated by the Credit Documents and otherwise referred to herein or
therein shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Required Banks or the
Administrative Agent, materially adverse conditions upon the consummation
of such transactions.
4.09 Fees. On the Effective Date, the Borrower shall have paid
to the Administrative Agent and the Banks all Fees and expenses agreed upon
by such parties to be paid on or prior to such date.
4.10 Security Agreement. On the Effective Date the Security
Agreement in the form of Exhibit F (as modified, amended or supplemented
from time to time in accordance with the terms thereof and hereof, the
"Security Agreement") covering all of the Security Agreement Collateral and
the Financing Statements (Form UCC-1 and/or UCC-3) of each jurisdiction as
may be necessary to perfect the security interests purported to be created
by the Security Agreement shall be in full force and effect and the
Collateral Agent shall have received evidence that all other recordings and
filings of, or with respect to, the Security Agreement, and all other
actions, as may be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the security interests intended to be created by the
Security Agreement have been completed.
4.11 Subsidiary Guaranty. On the Effective Date, the Subsidiary
Guaranty in the form of Exhibit G (as modified, amended or supplemented
from time to time in accordance with the terms hereof and thereof, the
"Subsidiary Guaranty") shall be in full force and effect.
4.12 Construction Contract; Refundment Guaranty; Drilling
Contract; Budget. On or prior to the Effective Date, the Borrower shall
have furnished to the Administrative Agent a true and complete copy of (i)
the Construction Contract, (ii) the Refundment Guaranty, (iii) the Drilling
Contract and (iv) the Budget, each of which shall be in form and substance
satisfactory to the Administrative Agent in all respects.
4.13 Compliance Certificate; Rig Valuation Report. On the
Effective Date, the Borrower shall have delivered to the Administrative
Agent (i) a compliance certificate in the form of Exhibit L to the Existing
Credit Agreement indicating that the Borrower is current with respect to
its obligations under the Existing Credit Agreement and is otherwise in
compliance with all the terms and conditions thereof and (ii) a report from
an Approved Shipbroker setting forth the Market Value of the rigs owned by
Wholly-Owned Subsidiaries of Holdings to the extent necessary to establish
pro forma compliance with Section 7.11, assuming the Facility is fully
funded.
4.14 Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing conforming to the requirements of Section
1.03.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by each Credit Party which is a
party to this Agreement to the Administrative Agent and each of the Banks
that all of the conditions specified above which are applicable in
accordance with their express terms at the time of such acceptance exist as
of that time. All of the certificates, legal opinions and other documents
and papers referred to in this Section 4, unless otherwise specified, shall
be delivered to the Administrative Agent at its Notice Office for the
account of each of the Banks and, except for the Notes, in sufficient
counterparts or copies for each of the Banks and shall be satisfactory in
form and substance to the Administrative Agent.
SECTION 5. Representations, Warranties and Agreements. In order
to induce the Banks to enter into this Agreement and to make the Loans
provided for herein, each Credit Party which is a party hereto makes the
following representations and warranties to, and agreements with, the
Banks, all of which shall survive the execution and delivery of this
Agreement and the making of the Loans (with the making of each Credit Event
thereafter being deemed to constitute a representation and warranty that
the matters specified in this Section 5 are true and correct in all
material respects on and as of the date of each such Credit Event unless
such representation and warranty expressly indicates that it is being made
as of any specific date, in which case such representations and warranties
shall be true and correct in all material respects as of such date):
5.01 Corporate Status. Each Credit Party (i) is a duly organ
ized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business in
which it is engaged, except in such case where the failure to be so duly
organized and validly existing in good standing and to have such corporate
power and authority (x) is not reasonably likely to have a Material Adverse
Effect and (y) is not reasonably likely to have a material adverse effect
on the rights or remedies of the Banks or on the ability of any Credit
Party to perform its obligations to them hereunder and under the other
Credit Documents to which it is a party, and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions
where it is required to be so qualified and where the failure to be so
qualified would have a Material Adverse Effect.
5.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms
and provisions of the Credit Documents to which it is a party and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit
Party has duly executed and delivered each Credit Document to which it is a
party and each such Credit Document constitutes the legal, valid and
binding obligation of such Credit Party enforceable against such Person in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is
sought in equity or at law).
5.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a
party nor compliance with the terms and provisions thereof, nor the
consummation of the transactions contemplated therein (i) will contravene
any applicable provision of any law, statute, rule, regulation, order,
writ, injunction or decree of any court or governmental instrumentality of
the United States or any State thereof, (ii) will result in any breach of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or (other than pursuant to the Security Agreement) result in
the creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of any Credit Party pursuant to the
terms of, any material indenture, mortgage, deed of trust, agreement or
other instrument to which any Credit Party is a party or by which it or any
of its property or assets are bound or to which it is subject or (iii) will
violate any provision of the Certificate of Incorporation or By-Laws of any
Credit Party.
5.04 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of any Credit Party which is a party to
this Agreement threatened with respect to Holdings, the Borrower or any of
their respective Subsidiaries (i) that are likely to have a Material
Adverse Effect or (ii) that are reasonably likely to have a material
adverse effect on the rights or remedies of the Banks or on the ability of
any Credit Party to perform its obligations to them hereunder and under the
other Credit Documents to which it is a party.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be used by the Borrower to finance the interim construction
costs, including owner furnished equipment and capitalized interest
expenses, of constructing a 103,000 metric tons displacement drillship
(Hull No. 1255) (the "Drillship") pursuant to the Construction Contract.
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System and no part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock in violation of Regulation U or to extend credit for
the purpose of purchasing or carrying any Margin Stock.
5.06 Governmental Approvals. Except for the orders, consents,
approvals, licenses, authorizations, validations, recordings, registrations
and exemptions that have already been duly made or obtained and remain in
full force and effect, no order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption
by, any foreign or domestic governmental or public body or authority, or
any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability
of any Credit Document.
5.07 Investment Company Act. None of Holdings, the Borrower or
any of their respective Subsidiaries is an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. None of Holdings, the
Borrower or any of their respective Subsidiaries is a "holding company," or
a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on
behalf of Holdings, the Borrower or any of their respective Subsidiaries in
writing to the Administrative Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Person in writing to any Bank will
be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided. The Projections and pro forma financial
information contained in such materials are based on good faith estimates
and assumptions believed by such Persons to be reasonable at the time made,
it being recognized by the Banks that such Projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such Projections may differ from the projected
results. There is no fact known to any Credit Party which is a party to
this Agreement which is reasonably likely to have a Material Adverse
Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Banks for use in connection
with the transactions contemplated hereby.
5.10 Financial Condition; Financial Statements. (a) On and as
of the Effective Date, on a pro forma basis after giving effect to all
Indebtedness incurred, and to be incurred, and Liens created, and to be
created, by Holdings and its Subsidiaries in connection therewith, (x) the
sum of the assets, at a fair valuation, of Holdings and its Subsidiaries
taken as a whole will exceed its debts, (y) Holdings and its Subsidiaries
taken as a whole will not have incurred or intended to, or believe that
they will, incur debts beyond their ability to pay such debts as such debts
mature and (z) Holdings and its Subsidiaries taken as a whole will not have
unreasonably small capital with which to conduct their respective business.
(b) (i) The consolidated balance sheet of Holdings and its
Subsidiaries at December 31, 1996 and the related consolidated statements
of operations and cash flows of Holdings and its Subsidiaries for the
fiscal year, as the case may be, ended as of said date, which have been
examined by Arthur Andersen LLP, independent certified public accountants,
who delivered an unqualified opinion in respect therewith, and (ii) the
consolidated balance sheet of Holdings and its Subsidiaries as of September
30, 1997, copies of which have heretofore been furnished to each Bank,
present fairly the financial position of such entities at the dates of said
statements and the results for the period covered thereby in accordance
with GAAP (or, in the case of the balance sheet, presents a good faith
estimate of the consolidated financial condition of Holdings and its
Subsidiaries at the date thereof), except to the extent provided in the
notes to said financial statements and, in the case of the September 30,
1997 statements, subject to normal and recurring year-end audit adjustment.
All such financial statements (other than the aforesaid balance sheet) have
been prepared in accordance with GAAP consistently applied except to the
extent provided in the notes to said financial statements. Nothing has
occurred since December 31, 1996 that has had or is reasonably likely to
have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the
notes thereto described in Section 5.10(b), there were as of the Effective
Date no liabilities or obligations with respect to Holdings, the Borrower
or any of their respective Subsidiaries of a nature (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, would be material to Holdings and its
Subsidiaries taken as a whole, except as incurred subsequent to December
31, 1996 in the ordinary course of business consistent with past practices.
5.11 Security Interests. On and after the Effective Date, the
Security Agreement creates, as security for the Obligations purported to be
secured thereby, a valid and enforceable perfected security interest in and
Lien on all of the Collateral subject thereto, to the extent perfection of
a security interest or Lien is governed by Article 8 or Article 9 of the
UCC (as defined in the Security Agreement), and subject to no other Liens
(except that the Collateral may be subject to Permitted Liens), in favor of
the Collateral Agent for the benefit of the Banks. No filings or
recordings are required in order to perfect the security interests created
under the Security Agreement except for filings or recordings required in
connection with the Security Agreement which shall have been made upon or
prior to (or are the subject of arrangements, satisfactory to the
Administrative Agent, for filing on or promptly after the date of) the
execution and delivery thereof.
5.12 Tax Returns and Payments. Each of Holdings, the Borrower
and each of their respective Subsidiaries has filed all federal income tax
returns and all other material tax returns, domestic and foreign, required
to be filed by it and has paid all material taxes and assessments payable
by it which have become due, other than those not yet delinquent and except
for those contested in good faith. Holdings, the Borrower and each of
their respective Subsidiaries has paid, or has provided adequate reserves
with respect thereto, in accordance with GAAP, for the payment of, all
federal, state and foreign income taxes applicable for all prior fiscal
years and for the current fiscal year to the date hereof.
5.13 Compliance with ERISA. (a) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has
an accumulated or waived funding deficiency or has applied for an extension
of any amortization period within the meaning of Section 412 of the Code;
all contributions required to be made with respect to a Plan and a Foreign
Pension Plan have been timely made; neither Holdings nor the Borrower nor
any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any
material liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any
liability (including any indirect, contingent, or secondary liability)
under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate or appoint a trustee to
administer any Plan; no condition exists which presents a material risk to
Holdings, the Borrower or any of their respective Subsidiaries or any ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to
the foregoing provisions of ERISA and the Code; or except as would not
reasonably be expected to have a Material Adverse Effect, no lien imposed
under the Code or ERISA on the assets of any Credit Party or any ERISA
Affiliate exists or is reasonably likely to arise on account of any Plan;
and Holdings, the Borrower and their respective Subsidiaries do not
maintain or contribute to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA) the
obligations with respect to which are not properly recognized or disclosed
in such entity's consolidated financial statements and notes related
thereto.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. None of Holdings, the Borrower or any of their respective
Subsidiaries has incurred any obligation in connection with the termination
of or withdrawal from any Foreign Pension Plan.
5.14 Subsidiaries. Annex III lists each Subsidiary of Holdings
(and the direct and indirect ownership interest of Holdings therein), in
each case existing on the Effective Date.
5.15 Patents, etc. Holdings and each of its Subsidiaries has
obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions,
that are necessary for the operation of their respective businesses taken
as a whole as presently conducted.
5.16 Pollution and Other Regulations. (a) Each of Holdings and
its Subsidiaries is in substantial compliance with all applicable
Environmental Laws governing its business for which failure to comply is
reasonably likely to have a Material Adverse Effect, and neither Holdings
nor any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing. All licenses,
permits, registrations or approvals required for the business of Holdings
and each of its Subsidiaries, as conducted as of the Effective Date, under
any Environmental Law have been secured and Holdings and each of its
Subsidiaries is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply
therewith is not likely to have a Material Adverse Effect. Neither
Holdings nor any of its Subsidiaries is in any respect in noncompliance
with, breach of or default under any writ, order, judgment, injunction, or
decree to which Holdings or such Subsidiary is a party or which would
affect the ability of Holdings or such Subsidiary to operate any Real
Property, offshore drilling rig or other facility and no event has occurred
and is continuing which, with the passage of time or the giving of notice
or both, would constitute noncompliance, breach of or default thereunder,
except in each such case, such noncompliance, breaches or defaults as are
not likely to, in the aggregate, have a Material Adverse Effect. There are
as of the Effective Date no Environmental Claims pending or, to the best
knowledge of any Credit Party which is a party to this Agreement, threat
ened, against Holdings or any of its Subsidiaries wherein an unfavorable
decision, ruling or finding would be reasonably likely to have a Material
Adverse Effect. There are no facts, circumstances, conditions or
occurrences on any Real Property, offshore drilling rig or other facility
owned or operated by Holdings or any of its Subsidiaries that is reasonably
likely (i) to form the basis of an Environmental Claim against Holdings,
any of its Subsidiaries or any Real Property, offshore drilling rig or
other facility owned by Holdings or any of its Subsidiaries, or (ii) to
cause such Real Property, offshore drilling rig or other facility to be
subject to any restrictions on its ownership, occupancy, use or transfer
ability under any Environmental Law, except in each such case, such Environ
mental Claims or restrictions that individually or in the aggregate are not
reasonably likely to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property,
offshore drilling rig or other facility at any time owned or operated by
Holdings or any of its Subsidiaries, or (ii) released on or from any such
Real Property, offshore drilling rig or other facility, in each case where,
to the best knowledge of any Credit Party which is a party to this
Agreement, such occurrence or event individually or in the aggregate is
reasonably likely to have a Material Adverse Effect.
5.17 Properties. (a) Holdings and each of its Subsidiaries has
title to all material properties owned by them including all property
reflected in the consolidated balance sheet of Holdings and its Subsidi
aries as referred to in Section 5.10(b), free and clear of all Liens, other
than (i) as referred to in the consolidated balance sheet or in the notes
thereto or (ii) Permitted Liens.
(b) Annex IV sets forth all the offshore drilling rigs and other
vessels owned or chartered by Holdings and each of its Subsidiaries on the
Effective Date, and identifies the registered owner, flag, official or
patent number, as the case may be, the home port, class, location and
operating status on the Effective Date, and, if chartered-in by Holdings or
any of its Subsidiaries, the name and address of the owner of such
chartered-in vessel.
5.18 Labor Relations. Neither Holdings nor its Subsidiaries is
engaged in any unfair labor practice that is reasonably likely to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or threatened against
any of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to
the best knowledge of any Credit Party which is a party to this Agreement,
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against Holdings or any of its Subsidiaries or, to the
best knowledge of any Credit Party which is a party to this Agreement,
threatened against Holdings or any of its Subsidiaries and (iii) no union
representation petition existing with respect to the employees of Holdings
or any of its Subsidiaries and no union organizing activities are taking
place, except with respect to any matter specified in clause (i), (ii) or
(iii) above, either individually or in the aggregate, such as is not
reasonably likely to have a Material Adverse Effect.
5.19 Existing Indebtedness. Annex IV sets forth a true and
complete list of all Indebtedness of Holdings and each of its Subsidiaries
on the Effective Date and which is to remain outstanding after the
Effective Date (excluding the Loans, the "Existing Indebtedness"), in each
case showing the aggregate principal amount thereof and the name of the
respective borrower (or issuer) and any other entity which directly or
indirectly guarantees such debt.
5.20 Citizenship. Each Credit Party which owns and/or operates
offshore drilling vessel(s) is qualified to own and operate such drilling
vessel(s) under the laws of the respective jurisdiction(s) in which such
drilling vessel(s) is/are registered.
5.21 Rig Classification. Each offshore drilling vessel owned or
leased by Holdings and its Subsidiaries is classified in the highest class
available for vessels of its age and type with the American Bureau of
Shipping, Inc. or another internationally recognized classification society
reasonably acceptable to the Administrative Agent, free of any material
outstanding requirements or recommendations, other than such requirements
or recommendations which if not cured by the owner thereof would not
materially diminish such vessel's value.
SECTION 6. Affirmative Covenants. Each Credit Party which is a
party to this Agreement covenants and agrees that on the Effective Date and
thereafter for so long as this Agreement is in effect (and until the
Commitments have terminated, no Notes are outstanding and the Loans,
together with interest, Fees and all other Obligations incurred hereunder,
are paid in full):
6.01 Information Covenants. Holdings and/or the Borrower will
furnish to each Bank:
(a) Annual Financial Statements. (i) Within 90 days after the
close of each fiscal year of Holdings, the consolidated balance sheet
of Holdings and its Subsidiaries, as at the end of such fiscal year
and the related consolidated statements of operations and of cash
flows for such fiscal year and (ii) within 180 days after the close of
each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower and its Subsidiaries, as at the end of such fiscal year
and the related consolidated statements of operations and cash flows
for such fiscal year; in each case including the amount of
Consolidated Capital Expenditures made during such fiscal year, set
ting forth comparative consolidated figures for the preceding fiscal
year, and, in the case of financial statements delivered pursuant to
clause (i) above, examined by independent certified public
accountants of recognized national standing whose opinion shall not be
qualified as to the scope of audit and as to the status of Holdings
and its Subsidiaries as a going concern, together with a certificate
of such accounting firm stating that in the course of its regular
audit of the business of Holdings and the Borrower, which audit was
conducted in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge of any Default or Event
of Default which has occurred and is continuing or, if in the opinion
of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year, the consolidated
balance sheet of Holdings and its Subsidiaries, as at the end of such
quarterly period and the related consolidated statements of operations
and of cash flows for such quarterly period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly
period, including the amount of Consolidated Capital Expenditures made
during such period, and in each case setting forth comparative
consolidated figures for the related period in the prior fiscal year,
all of which shall be unaudited, but certified by the chief financial
officer or controller of Holdings, subject to changes resulting from
audit and normal year-end audit adjustments.
(c) Rig Status Report. As soon as available and in any event
within 60 days after the end of the first three fiscal quarters of
Holdings and within 90 days after the end of the fourth fiscal
quarter, a report (in form satisfactory to the Administrative Agent)
detailing (i)(A) the then current location of each of the offshore
drilling rigs owned or leased by Holdings and its Subsidiaries, (B)
the then current term of and parties to any contract of any such
offshore drilling rig, and (C) the then current day rate with respect
to any such contract and (ii) for the previous fiscal quarter, the
average day rates and utilization for each such offshore drilling rig.
(d) Construction Report Within 10 days after the close of each
fiscal month of Holdings, a report (in form and substance satisfactory
to the Administrative Agent) detailing the then current status of the
construction of the Drillship, together with an updated budget and
timetable and analysis of any construction delays and/or budget
overruns.
(e) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 6.01(a) and (b), a
certificate of Holdings and/or the Borrower signed by its chief finan
cial officer, controller or other Authorized Officer in the form of
Exhibit H to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature
and extent thereof, which certificate shall set forth the calculations
required to establish whether Holdings and its Subsidiaries were in
compliance with the provisions of Section 7 as at the end of such
fiscal period.
(f) Notice of Default or Litigation. Promptly, and in any event
within (x) three Business Days after any Credit Party which is a party
to this Agreement obtains knowledge thereof, notice of the occurrence
of any event which constitutes a Default or Event of Default which
notice shall specify the nature thereof, the period of existence
thereof and what action Holdings or any of its Subsidiaries proposes
to take with respect thereto and (y) ten Business Days after any
Credit Party which is a party to this Agreement obtains knowledge
thereof, notice of the commencement of or any significant development
in any litigation or governmental proceeding pending against Holdings
or the Borrower or any of their respective Subsidiaries which is
likely to have a Material Adverse Effect or is likely to have a
material adverse effect on the ability of Holdings, the Borrower or
any Guarantor to perform its obligations hereunder or under any other
Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof and
following such time as management shall have had reasonable time to
respond thereto, a copy of each formal report or "management letter"
submitted to any Credit Party which is a party to this Agreement by
its independent accountants in connection with any annual, interim or
special audit made by it of the books of any Credit Party which is a
party to this Agreement.
(h) SEC Reports. Promptly upon transmission thereof, copies of
any material filings and registration with, and reports to, the SEC by
Holdings or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as Holdings or any
of its Subsidiaries shall generally send to analysts or all holders of
their capital stock in their capacity as such holders (in each case to
the extent not theretofore delivered to the Banks pursuant to this
Agreement).
(i) Other Information. From time to time, such other
information or documents (financial or otherwise) as the
Administrative Agent on its own behalf or on behalf of the Required
Banks may reasonably request.
6.02 Books, Records and Inspections. Holdings will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice to the
chief financial officer, controller or any other Authorized Officer of
Holdings or the Borrower, officers and designated representatives of the
Administrative Agent or the Required Banks, to the extent necessary, to
examine the books of account of Holdings and any of its Subsidiaries and
discuss the affairs, finances and accounts of Holdings and of any of its
Subsidiaries with, and be advised as to the same by, its and their officers
and independent accountants, all at such reasonable times and intervals and
to such reasonable extent as the Administrative Agent or the Required Banks
may desire.
6.03 Insurance. Holdings will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
in such amounts with carriers of such insurance industry ratings, covering
such risks and liabilities and with such deductibles or self-insured reten
tions as are in accordance with normal industry practice for similarly
situated insureds [discuss insurance required with respect to the
Drillship].
6.04 Payment of Taxes. Holdings will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien or charge upon any properties of Holdings or
any of its Subsidiaries, provided that neither Holdings nor any Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim
which is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
6.05 Consolidated Corporate Franchises. Holdings will do, and
will cause each of its Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence,
material rights and authority, unless the failure to do so is not
reasonably likely to have a Material Adverse Effect, provided that any
transaction permitted by Section 7.02 will not constitute a breach of this
Section 6.05.
6.06 Compliance with Statutes, etc. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property other than those the non-
compliance with which would not have a Material Adverse Effect or would not
have a material adverse effect on the ability of any Credit Party to
perform its obligations under any Credit Document to which it is party.
6.07 Good Repair. Except for offshore drilling rigs currently
under or scheduled to be repaired or which have been damaged or have
suffered a casualty as to which (within a reasonable period of time)
Holdings and/or the Borrower have not made a determination whether to
replace or repair, or if the determination to replace or repair has been
made, as to which such replacement or repairs are being undertaken, subject
to availability of equipment, materials and/or repair facilities, Holdings
will, and will cause each of its Subsidiaries to, keep its properties and
equipment used or useful in its business, in whomsoever's possession they
may be, in good repair, working order and condition, normal wear and tear
excepted, and, subject to Section 7.02, see that from time to time there
are made in such properties and equipment all necessary and proper repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto to the extent and in the manner useful or customary for companies
in similar businesses.
6.08 End of Fiscal Years; Fiscal Quarters. Holdings will, for
financial reporting purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on
March 31, June 30, September 30 and December 31 of each year.
6.09 Use of Proceeds. All proceeds of the Loans shall be used
as provided in Section 5.05.
6.10 Additional Rig Valuations. At any time as may be requested
by the Administrative Agent on behalf of the Required Banks (but in no
event in excess of three times in any fiscal year of Holdings (without
taking into account the right of Holdings or the Borrower to retain a
second Approved Shipbroker in accordance with immediately succeeding
sentence)) and at the expense of the Borrower, Holdings or the Borrower
shall retain the Approved Shipbroker requested by the Administrative Agent
to supply an updated written report setting forth the Market Value of the
Fleet (or a portion thereof) at such time, which report shall be
substantially in the form delivered pursuant to Section 4.13(ii) and shall
confirm compliance with Section 7.11. Holdings or the Borrower may retain
a second Approved Shipbroker of its own choosing at such time and at its
own expense to supply a second written report setting forth the Market
Value of the Fleet. Promptly upon receipt thereof Holdings and/or the
Borrower shall deliver copies of each such report to the Banks.
6.11 Further Assurances. (a) Holdings will, and will cause
each of its Subsidiaries to, at the expense of the Borrower, make, execute,
endorse, acknowledge, file and/or deliver to the Collateral Agent or the
Security Trustee, as the case may be, from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing state
ments, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral as the Collateral Agent may reasonably require.
(b) Each Credit Party which is a party to this Agreement agrees
that each action required above by this Section 6.11 shall be completed as
soon as possible, but in no event later than 60 days after such action is
requested to be taken by the Administrative Agent or the Required Banks,
provided that in no event shall any Credit Party be required to take any
action, other than using its reasonable commercial efforts without any
material expenditure, to obtain consents or other actions from third
parties with respect to its compliance with this Section 6.11.
6.12 ERISA. As soon as possible and, in any event, within 10
days after Holdings, the Borrower or any of their respective Subsidiaries
or any ERISA Affiliate knows or has reason to know of the occurrence of any
of the following, Holdings or the Borrower will deliver to each of the
Banks a certificate of the Chief Financial Officer of Holdings or the
Borrower setting forth details as to such occurrence and the action, if
any, that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate
is required or proposes to take, together with any notices required or
proposed to be given to or filed with or by Holdings, the Borrower, such
Subsidiary, the ERISA Affiliate, the PBGC, or a Plan participant or the
Plan administrator with respect thereto: that a Reportable Event has
occurred; that an accumulated funding deficiency has been incurred or an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period
under Section 412 of the Code or Section 302 of ERISA with respect to a
Plan; that a contribution required to be made to a Plan or Foreign Pension
Plan has not been timely made; that a Plan has been or may be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA;
that a Plan has an Unfunded Current Liability giving rise to a lien under
ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan, that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that Holdings, the Borrower, any of their
respective Subsidiaries or any ERISA Affiliate will or may incur any
liability (including any indirect contingent or secondary liability) to or
on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a
Plan under Section 401(a)(29), 4971 or 4975 of the Code or Section 409 or
502(i) or 502(l) of ERISA; or that Holdings, the Borrower or any Subsidiary
may incur any material unrecognized liability pursuant to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA). Upon request, Holdings or the Borrower
will deliver to each of the Banks a complete copy of the annual report
(Form 5500) of each Plan (including to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed
with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof,
copies of annual reports, and any material notices received by Holdings,
the Borrower or any of their respective Subsidiaries or any ERISA Affiliate
from any governmental agency with respect to any Plan shall be delivered to
the Banks no later than 10 days after the date such report has been filed
with the Internal Revenue Service or such notice has been received by
Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as
applicable.
SECTION 7. Negative Covenants. Each Credit Party which is a
party to this Agreement hereby covenants and agrees that as of the
Effective Date and thereafter for so long as this Agreement is in effect
and until the Commitments have terminated, no Notes are outstanding and the
Loans, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
7.01 Changes in Business. Holdings and the Borrower will not,
and Holdings will not permit any of its Subsidiaries to, materially alter
the character of the business of Holdings and its Subsidiaries taken as a
whole from that conducted on the Effective Date (including any material
expansion outside of the offshore contract drilling and production
business), provided that this Section 7.01 shall not restrict the engaging
in business ancillary to the offshore contract drilling and production
business or the fulfillment by the Borrower or any other Credit Party of
their respective obligations under the Construction Contract.
7.02 Consolidation, Merger or Sale of Assets, etc. Holdings and
the Borrower will not, and Holdings will not permit any Guarantor to, wind
up, liquidate or dissolve its affairs, or enter into any transaction of
merger or consolidation, sell or otherwise dispose of all or substantially
all of its property or assets or of any Collateral or agree to do any of
the foregoing at any future time, except that the following shall be
permitted:
(a) (i) any Subsidiary of Holdings (other than the Borrower) may
be merged or consolidated with or into, or be liquidated into, the
Borrower (so long as the Borrower is the surviving corporation) or any
Guarantor (so long as such Guarantor is the surviving corporation) and
(ii) all or any part of the business, properties and assets of
Holdings or any of its Subsidiaries (other than the Borrower) may be
conveyed, leased, sold or transferred to the Borrower or any Guarantor
or any Subsidiary of the Borrower or any Guarantors, provided that if
any Collateral is transferred pursuant to this Section 7.02(a),
Holdings, Parent and/or the Borrower shall provide the Administrative
Agent with ten Business Days' notice prior to such transfer, and the
Borrower or such Subsidiary, as the case may be, owning the Collateral
after such transfer shall take all action reasonably requested by the
Collateral Agent in respect of the continued priority and perfection
of such Collateral;
(b) Holdings may liquidate or dissolve or consolidate or merge
into another entity, provided (i) Holdings is the successor or
survivor in respect of such merger, and after giving effect thereto
Holdings will be in full compliance with the terms of this Agreement
and (ii) Standard & Poor's shall have affirmed in writing that such
transaction will not impair Holdings' implied senior debt rating as
such debt rating is in effect immediately prior to the announcement or
consummation of such liquidation, dissolution, consolidation or
merger;
(c) other sales or dispositions of assets provided that (x) each
such sale or disposition shall be in an amount at least equal to the
fair market value thereof (as determined by the Board of Directors of
the Borrower in the case of sales in excess of $20,000,000) and for
proceeds consisting solely of not less than 100% cash and (y) no such
sale or disposition shall constitute the sale or disposition of all or
substantially all of the combined assets of Holdings and its
Subsidiaries taken as a whole; and
(d) other sales or dispositions of assets in each case to the
extent the Required Banks have consented in writing thereto and
subject to such conditions as may be set forth in such consent.
To the extent any Collateral is sold or otherwise disposed of (to
any Person other than Holdings and its Subsidiaries) as permitted by this
Section 7.02, such Collateral shall be sold or otherwise disposed of free
and clear of the Liens created by the Security Agreement, and the
Administrative Agent, the Collateral Agent shall be authorized to take any
actions deemed appropriate in order to effect the foregoing.
7.03 Liens on Assets. Holdings will not and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any of its assets, whether now owned or hereafter
acquired, or sell any such assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such assets (including sales of
accounts receivable or notes with recourse to Holdings or any of its
Subsidiaries) or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice
of Lien on any asset under any similar recording or notice statute; except
that the following shall be permitted:
(a) Liens on assets granted pursuant to or otherwise permitted
by the Existing Credit Agreement;
(b) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves with respect thereto, in accordance with GAAP, have
been established;
(c) Liens imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics'
Liens, statutory landlord's Liens, maritime Liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of such Collateral
or materially impair the use thereof in the operation of the business
of Holdings, the Borrower or any of their respective Subsidiaries or
(y) which are being contested in good faith by appropriate proceedings
(including the providing of bail), which proceedings have the effect
of preventing the forfeiture or sale of the Collateral subject to such
Lien or procuring the release of the Collateral subject to such Lien
from arrest or detention;
(d) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(e) Liens existing on the Effective Date and listed on Annex V,
without giving effect to any subsequent extensions or renewals
thereof;
(f) Liens arising from judgments, decrees or attachments (or
securing of appeal bonds with respect thereto) to the extent not
covered by insurance, so long as the obligations in connection
therewith do not exceed $5,000,000 in the aggregate and otherwise in
circumstances not constituting an Event of Default under Section 8.08;
(g) any interest or title of a lessor or charterer under any
lease or charter (i) in existence on the Effective Date, (ii) among
Holdings and/or any of its Subsidiaries or (iii) otherwise permitted
by this Agreement;
(h) immaterial Liens on any Real Property of Holdings or any of
its Subsidiaries; and
(i) Liens on Rig 41 and the Earnings and insurances relating to
Rig 41 securing Title XI Financing incurred pursuant to the Borrower's
upgrade or refit of Rig 41.
7.04 Indebtedness of Arcade. Holdings will not permit Arcade to
contract, create, incur, assume or suffer to exist any Indebtedness,
except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness incurred pursuant to the Existing Credit
Agreement;
(iii) Indebtedness of Arcade existing on the Effective Date to the
extent the same is listed on Annex V, but no refinancings or renewals
thereof;
(iv) Indebtedness evidenced by Capitalized Lease Obligations so
long as the aggregate principal amount of Capitalized Lease
Obligations outstanding at any time pursuant to this Section 7.04 does
not exceed $1,000,000 in the aggregate; and
(v) Indebtedness subject to Liens permitted under Section 7.03(e).
7.05 Dividends; Restrictions on Subsidiaries,
etc. (a) Holdings will not, and will not permit any of its Subsidiaries
to, declare or pay any dividends (other than dividends (i) payable solely
in capital stock of Holdings or rights in respect thereof or (ii)
constituting spin-offs of divisions or direct or indirect operating
subsidiaries of Holdings (other than Arcade and the Borrower and their
direct or indirect Subsidiaries)) or return any capital to, the stock
holders of Holdings or authorize or make any other distribution, payment or
delivery of property or cash to the stockholders of Holdings as such, or
redeem, retire, purchase or otherwise acquire, directly or indirectly, for
a consideration, any shares of any class of the capital stock of Holdings
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any
funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class
of the capital stock of Holdings, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by Holdings with
respect to its capital stock) (all of the foregoing "Dividends"), except
that:
(i) Holdings may pay or make Dividends on any issue of preferred
stock whether now existing or hereafter issued; and
(ii) so long as no Default or Event of Default exists or would
result therefrom, Holdings shall be permitted to pay or make Dividends
in an amount not to exceed 50%, in the aggregate, of Consolidated Net
Income on a cumulative basis beginning October 1, 1996.
(b) Holdings and the Borrower will not, and Holdings will not
permit any Guarantor to, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or otherwise restricts (A) the
ability of any Guarantor to (a) pay dividends or make other distributions
or pay any Indebtedness owed to the Borrower or any Guarantor, or (b) make
loans or advances to the Borrower or any Subsidiary Guarantor, (c) transfer
any of its properties or assets to the Borrower or any Guarantor or (B) the
ability of the Borrower or any Guarantor to create, incur, assume or suffer
to exist any Lien upon its property or assets to secure the Obligations,
other than prohibitions or restrictions existing under or by reason of:
(i) this Agreement and the other Credit Documents;
(ii) the Existing Credit Agreement;
(iii) applicable law;
(iv) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(v) any restriction or encumbrance with respect to a Guarantor
imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all of the capital stock
or assets of such Guarantor, so long as such sale or disposition is
permitted under this Agreement; and
(vi) Permitted Liens and any documents or instruments governing the
terms of any Indebtedness or other obligations secured by any such
Liens, provided that such prohibitions or restrictions apply only to
the assets subject to such Liens.
7.06 Transactions with Affiliates. Holdings and the Borrower
will not, and Holdings will not permit any of its Subsidiaries to, enter
into any transaction or series of transactions after the Effective Date
whether or not in the ordinary course of business, with any Affiliate other
than on terms and conditions substantially as favorable to Holdings or such
Subsidiary as would be obtainable by Holdings or such Subsidiary at the
time in a comparable arm's-length transaction with a Person other than an
Affiliate, provided that the foregoing restrictions shall not apply to (i)
employment arrangements entered into in the ordinary course of business
with officers of Holdings and its Subsidiaries, (ii) customary fees paid to
members of the Board of Directors of Holdings and of its Subsidiaries,
(iii) capital contributions made by Holdings to the Borrower, (iv) all
transactions between or among Holdings and its Subsidiaries, (v) all
immaterial transactions with the officers or members of the Board of
Directors of Holdings or its Subsidiaries and (vi) all immaterial
transactions with Affiliates.
7.07 Vessel Management. Holdings shall not and shall not permit
any of its Subsidiaries to, contract out the management of a material
portion of the Fleet to third parties.
7.08 Coverage Ratio. Holdings will not permit the ratio of (i)
Consolidated EBITDAR to (ii) the sum of Consolidated Interest Expense plus
Consolidated Rent Expense for any period of four consecutive fiscal
quarters of Holdings (taken as one accounting period) to be less than
3.50:1.00.
7.09 Working Capital. Holdings will not permit Working Capital
on the last day of any fiscal quarter of Holdings to be less than $0 if
Working Capital was less than $0 on the last day of the immediately
preceding fiscal quarter.
7.10 Leverage Ratio. Holdings will not permit the Leverage
Ratio at the end of any fiscal quarter to be greater than 0.50:1.00.
7.11 Fleet Market Value. Holdings will not permit the aggregate
Market Value of the portion of the Fleet owned by Wholly-Owned Subsidiaries
of Holdings at any time to be less than 1.6 times the amount of
Consolidated Funded Indebtedness.
7.12 Restrictions on Amendments to Other Agreements; Certain
Prepayments of Other Indebtedness. Holdings shall not permit the
Construction Contract or the Refundment Guaranty to be amended in any way
which may be adverse to the interests of the Banks without the consent of
the Required Banks.
SECTION 8. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans and such default shall continue for
two or more Business Days or (ii) default, and such default shall continue
for three or more Business Days after notice by the Administrative Agent or
the Required Banks, in the payment when due of any interest on the Loans or
any Fees or any other amounts owing hereunder or under any other Credit
Document; or
8.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document
or in any statement or certificate delivered or required to be delivered
pursuant hereto or thereto shall prove to be untrue in any material respect
on the date as of which made or deemed made; or
8.03 Covenants. Holdings or the Borrower shall (a) default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 6.08 or Section 7 or (b) default in the due
performance or observance by it of any term, covenant or agreement (other
than those referred to in Section 8.01, 8.02 or clause (a) of this Section
8.03) contained in this Agreement and such default shall continue
unremedied for a period of at least 30 days after notice to the Borrower by
the Administrative Agent or the Required Banks; or
8.04 Default Under Other Agreements. (a) Holdings, the
Borrower or any of their respective Subsidiaries shall (i) default in any
payment with respect to any Indebtedness (other than the Obligations)
beyond the period of grace, if any, applicable thereto or (ii) default in
the observance or performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition results in
acceleration or the renegotiation of the material payment terms of any such
Indebtedness to become due prior to its stated maturity, (b) any such
Indebtedness of Holdings or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof,
provided that it shall not constitute an Event of Default pursuant to this
Section 8.04 unless the aggregate principal amount of such Indebtedness in
default exceeds $5,000,000 at any one time or (c) an "Event of Default" (as
defined in the Existing Credit Agreement) shall occur; or
8.05 Bankruptcy, etc. Holdings, the Borrower or any of their
respective Subsidiaries shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or
an involuntary case is commenced against Holdings, the Borrower or any of
their respective Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or substantially all of the property of Holdings,
the Borrower or any of their respective Subsidiaries; or Holdings, the
Borrower or any of their respective Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to Holdings,
the Borrower or any of their respective Subsidiaries; or there is commenced
against Holdings, the Borrower or any of their respective Subsidiaries any
such case or proceeding which remains undismissed for a period of 60 days;
or Holdings, the Borrower or any of their respective Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; Holdings, the Borrower or
any of their respective Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 60 days; or Holdings, the
Borrower or any of their respective Subsidiaries makes a general assignment
for the benefit of creditors; or any corporate action is taken by Holdings,
the Borrower or any of their respective Subsidiaries for the purpose of
effecting any of the foregoing; or
8.06 Security Agreement. (i) The Security Agreement shall,
after the execution and delivery thereof, cease to be in full force and
effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the
Collateral Agent or (ii) any Credit Party shall default in any respect in
the due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to the Security Agreement and
such default (unless such default creates an Event of Default under clause
(i) above) shall continue unremedied for a period of at least 30 days after
notice to the Borrower by the Administrative Agent or the Required Banks;
or
8.07 Guaranty. Any Guaranty or any provision thereof shall
cease to be in full force and effect, or any Guarantor or any Person acting
by or on behalf of such Guarantor shall deny or disaffirm all or any
portion of such Guarantor's obligation thereunder, or any Guarantor shall
default in the observance of any term, covenant or agreement on its part to
be performed or observed pursuant thereto and such default (other than any
default arising from a failure to make any payment thereunder) shall
continue unremedied for a period of at least 30 days after notice to the
Borrower by the Administrative Agent or the Required Banks; or
8.08 Judgments. One or more judgments or decrees shall be
entered against Holdings, the Borrower or any other Credit Party involving
a liability of $1,000,000 or more in the case of any one such judgment or
decree and $5,000,000 or more in the aggregate for all such judgments and
decrees for Holdings, the Borrower and the other Credit Parties (not paid
or to the extent not covered by insurance) and any such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof; or
8.09 Employee Benefit Plans. (a)(i) A contribution required to
be made with respect to any (x) employee pension benefit plan (as defined
in Section 3(2) of ERISA) maintained or contributed to by (or to which
there is an obligation to contribute of) Holdings or a Subsidiary or an
ERISA Affiliate or (y) Foreign Pension Plan has not been timely made or
(ii) Holdings or any Subsidiary has incurred or is likely to incur
liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) that provide benefits to retired
employees or other former employees (other than as required by Section 601
of ERISA) or employee pension benefit plans (as defined in Section 3(2) of
ERISA); (b) there shall result from any such event or events the imposition
of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) which lien, security
interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, will have a Material Adverse Effect; or
8.10 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent shall, upon the
written request of the Required Banks, by written notice to the Borrower,
take any or all of the following actions, without prejudice to the rights
of the Administrative Agent or any Bank to enforce its claims against any
Credit Party, except as otherwise specifically provided for in this
Agreement (provided that, if an Event of Default specified in Section 8.05
shall occur with respect to the Borrower, the result which would occur upon
the giving of written notice by the Administrative Agent as specified in
clauses (i) and (ii) below shall occur automatically without the giving of
any such notice): (i) declare the Total Commitment terminated, whereupon
the Commitment of each Bank shall forthwith terminate immediately and any
Commitment Commission or any other Fees shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans and all obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Credit Party; (iii) enforce,
as Collateral Agent (or direct the Collateral Agent to enforce), any or all
of the Liens and security interests created pursuant to the Security
Documents; and (iv) apply any amounts held as cash collateral pursuant to
Section 3.02 or this Section 8 to repay Obligations.
SECTION 9. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the singular
number the plural and in the plural the singular:
"Adjusted Commitment" for each Non-Defaulting Bank shall mean at
any time the product of such Bank's Adjusted Percentage and the Adjusted
Total Commitment.
"Adjusted Percentage" shall mean (x) at a time when no Bank
Default exists, for each Bank such Bank's Percentage and (y) at a time when
a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and
(ii) for each Bank that is a Non-Defaulting Bank, the percentage determined
by dividing such Bank's Commitment at such time by the Adjusted Total
Commitment at such time, it being understood that all references herein to
Commitments and the Adjusted Total Commitment at a time when the Total
Commitment or Adjusted Total Commitment, as the case may be, has been
terminated shall be references to the Commitments or Adjusted Total
Commitment, as the case may be, in effect immediately prior to such termin
ation, provided that (A) no Bank's Adjusted Percentage shall change upon
the occurrence of a Bank Default from that in effect immediately prior to
such Bank Default if, after giving effect to such Bank Default and any
repayment of Loans at such time pursuant to Section 3.02(A)(a) or
otherwise, the aggregate outstanding principal amount of Loans of all Non-
Defaulting Banks exceeds the Adjusted Total Commitment; (B) the changes to
the Adjusted Percentage that would have become effective upon the occur
rence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the aggregate outstanding
principal amount of the Loans of all Non-Defaulting Banks is equal to or
less than the Adjusted Total Commitment; and (C) if (i) a Non-Defaulting
Bank's Adjusted Percentage is changed pursuant to the preceding clause (B)
and (ii) any repayment of such Bank's Loans that were made during the
period commencing after the date of the relevant Bank Default and ending on
the date of such change to its Adjusted Percentage must be returned to the
Borrower as a preferential or similar payment in any bankruptcy or similar
proceeding of the Borrower, then the change to such Non-Defaulting Bank's
Adjusted Percentage effected pursuant to said clause (B) shall be reduced
to that positive change, if any, as would have been made to its Adjusted
Percentage if (x) such repayments had not been made and (y) the maximum
change to its Adjusted Percentage would have resulted in the sum of the
outstanding principal of Loans made by such Bank equalling such Bank's
Commitment at such time.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 10.09.
"Affected Eurodollar Loan" shall have the meaning provided in
Section 4.02(B).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to con
trol a corporation if such Person possesses, directly or indirectly, the
power (i) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such corporation or (ii) to direct
or cause the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Credit Agreement, as the same may be
modified, amended and/or supplemented from time to time.
"Approved Bank" shall have the meaning provided in the definition
of "Cash Equivalents."
"Approved Company" shall have the meaning provided in the
definition of "Cash Equivalents."
"Approved Shipbroker" shall mean each of the first-class,
international, independent, sale-and-purchase Shipbrokers of offshore
drilling units listed on Annex VI, as such Annex may be revised from time
to time at the request of the Required Banks with the consent of the
Borrower, which consent shall not be unreasonably withheld.
"Arcade" shall mean Arcade Drilling AS, a Norwegian Corporation.
"Assignment and Assumption Agreement" shall mean the Assignment
and Assumption Agreement substantially in the form of Exhibit I
(appropriately completed).
"Authorized Officer" shall mean any officer of Holdings, Parent
or the Borrower designated as such in writing to the Administrative Agent
by Holdings, Parent or the Borrower.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Loans or (ii) a
Bank having notified the Administrative Agent and/or the Borrower that it
does not intend to comply with the obligations under Section 1.01, in the
case of either (i) or (ii) as a result of the appointment of a receiver or
conservator with respect to such Bank at the direction or request of any
regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section
8.05.
"Base Rate" shall mean the higher of (i) the Administrative
Agent's Prime Rate, and (ii) 0.50% per annum above the Federal Funds
Effective Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan
pursuant to the Facility by the Borrower from all of the Banks with respect
to such Facility on a pro rata basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the
same Interest Period; provided that Base Rate Loans incurred pursuant to
Section 1.10(b) shall be considered included in any related Borrowing of
Eurodollar Loans.
"Budget" shall mean a breakdown in reasonable detail of the
projected costs and disbursements related to the construction of the
Drillship through completion and delivery.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any
day which shall be in the Cities of New York and/or London a legal holiday
or a day on which banking institutions are authorized by law or other
governmental actions to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest
on, Loans, any day which is a Business Day described in clause (i) and
which is also a day for trading by and between banks in U.S. dollar
deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance
with GAAP, including all such expenditures with respect to fixed or capital
assets (including, without limitation, expenditures for maintenance and
repairs which should be capitalized in accordance with GAAP) and the amount
of Capitalized Lease Obligations incurred by such Person.
"Capital Lease" as applied to any Person shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of Holdings or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit
of the United States of America is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (ii)
U.S. dollar denominated time deposits, certificates of deposit and bankers'
acceptances of (x) any Bank, (y) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000 or (z) any
bank (or the parent company of such bank) whose short-term commercial paper
rating from Standard & Poor's Corporation ("S&P") is at least A-1 or the
equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is
at least P-1 or the equivalent thereof (any such bank, an "Approved Bank"),
in each case with maturities of not more than six months from the date of
acquisition, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in
clause (ii) above, (iv) commercial paper issued by any Bank or Approved
Bank or by the parent company of any Bank or Approved Bank and commercial
paper issued by, or guaranteed by, any industrial or financial company with
a short-term commercial paper rating of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's (any
such company, an "Approved Company"), or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody's, as the case may be, and in
each case maturing within six months after the date of acquisition and (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Collateral
Disposition, the aggregate cash payments (including any cash received by
way of deferred payment pursuant to a note receivable issued in connection
with such Collateral Disposition, other than the portion of such deferred
payment constituting interest, but only as and when so received) received
by Holdings and/or any Subsidiary from such Collateral Disposition.
"CBK" shall mean Christiania Bank og Kreditkasse, New York
Branch.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.Section 9601
et seq.
"Change of Control" shall mean (a) Holdings shall at any time
cease to own 100% of the capital stock of Parent or, directly or
indirectly, the Borrower or any Guarantor, (b) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than R&B
Falcon Corporation, is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of Holdings, (c) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-
5 under the Exchange Act), directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of R&B Falcon Corporation or (d)
during any period of two consecutive years individuals who at the beginning
of such period constituted the Board of Directors of R&B Falcon Corporation
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of R&B Falcon
Corporation was approved by a vote of a majority of the directors of R&B
Falcon Corporation then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors of R&B Falcon Corporation then in office.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect
at the Effective Date and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Security Agreement Collateral
and any cash collateral delivered to the Collateral Agent pursuant to this
Agreement.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Banks.
"Collateral Disposition" shall mean the sale, loss, assignment
(other than to the Administrative Agent) or other disposition by Holdings
or any of its Subsidiaries of any of the Security Agreement Collateral.
"Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name in Annex I directly below the column
entitled "Commitment," as the same may be (x) reduced from time to time
pursuant to Sections 2.02, 2.03 and/or 8 or (y) adjusted from time to time
as a result of assignments to or from such Bank pursuant to Section 11.04.
"Commitment Commission" shall have the meaning provided in
Section 2.01(a).
"Consolidated Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases) by Holdings and its Subsidiaries during that period
that, in conformity with GAAP, are or are required to be included in the
property, plant or equipment reflected in the consolidated balance sheet of
Holdings and its Subsidiaries, provided that Consolidated Capital
Expenditures shall in any event include the purchase price paid in
connection with the acquisition of any Person (including through the
purchase of all of the capital stock or other ownership interests of such
Person or through merger or consolidation) to the extent allocable to
"drilling and other property and equipment" provided further, that
Consolidated Capital Expenditures shall only include the amount thereof
actually paid in cash during such period.
"Consolidated Current Assets" shall mean, the current assets of
Holdings and its Subsidiaries determined on a consolidated basis in
accordance with GAAP, including cash and Cash Equivalents.
"Consolidated Current Liabilities" shall mean, the current
liabilities of Holdings and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, but excluding (i) the current portion under
the Holdings Convertible Debentures and (ii) the current liability
associated with the required repayment of Loans in connection with the
Scheduled Commitment Reduction occurring on the Maturity Date.
"Consolidated EBIT" shall mean, for any period, (A) the sum of
the amounts for such period of (i) Consolidated Net Income, (ii) provisions
for taxes based on income, (iii) Consolidated Interest Expense, (iv)
amortization or write-off of deferred financing costs to the extent
deducted in determining Consolidated Net Income and (v) losses on sales of
assets (excluding sales in the ordinary course of business) and other extra
ordinary losses less (B) the amount for such period of gains on sales of
assets (excluding sales in the ordinary course of business) and other
extraordinary gains, all as determined on a consolidated basis in
accordance with GAAP.
"Consolidated EBITDAR" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation
expense, (iii) amortization expense, (iv) Consolidated Rent Expense, all as
determined on a consolidated basis in accordance with GAAP, (v) merger
related expenses actually incurred by, and allocated to Holdings and its
Subsidiaries in accordance with GAAP, in connection with the Falcon Merger,
in an aggregate maximum amount not to exceed $45,000,000 and (vi) charges
against earnings relating to any loss on the disposal of the discontinued
oil and gas operations of Reading & Bates Development Co., in an aggregate
maximum amount not to exceed $80,000,000.
"Consolidated Funded Indebtedness" shall mean, all Indebtedness
of Holdings and its Subsidiaries calculated on a consolidated basis in
accordance with GAAP; provided that with respect to calculations made
pursuant to Section 7.10 only, Consolidated Funded Indebtedness shall
exclude (i) up to $200,000,000 of unsecured subordinated debt issued by
Holdings in one or more public offerings following the Initial Borrowing
Date, which shall (x) mature after the Maturity Date, (y) not have any
principal payments prior to the Maturity Date, and (z) be explicitly
subordinated to this Facility and (ii) up to a maximum of $100,000,000 in
the aggregate of residual value guarantees related to the financing of the
two drillships being constructed pursuant to joint ventures between
affiliates of Reading & Bates Corporation and Conoco (the "Conoco JV
Ships"), provided that the underlying obligations of such residual value
guarantees shall not mature prior to the date which is 12 months after the
Maturity Date and provided further that, with respect to calculations made
pursuant to Section 7.11 only, Consolidated Funded Indebtedness shall not
include up to a maximum of $150,000,000 in the aggregate of guarantees by
Holdings or any of its Wholly-Owned Subsidiaries related to the financing
of the Conoco JV Ships for so long as Holdings maintains its present direct
or indirect joint venture interest in such Conoco JV Ships.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases) of
Holdings and its Subsidiaries in accordance with GAAP on a consolidated
basis with respect to all outstanding Indebtedness of Holdings and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing.
"Consolidated Net Income" shall mean for any period, the net
income (or loss) of Holdings and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in
conformity with GAAP.
"Consolidated Net Worth" shall mean, at any time, shareholders
equity (excluding treasury stock) of Holdings and its Subsidiaries on a
consolidated basis determined in accordance with GAAP, provided that, for
the quarterly test periods ending on December 31, 1997, March 31, 1998,
June 30, 1998 and September 30, 1998 exclusively, Consolidated Net Worth
shall be increased by adding thereto, (i) merger related expenses actually
incurred by, and allocated to Holdings and its Subsidiaries in accordance
with GAAP, in connection with the Falcon Merger, in an aggregate maximum
amount not to exceed $45,000,000 and (vi) charges against earnings relating
to any loss on the disposal of the discontinued oil and gas operations of
Reading & Bates Development Co., in an aggregate maximum amount not to
exceed $80,000,000.
"Consolidated Rent Expense" shall mean for any period, the rent
expense of Holdings and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in accordance with
GAAP.
"Construction Contract" shall mean the Contract for Construction
and Sale of a 103,000 Metric Tons Displacement Drillship (Hull No. 1255),
dated September 5, 1997, between Reading & Bates Drilling Co., Samsung
Heavy Industries Co., Ltd. and Samsung Corporation, together with any
Exhibits or ancillary documents related thereto.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a)
to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of such primary obligation against loss in respect
thereof, provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes and the
Security Agreement and any documents executed in connection therewith.
"Credit Event" shall mean and include the making of a Loan.
"Credit Party" shall mean Holdings, Parent, the Borrower and each
other Guarantor.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section 7.05.
"Drawdown Amount" shall mean (i) with respect to any Borrowing to
occur on the Initial Borrowing Date, the total amount of bona fide costs
and expenses then due and outstanding in connection with the construction
of the Drillship, plus all bona fide projected expenses which will mature
prior to the next succeeding Drawdown Date in connection with the
construction of the Drillship, (ii) with respect to any subsequent
Borrowing to occur on a Drawdown Date occurring on the first Business Day
of a calendar month, the total amount of bona fide expenses then due and
outstanding and bona fide projected expenses scheduled to come due during
such calendar month (less any amounts of prior Borrowings not theretofore
applied to pay expenses incurred pursuant to the construction of the
Drillship) and (iii) with respect to any Borrowing made to pay amounts
owing to Samsung, an amount equal to the amount then owing to Samsung,
provided that such Borrowing shall be accompanied by payment instructions
facilitating direct payment to Samsung of such amount by the Administrative
Agent for the account of the Borrower.
"Drawdown Date" shall mean each of (i) the Initial Borrowing
Date, (ii) the first Business Day of each calendar month to occur prior to
the Maturity Date and (iii) the date upon which each payment required to be
made to Samsung pursuant to the Construction Contract becomes due.
"Drilling Contract" shall mean Contract No. ANS028290, dated
October 27, 1997, among the Parent and Statoil Exploration (US) Inc.
"Drillship" shall have the meaning provided in Section 5.05.
"Effective Date" shall have the meaning provided in Section
11.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined by
Regulation D of the Securities Act of 1933).
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries solely in
the ordinary course of such Person's business and not in response to any
third party action or request of any kind) or proceedings relating in any
way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory author
ities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous Materials arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guide, policy and
rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act,
15 U.S.C. Section 7401 et seq.; the Clean Air Act, 42 U.S.C. Section 7401
et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq. and any
applicable state and local or foreign counterparts or equivalents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amend
atory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings or any Subsidiary would be
deemed to be a "single employer" (i) within the meaning of Sections 414(b),
(c), (m) and (o) of the Code or (ii) as a result of Holdings or any
Subsidiary being or having been a general partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Margin" shall be equal to 0.60% per annum.
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Loan, the offered rate (rounded upward to the nearest 1/16 of one
percent) for deposits of Dollars for a period equivalent to such period at
or about 11:00 A.M. (London time) on the second London Banking Day before
the first day of such period as is displayed on Telerate page 3750 (British
Bankers' Association Interest Settlement Rates) (or such other page as may
replace such page 3750 on such system or on any other system of the
information vendor for the time being designated by the British Bankers'
Association to calculate the BBA Interest Settlement Rate (as defined in
the British Bankers' Association's Recommended Terms and Conditions
("BBAIRS" terms) dated August 1985)), provided that if on such date no such
rate is so displayed, the Eurodollar Rate for such period shall be the rate
quoted to the Administrative Agent as the offered rate for deposits of
Dollars in an amount approximately equal to the amount in relation to which
the Eurodollar Rate is to be determined for a period equivalent to such
period by prime banks in the London Interbank Market at or about 11:00 A.M.
(London time) on the second Banking Day before the first day of such
period.
"Event of Default" shall have the meaning provided in Section 8.
"Existing Credit Agreement" shall mean the Credit Agreement,
dated as of November 13, 1996 and Amended and Restated as of July 3, 1996,
by and among Holdings, the Borrower, various lending institutions, Banque
Indosuez and Credit Lyonnais, New York Branch, as Documentation Agents and
Christiania Bank og Kreditkasse, New York Branch, as Administrative Agent.
"Existing Indebtedness" shall have the meaning provided in
Section 5.19.
"Facility" shall mean the credit facility established under this
Agreement, evidenced by the Total Commitment.
"Falcon Merger" shall mean the merger of Reading & Bates
Corporation and Falcon Drilling, with each such company becoming a wholly-
owned subsidiary of R&B Falcon Corporation.
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized
standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 2.01.
"Fleet" shall mean any and all offshore drilling rigs or vessels
owned from time to time by Holdings and its Wholly-Owned Subsidiaries.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established
or maintained outside the United States of America by Holdings or any one
or more of its Subsidiaries primarily for the benefit of employees of
Holdings or such Subsidiaries residing outside the United States of
America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or
payments to be made upon termination of employment, and which plan is not
subject to ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it
being understood and agreed that determinations in accordance with GAAP for
purposes of Section 7, including defined terms as used therein, are subject
(to the extent provided therein) to Section 11.07(a).
"Guaranteed Obligations" shall mean all obligations of the
Borrower to each Bank for the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of the principal and
interest on each Note issued by the Borrower to such Bank, and Loans made,
under the Credit Agreement, together with all the other obligations and lia
bilities (including, without limitation, indemnities, fees and interest
thereon) of the Borrower to such Bank now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any
other Credit Document and the due performance and compliance with all the
terms, conditions and agreements contained in the Credit Documents by the
Borrower.
"Guarantor" shall mean Holdings, Parent and each Subsidiary of
Parent, other than the Borrower, which becomes a party to this Agreement or
any other Guaranty.
"Guaranty" shall mean the Parent Guaranty pursuant to Section 12
hereof and any other guaranty executed in connection herewith.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import,
under any applicable Environmental Law; and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first paragraph
of this Agreement.
"Holdings Convertible Debentures" shall mean Holdings' 8% Senior
Subordinated Convertible Debentures due December 1998.
"Indebtedness" of any Person shall mean without duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of such Person, (iii) the
face amount of all letters of credit issued for the account of such Person
and, without duplication, all drafts drawn thereunder, (iv) all
Indebtedness of a second Person secured by any Lien on any property owned
by such first Person, whether or not such indebtedness has been assumed,
(v) all Capitalized Lease Obligations of such Person, (vi) all obligations
of such Person to pay a specified purchase price for goods or services
whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vii) all net obligations of such Person under Interest Rate
Agreements and (viii) all Contingent Obligations of such Person (other than
Contingent Obligations arising from the guaranty by such Person of the
obligations of Holdings, the Borrower and/or their respective Subsidiaries
to the extent such guaranteed obligations are permitted under this
Agreement); provided that Indebtedness shall not include (x) trade payables
and accrued expenses, in each case arising in the ordinary course of
business and (y) Indebtedness of a direct or indirect Subsidiary of
Holdings (the "Relevant Subsidiary"), of which neither Holdings, nor the
Borrower, nor any of their Subsidiaries other than the Relevant Subsidiary
is liable or obligated in any manner.
"Initial Borrowing Date" shall mean the first date upon which a
Borrowing is made pursuant to this Agreement.
"Interest Period" with respect to any Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar
agreement or other similar agreement or arrangement designed to protect any
Credit Party against interest rate risk.
"Leasehold" of any Person means all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Consolidated Funded Indebtedness on such date to Total
Capitalization on such date.
"Lien" shall mean any mortgage, pledge, security interest,
security title, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof) other than arising
from an event constituting a Total Loss.
"Loan" shall have the meaning provided in Section 1.01.
"Margin Stock" shall have the meaning provided in Regulation U.
"Market Value" shall mean as of any date of calculation the value
as of such date of any offshore drilling rig or other vessel provided in
the most recent valuation report delivered in connection with Section
5.13(ii) or 7.10, or in the case two reports have been supplied as of such
date, the arithmetic mean of the values provided in such reports.
"Material Adverse Effect" shall mean a material adverse effect on
the business, property, assets, liabilities, operations, condition
(financial or otherwise) or prospects of the Borrower or Holdings and its
Subsidiaries taken as a whole.
"Maturity Date" shall mean December 31, 1998.
"Minimum Borrowing Amount" shall mean $1,000,000.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Note" shall have the meaning provided in Section 1.05(a).
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
at 11 West 42nd Street, 7th Floor, New York, New York 10036 or such other
office as the Administrative Agent may designate to the Borrower from time
to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time
existing, owing to the Administrative Agent, the Collateral Agent or any
Bank pursuant to the terms of this Agreement or any other Credit Document.
"Parent Guarantors" shall mean Holdings, Parent and each
Subsidiary of Parent, other than the Borrower and its Subsidiaries which is
or becomes a party to this Agreement.
"Payment Office" shall mean the office of the Administrative
Agent at 11 West 42nd Street, 7th Floor, New York, New York 10036 or such
other office as the Administrative Agent may designate to the Borrower from
time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean for each Bank the percentage obtained by
dividing such Bank's Commitment by the Total Commitment, provided that if
the Total Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Commitment immediately prior to such
termination by the Total Commitment immediately prior to such termination.
"Permitted Liens" shall mean Liens described in Section 7.03(a)
through (i).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government
or political subdivision or any agency, department or instrumentality
thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by
(or to which there is an obligation to contribute of) Holdings or a Subsid
iary of Holdings or an ERISA Affiliate.
"Prime Rate" shall mean the rate which CBK announces from time to
time as its prime lending rate, the Prime Rate to change when and as such
prime lending rate changes.
"Projections" shall have the meaning set forth in Section
5.10(d).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Refundment Guaranty" shall mean the Letter of Refundment
Guaranty, dated as of September 12, 1997, issued by The Export-Import Bank
of Korea in favor of Parent to support the obligations of Samsung
Corporation and Samsung Heavy Industries under the Construction Contract.
"Register" shall have the meaning provided in Section 11.16.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Relevant Subsidiary" shall have the meaning provided in the
definition of Indebtedness.
"Replaced Bank" shall have the meaning provided in Section 1.12.
"Replacement Bank" shall have the meaning provided in Section
1.12.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which
the 30-day notice period is waived under subsection .13, .14, .16, .18, .19
or .20 of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks whose outstand
ing Commitments (or, if after the Total Commitment has been terminated, out
standing Loans) constitute greater than 50% of the Adjusted Total Commitme
nt (or, if after the Total Commitment has been terminated, the total
outstanding Loans of Non-Defaulting Banks at such time).
"Samsung" shall mean Samsung Corporation and/or Samsung Heavy
Industries Co., Ltd.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 3.04(b)(ii) Certificate" shall have the meaning provided
in Section 3.04(b)(ii).
"Secured Creditors" shall have the meaning set forth in the
Security Agreement.
"Security Agreement" shall have the meaning provided in Section
4.10.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the time
stock of any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries and (ii)
any partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries, has more than a 50%
equity interest at the time. Unless otherwise expressly provided, all
references herein to "Subsidiary" shall mean a Subsidiary of Holdings.
"Substitute Basis" shall have the meaning provided in Section
1.09(b).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Title XI Financing" shall mean financing provided by, or
guaranteed by, the U.S. Maritime Administration under its Title XI
Shipbuilding Loan Guarantor Program.
"Total Capitalization" shall mean, at any time, the sum of
Consolidated Funded Indebtedness and Consolidated Net Worth at such time.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Unutilized Commitment" shall mean, at any time, (i) the
Total Commitment at such time less (ii) the sum of the aggregate principal
amount of all Loans at such time.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in
accordance with Statement of Financial Accounting Standards No. 87, based
upon the actuarial assumptions used by the Plan's actuary in the most
recent annual valuation of the Plan.
"Unutilized Commitment" for each Bank, shall mean the excess of
(i) the Commitment of such Bank over (ii) the aggregate outstanding princi
pal amount of Loans made by such Bank at such time.
"U.S. Dollar Equivalent" shall mean, at any time for the
determination thereof, the amount of U.S. Dollars necessary to purchase the
amount of the relevant currency at the spot exchange rate therefor as
quoted by the Administrative Agent as of 11:00 A.M. (London time) on the
date two Business Days prior to the date of any determination thereof for
purchase on such date.
"U.S. Dollars" shall mean freely transferable lawful money of the
United States.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which
ordinarily, in the absence of contingencies, entitles holders thereof to
vote for the election of directors (or Persons performing similar
functions) of such corporation, even though the right so to vote has been
suspended by the happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares or
shares held by a nominee or in trust for such Person, is owned directly or
indirectly by such Person.
"Working Capital" shall mean the excess of Consolidated Current
Assets over Consolidated Current Liabilities exclusive of the Holdings
Convertible Debentures.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex or facsimile
transmission.
SECTION 10. The Administrative Agent.
10.01 Appointment of the Administrative Agent. (a) The Banks
hereby designate Christiania Bank og Kreditkasse, New York Branch as
Administrative Agent to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to autho
rize, the Administrative Agent to take such action on its behalf under the
provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Administrative Agent may perform any of its duties hereunder
by or through its respective officers, directors, agents, employees or
Affiliates.
(b) For purposes of this Section 10, the term "Administrative
Agent" shall include CBK in its capacity as Collateral Agent and
Administrative Agent.
10.02 Nature of Duties. The Administrative Agent shall not have
any duties or responsibilities except those expressly set forth in this
Agreement and the other Credit Documents. Neither the Administrative Agent
nor any of its respective officers, directors, agents, employees or
Affiliates shall be liable for any action taken or omitted by it or them
hereunder or under any other Credit Document or in connection herewith or
therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall not have by reason
of this Agreement or any other Credit Document a fiduciary relationship in
respect of any Bank or the holder of any Note; and nothing in this
Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon the Administrative Agent any
obligations in respect of this Agreement or any other Credit Document
except as expressly set forth herein or therein.
10.03 Lack of Reliance on the Administrative Agent. Independ
ently and without reliance upon the Administrative Agent, each Bank and the
holder of each Note, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Holdings and its Subsidiaries in connection with
the making and the continuance of the Loans and the taking or not taking of
any action in connection herewith and (ii) its own appraisal of the credit
worthiness of Holdings and its Subsidiaries and, except as expressly
provided in this Agreement, the Administrative Agent shall not have any
duty or responsibility, either initially or on a continuing basis, to
provide any Bank or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before
the making of the Loans or at any time or times thereafter. The
Administrative Agent shall not be responsible to any Bank or the holder of
any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority
or sufficiency of this Agreement or any other Credit Document or the finan
cial condition of Holdings and its Subsidiaries or be required to make any
inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of Holdings and its Subsidiaries or
the existence or possible existence of any Default or Event of Default.
10.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Banks
with respect to any act or action (including failure to act) in connection
with this Agreement or any other Credit Document, the Administrative Agent
shall be entitled to refrain from such act or taking such action unless and
until the Administrative Agent shall have received instructions from the
Required Banks; and the Administrative Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the foregoing,
neither any Bank nor the holder of any Note shall have any right of action
whatsoever against the Administrative Agent as a result of the
Administrative Agent acting or refraining from acting hereunder or under
any other Credit Document in accordance with the instructions of the
Required Banks.
10.05 Reliance. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed
to be the proper Person, and, with respect to all legal matters pertaining
to this Agreement and any other Credit Document and its duties hereunder
and thereunder, upon advice of counsel selected by the Administrative Agent
(which may be counsel for Holdings and/or the Borrower).
10.06 Indemnification. To the extent the Administrative Agent is
not reimbursed and indemnified by the Borrower, the Banks will reimburse
and indemnify the Administrative Agent, in proportion to their respective
"percentages" as used in determining the Required Banks, for and against
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, judgments, suits, costs, expenses or disbursements of whatsoever
kind or nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its respective duties hereunder or under
any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct.
10.07 The Administrative Agent in Its Individual Capacity. With
respect to its obligation to make Loans under this Agreement, the
Administrative Agent shall have the rights and powers specified herein for
a "Bank" and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the term "Banks," "Required
Banks," "holders of Notes" or any similar terms shall, unless the context
clearly otherwise indicates, include the Administrative Agent in its indi
vidual capacity. The Administrative Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other
business with Holdings or its Subsidiaries or any Affiliate thereof as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Holdings or any of its Subsidiaries for services
in connection with this Agreement and otherwise without having to account
for the same to the Banks.
10.08 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof,
as the case may be, shall have been filed with the Administrative Agent.
Any request, authority or consent of any Person who, at the time of making
such request or giving such authority or consent, is the holder of any Note
shall be conclusive and binding on any subsequent holder, transferee,
assignee or indorsee, as the case may be, of such Note or of any Note or
Notes issued in exchange therefor.
10.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions
and duties hereunder and/or under the other Credit Documents at any time by
giving 15 Business Days' prior written notice to the Borrower and the
Banks. Such resignation shall take effect upon the appointment of a
successor Administrative Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks
shall appoint a successor Administrative Agent hereunder or thereunder who
shall be a commercial bank or trust company reasonably acceptable to the
Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent,
with the consent of the Borrower, shall then appoint a successor
Administrative Agent who shall serve as Administrative Agent hereunder or
thereunder until such time, if any, as the Required Banks appoint a suc
cessor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pur
suant to clause (b) or (c) above by the 20th Business Day after the date
such notice of resignation was given by the Administrative Agent, the
Administrative Agent's resignation shall become effective and the Required
Banks shall thereafter perform all the duties of the Administrative Agent
hereunder and/or under any other Credit Document until such time, if any,
as the Required Banks appoint a successor Administrative Agent as provided
above.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay
all reasonable out-of-pocket costs and expenses of the Administrative Agent
in connection with the negotiation, preparation, execution and delivery of
the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto (including, without
limitation, the reasonable fees and disbursements of White & Case) and of
the Administrative Agent and the Collateral Agent and, after the occurrence
and during the continuance of an Event of Default, each of the Banks in
connection with the enforcement of the Credit Documents and the documents
and instruments referred to therein (including, without limitation, the
actual reasonable fees and disbursements of counsel for the Administrative
Agent and, after the occurrence and during the continuance of an Event of
Default for each of the Banks); (ii) pay and hold each of the Banks
harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable
to such Bank) to pay such taxes; and (iii) indemnify each Bank (including
in its capacity as the Administrative Agent), its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or
incurred by any of them as a result of, or arising out of, or in any way
related to, or by reason of, (a) any investigation, litigation or other pro
ceeding (whether or not any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the consummation of any transactions
contemplated in any Credit Document, whether initiated by the Borrower or
any other Person, including, without limitation, the actual reasonable fees
and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such los
ses, liabilities, claims, damages or expenses to the extent incurred by rea
son of the gross negligence or willful misconduct of the Person to be indem
nified) or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water, groundwater, surface or subsurface of any Real
Property, offshore drilling rig, facility or location at any time owned or
operated by Holdings or any of its Subsidiaries, the generation, storage,
transportation or disposal of Hazardous Materials at any Real Property,
offshore drilling rig, facility or location at any time owned or operated
by Holdings or any of its Subsidiaries, the non-compliance of any Real
Property, offshore drilling rig, facility or location at any time owned or
operated by Holdings or any of its Subsidiaries with federal, state and
local laws, regulations, and ordinances (including applicable permits
thereunder) applicable to any such Real Property, offshore drilling rig,
facility or location, or any Environmental Claim asserted against Holdings,
any of its Subsidiaries, or any Real Property, offshore drilling rig,
facility or location at any time owned or operated by Holdings or any of
its Subsidiaries, including, in each case, without limitation, the actual
reasonable fees and disbursements of counsel and other consultants incurred
in connection with any such investigation, litigation or other proceeding
(but excluding any losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified). To the extent that the undertaking to indem
nify, pay or hold harmless the Administrative Agent or any Bank set forth
in the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Borrower shall make the maximum contribution
to the payment and satisfaction of each of the indemnified liabilities
which is permissible under applicable law.
11.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, if an Event of Default then exists, each
Bank is hereby authorized at any time or from time to time, without pre
sentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and
any other Indebtedness at any time held or owing by such Bank (including
without limitation by branches and agencies of such Bank wherever located)
to or for the credit or the account of the Borrower against and on account
of the Obligations and liabilities of the Borrower to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of the Borrower purchased by such
Bank pursuant to Section 11.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made
any demand hereunder and although said Obligations, liabilities or claims,
or any of them, shall be contingent or unmatured.
11.03 Notices. (a) Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall
be in writing (including telex or telecopier communication) and mailed,
telexed, telecopied or delivered, if to Holdings or its Subsidiaries, at
the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address
specified for such Bank on Annex II; or, at such other address as shall be
designated by any party in a written notice to the other parties hereto.
All such notices and communications shall be effective when received.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given
hereunder, the Administrative Agent may, prior to receipt of written con
firmation, act without liability upon the basis of such telephonic notice
believed by the Administrative Agent in good faith to be from an Authorized
Officer of the Borrower. In each such case, the Borrower hereby waives the
right to dispute the Administrative Agent's record of the terms of such
telephonic notice.
11.04 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower
may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Banks. Each Bank may at any time
grant participations in any of its rights hereunder or under any of the
Notes to another financial institution, provided that in the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights
against such Bank in respect of such participation to be those set forth in
the agreement executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation, except that the
participant shall be entitled to the benefits of Sections 1.10 and 3.04 of
this Agreement to the extent that such Bank would be entitled to such
benefits if the participation had not been entered into or sold, and,
provided further, that no Bank shall transfer, grant or assign any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document
except to the extent such amendment or waiver would (i) extend the final
scheduled maturity of any Loan or Note in which such participant is
participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of the applicability of
any post-default increase in interest rates), or reduce the principal
amount thereof, or increase such participant's participating interest in
any Commitment over the amount thereof then in effect (it being understood
that a waiver of any condition, covenant, Default or Event of Default or of
a mandatory reduction in the Total Commitment, or a mandatory prepayment,
shall not constitute a change in the terms of any Commitment), (ii) release
all or substantially all of the Collateral or (iii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement.
(b) Notwithstanding the foregoing, (x) any Bank may assign all
or a portion of its outstanding Commitment and its rights and obligations
hereunder to its Affiliate or to another Bank, and (y) with the consent of
the Administrative Agent and the Borrower (which consent shall not be
unreasonably withheld), any Bank may assign all or a portion of its
outstanding Commitment and its rights and obligations hereunder to one or
more Eligible Transferees. No assignment pursuant to the immediately pre
ceding sentence shall to the extent such assignment represents an
assignment to an institution other than one or more Banks hereunder, be in
an aggregate amount less than $5,000,000 unless the entire Commitment of
the assigning Bank is so assigned. If any Bank so sells or assigns all or
a part of its rights hereunder or under the Notes, any reference in this
Agreement or the Notes to such assigning Bank shall thereafter refer to
such Bank and to the respective assignee to the extent of their respective
interests and the respective assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and
benefits as it would if it were such assigning Bank. Each assignment
pursuant to this Section 11.04(b) shall be effected by the assigning Bank
and the assignee Bank executing an Assignment and Assumption Agreement. In
the event of any such assignment (x) to a commercial bank or other
financial institution not previously a Bank hereunder, either the assigning
or the assignee Bank shall pay to the Administrative Agent a nonrefundable
assignment fee of $3,500 and (y) to a Bank, either the assigning or
assignee Bank shall pay to the Administrative Agent a nonrefundable
assignment fee of $1,500, and at the time of any assignment pursuant to
this Section 11.04(b), (i) Annex I shall be deemed to be amended to reflect
the Commitment of the respective assignee (which shall result in a direct
reduction to the Commitment of the assigning Bank) and of the other Banks,
and (ii) if any such assignment occurs after the Effective Date, if
requested by the assigning Bank and the assignee Bank, the Borrower will
issue new Notes to the respective assignee and to the assigning Bank in
conformity with the requirements of Section 1.05. Each Bank and the
Borrower agree to execute such documents (including, without limitation,
amendments to this Agreement and the other Credit Documents) as shall be
necessary to effect the foregoing. Nothing in this clause (b) shall
prevent or prohibit any Bank from pledging its Notes or Loans to a Federal
Reserve Bank in support of borrowings made by such Bank from such Federal
Reserve Bank.
(c) Notwithstanding any other provisions of this Section 11.04,
no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require Holdings or the Borrower to
file a registration statement with the SEC or to qualify the Loans under
the "Blue Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that became a Bank pursuant to an assignment
permitted by this Section 11 will, upon its becoming party to this
Agreement, represent that it is a commercial lender, other financial
institution or other "accredited" investor (as defined in SEC Regulation D)
which makes loans in the ordinary course of its business and that it will
make or acquire Loans for its own account in the ordinary course of such
business, provided that subject to the preceding clauses (a) and (b), the
disposition of any promissory notes or other evidences of or interests in
Indebtedness held by such Bank shall at all times be within its exclusive
control.
11.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between Holdings or any of its Subsidiaries and the Administrative
Agent or any Bank shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder or under any
other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any
Bank would otherwise have. No notice to or demand on Holdings or any of
its Subsidiaries in any case shall entitle Holdings or any of its
Subsidiaries to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative
Agent or the Banks to any other or further action in any circumstances
without notice or demand.
11.06 Payments Pro Rata. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any
Credit Party in respect of any Obligations of the Borrower or any other
Credit Party hereunder, it shall distribute such payment to the Banks
(other than any Bank that has expressly waived its right to receive its pro
rata share thereof) pro rata based upon their respective shares, if any, of
the Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise) which is applicable to the payment of the
principal of, or interest on, the Loans or Fees, of a sum which with
respect to the related sum or sums received by other Banks is in a greater
proportion than the total of such Obligation then owed and due to such Bank
bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving such excess pay
ment shall purchase for cash without recourse or warranty from the other
Banks an interest in the Obligations of the Borrower or any other Credit
Party, respectively, to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount, provided
that if all or any portion of such excess amount is thereafter recovered
from such Bank, such purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 11.06(a) and (b) shall be subject
to the express provisions of this Agreement which require, or permit,
differing payments to be made to Non-Defaulting Banks as opposed to
Defaulting Banks.
11.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writ
ing by Holdings or the Borrower to the Banks), provided that (x) except as
otherwise specifically provided herein, all computations determining compli
ance with Section 7, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation
of, and in conformity with those used to prepare, the December 31, 1996
historical financial statements of Holdings delivered to the Banks pursuant
to Section 5.10(b) and (y) that if at any time the computations determining
compliance with Section 7 utilize accounting principles different from
those utilized in the financial statements furnished to the Banks, such
financial statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days.
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXE
CUTION AND DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE BORROWER HEREBY
IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENER
ALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER LOCATED OUTSIDE NEW YORK CITY AND BY
HAND DELIVERY TO THE BORROWER LOCATED WITHIN NEW YORK CITY, AT ITS ADDRESS
FOR NOTICES PURSUANT TO SECTION 11.03, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST HOLDINGS OR THE BORROWER IN ANY OTHER
JURISDICTION.
(b) HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVE ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS
REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND
AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.09 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Administrative Agent.
11.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which Holdings, the Borrower and each of
the Banks shall have signed a copy hereof (whether the same or different
copies) and shall have delivered the same to the Administrative Agent at
the Payment Office of the Administrative Agent or, in the case of the
Banks, shall have given to the Administrative Agent telephonic (confirmed
in writing), written telex or facsimile transmission notice (actually
received) at such office that the same has been signed and mailed to it.
11.11 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of
this Agreement.
11.12 Amendment or Waiver. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Borrower and the Required Banks,
provided that no such change, waiver, discharge or termination shall,
without the consent of each Bank (other than a Defaulting Bank) affected
thereby, (i) extend the Maturity Date, or reduce the rate or extend the
time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) or Fees
thereon, or reduce the principal amount thereof, (ii) increase the Commit
ment of any Bank over the amount thereof then in effect (it being under
stood that a waiver of any condition, covenant, Default or Event of Default
shall not constitute a change in the terms of any Commitment of any Bank),
(iii) release or permit the release of (x) all or substantially all of the
Security Agreement Collateral or (y) the Guaranty of Holdings or Parent
pursuant to Section 12, (iv) amend, modify or waive any provision of this
Section 11.12, (v) reduce the percentage specified in the definition of
Required Banks (it being understood and agreed that, with the consent of
the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of Required Banks on
substantially the same basis as the Commitments (and related extensions of
credit) are included on the Effective Date), (vi) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement or (vii) waive, change the timing or amount of, or extend any
mandatory reduction in the Total Commitment. No provision of Sections 10,
or any other provisions relating to the Administrative Agent may be
modified without the consent of the Administrative Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (vii), inclusive, of the proviso to
Section 11.12(a), the consent of the Required Banks is obtained but the
consent of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right to replace each such non-
consenting Bank or Banks (so long as all non-consenting Banks are so
replaced) with one or more Replacement Banks pursuant to Section 1.13 so
long as at the time of such replacement, each such Replacement Bank
consents to the proposed change, waiver, discharge or termination; provided
that the Borrower shall not have the right to replace a Bank solely as a
result of the exercise of such Bank's rights (and the withholding of any
required consent by such Bank) pursuant to Section 11.12(a)(ii).
11.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 3.04, 10.06 or 11.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
11.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or
Affiliate of such Bank, provided that the Borrower shall not be responsible
for costs arising under Section 1.10 or 3.04 resulting from any such
transfer (other than a transfer pursuant to Section 1.12(a)) to the extent
not otherwise applicable to such Bank prior to such transfer.
11.15 Confidentiality. Subject to Section 11.04, the Banks shall
hold all non-public information obtained pursuant to the requirements of
this Agreement in accordance with its customary procedure for handling
confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably re
quired by any bona fide transferee or participant in connection with the
contemplated transfer of any Loans or participation therein (so long as
such transferee or participant agrees to be bound by the provisions of this
Section 11.15) or as required or requested by any governmental agency or
representative thereof or pursuant to legal process, provided that, unless
specifically prohibited by applicable law or court order, each Bank shall
notify the Borrower of any request by any governmental agency or represen
tative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental
agency) for disclosure of any such non-public information prior to
disclosure of such information, and provided further that in no event shall
any Bank be obligated or required to return any materials furnished by
Holdings or any Subsidiary.
11.16 Registry. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes
of this Section 11.16, to maintain a register (the "Register") on which it
will record the Commitments from time to time of each of the Banks, the
Loans made by each of the Banks and each repayment in respect of the
principal amount of the Loans of each Bank. Failure to make any such
recordation, or any error in such recordation shall not affect the
Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the
principal of, and interest on, any Loan made pursuant to such Commitments
shall not be effective until such transfer is recorded on the Register
maintained by the Administrative Agent with respect to ownership of such
Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain
owing to the transferor. The registration of assignment or transfer of all
or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 11.04(b). Coincident with the
delivery of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of assignment or
transfer of all or part of a Loan, or as soon thereafter as practicable,
the assigning or transferor Bank shall surrender the Note evidencing such
Loan, and thereupon one or more new Notes in the same aggregate principal
amount shall be issued to the assigning or transferor Bank and/or the new
Bank.
SECTION 12. Parent Guaranty.
12.01 The Guaranty. In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the
direct benefits to be received by Holdings and Parent (each a "Parent
Guarantor" and collectively, the "Parent Guarantors") from the proceeds of
the Loans, each Parent Guarantor hereby agrees with the Banks as follows:
each Parent Guarantor hereby jointly and severally unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety the
full and prompt payment when due, whether upon maturity, acceleration or
otherwise, of any and all of the Guaranteed Obligations of the Borrower to
the Guaranteed Creditors. If any or all of the Guaranteed Obligations of
the Borrower to the Guaranteed Creditors becomes due and payable hereunder,
each Parent Guarantor unconditionally promises to pay such indebtedness to
the Guaranteed Creditors, or order, on demand, together with any and all
expenses which may be incurred by the Guaranteed Creditors in collecting
any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts
received in payment or on account of any of the Guaranteed Obligations and
any of the aforesaid payees repays all or part of said amount by reason of
(i) any judgment, decree or order of any court or administrative body hav
ing jurisdiction over such payee or any of its property or (ii) any
settlement or compromise of any such claim effected by such payee with any
such claimant (including the Borrower), then and in such event each Parent
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon each Parent Guarantor, notwithstanding any
revocation of this Guaranty or any other instrument evidencing any liabil
ity of the Borrower, and each Parent Guarantor shall be and remain liable
to the aforesaid payees hereunder for the amount so repaid or recovered to
the same extent as if such amount had never originally been received by any
such payee.
12.02 Bankruptcy. Additionally, each Parent Guarantor
unconditionally and irrevocably guarantees the payment of any and all of
the Guaranteed Obligations of the Borrower to the Guaranteed Creditors
whether or not due or payable by the Borrower upon the occurrence of any of
the events specified in Section 8.05, and unconditionally promises to pay
such indebtedness to the Guaranteed Creditors, or order, on demand, in
lawful money of the United States.
12.03 Nature of Liability. The liability of each Parent
Guarantor hereunder is exclusive and independent of any security for or
other guaranty of the Guaranteed Obligations of the Borrower whether
executed by such Parent Guarantor, any other guarantor or by any other
party, and the liability of each Parent Guarantor hereunder is not affected
or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations of the Borrower, or (c) any payment
on or in reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by
the Borrower, or (e) any payment made to the Guaranteed Creditors on the
Guaranteed Obligations which any such Guaranteed Creditor repays to the
Borrower pursuant to court order in any bankruptcy, reorganization, arrange
ment, moratorium or other debtor relief proceeding, and each Parent
Guarantor waives any right to the deferral or modification of its obliga
tions hereunder by reason of any such proceeding.
12.04 Independent Obligation. The obligations of each Parent
Guarantor hereunder are independent of the obligations of any other
guarantor, any other party or the Borrower, and a separate action or
actions may be brought and prosecuted against each Parent Guarantor whether
or not action is brought against any other guarantor, any other party or
the Borrower and whether or not any other guarantor, any other party or the
Borrower be joined in any such action or actions. Each Parent Guarantor
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof.
Any payment by the Borrower or other circumstance which operates to toll
any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to each Parent Guarantor.
12.05 Authorization. Each Parent Guarantor authorizes the
Guaranteed Creditors without notice or demand (except as shall be required
by applicable statute and cannot be waived), and without affecting or
impairing its liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate
or alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or
any liability incurred directly or indirectly in respect thereof, and
the Guaranty herein made shall apply to the Guaranteed Obligations as
so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to its creditors
other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed
Creditors regardless of what liability or liabilities of the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document
or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of any Parent Guarantor from its liabilities under this
Guaranty.
12.06 Reliance. It is not necessary for the Guaranteed
Creditors to inquire into the capacity or powers of the Borrower or the
officers, directors, partners or agents acting or purporting to act on
their behalf, and any Guaranteed Obligations made or created in reliance
upon the professed exercise of such powers shall be guaranteed hereunder.
12.07 Subordination. Any of the indebtedness of the Borrower
now or hereafter owing to any Parent Guarantor is hereby subordinated to
the Guaranteed Obligations of the Borrower owing to the Guaranteed
Creditors; and if the Agent so requests at a time when an Event of Default
exists, all such indebtedness of the Borrower to any Parent Guarantor shall
be collected, enforced and received by such Parent Guarantor for the
benefit of the Guaranteed Creditors and be paid over to the Agent on behalf
of the Guaranteed Creditors on account of the Guaranteed Obligations of the
Borrower to the Guaranteed Creditors, but without affecting or impairing in
any manner the liability of such Parent Guarantor under the other provi
sions of this Guaranty. Prior to the transfer by any Parent Guarantor of
any note or negotiable instrument evidencing any of the indebtedness of the
Borrower to such Parent Guarantor, such Parent Guarantor shall mark such
note or negotiable instrument with a legend that the same is subject to
this subordination. Without limiting the generality of the foregoing, each
Parent Guarantor hereby agrees with the Guaranteed Creditors that it will
not exercise any right of subrogation which it may at any time otherwise
have as a result of this Guaranty (whether contractual, under Section 509
of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have
been irrevocably paid in full in cash.
12.08 Waiver. (a) Each Parent Guarantor waives any right (ex
cept as shall be required by applicable statute and cannot be waived) to
require any Guaranteed Creditor to (i) proceed against the Borrower, any
other guarantor or any other party, (ii) proceed against or exhaust any
security held from the Borrower, any other guarantor or any other party or
(iii) pursue any other remedy in any Guaranteed Creditor's power
whatsoever. Each Parent Guarantor waives any defense based on or arising
out of any defense of the Borrower, any other guarantor or any other party,
other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any
other party, or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the lia
bility of the Borrower other than payment in full of the Guaranteed
Obligations. The Guaranteed Creditors may, at their election, foreclose on
any security held by the Agent, the Collateral Agent or any other
Guaranteed Creditor by one or more judicial or nonjudicial sales, whether
or not every aspect of any such sale is commercially reasonable (to the
extent such sale is permitted by applicable law), or exercise any other
right or remedy the Guaranteed Creditors may have against the Borrower or
any other party, or any security, without affecting or impairing in any way
the liability of any Parent Guarantor hereunder except to the extent the
Guaranteed Obligations have been paid. Each Parent Guarantor waives any
defense arising out of any such election by the Guaranteed Creditors, even
though such election operates to impair or extinguish any right of reim
bursement or subrogation or other right or remedy of such Parent Guarantor
against the Borrower or any other party or any security.
(b) Each Parent Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices
of nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional Guaranteed Obligations. Each Parent
Guarantor assumes all responsibility for being and keeping itself informed
of the Borrower's financial condition and assets, and of all other cir
cumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Parent
Guarantor assumes and incurs hereunder, and agrees that the Guaranteed
Creditors shall have no duty to advise any Parent Guarantor of information
known to them regarding such circumstances or risks.
12.09 Nature of Liability. It is the desire and intent of each
Parent Guarantor and the Guaranteed Creditors that this Guaranty shall be
enforced against each Parent Guarantor to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. If, however, and to the extent that, the
obligations of any Parent Guarantor under this Guaranty shall be
adjudicated to be invalid or unenforceable for any reason (including, with
out limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of such Parent Guarantor shall be deemed to be reduced and such
Parent Guarantor shall pay the maximum amount of the Guaranteed Obligations
which would be permissible under applicable law.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the
date first above written.
Address: READING & BATES CORPORATION
901 Threadneedle
Suite 200 By_________________________
Houston, Texas 77079 Name:
Attn: General Counsel Title:
Telephone: (281) 496-5000
Facsimile: (281) 496-0285
READING & BATES DRILLING CO.
By_________________________
Name:
Title:
RB DEEPWATER EXPLORATION III INC.
By_________________________
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
Individually and as Administrative Agent
By__________________________
Name:
Title:
By__________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By__________________________
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By__________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By__________________________
Name:
Title:
BANK OF NOVA SCOTIA
By__________________________
Name:
Title:
ANNEX I
COMMITMENTS
INSTITUTION COMMITMENT
Christiania Bank og Kreditkasse $37,500,000
Credit Lyonnais $37,500,000
Skandinaviska Enskilda Banken $25,000,000
Credit Agricole Indosuez $25,000,000
Bank of Nova Scotia $25,000,000
------------
Total $150,000,000
ANNEX II
BANK ADDRESSES
Christiania Bank og Kreditkasse, 11 West 42nd Street
New York Branch 7th Floor
New York, NY 10036
Attn: Hans Chr. Kjelsrud
Tel. No.: (212) 827-4800
Fax No.: (212) 827-4888
1301 Avenue of the Americas
New York, NY 10019
Attention: Loan Administration
with a copy to:
Credit Lyonnais 1000 Louisiana
Suite 5360
Houston, Texas 77002
Attn: Page Dillehunt
Tel. No.: (713) 751-0500
Fax No.: (713) 751-0307
Skandinaviska Enskilda Banken AB (publ.) Rosenkrantz Gate 22
0123 Oslo, Norway
Attn: Jan Sjoli
Tel. No.: 47-22-827-000
Fax No.: 47-22-827-104
Credit Agricole Indosuez Ruselokkveien 6
0120 Oslo, Norway
Attn: Bjorn Hundevadt-Gulbrandsen
Tel. No.: 47-22-833-050
Fax No.: 47-22-833-055
Bank of Nova Scotia 1100 Louisiana, Suite 3000
Houston, TX 77002
Attn: Jamie Conn
Tel. No.: (713) 752-0900
Fax No.: (713) 752-2425
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of April 24, 1998, among R&B FALCON CORPORATION, a Delaware
corporation ("Holdings"), R&B FALCON DRILLING (INTERNATIONAL & DEEPWATER)
INC. (f/k/a Reading & Bates Corporation), a Delaware corporation
("R&BFD"), READING & BATES DRILLING CO., an Oklahoma corporation
("Parent"), RB DEEPWATER EXPLORATION III INC., a Nevada corporation (the
"Borrower"), the various lending institutions party to the Credit
Agreement referred to below (each, a "Bank" and, collectively, the
"Banks"), CREDIT LYONNAIS NEW YORK BRANCH, as Syndication Agent and
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, as Administrative Agent
for the Banks (the "Agent"). All capitalized terms used herein and not
otherwise defined shall have the meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
WHEREAS, R&BFD, Parent, the Borrower, the Banks and the Agent
are parties to a Credit Agreement, dated as of February 24, 1998 (as
amended to date, the "Credit Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. The preamble of the Credit Agreement is hereby amended by
(i) deleting the reference therein to "READING & BATES CORPORATION
("Holdings"), a Delaware corporation, READING & BATES DRILLING CO.
("Parent"), an Oklahoma corporation" and inserting a reference to "R&B
FALCON CORPORATION ("Holdings"), as assignee to the rights and
obligations of Reading & Bates Corporation and Reading & Bates Drilling
Co." in lieu thereof.
2. Section 2.01(a) of the Credit Agreement is hereby amended
by deleting the reference therein to 0.20% and inserting a reference to
0.25% in lieu thereof.
3. Section 7 of the Credit Agreement is hereby amended by
deleting Sections 7.01 through 7.12, inclusive, thereof in their entirety
and inserting the following new Sections 7.01 through 7.12 in lieu
thereof:
7.01. Indebtedness. Holdings will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the First Amendment
Effective Date and set forth in Annex 7.01 and extensions,
renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof;
(c) Indebtedness of the Borrower to any Subsidiary and of
any Subsidiary to the Borrower or any other Subsidiary;
(d) Permitted Project Debt other than the Indebtedness
created hereunder;
(e) Indebtedness created under the R&B Falcon Credit
Agreement in an aggregate principal amount not to exceed
$500,000,000; and
(f) other Indebtedness in an aggregate principal amount
not exceeding $30,000,000 at any time outstanding; provided
that the aggregate principal amount of Indebtedness of the
Borrower's Subsidiaries permitted by this clause (f) shall not
exceed $5,000,000 at any time outstanding.
7.02. Liens. Holdings will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of Holdings or any
Subsidiary existing on the First Amendment Effective Date
hereof and set forth in Annex V; provided that (i) such Lien
shall not apply to any other property or asset of Holdings or
any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and extensions,
renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(c) any Lien (including, without limitation, Liens
hereunder) on the Deepwater Pathfinder, Deepwater Frontier, and
Drillship III or related contracts to secure the respective
Permitted Project Debt incurred to construct such vessel; and
(d) Liens on fixed or capital assets acquired, leased,
constructed or improved by Holdings or any Subsidiary; provided
that (i) such security interests secure Indebtedness permitted
by clause (d) of Section 7.01 but the aggregate principal
amount of such Indebtedness secured shall not exceed
$20,000,000 at any time outstanding, (ii) such security
interests and the Indebtedness secured thereby are incurred
prior to or within 90 days after such acquisition or lease or
the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed 100% of the cost
of acquiring, constructing or improving such fixed or capital
assets and (iv) such security interests shall not apply to any
other property or assets of Holdings or any Subsidiary.
7.03. Fundamental Changes. (a) Holdings will not, and will
not permit any Subsidiary to, merge into or consolidate with any
other Person, or permit any other Person to merge into or
consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or
substantially all of its assets, or any of the stock of or voting
rights with respect to any of its Subsidiaries (in each case,
whether now owned or hereafter acquired), or liquidate or dissolve,
except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i)
any Subsidiary other than the Borrower may merge into Holdings in a
transaction in which Holdings is the surviving corporation, (ii) any
Subsidiary other than the Borrower may merge into any Subsidiary in
a transaction in which the surviving entity is a Subsidiary, (iii)
any Subsidiary other than the Borrower may sell, transfer, lease or
otherwise dispose of its assets to Holdings or to another
Subsidiary, (iv) any Subsidiary other than the Borrower may
liquidate or dissolve if Holdings determines in good faith that such
liquidation or dissolution is in the best interests of Holdings and
is not materially disadvantageous to the Lenders; provided that any
such merger involving a Person that is not a wholly owned Subsidiary
immediately prior to such merger shall not be permitted and (v) Hold
ings may merge with another Person if (A) Holdings is the successor
or survivor of such merger transaction and (B) Moody's and S&P shall
have affirmed in writing that such transaction will not impair
Holdings' implied senior debt rating as such debt rating is in
effect immediately prior to the announcement of such merger
transaction.
(b) Holdings will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other
than businesses of the type conducted by Holdings and its
Subsidiaries on the date of execution of this Agreement and
businesses reasonably related thereto.
7.04. Investments, Loans, Advances, Guarantees and
Acquisitions. Holdings will not, and will not permit any of its
Subsidiaries to, purchase, hold or acquire any capital stock, evi
dences of indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by Holdings or by any Subsidiary in the
capital stock of its Subsidiaries;
(c) loans or advances made by Holdings to any Subsidiary
and made by any Subsidiary to Holdings or any other Subsidiary;
and
(d) investments by Holdings and/or any Subsidiary in the
aggregate not to exceed 10% of Holdings' consolidated Tangible
Net Worth.
7.05. Hedging Agreements. Holdings will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement,
other than Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which Holdings or any
Subsidiary is exposed in the conduct of its business or the
management of its liabilities.
7.06. Restricted Payments. Holdings will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay
or make, directly or indirectly, any Restricted Payment, except (a)
Holdings may declare and pay dividends with respect to its capital
stock payable solely in additional shares of its common stock, (b)
Subsidiaries other than the Borrower may declare and pay dividends
ratably with respect to their capital stock and (c) Holdings may
make Restricted Payments pursuant to and in accordance with stock
option plans or other benefits plans for management or employees of
Holdings and its Subsidiaries.
7.07. Transactions with Affiliates. Holdings will not, will
not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions
not less favorable to Holdings or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among Holdings and its wholly-owned
Subsidiaries not involving any other Affiliate and (c) any
Restricted Payment permitted by Section 7.06.
7.08. Restrictive Agreements. Holdings will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement
that prohibits, restricts or imposes any condition upon (a) the
ability of Holdings or any Subsidiary to create, incur or permit to
exist any Lien upon any of its property or assets, or (b) the
ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay
loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary;
provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing
shall not apply to restrictions and conditions existing on the date
hereof and contained in the Indenture or identified on Annex 7.08
(but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or
condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions
and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (v) clause (a) of
the foregoing shall not apply to customary provisions in leases and
other contracts restricting the assignment thereof.
7.09. Tangible Net Worth. Holdings will not permit at any
time its Tangible Net Worth to be less than $600,000,000 plus (i)
50% of its cumulative Consolidated Net Income, if positive, for the
period from April 1, 1998 through the date of calculation, plus (ii)
100% of any equity issued by Holdings after April 24, 1998.
7.10. EBITDA Leverage Ratio. Holdings will not permit its
EBITDA Leverage Ratio as of the end of any fiscal quarter of
Holdings (calculated quarterly at the end of each fiscal quarter) to
be greater than the amount set forth in the table below on the appli
cable date. For the purposes of this Section 7.10, "EBITDA Leverage
Ratio" shall mean the ratio of (i) difference of Funded Debt minus
cash and cash equivalents of Holdings on a consolidated basis to
(ii) EBITDA for the four fiscal quarters ending on such date;
provided that (A) EBITDA for the period ending on June 30, 1998
shall equal the product of EBITDA for the six-month period ending on
such date times 2 and (B) EBITDA for the period ending on September
30, 1998 shall equal the product of EBITDA for the nine-month period
ending on such date times 1.33.
EBITDA
Period Leverage Ratio
6/30/98 thru 6/30/99 3.00x
7/1/99 thru 12/31/99 2.50x
1/1/00 and thereafter 2.00x
7.11. Sale of Properties. Holdings will not, and will not
permit any Subsidiary to, sell, assign, convey or otherwise transfer
any properties or assets except for (i) the sale of inventory in the
ordinary course of business; (ii) the sale or transfer of equipment
or other property or assets that is no longer necessary for the
business of Holdings or such Subsidiary or is replaced by equipment
or other property or assets of at least comparable value and use and
(iii) sales of properties and assets which shall not exceed
$50,000,000 in the aggregate in any fiscal year.
7.12. Amendments to Material Agreements. Holdings will not
modify or amend the terms of the Indenture as in existence on the
date of this Agreement or any documents described on Schedule 7.12
without the consent of the Required Banks, if the effect of such
modification or amendment would be to the material detriment of the
Banks.
4. Section 9 of the Credit Agreement is hereby further amended
by deleting the following definitions in their entirety:
Approved Bank
Approved Company
Arcade
Authorized Officer
Capital Lease
Capital Lease Obligations
Cash Equivalents
Change of Control
Consolidated Capital Expenditures
Consolidated Current Assets
Consolidated Current Liabilities
Consolidated EBIT
Consolidated EBITDAR
Consolidated Funded Indebtedness
Consolidated Interest Expense
Consolidated Net Income
Consolidated Net Worth
Consolidated Rent Expense
Construction Contract
Contingent Obligations
Credit Party
Dividends
Eurodollar Margin
Guarantor
Guaranty
Holdings
Holdings Convertible Debentures
Parent Guarantors
Refundment Guaranty
5. Section 9 of the Credit Agreement is hereby further amended
by inserting in the appropriate alphabetical order the following new
definitions:
"Authorized Officer" shall mean any officer of Holdings or the
Borrower designated as such in writing to the Administrative Agent
by Holdings or the Borrower.
"Bonds" shall mean the Senior Unsecured Notes of R&B Falcon
Corporation issued pursuant to the Indenture.
"Capital Lease Obligations" of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required
to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance
with GAAP.
"Change of Control" means (a) at any time Holdings shall cease
to own directly or indirectly, 100% of the capital stock of the
Borrower; (b) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the
date hereof) of shares representing more than 30% of the aggregate
ordinary voting power represented by the issued and outstanding
capital stock of Holdings; (c) occupation of a majority of the seats
(other than vacant seats) on the board of directors of Holdings by
Persons who were neither (i) nominated by the board of directors of
Holdings nor (ii) appointed by directors so nominated; or (d) the
acquisition of direct or indirect Control of Holdings by any Person
or group.
"Consolidated Net Income" shall mean with respect to Holdings
and its Consolidated Subsidiaries, for any period, the aggregate of
the net income (or loss) of Holdings and its Consolidated
Subsidiaries after allowances for taxes for such period, determined
on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from such net income (to the extent otherwise
included therein) the following: (i) the net income of any Person
in which Holdings or any Consolidated Subsidiary has an interest
(which interest does not cause the net income of such other Person
to be consolidated with the net income of Holdings and its
Consolidated Subsidiaries in accordance with GAAP), except to the
extent of the amount of dividends or distributions actually paid in
such period by such other Person to Holdings or to a Consolidated
Subsidiary, as the case may be; (ii) the net income (but not loss)
of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans
by that Consolidated Subsidiary is not at the time permitted by
operation of the terms of its charter or any agreement, instrument
or Governmental Requirement applicable to such Consolidated
Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss)
of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (iv) any extraordinary
gains, including gains attributable to property sales not in the
ordinary course of business; and (v) the cumulative effect of a
change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets; and further provided, that
there shall be added to such net income (to the extent otherwise
deducted therefrom) any extraordinary losses.
"Consolidated Subsidiaries" shall mean each Subsidiary of
Holdings (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been)
consolidated with the financial statements of Holdings in accordance
with GAAP.
"Construction Contract" shall mean the Contract for the
Construction and Sale of a 103,000 Metric Tons Displacement
Drillship (Hull No. 1255) dated September 5, 1997, between Reading &
Bates Drilling Co., Samsung Heavy Industries Co., Ltd. and Samsung
Corporation, together with any ancillary documents related thereto,
as assigned by Parent to the Borrower.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or polices
of a Person, whether through the ability to exercise voting power,
by contract or otherwise. "Controlling" and "Controlled" have
meanings correlative thereto.
"Credit Party" shall mean (i) prior to the First Amendment
Effective Date, R&BFD, Parent, the Borrower, Reading & Bates
Exploration Co., Reading & Bates (A) Pty., Ltd., Reading and Bates
Borneo Drilling Co., Ltd., Reading & Bates Offshore, Limited and RB
Rig Corporation and (ii) after the First Amendment Effective Date,
R&B Falcon Corporation and the Borrower.
"Deepwater Frontier" means the drillship being constructed for
a joint venture on the date of this Agreement in which Holdings
indirectly owns a 60% interest.
"Deepwater Pathfinder" means the drillship being constructed
for a joint venture on the date of this Agreement in which Holdings
indirectly owns a 50% interest.
"EBITDA" shall mean, for any period, the sum of Consolidated
Net Income for such period plus the following expenses or charges to
the extent deducted from Consolidated Net Income in such period:
interest, taxes, depreciation, depletion and amortization.
"Eurodollar Margin" shall mean a percentage equal 0.75% per
annum.
"First Amendment" shall mean the First Amendment to this
Agreement, dated as of April 24, 1998.
"First Amendment Effective Date" shall have the meaning
provided in paragraph II.5. of the First Amendment.
"Funded Debt" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all Capital Lease Obligations of such Person, (d)
all Hedging Obligations of such Person, (e) all obligations,
contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (f) all
obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances and (g) all obligations, contingent or
otherwise, of such Person guaranteeing, indemnifying or having the
economic effect of guaranteeing any of the above described Funded
Debt of another Person. The Funded Debt of any Person shall include
the Funded Debt of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is
liable therefor as a result of such Person's ownership interest in
or other relationship with such entity, except to the extent the
terms of such Funded Debt provide that such Person is not liable
therefor. Funded Debt shall expressly exclude Permitted Project
Debt.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization
or other directive or requirement (whether or not having the force
of law), including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or
controls, of any Governmental Authority.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing
or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation
of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital,
equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation or (d) as an account
party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that
the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business.
"Guarantor" shall mean R&B Falcon Corporation.
"Guaranty" shall mean the Guaranty of Holdings pursuant to
Section 12.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement.
"Hedging Obligations" of any person means the net obligation
(not the notional amount) of such Person pursuant to any Hedging
Agreement.
"Holdings" shall mean (i) for all purposes prior to the First
Amendment Effective Date and with respect to all references to
Holdings which refer to dates prior to the First Amendment Effective
Date, R&BFD and (ii) for all purposes after the First Amendment
Effective Date other than references to Holdings which refer to
dates prior to the First Amendment Effective Date, R&B Falcon
Corporation.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person
in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course
of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such
Person, (i) all Synthetic Lease Obligations of such Person, (j) all
Hedging Obligations of such Persons, (k) all obligations, contingent
or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty and (l) all obligations,
contingent or otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which
such Person is a general partner) to the extent such Person is
liable therefor as a result of such Person's ownership interest in
or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable
therefor.
"Indenture" shall mean the Indenture, dated as of April 14,
1998, between R&B Falcon Corporation, as Issuer, and Chase Bank of
Texas, National Association, as Trustee, providing for the issuance
of $1,100,000,000 of Senior Unsecured Notes and all renewals,
extensions and modifications thereof permitted by the terms of this
Agreement.
"Index Debt" means senior, unsecured, long-term indebtedness
for borrowed money of Holdings that is not guaranteed by any other
Person or subject to any other credit enhancement.
"Lien" means, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or
security interest in, on or of such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect
to such securities.
"Moody's" means Moody's Investors Service, Inc.
"Parent" shall mean Reading & Bates Drilling Co., an Oklahoma
corporation.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due
or are being contested in good faith and by appropriate
proceedings for which adequate reserves with respect thereto,
in accordance with GAAP, have been established;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, maritime and other like Liens imposed by law,
arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or are
being contested in good faith and by appropriate proceedings
for which adequate reserves with respect thereto, in accordance
with GAAP, have been established;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under Section 8.08;
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising
in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary
conduct of business of Holdings or any Subsidiary; and
(g) any interest or title of a lessor or charterer under
any lease or charter between Holdings and any Subsidiary or
between any of its Subsidiaries or as otherwise permitted
hereunder;
provided that the term "Permitted Encumbrances" shall not include
any Lien securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal
of and interest on which are unconditionally guaranteed by, the
United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing within
one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270
days from the date of acquisition thereof and having, at such
date of acquisition, the highest credit rating obtainable from
S&P or from Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the
date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by,
any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not
less than $500,000,000; and
(d) fully collateralized repurchase agreements with a
term of not more than 30 days for securities described in
clause (a) above and entered into with a financial institution
satisfying the criteria described in clause (c) above.
"Permitted Project Debt" means Indebtedness (including, without
limitation, or duplication, the Guarantee of any such Indebtedness
by Holdings) incurred in connection with the construction of
Deepwater Pathfinder, Deepwater Frontier and Drillship III
(including, without limitation, the Loans) by the respective joint
venture or Subsidiary owning such vessel not to exceed $375,000,000
in the aggregate and all extensions, renewals and replacements of
any such Indebtedness by the primary obligor thereof that do not
increase the outstanding principal amount thereof.
"Prior Indebtedness" means the Funded Debt of Holdings on the
date of the R&B Falcon Credit Agreement, excluding the Indebtedness
created under this Agreement and the Indebtedness evidenced by the
Bonds.
"R&B Falcon Credit Agreement" shall mean the Credit Agreement,
dated as of April 24, 1998, by and among R&B Falcon Corporation, the
lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent.
"Refundment Guaranty" shall mean the Letter of Refundment
Guaranty, dated as of September 12, 1997, issued by The Import-
Export Bank of Korea in favor of Parent to support the obligations
of Samsung under the Construction Contract, as assigned by Parent to
the Borrower.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any
shares of any class of capital stock of Holdings or any Subsidiary,
or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of capital stock of Holdings or any
option, warrant or other right to acquire any such shares of capital
stock of Holdings.
"S&P" means Standard & Poor's.
"Synthetic Lease Obligations" of any Person means the aggregate
obligations of such Person under each lease or a guaranty of such
lease which requires such Person to make payments of rent or other
amounts over the term of such lease, including payments at
termination, which are more than seventy percent (70%) but less than
ninety percent (90%) of the purchase price of the Property subject
to such lease but excluding interest at an imputed rate of interest.
"Tangible Net Worth" means without duplication in accordance
with GAAP the sum of (i) the total amount of capital stock of
Holdings, (ii) preferred stock, (iii) paid-in capital, and (iv)
retained earnings minus the sum of (i) patents, patent applications,
trademarks, service marks, copyrights, and trade names and (ii)
goodwill and all other intangibles.
6. The Credit Agreement is hereby further amended by (i)
deleting Annex V thereto in its entirety and inserting Annex V attached
hereto in lieu thereof and (ii) by inserting immediately following Annex
VI thereto Annexes 7.01 and 7.08 attached hereto.
7. On and after the First Amendment Effective Date, Parent is
hereby released from all obligations under and in respect of the Guaranty
contained in Section 12 of the Credit Agreement, provided that, in
consideration thereof, Holdings shall agree to assume, and does hereby
unconditionally assume for itself, all of Parent's obligations under and
in respect of, the Guaranty contained in Section 12 of the Credit
Agreement.
8. On and after the First Amendment Effective Date, the
Subsidiary Guaranty, dated as of February 24, 1998, executed in
connection with the Credit Agreement (the "Subsidiary Guaranty") is
hereby terminated and the guarantee of each party to such Subsidiary
Guaranty is hereby released.
9. On and after the First Amendment Effective Date, the
Security Agreement shall be amended pursuant to an assignment and consent
in the form attached hereto as Exhibit A (the "Assignment and Consent").
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the First
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) except as may be expressly modified by this Amendment, all
of the representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects on the First Amendment Effective Date both before
and after giving effect to this Amendment, with the same effect as
though such representations and warranties had been made on and as
of the First Amendment Effective Date (it being understood that any
representation or warranty made as of a specific date shall be true
and correct in all material respects as of such specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the Credit Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"First Amendment Effective Date") when the following conditions have been
met to the satisfaction of the Agent and the Required Banks (determined
immediately after the occurrence of the First Amendment Effective Date):
(i) the Agent shall have received from R&B Falcon Corporation
certified copies of resolutions of the Board of Directors or
statements of unanimous written consent in lieu thereof of R&B
Falcon Corporation with respect to the matters set forth in this
Amendment and such resolutions shall be satisfactory to the Agent;
(ii) (x) Parent shall have assigned all of its right, title and
interest in and to the Construction Contract and the Refundment
Guaranty to the Borrower pursuant to an assignment in form and
substance satisfactory to the Administrative Agent, which assignment
shall have been duly delivered to the Administrative Agent and (y)
Parent and the Borrower shall have duly authorized, executed and
delivered the Assignment and Consent;
(iii) the Borrower shall have paid to the Agent and the
Banks all costs, fees and expenses (including, without limitation,
legal fees and expenses) payable to the Agent and the Banks to the
extent then due;
(iv) all corporate and legal proceedings and all instruments
and agreements in connection with the transactions contemplated by
this Amendment shall be satisfactory in form and substance to the
Agent and the Required Banks, and the Agent shall have received all
information and copies of all documents and papers, including
records of corporate proceedings or governmental approvals, if any,
which the Agent may have requested in connection therewith, such
documents and papers where appropriate to be certified by proper
corporate or governmental authorities;
(v) each of R&B Falcon Corporation, R&BFD, Parent, the
Borrower and each of the Banks shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to
the Agent at its Notice Office; and
(vi) the Agent shall have received, and shall be satisfied
with both the form and substance of, an opinion of Wayne Hillin,
counsel to R&B Falcon Corporation, Parent and the Borrower, with
respect to the matters contemplated by the First Amendment.
Unless the Agent has received actual notice from any Bank that the
conditions contained above have not been met, upon the satisfaction of
the condition described in clause (v) of the immediately preceding
sentence and upon the Agent's good faith determination that the other
conditions described above have been met, the First Amendment Effective
Date shall be deemed to have occurred, regardless of any subsequent
determination that one or more of the conditions thereto had not been met
(although the occurrence of the First Amendment Effective Date shall not
release Holdings or the Borrower from any liability for failure to
satisfy one or more of the applicable conditions specified above). The
Agent will give the Borrower and each Bank prompt notice of the
occurrence of the First Amendment Effective Date.
6. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:______________________________
Title:
R&B FALCON DRILLING (INTERNATIONAL &
DEEPWATER) INC. (f/k/a Reading & Bates
Corporation)
By:______________________________
Title:
READING & BATES DRILLING CO.
By:______________________________
Title:
RB DEEPWATER EXPLORATION III INC.
By:______________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, Individually and as Agent
By:______________________________
Title:
By:______________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Syndication Agent
By:______________________________
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (Publ.)
By:______________________________
Title:
By:______________________________
Title:
CREDIT AGRICOLE INDOSUEZ
By:______________________________
Title:
BANK OF NOVA SCOTIA
By:______________________________
Title:
ANNEX V
LIENS
1. Mortgage of a Ship dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and BP
Exploration Operating Company Limited, in connection with item
6 in Annex IV.
2. Mortgage of a Ship dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and Britoil
plc., in connection with item 6 in Annex IV.
3. Deed of Covenant dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and BP
Exploration Operating Company Limited, in connection with item
6 in Annex IV.
4. Deed of Covenant dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and Britoil
Public Limited Company in connection with item 6 in Annex IV.
5. First Naval Mortgage on the "SEILLEAN" dated December 14, 1996
between TRB Holding Corporation in favor of Nissho Iwai Europe
PLC, in connection with item 12 in Annex IV.
6. Collateral Assignment of Deposit Account, Pledge and Security
Agreement dated December 14, 1996 with respect to the
"SEILLEAN" between TRB Holding Corporation and Nissho Iwai
Europe PLC, in connection with item 12 in Annex IV.
7. Assignment of Insurances dated December 14, 1996 with respect
to the "SEILLEAN" between TRB Holding Corporation and Reading &
Bates (U.K.) Limited and Nissho Iwai Europe PLC, in connection
with item 12 in Annex IV.
8. Vessel mortgage dated July 25, 1994 by Falcon in favor of
Diamond Services Corporation with respect to one of Falcon's
barge rigs, in connection with item 13 in Annex IV.
9. Texas and Louisiana UCC-1 Financing Statements filed July 2,
1994 in favor of Diamond Services Corporation with respect to
two of Falcon's barge rigs, in connection with item 13 in Annex
IV.
10. First Preferred Mortgage on the vessel "Coastal Golden"
(Peregrine VI) in favor of Coastal Capital Corporation, in
connection with item 14 in Annex IV.
11. Liens - BSI Assets, in connection with item 15 in Annex IV.
ANNEX 7.01
EXISTING INDEBTEDNESS
For purposes of this schedule only "Falcon" means Falcon Drilling
Company, Inc. and "R&B" means Reading & Bates Corporation.
1. Indenture relating to R&B's 8% Senior Subordinated Convertible
Debentures due 1998 dated as of August 29, 1989, as
supplemented, between R&B and IBJ Schroder Bank & Trust
Company, as Trustee (outstanding principal amount -
$18,494,500).
2. Indenture dated as of January 15, 1994, between Falcon and
Texas Commerce Bank National Association, as Trustee, relating
to Falcon's 9-3/4% senior notes and guaranteed by certain
subsidiaries of Falcon (outstanding principal amount -
$5,250,000).
3. Floating Rate Senior Note Purchase Agreement, dated as of
February 23, 1994, by and between Falcon and Crescent/Mach I
Partners, L.P., and guaranteed by certain subsidiaries of
Falcon (outstanding principal amount - $9,000,000).*
4. Indenture dated as of March 1, 1996, between Falcon and Bank
One, Texas, N.A., as trustee, relating another series of
Falcon's senior notes (outstanding principal amount -
$345,000).
5. Indenture dated as of April 14, 1998 between R&B Falcon
Corporation and Chase Bank of Texas, National Association, as
Trustee (outstanding principal amount - $1,100,000,000).
6. Agreement for the sale and purchase of Semi-Submersible
Emergency Support Vessel Iolair dated September 8, 1995 between
BP Exploration Operating Company Limited and Reading & Bates
(Caledonia) Limited, a subsidiary of R&B (outstanding principal
amount - $7,500,000).
7. Performance Guarantee dated September 8, 1995 by R&B in favor
of BP Exploration Operating Company Limited, in connection with
item 6 above.
8. Performance Guarantee dated September 8, 1995 by R&B in favor
of Britoil plc, in connection with item 6 above.
9. Initial Services Agreement dated September 8, 1995 between
Britoil Public Limited Company and Reading & Bates (Caledonia)
Limited, a subsidiary of R&B, in connection with item 6 above.
10. Heads of Agreement for the provision of Vessel Services dated
September 8, 1995 between Britoil Public Limited Company,
Reading & Bates (Caledonia) Limited, a subsidiary of R&B, and
R&B, in connection with item 6 above.
11. Letter of Credit Agreement dated December 30, 1996 between R&B,
as guarantor, Reading & Bates Drilling Co., and Christiana Bank
og Kreditkasse, New York Branch ($20,000,000 facility).
12. Loan Agreement dated as of December 14, 1996 among TRB Holding
Corporation, Reading & Bates (U.K.) Limited and Nissho Iwai
Europe PLC (outstanding principal amount - $24,774,244).
13. Two promissory notes dated June 30, 1994 payable by subsidiary
of Falcon to Diamond Services Corporation (outstanding
principal amount - $536,646).
14. Secured promissory note dated January 1997 payable by Falcon to
Coastal Capital Corporation (outstanding principal amount -
$6,390,000).*
15. Four promissory notes payable by a subsidiary of Falcon to
First National Bank of Commerce (outstanding aggregate
principal amount - $6,958,378).*
16. Undertaking dated September 30, 1997 by Reading & Bates
Drilling Co. to Arthur Andersen with respect to Reading & Bates
(U.K.) Limited with respect to the continuance of its business.
17. Indemnification Agreement by R&B in favor of Conoco Development
Company with respect to equity contributions by a subsidiary of
R&B required under the Liability Company Agreement dated
October 28, 1996 between Conoco Development Company and RB
Deepwater Exploration Inc.
18. Indemnification Agreement by R&B in favor of Conoco Development
II Inc. with respect to equity contributions by a subsidiary of
R&B required under the Liability Company Agreement dated April
30, 1997 between Conoco Development II Inc. and RB Deepwater
Exploration II Inc.
19. Guaranty by R&B and certain of its subsidiaries in favor of
Bank of America National Trust and Savings Association,
National Westminster PLC, New York Branch and certain other
lending institutions party to the Credit Agreement dated as of
November 10, 1997 among Deepwater Drilling II L.L.C. and those
institutions.
____________________________
* To be repaid on or before June 30, 1998
ANNEX 7.08
RESTRICTIVE AGREEMENTS
1. R&B Falcon Credit Agreement.
2. Letter of Credit Agreement dated as of December 30, 1996
between R&B, Reading & Bates Drilling Co., and Christiana Bank
og Kreditkasse, New York Branch.
3. Indenture dated as of January 15, 1994, between Falcon and
Texas Commerce Bank National Association, as Trustee, with
respect to Falcon's 9-3/4% senior notes (outstanding principal
amount - $5,250,000).
4. Floating Rate Senior Note Purchase Agreement, dated as of
February 23, 1994, by and between Falcon and Crescent/Mach I
Partners, L.P., including a form of Note (outstanding principal
amount - $9,000,000).
5. Indenture dated as of March 1, 1996, between Falcon and Bank
One, Texas, N.A., as trustee, with respect to another series of
Falcon's senior notes (outstanding principal amount -
$345,000).
6. First Preferred Mortgage on the vessel "Coastal Golden"
(Peregrine VI) in favor of Coastal Capital Corporation, in
connection with item 14 in Annex 7.01.
7. Loan Agreement dated January 17, 1991 between Falcon Drilling
Company, Inc. and Coastal Capital Corporation, in connection
with item 14 in Annex 7.01.
8. Credit and Sale Agreement dated June 30, 1994 between Diamond
Services Corporation and Eilert-Olsen Investments, Inc., in
connection with item 13 in Annex 7.01.
9. First Preferred Mortgage dated July 25,1994 by Eilert-Olsen
Investments, Inc. to Diamond Services Corporation, in
connection with items 13 in Annex 7.01.
10. BSI, in connection with item 15 in Annex 7.01.
EXHIBIT 10.3
FIRST AMENDMENT TO LETTER OF CREDIT AGREEMENT
FIRST AMENDMENT TO LETTER OF CREDIT AGREEMENT (this "Amendment"),
dated as of April 24, 1998, among R&B FALCON CORPORATION, a Delaware
corporation ("R&B Falcon"), R&B FALCON DRILLING (INTERNATIONAL & DEEPWATER)
INC. (f/k/a Reading & Bates Corporation), a Delaware corporation ("R&BFD"),
READING & BATES DRILLING CO., an Oklahoma corporation ("R&B Drilling") and
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH (the "Bank"). All
capitalized terms used herein and not otherwise defined shall have the
meanings provided such terms in the L/C Agreement referred to below.
W I T N E S S E T H :
WHEREAS, R&BFD, R&B Drilling and the Bank are parties to a Letter
of Credit Agreement, dated as of December 30, 1996 (as in effect on the
date hereof, the "L/C Agreement"); and
WHEREAS, the parties thereto and hereto wish to amend the L/C
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to L/C Agreement.
1. The preamble of the L/C Agreement is hereby amended by (i)
deleting the text "READING & BATES CORPORATION ("Holdings"), a Delaware
corporation, READING & BATES DRILLING CO. (the "Obligor") " appearing
therein and (ii) inserting the text "R&B FALCON CORPORATION (the
"Obligor")" in lieu thereof, with such amendment being made in order to
effect the assignment pursuant to the terms and conditions contained herein
of all rights and obligations of R&B Drilling under the L/C Agreement to
R&B Falcon.
2. Section 7 of the L/C Agreement is hereby amended by deleting
Sections 7.01 through 7.09, inclusive, thereof in their entirety and
inserting the following new Sections 7.01 through 7.12 in lieu thereof:
7.01. Indebtedness. Obligor will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the First Amendment Effective
Date and set forth in Annex IV and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof;
(c) Indebtedness of the Obligor to any Subsidiary and of
any Subsidiary to the Obligor or any other Subsidiary;
(d) Permitted Project Debt;
(e) Indebtedness created under the R&B Falcon Credit
Agreement in an aggregate principal amount not to exceed
$500,000,000; and
(f) other Indebtedness in an aggregate principal amount not
exceeding $30,000,000 at any time outstanding; provided that the
aggregate principal amount of Indebtedness of the Obligor's
Subsidiaries permitted by this clause (f) shall not exceed
$5,000,000 at any time outstanding.
7.02. Liens. Obligor will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or
rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of Obligor or any
Subsidiary existing on the First Amendment Effective Date hereof
and set forth in Annex V; provided that (i) such Lien shall not
apply to any other property or asset of Obligor or any Subsidiary
and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding
principal amount thereof;
(c) any Lien (including, without limitation, Liens
hereunder) on the Deepwater Pathfinder, Deepwater Frontier, and
Drillship III or related contracts to secure the respective
Permitted Project Debt incurred to construct such vessel; and
(d) Liens on fixed or capital assets acquired, leased,
constructed or improved by Obligor or any Subsidiary; provided
that (i) such security interests secure Indebtedness permitted by
clause (d) of Section 7.01 but the aggregate principal amount of
such Indebtedness secured shall not exceed $20,000,000 at any
time outstanding, (ii) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90
days after such acquisition or lease or the completion of such
construction or improvement, (iii) the Indebtedness secured
thereby does not exceed 100% of the cost of acquiring,
constructing or improving such fixed or capital assets and (iv)
such security interests shall not apply to any other property or
assets of Obligor or any Subsidiary.
7.03. Fundamental Changes. (a) Obligor will not, and will not
permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (in one transac
tion or in a series of transactions) all or substantially all of its
assets, or any of the stock of or voting rights with respect to any of
its Subsidiaries (in each case, whether now owned or hereafter
acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing (i) any Subsidiary may merge into
Obligor in a transaction in which Obligor is the surviving corpora
tion, (ii) any Subsidiary may merge into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary, (iii) any
Subsidiary may sell, transfer, lease or otherwise dispose of its
assets to Obligor or to another Subsidiary, (iv) any Subsidiary other
than the Obligor may liquidate or dissolve if Obligor determines in
good faith that such liquidation or dissolution is in the best
interests of Obligor and is not materially disadvantageous to the
Bank; provided that any such merger involving a Person that is not a
wholly owned Subsidiary immediately prior to such merger shall not be
permitted and (v) Obligor may merge with another Person if (A) Obligor
is the successor or survivor of such merger transaction and (B)
Moody's and S&P shall have affirmed in writing that such transaction
will not impair Obligor' implied senior debt rating as such debt
rating is in effect immediately prior to the announcement of such
merger transaction.
(b) Obligor will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other
than businesses of the type conducted by Obligor and its Subsidiaries
on the date of execution of this Agreement and businesses reasonably
related thereto.
7.04. Investments, Loans, Advances, Guarantees and Acquisitions.
Obligor will not, and will not permit any of its Subsidiaries to,
purchase, hold or acquire any capital stock, evidences of indebtedness
or other securities (including any option, warrant or other right to
acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by Obligor or by any Subsidiary in the
capital stock of its Subsidiaries;
(c) loans or advances made by Obligor to any Subsidiary and
made by any Subsidiary to Obligor or any other Subsidiary; and
(d) investments by Obligor and/or any Subsidiary in the
aggregate not to exceed 10% of Obligor' consolidated Tangible Net
Worth.
7.05. Hedging Agreements. Obligor will not, and will not permit
any of its Subsidiaries to, enter into any Hedging Agreement, other
than Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which Obligor or any Subsidiary
is exposed in the conduct of its business or the management of its
liabilities.
7.06. Restricted Payments. Obligor will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a)
Obligor may declare and pay dividends with respect to its capital
stock payable solely in additional shares of its common stock, (b)
Subsidiaries may declare and pay dividends ratably with respect to
their capital stock and (c) Obligor may make Restricted Payments
pursuant to and in accordance with stock option plans or other
benefits plans for management or employees of Obligor and its
Subsidiaries.
7.07. Transactions with Affiliates. Obligor will not, will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions
with, any of its Affiliates, except (a) in the ordinary course of
business at prices and on terms and conditions not less favorable to
Obligor or such Subsidiary than could be obtained on an arm's-length
basis from unrelated third parties, (b) transactions between or among
Obligor and its wholly-owned Subsidiaries not involving any other
Affiliate and (c) any Restricted Payment permitted by Section 7.06.
7.08. Restrictive Agreements. Obligor will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of
Obligor or any Subsidiary to create, incur or permit to exist any Lien
upon any of its property or assets, or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or advances to
the Obligor or any other Subsidiary or to Guarantee Indebtedness of
the Obligor or any other Subsidiary; provided that (i) the foregoing
shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof and contained in the Indenture
or identified on Annex VI (but shall apply to any extension or renewal
of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (iv) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement
if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing
shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
7.09. Tangible Net Worth. Obligor will not permit at any time
its Tangible Net Worth to be less than $600,000,000 plus (i) 50% of
its cumulative Consolidated Net Income, if positive, for the period
from April 1, 1998 through the date of calculation, plus (ii) 100% of
any equity issued by Obligor after April 24, 1998.
7.10. EBITDA Leverage Ratio. Obligor will not permit its EBITDA
Leverage Ratio as of the end of any fiscal quarter of Obligor
(calculated quarterly at the end of each fiscal quarter) to be greater
than the amount set forth in the table below on the applicable date.
For the purposes of this Section 7.10, "EBITDA Leverage Ratio" shall
mean the ratio of (i) difference of Funded Debt minus cash and cash
equivalents of Obligor on a consolidated basis to (ii) EBITDA for the
four fiscal quarters ending on such date; provided that (A) EBITDA for
the period ending on June 30, 1998 shall equal the product of EBITDA
for the six-month period ending on such date times 2 and (B) EBITDA
for the period ending on September 30, 1998 shall equal the product of
EBITDA for the nine-month period ending on such date times 1.33.
EBITDA
Period Leverage Ratio
6/30/98 thru 6/30/99 3.00x
7/1/99 thru 12/31/99 2.50x
1/1/00 and thereafter 2.00x
7.11. Sale of Properties. Obligor will not, and will not permit
any Subsidiary to, sell, assign, convey or otherwise transfer any
properties or assets except for (i) the sale of inventory in the
ordinary course of business; (ii) the sale or transfer of equipment or
other property or assets that is no longer necessary for the business
of Obligor or such Subsidiary or is replaced by equipment or other
property or assets of at least comparable value and use and (iii)
sales of properties and assets which shall not exceed $50,000,000 in
the aggregate in any fiscal year.
7.12. Amendments to Material Agreements. Obligor will not
modify or amend the terms of the Indenture as in existence on the date
of this Agreement or any documents described on Schedule V without the
consent of the Bank, if the effect of such modification or amendment
would be to the material detriment of the Bank.
3. Section 9 of the L/C Agreement is hereby further amended by
deleting the following definitions in their entirety:
Approved Bank
Approved Company
Arcade
Authorized Officer
Capital Lease
Capital Lease Obligations
Cash Equivalents
Change of Control
Consolidated Capital Expenditures
Consolidated Current Assets
Consolidated Current Liabilities
Consolidated EBIT
Consolidated EBITDAR
Consolidated Funded Indebtedness
Consolidated Interest Expense
Consolidated Net Income
Consolidated Net Worth
Consolidated Rent Expense
Contingent Obligations
Credit Party
Dividends
Guarantor
Guaranty
Holdings
Holdings Convertible Debentures
Maturity Date
Obligor
Parent Guarantors
4. Section 9 of the L/C Agreement is hereby further amended by
inserting in the appropriate alphabetical order the following new
definitions:
"Authorized Officer" shall mean any officer of Obligor designated
as such in writing to the Bank by Obligor.
"Bonds" shall mean the Senior Unsecured Notes of Obligor issued
pursuant to the Indenture.
"Capital Lease Obligations" of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.
"Change of Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any person or
group (within the meaning of the Securities Exchange Act of 1934 and
the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) of shares representing more than 30% of the
aggregate ordinary voting power represented by the issued and
outstanding capital stock of Obligor; (b) occupation of a majority of
the seats (other than vacant seats) on the board of directors of
Obligor by Persons who were neither (i) nominated by the board of
directors of Obligor nor (ii) appointed by directors so nominated; or
(d) the acquisition of direct or indirect Control of Obligor by any
Person or group.
"Consolidated Net Income" shall mean with respect to Obligor and
its Consolidated Subsidiaries, for any period, the aggregate of the
net income (or loss) of Obligor and its Consolidated Subsidiaries
after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall
be excluded from such net income (to the extent otherwise included
therein) the following: (i) the net income of any Person in which
Obligor or any Consolidated Subsidiary has an interest (which interest
does not cause the net income of such other Person to be consolidated
with the net income of Obligor and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends
or distributions actually paid in such period by such other Person to
Obligor or to a Consolidated Subsidiary, as the case may be; (ii) the
net income (but not loss) of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions
or transfers or loans by that Consolidated Subsidiary is not at the
time permitted by operation of the terms of its charter or any
agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in
each case determined in accordance with GAAP; (iii) the net income (or
loss) of any Person acquired in a pooling-of-interests transaction for
any period prior to the date of such transaction; (iv) any
extraordinary gains, including gains attributable to property sales
not in the ordinary course of business; and (v) the cumulative effect
of a change in accounting principles and any gains or losses
attributable to writeups or writedowns of assets; and further
provided, that there shall be added to such net income (to the extent
otherwise deducted therefrom) any extraordinary losses.
"Consolidated Subsidiaries" shall mean each Subsidiary of Obligor
(whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with
the financial statements of Obligor in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or polices of
a Person, whether through the ability to exercise voting power, by
contract or otherwise. "Controlling" and "Controlled" have meanings
correlative thereto.
"Credit Party" shall mean (i) prior to the First Amendment
Effective Date, R&BFD and Reading & Bates Drilling Co. and (ii) after
the First Amendment Effective Date, the Obligor.
"Deepwater Frontier" means the drillship being constructed for a
joint venture on the date of this Agreement in which Obligor
indirectly owns a 60% interest.
"Deepwater Pathfinder" means the drillship being constructed for
a joint venture on the date of this Agreement in which Obligor
indirectly owns a 50% interest.
"EBITDA" shall mean, for any period, the sum of Consolidated Net
Income for such period plus the following expenses or charges to the
extent deducted from Consolidated Net Income in such period:
interest, taxes, depreciation, depletion and amortization.
"First Amendment" shall mean the First Amendment to this
Agreement, dated as of April 24, 1998.
"First Amendment Effective Date" shall have the meaning provided
in paragraph II.5. of the First Amendment.
"Funded Debt" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all Capital Lease Obligations of such Person,
(d) all Hedging Obligations of such Person, (e) all obligations,
contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (f) all
obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances and (g) all obligations, contingent or otherwise,
of such Person guaranteeing, indemnifying or having the economic
effect of guaranteeing any of the above described Funded Debt of
another Person. The Funded Debt of any Person shall include the
Funded Debt of any other entity (including any partnership in which
such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Funded Debt provide that such Person is not liable therefor. Funded
Debt shall expressly exclude Permitted Project Debt.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or
other directive or requirement (whether or not having the force of
law), including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls,
of any Governmental Authority.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other
obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the
owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial
statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other
obligation or (d) as an account party in respect of any letter of
credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity
price hedging arrangement.
"Hedging Obligations" of any person means the net obligation (not
the notional amount) of such Person pursuant to any Hedging Agreement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily
paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person,
whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all Synthetic Lease
Obligations of such Person, (j) all Hedging Obligations of such
Persons, (k) all obligations, contingent or otherwise, of such Person
as an account party in respect of letters of credit and letters of
guaranty and (l) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such Person
is not liable therefor.
"Indenture" shall mean the Indenture, dated as of April 14, 1998,
between Obligor, as Issuer, and Chase Bank of Texas, National
Association, as Trustee, providing for the issuance of $1,100,000,000
of Senior Unsecured Notes and all renewals, extensions and
modifications thereof permitted by the terms of this Agreement.
"Index Debt" means senior, unsecured, long-term indebtedness for
borrowed money of Obligor that is not guaranteed by any other Person
or subject to any other credit enhancement.
"Lien" means, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the
same economic effect as any of the foregoing) relating to such asset
and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Maturity Date" shall mean June 30, 1999.
"Moody's" means Moody's Investors Service, Inc.
"Obligor" shall mean R&B Falcon Corporation, a Delaware
corporation.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or
are being contested in good faith and by appropriate proceedings
for which adequate reserves with respect thereto, in accordance
with GAAP, have been established;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, maritime and other like Liens imposed by law,
arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or are
being contested in good faith and by appropriate proceedings for
which adequate reserves with respect thereto, in accordance with
GAAP, have been established;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature,
in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under Section 8.08;
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising
in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value
of the affected property or interfere with the ordinary conduct
of business of Obligor or any Subsidiary; and
(g) any interest or title of a lessor or charterer under
any lease or charter between Obligor and any Subsidiary or
between any of its Subsidiaries or as otherwise permitted
hereunder;
provided that the term "Permitted Encumbrances" shall not include any
Lien securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of
and interest on which are unconditionally guaranteed by, the
United States of America (or by any agency thereof to the extent
such obligations are backed by the full faith and credit of the
United States of America), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270
days from the date of acquisition thereof and having, at such
date of acquisition, the highest credit rating obtainable from
S&P or from Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the
date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a
combined capital and surplus and undivided profits of not less
than $500,000,000; and
(d) fully collateralized repurchase agreements with a term
of not more than 30 days for securities described in clause (a)
above and entered into with a financial institution satisfying
the criteria described in clause (c) above.
"Permitted Project Debt" means Indebtedness (including, without
limitation, or duplication, the Guarantee of any such Indebtedness by
Obligor) incurred in connection with the construction of Deepwater
Pathfinder, Deepwater Frontier and Drillship III by the respective
joint venture or Subsidiary owning such vessel not to exceed
$375,000,000 in the aggregate and all extensions, renewals and
replacements of any such Indebtedness by the primary obligor thereof
that do not increase the outstanding principal amount thereof.
"Prior Indebtedness" means the Funded Debt of Obligor on the date
of the R&B Falcon Credit Agreement, excluding the Indebtedness created
under this Agreement and the Indebtedness evidenced by the Bonds.
"R&B Falcon Credit Agreement" shall mean the Credit Agreement,
dated as of April 24, 1998, by and among Obligor, the lenders party
thereto and The Chase Manhattan Bank, as Administrative Agent.
"R&BFD" shall mean R&B Falcon Drilling (International &
Deepwater) Inc. (f/k/a Reading & Bates Corporation), a Delaware
Corporation.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any
shares of any class of capital stock of Obligor or any Subsidiary, or
any payment (whether in cash, securities or other property), including
any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of
any such shares of capital stock of Obligor or any option, warrant or
other right to acquire any such shares of capital stock of Obligor.
"S&P" means Standard & Poor's.
"Synthetic Lease Obligations" of any Person means the aggregate
obligations of such Person under each lease or a guaranty of such
lease which requires such Person to make payments of rent or other
amounts over the term of such lease, including payments at
termination, which are more than seventy percent (70%) but less than
ninety percent (90%) of the purchase price of the Property subject to
such lease but excluding interest at an imputed rate of interest.
"Tangible Net Worth" means without duplication in accordance with
GAAP the sum of (i) the total amount of capital stock of Obligor, (ii)
preferred stock, (iii) paid-in capital, and (iv) retained earnings
minus the sum of (i) patents, patent applications, trademarks, service
marks, copyrights, and trade names and (ii) goodwill and all other
intangibles.
5. The L/C Agreement is hereby further amended by (i) deleting
Annex IV thereto in its entirety and inserting Annex IV attached hereto in
lieu thereof and (ii) by inserting immediately following Annex IV thereto
Annexes V and VI attached hereto.
6. On and after the First Amendment Effective Date, R&BFD is
hereby released from all obligations under and in respect of the Guaranty
contained in Section 11 of the L/C Agreement, and Section 11 is hereby
deleted in its entirety.
II Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment,
R&B Falcon hereby represents and warrants that:
(a) no Default or Event of Default exists as of the First
Amendment Effective Date both before and after giving effect to this
Amendment; and
(b) except as may be expressly modified by this Amendment, all
of the representations and warranties contained in the L/C Agreement
and the other Credit Documents are true and correct in all material
respects on the First Amendment Effective Date both before and after
giving effect to this Amendment, with the same effect as though such
representations and warranties had been made on and as of the First
Amendment Effective Date (it being understood that any representation
or warranty made as of a specific date shall be true and correct in
all material respects as of such specific date).
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of
the L/C Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete
set of counterparts shall be lodged with R&B Falcon and the Bank.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when the following conditions have been met to
the satisfaction of the Bank:
(i) the Bank shall have received from R&B Falcon certified
copies of resolutions of the Board of Directors or statements of
unanimous written consent in lieu thereof of R&B Falcon with respect
to the matters set forth in this Amendment and such resolutions shall
be satisfactory to the Bank;
(ii) R&B Drilling shall have paid to the Bank all costs, fees and
expenses (including, without limitation, legal fees and expenses)
payable to the Bank to the extent then due;
(iii) all corporate and legal proceedings and all instruments
and agreements in connection with the transactions contemplated by
this Amendment shall be satisfactory in form and substance to the
Bank, and the Bank shall have received all information and copies of
all documents and papers, including records of corporate proceedings
or governmental approvals, if any, which the Bank may have requested
in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities;
(iv) each of R&B Falcon, R&BFD, R&B Drilling and the Bank shall
have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Bank at its Notice Office; and
(v) the Bank shall have received, and shall be satisfied with
both the form and substance of, an opinion of Wayne Hillin, counsel to
R&B Falcon, R&BFD and R&B Drilling, with respect to the matters
contemplated by the this Amendment.
Upon the satisfaction of the condition described in clause (v) of the
immediately preceding sentence and upon the Bank's determination that the
other conditions described above have been met, the First Amendment
Effective Date shall be deemed to have occurred, regardless of any
subsequent determination that one or more of the conditions thereto had not
been met (although the occurrence of the First Amendment Effective Date
shall not release R&B Falcon from any liability for failure to satisfy one
or more of the applicable conditions specified above). The Bank will give
R&B Falcon prompt notice of the occurrence of the First Amendment Effective
Date.
6. From and after the First Amendment Effective Date, all
references in the L/C Agreement and each of the other Credit Documents
shall be deemed to be references to such documents as amended hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
R&B FALCON CORPORATION
By:___________________
Title:
R&B FALCON DRILLING (INTERNATIONAL &
DEEPWATER) INC. (f/k/a Reading & Bates
Corporation)
By:___________________
Title:
READING & BATES DRILLING CO.
By:___________________
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH
By:___________________
Title:
By:___________________
Title:
ANNEX IV
EXISTING INDEBTEDNESS
For purposes of this schedule only "Falcon" means Falcon Drilling Company,
Inc. and "R&B" means Reading & Bates Corporation.
1. Indenture relating to R&B's 8% Senior Subordinated Convertible
Debentures due 1998 dated as of August 29, 1989, as supplemented,
between R&B and IBJ Schroder Bank & Trust Company, as Trustee
(outstanding principal amount - $18,494,500).
2. Indenture dated as of January 15, 1994, between Falcon and Texas
Commerce Bank National Association, as Trustee, relating to
Falcon's 9-3/4% senior notes and guaranteed by certain
subsidiaries of Falcon (outstanding principal amount -
$5,250,000).
3. Floating Rate Senior Note Purchase Agreement, dated as of
February 23, 1994, by and between Falcon and Crescent/Mach I
Partners, L.P., and guaranteed by certain subsidiaries of Falcon
(outstanding principal amount - $9,000,000).*
4. Indenture dated as of March 1, 1996, between Falcon and Bank One,
Texas, N.A., as trustee, relating another series of Falcon's
senior notes (outstanding principal amount - $345,000).
5. Indenture dated as of April 14, 1998 between R&B Falcon
Corporation and Chase Bank of Texas, National Association, as
Trustee (outstanding principal amount - $1,100,000,000).
6. Agreement for the sale and purchase of Semi-Submersible Emergency
Support Vessel Iolair dated September 8, 1995 between BP
Exploration Operating Company Limited and Reading & Bates
(Caledonia) Limited, a subsidiary of R&B (outstanding principal
amount - $7,500,000).
7. Performance Guarantee dated September 8, 1995 by R&B in favor of
BP Exploration Operating Company Limited, in connection with item
6 above.
8. Performance Guarantee dated September 8, 1995 by R&B in favor of
Britoil plc, in connection with item 6 above.
9. Initial Services Agreement dated September 8, 1995 between
Britoil Public Limited Company and Reading & Bates (Caledonia)
Limited, a subsidiary of R&B, in connection with item 6 above.
10. Heads of Agreement for the provision of Vessel Services dated
September 8, 1995 between Britoil Public Limited Company, Reading
& Bates (Caledonia) Limited, a subsidiary of R&B, and R&B, in
connection with item 6 above.
11. Credit Agreement dated February 24, 1998, among R&B Falcon
Corporation, RB Deepwater Exploration III Inc., various lending
institutions, Credit Lyonnais, New York Branch, as Syndication
Agent and Christiania Bank og Kreditkasse, New York Branch as
Administrative Agent ($150,000,000 Facility).
12. Loan Agreement dated as of December 14, 1996 among TRB Holding
Corporation, Reading & Bates (U.K.) Limited and Nissho Iwai
Europe PLC (outstanding principal amount - $24,774,244).
13. Two promissory notes dated June 30, 1994 payable by subsidiary of
Falcon to Diamond Services Corporation (outstanding principal
amount - $536,646).
14. Secured promissory note dated January 1997 payable by Falcon to
Coastal Capital Corporation (outstanding principal amount -
$6,390,000).*
15. Four promissory notes payable by a subsidiary of Falcon to First
National Bank of Commerce (outstanding aggregate principal amount
- $6,958,378).*
16. Undertaking dated September 30, 1997 by Reading & Bates Drilling
Co. to Arthur Andersen with respect to Reading & Bates (U.K.)
Limited with respect to the continuance of its business.
17. Indemnification Agreement by R&B in favor of Conoco Development
Company with respect to equity contributions by a subsidiary of
R&B required under the Liability Company Agreement dated October
28, 1996 between Conoco Development Company and RB Deepwater
Exploration Inc.
18. Indemnification Agreement by R&B in favor of Conoco Development
II Inc. with respect to equity contributions by a subsidiary of
R&B required under the Liability Company Agreement dated April
30, 1997 between Conoco Development II Inc. and RB Deepwater
Exploration II Inc.
19. Guaranty by R&B and certain of its subsidiaries in favor of Bank
of America National Trust and Savings Association, National
Westminster PLC, New York Branch and certain other lending
institutions party to the Credit Agreement dated as of November
10, 1997 among Deepwater Drilling II L.L.C. and those
institutions.
_____________________________
* To be repaid on or before June 30, 1998
ANNEX V
LIENS
1. Mortgage of a Ship dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and BP
Exploration Operating Company Limited, in connection with item 6
in Annex IV.
2. Mortgage of a Ship dated September 8, 1995 between Reading &
Bates (Caledonia) Limited, a subsidiary of R&B, and Britoil plc.,
in connection with item 6 in Annex IV.
3. Deed of Covenant dated September 8, 1995 between Reading & Bates
(Caledonia) Limited, a subsidiary of R&B, and BP Exploration
Operating Company Limited, in connection with item 6 in Annex IV.
4. Deed of Covenant dated September 8, 1995 between Reading & Bates
(Caledonia) Limited, a subsidiary of R&B, and Britoil Public
Limited Company in connection with item 6 in Annex IV.
5. First Naval Mortgage on the "SEILLEAN" dated December 14, 1996
between TRB Holding Corporation in favor of Nissho Iwai Europe
PLC, in connection with item 12 in Annex IV.
6. Collateral Assignment of Deposit Account, Pledge and Security
Agreement dated December 14, 1996 with respect to the "SEILLEAN"
between TRB Holding Corporation and Nissho Iwai Europe PLC, in
connection with item 12 in Annex IV.
7. Assignment of Insurances dated December 14, 1996 with respect to
the "SEILLEAN" between TRB Holding Corporation and Reading &
Bates (U.K.) Limited and Nissho Iwai Europe PLC, in connection
with item 12 in Annex IV.
8. Vessel mortgage dated July 25, 1994 by Falcon in favor of Diamond
Services Corporation with respect to one of Falcon's barge rigs,
in connection with item 13 in Annex IV.
9. Texas and Louisiana UCC-1 Financing Statements filed July 2, 1994
in favor of Diamond Services Corporation with respect to two of
Falcon's barge rigs, in connection with item 13 in Annex IV.
10. First Preferred Mortgage on the vessel "Coastal Golden"
(Peregrine VI) in favor of Coastal Capital Corporation, in
connection with item 14 in Annex IV.
11. Liens - BSI Assets, in connection with item 15 in Annex IV.
12. Assignment of Construction Contract and Letter of Refundment
Guaranty to Christiania Bank og Kreditkasse, New York Branch, as
Collateral Agent in connection with item number 11 on Annex IV.
ANNEX VI
RESTRICTIVE AGREEMENTS
1. R&B Falcon Credit Agreement.
2. Credit Agreement dated February 24, 1998, among R&B Falcon
Corporation, RB Deepwater Exploration III Inc., various lending
institutions, Credit Lyonnais, New York Branch, as Syndication
Agent and Christiania Bank og Kreditkasse, New York Branch as
Administrative Agent.
3. Indenture dated as of January 15, 1994, between Falcon and Texas
Commerce Bank National Association, as Trustee, with respect to
Falcon's 9-3/4% senior notes (outstanding principal amount -
$5,250,000).
4. Floating Rate Senior Note Purchase Agreement, dated as of
February 23, 1994, by and between Falcon and Crescent/Mach I
Partners, L.P., including a form of Note (outstanding principal
amount - $9,000,000).
5. Indenture dated as of March 1, 1996, between Falcon and Bank One,
Texas, N.A., as trustee, with respect to another series of
Falcon's senior notes (outstanding principal amount - $345,000).
6. First Preferred Mortgage on the vessel "Coastal Golden"
(Peregrine VI) in favor of Coastal Capital Corporation, in
connection with item 14 in Annex 7.01.
7. Loan Agreement dated January 17, 1991 between Falcon Drilling
Company, Inc. and Coastal Capital Corporation, in connection with
item 14 in Annex 7.01.
8. Credit and Sale Agreement dated June 30, 1994 between Diamond
Services Corporation and Eilert-Olsen Investments, Inc., in
connection with item 13 in Annex 7.01.
9. First Preferred Mortgage dated July 25,1994 by Eilert-Olsen
Investments, Inc. to Diamond Services Corporation, in connection
with items 13 in Annex 7.01.
10. BSI, in connection with item 15 in Annex 7.01.
Exhibit 15
R&B Falcon Corporation
We are aware that R&B Falcon Corporation has incorporated by
reference in its Registration Statement No. 333-43475 its Form 10-
Q for the quarter ended June 30, 1998, which includes our report
dated July 28, 1998 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of
the registration statement prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
/s/Arthur Andersen LLP
Houston, Texas
August 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of R&B Falcon Corporation for the quarters ended June 30,
1998 and 1997 as restated to reflect the completion of a pooling of interests
between Reading & Bates Corporation and Falcon Drilling Company, Inc. and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 133 55
<SECURITIES> 0 0
<RECEIVABLES> 259 188
<ALLOWANCES> 10 3
<INVENTORY> 21 14
<CURRENT-ASSETS> 421 314
<PP&E> 2,518 1,618
<DEPRECIATION> 466 391
<TOTAL-ASSETS> 2,531 1,673
<CURRENT-LIABILITIES> 273 118
<BONDS> 0 0
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 860 807
<TOTAL-LIABILITY-AND-EQUITY> 2,531 1,673
<SALES> 0 0
<TOTAL-REVENUES> 560 425
<CGS> 0 0
<TOTAL-COSTS> 322 264
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 29 21
<INCOME-PRETAX> 213 142
<INCOME-TAX> 77 32
<INCOME-CONTINUING> 130 105
<DISCONTINUED> 0 (22)
<EXTRAORDINARY> (22) 0
<CHANGES> 0 0
<NET-INCOME> 108 83
<EPS-PRIMARY> .66 .51
<EPS-DILUTED> .65 .50
</TABLE>
